§ The Minister of Agriculture, Fisheries and Food (Mr. Joseph Godber)
With permission, I should like to make a state- 474 ment on the meeting of the Council of Agricultural Ministers in Brussels this week.
The House will recall that agreement was reached last month that we should apply the common agricultural policy on the basis of a representative rate for sterling rather than our official parity. This rate was based on the average of market rates for sterling in the first two weeks of January. Since then, following the devaluation of the dollar, sterling has fallen below this representative rate in terms of the Community unit of account and the result has been an increase in import prices. However, the Council has now agreed on an amendment to the existing Community regulations which will provide for the introduction of monetary compensatory amounts for the United Kingdom—and for Italy, whose currency is also now floating.
In effect, these monetary compensatory amounts will take the form of additional refunds on exports from other Community countries to the United Kingdom and reductions on import levies on imports into the United Kingdom from third countries. The precise levels will now be worked out urgently by the Commission and the management committees. The calculations involved are complex but, once established, the rates will be subject to automatic adjustment if there are further movements of 1 per cent. or more in the value of currencies. The immediate application of these additional compensatory amounts will ensure that, so far as the main basic foods to which compensatory amounts and third country levies at present apply, there will be no increases in prices in the United Kingdom as a result of the latest currency developments.
Apart from this important decision, the Council had a further discussion on direct incentives for beef production. The Commission will be making further proposals which will take account of the experience which we and other member States have had in this field. We also secured agreement that our growers will benefit in full from the Community subsidy on herbage seeds from the 1972 crop.
At the request of the Commission the Council decided to defer consideration and implementation of Community farm price levels for one month. These will 475 now be considered at the end of March and implementation would begin from 30th April.
§ Mr. Shore
I think that the Minister would accept that what we are dealing with is a statement on the consequences of the further devaluation of the pound which has taken place in the last two weeks and the impact of that devaluation on the complex arrangements for Common Market prices. If I understood his statement correctly, what it appears this time to indicate is that the Common Market has changed its usual practice in relation to a currency which is devalued and that, instead of demanding that the Government of the currency concerned should impose levies, it has agreed this time to maintain the existing prices in the country concerned by increasing the amounts of subsidies paid out to Common Market food exporters, in other words, that there will be a further subsidy to French and other farm exporters.
If I am right in that, does this mean that there will be more competition now facing the British farmer in the prices that he has to face in the year ahead? Does it not also mean that the actual cost of the Community's farm budget is hound to increase and that therefore the British contribution to it will inevitably have to increase with it? If so, by how much?
In the last part of his statement, the Minister referred to the delay for a whole month in the announcement of the new Community farm price levels. Would he not agree that this has important implications for our own farm price review, which is clearly to be pushed forward by a further month? In his view, is there any serious possibility of M. Lardinois in the extra month actually sorting out the anomalies of the now extraordinarily complex system of subsidies, export restitutions and levies which the CAP is now practicising, or is it simply a period of time bought mainly with the purpose of helping the French Government get through a difficult general election?
§ Mr. Godber
No, I would not accept the last explanation. What has been arranged this week does not, as the right hon. Gentleman describes it, result 476 from the devaluation of the pound. This is a direct result of the devaluation of the dollar and the movement of currencies which followed. It was not only the pound that was affected. The pound and the lire among the European countries are those to which we are referring.
As for the changes which have been made, I would remind the right hon. Gentleman that, last month, when I explained the changes which had been made then, I said that we made arrangements then that, if there were further changes, they would be dealt with by monetary compensatory amounts. I said that in reply to the right hon. Member for Cardiff, South-East (Mr. Callaghan).
That is precisely what we are doing at this time. The difference is that on that occasion we had arranged merely for floating upwards those monetary compensatory amounts. Now the arrangement has been made flexible so that they can float in either direction—[Laughter.] I do not know why hon. Members find this amusing. It is very important that the arrangement should be fair and right, and that 1 per cent. movement is the way in which it should operate.
The right hon. Gentleman asked whether this means that the farm budget will increase, and, if so, by how much. This will not, of itself, have any large effect on the Community budget. To the extent that it does, I should think that. if anything, it will benefit us slightly as a result of it. In other words, what we receive from the export restitutions will be slightly more than we shall pay in increased FEOGA contributions. That is the most information I can give.
