[Commission documents: R/2274/75, Transitional Arrangements for the Market in Mutton and Lamb; R/1742/76, Dairy Sector; R/1734/76, Balance in the Milk Market; R/2295/76, Changes in United Kingdom and Irish representative Rates (Green Pound); R/2387/76, Milk; R/2388/76, Milk; R/2389/ 76, Milk; R/2390/76, Milk; R/2391/76, Milk.]
On a point of order, Mr. Speaker. I am sorry that I have been able to give you only the briefest notice of this point of order, and for having given the Minister even less. I apologise to him, although I think that perhaps the point of order may not be unhelpful from his point of view.
Among the documents which are shown on the Order Paper as relevant to today's debate is document R/2295/76, on what is commonly known as the green pound. You will be aware that it has been the convention in some, though not in all, cases to treat documents thus set out in connection with the motion for the Adjournment as having been considered and debated by this House for the purposes of the understanding regarding secondary legislation of the European Economic Community.
We read in today's Press that the Commissioner for Agriculture is intending formally, so far as one can gather, to submit to the Council of Ministers early next week proposals on this subject which bear no resemblance to the contents of R/2295/76 and which are, in many respects, divergent from and contrary to them. I wish to ask you, Mr. Speaker, whether you can give a ruling to make it perfectly clear that anything which may be said in this debate on the subject of the green pound, and therefore in relation to this document, does not discharge in any way the obligation which Her Majesty's Government have accepted that there shall be prior debate in this House on any proposals which are to be considered by the Council of Ministers.
I am much obliged to the right hon. Gentleman for having given me notice of his point of order, brief though that notice was—and I understand the reason for that. The laying out of the Order Paper is not my responsibility. Secondly, the House will have a debate on the Adjournment—we have started on the Adjournment—and therefore I suggest that right hon. Gentleman makes his point, if he gets the opportunity to speak, in the debate. The conventions are not my responsibility, as I understand it. But there is nothing to prevent either the right hon. Gentleman or other hon. Members who are called to speak making clear the view that the right hon. Gentleman has advanced in his point of order.
Further to that point of order, Mr. Speaker. Surely the difficulty is that we have no official document before us regarding this new proposal. We have merely a Press report, and therefore by no stretch of the imagination can it be held that anything said today is a discussion of this Commission proposal.
It is not for you, Mr. Speaker, but for the Minister to give this assurance, and I think that the assurance that we need is that he will not commit us to anything at Brussels before this House and the Scrutiny Committee have had an opportunity to debate the document from the EEC embodying this new proposal.
Further to that point of order, Mr. Speaker. I can readily, and for two reasons, give my right hon. Friend the assurance that he seeks. First, the next meeting is not in Brussels, but in Luxembourg.
However, on the more substantial point, the position is really this: we have some indication of what the Commission's thinking may be. As far as I know, we have no actual proposals, with a capital "P", in front of us. This is only a capital "T" for thinking. It seems to me that the right basis, therefore, is to assure the House that in the event of such proposals being tabled, the House would have an opportunity, through the Scrutiny Committee, and so on, to examine those proposals in due course.
I am very much obliged to you, Mr. Speaker, for your reply and for the result that it has had. I raised this matter as a point of order with you as being the guardian of the rights of this House as against the Executive and, a fortiori, the EEC. I am grateful that note has been taken that the House will, at the end of the debate, have taken no formal decision nor even formally debated the subject of the green pound.
I am grateful to the right hon. Member for Down, South (Mr. Powell). Although it is not often said, I think that he has done the House a service this morning—not for the first time.
I am grateful that the amount of time that has been devoted to the discussion of the various Commission documents is rather longer than normally is the case. In the first place, it enables us to have a wide-ranging debate on the subject of agriculture, though, of course, it will come mainly within the three headings with which the Commission's documents are concerned.
In the second place, and purely personally, it enables me to deliver today my first speech in this House as Minister of Agriculture. I should like to tell the House how delighted and honoured I am to hold this old and historic position. Adding a personal note, I should like to say how glad I am to see opposite me the right hon. Member for Cambridgeshire (Mr. Pym). It is a dozen years now since we were both pairing Whips for our respective parties, and we have remained steadfast opponents and steadfast friends ever since.
I should like to start with the question of the milk action programme which the Commission submitted to the Council of Ministers in July. This contained in outline form measures which the Commission believed would bring the market into better balance. The basic document here is R/1734/76. The Commission has now put forward proposed regulations on the various measures. There are six new proposed regulations, plus one which has been on the table now for, I believe over a year. That makes seven in all.
Before considering this rather complex package item by item, which I think I should do, I should like briefly to consider the fundamentals of the problem and what our approach ought to be. The Commission estimates that there is a tendency for the Community to produce about 10 per cent. more milk than is required. This apparently takes account of a steady increase in the capacity of cows to produce more milk and, on the other hand, a tendency for demand to decline. The Commission figure is, as I have suggested, a broad estimate. Whatever the exact figure of the surplus, there is no argument that a surplus has persisted for many years and that it is quite considerable.
At this moment I am only explaining what the Commission's proposals were, and not, just for the moment, explaining what our attitude to them will be. The hon. Gentleman may find his question answered a little later.
The fact is that in spite of the drought, stocks in intervention stores are almost 200,000 tonnes of butter and nearly 1,300,000 tonnes of skim milk powder. The cost of disposal measures for milk products in 1976 has been 1,930 million units of account. That is one-third of the guarantee expenditure, or almost one-quarter of the expenditure from the overall Community budget. It is only fair to ask, what is the cause of this situation?
The fact is that prices have for a number of years been set too high and they have generated production which consumers would not purchase at the prices set. That is the answer, I think, to the question that the hon. Member for Banbury (Mr. Marten) very rightly raised. The reason is the importance of dairy farming in Europe. Two and a half million farms in the EEC have dairy cows. That is almost half of all farm holdings. Their well-being is important and often crucial in the economy in many regions of the EEC, quite apart from our own, and of course, it is only fair to recognise that this presents a number of other member States with difficulties.
Even so, the only long-term solution, in my view, is to set prices at lower levels in real terms, and this must be our overriding aim. Other measures should not substitute for a sensible long-term pricing policy.
It is in the light of that, and with that as a background, that I should like to turn to the Commission's proposals and I am afraid, if the House will not be too wearied by it, item by item.
Some of these proposals are inconsistent with the aim of a restraint on milk prices, but I have to say that some of them are positively damaging. The first that I should like to refer to is in document R/2390/76. That is the tax on vegetable oils. Its aim is to reduce the competitiveness of these oils against butter fat. Here it is proposed to apply a charge of 10 per cent.—the Commission has got to the figure of 10 per cent. as being a calculation consistent with the proposed levy on milk producers—on imports and domestically-produced vegetable and marine oils going for human and animal use.
The charge is also proposed to be applied to a vast range of imported manufactured foodstuffs containing these oils. I should like to say what I believe its effect would be. Its effect would be to raise margarine prices by from 2½ per cent. to 3½ per cent. The price of cooking oils would go up. In a nation which still—thank the Lord—is addicted to fish and chips, this involves the price of cooking oils used by the fish fryer, if not overall in the domestic household, but the domestic household is directly and primarily also concerned because among the other goods affected are manufactured goods—chocolate, tomato sauce to put with fish and chips, biscuits, and things of that sort.
Such a system would, first, be intensely complex to administer and it would affect literally hundreds of products, and a levy at varying rates would have to be calculated on each one of these. One would have to look at the oil ingredients in each of these products—hundreds of them—and estimate them. Therefore, although I always look suspiciously—and I hope that the House will do so—at the argument that something is complex to administer, I look at it critically, because this is sometimes the colour of things. In this case there is no doubt about its complexity.
The other basic reason is that I do not think that it would have more than a fractional effect on the demand for milk products, so all that one would have achieved by it would be merely to raise prices over a whole range of articles without any real effect on milk production, anyway.
My attitude on this matter, therefore, is that this measure is simply not acceptable. I regard it as my duty to oppose it, and I hope that other member States will take the same line.
The second item that I refer to is in document R/2388/76, the suspending of investment aids in the milk sector. The aim is simple enough, namely, to reduce the capacity of the Community to produce and process milk products. Investment grants paid to dairy farmers and milk processing plants would be suspended for three years. There would be exceptions for hill and less favoured farming areas and certain farms with development plans. I shall not go into the details at this stage.
What would be the effect of such a measure? First, it would be contrary to any attempt to modernise dairy farms and milk plants through the EEC. Secondly, it would militate against efficient dairy farming and an efficient dairy industry. Even from the Commission's own point of view, it must be the wrong basis for dealing with these matters.
So I understand.
The third basis is what would happen, in perhaps three years' time, when the suspension of investment grants finished. The effect would be higher prices throughout the dairy industry. As I tried to say earlier, that is precisely what we do not believe to be the right answer. Our attitude is simple, namely, that we cannot accept the proposal in its present form. We regard it as acting against the whole dairy industry.
I come to the third proposal in document R /1991/75. This is the old proposal. It concerns the exclusive use of milk fats. It is an old proposal that was put forward in 1975 and debated in October of that year. We could not accept it then and I see no reason to change that view or to weary the House with the same reasons that we gave in October 1975.
The fourth point is one that we need to consider carefully. It is in document R/2387/76. This is the proposed scheme to eradicate brucellosis, tuberculosis, and leucosis. The aim is to speed up the eradication of these diseases in dairy cattle. It is proposed that grants should be paid on the cattle slaughtered, thus reducing the number of dairy cattle and, in the short term, milk production. Its effect would also be to eliminate diseased cattle. I think that the proposal needs careful study. We shall need to see how such a scheme fits in with our own disease eradication schemes.
We have no leucosis in the United Kingdom, but I am told that it is a virus that causes tumours in animals. I must confess that as the new Minister for Agriculture, Fisheries and Food I had never even heard of it until yesterday. Perhaps the reason that I had not heard of it was that we do not have it in this country. I am told that that is the situation at the moment. I do not want to say any more about the proposal, save that I shall examine it. I could not object to anything that reduces the incidence of these diseases. Clearly that must be right. However, we have to make certain that any scheme is practicable. It is in that context that I shall examine it.
I now turn to document R /2389/76—the supplying of milk at reduced prices to schools. The aim is to encourage the consumption of milk throughout the Community and in the long term to increase the demand for milk. It is proposed that Community funds will be used to pay 50 per cent. of the target price of milk provided that 25 per cent. is paid by public authorities in the member States. If we take the two together, the 50 per cent. from Community funds and 25 per cent. from public authority funds in the member States, it means that in the United Kingdom, for example, there would be a subsidy on milk of about 4p to 5p a pint.
The fact is that already our local authorities provide milk free for children under 7 years of age and children in special schools. The proposed scheme might help local authorities, but we, together with the Department of Education and Science, which clearly has an interest, would need to study the proposal very carefully to ascertain whether it was practicable from our point of view and whether it fitted in with our existing schemes. However, in principle I should say that this is a measure that we could support.
I now turn to the two key elements of the package. The first element is the premia for the non-marketing of milk and milk products in document R /1742/76. Its aim is to reduce the size of the Community dairy herd. All dairy farmers would be eligible and premia would be paid on up to 150,000 kilogrammes of milk, which is the equivalent to the milk from about 37 cows, if the farmer stopped delivering milk for five years. Probably what would happen is that his cows would be slaughtered. Some farmers would convert their dairy units to meat production units. A case could be made out for assisting producers to give up dairy farming. If we were to get such a scheme, its basis should be to supplement a firm policy on producers' returns. We believe that the present scheme is far too wide in its scope as far as these islands are concerned.
I understand that we could get a scheme that might be confined to smaller and inefficient producers, but the level of premia would need to be far lower than is now proposed. A smaller-scale scheme would cost less. The present Commission scheme would cost as much as 660 million units of account, half being paid by the member States. That is far too much. Therefore, I propose to seek a rather more modest scheme that would relate better to the aim of reducing producer returns. I should also prefer a scheme that did not put quite so much emphasis on conversion to beef production. Apart from the fact that I think such an emphasis is wrong, it might cause the curious beef cycle to go off phase. We might then find ourselves in far too high a surplus in two or three years' time.
The second of the key elements and the seventh Commission proposal is the co-responsibility levy in document R /2391 /76. Again, the aim is to reduce producer returns by charging a levy of between 2 per cent. and 4 per cent. of the target price for three years. Next year the proposed levy would be set at 2½ per cent. That would be deducted from the producer's price. The proceeds from the levy would be used to expand the sales of milk products. It is true that the levy would reduce the incentive to produce milk, but we have taken the view that we should press for a reduction in end prices. That would be much better than the levy scheme. It is true that producer organisations and many other member States have come round to believing that they have to accept a reduction in dairy farmers' returns.
The use of the funds is a matter that we need to examine closely. Three years ago the Commission proposed methods of usage. First, the Commission wants to aid liquid skimmed milk so that it is not converted into powder. Secondly, it wants to use it for the school milk project. Thirdly, it wants to promote milk sales and new milk products.
I should be grateful if my right hon. Friend would enlarge on one point. I understand that one of the features associated with the milk regime has been a reduction in the use of liquid skimmed milk and an increase in the production of skimmed milk powder. Is he able to tell the House whether machinery which was purchased to create that powder was aided by the investment scheme? If so, there was aid to increase the amount of skimmed milk powder and now apparently there is to be aid to increase the sale of liquid milk. That appears to be one of the inherently ridiculous parts of the scheme.
I take my hon. Friend's point. On the question of skimmed milk powder, I think that this House has many times made known its views. Indeed, I am also aware of the position outside.
Does the right hon. Gentleman agree that the use of the levy to attain this result, instead of reducing the final price, is in effect levying a tax upon the consumer for purposes to be decided by the Community?
It is certainly a tax upon the producer. Therefore, it may inevitably find its way to being a tax on the consumer. Nevertheless, I do not think that we should reject it out of hand. I should prefer it to be the end price. I will again make my position clear on that matter. My predecessor has already made the position clear on a number of occasions. I merely say that I may be forced to consider this proposal, because it may be better than having nothing at all.
This package will be discussed at the Council of Ministers' meeting next week. Undoubtedly the proposals will come under considerable scrutiny. It seems to me that our one overriding aim over the next few years should be to set prices at a more reasonable level. This is the only sensible long-term solution. It would not only reduce the heavy financial burden of surpluses; it would be consistent with our plans for our own dairy industry.
My right hon. Friend has outlined a number of highly significant matters, on which, with the wholehearted support of Labour Members and many Opposition Members, he takes issue with the Commission, in contrast with the amiable spinelessness of his predecessor. Has he taken account of possible retaliatory action if he meets resistance from the Commission? May we have an assurance that he will stand fast despite any retaliation which the Commission or any member States may take if, as we know, they take a different view on these matters?
I should not have thought that on this question there would be very much retaliation. These are Commission proposals. I have merely outlined my approach to them. No doubt Ministers from other member States will also find things in this package which they do not like. I do not think that it will go quite like that.
Regarding my hon. Friend's comments on myself and my predecessor, I give him here and now Silkin's eleventh law of politics—which is that every Minister is better than his predecessor—and his twelfth law of politics—which is that every predecessor is better than the present Minister.
I should like now to turn to the second heading of the Commission's proposals—sheepmeat.
Before the right hon. Gentleman leaves the question of milk, may I ask whether he is apprised of the point that if everybody reduced production this country would end up importing more milk pro- ducts? If we cannot afford to import more, we cannot afford to produce less domestically.
I thought that implicit in what I was saying was that the way to get a sensible dairy policy was to encourage the best and to discourage the most inefficient producers of milk.
That is a little off the subject, but it looms behind it, as it were. I am very much aware of the importance and value of the Milk Marketing Board to this country, and its history over the past 40 years or more. This is something for which I propose to fight vigorously.
I turn now to the question of sheep-meat. This is a sector of agriculture where a common organisation has to be introduced in accordance with the provisions of the Treaty of Rome. France continued her national import arrangements, which include levies on and periodic market closure to lamb exports from the United Kingdom and the Republic of Ireland. These arrangements will conflict with the treaty after the transition period—the end of 1977. Therefore, the Commission has produced its proposals.
The United Kingdom has a special interest in this problem. After all, we are the largest producer, consumer and importer of sheepmeat in the Community. It seems elementary that we must safeguard our own interests. That is not to say that I do not recognise that others also have interests. They do. But it would be more than foolish to neglect our own interests.
If the French system is dismantled without replacement, the effect on the United Kingdom's exports to France would be adverse. Increased United Kingdom market prices for home and imported supplies would cause consumers to pay more for their food because of the increased export of lamb. It would also reduce consumption in this country. Therefore, in the long term it would create a diminished market for producers. In other words, a larger proportion—we do not know how much, but it could be a considerable amount—would go in exports to France. The result would be higher prices obtaining in France, a feedback into our prices here, and an eventual cutback in the market for producers. Therefore, we must participate in finding a solution to this problem.
The Commission's proposals of September 1975, outlined in document R/2274/75, did not meet with the approval of most member States. The document contained a number of features that we did not like. That is not surprising. The sheep industries and interests being so diverse, it is almost impossible to devise anything which will be unanimously approved.
Since May, the discussion has turned towards the more limited aim of improving intra-Community trade. There have been no new proposals, but the revised explanatory memorandum of 3rd August explains what the Commission has in mind.
I believe that for the United Kingdom that is a move in the right direction. It does to an extent safeguard consumer interests, because there is no arbitrary reduction of the compensatory amount to bridge the difference between United Kingdom and French prices. The second thing is that producer interests are safeguarded because the United Kingdom can continue to operate the Fat Sheep Guarantee Scheme.
However, there are difficulties, and it is foolish to underestimate them. The first difficulty is the proposed safeguard clause, which provides powers to restrict imports in the event of market disturbance. One is told that this clause will never be used in practice. If that is so, one asks: why put it in? I cannot accept a clause that would lead to new restrictions on frozen Iamb imports, particularly from New Zealand, and to a small extent from Australia.
The other difficulty is that the Republic of Ireland is pressing for a lower compensatory amount. That would create a distortion of trade between the United Kingdom and the Republic of Ireland, which I would regard as intolerable. We must, therefore, watch that carefully. I believe that further discussion on this matter is important and I want to approach it as constructively as possible. We shall need to be satisfied on these points before we can agree.
I said that there was a diversity of sheep production and marketing. There seems to be more than one industry when one talks of sheep, and that gives rise to difficulties of planning in the long term. The Council is right to try to agree interim measures first, but, whether or not it does, we should be guided by three principles: first, that these arrangements do not cause unnecessary price rises; secondly, that they provide adequate safeguards for the producers; thirdly, that they allow adequate continuing access for our imported supplies, particularly from New Zealand and Australia.
