UK Dairy Sector — [Joan Ryan in the Chair]

– in Westminster Hall at 11:29 am on 20th April 2016.

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[Relevant document: Third Report from the Environment, Food and Rural Affairs Committee, Farmgate Prices, HC 474.]

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion 2:33 pm, 20th April 2016

I beg to move,

That this House
has considered the UK dairy sector.

I am grateful for the opportunity to serve under your chairmanship, Ms Ryan, and to address the state of the UK dairy sector. This is an important debate, and I am glad that there are so many people here, not only from Wales and the devolved nations but from across the United Kingdom. I suspect there may be some interventions but, given the number of Members who wish to contribute, perhaps we will keep them to a minimum.

Everyone here will recognise and agree on the importance of the agricultural sector, especially the dairy sector, which is a vital part of our economy, our landscape and, in many parts of the country, our communities. In the rural areas that we represent—I represent Ceredigion—local family farms are the lifeblood that run through our community. Without them, many parts of my constituency could not survive and, in many cases, would not exist at all. Many farmers who work the land and tend the flocks and herds have done so from generation to generation for hundreds of years, and they want to continue, yet the future looks bleak for many of them. I get that ongoing and constant message from farmers and their representatives in the farming unions. This is a time of grave uncertainty for many farmers in my constituency, in Wales and throughout the United Kingdom. It is a time of difficulty and, day by day, many farmers are struggling to get by, which has led to the harrowing fact that almost half of all dairy farmers in Britain have stated their intention to quit the sector.

There has been an incredibly difficult market for dairy produce in the past several years. That difficulty has not been caused by one specific issue that can be easily addressed. A number of factors are involved: local ones, national ones and, of course, global ones. Farmers understand that—they have told me about it—and it has been endorsed by reports from the Select Committee on Environment, Food and Rural Affairs. I am glad that the Select Committee Chairman, Neil Parish, is here to share with us his wisdom and expertise on the back of an excellent report that has many positive recommendations, which I will pursue later.

Whether the factors are local, national or global, the impact is the same. In the summer of 2014 alone we saw farm-gate milk price returns to UK farmers fall between 25% and 50%, which meant a fall from about 34p a litre to 23.3p a litre as of late last year. That is the lowest price farmers have seen since 2009, yet many receive even less than that low figure. Yesterday, at the excellent Anglesey day pioneered by Albert Owen, farming unions told me that some farmers in north Wales may soon receive payment of just 16p a litre. Although 23p is difficult for many dairy farmers, and perhaps 26p or 27p would be sustainable, there is simply no farmer in this country who could survive for long by selling milk as cheaply as 16p a litre. Many farmers are already struggling and living on the edge financially. Yes, Government action on averaging out tax payments over three years for farmers is incredibly helpful, but it does not address many of the challenges they face.

Photo of Antoinette Sandbach Antoinette Sandbach Conservative, Eddisbury

One issue that farmers in my constituency of Eddisbury raise with me is the fact that the processors are not subject to the Groceries Code Adjudicator and that there is a huge gap between those on aligned contracts and those on non-aligned contracts, and it is those on non-aligned contracts who are really suffering at the moment.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I completely concur with the hon. Lady, who has experience of the farming industry both in England and in Wales. I will address the Groceries Code Adjudicator later, but I agree with her sentiments.

In Wales, the dairy sector continues to suffer from months of continuing low prices and poor profitability, and many of the farming unions are not convinced that there is likely to be a recovery any time soon. According to AHDB Dairy, for the 12 months to December 2015 total full costs of production ranged from 25.7p to 34.4p a litre. In short, there is huge disparity between the costs of production and the price that producers receive, which is a huge concern. The figures over the past decade show the loss of 5,500 dairy producers in England and Wales, and that downward trajectory will continue if nothing is done to help support dairy farmers. That means a change in the ethos of some of our farmers, but it also means positive action from the different Governments, whether it is the Government here in Westminster or the devolved Administrations. If we do not do that, it will have a terrible impact on the rural communities that many of us represent.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

One thing that the hon. Gentleman has not mentioned is the fact that this debate is almost as repetitive as the changing seasons. I must have been to more than 12 such debates over the past decade, and we always get platitudes from Ministers, who say that everything is being done. I hope he agrees that, when the Minister stands up on this occasion, we will hearing about concrete steps that the Government are taking to support our dairy farmers.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I agree with the hon. Gentleman. I refer him and the Minister to the report by the Environment, Food and Rural Affairs Committee. The hon. Gentleman has a fine pedigree in championing such issues. He set up the all-party dairy group in the last Parliament, and he initiated many of the 12 debates that I mentioned. I thank him for his contribution.

I mentioned rural communities. I reflect on the words of the farmer whom I spoke to on the streets of Aberystwyth last weekend, who told me that price fluctuations over the past five years have cost his business something like £100,000. That is a huge loss to the local economy, local businesses and the wider agricultural economy.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

I commend the hon. Gentleman on securing this debate. I must register a slight interest, as my husband runs an agricultural auctioneering business; he runs the Sedgemoor market, which many Welsh farmers come to. He has reported to me that there is a knock-on effect. It is not only the farmers selling milk who are affected; it is the whole industry. The cost of a cow now is less than £1,000. People who rear cows to sell them to dairy farmers can hardly cover the costs of their business. The whole chain is affected, not just the end of it, and we absolutely must do something to address this situation.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

The hon. Lady is quite right, and she represents a rural area, as I do. For people who do not live in a rural area, it can sometimes be very hard to understand the extent to which the agricultural community and the agricultural economy are engrained in rural areas and every aspect of life in those areas. We have had a big debate in our area about the closure of village schools. If families working on dairy farms move away, that has a direct impact on the capacity of small schools to function. If young families leave a community, public services dwindle as a consequence, as well as the auctioneers and others involved in the supply chain for the agricultural industry, as she said.

The nature of my remarks so far has been negative, but I do not want this to be a wholly negative debate, because we have some immensely innovative farmers who want to stay in the industry and want the industry to thrive and prosper. However, my farmers tell me that they want us to speak out about the reality on the ground as they experience it.

Of course, not all the problems are home-made. There are serious global challenges for British agriculture that are not under our control. The farmers I have spoken to recognise the significant impact of global supply and demand on their businesses, and the difficulties for Government in changing that. There has been a fall in the global commodity price which, along with other factors such as the Russian ban and the reduced demand for milk from China and the middle east, has played a part in the current difficulties we face in Wales and in the UK as a whole.

For those farmers who have stayed in business and continued producing dairy, production has increased, but so has production around the world and it seems unlikely to slow down in the near future. There have been warnings. I will not dwell on them too much, but the Welsh Affairs Committee, of which I am a member, warned about the impact of the end of quota and the impact of the increase in Irish production, which the Farmers Union of Wales has been talking about since 2009; but we are where we are.

While there are positive signs that the global market for milk will continue to grow, the growth in production is higher than the growth in demand, which has a huge impact on the commodity price of milk. We live in a globalised world and at times that unfortunately means that small changes somewhere else in the world have a huge impact at home. There is action that can and must be taken to improve British dairy producers’ opportunities on the global market, such as having a strong and long-term dairy exports strategy; I emphasise that it should be strong and long-term. However, these global factors cannot always be predicted.

The domestic market remains important. Over half the milk produced in the UK is sold directly as fresh liquid milk through retailers and consumed here in the UK. This milk is mostly sold as skimmed or semi-skimmed milk, with much of the remaining milk being processed into products such as cheese, yoghurt, milk powders and butter. There are some very good companies using that milk. I think of Rachel’s in Aberystwyth in my constituency; its products can be bought in Portcullis House. They are excellent products that are made using local milk.

While many dairy products are in a very competitive global market, there has been huge criticism about the relationship between supermarkets and their suppliers, especially when it comes to the price that supermarkets pay for the milk that goes on their shelves. Milk, as a staple in many people’s shopping baskets, has for too long been at the forefront of the UK retail price war. However, rather than affecting the profits of the supermarkets, it seems that much of this cost-cutting has instead affected the price paid to dairy suppliers. Much of the milk that is produced was bought at a price lower than it cost to produce. That situation is simply not sustainable for my constituents who are farmers— or for any constituents in the farming communities represented in Westminster Hall today. The FUW said in 2015:

“It is not, and never has been, the job of the producer to fund supermarket price cuts or to enhance a retailer’s market share. Sacrificing producers to a retailer price war can only function to further break an already fractured supply chain”.

