§ 6.20 p.m.
§ LORD BESWICK
My Lords, I beg to move that the Eggs (Protection of Guarantees) Order 1968, a copy of which was laid before the House on December 19, 1968, be approved. The 1968 Order makes only one major change in the provisions for the protection of the guarantee: that is in Article 3, which removes the obligation on the packing stations to stamp first quality eggs on the shell with the weight grade, if they are hen eggs, or the word "Duck" and the packing station code number, and lays down an alternative method of identifying eggs eligible for subsidy. The arrangements for the testing and grading of eggs at the packing station are not 84 affected by this change. Another change which is made by the Order is contained in Article 4. This is purely consequential on the removal of the stamp.
Subject to a modification in the wording made necessary by the removal of the stamp, it effectively continues a prohibition which has been in operation since 1961 on the sale or use for hatching of eggs which have attracted subsidy. A further consequential change is the addition of a definition of "container" in Article 2. The remaining Articles of the Order deal with such matters as the keeping and production of records, the right to demand production of books, accounts and records and the service of notices. These Articles are primarily concerned with audit requirements and consolidate the provisions in the previous Orders.
It is generally known that during the last year or two there has been increasing pressure from the industry for the removal of the stamp. It has been argued that there has been growing evidence of a strong consumer preference for unstamped eggs as such, and that the sale of packing station eggs has therefore been unfairly handicapped. From the point of view of the protection of the guarantee, it was part of the original justification for the stamping requirements that they operated as an automatic safeguard against the fraudulent representation of eggs which had already attracted subsidy. For some years, however, the prices the Board pays the producer have been normally below the Board's wholesale selling prices so there is effectively no financial incentive to offer eggs to a packing station a second time.
The removing of the stamp raises issues going much wider than the protection of the guarantee. It was tabled in the wider context of egg marketing arrangements generally by the Farmers Unions and the Egg Marketing Board in the course of discussions with the Agricultural Departments in the first half of 1967. It was as a result of the far-reaching proposals put forward in those discussions that Ministers came to the conclusion that a fundamental reappraisal of marketing arrangements was called for and decided to set up the Reorganisation Commission. The conclusion of the Commission was that the case on marketing grounds for the removal of the stamp had been established. Their broad conclusion was 85 that the requirement to stamp was proving an increasing handicap to the sale of packing station eggs since it had effectively led to the creation of two markets, with the unstamped market increasing year by year and the stamped market showing a tendency to decline. The artificial separation of the markets for stamped and unstamped eggs has therefore been to some extent an accidental by-product of the statutory stamping requirements and the Board's own arrangements. The case for the removal of the stamp on marketing grounds has been strongly supported by most sections of the industry. From the standpoint of the protection of the guarantee, the case for retaining the stamp as a deterrent against fraud has lost its force.
It will still be necessary, of course, to ensure that testing and grading standards at the packing stations continue to be strictly enforced, and for this a satisfactory method will be required of identifying the eggs which are being passed for subsidy at the packing stations. We are satisfied that this need will be met by the marketing requirements in Article 3 of the Order. These apply to the bulk containers into which the eggs are packed at the packing stations, and require the packers to mark the containers of first quality eggs with the weight grade of hen eggs or the word "Duck" and the packing station code number. The present quality control and audit inspections at the packing stations will naturally continue.
My Lords, this Order is concerned solely with the protection of the guarantee, but the Reorganisation Commission recommended the removal of the stamp as part of a complex and far-reaching series of proposals for the marketing and distribution of eggs. Among the Commission's proposals were a number relating to the protection of the consumer. We are well aware of the importance of this and shall be giving further consideration to consumer protection aspects generally in consultation with the interests concerned. The Egg Marketing Board have been one of the leaders in the campaign for the removal of the statutory stamping requirements. As such they naturally withdrew their own stamping requirements as soon as the present Order came into operation. 86 Thus the whole of the purely artificial element in the distinction between the markets for stamped and unstamped eggs has now been eliminated. So far as the Order is concerned, the changes which it has brought about can be justified not only in their own right but also as a useful first step towards the objective of a basically free market for all home-produced eggs. I beg to move.
§ Moved, That the Eggs (Protection of Guarantees) Order 1968, be approved.—(Lord Beswick.)
§ 6.27 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, may I thank the noble Lord, Lord Beswick, for explaining the technical effects of this Order and some of its implications. As he says, it is the first step towards the big changes which have ben foreshadowed by the Minister of Agriculture in the statement which the noble Lord gave us two weeks ago. There are one or two aspects on which I should like to make comment. First, I would welcome this Order. I am sure that it is a sensible step to eliminate the evolution of two different markets for stamped and unstamped eggs. I think it will be in everybody's interest to see the artificial barriers removed, with the disappearance of the "Lion" stamp. With regard to consumer protection, about which the noble Lord spoke, I think that the healthy lines of competition which are developing among the wholesale and retail trades in the marketing of eggs and in the branding of the consumer packs in which they are put up will be a powerful measure to protect the housewife from being supplied with other than first-quality fresh eggs.
