HC Deb 08 March 1976 vol 907 cc28-44
The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart)

With permission, Mr. Speaker, I will make a statement on Community agricultural support and prices for 1976–77 and our decisions on guaranteed prices and grants following the Annual Review.

The Annual Review White Paper is published today. The changes for the main commodities are as follows.

The Community's target price for milk will rise in two stages, giving an average increase for the year of about 6 per cent. Because of the monetary changes, the increases in the major producing countries will be lower. The impact in the Community as a whole will also be considerably offset by two other measures.

First, the intervention price for skimmed milk powder will be set at 2 per cent. below the level implied by the target price change and a further 1 per cent. below that level from 16th September.

Secondly, the Council will decide by September on the way in which Community milk producers can make a financial contribution to the restoration of a balance in the milk sector. In these discussions I shall insist on the absolute need for measures which will deal adequately with the Community's structural surplus.

In the light of this, the Government have decided to increase the guaranteed price for milk to 9.46p a litre. This is an increase of about 6p per gallon to 43p a gallon. This is about 16 per cent. higher than the revised guaranteed price for this year. The standard quantity will be slightly increased to 13,865 million litres. The higher support level for farmers will not result in any increase in the retail price of milk before the autumn.

These decisions demonstrate the continuing priority which we give to economic milk production in the United Kingdom, while exercising restraint on the full level of Community prices. Thus we have been able to improve further the relative position of the United Kingdom milk producers.

The Commission's proposal for the payment of grants to farmers who undertake not to market milk has been deferred for further consideration. The Community contribution to the general butter subsidy will no longer apply to butter of non-Community origin but the rate of contribution has been increased.

The amount of skimmed milk powder which the Community makes available for food aid in 1976 will be increased to 200,000 tonnes. The Community also intends to dispose of 400,000 tonnes of skimmed milk powder by a temporary scheme of compulsory incorporation in animal feed. On a temporary basis, also, aid will be available for the private storage of certain other protein products.

During 1976 the Government will also discuss with representatives of milk producers, processors, consumers and other interested organisations the arrangements in the milk sector from the end of the transitional period. We intend to ensure a smooth transition to reliance on the Community support system.

For beef, I have achieved my major objective, to which this House attached great importance. The premiums are being continued so that, when beef is plentiful, the United Kingdom consumer will get it more cheaply than with a system of intervention only. Furthermore, the Commission has undertaken to produce by November a detailed report on the merits of intervention and the full premium system.

This is an important step towards the adoption of a premium system on a Community-wide basis. For this beef year the United Kingdom average monthly seasonal target price for the whole beef year will be £26.60 per live hundredweight rising by the end of the beef year to £28 compared with an average of £23.06 for this year. This will enable farmers to plan their marketings in an orderly way to the benefit of the consumer. With permission, I will circulate details in the Official Report, and I am making copies available in the Library of the House.

Under the terms of the Treaty of Accession, the United Kingdom guarantees for cereals are being terminated at the end of July. A new pattern of Community support for feed grain has been agreed. The target prices for wheat and maize will be increased by 9 per cent. The effective intervention level for feed wheat, however, will be reduced by nearly 8 per cent. below this year's basic intervention price. The intervention price for bread-making wheat will be only 4 per cent. above this year's level. For United Kingdom producers, however, their intervention price will be substantially above the level of this year's guarantee.

For sugar, the increase in support prices for beet—8 per cent.—will give a boost to our expansion programme after two bad years. I do not expect any increase in retail sugar prices as a result of this settlement.

I turn now to our decisions on United Kingdom guaranteed prices and grants The guaranteed price for sheep will be increased by 18 per cent. to 42p a pound; from 3rd January 1977 this will be expressed in metric terms as 92.6p a kilogramme. The guaranteed price for wool will be increased by 23 per cent. to 83.7p a kilogramme. These increases are greater than the estimated increase in the costs of these commodities and should give a solid floor to sheep farmers' returns in the coming year.

