Orders of the Day — Agricultural Development Act, 1939.

– in the House of Commons on 1st August 1939.

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10.17 p.m.

Photo of Sir Reginald Dorman-Smith Sir Reginald Dorman-Smith , Petersfield

I beg to move: That the Scheme under the Agricultural Development Act, 1939, for the collection of levies from manufacturers of barley products and importers of beer and for enabling barley subsidy payments to be made to growers of barley in respect of barley grown by them in the United Kingdom and harvested by them during the year 1939, a draft of which was presented to this House on the 26th day of July, 1939, be approved. The House will remember that during the passage of the Agricultural Development Bill, I mentioned that although considerable progress had been made in negotiations with the interests concerned towards the preparation of a long-term scheme to deal with the barley crop, it had become evident that it would not be possible to complete these discussions and to bring such a scheme into operation by 1st August in order to deal with the new crop of barley when it begins to come on to the market. Therefore we took power under Section 20 of the Agricultural Development Act to prepare a simplified temporary scheme to operate for the 1939 crop. This scheme has now been prepared, and the Resolution which I am moving, invites the House to approve the scheme in the form already circulated to hon. Members in the White Paper issued last week.

It might be for the convenience of the House if I outline briefly the chief provisions of the scheme. In general, the scheme provides for contributions to be paid into a Barley Fund by brewers and importers of beer and manufacturers of pot-still whisky upon a sliding scale which will vary with the price of barley, together with such sums from the Exchequer as will provide for an acreage subsidy to growers of barley in the United Kingdom, which will also vary according to the price of barley.

The rate of the levy and the subsidy payment to growers will depend upon the weighted average price of home-grown barley during the six months from 1st August, 1939, to 31st January, 1940, as ascertained from the returns which will be rendered under the Corn Returns Act, 1882. In order to collect levies on imports of beer, which, of course, must be done when the beer actually enters the country, it is necessary to fix a provisional rate of levy for the first six months of the barley year, and for this purpose an estimate must be made of what is likely to be the average price of barley during the season, much in the same way as the Wheat Commission make an estimate of the average price of wheat in order to assess the quota payment under the Wheat Act. Paragraph 5 of the scheme, therefore, provides that the Minister shall prescribe, as soon after the 1st August as possible, an estimated average price. We hope to be able to make an estimate and publish it in 10 or 12 days' time, as soon as we can form some idea of what the market for the home-grown barley of the new crop will be.

All brewers and importers of beer will be required to contribute to the fund on a sliding scale. The amount of the levy will vary from Id. to Is. per standard barrel of beer, according as the price of barley varies between 9s. 11d. and 8s. 1d. per cwt. There will be the usual allowance for repayments of levy on beer which may be exported, lost or destroyed as in the case of Customs and Excise Duties. The levy for manufacturers of pot-still whisky will vary from Id. to 4d. per proof gallon. The remainder of the moneys necessary to pay the appropriate rate of subsidy to the farmer will be found from the Exchequer. If the average price of barley falls as low as 8s. per cwt. it is estimated that the Exchequer contribution will not exceed £500,000.

As far as whisky is concerned there was a strong desire expressed by both the farmers and the distillers in Scotland that the existing arrangements which are in operation there now should continue, that is to say, that there should be a fixed price for local barley. That is considered to be more satisfactory from the standpoint of both parties in Scotland than the provisions of this temporary levy subsidy scheme. I am told that owing to the nature of the trade and the limited number of persons engaged in that trade it will be a relatively easy matter to supervise the scheme and to administer an arrangement of this kind. It will mean a definite price for the local barley.

Paragraph 12 of the scheme provides that the manufacturer of pot-still whisky may be exempt from the liability to pay the levy provided he notifies the Secretary of State for Scotland of his intention to claim exemption from the scheme, and he satisfies the Department that he has fulfilled the conditions specified in the scheme. If the conditions are not fulfilled at the end of the year, then the distiller will be liable to pay on the whole of his production of whisky during that year. Should any distiller prefer not to claim exemption he will then be liable to pay levy on his production of whisky at the appropriate rate. A similar arrangement will be applied to distillers in Northern Ireland.

This is a temporary scheme which had to be devised within a very short time. It may be said that in addition to the brewers and the distillers there are a number of other users of barley for malting purposes, but the quantity of barley used for such other purposes is very much smaller than that used by brewers and distillers, and a number of complications arise which would require exploration and a lot of negotiation before we could devise appropriate scales of levy and before we could introduce administrative machinery for its collection. There is one other complication. Unlike brewers and distillers, manufacturers of other barley products, such as malt extract, are not already under Customs supervision. For these reasons it has not been practicable to include those other users within the scope of this temporary scheme, but I should like to make it quite clear that their omission is entirely without prejudice to their inclusion in the long-term scheme which we hope to devise during the autumn.

