European Community (Agriculture Proposals)

– in the House of Commons at 12:00 am on 16th March 1977.

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4.39 p.m.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

I beg to move, That this House takes note of Commission documents R/360/77, R/360/77 Addenda 1 and 2, R/2469/76 and R/2673/76; welcomes the Government's intention in respect of R/360/77 to negotiate a settlement which, taking into account the interests of consumers as well as of producers, helps to secure a better balance of the market, particularly in those sectors with a structural surplus; and, in respect of R/2469/76 and R/2673/76, endorses the Government's view that decisions on whether Commission proposals for changes in a member state's representative rate should be accepted are primarily a matter for that member state.

Photo of Mr Oscar Murton Mr Oscar Murton , Poole

Mr. Speaker has desired me to announce that he has selected the amendment in the name of the right hon. Member for Battersea, North (Mr. Jay).

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

The Scrutiny Committee has rightly recommended for the consideration of the House the Community document on proposals for CAP prices and for changes in the operation of the agrimonetary arrangements. There can hardly be a subject whose effects touch so deeply the whole population of our country.

Even in normal times all the members of the Community find it difficult to complete their consideration of the price proposals before the new marketing year begins in April. This year the appointment of a new Commissioner and the fact that the European Assembly must have its chance to consider the proposals before they are decided add to the difficulties. The Commission has worked energetically to produce proposals but these were still presented about two months later than usual.

The European Assembly is meeting only on 22nd and 23rd March. I have therefore taken the unorthodox but, I am assured, not unprecedented step of summoning the Council to discuss the price package over the weekend on Friday, Saturday and Sunday 25th to 27th March. This pressure of timing is common to all nine countries. But our country has other pressures quite separate from those of our partners. For we differ from them in a number of major respects. Above all, perhaps, we are very much a food-importing nation, and while it is right that we should expand our own home-grown production we cannot hope ever to be entirely self-supporting.

It is hardly surprising, then, that it should be our aim not only to preserve a price level more akin to our traditional requirements but to seek to put an end to the system of structural food surpluses, so long a dominant feature of the common agricultural policy and one which taunts our own people, in particular, with the twin evils of excessive prices and mountains of stored food that they cannot have. I believe it was Mr. Mansholt who said that the Common Market was not about the price of butter. No, but the two are not entirely unrelated.

This year, when all our efforts should be directed towards a determined attack upon inflation, we must now, under the rules of the Treaty of Accession, take the two final transitional steps to raise our prices to the full Community level. These two transitional steps would, in my view, give a reasonable return to producers in our own country but they will also cause an average rise of 2p in the £ in the price that the housewife pays for her food. Perhaps it is worth reminding the House what their effect will be. They will raise the price of butter by about 12p or 13p in the pound, and will also have a marked effect upon other foods, such as cheese, eggs and bread.

It is in the light of these national pressures and problems that we must look at the Commission's proposals in perspective, moderate as they may seem to some others in the Community.

The Commission's proposals fall into three distinct elements. The first is the non-price measures—for example, the revised milk action programme and the question of the rather penal levy on isoglucose. The second is the 3 per cent. average increase in common institutional prices. The third element consists of the changes in all the green currencies, except the Danish green krone.

First, we can set the stage for the milk proposals. We see a surplus of dairy products over the EEC as a whole. Butter mountains of an excess in altitude of 200,000 tonnes and other mountains of milk powder in excess of 1 million tonnes are still growing. There are no such mountains in the United Kingdom, although there may be the odd foothill or two.

What should be our aim in discussing this milk package? We all agree that what is needed is the promotion of an efficient EEC dairy industry. If we are to have that—I have made this point on other occasions, not only in the House but to our partners—it does not mean that, because we must have a contraction to get rid of surpluses, there should be a contraction in future throughout the Community to bring about equality in misery.

On the contrary, in those areas where it is inefficient and where it is dangerous for the Community to continue to increase expansion of milk, there should be a cutback. But where milk can be produced efficiently and where technology can come in to help, this is a benefit to the producer and the consumer, which ought to be encouraged. That is why it fits in with the United Kingdom's own farming policy and with the White Paper, "Food from Our Own Resources", prepared by the Government a couple of years ago with the assistance of the industry. Perhaps it is also why, in some quarters, that White Paper is regarded as not in the best of communautaire taste and as slightly nationalistic.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

In which countries in the Community are there small and inefficient producers? What attitude did those countries take in the discussions that the Minister has held so far?

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

The sort of countries I mean are those where, inevitably, part-time milk farming occurs on a large scale. There are parts of Germany where this is so, and perhaps parts of Belgium. It may occur a little in France but not much, and it also occurs in other parts of the Community. I fully understand the views of the Governments of those countries that one should not indulge in a ruthless attack upon the problem, that farmers and farm workers alike—although most are farms that do not employ workers because they are small family farms—should be protected and looked after as any decent, civilised, human Government would wish to do. My point has always been that the cost should be borne by each national Government in their social policies and not by the common agricultural policy.

I now come to an allied point. We should be determined to find practical ways of abolishing the existing surpluses so that the Community consumer receives the benefit. This must mean the sort of structural changes that I have mentioned. It is most important now, in the light of discussions that we are having, that we restrain prices so that further surpluses are not created. That is an argument for an effective attack on Community intervention prices to stop this build-up.

Over recent months the House has perhaps been a little wearied with the long discussion on the various details of the milk action proposals. I am afraid that the House will have to indulge me in repeating the argument. There have been changes, and it is as well that the House is aware of them. There has been no change on the question of the tax on oil and fats—the margarine tax. The House will be delighted to hear that the Government still regard this as totally unacceptable.

The Commission has mooted the possibility of butter subsidies, but it is all rather indefinite at present. It lacks shape, and one would very much like to see whether a little more flesh can be put on the proposals. Whether one can take it up depends on the terms, particularly the FEOGA contribution. I hope that that will become clearer as we progress.

We should certainly continue to support a proposal for increased provision of subsidised school milk. Unlike the tax on margarine, this is a practical, effective and healthy way of getting rid of the surpluses. We support the measures for the quick eradication of cattle diseases, such as brucellosis.

We said from the beginning that we would oppose a ban, as was suggested by the Commission, on national investment aids to dairy farmers. We thought this wrong, for the reasons that I gave in reply to the hon. Member for Banbury (Mr. Marten) a few moments ago, because there ought to be a benefit to both the producer and the consumer through efficient methods of technology in dairy farming. We have moved the Commission quite a long way on this. On the question of dairy farms, the proposal has been modified, and it looks as though we can accept it. On the other hand, we still believe that it is important that aid should be given in processing. I cannot see how one can say that a butter mountain is likely to grow because for example, one gives aid to the bottling of milk. That seems an absurdity, yet under the Commission's proposals, as they still stand, that is in.

We are prepared to consider, I hope as dispassionately as possible, the proposal for the conversion of dairy herds—that is, the non-marketing premium that the Commission has proposed. We should not want to go all the way with the Commission's proposals at the moment, but that may have a part to play in improving the general structure of the dairy industry. What we do not want to see, certainly in our country, is the disapperance of large and efficient dairy herds, which perhaps are rather more typical of the United Kingdom than of the rest of Europe.

Then there is the question of the co-responsibility levy. We are prepared to consider it. Rather surprisingly, the Council, overwhelmingly, was prepared to consider it. Eight out of nine members said, in some shape or form—perhaps in some cases at a lesser level—that they were prepared to do so. But I cannot see the point of a co-responsibility levy if it has to be offset by a price increase. That does not seem to make much sense.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

In his proposals, and with the view that he takes, is the Minister saying that British farmers should accept the full levy of co-responsibility as well as the co-responsibility that they already pay for through the Milk Marketing Board for the promotion and sale of milk, and the rest? Do we have to pay twice?

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

In a sense, that is part of the difficulty that we face. I want to emphasise that if one is to have a co-responsibility levy something must come out of it. The Commission is saying that under such a levy the money will be used to increase the consumption of dairy products.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

We are already doing that through the Milk Marketing Board.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

One would need to look at that very closely. As I said, I do not want to weary the House with too much detail, but I thought that that was evident from what I was saying.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

Does my right hon. Friend accept that what worries us is not just the double payment but the fact that the Commission has said plainly—it has repeated it this morning in Brussels—that it does not foresee the possibility of our continuing to keep the milk marketing boards? It has said that the boards are against the Treaty of Rome and that they must disappear. It was put as simply and as blatantly as that.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

The question of the milk marketing boards does not really relate to the co-responsibility levy. However, I agree that it is all part of the milk package. I shall come to the boards in a moment. They are vital.

The question of ice cream has exercised many adult minds, as well as children's minds, during the past few days, to judge from the Press. I think that most of us will accept that accurate labelling of products is in the consumer's interest. That must be so we want that with most products. What I and the Government cannot accept are proposals which, in the guise of promoting accurate labelling, in fact make it virtually impossible to market certain goods containing non-milk fats and proteins. That would be quite wrong, and I hope that our position on this matter is clearly and fully understood in Brussels. We have certainly made the point.

My hon. Friend the Member for Crewe (Mrs. Dunwoody), as all of us who know and respect her have known for some time, has the gift of telepathy. She mentioned the milk marketing boards, to which I intended to turn next. This matter was not mentioned in the Community proposals. I did not know about my hon. Friend's information of today, because I honestly have not seen it. My hon. Friend the Parliamentary Secretary mentioned this matter very strongly on Tuesday, I think. At that time, the Commissioner, while not commenting very deeply on it, gave no indication that there would be any sort of firm rejection.

Indeed, if one is considering what to do about a milk surplus, I do not see how one can contemplate giving up milk marketing boards. One has only to consider what has happened in other countries in the Community where liquid milk distribution has disappeared. For example, since the Netherlands gave up the daily milk round, consumption has gone down by 40 per cent. The same experience has occurred in other parts of the Community.

The right way of cutting the consumption of dairy products in this country, which is a great liquid milk drinker, would be to do away with the doorstep delivery, and the best way of doing that is to kill the milk marketing boards. Thus, it is all logical. But there are many reasons why that daily round is important. It is important for its own sake, because it is healthy. It is important in the context of what one does about the butter mountain. Otherwise, all that it would mean is that milk consumption would go down and the mountain would grow.

But the daily delivery has a strong social basis, too. I am not ashamed to repeat what I have often said: in my constituency and in many others, the only real method of knowing whether an elderly person who is living alone needs help or is in trouble is that milk bottle remaining unopened on the doorstep. The milk roundsman or the neighbours will see it. This has an enormous social effect, which I cannot believe the Commission has studied.

Photo of Mr Thomas Torney Mr Thomas Torney , Bradford South

Far from abolishing or trying to abolish the milk marketing boards, would my right hon. Friend try to convince the French and others that if they had a similar system they might not have such a large milk surplus? Will he try to get that across to them forcefully, while defending our right to continue with our marketing boards?

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

There are many things in this country—that is one of them—which the rest of the Community would do well to follow.

I come now to the proposals about isoglucose.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

May I ask a question before my right hon. Friend leaves the dairy sector? He said earlier that he thought that the butter price would rise by 12 per cent.—[HON. MEMBERS: "He said 12p on a pound."] Yes—12p on a pound, not 12 per cent. Before the end of the debate, will my right hon. Friend check that? According to the House of Lords Select Committee which considered this matter—I refer to page 17 of its Report—the possible impact on retail prices was a total increase, including the transitional steps and the price package, of up to 17½p per pound weight. Can he confirm that?

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

I was dealing only with the two transitional steps. They will produce a rise of between 12p and 13p. It is difficult to be exact, and that 1p may make a great deal of difference. However, it is difficult to know whether the Commission's proposals will produce an increase of 5½p or 6½p. My reference was only to the transitional steps.

Isoglucose is a new product. Because sugar is produced as it is in the Community, the Commission views with great caution—more, with dismay—any other product that might compete with that process. Therefore, the Commission says, the best way of dealing with the matter is by means of a penal levy. It is a little like the margarine tax applied to another product, perhaps for much the same reason.

There is a lot to be said for taking sugar and isoglucose together—and any other product that the future might bring; this is one that many of us had never heard of a few months ago—on an equal footing, so that neither has an advantage over the other. That makes sense. It does not make sense to me to penalise out of existence something that may be of great benefit to the consumer. In the end the consumer will make the choice—and let us make no mistake about that. It does not help to take a Luddite attitude to these things. We have made it absolutely clear that any such basis is wrong.

Photo of Mr Paul Hawkins Mr Paul Hawkins , South West Norfolk

Perhaps the Minister could come to the Eastern Region shortly to see the immense benefit that the sugar industry has produced for farming and employment there. It has helped lorry drivers, men working on the land and men working in factories. The industry has been responsible for one of the best changes in the system of farming, and has achieved what could not be done through other crops. I hope that the Minister will bear that point in mind. It is a most important industry on the arable lands of the Eastern Region and its importance goes beyond the growing of sugar. The industry has widely benefited employment.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

When I visited the Eastern Region a few months ago, things unfortunately looked rather sorry, because of the bad weather conditions at the time.

I said "on an equal footing" and I do not think that anybody should object to that. In other words, it should be worked out one against the other. That is the right approach.

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

The Minister has said that these proposals do not make sense. Can he assure us that in their present form they are unacceptable to the Government?

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

That is what I was trying to say. I hope that I was reasonably unambiguous about it.

The second part of the Commission's proposal refers to prices. I have emphasised repeatedly, and I re-emphasise today, the need for restraint. Indeed, I should like to put this point to the House as I have tried to put it to farmers. Farmers must understand that it is not entirely in their interests to have high prices if they attack the housewives in such a manner that they are unable to afford them. It is no good in the long term—and even now—producing goods for store. They should be produced for human consumption.

If I am asked to justify this I do not have to go much further than the food expenditure survey that was published about 10 days ago. It gives some interesting facts about what happened during the last quarter of 1976. I shall not weary hon. Members with the details, because they can examine them themselves, but as the prices of beef, lamb, potatoes, milk, eggs and sugar have gone up, consumption has gone down by an almost related percentage. In that quarter, the consumption of only one commodity did not go down, and that was pork. It is equally interesting to note that that was the only commodity whose price went down.

I now come to the third of the three stages of the proposals—the green currencies. In a way they are the central part of the package. The currencies determine what common price levels really mean when they are converted from units of a pound into national currencies. The Commission's proposed change in the green pound is 5·94 per cent. In fact, that adds 6·32 per cent. to the sterling value of CAP support prices, or aboue 1¼per cent. to retail food prices. The 3 per cent. increase proposed in common prices would add ¾per cent., making a 2 per cent. increase in all. That is about the equivalent of the two transitional steps.

I first explained my views on the green pound during the debate on 22nd October last year. When I look back to the answers that I have given at Question Times and the speeches that I have made, I find—a little to my own alarm, since, as Sir Winston Churchill said, consistency is the prerogative of hobgoblins and small minds—that I have been consistent on this. Nevertheless, small-minded or not, it is a fact that, as I have said all along, the green pound simply cannot be abolished unless we are to have something of greater value than any devaluation that we make, for the benefit of our country in the national interest; and that means, in fact, for the benefit of our consumers. Certainly if we found something like that I should not object to a modest devaluation of the green pound. But I would object in any circumstances to the total elimination of the gap between the two pounds, because that would be ruinous for the country and for agriculture generally.

One hears speeches claiming that farmers are being taxed at 35 per cent. and that that ought to be immediately remedied. I know that Opposition Members will raise their voices with me in saying that it is nonsense. I do not hear those voices now, but no doubt they will come.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

The Minister is an eternal optimist.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

I am, as my hon. Friend says, an eternal optimist.

These proposals for changes in the green currency arrangements are not included in the price proposals but they lie upon the table. While talks take place on devaluation and revaluation of the green currencies, we remain committed to our view—which I think is the right view—that it is the national concern of each member State to decide, in the light of its economy, when, it at all, it proposes to change the value of its green currency.

I shall not weary the House by pointing cut something that has been said on a number of occasions by my hon. Friends the Members for Southampton, Test (Mr. Gould) and Newham, South (Mr. Spearing), namely, that there is an alternative method and it is a respectable one, since the Community has used it for calculating the green currency basis. It would show a different result about which State was more in deficit in terms of green currencies.

I hope that the House will understand that the British Government do not have a dogmatic view on this point. There is no dogma involved. The national good alone should decide the matter.

I make the final point that it has been said to me that to treat the green pound in this way is to attack the farmer on behalf of the consumer. I do not dispute that the stand that we have taken over the green pound has been of enormous benefit to the consumer. However, it has not entirely been to the detriment of the farmer. Not every section of farming is affected by the green pound. Horticulture is hardly affected, and neither is sheep meat. But there are areas where it could have a positively dangerous effect.

I saw today a briefing from the National Farmers Union which says that last year, largely, but not entirely, because of the drought, there were additional costs of £460 million for cereals. What do farmers think the cost of those cereals—most of which were imported from Community countries—would have been if we had devalued the green pound? Of course, it would have been a great deal more.

Even on that basis, there are a number of arguments that need to be tackled in a national framework and considered in that light.

I hope that I have given the House some indication of the difficulties that we shall be facing in the price negotiations and also of the principles that are involved for us. We have to balance the legitimate needs of the producer with the necessity to provide food for the housewife at prices that she can afford. I hope that this balance, so long a part of our way of life, is beginning to be understood in Europe. There was rather more than symbolism in the fact that for the first time in history this week a President of the Agricultural Council of Ministers received a deputation not only from COPA—the European Association of Producers—but from the European Consumers' Association.

Our aims must be, first, to see that our producers receive a living—and a good living—and, secondly, to safeguard the interests of the consumer by the maximum restraint upon prices. I doing so, we must press for a basic improvement in the workings of the common agricultural policy, particularly in relation to the structural surpluses.

The amendment in the name of my right hon. Friend the Member for Battersea, North (Mr. Jay) and other hon. Friends asks us to press for easier access into the United Kingdom for efficiently-produced foodstuffs from outside the EEC. We have begun this process by securing a new régime for the importation of meat that will be available in April, and only yesterday my hon. Friend the Parliamentary Secretary was pressing for a continuation of further importation of potatoes with a view to reducing the price for the housewife. I have already dealt with the other points made in my right hon. Friend's amendment, and therefore have no hesitation in telling the House that the Government are prepared to accept it.

I do not underestimate the task that lies ahead, and, for the reasons that I have given, it would be foolish to presume that our objective will immediately be achieved, but I believe that the Government are on the right lines in their approach and that in this approach we have the overwhelming support of the people of Britain.

5.13 p.m.

Photo of Mr John Peyton Mr John Peyton , Yeovil

The right hon. Gentleman deserves commendation for one thing in particular. His ability to believe the totally incredible is wonderful. He believes that the Government are on the right lines. There are few who would go along with him.

I call the right hon. Gentleman's attention to the quaint arrangements—I use the politest term that I can—that we have for papers here. The right hon. Gentleman gave some valuable evidence to a Select Committee last week and there are still no copies of the transcript in the Vote Office, though one is available for inspection in the Library. This seems a rather foolish arrangement, so perhaps the right hon. Gentleman will draw it to the attention of the Leader of the House, who, since he ascended the mount, is no longer as sensitive as he used to be to the needs of Parliament.

I was interested to hear the Minister say that the Council was to have a long weekend. This is probably a good way of settling things. I hope that at least some meetings will be conducted with fewer people. I am not referring to Ministers, but to the great forces who assemble at Council of Ministers' meetings. It would be useful to have more informal exchanges in which members of the Council will not feel encouraged to go along with formally prepared positions which they read out while no one else listens.

The hon. Member for Crewe (Mrs. Dunwoody) mentioned a point that I should like to draw to the right hon. Gentleman's attention. Evidently the hon. Lady has information which is not available to us about the Commission's intentions in regard to the Milk Marketing Board. The Commission would be well advised to address itself to the problem of eliminating unwanted surpluses before it takes damaging action to interfere with the means which have been evolved and tried over many years for marketing this product. There is a fair degree of solidarity on this issue. I hope that the hon. Member for Bradford, South (Mr. Torney) will be able to catch Mr. Speaker's eye in the debate, although if he continues to make his speech from a sedentary position I shall not make all that much effort to be here when he finally speaks.

