Orders of the Day — Field Vegetables (Destruction)
Mr Richard Body (Holland with Boston)
In the course of the last growing season in this country no less than 6,000 tonnes of cauliflowers were destroyed under the auspices of the intervention board. The board paid out £200,000 to buy them before they were destroyed. The Minister of State may say that 6,000 tonnes represents only a small percentage of last year's total crop. None the less, that quantity would have constituted vegetables for some 15 million families. Those families lost the opportunity of having cauliflowers on their table, and as taxpayers they had to pay for the destruction of those cauliflowers.
We know that every vegetable gardener may find, in the course of his year, that his garden has yielded more than his family can eat. Accordingly he puts his surplus on the compost heap. By the same principle the commercial vegetable grower finds it unprofitable to put his produce on the market at the prevailing price, and accordingly he ploughs those vegetables back. That has happened on countless occasions in years past. Everyone would agree that it is unavoidable, and nobody will deny the growers' right to do it.
What we are concerned about in this debate goes beyond that. We might ask ourselves whether the taxpayer should be called upon to buy those cauliflowers before they are destroyed at a time when millions of taxpayers—I do not exaggerate that number—are unable to afford to buy those cauliflowers. Moreover, it is not a little galling for farm workers in my constituency to be instructed to destroy these same vegetables which their wives cannot afford to buy in the neighbouring shops. That is the case, and the Minister of State knows, as well as everyone else in the trade does, that the consumption of fresh vegetables has fallen in recent years.
That cannot be in anybody's interest and no commercial grower can rejoice about it. It is painfully obvious that the more we artificially raise the price of fresh vegetables, the more consumer resistance will grow to their purchase.
We are coerced into paying our taxes and we may ask whether it is right to coerce the British people into paying taxes if even the smallest fraction of that revenue is spent on destroying food which they would like to eat but cannot afford to buy because they are taxed too heavily.
I do not want to make a moral mountain out of a molehill, as the Eurocrats would call the £200,000. I believe that that operation would still be ethically doubtful if the sum were a mere tuppence. I hope that the Minister will not make the point that the cost is being borne by the taxpayers of the Common Market generally. I recognise that the money does indeed come from the Common Market budget, but the money going into that budget comes primarily from taxes and levies upon food. If the Common Market did not impose a high tax upon food imported from low-cost countries, it could not survive in its present form.
The wretched fact is that the British people now pay a higher tax upon the food that they prefer to eat than anyone else in the Common Market. I hope that the Minister of State will spare a minute or two to comment upon that, since we have longer than we expected to have.
The total of £200,000 may not sound much to the bureaucrats. Of course, it is a mere bagatelle compared with the massive sums that go to farmers and growers in the Common Market in order that those vast structural surpluses may be disposed of. Yet it works out at about 6p per cauliflower. It does not make the growing of cauliflowers profitable but it induces a number of cauliflower growers to take the risk and grow more than they would otherwise grow.
Syndicates of cauliflower growers in my constituency are willing to rent land at between £100 and £120 an acre. This is pushing up rents generally. Those farmers who grow wheat, potatoes, sugar beet and other important arable crops cannot possibly compete on those terms. I am sure that the Minister of State agrees with me. Many of my constituents who are tenants of the county council and the Crown Commissioners are facing rent increases and demands for rents of between £40 and £60 an acre. That is the consequence of inflating the rent of neighbouring land for the cultivation of vegetables and an indirect result of this branch of the intervention system.
I am glad that my hon. Friend the Member for Maidstone (Mr. Wells) is in the Chamber, because I am sure that he will agree that another objection to the intervention system is that only a minority of growers benefit from it. If the system is to exist, it should be open to all commercial growers or to none. I should have thought that the matter was of sufficient consequence for the Minister to have made a statement about it at that time.
On the other hand, if the Minister did know about it, he must have been aware—or would have been advised had he asked about it—that there are ways of keeping cauliflowers. In my constituency it has been done by two processes—freezing and brining. I have seen both at work. Would it not have been more sensible to have urged the officials in Brussels to authorise some expenditure on the freezing or bringing of these cauliflowers so that they could have been eaten by British people later in the year when cauliflowers are scarce? Instead, as we have done this winter, we have had to import cauliflowers.
It seems mysterious that officially we heard so little about the destruction of the vegetables. I should be grateful for an explanation from the Minister as to why no publicity was given to the matter. We know that officials of the Ministry were present and supervised the destruction of these thousands of tons of cauliflowers.
It could be that the managers of the FEOGA fund in Brussels would not have wished to have £200,000 spent on the giving of a grant towards the freezing or brining of the vegetables so that they might be eaten. There might have been an objection from our French competitors who are now successfully exporting cauliflowers to us at a very high price—certainly at a price which no farm worker in my constituency could afford to pay.
