§ 5.42 p.m.
The Minister of Agriculture, Fisheries and Food (Mr. D. Heathcoat Amory)
I beg to move,That the Fatstock (Guarantee Payments) (Amendment No. 2) Order, 1956, a copy of which was laid before this House on 23rd October, be approved.The purpose of the amending Order is to enable supplementary payments to be made to beef producers whose cattle have been certified, or will be certified, for guarantee payments during the present fatstock year, which ends on 24th March, 1957.
These supplementary payments are in no sense an extra bonus to farmers, but are payments which we believe are necessary to enable the Government to implement this year the price guarantees that were given after the last Annual Price Review. Last February, producers were told that we needed still more good-quality beef. To encourage this, the Government increased the standard price for fat cattle by 12s. 4d., to 151s. per live cwt. This is an average level of guarantee for the year as a whole. The supplementary payment, which will amount to about 11s. per cwt. and which I announced last Thursday, is designed to approximate the producers' returns for the current fatstock year to the standard price of 151s.
How close we get to the 151s. after making these payments is bound to depend on the course of market prices during the remainder of the year. Farmers' representatives and we are agreed that the payment we are now proposing is based on the best estimate that can be at present made of future market prices. Hon. Members may ask me why not wait until the end of the fatstock year before making good this deficiency. My answer is that if we did that we would be keeping producers out of their money for a longer time. The earlier payment we are proposing will not only assist producers, particularly the small producers, but will avoid the risk of any further adverse effect on the sale of store cattle.
This supplementary payment of about 11s. per cwt. is an average for the whole year. With the agreement of the National 1300 Farmers' Unions we have decided to graduate the payments so as to secure as fair a distribution of the total sum available as possible over the whole year. The supplementary payments, as hon. Members will have seen if they looked at the list I published, are highest during the earlier part of the year when the guarantees under the rolling average were lowest, and are lowest during the final period of the year when the ordinary guarantee payments should be at their highest. I gave full details of these graduated payments in reply to a Question by my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill) on 25th October, and I do not think there is any need for me to repeat the details now.
I emphasise that the graduated payments which we have agreed with the National Farmers' Unions do no more than remedy a defect of the present guarantee system by bringing the payments more in line with what they would have been for each period if the system had reflected the price movements of recent months more promptly.
Let us examine the present system for a moment to see what the defect is. The guarantee payment, as hon. Members will remember, is the difference between the standard price fixed at the Annual Price Review and the average realisation price, calculated over the preceding 52 weeks. That system has been in force since decontrol in July, 1954. By and large, it has not worked badly. In fact, for sheep and pigs it has worked very well indeed during the present year.
We have, however, found that it does not respond sufficiently quickly to abnormally sharp and sustained movements in market prices. This year the trend of cattle prices has been downwards, and because the high prices of last year were still in the 52-week calculation the payments made during the earlier months of the present livestock year were very low in relation to the market prices of the time. Because market prices have continued to fall, the guarantee payments, although they have been rising substantially each month, have not succeeded in catching up, with the result that as the year progressed it became clear that there would be a substantial shortfall of the standard price of 151s. by the end of the fatstock year. 1301 The extent of the shortfall would have been nothing like so striking but for the fact that we made a substantial increase in the standard price after the last Annual Price Review. It was a conjunction of two circumstances : the increase we made in the standard price and a substantial drop which followed in the market prices. They created an unusually wide gap that the rolling average method has been slow to fill. If we were to continue with the present system without a supplementary payment the shortfall would certainly eventually be made good, but it would take a long time. In our opinion, in view of the size of the shortfall it would take too long a period to make it reasonable to continue with the system.
Hon. Members may remember that in the White Paper which we issued after the last Annual Price Review we included a paragraph to the effect that it was never possible to hit off the standard price exactly over the course of 12 months, and that has proved the case over the past few years. In some cases there has been an overpayment and in some cases an underpayment.
The point which I want to make is that owing to the excessive drop in market prices it became clear by about August or September that the shortfall would be considerable. This explains briefly what the supplementary payments are and why we are making them. Hon. Members may recall that I have frequently said in the past few months that I was not irrevocably wedded to the rolling average method but that I thought it would be wrong to discard it until, by general agreement, we had found a method which seemed likely to give better results. I also said that I thought it would be a mistake to change the system in the middle of a year, but that if a better method could be found I was very ready to consider it for a future year.
When a method has proved unsatisfactory in administration, I think that is quite a sensible line to take. Hon. Members opposite, and the right hon. Gentleman the Member for Don Valley (Mr. T. Williams) in particular, may remember that their Government withdrew two schemes, a petrol rebate scheme and a marginal production scheme, because they did not produce, in practice, the results which had been expected and relied on.
1302 Some hon. Members may blame imports for the fall in market prices. I should like, first, to remind the House that prices of beef last year were abnormally high, and the present lower prices must, I think, be looked at in their proper perspective. Secondly, while it is perfectly true that there has been this year, and will continue to be, substantially increased shipments of chilled beef compared with last year, these Argentine imports, again, must be looked at in their proper perspective. This year, for the first time since the war, the consumption of beef in this country will be just about back to the pre-war consumption. For other meat it will be a little above the pre-war consumption. I am glad to say that the proportion of home-killed beef to total supplies is now about 63 per cent. compared with about 52 per cent. before the war.
§ Captain J. A. L. Duncan (South Angus)
Will my right hon. Friend give the figures of the consumption for beef, mutton and pork?
I have got them but if my hon. and gallant Friend will allow me, I will ask my hon. Friend the Joint Under-Secretary of State for Scotland, who will speak at the end of the debate, to quote the figures in aggregate.
In spite of those increased chilled beef imports, the Argentine shipments are still only about two-thirds of what they were before the war, and they account today for about 20 per cent. of our total beef supplies compared with about 30 per cent. before the war.
I was speaking of total beef from the Argentine, representing two-thirds of what they were before the war, I think, but I will check on that point. My hon. Friend knows that at the moment chilled beef dominates the position and that the importance of frozen beef is declining very rapidly.
I should like to emphasise that without these imports the public would not be getting today the amount and quality of meat they want. I would further remind the House that we are still very moderate meat eaters in this country compared with 1303 some of our friends overseas, in particular in the United States, Australia and Canada. I believe that in these times of full employment and higher living standards there is plenty of scope still to increase our consumption of meat, and such increased consumption could be met at present only by larger supplies from both home production and imports.
I should now like to say a word about the new system which we have in mind and which I confidently hope will make supplementary payments unnecessary in the future. First, it is clear, I think, that if the guarantee system is to be proof against the sort of price movement which we have had this year, we cannot continue to base the scheme on as long an accounting period as 52 weeks.
We must also keep well in mind that we cannot have it completely both ways. If we speed the process up we must lose something, and in this case what we shall lose, I think, to either a small or a greater degree—depending on how far we go—are the benefits of the free play of the market. In devising the new scheme we have to find where the best balance appears to lie between full market play plus guaranteed returns, which, in practice, have come in too slowly, on the one hand, and, on the other, no market play at all and virtually fixed prices.
We and the National Farmers' Union, with whom we have had most helpful and amicable discussions on this matter, have thought up quite a number of possible new schemes. Most of them we have together discarded for one reason or another, and I do not think I need bother the House with them. We have been keen to find as simple a scheme as we can so that everyone will have the best chance of understanding it, and I am sure that that is an objective which will appeal to every hon. Member who has tried to understand the rolling average system.
One simple method would be to have a standard price and then at the end of each month to work out a straightforward deficiency payment which would bring the actual average return for the month to the standard price. This method would have the virtue of extreme simplicity and would also make sure that over the year the results would be very close indeed to the standard price determined at the 1304 Annual Review, but, unfortunately, as so often happens, the most attractive and simplest scheme has serious drawbacks. One of these drawbacks would be that a farmer would have to wait for at least a month for the guarantee payment, and to many, not least to the smaller farmers, that would be a serious burden. There would also be the uncertainty during the month of the size of the guarantee payment, and that might have a seriously disturbing effect on the market, particularly on the market for store cattle.
Finally, individuals and organisations who prefer trading on a grade and deadweight basis and want to quote comprehensive prices would be at a disadvantage since an important part of their return would not be known until the end of the month. It has always been a principle that the guarantee system should be neutral as far as possible between one method of marketing and another and in this respect the system which I have just described would be seriously deficient.
For these reasons, the farmers' representatives made it clear to us that they would greatly prefer another alternative. To be satisfactory, the alternative scheme must provide, as hitherto, that the guarantee payment for each period should be known in advance, and also that the payments should be made weekly. That is one of the requirements which the new scheme must meet. Another is that the period which we take into account for determining the deficiency should be a good deal shorter than 52 weeks, and our present intention is to base our accounting on a four-week period instead.