But the effect of this measure is a first step towards the removal of the price guarantee structure of this commodity and therefore has far-reaching effects for the egg production industry. Here I should declare that I have a considerable interest in this matter on my own farm, as well as an interest in the industry generally. The removing of a commodity from the first Schedule of the 1947 Act is without precedent and nobody can predict exactly what will happen. Therefore, there is great anxiety among egg producers. The noble Lord spoke about the need to protect the consumer but I am sure that he will understand when I say a word from the point of view of 87 the producer. The long transition which the Government are providing—two years with the existing structure and three more years with some new structure under a new central authority—and at the same time the introduction of a system of import control by minimum import prices, seems to me a sound approach, giving long enough in the transition to make sure that it can be conducted in an orderly fashion.
The practical point which I should like to put to the noble Lord is that the Government must bear in mind that if they remove the subsidy they are in fact removing 6d. a dozen on every dozen eggs sold through the packing station. Obviously, if that were removed in one movement, all the producers selling their eggs through official channels now would be in danger of being either bankrupted or very hard hit. I am certain that the Government have no such intention. As I say, I think the lengthy transition indicates that it is the Government's wish to make it possible for this egg-producing industry to find a new equilibrium without subsidy.
During this transition period three things will be happening. First, with the disappearance of the machinery of the Egg Marketing Board to implement the assured price and assured market there will be big economies in transport and marketing costs. Secondly, the admirable trend to reduce basic egg-production costs will continue—though I suspect that the scope is narrower; and thirdly, the retail selling price in the shops will rise enough to give a reasonable profit margin for efficient producers after taking account of the first two factors. These three points are simply stated, but, of course, they are immensely complex in a large national industry like this, and have far-reaching implications.
To bring about this transition without causing hardship or disaster to the industry will require wise and skilful management by Her Majesty's Government, acting first through the Egg Marketing Board and, later, through the new Central Authority. The National Farmers' Union, as the noble Lord knows, are entirely opposed to this change, but in my opinion the majority of specialist egg producers who produce the bulk of the eggs, including the British Egg Associa 88 tion, recognise the logic of the Government's decision to make the change.
After all, subsidising a commodity whose production with modern methods could be doubled within twelve months makes little sense in the interest of either the producers or the taxpayers. In conditions of plenty, a subsidy has the effect of disturbing the natural balance of the market found by supply and demand, equating at a price sufficient to give a fair return to an efficient producer and a fair price which the consumer is willing to pay. So I think that when this transition is completed egg production will be put on the same basis as the highly efficient table poultry industry, which to-day is producing the cheapest meat on the market, and without costing the taxpayer a penny. Everything depends on this transition being made in a careful and orderly way, and on the effectiveness of the future import controls. I hope that the noble Lord, Lord Beswick, will be able to say in answer to these points that this is indeed the intention of the Government.
There are two or three questions that I should like to ask the noble Lord. The new Central Authority will have a difficult and important task in acting as a limited support power. Will the members be appointed by the Minister; and, if so, will they be chosen primarily for their trading and financial skill? Secondly, the Minister's Statement said that eggs will remain within the guarantee arrangements until March, 1974. Will the noble Lord explain what kind of guarantee arrangements will continue after the existing Board goes out of existence in March, 1971?
Thirdly, after March, 1971, will individual producers cease to have the right to require a packing station to buy their eggs? And will packing stations cease to have the right to require the Central Authority to buy surplus eggs for which they cannot find a market? Does this mean that after March, 1971, both producer and packing station will be responsible for finding their own egg markets? I imagine so. Fourthly, will the Government please reconsider their intention to raise a levy from the industry to finance the new Central Authority? All experience shows that the farming world is highly resistant to paying levies, and that this method of financing would 89 gravely prejudice the work of the new Central Authority.
I should like to conclude by paying a small personal tribute to the Egg Marketing Board, who really have done a great job for the poultry industry. They have made valued efforts to adapt the existing structure to meet present-day conditions, so different from those in which the Scheme was set up. Finally, in giving my support to the Order, I should like to say that I have confidence that the industry will measure up to this major change in its economy and continue to provide the nation with a plentiful supply of fresh eggs at highly competitive prices.
§ 6.35 p.m.
§ LORD LEATHERLAND
My Lords, it is probably unexpected that one should rise from these Benches to say a few words in support of the Order which my noble friend has introduced. But we all know that this particular proposal, which is one that I welcome, is part of a large and rather complex pattern of reorganisation of the egg industry. I feel that it would be desirable that the full story of that new pattern should be made publicly available, particularly for the benefit of the industry, as soon as possible, and that we do not have it coming out in little dribs and drabs, possibly creating a sense of uncertainty among some of the egg producers.
This is a complex industry. It is becoming a large-scale industry—indeed, almost a factory industry. The days when the egg production of a farm was looked upon as the perquisite of the farmer's wife, and she collected her 50 or 60 eggs each week to give to a man who came round and haggled with her, are gone. We now have huge organisations, perhaps half-a-dozen of them in the country, producing chickens by the million and eggs by the tens of millions. It is a fact that this industry has got a little out of balance. Some of these big organisations are finding that the competition in the chicken industry has reached a stage of (shall I say?) maximum production, or over-production; that prices have been coming down and the chicken breeding industry is not so profitable as it used to be. In fact, some of these big organisations are switching over from the production of chicken for meat to egg production, and are looking forward to 90 being able to increase their activities on an enormous scale in the next few years. Therefore I think it is more essential than ever that the Ministry should be able to make available to these organisations as quickly as possible full information about the whole picture of the new scheme.