Those of us who have criticised the system of intervention would have been chided for being anti-Marketeers. It is now a term of some honour, and I am sure that my hon. Friend the Member for Maidstone would agree with me on that matter. The common agricultural policy of the Common Market is now effectively the only policy of the Common Market which is in existence. Of the Common Market total expenditure, 75 per cent. goes on the common agricultural policy. Of that percentage, 90 per cent. goes on the so-called guarantee fund—what we in plain English would call intervention. In criticising the intervention system, we are criticising the heart and soul of the common agricultural policy and, therefore, the Common Market.
My hon. Friend the Member for Maidstone would agree that the Conservative Party is now persuaded that the Common agricultural policy is in drastic need of reform. He, like I, will be arguing in the forthcoming election campaign for that drastic reform.
Mr John Wells (Maidstone)
I hope that I shall be fortunate enough to catch your eye, Mr. Speaker, and that I shall be allowed to make my own argument on these points, rather than have words and thoughts put into my mind which may not be there.
The system was devised many years ago by a distinguished Dutch Commissioner for agriculture in the EEC. No doubt when he devised the scheme he had in mind the interests of his fellow countrymen in the Netherlands where all horticultural produce, with only insignificant exceptions, is marketed through a producer organisation. Thus he introduced the rule that, if the intervention or withdrawal system were to be allowed for horticultural produce, only a producer organisation should be allowed to dispose of vegetables in that way.
We do not use the phrase "producer organisation". We speak of "farmers' co-operatives". The Minister of State may be ideologically well disposed to the term"co-operative ", but let him not be deceived. A far more apt description would be "syndicate". That is the word used in my constituency about such ventures.
In most cases, these syndicates consist of comparatively few farmers who farm several hundred or possibly a few thousand acres. The syndicates tend to be exclusive and it is difficult to get into one. For the ordinary grower, and the majority of my constituents are in that category, this sort of withdrawal system or intervention is not for them. They do not get into the act.
As a general rule, the smaller growers—those with 100 acres or less—sell their cauliflowers to a produce merchant. Even if they deal with two or three merchants, they cannot take advantage of the scheme because no produce merchant can count as a producer organisation. The position in the Netherlands is different. What might have been a suitable and fair system for the growers of the Netherlands is not suitable or fair for our growers.
Can the Minister of State justify that? Does he not accept the inherent unfair-ness of the system? If he has had no doubts about the system, why has he been so taciturn about it before today? There seems to have been a measure of secrecy about disruption of these cauliflowers. I am not thinking just of the question tabled by the hon. Member for Swindon (Mr. Stoddart) two or three weeks ago about the number of vegetables that had gone into intervention. The answer given to the hon. Gentleman was "None". The impression was given that no cauliflowers were disposed of in accordance with the instructions of the intervention board. It may be that there was a technical slip in the phrasing of the hon. Gentleman's question, because the answer foxed some of my constituents who commonly use the expression "putting the cauliflowers into intervention".
We now know more of the story and I have a slight suspicion that the Minister of State was not aware that thousands of cauliflowers were destroyed in the last growing season at the taxpayers' expense.
Mr Richard Body (Holland with Boston)
I do not doubt that my hon. Friend the Member for Maidstone will loyally support the official Conservative policy and join me in saying that the common agricultural policy is in need of drastic reform. Of top priority is the way that we destroy good food at the expense of taxpayers, millions of whom are not only deprived of that food but cannot afford to buy it at that time.
It is galling for my constituents who are farm workers and who have to destroy food at a time when their wives cannot afford to buy it in the shops. That is what the intervention system has brought about, and we must reform it. I hope that the Minister will not seek to defend the indefensible.
Mr Nigel Spearing (Newham South)
The hon. Member for Holland with Boston (Mr. Body) has given a vivid example, in the cauliflower scandal, of the inbuilt upward spiral in production costs and cost to the consumer. The cauliflower is an important winter vegetable that is widely eaten in this country and is deservedly popular. The indirect effect of being able to provide a relatively high price for a commodity is significant and has secondary effects on the surrounding agricultural area.
The hon. Member mentioned wheat and potatoes and the effect on rental of land. The cauliflower situation that he exposed eloquently and thoroughly tonight illustrates how the system of intervention buying can put up costs generally, and that is reflected in rents. The wide open spaces of the Lincolnshire countryside are ideally suited not only to cauliflowers but to many commodities for which prices are high in the EEC and in which there are surpluses.
According to an answer that I had in Hansard on 17 January, in column 804, the cost of agricultural land in 1970 was about £200 an acre. In 1978 it was over £1,000 an acre. In England and Wales, land prices have risen in that period by a factor of five, which outstrips most of the unfortunate effects of inflation over the past few years.
All that has been caused by an agriculture policy that does not have the prosperity of the countryside or the provision of a balanced agriculture system as a first priority. It derives from article 39 of the Treaty of Rome, which provides that the objectives of the common agricultural policy shall be to increase agricultural productivity, ensure a fair standard of living for the agriculture community, stabilise markets, assure the availability of supplies, and ensure that supplies reach consumers at reasonable prices.
