CEREALS (DEFICIENCY PAYMENTS)

HC Deb 22 June 1955 vol 542 cc1433-58

9.48 p.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. G. R. H. Nugent)

I beg to move, That the Cereals (Deficiency Payments) Order, 1955, a copy of which was laid before this House on 28th April, 1955, in the last Parliament, be approved. This Order is made under Section 4 of the 1947 Agriculture Act. It is similar to the Order brought before the House last March for livestock. By making this Order under the 1947 Act, we are taking a further step in the changeover from war-time to peace-time arrangements, so that we shall then be implementing the agriculture price guarantees under the 1947 Act and, at the same time, giving this House a chance to see these arrangements and to debate them.

Prior to July, 1953, the grain trade, both home produced and imported, was controlled entirely by the Ministry of Food. As the House will recollect, there was this comprehensive system of foodstuff rationing and control of the millers' grist, merchants' mixtures, margins, etc. In July, 1953, State trading ended, rationing, allocation and controls ended, but we continued with the Ministry of Food trading as a support buyer to implement the price guarantees for a period of 12 months. That arrangement ended at the end of June, 1954, and since July, 1954, the price guarantees have been implemented under a system of deficiency payments and the Ministry of Food has had no further part in trading. This is the system which will be carried on under the Order now before the House.

During the past 11 months, this deficiency payment system has worked well to implement the assurance of price and markets for our farmers and, at the same time, to allow the free market to operate to the benefit of our housewives as consumers and to the benefit of farmers also as consumers and as purchasers of feedingstuffs for livestock production. The general principle of the guarantee is the deficiency payment which makes up the difference between the average market price level and the price guaranteed at the Price Review of the previous year.

In the case of wheat, the arrangement is to pay the deficiency payment on a tonnage basis, and we estimate that for the 12 months ending at the end of this month the cost of that guarantee in respect of wheat will be some £22 million. For barley and oats, the deficiency payment works on an acreage basis, operating again on the difference between the average market price and the guaranteed price and then related to the average production per acre of the country.

The cost of these two items is estimated to be £8.8 million for barley and nil for oats. That is the broad picture of the system as it has worked during the past 12 months. It has worked satisfactorily and smoothly, and I ask the House to give its approval to this Order.

9.52 p.m.

Mr. George Brown (Belper)

The Parliamentary Secretary is undoubtedly having to earn his corn tonight, and he has all my sympathy in doing so. He is defending a number of sticky wickets, and doing it, I suppose, as well as can be expected, though not particularly satisfactorily from the point of view of hon. Members on this side of the House or of the taxpayer.

I am sorry to have to press the hon. Gentleman rather hard on the last wicket which he has to defend. I cannot understand why the Minister is not here. These Statutory Instruments, and particularly the one which we are now discussing, are of very considerable importance indeed. This Order involves a considerable sum of the taxpayers' money. It raises large issues of principle, which, let me tell hon. Gentlemen opposite, are worrying all sorts of people who are not Labour Party supporters in the countryside and in the towns. I must say that I think it is treating the House with a little less than the courtesy which it deserves for the Minister to go completely away and to leave his Parliamentary Secretary to handle the whole lot.

In view of the argument which the Parliamentary Secretary has just deployed, let me make it quite clear that in raising considerable criticisms on these Statutory Instruments we are not arguing that the country has only a choice between times of restriction, shortage and control and times of unlimited dipping into the public purse by vested interests. We do not believe that to be the choice before the country.

The trouble with hon. Gentlemen opposite is that they are so doctrinaire on these issues that they cannot see that because we no longer have shortages, restrictions and controls it does not mean that we ought to be pouring out of our pockets as taxpayers' unlimited sums of money over which we have no control at all. It is no use saying, "Oh, well, you know that a month or two ago the electors decided that it was all right." They were not so happy about it in Guildford where the election result was notably worse than in almost every other Conservative seat in the country.

They were not so awfully satisfied about it in Norfolk, South-West where the result of considerable interventions both by the Minister and the Joint Parliamentary Secretary was to bring my hon. Friend back here at the expense of their own former Member. They were not so satisfied in Norfolk, North, where the considerable attempt made by the Minister and the Joint Parliamentary Secretary to explain this off to the electors resulted in my hon. Friend being here with a majority foul times as great. The argument that they were all satisfied wish it does not seem to apply where the Minister takes the trouble to explain it. Perhaps one of the reasons they are so coy about explaining it tonight is that it would have had much the same effect on everyone here.

I regard the system of paying deficiency payments on cereals, as it has worked out this last year, to be almost the granddaddy and grandmother of all the swindles that have ever been perpetrated. It is not the case of guaranteeing farmers; it is not the case of the taxpayer being asked to stand behind the farmers. This is a straightforward subsidy for Mr. Rank and Mr. Spiller and their friends in that industry. This is the millers' featherbedding, and it is doing it extremely well.

I beg Conservative Members not to rush straight into this just because their Government are putting it forward. It is not a countryside issue. It is an issue for the taxpayer and consumer in the rural areas. Let me say what I have said many times in this House, that those who sit for farming constituencies, as I do, know that in the end we shall maintain the policy of guaranteeing and supporting our agricultural industry only if we can persuade the urban population that it is reasonable and proper so to do. This, therefore, is an important issue.

