On a point of order, Mr. Speaker. The Documents before us are understood to be taken in conjunction with Document 539/75 of the Commission of the European Communities on a Regulation setting up a temporary system of aids to private storage of certain protein products. As this Report was thrown out by a very large majority of the European Parliament last week and automatically falls, is it not true that this debate is totally unrealistic?
Our debate on these particular Documents arises from a recommendation by the Scrutiny Committee. I pay tribute, as I have on previous occasions, to the work of this Committee. The Committee shoulders a substantial responsibility in scrutinising the proposals by the Commission and reporting to the House its conclusions on them. A large proportion of the proposals which are under consideration in Brussels relate to the food and agricultural industries.
As the responsible Minister, I am therefore very much aware of the value of the Committee's Reports in drawing the attention of the House to particular issues of importance and in stimulating discussion of them. I therefore welcome this opportunity of debating these two Documents.
The Committee's Report of 25th February—presented on this occasion by my hon. Friend the Member for Birmingham, Erdington (Mr. Silverman)—dealt with these revised proposals from the Commission concerning the use of skimmed milk powder in animal feed and the stocking of imported proteins. The Committee recommended in its Report that these revised proposals should be considered by the House. But it went on to say that it did
not consider that such further consideration"—
of the proposals—
need delay their adoption by the Council should such adoption prove necessary in the course of negotiations to achieve a satisfactory settlement on this package as a whole.
I am grateful to the Committee for the helpful and constructive attitude which it adopted on this particular point.
Of course, the normal purpose of our debates on Commission proposals is to guide the Government in their handling of the discussions on them in the Council in Brussels. On this occasion there is much to be said for the House considering the proposals, even after their adoption by the Council. The incorporation scheme is a novel temporary measure to deal with a surplus situation. It is right for this House to discuss the unfortunate predicament which made its adoption necessary and the principles which underlie it, and this discussion will be of great value to the Government in deciding their attitude to any future situation of this kind which may arise.
As the House knows, agreement on a prices package was reached in the Council on 6th March. This package included an agreement on arrangements for incorporation of skimmed milk powder and a decision in principle, pending an opinion from the European Parliament, to introduce a scheme for the storage of protein. The decisions taken include certain modifications of the proposals set out in the Documents to which the motion refers. It may, therefore, be helpful if I explain briefly the background to the proposals and indicate the developments that took place during the Council discussions.
The Commission's original proposals were included in its proposed farm price package for 1976–77. In putting forward its original proposals, the Commission drew attention to the level of the skimmed milk powder intervention stocks in the Community and to the need for a combination of measures to tackle this problem. It also emphasised the need to achieve a better balance between supply and demand in the milk products sector. Among the immediate measures suggested was the proposal that some 600,000 tonnes of skimmed milk powder should be disposed of from intervention stock for compulsory incorporation in compound feeding stuffs.
The proposal was that compound feeding stuffs should be required to include 2 per cent. by weight of such powder, which would be sold for this purpose at the same price as the cost of powder used in the production of feeding stuffs for calves in the Community. The intention here was, of course, that skimmed milk powder should be absorbed into pig and poultry feeds.
This original proposal was the subject of a detailed discussion with the interests concerned in the Community. The House examined it pretty critically in the course of its debate in February on the price package as a whole. There was also discussion in the European Parliament. A number of serious objections were raised to this original proposal and there were in particuar substantial doubts about whether it would be administratively feasible.
In the light of this reaction, the Commission came forward with the revised proposals in the two Documents which are before the House today. These envisage a system of deposits to encourage the use of skimmed milk powder in animal feed, linked with aids to provide for the storage of imported proteins.
These revised proposals, details of which are set out in the Select Committee's Report, were generally recognised as having a number of substantial advantages over the original proposal for compulsory incorporation. Instead of requiring the trade to include a specified minimum quantity of denatured skimmed milk powder in individual compound feeding stuffs, the deposit system leaves the trade substantially free to decide how and where skimmed milk powder should be absorbed.
There is, therefore, no requirement to check that individual compounds contain a mandatory minimum percentage of powder. This flexibility means that the trade will be able to operate the system in the light of its commercial judgment and of the situation in the various markets for its products.
The parallel arrangement for the storage of imported proteins is designed to help to reduce the immediate impact on the protein market of the skimmed milk powder incorporation scheme. Here again, it is for individual traders to decide how the scheme shall operate from the point of view of their own businesses. There is no compulsion on anyone to store proteins under this arrangement.
Looked at from a United Kingdom point of view, the revised Commission proposal had another substantial advantage over the original proposal. It is based on quantities of vegetable protein and not on compound feeding stuffs as such. Since we account for a smaller proportion of the Community's consumption of vegetable proteins than of compound feeds as a whole, our industry has to absorb a smaller proportion of the total quantity of skimmed milk powder to be disposed of under the arrangement.
During the course of the discussions in the Council from 2nd to 6th March, a number of helpful modifications to the proposals set out in the document before us tonight were accepted. In particular, provision has been made for the use of skimmed milk powder simply by incorporation as an alternative to denaturing. This should be helpful from the point of view of our own trade. But, in addition, the quantity of skimmed milk powder to be disposed of was reduced from 600,000 to 400,000 tonnes and the storage arrangement was also scaled down from 400,000 to 250,000 tonnes.
Before the Council meeting I saw the trade to discuss the Commission's proposals. I explained on that occasion that I personally did not like these particular proposals and that I would have preferred that the need for them should not have arisen.
Perhaps my hon. Friend will listen. He knows full well that the Scrutiny Committee made a Report. I shall tell him why.
But the Council was faced with the need to agree some way of tackling the skimmed milk powder problem as it existed. I told the trade representatives that it might be necessary to decide on a measure along the lines of the Commission's deposit scheme in the context of other arrangements for tackling the problems in the milk sector.
As the House is aware, a number of other measures were agreed in the price package. I have in mind in particular the decision to increase the food aid programme from 55,000 tonnes to 200,000 tonnes; the deductions from the skimmed milk powder intervention price, which will have the effect of lowering returns to producers; the agro-monetary arrangements, which will further reduce real returns to milk producers in important production areas of the Community; and the agreement to decide by September on arrangements for producer co-responsibility in the milk sector to operate during the next milk year. So the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) is quite right.