We notice the apparent decline in the order of priorities. As the hon. Member pointed out, the cauliflower growers, in attempting to provide greater productivity and to stabilise markets, appear to have affected the availability of supplies, and are therefore not providing the product at a reasonable price to consumers. That is the importance of the hon. Member's illustration. He demonstrated the irony of the producers of vegetables not being able to afford those vegetables in the local shops.
The assumptions about the common agricultural policy are not fulfilled by article 39 of the Treaty of Rome. By putting the priorities in that order and justifying intervention buying in order to stabilise markets, the CAP has erected a superstructure of enormous size on the agriculture industry not just of Britain but of the whole EEC. It is the influence and effect of the intervention board, which provides the authority and money for the ploughing in of cauliflowers, which is the key to the whole assumption.
We were used to hearing about food being burned, about coffee being fired in the fields, or various grains being put in railway engines to run them. At the time we tut-tutted and described this as immoral. To some extent it was, but in the circumstances that we faced in the past—particularly in the 1930s—the problem was that the crops were for sale at such low prices that there was no market for them. In the case that the hon. Member has described tonight, the contrary is true. There was a market for these vegetables and the price was not low by United Kingdom standards, but it was being kept up artificially. There is a difference of principle between the unfortunate need to plough in crops where there is surplus or glut and the example of cauliflowers.
People might ask about the alternative. The hon. Member mentioned storing these vegetables. I suspect that cauliflowers may not be susceptible to long-term storage. This is one of the disadvantages of vegetables. But an alternative to this is to sell these vegetables abroad, and that is what the intervention boards for agricultural products do in most EEC countries.
In a written answer in January, I was told that the guarantee section, which funds this in the EEC, was likely to sell off 15 million tonnes of cereals from the EEC. That is one way of getting rid of the problem, but it is not a happy one. The same table showed that the same was likely to happen to 440,000 tonnes of skimmed milk powder, which fortunately can be stored, and 2·6 million tonnes of sugar, which is double the amount of tropical sugar that we import from sugar cane from the ACP countries of the European Community.
In that respect the intervention operation is confined not to the relatively perishable cauliflowers but to some of the basic foodstuffs that may be stored for long periods. The written answer showed that the export refunds paid for dumping food on the world market were likely to amount in 1979 to no less than £2,847 million of EEC taxpayers' money. That pales before the total support of £5,377 million given to agriculture as a whole.
Mr Richard Body (Holland with Boston)
Does the hon. Gentleman agree that there is a further, wicked cost on the Third world countries that receive the cereals at a reduced price? Only 10 per cent. of the arable land in the Sudan is now being cultivated. The Sudanese find that it is no longer worth while to cultivate their arable land, thus giving work to their own people, as they are in receipt of dumped cereals from the EEC. That causes unemployment and excessive poverty to the Third world countries in receipt of cereals.
Mr Nigel Spearing (Newham South)
I agree with the hon. Gentleman. He has given an example of the result of this immoral and evil policy. Far from helping with world food supplies, the opposite is happening. Indeed, this may be proved by an article in Lloyd's List of 6 November 1978. It said that agreement on the world wheat pact was not reached in Geneva, and went on:
A large gap remains to be closed on the question of the size of world stocks. The United States has been adamant that nothing less than 30 million tonnes could effectively regulate the world price.…
The EEC, however, believes that world stocks of much over 15 million tonnes would overhang the market, depressing prices.
In other words, the EEC is denying to a hungry world the policies of storage that it claims for itself.
I thank the hon. Gentleman for raising the point about the Sudan. That poor country cannot enter into the world market in today's conditions. It is driving out farmers who can produce food, especially those in the poor countries, in favour of food produced and paid for by EEC taxpayers. That is extraordinary.
Referring to cauliflowers and the interventinon board, the hon. Gentleman did not go into detail on the mechanism of repayment. He mentioned the substantial figure of £200,000 that the British agricultural intervention board paid out. What I suggest would bear inspection the recent report of the EEC Court of Auditors, reference C 313 of 30 December 1978, which goes into the question of the European agricultural guarantee fund. The hon. Gentleman mentioned the figures. A high proportion of all EEC expenditure goes into the support fund. It is from this fund that the farmers who have ploughed in the cauliflowers receive their money. It is the fund from which the exporters of wheat to the Sudan, and the exporters of other surplus foods, including butter to Russia, also receive their funds.
It is important that the House should understand the important mechanism by which this operates. I understand that exporting such foods is not done by the Commission or the national intervention boards; it is done by private contractors. Fortunately, the Organisation for Economic Co-operation and Development—the OECD—in its 1974 publication describes in detail how the EEC achieved this. It explains on page 45 that in calculating the threshold price—that is an interesting and complicated sum, into which I shall not go—it is possible at least for the difference between world prices and EEC prices perhaps to be rather greater than the fact On the market.
Paragraph 74 describes how the Commission sets restitution payments for cereals each week. It says:
They are uniform throughout the Community, but differ according to the country of destination to allow for the appropriate transport costs. However, the Commission has some latitude which enables it to fix the level of restitution payments to try to influence the development of internal markets and export flows.