We also propose to include the safeguard that was introduced this year—fixing stabilising limits on either side of the standard price so as to ensure that the weekly returns cannot fluctuate violently from the standard price. In the circumstances of this year, the stabilisation adjustments we used have proved, I think, rather too wide, and in future we shall take a narrower range. If we do that, we shall also have a seasonal scale for cattle and sheep, but I do not think that it will be necessary to have one for pigs.
Those are the principles of the new system which we are proposing. They have the full backing of the producers' representatives, who believe, as we believe after recent experience, that a 1305 system based on these principles is the most reasonable that we can devise in the light of the whole of our experience during the past two and a half years. The new system will come into force at the beginning of the next livestock year, which will be 25th March, 1957. We are now working out the full details, which I hope to publish shortly. The precise figures of standard prices, and the stabilising limits and seasonal scales will of course be determined, in the usual way, as a result of the next Annual Price Review.
Hon. Members may wonder why we are not proposing to go over to the new system at once, instead of at the end of the year. Briefly, the answer is that if we were to do that we should run a risk of not being fair to those producers who have been reckoning on the steadily rising guarantee payments month by month for their expected returns during the last six months of the year. Then, again, the producers' representatives are fully in agreement with us that it would be better to leave the present system working, with this supplementary payment, for the remainder of the current year.
In conclusion, I would just like to say that the Government have faith in the future of the livestock industry ; and that faith has been fully justified by the steady rise in the numbers of our livestock during recent years. We confidently expect the numbers to go on rising, and so provide us with a still larger share of our meat requirements. The Government have said on a number of occasions that we want the efficient production of livestock in this country to be profitable, and to remain profitable. We have already undertaken that next year's standard price for cattle will be not less than the increased price we offered this year of 151s.
I believe that that, together with this promise of a new method of computing the guarantee payments, and the supplementary payments that we are proposing in this Order, afford firm and practical evidence of the Government's intention to provide a long-term foundation for our livestock industry.
§ 6.5 p.m.
§ Mr. Thomas Williams (Don Valley)
Perhaps the only kindly remarks I am likely to make in the course of my speech I had better make now. I certainly hope 1306 that the right hon. Gentleman will produce something of extreme simplicity, as he mentioned, and something that is not likely to break down in the first three or four months of its operation, because that is really what we are discussing in relation to this Order.
After listening to the Minister's apologia—and it can be nothing else—for the latest in the series of confidence-shattering muddles, hon. Members in all parts of the House might do worse than to re-read his speech in the debate on 30th April last. On that occasion he was in no sort of doubt about the rightness, the fairness and the wisdom of all the decisions in the Price Review. Of course, hon. Members will recall that he won a glorious victory for his party in the Division Lobby, but just six months later—and only six months today—some of the chickens have come home to roost ; in fact, the whole farmyard has come home to roost. The rightness, fairness and wisdom claim is completely disproved.
As I see it, the Government stand condemned for having "stolen" a Division based on false evidence. It is true, as the right hon. Gentleman has said, that the fatstock scheme has collapsed, as most of us on these benches—and, I believe, some of those on the benches opposite—really expected that it would. Now, we have the financial ambulance brigade coming to the rescue.
The right hon. Gentleman did not tell the House that what we are offering the industry today is no part of the results of the February Price Review, but a supplementary payment which was decided upon, if not at, then immediately before the Conservative Party Conference. I do not object to the Government making a virtue of necessity, but we certainly have every right to protest as vigorously as we can against the Government's ineptitude in blundering on from one muddle to another, and certainly undermining the stability and confidence of the industry.
It is not enough—and I hope that the Minister will bear this in mind when he makes his next big agricultural speech—for him to quote the March returns or, indeed, any other returns to prove that everything in the garden is lovely and that there is nothing at all to worry about. He knows that farmers both 1307 large and small have, over the past ten years, invested hundreds of millions of pounds in their undertakings. They just cannot afford not to take chances, in spite of the uncertainties created by the Government's policies. They must either go on, go out or go under, and I am sure that the right hon. Gentleman understands that. It seems to me to be rather indecent to use their loyalty, sagacity and determination to save the face of the Government from time to time.
What astonishes me, on occasion, is the super-optimism of the Minister, and the acute way in which he tries to dub those on these benches as ultra-pessimists. That is a very old trick, and the right hon. Gentleman is by no means the first Minister who has had to whistle to keep his pecker up. He whistled good and proper on 30th April this year for, reproving my hon. Friend the Member for Hamilton (Mr. T. Fraser) for attempting to give the Government the cold shivers, he said :We feel none of the things which the hon. Member implied we ought to feel because we are still completely satisfied that the determinations which have been made were right and fair.In the same speech he said, later:I will only say that we have listened carefully to everything that has been said by everybody since the Review, but in the result, if we had to make a Review again tomorrow, it would be the same one as we have already made"—[OFFICIAL REPORT. 30th April, 1956; Vol. 552. c. 45 and 46.]—presumably the fatstock scheme as well?
§ Mr. Williams
The right hon. Gentleman would have given it tomorrow morning as well, despite the fact that within three or four months the scheme had actually broken down. That was an example of abounding confidence, and one cannot help admiring the way in which the right hon. Gentleman transmitted that confidence to members of his own party, most of whom knew nothing at all about it.
There was, however, a bit of the confidence trickster about it or, to be more generous, a colossal ignorance of the facts of life regarding the marketing of fat cattle. The Minister was not quite so successful in persuading the farming community. Otherwise, resolutions of protest 1308 would not have been pouring in from National Farmers' Union branches all over the country. Not even the valiant efforts of the Prime Minister, when he addressed that mass meeting of 16 hand-picked Warwick farmers in private could quell the riot. I say "a mass meeting of 16" because that is all the Prime Minister, or somebody on his behalf, undertook to address. The reasons, therefore, are not difficult to see. Indeed, the Minister has explained some of them when he proposed this Order.
But there were many other matters involved on 30th April—the spreadover of prices, under-recoupment, the estimated net income, and the important item of the removal of the individual guarantee which the right hon. Gentleman did not mention this afternoon. It would be out of order to discuss all these items today, and I have no desire to do so, but it must be relevant to mention one or two of the chief causes of resentment accumulating in the countryside which finally led to this Order.
This is not quite the first time, as the right hon. Gentleman said, that there has been under-recoupment at a February Price Review. Indeed, if things remained constant it would be reasonable for the Government to expect some sort of a dividend on the capital provided between 1947 and 1950 from increased efficiency. But things have not remained constant under this Government—far from it. Every hon. Member knows that.
Speaking a few days ago, the Chancellor of the Exchequer said that we are one of the wealthiest nations in the world but are living on the edge of a precipice. Presumably he meant that we are either spending too much or producing too little. Last week he told us that the value of the £ had depreciated by one-sixth since 1951. So if we compare the net income of the farming community in 1949–50 as £306 million, with the estimated net income for 1956–57 as £299 million, we find that there is a direct reduction of £7 million and an indirect reduction by depreciation of £50 million for 10 per cent. more food.
While beef producers have been in travail over the past several months, thanks to the "rock 'n' roll" scheme failure, other farmers have also had their financial difficulties. I intend to call one or two witnesses from the Minister's own party before I sit down, to say why there 1309 is such widespread dissatisfaction in the countryside. First, there is the early demise of the unwanted rolling average scheme and the removal of the individual guarantee. Hon. Members may recall that before the last February Review there was an individual guarantee and a collective guarantee for fat stock which, although complicated, was, I believe, towards the end working reasonably well. But these were abolished and a new system was introduced known as the rolling average.
§ Mr. Williams
Yes, but side by side with an individual guarantee and without the sort of formula that is associated with this rolling average scheme. The right hon. Gentleman will agree that there always has been some sort of a seasonal price.
§ Mr. Williams
We have never had a spread-over for 12 months in the same way as there has been under this rolling average ; otherwise, there would have been the same breakdown.
On the contrary, the rolling average system has been untouched since July, 1954, and has worked precisely in the same way. The right hon. Gentleman is right in saying that the individual Review was revised but, taking the whole period since 1954 until the end of last March, there has been quite a substantial overpayment and not an underpayment on beef.
§ Mr. Williams
I was coming to that in a moment.