This is not the time to discuss these matters in detail. But the decisions reached on the skimmed milk powder incorporation and on the protein stocking arrangement have to be considered in the context of the other measures adopted. Any method of disposing of a substantial quantity of skimmed milk powder from intervention stocks would have given rise to difficulties and objections of one sort or another. It would no doubt have been preferable if the Community had not been faced with the need to take unpalatable decisions to try to deal with this problem. It is no good my hon. Friend the Member for Birmingham, Selly Oak (Mr. Litterick) laughing. I insisted that the Community dealt with this problem and reduced its surpluses. But the fact is that the problem exists and cannot be ignored.
The Government intended that the debate on the Documents which are now before us should take place on 10th March. It is unfortunate that it did not do so, because a number of misunderstandings were created. The first was that, because the debate had not taken place, the introduction of the schemes should be delayed. As I have made clear tonight, and as the Report of the Scrutiny Committee itself makes clear, it was never intended that the debate on 10th March should precede my agreement to the schemes in Brussels. Therefore, there was no reason for the delay in the debate to delay the introduction of the schemes. Nor, as the Government have acted strictly in accordance with the Scrutiny Committee's recommendations, should there be any suggestion that the scrutiny process has in any way been undermined.
As the hon. Gentleman knows—he was there—I gave evidence to the Scrutiny Committee, and the Report dealing with the proceedings of the Committee makes clear:
While, therefore, the Committee report that in their opinion the two instruments raise questions of political importance and recommend that they be further considered by the House, they do not consider that such further consideration need delay their adoption by the Council should such adoption prove necessary"—
To be fair to the Scrutiny Committee, the Minister must admit—he will recognise his own words—that he said—this is Question No. 81—
As I have said, that is why I have laid emphasis on a voluntary scheme. I agree with you entirely. Why should we be penalised because of what has happened, not through our making but through what we have seen, the growth of surpluses? So we are anxious to explore a voluntary scheme.
Those were the Minister's words, which the Committee took and trusted.
Of course, the Committee trusted them, and my view was that, despite the inclusion of the scheme, the package which was presented to the House was a good package and should not be frustrated. That is my position. In fact, the incorporation scheme became fully effective on 1st April. The protein storage scheme is intended to come into operation on 1st May, but this may need to be reconsidered in the light of the European Parliament's unfavourable resolution.
There were two reasons why I felt that I should not oppose that amendment. First, as I have made clear tonight, the schemes actually agreed upon in the Council were an improvement on those contained in the proposals set out in the Documents before us. The second and more important reason was that, as I have also made clear tonight, I have never pretended to like the incorporation scheme. I made this clear to the trade before I went to Brussels, and I made it clear to the House in my reply to a Question from my right hon. Friend the Member for Battersea, North (Mr. Jay) following my statement on the Brussels price package. But, although I did not like the scheme, I did not feel that I should carry this dislike to the point of blocking the CAP price package of which it formed an integral part.
In view of what he has said, will the right hon. Gentleman give a categorical assurance that no scheme anything like this will ever be contemplated again, let alone agreed to by the Government?
As the right hon. Gentleman knows, this is a once-for-all scheme, and I hope that that will be the position.
May I say a word to my hon. Friends who criticise the scheme because they criticise the CAP as a whole. I understand their argument, but I am responsible for negotiating. My aim is to get the best for Britain and the best for my farmers, and to strike a fair balance between the interests of producers and of consumers. I was convinced that the package as a whole was a good one for the United Kingdom. I recognised that, although I regretted the existence of the surplus of skimmed milk powder, I could not act as if it did not exist.
Does the right hon. Gentleman agree that it would have been far better to utilise the skimmed milk before it was made into powder by feeding it to pigs and cows at a lower cost?
The hon Gentleman has a point which I have always recognised and that is why I was critical of the scheme. I did not want to act as if the problem did not exist. Of the various ways of dealing with it, the incorporation scheme, with all its faults and disadvantages, seemed to me to be the best.
In this spirit I could have accepted the Opposition amendment had it been moved on 10th March and I shall not advise the House to vote against it if it is moved tonight. I regret the necessity for this temporary measure to deal with an existing surplus and I recognise that the long-term solution must be to tackle the surplus at its source.
I beg to move, as an amendment to the Question, to leave out 'takes note' and to insert 'disapproves' instead thereof.
I congratulate the Minister on his reappointment. His first appearance in the House as a result of that is not a particularly auspicious occasion. I support him in his remarks about the Scrutiny Committee, which is extremely valuable to the House.
In quoting and requoting the passage from the Committee's Eleventh Report, the right hon. Gentleman should acknowledge that the Committee did not in any way restrict his negotiating position. He cannot escape from his responsibility for the arrangement which he finally agreed.
We are concerned about the effect of these Instruments on the United Kingdom. We disapprove of the United Kingdom aspect. Other countries can speak for themselves but I am told that poultry producers and agriculture Ministers in other countries also disapprove. It is surprising that the scheme went through and many of us cannot understand how it did.
The European Parliament debated the storage aspect and my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) and the hon. Member for Crewe (Mrs. Dunwoody) took part in the debate. The Commissioner said in reply that it the European Parliament rejected the scheme, the Commission would reconsider it this week and put it to the Council for decision in the middle of May, which will create uncertainty. He also said that the matter would probably go before GATT, which creates another element of uncertainty.
Nobody denies that the disposal of surpluses which inevitably arise from time to time is a problem. The precise method of disposal must depend on the circumstances, but the method applied in these Documents, even with the slight amendments, is not an acceptable way for the United Kingdom to try to flatten the skimmed milk powder mountain that exists in Europe.
The United Kingdom has almost no surplus and is in no sense a contributor to the surplus. Not only do we have a shortage of milk produced at home, but we are extremely valuable customers to our European neighbours. We already take some of their surplus in the form of butter and cheese.
We could and should increase our own output of these commodities. But even if we do, this country will still remain an excellent market for food from other countries, because even the most optimistic projection of the expansion of British agriculture still leaves an enormous gap to be filled by imports. Therefore, so far from having any responsibility for the mountain, we are already contributing substantially to reducing it as an ordinary matter of trade.
