Orders of the Day — European Community (Skimmed Milk)

– in the House of Commons at 12:00 am on 31st January 1977.

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9.59 p.m.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I beg to move, That this House takes note of Commission Document No. R/70/77 on Skimmed Milk and Skimmed Milk Products.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

I have selected the amendment in the name of the hon. Member for Renfrewshire, West (Mr. Buchan), at end add: 'but regrets that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and arges the need to take further steps to avoid the creation of structural surpluses'.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I should like first of all to express our appreciation of the efforts of the Scrutiny Committee, which has once again brought an important proposal from the Commission of the EEC to our notice as needing further consideration by the House.

The subject of our debate tonight is EEC Document No. R/70/77 on the granting of aid for skimmed milk and skimmed milk powder used in animal feed. This is a draft Council regulation which would amend the basic regulation relating to skimmed milk and powder in various ways. It is still being considered by officials and technical experts in Council working groups and will come before the Council of Ministers in due course, possibly next month. It is, therefore, extremely useful to hear the views of the House in good time before decisions are taken on this matter. At this stage I should say that I accept the amendment in the name of my hon. Friend the Member for Renfrewshire, West (Mr. Buchanan).

Hon. Members will readily appreciate that we are dealing here with a technical subject but also one that has interested the House a great deal in recent months. It may, therefore, be convenient if I first explain some of the background to this measure and relate it to other skimmed milk powder schemes before going on to consider the Commission's proposal itself. One needs to keep this in perspective.

General rules for granting aid for skimmed milk and skimmed milk powder used in animal feed were laid down as long ago as 1968. Since then skimmed milk powder has been subsidised, but despite this there was a rapid build up in stocks of intervention powder in 1975. This led to the adoption early last year of the compulsory incorporation scheme, a measure which none of us liked and which, the House will be pleased to know, is now being wound up—indeed, the compulsory deposits charged on proteins came to an end last October. Although substantial quantities of powder—about 390,000 tonnes—have been denatured and used in feeds under the compulsory scheme, Community stocks still amounted to over one million tonnes at the end of last year. Last November we had the Commission's proposal—which we debated in the House on 17th December—to write down by 30 per cent. the value of old stocks, in recognition of the fact that they could not hope to command the same price as younger stocks and would probably have to be sold for animal feed.

Stocks are still very large. At present they total 1,048,000 tonnes. There is little or no chance of being able to dispose of this in the normal markets for human consumption and calf feed. They far exceed what it is practicable to distribute as food aid. The only new and substantial markets now remaining are for pig and poultry feed. Unless the Community tries to compel compounders to use it—and I know that the House would not want a repetition of that—its price must be brought down to that of competing proteins, such as soya meal and fish meal. Compounders can then decide whether to use it, in preference to other proteins, on a voluntary basis.

The Commission has, therefore, come forward with two parallel measures. First, it has proposed a scheme under which powder held in intervention stores can be subsidised down to the price of competing proteins. The Commission already has powers to do this under Regulation 1285/70 of the Council, and this proposal is now being considered in Commission working groups and in consultation with the technical experts.

Secondly, the Commission has come forward with the proposal which is the subject of our debate tonight. This proposal would have the effect of diverting greater quantities of liquid skim and fresh powder into pig and poultry feed, and would avoid seeing these products being sold first into intervention before being used later for animal feed. The new proposals deal with a highly technical subject, and while I shall describe the main features of the arrangements I shall avoid going too far into the technicalities.

As I have indicated, R/70/77 would amend the basic regulation relating to the subsidising of skimmed milk and skimmed milk powder—Council Regulation 986/68. This regulation defines the products, the conditions for the granting of subsidy and the factors to be taken into account in deciding the bracket within which actual rates of subsidy are to be fixed. The precise level of subsidy is fixed each year, after the Community price review, within the bracket decided by the Council.

The proposals that we are now discussing would amend those basic arrangements in the following ways. First, provision would be made to subsidise concentrated or what might be termed semidried liquid skim, a product which is not covered by the existing arrangements. Secondly, the proposals would provide for the payment of higher rates of aid on liquid skim fed to pigs under a contract of supply, and also on liquid skim and skimmed milk powder used in pig and poultry feeds. These rates of subsidy would be higher compared with rates of subsidy normally paid on skimmed milk and powder used, for example, in calf feeds.

Thirdly, the proposals would allow the Commission to maintain, beyond the end of the current milk marketing year, a minimum incorporation rate of skimmed powder in calf feeding stuffs as a condition of the granting of subsidy. Finally, they would allow the Commission to set a maximum moisture content for skimmed milk powder subsidised for animal feed.