The individual guarantee was abolished at the last February Review. Basically, this Order emerges because of the removal of the individual guarantee. On the face of it, this new scheme looked attractive—almost as attractive, for instance, as the Lord Privy Seal's speech at the National Farmers' Union dinner prior to the last Election. I am glad to see that the right hon. Gentleman has just entered the Chamber in time. If I may say so, it was equally as fraudulent as this new fatstock scheme. There was an apparent increase of 12s. per cwt. on fat cattle prices. I see that the Lord Privy Seal is leaving us again. I suppose that that 1310 observation is sufficient to turn any Minister out.
As I was saying, there was an apparent increase of 12s. per cwt. on the fat cattle prices, but associated with this alleged increase there was a formula which few farmers really understood. There was a floating figure ranging between 128s., 151s. and 174s. per cwt., but the final price to the producer was determined by the average auction price for the last 12 months. It was all very simple. At least, this scheme was introduced on the basis that it was going to simplify administration. I can only say that it is a good job that they did not introduce a complicated scheme.
It soon became obvious that the alleged increase of 12s. was an illusion and there was nothing in the formula to prevent falling returns to the producer, or there would be no necessity for this £11 million supplementary payment. Surely that is obvious. The average auction prices were linked with the higher prices received last year. As the right hon. Gentleman has already said, it works slowly. In other words, the beef producers had had it, and they could not have it again. It is difficult for me to believe that the Minister and the Government did not know what they were doing. The Minister told us on 30th April that he had done some farming and had also done some grumbling. I suppose he would, and I suppose he thought there was "a better 'ole" than farming. I hope he was more successful at farming than he appears to be at Whitehall Place. At least, he advised the Government to endorse his new scheme.
However, as auction mart prices fell by approximately 25 per cent. between April and September, so did producers' returns, despite the increased guarantee payment and the stabilising adjustment. In fact, on only two occasions in 28 weeks have they been within 10s. per cwt. of the coveted 151s. per cwt., and for the remainder of the period they are down from 17s. to £1 per cwt.
That figure could mean ruin to tens of thousands of beef producers in this country, particularly among the small men. Curiously enough, the housewife has got nothing out of it at all. Despite the fact that prices per cwt. fell from 134s. in April to 100s. in October, my wife tells me that beef prices in the butchers' shops are today just what they were six months 1311 ago ; so there is no redeeming feature even there.
I ask the right hon. Gentleman : why did two practical farmers forget the seasonal variation in prices which should cater for the yard fed animals and the cheaper grass fed animals? At least, it would have helped to preserve the balance of marketing and prevent overloading of the market in autumn with scarcity of supplies in late winter and early spring. But that is exactly what we might expect from a Tory Administration. The right hon. Gentleman consulted the experts, the National Farmers' Union and the rest, and he said, "After listening to everybody and everything, we should do the same sort of thing tomorrow".
The danger of the removal of the individual guarantee was clearly foreseen by the N.F.U. My hon. Friend the Member for Hamilton and almost every hon. Member who spoke from these benches deprecated the removal of the individual guarantee, and practically foresaw the collapse of the new scheme. How right they were is proved by this Order today to provide a supplementary retrospective payment down to the 26th March.
I shudder to think what might have happened to a Labour Government who had blundered so badly and so often with their various schemes. Probably they would have been hounded out of office by the so-called popular Press, for, whatever the Minister's responsibilities, it certainly is the general policy of the Government which has been responsible for the series of crises through which the industry has passed during the last few years. Their unseemly haste to dismantle every control before they have thought out alternative methods of guaranteeing prices or marketing produce has not only unsettled the industry, but has certainly jeopardised the campaign for increased efficiency, which every hon. Member from the countryside must know can prosper only in an atmosphere of stability and continuity.
First, we had the pig muddle which lost the country millions of pounds and cost the pig producers millions of pounds. Then we had the do's and don'ts of tillage, which lost us a million acres of tillage in less than three years. Now we have the "rock 'n roll" of beef prices, which has shaken that section of the industry to its very foundation.
1312 Is there any wonder, then, that National Farmers' Union branches pass resolutions of no confidence in the Government? As one very efficient, well-known farmer put it to me, even in an age of planning it is difficult to visualise a more ridiculous situation than this. Not only has there been a complete lack of realism displayed but a vivid example has been given of what is bound to happen when livestock policies are interfered with just when they have begun to settle down.
The Government are wholly to blame for the situation. After all, the February Review was conducted with full knowledge, by the Government at least, of the imminent threat of large imports of beef from the Argentine made possible by the depreciation of her currency, imports which home producers could not possibly hope to compete with in those abnormal circumstances. If the Minister realised that—and he should have done as an ex-Minister of State—and did nothing about it, then it almost amounts to chicanery to boast of a possible 12s. per cwt. increase when there was no possibility of reaching that figure in the set of circumstances likely to follow the conclusion of the February Review.
We on these benches are not the only ones to condemn the Government for their short-term shifts and changes in policy, particularly short-term shifts over livestock. Boiling down all the multitude of resolutions which went into the Conservative Party Conference, this composite resolution emerged, probably the weakest that the delegates could be persuaded to accept:That this Conference recognises that home agriculture can and must make its maximum contribution to our balance of payments programme. That in order to do so arrangements must be made under which the industry can plan ahead and undertake the necessary investment in the knowledge that short-term shifts of emphasis or changes in economic policy will not undermine its efforts.I thought it was a very good resolution. The right hon. Gentleman was good enough to accept it. The second part of it, which I did not intend to read, declares thatwithin the principles of the Agriculture Act. 1947, and the Agricultural Marketing Actsmeans can and must be found to do the job properly. Since the Labour Government passed both the 1947 Act and the original Marketing Act, we thank the 1313 right hon. Gentleman for the compliment he paid us when he said he was willing to accept the resolution.
Mr. Donald Goodwin, a Cheshire farmer, speaking to the resolution, said, among other things :Farmers encouraged to switch to beef were losing money heavily for their pains. At its best,he concluded,farmers feel that the Government have temporarily lost their way in agriculture.I entirely agree with him.The gloomier view would be that bit by bit the 1947 Act is being dismantled. It is a matter of the utmost urgency that farmers' confidence should be restored"—If it had not been lost, it need not be restored, need it?It is a matter of the utmost urgency that farmers' confidence should be restored by practical proposals at the earliest possible moment.And so say all of us. I hope that he got a very great cheer for that speech.
Then came Colonel A. J. W. Grubb, with one or two forthright observations ; and when Colonel Grubb talks about "grub," he knows what he is talking about.A great many small farmers will not continue to support our party unless they feel the Government really mean to support a stable agriculture by action as well as words. Lately, too many sights have been shifted too abruptly from too many targets for the peace of mind of many of us. Make no mistake, this discontent in agriculture is reaching alarming proportions. If the Minister thinks otherwise, he is sadly out of touch with the rank and file of farming today.I could not have done it better myself. I congratulate Colonel Grubb on his observations.
We now get this Order today. The Government are really hoist with their own petard, for they fix a "phoney" figure which they never expected to have to pay, and they are soon caught out by events. One can imagine the hurry, the scurry and shuffle at the Tory Party Conference, at Llandudno, where the warning to the right hon. Gentleman was loud and clear. The Chancellor obviously must have been in a dilemma, but he was stampeded into submission. Then the Prime Minister was put up to show what a generous and sympathetic Government we have towards agriculture.
1314 Now the cash is on the table. It is a very lamentable story. We cannot oppose the Order, of course, because it does no more than the justice the beef producers expected in April this year ; but neither can we congratulate the Government or the Minister on the way they have so badly bungled agriculture this year.
§ 6.30 p.m.
§ Mr. Phelim O'Neill (Antrim, North)
I want to say a few words of welcome for the Order. My welcome is based rather on the joy that exists over a sinner that repenteth, and I feel that I must say to my right hon. Friend, although in all probability it was not him but the Treasury who were to blame, that I think the Order should have been brought in, at the very latest, some time last July. It was quite apparent at that time what would happen, and although I congratulate my right hon. Friend on his courage in coming back and altering a decision, I only wish that he had come back to this House at the very latest last July.
I must, of course, feel rather strongly about beef, because although prices have been extremely low everywhere, nowhere have they been as poor as in Northern Ireland. I feel that a great deal of damage has been done during the last year or so. In my part of the United Kingdom, it has led to a considerable increase in the production of milk, which is likely to be of some embarrassment. It is a pity that when farmers obey the exhortations of the Government, which have been loud and clear during the last two years that they wanted beef, the very fact that they have obeyed those exhortations has landed them in considerable losses.
However, I congratulate my right hon. Friend on bringing in the Order. I feel that it will remedy the situation and that we can look to the future in beef with a great deal more confidence than in the past.
§ 6.32 p.m.