The Minister has just said that in the last 12 months it has cost about £30 million by way of deficiency payments to support the producers' prices. At the Press conference which the Minister's right hon. Friend gave after the Annual Price Review for this year, he estimated that for the coming year the cost would be about £46 million. So there is to be on the estimate of the Minister, if it works out at about right, 50 per cent. increase in the direct cost to the taxpayer of supporting the producers' prices through deficiency payments. So much for the allegation that the Conservative Party can do this so much cheaper than we were doing it.

Why are we paying deficiency payments for cereals? We are doing it, we are told, because it is right and proper to encourage the home cereal producer to produce more grain. That, I take it, is the Conservative argument for it, as it is our argument for it. But what are we doing at the same time? This Government, in giving away with the right hand, do not know what the left hand is doing. At the very moment when we are paying 50 per cent. more for supporting the home producers we are importing far more than we ever did before.

At the very moment—perhaps the Joint Parliamentary Secretary will take his attention off my election return and pay attention to these figures, which are more germane at the moment; I can tell him that the swing against me was rather less than half what it was in the rest of the country—that we had put up by 50 per cent. the cost of supporting the home producer, we had put up the amount of grain imported from overseas by 50 per cent.

In the first four months of this year we spent £64½ million, I am told, on importations from overseas of cereals and cereal preparations. In the same period of last year, we spent £40 million. So, in 12 months, the result of paying out a lot more to encourage our own producers is that we spent on overseas imports another £24 million of our scarce currency. If we look at the volume of the imports and take 1950 as 100, we find that in the first quarter of last year the figure was 96 and in the first quarter of this year it was 153.

You have some experience of these matters, Mr. Speaker. Can you really believe that it is sensible to pay out extra money to encourage the home producer to grow more and then spend another £25 million in importing another 50 per cent. of the very same thing from overseas? This is the result of the so-called free market. It is sheer anarchy. The Government are trying to run a free market for the miller and the importer, with a controlled and subsidised market for the producer. We believe that that makes nonsense of the whole thing and that the House should give its attention to the matter.

If we want to do the one, somehow the other has to be stopped. If they do not want to interfere with the freedom of the miller and the importer, the Government must look again at their idea of encouraging the home producer. What happens now? When the miller and the importer are free to buy these much larger quantities from overseas, the price they are prepared to pay to the home producer collapses. The result is that the amount we pay out by way of subsidy goes up, not because the farmer needs any greater guarantees; not because he is any less efficient; not because he is doing his job any the worse, but because Mr. Rank, Mr. Spiller and the rest of them say, "Thank you very much. We have already filled up our silos with overseas supplies. We are not going to pay you the price which the Government say is the right one."

Since the last harvest the average deficiency payment has fluctuated between £8 and £10 per ton. When I raised this question before, I was told that that price applied only to the men who did not do their job properly—the men who produced their grain and sold it with a lot of moisture in it, immediately after the harvest. The Government wanted farmers to dry it and store it. Does that make any difference?

Immediately after the harvest, which was a wet one last year, a subsidy of about £9 per ton was being paid. A little later it had risen to over £10 per ton. At the back end of the year—November and December—the subsidy dropped to £8. If the Parliamentary Secretary's argument were right, as we went on and began bringing in grain from farmers who had dried and stored it, the price should have risen and the subsidy dropped, but it did nothing of the sort. In January and February the people who had done what they had been asked to do were selling, but the deficiency payment had jumped up to £10 per ton again. In fact, it was almost as high as the highest point reached just after the harvest. Even for the last two-monthly period for which we have figures it was still running at over £9 per ton.

This price has nothing to do with the quality of English grain, or the extent to which the farmer has done his job properly. It is a wangled price—wangled by the millers and importers, simply because they were set free to spend our currency upon overseas imports first of all. Every farmer knows about this and is grumbling about it. What does the Parliamentary Secretary say in defence of this system, in which a farmer sells his wheat for £8, £9 or £10 per ton less than the alleged guaranteed price and then, at a later stage, when he wants to buy back the wheat offals for feedingstuffs, buys them back at a price higher than that which he originally received for the whole wheat?

This criticism has nothing to do with our being Socialists; this is the kind of criticism which cannot be laughed off by the Government saying, "We won the Election," or, "You want to go back to the ration book." This is the kind of issue which the High Court of Parliament is here to prevent. It is a matter of the defence of the public purse; the defence of the taxpayer—and the trouble with this Government is that they are not willing to organise that defence. The Joint Parliamentary Secretary would have felt very strongly about this matter the day before he joined the Ministry, but I doubt whether we shall hear from him tonight. If he likes to talk, we shall be delighted to hear him, in the light of what he used to say about this matter.

An outrageous scandal is operating. I ask the Minister to reply on this matter. He is entitled to say, "We are the Government. We have our way to do it and you have your way to do it," but what steps is he taking to prevent this scandal happening next year? Perhaps the Parliamentary Secretary has exhausted his right to speak, but we should be delighted to facilitate his speaking again. Anyway, there are other Ministers whose names are attached to this Order. There are the Secretary of State for Scotland and the Secretary of State for the Home Department. We should be delighted to hear from either of them the steps they are taking to stop this scandal—for it is nothing else—from continuing from now onwards.

