During 1968–69, the agricultural industry had a difficult 18 months largely as a result of poor weather and the aftermath of the foot-and-mouth epidemic. These factors, coupled with the tight credit situation, affected the momentum towards expansion. Even so, progress towards the objectives of the selective expansion programme continued, although in varying degree. It is against this background that this Review has been conducted, and the Government's aim is to ensure that the industry is enabled to overcome these problems.
This year, net output and net income are forecast to have risen substantially. Output in the 1969–70 farm year is expected to reach as high a point as it has ever done. Net income at over £535 million is expected to be the highest ever. We are anxious to maintain this momentum of production so as to make further progress towards the objectives of the selective expansion programme In order to do this and to tide the industry over until this year's improvement has worked through, certain of the industry's needs must be met. These needs are clear: to replenish cash resources, to contain costs and to increase investment. This cannot be done simply by sticking to the traditional Annual Review methods of price adjustment and production grants. The leaders of the industry have recognised the importance of the Government's willingness to adopt a more flexible approach and to design the measures to meet the real need.
The four point package that we are introducing is this. First, commodity prices: we are again making effective increases for the priority commodities—beef, pigmeat, wheat and barley. Because of the special circumstances this year, we are doing the same for milk, sheep and potatoes. The increases on these seven commodities will not only offset costs but give farmers money over and above this. They amount to about £54 million. In accordance with our policy, we shall reduce the guaranteed price of eggs by 1·43d. per dozen. We are ending the Small Farm (Business Management) Scheme which has run its course.
Secondly, extra resources in the way most quickly to hand: we are raising the rates of fertiliser and lime subsidies for the next 12 months. Nearly all farmers use fertilisers, and we calculate that, depending on uptake, this will put an extra £10 million into the industry.
Thirdly, we shall introduce new incentives to eradicate brucellosis through premiums on milk and on beef cows in accredited herds. These should amount on average to £5 million annually in the first years. They will automatically increase as more herds become accredited. The impetus to eradicate this disease will also help further to reduce costs. There is public concern about this disease, and I am anxious to make rapid progress to eradicate it.
Fourthly, there will be further incentives and resources directly linked to investment. We shall raise substantially for two years the rates of the agricultural capital grant schemes. The injection of cash through our other measures will, I believe, enable farmers to take full advantage of this improvement. The increased rates of capital grant should make available another £20 million or more for direct investment over a period of about two years.
The Orders providing for increased rates of fertiliser and lime subsidies and of capital grants will be laid before the House at once. The changes will come into effect tomorrow.
This four point package cannot be precisely evaluated in conventional Review terms. But the measures more than recoup costs as an exceptional arrangement this year and leave the industry with its efficiency gain in full.
In total, very substantial resources have been committed to the agricultural industry as a result of this Review. These, including the increased capital grants spread over a period of about two years, amount to about £85 million. We have provided the opportunities and conditions for the industry to keep up and improve the momentum of selective expansion. I believe that farmers will respond. The trends to greater production and produc- tivity must then result in a substantial move towards their income objective this year and the achievement of the selective expansion programme.
While we readily acknowledge that the figures the right hon. Gentleman has given on this occasion are higher than previously, is it not true That a large part is due to the very heavy increases in farmers' costs over the year? Perhaps he can tell us what they are. Is it not also an indication of the serious decline of the industry over the last few years? Will he tell us by how much the award falls short of what the farmers' leaders asked for, and will he tell us whether this determination has been agreed by the farmers' leaders? Can he also tell us, on the most optimistic interpretation of his figures, how much lower the purchasing power of farm incomes will be as a result of this Review than it was after the last Review for which a Conservative Government were responsible? Is he aware that we are glad that he is taking steps to help eradicate brucellosis? Are we to have area eradication in the near future? Without it, we cannot make progress. As for the capital grants, from where does he think farmers will find the necessary money to enable them to take advantage of the grants?
The right hon. Gentleman has shown a characteristically gloomy reaction to my statement. I am surprised that he has had to fall back on the old argument that we have not done too well. After all, income and output have gone up substantially in the last year, and we have produced two cost-plus reviews in our short time in power whereas right hon. and hon. Gentlemen opposite managed to produce only one in their 13 years in office, and that was in the election year of 1964. As to the uptake of capital grants, I think that recoupment of costs for the main commodities plus an injection of capital on top of that will enable farmers to take advantage of this Review and go forward with the selective expansion programme.
