The Minister of Agriculture, Fisheries and Food (Mr. Derick Heathcoat Amory):

With your permission, Mr. Speaker, and that of the House, I would like to make a statement on long-term assurances for the agricultural industry.

The Government have now examined, in consultation with the farmers' unions, the problem of devising more effective long-term assurances of support. I am glad to say that agreed new arrangements have been worked out. The objective was to find a system of forward guarantees that would give more positive help to the industry in its forward planning. I believe that the new arrangements will achieve this purpose; and the farmers' unions share this belief.

The new arrangements, of which details are set out in a white paper that is being published today, are as follow:

The Government will give additional assurance to the industry by means of two undertakings that will operate at annual reviews in future. The first will be an undertaking to maintain each year the total value of the guarantees—including production grants: at present about £1,150 million—at not less than 97½ per cent. of the total in the preceding year, plus or minus any cost increases or decreases that have occurred on review commodities since the last annual review. This represents a new and important development of the assurances stemming from the Agriculture Act.

Secondly, for the individual commodities, there will be an undertaking to maintain the guaranteed price for each commodity each year at not less than 96 per cent. of the guaranteed price for the previous year. This will give reassurance of continuing stability for the returns from each commodity. It will apply to crops as well as to livestock and livestock products. For livestock and live stock products there will also be a provision that in any period of three years reductions in the guaranteed price for a particular commodity will not together exceed 9 per cent.

Subject to these assurances, annual review determinations will continue on present lines so that account may be taken every year of all the relevant factors affecting the economic condition of the industry, and adjustments to the guarantees made where necessary. Crop price guarantees will, however, be determined after each annual review for the immediately succeeding harvest, instead of for the harvest of the following year as hitherto, so as more rapidly to reflect changes in costs and other circumstances.

New arrangements to meet present-day conditions have been made regulating the circumstances in which special reviews will in future be held.

Last, but not least, as part of these comprehensive arrangements, the Government will introduce a major new scheme of grants for assisting the provision of permanent fixed equipment on farms and the making of long-term improvements to land. The details are being worked out in consultation with the landowners and farmers. The grants will be at the rate of 33⅓ per cent., and the additional cost to the Exchequer may amount to about £50 million over a 10-year period. The Government hope that this new provision will lead to more rapid modernisation on farms in all parts of the United Kingdom and so to greater working efficiency and lower production costs.

These new arrangements will strengthen Part I of the Agriculture Act and the Government will observe the new undertakings at the 1957 Annual Price Review. Legislation will be introduced as soon as practicable to give authority for the new scheme of grants for farm improvements and to amend the Agriculture Act where necessary.

The general long-term policy of the Government will continue to be to support and assist the industry to achieve maximum economic output. I am glad to say that these comprehensive new arrangements have been welcomed by the farmers' representatives as a sound and satisfactory basis for future confidence and the necessary forward planning in the industry.

I am placing in the Library of the House the text of the letters that have been exchanged between the Government and the farmers' unions regarding their agreement.

Mr. T. Williams:

I am sure that hon. Members on both sides of the House will welcome this statement, especially because there is something new in it. We shall, however, have to read it very carefully before we can finally pass judgment. I should like to ask the right hon. Gentleman two or three questions which might be helpful to the House. First, with regard to the fixed equipment grants, the right hon. Gentleman suggests in his statement that it will cost about £5 million per annum for the next ten years. Will that be a direct Treasury grant or, like other production grants, will it mean a small reduction in prices?

Secondly, the right hon. Gentleman said that current prices in any year cannot fall below 97½ per cent. of the prices paid last year. Would that amount to approximately £29 million? If prices did descend by 2½ per cent., would it amount to about £29 million?

Thirdly, the right hon. Gentleman said that the individual commodity price cannot fall more than 4 per cent. compared with last year. To illustrate what I mean I would point out that pig meat values last year were £165 million. Therefore, assuming that this new scheme is in operation this year, pig meat prices could not fall more than £6,600,000.

Mr. Amory:

Yes, I think that the right hon. Gentleman is right. On the first point, these capital grants will certainly be additional to the guaranteed prices and the other production grants, and, therefore, will be a direct charge on the Exchequer.

I think that the right hon. Gentleman is also right about his second question. The position is that the margin which the Government have is 2½ per cent. on the aggregate total, plus or minus any price increase. If there were neither a price increase nor a price decrease the total margin would, as he said, be about £29 million, but against that there is to be set the annual gain in productivity to the industry which, in the past, we have calculated as being between £20 million and £30 million.

I think that the right hon. Gentleman is also right on his third point. The margin there will be 4 per cent. on the guaranteed price for each commodity.

