HC Deb 12 May 1978 vol 949 cc1605-20
The Minister of Agriculture, Fisheries and Food (Mr. John Silkin)

Before I report to the House, I should like to apologise to the hon. Member for Westmorland (Mr. Jopling) for the very short time that he has had to study the statement I am making. Unfortunately, the Brussels negotiations did not end until half-past two this morning. There was a strike at Brussels Airport and, having got up at half-past five this morning, I had to drive for a couple of hours to find a convenient airport from which I could leave.

I represented the United Kingdom at the meeting of the Council of Agriculture Ministers in Brussels from 8th to 12th May, accompanied by my hon. Friend the Parliamentary Secretary. After prolonged and difficult negotiation the Council reached agreement on a package of measures covering common agricultural policy prices for 1978–79 and some related issues subject only to the lifting of a formal Italian reserve.

The Council agreed on increases in support prices averaging overall some 2¼ per cent. This is the lowest increase since our accession and the settlement represents a further reduction of CAP prices in real terms. For example, the increase in milk prices has been held to 2 per cent. with a reduction in the co-responsibility levy from 1.5 per cent. to 0.5 per cent., which, of course, does not effect consumer prices. The overall position in the milk sector is to be reviewed in the autumn when the Council will be considering whether to suspend intervention for skimmed milk powder.

Agreement was reached on regulations which fully and permanently safeguarded the future of the Milk Marketing Boards. The earlier proposal for a temporary derogation was dropped, and I sucessfully opposed a new last-minute Commission proposal which would have threatened the boards' viability.

The 100 per cent. Community-financed butter subsidy is to continue until 31st March 1979 instead of ending on 31st December 1978 as originally proposed by the Commission. The rate of subsidy will also be decreased at a slower rate. These new arrangements are worth £26 million net to the United Kingdom. There was also agreement in principle to the payment, if necessary, of a national subsidy to Northern Irish milk producers.

Monetary compensatory amounts on pigmeat will be reduced by 8 per cent. as a result of a Council decision to reduce from 85 per cent. to 78 per cent the proportion of the basic price on which they are calculated. This change, which will be implemented once the opinion of the European Assembly has been received, will, together with the remaining 2½ per cent. devaluation agreed in February, result in a reduction of 16 per cent. in our pigmeat MCAs. In addition, the coefficients used for calculating MCAs on processed pigmeat will be reviewed in the coming months.

The United Kingdom variable beef premium will continue, and target prices for the marketing year starting on 22nd May will be published as soon as possible.

The Council agreed that it should aim to reduce MCAs but only in the context of a satisfactory price policy and of a more stable relationship between Community currencies. This means, in effect, that the proposal for the automatic phasing out of MCAs is now a dead letter. Devaluations of the Irish green pound, the Italian green lira and the French green franc by 6 per cent. 5 per cent and 7 per cent. respectively were agreed.

The Council also agreed on an improved support regime for olive oil and on new arrangements for wine to include both marketing measures and the improvement of the industry's structure.

Agreement was reached on a five-year programme of structural reform for agriculture in the poorer Mediterranean regions of the Community, the rates of the Community contribution varying up to 50 per cent.

Another £45 million is being provided for the individual projects scheme, and projects involving grants on United Kingdom fishing boats will now be eligible for this aid. Community aid is to be given to a joint programme of arterial drainage on both sides of the border between Northern Ireland and the Irish Republic.

The overall effect of the package will be to increase the food price index by one-half of 1 per cent., an amount equivalent to an increase of one-eighth of 1 per cent. on retail prices. Returns to the agricultural industry, net of increased feed costs, could rise by about £35 million to £40 million in addition to the £150 million to £200 million which will result from the 7½ per cent. green pound devaluation. The package as a whole represents a fair balance of interests and makes a definite step in the improvement of the CAP.

Mr. Jopling

We are grateful to the Minister for coming so quickly from Brussels to make his statement. We appreciate the reasons which caused us to see it at only very short notice.

