With your permission, Mr. Speaker, and that of the House, I would like to make a statement about the guarantees to agriculture for the coming year.
The Government have now determined these in the light of the Annual Review of the economic condition and prospect of the industry and of the long-term assurances provided for in the Agriculture Act, 1957. The details are set out in a White Paper which will be available in the Vote Office when I sit down.
The industry's position has been improving. Net output in 1957–58 is forecast at 63 per cent. above pre-war. This compares with a revised figure of 61 per cent. for last year. It is another record that reflects the strength of our agriculture. I am sure that the House will wish to give credit to all sections of the industry. At the same time, I must remind the House of the warnings that have already been given by my predecessor and myself about the upward trends in the output of milk, pigs and eggs.
The actual net income of the industry shows a satisfactory level and a rising trend. It is forecast at £360 million in 1957–58. This compares with a revised figure of £314 million for 1956–57. When adjusted for normal weather conditions, the figures are £361½ million for 1957–58 as compared with £333½ million for 1956–57. So, on both the accepted bases—the actual basis and the normal weather basis—the net income is far higher than ever recorded before.
Costs have gone up by about £11 million in a full year on review commodities. This is the lowest annual increase for some time. Efficiency continues to improve. Together with the increases in the price guarantees and production grants determined by the Government over the last three years, this has more than offset the effects of cost increases.
We have taken full account of the needs of the national economy and of our international trading position, especially in relation to the Commonwealth. The fight against inflation continues. The protection afforded to the farmer by the guarantees has involved an increasing Exchequer burden from £206 million in 1955–56 to an estimated £290 million in 1957–58. The long-term assurances will go on protecting him against sharp fluctuations. The value of them at a time of falling world food prices is obvious. We have considered the guidance that needs to be given to production of the various commodities; and given most careful thought to the position of the small farmer.
Our conclusion, on reviewing all the factors, is that it would be fair and reasonable to reduce the total of the guarantees. The maximum assured by the Agriculture Act, 1957, at this review is £1,257 million. We are satisfied that a reduction can be made without detriment to the industry's underlying strength and should enable the industry to maintain the improvement already achieved. The guarantees are to be reduced by about £19 million. This is about £2 million above the assured minimum.
The determinations now made are for livestock products for the year April, 1958, to March, 1959, and for crops of the 1958 harvest. The general production policy continues to be to foster economic production. The most important aims of the determinations for individual commodities are to discourage the highest cost production in the case of milk, pigs and eggs. The guaranteed price for milk is to be reduced by 1d. a gallon, that for pigs by 2s. a score, and that for hen eggs by lid, a dozen. On milk, we have limited the necessary reduction out of regard for the small farmer. On pigs, we are increasing the existing rates of the quality premium for bacon pigs by 6d. a score.
The guarantee for wheat is to be reduced by 6d. a cwt. The guaranteed price for fat cattle is to be increased by 1s. a cwt., to be used for further encouragement of quality production. The nitrogen subsidy is to be increased by £1½ million. The guaranteed prices for fat sheep, wool, barley, oats, rye, potatoes and sugar beet remain unchanged, except for a small increase in the support price for potatoes to compensate for an increase in the size of the riddle for guarantee purposes. The support price system for potatoes has been under consideration. This is to remain unchanged for the 1958 crops, but arrangements for altering the system for the 1959 crop will be announced by 1st July, 1958.
Possible revision of the Marginal Production Schemes will be discussed with the Farmers' Unions. The Government intend also to initiate discussions about proposals which they are preparing for additional provisions designed to give further assistance to the small full-time farmer.
The determinations now made meet the requirements of national policies and will enable the industry to maintain a fair and reasonable level of remuneration.
As the right hon. Gentleman knows, we do not negotiate with the Farmers' Unions. We have discussions with them. It is the duty of the Government of the day to make the decisions on the Price Review. Having cleared that point, may I say that the Farmers' Unions do not agree with our recommendations.