In other words, the intervention boards for agricultural products in each nation State are given a certain amount of latitude, apparently by implication, to encourage export flows. That, of course, means more dumping and more cost to the consumer.
Here I revert to the auditors' report, because it provides some extraordinary facts. I refer to an EEC document. First, it reveals that the accounts since 1973 have not been finalised. The latest accounts of this vast agricultural surplus money machine to be finalised were in 1972, and even they have been changed. The report continues for about 20 pages. I will not deal with all the points that arise, but I hope that my right hon. Friend will undertake in his reply at least to look briefly at some of them. It may well be that, with the plethora of EEC documents, it has not been drawn to his attention. We have a grievance in terms of the operation of this fund. This is the EEC Court of Auditors. They are not British or United Kingdom auditors, or critics of the scheme.
The report goes on to draw attention to the question of frauds and irregularities. The hon. Gentleman may or may not be able to put his finger on certain frauds relating to cauliflowers, but there are all sorts of complex operations which go on in respect of other commodities which are too complicated to be pursued even in the OECD booklet.
It is pointed out in the report that in 1977 the national intervention board reported 169 cases of fraud, amounting to approximately £5 million. That is a small sum relative to the sorts of sums with which the EEC deals, but it is a very big sum of public money.
Paragraph 2.70 states:
Clearly, these changes over such a short period cannot indicate either the real extent of fraud or the degree of care devoted by the Member States to prevent or curb it. A thorough analysis will be necessary before any opinion can be formed on these matters.
Instead of the auditors of accounts being able to say that in their opinion the accounts represent a fair and proper explanation of the true state of affairs, they go out of their way to state that they cannot say any such thing, because of the problems of detection of fraud.
Earlier on, rather potently, paragraph 2·24, in referring to the need to get up-to-date information, and get it quickly, states:
The court recognises that these aims which appear of fundamental importance to its role in the Community, will only be achieved over a period of time and by working with the institutions and other bodies concerned with the utmost co-operation possible.
In other words, the auditors hint that they have not been able to go into the accounts of the national intervention boards with sufficient detail in order to come to an opinion concerning the degree of fraud, because any fraud that exists is within the accounts and operations of the national intervention boards and not in the Commission accounts.
Mr David Stoddart (Swindon)
My hon. Friend the Member for Newham, South (Mr. Spearing) has drawn a most important matter to the attention of the House. Has this been reported in the British or Continental press? If the Comptroller and Auditor General had known that anything such as this had occurred in the accounts of any Government Department there would, quite rightly, have been a national scandal. However, I cannot recall this matter having been brought to our attention before.
Mr Nigel Spearing (Newham South)
I am grateful to my hon. Friend the Member for Swindon (Mr. Stoddart). I have not seen any reports of this in the press. I rather suspect—I blame no one for it—that this public document is probably known only to a very few people. I know of it myself only because of the excellent summary information in the documents with which Members of Parliament are provided. We knew that this audit board was set up some time ago, and this is its first report. I should also have mentioned that this is the first report of its kind, because the audit board was set up only after the United Kingdom entered the Community.
I have dealt with two points, and I shall now deal with the third. Earlier I explained the way in which national intervention boards put up exports on the world market through individual firms. The system is that individual firms tender or bid for amounts of food to export, and the highest bidder receives the contract. The intervention board then adds to the price that that bidder pays the difference between the world price and the EEC price obtaining at the time—that is roughly equivalent to the levy. The bidder then gets the additional amount in order that he can export that food in the reverse direction.
The audit board says, at paragraph 2·95:
Once the minimum selling prices have been determined, each intervention agency is free to fix the basic price for the invitation to tender".
Some details are then given.
It is obviously in the Community's interest that this basic price is as high as the market conditions will allow. For this, the intervention agencies should adopt a ' commercial approach '.
Paragraph 2.96 reads:
The losses resulting from the differences between the purchase price and the selling price being supported by the Community budget, the intervention agencies have no incentive to take such a line. Furthermore, the Commission has few means of checking whether the basic price fixed is really the highest possible. This would assume powers of verification which it does not possess, and time-limits for carrying out these checks which can have no relevance to those it has for clearing the accounts. Attention must therefore be drawn to the absence of controls on this point and to the gaps in the regulations.
My fourth point on this matter relates to the advertisement of amounts for bidding. In paragraph 2.94(ii) the audit board says that
publications that advertise the invitations to tender (Community citizens who are resident in another Member State than their own are often not aware of the existence of such publications).
It goes on, in paragraph 2.101, to say:
In fact in many cases there is no publicity in the strict sense of the term. For example, a circular may simply be sent to the contractors who normally deal with the intervention agency, thereby restricting access to the offer to those large firms which have close links with each intervention agency.
