Orders of the Day — Agriculture Bill [Lords]

Part of the debate – in the House of Commons at 7:30 pm on 23 March 1993.

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Photo of Mrs Elizabeth Peacock Mrs Elizabeth Peacock , Batley and Spen 7:30, 23 March 1993

My interest in manufacturing and industrial issues, as well as, of course, consumer matters is well known, and leads me to contribute to today's debate in two ways—first, in relation to wool, as chairman of the all-party wool textile group and, secondly, in relation to milk, as someone who has been closely involved with the industry for many years. I declare an interest as my husband is employed by one of Britain's largest dairy companies, with which I am in regular contact on a range of issues. I am happy to leave the future of the potato board to my hon. Friend the Member for Cambridgeshire, North-East (Mr. Moss), who made an interesting speech on that subject.

At first glance, the Bill, as it relates to wool, milk and potatoes, seems straightforward with no controversial issues—but nothing could be further from the truth. The bill is a privatisation Bill to remove Government involvement from the market for those commodities. I fully support privatisation as it gives a new boost to industry, but if we privatise, we must do so properly—something which the Bill does not appear to do.

One aspect of the Bill will have a serious effect on the wool industry and wool producers, which will, in turn, affect our textile industry—the measure to terminate the guaranteed wool price from 1 May this year. As has been said, that guaranteed wool price will disappear before the Bill has completed its passage through the House. The main purpose of the guaranteed price has been to give stability to wool producers, which it has done for 40 years. The cost to the Government has been small, and the stability continued until the world collapse in wool prices in 1990.

The stability created by the guaranteed price has allowed the British wool clip to improve in quality and image, and turn itself into an internationally recognised fibre. There are licensees all over the world, and there is representation in Japan, which is now one of the biggest consumers of British wool. The existence of the guaranteed price has helped to develop an efficient structure for the collection, distribution and promotion of British wool. That structure is the envy of many European countries and it was the basis of the system now operating in South Africa.

The guaranteed price has served producers in the less-favoured and remote areas of this country particularly well. More than half of British wool is exported, either in greasy, scoured or top form. Much of the processing takes place in Yorkshire, and Scotland and the borders. The stability created by the guaranteed price has ensured a constant supply of wool into the wool industry which, at present, is increasing its exports, both in terms of value and quantity. The guaranteed price has helped to secure employment in those areas. That has been a particularly important factor as the textile industry has declined over the years.

The existence of the guaranteed price has been of great value in preserving the environment and countryside. The British Wool Marketing Board, the Confederation of British Wool Textiles and the National Farmers Union have repeatedly asked the Government to maintain the guaranteed price until 1995 to allow time for the industry to recover from the unprecedented difficulties resulting from the international wool crisis of 1990–91.

There is still a big discrepancy between supply and demand, and the reduction in world stockpiles could take two or three more years. If the guaranteed wool price is removed this year, as proposed, producer returns will fall by almost half, which will compound the hardship recently experienced by sheep farmers. There could not be a worse time to remove the guaranteed price as, due to the international stock piles, world prices are at their lowest level in real terms.

At today's market prices, many grades or breeds of wool have no commercial value. They could disappear and be lost from the market when prices recover. Like the milk cheque, the wool cheque is important to farmers, even though it does not amount to much. It is an important source of income to producers, particularly those in hill and remote areas.

The sheep industry has been depressed and uncertain for some years. The loss of the guaranteed price will compound the problems. As many sheep farmers say, their incomes are being reduced. I understand that a farmer in Bedfordshire—an area that you, Mr. Deputy Speaker, will know well—receives less for a whole lamb complete with fleece than I pay for one leg in the butchers. That discrepancy shows that there is something wrong in the market.

Production will be lost to third world countries, which will affect textile manufacturing output, and employment in areas that are already suffering due to competition from cheap overseas labour. Exports will be lost and there will be an increase in imported wool. Both factors will affect the balance of payments. There may even be a switch back to synthetic fibres, which could cause environmental problems. Shearing and dipping will be discouraged—we have already heard about the cost of shearing sheep—which will have an effect on the general welfare of the national flock. Environmental problems could be caused as sheep shed their wool all over the countryside. We all know the importance of maintaining the countryside, but it could suffer.

The importance of sheep farming should not be understated. The quality and image of the clip will suffer, and the present system of collection, distribution and promotion could be undermined. We all know that promotion is important—both the British Wool Marketing Board at its headquarters at Clayton, Bradford, and the Confederation of British Wool Textiles must both be complimented on their work in that sector. If the British Wool Marketing Board carries large stockpiles of wool into a post-guarantee period, producers will have to bear the cost of holding stocks inherited from the guaranteed price regime.

I shall call on the Minister—when he returns to his seat—to reconsider the issue and, at the very least, to extend the scheme until May 1995 when we hope that the wool market will be in better shape. Wool producers need the Minister's help, and they need it now. Perhaps as the Minister is busy in discussions, he will read Hansard tomorrow to see what I am saying.