I am sorry to have kept the House for so long, but I have to deal with another rather important question. This relates to document R/2295/76, which deals with the representative rates for United Kingdom and Republic of Ireland pounds. The right hon. Member for Down, South (Mr. Powell) is aware that these proposals lie on the Council table even though the Irish part has been brought into effect. The best way in which I can start this part of my speech is to explain the green currency system. Apart from anything else, by doing that I might explain it to myself.
To have a common agricultural policy it is necessary to have some form of common currency, and this is where the unit of account comes in. When the CAP was set up, all currencies were linked to the dollar, so the unit of account was equal to a dollar. Since then, there has been considerable monetary instability. The floating of the dollar led to the unit of account being defined instead by references to the currencies in the European joint float—what is called the "snake"—and this is the German mark, the Danish krone and the Benelux currencies.
Green currencies are exchange rates for translating common measures—for example, common prices—into individual currencies. These green rates are fixed. If they were to float like actual currencies, support prices would float up and down as exchange market values changed. Therefore, it became necessary to apply monetary compensatory amounts as import subsidies and export levies for devaluing countries, and as export subsidies and import levies for revaluing countries, otherwise agricultural products would all have been attracted to the country with the highest support prices.
To change the green pound requires a decision by the Council on a proposal from the Commission. My view is very clear, and before I go to the actual effects I should like to enunciate my principle. It is that the member State most concerned should have the final decision on whether a proposal to change its green currency should be accepted. Our policy on the green pound is well known. We keep it under review and change it when we feel that that is in the national interest. Indeed, it has been changed in the past.
Let us examine this for a moment. A lot of mythology is tied up with the green pound. It is not just black and white—not even green and white. It is assumed in the country generally that a change in the green pound is good for farmers but bad for the consumer. At the moment it is bad for the consumer, but let us analyse it for a moment.
Does a green pound devaluation necessarily help all sectors of agriculture? It puts up the price of cereals, for example, but it does not automatically put up the guaranteed price of milk or the beef target price. The other day I produced a package of measures which I hoped might be of some use to farmers because of the drought. It included a milk price increase that was given to them irrespective of the green pound.
Does the right hon. Gentleman agree that if the green pound were devalued by 4·7 per cent., as is proposed, milk producers would get 2p a gallon more than the 2p that the right hon. Gentleman has provided by the drought measures?
That does not necessarily follow. It would have to be action following the devaluation of the green pound. The devaluation itself would not necessarily create that situation. A green pound devaluation does not necessarily put up the price of pigs. I do not think that the 4·7 per cent. devaluation referred to by the hon. Member for Banff (Mr. Watt) would have any effect on the price of pigs.
Can the right hon. Gentleman explain paragraph 18 of the agriculture report which says that in 1975 financial resources coming into the industry were given a boost by the devaluation of the green pound?
It was because that was accompanied by an increase in the price of milk. What I did—it was a fortnight or three weeks ago, but the hon. Gentleman probably knows better than I do—was to put up the price of milk without a devaluation of the green pound. The two do not necessarily go together.
Will the right hon. Gentleman make it clear that he is referring only to a commodity that has a fixed ceiling price such as milk and is not including other commodities?
I was trying to come to some of the other commodities in turn. I am beginning to think that I need not apologise for keeping the House. The House is keeping itself here, and as we are all enjoying ourselves, why not?
I do not think that a 4·7 per cent. devaluation of the green pound would have any effect on the price of pigs. What I have in mind is a different method of calculating the MCA for pigs. I believe that that would be the right thing to do, but that is slightly off the point about the green pound. The green pound does not necessarily affect all parts of the industry—for example, poultry and eggs, Devaluation of the green pound puts up feed costs and to that extent it affects the industry. I do not believe it is right to look on the green pound as something that inevitably hurts the farmer. What I am certain of is that to talk in terms of equating the green pound with the market pound, as though this were an eleventh commandment, would destroy the economy of this country and probably destroy agriculture as well.
I come now to the proposal. Next week the right hon. Member for Down, South and I might agree that this is "old hat" and rather out of date, but the House has a right to hear what I believe about the proposal. It is for a 4·5 per cent.—not a 4·7 per cent.—devaluation of the United Kingdom green pound, and a 7·6 per cent. devaluation of the Irish green pound. The proposal on the Irish green pound was accepted by the Council on 4th-5th October. The effect of accepting the United Kingdom proposal would be to increase support prices expressed in sterling by 4·7 per cent.—that is where the hon. Member for Banff got his figure from—and to take about six points off the MCA percentage.
It is difficult to give a clear and precise answer to what effect this would have on food prices in present circumstances, because prices in general are above the support levels, but it would have an effect, and I felt that at this stage it was wrong to make such a change. I made that view clear to the Council and I make it clear to the House.
On Monday, the Council will again consider the question. We shall be looking not just at the United Kingdom green pound but at the whole green currency system, and we shall be considering the outcome of changes made at the beginning of this week in the "snake" currencies, when the deutschemark was revalued by 2 per cent., increasing the German MCA, and the Danish krone was devalued by 4 per cent., causing MCAs to be applied to Denmark for the first time. So even in the short time between Council meetings the picture has changed.
It seems to me—this is neither a black and white nor a green and white basis of thought—that our policy should be flexible and never dogmatic. The need is to determine with respect to our green pound rate where the balance of national interest lies at any particular time—not only the balance of national interest, but the balance between the producer and the consumer, because they are interconnected much more closely than either of them sometimes says.
Before my right hon. Friend leaves the green pound, can he make any comment on the new proposals which appear in the Press this morning, or has he not yet received them?
The new proposals, I understand, are with a small "p" rather than a capital "P", in the sense that they represent the Commission's thinking. I may be wrong on that, because I have not yet had an English text. The principles I have been trying to enunciate seem to me to be clear. Whether the House agrees or disagrees with me, it cannot complain if I have regard to the same principles regardless of the proposals made.
Or the rise of the pound in one week. The fall or rise of the pound is not connected with it. Far be it from me to question the inscrutable workings of the Commission or why it came up with the figure of 4·5 per cent., but I shall question the scrutable workings of the Commission, which were, I suppose, that it felt that the country could accept just under 5 per cent. Had the Commission gone for anything higher, in its view we would have thrown it out of the window straight away. I am sure that that was the basis on which the Commission came to its conclusion.
The difference between the Irish green pound devaluation and the British green pound devaluation was based upon what each country was asking for. My memory is that the Republic of Ireland was asking for about a 10 per cent. devaluation, so the Commission did not go all the way with the Irish.
As I say, I cannot challenge the Commission's inscrutable workings, but I can challenge its scrutable workings, and I do challenge them on the basis that at present the country requires to assist the consumer and the farmer, but the consumer first, because of the effect of inflation upon us. That does not mean that we should ignore the farmer. On the contrary, we should do our best for him. That is why the package which I announced two or three weeks ago to some extent made the question of the devaluation of the green pound irrelevant to most farmers. It was part of the basis of that package, and they are receiving the benefit of it.
The connection between the producer and the consumer is vital and, whatever view we may take on other matters, we all of us here and in the country have to preserve that connection. A producer without a consumer goes broke, and a consumer without a producer goes hungry. The two are connected, and it is wrong to attempt to create a division between the two. They work together, and need to work together.
I apologised to the House about 20 minutes ago for the length of my speech—
My hon. Friend tempts me to go on for the next three years, but, having put my point of view, I should like to hear what the House has to say. All three subjects are of vital importance. I leave it to the House to give me its opinion on the Commission's proposals and the views that I have taken on how we should respond to those proposals.
I should like to begin in the generous spirit in which the Minister began his speech by according to him on behalf of the Opposition Benches a cordial welcome in his new post. We all wish his predecessor—the former right hon. Member for Workington, Mr. Peart—well in another place. It is perhaps an appropriate place for him after his lifetime of service to agriculture. We have noted with a certain wry amusement that he seems to have become involved in a good deal of overtime. Indeed, he is leading their Lordships into a period of overtime that is not the type of overtime which we have previously associated with the noble Lord.
The new Minister and I have been opposite each other in previous offices, and I trust that the good relations established then will continue now, to the industry's advantage, for it is a matter of great regret that political divisions across the Floor should have become so wide in recent years and affected agriculture.
Our differences are a cause for real concern, because food production is a business that requires long-term stability and continuity in policy terms if it is to give of its best. That must mean a broad measure of agreement across the Floor. Unfortunately, in recent years we have known less of that than we used to, but I congratulate the Minister on his maiden speech in this context because I agree with large sections of it, as I shall explain in due course. I take that to be an encouraging and hopeful sign.
I want to range a little wider than the documents. The British farmer, the farm workers and the growers have had to face three exceptionally difficult years as a consequence of the wild and, so far as we know, unique variations in weather, as a consequence of disturbed markets, or in consequence of certain Government decisions.
It is a tribute to the inherent strength of our agriculture and all those engaged in it that they have come through these trials in reasonably good shape. But, like everybody else, they have many anxieties and they face what must clearly be a difficult future with more uncertainties to take account of than is good for the prosperity of the industry.
Uncertainty is the enemy of investment and progress, and it must be a primary objective of this House, and in particular of the Government, to reduce uncertainty to the lowest possible level. In thinking about agricultural policy, we must first put the industry in its proper context—in the context of the United Kingdom with all its current economic and other problems, and in the context of the European Community. Whatever views may be held by hon. Members about the European Community, and however much some hon. Members would like to continue the campaign to keep Britain out, the fact is that this country is part of the Community.
In any case, we cannot escape the reality of our own economic plight. The dramatic evidence of the descent of sterling and the ravages of inflation are the inescapable background. The rate of inflation is much less now than it was, but that is of little comfort because even now it remains unacceptable and certainly higher than the rate in most of our competitor countries. The Government have abandoned their own target of reaching single figures even by the end of next year, and this represents a grim prospect. It affects food production just like every other business. Farmers can no more escape from it than can anybody else.
The fallen pound, while perhaps of some theoretical benefit to exports, is not so far showing the results to compensate for the added burden of our imports. It is those two factors—inflation and the fall in sterling—that make food price increases inevitable. We import nearly half our food, and no amount of juggling with temporary palliatives can in the end shield us from paying the true cost of our food, whether imported or grown at home. For decades we were able to take advantage of the reasonably plentiful supply of relatively cheap food available in the world. That supply no longer exists.
Is the right hon. Gentleman aware that there are vast surpluses of meat in the Argentine and in Australia, and also that there are surpluses of butter in those countries that could be obtained at reasonable prices?
In face of the world population explosion, it is doubtful whether such a supply of cheap food will ever be available again. Therefore, in these circumstances we have a major national interest to increase the supply of food grown on our land. Both the Opposition and the Government agree on that strategy. I am glad about that, and I am also glad that the Minister has given full support to the statement of intention contained in the White Paper.
But the industry is still waiting for the provision of the means and incentive to carry out that intention. From reports I have read—and I have now seen the Agriculture and Economic Development Council paper—its view is that the unit costs of home-grow food have risen less steeply than those of imported products. That surely is an added incentive to make agricultural expansion in this country a reality. In pursuing that policy, I feel sure that the emphasis all the time must be on an expansion related with the lowest possible and practicable costs of production. It is vital that we produce more food at the lowest attainable prices for the consumer. That is the objective of the exercise.
I agree with the Minister's comments about producers and consumers. That situation is sometimes represented as a conflicting interest between the two. In a sense that tension exists, but that should not be the case. The equation that has to be resolved is how to maintain adequate supplies of food at the lowest attainable cost to the consumer. The real conflict arises between short-term measures to restrain prices in the shops in the short term and what is required to maintain and to increase supplies of food in the long term. That is where the right balance must be struck and adjusted continuously as circumstances change.
My personal view is, and always has been, that this difficult responsibility is best done by one Minister of Agriculture and Food. Divided as the responsibility is at present, I believe that the main interest of the Secretary of State for Prices and Consumer Protection is to do anything that seems to help in the short term, and that the interest of the Minister of Agriculture is to prevent irreparable damage being inflicted on producers in the long term. My verdict on the experience of the past two and a half years is that the Secretary of State for Prices and Consumer Protection has won hands down, even though prices in the shops have soared and soared, as we all know. Of expansion in supplies there is as yet no sign.
I am not asking the Minister to organise higher output at any price, but I ask him to address his mind to the measures required to fulfil the programme of his own Government and to recognise the inescapable fact that food is bound to cost more. He should say that to the nation. To remain silent on that point is to mislead to the point of being almost, if unintentionally, a deceitful sin of omission.
I turn to the first of the documents that is before the House. The Minister explained with great clarity and brevity, as we would expect of him, the situation involving the green pound and made his position plain. As an aid to counter-inflation, the present grotesque misalignment of the representative rate is apparently to be maintained immutably. The Minister spoke of flexibility, but we did not hear much about it, except that he did not intend to devalue. He is able to take advantage of the rules of the game as long as they remain unchanged.
I agree that the devaluation of the green pound is not a completely unmixed blessing for producers. There is a price to be paid for everything. Broadly speaking, it is undoubtedly overwhelmingly to the producer's advantage. This is an integral part of the common agricultural policy, even though nobody ever visualised at the time that our economy would reach its present plight. Now we collect £1½ million a day from the Community as a direct subsidy to British consumers.
Will the right hon. Gentleman bring himself to say a word or two about the fact that, overall, Britain will actually be a contributor to the Community this year? When he talks about the cost to the Community of MCAs, perhaps he can mention in passing the cost to Great Britain of some of the other imports.
I shall put my case in my own way, and the hon. Lady can make hers when the time comes. It seems a curious sense of priority for the Government to cut their domestic subsidy while placing heavy reliance on a subsidy paid for by our friends. We on the Tory Benches agree to the phasing out of domestic food subsidies, which should never have begun. The Minister is aware that the green pound issue is nothing like as simple as he sought to make out. There is a price to be paid for the card he is playing. Each country has its own special and particular interests which it regards as overriding. The obvious example in our minds at the moment is that of our fishing industry. In other less critical matters concessions have to be made, otherwise the partnership does not work.
I do not regard rigid adherence to an even more misaligned green pound as an overidding national interest to be preserved at any price. In the first place, insofar as it contributes anything to counter-inflation policy, it does so at the Community's expense and brings serious budgetary consequences for the Community. But in no way does it tackle the fundamental weaknesses of our economy or the causes of inflation. Indeed, to some extent it disguises them. I noted what the right hon. Gentleman said, as reported in The Times this morning, that any adjustment of the green pound would jeopardise Britain's battle for survival against inflation. If this is what the survival of this country depends upon, it is a pretty shaky foundation.
The hugh distortion has other positive drawbacks. It puts our food producers at a competitive disadvantage with producers across the Channel. As it happens, our producers can, for a time, stand that because of their efficiency, higher productivity and structural strength. But it is not an arrangement that can endure, nor is it fair. When the agricultural world gave its support to entry into Europe, it was on the basis of fair competition after a transitional period. [Interruption.] It did not vote for Europe on the basis that it would be treated worse than its competitors.
The Government were a party to that campaign, so were we and so were the farmers. The Government must act fairly now, otherwise they will be treating farmers unreasonably.
What will be the position at the end of the transitional period, which will be reached on 31st December 1977?
I shall come to that. What will the position be on 31st December 1977? If farmers are then to be in a disadvantaged position, how will the Government's expansion plans be fulfilled? I predict that they will not be, or certainly not to the extent that is possible and practical. The Government have remained totally silent on the longterm price to be paid for an alleged short-term gain. We did not hear anything about that aspect today. This is one of the reasons—there are others—why we have been advocating a step-by-step realignment that would gradually adjust what is now a gross imbalance.
There is much more to it than this. In the face of the Government's determination not to realign, what are the reactions of our eight partners? Are they
digging in their heels over other aspects of the common agricultural policy which the Government would like to see changed, or are they completely happy about the posture we are taking? When the Minister returned from the last Agriculture Ministers' meeting, he is reported to have said:
The Commission has got part of its way, the Irish have got part of their way, and I have got all of my way.
Is that really so? If the right hon. Gentleman maintains that record, it will be something.
What about the alteration of the method of calculating MCAs in the pig sector? That is obviously necessary. Will the Minister be able to achieve that? I hope so, because present circumstances in the pig industry are unsatisfactory to the point of being unacceptable. The Minister knows the present dire state of the processors and producers in that industry.
That is certainly a serious announcement. I am sure that there will be other cases like it.
Recently hon. Members have received figures from the Meat and Livestock Commission showing the change in margins between September 1975 and September 1976. The figures show a serious situation. The scale of the MCAs paid as subsidies to Danish and Dutch producers is such that home producers are bound to lose some of their share of the home market. How does the right hon. Gentleman see that fitting into a home expansion policy?
The Government are trying to help the pig industry but nothing has happened yet. I do not believe that this fact can be divorced from our posture on the green pound. Mr. Lardinois has indicated this, although any decision is not his; it is for the Council of Ministers. The National Farmers' Union has expressed the same view.
I do not want to interrupt the right hon. Gentleman's flow, but I hope that we might have bipartisan agreement on what is an important point. I would like to be able to take such an agreement back with me to Luxembourg. My point is that the method of calculating pigmeat MCAs in relation to the green pound is totally wrong and that this is the view of all parties.
I entirely appreciate the way in which the Minister is trying to alter this. I have seen the particulars—it is quite separate from the green pound. The only point I was making was to wonder whether the right hon. Gentleman's intransigence, as it must seem to our partners, over the green pound has its effect on other aspects of the negotiations in which he is currently involved.
The misalignment that is causing such problems is in no way the fault of the Community or the common agricultural policy. It is the direct consequence of the fall of sterling, which in turn is one expression of the failure of the Government's overall economic policy, a failure which affects agriculture like everything else. It is so popular and so easy to blame the CAP for sins it has never committed. We all know that there is enormous scope for improvement, and no doubt there always will be. That process is in no way aided by inaccurate analysis. No one can deny that the extraordinary monetary fluctuations that have occurred recently have placed an entirely unforeseen strain on trade and on the CAP. Indeed, they are of such significance that Mr. Lardinois has spoken of the possible consequences in characteristically blunt terms. He has said that Britain is placing an immense strain on the organisation. He has talked of abuse. Yesterday he apparently said that the green pound had gone crazy.