The board goes on to criticise this noncommercial activity very heavily indeed and points out that in the replies there is no requirement for a reply from the Commission to this sort of practice. In other words, the audit board having pointed it out, it appears that the Commission has no reply to make to it.
My fifth point is connected with paragraph 2.113, which states that
It is obviously still necessary to determine whether the prices obtained under the various tenders are the highest possible, having regard to international market conditions. To this end, the Commission has regularly compared
the world market price and the fob price of the product … This method, which must take into account the final destination of the goods, hardly ever allows time for a decision to postpone or cancel the tender accepted.
This is an area which the Court has not yet been able to explore, because of its complex character and the changing nature of the factors to be considered.
Those are at least five points that I should like to draw to the attention of my right hon. Friend. A final point relates to paragraphs 2.98 to 2.103, where the Court stands by its comments that
Owing to the small number of firms in Europe dealing in the international trade of cereals, it is necessary to supervise very closely the actual conditions in which the information on tenders is distributed ".
There is enough there, I hope, to disturb the House, because the sum to which these comments refer is the £2,800 million. That is the area of export restitutions to which the auditors' comments that I have read out are applied. As I said, the accounts from 1972 have not been finalised.
Although the cauliflower example has led us into the principles of the operation of this guidance and guarantee fund, I hope that in reply to the more specific points made by the hon. Member for Holland with Boston my right hon. Friend will at least give an undertaking to the House that he and his Department will look into the operations of the United Kingdom Intervention Agency, which may well be under the aegis of the Comptroller and Auditor General. I hope he will ensure that when the time comes for this board to have a look at our books, some of the strictures that are clearly made in respect of other intervention agencies of other countries in the EEC will not be able to be applied to the United Kingdom.
Mr John Wells (Maidstone)
I congratulate my hon. Friend the Member for Holland with Boston (Mr. Body) on raising this very important matter. I support wholeheartedly that part of his speech in which he said that he wanted to support the well-being of those smaller farmers—although all farmers in his constituency are fairly affluent—who were not members of co-operative groups and who, therefore, could not get into the act, as it were. I must remind my hon. Friend, however, that all producer groups are voluntary and that it is open to his constituents to join a producer group.
Mr John Wells (Maidstone)
They may not want to, but it is open to them. Therefore, it is not right to say that they cannot get in on the act. What my hon. Friend should say is that they do not want to go through the necessary hoops to do so.
Mr Richard Body (Holland with Boston)
My hon. Friend may have some information that I have not received. I have tried very hard in recent weeks to ascertain the truth. I can find no small grower of less than 100 acres in respect of whom a welcoming mat was laid down to join these large syndicates. Yet it is such syndicates that know the system and are working it with some success.
Mr John Wells (Maidstone)
I am not saying that these growers should necessarily join the large syndicates, but there is no reason why they should not start another one. I do not want to fall into a local argument about my hon. Friend's territory, which he must know very much better than any other hon. Member. We all respect his local knowledge.
We must understand the underlying background to this situation. In the past year, there has been this massive intervention because of abnormal weather conditions. That is one of the problems. The hon. Member for Newham, South (Mr. Spearing) made a learned speech about the theory of these matters, but it was a townsman's speech which forgot entirely the problems of the countryside, which are at the whim of the weather.
The problem with last autumn's cauliflower crop was that with the cold, wet summer followed by a mild, early autumn, two months' crop was jammed into one month. Therefore, in one month there was suddenly a massive over-supply. There has been a decline in acreage over the last five years. In 1974, there were nearly 16,000 hectares—
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.
Motion made, and Question proposed, are voluntary and that it is open to his That this House do now adjourn.—[Mr. Bates.]
Mr John Wells (Maidstone)
In 1974 there were very nearly 16,000 hectares under cauliflower. The next year it was 15,700. The year after that it was only just over 14,000. The following year also it was 14,000. Last year, which is the year we are considering when this phenomenon arose, it was still under 15,000 for cauliflowers. Therefore, the acreage has decline.
My second point is that the two hon. Members who are anti-Marketeers must realise clearly that the United Kingdom production of cauliflower has gone up every year in the last five years. Taking the figures for the last three years only, United Kingdom production was 216,000 tons in 1976 and 280,000 tons in 1977, and there was a slight decline last year. My point, again, is that there was a slight decline in the overall picture last year.
The surplus, as I have already said, came all of a rush in a year when the total supply was less, but the percentage produced by the United Kingdom rose steadily from 86 per cent. three years ago to 92 per cent. two years ago and 93 per cent. last year. This means that in the year that my hon. Friend is grumbling about only 7 per cent. was imported and of that nearly one-third came from our good friends the Channel Islands. Therefore, it would be unreasonable to complain. The tonnage imported from my hon. Friend's old enemies, the Eight, in fact has declined. It was 20,000 tons three years ago, 19,000 tons two years ago, and 14,000 tons in the year about which he is complaining. So I think that my hon. Friend's anti-Market argument does not stand up.