The central objective of the proposals is to increase the use of skimmed milk and skimmed milk powder. The sub-sidising of concentrated liquid skim would enable savings to be made in the cost of transport; and the inclusion in the subsidy provisions of liquid skim, sold direct from creameries to pig farmers under a contract of supply, would save the cost of drying. Both these measures are designed to reduce the quantity of skimmed milk which is turned into milk powder and subsequently offered into intervention stores.

In the case of milk powder itself, by continuing minimum rates for incorporation of skimmed powder in calf feeds the intention is to sustain the higher level of usage which has occurred this year. The aid for skimmed powder fed to pigs and poultry would be paid on fresh powder, and this would enable our own pig and poultry farmers to make use of our own domestically-produced powder. These arrangements will also help to keep down intervention stocks by increasing the amount of new production which goes straight into the animal feed market.

The cost to Community funds of these schemes will depend on the level of uptake and the exact rates of subsidy which are fixed. However, the Commission has estimated, based on an annual Community usage of 3 million tonnes of liquid skim and 150,000 tonnes of skimmed milk powder, that the cost would be some 235 million units of account in 1977 and 285 million units of account in each of the three succeeding years. We should be expected to make our contribution to this cost, but this should be balanced in large measure by our receipts—namely, the subsidies on our own milk powder—and by lower imports of other protein feeds. This naturally follows.

Let me now deal with our attitude to the proposals. Against the back-ground of the very large stocks of skimmed milk powder in the Community and the general surplus in the milk sector, steps had to be taken to increase consumption of these products in animal feeds to prevent their simply being added to the stockpile. It would have been preferable had the surplus problem been dealt with some years ago, but the surplus now exists and steps must be taken to deal with it. In view of that factor, the measures that we are debating tonight are reasonable.

Photo of Mr Douglas Jay Mr Douglas Jay , Wandsworth Battersea North

Will my hon. Friend make clear that no pig or poultry producer will be compelled in any way to use this skimmed milk powder but may do so if he wishes, in which case he gets the subsidy?

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

Yes. That is an important point. The element of compulsion which was a feature of the previous scheme is not included in this scheme.

The measures will help to prevent the build-up of stocks and will also enable the products to be made available to users within the Community itself. Also, the scheme avoids the element of compulsion, which was such an objectionable feature of the scheme which is now in process of being wound up.

I come now to the amendment which appears on the Order Paper in the name of my hon. Friend the Member for Renfrewshire, West. The Government readily accept the amendment. We fully share my hon. Friend's view of the circumstances which have given rise to this measure. We wish to see an end to the continued creation of unwanted and costly surpluses. That is why we shall continue to support sensible moves designed to bring the Community milk market into better balance. These do not, as my right hon. Friend explained fully in the October debate on the Commission's action programme, include such measures as taxes on vegetable oils or total bans on investment aids to dairy farmers. They do, however, include the need for effective action to contain the level of milk prices in the Community.

I emphasise the point that I have made on other occasions: that the Government believe that the job of the Community is to ensure that milk and other commodities are produced by those who are most efficient in their production, and that those producers should be encouraged while the less efficient should be discouraged.

With those comments, I recommend the House to accept the amendment.

10.12 p.m.

Photo of Mr James Scott-Hopkins Mr James Scott-Hopkins , West Derbyshire

It is always rather depressing to come back to a subject which has been debated on more than one occasion—in fact, many times—and to hear from the Minister that the situation is almost as bad now as when we first debated it. The skimmed milk mountain is still there, and it does not appear that much is being done to dispose of it. The scheme for the compulsory inclusion of skimmed milk in compound feeds disposed of a certain amount—450,000 tons. Nevertheless the quantity has increased, and even the writing-down by 30 per cent. of old stocks has not had the effect of reducing stocks greatly.

There is no doubt that the scheme that we are now debating, although it will increase the attractiveness of using skimmed milk in liquid or dried form, will not reduce the existing stocks that are now multiplying within the Community. Drastic action must be taken to dispose of the existing stocks, which in present circumstances cannot be put on the world market because there are no buyers. Even with a 30 per cent. write-down, they are unattractive and are unwanted. Surely the best thing we could do would be to write the stock off and dump it, figuratively speaking, in the sea or dispose of it by any means. The stock will go on increasing unless strict measures are taken. This enormous amount of dried milk, particularly the older stock, has a depressing effect on the market.

The reason for the ever-increasing level, as I was glad to hear the Minister say, is that there are many farmers in Europe, but not in this country, who are producing milk but should not be doing so because they are inefficient producers. It is about time that the Council took action on this. I have had the honour of serving in the European Parliament, and I know that many proposals have been put to the Commission for dealing with uneconomic milk producers, yet the Council has always shied away from taking the required action.

I hope that following the Minister's remarks only the most efficient producers will be encouraged to produce milk and that the inefficient and uneconomic producers will be discouraged. If it was made no longer worthwhile for an inefficient producer to produce purely for the intervention price, that would be one way of getting on top of the situation.