Mr. Lardinois now proposes, so we understand, to put up a new system to the Council of Ministers, including an automatic adjustment to the green pound. In view of the history of this matter and the line that has been taken by the Government over the past year or so, it is understandable that such proposals should be brought forward. I have reservations about any automatic triggering mechanism but I certainly think that in the light of what has happened it ought to be considered. It is understandable that Mr. Lardinois and the Commission should in the circumstances bring forward proposals of a radical nature. I absolutely agree with the right hon. Member for Down, South (Mr. Powell) that this will have to be thoroughly scrutinised and debated in this Chamber before any decision can be reached.
The right hon. Gentleman has castigated my right hon. Friend for what he calls his intransigence. The House is entitled to know, since the right hon. Gentleman might become Minister of Agriculture, were there a change of Government, how far he would be prepared to give way. We would like to know to what extent he would be prepared to sell the past and allow consumer prices to rise, so far as they are referable to devaluation.
I shall come in more detail to that matter, but I have indicated that we favour—I have favoured it for a long time—the step-by-step approach, a gradual approach, because the disadvantages of taking an obstinate line and saying that there should be no change are greater than they would be if a gradual adjustment was made.
No. That would be too frequent a change. I do not agree with that suggestion.
Mr. Lardinois has also spoken of a possible breakdown, but I do not think a breakdown will occur. However much a few Members may look forward to that day, it does not alter the fact that the Community is of vital importance to Britain. Where is the security of our food supply without it? My fear is that the Government, by sticking to their present line on the green pound, are hindering changes in the CAP. The House gave a welcome basically to the stocktaking document 18 months ago, but hardly any progress has been made.
The question is whether the Government are going the right way about achieving those changes and others. It does not seem that they are. As yet, I see no positive gains in exchange for the Government's obduracy on the green pound. If it led to a reappraisal of the CAP, there might be some solid gain to show for it, but I see no evidence of that. Indeed, the evidence that I see is to the contrary. The Minister today gave no adequate reason for rejecting the very limited proposal of a 4½ per cent. devaluation which would, as he indicated, have a pretty minuscule effect, although some effect, on prices.
Can the Minister say anything about a deal that is alleged to have been offered in the course of his last meeting—it was reported in the Financial Times of 20th October—when it was suggested that the remaining import tariffs on vegetable oils could be eliminated, and, perhaps more significantly, direct consumer subsidies on Community food such as butter and beef appear to have been offered. I ask the Minister whether, in the discussion which must have taken place, he was made offers by the Council of Ministers of increases in subsidies on butter and beef as a means of trying to persuade him to agree with the 4½ per cent. devaluation proposal?
When the Commissioner made his proposal for a devaluation, I had already spoken to him earlier in the Netherlands and pointed out to him the basis of Her Majesty's Government's view that it was the counter-inflation policy which needed to be protected and, therefore, one had to stop consumer prices of food from rising if such rises could be avoided. He was aware of this, in relation to the green pound devaluation, for the first time—I say that advisedly—because he did not understand the depth of feeling which we genuinely had about it, and I was able to show him that this feeling existed.
Therefore, at Luxembourg, at the last Council meeting, the Commissioner produced a proposal which he said would have an effect on the cost of living whereby the transitional tariff on imported salads and fruits might be speedily withdrawn so that we would import those more cheaply into this country. It did not go anywhere near helping us, and it might hinder us, because its effect would be to penalise our own growers of salads and fruits as against those of countries exporting to us. Since then he has talked about other commodities. I do not think he has mentioned one, although the Press has mentioned it and one can deduce what he might have had in mind. It still does not affect the point. His estimate of the effect of a 4·5 per cent. devaluation on the price of food was an increase of 1·22p in the pound.
I am grateful to the right hon. Gentleman. It occurred to me from what I had read in reports—and I have no other information available to me—that an attractive offer had been put to the right hon. Gentleman and that he had rejected it. If there had been such an offer, the House would have been interested to know what it was.
There are two main questions on this issue to which the House wants an answer. What will be the competitive position of our farmers at the end of transition at the end of next year? What are the positive gains being obtained as a result of the Minister's stance on the green pound beyond accepting the subsidy from the Community which we have today?
As someone who briefly had some responsibility of Northern Ireland affairs, may I say that I know it was inevitable that special ad hoc measures would have to be taken to try to counter the worst consequences of a green pound distorted between Northern Ireland and the Republic. That distortion, which was 5 per cent., is now 12 per cent. That is a big discrepancy. I hope that what has been announced by the Minister's right hon. Friend will work as expected, although that would be unusual.
The price differences across the border are too great—about £3 per cwt for cattle—and I doubt whether ad hoc measures can cope with that in practice. One of my criticisms of document R/2295/76 is that it accepts a disparity between the two parts of Ireland, which is undesirable in principle. The Minister referred to this matter in connection with sheepmeat but the point applies elsewhere. Plainly it is better when the representative rate is at the same level on both sides of the border, and the fact that it is not is part of the price which Northern Ireland is paying for the Government's refusal of a partial revaluation.
I have said that I support a step-by-step realignment. I should not like today to commit myself to one which ended in parity in 14 months, because the discrepancy has become so enormous, the chasm so gaping, that the objective which we all had in mind a year or so ago seems difficult to attain. But it is precisely because the gap is widening all the time that I took the view months ago that we should have made a start. By not making a start, and as a result of the pound sterling going through the floor, the task of the Minister in creating realignment is so great that I could not at this stage say that it would be right to commit myself to a full alignment in 14 months. A start should have been made ages ago, and certainly a start should be made next week.
I come now to the question of the dairy industry and the two main documents, R/1734/76 and R/1742/76. This sector is of central importance to British agriculture, as it is to the Community, and is in the front line of any expansion programme. Britain is a highly efficient producer of milk because of its grassland and climate and because of its investment and expertise in milk production. We have maintained a continuous improvement in productivity and are in a strong competitive position.
Due to the drought and escalating costs, the immediate position is far from rosy. The Milk Marketing Board has recently produced figures showing sharply reduced margins. I had some papers from the Board a couple of days ago indicating that a margin of £131 last March is down to £93 this month. That is a big drop. Since then the Minister has awarded an extra 2p per gallon to take place in the new year. That will restore part of the margin, although less than half of it, but meantime feed costs will increase. Therefore, producers face an uncertain winter.
I think that my hon. Friend is right. To save time, I did not explain it in such detail. The milk producer will get 2p per gallon from 1st January. That is as I understand it.
I agree with the Minister that the ill effects of the drought will right themselves and will not, I hope, be repeated. It is the longer-term prospect for gradual and sustained growth that matters, and what I said about the green pound is relevant here. In the absence of any indication about future adjustments in the rate, what assurance has the industry got as to the future level of return? As the Minister has left it today, there seems to be no satisfactory Government policy about future margins and profitability. He could have brought that uncertainty to an end.
On the Commission's proposals themselves, I fully endorse what the right hon. Gentleman said about the tax on vegetable oils. We support his response to that. I also agree with him about his approach to and examination of the brucellosis proposals. I also completely agree with him about the capital grants. These should continue to be available for modernisation and improvement. At a time when we want emphasis on higher productivity and the lowest possible costs of production, it would be foolish to suspend this form of aid, which has contributed handsomely to the improvement of our industry's performance.
The exceptions referred to—the need to encourage the use of liquid skimmed milk on farms and the need for investment in the hills and uplands—are right. The first of these measures has been constantly pressed by my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) in the European Parliament.
I have no objection in principle to the co-responsibility levy because it will play a part in reducing the surplus across the Channel, where the problem exists, and this is one of the most serious problems facing the EEC. But British producers must not be allowed to be disadvantaged by it, because that would be unfair and would prejudice the expansion. If the levy is imposed, our producers' relative position should be safeguarded. In the event of the Government refusing to move the representative rate, will they move for an adjustment in the milk sector? The Minister is doing so in the pig sector, and similar action in the milk sector would be helpful.
The levy is a tax, and we all regard it as such. What we are talking about is price per gallon. We want to see the discipline of price in a genuinely competitive market. That is the way for our dairy producers to take advantage of the Community. On the principle of what we are saying, the Minister and I agree. The only difference is that he is holding the British producers at a disadvantage, but it is price that is the vital thing.
On the question of the non-marketing premia, we support the principle of the proposal, but again I agree with the right hon. Gentleman that the upper limit is too high and that it is too extensive a scheme. I am not clear about the purpose of having a minimum levy. One of the problems of the milk surplus in Europe is the large number of part-time producers, each producing a small volume of milk, and I see no advantage in having a cut-off at 50,000 kg. at the lower end of the scale.
I should like to mention here a possible additional condition. The four proposed conditions are set out in the explanatory memorandum to document R/1742/76 concerning the non-delivery scheme. Perhaps there could be an extra condition to the effect that a producer in receipt of this premium should not set up in milk on another holding. That may be thought unnecessary, but I think that it should at least be considered.
Finally on this document, I question the wisdom of imposing an obligation under the conversion scheme
to keep adult beef cattle or sheep
instead. That does not seem to me to be a necessary condition. There is always the risk of another beef mountain, and it is surely extraordinary to require someone to go in for the conversion scheme and compel him, as it were, to set up in beef.
I turn now to the proposals for mutton and lamb. During the summer the right hon. Gentleman's predecessor was hopeful that a transitional regime could be introduced, to take effect last September. At the time, I expressed doubts both as to the wisdom of it and the improbability of achieving it anyway. The greatest problem about it seemed to me to be the wide price differences between France and this country, and I thought that it was also an inopportune moment either to risk an avoidable price increase in Iamb in the United Kingdom or to add any more complications to the common agricultural policy at this juncture. The disadvantages were greater than the gains unless a better method could be found. Subject to one proviso, a better method, more limited in scope, has been found, as set out in the explanatory memorandum of 3rd August to document R/22/74/75.
The interim arrangements there set out would, according to paragraph 9,
no longer adversely affect consumer prices or producer support in the United Kingdom.
If that is so, my principal anxiety is met. The effect of an avoidable price increase to the consumer here would lead to a fall in consumption, which is not in the interests of either the producer or the consumer. If this scheme avoids that situation, it can do no harm, and at the same time it will be the first step towards an eventual common market in this trade when circumstances make that possible and desirable.
The proviso relates to New Zealand imports, and the Scrutiny Committee rightly identified this factor. I am sure that the whole House wants to be reassured beyond any doubt—and I think that the right hon. Gentleman reassured it—that our doors and the Community's doors will remain open for the continued supply of mutton and lamb from New Zealand.
I must now conclude. I apologise for taking so long, but I have given way quite a lot. I finish with a general observation about agriculture. I want to draw the attention of the House and the country to the risks we run in securing adequate supplies. After the defence of the realm, the next most important duty of any Government is to rescue the supply of food for the people. However remote it may seem, anxiety on this score exists and should be removed. We must not allow ourselves to get into an unnecessary condition of shortage.
In other words, I am apprehensive, as are many others who have lived in this industry for longer than I have, that the balance is not quite right as between producer and consumer at the moment, tak- ing a long-term view. We import between £4 billion and £5 billion worth of food and feeding stuffs per year. There is no disagreement that we have the capability of reducing that bill by growing more food here, but that is the side of the coin that the Government have neglected. Of course, the extraordinary weather and its consequences are an accident, but, given fair weather now, the industry will recover from that blow, and I welcome the positive steps that the right hon. Gentleman has taken to help in the situation.
The limitation on the industry's effort at present is financial resources. Falling income, severe inflation and crippling taxation combine to put agriculture in a financial straitjacket. Where is the cash for investment to come from? The margins have not been there, and this industry, capital-intensive as it is, normally provides the overwhelming bulk of its own capital, to the benefit of the producer and consumer alike. Its growth and increased productivity, one of Britain's success stories, has been a continuous process. Today there is a check in that process, but in everyone's long-term interest we must get back to the expansion path. That will cost more now than if we had never stopped expanding.
There is anger in the industry and among farm workers at the expected draining of resources from the land due to capital taxation. The impact of this is certainly affecting investment decisions, and investment is what the Government themselves want to see.
The Socialist State is taking too much. What is worse, it is threatening to take more. It is threatening a wealth tax. The result of that in this industry in these inflationary days would be devastating for everybody in the long term as well as for farmers in the short term. Taxation is too high already, and I note that neither the last Minister nor this one so far—to be fair to him, perhaps it is too early to judge—had anything to say in public on this crucial aspect. In the light of existing tax levels and the long-term needs for continued investment, what have the Government to say to the industry on this? It is time for them to break their silence.
Already farmers face higher interest charges when all other costs are rising. On top of that, until the Government pronounce otherwise, farmers face the possibility of a re-rating of land and buildings. When will the Government clear up that uncertainty?
What about the nationalisation of the land? Where does the Minister stand on that? It is time for him to break his silence on that too. He must have been thinking about it long before he took over his present office. This is an uncertainty for the industry which he could and should clear up.
In my view, the greatest immediate need is to restore to the industry the terms and conditions of trade that will enable it once again to have adequate financial resources. In no other way can farmers and growers even attempt to achieve that expansion programme that will save imports and secure more home grown food.
I believe that the Government's own target for expansion could well be exceeded, and with advantage for everyone. I say to the Minister: make it possible for those who work on the land to get on with the job.
The right hon. Member for Cambridgeshire (Mr. Pym) has certainly broken his silence this morning. But I should like to begin by welcoming very warmly the speech of the Minister—the first we have had from him as a Minister of Agriculture. If we are to have a Minister of Agriculture who stands up with some backbone, whether in Brussels or Luxembourg, there will be a great deal of joy in Heaven and also a considerable amount of joy in this House and in the country.
In many ways I regret that the debate has to take place only on a motion for the Adjournment. There may or may not be special reasons for that today. But as a matter of principle, in debates on EEC legislation in general, it is very undesirable that the House should have no opportunity of expressing its opinion by a vote. It is quite contrary to the many procedural assurances that we have been given. I simply content myself with saying that this is a bad precedent, whatever the facts are today, and I hone it will not be repeated.
Next, we are in the difficulty, which is rather typical in dealing with Common Market affairs, that we have before us in the Press today an entirely new proposal on the vital issue of the green pound, with which the Minister appears to be only vaguely familiar and about which we have no official information whatever. This seems to me to be typical of the methods of procedure followed by the Commission. Schemes are proposed in secret and sprung upon us suddenly, and we are then expected to discuss them without being in full possession of the facts.
I welcome, therefore, what I thought was the Minister's assurance that no decision will be taken on this until this House has had a chance to discuss this entirely new plan, and to be in possession of the facts when it does so.
The fact that the House has no opportunity to vote on the main proposals before it today is, of course, made all the worse by the fact that these regulations, if the whole lot of them were accepted, would have as much effect on the economic life and standard of living in this country as many annual Budgets, if not more. Yet we discuss them on a Friday without the opportunity for a single vote.
The damage that would be done to the British economy by some of these proposals would also be additional to the huge burdens already inflicted on us by the common agricultural policy—and also those, incidentally, with which we are threatened by the common fisheries policy, about which we heard the day before yesterday.
The common agricultural policy—which these regulations would in many ways make worse—is already throwing heavy burdens on our balance of payments, raising unnecessarily the price of almost all basic foods, thereby making an incomes policy in this country more difficult, actually reducing the consumption of some essential foods in the United Kingdom, and generating a conflict here between the farmers and the consumers which did not exist under the system of deficiency payments.
The right hon. Member for Cambridgeshire made an extraordinary statement when he said that there was no food available anywhere in the world which we could buy more cheaply if we were outside the EEC.
I am very glad to hear that the right hon. Gentleman did not say that, but certainly it sounded to some of us as if he did. He also implied that cheaper food was not available outside the EEC ring fence.
If hon. Members do not accept this from me, I should like briefly to refer them to two excellent articles in the Financial Times as recently as 16th October. In the second of these, the Financial Times agricultural correspondent—and there is no better writer in the Press on agricultural and food matters—quoted from EEC sources for the main foodstuffs the average of EEC prices and world prices in 1974 and 1975. In the EEC, grain prices were 10 per cent. to 20 per cent. higher than world prices, and still are, milk powder 40 per cent. higher, beef and veal 68 per cent. higher, and butter 220 per cent. higher.
The right hon., Gentleman must know that since then the United States has had an excellent wheat and maize crop, and that both the Soviet Union and India have also had very satisfactory wheat crops.
The Financial Times correspondent, John Cherrington, having given those figures, summed up the present situation very fairly as follows:
World prices of the key commodities—beef, dairy products, grain and sugar—are substantially below those in the Community, and on any reading of agricultural history they are likely to continue so.
What a comment that is on some of the statements that were made during the referendum campaign.
The same truth was equally fairly expressed in a statement by the Consumers' Association, quoted in The Times of 14th October. The association said:
The real problem is the very high price fixed in Brussels. Butter in the EEC is now 270 per cent. of world market price; skimmed milk powder 330 per cent.; beef about 200 per cent.; and wheat around 150 per cent. If prices were set at a more reasonable level, the United Kingdom would not need to use the 'green pound' to keep them down.
How much, then, is the common agricultural policy really costing our balance of payments at the present time? To have
imported the actual volume of each of the main foods that we imported in 1975 at the full EEC prices, as quoted by the Financial Times, instead of the world prices available to us if we had not joined the EEC, would have cost the United Kingdom in that year roughly an extra £800 million on the balance of payments. That is just a matter of arithmetic. That £800 million is, of course, being partially and temporarily reduced by what Mr. Lardinois quite fairly calls the "crazy" device of the green pound, the transitional period and the so-called MCAs.
So far as I can estimate, these at the moment are giving us back perhaps £350 million of the £800 million burden. If the Government have a better figure, I shall be glad to have it. But now, under Regulation R/2295/76. Mr. Lardinois and his Commission on their last proposals were wishing to cancel a material part of the £350 million so-called subsidy that we are receiving. But, even if that is not done, we are getting back barely half of the cost to us of the common agricultural policy at the moment. Even now, we are bearing a burden of at least £400 million and are that much worse off than if we had not had the CAP inflicted upon us.
The figures that my right hon. Friend has given are extremely important. But does he recall that he made these statements during the economic debate on 11th October? Has he received a communication from any quarter challenging the estimates that he gave then and that he has repeated today?
It is always good to be consistent and right, of course. So far, I have had no corrections or comments from the Government, though I should welcome them.
In these circumstances, to say that the CAP is subsidising us, as even my right hon. Friend the Prime Minister did in an incautious moment during Question Time a week ago, is the reverse of the truth. It is the green pound, and not the CAP, which is subsidising us. Incidentally, it is also subsidising producers on the Continent, who are selling food to us as a result.