I have only one final comment to make. The noble Lord, Lord Nugent, who similarly welcomed this first step in the scheme, asked that on the new Board there should be members with trading skill. That is all right. But we do not want a system of syndicalism here. We want all kinds of people represented on the new Board. I suggest that the consumer must have a powerful voice, and one that is perhaps as powerful is that of the producer. I support the Motion.
§ 6.39 p.m.
§ LORD BESWICK
My Lords, I must thank the noble Lord, Lord Nugent, for the welcome he has given to this Order and the changes with which it is connected. The noble Lord declared his interest in these matters. I think he might just as well have acknowledged his experience and knowledge; and the fact that he has this experience means that the welcome which he has extended is doubly agreeable to me, speaking for the Government. I should like also to thank my noble friend Lord Leatherland for what he had to say. His was an unexpected intervention, but nevertheless an interesting and useful one.
I was asked about the transition period. I agree with the noble Lord that there will be a time when there has to be a careful balancing of the phasing out of the old and the bringing in of the new. The noble Lord, Lord Nugent, asked for an assurance that it was the Government's intention that this change should be carried out in an orderly way, and that the future import control would be effective. So far as assurances go, I can satisfy the noble Lord. I give him the assurance that it is the intention of the Government to do this carefully and in an orderly fashion; and I think that spreading it out over the years to 1974 will enable precisely the kind of trouble-free change that we seek to obtain.
My noble friend Lord Leatherland said, "Let us not have information coming out by dribs and drabs". I appreciate the point he has made. At the same 91 time, I believe that if we can take one step at a time, as it were—and we are already taking one step by this Order—then that will be helpful to the producers. I have no reason to believe that the producers and all those concerned will not be kept informed as the changes are considered and brought about.
I was asked about the sort of people who will be appointed by the Minister—and they will in fact be appointed—to the new Authority. The noble Lord, Lord Nugent, was right in saying that we shall need people with trading experience. And, if I may say so, I think that my noble friend Lord Leatherland was also right when he said that we shall need on that Authority people with some consumer experience. It is the intention of the Minister, when making these appointments, first to consult all the interests concerned—packers, producers, distributors and the consumer organisations.
I was asked by the noble Lord, Lord Nugent (I am grateful to him for giving me an indication beforehand that he was going to raise this point), about how the system would work up to March. 1971, and between 1971 and March, 1974. At the present time the payments to the Board on behalf of the producers under the agricultural guarantee arrangements are taken into account by them in fixing the weekly minimum prices which they pay to producers. These central price-fixing arrangements will obtain up to March 31, 1971, and will cease as from that date. After that date prices will be determined by market conditions. But the central fixing of prices by a body such as the Egg Board is independent of the guarantee arrangements under the Agriculture Act; and subsidy payments under these arrangements—that is to say, under the Act—will continue to be paid to the industry after the demise of the Board, up to 1974.
§ LORD BESWICK
It would pay to the industry after the Board ends, up to 1974. The Board itself will end in 1971, and then there is still the period up to 1974.
As I announced in my Statement on January 22, the subsidy will be put on 92 to a flat-rate basis, being determined annually and paid to the new central body. The cost of support buying undertaken by the Authority will be the first charge on this payment, the balance being disbursed as a flat-rate subsidy to producers in respect of first-quality eggs sold to the packing stations.
The noble Lord asked whether the egg producers and packing stations will be responsible for finding their own markets for their eggs. After March 31, 1971, producers and packers will have to find their own outlets under normal commercial arrangements for the disposal of their eggs, apart from any taken up by the new Authority under its support-buying arrangements. The precise nature of these arrangements, of course, will be largely a matter for the new Authority, and I cannot go into details now.
The noble Lord referred again to-day, as he did when I made a Statement earlier, to the levies and the fact that they were unpopular in the farming community. I think I indicated then that I was not surprised he should raise this point; but he also will not be surprised to find that it is necessary to find money somewhere if this new Authority and the new arrangements are to be financed. He will agree, I think, that the new scheme is welcomed generally by the industry. He himself has indicated his support for the scheme, and the fact of the matter is that you either raise money by a levy or you have to go to the Treasury for additional money. As the propagandists of the Conservative Party are not slow to tell us, there is a limit to the amount of money the Treasury can collect from the consumer for the purpose of supporting agricultural products. I think, therefore, that on balance he will probably agree with me that if there is to be a levy it will have to be raised from the industry in whose support it will be expended. All I can tell him here, as a kind of solace, is that, while I acknowledge the sensitivity of the agricultural community on levies, they will be fully consulted as to the way in which this money will be raised. My Lords, I hope that I have answered the questions put to me, and that we can now approve this Order.
§ On Question, Motion agreed to.