I beg to move,
That an humble Address be presented to Her Majesty, praying that the Milk (Great Britain) (Amendment) Order 1965 (S.I., 1965, No. 77), dated 21st January, 1965, a copy of which was laid before this House on 27th January, be annulled.
We are here dealing with an Order amending previous Orders laid before the House, the most recent having been laid in September last by the previous Administration. This Order amends basically the Milk (Great Britain) Order, 1962, which laid down the various types of milk, and the conditions of sale, and really only changes the basic price of Channel Islands milk, with one or two smaller changes in the style of presentation.
I should first like to refer to two things that are causes of irritation. The first concerns the sale of half-pints of milk, where the price is adjusted upward by ¼d. to the nearest ½d. above. Can the Joint Parliamentary Secretary report any progress in talks with the industry and the distribution trade for settling this problem?
Secondly, the 1962 Order gave distributors the power to vary their charges in outlying districts, as long as the charge is not unreasonable. The actual words are "demand any unreasonable charge". I do not ask the hon. Gentleman to make any statement about this now but I am sure that, having had negotiations with the industry in an effort to sort out this problem, he will be aware that an abuse has crept in over past years. The emergency facilities contained in the 1962 Order for rural areas have been taken advantage of by distributors in some urban areas as well.
The House will realise that the 1964 Order, which this present Statutory Instrument No. 77 directly amends, removed the description "T.T."—tuberculin tested—and brought in "untreated" as a category. I well remember that hon. Members opposite, then in Opposition, were not particularly happy about the change, and I am delighted to be told that in recent months they have been converted to the use of the word "untreated". I should like to be assured that they are content with it. The difficulties have greatly died down, but I should like to hear from the Parliamentary Secretary that the change has been accepted and that there is no further problem in this respect.
Turning to the main burden of the Order, I would say that it is the most extraordinary thing we have had for quite a long time. Here the Government are changing the price of Channel Islands milk and only that. They are putting up the price by ½d. a pint for six months of the year, yet it will not be for six months in 1965 but for five months. I fail to understand the reason for this. Perhaps the Parliamentary Secretary will tell us why this should be so. Presumably this rise of ½d. in the retail price is the result of pressure brought to bear on the Government by the producers. This means 4d. a gallon for six months or, in other words, 2d. a gallon on Channel Islands milk over the year. I do not know what fraction of the 2d. a gallon over the year Channel Islands milk producers will get in 1965, as a result of their having it for only five months, as I have said, instead of six months.
This is an extraordinary way of going about the whole matter. First, this step was delayed until 31st January. I cannot understand why this was so. It is no secret that application was made by the producers of Channel Islands milk to the previous Administration. I was one of the people who received a deputation from them as far back as the middle and end of May, 1964, when they applied for an increase in the prices they were getting at wholesale level. They made a very strong case. We considered their case during the summer months when, as the Parliamentary Secretary knows and no doubt will point out in this debate, the cost of production is lower than it is at other times. We considered the case carefully as a serious application from a serious body of producers and we came to a conclusion which I announced in August just before the General Election.
The case which the producers put before us then was that their costs had risen and that the profit from keeping a Jersey, Guernsey or South Devon herd as compared with other herds of ordinary milk producers, such as Friesians, had deteriorated. They found difficulty in making a profit. Producers were going out of milk production or were having difficulty in remaining in it.
These were the representations made to me at the end of May last year. Heaven knows what has happened since. Ever since 16th October when right hon. Gentlemen opposite took office, there have been a great many increases in prices. These increases, including transport costs, have hit Channel Islands producers just as hard as and, it could well be harder, than they have hit anybody else.
I find it extraordinary that the Minister has waited all this time. He made an announcement on 17th December that he had accepted that there was a case for raising the price paid to the producers of Channel Islands milk. When he accepted that there was a case he was not generous enough to implement it straightaway or as soon as convenient. The producers had to wait until the end of January before the rise was effected when the increase came in at the retail level. Therefore there were only five months left instead of six months. Therefore, they were losing on the deal. They were not getting the full amount which was promised, and they will not have it during 1965. They will be short-changed. This is an extraordinary way of going about things, particularly for a Minister new to his job.