As to the effect of the scheme on the farmer, it provides that subsidy shall vary from 2s. 6d. to 30s. per acre, according as the price of barley falls from 9s. 11d. to 8s. 1d. per cwt. If therefore the average price of barley, irrespective of its use, falls as low as 8s. per cwt.—32s. per quarter—the farmer will receive on the basis of the average yield 39s. 6d. per quarter for his barley instead of 32s. per quarter. Of course, the barley grower who realises more or less than the average price will secure a greater or a less return than the 39s. 6d. per quarter.

I am glad to say that this scheme has been prepared in close co-operation with the brewers, the distillers and the fanners, and is in fact an agreed measure. I should like once again to acknowledge the willingness of the brewers and the distillers to co-operate, although I know that some of them do not like a levy contribution, but I feel that this ready co-operation which we have found is a very good augury for the future negotiations which will have to take place in order to work out the long-term scheme. I am convinced that the scheme will provide a very valuable safeguard to the grower of barley, and for the first time under statutory powers the users of barley for malting are making their contribution towards the assistance of the home producer of their raw material. I think this marks a very notable advance in cooperation between agriculture and industry, and as such I commend the scheme to the approval of the House.

10.27 p.m.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

I am quite sure that after the lucid speech of the right hon. and gallant Gentleman every hon. Member in the House will understand this barley scheme. I am sure that they know the finance of the scheme; just how much the grower is going to contribute if the price falls below a certain figure, and they know just what that means on a gallon of beer, in fact, they know all about it. If they do they know more than I do. I have read the scheme very carefully, and the right hon. Gentleman's speech is conspicuous not so much for what he said as for what he did not say. There are certain omissions in this draft scheme for which no explanation has been forthcoming from the Minister, and so far as I am concerned, I am just where I was when I first read the scheme. It is perfectly true that some scheme such as this was necessary under the Act which was passed by this House, and, therefore, I cannot imagine any hon. Member putting up any fundamental opposition to some scheme. But at least we are entitled to know what the scheme really involves. The only thing that the right hon. Gentleman told us about a potential Treasury payment was that if the price of barley for manufacturing purposes falls below 8s. the Treasury contribution might be £500,000. So far as the brewer is concerned, he told us that if he paid on a certain scale of prices there will be a certain scale of charges, and that if the price of barley falls to a certain point the brewer will pay so much per standard barrel of beer into the fund out of which a subsidy is to be provided.

But what the right hon. Gentleman failed to do was this. He gives us a list showing that if the price of barley falls below 10s. to 8s. 10d. then a subsidy per acre of 2s. 6d. will be payable. The price goes down from 9s. 10d. to 8s. 1d., and the subsidy per acre is also given in the third column on page 8. Therefore, we understand from that page that the guaranteed price provided by this scheme will be 10s. per cwt. for barley sold for manufacturing purposes. So far, so good. That is clear. However, when we turn to the Second Schedule on page 11, we are told that if the price of barley falls to 9s. 10d. per cwt., the brewers and importers of beer will pay Id. per standard barrel of 36 gallons towards the subsidy referred to on page 8, and if the price of barley falls to 8s., the brewers will have to pay Is. per standard barrel of 36 gallons towards that subsidy.

What I want to know, and what the House is entitled to know is this. We understand now that the guaranteed price is 10s. per cwt. for manufacturing barley, we know that under the price scheme it may be that the brewers and importers of beer and producers of pot-still whisky will make a certain contribution, but what contribution, or what proportion of the contribution, the brewers or the whisky manufacturers will have to make in certain given circumstances is not explained. While the right hon. and gallant Gentleman thanks his lucky stars that the brewers have been generous and have cooperated, he does not tell us to what extent they have co-operated. I know that the guaranteed price of 10s. for barley for manufacturing purposes is higher than the price received by the producers in any of the last nine years, except 1937. I am not even going to argue that a price of 10s. is an excess price-it may be a reasonable price, and one that will foot the bill of the farmer—but what I want to know is what proportion of the subsidy is paid by the brewers on the one hand and the Treasury on the other. There is nothing in the scheme which tells us what the two proportions are, and the right hon. and gallant Gentleman did not even hint what they are. He told us what the maximum payments maybe, but he did not tell us what proportion of the difference between the average market price and 10s. the brewers will have to meet. That may be a very dreary way of explaining the thing, and it may be even less clear now than it was when the Minister sat down, but if I have at least made the thing clear at all, hon. Members will understand what I am getting at—that the guaranteed price is known, that certain contributions from the brewers in certain circumstances are known, and the subsidy from the Treasury will have to come in later to fill the bill; but we do not know what the two proportions are. I hope the right hon. and gallant Gentleman will explain that.