If we look at the balance sheets of the people concerned, we can see what is happening. The Parliamentary Secretary said that this scheme was working well—I took his words down—for the benefit of the housewife and of the farmer, but it is not benefiting the housewife. She gets nothing any cheaper as a result of this scheme. The bread subsidy is still there. That has not come down as a result, and there is no other way in which the scheme benefits the housewife. It has not benefited the farmer. It is true that the miller, when he is doing the farmer down, says, "You don't have to worry because the Government will make this up. Leave it alone, and if I pay you £10 less than I ought the Government will make it up to you."

The Joint Parliamentary Secretary laughs, but he knows that that is said in every market and to every farmer. The farmer knows that it cannot go on at this rate. The Minister found it difficult to make an agreement at the price review this year, so the Prime Minister came along and said, "We are going to have an Election in the next few months, so let US fix it up." [An HON. MEMBER: "It was the Chancellor of the Exchequer."] I mean the Prime Minister, who intervened at the very end. There was a succession of interventions, I understand.

Next year there will be no Election in the offing, and the farmer knows that this scandal cannot go on, because it will not be stood for. That is what is worrying him. The scheme is not for his benefit. I very quickly looked up the figures for Messrs. Spillers and Messrs. Ranks, and I found that in 1953 Ranks made £4,850,000 gross profit. In 1954 their gross profit had risen to £6,409,000, an increase of £l½ million in two years. That is where the money is going. It is for them that we are voting the subsidy. Messrs. Spiller, in 1953, made £3,050,000. In 1954 they made almost £4 million, and in 1955 £4½ million, again an increase of about £11 million. That is where the subsidy is going. In dividends, Spillers made provision for £240,000 in 1953, for £321,000 in 1954, and for £428,000 in 1955, an increase of very nearly £200,000 in the three years, in dividends paid out. Messrs. Ranks paid dividends of about the same order.

That is where the money is going; that is what this system is doing. Of course, it is not producing the food. Look at the March returns of grain acreage. The wheat acreage is going down from 2,377,000 to the 1,949,000 forecast for this year. The barley acreage went up by a very small amount and oats acreage by a very tiny amount. Mixed corn is down, and we have a lower production in rye. All this is discouraging to the home producer, who cannot understand why he does not get paid the price that his crop demands. He realises that it is costing too much money for very little return. We are getting lower production. It is no use blaming the weather last year. When there was a bad winter under the Labour Government it was somehow our fault, but when we have bad weather now it is just bad luck. There was a drop in the tillage acreage of 400,000 last year before the bad summer began. That is what is shown here in these figures.

This is a public scandal. This is no part of an agricultural policy. The system of guaranteed prices is the only one that the National Farmers' Union has repeatedly said will result in increased production, with some control over expenditure from the public purse. I say that the Parliamentary Secretary must do more than he has so far been doing and show how this system is better than ours. He must defend the extravagant waste of public money here, and also defend the enormous increase in millers' and importers' profits and dividends. He must show us that under his system he can take some steps to stop this happening in the future. In my belief, he cannot do it, and that is what he has so singularly failed even to attempt to do.

10.11 p.m.

Mr. David Renton (Huntingdonshire)

The right hon. Member for Belper (Mr. G. Brown) has spoiled, as he very often does, a strongly arguable case by overstating it. Some of the extravagant adjectives which he used were quite inappropriate to the subject and do not help any body at all.

Nevertheless, the right hon. Gentleman produced some facts of which everybody in the House should take notice. It is a fact that there has been a tremendously increased import of wheat into this country this year, especially, I understand, of French wheat. I wonder whether the Government spokesman will tell the House whether French wheat is being sold in this country at prices below the cost of production. If, as I am informed, it is being sold at such prices that would seem to me to be dumping, and I should like to know whether it is that sort of dumping which, we were promised in the Gracious Speech, will be prevented in future by stern measures. I certainly hope that it will be.

Further, for the French merely to export their surplus wheat, knowing that it will be exported and sold below the cost of production, would appear to me to be an unfair trading practice within the meaning of our Election manifesto "United for Peace and Progress," and I should be grateful if I could be told whether it is technically regarded by the Government as an unfair trading practice.

I differ from the right hon. Member for Belper to this extent. I do not think that our farmers, certainly this year or next year, have anything to worry about because of the very deficiency payments which we are discussing under this Order. But, of course, there is a further factor to take into account. It is one thing to sell their wheat and get a price for it, knowing that they will receive a deficiency payment, but it is another thing not to be able to sell their wheat at all. There have been moments, fortunately only short, but, nevertheless, anxious moments, in recent months when farmers have doubted whether they will sell their wheat.

Mr. E. G. Gooch (Norfolk, North)

That is under a Tory Government.

Mr. Renton

This is a matter in which, if I may say so, the House will do much better not to adopt party points or doctrinaire tactics. I am trying to look at this matter as objectively as I possibly can.

Another thing which should not be lost sight of is that, although the longer a farmer holds his wheat the better price he gets, under the graduated payments scheme there is, generally speaking, some wastage. More serious still is the possibility that with a pile-up such as has revealed itself in recent weeks not all wheat may be disposed of before the end of the deficiency periods. Can the Government give an assurance that all wheat being offered is likely to be cleared out of farm stores and off the farms before the next harvest is ready? I have even heard farmers express some anxiety about that.