Of course, it is true that this is a voluntary measure and that there will be no compulsion upon pig or poultry producers or upon anybody else to use liquid or dried skimmed milk in their compounds. It is an effort by the Commission to make it more attractive and put it on an equal footing with soya and other protein feeds as an equally attractive additive to compounds. I am pleased that the proposal advocates something for which we have been pressing for some time—to make it easier for liquid skimmed milk to be supplied direct to the pig farmer. In this case there is no need for energy to be used to dry the milk, and if it is attractive to pig farmers to have liquid milk delivered direct at reasonable cost this must be done.

It seems that one can obtain this liquid skim only on contract, and it is difficult but vital to get a contract. I hope that the Minister will explain what the terms of the contracts will be, for how long they will last and what difficulties pig producers are likely to face in getting skimmed milk direct from the suppliers on contract.

The level of the subsidy and its cost are a reasonably good bargain for us, bearing in mind the total subsidy proposed by the Commission and the fact that there will be a clawback for us.

I hope that my hon. Friends will agree that the proposals are acceptable. They will not have a revolutionary effect on the unhappy state of the skimmed milk market. Something drastic must be done to get rid of excess old stocks. They must be disposed of at almost any cost because they are hanging over the market. Measures must be taken to stop the increasing size of the skimmed milk mountain, and this means removing the incentive for inefficient farmers to continue producing milk at their present level for intervention. There must also be subsidies to encourage farmers and compounders to use increased supplies of skimmed milk as opposed to other compounds such as soya.

I hope that the House will accept the proposals, which will go a small way to keep the level of skimmed milk, both liquid and dried, under control throughout the Community.

10.18 p.m.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

I beg to move, at the end of the Question, to add: 'but regrets that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and urges the need to take further steps to avoid the creation of structural surpluses'. A number of hon. Members will share my view that there is a feeling of déjàvu in these discussions. There used to be a tendency to say "We are all Socialists now." Now it seem that "We are all anti-Community now." The arguments of the original opponents of the common agricultural policy are now being adduced with great solemnity by both Front Benches.

I welcome the hardening of the criticism of the policy, both implicit and explicit, here and in Brussels, and in particular by our agriculture spokesman in Brussels. By no means the least reason for the amendment is to strengthen the hand of our negotiators in Brussels. Here is a good example of some of the rarer lunacies of the common agricultural policy.

The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) said that the problem was how to cope with supplies. That is not the problem. The problem is how to get some sanity into what is, even after these measures—indeed, I shall show that they exacerbate the situation—the continual creation of structural surpluses.

The hon. Gentleman, in a curious gospel of despair, suggested that we should parcel up the whole of the surplus and dump it in the sea as a means of getting rid of it. We, who were accused of exaggerating the lunacies of the CAP, are now being told that a possible solution is to drop this surplus in the sea.

I grew up in the 1930s. I remember talk about the destruction of food and so on because of the inability of the world to organise its supplies and purchases. Yet we are writing that into an institution to which this House has given its imprimatur. I do not know whether that is official Conservative policy. I hope that it is not. No doubt we shall hear more of that before the day is out.

We welcome the dropping of compulsion. The policy was "We think that this is nonsense. We know that you can find better and cheaper food additives, such as soya and other imported proteins, which it would be sane to use, but we shall compel you to use a proportion of the surplus skimmed milk powder because we have not worked out a means of using it." At least that aspect has been dropped. Welcome as the proposals are in so far as they drop the element of compulsion and recognise the lunacy of the continual surplus—the 1 million tons—they can hardly be said to be a great step forward in dealing with the major problem. Indeed, they may exacerbate it.

Looking at the documents relating to this matter, one sees that the Explanatory Memorandum points out that we shall permit the payment of higher rates of aid than at present permitted under the Regulation on liquid skim fed to pigs under a contract of supply". If there are to be higher rates of aid, two things will happen. First, it will cost us more in running the market. Secondly, far from being a disincentive, it must inevitably act as an incentive to the creation of structural surpluses. Therefore, the last phrase in our amendment is absolutely necessary. We require to take steps to prevent such surpluses building up.

This proposal will undoubtedly dispose of some of the mountain, because farmers will be highly paid to use it, but it appears to be an inducement to create even further surpluses in future. We have not grappled with that problem. It is that problem and this analysis of it that we want the House to endorse tonight.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

Did not the hon. Gentleman listen to the speech made by my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins)? My hon. Friend said that Europe must provide a disincentive for the smaller uneconomic dairy farmer and that that person should be encouraged to go out of business. Is not that the way to produce the situation that the hon. Gentleman is trying to achieve?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

Yes. That is what we have been arguing about for a very long time—before we entered the Market, while we were in the process of being dragged in, and ever since. I welcome that kind of statement. It is rather better than the suggestion of creating surpluses and dumping them in the sea. To that extent I welcome it.