The hill sheep subsidy has been increased by almost 140 per cent. since the 1974 Review and will be continued at the present level next year. Hill farmers will benefit substantially from the new support prices for beef and the higher guaranteed prices for sheep and wool. We intend, however, to increase the hill cow subsidy to about the maximum level permitted by the Less Favoured Areas Directive. The increase will be £4.50 per cow and the new level will be £29 per cow. In order to give an early boost to hill cow farmers' incomes, this extra payment will not be held up until 1977 but, subject to the approval of Parliament, will be paid as a supplement to the 1976 payment which is now being made.

This has been an exceptional year for potatoes with supplies severely cut back by the weather. We do not intend to over-react, but a substantial increase in the guaranteed price is justified. It will be increased by 43 per cent. to £40 a ton. This will be expressed in metric terms as £39.37 a metric tonne.

We have also reviewed our national subsidies and capital grants. The beef cow and calf subsidies expire this year but we intend to put before the House statutory instruments which will extend them for a further period. The beef cow subsidy will continue to be paid in relation to cows on holdings on the qualifying date in 1977. The calf subsidy will be paid on calves born up to the end of April 1977 and some payments will, therefore, continue until early 1978. The broad effect of these decisions is that these aids will continue for a further period but will not be available when United Kingdom farmers are receiving the full benefit of Community support prices after the end of the transitional period.

We have also decided, subject to the approval of the House, to raise certain rates of capital grant under both the Farm and Horticulture Development Scheme and the Farm Capital Grant Scheme. The increases, which are estimated to cost about an extra £30 million in a full year, are directed to investment in the better use and conservation of grass for all livestock and to economic milk production. The main improvements will be in grants for silos, milk buildings and equipment, cattle accommodation, barn hay fans, fencing, re-seeding and land reclamation. I hope to put Statutory Instruments before the House before Easter.

We intend to simplify the operation of the Farm and Horticulture Development Scheme, which attracts a Community contribution, and to put a substantial advisory effort behind it. In consequence, many farmers will find that this scheme, with its high rates of grant, will be open to them. We also intend to pay the costs of any guarantees by the Agricultural Credit Corporation on the bank borrowing of farmers implementing development plans under the Farm and Horticulture Development Scheme. The revised schemes will also include a number of higher grant rates in the hills.

In our White Paper last year we committed ourselves to the economic case for more production from our own farms. We set priorities and an objective to be pursued consistently to the early 1980s. These higher support prices and grants for our farmers make available the resources which will set us on course for a good farming year in 1976–77 and will help to achieve the medium term objectives in "Food from our own Resources".

Mr. Pym

The Minister was courteous enough to tell me at 3.28 p.m. that he had only just completed his statement and that no copy was available for me. I accept that there may be good reasons for that, but the mere fact that it happened underlines the gravity of the statement. It is the most complicated review we have had and is difficult to follow. Both because of its importance and of its implications, it is fair to ask for a debate in Government time so that all the implications may be considered.

The House will agree that the basic causes of the right hon. Gentleman's difficulties are, first, hyper-inflation at home and the soaring costs that go with it. [HON. MEMBERS: "It is because of the Common Market."] Let hon. Members wait. They can have their turn in a moment. The White Paper indicates that the increase in costs in two years is more than £1 billion. The second factor is the sinking pound. Those are the reasons for food prices going up so fast. [HON. MEMBERS: "And the Common Market."] These factors have a far greater influence than any connection with the Common Market.

We regret the weakness in the Government's negotiating position as a result of these factors for which the Government must take a collective responsibility. Does the right hon. Gentleman agree that inflation at home is still grossly excessive even at its reducing rate and that this, combined with the sinking pound, makes agricultural expansion even more urgent and important than before? [HON. MEMBERS: "Too long!"] In these circumstances import saving is becoming even more significant—

Hon. Members

Ask a question.

Mr. Speaker

Order. We heard a very long statement from the Minister. [HON. MEMBERS: "The right hon. Gentleman should ask a question."] Order. Hon. Gentlemen must not shout at me when I am on my feet. When a Minister has made an extended statement it is customary for the Opposition Front Bench to be allowed to ask a long supplementary question.