There is no division between us on the question of the marketing boards. We are conscious of the useful and constructive rôle which they have played for many years.

Photo of Mr Norman Buchan Mr Norman Buchan , Renfrewshire West

Can the right hon. Gentleman tell us what sort of guarantees he and his right hon. Friends had in this connection when they took us into the Market? I spent many weeks labouring precisely this point and received a number of mystical and miasmic assurances that were undoubtedly meant to encourage me in the belief that the Government of the time had this well tied up.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I shall leave the hon. Gentleman surrounded by mystical miasma for the time being. His Government had every opportunity to renegotiate the treaties. We were told that they set out to do that.

I am trying to be helpful and I am sorry that it provokes so many interruptions. I agree with the Government that the Milk Marketing Board makes a valuable contribution to the marketing of milk and I take the Minister's point about liquid milk. We should be at one with the Government in opposing any move to strip the boards of their essential powers.

Unlike the Minister, I assume that the Commission regards the proposals as something of a package deal and I shall approach them in that light. It is clear that they will please no one, but it is unlikely that any alternative that we could think of in present circumstances would do so either.

It is fair that we should attempt to judge the proposals against the rather sombre background of our affairs today, which those who condemn the proposals will, I am sure, be only too ready to ignore. We must not forget that our currency has declined in value by up to 30 per cent. against other important world currencies. Our inflation continues to run at unacceptably high levels. Consumer prices in the last three months have risen at an annual rate of 23 ½ per cent., whereas those in other countries inside and outside the Community who compete with us have suffered rises of only a third or a quarter of that figure, and sometimes even less.

The green currencies were introduced as a device to assist farmers and traders. They were never designed to come under the kind of strain to which they have been subjected as a result of the large discrepancies in values—amounting to 30 and 40 per cent.—which have arisen between the green currencies and the real ones. Apart from the fact that there has been a considerable burden on the Community in paying subsidies to the consumer in this country, there is also a point which the Minister failed to make this afternoon. This has all happened at the cost of considerable anguish to our producers. I accept from the Minister that the devaluation of the pound is a two-sided coin, even in the context of farming, but it would have been proper if the right hon. Gentleman had said something about the anguish through which the pig industry has passed—a dismaying experience.

If the right hon. Gentleman says that the green pound is a valuable bargaining counter, he will provoke the question why he has not used it effectively to re-open the basis on which the mcas are calculated so that the anomalous arrangements covering pig meat can be revised. There is no doubt that the present arrangement has put our own efficient producers in a position in which they can compete with nobody—and certainly not with the Danes or the Germans who have been making the most of a favourable situation for them. The pig producers in this country are experiencing a loss, of £2·50 or £3, even after subsidy has been paid. There is a limit to the length of time anybody can go on with that unpleasant experience.

Photo of Mr John Lee Mr John Lee , Birmingham Handsworth

Since the right hon. Gentleman castigates the present situation, will he make his position clear? Does he or does he not favour the devaluation of the green pound? In view of his lamentations about our rate of inflation, will he make clear the Opposition's view?

Photo of Mr John Peyton Mr John Peyton , Yeovil

The hon. Gentleman has never been much of a listener, although I am always obliged to him for his interventions. I am never sorry that I have given way to him because he always bowls an easy, slow ball which one can see coming a long way off. [HON. MEMBERS: "Answer."] I intend to make my own speech without the advice of Labour Members. I shall come to that matter in a moment. I am now applying myself to the question of food prices which, as the Minister has made clear in many speeches throughout the country, will rise.

The right hon. Gentleman the Prime Minister appeared to be in some doubt about the matter yesterday when he used some rather vague words. He said: food prices and the prices of commodities have risen very much. We are now beginning to see the end of that. As I said to the House previously, this will, I think, work its way through by mid-year, according to our forecasts."—[Official Report, 15th March 1977; Vol. 928, c. 216.] I wonder whether the Prime Minister's forecasts are the same as those put forward by the Minister of Agriculture. This is a moment when the Government are choosing to phase out the food subsidies which they so unwisely introduced.

In our view, the Government's handling of agricultural pricing matters and of the prices charged by food processors and manufacturers show them to be very much more sensitive to public opinion than they are when dealing with such matters as increases in gas prices.

I wish to refer to the document "Food from Our Own Resources", produced by the Government not all that long ago with the endorsement of the industry—a document that we welcomed. We are now in a position in which we have fallen 30 per cent. behind the projections then made for agricultural production. We have been told that the Government still adhere to their policy. Some farmers will still remember the words that appeared in that document. If farmers are to invest in expansion they need a degree of assurance about their future returns. Those words were widely read and welcomed by the agricultural industry and they have been remembered, but farmers now find it difficult to understand why their costs have risen by nearly 20 per cent.—a total of over £900 million—and why they must be content with the recovery, according to the Commission's proposals, of 14½ per cent.

The Minister made an extraordinary speech, because he did not make clear his own reaction to this point. He did not deal with the question of the rise in the costs of production, nor did he say whether he regarded as adequate the increases due to come to British farmers as a result of the transitional payments and the benefits that will follow from the devaluation of the green pound. I hope that the Minister in replying to the debate will make that point absolutely clear.

Photo of Mr John Watkinson Mr John Watkinson , Gloucestershire West

Will the right hon. Gentleman face up to the problem because it is the core of what he is saying? If he is asking for end prices to be increased, does he not realise that there is considerable consumer resistance to those end prices and that eventually farmers may not be better off? In those circumstances, does he not regret the fact that the Conservatives abandoned the deficiency payment system?

Photo of Mr John Peyton Mr John Peyton , Yeovil

But we are not now dealing with market prices. We are dealing with intervention and support prices, which is a rather different matter. [HON. MEMBERS: "Answer."] We are now discussing the Commission's proposals and, on behalf of the Opposition, I am entitled to ask what the Minister intends to do. We have not heard his views on the matter, and Labour Members should not be surprised that we ask these questions. Interventions of the kind made by the hon. Member for Gloucestershire, West (Mr. Watkinson) are a remarkable testimony to the good manners, patience and infinite courtesy of the Opposition. If the positions of the two sides in the House were reversed, as will undoubtedly happen soon, these questions would be asked with considerably more roughness than I am capable of, and would be repeated frequently, giving voice to the reaction of farmers to these matters. The view would be "Why should members of the Government continually spell out prospects which they themselves never observe?"

What would be the wise attitude of the agricultural industry to these proposals? First and foremost, it must bear in mind that its customers—I am now following the right hon. Gentleman—are a great deal less well off than they were. It must realise that the real value of the net Wage of the industrial worker after tax and social security contributions has sunk considerably under this Government. Many people have suffered a decline in living standards. I am sure that the right hon. Gentleman is right in reminding the farming community that its customers have been pretty hard hit. The right hon. Gentleman could also point with advantage to some of the miseries being endured by small business men.

In this package there are some important gains that are not available, for instance, to the European milk producer. It is proposed that that producer will get 3 per cent. in the autumn less a 2½ per cent. co-responsibility levy. I agree with the right hon. Gentleman that there does not seem to be much point in paying 3 per cent. and then taking back 2½ per cent. Either the Commission will have to explain the merits of this sophisticated exchange or it will have to eliminate it altogether.

Over the year our own milk producers will be receiving increases of 14 per cent. less the co-responsibility levy. I see no point in exempting the hill farmer from payment of the levy. If the Commission's policy is directed against the production of milk by the hill farmer, why let him off something that would discourage him from acting contrary to the Commission's policy?

I take the right hon. Gentleman's point that an efficient dairy industry does not require all-round misery. We do not want to see an across-the-board cut in the milk cow population. We want to see the elimination of uneconomic producers wherever they may be found.

The other European producers will not like this package. They will receive no transitional payments. Most of them will not benefit from a green currency devaluation. However, we shall find the package to be of some assistance in the elimination of high cost producers, which will diminish the likelihood of unwelcome surpluses.

It is easy to use emotive language about surpluses. We are becoming familiar with terms such as mountains and rivers. If the mountain of butter, about which we have heard so much, is broken down, if that is what one does to butter mountains, it ends up as a surplus of 750 grammes, less than 21b. per head of the population of the European Community. It should be seen in that proportion as opposed to something that is getting totally out of control. However, it is a totally unacceptable way out of a difficult situation to hand surplus butter to the Russians at bargain-basement prices.

Photo of Mr John Peyton Mr John Peyton , Yeovil

No, I shall not give way. I have given way on quite enough occasions.

The right hon. Gentleman appeared to be a little more open-minded today about the devaluation of the green pound than on other occasions. I was rather sorry that he did not mention the damage that has occurred to the pig sector as a result of the failure to accept a marginal devaluation at an earlier date.

At some time I hope that the right hon. Gentleman will tell me the net effect of the proposals, as he sees it, on pig meat and the pig producer. If the proposals of the Commission are accepted as they stand, will they, in the right hon. Gentleman's opinion, make possible a change in the basis of the calculation of the mcas for pigmeat? This is an important matter that I imagine the right hon. Gentleman must have in mind. If he cares to interrupt me, I shall be glad to give way.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

This may take a little time. I did not interrupt the right hon. Gentleman because I thought that he was nicely launched on his flow. It would have been cruel to have interrupted. From time to time I have tried to explain, when talking about pigmeat, that the equation of a green pound devaluation with the consequent drop in mcas is almost exactly met up to about 10 per cent.—beyond that level no one would go anyway—in the increase in feeding stuffs. I thought I had bored the House so often by putting that point that it was unnecessary to put it again. I agree about the need to recalculate mcas. It was for that reason that I took the national measures that appear to have irritated one or two people outside this country.

Photo of Mr Thomas Torney Mr Thomas Torney , Bradford South

My right hon. Friend is being taken to court.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

Yes, I believe I am being taken to court on this issue. However, I understand that the Commission will be coming forward in due course with its own proposals for a recalculation of mcas. Perhaps we can all agree that that would be the most beneficial thing to do. I have said that I do not regard it as being something that is due to us in any way other than in fairness and in equity. I am delighted to say that one or two other countries are beginning to think the same—for example, France and Ireland.

Photo of Mr John Peyton Mr John Peyton , Yeovil

I shall read with interest in Hansard what the right hon. Gentleman has just said to see whether he has added anything to what we already knew.

It is a matter for slight concern that the right hon. Gentleman, having, as he may see it, been forced to break the rules of the Community that he has just joined, should take the breach of those rules so lightly and flippantly.

I appreciate the point that has been made by one or two of my hon. Friends about isoglucose. However, I think that I share the right hon. Gentleman's reaction. To say that because a new product appears to offer a price advantage to the customer it ought immediately to be stamped on is a reaction of questionable wisdom. I am not far away from agreeing with the right hon. Gentleman on that.

It is important to remember what Mr. Gundelach said about the total effect of these proposals—namely, that the retail price index in this country would be affected to the extent of an increase of 0·7 per cent. The Minister may put it a bit higher, but not all that much It is to be remembered that we are dealing here with intervention and support guide prices, not market prices.

I want to conclude by saying a word or so about—[HON. MEMBERS: "Hear, hear."] That kind of reaction from that kind of quarter is one of the greatest compliments that any man could ever receive. I wish to conclude by saying a word or so about the common agricultural policy.

I believe that there is a danger of a permanent division arising beween those who champion and applaud that policy and those who detest and oppose it. One reason for it is that those who framed it could not think of a better alternative.

I am concerned that we should approach this serious problem in a responsible fashion and attempt to mould the common agricultural policy to the reality of requirements throughout the Community. In particular, we should attempt to introduce flexibility in its arrangements wherever possible. There can be little doubt that, in the light of experience so far, the more detailed and fussy the rules with which the CAP surrounds itself, the more difficult and tiresome will become the lives of those who wish to observe and to make it work and the easier it will be for those who find it convenient as a matter of habit to bend the rules to their own advantage.

6.43 p.m.

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

I beg to move, at the end of the Question to add: 'further urges the Government to press for easier access into the United Kingdom for efficiently produced foodstuffs from outside the EEC; and opposes the EEC Commission's proposals for exclusive use of butterfat and milk proteins, for a prohibitive levy on the production of isoglucose, and for a tax on vegetable and marine fats and oils'. I move the amendment if only because it makes it easier for my right hon. Friend to accept it, as he has already done. I am grateful to him for accepting the amendment. That at least carries us a little further.

I applaud my right hon. Friend's speech and his general attitude to the common agricultural policy. I only wish that we had heard that kind of speech from either Front Bench at any time in the last 10 years.

I am afraid that I cannot pay the same compliment to the right hon. Member for Yeovil (Mr. Peyton). After listening carefully to his speech—I was not one of the interrupters—I am still no nearer to knowing whether he is in favour of or against the CAP.

I think that more and more people in this country are beginning to realise the extent of the economic damage which has been done to us by the common agricultural policy. Indeed, its damage is now so great that mere tinkering with it and mere talk of reform is no longer enough. The only way out which will prevent irreparable damage to this country is to declare clearly that, unless we have drastic reforms by a certain date not too far ahead, we shall have to break free altogether from the CAP.

We are now told that the Milk Marketing Board is contrary to the Treaty of Rome. I hope that my right hon. Friend will make clear in Brussels that, if that is so, it is the Treaty which will have to be amended.

I put this immediate point to my right hon. Friend, which I have already raised with him. There is an opportunity, under Articles 52(3) and 135 of the Treaty of Accession, for us to avoid the further completely unnecessary transitional increases in food prices this year. I know that my right hon. Friend has looked at that question. However, I should like to press him again, in the light of the present level of food prices, to see whether we can here get some relief in accordance with the Treaty.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

That was one of the first things at which I looked. I found very little comfort from the legal viewpoint. In the light of my right hon. Friend's correspondence, I have looked at the matter again. I do not see any way round it. This may sound a bit of an inconsistency, but there does not seem to be any legal loophole. Even if there were, we could not institute it. That would have to be done by the Commission. Either way, I do not see what can be done. I have looked at the matter thoroughly.

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

If my right hon. Friend is right, it appears that one further condition that we were told was going to relieve us of some of the disadvantages of the common agricultural policy and the Treaty of Accession has little substance. I still hope that my right hon. Friend may be wrong.

In any case, it is not enough merely to stop all further increases in the already excessively high CAP prices. Instead of raising them still further by 5 per cent., as the Commission proposes for this country, including the transitional increases, prices should now come down wherever they are well above world prices and where large surpluses consequently exist. EEC prices for virtually every standard foodstuff which is vital to this country are now far above world prices. Indeed, all the propaganda that we had about there being no surplus food in the outside world, and the era of cheap food coming to an end for ever, has been proved to be yet another deception of the public.

According to the Commission's figures on page 98 of its Agricultural Report for the year 1975–76, wheat in the EEC last year cost 25 per cent. to 45 per cent. more than the world price. Maize, which the right hon. Member for Yeovil should know is a major feeding stuff and cost for our farmers, cost 28 per cent. more than the world price. Beef and veal cost 58 per cent. more, milk powder cost 166 per cent. more, and butter cost 220 per cent. more—three times as much as the world price. At present, because of the excellent grain harvests last summer in North America, Russia and India, the gap has become even wider than in 1976.

Take the example of butter to illustrate the price gap. The Commission, with the valuable help of a French Communist millionaire, as we now know, has recently sold thousands of tons of butter not merely to the Soviet Union but to Yugoslavia at about 17p per lb. New Zealand, if she were allowed, could supply us with butter at about 36p per lb. The British consumer is already forced by the levies imposed to pay 50p or more per lb. The EEC price, which we shall be forced to pay if we submit to all the horrors of the CAP within a year or so, is nearer to 70p per lb.

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

I always understate my case, as my hon. Friend knows. It is probably over 70p. That is about five times the price at which butter is now being sold to the Soviet Union and, indeed, to any country outside the EEC that is willing to buy.

I turn to cheese. On New Zealand and Australian cheese, the British consumer, in so far as we are able to import it at all, is now paying a tax of 60 or 70 per cent. We are paying a tax of over 50 per cent. on Canadian wheat. I am advised that is as high as it ever rose under the old Corn Laws before 1846. The tax on maize, which is a major raw material both for British industry and to British agriculture, is virtually as high. The House may be interested to know the latest figures because it is one of the things that explains the increased cost of agriculture to which the right hon. Member for Yeovil referred but did not explain.

Maize can now be landed untaxed in this country for £74 a ton. The levy at present being paid is already £30 a ton and has to go up this year to £49, making a 70 per cent. tax. These taxes on butter, cheese, wheat and maize are at a much higher rate, for instance, than VAT on the general range of many inessential goods.

I now turn to beef. Even after the liberalisation which my right hon. Friend has obtained, and on which I congratulate him, we are now forced to impose a 20 per cent. import duty and a levy on top of that although Australia and Argentina and some other countries can supply us with substantial quantities at low prices. We are raising the price of beef to the consumer by at least 50 per cent.—again I understate my case—more than what we would have to pay if we were not in the EEC.

Photo of Hon. Douglas Hurd Hon. Douglas Hurd , Oxon Mid

I would not quarrel with the right hon. Gentleman's actual figures. But does he not accept that the figures two years ago were different and that the figures in two years' time could again be different? Because we cannot change our agricultural farm policy every two or three years, may I ask the right hon. Gentleman whether, over a period of 15 or 20 years—because of the growth in the world's population and the increasing pressures from the developing world—he really believes those kinds of supplies will prove to be the best friend of the British housewife?

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

If the hon. Gentleman is right in thinking that world prices will be higher, then there is no need for the CAP. All the evidence over the past 20 to 30 years shows that the production of food in the world, particularly feed grains, has on average increased faster than the increase in world population. There is no reason why that should not continue.

I was coming to lamb. In order that the House may judge what would be in store if we adopted what I hope my right hon. Friend will resist—what those in Brussels call a "common sheep meat policy"—the situation now is that New Zealand, if free to do so, could land lamb in this country at a price of about £368 or £370 a ton. The internal EEC price at present is £1,997 a ton—five times as much. I am not saying that New Zealand could land all the lamb that we would wish at that very low price; but, nevertheless, the gap is an incredible one.

The EEC price for sugar also is now far above the world price, as is admitted in the documents that we are discussing, and a sugar mountain is now beginning to build up. The world price for skimmed milk powder is less than half the EEC price. Of course, with these wildly excessive prices we get surpluses. The right hon. Member for Yeovil tried to minimise them by dividing by 250 million. We could break down almost any figure that way. If I applied that to the right hon. Gentleman's income I am sure that he would find that it had a considerable effect.

The actual fact, in plain English, is that we now have 250,000 tons of beef, 250,000 tons of butter and 1,100 million tons of skimmed milk powder in stock. Those surpluses are not there because people are producing too much. They are there because prohibitive prices have prevented the consumer from getting them. We do not want to reduce production. We want to have the production and at a price at which the consumer is able to buy.

Is it not alarming that in the United Kingdom in the past year—my right hon. Friend gave some figures today—the consumption of beef, lamb, butter and milk has actually fallen? Some figures of consumption have fallen to the level of rationing that we were told 30 years ago was such a miserably low standard. That means that the real standard of living for a large section of our population is being unnecessarily lowered because of our membership of the EEC.

If more proof were needed, it is worth looking at what has been happening in the past year in some countries outside the EEC. I wonder whether people realise that in Canada, and in some other countries, wholesale and retail food prices actually fell in 1976. In the United States they rose by only 1·5 per cent., whereas in the EEC as a whole they rose by 14·6 per cent. and in the United Kingdom by 20 per cent.

Nor are we saving public money by having abandoned the deficiency payments and introduced this crazy protectionist policy. In the present year the manoeuvres of the Commission authorities on dairy products alone—my hon. Friend the Parliamentary Secretary used the figures in Brussels yesterday—show that about £1,100 million is being spent out of the EEC budget to which we contribute. Two months ago I was given a figure of £925 million. It has now risen to £1,100 million on dairy products alone.

