Glasshouse Industry

Schedule 3 – in the House of Commons at 12:50 am on 12th December 1979.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Waddington.]

Photo of Mr Bob Dunn Mr Bob Dunn , Dartford 12:56 am, 12th December 1979

I am glad, at long last, to leave Rhodesia and turn to the horticulture problems of North-West Kent. I welcome the opportunity to raise the problems of glasshouse producers.

First, I record my thanks to Mr. Lionel Mills, Mr. Michael Wallis, Mr. Vic Ross and Mr. Richard Holdaway, all of whom are members of the North-West Kent producers branch of the National Farmers Union. Their good-natured, intelligent and persistent lobby since 3 May has led me to take great note of their continents and complaints, and, thus convinced, I have sought to raise the issue on the Adjournment.

North-West Kent has traditional associations with glasshouse produce. That is partly because of the availability of land in the early part of the century, but mainly because of its nearness to the great London markets. In the early 1950s about 60 glasshouse producing units existed. It is unfortunate that only 25 now exist. Those no longer in existence have been converted to other agricultural use or lie derelict. In some instances there has been housing estate development. In former years about 1,000 people were employed in North-West Kent in glasshouse production. There are now barely 300 so employed.

Although the industry is in a reduced state, it is efficient and productive. For how long can that continue? With a lack of financial investment, with fierce, unfair competition from the Dutch, and with long-term energy problems, what sort of future has my local horticulture industry? The average age of members in the Dart-ford area is now approaching 50 years. No new glasshouse units have been opened for some time. Young growers are deterred from entering because of high capital costs and low returns. A further complication exists because of the supply and demand nature of the market within which the industry operates.

The first problem to which I refer is that of energy, which amounts to about 40 per cent. of annual production costs. Many growers are currently using oil. In view of the uncertainty of the price stability of that resource, they would rather convert to gas. National Farmers Union members have approached the gas board to obtain conversion but have been deterred either by the cost of conversion or by the unavailability of supply. Action is required by the Government to force the gas board to give glasshouse producers priority and to make increased grant aid available to enable the conversion of oil-fired units to gas or coal to be carried out.

Energy savings of at least 10 per cent. can be achieved partly by conversion to gas and partly by the installation of thermal screens. The NFU has called for an increase in aid available under the horticulture capital grants scheme, the farm and horticulture development scheme and the Department of Energy's conservation scheme, from 25 per cent. to 40 per cent. of total expenditure for installation of thermal screens.

The second problem relates to unfair competition from within the EEC, and mainly from the Dutch. Comparable price data based on energy prices obtaining on 1 November in Holland, Germany and the United Kingdom show the Dutch to have an enormous advantage over the other two countries. For example, for heavy oil, the United Kingdom and Germany pay 7·7p and 7·5p per litre respectively. For light oil, the United Kingdom and Germany pay lop and 12p to 15p per litre respectively. For gas—the Dutch growers use only gas—the Dutch pay 17·5 centa per cubic metre. That converts to only 4·345p per litre of oil. Germany uses oil for 90 per cent. of its production and believes that her growers pay 200 per cent. more than the Dutch.

The NFU has calculated that the price difference given to the Dutch has an advantage for the Dutch tomato producer of £6,000–£10,000 per acre over his United Kingdom counterpart. With the knowledge of the Dutch Government, the Dutch gas company operates a two-tier gas price system. That system gives horticultural units a price that is 31 per cent. cheaper than that given to domestic and other industrial users. The Dutch link their gas prices to the least expensive grade of oil. The reverse is true in the United Kingdom.

Other benefits are given to the Dutch in the form of loans at low fixed rates of interest and transport savings. That means that the Dutch are able to dump tremendous quantities of horticultural produce in the United Kingdom, to the detriment of my local growers.

Great cost is incurred in renovating old plant. Many growers work with wooden frames that warp with time and become less effective. The high capital cost of replacement, in addition to the low-profit market, has caused many people to live off the fat. That fat no longer exists, and no renovation is taking place. High interest rates act as a disincentive to renovation. However, our counterparts in the EEC receive low fixed-rate loans or other grants for double glazing in excess of 50 per cent.

Finally, I refer to the problems associated with plant inspectors. I understand that there is an EEC harmonisation of plant health directive that is likely to take effect shortly. Local growers complain that, due to the absence of Kent plant inspectors, who are often seconded to other parts of the country, irregular attention is paid to imports from abroad. However, exports from the United Kingdom to Holland and Germany are rigorously tested and rejected for the slightest defect. The reverse occurs in the United Kingdom. The problems facing the industry are enormous and the prospect of many people reducing their output, to the detriment of the British housewife, must be faced. I shall be grateful if the Minister will answer in particular those questions relating to energy and to unfair competition.