Mr. Pym

Thank you, Mr. Speaker. Is the Minister aware that parts of the package are helpful and that we welcome them? I refer particularly to the hill cow subsidies, the capital grants and the horticulture scheme. I tried to list them as the right hon. Gentleman went through them. It is, of course, rash to act on first impressions, but I cannot escape the first impression that in the light of the two exceptionally bad years, in which we know the weather was a significant factor, it is doubtful whether the package as a whole will fulfil the undertakings and commitments entered into by the Minister in the White Paper last April.

Will the right hon. Gentleman acknowledge that the green pound is already further out of line than when we debated agriculture about 10 days ago? Am I right in saying that the misalignment is approaching 10 per cent? The cause of that misalignment cannot be brushed aside. The representative rate of the green pound is basic to confidence in agriculture. Although the Minister may be pleased that he rejected the 2 per cent. change, I am certain that be will have to return to the subject very soon. [HON. MEMBERS: "Question!"] On the beef premium, is the Minister aware that we are glad that he has retained a version of his beef premium scheme, which is, unfortunately, watered down—

Mr. Peart

It is not watered down.

Mr. Pym

—but that we note that it is still not permanent? Is he aware that he has sacrificed a great deal for it? But we supported him in his attempt to get it and he should not exaggerate what he has achieved.

We are not satisfied with the proposals he has announced for skimmed milk. The proposals which were accepted are better than those which were before us when we debated the topic three weeks ago, but the United Kingdom is not in surplus and the surplus is not our responsibility. What the right hon. Gentleman has proposed is likely to prove unfair to pig and poultry producers and could conceivably affect the price of pigs by 10p a score, which is an avoidable increase.

I cannot now go into the other matters, such as milk, cereals, potatoes and sugar beet, but the comments I have made so far must indicate that a debate in Government time is justified after we have had an opportunity to consider the whole package, particularly in view of the enhanced and vital importance of agriculture to the British economy in the nation's present unfortunate circumstances.

Mr. Kelley

On a point of order, Mr. Speaker. In view of your ruling about the length of the statement and the desirability of allowing the Opposition to put a lengthy supplementary question, will you also extend the period of discussion on the statement so that Back Benchers may make similarly lengthy contributions?

Mr. Speaker

The hon. Gentleman misunderstood me. I did not rule on the length of the questions put by the shadow Minister. I followed long-established custom by allowing a long series of questions in response to a long statement by the Minister—

Mr. Russell Kerr

They were not questions.

Mr. Speaker

Order. I am sorry, but I cannot deal with heckling. Mr. Peart.

Mr. Peart

The question of a debate will be a matter for the usual channels and my right hon. Friend the Leader of the House. I accept that this is a complicated statement. For that reason I hope that hon. Members will study carefully both what has been said and the White Paper, instead of coming to rash conclusions or taking up special positions.

I accept part of what the right hon. Member for Cambridgeshire (Mr. Pym) said about inflation, but, of course, it existed under the previous Conservative Administration. At that time fanners were affected considerably by it. I remember the imbalance between the livestock sector and the cereal sector with the tremendously high costs which prevailed. This situation is not peculiar to a Labour Administration. It existed under a Conservative Government, too.

Adjustments to the green pound are an important and serious question. I have made two adjustments in the last six months. I was right to take the stand that I took on this issue because there was a risk that food prices could be forced up much more.

I am surprised that the right hon. Gentleman is so niggardly about the beef premium scheme. I think the farmers will welcome it, particularly with the new seasonal scale, which is an improvement on last year's arrangements. For the first time a variable premium system has been accepted in principle, and that is a deficiency payments system.

I agree that the question of skimmed milk needs watching very carefully. The important aspect here is the administration of the scheme. My hon. Friends and other hon. Members pressed me to tell the Community that it must get rid of surpluses. I give one example concerning food aid.