§ Mr. H. R. Spence (Aberdeenshire, West)
I am sure that the House listened with great interest to the description given by my right hon. Friend of the precise way in which the difficulties, one after another, led up to the need for revising the payments on meat. I am sure that the whole House welcomes the announcement 1315 which was made and which is now being implemented in the Order tonight.
I wonder, however, whether my right hon. Friend has ever considered what is the cause of some of the underlying difficulties. I venture to suggest that the method by which we today market and distribute our meat is entirely out of date and is a survival of the time when feeding stuffs were cheap and when science had not made the strides which it has made in various directions.
I believe that if a means could be found of keeping meat prices level throughout the year, many of the difficulties which are now being found would disappear. It might be possible, by the use of methods of chilling and refrigeration, to cushion our supplies of meat fairly well round the calendar.
At the moment, our economy makes it necessary to finish off our meat on grass. For that reason, there are times of abundant supply and times of shortage. For that reason, too, there are fluctuations in price. If I may quote mutton as an example, during the last 12 months the price for good quality lamb has varied between 2s. 8d. and 3s. 11d. per 1b. best carcase. That is a wide degree of variation.
My point is that if we could use modern methods of refrigeration, which would require a vast replanning of the whole scheme, we could level off the supplies of meat and get an even price to the producer and to the customer and a much lower charge on the Treasury. The present method of supply is rather like trying to give water to a large town which has a small and inadequate reservoir. When there is rain, the people can have a bath, but when the weather is dry they must go dirty. And so prices in our meat markets go up and down, which is precisely the reason for the difficulty which my right hon. Friend is now experiencing.
The Government might well consider in the near future setting up a Select Committee of the House to examine and to report on what could be done to modernise and to economise in our method of marketing and distributing meat.
We welcome the Order in Aberdeenshire because it is a great meat-producing county. I note with interest what my right hon. Friend said about the importation 1316 of Argentine beef. I hope that the Government will keep a very close eye on this aspect, because if they allow meat prices to be artificially depressed by cheap importations they are only making a rod for their own backs in the amount of subsidy which has to be provided. I wonder whether my right hon. Friend should perhaps consider, not the imposition of a tariff, but the regulation of importations from the Argentine by way of quota.
I welcome the Order, and so do the beef producers in Scotland, and I hope that my right hon. Friend will consider the setting up of a Select Committee to examine the whole question of meat distribution.
§ 6.37 p.m.
§ Captain J. A. L. Duncan (South Angus)
I, too, support and welcome the Order. The right hon. Member for Don Valley (Mr. T. Williams) had quite a good field day in attacking my right hon. Friend the Minister and in talking about" confidence-shattering muddle" and "false evidence", but I do not believe that confidence has been shattered in the way that the right hon. Gentleman tried to make out.
Before the announcement was made, the industry had settled down to the understanding of the new scheme as it was and was quite prepared to write off the losses it had suffered in the knowledge that over a 52-week average those losses would in time be made up. Although there had been losses, the industry realised that in time they would be made up. I do not, therefore, agree with the right hon. Gentleman that there has been this shattering lack of confidence.
§ Mr. T. Williams
Did the hon. and gallant Member listen to the terms of the resolution passed at the Conservative Party Conference, where the resolution demanded that something must be done to restore confidence? If confidence had not been lost, there would be no point in trying to restore it.
§ Captain Duncan
I know nothing whatever about the Llandudno Conference—that was an English affair—nor do I care about what is said at Llandudno conferences. If anybody wants to say anything about Scottish agriculture, let him come to Scotland to say it.
Was there really the muddle that the right hon. Gentleman tried to make out? 1317 For two main reasons, I do not think that the situation which has arisen could reasonably have been appreciated by the Government at the time of negotiations for the Price Review when the new arrangements were being discussed—that is, at about last Christmas and in January this year. When the discussions started, the price of beef—I am talking of the price at auction marts and not in the retail shops—was in the region of 151s. I have the actual figures here week by week for one of my own auction marts.
It was reasonable at that time, as far as one could tell, to assume that those prices would continue. There was no reason to anticipate a fall when these discussions were taking place in January. What happened was that by March prices had gone down from an average of 151s. or so to 130s., for light-weight bullocks by which time, of course, the average for all kinds of beasts was lower still. In giving those figures I was not taking the average of all beasts, but the average for light-weight steers.
Why did that happen? I cannot help suggesting that the main reason for that was the Argentine imports. With the assistance of the Librarian I have got out from the Library a table showing the figures of imports of Argentine beef of all kinds, not only chilled, though the figures for chilled are the main ones, of course, for the first nine months, month by month, for 1955 and 1956. They show that whereas in January, 1955, the figure was 20,000 tons or so, by March, 1956, it was over 35,000 tons, 756,000 cwts. to be exact. Compare the figures for March, May, June, July and August of 1955 with those of the same months of 1956, and we find there has been a very large increase in the imports of Argentine beef this year over last.
That is a factor which must be taken into consideration with the fact that the home supplies have also been increasing. My right hon. Friend said we had now reached in the total consumption of meat a figure of consumption per head equal to what it was pre-war. I hope that the Joint Under-Secretary, who is to reply to the debate, will give me those figures. What are those figures in relation to beef? I believe that the housewife is exercising a choice away from beef and towards pork and mutton and lamb.
1318 That, combined with increased supplies of beef from home and abroad, has had the effect of reducing the demand for beef on the market. From the Digest of Statistics we find that the average consumption of pork per month was 20,000 tons in 1954, and that by 1955 it had gone up to 31,000 tons. It looks as though the monthly average of pork consumption in 1956 has been roughly in the same proportion.
So my second reason is that the housewife is deliberately exercising a choice ; whereas when we de-rationed meat there was first a rush on beef and little chilled beef was imported and there was an increase in the price of beef in the home market, now there has been a gradual shifting in demand, which, with increased supplies from home and abroad and increased consumption of pork and mutton has caused a turning away from beef. This may well be because the butchers have not reduced their prices in the shops to the same extent as the farmers have had to suffer reductions in their market returns. I do not believe that for these two things, the Argentine beef or the housewives' choice, the Government are to blame, or were to blame when they worked out this scheme earlier.
So I approve this Order. I make no complaint that the Government have now altered the scheme so that the payment will work out roughly at an average over the year of about 151s., which was the original price agreed at the Price Review. I think that the Government have shown courage. When most people were prepared to accept the position and wait to get their money back, which might have involved a subsidy of 55s. a cwt. by, maybe, next May, they have taken the difficult choice of going back over all individual payments from 25th March this year and paying a supplementary payment on a seasonal basis to try to make it up to about 151s.
With my hon. Friend the Member for Antrim, North (Mr. P. O'Neill), I regret that the announcement was not made earlier. I think it might have been, because by July it was obvious, I think, that the scheme was not going to work out and that a big recoupment would be needed. Now we know that it amounts to about £11 million. If the Government had made the Order in July it would have 1319 had some effect on the store cattle position.
The Joint Parliamentary Secretary gave an Answer on Thursday of last week in which he said that the estimates for cattle, sheep and pigs as revised on 5th July, would total £63.4 million and that, of these, that for cattle would be £11.9 million ; sheep £10.2 million ; pigs, £41.3 million. Those estimates will have to be revised. I would ask my hon. Friend to have a shot at revising them.
Of course, we can never in market conditions get an accurate figure. We never can get complete recoupment to the farming industry. However, let us have a shot. May I make a shot? I suggest that for cattle, up to the end of the farming year, the figure will be nearer to £22 million than £11.9 million. At the same time, the pig market has been kept up so well that we may easily achieve a figure of subsidy not of £41 million, but of only £31 million, the same as the out-turn for last year.
Therefore, from the taxpayers' point of view I do not believe that this extra turn of £11 million will be serious at all, and there is even a chance that the original total estimate of £63 million will not be exceeded, because though there will be more on cattle, there may be a little less on sheep and less on pigs.
For all these reasons, I approve the Order. I wish it had been made earlier. None the less, the Government are to be congratulated on their courage in making it, and on putting the matter right, so that confidence, which has never been lost by the farming industry in this Government, may not be lost in the future.
§ 6.50 p.m.
§ Mr. Archer Baldwin (Leominster).
First, I want to congratulate my right hon. Friend upon having the courage to realise that the system under which this deficiency payment was being made was wrong and having the courage to alter it, but I am sorry that he and the National Farmers' Unions are still maintaining this idea of a rolling average even though for only one month.
§ Mr. Baldwin
I should not have said "rolling" average. I should have said 1320 "average". It will be made on an average of what beef made a month previously.
It will be based on an estimate of what beef will produce for the current four-weekly period.