When we see how milk is treated in the Bill, its true nature comes to light. It is an enabling Bill which leaves the action to the Minister. It is a sort of Arthur Daley Bill which suggests, "Trust me, guv'nor." I am not sure that many of us would buy a used car from Arthur Daley, and I leave my colleagues to gather the inference from my words.

Surprisingly, the Bill requires only the milk marketing boards to come up with schemes to reorganise the industry—the Minister then has to agree to those schemes. The Minister has no obligation to publish the schemes or consult anyone else in the industry. That does not constitute democracy, but provides a potential abuse of power.

I hear that there is already a mood within the milk marketing boards merely to change the letterhead, repaint the trucks, get rid of a few troublesome milk producers and carry on as before. That is patently unsatisfactory. The Minister should be obliged to consult the milk purchasers, retailers and consumer organisations. We are all consumers. Perhaps not all my colleagues do the weekly shopping, but their partners, wives, sons and daughters may do so—we are all consumers and all ultimately pay the prices. Such groups should be consulted by the Minister before he gives his approval to a reorganisation scheme. I am sure that, if the Minister were advising me on the reorganisation of my now infamous mythical whelk stall, he would at least take into account—I hope—the views of my customers. I suggest that he does the same in this case.

I should like to spend a moment discussing the competition aspects of the Bill. It is here that the issue of privatisation comes into play. The milk marketing board in England and Wales has already proposed that it should be converted to a milk brokerage, Milk Marque, aiming to control 80 per cent. of milk from farms. Its equivalent in Scotland proposes to operate an integrated milk brokerage and dairy business, with more than 50 per cent. of the market in Scotland. Clearly, we have competition on our hands, and it could be an issue from the very first vesting day.

It reminds me of the problems that we have had with privatisation in the energy market. We have privatised gas and we are allowing a monopoly to continue, restricted only by an efficient and tough regulator—and even he suggests change. In the electricity industry, there is an inefficient regulator who has been unable to prevent the industry from falling into disorder. If I were to use any more such examples, I am sure that the Chair would quickly rule me out of order, but we have adequate supplies of energy in this country, and a great deal of milk, so we should not have to import either.

I am advised that Milk Marque, the potential monopoly, has already announced the non-negotiated price at which it will supply dairies as from 1994. I understand the proposed price is 20 per cent. higher than current prices. I cannot see the British housewife wanting to pay 20 per cent. more for milk just because the Government are allowing a monopoly to develop. I trust that the consumer organisations will pick up this point and discuss it forcefully with the Minister.

Not only will Milk Marque attempt to set prices that bear no relation to the market; it also reserves the right to ration supplies, presumably to impose its own prices. That strikes me as a potential abuse of a monopoly position, and we do not want references to the Office of Fair Trading or the Monopolies and Mergers Commission early in the new scheme. I sincerely hope that it will not encourage British dairies to import raw material supplies from northern France, as we do with French electricity, or British farmers will be very cross. I know that the chairman of Northern Foods has already described the massive investment that that company will make in plant in this country once he knows what the Minister's views and actions will be. I would certainly not want him to go away with the idea that it would be much better if he invested money in jobs in northern France rather than here.

We want our industry here. I want British electricity in our power system and British milk on my cornflakes. I expect the Minister to ensure that I and future generations will have it.

The Bill must deal with the competition aspect. We cannot just leave it to the Minister to sort out the industry as best he can. Limits must be placed on the size and form of any milk marketing board successor established as a result of the Bill. The Bill must also set limits on the size of any future milk brokerage. We cannot rely on a regulator with the title of Ofmilk. That would do nothing to encourage our British industry. In any case, our regulators are only partly successful, and there is no reason to suppose that they would do any better in this industry.

We have made a botch of some of our privatisations, and we must not make a botch of milk reorganisation. Most people need milk every day of their lives and like it delivered to their doorsteps, so the legislation needs to be framed to promote competition and prevent the need for intervention by the OFT or the EC Commission.

I understand that certain services are of significance to British dairy farmers and the dairy industry. They have already been mentioned, but I shall mention them again so as to leave the Minister in no doubt about the concern felt. The services are artificial insemination, milk testing and milk recording. These services are currently provided by the milk marketing boards. I understand that Milk Marque has assumed that they and their assets would be vested in the new organisation.

That would be unsatisfactory. Some milk producers will not be trading with Milk Marque. They will sell to other organisations or direct to dairies—but they will need the benefit of those services. For reasons of commercial confidentiality, those producers will be reluctant to use the services if they remain within Milk Marqueßžand who could blame them?

Moreover, the same farmers have a claim on the assets used by all those services, in the form of farms, offices, laboratories and means of transport. Milk producers have contributed to their cost for many years, so they should remain freely available for use by all milk producers. The services are critical to British dairy farming and should therefore be moved to independent control—to the Agricultural Development Advisory Service, to a commercial organisation or even to a non-profit-making trust.

The milk producers who do not trade with Milk Marque also have a claim on other MMB assets—the land and property at Thames Ditton, at regional offices and at depots and farms around the country. The property belongs to all milk producers; they have all paid for it over the years they have been members of the scheme. It would be most unfair if the benefit of these properties fell into the lap of a single milk brokerage.