Mr. Thorpe

Is the Minister aware that, although his statement was long and complicated, I shall not seek to compete with him or the right hon. Member for Cambridgeshire (Mr. Pym), except that I shall be brief. What discussions were there in general about the green pound as the determinant of the prices paid to British farmers? Does the right hon. Gentleman agree that disparity between the true exchange rate and the green pound has always hitherto worked to the disadvantage of British farmers? Was that point discussed?

Second, were the slaughter premiums agreed at less than he thought was the minimum for the health of our beef industry? Could he say something about pigs, which were not mentioned? While one unequivocally accepts his remarks about hill cow subsidies, which are extremely welcome, is this price review an indication to beef producers to expand production, cut it back or leave it much as it is?

Mr. Peart

As I said to the right hon. Member for Cambridgeshire, I felt that it would have been wrong to make a move over the green pound in this price review, for the reasons I mentioned. On the question of my premia system, I believe that what I have said is right. When hon. Members carefully read the scale, they will see that farmers will be in a better position than last year. Pig prices are very good in the Community.

Mr. Jay

Did my right hon. Friend accept the compulsory use of skimmed milk powder in feeding stuffs as being beneficial to this country or simply because, as a member of the EEC, we could not avoid it?

Mr. Peart

I said that I did not like the scheme. I met the trade just before I went out to Europe. When a package is put together, however, there are times when one has to concentrate on how to improve the details. We shall still try to do that.

Mr. Powell

Would all the increases in food prices to the consumer which follow from this statement have been necessary if Britain had not been part of the EEC?

Mr. Peart

One has to accept that Northern Ireland farmers, Welsh farmers, hill farmers and lowland fanners deserve a proper return to enable them to produce the food that we require and to expand. I regard this package as a fair balance and I believe that in the end the consumers will agree that giving the producer a fair return is the only way in which we can have security of supply, which I believe we shall now get.

Mr. Buchan

Would my right hon. Friend agree that this package represents a major defeat for all the hopes with which we entered negotiations? Would he not agree that, on beef, we have accepted a whittled down and perhaps non-profitable version which in turn will be paid for by us instead of by the EEC? Would he not even now accept that our policy was not merely to get rid of surpluses but not to produce them in the first place and that the incorporation of 400,000 tons of skimmed milk powder compulsorily will add to the price of everything we eat in Britain? Finally, in defence of his position here, would my right hon. Friend not add weight to the case of those of us who are arguing for the necessity of maintaining food subsidies, particularly for the lower income groups?

Mr. Peart

On the question of improvements in the operation of the policy in Europe, I believe that when my hon. Friend looks carefully at the variable premium system, including the seasonal provision, which is important for the fanner and to ensure that the scheme is properly administered, he will agree that we have achieved a tremendous improvement. I am surprised that, like the right hon. Member for Cambridgeshire, my hon. Friend is so niggardly. I wonder why, because this is what he wanted.

We have argued over and over again that the price review determination should take into account the needs of the efficient farm. We have also argued and recognised the necessity for producer co-responsibility for surpluses, especially of milk. The Council of Ministers agreed to that. There is a problem with surpluses in the Community but there are similar problems in New Zealand, Australia and the United States. I would say to some of my hon. Friends that I would rather seek to achieve success in this direction and at the same time to recognise—

Mr. Molloy

Tell us when failure comes.

Mr. Peart

I hope that my hon. Friend will get up to ask me a direct question instead of shouting at me. I know him very well and I know that he is a reasonable man, although he may disagree with me, but hon. Members should listen to what I say. One of the great problems in the world is that countries such as the USSR had have failures in their agriculture and the Western world has had to help them out.

Mr. Watt

Although I congratulate the Minister on the many excellent features of the result of his negotiations, would he not agree that he should now bow to the inevitable and accept an intervention scheme for meat instead of sticking to the beef premium scheme? Does he not agree that the cash for an intervention scheme would come from the EEC, whereas the cash for the beef premium scheme must come from our own Exchequer?