§ Mr. Shore indicated dissent.
§ Mr. Godber
The right hon Gentleman may shake his head, but that is the information I have. It depends entirely on the quantities of our exports that flow in this way, because there is more than one currency involved here. The bulk of the advantage of this arrangement, I think, will go to Italy, but Britain will obtain a certain proportion of it. There is no question about that.
In so far as the home farmer is concerned, the delay in regard to new Community price levels will not affect, of itself, the British farm price review. 477 What will affect our arrangements are the arrangements under Article 54, which have not yet been finalised but which we hope to get finalised within the next week or two, but they will not delay the implementation. I hope to be able to announce the result of the farm review about the middle of March.
§ Mr. Charles Morrison
With regard to the point about beef, will my right hon. Friend recommend very strongly to the Commission our system of production grants for the encouragement of beef production? Have those ideas already been fed to the Commission? If so, what reaction has he received?
§ Mr. Godber
Yes. I have instanced what we do in the form of production grants for beef in this country, and there were several proposals put before us yesterday. One of them was somewhat similar to our methods. But I pointed out that there was insufficient information about the cost and effectiveness of these proposals. I hope, however, that within the next month or two, it will be possible to work out some sensible arrangement within the Community which will help to stimulate production without necessarily putting up the price to the consumer.
§ Mr. John Morris
Will the Minister try to simplify matters? First, has not the pound in reality been substantially devalued since it began to float? Secondly, does this mean that the cost to the housewife will he more or less? Thirdly, will it mean more or less price for the farmer?
§ Mr. Godber
if the hon. Gentleman is referring to the period since the pound originally started to float, in the statement I made last month, following the meeting last month, I pointed out that the representative rate, to which I have referred today, was about 9½ per cent. below the old unit of account rate. The unit of account rate was fixed at a time when the pound had floated upwards, so it was a substantial reduction from that. What has happened now is a reduction which will approximate somewhere between 5 per cent. and 6 per cent., as a further depreciation of the pound in relation to European currencies, although it is an appreciation in relation to the 478 United States currency. Therefore, it is very difficult to say precisely, coming in the middle of this, just what the effect on British food prices will be. But certainly so far as what was arranged yesterday is concerned, it will protect the British consumer rather than the other way round.
§ Sir Robin Turton
Did my right hon. Friend raise with the other member Governments the problem of the British egg market being flooded by Common Market eggs, and will not this problem be aggravated by the increased monetary compensatory amounts to which he has agreed?
§ Mr. Godber
The increased monetary compensatory amounts to which I have agreed will not directly affect eggs and poultry at this time because in regard to eggs and poultry they are related to the position of grain other than wheat, and wheat is the only one of the grains to which monetary compensatory amounts apply at present. Therefore, they will not have a direct effect in regard to eggs and poulty.
Regarding the first part of my right hon. Friend's question, I discussed informally with officials of the Commission yesterday the particular problems of British egg producers and warned them that we might find it necessary to invoke Article 63 if there is a clear distortion of trade.
§ Mr. Deakins
At what rate of exchange will the very heavy increased costs to United Kingdom farmers in 1972–73 be taken into account in the forthcoming Community agricultural forecast of prices for the coming year'? Is there not a serious danger that these very heavy increased costs will have been devalued in terms of the unit of account, which is the unit basis for the fixing of Common Market farm prices?
§ Mr. Godber
The hon. Gentleman must be working under a misapprehension here. What we shall be doing in regard to the United Kingdom will be related to internal values. In so far as the units of account are concerned, this will be in relation to Community price levels. We are raising British prices towards Community price levels over a five-year period. [HON. MEMBERS: "Oh."] This has always been made 479 perfectly clear. It is over a five-year period. What we shall be doing in this price review I cannot anticipate now, but it will not necessarily be directly related to the changes in the unit of account, to which the hon. Gentleman referred.
§ Mr. Godber
My hon. Friend is right in saying that it is extremely complicated. I do not think that he is right in saying that it is likely to collapse. There is far too much at stake here for it to be allowed to collapse, in regard to the economy of nine countries. I should have thought that that was the main factor on both sides of the House.
