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.