Mr. Peart

As the hon. Gentleman knows, I have always said that I believed that the system of permanent intervention was not a good one. That is why I first negotiated what was called a fixed premium scheme and subsequently, in the price review negotiations, a variable premium scheme. I now have that system. Not only that, but I believe—

Mr. Watt

But it is only one.

Mr. Peart

No, it is not just one. I believe that Ireland, Holland and Germany look favourably on what we have done. There was good will in the Community on this. That is why—

Mr. Skinner

A pity we do not see more of it.

Mr. Peart

My hon. Friend must please listen.

We also now have a recognition that this premium system, which was originally condemned by most people, could be enshrined in a Community system.

Mr. Peter Mills

Will the right hon. Gentleman bear in mind the fact that, although it is essential to cover producers' costs, he and the Community are on the wrong course over dairy surpluses? Would he bear in mind the fact that what he should have put forward was variable intervention prices and even national quotas for milk, so that those countries which produce only for surplus are dealt with? Why is that not being put forward? What the right hon. Gentleman has done in this matter is to store up trouble for the future.

Mr. Peart

If the hon. Gentleman carefully examines the implications of the price package for countries such as France and Germany, he will see that they have very small increases—3 per cent. and 2 per cent. That is why we must recognise that this award is not so good for them as people imagine. I mean this sincerely in relation to the percentage price increases for milk in Germany and France. Our position is different, and I know that the hon. Gentleman feels strongly about it. When we debated the Scrutiny Committee's Report and associated matters, he put this point to me. This is a difficult problem, but we are still prepared to examine whatever proposals may emerge from the Commission and to discuss them in the Management Committee.

Mr. Roper

How far does my right hon. Friend feel that the Community price review has implemented the stocktaking report on the reform of the common agricultural policy? What more will he and his colleagues do to ensure that the cost of surpluses is borne by producers as well as by consumers and taxpayers?

Mr. Peart

That is a fair question, which I partly answered earlier. A price review based on the efficient and commercial farm was one of our objectves. That has been accepted. I believe also that the right of a country such as Britain to have the type of beef régime we think is better for our conditions has now been accepted. I believe that the principle of co-responsibiliy for getting rid of surpluses has also been accepted. One thing which did not emerge in the price review was the liberalisation of imports. I intended to raise New Zealand's position here, because it is very important, but after talks with the New Zealand Administration, I will do so at a later date.

Mr. John Davies

Is the Minister aware that, even for someone like myself who greatly supports the principle of intervention as a method of organising the market, it is still to be found—by me certainly and I think by others—that the balance of judgment reached in the Council of Ministers is one which has too great a regard for the surplus producers of the Community and too little for a country such as ours, which is, after all, a great customer for those surpluses? Will the Minister assure the House that he is taking steps to get this balance better adjusted in the Community?

Mr. Peart

I accept that. I know that the right hon. Gentleman has raised this matter previously. On the other hand, some people say: "Are there not inconsistencies in your policy of trying to increase your own, say, milk production while at the same time supporting a policy to restrict milk production in the Community?" I agree, because we are in a special position, that this is something that we must carefully and vigorously scrutinise and watch. I will do just that.

Mr. John Mendelson

My right hon. Friend invited us to listen to him, but will he accept that those who listened to him most carefully in the years when he was a leading opponent of this country's entry into the EEC have found that he was correct when he warned the British people against entry? We are confirmed in our view from the fact presented to us as a result of these negotiations. First, can he confirm or deny the official French and German reports that for the limited concessions on beef, for which he asked and which he received, he had to make considerable concessions on the prices of other commodities? Secondly, will he publish a White Paper without delay setting out the real increases in the cost of food since entry into the EEC, because that will prove that prices are much higher than the Government have ever admitted?

Mr. Peart

I cannot accept what my hon. Friend said. I believe that the deal I negotiated for the Government was right. My hon. Friend is a member of the party which recognised that we were right to renegotiate. That was our policy. However, at the end of the day I achieved concessions which cannot be ignored. A man is a silly fool if he refuses to face facts. I respect my hon. Friend—indeed, we used to go to Strasbourg together—but I ask him to look at facts of life, read the White Paper and see just what we have negotiated. In the end we shall be found right to have accepted membership and to be making our influence felt.