I ask the House to consider the extraordinary situation which we have now reached in the case of our main foodstuffs. Contrary to what the right hon. Member for Cambridgeshire told us, beef imports from Australia and Argentina, which have plentiful supplies, and from almost any other country outside the EEC, are now excluded from the British market altogether. The price of beef in the EEC is double that in the world market, and the consumption of beef in this country has been cut heavily. These are, indeed, import controls, and, to my mind, the present situation in beef can be described only as protectionism gone made.
I am not sure that the House realises that there are also large intervention stocks in this country at present. I do not blame the present Minister, because he has hardly had time yet to reverse the controls and put these matters right. What is more, British beef is now being exported to the Continent not in order, mainly, to be eaten there, but to be added to intervention stocks on the Continent. Some people can hardly believe what is going on behind all these veils.
The agricultural correspondent of the Guardian put it this way on 21st September:
The Continent is buying British meat because more and more beef produced there is finding its way to EEC cold stores in an attempt to keep up the market price and because the EEC has a virtual ban on imports from non-member countries including Australia and Argentina.
What this really means is that the British standard of living is being forced down in order to maintain these extortionate prices of beef for the benefit of Continental farmers.
Let us consider dairy products. Regulations R/1734 and R/1742 and the proposals in them would make matters even worse than they are now, and I warmly welcome the Minister's announcement today that he will at any rate be opposing the most objectionable of those proposals also.
First, the dairy policy of the EEC, which is largely designed to keep up prices and to reduce the consumption of food, is costing the taxpayer about £1,000 million in the present year. I think that my right hon. Friend gave the figure. That is another incredible part of this story. Already butter and cheese in the EEC are costing two or three times the world market price. Supplies from Canada and Australia are virtually shut out and, of course, the consumption of butter in this country is already falling.
The Food and Drink Industries Council, whose report appeared in The Times on 13th August, expects butter consumption in the United Kingdom to drop further from 500,000 tons last year to 300,000 tons in 1980. That represents a 40 per cent. fall in consumption.
At the same time, butter production in New Zealand is being cut severely, because that country is not allowed to export freely to the EEC. If the right hon. Member for Cambridgeshire does not believe me, I refer him to the Financial Times of 11th August, where he will find these words:
A cut of about 20,000 tons from last year's 80,000 tons in New Zealand's butter production is likely because of New Zealand's reduced access to the EEC.
Again, how different are the facts from what we were told about there being no food available for us anywhere in the world.
Does not that illustrate very well the point that my right hon. Friend the Member for Cambridgeshire (Mr. Pym) made about securing supplies of food for this country? Surely it is the Common Market and its policy which are damaging the industry in New Zealand, and in the long run, in a time of crisis it is New Zealand which could come to our rescue.
Yes, and New Zealand also came to our rescue during the war and immediately afterwards, as many of us remember. That is my very point.
If we continue to accept the present provisions of the CAP and the Treaty of Accession, butter prices in 1980 are likely to double again in this country, compared with their present level. That is the estimate of the Food Industries Council. Already, by 30th September this year there were already 45,000 tons of butter in store in the United Kingdom.
Meanwhile, stocks of skimmed milk powder in the EEC, despite the marvellous scheme to force producers compulsorily to use them as feeding stuffs, are still more than 1 million tons. I thought that I heard the Minister saying that they stood at "13 hundred thousand" tons, which is, I suppose, a polite way of saying 1,300,000 tons. The EEC proposals for remedying this are to put a tax on margarine and other oils and to pay farmers to stop producing
milk. Regulations R/1734 and R/1742 are intended, in the words of the Ministry's explanatory memorandum, to induce farmers to
give up all sales of milk and milk products for five years.
In plain English, this means that, first, the prices of milk and dairy products are put up so far above the economic price that a great many people cannot buy. Then, it is said that, as there is a surplus, it has been decided to pay producers to stop producing an essential food.
Economic policy has not been quite so crazy since the early days of the Roosevelt Government of 1933 and 1934, when they paid American farmers "not to produce hogs." In the United States in the 1930s, that phrase became a national joke. I think it rather characteristic of the change in the position that we have reached today since the signing of the Rome Treaty that the Ministry's memorandum describes the same process as
restoring equilibrium in the milk market.
Anyway, it is not the British farmer who is producing the surplus. Clearly the Minister should resist this proposal resolutely—and, as I understand him, he intends to do so. What we want are lower prices—not lower production—and low-cost imports from the outside world to maintain our standards of living.
I hope that the Minister will also resist the even more absurd proposal to tax margarine and other oils and fats to prevent people from consuming them as well. If he does resist that plan, he will have the support of the whole House and the country, and perhaps we shall even see in the course of his resistance the use of the veto, which we were often promised years ago when we were debating entry into the EEC.
In the case of mutton and lamb—and I refer here to document R2274/5— there is an even more extraordinary proposal to give the EEC Commission power, when it pleases, to ban all imports of mutton and lamb into this country from Australia, New Zealand and elsewhere. I welcome the impression given by both Front Benches today that we are all opposed to this utterly indefensible pro- posal. I find it inconceivable that such a proposal should have ever been advanced, and it is an indication of the state of mind that exists in either Brussels or Luxembourg, or both.
This country is a major producer, consumer and importer of mutton and lamb, whereas the Continent produces and consumes very little. Lamb is a major element in the British standard of living—more than ever now that beef has been virtually excluded from British diets by the common agricultural policy. Yet, in order to keep up beef prices in France to extortionate levels, the British housewife is to be forbidden to buy lamb from Australia or New Zealand whenever the Commission wishes to introduce a ban.
I warmly welcome the Minister's statement that he will not accept this, and I hope that this will be one issue on which we can show some real backbone.
All this and the common fisheries policy, too. And on top of even that, we have the Commission's proposal to devalue the green pound. I strongly support, and I believe that the great majority of Labour Members support also, the Minister in his uncompromising opposition to this further attack on our level of food prices and our living standards. I think that his statement on this was much more satisfactory than many of us had feared it would be. The green pound should not be devalued until major reforms in the common agricultural policy are achieved and put into operation, and the present outrageously high prices are brought down. A mere temporary postponement is not good enough, because in the transitional period, and in the annual price reviews, EEC food prices are going up and up all the time.
The really vital flaw in the CAP is that it defies the most basic of all economic principles—that if artificially high prices are enforced, production will be inflated, consumption discouraged; and the inevitable result is a surplus which cannot be got rid of. This House has been constantly promised major reforms of the CAP. I believe that our economic recovery will not be possible as long as we are burdened by the crippling effects of the CAP.
I have no doubt that the present Minister means well, but up to now all we have done in relation to the CAP is to react to the successive outrageous propositions which have been handed out by the sausage machine in Brussels. We have made hardly any constructive proposals. Only when we show persistent determination will we get results, and perhaps we should be prepared to use the same methods as the French did in imposing the illegal tax on Italian wine.
The Minister will have the overwhelming support of the House and the country if he makes it quite clear that we will not accept a sweeping devaluation of the green pound, or all these other new burdens, until the CAP is basically reformed. This is the only way to do it.
After listening for nearly two hours to this debate I wonder whether we have not got our Government of national unity after all. I have never experienced so much unison as that which has been in evidence today.
On behalf of my party, I wish the Minister well in his new post. He has a great deal of responsibility but I am sure that he will look after the interests of the consumers and producers alike. I also pay tribute to his predecessor, who also looked after the interests of British agriculture when he was in office. I hope that he will have a long stay in the other place, and I hope that the present Minister will not be sent to the other place for a few years at least.
The Minister's presentation of his maiden speech from the Dispatch Box was first-class. At one point he nearly had me convinced that everything in the garden was rosy. Unfortunately, I do not believe that is true. I believe that the Minister is sincerely interested in listening to the views of all hon. Members and that he wishes to restore confidence in the agricultural industry and satisfy consumers that they will not have to go short of food in years to come.
I was disappointed that the Minister's first big mistake after taking up his new appointment was to be so adamant in his refusal to devalue the green pound at this stage. He has failed to see the red light warning of disasters to come, and he has taken only short-term results into consideration. I am sure that the Minister
has read the comments of the National Farmers' Union on this matter. It said:
In refusing to devalue the green pound the Government are allowing their concern with the immediate economic situation largely to override considerations of longer-term national interest. The Government have at least given some recognition of the problems of the agricultural industry and reaffirmed their interest in its future. The Minister in his statement declares that agriculture has a vital part to play in our national and economic effort, and the Government remains committed to the objectives set out in 'Food From Our Own Resources'. We emphasise, however, that if the production possibilities outlined in the White Paper are to be realised, the Government must act to ensure a sound and prosperous agricultural sector. This can only be achieved through a devaluation of the green pound.
As the Minister and others have reminded us, all those concerned with agriculture and those who wish to see it flourish have strongly advised devaluation. They include not only the farming unions but the National Union of Agricultural and Allied Workers and the Agricultural Economic Development Committee, which is there to advise the Government. I need not enumerate the great advantages that would come from at least a partial devaluation of the green pound. In the long term, however, it would help the consumer as much as the producer.
The farmer will not put his whole heart into producing unless he is able to recoup his losses, and the drought this year, in spite of some Government help, has not assisted matters. The farmer therefore watches the widening gap between sterling and the green pound with anxiety, and feels unable to risk any expansion. That means that production is bound to fall, and the British consumer will inevitably find himself buying more expensive food from abroad, thus pushing up the cost of living index far more than the 1 per cent. or 2 per cent. that would result from an immediate green pound devaluation.
I have figures here which show that beef production has gone down rapidly over the last couple of years. In 1974 we had 15 million head of cattle. That figure has now gone down to just over 14 million. In Wales alone the production of beef cows has dropped by 7·5 per cent. over the last 12 months. I was delighted with the Minister's assurance that he will do his utmost to safeguard the interests of the dairy producers by making sure that the Milk Marketing Board, which has given excellent service to dairy producers for the last 30 or 40 years, will be with us for many years to come. I hope that the Board will stay in being and will retain its current statutory powers.
The downward trend can be observed with sheep and pigs. Production of wheat, barley, potatoes and sugar beet has also fallen. The trend of production in Britain is gradually down, but our imported food and feed bill has gone up almost 400 per cent. in the past 15 years, from £1,537 million in 1960 to nearly £5,000 million in 1975–76. We must consider whether, if this trend continues, the nation will be able to afford these imports.
In view of the Minister's attitude towards devaluation of the green pound he must say how he intends to build up confidence in the industry to enable it to meet the targets set out in the Government's White Paper "Food from Our Own Resources". The target there is 2½ per cent. per annum. I believe that the Government should set it at 10 per cent. per annum. They have freely admitted that agriculture has an important part to play in our economic well-being, but how will the industry be encouraged to play it? It will certainly not be by the Minister's present attitude to the green pound.
There are whispers in the air about the nationalisation of land, and this suggestion is another deterrent factor to expanded production. The Minister must deal with this point before he will restore confidence. Will he consider setting up a land bank, as his predecessor undertook to me to do. During the Committee proceedings on the Agriculture (Miscellaneous Provisions) Bill he promised to look at the matter in the European context, with a view to helping our young farmers. Will he consider providing capital for farmers, especially those who are starting out in the industry? I am sure that many young farmers find it difficult to obtain the capital to start farming on their own. Is the Minister willing to produce a 10-year plan for agriculture and to give farmers the encouragement they need to go ahead with long-term programmes that would eventually lead to greatly increased production? A constructive move by the Government is long overdue.
In every sphere we have had enough of short-term solutions. We badly need a long-term view and long-term planning. The Minister's decision over the green pound is sad not only for agriculture but for the nation as a whole. I hope that in the near future he will begin to realise the error of his ways. I am sure that his dearest wish is to help the consumer, but to do that he must make every effort to ensure that the industry is healthy and thriving.
I turn now to the sheepmeat regulations. I agree entirely with the sentiments expressed by the right hon. Member for Cambridgeshire (Mr. Pym) and Labour Members concerning the import of New Zealand lamb. Can the Minister give consumers the assurance that New Zealand will be willing to continue sending its lamb to this country, or will it seek an alternative market?
The hon. Member's party—with the possible exception of the hon. and learned Member for Montgomery (Mr. Hooson)—is completely Eurofanatical. Since he is dealing with imports and since he has heard what the Minister said about the effect of the Common Market in shutting out New Zealand imports, will the hon. Member say whether his party's policy is that we should defy the CAP? I hope that it is, but we should like to know the thoughts of the Liberal Party if it wants cheaper food.
I do not think that this is an opportune time to say whether or not we should remain within the CAP. No doubt the hon. Member will have a glorious opportunity to deal with that.
I am delighted that the Government have been able to persuade their counterparts in Europe to hold on to the guaranteed price system for lamb in this country. Obviously we would want that to be included in the sheepmeat regulations. We learned our mistake two years ago, when we did away with the guaranteed price system for beef. I hope that we can be assured today that the guaranteed price system will be retained by the EEC.
Here I wish to declare an interest as a vice-chairman of the British Wool Marketing Board. We possess similar statutory powers to those of the Milk Marketing Board. It is the view of all sheep producers in this country—I speak here as a farmer—that we should retain this marketing system.
Is the hon. Member aware that the attitude of the Commission is very simple? It will not accept conditions that enable farmers such as the hon. Member to work in the way they do at present. Is he aware that it intends to try to get rid of the monopoly that makes it possible for the Milk Marketing Boards and the other product boards to work?
I am aware of what the hon. Lady has just said, but I am trying to get an assurance from the Minister, for our producers, that the Government will do their utmost, in our present position as members of the Common Market, to retain the marketing system that we have. I have held that view for many years.
I am convinced that many right hon. and hon. Members on both sides of the House would agree that the reintroduction of the lime subsidy would be of great benefit in increasing production from hill and marginal land. We must all confess that the land is honest, and that if we feed it it will feed us, in turn. However, we need further assurances if we are to expand.
I have covered some points about marketing boards, but what about the less-favoured areas? This will come within the sheepmeat regulations, but it will not be confined entirely to the regulations. For marginal and hill farmers to increase production from the land—I believe that they can increase it by at least 50 per cent. in the next few years, given the right incentives—the assurance is now needed that the hill sheep subsidy and the hill cow subsidy will be retained. "Subsidy" is a dirty word in the view of some hon. Members, but whatever one wants to call it, be it a compensatory allowance or something else, will the Minister assure our producers that he will do his utmost to help retain our present system?
To restore confidence and stability, our consumers and producers must work in harmony if Britain is not to go short of food within the next 10 years.
I do not find it possible to follow the hon. Member for Cardigan (Mr. Howells) too closely in the views he has expressed. One of the hazards of this sort of debate is that sometimes we do not say in simple terms exactly what the cost of something like the common agricultural policy has been to Britain. I should have liked to see the orders before us today voted on and thrown out of this Parliament. I can give my reasons for that very shortly.
What has been demonstrated clearly by my right hon. Friend the Member for Battersea, North (Mr. Jay) is the real cost of the CAP to the British housewife. However, what has not been made clear, either in the speech of the right hon. Member for Cambridgeshire (Mr. Pym) or in the discussion generally, is what is actually happening in terms of Britain's involvement in both monetary compensatory amounts and the future of this agricultural policy.
We are eternally being told that the CAP is the cornerstone of the entire Maison de l'Europe. If that is in fact so, it seems to me that the house is just about to fall down, because the whole CAP appears to be based on the assumption that European farmers are rather like Jack and the beanstalk—they own one cow, and unless that cow can be made to pay we are in dire danger, and we cannot conceivably change our policies.
The result is simple. Every time we have a price review, the price for liquid milk and milk products is allowed rise. The Commission then finds itself faced in some instances with surpluses with which it does not know how to deal. It then comes forward with a number of ad hoc plans. Some are so absurd as to be manifestly unworkable. It then has to insist that skimmed milk is included in feed, irrespective of the effect on either the milk or the animals concerned, or it has to introduce artificial measures pushing up the price of vegetable oil, which is the suggestion before us today. What it is really saying is this: "We have a lot of milk products and butter. Because we have pushed up the price too high, people are not buying them. They are buying alternative forms of food. Therefore, we must now nut up the price of the alternative food."
The hon. Member for Cardigan says that the farmers require a long-term guarantee that they will be able to produce, otherwise they will fear for the future. I point out to him that the customer has a part to play in this affair, and she is already faced in Britain with a considerable number of price rises simply because of the transitional period through which we are passing. What we are now proposing, apparently, is making it more difficult for her to buy the foods she needs.
The milk action programme is an ad hoc series of suggestions which has not been thought out, even in terms of the balance of advantage of the consumer versus the farmer.
That was thrown away when we gave away our system of deficiency payments. One cannot come into the House of Commons and ask for Britain to join the Common Market and then complain about the effects. Some of us pointed out beforehand that Britain was in a totally different situation from that on the Continent. We import two-thirds of our food. We are a highly industrialised country. When the right hon. Member for Cambridgeshire was talking about monetary compensatory amounts and the fact that Britain was having such an effect as would tear apart the Common Market, I should have liked him to give an undertaking that if we accept changes in the monetary compensatory amounts we should also instantly apply an import deposit scheme which would enable us to protect some of our industrial products. What is happening at present is that we are paying very large amounts into the Common Market and getting no advantages whatsoever.
We import 55 per cent. That is very much more than any other European country.
We are paying artificially maintained prices. We are paying not the correct price of food but for a system which maintains the price of agricultural products at an artificially high level. If we are to try to change the monetary compensatory amounts, as has been requested this morning, by how much are we to change them? The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) suggested in the European Parliament that we should agree to a change of perhaps 5 per cent. He said "per month", but I think that that was a slip of the tongue.
I am glad that the hon. Gentleman has cleared that up. That is the first time that we have had a firm figure mentioned today. The effect of that on the price of goods in the shops would be very considerable. It would help to have it spelt out.
The other thing that interests me is that it appears that the Conservative Party fully accepts the suggestion that there should be co-responsibility by the producers of milk. I have been studying this scheme for some time, and I am increasingly coming to the conclusion that the co-responsibility suggestion should be totally unacceptable to British farmers. In very few words, I shall say why that is so.
Britain is not a contributor to the milk lake. We have had a wine lake; perhaps we have got a milk puddle. British farmers do not, even now, produce enough milk for the British housewife. Therefore, if one accepts the suggestion that they should nevertheless pay to dispose of the over-production elsewhere in the Community and that this should mean a cut in their incomes, is not one also suggesting that probably the next time round in the price review they will ask to have that cut in their incomes made up by an increase in the price of milk? Would not that in turn lead to a situation in which we should begin to contribute to the overstocking of goods that we see in other countries?
I am fundamentally opposed to the co-responsibility levy. I do not think that it is a practical way of dealing with the milk surplus. I believe that it will have the opposite effect. I made a number of suggestions to Mr. Lardinois, outlining the changes that I should like to see come about. I notice that hon. Members smile, and they are quite right to do so. My suggestions were met with the thundering indifference that we have almost come to expect from the Commission as a whole.