The other important question here is whether the proposed increase is correct. Is the Minister convinced that 2d. a gallon or ½d. a pint is exactly the right amount to put supply and demand in balance? Does he suggest that the putting of this extra amount into the producers' pockets will encourage them to stay in production or increase the supply to the public? One extraordinary feature of the situation is that the demand for Channel Islands milk has been steadily increasing, particularly over the past 6 to 10 months, at a time when supplies have been decreasing. On the one hand, there has been pressure for an increased supply, while, on the other hand, supplies actually coming forward have been decreasing as a result of the pressure of costs operating adversely on producers. Does the Minister imagine that he has found exactly the right amount, this 2d. a gallon for the whole year, to bring supply and demand for this specialised product absolutely into balance?
Frankly, I do not believe it, and this was the reason why, in August last year, the previous Minister decided that after the election we would free Channel Islands milk from price control. I regret bitterly not only that we are not sitting on the Government benches but also that the hon. Gentleman and his right hon. Friend have not followed the very good advice contained in the announcement which we made at the end of August. This followed directly the lines recommended by the Thorold Committee. As the hon. Gentleman knows, the Thorold Committee recommended that milk should be free from price control by the Government. I do not accept that this freedom should apply to ordinary milk, but, of course, this is not what we are discussing now. I think that it can, however, quite properly apply to Channel Islands milk, which represents only between 5 to 7 per cent. of total milk consumption in this country. It cannot be said that freeing Channel Islands milk from price control would endanger the supply of a basic commodity or allow the public to be held to ransom by producers, distributors or anyone else.
Channel Islands milk is an admirable product on which to start the implementation of that part of the Thorold Committee's recommendations. The advantage would be that not only the trade, distributors and producers, would be able to get supply in line with demand but we should also be able, I hope, to meet the growing demand for this extremely good product in the coming months and years. I gravely doubt that the Government's action in raising the price of Channel Islands milk by ½d. a pint will achieve this result.
I hope that the Parliamentary Secretary will be able to tell us about the forecasts or estimates given to him by his Department of the number of Channel Islands milk producers who will stay in production and increase their supplies and of the number of distributors who are reckoning on an increased supply to the Milk Marketing Board to meet the demand which they know exists among their customers. If he can do this, he will be able to meet his objective of matching supply and demand as well as giving a sufficient reward to Channel Islands milk producers.
In seeking to give that sufficient reward, we must remember that the type of cow he has is smaller than the Friesian or Ayrshire or other types and that the yield of milk over the year except in exceptional cases is nothing like as much as with these other animals. Costs are also heavier.
I cannot but fear that the reason for this Government action stems from remarks the Minister has made. He has said that he has no intention of raising the basic price of milk to the consumer. Presumably, therefore, he has no intention of allowing Channel Islands milk out of his control. Perhaps he has been told by the Prime Minister that he must keep under strict control that part of the cost of living with which he is concerned. Perhaps that is the reason for this scheme.
I am certain that the right way to deal with the problem would have been to free Channel Islands milk from price control. Unless the Joint Parliamentary Secretary is able to give us a very different and far-reaching explanation, we believe that this new scheme will not achieve equity for the consumer in giving him enough Channel Islands milk to meet his demands nor will it give sufficient return for the Channel Islands producer to allow him reasonable profit and to get his supplies equal to the demand which exists.
I want to talk about this Order from the point of view of dairy farmers in Scotland. I should declare that I am a dairy farmer, although my herd is Ayrshire and, therefore, I am not a producer of milk of Channels Islands quality. I support what has been said by my hon. Friend the Member for Cornwall, North (Mr. Scott-Hopkins) about the higher costs which face producers of Channel Islands milk.
This is something that also applies to producers in Scotland, where, with a generally lower temperature, poorer climate and, in particular, because of a very much longer winter, our costs of production tend to be higher. Therefore, if we are to have sufficient supplies of Channel Islands milk it is most important that the price should be sufficiently attractive to producers. I do not feel that the increase contained in this Order is of a size that will help the producers and give them a fair recoupment of their costs. Only if the price were freed could we see a fair return for the producers.