We welcome the Minister's remarks about the future of the Milk Marketing Boards. Does he agree that the very strong feelings in all parts of the House have strengthened his hand? Does he also agree that while his persistence over this matter might have caused some irritation in Brussels, there would have been a great deal more irritation and fury here if he had failed in that regard? Does he recall that we expressed our concern last week that the solution which might emerge with regard to the Milk Marketing Boards might not be permanent? We are very glad that the word "permanent" is included in the statement. Will the right hon. Gentleman make some remarks about how he now sees the future of the other boards, particularly the Potato Marketing Board and the Hop Marketing Board?

With regard to the overall rise of 2.25 per cent. in institutional prices, is the Minister aware that we have considerable concern over this matter? He will recall that, during the pre-Easter debate on the price review, Opposition Members called for an increase in institutional prices by no more than 1.9 per cent. What does he feel will be the effect of this settlement on the creation of more surpluses? Does he see some commodities—and, if so, which ones—increasing the level of surplus in the year ahead?

With regard to the pigmeat arrangements and the MCAs, is the Minister aware that we are still very concerned about the pig industry? Will he confirm that the effect of this settlement will be to decrease the MCAs on bacon by about £40 a tonne to £240 a tonne? That is very close to the level of bacon MCAs before the debate on the green pound at the beginning of this year which caused the House to insist on the 7½ per cent. devaluation. For that reason, will he understand that we are still extremely concerned about this sector?

What further steps does the Minister intend to take in order to reduce the MCAs? There was a passage in the statement which perhaps gave the impression that the Minister was giving up his attempts to reduce MCAs. That was the passage in which the Minister spoke about the phasing out now becoming a dead letter. Will he confirm that he is not giving this up? With regard to the butter subsidy, his statement is not very clear. Will he confirm that what will happen on 31st March next year is that the butter subsidy will be phased out altogether? That was not clear from the statement.

What other discussions went on with regard to the fishing industry besides the announcement about grants to fishing boats? When does the right hon. Gentleman expect to get down to a reorganisation of the common fisheries policy? Were there any discussions on that matter?

Because of the complications of the statement, and since the Minister himself has said, on radio and elsewhere, that this is a very important settlement, we must have a full day's debate in Government time on the Floor of the House. Will he use his best endeavours to allow that to happen?

Mr. Silkin

The question of a day's debate is a matter for my right hon. Friend the Leader of the House. However, I can imagine no subject that I personally would like to spend a day debating more than this particular price settlement.

I am grateful for what the hon. Gentleman said about the Milk Marketing Boards. It is perfectly true that the whole House was with me on this matter. I felt it, and it gave me a good deal of strength in Brussels in resisting those who wanted to emasculate the whole basis, either by making the boards transitional or, at the latest intervention of the Commission, by destroying their viability altogether. I permit myself the rather sombre reflection that perhaps it would have been better to have thought about the permanence of the Milk Marketing Boards at the time of the Treaty of Accession.

Mr. Jopling

What about during renegotiation?

Mr. Silkin

That became much more difficult, unless one was prepared to do what I did last night.

The hon. Gentleman has raised a point in relation to the other boards. That is something which we in the House ought now to be considering. I felt that the first thing was to preserve the Milk Marketing Boards—they are the biggest, most direct and most important—but I agree that there may well be repercussions and I shall look into the matter.

The hon. Gentleman asked about surplus. I was conscious of this the whole time. Of course, when one takes 2¼ per cent. average prices as against 1.9 per cent., one must look at the ingredients that make up the 2¼ per cent. For example, the increase of 2½ per cent. on the price of pigmeat is effective only with regard to MCAs. The support arrangements are not necessary. That weights the average very considerably. I think we were agreed that there would be some margin. Since the Belgians and other Benelux countries were asking for a 5½ per cent. increase on milk alone, I do not regard the 2¼ per cent. as being a totally discreditable settlement to bring back to the House.

With regard to surplus, the fact is that there is a drop in real terms in the income of milk producers, and that is the commodity which is most in surplus. There is a cut on the B quota in sugar, and that will have its effect on producers. We have kept the cereals price to the Commission's original proposal, which I think the House agreed with at the time. Therefore, I think that we have started moving, not as fast as I personally would like, but very fast indeed along the road of cutting surpluses.