§ Mr. Baldwin
As far as I can see, we shall be very nearly in as big a muddle in future as we are in at present. I am not accepting the blame is entirely on the Government in this muddle about which the right hon. Member for Don Valley (Mr. T. Williams) spoke. The people to be blamed are those who negotiated the Price Review—the Ministry and the farmers' representatives.
The rolling average has been in existence for two years and it must have been apparent when these negotiations were taking place that a rolling average designed to keep up a guaranteed price of £7 11s. was bound to suffer for the reason that in the winter of 1955 feeders were making £9 to £10 a cwt. and if those prices were taken into the rolling average of 52 weeks it would be impossible to pay a rolling average of £7 11s.
I do not see why we should not operate a system in respect of fatstock which would be exactly the same as that operating in the case of wheat. I have spoken to a great many farmers in the last few months and I have not met a practical farmer who is a beef producer who does not agree that that would be a fairer system. We should then not be basing payment on estimates or on what somebody actually received 12 months previously, but on an average price for a seasonal period. I want to see the Minister fix a seasonal period for fat-stock, of two or three months, and base the deficiency payment on that period, making the payment in arrears and not in advance. We have to wait a long time already for the wheat deficiency payment and we are quite prepared to wait that time for payment on beef. I think that the negotiators should go back to that system which is working so well with wheat and with which no one disagrees.
My right hon. Friend said that the present system worked satisfactorily in the case of pigs and sheep. It has done so in some places, but what happens? In the spring when we were bringing in fat lambs they were making up to 4s. a 1b. That price is taken into the rolling 1321 average and it means that somebody in the autumn is selling his sheep below the price he expected, and he does not have the amount made up because somebody was selling in the spring at 4s.
It is quite true that the price of pigs has been considerably improved for some months, but will that last? If there is a rolling average for pigs and the price is good, more people will come into the job and there will be a glut and prices will be depressed. Those people will then go out of the business but, because those came in and depressed prices, others who keep up the regular supply of pigs will suffer. That is not right. Those who do the job continuously should reap the benefit.
It has been said that fatstock cannot be dealt with in the same way as wheat, because the wheat is dead and the beef is on the hoof. I do not agree. When I take my wheat off the combine in the autumn I know approximately what my crop will bring when I elect to sell it. If I knew months in advance what I was going to get approximately for my fat-stock I should know when to bring the cattle out as beef. At present, farmers have not the least idea what they will receive in the spring. I want to see stability given to the industry by letting farmers know approximately what they will get months ahead and not have the prices based on what somebody else made 12 months previously.
A great deal has been said about the reason for the depression of prices and about Argentine beef. As a farmer I do not mind two hoots how much beef is brought in from the Argentine if I get the guaranteed price. If a great deal of Argentine beef is brought in and the housewife gets cheap meat, good luck to her—I shall get my guaranteed price. But there will come a time when the taxpayer, through the Chancellor of the Exchequer, will get tired of the vast sums of money that have been paid out in subsidies to farmers.
If the Government want to meet cases such as that of the Argentine where a country depreciates its currency and floods our market with cheap beef, we should not have a quantative regulation, because if we have that we must have allocation. The Government should put a tariff on beef imports from this country 1322 and from the revenue received from that tariff they should pay a levy subsidy to the farmers.
Did my hon. Friend imply that he thought there was a deluge of beef coming in from the Argentine at present? I could not possibly agree with him about that. As I have mentioned, the quantities of beef coming in from the Argentine are extremely moderate.
§ Mr. Baldwin
I quite agree. I meant a large increase in imported beef compared with the quantity two years ago, which brings another point to my mind.
When the negotiators arranged the guaranteed price last February they must have known that increased imports had been coming in for some time and that those imports would depress our beef prices and, therefore, the rolling average would never compensate farmers to the extent they were entitled to expect. It has been suggested that the system of a rolling average should continue, but when the next February Price Review takes place my right hon. Friend has agreed that the increase in wages shall be taken into account.
If there is one section of our industry that is entitled to expect a rise to meet that actual expenditure it is the meat-producing section. Therefore, what is the good of a guaranteed price and a rolling average being continued after February at £7 11s.? I do not see how the farmer will get his money on the basis of something that happened in 1956. I want to see my right hon. Friend chop this system straight off and start a completely fresh system, so that if he agrees to give the farmer £7 or £8 the farmer will start to receive it straight away after the next Review.
§ Mr. Baldwin
Well, I must read the speech, because I gathered that if the new price comes in at, say, £8 per cwt., the deficiency payment will be based on an estimate of what the price was a month before. Do I take it that there is no reference back?
§ Mr. Baldwin
Well, I am glad, but I want to see it in black and white. We 1323 get a standard average price of £7 11s. at present. I want to see that broken down so that it starts with a low guaranteed price for grass-fed beef, rising gradually to a higher price in the spring when the high-cost beef is brought in.
That would reward those who go in for winter beef, it would level our supplies of beef to the market and it would reduce the demand on the Chancellor of the Exchequer. If, however, there is to be a standard price running throughout the year it must mean that those of us who have been producing winter beef will simply put our land under grass and will bring the animals out as summer beef, knowing that we shall be given a certain figure. That would mean colossal sums of money for the Chancellor to find, so I hope that whatever is done it will be done in such a way that the winter production of beef is maintained.
My hon. Friend suggested that we ought to produce beef off the grass where we can do it cheaply and then put it into cold store. Heaven forbid that we should ever put our English fresh beef into cold store. Let those who bring in frozen or chilled beef continue to do so, but do not let us go to the expense of turning our fresh beef into chilled or frozen beef, because that would involve great expense with no benefit.
It has also been suggested that we should regulate the import of beef from the Argentine. I asked several of my farmer friends this question : "Do you think that we should stop the import of Argentine beef in the autumn, when we produce our cheap beef?" They replied, "Yes." I said, "Put yourselves in the position of the owner of ships trading between the Argentine and Britain. Are we to say to them that they should put their ships into mothball and sack their crews until we tell them we want to use the ships again?" That is not practicable, because if the owners of such ships cannot maintain a steady trade throughout the year they will go out of business. So it is not possible to regulate the import of Argentine beef any more than tariff protection is possible.
The right hon. Gentleman the Member for Don Valley said that beef prices had not been reduced in the shops. I hear that frequently. I am not here to defend the butcher, but I must point out that 1324 when he buys a first-class bullock he does not buy all sirloin. He has to get rid of forequarters and brisket. The housewife, who a few years ago was more or less forced to buy those cuts, now has the choice of buying selected chilled Argentine hindquarters. Obviously, she would prefer hindquarters to forequarters and brisket. The result is that the butcher has to sell his best cuts of beef at a very high price in order to average out the price of his lower cuts.
My reply to critics who have put that point to me is this, "You have organisations which take cattle from the farmer to the butcher. I suggest that instead of remaining, as middle-men they should start some butchers' shops to see what they can do in the retail trade, instead of being one extra link in the chain of distribution." That is the test of whether the cattle are being marketed properly—take them straight from the producer to the retail shops. It is no use talking airily about it, we must be practical.
I hope that when I read the speech of my right hon. Friend that I shall not find it unnecessarily complicated. I hope, also, that the Minister will realise that if we have a seasonal average, and if during the period in question the average price for markets is ascertained, as is done in the case of wheat, and at the end of the period a deficiency payment is given to all the beef salesmen in that period, the effect will be as follows.
The man who produces the best beef and is a good salesman will pick up the same amount of deficiency payment as the inefficient producer and, therefore, good production will be rewarded. We see this work well in the case of wheat. If a farmer grows the best quality wheat and sells it at a pound or two more than those who produce a lower quality, he gets the same amount of deficiency payment as a man who sells his wheat at £2 or £3 less than he does.
Finally, a word about the individual guaranteed price. Many people do not realise what that was. Nothing pleased me more than when I learned that the Minister intended to abolish it. I say that because the individual guaranteed price rewarded the inefficient producer and the man who did not know how to sell his produce. I do not want to see the Welfare State extended into agriculture. I do not want inefficient producers to be carried on the backs of the efficient. 1325 With the individual guaranteed price there was no incentive to make the beasts better in order to obtain a higher price, because the inefficient producers knew that when they put their cattle on the market they would find the price brought to near the level of that of the best producer. Therefore, from the point of view both of the farmer and the taxpayer, I am glad that we have abolished the individual guaranteed price and I hope that it will never be reintroduced.
§ 7.7 p.m.
§ Mr. Sidney Dye (Norfolk, South-West)
I cannot express adequately the pleasure I have derived in listening to the debate. The Minister made an excellent speech, but his hon. Friend the Member for Antrim, North (Mr. P. O'Neill) said that it seemed to him to be that of a repentant sinner. The hon. Member for Aberdeenshire, West (Mr. Spence) said that there was something wrong with the entire system, not merely with the price regulations, and suggested that a committee should be appointed to investigate the slaughtering, marketing and retailing of cattle in an attempt to discover whether our existing system is efficient or whether something more efficient could not be devised.