Then, I want to ask why it is that in the case of barley sold for the purposes of manufacturing beer a guaranteed price of 10s. per cwt. is provided for, when under paragraph 12 in the scheme, if pot-still whisky producers comply with two conditions, they can be exempted from any payment towards the scheme, and presumably, in that case, the Treasury payment will increase accordingly. It may be that I am wrong in that assumption. The two conditions to be fulfilled are, first, that in the manufacture of that pot-still whisky, 50 per cent. of malt made from British barley must be used and, second, that the producer of the whisky must have paid an average price of 8s. per cwt. for the barley. Why should it be 8s. per cwt. in the case of whisky and 10s. per cwt. in the case of beer? I know the right hon. Gentleman referred to Scotland, where whisky is largely produced and to the fact that this would be convenient for them there, but, it appears to me that the question is invited: Why should the beer producers have to pay 10s., while the whisky producers have to pay only 8s. per cwt.? Perhaps the right hon. Gentleman will further elucidate those points. First what proportion of the difference between the market price and the standard price will the brewers' contribution be, and what proportion of that price will be left to the Treasury and, secondly, why are the whisky pro- ducers, if they pay 8s. per cwt., exempt from the scheme?

There is one other question. Perhaps it is scarcely relevant, since the scheme is intended to apply only for one year. But when the year has passed, other schemes will be forthcoming according to the terms of the Act and similar or almost similar arrangements will have to be embodied in them. In 1937 the average price paid for barley from August to the end of January was 12s. per cwt. Suppose in some subsequent year there is a very small crop and barley producers sell at the maximum price and that price exceeds 10s., what is to happen? Will the beer and whisky producers and the Treasury all be exempt from any contribution and excluded from any participation in the price, in excess of the standard price laid down in this scheme? We ought to know that, because, on this temporary scheme, future permanent schemes will be, more or less, based and the more we know about the temporary scheme, the better shall we understand any permanent scheme that is brought forward. I hope the right hon. Gentleman will answer those question and then we may let him have his Resolution.

10.38 p.m.

Photo of Sir Richard Wells Sir Richard Wells , Bedford

This, of course, is a temporary expedient, and I speak with some knowledge of the brewing industry when I say that I agree with the Minister, that some brewers do not like it. I do not think that any trade desires extra taxation. But it is an agreed scheme, because the brewers feel that they would like to see the farmer get a. fair price for his barley. In any scheme that is brought forward, either now or in the future, we, as brewers, desire to see that the farmer does get the advantage of the extra payment and that it is not lost by way of middlemen or in any other way. The hon. Member for Don Valley (Mr. T. Williams) asked what would be the maximum. I believe the maximum payable by the brewers would be, if necessary, something like £900,000, or just over that sum, if the charge were to be levied for this year.

One of the difficulties—I think the great difficulty—regarding barley in this country, is the question of foreign barley coming in at a low price and knocking the bottom out of the English market. As hon. Members know there is a 10 per cent. duty on foreign barley and none on Empire barley. If that duty could be trebled, with a preference on Empire barley, I think the bottom could be put into the barley market, and we should not have this trouble in front of us year after year. The farmer cannot sell his feeding barley at anything like the value which it ought to fetch, and the foreign feeding barley comes into this country at from 18s. to 24s. a quarter, whereas feeding barley in this country should be something like 30s. a quarter. Malting barley, of course, has a limited market, and the farmer always feels very hurt when he has a good class of barley and cannot sell it for malting and perhaps has to sell it at as low as 15s. We accept this scheme because we believe that it will help the farmer through what will be in all likelihood a very difficult season in this next year, and we hope that we may be able to create a permanent scheme for the future benefit of the farming industry.

10.41 p.m.

Photo of Major Frank Heilgers Major Frank Heilgers , Bury St Edmunds

I do not believe that we can deal with this matter by means of an import duty, as was suggested by the hon. Member for Bedford (Sir S. Wells). I have had a good deal of experience of this problem. The import duty position has been examined repeatedly, and it has been on all occasions found to be impracticable. But it was not for that purpose that 1 rose to-night. I rose to congratulate the Minister and to say that it is something of a triumph on his part to have produced a scheme at last. Ever since 1922 the best brains in agriculture have been engaged in the search for a solution of the barley problem, and it has been no easy problem, because the East of England has wanted a high price for malting barley and the West has wanted a cheap barley for feeding pigs. This scheme, at any rate, caters for both parties. I think there is one danger about the scheme, and that is lest the 10s. per cwt. does become a general standard price and the best growers will not be able to obtain a due reward for the best barley that they produce. Anyhow, it seems to me that, in spite of that difficulty, any scheme is better than no scheme at all, and I do thank the Minister for what he has done in the matter.

10.43 p.m.