That is why I return to the point about the Groceries Code Adjudicator made by Antoinette Sandbach, and it is why many of us in this House supported the creation of the adjudicator.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I know that the hon. Gentleman has done a lot of work on this issue, so I give way to him.

Photo of Julian Sturdy Julian Sturdy Conservative, York Outer

I congratulate the hon. Gentleman on securing this important debate and on making a powerful argument. Regarding the Groceries Code Adjudicator, he will be aware that there is an upcoming review of the adjudicator, two years after the office was created. Is that not the perfect opportunity to strengthen the adjudicator and its remit, as my hon. Friend Antoinette Sandbach touched on? This is an area where Government can act.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

Again, I completely concur with that comment. I think the hon. Gentleman secured a debate on the Groceries Code Adjudicator in this Chamber a few weeks or months ago, and he made that point very strongly then. He is quite right; we need the opportunity that this review presents.

I supported the creation of the adjudicator, as did my party, and I commend the cross-party efforts to create the adjudicator. Andrew George, the former Member for St Ives, and others, including the hon. Member for Ynys Môn—in fact, all parties in the House pioneered and put forward the case for the adjudicator, the creation of which was long in coming.

Like Julian Sturdy, farmers tell me that, yes, the adjudicator has the power to name and shame, and, yes, the adjudicator has the power to levy fines, but those powers are insufficient. The adjudicator needs to have the power to examine the whole of the supply chain from gate to plate, even if that requires legislative change. That would instil great confidence in many farmers who do not have a direct relationship with supermarkets through one of the admirable dedicated supply contracts.

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention)

I am grateful to the hon. Gentleman for giving way, for securing this debate and for the passionate remarks he has made. Based on what he has just said, and based on the previous intervention, unless the Government act during that review and give the adjudicator some teeth, there will be a huge Government failure on the dairy industry.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I totally concur with that. I think there is an emerging consensus. It took some time to give the adjudicator the capacity to levy fines. I think this is the next step, but it cannot come quickly enough for many of the farmers in Carmarthenshire, Ceredigion and elsewhere.

We are told that more dairy farmers are supplying supermarkets on a dedicated contract, which is true, and that many of those farmers receive more favourable milk prices, which is good, but only 4% of Welsh dairy farmers have a direct link with the supermarkets. I celebrate that 4%—I congratulate those farmers and those supermarkets on having better arrangements—but it is only 4% of Welsh farmers who can potentially be assisted by the Groceries Code Adjudicator if there are contractual breaches. The rest of them are on their own and there is a huge sense of vulnerability.

I will proceed as quickly as I can now; if the House will excuse me, I will not take any more interventions. I will talk about efficiency in the dairy sector. Of course, efficiency can help to reduce the cost of milk production, but to do so farmers need to have the money to invest, and that needs to be recognised in the price paid to farmers for their milk. The FUW says,

“Whilst... some retailers have made small in-roads in this area, it remains imperative that the prices paid to producers not only cover the cost of production, but also provide room for investment in order to allow the sector to innovate and remain competitive.”

I am yet to find a farmer who does not have an eye on the future and who is not prepared to plan or innovate. The issue for almost all those producers, and many of the larger ones, is that the financial constraints on them—some of those constraints are sometimes imposed by the banks, which are not always helpful; many of them are, but many of them are not—make it impossible for them to invest in the way that we want them to. If we expect farmers to invest, say, £100,000 to extend a milking parlour at a time of gravely low prices, that is a huge challenge and for many farmers it is not feasible.

Despite that, the industry has achieved many of the efficiencies expected of it. It is predicted that between 2015 and 2016 the industry will reduce the cost of production by 4.56 pence per litre. However, to go back to the international dimension to this situation, at the same time prices fell by 20%.

We need to look at processing capacity. In Wales, the fact is that we have had no substantive investment in processing facilities for 10 years, although Liz Saville Roberts may tell us a little good news if she catches your eye, Ms Ryan. There has been a loss of milk and cheese processing at a time of increasing supply. That needs to be addressed.

Briefly, I will endorse what the Environment, Food and Rural Affairs Committee said in the recommendations of its excellent report, “Farmgate prices”. One of the recommendations stated:

“Claims from national retailers that there are ‘sustainable economic reasons’”— sustainable for whom, we ask—

“justifying price differentials have not been fully accepted by many farmers, and retailers must”—

I emphasise, “must”—

“do more to explain their reasoning and to ensure their prices adequately reflect the costs of production.”

The report talks about producer power in the marketplace. What is being done at the UK level—I would ask the same question to Ministers in Northern Ireland, Scotland and Wales—to encourage producer organisations? In Wales, there has been concern that the Assembly Government have not been forthcoming with the resources promised to the farming community to develop producer organisations.

The report highlighted that opportunities exist for imports to be displaced and for new products to appeal to UK and global consumers. The whole supply chain needs to invest in continued improvement and productivity. If that is an aspiration, it is a laudable one, and I know many farmers are attempting to respond to it.

The report also questioned the

“assurance from the retail sector that there is no link between the price at which supermarkets sell to their customers and the price supermarkets pay to farmers.”

The report said that “Progress is uneven”. I would say that the Committee is being rather generous in saying that it is “uneven”.

DEFRA and Agriculture Ministers in the devolved Governments need to encourage the use of more long-term contracts. That will help to provide predictable levels of income and ensure secure financial planning and investment decisions, regardless of the price in the supermarket. There needs to be clearer guidance from DEFRA so that customers know that they are buying British goods or—I would say this, wouldn’t I?—Welsh produce.

Through the European school milk scheme, children over the age of five receive a subsidised portion of milk. Revisions to the scheme—I believe the UK Government abstained—were passed this month, which means that the UK will receive just under €10 million in aid per school year, which is the fourth highest allocation of any country in the EU. DEFRA is responsible for implementing that allocation. Will the Minister clarify whether the Government will continue to participate in the revised European school milk scheme? What plans do they have for consultation? Critically for this debate, what discussions has the Minister had with the dairy industry about how it can benefit from the scheme?

My final substantive point is on the voluntary dairy code of practice, which often gets ignored. There is concern over its brevity and the number of people it covers. My farmers tell me that the code has had little impact on the farm-gate price received by producers and is largely ineffectual in the midst of a market surplus. When the former Minister, Sir James Paice—Jim Paice—came to the Royal Welsh show in Builth Wells and announced the code, there was great excitement among the farming community. We were told at the time that, if there were concerns that the dairy code was not working effectively, the Government would leave open the potential for a statutory code of practice. How is the voluntary code being monitored? What consideration is being given to putting it on a statutory basis? For a long time, the FUW has called for the inclusion of market-related pricing formulas within dairy contracts, and I fully support that.

I could go on; it is a hugely wide subject. The remit of the debate was deliberately made as wide as possible to encourage contributions from Members from all parts of the UK and with different experiences, but there will be a commonality to many of the messages that we present to the Minister. There are two great industries left in Wales—steel and agriculture—and a growing small business sector, which we nurture. The steel industry is concentrated. We hope that the proposals for a management buy-out in Port Talbot yield results, because the impact of many thousands of people losing their jobs overnight would be catastrophic for Wales and the United Kingdom. However, a more sublime, devious decline of an industry is happening in Wales, and that is agriculture. The Committee report gives us some of the answers that need to be pursued. It is very important that the thousands of jobs in rural communities are sustained and protected. I do not dwell on the negatives, because I am reminded by the young farmers who come to my surgeries—I go to their meetings, and they want to stay in the industry—that they are the people we need to support and on whom our rural communities depend.