I suggested that we should replace the proposed levy with a straight cut in producer prices. I said that we should exempt the sales of fresh milk and possibly the sales of other fresh products. What is noticeable about the whole of the plan is that it makes no differentiation between milk and milk products. It merely provides that everyone will be forced to pay. We should replace the proposed tax on oil and margarine by a tax on concentrate feeding stuffs for dairying.
One of the arguments that are always put forward is that we have to move back from artificial fodders to grassland in order to improve production. If the Commission is allowed to go ahead with the plans that it has put before us today, we shall not change the amount of milk surplus in the Community. The OECD has estimated that there will be an increase in milk production over the next 10 years of anything between 0·75 per cent. and 1·5 per cent. We are not doing anything more than tinkering with the whole problem.
I believe that at the distribution end and at the buying end there will be a straightforward buyers' strike. The one thing that no one ever says is that we can force British importers to bring in food but we cannot force the British housewife to buy it at prices she cannot afford.
I should like to know what happens in the distribution industry. Why is it that Cox's orange pippins are being sold in the lanes in my constituency when most of the large retail stores have vast quantities of French Golden Delicious apples and not one British product? Why is it that when we go to the average cold cabinet we find a very small amount of British butter but every other kind of butter? Why is it that we are being put into this situation? The answer is that Britain is an open and easy market. It is a market that is easily penetrable. The penetration is easily organised and anybody can get into it. However, let someone in England try to sell his products on the other side of the Channel and then see what happens.
We are talking not about widening a market but about allowing ourselves to be put in a position where we shall always be told "You are the people who should pay the proper price for your food. You have to import so much of it, and you should pay the price that suits the Common Market farmer and not the British housewife." I say that these proposals should be rejected. I say that not because the tax on margarine, for example, is so absurd that I do not see how it can be defended, but because of the whole policy that is emerging. The Commissioner said that I used the word "madness" five times when discussing his plans. I am sorry that I have to use it five times before he gets the message.
We shall be faced with a revolt in this country if we allow the changes that are now being proposed to take place. Even a 5 per cent. devaluation of the monetary compensatory amounts or a 2 per cent. levy on co-responsibility will have an effect on prices in the shops and on the housewife. Such matters will have an effect on the housekeeping money. The housewife may not know why, but she knows what is happening. She will soon get fed up to the back teeth. When she makes her voice clear, she will do so not in nine different languages but in simple Anglo-Saxon terms that even Mr. Lardinois can understand. I hope that the House will reject these proposals.
This is not a serious plan to change the milk surplus. It is meant to have no effect at all. It is a propaganda move, but the effect of it will be real, immediate and obvious to everyone. I only wish that we could vote against it outright.
In the short speech that I intend to make I shall concentrate on the plight of the United Kingdom pig producers and processors who are having to compete against foreign producers in conditions that are so unfair that many bacon curers, however efficient, are bound to go to the wall unless these inequities are removed very soon.
East Yorkshire is one of the most prolific pig producing areas in the country. A fair number of the pigs come to be processed in my constituency. At the Yorkshire Farmers' bacon factory at Norton about 200,000 pigs per annum are put through. It must be one of the most modern units of its kind. It provides good employment for about 250 people in Norton. The firm has led the field since 1933, so there is plently of experience within it. I can safely say that if that plant is not viable there must be very few plants in the country that are. I hope that the Minister will summarise the position of the industry when he replies.
How many bacon curers have gone out of business over the past two years'? How many are in danger of bankruptcy? Reference has already been made to the factory of Scott Bowyers, in Bletchley. The firm is the largest employer in Bletchley, employing about 1,300 people. Apparently it is threatened with closure. For the past 20 years, there has been a running debate on the question whether the Danish bacon industry is unfairly subsidised. The MCA plus the AC have put a stop to that debate once and for all. The practical operation of the monetary compensatory amounts and the transitional compensatory amounts have clearly resulted in a subsidy of £329 per ton or 14p per pound for Danish bacon. If that situation is allowed to continue, clearly the British bacon curing industry is doomed.
It is a remarkable achievement that so far the home bacon industry has maintained its share of the total United Kingdom bacon market at about 50 per cent. Nevertheless, that is 50 per cent. of a market that has dropped from 12,500 tons a week in 1972 to 9,600 tons now. The most effective cure of the industry's troubles would be a change in the calculation of the pigmeat MCAs as they were detailed in the Meat and Livestock Commission's weekly European market survey. From what the Minister said this morning, that appears to be exactly the proposition that he will put to the Commission at its next meeting. I should be glad to have confirmation that that is so.
I should like to know what reaction to that proposal the right hon. Gentleman expects from the Commission. I thought that he seemed particularly optimistic today. The effect of the proposed change in the pigmeat MCA calculation seems so favourable to the United Kingdom that one can expect strong opposition from Denmark, the Netherlands and Western Germany—countries that benefit from the existing arrangements. The change would be entirely just, but the MCA on green bacon would decline by about £130 per ton, or 58 per cent. There would also be an 11·5 per cent. reduction of the MCA on canned ham. I am fearful that the Commission will be reluctant to support a change in the method of calculation until the United Kingdom makes at least a first move towards devaluing the green pound. I support the right hon. Gentleman's remark that he will have to give something before he receives a favour of that sort.
I do not believe that our new Minister of Agriculture, Fisheries and Food will get away with the theme that devaluation is of no great advantage to the farming community. In my post today I received the Agriculture EDC Interim Report, which I suppose is as authoritative a statement as one can get. It devotes paragraph 19 to deploring the present state of our industry. In paragraph 20 it is said that there is urgent need for additional financial resources to be injected. The whole of paragraph 21 is devoted to the financial effect that the devaluation of the green pound would have for farming.
Paragraph 21 states:
One important mechanism through which the Government can divert resources to agriculture is a partial devaluation of the green pound, thus providing scope for an increase in support prices of most of the main farm products. It is 12 months since there was any adjustment in the green pound and it is now about 30 per cent. above the market rate for sterling. Farmers are therefore squeezed by having to meet costs which have, in the main, felt the full impact of inflation, while returns have been held down by applying an artificially low exchange rate in calculating CAP prices.
So it goes on. Without a single doubt, this body regards devaluation of the green pound as very important for farming, whatever our new Minister may say. The report goes on to point out the long-term effect on the balance of payments and on the expansion of farming. I should like
to hear more about that aspect when the Minister of State replies.
Finally, I should like to dwell on the question of the long-term finances of the industry. Over the last year or two the House has debated the question whether the new capital taxation that the Government have imposed on industry, and on farming in particular, will have an adverse effect. Time and again we have been told by Government spokesmen that we are overplaying our hand, because it will not have anything like the effect that we fear. It is difficult to argue, because in the early stages capital transfer tax does not make itself felt. But this report, in paragraph 25, tells us that it is estimated that the effect of capital transfer tax will build up to an average of £100 million per annum at present-day prices.
The Agriculture EDC Interim Report to NEDC of October 1976. The report goes on to say that of this £100 million per year burden on the industry £60 million would have to be found by owner-occupiers and £40 million by landowners. These are authoritative figures, which have at last come out. However, these facts have been known to farmers for all these years. They are extremely worried about the situation. That is one of the reasons why confidence has gone and investment has fallen. Until this paragraph in the report is taken seriously, we shall get no more confidence in agriculture.
I came to my seat this morning with a heavy heart because of these measures, which are likely to be introduced by the Common Market Agriculture Commissioner, but, having listened very carefully to the maiden speech of the Minister, I feel greatly relieved. I thought that he made an excellent speech. It remains to be seen whether Brussels, or wherever it is that he has to go to negotiate this matter, is or is not able to deliver the goods in Common Market terms. In other words, will my right hon. Friend be able to back up what he said he wants to do?
Hints have been thrown out that many Labour Members and, to some extent, Opposition Members are still fighting the campaign to get Britain out of the Common Market. It is extremely difficult not to do that. This is not a flippant business. We are dealing with the nation's food. It has been said that the prime job of any Government is to ensure that they feed our people. It is also their job to ensure the provision of food at prices that people can afford. Obviously we cannot feed the people if they cannot afford the prices that we are asking them to pay for the food. That is the prime consideration.
Is not the effect of high prices for essential foods to force people to use their money for this purpose as a first call upon their finances, with consequent pressure on the Government to maintain proper incomes and an economic policy, which is to the benefit of the Community and of this country? Surely that is the pressure that my right hon. Friend should put on the Council.
My hon. Friend has made a very good point. The matter is so serious that we do not mind being accused of fighting the battle to get Britain out of Europe. Of course, we recognise that there was a referendum and we know the result, but, in trying to make the Common Market work to the advantage of this country and not just to the advantage of France, Germany and the other member States, we lay ourselves open to the charges that have been made.
The common agricultural policy is nonsensical as far as we are concerned. The great nonsense—I have said this many times, and it is worth repeating—is that we have joined a club in which all the nations produce most or all of their own food. They are mainly self-supporting. But, as has been said, we produce only half of the food that we need.
Even if we are successful in growing more food, we could not in our wildest dreams become 100 per cent. self-supporting in these small islands, because we have not got the space to do it. Policies designed to protect nations that are self-supporting will not do for the United Kingdom, because, from time immemorial, we have gone out into the markets of the world and bought the food that we cannot produce at the best possible prices.
There has been talk this morning about the green pound. This is more nonsense that has been brought about by the club that we have joined. My record shows that I do not try to depreciate the British farmer. I have on occasions in this House appealed for help for the British farmer. But why change a perfectly good system of deficiency payments for farmers—a system originally introduced by a Labour Government? We had to abolish that system and accept the common agricultural policy when we joined the Common Market.
It is not my intention to make a speech attacking the Common Market. We are in this mess of a market and therefore we must ensure that, for a change, it works to our advantage and not just to the advantage of the rest of our European partners—I use the word "partners" with a query—if we can call them partners.
I turn now to the milk industry. What a terrible thing it would be if we had a system of incentives which reduced the production of milk in this country. A levy system would put up the price of milk and restrict its production, because the consumer, to whom the levy would be passed, would not be able to afford it. I came to the House this morning specifically to attack this proposal. I am pleased that my right hon. Friend, from what he said, agrees that it is no good for this country.
The right hon. Member for Cambridgeshire (Mr. Pym) said that the real problem in the milk industry is the small, inefficient, part-time producer. Where are there small, inefficient, part-time producers? They are to be found not in Britain but on the Continent—in France and other countries. That is where there is an opportunity for rationalisation; not in Britain.
Our milk industry is extremely efficient from a production point of view, and it has been greatly helped for many years by an efficient processing and distribution industry. Here I ought to declare an interest, in that I am a sponsored Member of Parliament having been sent here by a trade union that has thousands of its members employed in the processing and distribution of milk, and, indeed, within the Milk Marketing Board itself.
Many years ago, we, in our wisdom, set up the Milk Marketing Board. I am not of farming stock, but I remember farmers being worried whether they would be able to sell their milk or whether it would have to go down the drain. The Milk Marketing Board got rid of that bad dream. It abolished that fear and ensured that if the milk produced could not be sold as liquid milk it would be manufactured into butter, cheese and other commodities. The Board ensured that the milk would not be wasted or create a huge puddle or lake.
The distribution side of the milk industry is very efficient and provides the housewife with a service that is second to none. Ours is the only country within the EEC that has a system for the delivery of milk to the doorstep, and I hope that my right hon. Friend will ensure that we defend to the utmost our right to maintain both that system and the Milk Marketing Board itself.
The daily delivery of milk is a factor in the large amount of liquid milk that is sold here. The consumption of liquid milk is much greater in Britain than in the other Common Market countries, and over the years the price of milk has been maintained at a reasonable level. What is more, the Dairy Council propagates the idea of using and drinking liquid milk.
The Minister should refuse to take any share or participate in the co-responsibility levy on milk surpluses until the milk industries of our partner countries spend as much money on advertising milk and promoting milk sales as is spent by the Milk Marketing Boards in Britain.
I thank the hon. Gentleman for that suggestion. I agree with him, but I go further and say that there must be no move to cut down the production of milk in this country until there has been a reduction where it really matters. By that I mean the countries from which the lake comes, such as France. This country can use all the milk that it produces.
I remember that about this time last year—it may even have been a little later, in about November—the industry was worried because it did not know whether it would have enough liquid milk to go round at Christmas, and whether there would be enough milk to make the cream that was needed; but we managed. We cut down the production of cheese.
One hon. Member spoke about not being able to get much British butter in our shops. The reason is that we produce only about 20 per cent. of the butter that we need and have to import the rest. Why in heaven's name we do not produce more butter and market it, I do not know. A little while ago we came up against the ridiculous situation that even though we produce only 20 per cent. of our butter needs some of that produce was being used for the stupid intervention system. This is not a question of carrying on the war against the Common Market; it is an appeal to common sense and an attempt to point out the stupidity of the CAP as it relates to us.
I know that many hon. Members wish to take part in the debate, but I want to refer to something else, and here again I declare an interest. My trade union has many members within the baking and confectionery industry. The matter that I wish to refer to is the ridiculous tax on vegetable and marine oils, because it will do more than merely put up the price of margarine. That would be a bad thing to do, anyway, but it must be remembered that these oils are used in the manufacture of many other commodities, such as biscuits, crisps, bread, fish and chips, and so on. The increased tax will put up the price of all those products.
That is not just my opinion; nor is it just the opinion of anti-Marketeers. That view is contained in a document put out by the Food Manufacturers' Association, which consists of people who make these commodities. The directors of the companies concerned say that if this tax is imposed on cooking oils it will make the foods they produce dearer and create consumer resistance.
That is undoubtedly true, but it will also do something else. It may be known to hon. Members present, because I expect that most of them are interested in the food industry, but it may not generally be known that we have a fine record in exporting manufactured food products. We make some of the finest biscuits in the world, and they are exported to many countries, and certainly to Europe. We have a good record in the export of chocolates, sweets, and so on, and this tax will hit the export side of the food manufacturing industry.
Whatever the political convictions of hon. Members, I am sure that no one will deny that we need to be able to export more. That being so, we must guard against any action that threatens our ability to export and earn vital foreign currency. We must guard against any action by the EEC, Japan or any other country that threatens to impair our ability to export.
I agree with the hon. Gentleman, but it comes down to the fact that the people who make these suggestions are at their wits' end because of the inefficiency and mess of their own dairy industries. I am thinking here mainly of France. Those concerned are prepared to inflict these horrors on us if they think that by so doing they will get rid of the surpluses created by their own inefficient dairy and milk-producing industries. That is the crux of the matter.
All power to our new Minister when he goes to wherever he has to go to argue the case on our behalf, but woe betide him if he comes back and tells us that lie has failed to do what he wants to do and believes in. If he does that, I shall talk to him in much stronger terms.
I wish to express the regret of many farmers in Northern Ireland at the departure of the former Minister of Agriculture to another place and higher services. I also express our gratification that he has been replaced by such a forceful character. I am thankful also to see the Minister in charge of agriculture in Northern Ireland on the Front Bench today.
In no place in the United Kingdom do the effects of the green pound cause as much bitterness as they do in Northern Ireland and among Northern Ireland Members. I intend to deal first with the cattle trade and the interdependence of that trade between Northern Ireland and Eire. Hon. Members may not know that Northern Ireland, each year, legally imports from Eire large numbers of store cattle and legally exports to slaughterhouses in Eire large numbers of fat cattle.
When we talk about devaluation of the green pound we are talking about the devaluation of the Irish pound against the unit of account. The practical effects of the 7· per cent. devaluation of the green pound were that in Northern Ireland the price of fatstock rose to 50p a pound in the livestock market against a selling price for the same beast by the slaughterhouse of 48p a pound and the same was true of the pig trade. About 3,500 jobs were threatened.
I express the thanks and the congratulations of Northern Ireland Members to the Secretary of State for Northern Ireland and his colleagues, and the Minister of Agriculture, for the decisive steps that they took to put a stop to the smuggling from North to South.
We must also look at the cost. A sub-subsidy of 5· per pound for beef and 31p per score for pigs, which costs £l million a month, is a totally unacceptable price for consumers in this country to pay for an open border. The problem remains. The bunghole appears to have been plugged with a little piece of mud that will rapidly wash away. Furthermore, Eire may again devalue its currency. In theory, the EEC is supposed to give permission for this, but I do not think that it would complain, because devaluation would result in the saving of EEC funds.
Will the Minister tell us why Eire was allowed to devalue when that was only half the proposal before the Ministers? It seems ridiculous that one part of the British Isles, which has a currency at parity with ours, should be allowed to devalue when the proposal applied to the entirety of the islands.
The hon. Gentleman has made a fair point. I felt in Luxembourg at that time that the representative rate was a matter for the national Governments of the member State and for no one else. Taking that view, I had to accept that, whatever might be the repercussions, the same principle applied to the Republic of Ireland.
We should realise that, associated with our entry to the EEC, a fundamental change was needed in our attitude to the production and cost of food. The Prime
Minister, in replying to a supplementary question put by my right hon. Friend the Member for Down, South (Mr. Powell), referred to this. He said:
It was always one of the weaknesses of our entry into the Community that the CAP does not suit our requirements.
He went on to make this rather curious statement:
That is why we must pursue… with some, thought not all, other member countries a policy of getting substantial reforms over a period. I believe that we shall be able to do that."—[Official Report, 14th October 1976; Vol. 917, c. 629.]
The Secretary of State for Northern Ireland, in a statement on the reintroduction of the meat industry employment scheme, said:
We shall be taking stock and urgently examining whether there are other ways of solving the problems.
I conclude that the Secretary of State for Northern Ireland was referring there to the problems that arise between Eire and Northern Ireland. He has given himself only a month to arrive at a solution.
What did the Prime Minister mean when he said that he would pursue that matter with some countries, but not all? Will an effort be made by the United Kingdom and certain other Common Market countries to achieve a total change in the CAP? That is the only reading I can give to the Prime Minister's remarks. I should like the countries to which he referred to be named.
I think that everyone will welcome the attitude inherent within these remarks, that it is realised that the CAP does not suit our requirements and that major changes must be made. The sooner they are made the better. The CAP is a regime of common prices, and common prices inevitably imply either a common currency or currencies with fixed parities. As these conditions are not fulfilled in the EEC, we have had to invent an imaginary currency—the green currency. It is supposed to have the characteristics of a common currency or of currencies with fixed parities, but in practice it is only partially immune from variations in parities.