With the help of the Commission's own price figures of world prices and the EEC prices that I have quoted, one can estimate the cost of the CAP to the balance of payments last year. If we take the actual volume of imports of foodstuffs into the United Kingdom, and the prices that I have quoted, the extra cost of importing our food at EEC prices, rather than at world prices, amounted in 1976 to about £900 million to our balance of payments. By means of the curious green pound and mca temporary devices, we got back about £400 million. If the Minister has a better figure perhaps he can give it to me later. Therefore, as a result of the CAP, there was a net burden of about £500 million. Of course, all the propaganda tells us that we are getting £400 million but we are not told about the £900 million we lose.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

With regard to the £400 million, may I ask my right hon. Friend whether it is not a fact that some of this money goes to the exporters on the Continent, particularly to German and French farmers? Although it may help our prices, it also helps theirs and without it they would have still greater surpluses.

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

That is perfectly true. Accurately, one should not say that we get this. But it is a gain to our balance of payments. And the £500 million net loss to our balance of payments is additional to the £1,100 million deficit on trade with the rest of the EEC on goods other than food which we suffered last year. In addition, I see from the public expenditure White Paper that our net payment to the EEC budget in the current financial year is £447 million. That adds up to a total balance of payments burden arising from EEC membership of about £2,000 million at present.

A very heavy responsibility rests on the shoulders of the right hon. Member for Sidcup (Mr. Heath) who saddled us with the Treaty of Accession which has had these results, and a substantial responsibility also rests on everybody who voted for the European Communities Act.

Coming to the immediate present, in my right hon. Friend's negotiations in Brussels there are three new and rather extraordinary proposals coming forward of which he spoke. I think that it would be as well to be perfectly clear today where we stand in relation to these three extra proposals.

First, because sugar prices are much too high, the Commission threatens to impose a prohibitive tax on this low-cost substitute which we have all learned about in the last few weeks and which is called isoglucose, a product of maize and a very satisfactory substitute, I understand, for sugar. If this were done, British factories recently built would be thrown out of business.

Even the Economist condemned this extraordinary proposal. But it is worth noting that this is a proposal seriously made by the Commission, ridiculous though we may think it to be. Even the Economist condemned it and said that it would be more sensible to reduce the price of sugar. I understand that my right hon. Friend said that the proposal is regarded as unacceptable by the Government of the United Kingdom. I take that to mean that he will not in any circumstances approve of it. It is to my mind an absolutely indefensible proposal of which I hope that we have heard the last.

Secondly, the Commission, because of the muddle it has got into over skimmed milk, now proposes—here I was not quite so sure what my right hon. Friend said—in effect to ban the marketing in the United Kingdom of a range of milk products including skimmed milk powder with added vegetable fat. This proposal would both deprive the consumer of a valuable product and put out of business a whole factory—in this case in Northern Ireland, of all places.

I understand that the Commission calls this particular bright idea the exclusive use of butter fat and milk proteins". This seems to be just another vicious restrictionist device designed to prevent the consumer from being allowed to purchase any product which might compete with some of the stocks which the Commission is trying to get rid of at all costs.

I was not absolutely clear whether my right hon. Friend said that he is also treating this proposal as unacceptable. I hope that he is. If we can be told this firmly before the end of the debate, it will be very satisfactory. However, I imagine that his acceptance of my amendment would make it clear that he is not prepared to agree to this proposal either.

Thirdly, the Commission is still pressing our old friend—or, rather, our old enemy—the ridiculous proposal for a tax on margarine, described as vegetable and marine fats and oils". I understand that my right hon. Friend perfectly clearly undertook that he will not accept this proposal either. If so, that would be another satisfactory result of this debate.

In conclusion, all this shows—both what is happening and what has been threatened—what immense damage is being inflicted on Britain by the common agricultural policy. I believe that the most disastrous result of all is the threat to a satisfactory pay restraint policy in stage 3 of a system which is artificially raising prices to the British consumer by about 50 per cent. above where they really need to be. What folly that is at present. If hon. Members do not accept that from me, I advise them to study the statements made in the past fortnight by the Consumers' Association and the Consumer Council which have made very emphatic representations.

For those reasons, if Britain is to get out of this straitjacket, and achieve real economic recovery, we need now a clear declaration that we cannot be bound and crippled any longer by the ever more damaging proposals which come out from Brussels under the common agricultural policy. Our amendment is intended to strengthen the Minister's hands in his negotiations. I wish him well in them and hope that he will have success on all the points that I have mentioned.

6.6 p.m.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

This important debate will throughout the evening air many of the problems and fears that many of us have about food, agricultural production and the common agricultural policy itself. The Minister's speech, to which I listened very carefully, did not deal with many important points. I think that he should have elaborated far more on the pig industry, particularly as the problems of that industry are so bad.

The Minister also merely touched on the question of co-responsibility, which is crucial. If British farmers have to accept a reduction in the covering of their costs and accept co-responsibility, I do not see why the responsibility should arise twice. British farmers are already paying £9 million this year in promoting the sale of milk and milk products.

The Minister was rather unfair to the agricultural industry in his comments about the cost of food to the consumer. He did not mention the rise in the cost of production to the farmer. He did not tell us of any efforts that he has been making to continue the beef premium, nor did he tell us much about the problems of people in the Community who produce milk simply for intervention. I agree with the many British farmers who believe that there should be a reduction in intervention prices for skimmed milk powder and other things.

In the Select Committee the Minister made a more widely based speech and filled in more gaps, in great contrast to the speech that he made to the House today.

Let no one think that this is an easy problem that can be solved overnight. It is a complicated problem, affecting conflicting interests. Let us consider the attitude of the consumer. She resents the rise in the price of food.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

He and she resent the rise in the cost of food. That is understandable. However, I should sometimes like to be told that the British consumer resents the rise in the cost of motor cars, television sets, and other such items. We never hear any protests from Labour Members about the rise in the cost of those items.

The attitude of the consumer is well understood. She says also that she is not getting as much money to pay for food, because the fall in the standard of living for many people is real. She also resents the high cost of imported food. Who is at fault there? Certainly not the British farmer. It is the Government's economic policies that have meant a fall in the value of the pound. We must not forget that 48 per cent. or more of our food is imported. British agriculture is not the enemy of the consumer; the enemy is the Government, in their economic policies, which have meant a real drop in the value of the pound, with the result that the price of food has gone up. It is no good Members on the Government Benches smiling—they know that what I am saying is true.

The consumer feels very strongly about butter surpluses going to other countries. I could not agree more with the consumer. It is about time that the Community realised that if there are surpluses, consumers within the Community should have the benefit. Sometimes the consumer has to pay very dearly when there is a shortage of some commodity, such as potatoes. At other times, when there is a surplus, she should get the benefit. Schemes should be devised to deal with the surpluses within the Community. If such surpluses cannot be dealt with they should be sold outside the Community, but the consumer inside should be the first to have the advantage.

The consumer must realise, of course, that sometimes there is bound to be overproduction. A farm is not like a factory, where one can control events. Overproduction will happen, and sometimes it is wise to have it—it is good housekeeping.

Farmers feel very sore at present, because the Government have not really lived up to the promises in "Food From Our Own Resources". We saw a 10 per cent. drop in production last year and another 10 per cent. is expected this year. The increase in farmers' costs is running at £895 million, which is an enormous increase. Are not farmers allowed to try to recover their costs, just like manufacturers of motor cars and television sets? Why should the farmer be the only one to bear the increased burdens? Also, his increased burdens have been considerable—fuel costs, for example, which have a lot to do with the Government because of the fall in the value of the pound.

I have heard farmers say that they must have an increase, no matter how small, in the value of the green pound because that would be a show of confidence from the Government. If we do not get some devalution, no matter how small, British farmers will feel that their lack or confidence is justified.

Photo of Hon. John Silkin Hon. John Silkin , Lewisham, Deptford

The hon. Member talks quite rightly of an increase in costs of £895 million. I will not ask him about the drought which affected his constituency. But whatever the reason for the increase—and drought played a part—a figure of £460 mililon, well over half, was due to the increase in cereal costs. Will he tell the House what a 5 per cent. devaluation of the green pound would have added to that £460 million?

Photo of Mr Peter Mills Mr Peter Mills , Devon West

I agree that there would have been an increase, but a small increase would be the token of confidence that British farmers require. No one wants parity but a small increase would give the necessary confidence.

Investment is dropping fast and British agriculture is not in a healthy position. I say to my farming friends—and I said this at Wincanton only last week—that if British farmers think they can ignore the results of over-production and high food prices they do so at their peril. Look what is happening to butter consumption, for example. There is no point in producing butter, even in this country, if it cannot be sold. British farmers must temper their demands with what is actually happening. There is the feeling that we must have restraint. All I ask of the Government is that they should not make it harder for British agriculture by the kind of proposals that we have had, such as tied cottages and taxation. All these measures weaken the confidence of British agriculture.

I turn to the Government's attitude. They are looking at short-term considerations only, not at the long-term issues. I can understand the overriding need for the control of food costs, but the Government do not help themselves with these difficult problems. Our economic position and our high rate of unemployment do not help the situation one little bit. Unemployment is no friend of British agriculture. The economic position that this Government have brought the nation is no friend of the consumer either. I believe that we must do everything we can to try to keep costs down, but we must realise that farmers must cover production costs or at least go a long way to doing so, otherwise production starts to fall. The Government must realise that as a fact of life.

Having watched the Community's track record—and I do not like saying this because I am very pro-Europe—I think that it has not had the guts to tackle its problems. The real problem is that farmers are producing for intervention, and therefore for surplus. I agree with the Minister when he says that it is no good dealing with this problem only through price rises or reductions, and that it is for Government's nationally to deal with their own regional, structural problems. This should be done. It saddens me that the Community fears political reactions, and this stops it from taking steps that should be taken. It does not have the courage to deal with this matter. That is the nub of the problem.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

Earlier, the hon. Member was critical about pigmeat, but the reality of the situation is that the common agricultural policy is at fault.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

I do not agree. I think that the nub of the problem on pigmeat is the fall in the value of the pound and the widening of the gap. The mcas are enormous, and the subsidies given have clobbered our pig industry.

The Minister has done something to help, but it was too late, and the pig industry, particularly the bacon side, will take a long time to recover. I believe that the Community needs to put its house in order in certain areas. I do not believe that we can go on with the CAP in its present form. It must be more flexible. Certainly, when I was going round encouraging my farmers to support it, I always said that it should be flexible enough to meet the problems that arose. We cannot have a rigid policy. There must be a certain amount of national policy within the framework of the CAP.

Some of us were in Paris the other day and we saw signs that French politicians were beginning to attack food costs. Certainly M. Barre did so. They are concerned with certain areas producing only for intervention. I hope, therefore, that within the Community there will be different attitudes, nothing like so rigid as in the past. More flexibility is what is needed. I believe that it can be done, and I hope that, in this price review, this problem will not be fuzzed over. I believe that we have to get at the nub of the problem and deal with it. It needs courage. It will be difficult to do it. I hope that we shall have from the Government a far clearer statement, dealing with these things in the way that I have suggested.

I accept again that it is an extremely difficult equation to try to reconcile these different attitudes, but I believe that it must and can be done. I only hope that we shall have a little more patience from some hon. Members on the Government Benches and that they will consider not only the needs of the consumers but also the frightening problems facing the British food producers.

6.21 p.m.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

The hon. Member for Devon, West (Mr. Mills) will not be altogether surprised if I do not follow him—not least because, if he will forgive me for saying so, I find his arguments muddled.

There is no doubt that this price review is probably one of the most politically important that the Common Market has faced since its inception, particularly because of the impact that prices in the long term have, both on production and on the price of food in the shops.

We are eternally being told that one of the things that the common agricultural policy was designed to do was to protect the income of the producer, to ensure that the consumer would always he protected against food shortages, and to enable the agricultural industry as a whole to undergo certain structural changes in order to move towards greater efficiency. I welcome this opportunity to say, before the price review is completed, that I see not nearly enough movement in any of these directions in this price review. Perhaps Parliament has not yet taken on board the full impact of the political effect that the common agricultural policy is having at present. We are eternally being told that there are those of us who only speak for the consumer, but if there is one thing that frightens me about the policy it is that it does not do what hon. Members opposite who speak for the farming lobby are most concerned to see it do: it does not protect the income of the small farmer, it does not bring about structural changes, and it costs the taxpayer at every level a small fortune, and is continuing to do so.

Let us look at the main body of these proposals, which concern the dairy industry. The dairy industry in the Community as a whole is in gross over-surplus.

One of the reasons is that the units concerned are very small, each with a very small number of dairy cows. Over the years there have been attempts, by using non-marketing premiums and the sort of suggestions contained in this price review, to encourage small farmers to leave the land. It has not happened. It has not made the slightest difference to the dairy industry in real terms.

The British farmer, who has, over the years, had to become more efficient, is not the one who is contributing to the dairy surplus, yet if he endeavours to become more efficient he is told that, far from being able to supply his own consumers with the dairy produce they need at prices they can afford, he will be penalised by the Common Market for going against the general policy decisions of the Commission. That is monstrous nonsense.

The new Commissioner for Agriculture, when he took office, said that the common agricultural policy had been vindicated. Within two weeks he had to seek to change an export move in the butter market because of public revulsion at the idea that, in a Community where many people could not afford to buy butter, we had got ourselves into the absurd situation where in order to get rid of surplus stocks, we had to sell off that very product at uneconomical rates to nations outside the Community, just because the butter was deteriorating at the rate of 30 per cent. a year and would soon have to be shifted one way or another.

What is happening in this price review? We see the same negative response. We see the same suggestion that, although people cannot afford to buy butter, the Commission will nevertheless put a levy on margarine and vegetable oils to make it more difficult for the consumers to buy them. Again, because the Commission thinks that there is going to be an overproduction of sugar, it is to take action against isoglucose, which is not even a defensible challenge to the sugar market, since it is only used by manufacturers of foods because it happens to be in liquid form and can easily be used in manufacture. We see suggestions for non-marketing premia in that case, although with no careful assessment of the effects. We see the suggestion that we should, perhaps, even move back towards the subsidy system for the marketing of butter.

How absurd it is that, as a nation, we did away, on our entry into the Community, with our whole system of food subsidies, only to be told now by the Commission that, because it happens to be politically useful at present, perhaps, we should subsidise the sale of butter, with a certain amount of assistance from the Commission, because that will get it off an unpleasant political hook. This is not political planning or economic sense, and it is not defensible. The situation has to be seen in all its magnificent absurdity.

The policy forces the taxpayer to pay when food goes into intervention after a certain level. It forces the taxpayer to pay to maintain that food in intervention at very considerable cost. It is then decided to export the food because that is the only way to get it off our market, and the taxpayer is forced to pay yet again, this time for export subsidies. Meanwhile, in the shops, the very people who as taxpayers are supporting this bizarre policy are having to pay for the goods five times the price they need pay under a normal and a balanced system.

If anyone thinks that there is political will to change that policy, I point out one thing. In this country we have the Milk Marketing Board. It was brought in precisely because at a certain time the income of the farmer and the interests of the consumer needed to be equally safeguarded. The Commission's attitude towards the Board is plain. It has been voiced more than once. The Commission says "This machinery is not acceptable because it contravenes the Treaty of Rome, and because it does so the Board must disappear." What, then, we ask, being the poor simple little creatures that we are, is the alternative suggestion? Answer comes there none. Indeed, the hon. Member for Norfolk, North (Mr. Howell) was beaten to his knees for daring to suggest in the European Assembly that the Commission should look at the whole question of the Milk Marketing Board to see whether it did not produce the sort of pattern for the future which would enable us to balance consumer interests with the whole question of production. That has not been acceptable to the Commission at any point.

The reality of the common agricultural policy—and it needs to be discussed in this House far more often than it is—is that it is geared at present towards keeping the small and inefficient farming unit going simply by seeking to find prices that are acceptable to those farmers; that it offers open-ended subsidies to all sorts of sectoral interests, such as tobacco growers in southern Italy, lemon growers and silkworm cocoon growers; and that it offers absurd and immediate remedies for situations in wine and olive oil production which cannot be defended. Never at any point does it produce a sound and sensible policy which can be defended to the consumers within the Community. We cannot continue in the way that we are going. The CAP must not be allowed to remain untouched.

There is no evidence of any political will inside the Community to bring about the radical changes which only will save us. I say this because I believe that the pressures on Britain to revalue the rate of the green pound owes little to the desire to see structural change in the Common Market or the achievement of common prices, but much more to a desire to open up markets that are easily organised and easily available. The attitude of the Community as a whole is that it must take temporary measures, always in a negative sense, to try to redress the position that the policy itself has created and will continue to create.

The price mechanism is not the only thing that will affect the future of agriculture, but it is one of the basic things, because farmers will change their forward planning in accordance with this year's price review. The consumer will be forced to buy less and less of more expensive products.

In the final analysis, the Community itself will be faced with such political pressure that all of us as politicians will no longer be able to come to the House and say that the policy must be changed: the pressure on us and on our constituents will be so great that the whole thing will fall apart almost in front of our eyes.

I say to my right hon. Friend the Minister that perhaps one of his greatest abilities is to speak plainly, as he has spoken plainly, about the real implications of the CAP; and he has sought, for once, to put them in terms that are understandable to the Members not only of this Parliament but to the Community as a whole. In doing so he is performing an immeasurably valuable service.

I do not envy him his task. However, if he fails, and does not bring about very radical and revolutionary changes in the CAP in the next 12 months, there will not be just a problem of what the consumer pays. If unforgivable political pressure is put on people in the Community they will respond in a violent way. It is not the first time that people have regarded the price they pay for food, especially for staple foods, as one of the most important questions in the political spectrum. It is an attitude that they have taken before and will take again. I never thought that in this country we would be faced with this reality and this political difficulty. The lead must come from here. Unless these changes come about, the political consequences of the CAP will be far greater than many hon. Members are yet prepared to accept.

6.33 p.m.

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

I have listened with interest to the debate, from which one thing is clear. Members on both sides agree that major reform is required in the CAP in the next 12 months if agriculture is to survive in this country.

I congratulate the Minister, as I have done previously, on his stand on behalf of the pig industry. I was delighted that he stood firm, and I hope that he will do so again with other commodities. During the last six months I have read with interest of the way in which consumers have been trying to persuade our agriculture Ministers not to increase food prices. I received a letter for the first time from the National Consumer Council, dated 9th March, and I am sure that many other hon. Members received similar letters. The letter states: Dear Mr. Howells, EEC food prices are too high. So major United Kingdom consumer organisations have joined together for the first time to lobby Members of Parliament on the European Commission's farm price proposals for 1977–78. I am sorry that the day has come when consumers are opposing price increases in this country.

I have also read in many agricultural papers recently that our present Minister of Agriculture is consumer-oriented. We have read that the EEC Commissioner for Agriculture is consumer-oriented and that the previous Commissioner was producer-oriented. It is up to the Minister to defend himself one way or the other.

I believe that we should have two Ministers on the Front Bench—I know that we have three agriculture Ministers—one responsible for agriculture and another responsible for food, although I do not know whether that will ever come about—[An HON. MEMBER: "Fisheries."] Perhaps we could have a separate Minister for fisheries as well.

I declare my interest in the subject. I am very worried that at present in this country production is on the decrease, consumption is on the decrease, and, worst of all, we waste 20 per cent. of the food that we produce. A great deal of homework will have to be done in the near future.

Photo of Mr Leslie Spriggs Mr Leslie Spriggs , St Helens

The hon. Gentleman has told my right hon. Friend the Minister that a change in the CAP will have to take place in the next 12 months. Is he aware that we cannot change the Treaty of Rome unless France and other beneficiary countries agree? They have the power of veto, and they will use that power of veto to stop any change.

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

I agree with the sentiments of the hon. Member for St. Helens (Mr. Spriggs) but I think that there is something more important than a veto, namely, influence. I believe that the British Government and British agriculture, of which we are so proud, will be able to influence not only the Commissioners in Brussels but our counterparts producing food in Europe. If we could persuade them to come to this country and see how our marketing system operates in comparison with their own, they would learn a great deal.

The biggest mistake that we ever made was to do away with the guaranteed price deficiency payments, which operated so well in the past 20 or 30 years. There is no point in arguing whether we voted for or against entry into Europe. The previous Government did the damage by doing away with the guaranteed price system that had operated successfully in this country. We still have a guaranteed price system for lamb and sheep. The intervention system of buying must be scrapped. I hope that the Minister will stand firm on that point.