Secondly, the new scheme, if it ever gets off the ground properly, will require us to put into animal feed such small reserve of powder as we have and to buy the rest across the exchanges and import a tonnage that we do not want and for which we have no need. Worse than that, it is expensive for what it is and will raise the price of feeding stuffs, which means higher prices in the shops.
Not only is this increase in price avoidable, but it is unfair. It leads me to my third reason, that the impact will fall directly on the costs of compounders and of farmers who are not even involved in milk production. It will fall on pig producers and poultry men, and beef producers to some extent. None of these producers has any remote connection with the skimmed milk powder mountain.
What is more, our poultry men produce a significant proportion of our meat requirements at most reasonable prices, and without making any demands on the Exchequer. They make minimal demands on the European Community budget too. Eggs and poultry account for 0·47 per cent. of it, and pigs 1·33 per cent., compared with milk which takes 37·6 per cent. It is quite unjust to expect the pig man and the poultry man to rescue another sector of food production in other countries from their own excesses. The Government brought back this deal as part of their package and they have responsibility for it.
The fourth reason is a particularly bad one from the United Kingdom point of view. This country happens to be a heavy user of animal compounds, the price of which is a sensitive element in production costs, and therefore ultimately in consumer prices. These costs are already going up as the pound falls, and the effect of the scheme will bear unduly and additionally on the United Kingdom.
Fifthly, it was produced at virtually no notice and, despite what the Minister said tonight, without thorough consultations about the implications, both technical and financial. The Grain and Feed Trade Association has described the consultations as a mockery. It was asked for its views without being given the full details of the system—
Let the shouting match go on, if those involved wish.
The Council of Ministers' Regulations were not all passed until 31st March, only one day before the scheme was supposed to be in full operation. Nevertheless, deposits were paid as required from the middle of March, but even today they cannot be redeemed. I understand that no skimmed milk powder has yet been denatured and the licensing of premises has not yet taken place. Will the Minister who winds up the debate confirm that in any case the plant capacity to denature could cope with no more than 20,000 tons in six months if it worked at full capacity? That is only half the total that we are to try to absorb. If that is true, it means that half the proposed tonnage would have to be incorporated directly.
There is another technical aspect. Representatives of the poultry producers —the British Poultry Federation and the poultry section of the National Farmers' Union—have told me today that the stipulations in Part 2 of Annex 1 of Regulation 753/76, dated 31st March, make the compound unsuitable for poultry meat production, so that it cannot be used for poultry in that form. I am further advised that very few experiments have been undertaken about the levels of skimmed milk powder in feeding stuffs and what their effect will be. That is another technical complication. There is also the problem of potential dampness and the risk of a mix of feed turning into a silo of porridge. It may be cheaper in the end not to take the 50p differential, to forgo the premium and not to incorporate the powder at all.
My final reason is that the scheme will not dispose of the existing surplus. What is the evidence that the mountain will not grow again? The way that the price review was set for the milk sector brings no disincentive for continuing the surplus across the Channel.
Perhaps I can persuade the right hon. Gentleman to add a seventh reason and to leave pigs and poultry. I remind the House that throughout the world there are hundreds of millions of hungry and starving babies. A bit of milk powder could make the difference between life and death for them.
My answer to the hon. Gentleman is that the Community has agreed to make 200,000 tons available. There are different opinions about the amount of skimmed milk powder which the Third World and the developing world can absorb. It is not as though they all like the stuff or that it is part of their normal diet, or that it suits their digestion. However, in so far as it may be distributed for that purpose, I am naturally in favour of such distribution.
I agree with my hon. Friend that surpluses exist around the world. It is a world-wide problem. The provision of food for the countries that need it can sensibly be done only on a world-wide basis. I agree with the hon. Gentleman about that.
Within the European Community there are other schemes in the melting pot to help reduce production levels in other European countries, but they are at only a preliminary stage. They are far from being agreed yet, let alone becoming effective. The surplus across the Channel will not suddenly end.
We have heard nothing from the Minister tonight that is constructive. We have heard nothing about the possibility of using liquid milk on an organised basis and saving the cost of drying it. We have heard nothing about the future. I have asked the right hon. Gentleman about future schemes and we have heard nothing about them. The Minister seems to be content with a scheme of which he disapproves, which I think is a fantastic position.
Is it still too late to adjust the price at which the powder is to be incorporated? I understand that it is to be charged at about five times its actual worth as animal food, over £300 a ton instead of about £70. The more one considers the proposition the more unreasonable a prospect it seems.
I wish that the hon. Member for Bethnal Green and Bow (Mr. Mikardo) would stop shouting. Just be patient.
The Agricultural Commissioner is trying to follow a policy of producers sharing in the responsibility of coping with the consequences of their surpluses. That is a sound principle. That was part of the stocktaking Document which the Minister welcomed, as did the Opposition. It is not clear how this scheme ties in with that strategy. It is obvious that it goes in the opposite direction.
It is difficult to understand why the right hon. Gentleman had any truck with these proposals in the first place. The right hon. Gentleman referred to the February debate. I warned him then, as did many hon. Members on both sides of the House before the review was settled, of the problems that the scheme would present. I also said that he was in danger of putting himself in a position where he would have to pay too high a price for his beef premium scheme.
The right hon. Gentleman asks whether I would veto the whole package. But surely the whole package must make sense. Is it not true that the right hon. Gentleman's colleagues on the Council of Ministers also disapproved of the scheme? If that is so, why did they come to such a ridiculous arrangement—which is what this is?
I think that every hon. Member who spoke in that debate was critical of the disposal scheme. It was not as though the Minister was not warned. Indeed, the Minister himself says that he does not like it, which makes our position in the House absurd. We now have the Minister's evidence to the Select Committee on European Secondary Legislation on 13th January this year. On page 18 of the evidence he said:
I should be concerned, however, to ensure that producers are not unfairly disadvantaged because we have no significant stocks of powder.
But our producers have been disadvantaged.
On page 20, in answer to a question from my hon. Friend the Member for Devon, West (Mr. Mills), the Minister said:
As I have said, that is why I have laid emphasis on a voluntary scheme. I agree with you entirely. Why should we be penalised because of what has happened, not through our making, but through what we have seen, the growth of surpluses?".