The hon. Gentleman is pretty well right with regard to pigmeat. I mentally assessed it as £44 a tonne, but he may be more right than I. I must confess that when it comes to doing mathematical calculations my mind is a little tired after two all-nighters. However, it is somewhere along that level. The fact is, and the House should recognise it, that I started the recalculation of pigmeat MCAs alone. I was joined by the French and Italians in about October. I was still pressing for double the decrease as late as last night, but by then I was alone again. Neither the French nor the Italians were backing me any more. It was, therefore, a case of accepting this for the time being or accepting nothing. I thought it better to accept it. I did get from the Commission, however, the undertaking that it would review the coefficients on the processing of pigmeat. That has a very direct effect upon our bacon industry. I shall look to further reductions in the MCAs as a result of that.

I think that the hon. Gentleman and I have a difference of opinion with regard to the automatic phasing out of MCAs. I have never believed, on the present basis of the distortion of currencies, that phasing out of MCAs is a good thing. The hon. Gentleman has talked about eliminating all the MCAs throughout the Community over the next two or three years. The increase of 10 per cent. in food prices which would result from that is not acceptable to me. The answer on the MCAs is the point which we put and which was perhaps the reason why the Commission's proposal was killed—namely, that we should get the common price level down to where it ought to be and adopt the European unit of account—that is the much more logical one, which is the basket of all the currencies—rather than basing it effectively on the German mark.

The hon. Gentleman asked me about the butter subsidy. The effect is that from now until the end of July the subsidy paid by the Community is at the rate of 25 units of account—I am sorry, 28 units of account. I must apologise to the House for getting the figures slightly muddled. Mathematics at the moment is not my strong point.

The effect is that it will be 28 units of account until the end of July, from July to the end of the year it comes down to 23 units of account and from the end of the year until March 1979 it becomes 18 units of account, so that the regression is rather slow. But it leaves open whether that 18 units of account or any other figure is available for next year. It is not necessarily therefore totally destroyed. It is a matter that we can discuss in the context of next year's price negotiations.

I think I have now dealt with everything raised by the hon. Gentleman except the fishing question. It will not surprise the House to know that during all these days and nights no one was really able to concentrate on fishing questions. But, of course, they are very important and I have them very much in mind. The plain fact is that all the experts were busy dealing with these other subjects. I did not, however, totally forget fishing, which is why I managed to get £4 million in the pipeline for new fishing boat aid as the allocation for the United Kingdom in this project.

Mr. Molyneaux

Is the right hon. Gentleman aware that we share the general satisfaction at the retention of the Milk Marketing Boards and that we particularly welcome his assurance that the decision is permanent? At the risk of appearing to be a minority on this side of the House, I agree with him that he has retrieved the damage done in 1972 at the time of accession.

Is the right hon. Gentleman aware that we congratulate him on obtaining the necessary scope to give financial support to milk producers in Northern Ireland? I hope that he will soon take advantage of that. When does he intend to adjust the meat industry employment scheme to take account of the agreed devaluation in the Irish green pound?

Mr. Silkin

I am grateful to the hon. Gentleman for what he has said. I think that only his third point calls for comment from me. I understand that my right hon. Friend the Secretary of State for Northern Ireland will make a statement in due course.

Mr. James Johnson

I compliment my right hon. Friend on his usual successful fight against the usual overwhelming odds of so-called partners. We are delighted in the fishing industry to hear that he has obtained what may be £4 million to be spent in structuring the future fleet. In view of our plight on Humberside, how it will affect us there?

Mr. Silkin

I shall let my hon. Friend have the details of that. It affects fishing in the North-East and in Scotland and the South-West as well.

Mr. Grimond

I, too, congratulate the Minister on the news about the Milk Marketing Boards as far as it goes. Does he consider that their future is now assured? I understand that fishing was not discussed in detail, but can the right hon. Gentlemen say when he hopes that there may be some progress? What is the position at the moment about the proposals for licensing in the North Sea?

Mr. Silkin

I managed to talk unofficially with Commissioner Gundelach about when we might resume discussions on fishing. Subject to what our partners may say, we hope that it may be possible in June. Clearly, the question of licensing is important and it is still very much in our minds. There are also other questions, such as conservation and what national measures might need to be taken now that the price negotiations are over. I shall be looking at this matter urgently.