May I conclude with a very little personal reminiscence? I became a National Liberal in 1932 because I considered that the Conservative Party had the right ideas about protecting our own growers from dumping. So far, I have never regretted that step. I hope that the Government reply to this debate will show that I have no cause to regret it this year.

10.16 p.m.

Mr. M. Philips Price (Gloucestershire, West)

The Parliamentary Secretary has told us that the amount of wheat deficiency payments this year will be about £20 million, and neither the country nor this House can be indifferent to that, especially if the amount is to increase. I am sure that no Chancellor of the Exchequer can be indifferent to such a serious deficiency payment, which shows signs of increasing rather than the reverse.

Can we continue indefinitely with it without some limitation on wheat acreage? In, I think, 1931, following a General Eection in that year, a Wheat Act was passed by the National Government which gave a deficiency payment but limited the acreage. If the acreage was exceeded the deficiency payment began to decrease. Perhaps we shall have to face a similar situation.

Another consideration, which my right hon. Friend the Member for Belper (Mr. G. Brown) has pointed out, is that the price of wheat at this time of year—when we thought it would be much higher—is only in the neighbourhood of 21s. a cwt. I sold some about a fortnight or three weeks ago at 21s. 9d. Having held it over from last harvest, having dried it and stored it, I thought I should get about 30s. now, but not at all—I got 21s. 9d. I suppose I shall get a deficiency payment of about 10s. a cwt., but it makes one wonder whether the millers are not getting the wheat too cheaply and whether some of this money is not really going into their pockets.

The farmer is all right, he is paid partly by the miller and partly by the deficiency payment, but the taxpayer has to pay and I do not think the Chancellor of the Exchequer can remain indifferent indefinitely to this widening gap.

The hon. and learned Member for Huntingdonshire (Mr. Renton) has spoken about the dumping of wheat from France and I have heard much the same. One wonders very much whether the Government will not have to work out a method by means of which the millers do not get away with more than they should.

We must have cheap supplies for the consuming side of agriculture, namely, pigs, poultry and livestock generally. Cheap feeding stuffs are essential. I very much agree with the deficiency payments for barley and oats on the acreage basis as it is, and I see nothing to grumble at or worry about there, because this encourages fodder crops which are the basis of our livestock industry.

My right hon. Friend the Member for Belper referred to the drop in the acreage of arable land. That does not worry me particularly, because I think what is happening is that our farmers are more and more going over to ley farming. I know of farms on the Green Belt to the north of London, and there are many others elsewhere today, with pasture lands which were inferior and where no more than a ton of hay to the acre could be produced. Now there are two or three year leys producing 2½ tons to the acre with the aid of the new methods of artificial manuring.

That means that the figure for tillage may go down, but it does mean that the figure for silage and hay production per acre goes up. It seems that one need not worry unduly at the drop in arable acreage, provided there is an increase in respect of the other crops to which I have referred.

I should like to know what is happening to the very large wheat crop that has been grown in this country and also imported from abroad. It must amount to an enormous figure. British wheat goes mainly into biscuits and pig and poultry food. It is not so good for bread making, as we know. I should like to know whether it is really true that there is such a demand for pig and poultry food and biscuits, that we can absorb this tremendous crop which is not only grown but also imported. The whole thing is rather a mystery, and I would like the Government to clear it up.

As I have said, I do not altogether like this suspicion that the millers are paying this low price at this time of year, when I should have thought they would have been paying more, which means that the Government subsidy and the taxpayers' contribution have to increase. That seems to be wrong, and I wish the Government would look into this matter because I am certain that in the long run the taxpayers will not stand for it. After all, we are mainly an urban country, with a large industrial population, and although we have long since, I hope, given up the idea that agriculture should be left to find its own level I think there are limits and I wish that the Government would look into this matter.

10.25 p.m.

Mr. Sidney Dye (Norfolk, South-West)

I do not know whether I ought to offer an apology to the House for addressing it four times today, but I have, of course, lost time to make up, and these are matters of very great importance to agriculture.

I want to deal with some very serious deficiencies in this scheme as part of the agricultural policy for the country. The Parliamentary Secretary came to Norfolk on a number of occasions during the General Election.

Mr. Gooch

And stayed a long while, too.

Mr. Dye

One of the points which the Conservative Party plugged was the amount of subsidies which the Government were giving to agriculture. I thought that that was a bad line. I have never thought that any political party ought to appeal to the agricultural community on the basis of the amount of money it was taking from the taxpayers and giving to one section of the community. It was a shocking thing for people to come to the country districts to do after they had had experience in this House. Nevertheless, hon. Members opposite did it.

The result of their policy is that the amount of subsidies has gone up, but the amount of those subsidies remaining with the farmers has fallen. As my right hon. Friend the Member for Belper (Mr. G. Brown) has pointed out, a large part of those subsidies, described as subsidies for agriculture, go to support the industries and interests which handle our produce after it has left the farms. That is a great weakness in the present method of subsidising.

Let me tell the House what hon. Members opposite did to bolster their approach to the electorate on this subject. As a farmer, I received a cheque for £70 two days before the Election. I suppose thousands of other farmers received their wheat subsidy payments on 23rd or 24th May. [HON. MEMBERS: "Was it calculated?"] I would not suggest that it was calculated. It was coincidence or something else.