Photo of Mr Jerry Wiggin Mr Jerry Wiggin , Weston-Super-Mare 1:04 am, 12th December 1979

I am grateful to my hon. Friend the Member for Dart-ford (Mr. Dunn) for raising a number or important issues for the glasshouse industry. I congratulate him on putting these problems so succinctly on what I believe is his first Adjournment debate. I am sure that he will accept that the problems that he has mentioned are not confined to growers in North-West Kent but serve as an example of the present concerns felt by the whole glasshouse industry.

The major disquiet that my hon. Friend has raised is about the availability and the cost of energy, especially oil, which is the fuel most frequently used for glasshouse heating. That concern is fully understandable, since the cost of heating can be as much as one-third of the growers' production cost.

While my hon. Friend will appreciate the difficulty of making any long-term forecast about the availability or price of oil—particularly at the moment—as far Sea oil is priced at world levels. Contract prices for gas, where it is used, are fixed in individual negotiations between the customer and the gas board. It has been as can be foreseen the oil supply situation for the winter months should be satisfactory. In times of shortage, voluntary arrangements for distribution are the best as long as conditions allow.

Similarly, and I fully understand that the price of oil to horticulturists has gone up by about 50 per cent. in the past year, I must stress that the Government do not determine the price of oil or gas. North suggested that we should give a subsidy, such as the one paid in 1974, to horticulturists to help them adapt to this year's price rises. But the current circumstances arc quite different from 1974, when there was an unexpected threefold increase in oil prices, which would have put many growers out of business had they not been given time to adapt to such a large increase in their costs.

It is not in the long-term interest of growers to shield them from rising oil prices. They need to adapt if they are to survive in the long run. We do, however, give them help in other ways. Horticulturists receive full rebate of excise duty on oil for glasshouse heating and soil sterilisation, and their supplies are zero rated for VAT. My Department is helping all the time through ADAS advice to growers to help improve production methods, and grants are available for energy-saving equipment. This includes conversion from oil to other fuels where this is technically feasible and commercially viable.

I note what my hon. Friend said about the supply of gas, but it is a well-understood problem where there have been difficulties in the supply and price of oil. Gas has been a relatively cheaply priced fuel, and many users of fuel, both domestic and industrial, have turned to the gas industry for supplies. But that industry has not been able to provide them, and horticulture is no different in that respect. It is certainly not an area in which the Government could, or in my view should, intervene.

Investment by growers in energy-saving measures such as the installation of thermal screens or improvements in heating systems, including conversion from oil to some other fuel, should be worthwhile investments in themselves. Current rates of grant ranging from 15 to 25 per cent. under the various schemes are not an inadequate contribution to such capital investment. We are also carrying out a considerable amount of research and development on energy-saving techniques, including thermal screens, which my hon. Friend mentioned. The whole question of the long-term future of energy for glasshouses is being studied jointly by officials of my Department and the NFU.

While I understand my hon. Friend's concern about high capital costs of both glasshouses and associated equipment at the present time, I am certain that he will be sympathetic to the view that this indusry is very open to competition, and he will be pleased to learn that there are those who make substantial profits as well as those at the other end of the scale. It may just be that the latter number amongst my hon. Friend's constituents. I cannot support the view that the Government should intervene in the industry beyond the present level. This is, of course, in line with our party political philosophy.

However, I share my hon. Friend's concern and I am most sympathetic to the plea that the industry should be able to operate in conditions of fair competition. Glasshouse producers have undoubtedly been facing stiffer competition from imports since we joined the EEC, and in particular since the end of transition when we became fully exposed to free trade between ourselves and other member States. We are frequently being told—and my hon. Friend has said so in as many words tonight—that the glasshouse industry is not afraid of competition as long as it is fair. I applaud that sentiment. It is just what I would expect to hear from an enterprising and forward-looking industry, which I believe the glasshouse sector to be.

However, we have to be on our guard against labelling all competition as "unfair". That would be a dangerous frame of mind to allow ourselves to get into. It cannot be said, as a general proposition, that what is unequal is unfair. We have to accept that natural advantages and disadvantages—soil and climate, for example—are not evenly distributed. Similarly—within certain limits which I will come to in a moment—there may be legitimate reasons why the differing policies of national Governments result in variations in the business environment; for instance, in the costs of labour, machinery, haulage, fertilisers and other inputs.