Mr. Wiggin

Without wishing to belittle the right hon. Gentleman's achievement over the Milk Marketing Boards, may I ask whether he will acknowledge that this success has nothing to do with doorstep deliveries of milk? Will he further tell us that a threat to doorstep deliveries by cheap imports to supermarkets or other methods of distribution still exists? Will he assure us that he will remain observant to ensure that such a threat does not materialise?

Mr. Silkin

I think that I can carry the hon. Gentleman with me on this matter; I should like to do so. It is true that without the Milk Marketing Boards it is possible to have a system of milk distribution. There was a system 35 years ago before the then Labour Government introduced the concept. I agree with that concept, but we are now dealing with twice the consumption of milk of the early 1930s. It is perhaps the biggest logistical operation in foodstuffs in the world and certainly the most efficient.

I have looked into this question very deeply. This was why the Commission agreed with me that the Milk Marketing boards, it would not be the very big it had some curious ideas of what limits and conditions might be imposed. The trouble is that, if we ceased to have the boards, it would not be the very big dairy companies—the large multimillionaire concerns—that would suffer but the smaller companies on the fringes. This point was well set out by Mr. Ben Davies of the Dairy Trade Federation when he commented on my stance about a week ago. He fairly made the point that the smaller firms were those that would be in jeopardy.

Once the Milk Marketing Boards went, one would also open the door—I assure the hon. Gentleman that I am very conscious of this—to the introduction of milk coming from abroad, which by the very nature of its transport would mean that it was not fresh, whereas our doorstep delivery is of fresh milk. Once we got that sort of import, it would open the door to the carton in the supermarket and the end of doorstep deliveries.

Finally, perhaps I may use the words of Aneurin Bevan, although he used them in a more important context. Why look into the crystal when we can read the book? Holland had milk marketing boards and highly efficient doorstep deliveries. The Dutch have them no longer, and they have had a drastic cut in the consumption of liquid milk.

Mr. Hardy

What my right hon. Friend has reported is a solid if exhausting achievement, and it is a pity that Conservative Members have been so glum and grudging about it. Will my right hon. Friend maintain his efforts to ensure that British pig production can begin to prosper and that adequate marketing for the promotion of greater milk consumption within the rest of the Community can develop quite markedly?

Mr. Silkin

Yes, Sir. This is not the end of the story. As far as I am concerned, it is only the beginning.

Several Hon. Members


Mr. Speaker

Order. I shall do my best to call hon. Members, but I remind the House that this is the last day for Private Members' Bills. Therefore, if those I call will co-operate, I shall be grateful.

Mr. Crouch

I am not surpised that the Minister's mathematics is a little slow today. I for one am rather surprised that he is here at all. I would have preferred him to rest until Monday and I am grateful to him for coming here after such tough sessions.

With regard to the Milk Marketing Boards and the qualifications surrounding them, is the right hon. Gentleman satisfied that those qualifications are reasonable and fair?

Mr. Silkin

I thank the hon. Gentleman for what he has said. With regard to the Milk Marketing Boards, yes, it is permanent as long as we maintain our consumption of liquid milk. There is a good deal of latitude in this. The consumption could even come down quite a bit, but in my belief it will not. I am totally satisfied that legally, constitutionally and practically we have saved our Milk Marketing Boards.

Mr. Roper

Will my right hon Friend accept congratulations on what he has done to protect important British interests this week in Brussels? Will he also accept that the holding of the general price level to an increase of only 2½ per cent. is an important first step to achieving the objective set out by the Prime Minister in his letter to the Labour Party last October, of shifting the common agricultural policy to a more satisfactory basis? Is it not also the case that this year's agreement is good evidence of the opportunity of changing the CAP from within?

Mr. Silkin

The actual figure is 2¼ per cent., not 2 per cent., so we are ¼ per cent. ahead of my hon. Friend at the moment. It was ever present in my mind that we were looking after the interests of the CAP not only in the United Kingdom but in Europe. That being ever present in my mind, I think that we are well on the way to dealing with the greatest evil of the common agricultural policy—the creation of a structural surplus.

Mr. David Price

Did the Minister discuss the EEC proposal for the sheepmeat regime? If not, when does he think that that process will begin?