The hoarding of meat is old-fashioned. Meat was hoarded in biblical times. Meat should not be put in cold store for months at a time. In the last two or three years we have lost the guaranteed price system for beef, we have lost the beef cow subsidy, we have lost the lime subsidy, and we are about to lose our boards.

If a milk marketing board such as ours were operating in Europe there would be no surplus of butter or milk. I still believe that not one European country is over-producing any commodity, including milk. The main reason why food is being put into store is that it is being sold at too high a price in France. If butter and milk were sold at a reasonable price there would be no over-production of butter in France. Therefore, let us try to persuade our counterparts to abandon the intervention system that operates in Europe. I advise the Minister to stand firm and to refuse to accept any more directives and orders from the EEC.

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

The hon. Member must be patient. I know that he wishes to speak.

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

I think that the trouble lies in the way that the hon. Member for Cardigan (Mr. Howells) is holding his papers. He gave the hon. Member for Bradford, South (Mr. Torney) the impression that he was on the last page of his notes, which was why the hon. Member sought to rush in.

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

I turn now to the documents in question. They deal with an appraisal of the agricultural situation in 1976 and they serve as a basis for the 1977 price review. Several recommendations are made by the Commission for 1977. The British Government do not agree with all the proposals. The three most important areas dealt with are milk, beef and pigs. One of the Commission's main recommendations is for the devaluation of the green pound. Both the National Farmers' Union and the Farmers' Union in Wales agree with the necessity for that step. The right hon. Gentleman says, however, that the Government's position is that a change in the value of the green pound can be made only in the overall national interest, and I agree with those remarks.

Various proposals concerning changes in the prices of certain commodities are especially important because of the price review. The most important part of the documents, however, relates to the policy implications involved in implementation of the recommendations. Two particular proposals are especially important. They are the devaluation of the green pound and the likely abolition of our marketing boards, particularly the Milk Marketing Board. Here, I declare my interest as vice-chairman of one of the marketing boards, which I hope we shall be able to retain.

One gets the impression from examining these documents that a complete reappraisal of the CAP is needed, that there must be a fresh look at its aims, its direction and its application to British agriculture. British agriculture is far from healthy. Farmers all over Britain are disillusioned with the lack of help that they are getting in their work—work which is crucial not only to the British economy, because of its importance to the balance of payments through providing alternatives to imported food, but because if British farmers are unable to produce food for our people Britain will be short of food.

If we want the land to feed us we must feed the land. This debate is part of a general continuing appraisal of Britain's agriculture and of the CAP, and I welcome it for that reason. However, we want something more than an occasional debate on agriculture when a price review is on the horizon and when there is nothing more pressing for the House to discuss. I should like a Select Committee on agriculture to be established, its terms of reference being to give priority to the British marketing procedure, the green currencies and Britain's rôle in the CAP.

Such a Committee would be able to keep abreast of the numerous directives emanating from Brussels far more effectively than the House can do. It would be able to consider at length such matters as the delicate balance of consumer and producer interest. It could consider a suggestion that I made recently that the whole of Wales should be a "less-favoured area" under the definition of the Commission. It could also consider the viability of the present marketing systems in use in the Community. It could also seriously consider whether the CAP should be—

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

No, not scrapped; we need a CAP. My right hon. and hon. Friends have for long called for a fundamental reform of the CAP, and we do so again now.

One of the greatest failures of the CAP has been its inability to achieve a sensible and rational pricing policy. The present policy is inflexible, and that is where its weaknesses lie. It is nothing short of criminal that butter should be sold off cheap to the USSR when it is so expensive in British shops that many of our people are having to buy margarine. EEC prices should be made more flexible in order to allow for fluctuating supply and demand while at the same time maintaining adequate prices for producers.

My colleagues and I have long argued that EEC prices should be brought into line with world prices. That would help to even out some of the worst discrepancies in European prices.

Photo of Mr Richard Body Mr Richard Body , Holland with Boston

Since the hon. Member is expressing the view of his party, will he say whether on this occasion he and his colleagues will support the amendment in the name of the right hon. Member for Battersea, North (Mr. Jay) which begins by urging the Government to press for easier access into the United Kingdom for efficiently produced foodstuffs from outside the EEC".

Photo of Mr Myer Galpern Mr Myer Galpern , Glasgow Shettleston

Order. I wonder whether, before the hon. Member for Cardigan (Mr. Howells) resumes his speech, he would be good enough to move slightly to his left. He seems to be standing on a creaking floorboard and the noise is being amplified through the system and is disturbing us. I am serious about this. Will he please move off the creaking floorboard?

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

I shall take your advice, Mr. Deputy Speaker, and I shall also begin a diet tomorrow.

May I reply to the question from the hon. Member for Holland with Boston (Mr. Body)? I can assure him that we support the amendment.

The sooner there is a European Parliament which has increased moral authority resulting from its consisting of directly elected members the sooner we shall have a proper forum in which to thrash out these problems and in which our views will have a chance of being heard.

Photo of Gwyneth Dunwoody Gwyneth Dunwoody , Crewe

Does the hon. Member accept that if he had just spent two days in the agriculture committee in Europe, as I have, he might not be so firmly of the opinion that the European Parliament will necessarily mean any change in the CAP?

Photo of Mr Geraint Howells Mr Geraint Howells , Cardigan

I accept the hon. Lady's views, but I believe that many changes can be made to the CAP. The Minister has stood firm on one or two occasions and I am convinced that he will do so again, so that the future of British agriculture will be sound and, given the right incentives, will be able to supply consumers in this country with food at reasonable prices.

6.49 p.m.

Photo of Mr Thomas Torney Mr Thomas Torney , Bradford South

First, I congratulate my right hon. Friend the Minister for the stand he has been taking against almost immeasurable odds. In case he intends going off for his dinner shortly I propose to make the end of my speech now. I want to appeal to him to do something more—dare I say?—at United Kingdom Cabinet level about the stupidity and hopelessness of the CAP. Hard and effective as his work in Brussels may be, it alone is not sufficient. The entire British Government should make it clear that if there is not a fundamental change in the CAP, or if it is not scrapped, assuming that fundamental change cannot be made, this country will be compelled to take unilateral action. This is the type of matter that should be discussed at Cabinet level.

I do not know whether my right hon. Friend noticed that I made one or two comments in the Press about the butter scandal. Since then I have been inundated with letters and approaches from many people—even in the streets—supporting what I said. Those people were shocked that butter was being sold off so cheaply to a foreign country when we have to pay greatly inflated prices in the shops. They imagined that our Minister or Government could change that. The mass of the British people are working themselves up to a tremendous feeling about the activities of the CAP, not only in connection with the butter scandal. The Government should take heed of that.

From the letters and approaches that have been made to me it is clear that the mass of the British people did not understand that when they voted for our remaining in the Common Market they were voting away their right to opt out of an activity that is so utterly stupid.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

The hon. Member advised the Cabinet to be unanimous. Would it not strengthen the matter if Parliament as a whole discussed the system and voted upon it so that those who support that ridiculous system can stand up and be counted?

Photo of Mr Thomas Torney Mr Thomas Torney , Bradford South

I agree with the hon. Member for Banbury (Mr. Marten). That would be a good idea.

During the butter scandal some hon. Members and I signed a motion condemning the EEC's action and calling for a basic change in the common agricultural policy. That motion was signed by over 100 hon. Members from both sides of the House, and some of them were those who supported our entry into, and our remaining in, the Common Market. The suggestion of the hon. Member for Banbury would probably have an even greater impact, and I commend that suggestion to my right hon. Friend.

It is incredible that the Opposition, when in Government, took us into the Market and that my own Government agreed to our remaining in, when the slightest examination should have made clear that the type of activities that are now taking place would occur. We are now experiencing the butter mountain. Before that it was beef; before that, butter; and before that, wine. That situation is bound to exist under the present policy. I cannot understand why seemingly honest, sincere members of the Conservative Government, and some of my own Front Bench, could not see what would happen. They may well have deluded themselves into believing that they could negotiate a change in the CAP.

I do not believe that that is possible. Let us examine why it is not possible. The fundamental defect in the policy is that it was designed before we entered the Market. It was designed primarily for nations that are mainly self-supporting in food. Everybody knew that when we argued about entering the Common Market. Everybody knew that we produced about only 50 per cent. of our own food. That is why our prices have shot up, and will continue to do so till the Community level is reached. Before entry to the Community we bought half of our food in the markets of the world, not in the Common Market.

My right hon. Friend the Member for Battersea, North (Mr. Jay) said earlier that New Zealand could supply us with large quantities of butter at less than half the price our housewives are paying now. That is true. Yesterday I spoke to the New Zealand shadow Minister for Agriculture. He pleaded with me to help to increase the amount of butter imported into Britain from his country. He said precisely what my right hon. Friend for Battersea, North said earlier—that New Zealand could supply butter much cheaper than we can buy or sell it under Common Market instructions.

The basic principle was wrong and we should never have entered the Common Market knowing that we produce only half of our own food and that the original Six nations of the Community wanted to protect themselves because they are mainly self-supporting. French agriculture and much of the Community agriculture outside Britain is grossly inefficient. About 1½ million farms in the Common Market countries, and many in France, have 10 cows or fewer. Surpluses are created and prices are fixed on the basis of that type of inefficiency.

There is also a political issue involved. The farmers represent an important part of the electorate in France. France will never agree to the conditions that we and our Minister want because that would put their votes at elections in jeopardy. That is why I say that we must be forceful both in the Cabinet and in the House.

Far be it from me to say "I told you so", but through speeches in the House or through the publicity in the Press given to those speeches, the British people must be made to understand that the responsibility for the present malaise is clearly on the shoulders of the electorate who, perhaps through a misunderstanding, agreed to remain in the Common Market, and upon those on the Front Benches who agreed to our entering and remaining in. I find it difficult to believe that the latter had so much misunderstanding about all this, as the mass of the British people, according to the letters that I am receiving, so obviously had.

There is a great crescenda of feeling in the country. I go along with one of my hon. Friends who was hinting that if something like this comes out again, if there is another massive sale of butter, beef or something else to a foreign country, Russia, or the oil-producing countries—some of the butter has gone there—and if it is sold at a fraction of the price that our wives are having to pay in British shops, there will be trouble in this country. We are not paying merely through the nose but through the ears and the eyes as well. That cannot be stated too often. We pay taxes to keep food in intervention. We pay taxes for the inefficient farmers who are being subsidised in producing this stuff so that it can go into intervention. When there are full stocks in intervention and we have to get rid of them, we pay taxes to sell them to Russia or somewhere else, and at the same time we sell them in our shops at tip-top prices.

When I and many of my hon. Friends were trying to persuade people to vote to come out of the Common Market, perhaps one of our propaganda efforts should have been this: "The CAP means that you do not produce food to eat but produce it to put in store." To me, nothing could be more stupid and ludicrous. We must somehow take firm action to change the policy. It is not at all a matter of "stinking fish" or of some of us feeling aggrieved because we lost the battle over the Common Market. It is nonsense.

It involves the economy of our country. We all know that shortly there will be talks, if they are not going on already, on another phase of pay policy. Success in such talks will affect our economic situation. Both sides of the House can agree about that. Any success that can come out of those talks must be governed by the cost of living, but in one fell swoop the cost of food will jump by 2 per cent. for the mere coming into line with CAP prices. Then, if the Commission's proposals are adopted, in another fell swoop we shall have another 2 per cent. put on our food prices. This makes a 4 per cent. increase, and 17p on top of the already high price of butter. If that is not stupidity, I do not know what is. For cheese I think that the increase is Sp in the transition and 4½p for the overall increase required by the CAP—9½p. One could go on in relation to eggs, bacon, pork and sugar, the prices of all of which will rise because of the stupidity of this policy.

I must comment on the Milk Marketing Board. Only at the end of last week, a group of Labour Members went to the Dairy Council so that it could talk to us about milk. It was complaining, very rightly, that the removal of our subsidies on milk had caused sales problems. Less milk was being sold. The Dairy Council was appealing to us to do something about restoring free milk in schools—a good point. It was appealing to us to publicise the existing rights of people in need to get free milk through the various social service benefits. It was very concerned about the suggestion that the Milk Marketing Board may be abolished by the Common Market rules, and that we may even lose our doorstep deliveries.

Here I must declare an interest. I am sponsored by the Union of Shop, Distributive and Allied Workers, which is the main union covering the lads and lasses who deliver milk to our doorsteps. The supply of milk on the doorstep to the housewife is an institution. It gives work to many thousands of people. Above all, it keeps our sales of liquid milk high. British sales are not absolutely the highest, but they are fairly high. There would certainly be a slump in liquid milk sales if we were forced to discontinue our doorstep supplies and if our Milk Marketing Board were abolished.

It is obvious to me, from the speeches that I have heard today and in previous agriculture debates, that there is a great body of opinion in the House that will fight tooth and nail to stop the Common Market interfering with our Milk Marketing Board. My right hon. Friend the Minister, far from allowing its abolition, should be going to Brussels to extol the advantages, not only over a short time but over a great number of years, that the Milk Marketing Board has given to our dairy industry and, indeed, to the agricultural production side of the industry. If we can do nothing else, we should be telling the rest of the Common Market that we would willingly show our system to it and that its adoption throughout the Common Market would be of benefit in helping with the tremendous surpluses.

However, the major effort to avoid the surpluses is to take the inefficiency out of Common Market farming—not British farming, which is efficient. Our dairy farming is most efficient. We have the right climate, and so on. We must take the inefficiency out of farming in France and other countries.

That reminds me of another stupidity of the Common Market—oranges. Lemons have been mentioned, but I mention oranges. The oranges we eat are supplied mainly by Israel, Spain and Africa. Less than half of 1 per cent. are supplied by Italy, but the price that we have to pay for our oranges is dictated by that half of 1 per cent. that we get from Italy because Italy is in the Common Market. Production in Italy is grossly inefficient. Italian prices are higher than those in the rest of the world. That is another utter stupidity of the CAP.

Photo of Mr Neil Marten Mr Neil Marten , Banbury

The hon. Gentleman has been saying that the CAP must be completely changed. I say that the CAP should be scrapped; he says that it should be changed. Is he not aware of a broadcast by President Pompidou who said, I understand, that, unlike his predecessor, General de Gaulle, who said "Non" to us about our entry, he allowed us to enter provided that we did not radically change the CAP? Is that not so?

Photo of Mr Thomas Torney Mr Thomas Torney , Bradford South

I am not aware of that statement but I fully accept what the hon. Gentleman says. It reinforces what I and other hon. Members have said—that there is very little chance of getting change by the kid-glove method. Hence the fact that we must be more forceful.

That is perhaps a closing note for me to put to the Minister, as I commenced. We really must be more forceful, and we must get the backing of a vote in the House, because on the CAP aspect of the Common Market there would be a very different vote now from that which took place when we voted to enter the Common Market. That should strengthen the arm of my right hon. Friend when he goes to Brussels and to the Cabinet to demand the kind of action I have been trying to demand today.

7.10 p.m.

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Angus North and Mearns

The hon. Member for Bradford, South (Mr. Torrey) was correct in at least one thing. He said that the Minister would not be able to stay for the whole of his speech and that has happened. The hon. Gentleman said that he would make his speech back to front to accommodate the Minister, who had to leave. I am disappointed that he left. I wantd to start by commenting on the Minister's speech, but I quite understand why he is not present.

I take exception to what the hon. Member for Bradford, South said about less efficient producers in other countries. If we believe in being international, we should be interested in those producers. The part we play in forming policy can show that we are concerned as well. One of the significant things about entering Europe—although some hon. Members may take a different view of our own interests—is that the British farmers, through membership of COPA, the union which embraces all farmers throughout Europe, have been prepared to take an interest in producers in other countries, some of whom are less well off and less efficient than ours. They have shown an international attitude and outlook which is an encouraging result of our entering the European Community.

I should like to take up a number of points from the Minister's speech and I shall be grateful if the Under-Secretary would take note of them. First, the Minister said—I accept that he is responsible for food as well as agriculture—that high prices are not necessarily in the farmers' interests. He is right in that. To some extent this has effected consumption. But the Minister should not emphasise that alone. He mentioned pork, but relative to other commodities the price of pork has fallen and consumption has increased. He must remember that, although consumption may have increased, production is falling. Although for a short time the consumer may have certain advantages, the Minister has the responsibility for the availability of supplies later. To be fair, he must look at that as a whole.

The Minister also mentioned the green pound. In this I support my hon. Friend the Member for Devon, West (Mr. Mills) who made one of the most effective and powerful speeches in this debate. As he said, adjustments of the green pound are fundamental to the economics of our farming industry. But no one is saying that we should adjust in one. The Minister must realise that responsibility for the green pound—there is now a tremendous gap in the value of the currencies—lies not with the farmers but with the Government through their economic policy. The Government must take that responsibility.

That is the reason why the farming community is so frustrated and dissatisfied at present. It is no use saying we cannot do this. The farmers can do nothing to help towards it. They are relying on the Minister of Agriculture to help them in the position in which they are placed, not through their fault but through Government policies.

The Minister was absolutely right to say that in applying proposals which the Community put forward to restrict some of the commodities in surplus, such as dairy products, we should not necessarily apply them right across the board to every country in the same way. I ask him to practise the same flexibility which he asks the Community to practise. His inflexibility and unwillingness to carry out some of the adjustments necessary, for example, in relation to the currency, are making the Community much harder in its attitude towards some of the things our Government rightly want to achieve. When he is asking the Community to be flexible, the Minister should realise that flexibility is a two-sided thing. He must be flexible as well.

Another point in the Minister's speech, a small one and one in which I have a direct interest, relates to retailing milk. I was interested in the tribute the Minister paid to the important part played by the milk distribution industry and the Milk Marketing Board. With respect to the Milk Marketing Board, when it comes to putting the milk on the doorstep the responsibility for distribution lies with the countless large and small firms up and down the country and individual enterprises.

I ask the Minister to take one small and more limited point. I had not intended to make it until I heard what the Minister said. I ask him to remember that those in the liquid milk distribution industry are facing a difficult time, as is everyone else. Their margin is fixed by negotiation with the Government. They have no control over the price. Theirs is the only industry in the country whose margin is totally controlled by the Government.

I do not know what the position is in England and Wales but in Scotland there is considerable worry and concern about the way the margin for the distribution of milk is worked. I do not want to make a big point of this, but if the Minister is sincere in his desire to encourage the sale of liquid milk in this country, I ask him to look at the Scottish situation. The situation may be the same south of the Border. Soon in Scotland the compulsory sale of pasteurised milk will he introduced, unless it is brucellosis-free. In a few years' time it will be possible to sell only pasteurised milk in liquid form.

In country areas, small producer-retailers and small retailers will face much higher costs. In most cases, if they sell, as they do in Scotland, a premium graded milk, subjected to far higher health standards, they will see a reduction in the price that they can charge because that grade of milk will soon disappear and they will have to sell pasteurised milk. The expenditure to do that will be higher than at present. I ask the Minister to look at this and to pay attention to the liquid milk distributor, if he is sincere in encouraging the sale of liquid milk.

My main point concerns the crisis which the pig industry in Britain is facing at present. The industry has gone through many difficult times in the past but it is now facing the worst for nearly 10 years. In that industry there is a realisation and understanding that it is, and always has been, subjected to cyclical changes. Sometimes, there are good returns, at others there are losses. What marks the present situation off from the difficulties of the past is that the trough is deeper and to some extent much more prolonged than almost any period of low prices and low returns that the pig industry has ever gone through in recent years.

I welcome the contribution the Government made to the industry with the temporary subsidy introduced in January. That is a useful and helpful measure. I have been looking at the figures and prices for pig production in Scotland from 20th January, when the subsidy was introduced, to 10th March. Bacon prices were £6·36 a score on 20th January. On 10th March, they were £5·94 a score, so the subsidy had been more than eliminated by the fall in price. The price for cutter pigs, which are the main contract for pigs in Scotland, was down from £6·24 to £5·88. The price paid by Lawson's Bacon Factory in the constituency of my hon. Friend the Member for Aberdeenshire, West (Mr. Fairgrieve) who has been making strong representations about it—this is the price which most affects my constituents, from whom I have had direct representations in the last few days—dropped from £6·24 to £5·74.