Photo of Joan Ryan Joan Ryan Labour, Enfield North

I say to right hon. and hon. Members that we have 10 people seeking to contribute, so I am placing a four-minute limit on Back-Bench speeches. If everyone is helpful, everyone should get in on that basis. I will be seeking to start calling the three Front Benchers at 3.30. With the Minister’s co-operation, I ask that we allow the mover of the motion two minutes at the end, bearing in mind that we have a few minutes past the hour as we started late.

Photo of Glyn Davies Glyn Davies Conservative, Montgomeryshire 2:55 pm, 20th April 2016

I am grateful for the opportunity to speak early in this debate. To some extent, I had been hoping to hear all the other speeches and use them to contribute to mine. I congratulate Mr Williams not only on raising such an important debate, but on doing so in an excellent way. There was hardly a single comment that I disagreed with. He has raised most of the issues that I would have raised, so I will concentrate on two points only; I realise that many Members want to speak.

My first point relates to the public announcements in the past couple of weeks about an increase in the price that Arla pays farmers. It seems to have been accepted as an increase by DEFRA in publicity saying, “Well done, Arla”, but it was not an increase. Arla’s press release worked a treat, but the increase did not reach the farmers. We need to be pretty clear about that simply as a point of information.

The second issue I want to raise is hugely important. Cross-border single farm payments are a massive problem, particularly in Wales. The agriculture industry is structured such that the single farm payment from Brussels is crucial to the economy of farms. The cross-border farms in Wales have been deeply let down. They are not getting any money at all, but I am raising this issue with the Minister because the problem in Wales—this is what the Welsh Minister is saying to all those farmers—is that the information is not available to the Welsh Government. The Welsh Government therefore cannot calculate the payments for the cross-border farms, and they are getting nothing.

The farmers are in a desperate position. We read today about a supplier who has gone bankrupt. Some 300 cross-border farms in Wales are suffering. We have to have a proper working relationship between the Rural Payments Agency and Rural Payments Wales. We are told that they are not talking to each other, and people are losing out because of a bureaucratic failure. I do not know where the failure lies, but it needs to be gripped by DEFRA so that the problem can be sorted out for the sake of those cross-border farmers who are heading towards bankruptcy, purely because of inefficiency and bureaucratic failings.

Photo of Margaret Ritchie Margaret Ritchie Social Democratic and Labour Party, South Down 2:58 pm, 20th April 2016

I congratulate Mr Williams on securing this incredibly important and hugely topical debate on our dairy sector. The dairy sector has a long and proud history in Britain and in Ireland, both north and south. In Northern Ireland, the dairy industry stretches back many generations. Members will agree that dairy products are so much a part of our everyday diet that it is easy to forget the huge skill and effort it takes for farmers to produce such world-class produce. In fact, the all-party group on dairy—I am one of its vice-chairs—recently produced a helpful document on the need for Government, schools and the wider industry to promote dairy as an essential part of our diet.

We have already heard about the challenges faced by the dairy sector in Britain. Unfortunately, the issues are even greater in Northern Ireland, where they are amplified by our reliance on the export market. Northern Ireland’s small population and proportionally larger dairy sector means that our farmers must seek export markets for their produce, either in the south of Ireland, in Britain or further afield. That means that our farmers are the first to feel the impact of falls in the global dairy price or currency shocks. The situation is made worse by the lower prices Northern Irish farmers tend to get for their produce.

Despite producing dairy products that are as good as or better than products produced here in Britain—forgive me for being slightly parochial—Northern Irish farmers consistently suffer from lower average prices paid by national processors and retailers. In 2014, the average price for milk in Northern Ireland was 4.42p per litre less than the average price in Britain. In 2015, the price difference was even greater, reaching 5.34p per litre. Farmers are having to sell their milk for less than what it costs to produce. Anyone can see that that is unsustainable.

This is not just a matter for us Northern Ireland MPs or the Northern Ireland Executive in Belfast; regional dairy price inequality should concern every MP and Minister in Northern Ireland and Britain. Although we would say that Northern Ireland is the worst affected, there are many areas of England, Scotland and Wales where farmers are paid less than the cost of production. There is no doubt that that has dire implications for the long-term future of the industry. The Environment, Food and Rural Affairs Committee produced a very good report on farm-gate prices and made recommendations that I hope the Government will be able to implement.

Photo of Rebecca Pow Rebecca Pow Conservative, Taunton Deane

Perhaps a leaf might be taken out of the Northern Irish book, because I believe that the dairy companies of Northern Ireland successfully bid for an EU grant to help to promote the export of dairy products. Northern Ireland is obviously very successful at that, which is perhaps a good reason for remaining in Europe.

Photo of Margaret Ritchie Margaret Ritchie Social Democratic and Labour Party, South Down

I thank the hon. Lady for making that helpful point. She is on the same page as me in terms of retaining membership of the European Union.

Photo of Margaret Ritchie Margaret Ritchie Social Democratic and Labour Party, South Down

Perhaps it would help if I moved on.

We must look at solutions. The Government must seek to bring to Britain and Northern Ireland a scheme that the European Investment Bank has already trialled in the south of Ireland. Under the scheme, the bank would allow DEFRA and the devolved Administrations to act as guarantors for loans made to dairy farmers. That added level of security would allow banks to make loans on much more favourable terms. For instance, in Northern Ireland, a bank loan made to a dairy farm typically has a pay-back period of 15 years, which is well below the average in Britain because of the difficulties to which I have referred. The Ulster Farmers Union believes that with the Government acting as a creditor, banks could offer loans with pay-back periods of 30 years, doubling the time farmers typically now have. Will the Minister and his colleagues in the Department give some consideration to that scheme? Will he give us his opinion, or at least go away and have a think about it before coming back to us MPs with a particular interest in the matter?

Photo of Joan Ryan Joan Ryan Labour, Enfield North

Order. The hon. Lady should draw her remarks to a close.

Photo of Margaret Ritchie Margaret Ritchie Social Democratic and Labour Party, South Down

Like the all-party group on dairy, I believe that dairy should be put back on the daily menu. That means encouraging parents, schools and others. I urge the Minister to take heed of this debate.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham 3:04 pm, 20th April 2016

I must correct Ms Ritchie: the best dairy products are from Shropshire. I congratulate Mr Williams on securing this debate.

When I was first elected as a Member of Parliament in 2005—11 years ago—we set up the all-party group on dairy farmers because at that time Shropshire farmers were on their knees. We heard a lot of anecdotal evidence about the terrible financial difficulties they were suffering. Eleven years on and we are in almost the same place as then—indeed, we are probably even worse off. It is rather frustrating to have repeated debates in Westminster Hall while the situation continues to worsen, so I am really looking forward to the Minister giving us some heart-warming news of specific Government action on this issue.

I am delighted that tomorrow I will be attending the Shropshire business awards 2016 at RAF Cosford to support my friend, Daniel Morris, a cattle farmer, in the farming section. I hope that my hon. Friend the Minister will wish my constituent every success.

When we set up the all-party group on dairy farmers, more than 200 MPs joined—it was one of the largest all-party groups in the House of Commons. We produced a report, and during the process interviewed a lot of people, even going to Brussels to take evidence. We came up with two recommendations: first, a grocery adjudicator, and secondly, a limited cull of badgers. We took those recommendations to the then Secretary of State for Environment, Food and Rural Affairs, David Miliband, who basically laughed us out of his office saying that both were completely impossible and would never happen. I am extremely pleased that the Government have introduced the Groceries Code Adjudicator but, as has been said already, we want to hear what teeth the adjudicator is going to be given and about the roll-out of limited badger culls.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset

I represent an area that has had a cull, and the data I have seen are certainly encouraging. Nevertheless, we should not simply lay the blame with the Labour Secretary of State at that time, because later the then Lib Dem Deputy Prime Minister, Mr Clegg, put the brakes on the rolling out of the cull in Dorset. A Conservative Secretary of State took those brakes off.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

I am extremely grateful to my hon. Friend for that intervention.