Mr. Silkin

In fact, we did not. There is a formal note that the sheepmeat regime proposals are on the table and that we must settle them as soon as possible. I begin to wonder how much EEC agriculture legislation of this far-reaching kind can now be done outside the price fixing itself, because one spends so much time discussing it with perhaps not the urgency that a price settlement brings. If I am right on that—it is only guesswork—it may be nine or 10 months before we come to grips with the problem. However, I may be wrong.

Mrs. Dunwoody

Is my right hon. Friend aware that he will earn the thanks of every housewife for the fight that he has put up for the Milk Marketing Board, particularly in view of the fact that as late as 8 o'clock last night both French and German representatives in the European Assembly were seeking to say that it was an illegal organisation and could be opposed by the European Court?

Will my right hon. Friend be vigilant about the health rules relating to liquid milk, because there is a clear indication that European farmers intend to say that our health rules are an artificial barrier to trade? Even the suggestion of any lowering of our standards in this respect would cause tremendous harm to our general belief in clean and free milk.

Mr. Silkin

I noticed, as my hon. Friend said, that there was some disposition on the part of some members of the European Assembly from other countries to question the legality of the Milk Marketing Boards. They cannot now, because they are part of the milk marketing regulation and that is that.

I was also a little surprised at what I felt was the rather tepid attitude taken by, I think, Mr. Brunner at the same time; but that may simply be Press reports; I do not know.

The question of the health regulations is very much in my mind. I agree with my hon. Friend that these regulations must be maintained. I shall do my best to ensure that they are maintained.

Mr. Maxwell-Hyslop

Is there yet any move to limit excess Continental milk production by any form of quota system as opposed purely to using the price mechanism?

Secondly, will a copy of the Minister's statement, which was long and detailed, be put in the Vote Office today?

Thirdly, although it is a complicated calculation, is the Minister able to give us any preliminary view on the affect of the other currency devaluations—the green lire and the green franc—on our 7½ per cent. devaluation? Presumably there will be an interrelation between those two subsequent events.

Mr. Silkin

To take the last point first, I think that the effective interrelation occurs between the Irish devaluation and our own position, not the other currencies. There is a marginal benefit to us from the token German mark revaluation of 0.3 per cent., I think it is. That is one reason why I mentioned the measures that we were asking to have considered with regard to Northern Ireland—that is, the giving of national aid. That is why the hon. Member for Antrim, South (Mr. Molyneaux) asked me about the meat industry employment scheme.

There was no immediate discussion, though I raised it, about the general reduction of dairy production in Europe. However, the Commissioner said that he would be bringing a new package forward, probably in the early summer, which would be much more embracing than the previous milk action programme. Whether it will contain the idea of a quota, I do not know, but the Commissioner took the view that it badly needed to be done.

I think that there was a third point, but I cannot remember what it was.

Mr. Maxwell-Hyslop

I asked whether the Minister's statement would appear in the Vote Office today.

Mr. Silkin

Yes. I shall certainly make what arrangements I can to ensure that is so.

Mr. Spearing

I congratulate my hon. Friend on the personal part that he has played in protecting the Milk Marketing Boards. Does he agree that the powers of the EEC over domestic matters in this country depend no longer upon this House but on the happy or unhappy chance of the health and personality of the Minister of the day?

As the EEC budget shows support prices for cereals of about £1,000 million and for milk approaching £2,000 million, of which £600 million in each case is for export rebates, is the agreement on 2½ per cent. likely to change those estimates?

Mr. Silkin

The agreement is 2 per cent. for dairy products. I think that it is bound to increase the figure. I shall need to study much more fully whether it will increase it in real terms. This has been a very low increase in real terms and it requires some consideration.

On the first point made by my hon. Friend, I am glad about the health, anyway. I do not know about the effectiveness. There is some point in the House having its say. As I have said on a number of occasions, if the Minister can get the whole House with him, it gives him far greater strength in the EEC not only in agriculture matters but in fisheries as well.

Mr. Moate

On the question of pigmeat and the MCAs, clearly we welcome any reduction in the MCAs that the Minister has managed to secure out of our EEC partners, who seem to be remarkably pig-headed on this subject. But if there is an MCA of about 240 or 235 a tonne, does it not mean that the Dutch and the Danes will still be heavily subsidised to undercut our producers? If the situation remains critical for our producers, are there any steps that the right hon. Gentleman can take in the interim period to improve their situation?