The hon. Member for Leominster (Mr. Baldwin) would like to return to the system which was instituted by my right hon. Friend the Member for Don Valley (Mr. T. Williams) after the war. Under that system there was a guaranteed price according to the quality and according to the time of the year. So, after all these years of Conservative Government, the most Conservative Member on the benches opposite would welcome a return of all that my right hon. Friend did. The hon. Gentleman wants a system of guaranteed prices and his friends want something different from what they have had during the past six months. Not one Conservative hon. Member who has spoken has expressed a word of confidence in the forecast which the Minister has made about his policy for next year and future years.
Indeed, hon. Members opposite feel, as most people in the country do, that they have had enough of Tory Government and that this so-called freedom will wreck British agriculture. That was our experience before the war. Hon. Members opposite want producers to have security 1326 in producing the greatest quantity of the highest quality beef that we can achieve in this country. There was security under the former system, although I agree that the system was not complete.
I agree with the hon. Member for Aberdeenshire, West that the time has come for us so to organise our system of meat production and distribution so that it will be efficient and satisfy the British public and so that our home-produced beef will compete in quality and taste with meat from any part of the globe.
The Minister has tried to cover up the extent of his responsibility for the breakdown in the present system of guaranteed prices. The Annual Review and Determination of Guarantees, 1956, stated in paragraph 21:The Government have decided to discontinue the individual guarantees for all classes of fatstock which were a feature of the guarantee scheme introduced in 1954 after the end of control. These were intended to provide individual producers with a safeguard against any serious imperfections in the auction markets when private trading was restored.The paragraph also stated :In fact the auction markets are now working reasonably well and the stage has been reached when the risks which these arrangements were intended to meet no longer justify the elaborate machinery involved.That was the Government's belief at the time.
The new scheme was forced upon the agricultural industry against the advice of the National Farmers' Union. I am assured that at all times in the negotiations the representatives of the National Farmers' Union told the Minister that in no circumstances would they accept any responsibility for doing away with the system of individual guarantees and that if the Minister did it he would repent, as he has done today, and the system would collapse. Consequently, the Minister must accept full responsibility and not try to say, as he has done today, that he is negotiating with the National Farmers' Union about future prices and trying to involve them in responsibility for what he forced upon them at the beginning of the year. It ought to be made plain to the House and the country that the Minister forced the scheme upon the N.F.U., that the N.F.U. tried to resist it, and that at no time did the N.F.U. agree with the Minister's amendment in the February Review.
I certainly agree with what the hon. Gentleman has said. I accept full responsibility for the method which has been followed. After the Price Review the N.F.U.s made it clear that they were not in favour of the abolition of the individual guarantee but even if the individual guarantee had been continued it would have made no impact upon fulfilling the standard price for this year. It would not have solved the problem that we are solving in this way at the moment.
§ Mr. Baldwin
The hon. Member for Norfolk South-West (Mr. Dye) mentioned that the individual guaranteed price was introduced to protect vendors from butchers' rings in the markets. That is true. Now that there is the Fat-stock Marketing Corporation is it not up to the man who is afraid of the ring to go to the Corporation?
§ Mr. Dye
What the hon. Member for Leominster will not face is that any system of deficiency payments is based upon low market prices. It has been apparent from the operation of the scheme during the past six months that there are not only abnormally low market prices but very big variations in prices from week to week and between different parts of the country. Farmers from any part of the country taking cattle of equal quality to market in the same week may receive widely varying prices. Also, because the deficiency payments system is based upon an average, those who obtain high prices will receive the same deficiency payment as those with low prices. What is fundamentally and lamentably wrong is to try to base a system of marketing and production upon the instability of auction marketing.
I have here the report in last week's Farmer and Stock-Breeder based on the official figures, which reads:Fat Cattle Prices for fat cattle continued to drop last week. On average, lightweights fell by around 5s. per cwt. but heavyweights showed a much steeper decline.1328Although the general trend on Monday was downwards, several markets reported a more cheerful tone on that day. Increases of 1s. or 2s. per cwt. occurred at Abergele, Hereford and Lancaster, and 9s. at Penrith. At Bury St. Edmunds there was an exceptional leap upwards of 23s. for lightweights.For the rest of the week there were very few markets which showed higher rates than of late. Carmarthen and Llangefni were two of the exceptions, the former with an increase of 4s. and the latter of 1s.Examples of the way prices were going towards the end of the week can be taken from the Thursday and Friday markets. At Belford, Fakenham and Llangefni lightweights were 6s. per cwt. down, heavyweights from 5s. to 11s. At Banbury lightweights fetched 7s. per cwt. less and heavyweights 14s.That kind of market report has been appearing in this publication for weeks. Farmers are expected to produce decent cattle in the face of such great variations in price as those, the price sometimes going up by as much as 23s. per live cwt. in one week in one market and collapsing elsewhere. The whole thing is chaos and disorder. How can we expect to have security for the production of beef in such chaotic marketing conditions, and especially when we also have ineffective and inefficient slaughtering conditions and a mass of small butchers' shops supplying the public?
What the Government are not trying to find out and remedy is why there has been this big fall in the market price of beef. It is quite clear that the present retail prices of beef are the same as those ruling over a year ago when prices on the market were very high. The excuse one often hears for that is, "Oh, well, if the price of beef is low, it is probable that the price of mutton or lamb is high. What they lose on one they gain on the other." But at the present time, the prices of all classes of fat stock have been falling for weeks, and still we have high retail prices.
If it is right that the prices fixed for fat cattle should be based on the cost of production over a period of years, and if the Government come in with a guaranteed deficiency payment which is decided on the market prices, why should not there be a system of deciding what is a fair margin for the middleman to receive between the producer and the consumer, because it is they who buy the fat cattle who determine how much the deficiency payment shall be? It is not the Government who determine it, it is those who operate on the market.
1329 If they are making much greater profits now, why should not the Government turn round and say, "Because of the low market prices, we are having to pay a bigger deficiency payment. You are the fellows who are getting the value out of it." Why not place a levy on the butchers, wholesalers and retailers to make up this £10 million, £11 million or £12 million that is now required? Surely, if we are to get stability into marketing, there must be response on both sides, both by those who sell and those who buy.
If, as the right hon. Gentleman says, it is not the increased amount of Argentine beef coming into the country that is causing the low market prices at present—
§ Mr. Dye
Oh, yes, the right hon. Gentleman said quite clearly that there is not an excessive amount of Argentine beef coming in at the present time, and he said that in answer to an hon. Friend of his who indicated that he thought that it was the import of Argentine beef ; so I take it that the right hon. Gentleman's reply meant that he felt that there was no excessive amount of Argentine beef coming in and that import was not causing the present low market prices for home-produced beef.
The two things are entirely different. I said earlier in my speech that the increased supply of Argentine meat was one of the contributory factors to lower prices, but at the same time I said that the present total supplies of beef, including the supplies from the Argentine, were certainly not excessive. That can easily happen. That is the position at present, not an excessive total supply but a lower market price.
§ Mr. Dye
What the right hon. Gentleman will not face up to is why the price of home-produced beef is low when the retail price is high and steady. That is the crux of the whole problem. That is what we ought to be trying to solve and not calling on the taxpayer to find another £10 million, £11 million or £12 million. We ought to be able to get at the cause of the present low market prices, which the right hon. Gentleman did not expect. Surely the right hon. Gentleman will agree that he never expected the present market prices to fall so low.
1330 Is the position now that the Ministry does not know what is happening from one week to the next? Only last week, in answer to the hon. Member for Norfolk, South (Mr. J. E. B. Hill), the right hon. Gentleman indicated that for the weeks in October he expected the deficiency payment to total 28s. per live cwt., but in the present issue of the Farmer and Stock-Breeder, which came out today, it is now clear that for those same weeks the deficiency payment would be 29s. 6d., so the Minister did not know last week what he would have given under the old system without the Order today by way of deficiency payments. He cannot follow the market from one week to the next and so decide what the deficiency payment is.
Surely, we have here the real crux of the problem. We have something else. Reference has been made to the import of Argentine beef, and we are reliably informed that the shipping companies operating between this country and South America are building bigger and faster ships so as to bring more Argentine beef at a lower cost to this country. At the same time, the Government are preventing the butchers, municipalities, or the Ministry from spending any money on improving slaughtering facilities for home stock. The whole thing is held up because we require modern facilities for the handling of the stock after it leaves the farms, which the Government say they will not allow to go forward at the present time.