Photo of Mr Russell Fairgrieve Mr Russell Fairgrieve , Aberdeenshire West

Since my hon. Friend has mentioned my constituency, in which Lawson's is situated, does he appreciate also that the present industrial worries and troubles in that factory are connected with the lack of morale arising from this situation, and that through-put in the factory is now down by a third?

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Angus North and Mearns

I am grateful for that intervention; there are other serious difficulties facing that factory.

The figures that I have have been given to me by producers in the North-East of Scotland and in my constituency. The Convenor of the Pigs Committee of the Scottish NFU, Mr. Cargill, is a constituent of mine and I had the figures verified this morning. They show that even the temporary marginal help which the Government gave in January has been more than eroded as a result of the fall in price in the following two months.

The position in Scotland is not quite as bad as in the United Kingdom as a whole, but the official figures of the Meat and Livestock Commission showed a net loss on the net margin of £1·62 per pig. It improved marginally in February as a result of the Government's action, but in March, because of the fall in the price of pigs, producers are now facing a similar net loss to that in January.

What effect is all this having on the industry? I mentioned the relationship between prices and production. From 7th August until early March this year—it was in early August that the MLC costing figures first showed the pig industry production side going into unprofitability—the numbers of sows and boars slaughtered have increased by 28 per cent. compared with the similar period 12 months before. On weekly United Kingdom figures, we find that in the week ending 12th March 1976, slaughterings totalled 6,500, compared with 10,000 in the same week this year—an increase of more than 50 per cent. It is no wonder that the leaders of the Scottish pig industry have asked whether this trend represents the forced destruction of the pig breeding herd in the United Kingdom.

I have painted the picture fairly starkly, but these figures are substantiated by responsible official bodies in Scotland. My real question is, what is being done? I have put the case strongly so as to strengthen the Government's arm—I was encouraged by what the Minister said—in their attempts to change the basis of the pigmeat mcas. If we could change from the intervention price basis to a cereals price basis, that could help to alleviate the problem in the short term. I hope that any action will be taken quickly.

We can get far too emotional, in some cases hysterical, about surpluses. I strongly endorse what my hon. Friend the Member for Mid-Oxon (Mr. Hurd) said. If we had not been working the surpluses, if we had not had the CAP in 1974–75, and, through our membership of the Community, access to its food supplies, we should have paid far more for our food.

As my right hon. Friend the Member for Yeovil (Mr. Peyton) said, we must get this matter into perspective. The so-called mountains amount only to a few days' or weeks' supply when set against the total resources of the Community.

Photo of Mr John Lee Mr John Lee , Birmingham Handsworth

Dealing with just one aspect of the accumulation of surpluses, does the hon. Gentleman think that it contributes to the well-being of the Community and the sustaining of a proper food supply that in many cases the food which is accumulated is denatured and downgraded, for example as feeding stuffs?

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Angus North and Mearns

Yes, I do believe that it contributes and that the basis of the CAP in budgeting for a surplus is correct. In some of its application it is wrong and needs reform, but the fundamental thinking behind it is right. All Governments have a responsibility not only for the price of food but also for the security and continuity of food supply.

When we go through periods, as we have recently and will again when food is in short supply, unless there is some budgeting for surpluses, the consumer is held to ransom. The housewives of this country, for example, were held to ransom over the price of potatoes, simply because our potato producers were not getting the encouragement they deserved. Because the Government of which I was a member in 1973–74 did not give this encouragement and production was cut back—it was due also to weather problems, of course—the consumers were held to ransom. There is nothing wrong or immoral about budgeting for surpluses if one intends to fulfil the responsibility for continuity and security of supply.

Photo of Mr Bryan Gould Mr Bryan Gould , Southampton, Test

Would the hon. Gentleman not agree that the price of potatoes was eventually reduced to the consumer by a relaxation of the Community rules to allow imports from cheap producers outside the Community?

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Angus North and Mearns

Potatoes, of course, are not covered by the CAP, yet the consumer was held to ransom. There is a lot of confusion over this matter, with many people blaming the CAP for the potato problem. That is not fair, considering the production background in this country.

Photo of Gavin Strang Gavin Strang , Edinburgh East

My hon. Friend the Member for Southampton, Test (Mr. Gould) is right to this extent—that, although there is not a common regime for potatoes, there is a common external tariff. That tariff is at present suspended and only yesterday I was asking in the Council of Ministers whether that suspension could be extended even further, into April.

Photo of Mr Alick Buchanan-Smith Mr Alick Buchanan-Smith , Angus North and Mearns

I am grateful. I apologise if I misled the House. Potatoes are not covered by the CAP but they are covered by the common external tariff. The Minister's intervention underlines the Community's flexibility in meeting situations like that.

One would be very foolish to condemn the Community simply on the grounds of the CAP. Its benefits go far wider—into politics, defence and so on. I believe in the fundamental basis of the CAP, of budgeting for a surplus. We must of course always be ready to reform it and to make it more realistic. As one who believes in Europe, I would say that if the Community and the Council of Ministers do not show themselves flexible and prepared to reform sensibly, the EEC will fail in the longer term. It is a test of the Community to show that it is prepared to reform the CAP sensibly.

It may be that at the end of the day we should not look at this simply in terms of intervention and of storing up surpluses. I am flexible on this. Maybe we should look at such methods as intervention for commodities that can be stored. For other perishable commodities the deficiency payments system may be right. The common agricultural policy and its deficiencies have become a pawn in this political game that is played by those who are for or against the Common Market. Producers and farmers want to get on with the job of producing food. Promises and encouragement were held out to them by the Government in the White Paper "Food from Our Own Resources". All that they and I ask is that the farmers of this country should be given the opportunity of getting on with the job.

7.31 p.m.

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

I shall attempt to be reasonably brief. A remarkable document has been produced for hon. Members by the National Consumer Council in association with the Consumers Association. It says: The Commission's proposals include an average increase in CAP farm prices of 3 per cent.; a devaluation of the Green Pound of nearly 6 per cent.; and a number of devices to fulfil the objective of maintaining producers' incomes. In addition, the UK is committed to completing 'transition' this year. Transition is the step-by-step raising of prices to full European levels, a process we agreed to when we joined the Common Market.The overall result with transition would be to push up food prices in the shops this year by 4 per cent.—£600 million on consumers' expenditure on food, or about 70p on a family's weekly food bill. This is over and above increases due to general inflation. For example, transition will add 12p to the cost of 1 lb of butter, green pound devalution of 6 per cent. will add 3p, and the 1977 proposed price increase will add another 1½p, giving a total extra increase this year on the price of butter of 16½p.

Some hon. Members, especially the right hon. Member for Yeovil (Mr. Peyton), have said today that they blame the present situation on the Government's mishandling of the economy, but part of the problem is the fact that we are in the Common Market anyway. Since that is so, it should be recalled that one of the promises held out to us at the time of joining was that our overall economic position would improve. It brings a hollow and cynical smile to many of us who fundamentally disagreed with joining the EEC when we realise that the basic terms and promises that were held out in order to induce people to agree to our going into the Common Market have not materialised. Instead, this old excuse is being used.

I welcome what the consumers' associations have done. One of the 19 organisations associated with this document is the National Federation of Women's Institutes. It represents producers' as well as consumers' interests. I am sure that hon. Members on the other side of the House realise that the Women's Institutes of this country are largely made up of farmers' wives. They have associated themselves with this document which says that food price rises should not be tolerated. They know the difficulties that their husbands face.

The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) waxed lyrical and produced documents to show what the pig producers are getting. I do not dispute that figure. But I wonder where the hon. Member was when the Minister was weekly having questions put to him on this matter. The Minister said that he was trying to renegotiate mcas under the present régime. The hon. Member for North Angus and Mearns finds satisfaction in the fact that the Minister has revealed that he is still trying to do it. But now that we are in the Common Market, we find that if something does not suit other member States they can discourage speedy negotiations. It is all very well for the hon. Member for North Angus and Mearns to speak as he did about pigmeat and then expect the Minister to go to Europe and to bang on the table, but my right hon. Friend has no strength in his arm then and must try to find agreement.

During debates in the House on pig meat, the Minister has repeatedly said that he is seeking urgently to have mcas altered. That is still the position. Hon. Members who wished to go into this absurd system now shake their fists and say that the Minister is not doing enough. There is another alternative, and I have the right to press it on the Minister. He can take arbitrary action and go it alone. That is exactly what the Minister has had to do in the end. Hon. Members should not advocate the principle of the Common Market and everything that it entailed—and that includes CAP—and then criticise the Minister. Do they want him to take more arbitrary acts of that kind? It is a logical position for me who does not believe in the efficiency of the CAP anyway, but if hon. Members, including the right hon. Member for Yeovil, want to criticise the Minister on pigmeat or anything else, they should have the courage, when challenged, to suggest alternative policies, to say that CAP is a disaster, and that it must be scrapped, and that we must move to a better system. One hon. Member asked, in a travesty of a speech earlier, who would speak for the farmers, because the consumers are always well represented. That is not true. The trade union movement speaks through the TUC for the person at work. The TUC speaks well and puts power behind the worker. The employers through the CBI, and farmers through the NFU, have powerful lobbies. I do not argue about that. The person in society who is poorly represented and who has no strength to his arm is the consumer. Therefore, I welcome the fact that the consumers associations, representing so many bodies—and I think they are a little alarmed about the way in which these figures will be treated because they are non-political bodies—have a right to tell the Government or the Opposition or anybody else that if they do certain things they will result in certain other things happening to consumers. Nobody has challenged the figures that have been produced.

It would be a mistake not to realise that we are now seeing the revolt of people in this country through the consumer movement. The movement will be more vocal and it will not tolerate surpluses being built up and sold to people outside the Common Market at low prices when those foods are denied to consumers here. I want to make my position clear.

Photo of Mr Russell Fairgrieve Mr Russell Fairgrieve , Aberdeenshire West

How can politicians in the advanced nations of the Western world talk about surpluses of food when two-thirds of the world's population is undernourished?

Photo of Mr John Ellis Mr John Ellis , Brigg and Scunthorpe

I fully agree on that point, and that is one of the reasons why I am making such an angry speech—it is because we have such surpluses and there is a danger of their going bad. That is why butter is being got rid of at such ridiculous prices. That is absolutely stupid, and the hon. Gentleman has reinforced my argument.

The Minister made a good speech. It has been criticised merely on points of detail. No alternatives have been put forward. The Opposition Front Bench spokesman did not say whether his party wanted CAP to be scrapped or what he wanted done with the green pound. If I can do anything for consumers, it is to stand foursquare behind them. We shall see a radical change. Consumers will become a force, and when such policies are being carried out it is right that they should. Present policies are illogical and absurd and it is time—whatever Government are in power—for us to refuse to go along with this absurd agricultural policy.

7.40 p.m.

Photo of Mr Marcus Kimball Mr Marcus Kimball , Gainsborough

The hon. Member for Brigg and Scunthorpe (Mr. Ellis) represents a part of the country that gave the second biggest "Yes" vote in the Common Market referendum. That shows that most of the people in Lincolnshire have a sound knowledge of what the EEC is all about.

We are all familiar with the consumer document from which the hon. Gentleman quoted, but there is another view on it. The document shows a certain lack of understanding about the workings of the common agricultural policy. It says that all increases in institutional or guarantee prices are reflected in food prices, but this does not apply when the market price is above the guarantee price and there is no question of intervention. Higher intervention prices life the point at which Government support becomes operational and this gives farmers confidence and a firmer base for any investment or modernisation that they may wish to undertake.

The debate is taking place against the background of this year's EEC's equivalent to our annual price review, which is the meanest on record for the whole Community and is the worst ever for British producers.

The general feeling in agriculture is that in their treatment of the green pound the Government have found a way of permanently insulating British agriculture from Community farm price levels by maintaining the green pound at an artificially low level. There has been no adjustment of the value of the green pound since October 1975.

I hope that the Parliamentary Secretary, who is to reply, realises that the agricultural community feels that we must have a significant change in the value of the green pound soon. It is most important for the British farmer that a permanent method of adjusting the rates to take account of fluctuations in the value of European currencies should be worked out quickly.

The speeches of hon. Members on the Government Benches, including that of the right hon. Member for Battersea, North (Mr. Jay), involved nothing more than a knocking of the CAP with no alternative policies being suggested. Hon. Members on the Government Benches seem to be wedded to the deficiency payments system, but they forget that before the CAP that system was breaking down, had reached a level that was unacceptable to the British taxpayer, and was being reinforced by standard quantities that were unacceptable to British farms. No Labour Members have told us what they would put in place of the CAP.

Photo of Mr Leslie Spriggs Mr Leslie Spriggs , St Helens

My right hon. Friend the Member for Battersea, North (Mr. Jay) is not here to answer the hon. Gentleman. I was here when my right hon. Friend spoke, and his important alternative was that Great Britain should find a way out of the CAP and have the right to trade with nations that produce food more cheaply.

Photo of Mr Marcus Kimball Mr Marcus Kimball , Gainsborough

The right hon. Gentleman's alternative on sheepmeat would knock this country's sheep industry for six. He said that he would like to see New Zealand lamb coming in at the prices at which the New Zealanders can afford to produce it. That would put all our producers out of business.

The Community price review is very mean, especially in view of the massive cost increases that the industry has suffered, including, for example, £460 million on feeding stuffs. What farm has not been knocked for six by the cost of machinery repairs, fuel and servicing, and the exceptionally high cost to agriculture of overdrafts and loans?

There is a real problem among livestock producers. My hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith) spoke about the problem in the pigmeat industry. It is facing a crisis. The industry is grateful for what the Government have been able to do, but it has not been enough. We must change the value of the green pound or we shall not solve this problem.

Beef producers need longer-term assurances about the continuation of the premium scheme as an option to the full intervention system.

I regret that we failed to get a sheepmeat regime negotiated in this price review. I understand that we nearly got such an agreement. It is the next most important area of livestock production. It is unfortunate that our colleagues in the Community, particularly the Irish Free State, have been trying to get too much too quickly instead of going for an interim agreement on sheepmeat. I hope that the Under-Secretary will confirm the Government's intention to press on in an attempt to get an interim agreement on sheepmeat covering the next five years.

Photo of Nicholas Winterton Nicholas Winterton , Macclesfield

My hon. Friend mentioned Eire. Will he direct his attention to the undermining of the British beef market by beef cattle being dumped on our market by the Eire Government because of the huge differentials in the green pound?

Photo of Mr Marcus Kimball Mr Marcus Kimball , Gainsborough

I agree with my hon. Friend, but I must not stray from the point that I was making.

There is a chance on 29th March to do something for the agricultural industry in the Budget. If people take a lower return in wages under the social contract the Chancellor of the Exchequer makes it easier for them to bear the burden by promising them, and eventually giving them, a small reduction in taxation.

The Parliamentary Secretary will agree that present price levels represent a severe cut-back in the prosperity of the agriculture industry. I hope that before his Budget the Chancellor will look at the proposals for reforming the tax structure of agriculture and providing more help, especially in relation to the problem of fluctuations in farm incomes. Farms often have a high income in one year, but the high tax assessment on those returns falls due the next year, when there may be a much lower yield.

I know that the Government recognise the problem. The Parliamentary Secretary has made some sympathetic noises about it. I hope that, in order to mitigate the very bad price review, further progress can be made in adjusting the taxation system to meet particular problems of the industry, especially the annual fluctuations in profitability. Some help has been given by way of the new capital transfer tax arrangements for business assets, but more must be done to help with the fluctuations in farm incomes.

What has come out of this debate very clearly, in speeches from both sides of the House, is the need to reshape the common agricultural policy. My right hon. Friend the Member for Yeovil (Mr. Peyton) said that we must be more flexible in our approach to the CAP. It is sad that the references made in the last review in 1974, following the first 10 years of the working of the CAP, have not been followed up by the idea of reinforcing target prices with production grants. I am certain that this is an area in which we should look for substantial change in the CAP, and include some of the best parts of the old system. Such a move might help some of the less favoured areas. We should also carefully examine the situation to see whether we can work some production grants into the present system. I believe that such moves would be favourably received.

The present feeling is that we have a Minister of Food rather than a Minister of Agriculture. I was encouraged by the words of my right hon. Friend the Member for Yeovil, because the Opposition wish to see a Minister of Agriculture once again and not just a consumers' Minister.

7.52 p.m.

Photo of Miss Joan Maynard Miss Joan Maynard , Sheffield, Brightside

I am sorry that my right hon. Friend the Minister of Agriculture has had to leave the Chamber, although I understand why he has had to do so. I congratulate him on his speech and warmly endorse his efforts in trying to restrain food price increases to a minimum.

I do not agree with the hon. Member for Gainsborough (Mr. Kimball) that my right hon. Friend is acting only as a Minister of Food. Labour Governments have an honourable record on the subject of agriculture. The hon. Gentleman also referred to the social contract. The three documents with which we are dealing in this debate tie in with the whole subject of prices and inflation, about which we are all concerned. It is true to say that farm workers have loyally supported that contract. As a result, they have made sacrifices and have accepted a cut in their standards of living. That is a considerable sacrifice, because farm workers are, to begin with, low-paid. Farmers should not expect only the workers to make sacrifices; other people must make them, too. Farmers may come to the view that they are not entitled to everything they want in terms of price increases.

I turn to the question of high prices and what has been said about their being counter-productive—and I think it is agreed that they can be put in that category. High prices certainly do not help the industry, because if the industry meets sales resistance is will not be so successful or profitable, or able to invest as it should, and it will not have the confidence that we want it to have, because it is a great and important industry.

I believe that prices are being kept artificially high—[HON. MEMBERS: "No."] I thought that we were all agreed that there was a need to make progress in reducing the surpluses that are created by artificially high prices. However, I realise that some Opposition Members defend those surpluses on the ground that Governments must make provision for consumers in terms of certainty of supply, and obviously that is a responsibility faced by every Government. However, I suggest that this was much more sensibly achieved by deficiency payments and guaranteed prices. One often hears it said that our consumers are being held to ransom on potato prices, but it is true to say that consumers are being held to ransom in the prices that they must pay flowing from the common agricultural policy.

Let me turn to the subject of the milk surplus.

Photo of Mr Michael Jopling Mr Michael Jopling , Westmorland

I am interested in the hon. Lady's argument. She extols the virtues of the earlier deficiency payments system and seeks to justify her comments by instancing the commodity of potatoes, but is it not true to say that there is no Community regime on potatoes and that the present system provides support for that commodity, based on the deficiency payments scheme and the guaranteed price arrangement, which the hon. Lady was extolling a few moments ago?

Photo of Miss Joan Maynard Miss Joan Maynard , Sheffield, Brightside

The system that operated kept potatoes out of the market, and that was why we were paying such a high price for them.

I was about to deal with the question of milk surpluses and surpluses in milk products, such as butter and cheese. The Commission, on its own figures, estimates that production is 10 per cent. too high. I am glad to see that our Government are supporting the increased provision of subsidised school milk. That reminds me of the actions of a distinguished right hon. Lady who now leads the Opposition when, as Secretary of State for Education and Science, she took away free school milk. I am delighted that that situation is to be reversed.

I believe that the way to deal with surpluses is to expand efficient production—and certainly the majority of United Kingdom production falls into that category. I believe that we should contract inefficient production and production that is incapable of economic improvement. The EEC has attempted to ban aids to modernise and improve our dairy farms. I am glad that the Government have been able to resist that attempt, because that would have been the road to ruin. Prices are being kept artificially high, and result in mountains of food while millions in the world starve. There seems no sense in that arrangement.

Some of us never wanted to go into the Common Market. Our worst fears have been realised. There is now a great deal of discussion whether we should have direct elections in the EEC. I gather that we shall probably lose our marketing boards, because they are contrary to the provisions of the Treaty of Rome. I believe that we should more usefully spend our time in discussing how to get out of the Common Market rather than how people should be elected to any assembly within it. The Common Market has proved a disaster to the British people, and certainly to the farming community.