Does not the right hon. Gentleman think that his prophecy that the net profit of the industry will go from £314 million last year to £360 million in the current year, based on a net output of 63 per cent. above pre-war, is a rather optimistic statement? Further, is the House correct in understanding from what the right hon. Gentleman has said that the farming community is asked to bear the £11 million increased costs of production, plus a reduction of £19 million in prices, making a total weight to carry of £30 million in the forthcoming year?
May I first answer the question about whether there is reason in my hopes that the farmers will maintain their income over the coming year. I base my hopes on this. It has been accepted that increased efficiency in the commodities which are covered by the Review under the 1947 Act is at least £25 million a year. In addition, experience has shown that increased efficiency for the rest of the industry for crops not covered by the guarantees amounts to another £5 million. That makes a total of £30 million. We are reducing the subsidies and guarantees by £19 million. Taking into consideration further costs that may come into this year—we reckon that they would be in the neighbourhood of £10 million—my addition, therefore, works out as follows: £30 million for increased efficiency and £29 million for extra costs. That looks to me as though the farmers, with any luck, will be able to retain their income this year.
No, Sir. I do not want to mislead the House. That is generally accepted as the figure. I think that I am being very conservative—[HON. MEMBERS: "Oh."]—which is a very good thing. I think that £25 million is a very conservative figure for what increased efficiency brings to farming today.
I would like to assure the House that the income figures that I have given have been accepted by the National Farmers' Unions. I give full marks to the National Farmers' Unions for the vigour with which they prosecuted their case, but I am sorry to say that my arguments were stronger than theirs, I would also like to say that throughout they did their best, in representing the members of the Unions, to get as much as they could. They did it with efficiency and skill, but always with the utmost courtesy.
I do not know what pledge the hon. Gentleman is referring to. It is true that some discussion has been going on about further credit schemes for farmers, but, under present financial circumstances, that has been ruled out. However, I think that the scheme that we have in mind for small farmers will be of very great benefit to them. The rough outline is that we shall have certain criteria—on acreage, a certain type of self-employed man with, perhaps under certain conditions, another man working for him, a scheme based on better grass conservation and annual grants injected into the farm to make it a viable unit and able to stand on its own feet.
May I ask my right hon. Friend two questions about the general level of farm production? Is it not a fact that the declared objective of the present Government was to raise production to 60 per cent. above pre-war by 1957–58 and that that figure has now been substantially exceeded? Secondly, is not the proper measure of progress in this matter the fact that in 1950–51 farming production was 43 per cent. above pre-war and, in the last seven years, has risen by a record amount to 63 per cent. above pre-war?
My hon. Friend, as he very often is, is completely right. It is quite true that the target set to the farming community was to raise production 60 per cent. above the pre-war level. It is of immense credit to the farming industry that it has exceeded its target.
Is the Minister aware that when we discussed the 1957 Act we demonstrated how misleading these forecasts could be? Is he further aware that we are rather suspicious that the references to t he small farmer are propaganda to lessen the blow for Torrington? Does the right hon. Gentleman not recognise that this award will bear most hardly on the small farmer?
Does the hon. Gentleman not realise that when he was in power—[HON. MEMBERS: "Answer."] It is fair to say to the hon. Member that when his party was in power, it never produced any scheme designed specifically to deal with the small farmer. As for these electioneering moves on the part of the hon. Gentleman and the crocodile tears which he shed yesterday about the escalator going down, I am glad to say that it is, in fact, going up.
I hope that such questions as are asked will relate to the statement. Let us try to keep to that, because there is no debatable Question before the House.
Is it fair to conclude from the figures given by my right hon. Friend that the burden on the taxpayer for the coming year will be £270 million as compared with £206 million in 1955 and £290 million last year?
I cannot assure my hon. Friend what the final bill will be, because that will depend on world prices. What I can say is that whatever happens to world prices, the bill will be £19 million less because of this Review.
