Brexit: Food Prices and Availability (EUC Report) - Motion to Take Note

Part of the debate – in the House of Lords at 2:05 pm on 25th April 2019.

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Photo of Lord Teverson Lord Teverson Chair, EU Energy and Environment Sub-Committee 2:05 pm, 25th April 2019

My Lords, it is a great pleasure to introduce this report, which, like the previous one that was debated this afternoon, is a year old. For that reason, I am sure that we will bring the debate up to date. On the other hand, in a key way nothing has happened: we are still in the European Union, and the concerns, fears, expectations and hopes of this report when it was written a year ago are still to be proven or unproven. I hope that today’s debate may still contribute something, for when or if Britain leaves the European Union, on this important area of food. I emphasise, though, once again, like all my fellow EU Sub-Committee chairs, that the committee itself is completely neutral on Brexit or no Brexit: what we are attempting to do through these reports is to explore the issues in depth and to call Ministers and the Government to account, as we will today.

The report we are debating today is particularly important because food is not an issue that we necessarily debate in this House very regularly. Although food and Brexit, and the issues that are in the report, are very important, we Members of the House of Lords are able to go downstairs and have a two-course meal for probably a fiver. It does us good, it is very nutritious and there is probably no one around the Chamber, I suspect, who is challenged in terms of diet, consumption, being able to eat or food poverty. Yet today a report came out saying that we now have some 1,800 food banks in this country and that some 14 million meals over the last year were provided to those in fuel poverty—sorry, food poverty; I was speaking in the wrong debate there. What I want to emphasise during this debate is that while we as—dare I say?—typical Waitrose customers may not be too concerned about this area, it is a real challenge to a large number of families in this country. Food prices and food security really matter.

Let me give a little background. Why is food particularly important and why is it different in terms of the Brexit debate? First, unlike services and unlike many manufactures, food is perishable. If we do not deliver it, if we do not get it through borders, if we do not manage to get it through phytosanitary controls, the product is wasted. It is an important part of the food supply chain that is very time-determinate. The other area is that food is particularly important in terms of public health and biosecurity. Therefore we cannot just throw open our trade gates and ports, because there are serious issues around public health—as we saw with the tragedy of foot and mouth disease some decades ago—and all the challenges we have with biosecurity.

We import some 50% of our food, and 30% of all our food comes from other European Union countries. You have to add on to that, in terms of this debate, another estimated 11% that comes through the 50 trade deals and agreements that the EU has with some 56— sometimes reported as 60—other states. So altogether, 40% to 41% of the food consumed in this country comes through EU or EU-related treaties. For some 30 years our self-sufficiency—an area which sometimes receives particular political attention—has declined. That is not necessarily a very easy answer.

We have to remember that, unlike manufactures—certainly unlike services—the agricultural sector is still least affected by reductions in trade tariffs and the costs of trade. Barriers to agricultural produce, whether processed or raw, are still relatively high in world trade. As we know, the EU tariffs that we reflect at the moment in our joint customs regime are on average something like 22% on the cost of food coming in from non-EU areas—although developing countries of course have preferential terms in that area. It is worth saying that one of the biggest determinants of the change of food prices is the exchange rate. It was certainly true for the Minister when we held the inquiry that that was far more important than the Brexit issue. We must remember that the two are intricately related; a bad or difficult Brexit probably means a major impact on exchange rates as well.

I will go through a couple of scenarios that the committee considered as to what might happen with food prices. One is very optimistic: once we are a free trading nation, we will have complete control over our tariffs and could decide to completely reduce them to zero and open our agricultural markets to the rest of the world. In that scenario, food prices should come down quite substantially. That would of course have a major effect on the UK agricultural industry, but it might be seen by a Government at the time as a price worth paying. But we must remember that, under World Trade Organization rules and most favoured nation rules, if we reduce tariffs to zero for one area and do not have trade agreements with other nations, they all have to be reflected in precisely the same way. That is particularly concerning in terms of a no-deal exit from the European Union. We could reduce prices in that sort of situation, because there would probably be a glut of UK products that could no longer be exported to the EU because of its external tariff. So there is optimism on prices.