Who benefits from the present artificially high prices? It is the German farmers and the inefficient producers who are farming uneconomic units who gain the advantages of them. As the Minister said, we do not want to deal ruthlessly with the small producers, but that is a matter for national Governments and should not be solved by charging ridiculously high food prices throughout the Market. We were told in the negotiations that if we were in the EEC we would obtain cheaper food. What has happened is that prices in the Common Market have usually been above world prices. At present we can buy wheat, butter and cheese much more cheaply in the world market.

Let me refer to the butter scandal. We know that 260,000 tons of butter are in stock within the EEC and yet the British consumer has to pay 56p a pound for it. But that butter is being sold outside the EEC at 17p to 18p a pound. Many people have argued that if cheap butter is available it should be sold within the Market—but it cannot be sold within the Market because of the CAP system. Furthermore, because of the artificially high prices, patterns of consumption are changing. Less butter and meat and fewer eggs are being bought. These are important protein foods, and it is not good for the health of our people that they should be eating less of them. Price increases should be kept to a minimum.

I should welcome a freeze on basic food prices. They have inflated by 23½ per cent. in the past 12 months, at a time when we have had a policy of wage restraint. That gives some idea of the cut in living standards that workers have accepted and the sacrifice that they have made. The trouble is that we have EEC prices but not EEC wages.

The proposed price increases in the price review plus the final transition to EEC prices this year will, if they are accepted, put 70p a week on the average family's food bill. Food subsidies are to be slashed next year from the present £409 million to only £37 million. These cuts should be restored.

Price inflation is running at 21·8 per cent. a year. So much for the theory that wages were the real cause of our difficulties. The present situation follows nearly two years of wage restraint. We face the prospect of the price of tea increasing to 32p a quarter while Brooke Bond's shareholders have brewed record profits. The company's pre-tax profit has jumped by more than £6½ million, to £16,795,000 for the past six months. Beef prices have fallen for the producer but the consumer still pays the same high price. Is there any wonder that consumers are beginning to say that enough is enough? We must remember that the buck always stops at the consumer.

Our farm workers help to produce 50 per cent. of our food. They are among Britain's lowest-paid workers. The gap between the average earnings of industrial workers and farm workers is now running at nearly £20 a week. It is because of the level of their wages that farm workers are not able to eat the prime beef that they produce.

There is much pressure from the Opposition Benches to devalue the green pound. I re-emphasise the point made by my right hon. Friend the Minister of Agriculture, Fisheries and Food that not all farmers would benefit from such devaluation. The price of animal feeding-stuffs would go up by much the same amount as the extra return on the goods produced. Many of our farmers would not benefit at all. If possible, the green pound should be used as a bargaining counter to obtain a fundamental reform of the common agricultural policy. Alternatively, as the TUC says, it should be used as a bargaining counter to achieve a fundamental reform of the way in which food prices are determined in the EEC.

I refer again to the agreement between the Government and the TUC on the social contract. We have seen the loyal support of all workers, including farm workers. I emphasise to the Government that they said that their side of the bargain would be to try to hold down prices. I am pleased that my right hon. Friend is trying to do that. It is an important side of the social contract. Some say that we should educate the housewife to accept that she will have to pay higher food prices. That is to ignore the fact that she has only a limited amount of cash.

I strongly support the Minister in his attempt to minimise the increase in food prices. Everyone needs food, and the political consequences of the present price rises and of failing to stop price rises going ahead at the present level will be serious. We need a fundamental change in the common agricultural policy. If we cannot get such a change, we need to scrap the policy.

I support those on both sides of the House who have been arguing for a debate and a decision by the House on the whole issue of the CAP. High food prices hit hardest the lowest-paid and the poorer sections of our community, because they spend a higher percentage of their income on food than do the higher-paid. As Socialists it is our job to protect, in particular, the underprivileged and the less well-off.

8.6 p.m.

Photo of Andrew Welsh Andrew Welsh , Angus South

In this important debate, and certainly in the speech of the hon. Member for Sheffield, Brightside (Miss Maynard), great stress has rightly been laid on the needs of the consumer. I hope that in taking that approach we do not lose sight of the needs of the producer. I shall air some of the problems faced by agriculture and I hope that I can urge the Government to take some action.

Farmers have a great predilection to moan and girn. This seems to be some kind of an occupational hazard. In Scotland they are moaning and girning just now. I hope that the Minister of Agriculture, Fisheries and Food will have the wisdom to listen to what they are saying. I hope that he will listen to some of the arguments that are being made in his direction.

At present certain specialist groups of farmers do not have to look for their troubles. There is the problem of capital taxation in an industry that generates almost all its own capital internally. If there are not profits, the much-needed investment in new machinery and technology will not take place. I hope that the Minister will consider urgently the essential changes in this present punitive capital taxation faced by agriculture and positively fight for price levels in the EEC and the United Kingdom that take into account the special nature of the Scottish and United Kingdom agriculture industry.

I lend my voice to the plea for some sensible adjustment of the green pound. I realise the problems that face consumers when they have to pay the price for the continued failure of the United Kingdom economy and the accompanying and consequent devalued pound. However, it is definitely in the United Kingdom consumers' long-term interest to ensure and protect United Kingdom producers. Our farming industry is efficient. It is efficient enough to face and overcome its competitors. However, it can do so only if it is allowed to compete on a fair and equal basis. I urge the Minister positively to search for a better long-term deal than has so far been achieved in respect of green pound arrangements and the common agricultural policy.

I ask the Government to consider certain individual sectors of the agriculture industry and to take action to meet their problems. No one can be blind to the present difficulties facing the pig industry. I ask the Minister to look urgently at the problem and to take action over and above his present 50p per score subsidy. The current unjustifiably high mcas that are payable on imported bacon are another turn in the screw for the pig producer.

The plight of the industry is shown in the continuing high level of sow slaughterings, which are 66 per cent. above the level of one year ago. That is evidence enough that the Government subsidy is not fulfilling its stated intention. The reason is not hard to see. Even this year, for example, in the North-East of Scotland pig prices have shown a worrying drop.

The hon. Gentleman is not present at this moment, but I confirm the figures of the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith). Those figures show a worrying drop. For example, SMC A1 bacon pigs fetched £6·36 a score on 20th January 1977. By 10th March the price had fallen to £5·94 per score. In the same period the price of SMC A1 cutter pigs fell from £6·34 per score to £5·88. In other words, the 50p per score subsidy has been completed eroded and caught up on by falling prices. Indeed, I understand that many farmers are now worse off than before the subsidy was introduced. I hope that the Government will bear in mind the repercussions, in terms of unemployment, that this situation can have in a rural area unless it is halted.

With the massive increases in feed costs, it is obvious why the pig industry in particular is in trouble. For the period January to March, one estimate is of a rise of £4 per ton in feed costs, which has had to be absorbed by United Kingdom producers who face tough subsidised foreign competition. No wonder the Scottish pig farmers are angry about a common agricultural policy that allows them to face Danish imports with massive subsidies of £259 per ton for exports to the United Kingdom. In view of these figures, I suggest that the Minister should consider adding an additional 50p per score subsidy to the measure that he has already taken. I hope that he will act urgently on suggestions for a recalculation of the mca formula in terms of feed prices.

That may not be communautaire in outlook, but I am sure that it would not stop the French Government, for example, if they felt that one of their basic and essential industries was in danger. If the Minister does not act, these problems will inevitably lead to a shortage of pig-meat in about seven to eight months, with all the attendant evils that that will bring for the consumer.

The working of the CAP and the continued fall in the value of the pound is making the United Kingdom literally a high-priced food dump for Europe—Danish bacon, Irish beef, butter, cheese, and so on. The results are there for all to see. That is the opposite of the Government's stated intention in their White Paper "Food from Our Own Resources". That is the reality of the situation. The Government must fight hard for our agriculture industry in the face of this kind of unfair competition.

I hope that the Minister will bear in mind the special problems of the Scottish sheep industry, which has recently undergone a hard winter with consequent extra expense on feeding stuffs. One estimate given to me is an extra £3 to £4 per feeding ewe. I ask the Minister to take that very much into account when deciding his target for an end product price. I believe that he has already made an announcement along these lines today, and that is to be welcomed.

Will the Minister also assure the Scottish sheep farmers that in his EEC negotiations he will seek continued access for their products to the French, particularly the Paris, market?

Is the Minister aware of the discrimination against Scottish sheep exports to France? The levy almost doubles the price of each lamb exported. The export levy appears to be a penalty against our exports. I hope that the Minister will raise this issue and gain some adjustment for the Scottish farmers involved.

Is the right hon. Gentleman aware of the importance to my constituency in particular and to Scotland as a whole of the soft fruit industry? I should like to mention a specific problem affecting raspberry growers. In its agricultural thinking the Common Market has not fully taken on board the importance of this Scottish resource. For example, there is no adequate EEC monitoring or statistical service for an industry that has the dangerous threat of cheap Eastern European dumping hanging over it all the time. I ask the Government to give special thought to the specific needs and worries of the Scottish soft fruit industry within the context of the EEC.

On entering the Common Market, like it or not, we became part of a highly protectionist organisation, hence a high-price food system, and consequently we have high food prices. But we do not have the corollary of the promises made to us when we went in—the high wages that were supposed to meet the high and rising costs of foodstuffs. British housewives are suffering at the same time as the argriculture industry is being asked to compete, in some instances, on unfair terms. I hope that the message has got through to the Minister. I know that he has a difficult tightrope to walk. However, the CAP must be fundamentally reformed. As far as I am concerned, the sooner that happens, the better.

8.15 p.m.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Central Fife

I think that the people of Scotland will note that the hon. Member for South Angus (Mr. Welsh) spent the greater part of his speech reading from an NFU brief. The hon. Gentleman made scarce reference to the consumer. I want to refer almost entirely to the interests of the consumer.

Photo of Mr Willie Hamilton Mr Willie Hamilton , Central Fife

I shall not give way. I have promised to make a short speech.

The existence of the common agricultural policy reflects the power of the farm lobby in Europe. The farming vote in Europe determined the nature and character of the CAP. As soon as we got in, the seeds of conflict were sown. We were the most highly urbanised country in the new Nine and we paid far more attention—politically, we had to do so—to the interests of the consumer than did the Europeans. Therefore, there was a direct conflict between a country, a Government and an agriculture industry primarily geared to safeguarding the interests of the consumer while giving a fair deal to the farmer and interests prevailing on the Continent. That conflict was inevitable. In consequence, we shall see in Europe and in this country a year of consumer aggression.

I was and still am a pro-European. I believe that the long-term advantages of being in the enlarged Community far outweigh any temporary short-term disadvantages, of which this is one. However, there is a gut feeling among housewives in this country that they are being taken for a ride, especially in regard to food prices. Coffee and tea do not particularly come into this argument. The housewife feels helpless in the face of the gamble that is now going on in these commodities in the commodity markets. Of course, we get the rationalisation of the pundits on radio and television about droughts, floods, fires, or whatever it might be. But enormous profits are being made by middle men who are gambling on futures in these commodities.

That outrage was compounded and crystallised by the revelation that EEC surplus butter was being sold to the USSR at knock-down prices by a French Communist spiv who was exercising private enterprise initiatives, so lauded by the Conservative Party, which should be the last in the world to complain about this guy who was minding his own business, standing on his own feet, and flogging butter to the Soviet Union. Obviously the Russian agricultural system does not work, so Russia must look to the EEC capitalist organisation for its butter and to another capitalist organisation, America, for its grain.

Of course, there is no incentive for the Russians to have an efficient agriculture industry when they can get cheap butter from the EEC and cheap grain from the United States. No doubt the Soviet Union, with its capitalist instincts, will resell that cheap butter to Chile or to other countries. We can do nothing to stop the Soviet Union from doing that.

The sale of the butter to Russia was made no better by the knowledge that the deal was perfectly legal within the terms of the CAP. The EEC is an exporter of butter because the CAP is designed to produce what are described as structural surpluses. It produces more than is needed. To ensure that nobody can make an extortionate demand, it keeps the price high. Therefore, it cannot sell all the butter in the domestic market. The CAP encapsulates the high price policy. We knew that when we went into the Market.

The reason, apart from the one that I gave earlier, is that the CAP is the only effective regional policy in Europe. We have had a regional policy of one kind or another in this country since the 1930s. But that is the only regional policy which the EEC has got. It has got to make sure that the poorer farmers in the poorer regions get prices for their commodities which are sufficiently high to enable them to have a living. But that by definition means that the richer farmers in the more prosperous areas are extremely rich and getting richer.

The figures produced by the Economic and Social Committee in Europe show that the gulf between the poorer farmers and the richer ones in Europe is getting greater rather than less. The regional policy, as expounded and encapsulated in the EEC, is failing. But we are getting the worst of both worlds. Not only are the poorer farmers not getting a good living—the policy was designed to protect them—but also the consumer is getting an extremely raw deal. To add insult to injury, these surpluses are not being channelled back to the consumers within the EEC but are being sold to third countries outside.

It is inevitable, indeed highly desirable, that an agricultural policy, be it a national or an international one, should produce surpluses. We all make a great virtue of saving, individually and collectively, as a nation. We strive to have an individual or family surplus ourselves. That is what an agricultural policy does. The more efficient it is in a good harvest year makes it inevitable that a surplus will be produced. That enables us to tide ourselves over in years when we have a drought such as last year and the year before.

I pay tribute to the Minister for making it clear that the CAP must take account of our national interests. We cannot simply accept what the EEC does without regard to the effects on our internal economy. The Government have accepted the need to adopt these two remaining transitional stages to EEC prices in the course of this year. That in itself will make it extremely difficult to achieve a third phase of the social contract. If the Commission's proposals are adopted in addition to these two transitional stages towards EEC prices then I believe that a third phase of the social contract will be virtually impossible.

The European Commission and the Council of Ministers must understand that. My God, the NFU is the most powerful pressure group in the world. Peter Jay was right when he said something like that in The Times the other day. The farmers are doing very well. To put it mildly, they are not doing too badly. They are wanting to go much further than the Commission proposes. Our NFU wants higher prices, a devaluation of the green pound and all these other things. It knows very well that the future of this country depends on some kind of agreement with the workers for at least another 12 months. If we do not do that, then farms, and the rest of our industrial community will go bankrupt.

A lot of criticism has been made of the CAP. I in no way seek to dilute that criticism, because the CAP is subject to criticism. However, the alternative proposals have been pretty thin on the ground. I would call the Minister's attention to the report of the EEC Social Committee, dated 10th March 1977, which states: The Committee considers that the Commission should call an ad hoc conference at Community level of the various interested socio-professional groups. Such a conference would certainly help to clarify the options and assist a decision-making process with respect to improvements being made to the CAP in order to strengthen the Community. The report went on to detail a positive alternative to the present CAP. I hope the Minister will comment on that report because it was published in January 1977 and is very much up to date. That committee consists of authoritative people from all walks of life in the Community right across the political spectrum. It is worth getting some kind of response from the Minister about it.

It is no good condemning the policy and saying that for sound national reasons we are not going along with the Commission's proposals, without proposing alternatives. My hon. Friend may not have read the agricultural document produced by the Socialist Group in the European Parliament which emphasised the need to redress the balance between producers and consumers. I hope my hon. Friend will take time to read that document because we went out of our way to say that of course the producer needs to have a fair return on his capital investment and labour but we emphasised that the consumer also has rights. Up to now the CAP has been oriented towards the needs of the producer and has completely ignored the interests of the consumer. That is reflected in the composition of the Commission. There is no Commissioner for consumer interests but there is a Commissioner for the agricultural lobby.

All these things need to be weighed carefully by the Government. I hope they will eventually produce a White Paper themselves setting out their view of an alternative agricultural policy rather than pursuing, as they seem to have done up to now, a fairly negative policy of opposing what the Commission has produced.

8.28 p.m.

Photo of Mr John Farr Mr John Farr , Harborough

I am sorry that the hon. Member for Sheffield, Brightside (Miss Maynard) is no longer in the Chamber. It is a pity that her speech, which was so unsympathetic but so characteristic of her, contained so little mention of expanding United Kingdom agriculture. She did not seem to regard that as an important factor. It is therefore hardly surprising that a number of branches of the National Union of Agricultural and Allied Workers no longer wish to sponsor her membership of the House.

I declare an interest immediately, in that I farm in this country. I have two particular points to raise. The first concerns the gravity of the situation of beef production in those parts of the country that specialise in producing the finished beef animal. The situation is becoming increasingly worrying every day because of the Minister's apparent lack of concern about the problem that faces many producers, especially beef producers.

Recently the Minister visited my constituency. He had the courtesy to inform me in advance of his visit. He made a speech there. Although my constituents accorded him their usual traditionally friendly welcome, I assure the Parliamentary Secretary that what the Minister said did not satisfy my constituents by any means. They are desperately worried about the insincerity of this Government towards beef producers.

The Government's insincerity is evidenced by the latest table of statistics, which shows that beef production is down and is declining. It is way off the target declared in "Food from Our Own Resources".

The lack of confidence on the part of producers is also aggravated by the very low prices that were experienced in 1974. They gave beef producers a nasty fright. They are careful to remember that lesson when they consider maintaining or expanding production.

The Government have not helped to create confidence amongst beef producers by their failure to take any action about the green pound. They certainly have not maintained confidence because of their proposals in relation to taxation. The loss of service houses has not made farming easier for livestock men. We have a problem that is with us no matter what Government are in power, namely, the steady drain of agricultural land to non-agricultural use.

What producers and beef fatteners in the East Midlands want is a definite commitment from the Government that the variable beef premium scheme will be retained from 31st July 1977, which is the date when it is due to be phased out. We are daily waiting to hear the plans that the Government have to maintain some form of security for the long-term beef producer after 31st July of this year.

Another worrying aspect for the beef producer is the number of heavy Irish beef animals entering Britain. This number has been increasing since the Irish changed the value of their green pound whilst we in Britain refused to take action. The differential has made it much more profitable for the Irish to export almost finished beef animals to finish in Britain. That, in turn, is lowering the price of finished animals to British producers.

Another worrying aspect of a more general nature is in relation to the common agricultural policy, in particular the butter mountain. My hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith) said that we must expect the CAP surpluses to continue. He gave an example of what happened with commodities if surpluses did not exist.

However, there are surpluses and surpluses. I do not believe that public opinion will tolerate the amassing or continuation of the maintainous type of butter surplus that has been built up under the CAP. A pool, reservoir or moderate surplus of one commodity or another is a very valuable and useful buffer stock for many reasons, but this has got out of hand for dairy products. It is completely and utterly out of balance, and that is indefensible. I urge the Government to take action to restore the situation to one in which it is possible for an unbiased politician to go to his constituency and defend a moderate or reasonable surplus, instead of a gigantic mountain.

To my constituents, the particularly offensive thing about the butter mountain is that the taxpayer is subsidising cheap butter exports for the benefit of Iron Curtain countries. This is wrong, annoying and irritating, and is something that my constituents will not tolerate. They feel that it is quite wrong for the EEC to attempt to tamper or interfere with the price of vegetable oil products to get out of the mess in which it finds itself, over dairy products. It is rather like our Government defying the Prices Commission and forcing the British Gas Corporation to raise the price of gas because other forms of energy are uneconomic and cannot compete.

It is intolerable that the vegetable oil manufacturers should be requested to put up their prices whether they want to or not. It is quite wrong that we should get proposals of this nature relating to ice cream and dairy products. We have had this statement from the EEC, saying that one of the Commission's proposals, apparently to be considered soon, is that ice cream and a tin of cream of tomato soup can no longer be called such unless they contain a certain element of full cream. When one starts to tamper with the normal usage of names of children's commodities, such as ice cream, one wonders how ridiculous the whole system can become. If this ridiculous proposal is allowed to go through, sooner or later we shall have a regulation emanating from the EEC saying that the Milky Way can no longer be called such because there is not a proper element of dairy fat therein.