The regulation states: Whereas there are large intervention stocks of skimmed milk powder in the Community; whereas, because of the high costs resulting from prolonged public storage, it is necessary to take special measures to facilitate the use of surplus skimmed milk for purposes other than the manufacture of skimmed milk powder", it is intended to give a grant for the maximum use of liquid skimmed milk as feed". That of itself is not designed to avoid the creation of surpluses. It is not to avoid the high cost which has been resulting from prolonged storage. That is the first argument for dealing with the existing mountain that is being expensively and uselessly maintained but has the consequence of perpetuating and exacerbating the structure.

We are frequently told about the benefit that we have gained from being in the Common Market. It is said that our food prices are subsidised each day to the extent of between £1 million and £1½ million. I question that strongly. First, food costs are high precisely because we are in the Common Market. Although the price of food is being subsidised, the consumption of that which should not have been produced in the first place is adding to the cost. We must weigh the advantage of food prices as a result of the so-called subsidy with the cost of the CAP, which is about 200 million units of account.

Perhaps the most effective way of coming to a balance is to read the EEC budget for 1977. We see that the social policy receives 6·64 per cent. of the budget. Regional policy receives 5·2 per cent. Research, energy, industry and transport policy receives 3·42 per cent. Development policy receives 2·8 per cent., while 64·42 per cent. is being spent on the common agricultural policy. Ten times as much is being spent on the CAP as on social policy. Twelve times as much is being spent on the CAP as on regional policy—we all remember how much we used to hear about that—and 20 times as much is being spent on the CAP as on research, energy, industry and transport policy. No less than 23 times as much is being spent on the CAP as on development policy. That is the proportion of the cost against which we must weigh the so-called support for our food prices. Instead of this policy being a great benefit to us, it seems rapidly to be becoming an intolerable incubus.

Photo of Mr James Scott-Hopkins Mr James Scott-Hopkins , West Derbyshire

Does the hon. Gentleman realise that included in the percentage he has quoted that is spent on the CAP from the EEC budget is the cost of monetary compensatory amounts, which is running at £2 million a day and represents a subsidy towards our food costs? Does he realise that that element is included in the percentage he has quoted?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

Yes, of course. But let us not forget that that is only of apparent benefit. It must be set against the cost that had to be met in the first place by being in the EEC, especially the import levies that pushed up the price of cheaper food imports. If the hon. Gentleman does the whole sum, he will see the point.

Secondly, we are not the only beneficiaries. The West German farmer will also benefit. Another matter that has to be considered is what is to happen if this does not work. "Agra Europe" states: Apart from the transport difficulties mentioned last week processing the paste"— that is, the semi-liquid skin— could pose some problems. The West German ministry of agriculture for one is placing no great hopes on the marketing possibilities for condensed skimmed milk. That was "Agra Europe" on 28th January.

What happens if this scheme does not work? Where do we move to from here? We believe, as we say in our amendment, in moving towards an intelligent pricing policy. We believe that we should be encouraging the efficient as opposed to the inefficient. Above all, we must have adequate protection for our own dairy industry.

If the scheme fails, if compulsion does not succeed and if the new financial inducement does not succeed—the West Germans are saying that it is unlikely to succeed—where does the Market go?

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

The hon. Gentleman is making an interesting speech. Does he agree that during the past three years we have found it difficult in Britain to persuade ourselves that our method of marketing is years in front of that of our counterparts? Does he agree that we should try to sell to our counterparts in Europe our method of marketing—namely, the Milk Marketing Board, which has served the industry well over the past 30 years to 40 years without any surpluses of skimmed milk?

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

I thank the hon. Gentleman. As often happens in this place, an intervention makes the point to which the hon. Member who is speaking is about to come.

What I am posing is this. If compulsion does not work and if the suggested additional incentives do not work, what then? We know what it should be in relation to Britain—that the British dairy industry must be defended and expanded. We can expand efficiently. "Food from Our Own Resources" spells that out. There is a necessity for that because we could then, among other things, lower our imports of processed milk in the form of cheese and butter. There is an absolute case for that in relation to Britain's economy and for such expansion in relation to the British dairy industry. But what if the other method has failed and the EEC does not face up to taking on board the kind of policy that we have been operating?

That raises also the necessity to defend the Milk Marketing Board and its tradiditional role, because, just as it has been under attack and criticism for the nature of its work in acting as a balance between consumer and producer, its dealing with both the producer price and the retail price is now coming under question.

I hope we shall have a guarantee that as part of the amendment, which has now been accepted by the Government, it is recognised that a necessary corollary, to avoid the creation of structural surpluses, is first, for Britain, the defence of our dairy industry and the prevention of any quotas of any kind towards compulsory cut-back in the efficient sectors of our industry, and the defence of the Milk Marketing Board and its traditional rôle. All these things are implicit in our amendment, which I am glad that the Government have accepted.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

The Question is, That the amendment be made.