The right hon. Gentleman asked me what were the N.F.U.'s aims. The Review is not agreed. I am extremely sorry that it is not agreed in view of the fact that it is a very good Review. The N.F.U. leaders set themselves an income objective of £650 million. It was deduced from that that their aim was £140 million. They have never set such a precise aim, and I do not think that they had it in mind that the Review should be an award of £140 million. In fact, this Review will enable farmers to get on with the job.
Is my right hon. Friend aware that his approach to the Price Review is something to which we have been looking forward, especially after the recommendations of the Select Committee on Agriculture? Can my right hon. Friend spell out what will be done in hill farming areas to assist those who have had a very bad deal in the last year or two?
I am obliged to my hon. Friend. This Review will be of considerable advantage to hill farmers. We are making good increases on the guaranteed prices of sheep and of fat cattle. In addition, we are putting 30s. on the hill cow subsidy and £1 on the beef cow subsidy. On capital grants, we are making increases in grants under the Hill Land Improvement Scheme. For drainage in hill areas, the grant will be increased from 60 to 70 per cent., which is a very substantial amount.
Does the right hon. Gentleman realise that milk producers in my constituency and throughout the country will look upon what he has done for milk as derisory? Does he further realise that unless he substantially increases the standard quantity—unfortunately I have been unable to find out whether he has or not, and he has not said so; if he has, I think that he should have said so—and implements promises to restrict imports, the milk producing industry in this country is finished?
The fact is that we have done extremely well for the milk producing industry. The guaranteed price is now the highest ever. There will be an increase of 2d. a gallon on milk. Milk producers will benefit from all four parts of this package. In particular, the industry will gain increasing advantages year by year from the brucellosis scheme, because that will give the farmer who has a brucellosis-free herd 1¼d. a gallon on top of the 2d., which is a very substantial sum indeed.
Is my right hon. Friend aware that members of the National Farmers Union—I am a member of the N.F.U.—by and large will welcome this Review? I say that because, by a quick calculation, one can readily appreciate that the average milk farmer in this country will get a substantial increase in his return of about £200 to £250 a year. But may I ask my right hon. Friend to go into the question and give us an indication of what the average farmer will gain from this Price Review?
I entirely agree with my hon. Friend that farmers will appreciate this Review when they have studied it and calculated the advantages which they will gain from it. It is difficult to be precise about a calculation of the actual effect on farmers' incomes of any given Review; but I should say—these are approximate figures—that a small dairy farm with about 25 dairy cows would get about £200 a year extra; that a medium sheep farm with about 600 ewes would get about the same; that a medium cereals farm of about 220 cereal acres would get about £500 a year extra; and that a specialist pig producer with about 100 sows would get about £600 a year extra. This is the kind of return that the farmer will get as a result of this Review.
Speaking as a member of the National Farmers Union, may I assure the right hon. Gentleman that Worcestershire farmers will deplore a non-agreed settlement today? Whereas we realise how difficult it is to evaluate the whole package, may I ask the right hon. Gentleman whether he can tell us what the effect of Part I of the package will be—the increase in commodity prices—and what progress that makes towards bridging the gap between farmers' incomes last year of £535 million and farmers' demands for £650 million? How much of that £115 million is made up of the commodity advance in prices?
The hon. Gentleman will know very well that it is not possible, in view of the imponderables of weather and disease, to calculate today to what extent that objective can be met. But this Review will take farmers a good way towards their objective. I am sure that the farmers of South Worcestershire will be pleased with this Review.
I congratulate my right hon. Friend on announcing what I regard as a fair Price Review. I am speaking for the industry, not the N.F.U.
May I ask my right hon. Friend whether, in determining labour costs, which are set out in the White Paper on the guaranteed products being increased by £20 million, he has taken into account that this is based on the present labour force, not that which it is likely to be at the end of 12 months and that, therefore, to this extent the estimated cost is far beyond what will be the real cost when the final accounts are known at the end of the year?
In quoting the figures for farms of different kinds, was the Minister not giving the gross addition to income, not the net addition, which is eaten up by increases in costs?
Secondly, is the right hon. Gentleman satisfied with the balance of the Review between beef, sheep and milk? As the increase for milk is relatively greater than for sheep or beef, there will be a tendency for people, who might otherwise go in for beef or sheep, to stick to milk production.
Thirdly, as most progressive farmers buy fertiliser early in the year, and most have already done so, may I ask the right hon. Gentleman whether he intends to make the fertiliser subsidy retrospective at least to the start of the year to cover orders already placed?