I want the Minister to remember what I am about to say and to have these figures indelibly imprinted on his mind, in perpetuity. In Shropshire in 1997, we slaughtered 47 cows because of bovine tuberculosis; last year, the figure was more than 2,000. It has gone from 47 a year to 2,000 a year. We have a bovine tuberculosis crisis in Shropshire. I have said this in previous debates and I do not mind saying it again. I have sat round a kitchen table with one of my dairy farmers, Chris Bulmer from Snailbeach, after his entire herd had been taken away. We sat together crying, such is the emotional drain on farmers and their families.

The biggest organisation in my constituency is the Shropshire Wildlife Trust. What is its symbol? A badger. I know that many people from the trust would like to hang me from the nearest lamp post because I advocate a cull. They would have difficulty because I am so tall.

Photo of Daniel Kawczynski Daniel Kawczynski Conservative, Shrewsbury and Atcham

They would need an extra-high lamp post. There has been fury and blood on the carpet at the meetings I have had with the Shropshire Wildlife Trust. It has to understand that nobody wants the needless slaughter of animals, but when our fellow human beings—our fellow citizens—are going through such appalling financial misery, the time has come for the Government to act boldly and roll out the cull to other parts of the country.

My right hon. Friend the Chancellor recently announced in his Budget an extremely controversial measure on fizzy drinks. It is not universally popular, but he took a really bold move that is shaking the industry. Something of a similar nature must now take place to protect our dairy farmers. We cannot allow this vital industry to be decimated.

Photo of Sue Hayman Sue Hayman Opposition Whip (Commons) 3:09 pm, 20th April 2016

It is a pleasure to serve under your chairmanship, Ms Ryan. I also want to thank Mr Williams for securing this debate, which is important. I want to say a few words about the situation in Cumbria, where local farmers tell me it is the worst they have ever known it to be. We have heard about the price paid for milk not covering the cost of production, but in Cumbria we have the added costs of transportation to the processors. One farmer told me that in the past financial year he made £26,000 from selling his milk. This year he estimates £12,000. That reduction in income is simply unsustainable. I have a friend who has decided to sell his herd because he cannot even make enough money to pay for the renting of the milking machines.

I have been told that at Carlisle market 11,000 dairy cows have been sold since January this year. That has a knock-on effect on the wider rural economy. Feed merchants, fertiliser merchants, machinery sellers and vets all feel the impact of the pressures on our dairy industry. A major issue for the farmers who have contacted me—I am sure nobody here will be surprised—is the fact that they have not yet received their basic payment scheme money, which should have been paid in December. In my area, where many of the farms have been flooded, the situation is desperate. The Rural Payments Agency said it would prioritise farms that had suffered from flooding, but that has simply not happened. One farmer, Susan Tyson, has contacted me. She farms at Underskiddaw near Keswick and she has had nothing, although her application went in last May. She said that every time she asks about it, she is told that

“there is nothing wrong with your claim but we don’t know when you will be paid”.

How on earth are farmers supposed to manage? They have taken out loans and have paid their tax bills. The situation is simply not acceptable.

Farmers need to know what is happening with their money. How else can they budget, invest and plan for the future of their farms? This is made particularly difficult in an industry where the cost of what is being sold is dictated by the consumer. We have talked about the Groceries Code Adjudicator, and I am really pleased that we have that. I agree with hon. Members who have said that now that that is up for review, we need to make sure that it is strengthened and extended and that the adjudicator has real teeth to be able to help particularly the small farmers who fall out of the system.

Farmers are asking me what else they are supposed to do. Farmers whose families have farmed the land for generations now face the prospect not just of selling their herds, but of selling their land, which is absolutely heart-breaking. I also want to draw Members’ attention to the fact that members of the farming industry are three times more likely to take their own lives than people in any other industry. A farmer in my constituency recently collapsed and died at a sale. How much of that was down to stress? He was only in his 40s. The stress that people are under is unacceptable.

I am sure the Minister, who represents Penrith and The Border, is aware of the situations I am talking about in Cumbria, so I urge him to get the Government to work with farmers, processors and supermarkets to find a solution, but we also need advice and support to help farmers cope in these difficult times. Finally, just get the RPA to make the payments.

Photo of Neil Parish Neil Parish Chair, Environment, Food and Rural Affairs Sub-Committee, Chair, Environment, Food and Rural Affairs Committee, Chair, Environment, Food and Rural Affairs Committee 3:13 pm, 20th April 2016

It is a great pleasure to speak in this debate, Ms Ryan. I thank Mr Williams for securing this debate and keeping a spotlight on dairy prices. May I offer him a little solace? I think a previous Minister, David Heath, from his party, was a very good agriculture Minister. I want to put that on the record. We may not have agreed on politics, especially in our younger days on Somerset County Council, but I will not go into that.

Food and farming is a £100 billion industry. One in eight jobs are in food and farming, so it really needs to be taken seriously. Dairy farming is the backbone of most livestock agriculture. It has a knock-on effect on the beef industry because most of the beef industry comes from dairy. When a lot of cull cows come on to the market because of the poor price of milk, the price of beef is depressed as well, so the whole thing has a knock-on effect.

The situation is not simple. We have had a large over-supply of milk throughout the world, but New Zealand has now dropped production by 5%, which must be good news. We can see a knock-on effect across the world of an approximately 2% increase in dairy trade year on year, so if we can start to reduce production and increase the volume, we will get better prices internationally. In the meantime, we must concentrate on two fronts in particular. One is making sure that this country can get the best market possible for milk. We need to work with the retailers and say to them, “Not only offer a good price on liquid milk, but a good price on processed milk.”

Tesco and others are stepping up to the plate. As I have said before, I used to want to be able indiscriminately to shoot a retailer a day and feel much better, but I cannot actually do that because there are some good retailers out there. When supermarkets put in milk as a loss leader for perhaps 89p, we must make sure that they fund that themselves and are not funded by the processor and the farmer. I do not like milk as a loss leader because it downgrades the value of milk. All of us in this room would stand up and say that our produce from our county is the very best in the country—there is no doubt Devon’s is the best—but I say to the Minister that we have to get country of origin labelling. We have to make sure that it is not only country of origin but regional labelling so that we can compete with one another on cheese, on yoghurt and on dairy products in total. That is absolutely key to the argument, so let us make sure that Government procures everything that is British as well, and let us make sure that the health service and the schools that provide school milk serve up things that are British. I know the Government have done a lot of work on that, but we need to do even more.

On the single farm payment, let us ensure we do not have the debacle that we have had this past year where we still have 10% of farmers waiting to receive their payments. I welcome the fact that the Rural Payments Agency has, perhaps slightly belatedly, said that the last 10% will get at least 50% of their payment by the end of the month. This is very important. This is money the Government can actually produce and they can make sure that it gets through.

We have to make sure that we get export markets right. China wants more milk powder. China has decided to allow the country to produce more children and that is why there is a big market for baby milk powder. That is key. We have to make sure we have the processors and everything in place to take that up so that we have either Chinese money or European investment money. Let us get this industry moving so that we are able to get the best price for our farmers.

Photo of Joan Ryan Joan Ryan Labour, Enfield North

To accommodate all those who wish to speak, I am now going to reduce the time limit to three minutes per speaker.

Photo of Liz Saville-Roberts Liz Saville-Roberts Shadow PC Spokesperson (Home Affairs), Shadow PC Spokesperson (Environment, Food and Rural Affairs), Shadow PC Spokesperson (Education), Shadow PC Spokesperson (Health), Shadow PC Spokesperson (Women and Equalities) , Shadow PC Spokesperson (Energy & Natural Resources), Shadow PC Spokesperson (Local Government), Shadow PC Spokesperson (Justice) 3:18 pm, 20th April 2016

Diolch yn fawr, Gadeirydd. I thank Mr Williams for securing this debate. Both he and I know that whether it is llaeth or llefrith, Welsh milk is best.

The efficient method of food production—namely, the conversion of grass into dairy produce—is particularly well suited to the Welsh climate. It would be irresponsible to stand back and do nothing when the industry is in crisis. As has been mentioned already, there are many reasons for the latest drop in milk prices, and we have mentioned Russia. As an aside, it is worth noting that Russia is subsidising its home dairy producers to the tune of $400 million as we speak.