Between the United Kingdom and Eire there is a fixed parity, which long preceded the CAP. If the parity between the pound sterling and the Irish pound means anything, there should logically be exactly the same green currency, but the EEC does not rise to that level of logic, and different values for the green pound are fixed. That cannot be defended on any ground. Especially it cannot be defended where there is a wide open land frontier. That frontier prevents differentials in the green currencies being offset by the MCA payments on the frontier. The smugglers are bypassing the MCA payments.
The right hon. Member for Cambridgeshire (Mr. Pym) referred to the disparity between the two parts of Ireland. On reflection, I think that he will agree that he was not putting the case quite accurately. He should have referred to a disparity between two countries with a common currency or, rather, a currency of the same value embodied within the British Isles. It is that disparity between the Irish and the British green pounds which leads to the British consumer subsidising the Eire producer. The House cannot lightly dismiss that.
So long as the present CAP exists and the United Kingdom adheres to it, there are four possible remedies, three of which apply to Great Britain and the fourth specifically to Northern Ireland. The United Kingdom and Irish green pounds should be brought into line with each other. That would mean either higher prices for the British consumer or lower prices for the Eire producer, or possibly a combination of the two. Offsetting the difference, as at present, by internal United Kingdom subsidy in Northern Ireland has all the usual disadvantages of subsidies, including the creation of a distortion in trade between the United Kingdom and Eire and Northern Ireland and Great Britain.
The other possibility is one that the Irish Government would not find particularly acceptable—to devalue the Irish pound below the United Kingdom pound. That cannot be done while the Irish currency is in common use in Northern Ireland and while the parity is fixed between the two countries. I believe that the Irish pound should be allowed to float to reach its true market value. I cannot see that being done. Although we are told that there will be difficulties, the best control would be strict control of the border. I believe that such a move would have effects that would be beneficial beyond the bounds of agriculture in terms of both countries. It would bring to an end the smuggling rackets in agriculture and end the traffic in murderous men and weapons between North and South.
At present, the green pound system appears to provide British and Irish consumers with some kind of subsidy at the expense of the rest of the EEC, but this can only be on the assumption that we are obliged to import food from the EEC or from the rest of the world on terms laid down by the EEC. If that were not the case, we could import food at lower prices than those which exist in the EEC regime. I believe that our partners and co-members of the EEC are hard-headed business men. They certainly are not going to pump a great deal of money into our coffers, and would not allow us to collect a subsidy unless there were a catch somewhere. The catch is that in the long term they expect to obtain from our membership of the Common Market an advantage that will upset the present apparent disadvantage—or perhaps the catch lies in the figures given today by the right hon. Member for Battersea, North (Mr. Jay).
I believe that the green pound is essentially a deception, because it tends to conceal the true value of money and the true costs of production. It is like early earth movements leading to an earthquake. The whole system is strained until something gives. Whenever an earthquake occurs, many people are hurt. Unless corrective action is taken over the green pound, I believe that before very long that earthquake will occur in terms of the whole of the CAP.
I have a great deal of sympathy with the hon. Member for Londonderry (Mr. Ross) because many of us on this side of the water tend to forget that the United Kingdom has a land frontier with one other member of the EEC. The hon. Gentleman outlined the consequences of these documents for that part of the United Kingdom. It brings to mind the fact that Eire was interlocked with our own system of agriculture, and the differential in terms of the green pound will no doubt have repercussions of which we have not yet heard.
Should it not also bring to the hon. Gentleman's mind the fact that there are land frontiers in the rest of the Community and that the rackets there might be multiplied seven or eight times?
I am grateful for that intervention, because later in my remarks I shall come to the misuse of money and I shall criticise the failure to take certain action.
The House must congratulate my right hon. Friend the Minister of Agriculture on his approach to this subject. His was one of the most refreshing speeches we have ever heard from a Minister of Agriculture. [HON. MEMBERS: "Hear, hear."] I am glad that Conservative Members agree. At least on this subject, we display a fundamental unity of the type we had in common before we went into the Common Market.
Let us suppose that by some mischance the House and the Minister of Agriculture were not in such accord today. What could the House do about it? The answer, as is evident from the Order Paper, is that we could do virtually nothing—except, possibly, vote against the motion or adopt some procedural tactic at 4 o'clock. In view of the important constitutional position of this House, I do not think that it is good enough. What would happen if in other circumstances the present Minister of Agriculture were now in Opposition facing a Conservative Minister on this same subject? What constitutional safeguards would he have? Again, I suggest that there are virtually no safeguards.
I understand some of the reasons for the present situation. Any block placed upon the Minister by the House in his visits to the Council might reduce his bargaining power and, indeed, might prevent him doing what is best for Britain. This means that the mechanisms of the Common Market institutions undermine and destroy the historic mechanisms of this House, even in the present debate. We should pay attention to this problem because the difficulties will increase rather than lessen.
We have before us in this debate a number of basic documents which, we are told, are relevant. There are other documents which are equally relevant but which are not mentioned in italics. We have before us document R/2274/75, which is a Community document, but we must remember that the Select Committee on European Secondary Legislation has reported on two of these matters. The House of Commons in Report No. 53/XI, has reported on evidence given about the sheepmeat regime, but we are not told that on the Order Paper. Other relevant documents emanate from the House of Lords. There is, for example, document No. 326 of 30th September last, which again is not mentioned on the Order Paper.
There are five documents numbered R/2387–2391 inclusive on the subject of milk, to which not much reference has been made today. I obtained those documents only this morning because I did not know whether they were to be discussed. Therefore, I have had only a brief opportunity to glance through them.
There are a number of documents which relate to the regulations submitted by the Ministry on 19th October and which had to undergo the scrutiny procedure in the House. Although I thank the Government for making those documents available, I must point out that it is almost useless to make papers available only on the day when a debate is to be held. That is not good enough, although I appreciate that the Government might not have had a choice in the matter.
In opening the debate, my right hon. Friend the Minister referred to the amount of money used in the Common Market for the support of milk and milk products, and he quoted the 1975 appropriations. I have with me the Official Journal of the European Communities, from which I learn that a figure of 1,941,100,000 units of account is to be used in support of milk. That gives an appropriation of 5,160,300,000 units of account which, according to my arithmetic, is 37 per cent. of the guarantee.
As has been pointed out, none of that comes to the United Kingdom. By and large, we do not require these support guarantees. As was shown by the Common Market Agricultural Fund annual report, which was debated just before the recess, there is no proper auditing of the disbursement of these funds. That was made absolutely clear; hence the point raised by the hon. Member for Banbury (Mr. Marten). When we look at some of the complex proposals for providing farmers with grants, the bureaucratic complexity is immense. It would be wrong not to mention that there is no proper auditing.
I wish to refer to the milk scheme. There are various aspects to that, but what has not been mentioned so far is a report of a House of Lords Select Committee, No. 326, published on 30th September 1976. Sometimes we tend to downgrade the other place. Although I am not a supporter of it in general terms, in this case I feel that it has done a first-class job. It has made a number of comments which ought to be mentioned, because they may be read elsewhere and I do not believe that they can be controverted.
Referring to the policies for milk substitution, the report states:
these proposals raise in a specific form… the lack of substantiation in many Commission documents of the effect of policy proposals being put forward as solutions to specific problems of Market imbalance. Thus no clue is given how significant the Commission expect its proposals to be in reducing Community milk production and in lowering the number of dairy farmers in the Community.
The report mentions one or two other points and goes on to say:
Again the beef conversion scheme can be expected to lead to a switch from milk to beef presumably leading to an increase in Community beef production. No estimates are given of how much extra beef production might result… nor of the effects of this extra production for Community beef prices.
Here is a fundamental criticism of the proposals which have been brought up.
The report, while giving us diagrams and excellent statistical material, goes on to say, in paragraph 15:
One of the most significant developments in the dairy market in the last ten years, according to the Commission, has been the replacement of liquid skimmed milk for feeding dairy animals with manufactured skimmed milk power. Improvements in technical efficiency in the dairy processing industry and methods of milk handling have all contributed to this trend. But the most significant factor has been the increase in the skimmed milk powder manufacturing capacity of the Community's dairy industry which is understood to have risen some tenfold in the last few years.
That is why I interrupted earlier, because this report also tells us, in paragraph 12, that Community support in 1975 totalled 1,000 million units of account for investment in dairying. Unless we know to the contrary, I suppose that it was investment
in milk powder machinery among other things. I see the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) shaking his head, and I will accept that. At least it was a considerable investment. Now the Community is providing money to enable people to get out of dairying. Thus we have the price leapfrogging, as my hon. Friend the Member for Crewe (Mrs. Dunwoody) vividly illustrated.
Money is not being spent to the mutual benefit of consumer and producer. It is being used in a way which does not help the producer very much because, although he may receive higher prices, he is in no position of certainty. The consumer has to pay the high prices. Looking at the documents, one can only assume that this is slide-rule bureaucracy gone mad. It seems that when there is an imbalance in the market the Brussels Commission brings out a scheme which is purely cosmetic.
As my right hon. Friend the Member for Battersea, North (Mr. Jay) has pointed out, most of the schemes are contrary to the basic laws of economics. The Commission produces a scheme which is against the tide of natural economic flow. Unlike the right hon. Member for Down, South (Mr. Powell), I am not against economic intervention. I believe that we should do it on occasions. But it is nonsense to try to intervene against a natural flow unless it can be done properly. All the schemes that we have received from the Commission create great difficulties.
The basic problem as I understand it, particularly with milk production, is that if we set a price which gives a reasonable return to the small family farm we provide a return which is very good, even unreasonably so, for the large producer. That is the central problem which the CAP has never solved. It will not produce a solution until it takes account of the agricultural facts of life which some of the slide-rule merchants in Brussels do not appear to appreciate. How might we get rid of this problem? We might approach it in the way in which a Conservative Government acted in the early 1930s and produce a Milk Marketing Board principle. The Board works with admirable lack of intervention from this House and is, as it were, a hived-off mechanism which does not require constant attention and debate, which is good for the industry and the consumer.
It might have been thought that something on those lines would have been a good thing for those operating the CAP to examine. It is clear from the documents and from what we have been told by Tory Members that, far from being interested in this, the CAP does not want to know about marketing boards. Indeed, there is a certain threat to our own Milk Marketing Board from Brussels. Far from producing practical and watertight schemes from an auditing point of view, those responsible for the CAP produce the reverse and do not look at schemes which will go to the root of the ostensible problem, namely the relationship between small producers and a fair price.
I come now to the question of our ability to discuss these matters here and where they are discussed elsewhere. We have been fortunate today in having a wide-ranging debate, albeit a four-in-one debate. But these matters are discussed elsewhere. They are discussed in the Committee on Agriculture of the European Assembly. I understand that that committee has not taken the same view of these proposals as we have. I do not think it has been specifically mentioned today, but I assume that the committee has taken almost the reverse view in every respect. Perhaps any hon. Member who can say something to the contrary will speak up. I see that the hon. Member for Derbyshire, West disagrees again. It could be that on any of these matters the European Assembly will take a different view.
Our connection with the Council is through the Minister. He is the only link between this House and the Council—[Interruption.] The hon. Member for Derbyshire, West says "No". It so happens that at the moment some of our colleagues are Members of the European Parliament. But, if the hon. Gentleman and some of his friends have their way, that will not necessarily be so when we have direct elections. It will mean that for every eight constituencies there will be one European Member of Parliament. He alone may have access to the Committee on Agriculture. I dare say that because the numbers of the committee will be limited it may be someone else from a quite different part of the country.
I want to ask Tory Members who have a view about this what their position will be then. The hon. Member for Devon, West (Mr. Mills) has a particular interest in milk in that his constituency is a milk-producing area of great importance. Who will be involved in discussions of this sort? Will we be told by the European Member of Parliament to get out because the matter is being discussed in Europe? Will we be told that that is the means of putting pressure on the Commission, through a directly-elected Assembly each of whose members will roam around the equivalent of eight of our parliamentary constituencies? What will be the standing of discussions such as we have had this morning?
Opposition Members had better think very carefully about this principle, because if there are two trains of accountability in agriculture, one through this House and one through the European Assembly and its Committee on Agriculture, the same will apply to fisheries, energy, industry, commerce, banking and more or less anything else which has relevance for the European Community—and there is very little now which does not. What will be the position of hon. Members opposite in debates in this Chamber? Will they be glad to take up matters of great concern to their constituents, or will they say "Go to your EMP"? That is the choice which hon. Members opposite and my hon. Friends must face.
Some of us know where we stand on this issue because we believe that the direct representation on universal suffrage of people going from any part of the United Kingdom to the European Assembly will have inevitable effects. They will be on just as slippery a slope as they are for the reasons that we have not discussed these matters on a motion of approval. Therefore, although I am glad that we have had this debate and am pleased about the position taken by my right hon. Friend the Minister, I ask hon. Members, particularly those who have it in mind to approve any measures which the House may take on direct elections, to think carefully about their positions, the position of the public, the question of the discussion of these matters and, in particular, the position of the House in determining the policy for this country's land.
It is right and proper that I should declare an interest in these matters because many of them affect me personally.
Document R/2295/ 76 clearly refers to
proposal for a Council regulation amending the exchange rate to be applied to the Irish pound and the pound sterling for agricultural purposes.
Those of us who are members of the Select Committee on European Secondary Legislation are concerned that they can be divided and that unilateral action can be taken. It is dangerous to do this and to allow the Irish Government to get away with it. I leave the Minister to ponder that. He will be in difficulty if action like this is taken on other matters.
Some of what we have heard today reveals an appalling ignorance about what is happening in agriculture. Listening to some hon. Members, one would think that British agriculture was opposed to the consumer. In fact, it depends utterly on the consumer. Costs are rising rapidly in agriculture, just as they are in other industries. Farmers' costs must be covered, otherwise they will not produce the food that the consumer needs.
There are three large black clouds hanging over British agriculture which are sapping the confidence of people in the industry and which have hindered expansion just when it is needed. The first is the drought. We cannot blame the Government for that, but the Government can assist in solving the problems resulting from it. The £30 million that they have given does not cover the increased costs of the agriculture industry. Milk production in the South-West, which includes, Devon, Dorset, Cornwall and Somerset, is down by 17 per cent. as a result of the drought.
The green pound is the second black cloud. The agriculture industry perhaps looks at only one side of the coin. The Minister has explained that there are other aspects, and I agree with him. However, the Government can be blamed for allowing an enormous gap to develop. Unless we do something about it, we shall never achieve parity with our Common Market colleagues.
The third black cloud is taxation and land nationalisation. Hon. Members opposite may dismiss this as not being a problem or a cloud, but it is a very serious one for agriculture. As the Minister goes around the country and learns his job, in which I wish him well, he will find that this problem looms large in the minds of British farmers.
If we are to get production going and supply the food that this country needs, those three black clouds must be dealt with. Make no mistake about it—the increase in costs in agriculture is enormous. As in other industries, the cost of fuel to the agriculture industry has increased. It is right that wages should increase. Farm workers should have a good standard of living. Machinery costs have increased 30 per cent. in the last 12 months. Therefore, the cost of food to the consumer is bound to increase. Do hon. Members expect people in the agriculture industry to produce food at a loss? It is about time some hon. Members thought more deeply about these matters.
I turn to the question of the sheepmeat regulations. The document talks about "freedom to make national arrangements". Such freedom will not help the production of mutton and lamb. As has been suggested, we need the help of a scheme. Anyone with experience of the meat trade knows the sudden effects of the ban on imports, particularly when the French Government put up the shutters. A right of entry will help. The original scheme that was drafted was not helpful.
Secondly, sheepmeat is a product that the Community requires. This is a welcome change. After the Community's shunting over the question of butter, cheese and grain, it is nice to think that we can supply something in return, helping our balance of payments.
Thirdly, we need a continuous market, not an on-and-off market, if the export of mutton and lamb is to be taken seriously. A fluctuating market affects prices considerably, and also the confidence of the sheep producer. If there are violent swings in the market, the farmer is not interested in producing the mutton and lamb that are required for this country, let alone for export.
Fourthly, our regular customers in Paris markets do not like an on-and-off system. Supermarkets require regular supplies, just as we like to receive regular supplies of Danish bacon, cheese and butter.
Fifthly, the consumer in this country is not capable of absorbing all our home grown supplies at certain times of the year. Without the French market, there would be problems, because we do not have freezer plants. If there is a sudden drop in prices, the confidence of the producer goes out of the window.
We in the South-West are large producers of lamb. My co-operative, North Devon Meat, which I hope the Minister will visit and which is the largest plant in this country run by British farmers, exports between 30 per cent. and 40 per cent. of its input—3,000 to 4,000 lambs a week, worth £90,000. This is big business, and it helps our balance of payments and provides employment. Disaster results when the French say "No". Therefore, I welcome the proposals. They will do nothing but good for sheep and lamb production.
I am assured by the manager of North Devon Meat—Mr. Dick Cawthorne—who is probably one of the greatest experts on the matter in this country, that the flocks will go up between 20 per cent. and 25 per cent. if we have an assured market, both domestic and export. Nothing but good can come out of that, not only to the farmers but the consumers and the country, and it is the right type of agricultural expansion, without heavy and concentrated costs, since mutton and lamb can be produced from grass.
If we can have such a market and keep our share of it up to the level that I want, we can start to think about freezer plants. That would be a step in the right direction, because thereby any excess production could be stored in order to help the consumer when supplies are short.
I am desperately keen to protect New Zealand's interests—I do not like the further restrictions which could be imposed on New Zealand's produce—but we must accept that the New Zealanders are finding other and more profitable markets in the Middle East, Japan and elsewhere. Therefore, we have to take up that slack if we are to supply our needs.
I believe that nothing but good could come out of these proposals. They would give confidence, which would give increased production, which is the right way forward. But the Minister should watch one point carefully. It covers all classes of sheepmeat, dead and alive. I am not happy about live exports of mutton and lamb. Beef is a different matter. One has only to study what has happened in France. I want to see the trade on a deadweight basis. That would be right for animal welfare, for the best financial results and for employment, since everything would be done here and then the meat would be exported. Perhaps the Minister will make a particular point of seeing that live exports are not included in these proposals. Many farmers will not like my saying so, but it is right that it should be said.
A major omission from the Government's drought package, which they should reconsider, is aid through the tax system. There is no doubt that that would be a major help to confidence. Spreading the tax burden over three years would be of great benefit. Agriculture is a chancy business. The weather plays many tricks on production and profits, and one cannot judge the situation by one year alone. A three-year tax period would do more to give confidence to British agriculture than anything else at the moment.