As many as are of that opinon say "Aye".

Hon. Members:

Aye.

10.33 p.m.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

You gave me quite a shock then, Mr. Deputy Speaker.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

I thought that the House had agreed to accept the amendment.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

With respect, Mr. Deputy Speaker, that is not so at all. There is some opposition to it.

We in the Select Committee on European Secondary Legislation had no hesitation in bringing before the House again the problem of skimmed milk powder. To say the least, I am highly critical of what is going on, and I do not think that this helps one little bit—although it may help in a very limited way, and marginally.

My hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) says that it is depressing. It is far worse than depressing. It is deplorable that the Community had not had the courage to deal with this problem. It is still tinkering with it. It is very sad that we should be having more and more of these tinkering methods of dealing with the problem.

It is important to reiterate the fact that this problem is not the making of United Kingdom farmers and that we have not need to put our house in order. We spend money on selling our milk and marketing it in the proper way. We have the discipline that is necessary on farms. It is sad that the Community is not prepared to take the sort of steps that we have taken in Britain.

The instrument contains further measures designed by the Commission to reduce the skimmed milk powder mountain. I am absolutely sure that this is the wrong way of dealing with this problem. What is needed is courage in the Community to deal with the problem once and for all. With great respect to my hon. Friend, I do not believe that it is useful to dump this powder into the sea.

We are not getting to the root of the problem. Farmers go on producing milk for intervention. They are producing milk without any responsibility for marketing and they still receive the intervention price. That is not good enough. It is not the fault of the British farmer. If the milk were tipped away these farmers would continue to produce for intervention. That point must be made clearly.

We must have a policy of co-responsibility. British farmers are prepared to accept that, because they have always accepted responsibility. There should be a lower intervention price for people who are producing only for intervention. When will the Commission and Europe take the bull by the horns and deal with the problem? If they do not we shall have such measures as this, which merely tinker with the problem.

I am not against intervention if it is used to store seasonal surpluses, such as butter and grain, and possibly meat. That is good housekeeping. But this is not. This is a permanent feature which must be dealt with. I want to see Ministers take a stronger attitude. The system is crazy, because subsidies are being paid to produce milk and further subsidies are being paid to get rid of the surpluses. There could not be a crazier situation. It is therefore important that the House should say "No". At the same time, it must realise that intervention in itself is not a bad system. Some hon. Members have said it is bad, but it is not. Only this type of intervention is bad.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

I hesitate to interrupt the hon. Member in his excellent speech, but our objection to intervention is exactly on the lines that he describes. Of course, no one is opposed to an intelligent stockpiling policy, but we object to food being produced for surplus.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

My pairing partner may speak for himself, but other hon. Members condemn any intervention out of hand. That is wrong. We are seeing an abuse of intervention and it is time we spoke more strongly.

The Minister has said nothing about concentrated or semi-dried liquid skim. I have never heard of that being produced in this country. Will it apply here? Will British farmers have the advantage of this scheme? I doubt it. If the country and the Community were sensible they would put pig units near to the dairies, so that skimmed milk could be pumped to them. That is the way in which subsidies should be spent—on capital projects such as that.

Many British farmers will not be caught again. They have experienced all this before. They have been allowed to have skimmed milk when there has been a certain amount of it available, then just when they have geared themselves up for it, and have spent capital on it, it has been turned off, and no more supply is available. I do not think that the regulation will be much use to British farmers. What does the Minister think? Can British farmers have any confidence in the proposals?

The cost worries me considerably, too. I do not like to think of pouring good money down the drain. The money that will be spent on subsidies should be used for the right purpose, which is to help encourage a great reduction in the number of cows owned by many small farmers and create alternative employment for those farmers, who at present must go on producing the milk because they have no other livelihood. That would be a much better way for the Community to spend its money.

Why not use the money to set up what is really needed in Europe, which is a European Milk Marketing Board? It is about time the Commission got down to brass tacks. The trouble is that it lacks the courage. This is a sad state of affairs.

I am highly critical of the regulation. I have a brief which speaks of the intractable problems of the Community's dairy sector. They are not intractable. There are solutions if the Commission is prepared to take the bull by the horns.

10.42 p.m.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Not only do we face a grotesque situation; we are having a grotesque debate. We have spent longer in the past year talking about milk products than about Britain's transport problems. Because we are in the EEC, we are reduced to talking about the technicalities of pig swill for several hours in one Session.

There has been talk of costs and prices. In recent answers to Questions I have gathered some basic figures on the basis of which I have done some calculations. I understand that the current common agricultural policy price for butter is 86p a pound. We in this country pay about 53p. For imported butter, 65p of the 86p represents a levy. I understand that the world price is between 20p and 25p. There is a serious imbalance between world prices and CAP prices, the sort of prices which lead to the surplus skimmed milk.