The whole thing is entirely wrong and indefensible, because the cost of dairy support in one year amounted to no less than £1,140 million of taxpayers' money. The enormity of that figure is such that I could never defend it. I do not consider that I have heard the answer to that problem suggested in the debate today. There are many answers to the problem, and everyone has different ideas, ranging from those of my hon. Friend the Member for Banbury (Mr. Marten), who continually offers the advice that we should scrap the whole thing and has much support on both sides of the House, to more sophisticated solutions. The fact is that the problem must be solved because the people of this country will not tolerate mountains of butter products. The sooner we recognise this the better.

I do not agree with my hon. Friend the Member for Devon, West (Mr. Mills), who said that it would be adequate simply to freeze the price to the producer of certain dairy products, or marginally to reduce the price return. I do not think that that would be an adequate or meaningful way of getting to grips with the problem. Last year the whole of Europe, not just this country, had a very dry summer. The whole of Europe, not just this country, had dairy production below normal. If we have a normal summer this year, as is likely, dairy production will probably increase, unless really overriding steps are taken.

Photo of Mr Peter Mills Mr Peter Mills , Devon West

I think that I ought to clarify the position. I said that there should be a reduction in the intervention price for skimmed milk powder. There should be a substantial drop in it. It would have a real effect on those who are simply producing milk for intervention.

Mr. Fan:

My hon. Friend is referring to a scheme that may have a marked effect, although I do not think that it goes far enough. Other suggestions have been put to us to temporise this steady increase in the production of dairy produce within the Community. For example, there is the suggestion of a non-marketing and conversion scheme. This would give the Community power to persuade farmers between the ages of 55 and 63, who have fewer than seven cows, not to sell their milk. We have the extended school milk programme. We have the extension of consumer subsidies for butter products which may also help to increase consumption. We have, in addition, the co-responsibility levy of 2½ per cent., possibly, from 16th September for all Community producers except those in mountain areas, and the Commission has proposed a standstill for the whole dairy sector until 16th September.

I regard all these as fringe measures. They do not get to grips with the mammoth problem that, sooner or later, unless action is taken, will bring down the common agricultural policy in ruins. If we wants to save the CAP during his period of chairmanship of the Council of Ministers I believe that the Minister, whatever his convictions—I do not regard him as a friend to the farmers, but he is a forthright man—can do the biggest service of all to the Community by suggesting far more forthright and energetic measures than anything that we have heard so far.

The sort of thing that the House should be considering, and that the Government should be introducing in their consultations in Europe, is cutting out the smaller producer in the Community. I know that it is easy to say that. One need only look at the statistics to see how difficult it would be, but the smaller producer has to go. I am not necessarily one who says that everything that is bigger is more efficient and more beautiful. I do not think that any of us would say that, in the light of the dreadful state of British Leyland, which was forced into its present gigantic mess by a former Secretary of State for Industry. But I am saying that it is nonsense that nearly 20 per cent. of the dairy cows in Europe and over 40 per cent. of the herds consist of herds numbering under five cows. These people must be persuaded to get out of the business so that more efficient producers can get on with the job and produce milk and dairy products more efficiently on a bigger scale and more cheaply for the benefit of the consumers.

Such attempts have been made in the Nine, but they have been marked by a studied failure in all the different schemes produced to encourage the smaller herd owner to give up. They have had one common characteristic—a marked lack of success and lack of response. That can be seen by studying the figures, which show that the factors that make for efficiency in dairy production have changed little in the past few years in the EEC.

The tables show, for instance, that 11 per cent. of total dairy production in the EEC comes from Italy, but that the average herd size in Italy is only five cows. The Republic of Ireland produces 5 per cent. of total EEC dairy production and has an average herd size of just under 10 cows. No less than 22 per cent. of EEC dairy production comes from the Federal German Republic, where the average herd size is only nine. Yet in the United Kingdom we produce about 12 per cent. of total EEC daily production with an average herd size of 41 cows.

The carrot has been there long enough. Much more vigorous policies and actions are needed to cut out all the producers in the Community with a herd size of one to four cows. These small herds account for 40 per cent. of all herds and nearly 10 per cent. of all cows. If we could get a scheme of this nature started in the Community we would see a transformation in the size of the butter mountain. It would decline to more reasonable proportions and would be regarded as no more than a reasonable buffer stock.

How could we bring this about? I have suggested that a certain amount of compulsion should be used, but this is a very difficult situation because normally one leaves these things to the play of market forces. Normally one assumes that if a producer is operating on a bigger scale he is operating more efficiently, and, therefore, his neighbouring competitors will gradually fade out of business because of normal market forces.

This has not happened with the tenacious dairy producers. They have had the book thrown at them. All the discouraging legislation that we could throw at them has been thrown in the EEC and enacted in their own countries, yet dairymen with herds of one to four cows own nearly half of all the herds in the nine EEC countries.

We cannot rely on normal market forces to bring about a solution. We cannot rely on the natural disadvantages of producing from only four to five cows compared with, say, 30 cows to freeze out the small man. More positive steps must be taken. One does not like to legislate or even to recommend legislation of this nature when a tiny herd may possibly not mean much in terms of financial reward but is still a great interest to a family or a widow. We must bear all these factors in mind.

Nevertheless, the time has come for the Minister, when he next meets his colleagues as President of the Council of Ministers, to consider whether we should be advocating a scheme under which the more milk that a producer produces the higher will be the rate per gallon that he receives. It could, perhaps be based on a monthly gallonage, so that anyone producing, for example, 1,000 or 2,000 gallons per month would receive the basic rate but if the gallonage exceeded the basic monthly quota, by every amount that it exceeded the quota the monthly return would be increased.

By advocating a scheme such as that we would be doing more than just waiting for long-term market factors to take effect. We would be doing more to get rid of the butter mountain than just sitting back and waiting for people to die or retire. We should be proposing something that does not just rely on market forces helping the bigger and more efficient producers.

If we took action on these lines we would be able to elbow out the smaller man from the industry with dignity and speed, and we would bring back some common sense and some public acceptance of what is at the moment an indefensible blot on the whole agriculture industry of Europe.

8.50 p.m.

Photo of Mr William Hughes Mr William Hughes , City of Durham

I must start by expressing absolute amazement at the logic of the proposals advanced by the hon. Member for Harborough (Mr. Farr). If he believes that it is possible to elbow out Italian and French peasants he should realise that the politicians who proposed that would get something more than elbowing. One of the figures he did not produce shows that between 1969 and 1974 the Italian milk cow herd dropped by over 20 per cent.

If he is suggesting that there is too much milk, he might accept that it would probably be politically easier to wipe out the very large producers who are small in number and highly efficient. The economic logic of his argument disturbs me. He suggests that those producing more than 1,000 gallons monthly would get a higher price per gallon. He goes on to suggest that this will reduce the surplus, but by definition the big farmers who would gain have the capacity to expand. They can get bank loans more readily.

One of the difficulties that has faced the use of price policy in the dairy sector is that if the price is decreased, frequently the supply of milk temporarily rises. This is because awkward peasants, those who do not put a cost on their labour, simply milk an extra cow and hope to make up the difference by a little extra work on their own part. The vast bulk of the milk in the Community.—believe the figure is more than 80 per cent.—is produced in four months off grass by the small people. So the cost of feedstuff does not affect them much. Therefore a fall in the price would not necessarily lead to a fall in the supply. In the short term the opposite could be the case.

I turn now to the problem of the butter surplus. It would be ungracious to remind the House of the response of certain Irish and other colleagues in Europe who say that we could get rid of a lot of the surplus by ceasing to import New Zealand produce. That to them would be a perfectly reasonable solution, and it could be secured without having to elbow the small producers in the Community out of the way.

On present per capita consumption it appears that there will be a butter surplus of about 500,000 to 600,000 tonnes in the Community by the end of this year. The cows have either already been to the bull or have started lactation. What, therefore, is the best way of getting rid of the butter surplus? Probably the cheapest answer is to burn it, because that costs the taxpayer nothing. The taxpayer has paid for the intervention and he does not have any ongoing costs of storing it or of paying the Russians to buy it. Burning it would be the cheapest thing for the taxpayer to do.

The most expensive thing to do would be to sell it as subsidised butter to internal consumers. That is the tragedy of surpluses of a structural and permanent nature. If one destroys the surplus, that is cheap but politically unacceptable. If one tries to do the politically acceptable and sell it at subsidised rates within the Community, that becomes expensive—at least twice as expensive as dealing with the matter the other way.

There is, therefore, a risk. If one introduces internal consumer subsidies, larger sums will have to be paid by the taxpayers. The need to eradicate the sources of the surpluses is becoming stronger. I doubt whether the co-responsibility levy, the non-marketing premium and the other current proposals will achieve much to reduce the present milk surplus. It is not a problem of too many cows—in that respect I agree with the hon. Member for Harborough—but it is a problem of too many people who rely over heavily on cows for their incomes, as the current milk cheque syndrome shows.

We shall not eradicate the milk surplus unless we find a way of replacing that income immediately and directly for the many people who have no means of changing their form of husbandry into something that is equally profitable per man-hour or per acre. Perhaps direct economic support for small farmers in the disadvantaged regions of the Community is the best social and economic method of eradicating the structural surpluses. Even if that were to succeed—and one has tried to discuss it in other bodies such as the European Parliament—what the price review shows quite clearly is that the CAP, whatever validity it had in a period of relatively fixed exchange rates, would simply fall apart at the seams, with or without mcas.

That may sound a little technical but the unit of account for agriculture is used arbitrarily as are all units of account. The agriculture unit of account happens to involve the snake countries. There is another unit of account called the European unit of account and it is based on current exchange rates. If one recalculates the present price proposals and instead of using the present type of unit of account one uses another unit of account the political problem is reversed. One forces the Germans to decrease their prices by 25 per cent. That is an entertaining proposal. However, the corollary is that by the arbitrary choice of that particular base unit one forces upon the weaker currency nations a reinforcement of inflation by the very mechanism of the unit of account basis, and to that extent those who are subject to inflation pressures have them stoked up ever more, and ever more.

What has become quite clear over recent weeks is that any agricultural price packet coming from the Commission—leaving out adjustments of mcas—that was remotely acceptable to hon. Members on either side of the House would be wholly unacceptable to, say, Belgium or Luxembourg, whose voters would again be faced with a sharp fall in their real incomes, which is not acceptable to them.

We in this House must accept that mcas have now become a potential tool for fixing prices within the snake countries and that perhaps one of the methods of coping with the difficulties of the Benelux countries is to give them a sort of artificial mca—we should have to call it something else temporarily; perhaps a "temporary currency unit"—to get them over their problems. However, this is the sort of area in which the concept of a single market price has disappeared. It is just through the figment of our imagination that we are creating it. In reality it has disappeared from the Community.

Finally, I should like to refer to one or two areas that have been touched on by other speakers. Quite clearly, the Commission's attempt to put isoglucose exclusively within the sugar sector is misguided, because there is a general review of starch products and starch product manufacturing within the Community. There is an element that tries to refer to differentiating between maize imports and the balance of payments problems to the Community that they involve and that says, therefore, that one should attack isoglucose on that basis.

There is no objection to making importers pay import levies and so on. However, what is quite unacceptable is that, rather like King Canute faced with a new tide of technology coming in, we say "Stop". In the Commission's documents on the agricultural situation it praises efforts at increasing sugar production, to the point at which a surplus is expected—at about 3 million tonnes this year with a decent harvest. Then what does it do? Certain little voices are heard saying "We fixed it too high for the Lomé countries. We should stop this kind of sugar coming in". Those little voices creep out from the woodwork, faced with a surplus, and say "There is this other dreadful stuff that costs a lot less for the manufacturers. We must stop them making it at a competitive price."

It is discouraging to any farmer or business man in the Community to make a capital investment, as people have done, for isoglucose manufacturing, in perfectly good faith, and then to have that investment totally destroyed as a commercial venture by desire and pressure from other forces. Therefore, I hope that my right hon. Friend will continue to press very hard for the retention of the right to manufacture isoglucose at a competitive price and that its manufacture should not be totally destroyed by this arbitrary whim of the Commission.

The other matter is the much more difficult area of the exclusive use proposals. Clearly, consumer protection has a proper place in this. It is difficult to object to asking that an edible substance called "cream" should have some dairy content. The joke that Bristol Cream Sherry should have a dairy content is going a little far. There seems to he a genuine case that labelling should be accurate and we should be reluctant to deny that. The use of labelling as a backdoor method of trying to alter consumption patterns and to get rid of mountains is unacceptable. One has differing advice, but it is more than possible that the reverse would be the case.

The proposal first saw the light of day in March or April 1974. I hope that the present Government will continue to oppose its crude application and seek a better method of labelling dairy products that does not mix up correct labelling, which we would welcome, with incorrect labelling as an excuse for putting on pressure to reduce the mountains.

9.6 p.m.

Photo of Mr Richard Body Mr Richard Body , Holland with Boston

Not for the first time, I find myself in total agreement with the hon. Member for Durham (Mr. Hughes). He poured his share of derision on the butter mountain. Of course that mountain is absurd, but I doubt whether very much harm will be done to anyone as a result of it. It will cost something, and there may be a marginal loss to New Zealand producers. What will happen to the world's sugar producers is far more serious. I am grateful that the Minister is now present. I know that he needs no persuading about this point.

Only a short time ago the Community decided to increase sugar prices substantially, with the result that the Community's acreage was expanded by about 16 per cent. and certain countries embarked upon sugar production which had no business to do so. I have in my constituency one of the most modern sugar beet factories in the world. Therefore I am the last one to advocate contraction of our own sugar beet industry. However, I hope that any expansion will be based in East Anglia where we can grow efficiently and effectively.

That cannot be said of parts of Ireland, Italy and, to some extent, Denmark, where there has been a massive expansion of sugar beet production in the last two years. There has been a 37 per cent. increase in production in Italy. The increase in price has inevitably met consumer resistance and there has been no substantial increase in consumption in the Community in the last year or so. Indeed, it is almost static. Yet we shall have a large increase in tonnage.

The Community calculates that there will be a surplus this year of 2·9 million tonnes. I remind the Minister of what happened before. An outlet must be found somewhere, and sugar is one of the easiest commodities to store in intervention. The last time the Community resorted to dumping sugar was, I think, in 1968. On that occasion it dumped 1 million tonnes, about one-third of what it may well dump in the world in the next 12 months or so.

Some of my hon. Friends, including my hon. Friends the Members for Banbury (Mr. Marten) and Harborough (Mr. Farr), and I visited sugar growing countries shortly afterwards. It is not possible to describe the destitution that we witnessed. Those plantations could produce sugar efficiently and, despite what my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) may say, at a cheaper price than we do in this country when one eliminates the subsidy available to our growers.

When the Community dumped that 1 million tonnes, it was on a very sensitive market. The world market is only 12 per cent. of the total, because all the other sugar has always been bought and sold among countries, either through the then Commonwealth Sugar Agreement or through the International Sugar Agreement. Thus, only a very small amount was needed totally to dislocate the world's sugar market. The Community's action in 1968 caused the world price of sugar to fall to below £20 a tonne and for some weeks it was as low as £12·50—less than half the cost of producing it in the most efficient countries, like Mauritius and Fiji.

That free market is enormously important to the Third World. Of course most of their returns come from the sugar agreement, but if they want more than the barest income—anything at all for any improvement of their plantations—that must come from their returns on the free world market.

It was a long time before those sugar plantations and the many thousands of people who depend on them for their livelihood—and a very meagre livelihood at that—recovered from the EEC's onslaught. It was as vicious and selfish an act as one could imagine when the EEC dumped that 1 million tonnes. Now, there is a risk of three times as much sugar being dumped. According to the report which I know the Minister will have studied carefully, there is no sign that the EEC will come to terms with the potentially serious consequences of that large surplus.

The Minister has so far been very successful in teaching his colleagues on the Council. I hope that he will give them a little more tuition about how we are managing matters in this country. I cannot believe that the quota system is working satisfactorily on the Continent. It cannot be right to expand the Italian quotas by 37 per cent. We could not dream of doing that in this country. If we were to expand production here, we could do so much more effectively than Italy, Denmark or Ireland, the three countries which have been the main beneficiaries of the sugar expansion.

Photo of Mr John Farr Mr John Farr , Harborough

My hon. Friend will recall that, in the period of which he speaks, when there was a surplus production of sugar in the world, the EEC refused to sign the International Sugar Agreement which was hammered out. Does he know whether the EEC has a more outward-looking attitude now, whether it has changed its mind and is now a signatory of the agreement, which would surely lead to a more orderly marketing of sugar supplies?

Photo of Mr Richard Body Mr Richard Body , Holland with Boston

That shows how selfish the Community has been over sugar. My hon. Friend is right to remind me that the Community refused to sign the agreement, which would have made some amends for the appalling harm that it did to many thousands of desperately poor people whose livelihood depends on the sugar plantations. My hon. Friend is right to say, albeit rhetorically, that there is no sign now that the Community is alive to the terrible consequences of dumping this 3 million tonnes.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

Would the hon. Gentleman not go further? This is the very time when the Third World countries are seeking a new economic order through a common fund to maintain the stability of this product. If the same thing happens, on a larger scale than in 1968, would not have have severe repercussions for the whole developing world and be ample evidence of the essentially evil nature of the CAP?

Photo of Mr Richard Body Mr Richard Body , Holland with Boston

I agree entirely. Reading the report, one realises that the Community has no conscience about this and does not understand the measure of the evil that was done when it dumped a large quantity of sugar on the world market. I emphasise to the Minister that I hope that he will do something more to persuade the EEC to review its policies for giving quotas and that there should be a system there that is more similar to that which we have. Only those areas of the Community that can produce sugar efficiently should be allowed to do so.

On the many occasions that I have spoken about pigs I have had to declare an interest. I do not do so now because I got out of that market on 1st January 1976 when prices were high. My neighbour asked me why I was doing that and said that I should stay in because prices were good, but I thought it was wholly predictable that the pig market would go sour in 1976 and still sourer in 1977 I took great pleasure in saying that the Common Market would be to blame for it.

I am glad to say that I publicly gave detailed reasons why I proposed to go out of pig production at the beginning of 1976. I want to touch on this point because I wholeheartedly applaud what the Minister has done. He has been rather unjustly censured by some of those who advocate that more should be done now.

It was predictable that the price of feeding stuffs would considerably increase. For years, those of us who produced pigs have been able to pay less than £30 a ton for feeding stuffs. I paid £27. One paid that price for years and never imagined that it would go up. As the Minister knows, the price of feeding stuffs is of obvious importance to the producer because it represents 80 per cent. of his costs. Now the price has gone way over £100 a ton. There has been about a four-fold increase in a short time. I must say to my hon. Friends who become so euphoric about the Market that we have had to pay this appalling four-fold increase in the price of feeding stuffs and that the increases will continue.

My other reason for getting out of pig producing was that it was equally predictable that there would be a Community cycle. We have always dealt with our home cycle. We found that every four or five years prices were too high and then went too far down. Those of us who were specialists in pig production knew that cycle and survived it. Now we have a Community cycle and it is a different creature.

The Community decided to expand pig production and we have had a 3 per cent. increase. That may seem small, but it has bedevilled the pig market throughout the Community. There is now a surplus and the total herd is about 72 million pigs, yet demand has not risen to meet the increase. Indeed, the demand has stayed still. I am speaking now of the demand throughout the whole Community—I stand to be corrected, but I believe I am right in saying this—and the increase in the price of pigs has met with consumer resistance with the result that consumption has not increased. Therefore we have a surplus of pigs in the Community, and this is the essential reason why prices are unsatisfactory and will remain so for the whole of 1977. It is because the Community has increased the pig herd, and that position will continue throughout the whole of this year. It will not be until some time in 1978—probably towards the end of the year—that we shall get the market back into some kind of balance.

Farmers may just be able to hold on to their herds because of the unilateral and arbitrary action of the Minister which was manifestly contrary to the Common Market's policies. I am glad that he took that action and I hope that he will stand firm and will not suffer too much at the European Court of Justice when he stands in the dock there.