§ Mr. Dye
The Government are not providing any facilities for improving or building new slaughterhouses in this country. They are allowing certain butchers on the basis of their present high profits to carry on improvements to their slaughterhouses, but they are not providing for large-scale improvement or building of slaughterhouses at present, whereas the shipping companies are going ahead with their schemes.
If the hon. Gentleman cares to put forward an application here and now to build a new slaughterhouse, I will give it great consideration.
§ Mr. Frederick Willey (Sunderland, North)
Is the right hon. Gentleman 1331 aware of the lack of success which we have had in Sunderland where we have a very good case for a slaughterhouse?
§ Mr. Dye
I personally do not want to build a slaughterhouse, but I have a wholesale butcher in my constituency who has deposited plans with the local authority. They have gone to the Ministry, and there they have been, as the right hon. Gentleman's Parliamentary Secretary knows, for over a year, and he cannot get permission to go forward. The Parliamentary Secretary knows that, and the Minister ought to know it, but he does not. The Minister does not know what is going on in the country or in his own Ministry, and because of that he makes these statements in the House from time to time for which he has to repent. But he does not repent, as most sinners do, in sackcloth and ashes, but with smiles and charms. Surely we ought to expect that we can make progress in the handling of our livestock both in marketing and slaughtering if great improvements are being made for the import of beef into this country.
If the right hon. Gentleman cannot make the butchers and others who handle the stock disgorge their big profits and make them available to meet the requirement of the larger deficiency payment, surely he should listen to his hon. Friends as well as hon. Members on this side of the House. He ought to listen to the plea for an inquiry into the margins allowable to the butchers and others handling the fatstock. He should have a system of margins based upon their actual costs if we are to have a system of guaranteed prices to the farmers also based on their ascertained costs. It seems that is only reasonable.
There has been a collapse in the Government's policy. Inside six months they have had to come to this House and say, "We have made a mistake." Their own supporters say they should have done it much earlier, but they did not, and here they are now, at the end of October, saying that their system has collapsed ; that they must have more money to meet the deficiency payment. Surely we shall have an inquiry into the whole system of marketing. Surely, now that the Minister thinks The butchers and others and the municipalities can make improvements and build new slaughterhouses, he 1332 will agree that a period should be given for this work, so that we may have on the one hand an expanding and improving livestock industry and, on the other, a proper and efficient system of processing, slaughtering and the rest. Then the consumers may obtain a more satisfactory supply, and we can all rest assured that no one is reaping huge profits at the expense of the taxpayers.
That is the fault about the present system of deficiency payments. The people who operate the markets can determine how much the Government will pay in subsidy to them and to others, and there is no check. Surely there should be a check, and this has revealed the need for it. Surely the Minister will tell us that, having listened to the speeches of his hon. Friends. They are becoming socialistic in their approach to this problem and are now not merely discontented but can see that this old idea that freedom works in the modern world has been proved completely false, and that we must have something different which must be both fair to the producer and to the consumer.
§ 7.35 p.m.
§ Sir Harold Roper (Cornwall, North)
The hon. Member for Norfolk, South-West (Mr. Dye) will forgive me if I do not follow him in his argument. I understand that the Joint Under-Secretary will be speaking shortly to deal with the points which he raised.
I wish to pay a tribute to my right hon. Friend for introducing this Order. It has taken the sting out of the complaints and the dissatisfaction expressed by those farmers whom I represent and I feel confident that the new scheme now in embryo will, when it appears, give them cause for still further satisfaction.
I understood my right hon. Friend to say that the shortfall below the standard price would eventually be made good, but, he went on to say, in a period beyond the year covered by the rolling average. That will be true of the country as a whole, but my point is that it is not true of remoter places like Cornwall and parts of Scotland. Inevitably, it cannot be true, unless the market price over the period is substantially more than the standard price. In Cornwall, our market prices regularly run around 4s. and 5s. a live cwt. below the national average.
1333 I wish to ask my right hon. Friend whether, in working out this new scheme, he can introduce some form of regional adjustment to help us to overcome that problem. In correspondence with the Parliamentary Secretary I have been told that one of the difficulties is that our store cattle are purchased in our markets and transported elsewhere for finishing. That may be a point, but I suggest that it is not the decisive point. Even in this present scheme there has been a difficulty about store cattle. The fact that the retrospective application of this scheme leaves sales of store cattle out of account is not considered a decisive argument against the scheme.
I ask my right hon. Friend to look at the scheme again and consider whether something can be done to rectify that matter which affects people in the remote areas. I congratulate the Minister on this scheme, but I ask him to look again at that matter.
§ 7.38 p.m.
§ Mr. C. N. Thornton-Kemsley (North Angus and Mearns)
I think that I should divulge an interest. I try to produce fatslock—Aberdeen Angus—and sell them. I therefore have an interest in the price which they and other fatstock may realise. We have had a very bad time. We have experienced a summer in which our cattle has been fetching about £12 to £15 per head less than they did 12 months ago in spite of the incidence of increased costs.
I have always held the view that there is only one satisfactory way of guaranteeing a price to the producer of fatstock and that is to make sure that the price of the individual beast, after it has been sold, is made up to the level of the guarantee agreed at the annual review of prices; in other words, an individual price guarantee. I do not mean the kind we had under the old system. I do not think that that worked properly.
There are great disadvantages about an individual price guarantee, the principle of which I suppose is that it does remove, or it is alleged that it removes, the incentive to individual producers to do that little bit extra to go in for quality production. I do not believe that this is necessarily true, if we have the kind of individual price guarantee which I should like to see, which would be tied 1334 to grade, and where we would have a rigid inspection to ensure that no one qualified for that grade and the guaranteed price accompanying it unless his cattle were up to the required standard.
I have reluctantly to face the fact that that would involve an enormous inspectorate throughout the country in order to achieve uniformity and fairness in grading, and grading which was judged to be fair by the farmers themselves. I must decide regretfully, as I think the Government have decided—certainly the National Farmers' Unions have so decided—not to press any longer for that kind of individual price guarantee. Therefore, I welcome the proposals which have been made.
My hon. Friends the Members for Aberdeenshire, West (Mr. Spence) and Leominster (Mr. Baldwin) spoke about tariffs as if there were no tariff on imported beef, whereas there has been such a tariff for twenty years—ever since the Ottawa Conference before the war—although not a very large one. On chilled beef it has been ¾d. per lb. and on frozen beef two-thirds of a penny and on beef offal 20 per cent. ad valorem. Before the the war, chilled beef sold for about a third of the price at which it sells now. Therefore, it would be legitimate and reasonable to press, if we were free in these matters, for an increase in the tariff on imported beef to that extent and still remain in the same relative position as before the war.
My hon. and gallant Friend the Member for South Angus (Captain Duncan) made a point about Argentine beef. I do not think that there is an early prospect of the Argentine chilled beef supply coming anywhere near the prewar level, even if the cattle were available for export. Reports are that the Argentine people eat much more beef themselves and have not such an exportable surplus as hitherto. Even if there were the port facilities in this country and in the Argentine, there will not be sufficient refrigerator space to bring more than 25,000 tons a month over here, regularly, for some time.
I greatly welcome the Government's initiative in introducing the new scheme. They have shown themselves aware of the difficulties of the fatstock producer during the recent disastrous summer, and ready 1335 to correct it. I welcome the decision to make a retrospective payment and the Government's intention to introduce a new scheme for the fatstock year beginning at the end of March, 1957. I welcome the fact that the Government have been able to carry the National Farmers' Unions with them, for these are, after all, the accredited representatives of farmers and of fatstock producers in principle and in detail.
§ 7.44 p.m.
§ Mr. Douglas Marshall (Bodmin)
I have only one minute at my disposal before the Minister is to reply to the debate, but it is sufficient to enable me to say how much I welcome the scheme and congratulate the Minister on taking the initiative. I was glad to note by his remarks that the right hon. Member for Don Valley (Mr. T. Williams) gives full credit to the Minister also, and that we shall not hear that the scheme is the result of pressure groups.
The scheme is the result of action by the Minister in the spirit of what he undoubtedly wished in the way of a guaranteed price. He desired that, by virtue of the rolling average, a certain sum of money should definitely be distributed to the farmer, but when he saw that it would not happen within a sufficiently short time my right hon. Friend introduced this scheme, which carries out the spirit and the intention of the Price Review decision last February. I hope that farmers will recognise that when the Minister sees at any time that the spirit of his intention is not being brought about he introduces legislation to implement the spirit of his intention, and that therefore, farmers should trust him.