Is it not a fact that during a period when farmers have achieved their target and increased their efficiency at double the average rate of industry, they have lost a quarter of their share of the national income? Will the Minister further say whether his congratulations to the farmers on their increase in productivity are not coupled with a sharp warning not to do it again?
For the first time, the net real value income of the farming community is back to what it was in 1948 after it had the £40 million capital injected into it. That shows a considerable improvement, as the hon. and learned Member has seen from the income figures. Anybody can use figures. It is possible, for example, to compare farms with companies. They can be compared with companies with £1 million capital and a large income, but that would be a bogus comparison since it would be comparing a large company with the average farming unit of 100 acres, employing two men. We must, therefore, get the right comparison. The normal comparison, I should have thought, would be with something of equivalent size—for example, the small trader or partnership, in comparison with both of which the farmer is, I am glad to say, better off than his counterpart in any other type of business.
The under-recoupment this year, taking into account the extra costs and the £19 million cuts in guarantees, amounts to £29·9 million. It is interesting to note that in 1951, the last year when the party of the right hon. Member for Don Valley (Mr. T. Williams) was in power, costs rose by £75 million, the award was £43 million and the under-recoupment was £32 million. That is interesting in view of the fact that at that time we were in a financial crisis and the right hon. Gentleman and his hon. Friends ran away from it. Here we are under-recouping rather less and sticking to our guns and beating inflation.
Mr. T. Williams:
I am not nearly as anxious for propaganda as the right hon. Gentleman. Will he tell the House what was the average under-recoupment for the first nine years following the 1947 Act? If he does not have the figures in mind, may I say that the average under-recoupment was £15 million per annum, while this year the under-recoupment is £30 million, with the £11 million increased costs of production and the £19 million cut?
Certainly, I will answer. As I said, in 1948, £40 million was injected into the industry. In the next year, the under-recoupment was minus £9½ million; in 1950, it was minus £17·6 million and in 1951, it was the figure I quoted of £32 million, about £2½ million more than we are giving today.
May I ask an entirely uncontroversial question? The figures given by the right hon. Gentleman for farming incomes during the last two or three years do not correctly portray changes in the value of money. Secondly, when the right hon. Gentleman says that extra costs amounting to £11 million have been recouped by the extra guarantees and subsidies given over the last three years, will he explain that? On his own showing, the farming income in real terms has not increased over the last three years. Therefore, how is it intended to recoup these extra costs?
Last year, costs went up by £38 million. There would have had to be an award of £8 million under the 1957 Act; although it was not in being, we respected its provisions. In fact, £6 million more was given over the £8 million required, making £14 million. This year, increase in costs has gone down from £38 million to £11 million. Last year we gave the industry an increase of £6 million and this year we are giving it an increase of £2 million over the minimum which was required of us.
Will the Minister include in his discussions with the small full-time farmers those who are engaged in forestry as well? Further, will he take into consideration the fact that the small full-time farmers do not come into the Farm Improvement Scheme at present?
I will certainly consider that. One of the points in connection with the proposals for small full-time farmers is that I want the fullest consultation with the Farmers' Unions and all other sections, and the hon. Member's suggestion might come into that.
Can my right hon. Friend forecast how much difference, in practice, the reduction in the three individual items is likely to make to the farmers' income in the coming year?
While the farmers may be pleased with the announcement which the right hon. Gentleman has just made, may I ask whether he realises that there is another aspect of his duties which has been steadily neglected by his predecessors? He, of course, is new to the job, but will he remember that he is Minister of Fisheries, also? When wilt the right hon. Gentleman make a similar comprehensive and clear announcement about the fishing industry, which badly needs it?
The hon. and learned Member is quite right to remind me of my responsibilities. I am glad to say that he knows that I have started to take quite an interest in that industry. He and I have met in fishing circles on more than one occasion.