Photo of Lieut-Colonel Sir Arthur Heneage Lieut-Colonel Sir Arthur Heneage , Louth Borough

It is only right that the hon. and gallant Member for Bury St. Edmunds (Captain Heilgers) and myself should say a few words about this barley scheme, and I join with the hon. and gallant Member who sits for Suffolk, while I represent Lincolnshire, in congratulating the Minister. Norfolk, Suffolk, and Lincolnshire caused the great trouble to the National Government. From the point of view of the farmers, they want to know when they are going to get the money. As the House knows, they are extremely short of money, and I should be very glad if the Minister would let us know the average weighted price. I am sure the House will excuse my mentioning that the farmers would like to know whether they can get something on account, but I do congratulate the Minister on the scheme that he has produced.

10.44 p.m.

Photo of Sir Reginald Dorman-Smith Sir Reginald Dorman-Smith , Petersfield

In answer to the hon. Member for Don Valley (Mr. T. Williams), who asked about the proportions as between the Treasury and the brewers, the proportion will be that the Treasury will pay round about a third and the brewers two-thirds; that is to say, to take one example, if we take 900,000 acres of barley, with a total of 15,000,000 barrels of beer, and the brewers have a price of 32s., the brewers will be paying £900,000, the subsidy per acre will be 30s., there will be a total subsidy of £1,350,000; and the Government them-serves will pay round about £450,000. It is impossible to give any exact figure, but it is round about one-third from the Government and two-thirds from the trade. As far as pot-still whisky is concerned, and why there is a less price for the barley used for that—8s. instead of 10s.—the price of the barley used for whisky always has been lower than that used for beer as it is of not quite so high a grade. If the whisky distillers give over the 8s. there is no subsidy whatever from the Treasury. With regard to the hypothetical question of an hon. Member as to what may happen in the future, I do not like to be dogmatic, but as I see it— certainly in this year—if growers do get the 40s. or over there will be nothing from the Treasury and nothing more from the brewers. They will just get their 40s. or more. This is an insurance scheme; it is putting a bottom to the market and is not guaranteeing a profit.

I am grateful to my hon. Friends for the kind words which they have said about this scheme, and I too am very glad indeed that we have been able to secure a foundation for barley growers in the future. I am afraid that I cannot give the hon. Member any firm idea of when there may be an advance under this scheme, because, as he knows, we first have to ascertain the market prices, but under Section 17 there is power to make advances at a suitable moment, and we will try to make an advance when we can.

10.47 p.m.

Photo of Sir George Courthope Sir George Courthope , Rye

There are two points which have not been mentioned to which I hope my right hon. and gallant Friend will pay close attention. As has been said already, the brewers, of whom I am one, have assented to this scheme in their desire to help the producers of their principal raw material. We are exceedingly anxious to ensure that the price we pay shall reach the farmers and not stick on the way, and I fancy it will be very much easier for the right hon. and gallant Gentleman than it will be for the brewers to ensure that that is so. Inevitably a very large proportion of the malt used by the brewers is purchased in the form of malt and not in the form of barley, and there is one detail which I hope the right hon. and gallant Gentleman and his officers will watch. There has been trouble in the past arising from what is known as Danish island barley. After it has been converted into malt it is very difficult to distinguish it from malt made from home-grown barley. There are considerable imports of that commodity at prices which one would expect to pay for feeding barley, and there is a distinct risk, unless the position is carefully watched, that part of that Danish island barley malt will find its way into use as home-grown malt. I should feel very much happier if the right hon. and gallant Gentleman would give us an assurance that those two points will not be overlooked.

10.49 p.m.

Photo of Mr Thomas Williams Mr Thomas Williams , Don Valley

If I may have the permission of the House to speak again, I should like to say that it is now clear what the guarantees exactly are. The right hon. and gallant Gentleman has told us that any deficiency between the market price and the standard price will be made good as to two-thirds by the brewers and one-third by the Treasury. If the price went to the lowest point of 8s. brewers would still have to pay 9s. 4d. per cwt. for their barley and the Treasury would have to come in with 8d. There is another question I would beg of him to keep in mind. I raised the same question on Second Reading. While the brewers are known for their generosity in many ways I am not too sure that they will be happy if they find that they have to guarantee 9s. 4d. per cwt. for the barley they take from home producers, and that in a bad season they are called on to pay 12s. or 13s. It is worth while the right hon. Gentleman looking at this, because even the brewers are serious business people if their profits are any guide, and if the right hon. Gentleman is searching for stability in the agricultural industry he not only wants to put a bottom in the price but he wants to make doubly sure that the scheme is not going to be crippled.

Resolved, That the Scheme under the Agricultural Development Act, 1939. for the collection of levies from manufacturers of barley products and importers of beer and for enabling barley subsidy payments to be made to growers of barley in respect of barley grown by them in the United Kingdom and harvested by them during the year 1939, a draft of which was presented to this House on the 26th day of July, 1939, be approved.