I end with two questions to the Government. First, why is British agriculture treated as a second-class citizen? That is the effect of the green pound. The failure of the Government to start to adjust means that although we are in the EEC we are second-class members of it.
I want to stay in the EEC, but while we are in, why is British agriculture treated as a second-class citizen?
Secondly, why is agriculture the only sector to have a double standard over the value of the pound sterling? In any devaluation of the pound, the steel industry, for example, immediately adjusts its prices, so why should agriculture be clobbered every time? Agriculture has the best record of production and increased productivity of any British industry. I am not asking for parity, but I am asking that we start to bridge the gap. I do not see why agriculture alone, the highly efficient food producing sector of our economy, should bear the whole burden of the problem of the falling value of the pound. That is grossly unfair.
I apologise to the House for my absence from the Chamber during the last hour, but I had to attend to a constituency problem which had arisen.
I congratulate my right hon. Friend the Minister of Agriculture on the marvellous clarity of his analysis today. I have listened to Mr. Lardinois in the European Parliament, fudging and making complex issues more intractable and more obfuscated. Listening to my right hon. Friend today was a marvellous experience. He put difficult and complex issues into comprehensible terms. I am grateful to him for that as much as I am for the clarity of his views.
I want to deal with three issues—milk products, the green pound and reform of the common agricultural policy. One of the difficulties, however, in the debate is that the documents we are debating contain proposals which are not now being pursued by the Commission—and perhaps I am now breaching the conventions of the European Parliament in saying so. There is, for example, the proposal that those who go in for non-marketing premia must have sold off their dairy equipment within three months. When this matter was raised in the Committee on Agriculture of the European Parliament, we were told by the Commission "We have dropped that bit". Therefore, the documents that the House is debating as containing Commission proposals no longer reflect all the Commission's thinking.
I use that simply as an example, but it is an all too frequent occurrence, reflecting the time lag and the so-called flexibility of the Commission. The Commission changes its stance on issues like this like the breeze changing direction when whirling beech leaves around in autumn. The whole thing occasionally becomes a farce. The docu- ments we are debating today, whether they concern the green pound, which is the major issue, or milk products, which is the lesser issue, no longer represent the position of the Commission.
In considering the milk situation, two things should be clear. The historical evidence throughout the Community shows that if one increases the farm gate price of milk one increases production, and that if one decreases the farm gate price of milk one also increases production; but if one uses the price mechanism as a means of regulating the quantity of supply, one is using a totally inadequate instrument. It is an absolutely absurd instrument to use.
That is because—if I may indulge very briefly in a little agricultural economics—the zero cost of labour to certain sorts of dairy farmers means that, if their price per gallon goes down, they choose to milk more cows and increase their gallonage to maintain their income.
We are, therefore, in the very difficult position that if we try to manipulate the quantity of supply by means of the price paid to farmers, we shall get it wrong whichever way we do it, because the need to reduce the price to bring down the supply is so gross as to be politically unacceptable to most of our partners in the Community. We may want to do it as a matter of national need, but internationally this method is not available.
As the early results from the recent increase in milk price show, if we accept the figures from the Dairy Trade Federation, the last increase in the price of milk of 1p a pint has resulted in a 2 per cent. drop in liquid milk consumption. What help is that, Mijnheer Lardinois and the European Community, in solving the problem of surplus milk? It is the wrong road, and the Community is going in the wrong direction up that road in regard to milk. It is the inability of the Community to recognise that the problem is the lack of consumption per capita outside Britain, and the danger of reducing per capita consumption within Britain, that poses the major difficulty in regard to surplus milk production in the Community.
The present series of proposals, by making butter, milk and all milk products more expensive while holding down earnings levels domestically, can only mean the substitution of other forms of agricultural production for milk and milk products.
It is at that stage that the Community comes along with this farcical proposal for taxing margarine and so forth. It is of interest to note—if I am not betraying State secrets again—that in both the Committee on Agriculture and the European Parliament there has been no difference between British Opposition Members and Government Members. We have said on both sides that these proposals for taxing oils and fats are wholly and totally unacceptable and should not be entertained for one moment.
The problem of milk surplus is not a problem of cows or milk. It is a problem of too many farmers, too many human beings, relying for their income on the milk cheque. Until we reduce the number of human beings who rely on milk cheques for their income, we cannot hope to reduce the surplus of milk, whether it be in terms of dried milk, butter or anything else. These proposals from the Community, therefore, seem to have got things a little the wrong way round.
Last week, when we had an emergency debate in the European Parliament on the problem of the green pound, I was a little disturbed by one or two of the remarks made by our Conservative Members, but what was quite clear and should be noted by this House is that Petrus Lardinois, the Commission and most of the spokesmen from other countries realised that at the moment the monetary exchange value of the pound is totally unrealistic and that to gear the green pound to the present artificial exchange level is to gear it to a wrong level.
Then why do Chancellor Schmidt, Petrus Lardinois and Commissioner Gundelach all say that the pound is currently undervalued and that if the green pound is traded in relation to an undervalued, ordinary pound the differentials are accentuated? What they have been saying is that the gap between real costs, the real value of the green pound or the ordinary pound, and the basket of European currencies is wrong at the moment.
What is also clearly accepted is that any over-urgent rehabilitation of the green pound to the real value of the pound, however quantified, could cause unacceptable distortions for this country. There are those in the Community not very far from Brussels who would say that at the moment the green pound represents a distortion of international competitive positions. What is quite clear is that it reflects the reality of totally different sets of production costs.
The green pound is not the cause of the imbalance as between Germany, France, the United Kingdom and Ireland. It is simply the reflection—the epi-phenomenon, if I may use a splendid long word—and unless we get the costs of agricultural production nearer into proximity there is no point in pretending that the green pound is unnecessary. The green pound is the reflection of differential agricultural costs.
For the National Farmers' Union and the National Union of Agricultural Workers to pretend that if we correct the green pound imbalance we shall bring prices and costs into order is, with great deference to them, to get carts and horses all mixed up in a most terrible mêlée. What we have to accept is that, when there are differential interest rates between the United Kingdom and Europe and a whole range of different production cost structures, to expect to have a single Community price is unrealistic, and that to impose it is simply to impose one unreality upon another.
The real problem is that production costs in the Community vary over a hugh range. One possible solution is to permit, as the right hon. Member for Down, South (Mr. Powell) would wish, the whole regimen of free floating exchange to correct that section of imbalances over time and, therefore, bring the imbalances of production costs into equilibrium, and to give up producing this here and go in for producing that somewhere else. That is one possibility. However, the social reality is that no French, German, Dutch, Danish or Irish Government could politically permit that to happen.
I agree entirely with the right hon. Gentleman. The assault upon our state and our stand on the green pound is based upon the belief that the Community cannot exist without a common price. Petrus Lardinois and others keep on announcing this doctrine, which is so bereft of economic virility as to be farcical. But that is what they believe, and, poor souls, they are entitled to their beliefs. But it does not make it real when the differences in production costs are so enormous.
I hope that my right hon. Friend has read the document produced by the Socialist groups of all the Nine. The Socialist group in the European Parliament is the only one which represents all the nine countries. We have come to an agreed position, though not with much ease. Having been on the working party, I know that the ease was distant most of the time.
First, we see clearly the need to shift the balance of Community funding away from using the end price at a high level as a means of securing agricultural incomes independent and irrespective of the cost problems of the enterprise, towards selective income support for those farmers who, because of geographical, climatic and structural reasons, are disadvantaged. We accept that such farmers need to be assisted for social reasons. However, when we see that the greatest part of the Community funds which go to France or Germany or this country ends up in the pockets of about 20 per cent. of the farming community because of the practice of utilising the price mechanism rather than the income levels of actual farmers, we have a policy which is fundamentally anti-Socialist because it is giving to the rich away from the poor consumer.
Finally, we suggest the possibility of a two-tier form of intervention. I hope that the Minister will consider this. I accept that certain of my right hon. Friends and hon. Friends are not very fond of intervention, full stop. I think privately that we are lumbered with it in Europe but that, if the level of intervention is fixed at the costs of the most favoured producer and income support is granted thereafter for those disadvantaged, there is hope along those broad lines for some reform of agricultural policy.
In discussing milk I must declare an interest, since I am a dairy farmer. I wish to confine myself to a few remarks about milk and the green pound.
I agree very much with the hon. Member for Durham (Mr. Hughes) when he says that the price mechanism in itself is not adequate. As a dairy farmer and as one who is expanding his herd, I know that those remarks are true, and I hope that the Minister will take note of them.
However, I disagree with the hon. Member for Durham when he says this is a matter of the numbers of farmers. That is nonsense. It is a matter of the numbers of cows. We have 2 million too many cows in Europe, and some way must be found to encourage European farmers to keep and maintain fewer cows than they do at present. The introduction of ploughing-up grants would be a sensible idea to try to encourage the switch from milk production to cereal production. We in the Community are net importers of 12 million tons of cereals. Here is an area where we could usefully expand production at the expense of milk production.
I am not happy with the proposals that have come forward from the Commission. The Commission has failed to look seriously at this problem and it relies almost entirely on the price mechanism.
This co-responsibility levy—some people call it a tax—amounts to a price cut to the producer in the first place, and too much emphasis is being placed upon it. We are relying also on a conversion premium and a non-delivery premium which will disrupt the meat market unless we are very careful.
It seems to me that we need a better mechanism for handling milk production in Europe generally. I welcome the Minister's remarks on the Milk Marketing Board. The Board served us well for 40 years, and unless some sort of professional organisation is established in Europe to manage the European milk market we shall always be in a chaotic state.
All we have in Europe at the moment is a milk management committee which consists of a chairman from the Commission and nine people from nine Ministries getting together periodically to deal with milk marketing. They are all civil servants. In Britain we have people who are producers, or who are in the trade, consumers and other sections of the community represented on the Milk Marketing Board, and we should press for a similar organisation in each member country, and for the Commission as a whole, in order to plan and regulate our milk market. Such an arrangement would save us from the tremendous embarrassment that we have at the moment.
Those of us who believe in Europe see nothing but harm coming from the fact that we have 2 million excess cows and excessive milk production. I urge the Minister to press this point of view on his colleagues in the Council.
I believe that the Minister is making a very serious mistake and putting himself in a foolish position in terms of the green pound. He will not be able to hold his position of not moving at all on the green pound; sooner or later he will find that he will not get everything he asks for, and will have to give way.
I cannot understand—neither can any other farmer—how on earth we ever arrived at this untenable position. We must accept what Commissioner Lardinois says, that there must be an automatic phasing out of green currencies. They are an innovation that has proved to be unworkable, and they will do infinite damage to the whole concept of the EEC unless we get rid of them at the earliest possible moment.
I fail to understand, for example, how on earth it can be sensible to readjust the Irish pound by 7·5 per cent. and for the Commission itself to suggest a readjustment of the British pound by 4·5 per cent. What can be the sense in having a difference here? We have enough difficulty in trying to get a common currency. There will be no real Common Market until that is achieved. Yet by this foolish attitude we have taken the opposite step and divided the British and the Irish currencies, which hitherto had always been as one.
Two important agricultural bodies have decided that the Minister is making a very serious mistake. The Agricultural Committee of the NEDC considers that there should be an immediate readjustment of the green pound, and so does the National Union of Agricultural and Allied Workers. The union recognises that there can be no justice for anyone involved in agriculture until there has been a considerable readjustment of the green pound.
It is all very well for the Minister to point out the complications which will arise in certain sectors with feedstuffs going up and so on, but it is wrong of him to try to deceive the country because he knows that British farmers and farm workers are suffering because of this huge disparity in the green pound. He knows that the agriculture community would benefit tremendously from a readjustment. Farmers are paying the full price for their fertilisers, machinery and other inputs, but they are getting a devalued price for their produce. If the Minister has the interests of agriculture at heart he will accept this point and stop flannelling around, pretending that somehow the pluses and minuses equal themselves out.
Let me turn now to the awful situation in which Britain finds itself, not only of accepting charity to the tune of £1·5 million a day but of insisting on having it. As a country, we have decided that we shall be a part of the Community. I believe that the time has come when we should be ashamed of insisting on receiving £500 million a year in the form of food subsidies from our friends abroad.
I shall use whichever words I think fit, whatever the hon. Lady may say. There is no doubt that because of our failure to realign the green pound we are accepting this huge sum of charity from our partners, and the sooner we end that awful situation the better. It is not just a matter of money. We are degrading ourselves—
I congratulate the Minister on his appointment. I regret, however, that the Prime Minister did not see fit to take this opportunity to split up the job into separate Ministers for agriculture and food. I sincerely believe that the British housewife will not be sure of a constant supply of food until we have a Minister who is entirely responsible for food production. If, at a later stage, a British Government, of whatever complexion or character, decided to subsidise the food supply to the housewife, it is important that that should be a decision of a Minister of food. It is important that the two jobs be split.
I pay tribute to the work of the Minister's predecessor. In Lord Peart this country had a fearless and proud Minister, who was very popular with the agriculture industry and who did an excellent job for it. During his tenure of office he had a particularly difficult job, in that he started with a system by which Britain was able to buy food from all over the world in cheap lots wherever it could be found and by a system of deficiency payments could make up to the British farmer the difference between the world costs and his costs of production. Lord Peart, like myself, was most reluctant to give up that system when we landed in the Common Market. He was particularly reluctant to change from a system of deficiency payments to the system of intervention buying.
Now that we have removed the umbrella by which we managed to protect the housewife's purse, we are in a very different ball game. I believe that the present Minister has an easier role to hold than his predecessor had. Although the path may yet be stony, it is much straighter than it was previously.
The present Minister must now buy dear food with a weak pound. The sooner he gets that changed, the better. He has two methods of doing that. He can strengthen the real pound or raise the production of food from home resources. I believe that in his capacity as Minister of Food, it is the second thing that he must do.
It is absolutely vital that we get greater production from our own resources. Steps must be taken to encourage food production. Many methods have been mentioned in the debate, I do not wish to repeat them. However, I speak as a dairy farmer, as did the hon. Member for Norfolk, North (Mr. Howell). We resent strongly having to produce milk at European costs of production and sell it at the present unrealistic prices. There is at present a disparity of 38 per cent. between the value of the green pound and the value of the real pound. The British dairy farmer is being penalised by having to sell at British prices while having to produce at European costs.
Let us consider our position vis-à-vis the German dairy farmer. Because of the tremendous strength of the deutschemark, the German dairy farmer is now getting, in real terms, 45 per cent. more for his milk than is the British producer. That is why I said earlier, in an intervention, that it is absolutely essential that the Minister makes an early start in narrowing this gap.
I do not wish to put extra strain on the housewife's purchasing power too quickly. However, if the Minister would adopt the suggestion that I gave to him —I do not sell him the idea; I give it to him—that we should revalue by 1 per cent. a month from now on, we could gradually narrow the difference. The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) maintains that we should be going for 5 per cent. per quarter, but that is too drastic. It is important that we should go for 1 per cent. per month.
I have always thought it a great tragedy in present day life that so many boys and young men are brought up in cities. They do not learn the basic lessons that we who have had the advantage of being raised in the country learn automatically. I can remember, as a small boy, playing with dams in streams. On lesson that I learned at a very early age was that the moment one dams up something totally, something has to go. The water would build up and up, and then the dam blew out in one's face. However, if one let out just a little water all the time, one could hold the dam indefinitely.
Now the Minister wants to hold down the price of food to the housewife. If he would let the water out of the dam gradually, by a gradual reduction in the difference, he would help to hold down the price to the housewife.
We all know, especially those of us who live in Scotland, that the Minister hopes against hope that the British pound will strengthen. The right hon. Gentleman is looking blindly to the day when the vast volume of oil from Scotland's resources will strengthen the British pound. It is hoped that it will rise again and that the disparity between the green pound and the real pound will be reduced. I believe that that will happen because of the oil, but it seems a tragedy that we have to use a once-and-for-all resource to do the job—a resource that cannot be renewed. It would be far better if we could strengthen the British pound by cutting down the cost of food imports. I believe that that is the right hon. Gentleman's real task in the months and years to come.
I congratulate the Minister on the excellent start that he made this morning but I fear for his fantastic optimism, as did the hon. Member for Norfolk, North. I think that in the weeks to come we shall hear the Minister telling us "That is the way I wanted it, but it just did not happen that way". I congratulate the right hon. Gentleman on his optimism, but I doubt very much whether it will continue indefinitely.
I now turn to the sheepmeat regime. Again, I congratulate the Minister on his determination to see that the French market opens to the British producer and stays open. The open-and-shut policy has been terribly damaging to the market. We British sheep farmers are efficient producers of sheepmeat and we have no wish to receive the artificially high prices that the French insist on paying to their producers. The British sheep-meat producers can produce lamb at 55p a pound, not at the French price of 80p, 85p or 90p.
If we are looking for parity in the so-called Common Market, let us have the French market opened to our lamb at realistic prices from now on. I urge the Minister to force his European partners —perhaps "persuade" is the right word —to keep the French market open at all times. It is no use expecting the British producer to produce lamb for the French market at certain times of the year and to close the market to him at other times. It is important that the French market is kept open at all times of the year. The British market for foodstuffs—I think particularly of poultry meat—is open to the French producer at all times.
The Minister has a hard task ahead of him and I congratulate him for the start that he has made today. I trust that he will use the determination that he has shown in his dealings with our so-called partners, who are to my mind our opponents, in the Common Market.
I hope that the Minister who replies will tell us what the Government want of the British milk producers. Do they want them to produce the maximum or the minimum amount of milk? Whichever is the answer, the producers have a right to know. I believe that we need the maximum amount, because we do not have the spare currency to go across the exchanges to import milk and milk products that we can produce at home.
Secondly, the ADAS, the Minister's own agricultural advisory service, is advising a degree of concentrate feeding that absorbs at least the total return that the milk producer now obtains, thereby leaving nothing for the overheads of the business such as labour costs, electricity or the depreciation of equipment. The ADAS says that it is concerned to give good technical advice about maintaining animals in proper condition. If the producer is not given the price for his milk that enables that to be done, that is a political matter and not a matter for the ADAS.
The Minister claims that he does not like artificial incompatibilities. I suggest that he must come clean on this one. He must say to the ADAS "Do not advise people to go bankrupt" or "We are prepared to accept that animals should be fed with a degree of concentrates which results in low milk production so that the business will remain viable." The right hon. Gentleman has no right to have one branch of his Ministry giving advice that will result in insolvency and another branch fixing a return to the producer that will result in insolvency if the advice of the ADAS is taken.
I am not saying which answer the Minister should give. I know in my own mind which answer he should give. All I am saying is that he must give an answer. The right hon. Gentleman must not dodge that question. In that context, the effect of the drought means that there will have to be far higher substitution anyway for the roughage which is not there. That means high cost production.
