HL Deb 15 October 1975 vol 364 cc896-902

3.40 p.m.

The MINISTER of STATE, DEPARTMENT of INDUSTRY (LORD BESWICK)

My Lords, with permission, I would repeat a Statement being made in the other House on the results of the Meeting of the Council of Agriculture Ministers on 13th and 14th October.

"The Council agreed that the representative rate for the pound—the Green Pound—should be adjusted by 5.8 per cent. This will raise support prices for United Kingdom producers by about 6.2 per cent, in sterling terms. The change in the Green Pound will generally take effect from 27th October but will be deferred for certain commodities. For wheat the date of implementation will be 1st July 1976; this will defer any effect on the price of bread. For beef the date of implementation will be 5th January; this will avoid any incentive to put beef into intervention in the autumn period of heavy marketings.

"The agreement reached in Luxembourg will be of real benefit to British farmers. It should be worth about £90 million to them in a full year, after taking account of its effect on feed costs. Of this sum over £50 million will go to our milk producers. We shall now increase the guarantee for milk by an extra 2.3p a gallon from November, which will mean that the effective guarantee over the winter months will now be over 40p a gallon. The average guaranteed price for the year will be 37.04p. I announced in the summer that the retail price of milk would have to rise by 1p in the autumn. Following this increase in the producer guaranteed price and the adjustment I announced on 29th September, the retail price will now rise by 1½p per pint to 8½p per pint from 2nd November.

"I am sure that this settlement will help to meet the milk producers' difficulties. It comes on top of the increase of 2.2p per gallon decided in July, making 4½p per gallon altogether. There will be scope for a further increase at the beginning of the next milk year. This will be for the Government to decide after the Annual Review.

"There will also be a useful increase in the producer price for sugar beet. For beef the new buying-in prices will put a higher floor in the market in 1976. The cereals grower should also benefit in due course. Pigmeat processors, who have been in difficulties, will greatly welcome the reduction in monetary compensatory amounts.

"We have agreed to these changes in the interest of our agricultural industry and in order to safeguard our food supplies. We have sought to keep a balance with consumer interests.

"The main effect on the consumer is on milk, which I have already mentioned, and butter and cheese, on which there may be increases of about 2p a pound depending on the market situation. Otherwise the effect is expected to be less than one-tenth of 1 per cent. on the cost of living. It will be postponed for bread and flour until July next year. This is a very considerable benefit. Even when everything is taken into account, the total effect in a full year is expected to be less than 1 per cent. on the cost of food and less than one-quarter of 1 per cent. on the total cost of living.

"Finally, I am glad to say that the representative rate for the Irish Green Pound has been devalued less than the United Kingdom Green Pound. In consequence it will be possible to end the monetary charges which are at present applied to agricultural trade between the United Kingdom and the Irish Republic. This will be very welcome to both farmers and traders, particularly in Northern Ireland."

My Lords, that concludes the Statement.

3.45 p.m.

Earl FERRERS

My Lords, the House will be very grateful to the noble Lord, Lord Beswick, for repeating this Statement. I can only welcome it. For some time we have urged that the Green Pound should be devalued. The Minister has now achieved this to a certain extent and we welcome it. As the noble Lord rightly said, the main effect of this will be on milk. I should have preferred to see an across-the-board devaluation and not one done at different dates as the Statement explains will happen. One appreciates the reasons why this is done, but I rather fancy that it is more for the benefit of the Treasury than, as the Statement says, for agriculture.

It was essential that the Green Pound should be revalued in order to give some kind of security to the milk producers. This will certainly help. I do not think the noble Lord should feel that it will necessarily wholly give them the confidence that is required. The fact I regret is that the Government will keep on taking nibbles at the cherry. We had a devaluation of the Green Pound last July and since then between 250 and 350 milk producers have gone out of production. We now have another devaluation. But I give credit to the Government for saying that the increased cost of this will go on to the retail price and will not be added to the Milk Fund.

I would ask the noble Lord, Lord Beswick, this question. After the devaluation of the Green Pound which he has announced—and I am amazed at the funny figure of 5.8 per cent.; one wonders who arrived at this curious figure—what is the difference between the Green Pound and the pound now? I also welcome the narrowing of the Green Pound in relation to the Irish Green Pound. Can the noble Lord say what is the difference between those two? It is said on page 4 of the Statement: There will be scope for a further increase at the beginning of the next milk year. Does that mean that there will be scope for an increase because of the arrangements which were agreed to this week, or because the Government will take a fresh reappraisal? Will the noble Lord confirm that it is the Government's intention as soon as possible to get parity between the Green Pound and the pound?

Lord MACKIE of BENSHIE

My Lords, I too welcome the Statement from the Minister. I share the misgivings of the noble Earl, Lord Ferrers, about too many bites at the cherry. We on these Benches are of course very aware of the need to keep down the rise in the cost of living and not to have savage increases, but here the Government must take their courage in their hands. I am aware that the Minister's fight is with his colleagues here and not so much with his colleagues on the Council of Europe. But the evidence today is that if the Government do not do something fairly drastic to restore confidence, then we are going to get into a great deal more trouble. It is interesting that today the price of potatoes is moving from £80 upwards and it is reckoned it will go much higher in the spring, having a significant effect on the cost of living. I am absolutely certain that this is due to a lack of confidence on the part of the potato grower in the support price, which is at a totally false figure and cannot possibly cover the cost. This is having a much more adverse effect on the cost of living than any rise in the price of milk resulting from this agreement.