The Commissioner is well aware of the complicated nature of these arrangements. I am hoping that he will be coming to London in the near future, when we shall be having discussions with him about ways in which they can, in the long run, he simplified.
§ Mr. Godber
The right hon. Gentleman knows perfectly well that in all the discussions we have had, in the House and elsewhere, about the accession, it was always made clear that we should raise our prices to Community levels. His Government estimated what that increase would be in their White Paper, and we took over that objective. We have given forecasts which have accorded somewhat similarly to the position of the previous Government. There is no change whatever in relation to that. But what I and my colleagues tell him is that so far rises in prices in this country have certainly not been occasioned by the Community.
§ Mr. Hugh Fraser
In view of the surpluses, now becoming very considerable, of butter and other commodities in the Common Market, will my right hon. Friend resist any proposals which may be put for increasing agricultural prices in Europe in the review. Furthermore, will he consider the arrangements by which Britain can buy some of these surpluses rather than allowing the price of butter to rise by £200 a ton in July?
§ Mr. Godber
The problem of surpluses has been a recurring one in the Community since its formation. At present butter is in surplus again, although it was not a year ago. These will obviously be matters of importance, concerning myself and my colleagues, in Brussels when we discuss them. It is certainly not my desire to see Community prices levels rise in this way. I hope we shall find a satisfactory solution, but I cannot anticipate the outcome of these discussions.
§ Mr. Strang
When will the Minister and his Common Market counterparts face up to the fact that the vast array of complicated border taxes and compensatory payments has long since made a nonsense of the idea that we can have a European agricultural policy based on common market prices? As it is the British people, above all, who suffer from this policy, will he take the lead in calling for it to be scrapped and will he tell the Commission to concentrate on something useful, such as regional policy?
§ Mr. Godber
The simple answer is that I do not agree with the hon. Gentleman at all. The Community arrangements for a CAP make an effective contribution towards European unity. It is not so much the common agricultural policy but the complications about the relative currency values that have made problems so difficult over recent years. These are the facts. This is what has complicated the issue. I hope and believe that we shall be able to get these matters sorted out in a satisfactory way. But at present, although these are complicated, they are fair as between one country and another.
§ Mr. Marten
On the topic of rises in the cost of food, will my right hon. Friend confirm that we are now phasing out subsidies on sugar—a commodity which has been subsidised for some time without rationing? Will he inform the TUC 481 how stupid that body is in recommending to the Prime Minister that food should be subsidised because, under the Common Market régime we are not allowed to go in for subsidies?
§ Mr. Godber
On the question of sugar—and I made this point last month—the relatively small consumer subsidy is being phased out. So far as the TUC is concerned, my right hon. Friend the Prime Minister is quite competent to deal with these matters.
§ Mr. Buchan
Is not the whole common agricultural policy in a state of shambles? If we are to understand the Minister's statement, does it not mean that there has been not so much a devaluation as a devaluation on top of a devaluation? Secondly, we are told that there is to be no delay in terms of a review of British agricultural policy but only that there will be a postponement until the middle of March. Thirdly, the subsidy on beef will continue, although the Minister does not know how it is to be done, though that question must be decided in advance of the review. This is the present situation in which British agriculture finds itself.
Is it not disgraceful that our policy has been postponed while the mess is sorted out in Brussels? Will the Minister put the British policy to the Commission for ratification before he announces it to us, or will the Commission cancel it and will he then make an announcement to the House? In the meantime, what does he intend to do 482 about prices? Does he not appreciate that a 3½ per cent. increase since the freeze constitutes not a freeze or a thaw but a torrent of price increases? The Minister should act now.
§ Mr. Godber
The hon. Gentleman, in an effort to try to score party points, completely misunderstands the situation. It is not the CAP which is in difficulty. It is the effect of the currency problems which arise from wholly different sources. The hon. Gentleman is wrong in talking about delay in the farm price review, because we are not delaying it. The middle of March is the normal timing, and that is when it will come out. He is confusing our price review with the Community pricing arrangements. It is the Community pricing arrangements which are being delayed by a month. This will not affect us in any way. If he feels that things are in a shambles, he has only to look at the affairs of his own party.
§ Several Hon. Members rose——