Another subsidy was on beef. For the cattle marketed in April the subsidy was 5s. a cwt. and for those marketed in May it was 3s. 6d.—but the prices of those cattle were far above the guaranteed prices. How was it that for the period just before the Election subsidies were paid although the market price far exceeded the guaranteed price? Just an accident? Or was it calculated? If so, on what basis?

I do not think we shall ever have a sound policy for British agriculture on the basis of trying to bribe the electorate. That is the very weak position in which the Conservative Party have placed themselves. If, to obtain agricultural support in 1955, they have to bolster up a system where the total subsidies are running at the rate of over £250 million a year, what will the rate of subsidy have to be at the next Election? Will it be £400 million, £500 million, or what will it be?

The way in which this subsidy works is unfair. The hon. and learned Member for Huntingdon (Mr. Renton), who is no longer in his place, raised the question of the price of wheat and argued that those who kept their wheat the longest could get a better price. However, when we take into account the deficiency payment and the market price, the farmers who sold their wheat in May and June will receive a lower amount than those who sold their wheat in January and February, because the price was then running at 25s. or 26s. per cwt. whereas it is now down to 21s. per cwt.

How is the average price for barley calculated? I am informed by those who are in the trade that four-fifths of the barley produced in the eastern counties is marketed before Christmas. We know from experience during the last season that it was then sold on the market at a very low price. After Christmas the price rose rapidly. Was the barley that was sold in February direct from the growers or had it been bought by merchants earlier and then sold on the market at the higher price? If it was merchants' barley, how should that come into the calculation to obtain the average price for barley sold off the farm in order to arrive at the deficiency payments which should be made?

All of us who are growers of barley know that it is normal for the barley, after it has left the farmer, to be sold not once but perhaps five or six times from one merchant to another, and that that practice increased during the past season. If the barley was bought by merchants and stored and then sold at a higher price later on and the price remained higher for a period, it seems to me that the farmers will not get the amount of deficiency payment which the Government indicate that they should get, the difference between the price at which the barley is sold from the farm and the average market price spread over the season. I imagine that there is great difficulty in arriving at a fair deficiency payment to make up the difference between the guaranteed price and the market price, and I wonder how the Government work it out.

There is also the general position. I am a grower of barley. Last year I combined one field at harvest-time. I thought I would get rid of it while the going was good. I took a sample to market. A merchant offered me 75s. per quarter. I said, "That is a low price, is it not?" The merchant replied, "Yes, but you will get deficiency payments." I went to another merchant in Norwich market, and he offered me exactly the same amount. Again, I said that it was a low price, and he also replied, "Yes, but you will get deficiency payments."

Does the fact that this scheme with a deficiency payment is in operation influence buyers of barley to the extent that they will offer a lower price than they would have done if there had not been any deficiency payment? If so, the benefit of the subsidy is going not to the farmers but to the merchants, the maltsters and the manufacturers of feeding stuffs and other things. This system of deficiency payments is undermining the moral fibre of a free market. We must either have a free market and allow it to operate or we must have a system of fixed prices. A system of deficiency payments like this is just a godsend to those who are there to buy.

The position as it worked out this last year was that the buyers, after harvest, could give any price that they liked. There was sufficient evidence to show that they had all laid their heads together and offered about the same price for the same quality barley. Therefore, the Government have transferred from the Ministry of Food the job of fixing a price that should be fair to the producer and fair to the taxpayer to an organisation of merchants who meet secretly some, where and fix the price for their own advantage, and this meeting has the power to decide how much subsidy the Chancellor of the Exchequer shall pay out. The right hon. Gentleman never knows, he cannot estimate at the begin- ning of the season how much subsidy he will pay on barley or wheat or oats. Somebody does, however, and that somebody is represented by those who operate on the markets.

Can we justify that as a permanent system of our agricultural policy? If so, it looks to me as if it will be a very costly one for the taxpayer. I think that it is neither fair to the farming community nor to the taxpayer, and if, in between, those manufacturers and millers have been able to increase their profits at the rate at which they are doing it, it is time that we tried to get a different and a better and a fairer system.

It has been pointed out already that the price of wheat today is roughly 21s. a cwt., but the price of milling offals is 28s. a cwt. and the price of flour will be above that. So that the difference between the purchasing price of that portion of wheat which comes from the home production and the end-product has become wider than ever.

There is another aspect of this matter. I was speaking at a village meeting at Nordelph—the hon. Gentleman may have gone down there as well—and one of his supporters, a well-known Conservative farmer, asked me at the meeting whether I realised that he had been able to buy good wheat at £22 or £23 a ton. He also told me how many tons he had bought and that he was a pig keeper. He thought it was a good thing that he should be able to buy good wheat at that low price to feed to his pip. The question I want to ask is: what was there to stop him selling that wheat for milling purposes and then getting a subsidy on it? What is there to stop English farmers buying cheap French wheat, keeping it on their farms and eventually selling it and getting the subsidy?

Is this foolproof or is it not? I was informed by somebody who had made investigations that in the south-western counties they were doing this and that officials had to investigate. If there is no means of checking wheat that has once been sold off the farm by marking it or by any other method, and it can be sold again and the subsidy is payable, then there is a fundamental weakness in the system. The House must be assured that that is not so.