We have heard about the role of supermarkets. Today is an opportunity to say that supermarkets should be encouraged—I use the word with emphasis—to ensure that discount retail price strategies are funded from their own profits, rather than dumped on farmers. The fact that the profit motive of retailers is allowed to trump the sustainability of UK farming is in the long-term interests of neither the UK consumer nor the UK economy. The primary ask from farmers is that the Government acknowledge that something is fundamentally wrong in the supply chain, which cannot be remedied without intervention. We cannot go on ignoring that fact and relying on the market to correct itself.

There are codes of practice in the food chain, both statutory and voluntary, that must either be proved effective or reviewed, strengthened and enforced. The statutory grocery supply code of practice applies, at present, only to the biggest retailers. It is overseen, as we know, by the adjudicator. The Government made a commitment in their election manifesto last year to increasing the powers of the adjudicator. I suggest that that might be done by reducing the minimum turnover requirement, making the arrangement applicable to a wider range of retailers. Perhaps that could happen in the two-year review that was mentioned.

Agriculture suffers from the public perception of being hand-out dependent. None the less, many farming families have shown great enterprise in the face of volatile markets by venturing into value-added or branded products. I must in the brief time available to me mention Dylan and Annwen Jones of Bryn Rhydd, Edern—my next-door neighbours, effectively—who, with their Puerto Madryn herd of Holstein-Friesians, have been producing the excellent Glasu ice cream. I am also proud to represent the constituency that is home to South Caernarfonshire Creameries at Rhydygwystl, which has been owned since 1938 by its dairy farmer members. I am proud to say that they are about to launch a new cheese factory unit, although this is a most difficult time to be operating.

I call on the Government to make full use of the potential of public sector and third party procurement opportunities, and to work with devolved Governments to enable and to invest in added-value processing opportunities. Finally, will the Minister make a commitment to press the EU Agriculture Commissioner to move ahead with proposals presently under consideration to allow emergency state aid of up to €15,000 per farmer annually?

Photo of Simon Hart Simon Hart Conservative, Carmarthen West and South Pembrokeshire 3:21 pm, 20th April 2016

Big thanks are due to my near neighbour, Mr Williams, for striking the right balance between optimism, pessimism and realism about the industry.

I have only a few points to make. We have heard a lot about the negative effect on the industry and the supply chain, but not much about the negative effect that that causes for the environment, which is equally significant. There was some reference to the state of the steel industry in Wales, and the impact of potential closure on the community around Port Talbot, and further afield. When I look at the great efforts being made by No. 10, and the huge efforts of the Treasury, the Department for Business, Innovation and Skills, and the Wales Office, to rescue the steel industry, just as much for social and cultural reasons as for economic ones, part of me wants to ask the Minister whether his Department is looking into assessing the potential downside of the dairy industry’s problems in the same way as those other Departments are looking at the potential downsides of the closure of the steel industry. Numerically, spread across the UK, the numbers of people in each case may not be as dissimilar as we might think. The impact is no less important just because dairy farmers are dotted around individual communities and farms. I hope that that assessment is being undertaken and, if not, I hope it will be, because there are some significant numbers that we need to address.

There has been some reference to the role of Government in procurement, labelling and education. Just on the matter of education I want to say that it is quite frustrating for dairy farmers when advice comes out of the Department of Health about reducing dairy intake by 50%, without, really, any supporting evidence or context to it. Some cross-departmental co-operation on the messages coming out of Government, with regard to the positive side of eating home-produced dairy products, would be useful and would send a positive message to farmers, who are looking to Government, desperately at times, for a positive lead and an indication that the Government are on their side. Such things, small as they may seem, are significant for the message they send. Also, let us, via the Department for Education, talk about the value that home-grown food provides in the many ways that have been discussed, rather than simply talking about the cost of food. Of course cost is a driving factor, but are the Government doing enough with respect to the value of that high-quality product?

As to labelling, the issue is not about labelling milk. Sometimes it is about labelling other agricultural products that farmers produce. The supermarkets will say that they label things very clearly, and up to a point they do, but the frozen lines are not well labelled at all. On any supermarket website it is almost impossible to discover where frozen lines come from, whether that is in this country or not. A little more work by retailers on frozen lines would be helpful.

Finally, on the point that my hon. Friend Glyn Davies made, the DEFRA interpretation of farm-gate average prices and the Arla press release give the impression that the Department does not really understand the severity of the situation. Perhaps now is a good time, with a sort of stand-in Minister—if he does not mind my saying so—to put the record straight and remind farmers that DEFRA completely understands the problems they face.

Photo of Lisa Cameron Lisa Cameron Shadow SNP Spokesperson (Climate Justice) 3:25 pm, 20th April 2016

It is a pleasure to serve under your chairpersonship, Ms Ryan. I thank Mr Williams for bringing this extremely important debate to the Chamber.

The dairy sector is vital to the farming and food sectors and the wider rural economy across the UK, including Scotland. It is also an integral part of local communities. My constituency is made up of many rural areas, and farming and dairy industries have been key contributors to our local economy and job markets for many decades. One of the key issues for my constituency at present is the recent announcement by Müller Dairies that it is proposing to close its site in East Kilbride. That is part of a larger plan to consolidate elsewhere. The plans may also affect two of its dairies in the Aberdeen area.

The East Kilbride dairy has been owned by Müller only since 2012, but it has been a local institution for many years. It was previously owned by Robert Wiseman Dairies, which was founded in 1947, and it traces its roots back to Robert Wiseman senior, who started out in East Kilbride with a milk round, delivered from a horse and cart. Wiseman Dairies grew to be one of the major suppliers of milk and dairy products across the UK, until it was bought by Müller a few years ago. The dairy currently employs 131 staff, and the loss of those jobs would be a huge blow to the staff and the wider community. It is considered to be a vital local industry, and is ingrained in the identity of East Kilbride.

At present, a statutory consultation process about the proposals is going on. I am due to meet with representatives of Müller to discuss the proposals, and I will be following developments closely with the parent company, the Scottish Government, and the local East Kilbride taskforce. Scottish Enterprise and Scottish Development International will also be meeting with Müller to explore potential options for supporting all the company’s sites in Scotland, and their employees. At a personal level, however, this is an extremely unsettling time for those affected—people in my constituency have been left experiencing a period of uncertainty as they wait to find out the future of their jobs. We must do all we can to offer support and protection for jobs in that vital local industry.

The Scottish Government believe it is important to encourage local production, sourcing and consumption, as that helps to support local businesses and ensure that quality products are available. I reiterate what has been said about the importance of the dairy sector, particularly for my constituency and at this vital time. I ask the Government to do all they can to protect the industry, our economy and our local dairy farmers.

Photo of Rishi Sunak Rishi Sunak Conservative, Richmond (Yorks) 3:28 pm, 20th April 2016

I thank Mr Williams for obtaining the debate.

I recently spoke with an 80-year-old dairy farmer, in my North Yorkshire constituency, who told me that in a lifetime of dairy farming he had never seen times as bad. I believe that there are five key steps that need to be taken by Government, industry and consumers, to bring some relief to him and others and safeguard the future of dairy farming in the UK. First, we need buyers to give farmers a fair deal. I commend retailer initiatives from Tesco, Sainsbury’s and others, which ensure that farmers receive a fair cost-of-production price for their milk, but if the dairy sector is to be sustainable, retailers need to expand that good work on liquid milk to other dairy products, and, indeed, more milk buyers need to follow the lead of the large retailers. That process should, of course, be overseen by a robust Groceries Code Adjudicator with additional powers to investigate downstream supply chains and indirect suppliers.

Secondly, we must make and buy more British. It might seem that there are few things more British than an honest slice of Cheddar, yet almost half the cheddar consumed in the UK today is imported from overseas. We must invest more in processing technology to ensure we add value to British milk by turning more of it into British butter, yoghurt and cheese, rather than importing. Alongside that, we must have better food labelling so that large retailers and caterers clearly show consumers how much of their dairy products is British.