Why indeed? Yet that is exactly what he has agreed to. What was the point in giving that evidence if the right hon. Gentleman is now attempting to go ahead in this way? The House is of the opinion that this is a bad act of government. There are still immense practical problems in getting the scheme going. Such an arrangement cannot be ended quickly enough, and nothing like it must be contemplated again.
I support the amendment moved by the right hon. Member for Cambridgeshire (Mr. Pym).
My right hon. Friend the Leader of the House said today that it is his purpose to restore the supremacy of this House. I must say that I think he said that on the right day.
The Minister of Agriculture, Fisheries and Food has left the House in an impossible position. He admits that this is a crazy scheme which is damaging the country, he accepts an amendment condemning the scheme by this House, yet apparently he intends to leave it in legal operation in this country.
In my view the skimmed milk powder scheme is an economic and legal monstrosity. Even the NFU described it as
… ill-conceived, ill-prepared and completely unacceptable in principle".
My right hon. Friend the Minister of Agriculture spoke of the background, but he did not explain how the Commission has got us into this crazy situation. The basic reason is that the CAP sets its prices of food, and particularly of dairy products, far too high, so that consumers cannot buy what is produced. All the resulting antics follow from this. First, milk is too dear to buy, and so it is turned into butter. Then the butter is too dear and is turned into a mountain and sold cheap to the Soviet Union and other countries outside the EEC. Then prices are juggled about so that, instead
of having a butter mountain, we have a powder mountain—a mountain that is now over a million tons.
The cost of these extraordinary operations—and this is a figure given by the Minister himself—for dairy production alone in the present year will be £808 million of public money. It is not surprising that even the not exactly anti-Common Market journal the Economist recently described these dairy operations as follows:
EEC money is used to subsidise buying milk from fanners, converting it into skimmed milk powder and adding water to it, so that it can be fed to the calves of the cows that supplied it in the first place. This in turn will enable the calves to grow up so that they can produce still more subsidised milk.
That is a fair description. Having reached this stage, because the skimmed milk powder is also too dear to sell on any sort of free market, the Commission is forced to compel producers to use it. That is what the scheme means, even when, as with the British producers, they in no way contributed to the surplus or to the imbecile EEC policies which have produced this situation.
This move will gratuitously increase still further the cost of British agriculture, as the NFU and the Minister have correctly pointed out, and, before long, raise still further the cost of eggs, poultry and meat. What a piece of madness this is, at a time when incomes policy demands that we should keep down the price of food and the cost of living as much as we can.
In addition, to add insult to injury, the Minister himself went off to Brussels in the first week of March and accepted this grotesque scheme even though the House had not then debated it and even though there was a motion on the Order Paper condemning it. We were told on 16th March that the Government were prepared to accept that motion. Further, the Government apparently put the scheme into legal force in this country partly on 19th March and partly on 31st March, before we had had any opportunity to debate it.
What has become of all those wonderful promises we had in the referendum to the effect that British Ministers would have the power of a veto in Brussels if anything was contrary to British interests?
I must remind my right hon. Friend of what was said in his Government's manifesto which was posted through everyone's door during the referendum campaign. It was said:
The Minister representing Britain can veto any proposal for a new law or a new tax if he considers it to be against British interests.
What is the good of giving that undertaking in the referendum campaign and then swallowing a lunatic scheme of this kind, giving as a defence that it was part of a package and that the Minister could not help it?
The legal implications of this seem to me as disturbing as the economic consequences. Are the Government telling us that they propose to go on imposing a legal compulsion on producers even though the House of Commons is likely tonight to adopt an amendment, accepted by the Government, condemning this proposal in precise terms? If the Government are saying that they intend to defy such an amendment—and I am glad that my right hon. Friend the Leader of the House is with us—it is not a happy augury for the rule of law, quite apart from food prices. The matter cannot rest there.
I remind the Minister of what was said by the Foster Committee—which is well known to my right hon. Friend the Leader of the House—in discussing the question of secondary legislation. The Committee said:
Your Committee consider it inconceivable that any Government would act contrary to such a resolution of the House of Commons even if, which is doubted, it were legally and constitutionally entitled to do so.
We must know, tonight or very soon, what the Government conceive to be the legal position. I suggest to my right hon. Friend that we should have a statement from the Government, if possible tonight, if the House passes this amended motion invalidating these proposed Regulations, saying that the Government will cancel them forthwith and reconsider the whole matter. This whole lamentable skimmed milk fiasco only emphasises the complete unworkability of the CAP in its present form.
Thank goodness this is becoming even more widely recognised. I could quote many authorities. The editor of The Times Business News, Mr. Hugh Stephenson, on 5th April described the common
agricultural policy as "self-evident lunacy". The agricultural correspondent of the Financial Times, on 9th March, condemned the surrender of the Minister of Agriculture in the first week of March as
entailing the failure"—
for it is nothing less than failure—
of the United Kingdom Government's intention, made clear at the time of the referendum, of reforming the CAP".
If the Government intended to reform the CAP in any meaningful sense, why did they adopt this ludicrous scheme? Even the EEC's official Bureau of Consumers Unions—thank goodness it has that now—in its report of 24th February this year, said:
Consumers are therefore being charged very high prices, which lead to over-production, and then the taxpayer provides for the disposal of the surplus".
That is what has been said, not by an extremist below the Gangway but by an official body set up in Brussels.
Therefore, I hope that the House will support and accept the amendment condemning the skimmed milk powder proposals and thereby condemn the whole ridiculous common agricultural policy.
I do not wish to speak at length because many other hon. Members want to speak, but the Minister has got it wrong. He keeps relying on the Report of the Scrutiny Committee, but he should listen to the voice of this House and of the other place. He should not take the Report of the Scrutiny Committee as his defence for his action.
My hon. Friend, like the Minister, realises that the purpose of the Scrutiny Committee is not to pass an opinion but solely to draw the attention of the House to the matter. The Committee, in its Report, refers to a "satisfactory result", but it is for the House to judge whether the result is satisfactory, not the Committee.
That bears out what I was saying. The Minister should be guided by the House. He has ignored the views of the House of Commons and of the other place, which are both very much against the proposition.