My hon. Friend the Member for Banbury (Mr. Marten) has said on a number of occasions that we should scrap the CAP. I agree with him. I think that the hon. Member for Fife, Central (Mr. Hamilton) was over-optimistic in talking about a year of consumer aggression. It will not be one year but several years, and this will cause friction between consumers, particularly in this country, and farmers. Representing, as I do, more farmers than any other hon. Member, I should regret such a development. I passionately believe that the long-term interests of the consumer are the long-term interests of farmers, but this will not be apparent for the next few years and there will be a clash of interests between consumer and farmer.

This clash will involve dangers for the farmer. It is disagreeable for those of us in farming to have to admit that about one-quarter of our gross income comes from the taxpayer's pocket. We usually keep fairly quiet about it, but that sort of largesse is dependent upon the good will of the British people. If that is lost, we cannot expect the sort of support that we have had and that we must have if we are to remain a prosperous branch of our national industry.

Another consequence of years of consumer aggression will be that we shall never see any sensible European union. It is almost 20 years to the day since the Treaty of Rome was signed and in all that time the only common policy that we have worked out is the CAP. I was a Member of this House at that time, and I urged that we should be represented at those proceedings and should play a part in the formation of the Community.

I regret enormously that in all those years we have been able to establish only something which will be a thorough irritant to the British people until it is fundamentally and drastically reformed. I do not think that it ever will be reformed because there will always be powerful interests, especially in France, Holland and Ireland, that will oppose any fundamental change.

We shall never progress beyond the CAP towards other steps of international co-operation in Western Europe that are so essential for our peace and security. Not until we scrap the CAP shall we be able to work towards a sensible European unity.

9.25 p.m.

Photo of Mr John Lee Mr John Lee , Birmingham Handsworth

The hon. Member for Holland with Boston (Mr. Body) is one of my oldest friends in the House. We do not often find ourselves in agreement on political matters but we never find ourselves in disagreement in discussing the Common Market and the idiocies of the common agricultural policy.

It was a breath of fresh air to listen to the speech of my right hon. Friend the Minister of Agriculture. We had long gloomy periods, with foot-and-mouth Fred coming back from Brussels proclaiming defeats as though they were victories, delivering long pages of gobbledegook as though he did not understand them, which was understandable because they were almost totally incomprehensible. At last we have a Minister of Agriculture who is on top of his job and prepared to have a row with this organisation, as he has on several occasions—and he may well have many more.

I share with the hon. Member for Holland with Boston concern for the underdeveloped world. I have always taken a strong interest in that subject. What is objectionable about the Common Market is not just the idiocies of its complex agricultural policy, but the sheer immorality of it and the way in which it has knocked the guts out of the economies—and threatens to do the same thing again—of many poor and economically suspect countries such as Fiji, Mauritius and Barbados. Such behaviour makes one incensed, but all the more glad when one sees the obvious discomfiture of the latest absurdity in the Community over isoglucose. That is an embarrassment that will be exploited.

I do not think there is the slightest chance that these policies will be reformed. The hon. Member for Harborough (Mr. Farr) is a respected farmer, and he produced some interesting suggestions for ameliorating the situation, but at the end of the day I believe that his proposals would have the opposite effect to that which he intends. They would increase the surpluses instead of reducing them.

We welcome the situation in which the Minister finds himself in conflict in the courts. We face an unbridgeable and irreconcilable situation on at least four matters. The first is the stand taken by the Minister, which I endorse, in his refusal to devalue the green pound. That will produce more and more anger from the other members of the Community, particularly M. Lardinois. Secondly, there is the butter policy, which my right hon. Friend said is totally unacceptable. I do not think we shall do other than react violently to that situation. Then there is the isoglucose issue.

Finally, there is the problem of mcas, which was said to be temporary. They were introduced in 1969 when there was a wide divergence in values in the currencies in the system and when the Germans revalued and the French devalued. That was intended to be a temporary palliative to tide over a situation which was expected to correct itself but shows no signs of doing so.

I should like to know whether the lawyers in the Common Market—I do not know whether my right hon. Friend will be able to answer this question, but he is a lawyer—have worked out the implications if he is found to be in default in the courts, and what kind of retaliatory action or sanctions are expected to be forthcoming. I hope that we shall snap our fingers at the courts in the Community, because that will be the beginning of the destruction of the Community. or the beginning of our declaration of UD1 from the Common Market. That will be an opportunity that many of us who not only dislike the agricultural policy but everything else in the Community will welcome.

The hon. Member for North Angus and Mearns (Mr. Buchanan-Smith), in a somewhat disingenuous speech, proclaimed his faith in Europe. I respect his sincerity, but he referred not only to agricultural matters but to the subject of defence. Anybody who takes that kind of view on defence and economic matters would never have acquiesced in the selling off of butter, at cat's meat prices, to the Russians and East Europeans.

That must be contrasted with the attitude of Senator Henry Jackson—Scoop Jackson—who wanted to link sales of cereals to Russia with an amelioration of Russia's internal policy. There is an argument for that. Sometimes these methods of trying to intervene in the internal affairs of another country can be counter-productive, but one can see the purpose behind them. At least it could be said that there was a policy synonymous with the idea of a separate and distinguishable Western attitude.

In any event, we have seen a Communist millionaire selling off butter to the Russians. I should like to know how much the Commission was privy to the proposed sale. I should like to know whether—as I believe and have been told—there was a belated last-minute attempt to intervene only after my right hon. Friend had been in touch with the Chairman of the Commission.

Some of us suspect that the Commission knew or suspected what was going on for quite a while. It was only because my right hon. Friend took the initiative that the matter was blown wide open. I suppose that there is a reasonable expectation—I am anxious to know from my right hon. Friend whether this is true—that we shall not have a repetition of such an absurdity. If there were a repetition there would be a row on the Labour Benches. Surely that would be the position on the Opposition Benches, for ideological reasons.

My right hon. Friend the Member for Battersea, North (Mr. Jay) almost drenched us in statistics in comparing world prices with Community prices. My right hon. Friend was demonstrating the advantageous position now held by world prices, especially in dairy products and cereals, and comparing them with Common Market prices.

My right hon. Friend was good enough to inform me recently that we have spent £121 million on agricultural levies on imports from outside the Common Market, of which about £68 million has been spent on milk and milk products while nearly £18 million has been spent on cereals and £10 million on pigmeat. That was the situation existing under the undevalued pound. At least it was partly undevalued in October 1975. Since then there has been greater resistance, although devaluation has been sought. I put those figures on record as an illustration to those who try to gloss over the fact that we are obliged to be penalised every time we seek to import from sources cheaper than the Common Market.

I said at the outset of my remarks that isoglucose was one of the sticking points. I suppose it is one of the matters that might lead to a confrontation. Whether the Commission is beginning to be a little embarrassed about the matter I know not. I suppose that most hon. Members have read the letter from Lord Douglas of Barloch that appeared in yesterday's edition of The Times. The noble Lord wrote: A factory for the production of fructose is due to start in London very soon. It has cost some £8 million. The market price of its product calculated on an equivalent basis will be £206 a ton as against £215 for beet sugar. The penalty proposed on it is £56 a ton. This prohibitive tax is virtually a confiscation of the expenditure on the erection and equipment of the factory. Lord Barloch compared it with Luddite activity. Is there anyone in the House who would deny that? Would anyone really say that there was any conceivable justification for such action? Could such a claim be made by even the most fervent Marketeer? I suppose that some of them are dotty enough to do so, but nearly everyone else would regard it as utterly indefensible.

We are discussing a jumble of documents, which we are supposed to have digested before the debate. As always on these occasions the Ministry has kindly provided a precis and put in an explanatory memorandum, which is just as well since most of the documents are too large to be manageable.

I notice that Document R/2469/76 refers, in relation to the proposal that we are resisting for devaluation of the green pounds to the Commission taking over powers from the Council of Ministers. I think that my right hon. Friend knows the passage to which I am referring. If that is so, that is a further retrograde step. At least the Ministers in the Council of Ministers are answerable to the respective Parliaments of the component nations of the Community, and some pressure can be brought upon them. But the Commission, as that redoubtable anti-Marketeer on the Right wing of the Labour Party, William Pickles, described it, is the most complete and—in the strict sense—bureaucratic organisation that the world has produced in modern times, and is responsible to no one. I should like to know how far that proposal has gone. I do not expect my right hon. Friend to intervene now, but when he replies I hope that he will deal with that matter.

I end on one point that, in a sense, is not the Minister's direct responsibility but is for the Government as a whole. I express the regret—belatedly, and probably to no purpose—that consumer subsidies are to be phased out. They may not have made a great impact. To some extent their impact is psychological. At any rate, at a time when inflation may be gathering pace again and is certainly not diminishing to the single figures that we would wish, it does not seem right to phase them out.

I think that we are all agreed, including the right hon. Member for Yeovil (Mr. Peyton) somewhat tentatively and in an embarrased manner, that it is wrong to devalue the green pound and to concede other demands made by the Commission which would result in a further fuelling of inflation. Therefore, it is surely wrong to take away that admittedly minor ameliorative measure, which was introduced in 1974. I do not have much confidence that my pleas will be harkened to, but it is my wish that the Government, even at this late stage, will think again about that matter.

9.38 p.m.

Photo of Mr Jerry Wiggin Mr Jerry Wiggin , Weston-Super-Mare

A feature of the debate has certainly been that some hon. Gentlemen who do not normally participate in farming debates have taken part in this one, perhaps through their own interests in food. I am sure that is a good thing and is to be welcomed.

The hon. Member for Birmingham, Handsworth (Mr. Lee) has not been a great debater on agricultural matters. When my great-grandfather represented the then Handsworth division of Staffordshire at least some part was agricultural and that would have been more appropriate.

I shall not follow the hon. Gentleman in most of what he said, because I do not agree with him. Moreover, his opening remarks about the previous Minister of Agriculture were both accurate and concisely put. I reserve my judgment about the present Minister of Agriculture a little longer, but I congratulate him on the clarity of his presentation to date which I am sure hon. Members on both sides of the House greatly appreciate. These matters are extremely complex, and winding them all up in a ball of cotton wool does not make it easier to understand the issues or to argue the case.

There has not been as much talk today as I should have liked about the obvious unfairness of failing to recoup the extra costs that the farming community has had to bear during the past 12 months. There is absolutely nothing new about not giving agriculture back its true costs. This was a constant and recurring feature of the old deficiency payment scheme, under which an arbitrary sum was deducted from the calculation on the ground that the industry had become more efficient. I hope the Parliamentary Secretary will tell me if there is any other industry which, even under the strict Price Commission rules, is not at least allowed to recover its costs. So far as I know there is no other. It is assumed that agriculture, because it is inherently very efficient, can carry the substantial burden, running into at least £100 million a year, on its back through its own efficiency.

It is said by some, I think by the Consumers Association, that at a time when we are fighting inflation the farmers have a social responsibility to make their contribution. Farmers have made their contribution, in terms of social responsibility and increased and efficient production, for many years. To use this particular argument at this time is like saying to any section of industry "You must not have all your costs back". So far as I know, that is not a feature of the present arrangements for the curtailment of inflation.

When the right hon. Gentleman was discussing the problems over the green pound during his opening remarks I had considerable sympathy with what he said, but he omitted to point out that the real difficulties with the green pound have resulted from the disastrous drop in the value of the £ sterling. That was due to the Government's mismanagement of our economic affairs. There can be no argument about that. The value of the pound is the value which the world puts upon the currency of this nation, and that is the responsibility of the Government. If the right hon. Gentleman would persuade his colleagues to do some of the things that are so necessary, to a substantial extent, our economic and green pound problems could be solved almost overnight.

A great deal is said about the difficulties of curtailing production. I heartily endorse the remarks of those hon. Members who have said that the natural reaction of the farmer whose prices are cut is to increase production, which immediately exacerbates the problem. It was exactly that problem which was the weakness of the old deficiency payments scheme. As over-production got worse, the Government said, "We shall cut prices" and immediately everyone reacted by increasing production yet further. There is nothing new about that. But it is absolutely true that it happened.

We must have a complete rethink about expansion in agriculture. We talk and think about expansion as expansion only in production. We have to start thinking about expansion in profit. Farmers have to be allowed to see at least as much profit, or perhaps more profit, from a controlled level of production, rather than seeking all the time to cover extra expenses by producing more unwanted goods. I believe this could be done through the strict discipline of marketing boards, which must be monopoly first-time buyers.

Our own Milk Marketing Board is a good example of how this can work to the positive advantage not only of the producer but also of the consumer and, as the Minister mentioned, the distribution system, the retailer, and so on. There seems to be great unanimity on both sides of the House with regard to retaining the Milk Marketing Board. I would suggest the system used by the British Sugar Corporation—another monopoly first-time buyer—in calculating, under Community rules, a quota system that allows a given quantity—an A quota—to be paid at a fairly high guaranteed price, which gives the farmer a knowledge and certainty of profitable production at a certain level. The grower can then grow more acreage at B quota prices, which may, in a year of shortage, exceed the A quota, but in a year of surplus may be totally unsaleable. That brings home to the individual producer the responsibility of adjusting his production to the market.

That is the problem the solution to which every country and every Government has been seeking for many years—to try to co-ordinate production with demand, given the immense variables of the weather and all the factors in agriculture of which we are so well aware.

I suggest that the representatives of the United Kingdom argue in Brussels that the marketing boards have much to offer. The marketing boards are not new to Common Market countries. France markets the vast majority of its grain through an organisation called ONIC. There are other co-operatives in Europe, which could be moulded into marketing boards given the necessary will. Today we have heard criticism after criticism. Let us try to be positive and make suggestions for putting the matter right.

I listened with interest to the critical remarks that were made on the subject of vegetable oil substitution for butter and margarine, on the proposed duty on isomerose production, and on the question of imposing conditions in relation to ice cream and certain other dairy products. Let us leave aside the jokes about cream sherry and the Milky Way and be serious.

If those products are sold on a subsidised basis, the market will be destroyed. There will not be the extra capacity. There may not be a demand for the product. The solution may be to take the argument to its logical conclusion and say: if ice cream, why not real cream instead of imported goods that cost us foreign currency? I do not know whether the consumer will like this proposal. I know that the manufacturer does not like it, because he does not like dealing with these raw materials.

I have some knowledge of the sugar industry. Until very recently I was closely connected with it. Isomerose production is expected to be 400,000 tons a year. If my calculations are correct, that will replace 200,000 acres of sugar beet production. If the Minister's solution to the problem is to tax isomerose so that its price is the same as that of sugar, he may well not achieve his objective. My instinct suggests that we should be moderate and have a system that is cheaper and more efficient, whether the item is food or anything else. We must take a step forward, and not be Luddites.

Isomerose is made from imported maize. Therefore, in the protective tariff wall put up around the Community for all imported foodstuffs there may be a case for saying that an extra duty should be imposed on maize so as to protect the domestic sugar beet producer. I mean any sugar beet producer within the Community. Maize is used to the greatest extent for cattle food. That is the biggest consumer of maize within the Community.

If it had been decided that taxing isomerose as an individual item would be advantageous to the beet producer, I would not have minded if the manufacturers had been told before they had started building their plants. But to decide it after they built their plants imports an element of unfairness.

We must be quite clear within the Community whether this form of protectionism is acceptable. If it is not, we must find a better solution. This is merely restricting the consumption of domestically produced products in favour of imported goods, and this applies in all three cases. I am sorry that it will affect some manufacturing industries. This is what we must weigh up.

I do not believe that the CAP is ideal, but I certainly do not believe that the old deficiency payment system was ideal. It is extremely unsatisfactory that we should be seen to be selling surpluses to Communist and other countries at ludicrous prices when our own consumers want the best deal possible. But I believe also that the criticisms voiced here today have been particularly destructive and not constructive.

The right hon. Member for Battersea, North (Mr. Jay) read out a list of items that could be produced more cheaply in other countries. That is nothing new. Wheat from Manitoba will always be cheaper than wheat from Hampshire, because Manitoba is a more economical place to grow wheat. Equally, Argentina is a better place for beef and New Zealand is a better place for dairy products. These are facts of life. If we do not protect our farmers as a matter of policy there are severe implications, not only for production, but for the capacity of farmers as employers, for the social structure of the countryside, for our strategic position, and for the substantial consuming power of the farmer in the industrial field.

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

I have always supported the deficiency payments system because it avoids the present conflict between farmer and consumer.

Photo of Mr Jerry Wiggin Mr Jerry Wiggin , Weston-Super-Mare

With due respect, I do not accept that. I tried to run a farming business under the deficiency payments scheme, under which one was always subject to the whim of the Government of the day. The Government adjusted their prices to suit the Treasury and these were almost never in the interests of the producer. Also, it had substantial long-term implications. The day that the farmer of this country is allowed to go to the wall will be a sad day for this nation.

9.52 p.m.

Photo of Mr John Watkinson Mr John Watkinson , Gloucestershire West

I certainly agree with the comments of the hon. Member for Weston-super-Mare (Mr. Wiggin) about the CAP being far from ideal. I will go along with that—extend it further and say that the CAP is a system that I, personally, would like to see scrapped. The hon. Member also pointed to the important issue of the problems confronting British, farmers and farm incomes at this time. He was right to point out to the House—and I know this from conversations with my own farmers—the dramatic increase in the cost of production that farmers have had to face and the virtual impossibility of buying new machinery. Farmers are having very difficult times.

It seems to me that this is a real problem. Set alongside it there is the problem of the consumer. This was illustrated in a recent edition of Farmers' Weekly. On one page were the views of the National Farmers' Union about the proposals from the Commission being "totally inadequate". On the opposite page there was a survey by the Ministry of Agriculture about food consumption in this country. The Minister referred to this in his speech. The survey shows that housewives last year bought less milk, butter, eggs, fish, mutton and lamb, white bread, citrus fruit and tea. It is also the case that in the last three months of the year the consumption of bacon fell to its lowest level since 1951.

My right hon. Friend is being unfairly accused of taking an interest only in the consumer. But he has been attempting to point out to the EEC and to the farming community the difficulties in the present situation. The farming community is asking for a devaluation of the green pound, which would bring about an increase in prices here. But one has to ask whether that would be in the best interests of the farming community, because we have evidence of consumer resistance. For a long time, it has been a fundamental objection by consumer bodies that they have not been represented at the negotiating table. The consumers are now expressing their views through the shopping basket. They are withdrawing their custom because of exceedingly high prices.

Furthermore, the problem in relation to the British consumption of foodstuffs is exacerbated in that, I suspect, the demand for various types of food here is much more elastic than it is on the Continent. We may all bemoan the fact, but it is the case that the British consumer is less concerned about the quality and the nature of the food he consumes than probably his Continental counterpart. To that extent, the price factor in the equation probably weighs very heavily with him, and the net result could be, as my right hon. Friend pointed out, that a devaluation of the green pound, an increase in the price of the end product for consumption, would actually produce reduced farm incomes.

All I am saying is that this is the reality, and something that we have to bear in mind when we point, as the hon. Gentleman legitimately did, to the difficulties facing farmers. With respect to some of my hon. Friends, I think that on occasion we can give the impression that we are somewhat consumer-oriented. It is right, therefore, that at least I should point out—and I know that some of my hon. Friends would agree with me—that we are aware of the problems and difficulties facing farmers and the difficulties relating to their falling incomes. But I do not think that the case is made out that a devaluation in the green pound would assist our farmers.

As I have said, I am opposed to the present operation of the CAP. This is because I take the view that the system of support used in it—the end price support system—has the inevitable consequence of producing surpluses. These are not infrequent, but occur year in year out, and I suspect that we shall be referring to surpluses, if we still have the CAP, in every debate hereafter. It is a basic and fundamental consequence of the system.

Given the fact that there is in European agriculture an inherent tendency to overproduce, and given the end price system, I think we shall get surpluses. Given those surpluses, I think that my right hon. Friend was right to point out that it is vital that we should have a policy. Hon. Members are probably getting impatient with the Commission because of the delays in producing a coherent policy to deal with the surpluses. The way in which part of the butter mountain was disposed of to the Russians was grotesque. It seems to me that we are in a position to have a policy—a welfare policy—of utilising these surpluses for the old and the young within the Community itself.

I would like to go somewhat further than this. I do not want to see agriculture purely in the European context. I want to see it in a wider context. We—

It being Ten o'clock, the debate stood adjourned.