Thirdly, the industry needs to create more dairy producer organisations. Groups of farmers banding together to negotiate a better sale price for their milk and a lower purchase price for their feed, and to share machinery, are commonplace across Europe. In the UK we currently have only one such producer organisation. In Germany, there are 143. If farmers are to balance out the power of big processers and retailers, that must change.

Fourthly, we need to develop a working futures market. As New Zealand and America show, futures can be a vital tool for providing price stability in a volatile world. It is crucial, therefore, that the Government continue their efforts to ensure that the relevant benchmarking data are available, which will help British dairy futures to become a reality.

Finally, Government at all levels must buy British. I know that the national Government are working hard to purchase British dairy products, but at a regional level we can do more. We must push local government, the military, hospitals and schools to do their part as well.

In conclusion, without its dairy farmers, the lush fields of the Yorkshire dales in my constituency would soon turn to scrub and its dry stone walls would go unrepaired. Only if the Government, farmers and consumers work together will we preserve our dairy industry and, with it, our rural communities and beautiful countryside for generations to come.

Photo of Joan Ryan Joan Ryan Labour, Enfield North

With the co-operation of the Front Benchers, I have time for a couple more speakers. If everyone is to get in, they will have to speak for no more than two minutes. I leave it to their co-operation.

Photo of David Simpson David Simpson Shadow DUP Spokesperson (Business, Innovation and Skills), Shadow DUP Spokesperson (Environment, Food and Rural Affairs) 3:31 pm, 20th April 2016

The agri-food sector employs about 100,000 people across the whole of the industry, and the dairy sector makes up a lot of that figure. When I speak to farmers, they tell me that there are a number of things that they have no control over. They had no say on the Russian ban, and they had no control over the quotas being done away with or the fluctuations of the euro.

Everyone knew that when the quota system went there would be a free-for-all and production would go up. The production of milk in Northern Ireland has increased by 4% this year, even though prices are falling. On Monday, I spoke to farmers who have been told that they will be paid 16p a litre for milk in May and that it will go down to 15p in June. That is crazy.

We have heard today of the pressure on farmers. Hon. Members have talked about meetings they have had with farmers who have shed tears. I have experienced the same thing. Farmers do not know how they are going to pay their next bill or how they are going to fend for their families. We have also heard about the issues of mental health and stress, about which I have written to DEFRA. Something for the farming community needs to be put into the UK mental health strategy.

The dairy sector is a vital industry, and it needs help. We can talk about retailers and new cheese factories, but that takes time. Something needs to be done now to alleviate the difficulties and problems that the dairy sector faces. In Northern Ireland, there is talk of a voluntary reduction of milk production. Whether that happens is a matter for the farmers and the processors. France and a number of other countries are in favour of a reduction, but the problem is that the tap cannot just be turned on and off in milk production. More help is needed, and we look to the Government to ease the difficulties and problems.

Photo of Joan Ryan Joan Ryan Labour, Enfield North

I call Mel Stride—[Interruption.] Sorry, I call Simon Hoare.

Photo of Simon Hoare Simon Hoare Conservative, North Dorset 3:33 pm, 20th April 2016

Thank you very much, Ms Ryan—I think. I want to make two brief points in the time available to me. Like my colleague Ms Ritchie, I am a vice-chair of the all-party group on dairy.

I want to pick up on the point that other hon. Members have made, about the Rural Payments Agency. Last week alone, I spoke to five farmers who had collectively spent six and a half hours waiting on the RPA hotline. I was slightly surprised when I tried to talk to somebody—as did my caseworker—only to find that we were left on hold for an average of 37 minutes. There is no direct email or telephone hotline for Members of Parliament to contact the RPA on behalf of their constituents. Most other Government Departments have such facilities. I urge the Minister to use his good offices to press for that.

In March, the all-party dairy group, after a lot of research, launched its report “Putting Dairy Back on the Daily Menu”. It was based on best practice and used a lot of scientific research. It sought to emulate the French example of having three a day for dairy, just as we have five a day for fruit and veg. Many dairy farmers saw it as a lifeline. One can imagine the shock—my hon. Friend Simon Hart spoke of this—when Public Health England reduced the intake of dairy from 15% to 8%. That was a kick in the bullocks as far as the dairy industry was concerned.

I invite DEFRA Ministers to stand with the all-party group on dairy and talk to the Prime Minister, the Department of Health and the Department for Education to work out what methodology the recommendations of that rather dodgy Public Health England report were based on. They need to understand the huge damage it will do to the dairy sector and the huge damage and uncertainty it will cause for those in the public sector who buy food, whether in schools, hospitals or elsewhere. We look to DEFRA to stand with us to try to get that crazy recommendation overturned.

Photo of Corri Wilson Corri Wilson Scottish National Party, Ayr, Carrick and Cumnock 3:36 pm, 20th April 2016

My constituency is predominantly rural. Dairy farming is at the heart of Ayrshire, so I am pleased to have the opportunity to speak in this debate. Ayrshire is home to the famous Ayrshire cattle and has been described as the dairy of Scotland. That claim is now in jeopardy, as the current milk prices are threatening the livelihoods of many farmers across the region.

Earlier this year, I was contacted by a group of local dairy farmers in dire straits, many of whom would never have previously come to an MP with a problem. That group was just a small proportion of the 70% of dairy farmers in Scotland who are non-aligned—in other words, they do not have direct contracts with supermarkets via milk processors, so they have to accept the price that is given to them on the open market.

Milk prices have gone into freefall in the past 12 months. My local farmers report that they now receive a pitiful 14p per litre, while their aligned neighbours typically get about 22p to 25p. A broker collects the milk from both the aligned and non-aligned farmers, which means that the 22p milk sloshes around in the back of the tanker with the milk that has been bought at 14p. That situation sets neighbours against each other, as the milk ends up in the same cartons regardless of the price paid to the farmer.

I welcome the Scottish Parliament’s inquiry into the milk pricing crisis and the work the Scottish Government have undertaken to support the dairy sector. One of the key issues that we in Westminster can address is the Groceries Code Adjudicator, which has been mentioned a number of times. Unless the adjudicator is given a remit to look beyond the relationship between retailers and processors, there is little point in having one.

One of my dairy farmers recently said to me that people need farmers at least three times a day, yet the industry is being decimated. We cannot sit back and allow that to happen.

Photo of Steven Paterson Steven Paterson Scottish National Party, Stirling 3:38 pm, 20th April 2016

Thank you for the chance to speak, albeit briefly, Ms Ryan. I am grateful to Mr Williams for securing the debate. The dairy industry is extremely important in my constituency, which contains many dairy farmers and associated businesses, such as Graham’s the Family Dairy and Asher’s Ice Cream. In the limited time I have, I will concentrate on just a couple of the things that I was going to say.

As hon. Members have said, dairy is a healthy product. We should encourage further consumption of it to help to address some of the underlying problems in the industry. I share the concerns about some of the messages coming from the Government, and I hope the Minister will comment on those concerns and put them at rest.

After the election last year, I visited Graham’s the Family Dairy in Bridge of Allan in my constituency and had a tour of the factory with the managing director, Robert Graham. Graham’s has operated for more than 70 years in my constituency, and it produces a wide range of excellent products. It employs 500 staff and is supplied by 90 dairy farmers across Scotland, many of which are in Stirling. Its products are excellent sellers. Last month, Graham’s signed a partnership deal with the food supplier Brakes, which represents a significant boost to the industry locally. That is good news, but there is a lot still to do, because the industry is in a perilous state.

Last year, the Scottish Government launched a dairy action plan to offer immediate support because of the problems facing the sector. One of the recommendations was to develop a strong Scottish dairy brand at home and abroad, and to get more Scottish dairy products on retail shelves, in food service and in export markets. Additional funding was given to the Dairy Growth Board to develop a Scottish dairy brand, which was released at the royal highland show last year. Ongoing efforts involve engaging with retailers to encourage the stocking of local Scottish dairy produce, in order to develop a viable Scottish supply base for the future, which will create a more resilient and sustainable dairy industry. Other initiatives have seen the Scottish Government promote the use of Scottish dairy produce in the public sector, for example through work with local authorities to get Scottish cheese, butter, yogurt and other dairy products into schools.