Again, in respect of his complaint—and he was very reasonable about this, and so was the hon. Member for Newham, South—that cauliflowers ought to be put in brine or something, there was a bit too much of the "or something".
Mr John Wells (Maidstone)
Precisely, but the problem about freezing is that it is extremely costly and the freezing equipment will be suddenly vacant and available just because the good Lord has provided such a climate. There is not the spare freezing space waiting—
Mr John Wells (Maidstone)
It is no good my lion. Friend saying "No". This is a fact. There is not spare tonnage of freezing capacity readily available when the good Lord provides a glut of cauliflower. Therefore, the only remedy is that which he suggested—brine—and there is no outlet there.
The intervention procedure comes into effect when the price of cauliflowers is about 80p for a box of 12. My hon. Friend says that the farm workers' wives in his constituency cannot pay the high price of cauliflowers. If they cannot pay 7p for a cauliflower, it is about time they could. He has put over a most specious argument.
Mr John Wells (Maidstone)
This is the price at which the intervention becomes effective. The other alternative which is sometimes touched upon is the possibility of giving it away to the institutions. There one gets all emotional about the waste of good food. I must say that the institutions have all entered into long-term contracts for their supply of vegetables. How would our excellent kitchens here, unless they were on strike, manage if they suddenly had a glut of cauliflower one day and my hon. Friend did not fancy cauliflower for his dinner? It would not do. They have entered into contracts for carrots and petit pois, and I do not know what else. My hon. Friend will go to dinner and order carrots or petit pois. He will not order cauliflower because there has been a glut in his constituency. That is not the way institutional catering works. Therefore, it would be impossible for the people undertaking the intervention arrangements to offload the produce as a gift to the institutions. It is not practical.
Mr John Wells (Maidstone)
I know not the workings of the hospitals or the schools. I wish my hon. Friend would either stand up and intervene or remain silent. He made a long, interesting speech and I would like him to allow me to make a short but perhaps boring speech. Will be bear with me while I bore him?
The National Farmers' Union, which represents small as well as large growers—indeed, one sometimes thinks that the NFU internal policy is too conditioned by the smaller farmers—supports this intervention system because it brings into the market stability and puts a floor price into the cauliflower market. The floor price is at a very modest level. The 80p a box I referred to covers only the labour, the container, the transport and the commission.
My hon. Friend made great play of the price of land and the cost of rents, and talked about astronomical figures. He cannot tell the House that £33 a tonne for cauliflowers will go to pay an astronomical rent to anyone. There is no element of rental in it. It is a bare loss saver for the grower.
I believe that this is a reasonable system. There is no compulsion on a producer group to destroy; it is merely offered to them as a possibility. At the price of approximately £33 a tonne we are not doing anything very terrible and we are getting a, firm, stable price and keeping my hon. Friend's constituents in production.
Mr John Wells (Maidstone)
That is good. If this were done away with, there can be little doubt that there would be a still further decline in the cauliflower acreage. If growers could not be assured of protection in a period of glut, there would be a further decline in the acreage and, what my hon. Friend would fear even more, imports from the Eight. He would be coming to the House the year after the intervention system was abolished grumbling that the Eight were sending us their miserable cauliflowers. I can imagine the speech my hon. Friend would make.
Mr. Deputy Speaker (Mr. Oscar Minion):
Order. Hon. Members must not quarrel over cauliflowers.
Mr John Wells (Maidstone)
Thank you for your kindly protection, Mr. Deputy Speaker. The fact remains that there is no compulsion on anyone large to adopt the system, and there is no prohibition on anyone small from joining it. There may be a lack of desire to join, but they are free to do so if they wish.
I commend the system to the House and, although I am grateful to my hon. Friend for raising the matter, I think that the agricultural community as a whole welcomes the system as it stands.
Mr Edward Bishop (Newark)
I would hate to get involved in a family quarrel, but I assure the hon. Members for Holland with Boston (Mr. Body) and for Maidstone (Mr. Wells) that while they seem to be disagreeing about cauliflowers, my right hon. Friend is trying to sort things out in Brussels. I was interested in the suggestion that we are Ministers responsible for agriculture as well as food. That is an important point. We need to balance the interests of the producer with those of the consumer. To produce with little or no regard to the consumer is to do a disservice to both.
Hon. Members on the Opposition Benches and my hon. Friends will know that in trying to get rid of surpluses my right hon. Friend is going to move mountains. That is not a bad objective. The hon. Member for Holland with Boston has done a service tonight by giving us a chance to look at the situation that he details and to make comments. I am also grateful for the presence of my hon. Friends the Members for Newham, South (Mr. Spearing) and for Swindon (Mr. Stoddart), who expressed concern, and the presence of the hon. Member for Maidstone, who has a particular interest as Master of the Worshipful Company of Fruiterers from 1977. I am not sure whether he still holds that eminent position, but at least he reached it, which indicates his interest in this debate.