I should like to know how all this fits in with the Price Code. The compounders will be raising their prices without giving the Price Commission the statutory 28 days' notice. I raised this matter at Question Time today with the Minister responsible for prices and consumer matters. I understand that the answer is that, because the Community has made this regulation, it overrides the Price Code and the duty to give 28 days' notice to the Price Commission. I should be grateful if the Minister would say whether that is correct.
In an intervention, I asked whether this proposition was ultra vires. I read an opinion by an eminent German lawyer who specialises in Common Market law, and his view is that it is ultra vires under Article 39.1 of the Treaty of Rome because it is a cost increase on production. Article 39.1(c) provides that this sort of thing should be done only for market stabilisation, and this essentially is not market stabilisation; it is passing on the financial burden to the users. I should like to know whether this proposition is in line with GATT—I think Articles 3 and 9.
I am puzzled. These people who were keenest to take us into the Common Market and foist this system upon us are most hysterically outraged when faced with the consequences. I found the speech of the right hon. Member for Cambridgeshire (Mr. Pym) a rather revolting exercise in political humbug.
I wish to comment on what the Minister said, and, although I had not intended to do so, I wish to refer to the Report of the Scrutiny Committee and his use of it. My right hon. Friend was being more than a little disingenuous.
The Minister referred to the virtual approval of the Committee because of the new flexibility and so on. In fact, the Committee said that its earlier concern had been about the compulsory nature of the proposals and the consequent increase in the cost of compound animal feeding stuffs. The Minister said that this concern had been met by the new flexibility and commercial judgment provisions, but the Committee has said that the new proposals meet neither of its original objections.
Though commercial judgment may be exercised on the proportion of skimmed milk powder to be included in products, instead of the mandatory 2 per cent. proportion, compulsion remains, as does the consequent increase in the cost of compound animals feeding stuffs, and both these facts are clearly stated by the Committee. It was disingenuous of the Minister to speak of a shift in the new proposals and to refer to it as a good scheme in the same breath as he was saying he would not advise us to vote against the amendment.
I feel sorry for the Minister. It is not his fault alone. He has to express the thinking of the Government on these matters. Above all, it is the fault of those who did not listen to those of us who recognised and showed what would happen and who have now been proved right. This agreement is the end of the hopes expressed during the referendum campaign and it makes a nonsense of the argument about equality of prices between Great Britain and the rest of the world and the EEC and the rest of the world. We are now seeing the economic consequences of the false propaganda spread during the referendum campaign.
It is not we alone who object to this proposal. The World Food and Agriculture Organisation has also expressed its doubts and its hope that the Community will ensure that these proposals will not work to the detriment of exporting countries and will not depress the growth of international trade. It urges that the measures should be discontinued as soon as possible. Those words are a virtual echo of the Labour Party policy document in relation to international trade and the problem of exporting countries on which we fought the February 1974 General Election.
Hitherto, imports of protein into this country have been duty-free. Now, for the first time, we shall be putting a tax on our protein intake. Yet we know that this protein is vital for our livestock industry. There is nothing in the proposals or the rest of the package that will prevent future surpluses. On the contrary, the proposals suggest that we shall end up with even greater surpluses. Again, I am not alone in suggesting this. COPA predicts 2 million tonnes' production this year, compared with 1·9 million tonnes' production last year. Even if the figures are not precisely correct, they do not suggest a reduction.
The fury of the right hon. Member for Cambridgeshire about these proposals was rather muted, compared with some of his criticisms of my right hon. Friend, and he did not bring out the fact that eventually this cost will be borne by the consumer. The cost of feeding stuffs will be increased and this increase will have to be paid for by the livestock producers and the consumers. This is the background against which we must look at these proposals and I wish that there had been a little more comment on the specific proposals from both Front Benches.
The poultry industry has calculated that the result of these proposals will be an increase in costs of 6 per cent. to 8 per cent. to be borne by the industry and, finally, the consumer. It is an increase of about £5 million plus—anything up to £4 a tonne extra.
Since, according to the Scrutiny Committee, the importation of protein will mean that the use of the material will be regardless of cost, it cannot be said to be a commercial judgment. The most important aspect of a commercial judgment in the production of livestock is the judgment of the cost of feeding stuffs—because about 75 per cent. of the cost of producing livestock in this country is based upon the cost of feeding.
The importers and compounders are now talking in terms of 43p a tonne in administrative costs, on top of the cost of between £2 and £4. This itself is based on the intervention cost, and the intervention cost is about £360 per tonne as compared with the approximately £91 per tonne in the case of normal vegetable protein, particularly soya. It is reduced by subsidy, but we are still left with a ratio of 4:1 in terms of the cost of the compulsory additive, if it is used.
It is true that the deposit is back, but the user will pay more because there is the higher cost of the skimmed milk powder, the transport costs, and the denaturing costs; so in place of the £2 that the user will have returned he will have a loss of about £1·50. Most of this product will be pushed on to pigmeat. There are good reasons why poultry men will find it difficult to use. There is the suggestion that over-use will taint the meat.
But it does not stop there; the costs involved are not merely technical costs. This is where speakers on both Front Benches have gone wrong in talking about 1½ per cent. and 2 per cent. food price increases. They have been referring to direct technical costs. They forget that the costs in the rest of the protein market will rise along with the rise in the cost of this product.
That, in fact, is what has happened. A producer has told me that he has been told that the cost of his vegetable protein feed has risen by £6 per tonne. That is already happening, consequent upon the skimmed milk powder aspect—and it was supposed to be a substitute for vegetable protein. It is clear that the problems of both producers and consumers arise largely from the question of costs of the kind I have described.
It does not stop there. There are the technical difficulties involved in using this material. The right hon. Gentleman talked about silo-type porridge. Somebody else referred to it as a substitute for mortar. We know that there are some difficult technical problems involved, and these mean extra costs. Finally, there is the problem of denaturing. This country has only about 50 per cent. of the denaturing facilities required for the amount it uses.
There are also crucial matters of principle. I agree with the right hon. Gentleman that the section of the livestock industry which did not cause the problem is having to bear the burden of the costs and the difficulties. It is not the pig and poultry trade but the dairy trade that has caused the problem—and I refer to the dairy trade in the rest of the European Community and not in this country. The point is that the nation that did not cause the problem—Britain—is already bearing the cost. Whereas Britain produces 15 per cent. of the Community's milk production, we have little more than 5 per cent. of the skimmed milk stock, but we shall have to bear the costs because we are one of the largest importers of vegetable protein.