Secondly, may we be assured that, if we are not to get surpluses of sheepmeat, mutton mountains or lakes of lamb and higher prices to the housewife, he will resist any moves towards a sheepmeat regime?

Mr. Silkin

I do not think that the question of a sheepmeat regime arises on this price fixing, for the reasons that I have given. We need to be very clear about this matter. I could honestly anticipate a sheepmeat regime which would be beneficial from our point of view. Therefore, I have to consider whether it is better to go for that or to say no sheepmeat regime at all. This is an important matter to consider. After all, the trouble with the non-existence of a sheepmeat regime is the closing of the French market for a large part of the time. There are balancing and difficult considerations.

With regard to pigmeat, I said that we had an undertaking from the Com missioner—it lies within the powers of the Commission and of the management committee, not the Council of Ministers, to get this through—that there will be a review of the coefficients on pigmeat. That could make quite a substantial difference in the bacon trade, as those who are technically concerned will know—a difference quite as good as the change in the recalculation. I shall certainly be alive to every method that we can possibly consider and adopt.

Mr. James Lamond

I congratulate both my right hon. Friend the Minister of Agriculture and my hon. Friend the Parliamentary Secretary on the magnificent rearguard action that they have fought on behalf of British consumers. But do they ever reflect, as they drive through the Belgian night, that it might have been better had we never been involved in this war by not joining the Common Market, because then we should have had the benefit of their undoubted talents much nearer home, in this country?

Mr. Silkin

I am grateful to my hon. Friend, particularly for the mention that he made of my hon. Friend the Parliamentary Secretary, who acted splendidly with me on the two enormously long days and nights. I think we can leave to my memoirs my reflections as I speed through the Belgian night.

Mr. Arthur Jones

Is the Minister able to say anything about the effects that a reduction of 8 per cent. in the MCAs will have on the pig industry and on curing in this country? He mentioned a lowering of the coefficient from 1.35 to 1.25. What effect will that have upon bacon?

Mr. Silkin

To give a detailed view on this I shall have to write to the hon. Member. I do not have the details with me. It is bound to make quite a difference. As I understand it, a 5 per cent. step-down in the MCAs is equivalent to £15 per tonne on the price level. Perhaps at leisure we can work it out ourselves.

I shall send the hon. Member details about the coefficient. The Commission has undertaken to review it. If it comes to a decision, the Council is not required to accept it. It goes to the management committee, which means effectively that, if the Commission wants to get it, it will get it. I do not know what will be proposed until we have seen the result of the studies. I hope that they will be quick.

Mr. Christopher Price

Is my right hon. Friend aware that whereas he has earned all our congratulations on his Herculean efforts to save the Milk Marketing Boards and holding down to 2.25 per cent. what might have been a higher percentage for agriculture subsidies, it is a little early to talk about the imminent reform of the CAP and the disappearance of surpluses? My right hon. Friend said that they are disappearing slowly. It has been said that there are 2 million too many cows in Europe. At the present rate of progress, when does he think that Europe will eliminate its dairy surplus?

Mr. Silkin

Too long. But a start has to be made and it has been made. Like my hon. Friend, I sometimes get impatient. Perhaps that is what occurs to me as I speed through the Belgian night. We are in the presence of a trend which accepts that the United Kingdom is enforcing a proper restrained price policy. This was not so before. In two successive years there have been the lowest price increases. This will have its effect. Like my hon. Friend, I believe that it is not fast enough, but it is better than nothing.

Mr. Bowden

I am sure that the Minister is aware that the House admires his long distance staying power. Will he now turn his attention to the fishing industry? The inshore industry is in danger of extinction. What was he aiming to achieve in Brussels for the inshore industry?

Mr. Silkin

In this particular marathon session we achieved nothing for that industry, but I hope that now we have this behind us the Commission and ourselves will be able to deal rapidly with it. I agree that this is a vital issue and a vital industry. I intend to do my best to preserve, maintain, and, if I can, extend it.

Mr. Jay

Does my right hon. Friend agree that his great victory for the Milk Marketing Boards, upon which I congratulate him, leaves us in this respect almost as well off as if we had not joined the EEC?

Mr. Silkin

Yes. That might have been another thought that occurred to me as I sped through the Belgian night.

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