In the brief time available, I want to make clear that it is not the aim of the Intervention Board for Agricultural Produce to destroy field vegetables. I must therefore explain the market support arrangements for fresh fruit and vegetables used in the European Economic Community. Before that, I will say a word about the traditional ways in which growers have customarily dealt with seasonal surpluses which are typical of this sector.
Prices of horticultural and other produce often depend on supply and demand. Both are affected by the vagaries of the weather. This can rapidly lead to very poor prices, either because of a local or a general surplus of supply in relation to demand and later, as growers react, to reduced production. It is common practice, and has been for centuries, for growers not to market their produce if the price they can get makes it unremunerative to send the produce to market. In such circumstances, as hon. Members will know, the usual practice has been to plough it in, although part of the answer should be greater attention to marketing, including the possibility of moving produce to centres of population where demand may be higher. This is one of the reasons for encouraging larger marketing units, such as grower co-operatives and producer organisations.
For perishable and bulky produce, even this may well not solve the problem of seasonal gluts. The hon. Member for Maidstone made the point about the timing of that. I emphasise, however, that the decision to destroy relatively small amounts of cauliflowers last autumn was taken not by the intervention board officials, remote from production areas, but by the producers on the spot, who could not find any other outlet for their surplus produce.
I want to refer to the producers' organisations and examine the reasons why they exist and how they are made up. For the purpose of making withdrawals from the market, a producers' organisation is any organisation of fruit and vegetable producers, established on the producers' own initiative. In particular, it promotes the concentration of supply and regularisation of producer prices, supplies technical means for presenting and marketing produce, sells the total output of members' produce, and also has rules for marketing which include improving product quality and adapting supply to the market requirements.
Producer organisations are voluntary organisations. Grant-aid is available for the first three years of their establishment, to encourage their formation and to facilitate their operation, subject to certain conditions about the duration and effectiveness of their activities.
The hon. Member for Holland with Boston mentioned particularly the difficulties of the small producer compared with the larger organisations. These arrangements should help the smaller growers to form themselves into such organisations and, by their operating on a larger marketing unit, to enable them better to market their produce. The Community considers that, given the special features of the market in fruit and vegetables, the formation of producers' organisations with certain rules, in particular about marketing, is likely to contribute to the attainment of objectives of the common organisation of the market. Grant-aid is therefore available to encourage their formation and to help in their operations in the initial stages.
It is against this background that the Community has chosen producer organisations as the appropriate marketing bodies to engage in market withdrawals to help stabilise prices. The Community also had it in mind that these arrangements should help the small growers by becoming part of a larger marketing unit. This is something which the local people concerned might bear in mind.
The Community system recognises these problems and it tries to alleviate them. Briefly, for most fruits and vegetables, recognised producer organisations may themselves fix minimum prices below which members' produce may not be offered for sale and themselves finance any resulting withdrawals from their own funds, raised by a levy on their members' sales. Such expenditure is not compensated from Community funds except in special circumstances.
For certain fruits and vegetables of special importance to Community producers—those of interest to British growers being apples, pears, cauliflowers and tomatoes—the Community rules provide that serious disturbances of the market can be dealt with by way of compensation paid from Community funds for produce withdrawn from the market by producer organisaions, subject to certain conditions being met. For this purpose the Council of Ministers fixes each year, for each product, the prices from which seasonal scales of withdrawal prices are derived. These vary from about 40 per cent. to 70 per cent. of the normal run of market prices. In practical terms, growers last autumn received in compensation about 2p per pound for their cauliflowers under these arrangements compared with a normal market price of some 4p to 5p per pound. That is a matter that the hon. Gentleman should bear in mind.
Mr Edward Bishop (Newark)
That is a factor that has to be taken into account. In the event of produce not having a market in places where transport is involved, it is some form of compensation.
In fixing these "safety net" withdrawal prices, the Council takes account of the need to contribute to the support of farmers' incomes, the need to stabilise market prices without leading to structural surpluses, and the need to consider the interests of consumers—on the basis of the trend of average Community producer prices in the past three years. If producer organisations withdraw produce from the market at not more than the relevant withdrawal price, they may claim compensation from Community funds. One of the conditions—this is clearly a very necessary one—is that withdrawn produce must be disposed of through outlets chosen to avoid further disruption of the market while at the same time aiming to the greatest extent possible to avoid destruction. These approved outlets include free gifts to charities and schools, use for animal feed and, for certain fruits, processing into industrial alcohol.
I recognise that in the circumstances it may not be possible to dispose of surpluses in that way. The hon. Member for Maidstone spoke about institutions, for example, knowing when the produce will come to them when a surplus is likely so that they may use that knowledge to advantage.
It is obvious that it would not be possible—as I have sometimes seen suggested—to make free distributions of produce to those who would normally be in the market to buy it. It is considered that to do anything like that would only be to weaken still further the market mechanism, which it is our object to support.