Major H. Legge-Bourke (Isle of Ely)

The hon. Gentleman must be aware that early in July, I think, a return of the acreage of wheat that a farmer expects to harvest this year has to be rendered. Calculation of the amount of wheat that the farmer eventually harvests is based on what he put originally in the return.

Mr. Dye

Is not the hon. and gallant Gentleman aware that production per acre varies very considerably, and that one farmer may have six sacks to an acre and that another farmer may get twelve sacks? Has he in his mind any proof that such a thing as I have suggested could not happen? I am asking, because I think the public will want to know.

Major Legge-Bourke

I understood that what the hon. Gentleman was suggesting was that in recent months a farmer was able to buy imported wheat and that he could try to market it as his own. I am telling him that soon after actually drilling the wheat the farmer has to render a return of the acreage he has drilled. I grant that the deficiency payment is not based on acreage. I appreciate that, but surely the hon. Gentleman is stressing the point a little too much when he suggests that such a farmer would buy imported wheat and add it to his own.

Mr. Dye

I am not suggesting that. I am asking what are the safeguards against it, because it was brought to my notice that certain officials had to make investigations on farms in relation to this. I think that the general public should be assured that abuses of this character cannot be of a widespread nature.

On the subject of barley, I notice that the Ministry is considering export licences, or something like that, for a certain quantity of barley after harvest. After the last harvest a considerable quantity of barley was exported from the eastern counties and the farmers received 22s. or 23s. per cwt. for it, so they would be subsidised. Are we to continue subsidising the export of barley from here to Denmark and other Continental countries? If so, what ground have we for complaint against the French dumping their wheat in this country? Later in the year we were buying imported barley at far greater prices than £22 or £23 per ton. It seems stupid to subsidise the export of barley in September and October and then, later in the season, to import barley at a much higher price.

This occurred during the past season. I understand that the Ministry consider that the same thing will happen this year. If so, it seems to me to be hopelessly wrong and that this free market will lure us into many pitfalls. As we on this side want to get back to an agricultural policy with a sound basis, we must ask the Government for proper safeguards. The Government must answer the questions I have asked if we are to assure the public in general that our agricultural policy is sound and if we are to limit the amount that comes from the Exchequer year by year.

10.45 p.m.

Mr. Nugent

Might I try to answer some of the points which have been put from both sides of the House? First of all, there was the important point which the hon. Member for Norfolk, South-West (Mr. Dye) made, namely the charge that farmers in the south-west were offering to sell wheat which had been imported from France, or other wheat which they had not grown, and then claiming the subsidy. I noticed, incidentally, that he chose an area a long way from East Anglia.

Mr. Dye

I did not choose it.

Mr. Nugent

Well, I think that my hon. and gallant Friend the Member for the Isle of Ely (Major Legge-Bourke) was right in what he has said. It must be remembered that there is an elaborate system of checking. A large proportion of growers' returns are checked.

Mr. Dye

One-third?

Mr. Nugent

I would rather not give a figure; I agree, not the whole, but a large proportion of them. The acreage is checked, and then the tonnage sold off the farm is checked, and between the two we can judge pretty accurately whether a farmer has sold wheat which he could not have grown according to the acreage which he had. So, I can give the hon. Member and the House the assurance that the system of checking is adequate—and I agree with my hon. and gallant Friend the Member for the Isle of Ely that it would be a rare exception to find a farmer who would do this sort of thing—to prevent such a defalcation as the hon. Member suggests.

Various anxieties were expressed with regard to the sales of barley in February, when the prices were high, compared with sales in the autumn when prices were lower, and I was asked how the returns were calculated. The top part of the price scale was so truncated as to take the malting barley sales out of the average net return, so that the guaranteed prices were related to the feeding stuffs price for barley. The farmer who sold in the autumn made a lower price than the average he would have received had he sold at a different time. But that is one of the aspects to which we want farmers to direct their attention. We want farmers to sell when the consumers want it and not to push huge quantities of barley on to the market when the demand is not there. There is a need for the farmer to help not only in providing the quality, but also in timing; and that is important to the farmer, since it affects the return which he gets.

The man who sells his wheat in January certainly obtains a better market price than the man selling in May or June. But the deficiency payment will be correspondingly higher in order to bring the gross return—that is the average market price, plus the deficiency payment —up to the guaranteed price. Our intention is that there should be something like a £5 a ton differential between wheat sold last autumn and that sold now. We have tried to encourage farmers to provide themselves with conditioning and storage plant so that they can market their wheat in an orderly fashion, and that I am glad to say they have done so.

The hon. Member for Gloucestershire, West (Mr. Philips Price) expressed anxiety in asking if I thought that English wheat was being sold too cheaply. I would remind him that there is a free market in wheat. Imported wheat comes into this country and combines with the home-produced crop in a free market, which is at very much the same level as the world market. We import annually between 4 and 5 million tons—rather less than in pre-war days—and that combines with some 2,500,000 tons produced in this country to make the whole wheat market.

Mr. Philips Price

Is not there a very large wheat import, and can the Minister explain why this is so and give the amount?