It must be accepted that demand for this type of milk is of a specialised nature. The argument that we should try to keep down the cost of basic foodstuffs does not apply to it in so far as it is a quality foodstuff. As such, the price should be freed so that consumers pay the price that will bring forth the supplies that they want. There is a very big potential of demand for this grade of milk, particularly in towns where, very often, housewives are confined to buying ordinary standard grades of pasteurised—in some quarters it is called "paralysed"—milk and have little choice of buying a better quality product. As incomes rise, housewives will be prepared to pay more for basic foodstuffs and will be prepared to spend more money on produce such as Channel Islands milk.
Yes, but I am confining my remarks to Channel Islands milk, which comes more strictly within the Order. There is a big potential demand and a willingness to pay more for quality milk, and if supplies were more readily available and housewives knew that they could get it, the demand would be very large.
By restricting the price of the product, consumption is being held down and anything done to reduce consumption of one of our basic agricultural commodities is a backward step. If the price of the product could be freed, there could be a considerable expansion in this sector of the dairy industry.
Channel Islands milk is one of the quality milks. Under the Milk (Special Designations) (Scotland) Order, 1965, new premium grades are now being designated for Scotland. Many producers in Scotland are concerned that by adopting such a restrictionist attitude towards Channel Islands milk the Government may adopt the same policy towards the new premium grades due to come in later this year.
In this context, I ask the Government to give much more consideration to this matter and to see whether they cannot give more encouragement to those who are prepared to produce this kind of milk, for which there is a genuine demand.
Hon. Members opposite must make up their minds what they want done. First, they complain that the Government have been putting up prices, and now they complain that we have not allowed prices to go up high enough. That is exactly what their argument means and the House had better realise it. Whether it is right or wrong does not matter for the moment, but let us be clear what the argument is.
I was interested to hear the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) make the same plea and say that we should allow prices to increase even more so that production would become more attractive. I shall deal with that argument later, but I want, first, to reply to the hon. Member for Cornwall, North (Mr. Scott-Hopkins).
It is true that every time there is a charge of 10½d. a pint, someone will want to know who is to pay the extra ¼d. for the half pint. There is always trouble about half pint supplies of all milks, and even complaints from distributors that it is uneconomic to provide half pint containers. That argument goes on.
Then there is the argument about delivery charges, which applies not only to the Channel Islands milk, but to all milks. In certain areas, distributors impose a charge, as they are entitled to do, because the cost of delivery is greater than it is in normal areas. There are always arguments about whether certain distributors are abusing this right. The argument still goes on and we try our best in the Ministry, as the hon. Member for Cornwall, North will know, to get people to see reason and to find reasonable solutions to the problems.
It may be helpful to the House as a whole if I remind hon. Members of the background. Under the Milk Marketing Scheme, all milk, including Channel Islands milk, is sold to the Milk Marketing Board at the pool price—apart from that retailed by producers. For many years, however, Channel Islands milk, which is a quality product with a high butter-fat content, has been sold at a higher price than ordinary milk. This has allowed distributors to pay a premium to producers of Channel Islands milk at rates which vary throughout the year.
When this scheme first started in 1950–51, the premium was worth £650,000 per annum. But in 1963–64 it had risen to no less than £3,208,000. This is not an insignificant sum which represents the difference that the producer gets for the production of Channel Islands milk. Over the same period production has risen from 41 million gallons to 108 million gallons. The hon. Gentleman must know that recently there has been no difference in the amount produced, because it has remained at an average of 109 million gallons for the past three years. It is true that in June last year the Joint Committee of the Milk Marketing Board and the Central Milk Distributive Committee asked for the maximum price of Channel Islands milk to be raised by ½d. a pint throughout the year so that the producer's premium could be increased by 3¼d. a gallon over the year, leaving an additional ¾d. a gallon, not for the producer, but for the distributor.
The matter had not been resolved by the time of the election, although in September the previous Government indicated that if returned to power they would decontrol the price of this type of milk. It therefore fell to my right hon. Friend to consider the Joint Committee's application. He did this very shortly after taking office and announced that on the evidence before him he was not satisfied that the case for an increase had been made out. However, to give the industry every chance of stating its case, he invited it to provide further evidence in support of its application.
In the light of the industry's additional data, and following discussions with the Joint Committee, my right hon. Friend concluded that, to prevent consumers from being kept short of Channel Islands milk, it was necessary to raise the premium so as to encourage more supplies in the winter months. This Order enables this to be done by increasing the retail price by ½d. a pint for the six winter months October to March in a full year.