The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) referred to dumping in the sea. We have now reached the reductio ad absurdum which some of us warned Conservative Members about in 1972 and before. I am sorry that they did not take our word or go into the CAP in as much detail as some of us did.

My hon. Friend the Minister also said something grotesque—that we must subsidise the milk skim in order to bring it down to the price of its competing alternatives, such as fish meal. I suppose that the fish meal is derived from some of the trawler Hoovering operations now going on in our great pool of sovereignty around our coasts. I do not think that it is as renewable a resource as milk is. My hon. Friend is a Minister for fisheries as well as food and agriculture. I ask him whether what he has said means that we are having to subsidise some of the milk skim down to a level at which it can compete with fish meal which may well be taken out of the seas around our coasts, with no conservation basis. If that is so, we are subsidising the reduction of our fish stocks in a grotesque way. If it is possible we should ban the use of fish meal.

The hon. Member for Devon, West was right in his remarks about the Milk Marketing Board. It is time that the Commission dealt with this issue, not only by giving a proper hill farm subsidy or regional support for marginal milk producing areas, but by spending money on setting up the type of marketing operation which we did in the 1930s. If the new scheme works, £100 million a year will be spent. If that money is available, some of it should be spent on studying marketing operations throughout the Community.

I hope that my hon. Friend will tell the Council of Ministers of this debate. I hope that he will take copies of Hansard with him so that he can show the strength of feeling and the utter contempt which we in this House have for the way the Commission and others conduct their business in this area. At one stage our Milk Marketing Board was in danger of being dismantled. Had not some of us, and the Government, defended it, that might have happened because there were debates during the passage of the European Communities Bill and subsequently about whether its activities were legally possible once we acceded to the EEC. We were sensible to retain the Board. We should put its ideas into operation in the rest of Europe so that we get rid of these obscene arrangements for the subsidising of pig swill.

10.47 p.m.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

I fully endorse the views expressed by my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) who made a useful contribution to the debate. Like my hon. Friend the Member for Devon, West (Mr. Mills), perhaps he did not describe the situation sufficiently harshly. It is a deplorable situation. All hon. Members representing the United Kingdom in the European Parliament should do their best to ensure that this situation does not continue and that amendments are made to the policies affecting the dairy industry to ensure that the current surplus is not repeated.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

Would the hon. Member say whether he endorses the remarks of his hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) about dumping in the sea, which was a true "reductio ad mare"?

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

I believe my hon. Friend has perhaps been purposely misunderstood on this point. He did not say that we should dump skimmed milk powder into the sea. He said that the surplus should be disposed of in any way possible. There are those in overseas countries who are starving, who do not have an adequate diet, and who could use this powder. Although offers have been made on a world-wide scale it has not been easy to get the surplus transported to those in need.

I take up the point made by the hon. Member for Newham, South (Mr. Spearing) about "hoovering" operations in our sovereign waters around our coasts. I believe that I am right in saying that, because of the ingredients it contains, fish meal is a vital element in pig feed and cannot be replaced by skimmed milk powder.

My hon. Friend the Member for Devon, West was right to say that the present situation is deplorable and intolerable. It is ridiculous that the marginal small dairy farmer—perhaps the man with a dozen dairy cows or even less—in France should be allowed to dominate the European situation in dairy farming and produce the present position, which has long been unacceptable. Hon. Members are right to refer to the efficiency of our own dairy industry.

What are the Government doing about selling to Europe our Milk Marketing Board? I believe that my colleagues in the European Parliament have been positively and constructively pushing the advantages of such a board and the excellent job ours does. Indeed, my hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) has brought representatives of the European Parliament here to see for themselves how our board operates. While we have had useful comments from the Minister, could not he indicate what steps the Government are taking to promote to our European colleagues the advantages of the Milk Marketing Board?

We have had numerous debates, as has been said, on all aspects of the dairy industry at late hours in the House. Perhaps it is a pity that so few Members are here, because it is a useful forum for putting ideas as to how the common agricultural policy could be amended to the advantage not only of ourselves but of all the members of the Community.

A few weeks ago I visited a substantial and successful private dairy close to my constituency—Heald's Dairy of Didsbury. It has depots in my constituency. It is highly efficient. It promotes liquid milk and dairy produce sales and produces, surprisingly enough, a certain amount of dried skimmed milk powder. But I am advised that to date not a single hundredweight of that powder has been put into intervention. Why? Because there are uses to which it can be put.

As one who does not really like subsidies, believing in a market economy, I hesitate to put this forward, although perhaps it is the way we can tackle the problem, but has the Minister considered providing an incentive to the food processing industry to use more of this powder? A great deal of the powder produced in this country goes to the food and food processing industries. Could the hon. Gentleman consider discussing the matter with his European colleagues to see whether they have investigated other outlets for this surplus, which is causing so much of a problem to the Community?