Mr. Nugent

I think that the answer is simple. If we are to import into this country between 4 million and 5 million tons a year, which is the normal import, we must be importing something like 400,000 tons every month, which are huge quantities. That is the normal picture. We normally use something like 70 per cent. to 75 per cent. of imported wheat in the grist for the flour for making our bread. Rather more than half of our home-produced wheat goes for milling; the remainder of it goes for feeding stuffs. That is to say, over a million tons of home-produced wheat goes for feeding stuffs, and the merchants and compound manufacturers are in direct competition with the millers.

All kinds of ugly accusations have been made against the millers. I wonder on what grounds they are made. No doubt the right hon. Gentleman will have an opportunity of substantiating those statements. But we have no evidence for them, and they are not nice accusations to make; nevertheless the right hon. Gentleman made them. No doubt in due course he will produce figures to substantiate them.

Meanwhile, let me say that, apart altogether from what competition there is between the millers themselves, the feeding stuffs merchants are in direct competition with the millers for the wheat, and the home-grown wheat which does not go for milling goes for feeding stuffs. Right hon. and hon. Gentlemen opposite have accused the feeding stuffs merchants of being in "rings." They have said that buyers generally are putting their heads together. Really! There are something like 2,000 merchants throughout the country. They all buy grain. Some are compound manufacturers on their own account. A large number are in competition with the big compounders. Do hon. Gentlemen opposite seriously suggest that it is possible for 2,000 merchants to put their heads together and agree prices from day to day? It is ridiculous.

Mr. Dye

Does not the hon. Gentleman read the circulars that go round to them from their own associations suggesting the prices?

Mr. Nugent

They do not suggest the prices; they give the market reports. These men are in business to make their living. If they can buy grain cheaper than the fellow next door and so get more custom, they will do so. If they did not do that, they would find themselves out of business very quickly.

The fact is that right hon. and hon. Gentlemen opposite either will not or cannot understand the working of a free market. These men are in business to make their living. If they fix a price which is unreasonably low farmers will not sell to them. The farmers themselves are in the market. How is it possible for the merchants, 2,000 of them, to get together and fix the price against the farmers? If any particular merchant offers a farmer an unfairly low price, the farmer simply goes to another merchant. It is as simple as that.

Mr. Dye

Is it?

Mr. Nugent

It certainly is.

Mr. Dye

Would the hon. Gentleman like to undertake to sell my barley after the harvest?

Mr. Nugent

If the hon. Member cannot understand how to sell his own barley, I think that he is very little qualified to come here and tell the House of the failures of the free market. The fact is that—

Mr. Dye

I was not born with a silver spoon in my mouth.

Mr. Nugent

Did the hon. Gentleman wish to interrupt me? The fact is that the hon. Gentleman has completely distorted the working of the market.

To return to the more serious aspect of the anxiety of the hon. Member for Gloucestershire, West, I can assure him that here there is a live competitive market. What does not go to the miller goes in feeding stuffs to the individual farmers. It is used in compounds by the compounders or bought direct by the farmers and fed to poultry. That absorbs some 600,000 or 700,000 tons of wheat direct, where farmers buy it from the merchant direct as grain. So there is a really live and competitive market.

I can assure the hon. Gentleman that there is no evidence whatever of these very ugly accusations of "rings" either with the millers or the feeding stuffs merchants. In fact, our impression is that both sections are serving the community, and the farming community, well, and that their margins are reasonable. If right hon. Gentlemen opposite have any evidence to the contrary, we shall be very ready to look at it and to take the necessary action.

I turn now to the further point which was put to me by my hon. and learned Friend the Member for Huntingdonshire (Mr. Renton) on the question of the French wheat. We now have a free market and merchants are free to import whatever grain is available from whatever part of the world they like to meet the consumer demand here both for the milling trade, for human consumption, and for feeding stuffs. Bearing in mind that we are importing some 7 to 8 million tons of wheat and coarse grains every year, it is clearly to the advantage of the livestock feeders to buy grain—whether it is maize, barley, oats or wheat—as cheaply as we can get it. We should bear in mind also, in relation to the subsidy, that when the feeding stuffs for our pigs and poultry is cheaper we get an immediate reaction in the feeding stuff formula which, in the course of a few months, directly reduces the guaranteed price for eggs and pigs and thereby reduces the subsidy. For the rest of it, the price of that which goes to feed the dairy herd will be taken into account at the following Price Review.

So in this question of French wheat—and one hears a great deal about it these days—the quantities that are imported are significant, amounting to about 180,000 tons in 1953–54 and about double that this year, but in the context of so many millions of tons of cereals that are imported altogether it is not a very great figure. Our own farmers are fully protected with the deficiency payments system, and looking at the broad picture, not only of cereal production but of livestock production as well, there is clearly nothing to fear here. If we go on providing our livestock feeders with cheaper feeding stuffs, that is going to be to the advantage of everyone.

I am not going to bother the House with the figures of the Election results of the right hon. Member for Belper (Mr. G. Brown). No doubt everyone knows them.

Mr. G. Brown

You got in first.

Mr. Nugent

There is no novelty in it now, but mine would make better reading than those of the right hon. Gentleman. As for his argument, Members opposite must accept the fact—although I do not have the time to go into great detail—that there is no halfway house between a complete system of control or State trading and a free market. We have been through the business of de-control and we have had to consider whether to do it commodity by commodity, or just how we would handle it. I well remember the arguments put in 1952 when we were considering how we could free the cereal industry and how we could end feeding stuffs rationing. That seemed to be one of the first things we could do, and we considered various measures whereby we could do it in stages; how we might be able to do it one cereal at a time.