Hon. Members say, "Why did not you decontrol Channel Islands milk altogether?". Channel Islands milk makes up between not 5 and 7 but 7 and 8 per cent. of the liquid sales of milk in this country. It is no use the hon. Member for Cornwall, North shrugging his shoulders. It is not an insignificant amount. It is a sizeable proportion which we feel cannot be dismissed as a mere luxury commodity.
Whatever we did this year would not affect this winter. But I am bound to tell the hon. Gentleman that, as a result of this increase, Channel Islands milk producers will be £700,000 better off in 1965, which is not an insignificant sum, as I shall show later.
I repeat what I have just said. This is a sizeable proportion which cannot just be dismissed as a mere luxury product, particularly bearing in mind that to decontrol the price of Channel Islands milk could lead to quite unreasonable increases—we have no assurance that there would not be unreasonable increases—in price if at any time in the year supplies were short. It must be remembered that in certain areas, which admittedly are small, sales of Channel Islands milk represent about 20 per cent. of the supply of liquid milk. It is, therefore, important for those areas.
It is true that the Thorold Committee recommended that Channel Islands milk should be decontrolled. It recommended, in fact, the decontrol of all special milks. It is a long time, over 2½ years, since that Committee reported. [An HON. MEMBER: "Get on with it."] The hon. Gentleman asks why we do not get on with it. We have been in office only four months. The hon. Gentleman did not do it in 2½ years when he was Parliamentary Secretary.
That was two years after the Thorold Committee reported. Not having done it in 2½ years, the hon. Gentleman has no right to ask us why we have not done it in four months. We felt that because these supplies represented this large amount, and in some areas a considerable part of the liquid milk supply, it was not right to introduce decontrol at the same time.
The hon. Gentleman asked why we did not make an increase of ½d. per pint for the whole year. The fundamental point is that my right hon. Friend, with his responsibilities to consumers as well as to producers, had to be satisfied that an increase was justified before he could agree to raise the maximum price. The House had better realise that this is what he has done.
The evidence which my right hon. Friend considered fell broadly into two parts: producers' costs, because they had to be considered, and the supply position. After careful study, it was found from the available data on production that costs did not provide sufficiently firm grounds to justify a considerable increase. There has been some decline in the last two years in the value of the Channel Islands premium relative to other milk, but over half the fall was due to the high prices for Friesian calves. It cannot be assumed that the existing price relativities will continue indefinitely. Even without that, I would not accept that a reduction in the relative value of the producers' premium is a good enough reason for making the consumer pay Channel Islands milk producers an extra £1,300,000 a year, which is what it would have meant.
Even before the recent increase, these producers were getting, on average, 7d. per gallon more than other producers. Moreover, we have to remember that in absolute terms they benefited, with other producers, from the increase in the guaranteed price last March. The whole issue turns, therefore, on the supply and demand position, on which many arguments have been put forward about the level and likely trend of production.
Taken at face value, however, the figures indicate that the reduction in output and in numbers of producers has been less than with ordinary milk. For example, there was a fall of 1·5 per cent. in premium sales in 1963–64 compared with a fall in total sales of 4 per cent. Even if, as has been suggested by the industry, the real fall in Channel Islands milk is higher than this, there is no reason to think that it has fared very differently from other milk. Nevertheless, while the amount of Channel Islands milk attracting premium has remained at the same level—109 million gallons—over the last three years, there has not been enough to satisfy demand in the winter months, either last year or this year.
While it is very difficult to quantify the shortfall, we concluded, after discussion with the Joint Committee, that there is a shortage, varying in degree in different parts of the country, in the winter and that this is due primarily to increased demand.
It is a matter of judgment how large an increase in the premium is necessary to bring forth the additional amounts of Channel Islands milk that are needed in the winter. I think the hon. Gentleman agrees that this is difficult to decide. After very careful consideration, my right hon. Friend concluded that an increase of ½d. a pint from October to March inclusive was warranted. As the right hon. Gentleman said, this is equivalent to an increase of 2d. a gallon on average over the year as a whole.