Mr. Williams:

Will the grant for fixed equipment largely be devoted to the very large number of small farms?

Mr. Amory:

I very much hope—and I think that the right hon. Gentleman will agree with me, from his knowledge of the industry—that it will be of particular help to the small farmers. It will be paid to the landlord if there is a landlord and tenant but, by agreement between the landlord and tenant, it could be paid to the tenant, if he incurs the expenditure. It will be of very great help to the large number of small owner-occupiers, and is one of the reasons why I, personally, am particularly keen on this new farm improvement scheme.

I congratulate my right hon. Friend on being able to induce the Treasury and the Cabinet to take a long view. Do we understand that it is the considered view of the Government that these longer-term assurances will now enable farmers to get ahead with the job of economic production and marketing without having to look over their shoulders so much, which will be to the benefit of the public generally?

Mr. Amory:

Yes, Sir. I realise the very difficult time which farmers have been having because of the unusual and exceptionally difficult weather which we have experienced in the last year or two. I am confident that these new assurances will enable the farmers to go forward with renewed confidence and continue their really remarkable progress in increasing productivity.

May I ask the Minister whether, when he is next considering capitalisation and long-term policy, he will, in addition to consulting landowners and farmers, also consult representatives of the workers?

Mr. Amory:

I hope the hon. Gentleman knows that I am at all times anxious to keep in as close touch as possible with the representatives of the workers.

May I ask my right hon. Friend whether I am right in assuming that when I heard him talk about unions it included the Scottish union as well as the English union? That was not quite clear to me. May I ask, also, whether the fixed equipment grants will apply to reconstructed buildings as well as to new buildings?

Mr. Amory:

The answer is, "Yes" in both cases. The unions cover England, Wales, Scotland and Northern Ireland. The grants will apply to every scheme of capital expenditure either for new buildings or major reconstructions, provided that the expenditure can be regarded as economic.

On a point of order. The right hon. Gentleman has just mentioned Scotland, Sir. Are we to understand that he has now taken over responsibility for agriculture in Scotland? Are we not to get a statement from the Secretary of State for Scotland?

That is not a point of order.

May I ask whether the schemes contained in the long-term programme are in addition to existing schemes for marginal areas and the crofting counties? If that be so, may I ask the right hon. Gentleman, as representing the Secretary of State for Scotland, whether, in addition to consultation with landowners and farmers' unions, and so on, there will be consultation with those with special knowledge of small farms in the marginal areas and crofting districts and particularly the Crofter Commission?

Mr. Amory:

These are additional to the grants at present made under the Hill Farming and Livestock Rearing Acts and to marginal producers under the marginal production schemes. I will convey the observations of the hon. Gentleman to my right hon. Friend the Secretary of State for Scotland.

May I ask whether the percentage diminution safeguard announced by my right hon. Friend for individual commodities will mean that the rolling average system for pigs, which has proved unsatisfactory to so many farmers, will now be superseded by something giving them a better assurance?

Mr. Amory:

That is a separate question, but my hon. and gallant Friend will find in HANSARD an explanation of the new scheme we have instituted to replace the rolling average system. The new scheme will apply as from 25th March next.

Having regard to the constant criticism of members of the Government about granting subsidies to consumers who do not need them, will the Minister, when granting subsidies to farmers, differentiate between those who need them and those who do not?

Mr. Amory:

The important objective which we must keep before us is to ensure that the payment of these subsidies results in increased efficiency in the industry. in the interests of the whole nation.

May I ask my right hon. Friend whether the improvements grant and capital equipment grant will be equally applicable to horticultural growers who require them for gas storage and refrigeration plant? May I ask also whether consideration was given during the discussions to the possibility of making the annual review retrospective rather than forward?

Mr. Amory:

Capital grants will apply to items of equipment which are common to horticulture and the rest of agriculture. They will not apply to highly specialised equipment. Consideration was given to every conceivable aspect and alternative before we decided on the proposals which I have announced. In the result we came to the conclusion, for the reasons stated in the white paper, that it was advisable, broadly speaking, to continue the present arrangements for the Annual Price Review.

May I ask the Minister whether he came to any conclusion about the aim of his policy? Is it the aim to increase production to a certain percentage over a five-year period, and with any specific emphasis on crop products?

Mr. Amory:

Our general production policy is the one I gave in my statement. It remains to obtain the maximum economic production from the industry. We have mentioned the products that we believe should be expanded in the national interest in the White Papers issued after the last three Annual Price Reviews. We are anxious to see still further production of beef, mutton and lamb and further production of home-grown feeding stuffs in order to ease our balance of payments. Those are the factors to which we attach importance.