Photo of Calum Kerr Calum Kerr Shadow SNP Westminster Group Leader (Environment and Rural Affairs) 3:40 pm, 20th April 2016

This has been an excellent debate, and I congratulate Mr Williams on securing it.

We may have had many debates on this subject, but this one has highlighted the fact that we need time in which to discuss it. What came across to me right from the offset was the desire to resolve the situation. Our farmers get a bit of a bad name sometimes—they have a tough job, with many factors ranged against them, which means that they are sometimes seen as being somewhat negative and complaining. Actually, as one farmer said to me, “To still be in farming, you’re an optimist, because you’re still keeping at it.”

The hon. Gentleman made an excellent starting contribution, which set out the challenges and, critically, put forward proactive and constructive suggestions. As he said, the issue is a complex local and global one, with many factors in play. Fundamentally, the drop in the price received has outweighed the savings from efficiencies in production. He made an excellent point about that.

We are lucky to have my neighbouring MP from across the border, the Under-Secretary of State for Environment, Food and Rural Affairs, Rory Stewart, responding to the debate, because I am sure that he will talk about concrete steps and not platitudes. He is known for getting his wellies on and getting engaged, and I am sure that he will demonstrate that again today. We need to consider many issues—the Groceries Code Adjudicator was mentioned regularly in the debate, as was the voluntary code of practice, which I will return to—but let us keep it positive and proactive. Ms Ritchie nearly started off a different kind of milk war with her boastful contribution, but such is the nature of politics—it was understandable.

Daniel Kawczynski made some excellent points. I congratulate his all-party group on its work, in particular on the GCA, and it presented a strong case on the badger cull. For reasons of time I cannot go through everyone’s contributions, so I apologise to the many other Members who added to the debate. It has been of great benefit to have present the Chair of the Environment, Food and Rural Affairs Committee, Neil Parish. He summarised the key points about the market for milk, the important distinctions between fresh and processed milk, how critical labelling is and the role that Government procurement has to play.

It is fair to say that the dairy industry throughout the UK is in crisis, and that is particularly true in Scotland, as we have heard. The downturn in milk prices has led to a fall in returns of some 50% for many Scottish dairy businesses. My hon. Friend Brendan O'Hara wanted to be present today, but is in the main Chamber. His concerns for his constituency, and the figures involved, are worth reviewing. Only three years ago, the farmers whom he represents were receiving 32.5p per litre; now, they obtain a farm-gate price of just 15.8p per litre, even though the milk is costing them 26p per litre to produce.

We cannot leave the milk pricing issue simply to market forces. There is a pressing need for action and more imaginative solutions. Collaboration involving Government and the entire supply chain is needed, with urgent action across a range of areas. In the short term, it is critical that banks are involved in the planning process and are prepared to extend credit to dairy farmers. That makes business sense, because global experts believe that the long-term outlook for the sector is promising. We need to maintain a viable UK industry through the lean times, and to do that we need collaboration and innovation now.

Above all, we need to deal urgently with the fact that we have a broken supply chain, with fundamental imbalances exacerbated by short-term opportunism. The chain needs to be fair, workable and responsible. Unless we have that, milk producers and others will continue to get a raw deal and will not have the confidence to invest.

For a start, we need the dairy voluntary code of practice to be refreshed. NFU Scotland says that that is potentially the key to the viability of the sector, and I agree. The code is designed to set out minimum good practice, and as long as it is respected and there is a commitment to it, it could be effective. So far, however, it has not developed enough momentum. The NFUS has warned that to date, and despite Government support, vested interests have undermined the uptake of the code of practice, and that the code is not being allowed to deliver the benefits that it could provide. I know that the Farming Minister is committed to strengthening the code in relation to the milk sector, and I welcome that, but it must include the whole supply chain. If for any reason we cannot make progress with a voluntary code, we need to look again at the option of compulsory contracts.

Another way to assist the dairy industry—this ties in closely with the voluntary code—would be to strengthen the role of the Groceries Code Adjudicator. Some Members have already made specific recommendations, but I will summarise the three main possibilities: allowing her to initiate her investigations rather than waiting until a complaint has been received; taking in smaller retailers and indirect suppliers; and reporting on the balance of pricing across the whole supply chain. Another useful step forward, as we have heard, would be to encourage retailers to use labelling to identify the origin of the product, giving consumers the power to buy local and from the home nations.

We cannot allow the retail giants and others to keep on milking our dairy sector. Firm action is needed and firm action must come—we owe that to our farmers, our consumers and our national self-sufficiency. Without wasting another moment, let us give our dairy sector the help and support that it deserves.

Photo of Nick Smith Nick Smith Shadow Minister (Environment, Food and Rural Affairs) 3:47 pm, 20th April 2016

I thank Mr Williams for introducing the debate and the many colleagues who have intervened and made contributions this afternoon. Time is short, so I cannot mention everyone, but the hon. Gentleman certainly gave a great cri de coeur for dairy farmers throughout the country, as well as for the steel industry in Wales—I thank him for that.

With the global market in flux and farm-gate prices on the floor, the UK dairy industry is in danger. Some farmers are being paid less than the cost of producing the milk, which is unsustainable. Only last month, thousands of proud farmers felt that they had no other choice but to march on Whitehall and ask for change and for support. The Government must listen to that call. Bodies such as Dairy UK are saying there are no quick fixes, although the Government recognise that a package of support is needed to help save the industry from collapse. However, despite promising much in the face of pressure from the industry, there is still no sign of respite.

The Environment, Food and Rural Affairs Committee report listed many recommendations that I hope the Government will make good on. It talked about a futures market for dairy. Will the Minister make it clear when such a market will be established properly?

The British public have consistently proven that they back a “buy British” principle, but dairy in the UK still lacks country of origin labelling. The Farming Minister has been unable to get the EU to bring that forward, despite the EU approving similar branding on a vast swathe of other products. Meanwhile, he has written to supermarkets to encourage them to display the British flag on British dairy products. That code, however, is voluntary.

On exports, sector leaders such as Dairy UK have called for the development of new markets where we can showcase the quality of British products. It looks as if there may be good news on red meat and the USA this week, but will the Minister detail the results of talks with other countries about their importing our dairy products? All such suggestions are long-term goals, and that is understood, but where is the progress on those key issues?

The NFU and farmers have joined Labour in calling for the Groceries Code Adjudicator’s powers to be toughened up. The Environment, Food and Rural Affairs Committee has published a report calling on the Government to consider extending the GCA’s remit. The Committee wants it to incorporate both direct and indirect suppliers. Will the Minister confirm that those concerns will be taken into account when the GCA is reviewed later this year?

Photo of Jonathan Edwards Jonathan Edwards Shadow PC Spokesperson (Treasury), Shadow PC Spokesperson (Business, Innovation and Skills), Shadow PC Spokesperson (Transport), Shadow PC Spokesperson (Foreign Intervention)

As the hon. Gentleman is aware, in Wales many of the powers relating to Government intervention are devolved and, to date, the Welsh Government have decided to pursue a voluntary code of practice in this sector. Does he agree that it is about time that the Welsh Government began to look at statutory intervention, and not just leave it on a voluntary basis?

Photo of Nick Smith Nick Smith Shadow Minister (Environment, Food and Rural Affairs)

That may be helpful and I certainly think it is worth looking at.

The problem of delayed payments has come up too, with the high-profile failure of the Rural Payments Agency system this year. That money is a vital lifeline, given the struggles in the dairy marketplace, yet a Public Accounts Committee report revealed a payments fiasco. The Government must accept their part in a failing IT project that may have landed us with a £180 million annual fine from the EU. Money that could have gone to British agriculture will now be thrown away. The NFU says that that the RPA should be making 90% of payments by the end of December each year. Will the Minister give assurances that that target will be met in future years?

Finally, I welcome the deep analysis done by the NFU on the implications of a UK exit from the EU. The analysis showed that every Brexit scenario resulted in a large drop in income for farmers. Will the Minister join me in recognising that for dairy farmers, staying in the EU is vital for the trade and support that it provides to the industry?