We were driven to the conclusion that there was no half-way house: it was a matter either of freeing the lot or State trading in the lot, and we decided to free the lot. I have no doubt that in the outcome not only the farming community —in seeing the end of feeding stuff rationing—but also the country as a whole have benefited enormously. The alternative of working a system of support prices with Government buying did not bear examination when we looked at it. We have had one year of it. In the first year of de-control, 1953–54, we operated a support price system with the Government standing ready to buy what the farmers could not sell at the guaranteed prices.

It is difficult to compare the cost of the two systems. Actually, that system cost some £34 million for that year. But I am not comparing like with like, and I would advise the House not to draw conclusions from that. But I do make the point that if we are obliged to buy in great quantities of grain from the market in order to implement the guarantee, the handling costs alone will run out at from £6 to £7 a ton, quite apart from trading losses. Those are the kind of factors that one runs into when one goes back to the system of State buying and fixed prices.

I do not wish to recapitulate the whole of the argument put forward in the debate last month, but I reiterate that, on top, there is the problem of the trading loss. The whole experience of these big trading undertakings by Government has shown that Government cannot operate these systems without running into a serious loss if full supplies are to be maintained. In times of shortage when the demand is more than enough to take up the whole supply, it is naturally easy to avoid a trading loss, but when supplies are sufficient, and when they cannot be rationed, there is no way in the world for the trading commission or the Government to protect themselves against an enormous trading loss. We have the complete example of that happening in practice with the Raw Cotton Commission which finished up in its last two years with a trading loss of between £40 million and £45 million.

We are quite convinced that if we tried to operate a scheme on the lines suggested by right hon. and hon. Gentlemen opposite of a trading commission dealing in all wheat and some sort of regulatory scheme for barley, we should first be compelled to control all cereals owing to the interchangeability of wheat with coarse grains because it is not solely a milling commodity. Therefore, if we had a control system for wheat we should be forced to take control of barley and oats as well. It would not be possible to deal in only one of them.

We are quite convinced that if we tried to operate such a system and to assure sufficient supplies for the feeding stuff and the human consumption markets, the losses would be astronomical. In order to protect the public purse we should be driven to allocating supplies and keeping the market short in order to protect ourselves against enormous losses. I am not making a party point but simply relating partially facts and partially experience of what we have seen with other commodity commissions and taking into account a great deal of very wise judgment from the experts in our own Department.

The conclusion to be drawn from it all is that there is no half-way house. We must either have a free market, as we have now—and the deficiency payment in no way affects the free working of the market; it is the one system of guaranteed prices which does not affect the free working of the market—or a complete control system. In the latter system we should be driven to shortening supplies, and unless we wanted to see stuff going under the counter we should be driven to rationing.

That argument is really irrefutable, and when right hon. and hon. Gentlemen opposite complain in the country of what they think are the abuses in the present system, they are not really facing the facts. The only alternative to this system of a free market is to go back to a complete trading system and then be forced to go back to allocation and rationing.

Mr. G. Brown

No.

Mr. Nugent

The right hon. Gentleman has yet to explain how he is going to to do this in detail. If he can, then he is a very clever man, but he certainly has not done so up to date.

Mr. Brown

Having dealt with what he thinks we believe in, will the hon. Gentleman say whether there is no way in the system which he prefers of preventing the drain of money from the taxpayer's purse ultimately to the trade as is now going on?

Mr. Nugent

I cannot agree with the right hon. Gentleman that it is going to the trade. It is not. What determines the deficiency payment now paid is the difference between the price level which we have guaranteed and the average market price level. The average market price level is the free market price. It is the equilibrium between supply and demand. It is directly related to the world market price. Whatever the trade may be able to control here, and it certainly does not have the control which the right hon. Gentleman thinks it has, it cannot control the world markets. The world markets are directly related to the market here. Imports and exports are free, as has been remarked. There is a completely free competitive market here now.

When I say that the market price level is what determines what the deficiency payment will be, I do make the point that the deficiency payment goes to the producer to make up the difference between what the market returns to him and the price level we have guaranteed. We have seen it working in the past year. Wheat had a substantial deficiency payment of about £10. The payment on barley was heavy at first, and then because demand exceeded supply the price rose and the deficiency payment was lower. It was the same regarding oats. At first it looked as though the deficiency payment would be heavy, but up went the price, and there has been no deficiency payment.

The same thing may happen in future with wheat. He would be a rash man who tried to forecast the future course of world market prices. It may be that next year, or the year after, the world wheat price level will be higher than it is now. If it is, the deficiency payment will be lower. Those are the facts. There is no basis for the right hon. Gentleman thinking, as he persists in doing, that the deficiency payment is going to the merchants. It is not. They are operating efficiently and competitively.

I commend this Measure to the House. The deficiency payments system has been working well. I have every expectation that it will continue to do so, and ask the House to approve the Order.

Question put and agreed to.

Resolved, That the Cereals (Deficiency Payments) Order. 1955, a copy of which was laid before this House on 28th April, 1955, in the last Parliament, be approved.