Many hon. Members on both sides of the House have pointed out that the EEC is trying to resolve things which are fundamentally incompatible. If, for social and political reasons, it is deemed necessary to keep a large number of extravagantly high-cost producers in business in EEC countries and yet we do not want that to result in over-production, the only way to resolve those difficulties is by a quota system. We must come out of a fiscal market incentive system entirely and say "We will pay high incomes unrelated to the economic value of what is being produced because politically we want to keep you doing what you are doing now, but we will limit your output by quota."
Unless the reality of this situation is grasped, no policy can be successful, because a policy which is trying to do two irreconcilable things can never be successful. By definition, it is an impossibility. It is only by facing that impossibility that we shall choose the only way out.
Lastly, will the Minister remember that one factor which is limiting our exports, particularly of sheepmeat, is the availability of licences for vehicles in which it can be transported? Lloyd Maunder Ltd. in my constituency, a smaller meat packer than North Devon Meat referred to by my hon. Friend the Member for Devon, West (Mr. Mills), has had to postpone shipments abroad because there is no one to carry the meat. The Ministry reacted very quickly when I drew this matter to its attention, but its hands were tied by the maximum number of licences which it was able to issue.
I am deliberately resuming my seat now so that my hon. Friend the Member for Banbury (Mr. Marten) may speak, however briefly.
I am obliged to you, Mr. Deputy Speaker, and to my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) for this opportunity to take part in the debate. I shall endeavour to complete my remarks in two minutes.
I have much to say. I must congratulate the Minister, and I do so in shorthand form. I hope that he will remain firm when he goes to Brussels and will not fall under the influence of what has been called the coffee and cognac. My message to him is to stand firm.
There were many matters about which I wished to speak. I particularly wish to comment on Article 6 of the sheep-meat proposal because of the possible effect on New Zealand. If that safeguard clause is ever invoked, it will do irreparable damage to the New Zealand sheep market, which is already suffering as a result of the Common Market. The dairy market in New Zealand is also suffering because of the Common Market, and if we are not careful we shall destroy a valuable contributor to world food production.
The only way that we can get the situation put right, and this came out in the debate in a variety of ways, sometimes without actually being said, is to move more towards the system which we used to have—I thought this was the burden of what was said by my hon. Friend the Member for Tiverton—a quota system backed by deficiency payments. I believe that the more the Minister lives this problem of the mad CAP, the more he will come round to believing that it is not the proper system for a country like ours, which has to import 50 per cent. of its food.
I do not have time to quote the Consumers Association, but if one reads its report one sees that in world markets the price of many of the main items of food is substantially lower than in the Common Market. That must mean that there is a surplus to buy. Economics show that that is what it means. My right hon. Friend talks about security of food supplies because we are in the Common Market, but surely it is true that in outside markets or away from the CAP we would have far more secure supplies. That must be so if one considers the prices and figures.
I am grateful for having been called to speak in the debate, and I apologise for overunning my time by one minute.
My first task must be to join hon. Members on both sides of the House who have congratulated the right hon. Gentleman on his maiden appearance at the Dispatch Box, dealing with this subject. It is nice to see him dealing with a subject of which he had considerable previous knowledge.
The right hon. Gentleman has taken over at an awkward time, and the debate today has underlined the problems facing him. The agriculture industry is looking to the Minister to show it the way in which he and his Government want it to go. Do the Government mean what they say about increasing home-produced food supplies? To make up the gap, is that what the Government want? If they do, will they provide the industry with the means to do it?
Various contributions have been made to the debate. My hon. Friends mentioned the tax to be imposed, and so on. I shall not go over all those matters again, because the right hon. Gentleman has been courteous enough to listen to all the speeches. There are problems, and I hope that as soon as the right hon. Gentleman has had time to absorb the atmosphere of his Ministry he will give a clear lead to the industry about where it should be going.
The same comment applies to the right hon. Gentleman's consumer responsibilities. I am a little worried that the right hon. Gentleman said that the consumer interest was of overriding importance, and that doing nothing to put up the cost of living in any way was of supreme importance. I can understand the importance of that to the Government's policies. Heaven knows that their policies have got into enough of a mess in other respects and that we are suffering grievously from them. Nevertheless, the right hon. Gentleman must bear in mind his responsibilities towards farmers and those who depend on them—farm workers and a mass of other industries dependent on the agriculture industry.
There is a third element with which the right hon. Gentleman will have to deal, and that is represented by our partners in the EEC. It is my belief that the Government's credit—not the right hon. Gentleman's—has very nearly run out in Europe. The right hon. Gentleman spoke about holding firm on the various issues with which we are dealing in these documents. He said that he would stand firm on most of the proposals, note others, and give deep study to some. He is not prepared to support anything except one or two of the smaller measures.
Our partners in Europe think that something has to be done about the main issues, and the right hon. Gentleman will find little acceptance of an attitude of mind that is completely negative. He knows that the Opposition are on the side of this country. Unhappily, the Minister's right hon. and hon. Friends have squandered nearly all the credit that we had in the Community, and the help that it has given and was willing to give has virtually gone out of the window.
I am sorry, but I have very little time, and I am sure that the right hon. Gentleman wants to hear the Government's reply to the debate.
I wish the Minister good fortune in his forthcoming negotiations. I understand his feelings about them.
There are three main issues. On the EEC proposal concerning vegetable oils, the Conservative Members in the European Parliament and on the European committee have expressed themselves as being completely against those proposals, on all fours with Labour Members. We are in agreement with the Minister when he says that he finds the proposal completely unacceptable. That must be so.
The right hon. Gentleman is right to be cautious about the Commission's proposals concerning the non-marketing of milk. I do not go as far as he went in saying that the cut-off is necessarily too high. It is right that it should come down a little, but we all know that the problem is not too many farmers but too many cows. We have to get out of production 1½ million cows in the area where they are least profitable. The Commission's proposal is a method of helping to do that. It will not go the whole way, but it will help. I hope that the right hon. Gentleman will not be too obstructive in relation to that proposal, because it is a start in the right direction.
Changes have been made in the Commission's proposals. As the right hon. Gentleman will see from documents that will come before him, the proposal for the sale of milk machinery within a certain period has gone out of the window. The Commission is not insisting that a farmer who gives up dairy farming should go either into beef or veal farming. The Commission has accepted what the European committee suggested and is prepared to leave it completely wide open. If farmers want to go into cereal production and Government help is forthcoming to help them to do so, that would be much better, because it is easier to deal with a surplus of cereals than with a surplus of milk or animal products. I hope that the right hon. Gentleman will do all he can to encourage a shift in that direction, which would have the effect of improving the structure of the agriculture industry within the European Community outside the United Kingdom.
I hope that the Minister will be more positive on the school milk proposal. It cannot be against the interests of the United Kingdom and would foster the consumption of a small amount of extra liquid milk. The more liquid milk that can be drunk in Europe, the better. Other European countries have a long way to go before they catch up with our consumption of liquid milk.
My right hon. Friend the Member for Cambridgeshire (Mr. Pym) was right in saying that the proposal for suspending national subsidies to the milk sector would be a retrograde step. Any grant or subsidy proposed to help expansion in the dairy or milk sector should be resisted, and the Commission should be supported in that, but we should be allowed to continue to give grants towards the improvement or modernisation of existing plant, be it at processing level or at farm gate level.
There is no disagreement about the brucellosis and tuberculosis proposals. I am sure the right hon. Gentleman will not find any problem in agreeing with his colleagues on that measure.
I turn to the most difficult proposal, that of the levy of 2 per cent. on expanding markets, which the Commission proposes should start in April. It is difficult to find out why Labour Members are opposed to this in principle. Where there is over-production it is the producers who have at some stage to pay the price of not matching production to the demands of the market. Of course we want an even balance, but that is one of the most difficult things to achieve. Co-responsibility, in principle, is surely something that we can accept. The timing of it, however, is appalling.
We have a drought situation, which has done an enormous amount of damage to the industry. It is difficult to bring in some kind of levy at this point, but there is no doubt that there is too much milk in Europe. There are 1½ million too many cows. Something has to be done to bring home to producers throughout the Community what that means. I am sad that we have not put forward different proposals for dealing with this.
This subject was vaguely touched by the hon. Member for Durham (Mr. Hughes) when he said that there were alternative methods. I would have hoped that we could have a much more flexible method of intervention price, based on a seasonal scale that is much more adjustable, whereby it would not be worth while increasing production to go straight into intervention. This is what has be-devilled the milk scheme. It has been profitable to produce milk and send it straight into intervention.
The Minister said that he wanted to lower the end price of milk. Did he mean the end price to the farmer? If so that would be disastrous for the dairy industry. I think that he meant lowering the price to the consumer. That means that he will have to do something between the two. Farming costs are rising. If there are these rising costs and the farmers' end price is to be cut—unless the middle man can be squeezed to the extent of absorbing everything—the only answer is a subsidy in some form or other. The best way of dealing with this situation is by having a seasonal scale of intervention, with the levy fixed just above that which is possible for the modern farm without its going bankrupt.
I am delighted that my hon. Friend the Member for Devon, West (Mr. Mills) and the hon. Member for Banff (Mr. Watt) welcomed the sheepmeat proposals. I hope that the Minister will be a little more enthusiastic about them. This is opening up the French market, over a period of time, to exports from this country and Ireland. We have a great market to attack there. I do not agree with the right hon. Gentleman when he says that because we shall be diverting a certain amount of our production into France it will inevitably mean a rise in prices for our housewives. That is not necessarily so. If we look at seasonal scale fluctuations we see that there is enormous spare capacity, which we can quickly build up and send to France.
I come now to the green pound. We are discussing the wrong issue, really, because the Commission has put forward a new document, a copy of which I have in the English translation. There are two points in it. The first is that there is to be a ceiling on the amount of MCAs in 1978. It also suggests a system of automatic adjustment every six months.
Everybody in the House—apart from the hon. Member for Durham and the right hon. Member for Battersea, North (Mr. Jay)—agrees that the existing level of differential of 38 per cent. or 39 per cent. is ridiculous. It imposes a dreadful burden on our farmers. My hon. Friend the Member for Buckingham (Mr. Benyon) gave an example of what happened to a processing factory in his constituency, and my hon. Friend the Member for Devon, West also gave examples.
At present the pig industry is suffering a great deal, in terms not only of bacon production but of the whole industry. There is no time for further delay. The Minister must do something about the situation. Much as I like the Minister's suggestion in regard to basing the system on the cereal price in terms of the MCA, I believe that he will find difficulty in obtaining acceptance of that proposal. The Minister's credit is almost exhausted in the Council, but if he can try to get the figures down on that one product I would support him.
I hope that the Minister will be able to achieve some results, but I believe that the Commission may well say "No" and that it will require a special overall reduction, with special mechanisms. I wish the Minister luck in his negotiations, and I hope that we do not have to pay too high a price. However, he must carry out his ministerial responsibilities and seek to bring the figure down, so as to maintain a healthy agriculture industry in this country.
The House will agree that we have had a full and interesting debate and that this has been a unique occasion. In practice, we have conducted a major debate on some of the central questions arising from the common agricultural policy—a debate which many hon. Members believed was long overdue, because so many earlier debates on these topics have taken place very late at night or in the early hours in the morning.
The House has heard the views of my right hon. Friend the Minister, and he and his ministerial colleagues have had the benefit of hearing the views of hon. Members. We have had the opportunity to examine in detail some of the most important areas which illustrate different aspects of the CAP and of the problems which it presents both for ourselves and for other Community Governments. It has been extremely useful to have heard the views of the House, and I know that my right hon. Friend will bear them in mind when he goes to Luxembourg next week.
The right hon. Member for Cambridgeshire (Mr. Pym), in opening the debate for the Opposition, conducted a comprehensive review of the current situation. He said that uncertainty was the enemy of progress and he thought that we should seek to fit agriculture into its proper context both nationally and in the EEC.
The right hon. Gentleman stressed that inflation was being dealt with but pointed out that the problem in the United Kingdom was larger than that which faces our partners and competitors. That has been answered in part by our support of the green pound and, indeed, in other ways. The right hon. Gentleman emphasised that the position of sterling affects our imports of food, which of course are considerable. We appreciate that factor because the main theme of our policy in the White Paper lies in producing more of our own food to help our balance of payments and in other ways.
My right hon. Friend the Minister stressed the fact that the consumer matters most and that we must bear that factor in mind when considering our food production. At the same time, we appreciate that we cannot have the food we need unless the producer obtains a fair return. Therefore, in talking of the consumer as one party, we must also have in mind the needs of the producer and think of the incentives that are needed to help him produce his commodity. At the same time, prices must be reasonable.
The right hon. Member for Cambridge-shire asked for more flexibility on the subject of the green pound. I believe that my right hon. Friend's predecessor in office was sensitive to the needs of all concerned, because in the last two years there have been four changes in the green pound. The right hon. Gentleman should know that we inherited the green pound system when we became members of the Community. I wonder why we should throw this facility out of the window and keep some of the obvious disadvantages of Community membership.
The right hon. Gentleman talked about a long-term price for a short-term gain, but that puts the matter too simply because the need is to judge the time for change, and that is the basis of our policy on the green pound.
The right hon. Gentleman asked about the attitude of other EEC members to the recent package. He said that they had got part of what they wanted, whereas we had got all that we wanted. That puts the matter much too simply. As my right hon. Friend said, it is not a matter of black or white, or indeed of green or white. The overriding aspect which some fellow members of the Community appreciate most is the knowledge that our economic and financial strength and the strength of other members of the Community are very important. It does not help any members of the Community or the Community as a whole if any member country is weak in this respect.
We have shown signs of beating inflation, or at least of restricting the rise in inflation. It is the Government's aim to prevent sudden, dramatic and substantial rises in the cost of living, and that is right. Every week, Opposition Members attack us for price rises. Yet they are the ones who suggest policies that would increase the cost of living. They are the ones who have been talking about sweeping away food subsidies. They are the ones who talk about dramatic rises in the green pound which would have that effect. They would not only increase the cost of living but would destroy the good will which is the basis of our voluntary restraint policies. These are important facts, and if the Opposition do not recognise them I am sure that members of the Community do.
The right hon. Member for Cambridge-shire referred to my right hon. Friend's aim to deal with the problem of the pig industry through an adjustment of the MCA and not through the green pound. When my right hon. Friend asked the right hon. Gentleman where he stood on this issue because it would help Britain if we could say that there was unanimity on it, the right hon. Gentleman refused to come clean and to say where he stood, although the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) has dealt with the point in the last few minutes.
Is the hon. Gentleman suggesting that I was not clear in what I said about the adjustment which should be sought in the pig sector? If so, it is a gross misunderstanding. I have been urging for months that there should be an adjustment to ease the disadvantaged position of the pig producers. I said that the Minister was trying to achieve it but that he had not yet achieved it.
My right hon. Friend had in mind the cereal aspect of the matter. We should assure the Community that we are united on this subject. I apologise if I did the right hon. Gentleman an injustice, but it is important that we should know where he stands.
I recognise the problems of the hon. Member for Howden (Sir P. Bryan) and others. We recognise that the United Kingdom pig producing industry is facing problems, not least of which is the competition from the Continent arising from the current high levels of compensatory payments. My right hon. Friend's predecessor put forward at Brussels proposals for changes in the method of calculation of the MCAs. However, pressure of other business prevented substantive discussion of it at the recent Council meeting, and we have asked for it to be placed on the agenda for next week's Council meeting in Luxembourg. I cannot prejudge the attitude of other members on this matter.
I have dealt with some of the main points which have been raised by hon. Members. It is important to look at these proposals against the wider background of our own economic and agricultural policy and our intention to get further improvements in the CAP. The Government have important interests to balance. Our primary, indeed overriding, aim must be to safeguard our own economic recovery. I believe that this is well understood by the other member Governments of the Community. They recognise that it is in the general interest for the United Kingdom economy to be stronger, and we have their full support in the measures we are taking. In particular, there is the need to control inflation and to avoid any unnecessary increases in the price of basic foodstuffs.
In addition to these immediate priorities, we have the need to seek further improvements in the CAP. This must be a continuing business, and it is not possible to offer precise methods of making improvements. Hon. Members sometimes talk of this as though we should have a detailed set of objectives—a shopping list. This seems to me to be un-realistic. Our central aim is to seek changes in the CAP in order to secure a better use of resources.
The measures on milk which we have discussed today represent a recognition by the Community of the need to deal with surpluses, and though, as my right hon. Friend has explained, we see certain difficulties, they are a step in the right direction. Although the long-term answer is to restrain prices, some of these measures could have a part to play in dealing with the immediate problem.
The House has for many months asked for policies to deal with surpluses. We must ensure adequate production from the countries which are the most efficient producers, because shortages also have their price as well.
A further important strand is the prosperity of our own farming industry and the achievement of the expansion programme described in "Food from Our Own Resources". Hon. Members will see from the White Paper that in 1973 the average size of the dairy herd was higher here than in any other part of the EEC, and that the annual yield per cow was second only to that of the Netherlands. At the same time, the United Kingdom was only 60 per cent. self-sufficient in milk and milk products in that year, while the Netherlands and West Germany, for example, were more than self-sufficient.
We believe that it is the efficient producers—not only those in this country—who should have the opportunity to provide the milk and milk products we need if we are to overcome some of the problems we face. My right hon. Friend will bear that particular aspect in mind in the forthcoming days.
I hope that the House will recognise from what has been said that there is no conflict between our attitude to the measures we have discussed today and the Government's wider economic policies. Our agriculture industry exists to feed the consumer. Indeed, we all have a consuming interest in food and food production, and the agriculture industry has a vital role to play in the saving of imports. To expand production here of commodities such as milk and sheepmeat, in which we have some comparative advantage, is fully consistent with our objective to seek a more efficient common agricultural policy.
Those of us who have travelled abroad realise that the whole world knows of the advanced research and the scientific and technical basis of our agriculture, and other countries want their industries to be efficient as well. British agricultural productivity stands comparison with that of any other member of the EEC, and it is a sign of our competitiveness, both within the EEC and outside it, that British agriculture, with less than 3 per cent. of the working population, provides more than half the food we need. At the same time, last year it had a substantial export record. One wishes that other British industries had such a good record of productivity of which we can be very proud.
In this context, it is our aim to ensure that Britain produces more food from our own resources, thus helping the balance of payments position, reducing imports and expanding exports. In discussing these or any other proposals which come before the Community, my right hon. Friend will bear all these points in mind, and I am sure that he will have the support of the House.