Then there is the international aspect. Two years ago the Americans banned the export of soya beans. Now, we are told, they are raising with GATT strong opposition to this scheme. They are in consultation with the EEC. It seems that the formal submission of the American protest to GATT has been delayed pending the outcome of those consultations. We talk of the Common Market and freedom of trade, but it is against that international background. Its policy conflicts with Labour's basic policy on agriculture, laid down in our policy documents in 1973 and 1974.
We could cope with the use of liquid skimmed milk but it is ridiculous that it should first be dried and then brought back into liquid. Either this scheme will solve the problem or it will not. Supposing it does not. What shall we do then? It has not properly started yet. If it does not solve the problem, tougher methods will be necessary next October. Will the Community then bring in compulsory methods, with a mandatory amount of incorporation, or will it bring in larger deposits? If the scheme is working, the Community will say "Let us continue with it."
We are in a "Catch 22" situation. We have lost the major battle and I am concerned with the future. The question of a veto has been raised. As my right hon. Friend apparently agrees with the Opposition that there should have been disapproval of these regulations, will he use the veto in October when the scheme is either toughened or continued as it is? We should like an assurance on that.
The chickens have come to roost on a mountain of skimmed milk powder. It is a nonsense of a policy; it is not the end of the mountain, for all the indications are that it will increase. Mr. Lardinois is resigning. He is lucky; it is a sensible resignation, and it would not be a bad idea if this nation resigned with him.
This is an important debate because so much is at stake. The Minister leaned heavily on the Select Committee. The Committee understood his problems in wanting to do a deal in Brussels, and took into account very strongly his firm promise that he would try to win the battle over this scheme. For that reason, I think we allowed this scheme to go forward. It is a little unfair of him now not to admit that he gave a firm promise to us. I am afraid that when it came to the crunch in the deal, he gave way.
What has worried me for some time about the Community is that in the dealings in Brussels we do not take a stronger line in seeking the best deal for British farmers. Had the French been in this position, they would not have given way. My criticism of the Minister in this deal is that he did not win after what he had said.
I did not agree much with the speech of the hon. Member for Renfrewshire, West (Mr. Buchan), but I agree that this scheme will continue. If it is successful, if it gets rid of the mountain of skimmed milk powder, the Community will want to continue it.
The Ministers have not got to the root of the problem and dealt with those who produce for surpluses only. There is a real danger here. It is no good the Minister saying that this is once and for all. It will go on unless we deal with the real problem.
We in the South-West will suffer more than any other area because we have more stock. This will be a serious burden on all our animal production. It will also be bad for the trade. In one of its briefs, the trade says:
Secondly, it must be a matter of grave concern, as the foregoing illustrates, that British Ministers should have followed the Commission in accepting that what was essentially a practical, and indeed highly technical, problem should be the subject of a political solution taken without any prior attempt to analyse its consequences or its effects on trade and trading.
That is a serious condemnation of the Minister: It was a political deal which did not take account of the grave problems of the trade. Se we must condemn him on that as well.
Everything has been so negative. We should be taking a positive approach in the Community. I agree with what has been said about the sale of liquid milk. That is not possible because of the large volume involved, but something could be done to help. Certainly this milk powder should be sold at a lower price and farmers should accept a lower intervention price in areas of surplus. That is the positive way of dealing with the problem instead of tinkering with it.
We have heard tonight mostly from anti-Marketeers. I am proud to be a pro-Marketeer. It is easy to criticise the CAP, but we should try to rectify the mistakes rather than dump the whole arrangement. I have never believed that the CAP was static. It is flexible: we learn from our mistakes, as we do anywhere else. [Interruption.] It would be a great help if some of those who are chittering had a little skimmed milk. They would then have a better bloom on them at least.
We need to be flexible and learn from our mistakes and to deal with the problem where it exists. The Minister should go to Brussels and seek to take positive steps, by which I mean variable intervention measures to deal with certain areas within the Community which are simply producing for surplus. There might be national quotas. Certainly there should be a board to enforce the disciplines of the Milk Marketing Board. There should also be regional policies to encourage some of the small farmers who are producing simply for surplus, perhaps in Germany, to find alternative work.
I must warn the Minister that there will be a major backlash from British farmers unless this problem is dealt with now. I hope that he will go to Brussels and take energetic steps now to deal with it. This scheme is not the right way. It is bad for British agriculture and the consumer and in the long run it will be bad for the Community.
May I disabuse the hon. Member for Devon, West (Mr. Mills) of any illusions he may retain about the common agricultural policy? I have had the unfortunate privilege of sitting with some of my colleagues in the front seat whilst this Whitehall farce developed, and, although people have not lost their trousers, they appear to have lost their heads.
Put brutally, there have been no structural changes inside the price provisions which will change the structure of the dairy industry inside the Common Market. Because there is no structural change or incentive to encourage anyone to lower his production of milk, we are seeing an absurd attempt to try to recover a situation which has already been abandoned by the Commission.
At the beginning of January, the Commission was asked whether, if it went ahead with this absurd and foolhardy scheme for compulsory incorporation, this would affect the sale of protein and whether it had discussed it with the United States, which was one of the largest exporters. The Commission assured us that there would be no argument, there would be no problems with GATT, and there would be no problems of any kind. Yet, as soon as the price review was agreed, the Commission came back to the member Governments and the European Parliament and said that, because the Americans were upset, it thought that Community taxpayers should pay to have 2 per cent. of the protein put into intervention and that that price should be paid by the ordinary taxpayer.
I leave aside the fact that the CAP is completely and utterly abhorrent to me when it sets out to denature food in a world where two-thirds of the people are starving. I simply say that this is not defensible. It is not defensible in commercial terms, it is not defensible in political terms, and it also raises an absolutely frightening situation.