Although this represents less than the 3¼d. a gallon for which the producers had asked, it is worth about £830,000 per annum to Channel Islands producers, who are already drawing premiums worth about £3¼ million. This has to be shared amongst 9,150 premium contracts. The increase represents about £90 per premium contract. This is not insignificant, and will raise the total value of the premium for the first time to more than £4 million. This is a very substantial increase indeed when one bears in mind that the retail price of Channel Islands milk is already 1½d., or 17½ per cent. higher than ordinary milk, and it is to that that this further sum has to be added.
It has been suggested that the increase should have been made sooner. Neither I nor my right hon. Friend can accept responsibility for what happened before mid-October. As I have explained, we made a statement on this matter within weeks of coming into office. By then little if anything at all could be done to help meet the shortage this winter because, to be effective, action should have been taken in the summer. I do not think that the hon. Gentleman would dispute that either.
Nevertheless, we thought it right to let producers benefit for the remaining months of this winter. I am aware of some disappointment expressed by producers of Channel Islands milk that the increases were not higher. That is perhaps understandable, but I think that it is perhaps based on a misunderstanding of the position, because, for the reasons which I have given, I do not believe that a greater increase would have been justified. We shall have to wait some months, as others have done before us, before we can assess precisely the effect of the recent award. On the facts as I see them, there is no reason to believe that it will not have the desired effect.
I assure the House that we gave careful consideration to this application and, if one compares the time that we took to consider it, with the time taken by our predecessors, it will be seen that we cannot be accused of delay. What we were trying to do was to hold the balance fairly, to make it economically better for the producers, and to safeguard also the position of the consumer. If anybody judges this matter fairly, I am sure he will come to the conclusion that this Order is just about right.
I find the hon. Gentleman's reply most unsatisfactory. I think that his arguments are muddled. He kept on talking about the difficulties, which he said we would all appreciate, of deciding whether it should be 2d. per gallon for the year, or 2½d. or 3d. This only goes to underline the point that I made when I opened the debate. It is extremely difficult to know what the exact amount is. I do not believe that the hon. Member is in the best position to decide, with his advisers, how to match supply and demand. It would be far better to leave this to the trade and the producers, through the supply and demand factors on the market.
I do not take the point that the 7 or 8 per cent. of the total milk consumption which is Channel Islands milk is a significant factor which makes it impossible for the hon. Member to free it from price control. He will remember that an alternative supply of ordinary milk is available to consumers, and after the first few months of this winter I do not believe that an imbalance would continue to exist if producers and distributors were able to operate so as to keep the level of production of their herds in line with the demand from consumers.
Neither do I think that the Parliamentary Secretary's argument about producers holding consumers to ransom holds water.
The whole burden of the hon. Gentleman's argument about the 7 per cent. was that it was so vital a proportion that it could not be freed from control, because 7 per cent. and in some cases 20 per cent. of consumers could be held to ransom. The producers would not behave in that way, and the hon. Member knows it. He said that nothing he could do would change this position this winter in respect of the supply of Channel Islands milk. That is true, but he could have stopped the drift away from Jersey, Guernsey and South Devon herds to Friesian and Ayrshire herds in the winter months if he had freed Channel Islands milk as we said we would. If he had done that I am certain that we would not have had the drift away from these herds on the part of producers.
Can the hon. Member tell us what happened between November, when his right hon. Friend announced that he would not grant an increase, and 17th December? What significant factors changed the situation so radically between November and 17th December that the right hon. Gentleman changed his mind about an increase? Was pressure put upon him, or did he for once have enough courage to stand up to his right hon. Friends in the Cabinet and insist on this increase? The whole tenor of the hon. Gentleman's reply is most unsatisfactory.
In the circumstances it would not be right to vote against the Order. [Laughter.] Hon. Members may laugh. If we voted against the Order we would be depriving Channel Islands producers of the small amount that the hon. Gentleman is giving them. We do not want to deprive the producers of what they are given by the Order, but I beg the House to realise that this is a most unsatisfactory way of proceeding. It is not the way to secure Channel Islands supplies sufficient to meet the demand. Neither is the right way to make certain that producers can match the demand. It would be much better to free Channel Islands milk, as being a special milk, from price control, as was recommended by the Thorold Committee.