It would be as impossible—and improper—to try to equalise all these factors as it would be to compensate a grower for a badly sited holding. In general, growers have to work within the circumstances in which they find themselves, and it is precisely because the exercise of management skill and decision-making is a major determinant of the ultimate success or failure of the enterprise that this branch of agriculture has always attracted the talented entrepreneur.

Where I agree with my hon. Friend is on the importance of upholding the rules of fair competition under the Treaty of Rome. It has been represented to us that the rules are being breached and that there is unfairness of competition. We have thoroughly investigated the facts through our agricultural attaches, and we find that the allegations are unfounded.

Let us look at the details. It has been claimed that it is unfair for Dutch growers to buy gas for heating their glasshouses at a lower price than our growers pay for their fuel, which is mainly oil. But the Dutch gas is onshore and near to the greenhouses—and I acknowledge that Dutch growers buy it cheaply. But that in itself is not necessarily unfair. There is no evidence that the gas price is below the cost of production or that Government subsidies are involved. It would be a very different matter if that were the case, and given any real evidence we would immediately act on it. I have said this in the House before, and I hope that my hon. Friend will note that promise. If there is evidence available, the Government will act upon it.

Then again, as my hon. Friend pointed out, the Dutch investment law—the Dutch WIR scheme—is unfair as compared with our system of support for the glasshouse industry. The WIR scheme is complex and very different from our traditional system. It is not easy, therefore, to make precise comparisons, particularly since the position of individual growers can vary widely. But the facts show that, broadly, the tax provisions that we make, such as the capital allowances, plus our system of capital grants, plus the sums spent on research and development—where horticulture, incidentally, is treated most generously—will stand comparison in total benefit to the horticulture investor.

The EEC Commission has studied the Dutch WIR system. Indeed, it was modified at the Commission's request. The Commission concluded that it was not incompatible with Community rules and not, therefore, unfair.

It is right to be watchful, but for action to be taken on grounds of unfairness under the Treaty we need to prove one or the other of two things: either that the Government of another member State are giving an illegal national subsidy or that the sellers are operating restrictive agreements or practices which affect trade or distort competition. On investigation, the allegations put to us so far have met those tests and cannot, therefore, be labelled unfair.

I turn to the specific question of plant health which my hon. Friend raised. I fully realise that, as my hon. Friend said, there are fears in the industry that the implementation of the EEC frontier directive will weaken our import controls and increase the risk of bringing in plant pests and diseases. This is not so. The original draft directive has been very much modified to protect the special plant health situation of the United Kingdom and contains all the safeguards essential to us.

Where prohibitions on imports are to be removed, alternative restrictions relating, for example, to areas of production and to cleaning and packing will be imposed. These will, as has always been the case, be controlled by the plant health service of the exporting member State. We have had experience of working with these services and in general have a great respect for their expertise and efficiency in meeting our requirements. We are sure that they will be no less effective in seeing that the requirements of the directive are carried out.

It will, however, be important, as it has always been, to monitor imports, partly to see that agreed procedures are being operated but also to watch for unforeseen hazards. My inspectors will be looking particularly at those areas where the directive has altered existing arrangements, and where necessary we shall, as we have always done, destroy or reject unhealthy material. To cope with this additional work, the size of the inspectorate has been increased by 10 per cent.

The philosophy of the Government is to encourage enterprise, which horticulture has in no small measure. This extends beyond the glasshouse sector. My hon. Friend will be well aware of the importance of orchard fruit production in his constituency. This is another sector in which the pace of competition is quickening and where I see encouraging signs that growers are prepared to adapt their production and marketing methods to meet the challenge. This is what all farmers and growers should be doing, as, indeed, many of them are.

Fresh fruit and vegetables of top quality are in great demand in this country, and there is every evidence that our consumers are ready to pay the necessary price for the best produce. Who will supply what the United Kingdom market requires? Why should it not be our own growers, who themselves also have several natural advantages, including that of proximity to market? Where the foreign competition can be shown to be unfair in terms of the Rome Treaty—and not merelyunequal—then, as I have already said, the Government will certainly be prepared to take vigorous action to redress any imbalance.

My hon. Friend will accept that we have chalked up several successes in this direction already. Where there are technological problems or opportunities for technological advances—such as within the area of plant health and in the field of research and development, to both of which I have already referred—here, too, the Government will continue to help and encourage the industry and ensure that it receives its due share of support.

But in matters of business enterprise, and in facing the challenge of imports in an era of free trading, the Government look to the whole horticulture industry—of which the glasshouse sector is an important part—to live up to its past reputation, to stand on its own feet, and to reap the future rewards that are there to be earned by skilled and resolute growers.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past One o'clock.