I am sure everyone today, whatever their personal opinions, will agree that a major part of this debate should be devoted to agriculture. It accounts for some three-quarters of Community budget expenditure. The common agricultural policy demonstrates the closest approach ever made towards a common market. And it is the development of agricultural policy, in relation to our own important production potential and to imports, which will determine both the security and cost of our food supplies for the future.
Like most agricultural support systems, the details of the CAP are often technical and complicated. But we have to form a judgment in this crucial sector on the implications for this country of the situation now obtaining within the Community and that likely to apply outside it. First, therefore, I shall seek to set out the fundamental factors, including what we have secured in the process of renegotiation. Later, I propose to say something about my own present views and position.
In the Labour Party manifesto of February 1974 we said that we sought
Major changes in the Common Agricultural Policy, so that it ceases to be a threat to world trade in food products, and so that low-cost food producers outside Europe can continue to have access to the British food market".
This reflects the real concern felt by many people—myself included—that we should not be forced into a rigid system, designed and operated to suit the requirements of the Six original members but paying scant regard to United Kingdom interests as a major food importer.
However, it is salutary to remind ourselves today that under the system of guaranteed prices and deficiency payments we did not maintain an open market in the United Kingdom. We could not do so—and no country with an important agricultural industry of its own has even done so. We were, for instance, operating quota systems for butter, for certain fruits and for bacon, minimum import prices enforced by levies for cereals and a whole range of tariffs on other foodstuffs. It is true that at that time Community prices were in general far higher than world prices, that its import barriers were more widespread and protective than ours and that we traditionally had been able to obtain the bulk of our imported supplies at relatively low prices from Commonwealth and other third countries.
When we took office, therefore, the key question for me, as the Minister charged with responsibility for agriculture and for safeguarding the nation's food supplies, was how best to translate the manifesto commitment into concrete negotiating points. It was clear enough that the terms of entry negotiated by our predecessors were largely transitional and inadequate to ensure that the CAP could be operated for the future with proper regard for our legitimate interests if this country remained a member of the Community. It was equally clear that developments were taking place in world trade which had a substantial bearing on these issues.
It is not, I think, in dispute that our entry into the Community coincided with the start of a marked increase in the general level of world prices and a serious shortage of some commodities. World grain prices rose fourfold between 1972 and 1974. At the peak last year the world sugar price was as much as 10 times the average of prices paid the previous year under the Commonwealth Sugar Agreement, and for many foodstuffs the prices of our traditional suppliers outside the Community have risen far more than those inside it.
There are those who assert that this is a temporary phenomenon, that prices are already falling in some cases, and that if we were free from the constraints of continued membership, we should soon find sources of relatively cheap food again. I wish I could share their confidence. But there has been something of a revolution in world food supplies and prices comparable to the oil crisis, which itself was responsible for major increases in the costs of food production, processing and distribution, through its effects on fertilisers, fuel, transport and shipping costs.
Moreover, the rising world population with increased expectations, and the growing ability of developing countries to make their demands effective, must increase the pressure on available supplies. Also, world stockpiles have been seriously depleted. In these circumstances it is foolish to suppose, much as they value continued access to our markets, that any of our traditional suppliers would be willing to gear themselves primarily to meeting our needs, especially at the expense of other outlets where they could obtain a higher return.
Of course, world commodity prices will fluctuate, and, of course, certain foodstuffs can be produced more cheaply outside the EEC. But in my judgment the increases in domestic food prices which we have already experienced have in the main been due to world causes rather than to our EEC membership. It would be irresponsible, whatever our views of the Community, to plan for the future other than on the assumption that the general level of world food prices is likely to be higher than in the past—with the strong possibility of sharp fluctuations in both availability and price. [Interruption.] In reply to a seated interjection, I accept that I have to face the reality and I must state what I believe to be the truth.
These considerations lead to two fundamental conclusions. The first is that it makes increasingly good sense to produce as much of our own food as we can efficiently and economically. Very soon I shall be producing a White Paper on this specific matter. Secondly, EEC prices are likely to be much more in line with world prices than in the past, and the CAP system could provide our best assurance of supplies.