In all these considerations we must not forget the interests of our own dairy industry. I am sure that I have the support of all those hon. Members present—even though they represent perhaps only one-sixteenth of the total membership—when I say that our dairy industry is the most efficient in the Community. I hope that, in deciding how we can solve the problem of the skimmed milk surplus we do not destroy or undermine the interests of our own dairy industry.

I believe that our industry has a great deal to teach Europe. It certainly has a great deal to teach the small marginal French farmer. I hope that my own colleagues who represent this House and this country in Europe, together with the Government, will take that message to Europe.

I am delighted that the Government have accepted the amendment put down by the hon. Member for Renfrewshire, West (Mr. Buchan) because it strengthens the Government's arm. I again emphasise the point made by my hon. Friend the Member for Devon, West that we are dissatisfied with the present situation. The document we are considering not only tinkers but plays with the problem we are facing at present. More has to be done. The amendment will not solve the problem. It is yet again another interim measure.

Our Milk Marketing Board is a fine organisation. As a "market" Tory, that is perhaps a surprising thing to say, but it is. It promotes liquid milk sales. We must stand by the daily "pinta" that appears on most doorsteps up and down the country. It is one of the best and most useful ways of getting rid of so much of our milk products.

We cannot divorce the dairy industry and the beef industry. They go together. We must use beef and milk products to the best advantage.

My message is: Let the Government get off their backside and put over to our European partners that the problem we face can be solved. But the Government must have spunk to get off their backside and say something about it soon.

10.57 p.m.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

It becomes ever more obvious that many of us are in the position of trying to defend the Common Market from those hon. Members who were the most fervent advocates of it in the early years. We certainly have to try to keep a sense of perspective in all these things. But the fact remains that skimmed milk and skimmed milk powder are products of manufactured butter.

We are glad that others are now responding to what we have already said—that those who are the most efficient producers in the Community should have the greatest encouragement to produce. But at the same time we have to keep a balance. That was the point made by the hon. Member for Devon, West (Mr. Mills).

There are one or two points that I should like to reply to. The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) suggested that nothing had been done to reduce the stocks of skimmed milk powder in the EEC. Stocks are certainly high and amount to over 1 million tonnes, but this is 250,000 tonnes less than a few months ago.

The measures that we are debating tonight will help increase the use of powder and skimmed milk voluntarily. That is important as the House will recognise. The measures should help reduce not only the stockpile already built up but the surplus that may be built up in future, which could have got worse had we done nothing about it. Something is being done.

I believe that this scheme is much better than a compulsory scheme, which rightly caused so much objection in the country.

The hon. Member for Devon, West said the proposals are the wrong way to deal with the problem. I notice that the hon. Gentleman did not suggest ways of dealing with the problem, except to say that intervention prices should be reduced. I believe that the fundamental solution is to bring the EEC milk market into balance. This must mean restraint on end prices which would reduce production in the future.

There is the problem of the existing stocks. It is better to dispose of the surplus on a voluntary basis rather than on a compulsory basis, as has been done in the past.

Amongst other ways of using the surplus, the hon. Member for Macclesfield (Mr. Winterton) suggested feeding it to those countries which needed it. I remind him that this is a feature of a scheme agreed by the Community under which something like 200,000 tonnes were used in this way. Certainly this is better than the proposal of the hon. Member for Derbyshire, West that we should throw it into the sea.

Photo of Mr James Scott-Hopkins Mr James Scott-Hopkins , West Derbyshire

I did not intend that remark to be taken literally. I said that this surplus mountain must be disposed of. It is no good paying the charges for storage and so on. They are mounting all the time. My basic point was that we must dispose of this mountain. I hope that this proposal will contain the existing level. But it will not dispose of it.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I did not accept the suggestion in the sense in which it was apparently made. I was saying that we should find a use for the surpluses and that, if they could be used positively and constructively, so much the better.

The Council of Ministers agreed to increase food aid donations to 200,000 tonnes of powder. Experts consider that the total amounts now committed by developed countries are near to the maximum which can be distributed safely. There are problems in feeding it to babies and children, and this is a factor which must be taken into account.

Another factor in getting rid of some of the surpluses would be to have some regard to the price. We believe that the market price is largely decided by the intervention price which is set by the Council of Ministers. New markets for powder can be found only by a substantial price reduction which, we believe, is what this proposal will allow.

I pay tribute to the way in which my hon. Friend the Member for Renfrew-shire, West (Mr. Buchan) moved the amendment, which has the support of the House. The House has shown, not only tonight but on many occasions, how anxious we all are that the surpluses should be dealt with in a positive way, which is at source by preventing them from arising.

I come, then, to the Government's general policy in relation to surpluses, because this is at the root of the whole problem. We have had a number of opportunities in recent months to debate this matter, and the Government's views are well known to the House. But they will bear repetition.