Photo of Simon Hoare Simon Hoare Conservative, North Dorset

The situation is worse than the hon. Gentleman seems to suggest. Right hon. colleagues on my side of the House—although not on my side of the European debate—told us last week that all the money we spend on the EU would be spent on the national health service. My reading of that was that that equals no subsidy and no support to agriculture anywhere in the United Kingdom.

Photo of Nick Smith Nick Smith Shadow Minister (Environment, Food and Rural Affairs)

I need to move on to allow the Minister to come back on the problems and issues that colleagues around the Chamber have raised.

The UK Government have recently failed to support an important EU funding stream for our dairy industries, so I would like the Minister’s response on that issue.

In conclusion, the Government must make good their promises on a futures market for dairy and country-of-origin labelling, give a proper boost for British dairy exports and put the RPA on track. They must speak with one voice about the value of the single market and the value of EU funding for British dairy farmers.

Photo of Rory Stewart Rory Stewart The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs 3:52 pm, 20th April 2016

Unfortunately, I have been asked for answers to 31 separate requests—I have written them down—and I have been allowed only seven minutes to respond, but I will do my very best.

Fundamentally, dairy matters deeply to the United Kingdom. Mr Williams, to whom I pay tribute for securing this debate, made a very powerful case for the importance of the dairy industry to communities. Steven Paterson made a powerful case for the nutritional importance of dairy. Jonathan Edwards made a deep and complex argument about the importance of dairy for our history and heritage. My hon. Friend Rebecca Pow pointed to the economic importance of dairy and, of course, the chairman of the Environment, Food and Rural Affairs Committee, my hon. Friend Neil Parish, made a strong argument for the importance of dairy for the farming industry in general.

The situation is genuinely terrible. Over the last decade, we have gone from having 13,500 dairy farms to having 9,500. We have seen that very directly in Cumbria, as Sue Hayman expressed so eloquently. In my constituency, from very large herds—thousand-cow herds in places such as Longtown, producing 10,000 litres per cow per year—right the way down to the herds of 50 or 60 cows in the Bailey valley, we now see them being sold in the marts and we see real pressure and psychological strain. As Ms Ritchie pointed out, the regional factors are really important in places such as Cumbria and Northern Ireland, where access to the liquid milk markets in places such as London is much more difficult. Our prices are considerably lower.

Calum Kerr made a powerful argument about the global context in which the dairy industry operates, and the Labour shadow spokesman, Nick Smith, also made a very good statement about the context. Of course, global demand has dropped—Chinese demand alone has dropped by 23%. China matters: 30% of the global export market is China and Russia. At the same time, our production is going up. There is a real problem. Production was up last year globally by 6% and UK production was up by 2.7%. This is not just a UK problem. In New Zealand, the prices per litre for their milk are now down to 12p per litre. New Zealand production is falling, as we heard from the chairman of the Environment, Food and Rural Affairs Committee, my hon. Friend the Member for Tiverton and Honiton.

We believe that things can be done. Despite the serious issues raised by both David Simpson about capital structures and Corri Wilson about price, we think there is a great future. In China, the average person consumes about 30 kg of milk products a year. In Britain, the average per person is about 250 kg a year. There is huge upward potential in terms of such markets, which Britain can exploit, provided the United Kingdom can get from the short-term problems to the long term. That will be a real challenge.

My hon. Friend Daniel Kawczynski made points about the health of our herds. It is why we are taking the steps that we are, not just in bovine TB but in Johne’s disease, and there is all the investment we are putting into animal health. My hon. Friend the Member for Tiverton and Honiton made points about supermarkets. Indeed, I join him in paying tribute to the steps that supermarkets such as Tesco have taken, particularly in moving towards British yoghurt.

Dr Cameron pointed to the serious problems on processing. We are looking at that seriously with European Union partners to see whether strategic investments could be made in processing in order to ensure that liquid milk, particularly from more remote parts of the United Kingdom, can be processed in the right place. The hon. Member for South Down raised some of the problems with the banking system. We are addressing that issue directly through conversations with the banks.

There are other steps—about 14 of them—that the Department is taking that were not addressed so much in this debate. It is important to bear in mind that underlying the dairy industry is considerable Government investment. On average, about £20,000 per farm comes from the Government. We have provided emergency support of £26.3 million for the current dairy crisis.

Cutting red tape is something that has not been discussed today. We estimate that by the end of this Parliament, we will have saved farmers in general £450 million by moving to single-farm inspections. We have invested £160 million in agri-science. That is absolutely essential for everybody talking about innovation. We are looking at inward investment and had the Chinese company, Yili, here.

The hon. Member for Blaenau Gwent raised the issue of exports. The Secretary of State is currently in the United States, driving British food exports, and we are also driving them into Chinese markets. We are focusing a great deal on specialist producers. I would like to pay tribute, for example, to the movement in Swaledale towards yoghurt production.

That brings me to the point made by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) on the advances that we ought to be able to make in markets, hedging and future markets. We have a specialist working on that in DEFRA with very considerable experience in the financial industry. It is a very complex industry, but we believe that it is something we ought to be able to make progress on.

On producer organisations, which were raised by the hon. Member for Ceredigion and by my hon. Friend the Member for Richmond (Yorks), we have created the seed funding to launch producer organisations. We have created the legislative framework for those producer organisations.

On procurement, which the hon. Liz Saville Roberts raised, £60,000 of British Government money is being put into our schools to provide milk for our children. That is Department of Health money, proving that that Department recognises that milk is nutritionally beneficial to our children. The Justice Secretary has committed to milk coming into our prisons.

My hon. Friend Simon Hoare and the hon. Member for Workington rightly raised issues about the Rural Payments Agency. I am therefore delighted to be able to announce that we will make part-payments to every farmer by the end of April: that means at least 50% of their payments by the end of this month to address this issue.

Finally, my hon. Friends the Members for Eddisbury (Antoinette Sandbach) and for York Outer (Julian Sturdy) raised the question of the Groceries Code Adjudicator. Again, I am delighted to announce on behalf of the Department that we are doing a full review of the powers and behaviour of the Groceries Code Adjudicator. That is being done by civil servants at the moment, and we will report back on progress and looking specifically at issues such as whether the adjudicator can address the processing industry.

I pay tribute to the hon. Member for Ceredigion for securing this debate and for the extraordinary quality of the argument, interest and commitment in this Chamber. The issue is unbelievably difficult and heart-breaking for farmers. Dairy farmers are at the core of our culture, history, identity, nutrition and heritage. The 17 measures that I have set out are contributions towards that, but ultimately we must get from a short-term crisis to a long-term future in which global demand for milk is rising and Britain is ideally placed to meet it.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion 4:00 pm, 20th April 2016

I am grateful for the opportunity to thank all hon. Members, including those on the Front Benches, for their contributions. I am not sorry we asked the Minister 31 questions. I know that if he was unable to answer any as fully as he wanted, he will write to us. I thank him for his contribution and those of the Front-Bench spokesmen. Many points of note were made, some following from my speech, and many new ones.

Ms Ritchie spoke about Northern Ireland and the proactive way in which moneys are being released to support investment. That is important. Mention was made of TB eradication. Simon Hoare may find that history regards various aspects of coalition life and policy rather differently from him. We will see what happens in the fullness of time. Certainly in Wales, there has been consistency in three of the four parties about what we need to do to eradicate TB. I am particularly pleased that Ceredigion, with Carmarthenshire and Pembrokeshire, recently voted for a selective badger cull. That was the first issue raised at a meeting I had on a farm last week. It needs to be addressed.

Finally, I did not raise this, but I am pleased that my constituency has been labelled the most Europhile part of the United Kingdom. I am proud of that—[Interruption.] Hon. Members knocked me off my perch. A strong reason is the importance of the farming industry, which is a major employer in my constituency. Farmers are fully aware of the necessity of continued EU membership. On that controversial note, I thank all hon. Members for taking part in this debate.

Question put and agreed to.

Resolved,

That this House
has considered the UK dairy sector.

Sitting suspended.