Supervision of these arrangements in the United Kingdom is undertaken by the intervention board, which is responsible for making compensation payments after deducting any receipts from approved disposals. Under the arrangements every effort is made to dispose of withdrawn produce for human consumption or, at worst, animal feed. However, with the best will in the world, with perishable produce in a glut we have to accept that it is not always possible to achieve that, and some produce, unfortunately, has to be destroyed before it becomes a nuisance. We are dealing now not with beef, for example, which would have gone into intervention if my right hon. Friend had not taken the view that beef is for eating, but with a commodity that cannot be easily stored and kept in good condition.
In 1978 when 6,098 tonnes of cauliflowers were withdrawn, mainly in Lincolnshire, there was the problem of a relatively sparsely populated area with similarly few livestock farms, and it was inevitable that some of the produce would have to be ploughed in.
I know something of the hon. Gentleman's constituency in Lincolnshire because I am one of his near neighbours, representing a constituency in Nottinghamshire. On the occasion when he is tied up in Lincolnshire, I am tied up elsewhere.
Withdrawals in this country have been small both absolutely and in relation to our production. They have, however, increased recently, and, taking cauliflowers as an example, in 1973 28 tonnes were withdrawn with compensation of £440. In 1974 it fell to 6 tonnes, with compensation of £121. In 1975 and 1976 we were clear, but in 1977 we went up to 405 tonnes with compensation of £13,298. In 1978 we had 6,098 tonnes withdrawn, which was about 2 per cent. of our production. That withdrawal attracted about £200,000 in compensation. Similarly, there have been small withdrawals of tomatoes, pears and apples.
Taking the figure at 2 per cent., this is a relatively small surplus. It is difficult, with our parliamentary and ministerial responsibilities and with what influence we have on market forces and the unpredictability of weather—where in a good weekend crops may be brought on—to ensure a small surplus. Small surpluses are better than a shortage, and that fact must be borne in mind.
I am sure that we all found the comments of my hon. Friend the Member for Newham, South very interesting. He made a reference to export refunds. It is a question of balance, but if export refunds do not help to encourage some exports there could well be more produce withdrawn.
In the horticulture sector, on balance, the export refunds are generally cheaper than the cost of the equivalent withdrawals. There are, however, no export refunds on cauliflowers.
My hon. Friend also spoke of the possibility of fraud. I assure the House, whether the matter be relevant or not, that the withdrawal arrangements are not abused. There is a careful scrutiny of the procedure. The disposal of withdrawn produce through the approved outlets is verified and the scheme is subject to audit. I give my hon. Friend the assurance that I shall carefully study his comments in the debate.
Mr Nigel Spearing (Newham South)
Mr Edward Bishop (Newark)
I take note of my hon. Friend's suggestion. One can put these fairly modest support arrangements into perspective by seeing them as a form of insurance to cushion both the producers and consumers against the effects of substantial fluctuations in supply.
Hon. Members accept that even before our entry into the Community there was a surplus for many years. It has been the producers' task to find an outlet.
The hon. Member for Holland with Boston asked about the bringing and freeezing of surpluses. Processing adds to the costs. The question of whether there is a consumer demand for the product at a remunerative price is involved. If a producer can provide an outlet for his produce, that increases demand for the produce. Whether money should be spent on encouraging the production and, likewise, the demand depends upon the demand for the product. Such an outlet is not an approved outlet for the purpose of withdrawals where the normal market demand for the fresh product can be reduced and the market support defeated.
There are limits to the expenditure which can be incurred on these arrangements. As always, it is a matter of a reasonable balance between cost and advantage. Our main concern is to avoid the risk that these arrangements will degenerate into a system for encouraging uneconomic production and hence structural surpluses.
It is the producer's job to be sensitive to the demands of the market, to what the consumer will pay, the market and the other factors. That is why we should like the withdrawal prices to be frozen at their present level. That is the line that we are taking in the CAP price discussions. The Community knows that.
We are by no means enamoured of the Community's present system of supporting the market in this sector. In the United Kingdom we have sought to ensure that the system is not extended to more than the few sensitive crops already covered. We have not operated—as we might have done—the special arrangements for State buying-in. However, it is necessary to recognise that growers' returns are dependent on unforeseeable changes and changes in the weather—which affect not only the output of horticultural produce and the point at which it becomes ready for marketing but the consumer demand for it. Unfortunately, the two do not necessarily coincide.
For this reason, the problem needs to be tackled at both ends. Accordingly, we have been encouraging not only the adoption of new and improved technologies aiming to regulate—as far as nature will allow—the availability of produce, but some necessary improvements in marketing, the better to adapt supply to consumer needs. The committee of inquiry into marketing which my right hon. Friend has proposed in the White Paper will be greatly concerned to advance this proposition.
The House knows of the present Government's intention to reform the CAP. One of the problems is high prices, which lead to surpluses. The other problem is to deal with surpluses, which lead to higher prices to the consumer and higher costs to the taxpayer. We have taken those factors into account in the past. We hope to resume the consideration of those problems when we are returned to power after the general election, so that we can put right some of the bad conditions that the Opposition accepted when they negotiated entering into the Community a few years ago.