Mr. Hicks

Is the Minister aware that his announcement about the further support for hill areas is most welcome? Is he also aware that the present position of hill areas is serious? Will he explain how hill farmers can claim supplementary benefit? When is that likely to take place?

Mr. Peart

I cannot give the exact date. I am grateful for the hon. Gentleman's remarks.

Mr. Molloy

Is my right hon. Friend aware that his statement this afternoon is a complete farce and has rendered superfluous any form of real consumer protection in this country? Is he further aware that this agreement will have a serious and deleterious effect on aspects of the Government's policy with the trade union movement while wages are being held down and while the Government promise that every endeavour will be made to maintain prices? All that stands in danger of going by the board and, therefore, the Government's policy on inflation can be seriously affected by this statement. Will my right hon. Friend not revert to his former thinking, when he correctly believed that the dream of the Common Market could turn out to be a nightmare? Is he aware that we are witnessing the first effects this afternoon?

Mr. Peart

I hope that my hon. Friend will examine the figures carefully. By the end of the year the effect may be an increase of 1¼ per cent. on the Retail Food Index. The transitional step will add about an extra 1 per cent. For example there will be an increase of 1p on liquid milk but not until October. The Brussels settlement, the transitional step and United Kingdom guaranteed price increases will add not more than 1p in the pound to the cost of living by the end of the year.

Mr. Costain

Does the Minister accept that many horticultural growers, rather than receiving grants, would prefer to be given tax concessions similar to those given to industry in development areas? Would he consider this point and also publish details of such concessions and grants as are available, seeing that pub- licity is given in the technical Press, so that growers may know what they can get as soon as possible?

Mr. Peart

Perhaps I could correct a mistake that I made. I gave a figure on milk for the end of October. I should have said there would be no increase until the end of the year. I did not discuss horticulture fully in the Community. There are problems over fuel, and so on. However, we must appreciate that fuel prices have to be allowed to work through.

Mr. Kelley

Will my right hon. Friend not agree that if the nation had accepted his advice during 1970 to 1974 the housewife in the High Street need not necessarily have been faced with the problem with which she will be faced as a result of this agreement?

Mr. Peart

I do not accept that now. What has been agreed is reasonable. It is a package. Apart from that, we have great strength and influence in the Community. Britain alone would still have to have a price review. I received the same criticism when I was previously Minister of Agriculture.

Mr. Maxwell-Hyslop

Will the Minister please publish the penultimate item in Table 1: Consumers' expenditure on food and alcoholic beverages … Percentage of total consumers' expenditure net of excise duty, so that the percentage figure is not distorted by increases in excise duty on alcohol, which are imposed for purely fiscal reasons and which can give quite the wrong impression of a trend?

Mr. Peart

I shall certainly note that.

Mr. Spearing

We have been told about the compulsory incorporation of skimmed milk into feeding stuffs. Can the Minister give us some idea of the animals in this country to which this new feed mixture must be fed, the tonnages involved, whether this will mean the import of skimmed milk from the mainland of Europe, how much extra this feed will cost compared to the alternatives and who will pay for the extra amount?

Mr. Peart

I cannot say how much it will cost. I have already said that the scheme will be considered in detail in the Management Committee and the special committees. We are looking at this carefully. It could affect our poultry and pig producers.

Mr. Marten

Will not this price review increase the skimmed milk mountain? What is the skimmed milk mountain costing the British people at present? After all, they did not create any of it. Does the Minister agree with page 18 of the price review document on agriculture which shows that nearly all the main food that we need is much cheaper outside the Common Market—and was cheaper last year during the referendum?

Mr. Peart

I believe that food prices in the Community compare favourably with those in countries outside the Community. I have given indications of where there are shortages in many countries. In the Community similar shortages do not arise. For that reason this is the correct policy.

Several Hon. Membersrose

Mr. Speaker

We cannot go on debating this matter now.

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