In the Agriculture Committee of the European Parliament we were told that this scheme had come into operation on 19th March irrespective of the views of this Parliament or any other. I have not been elected to stand by and see the imposition of unfair taxes by a non-elected group elsewhere than in Westminster, and I deeply deplore the fact that we are tonight supposedly discussing a fait accompli. The sooner that we get it straight that we cannot accept the sort of scheme brought before us in the form of a skimmed milk powder absurdity, the sooner we shall begin to reform what is a totally unacceptable common agricultural policy.
I congratulate the Minister on his reappointment in the present Administration, and I wish him well.
With respect to a number of right hon. and hon. Members, we are not discussing whether we should be members of the European Community. We are members, and, therefore, we are discussing the common agricultural policy and the effect of the skimmed milk regulations on agriculture.
Whether or not we like the CAP, many politicians, food producers and consumers believe that it will collapse within the next 12 months unless the leaders of the EEC countries do all in their power to unite in trying to sort out the monetary compensatory system now operating. The green pound also has bedevilled us for a long time, and it is about time that it was abolished.
We have heard that Mr. Lardinois is to resign at the end of the year because of the problems in trying to sort out the CAP. But I believe that too many Government supporters are attacking the Minister. They cannot blame the Minister for our being a member of the European Community—
It is all part and parcel of what we are discussing because it all came in with the price review package.
I often sympathise with the Minister about the pressures brought to bear on him to accept many EEC directives which are not acceptable to him or to our agricultural industry. We have to accept many EEC directives in view of the bargaining power of the EEC in order to achieve what we want in this country. But the hon. Members who are attacking the Minister tonight did not vote with me when I divided the House on the last directive, which barred small farmers from qualifying for the new hill sheep compensatory fund. That involved a principle of the common agricultural policy.
I regret that we have to accept the principle of the skimmed milk Document. The NFU has a very good case for not accepting it. The relevant points are contained in the last two paragraphs of the NFU brief saying:
For the foregoing reasons, the NFU believes that the scheme is both ill-conceived, and ill-prepared and should have been abandoned and that any future extensions of the scheme must be resisted by the Minister. … In the view of the NFU the only practical alternative is to make SMP available at a cost which would make its use financially attractive compared with other proteins.
It has been said that we are making heavy weather of the issue before us tonight, that the price increase will be approximately 7½p per cwt, or £1·50 per tonne. That is a small amount, and in view of the excellent package that the Minister brought back from Brussels, the less we say tonight the better. Nevertheless, I support the amendment.
There can be no doubt about the feeling of the House towards these proposals. I am not certain that the Minister completely understands that the House does not sympathise with what he is doing. It is strange that we should be discussing two Documents, one of which—the protein deposit scheme—has been brought into operation in two stages, on 19th March and 31st March. The second scheme, concerning storage aid, will not come into operation as yet. The Minister and his colleagues must take decisions on it at the next agriculture meeting of the Council of Ministers some time at the beginning of May, after the Commission has revised previous proposals following their rejection by the European Parliament last Thursday—as the hon. Member for Crewe (Mrs. Dunwoody) knows, for she was there.
It is only right that the Minister should state his intentions. Here we have a Document which has been brought into operation in two stages. The deposits scheme came into operation on 19th and 31st March. I shall not venture an opinion on whether it is ultra vires, as my hon. Friend the Member for Banbury (Mr. Marten) said, according to Article 39 of the Treaty of Rome. It is quite possible that it is. Whether it is ultra vires for Ministers to have taken a decision before they reconsulted the European Parliament, which never saw this scheme of deposits, is another question, which once again I do not think we want to argue out now. It will be argued out at a later stage, presumably within the European Parliament. There are two issues, and on both it could be ultra vires.
Nevertheless, this House is about to disapprove of this scheme. Frankly, I do not see how the Minister can continue operating it if the House disagrees with it. He must tell the House—or perhaps the Leader of the House would care to intervene in the short time available—exactly what is to happen. If the House accepts my right hon. Friend's amendment and disapproves the scheme, perforce the Minister would have to come back to the House with a different scheme and ask for approval again and this scheme could not be continued.
The hon. Gentleman and I know that for many years we have had similar incidents in which, when the House has come to a decision and the Government have lost, the Government have accepted the decision of the House, or the Minister has resigned. Perhaps when he replies to the debate the Minister will say whether he will accept the decision of the House or resign.
I am grateful to the hon. Gentleman for his intervention—which was not, perhaps, quite as helpful as he thought it would be. The right hon. Gentleman will make his own statement shortly.
On the second of these proposals—and this matter was raised by the hon. Member for Crewe and by my hon. Friend the Member for Banbury—there is considerable doubt as to whether by bringing the private storage aid scheme into effect we are not contravening the regulations of the GATT. This is almost certainly true. The reason that it was brought in, as the House well knows, was in order to forestall the Americans' bringing a case immediately because the Community is breaking the GATT. In fact, it is 250,000 tonnes on which private storage fees can be paid by the Community, and the import from the United States is just over 8 million. It is a very small proportion, but a very significant one. It is, in fact, breaching the regulations of the GATT.
However, the Minister has been hardly fair or frank with the House about the whole of this skimmed milk powder story. We have over 1 million tonnes in store. If he had accepted the Commission's proposals in the round, the whole package, there would have been a possibility that we might have been able to be constructive tonight; but he did not. He and his colleagues did not accept any kind of measures put forward by the Commission to reduce the levels of herds in Europe, which would not have affected this country at all.
The Minister accepted quite wrongfully an increase in the intervention price of dried milk. My hon. Friend the Member for Devon, West (Mr. Mills) was dead right when he said that it was not an increase in the intervention price—which the right hon. Gentleman accepted—that was needed, but that it was a doing away with the intervention price for dried milk, and the introduction of a tendering scheme, which was the Commission's proposal. That is what should have been done. If it was not a tendering scheme, as my hon. Friend the Member for Devon, West said, there sould have been a marked lowering of the intervention price.
At the Council meeting, the Minister and his colleagues accepted only part of the package proposed by the Commission. The result has been very bad for this country and it will not have any effect on an increasing amount of dried skimmed milk going into intervention. It is true that there will be a certain amount of disposal of skimmed milk under these arrangements, to the detriment of farmers in this country and with extra cost to the consumer.