I was giving the approximate figures and dealing with net incomes. I think that the balance of the award on commodities is right in the light of our efforts to meet the objectives of the selective expansion programme.
Concerning fertilisers, we are laying the Orders and the changes will come into effect tomorrow. For technical reasons, it is difficult to meet the hon. and learned Gentleman's point. But I should like to add one thing more about fertilisers. I am glad to be able to announce that the fertiliser manufacturers have agreed, subject to any exceptional circumstances, not to raise costs over the next 12 months.
My right hon. Friend besides being described properly as the Minister for farming interests, is also the Minister for the consumer. Will he, therefore, tell us what effect he expects this Review to have on the cost of living in respect of food, what effect it would have had had the whole of the farmers' demands been met, and what effect it would have had if the policy of the party opposite had been accepted?
The effect on retail food prices will be felt only on milk. Thy price of milk will go up by 1d. a pint towards the end of the year. At this stage I cannot give a precise date. Apart from that, there will be no effect on food prices. That is the value of this system as opposed to the system of the Opposition. If they were operating their system, with this kind of Review, the effect on retail food prices—[Interruption.] They do not like to hear the truth—would be to increase they by 2 per cent.
Is my right hon. Friend aware that we on this side recognise that, under the very difficult circumstances in which he has negotiated this Price Review, it is both reasonable and acceptable? Does he also recognise that farmers—I speak as a farmer—always ask for more than they expect to get?
While welcoming what the Minister said in introducing incentives to eradicate brucellosis and appreciating the effect that this will have on milk farming in Northern Ireland, may I ask whether he can outline briefly what beneficial effects the small farmer who is a distant producer, such as the small farmer in Northern Ireland, can hope to get from this Review?
I think I can tell the hon. Lady that Northern Ireland will benefit especially from this Review. Northern Ireland has a better season than the rest of the United Kingdom during 1968–69, and full-time farming incomes in Northern Ireland increased by an average of 17 per cent. This Review is very helpful to livestock producers. Since brucellosis has largely been eradicated in Northern Ireland, the new scheme will bring in extra cash for almost all milk producers and beef cow producers, and therefore small farmers will benefit.
Can the right hon. Gentleman say whether the increased 2d for milk will apply uniformly over the United Kingdom? Will Scottish farmers get the full benefit of it? Second, can the right hon. Gentleman make clear whether what he has said is designed to maintain the present output, or to increase it? If it is to increase it, what does he propose to do about imports
The 2d. will apply over the whole of the United Kingdom, and the object of the Review is to maintain output. If the hon. Gentleman is talking about the stability of the market—and he is constantly asking questions about it—he knows that we have quotas on butter, voluntary restraint on cheese, and that we are operating de facto the G.A.T.T. arrangements on skimmed milk powder, which will give the home producer far greater opportunities than he has now.
Is my right hon. Friend aware that agriculture, right across, is the nearest thing to what the Americans call a lobby? Would it not have been better to have referred this to the Prices and Incomes Board? Is my right hon. Friend aware that at the end of the day most people who live in cities, and consumers, will consider that this is a very handsome settlement?
The operation of the Price Review comes under the Agriculture Act, 1947, and our procedure, therefore, is a statutory obligation. I agree with my right hon. Friend that one has to keep the balance between the producer and the consumer. We do this better than any other country in the world.
Is not the forecast of net agricultural output in 1969–70, set out in Table K, the same as for 1967–68? There has therefore been no move forward. Does the right hon. Gentleman seriously maintain that he is on target with his own selective expansion programme?
I have explained many times, and I shall do so again briefly, what the position is on the selective expansion programme. We are on target for beef, we are lagging behind on cereals because of the wet weather that we had nine months ago, and we are just about on target for pigs. With the boost provided by this Review, we shall attain our targets by 1972–73.
Can my right hon. Friend say something more about the four-point package, how it is evaluated, and what effect it will have on import savings? Can he also tell us how the fertiliser subsidy will benefit the consumer, rather than the monopoly fertiliser firms?
The increase in the fertiliser subsidy will benefit the consumer in so far as it will assist the producer to produce food which is sold in this country at a reasonable price, especially compared with the price in other countries. As regards the four point package, we have tried to help the farmers' need for immediate cash, and to make for investment in the industry. If we can get the balance of these two things right, this will help us to achieve our objective.