§ 7.45 p.m.
§ The Joint Under-Secretary of State for Scotland (Mr. Niall Macpherson)
I think the House will agree that we have had a good-tempered debate, as we might well have when the Government are providing an additional £11 million for the industry concerned. The debate has even given pleasure to the hon. Member for Norfolk, South-West (Mr. Dye), although I understand that the reason for his pleasure is something of a critical nature that might have been said at various times by Government supporters—
§ Mr. Macpherson
—Yes, and constructive indeed, because we who sit on these benches are always constructive.
My right hon. Friend has explained why the Government decided to make these payments over and above the existing scheme. They will average about 11s. per live cwt. over the year and will range from 23s. per cwt. in the first period of four weeks to 3s. per cwt. in the last period. I do not think that the reasons given by my right hon. Friend have been wholly understood. Guarantee payments were very low in the early part of the livestock year, when prices were still falling from their high level of the preceding summer. Indeed, there would have been no payment at all in the first three-month period had the level of the guarantee not been raised at the last Annual Price Review. That was a vindication of my right hon. Friend's satisfaction last April that the determinations of the Annual Price Review were right and fair, as the right hon. Member for Don Valley (Mr. T. Williams) recalled.
The other point is that it now seems that under the present scheme the total value of guarantee payments will not be enough this year to bring the average total return up to the level of the guarantee, as my hon. Friend the Member for Bodmin (Mr. D. Marshall) has just reminded us. That does not mean that the increase in guarantee at the last Annual Price Review was an illusion, as the right hon. Member for Don Valley suggested ; in the long run, the guarantee would be attained. I would remind the House that the guarantee does not mean that on any particular transaction, or even on the average in a particular month or a longer period, the guaranteed price will be realised. The shortfall would be made up on the average but not, I would remind my hon. Friend the Member for Cornwall, North (Sir H. Roper), on each individual transaction.
The Government expected, and the farming community was justified in expecting, that within the period of the livestock year the total price realised by the farmer as a selling price, plus the guarantee payment, would correspond with the guaranteed price. This year that does not look like happening. In each of the last two years the guaranteed price for beef has been exceeded. But that does 1337 not mean that because it looked as if this was not going to happen this year the scheme had broken down. The right hon. Member for Don Valley used very hard words when he talked about chicanery and "phoney" figures. He said that the Government never expected to have to pay, but that is entirely at variance with the fact that in the long run the Government were bound to make up the guaranteed price.
§ Mr. T. Williams
Why did the Government delay until September or October before making up their mind to produce the supplementary scheme?
§ Mr. Macpherson
For the good reason that we had to watch the course of prices to see what was to happen. In time we might have come very much more closely to the guaranteed price. The Government were determined to encourage beef production and intended the guaranteed price to be realised, and so my right hon. Friend announced last July that the guaranteed price would be kept at not less than its present level of 151s. That would have ensured that it would have been obtained. That undertaking still stands.
In short, the present scheme gives the guaranteed price but not necessarily within any one fatstock year. Because of the time-lag, there is a tendency to lose confidence temporarily in the scheme, although this would be corrected in time. We recognise this imperfection in the scheme and we are setting out to improve the scheme while retaining its virtues.
The Government never claimed that the scheme was perfect. Indeed. I remind the House that in the White Paper on Decontrol of Food and Marketing of Agricultural Produce, issued in November, 1953, these words appeared :No scheme introduced at this time can be regarded as permanent. The present plan has been devised to meet the immediate situation, and is open to modification in the light of experience.We have had the experience of unexpectedly high prices in the first three four-week periods of 1955–56 the total average return was never below 170s. 6d. at a time when the guaranteed price was 138s. 8d., and in seven out of the thirteen periods it was above the guaranteed price. This year, on the other 1338 hand, we have had the experience of falling prices when the decline has not been completely offset by the rise in guarantee payments. In fact, stabilising adjustment payments have been made in the last three four-weekly periods. It is this steady fall which has demonstrated the weakness in the 52-week rolling average system, namely, that it adjusts the rate of guarantee payment too slowly to enable the total return to approximate to the guaranteed price.
It is not for me tonight to discuss the framework of the new scheme which we shall introduce next March, but what is needed is to replace the present fatstock scheme by a method of payment which is more quickly responsive to changes in market conditions. We have reached agreement with the National Farmers' Unions—and hon. Members have been good enough to remark on this point—on the main features of a new scheme, although it cannot be finally completed until the start of the next annual review.
I have noted what hon. Members have said about the requirements of the new scheme. My right hon. Friend has outlined the main requisites. Suffice it to say that we are thinking in terms of a narrower band of stabilising adjustment limits with a seasonal scale in the case of cattle and sheep—some of my hon. Friends were anxious to have that—and a rate of guarantee payment based on four weeks instead of the average of the past 52 weeks.
What we have to do tonight is to seek the approval of the House of the Order which enables my right hon. Friends to make additional payments over and above those which are available to producers under the present fatstock scheme. The House will note that the power to make such payments is limited to payments in respect of cattle and is confined to the present year. My right hon. Friend has said that the present scheme has worked well for sheep and pigs, and there is no occasion to change it here.
The manner in which the power is to be exercised is set out in the written reply to the Question put down by my hon. Friend the Member for Norfolk, South (Mr. J. E. B. Hill) last Thursday and the total cost to the Treasury will be approximately £11 million. A Supplementary Estimate will be presented in due course. That is the answer to my hon. and gallant. 1339 Friend the Member for South Angus (Captain Duncan)—or, rather, the only answer which I can give him at the present time. I am unable to confirm or deny the figures which he suggested of the size of the Exchequer payments in relation to the fatstock scheme.
I think the House would like to hear a word about the time of payment. The supplementary payments for the first eight periods will start almost at once and it is hoped that they will be completed by the end of the livestock year—that is to say, 24th March, 1957. As hon. Members have pointed out, this is a complicated business involving going right over all the previous transactions. There may be a slight difficulty in the early stages in Scotland, but we hope to complete the payments by the end of the livestock year. For the last five periods of this livestock year—that is to say, from 4th November to 24th March—supplementary payments will be included in the guarantee payment plus any stabilising adjustment payment made weekly.
I was asked by my hon. Friend the Member for Cornwall, North about how the payments will affect breeders of cattle and those who raise store cattle. The additional payments will not benefit them directly. The retrospective payments cannot benefit them directly except in as far as they tend to stimulate confidence, but the additional payments from now on should benefit them indirectly in that if the farmer who finishes cattle for slaughter knows that he will get this additional payment, he is likely to be disposed to pay more for stores than he would otherwise have done.
My hon. and gallant Friend the Member for South Angus asked a question about the consumption of meat per head of the population and suggested that there had been a swing away from the consumption of beef in relation to other forms of meat. There is something in what he said. The consumption of beef for 1955 has been roughly held as compared with that of 1950, whereas the consumption of all fresh and frozen meat rose in that period from 76.1 lb. per head of the population to 89 lb. per head of the population. We think that in this year the consumption of beef is likely to be back, roughly, to its pre-war rate of about 55 lb. per head of the population.
§ Mr. Macpherson
As I was saying, we think that the consumption of beef per head of the population is likely to return to roughly the pre-war level of 55 lbs. as against last year's level of 46.2 1bs.
My hon. and gallant Friend also asked a question about imports from the Argentine. As my right hon. Friend said, it has never been maintained that imports from the Argentine have not affected prices. Of course they have. The increase in imports from the Argentine has been pretty considerable. Nevertheless, we have to bear in mind that even now the Argentine is providing us with only about 20 per cent. of our total supplies of beef compared with about 30 per cent. before the war. Without the supplies which we are now getting from the Argentine, the average level of beef consumption in this country would still not have returned to its pre-war level, notwithstanding the increase of about 20 per cent. which has taken place since then in home production.
Other points have been raised and, with permission, I will write to my hon. Friends and to hon. Members opposite who have raised them, but I think I have dealt with the main points which have been raised. I would conclude by saying that the Government's willingness to make these additional payments and to modify the present scheme demonstrates, first of all, their readiness to learn by experience, in marked contrast to the party opposite, and, secondly, their intention to treat farmers fairly. There has been some doubt expressed about that, but this Order indicates that intention and that determination. Lastly, the Government's firm intention to carry out the policy declared in the last White Paper on the Annual Price Review ; namely, the further encouragement of production of fat cattle, and, with that object in view, to retain a high level of guarantee as a necessary part of their long-term policy for beef production.
§ Question put and agreed to.
That the Fatstock (Guarantee Payments) (Amendment No. 2) Order, 1956, a copy of which was laid before this House on 23rd October, be approved.