I hope, therefore, that my right hon. and hon. Friends, and hon. Members opposite, will support our amendment, and, if that amendment is successful, I hope that the Minister will say what his intentions are. I do not believe that he can continue to maintain this scheme in face of the disapproval of the House. Certainly, when he goes to Brussels in May, he cannot and must not bring in the private storage aid scheme. That is quite obvious, and I hope that he will accept the verdict of the House.
May I reply to the debate and respond to questions and comments? It has been a useful debate, although some passions have been aroused. I understand the view taken by those of my hon. Friends who have always been critical of the CAP. [An hon. Member: "My right hon. Friend was once."] I was once, yes. But the Opposition negotiated entry into the Community, and I am rather surprised at some of their contributions to the debate.
I thank the hon. Member for Cardigan (Mr. Howells), and I agree with him that we should not exaggerate the effect of the scheme. I was asked at one stage about increases in production costs. I have a note here in reply to that which advises me that compound feed prices might increase by about 1½ per cent. in the United Kingdom during the time when the scheme is in operation, and it is expected to finish in October. This is very much less than the estimates based on the Commission's original proposal. The question of how this is reflected in the prices of individual feeds under the revised arrangements will largely be a matter for the compounders themselves to determine in the light of their commercial judgment—I argued that at the outset—and the market situation.
There has been reference to the impact on pig, poultry and egg producers. All I would say here is that it is not possible to make a precise assessment, but I believe that the effect on producers should be relatively small and temporary. One must also bear in mind—I say this to hon. Members on both sides—that the markets for pig and poultry meat are currently firm and are expected to remain so, certainly during the life of the scheme. Egg prices, too, are better than they were at this time last year.
I know and understand that strong feelings are expressed—[Interruption.] It is all very well to make speeches while sitting down. It would be better if the hon. Member for Devon, West (Mr. Mills) stood up and intervened properly, and if time were not so short I should invite him to do so. All I ask hon. Members to do, as the hon. Member for Cardigan did—he is a farmer, and he is critical of the scheme—is not to exaggerate the situation.
The right hon. Member for Cambridgeshire (Mr. Pym) asked whether we should increase United Kingdom production of skimmed milk powder. The United Kingdom is normally self-sufficient in skimmed milk powder. Few, if any, imports of powder will be required as a result of the scheme, and these will in any case give rise to no cost to the balance of payments.
The Poultry Federation raised the point that the formulae for skimmed milk powder preparation are unsuitable for poultry. I can only say that the trade was consulted before the formulae were drawn up as a result of the original proposals and the formulae were amended. I understand that the Federation has now raised some further points on these matters. We are examining these, and if there is a case we shall suggest further modifications.
The right hon. Member for Cambridgeshire said that the Council regulations were not all passed until 31st March, one day before the scheme started. That is not so. The Council regulation was formally adopted on 15th March. I was pressed about the lack of denaturing plant, but the scheme does not require denaturing.
There have been criticisms about the nonsense of the Community milk surplus, but I thought I had made clear that the long-term solution must be to tackle the surplus at source. I have always argued that. Over and over again in the stocktaking exercise, I have pressed for a realistic price system, but I am only one member of the Council. Hon. Members must appreciate that surpluses of skimmed milk are not peculiar to the Community. New Zealand, Australia and the United States have surpluses.
The position of compounders in relation to the Price Code is important. My right hon. Friend the Secretary of State for Prices and Consumer Protection has granted an exemption from the pre-notification requirement which permits compounders to pass on increases in costs resulting from the scheme during April and to notify afterwards rather than before. The trade has welcomed that exemption.
The hon. Member for Banbury (Mr. Marten) made a strong speech. I referred to the Scrutiny Committee's Report to demonstrate that I have not been in conflict with the Committee's procedure. I defend my acceptance of the scheme, as I defended it in my opening speech. The problems exist whether we like them or not and I believe that this scheme is the best available solution.
I was asked to make a statement about the European Parliament's criticism of the scheme. The matter will have to be carefully examined and then it is a matter for the Council. Any new proposal will be submitted to Parliament. Perhaps we shall take a different attitude, but we must wait and see what happens to the Commission's proposals. I cannot say whether I shall be in a position to veto—it would be wrong for me to say that. Many hon. Members have argued that I should have vetoed the scheme, but I believed that the package was a good one. No other Ministers vetoed the scheme. It would have been foolish to do so when we had a good package.
It being one and a half hours after the commencement of proceedings on the Motion, Mr. DEPUTY SPEAKER put the Question, pursuant to Standing Order No. 3 (Exempted business).
On a point of order, Mr. Deputy Speaker. The House has now accepted the amended motion which disapproves of the proposals. Surely we must have a statement from the Minister or from the Leader of the House to explain what is now the legal position. It is inconceivable that the Minister should disregard a decision of this kind. Are we to assume that the scheme is no longer legally in operation for the United Kingdom?
I hope that hon. Members will appreciate the position. The Chair cannot compel any hon. Member to make a statement in the House. I hope that I shall not be bombarded with points of order, because my ruling will be stubborn—it is not a matter for the Chair.
Indeed, Mr. Deputy Speaker, but I appreciate your courtesy and concern in this matter. May we ask my right hon. Friend the Leader of the House or another Minister to say whether a statement could be made tomorrow afternoon? May we have a definite promise, now that this decision has been made? By tomorrow people outside the House will be very anxious and the legal position should be clarified.
Further to the point of order, Mr. Deputy Speaker. The Minister has been helpful, and we appreciate his response. But if the Government are to consider the matter, the House will wish to know the outcome, and it would be appropriate for that to be tomorrow. The next day we rise for the Easter Recess. Many things depend on the decision. It seems to us right that there should be a statement tomorrow afternoon. I appreciate what the right hon. Gentleman said, but I hope that he can go that much further.
Further to the point of order, Mr. Deputy Speaker. We understand that a decision on this matter is to be taken by the Council of Ministers on 2nd May. As the House has disapproved the scheme in substance, when my right hon. Friend makes a statement—we hope it will be tomorrow—will he say clearly that he will as a result disapprove the scheme when he gets to Brussels? If my right hon. Friend the Leader of the House is to make a statement, perhaps he may be reminded that there is an Early-Day Motion in the names of the members of the Scrutiny Committee criticising the totality of our procedures. Will he make a statement about that when he has the opportunity?