My right hon. Friend has made it clear that the problems of surpluses in the dairy sector must be tackled firmly. The hon. Member for Macclesfield wondered what the Government intended to do about them and urged Ministers to stiffen their resolve. This has been a feature of the present Government's policy in the last few years. We believe that the fundamental reason for those surpluses is that, for a number of years now, prices have been set too high. These have led to production far in excess of what consumers are prepared to buy, and at a cost which reduces demand. The only long-term solution, as the hon. Member for Devon, West said, is to restrain end prices. We shall be approaching successive price-fixing exercises with that aim in mind.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

Again, I do not think that the Minister has entirely understood what I said. I did not say that the end prices should be reduced. Obviously, if costs rise in milk production, the price of the milk to the farmer must be increased. What is wrong is the intervention level on skimmed milk powder. That is entirely different from the end price for liquid milk.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I need no clarification of this factor, because the incentive to produce milk or any other commodity must be related to the reward in relation to the costs of production. If the reward is not high enough, costs of production may be a mitigating factor in production itself. We have to get the balance right. The more efficient producers should be encouraged and the less efficient should be discouraged. We have to get the right balance in the end price and also in the intervention price.

The hon. Member for Macclesfield asked about where the Government stood with the Milk Marketing Board. We have had many debates on the boards which are a feature in the production of various commodities in this country. We have said time and time again that we want to make sure that the essential features of production are maintained.

We all recognise the value of the Milk Marketing Board over the last 43 years or so in stabilising production and marketing milk in this country. We have made our attitude on the future of the Board very clear to our colleagues in Europe.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

Will the Minister go back to the point raised by my hon. Friend the Member for Devon, West (Mr. Mills) about the end price of milk? Is he aware that his remark this evening that the only way to resolve the situation is by restraining the end price which the consumer pays for his pint will be received with dismay by the dairy farmers? At the moment they are in grave difficulties, and I have had a lot of representations about the problems they face as a result of inflation. The point my hon. Friend was making was about restraining the intervention price.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I take note of the hon. Gentleman's remarks. I am talking about encouragement for production of any commodity. At the end of the day, prices must be related to the need for the commodity, and the cost of production. Those countries which can produce commodities more efficiently should be encouraged, and others restrained. Otherwise the whole thing will get out of balance and we will wind up with surpluses like those we are dealing with tonight.

The House has already debated the EEC action programme proposals, and the Government's views on this are on record. The action programme is still before the Council, but the Commission's proposals for prices in the new marketing year will become available early next month. For our part, we shall seek to achieve the maximum degree of restraint on prices of commodities which are in surplus, such as those in the dairy sector, subject to the points I have just made.

I believe that the points raised by my hon. Friend the Member for Renfrew-shire, West are relevant—there is a need to take account of the contribution of the United Kingdom to the Community budget as a whole. We contribute 19·2 per cent. of that budget. Between 70 per cent. and 75 per cent. of the budget relates to the common agricultural policy. This is the extent of our contribution to the Community, and when people talk about the green pound, and this country receiving charity from the EEC, they should recognise the significant contribution that we make to the overall budget, and to the CAP.

This has been a useful debate, and the Government will take note of what has been said.

Photo of Mr Michael Jopling Mr Michael Jopling , Westmorland

I am very disappointed that the Minister has not referred to the crucial matter of liquid skim milk which was raised by my hon. Friend the Member for Derbyshire West (Mr. Scott-Hopkins). He mentioned the difficulty of getting a contract. If the Minister knows anything at all about the pig industry he will know that the producers moan constantly that they enter into contracts to get liquid skimmed milk, and before long they find that the dairy is unable to supply it.

Photo of Mr Edward Bishop Mr Edward Bishop , Newark

I apologise for having overlooked that point. The need for a scheme to subsidise liquid skim for farmers was raised by the hon. Member for Derbyshire, West. The scheme is intended to make skimmed milk in liquid form competitive with other protein feeds, and in this way it should be more attractive to pig farmers than it is at present.

The details of the arrangements will have to be worked out, but it is necessary to ensure that if liquid skim is to be made usable by pig producers there must be an assurance of continuity of supply.

That is the basis of the need for the contract. Farmers may thus be prepared to enter into contract arrangements with the supplier. The proposals are aimed at securing these contract arrangements, but the details have yet to be agreed. The need for an assurance about continuity of supply makes that necessary.

Amendment agreed to.

Main Question, as amended, put and agreed to.

Resolved,That this House takes note of Commission Document No. R/70/77 on Skimmed Milk and Skimmed Milk Products, but regrets that such disposal arrangements are necessary; recognises the need to secure adjustments to the price support arrangements in order to achieve a better balance of the market in the milk sector; and urges the need to take further steps to avoid the creation of structural surpluses.