For all these reasons, we decided from the start of renegotiation that the sensible course was to seek changes—major changes where necessary—in the operation of the CAP and some of its commodity régimes, but not to try to overthrow the system itself. It was on this basis that our detailed negotiating objectives were formulated and agreed. As the House is well aware, they were set out in some detail in the statement I made to the Council of Ministers on 18th June 1974. It is in the light of the progress which we have since made towards these objectives that the motion before us has my strong support. I must therefore deal with these objectives and that progress at some length.
The White Paper describes these objectives under two main headings—first, trade with third countries and, secondly, the operation of the CAP. Our aim on the first of these was to secure improved access to the Community market for food imports from third countries, and this we have achieved in a number of ways. Two in particular stand out—New Zealand dairy produce and Commonwealth sugar. We made it clear at the time that the arrangements made by the previous Government on both these questions were inadequate.
My right hon. Friend the Prime Minister has stressed this repeatedly. For example, Protocol 18 of the Treaty of Accession provided for access on a degressive basis. It left entirely open the quantities of butter which might be permitted from New Zealand after 1977, it made no provision for continuing imports of cheese after that date, and the price arrangements were unsatisfactory in that they were related to the average price obtained by New Zealand on the United Kingdom market between 1969 and 1972. As a result of renegotiation, the President of the Commission has agreed to submit proposals by this summer under which annual imports of New Zealand butter for the three years after 1977 can be maintained at around the level of 1974–75 deliveries.
This marks the ending of degressivity and access for New Zealand butter should continue indefinitely. It has also been agreed that the problem of cheese imports should be looked at urgently, and the need has been accepted for periodic review and adjustment to the price, this last feature of course being in addition to the 18 per cent. increase which we secured last year. May I say to some of my hon. Friends who may be critical of this aspect that the New Zealand Government have welcomed these developments.
It was also the case that no firm arrangements had been made to ensure continuing imports of Commonwealth sugar to the British market after the Commonwealth Sugar Agreement expired at the end of last year. We asked for adequate and continuing access linked to assurances of supply at prices fairly and realistically related to Community prices. That is exactly what we have secured.
The developing Commonwealth countries were given the opportunity of sending up to the limit of 1·4 million tons, which was the amount then traditionally supplied under the former Commonwealth Sugar Agreement, and they have a guarantee for an indefinite period for the quantities that they have undertaken to supply.
This achievement formed part of the Lomé trade and aid convention recently concluded between the Community and 46 developing countries, including 22 Commonwealth countries in Africa, the Caribbean and the Pacific. In addition to the provisions on sugar, this guarantees almost completely free entry for their agricultural products. More generally, we have secured reductions in Community tariffs and levies. For example, concessions have been achieved on a range of products such as matured Cheddar cheese, canned fruit and fresh and canned salmon.
We have not yet secured all the arrangements we want to see, but there are good prospects both in relation to the multilateral trade negotiations and in the negotiations now in train with various Mediterranean countries. We shall also be seeking more stable arrangements for beef imports from third countries, con- sistent with safeguarding the position of our own producers. We have made it clear that in our view some tariffs are still higher than they ought to be. In the case of New Zealand lamb, we have given notice to the other member States that we shall be seeking to eliminate or reduce the Community tariff, at least for imports into the United Kingdom. Nevertheless, the improvements we have obtained so far are evidence that the Community is not now an economic autarky. It is taking an increasingly outward looking view, and I am confident that our continuing presence in Brussels can help to maintain that trend.
I now turn to the internal operation of the CAP, and begin by referring to the beef regime. This formed a vital part of our renegotiation objectives. We made no secret of our dislike of the extent to which the Community system relied on a high level of intervention. During last year the drawbacks of full-scale intervention became more and more apparent. The Community had to buy up large quantities of surplus beef in order to maintain market prices for producers. As a result, consumers were being denied the benefit of cheaper supplies.
As an interim measure, I persuaded the Community to introduce a special system of premiums last August. And in the course of the negotiations on the CAP prices package earlier this year, it was agreed that there should he a new system of variable premiums within the beef rén to deficiency payments, and that these should be partly financed by the Community. It is these payments, rather than support buying which now provide the major element for the support system for beef now operated in this country. They give producers the assurance of adequate returns without unacceptably high prices for consumers, and they avoid excessive stockpiling of frozen beef.