I note that the Minister is very conscious that this action is not enough—the language of the Statement appears to me to indicate this: It says: … this settlement will help to meet milk producers' difficulties It comes on top of the increase. … There will be scope for a further increase". I think that the Minister should have another battle. May I ask whether he is considering trying to get permission to abolish the subsidy for going out of milk and into beef, which we are paying in this country at the present time when we may have a milk shortage. It is absolute madness, but it is a fact that producers are being paid to go out of milk at the present time. In this country this is madness, and it conflicts with the interests of the European countries. So may I ask whether we are going to do something about that?

I would also reiterate a question put by the noble Earl, Lord Ferrers. When are we going to get parity with the actual value of the pound? Nothing less will matter, because our costs in this country are exactly the same as the costs in Europe and there is no good reason for doing otherwise except containing inflation —a very good one but it has the opposite effect. Furthermore, is the Minister aware that confidence is sadly lacking in the beef trade and that still producers of the essential stock—the young stock from the hills in Wales, Scotland and elsewhere—are not receiving a price which is economic, as is borne out by every costing done by independent bodies such as the colleges? Will the noble Lord say when he can give firm, long-term assurances that the beef producer, the beef fattener, will get parity with Europe and then be able to pay a price that will ensure our supplies?

Lord SLATER

My Lords, may I ask the noble Lord one question before he replies?

Lord BESWICK

My Lords, it is customary for Ministers first to reply to the two Front Benches.

Lord SLATER

My Lords, my question is on a point which has been made. This is just making a mess of it.

3.51 p.m.

Lord BESWICK

My Lords, if I may endeavour to reply to the various questions which have been put to me, first may I thank the noble Earl, Lord Ferrers, for the welcome he gave to the Statement. He said that he would have preferred to have had an across-the-board arrangement instead of the different dates which I have mentioned. The fact is that the difficulties of the farming community vary, but I think we all agree that it is the dairy farmer whose need is the greatest. That is one reason why there is this differentiation between the dairy and the beef dates. The noble Earl spoke about different bites at the cherry, but I think that the noble Lord, Lord Mackie, is a little more understanding of our difficulties in this respect. Obviously it is necessary to think of the consumer in these matters and to have phasing, if at all possible. On balance, I believe that it is better to do it this way than to have one big increase and make that last for a longer time.

I was asked by the noble Earl whether I could explain to him—and I am sure that the House is straining to know the answer—this figure of 5.8 per cent. This is the difference between the old rate of exchange with a unit of account of 1.86369 units, and the new one, which will now be 1.7556 units. The difference between those two figures is 5.8 per cent. As I never lose an opportunity of telling the noble Earl, may I remind him that he was greatly in favour of our entry into the Community and part of the Treaty obligation is that we should accept this kind of arithmetic. I was asked about the phrasing of the Statement in which reference is made to the scope for further increases. There is no question of any automatic further increase. However, as he put it, it will be possible later to reappraise the situation.

I was asked about the difference between the Green Pound and the ordinary rate of sterling exchange. I think I am right in saying that the difference after this reduction is 7 per cent. There will still be a 7 per cent. difference between the market rate of exchange and the agricultural rate of exchange. The difference between the United Kingdom and the Irish Green Pound is about 1.6 per cent.

I was asked by the noble Lord, Lord Mackie of Benshie, about the importance of confidence and I accept what he says. May I say to him that we all know that there has been this lack of confidence, and it is essential for all of us to ensure that we do not more than necessarily talk ourselves out of confidence. There has been a considerable improvement here, so let us think rather a little more about the improvement than about the difficulties with which we have had to contend. We might also remember that there are others in the nation apart from farmers who have difficulties to contend with in the present situation, and it will not do any of us any good if we sap each other's confidence. I recognise the point which was made about potatoes. I will look into and write to the noble Lord, Lord Mackie, about that point and the one which he made about milk and comparative encouragement as between dairy and beef farmers. It does not arise out of this discussion.

I was asked by both noble Lords if I could give a date when there will be parity between the sterling rate in the market and the Green Pound exchange rate. The answer is that I cannot. Again it is a question of phasing, and I believe that a gradual move up to parity will be better than a sudden lurch.

Lord SLATER

My Lords, my question to my noble friend is this. It arises from a question that was asked by the noble Earl, Lord Ferrers, and I ask it for the benefit of the general public of this country. When the Government talk about the Green Pound what are they talking about? There is the Green Pound and the ordinary pound that we use here as sterling currency. Is my noble friend able to say what is meant when the Government talk about the Green Pound?

Lord BESWICK

My Lords, I quite understand my noble friend's difficulty. As I have already said, the fact is that we have gone into the EEC, with all the responsibilities attaching thereto. There is a procedure for making payments under the Common Agricultural Policy. These payments are made, during the transitional period at any rate, at a separate rate from the ordinary sterling rate. As I have said, for the purposes of the Common Agricultural Policy the exchange rate at the present time is 1.7556 units of account. That is the so-called Green Pound rate, which varies now by 7 per cent. from the exchange rate that the noble Lord would obtain if he changed pounds into francs in the ordinary money market.

Lord ALPORT

My Lords, may I ask whether there is a Green Franc and a Green Mark as well?

Lord BESWICK

My Lords, yes. The Green Pound is exchanged into Green Francs and Green Lire.