Alternatively, in a no-deal Brexit we will almost certainly have, not the frictionless trade we all want for the future but one that is very much the opposite—high paperwork, full controls on phytosanitary, documentation and new IT systems. In terms of the export and import of goods, it is estimated by the port of Dover that the difference could be from two minutes, as at the moment, for goods passing through on ro-ro to as much as 45 minutes under full documentation. Efficiency will go down, and that cost will ultimately have to be borne by consumers. A completely open and free trading nation could have world markets and increased food security, but, again, our domestic self-sufficiency will almost certainly go down. Again, we have a whole area of technical regulations and red tape barriers. As we now know, even more than a year ago, we have a situation where other free trade deals are probably far more difficult to implement than we had thought at the time.

I will look briefly at a no-deal scenario. Exchange rates will probably go adversely, which will cause prices to go up. There will be border checks and a tariff regime—although, as the Government since our report have published what those tariffs might be, it is interesting to see that there would still be substantial tariffs in a number of areas such as pigmeat, sheepmeat and similar products, and not so much in manufactures.

In the time that I have left, I will concentrate on labour and food security strategy. One of the consistent themes in the reports of my sub-committee is the real challenge of labour post Brexit, with or without a deal. This was mentioned in previous debates. Certainly, some 30% of the individuals engaged in the food processing industry, which is the largest manufacturing industry in this country, are non-UK EU nationals. In Cornwall, where I live, that proportion is significantly greater. Some 80% of the workers in the horticultural industry are seasonal, and 96% of them are from other EU countries. So there really is a challenge in delivering UK food in terms of both the supply chain and actual production and harvesting. We also looked a number of times at vets, who are overwhelmingly non-British EU citizens. There, too, there is a huge challenge.

I will return to the other development since this report was produced a year ago—immigration policy, and the potential £30,000 level of barrier to entry. Clearly these sectors will be hugely challenged by that. A year ago, the Minister was even against a seasonal workers scheme. I believe that now there is a change there, and I would be interested to hear from the Minister whether it is still the intention to change that.

Members of the committee felt very strongly that overall there was a need for a food security strategy. I would like to think that through listening to our report the Government have now undertaken to publish one post Brexit, but I would be interested to hear from the Minister where that is now.

I have one or two questions from the committee. First, we have already seen within the WTO the conflict around tariff rate quotas and splitting those between ourselves and the European Union, and the objections, particularly from southern hemisphere producers. I would be interested to hear where we are on that. On IT systems, the so-called CHIEF system had huge capacity issues in terms of future customs procedures, so can the Minister say where we are in terms of replacing the system or at least enabling it to cope with the huge amount of increased paperwork? On tariffs, I found it difficult to understand the Government’s proposal in terms of the Northern Ireland/Republic of Ireland border, where they said that there should be no tariffs. I do not understand how that cannot cause both large distortions in trade and indeed criminality —so I would like to understand that. It was almost a surprise to the committee that the former Minister, Sir George Eustice, said that to help trade through ports there would be no phytosanitary checks. If that is still the case, how long would that last for, and when will that national food strategy come out?

One of the things that came out strongly from our report is that the Minister at the time seemed a lot less concerned about food and its security and pricing than the committee and certainly our witnesses were. It is quite obvious that the frictionless trade in food and food products that all of us, including the Government, want, is impossible in the context of the red lines that the Government still have. I do not understand how those can be reconciled, and nor does the committee. Food will be the first casualty of Brexit, particularly if it is a no-deal Brexit. In addition, we have food poverty and real wages have not gone up in the UK since before the recession in 2008. For the lowest decile of the population, food now accounts for 33% of household expenditure, whereas for the top decile—which I suspect a number of us are in, although perhaps not myself—it is only 10%. That is a real challenge. I look forward to the Government taking this issue seriously for the future and to the answers that will be given by the Minister, as well as to the noble Earl’s maiden speech. I beg to move.