There are those who have criticised this arrangement, largely on the grounds that it is only for one year. I believe that they underestimate our achievement and its potential significance as regards thinking and practice within the Community. What we have achieved is not just a temporary derogation for the United Kingdom. It is a very real innovation which is open to all member States. I further believe that, as its operation becomes more familiar to them, their doubts—on such questions as cost, and possible distortion of the market—will recede. Of course, we have to undertake new price settlements for every commodity arrangement each year and we set such considerable store on the need for continuing satisfactory arrangements on beef that I will not agree to any future settlements which do not meet this need.
Meantime, the changes we have secured in the beef régime are evidence of a welcome flexibility in the operation of the CAP. We attach great importance to this last point so as to enable special circumstances to be dealt with in different parts of the Community.
In particular, our manifesto stressed the need for a clear emphasis on national aids. This we have achieved in two ways. First, we have retained the national aids which we had before accession, and under the Less Favoured Areas Directive, our hill cow and hill sheep subsidies will attract FEOGA assistance. Secondly, we have demonstrated that the CAP can be flexible in enabling member States to deal with specific problems that arise from time to time. That is stated in the last manifesto on which we fought the election. We listed in it the direct aids that we have achieved. Examples of those aids are the special subsidy on pigs which we introduced last year, the near doubling of the calf subsidy pending the new beef régime and the restoration of the lime subsidy, which the previous Government had abolished.
Of course, there have been other criticisms of the CAP. One of these has been that, with its emphasis on high prices and support buying, it is too oriented towards the needs of producers—and inefficient producers at that. I myself have made this point. That is why I made it clear in my statement to the Council last June that the Community's pricing policy should take account of the needs of efficient producers and the supply-demand situation. Recent pricing decisions have reinforced the tendency for Community prices to be reduced in real terms. Paragraph 21 of Command 6003 gives specific examples of this for various commodities, and points out that, with the exception of beef, world market prices rose substantially in real terms over the last few years. This fact alone bears out the doubts I expressed earlier about the claims of those who see our pursuing a cheap food policy outside the Community.
This trend in world prices also has a bearing on the interests of consumers, this, too, being something on which we set considerable store in the renegotiation. Our consumer subsidies on a range of basic foods are likely to amount to some £550 million over the next year. These have not been questioned, and indeed the Community has itself contributed to the consumer subsidy on butter. Apart from this, and the downward pressure on real prices, the consumer interest has been met in a number of ways. The changes in the beef régime are one example. So, too, are the Community subsidies for sales of beef to pensioners. This is something which our meat trade has welcomed.
Perhaps the best example of all is the obligation which the Community has accepted to maintain supplies of sugar by buying supplies on the world market and selling them to consumers at the lower Community price. This alone has provided a subsidy of nearly £40 million to United Kingdom consumers. The significance of these measures can be seen from the payments made from FEOGA to our own Intervention Board during 1973 and 1974. Of the £175 million we received, over £80 million, or nearly 50 per cent. was for import subsidies, and a further 13 per cent., £22 million, was for direct consumer subsidies. By contrast, only about 5 per cent. of the total was for intervention and storage. This should at least give food for thought to those who maintain that the sole objective of the CAP is to take produce off the market so as to keep up prices.
If the CAP is to work properly it must avoid the creation of surpluses in the first place. This is one of the points which the Commission has recognised in its stocktaking report, which holds out prospects of further improvements of the kind we want to see. We shall be discussing the report in the Council. The discussions are bound to take time, and I do not want to say more at this stage other than that we shall continue to press hard for the changes which we believe to be necessary.
If we succeed in securing them there is nothing that our own highly efficient industry need fear. I stress that last point because, inevitably perhaps in view of the criticisms which have been made, I have given more prominence to the needs of the consumer. However, we must never forget the overriding need to secure economic and efficient production. We must remember that our farmers, who are probably the most efficient in the world, must be given fair prices and reasonable prices to produce the food that we need. This is not just good for the farmer but it is good for the consumer. That must be stressed.