The Minister of Agriculture, Fisheries and Food (Mr. Derick Heathcoat Amory)
With your permission, Mr. Speaker, and that of the House, I would like to make a statement on the statutory annual review of the economic condition and prospects of the agricultural industry which has now been concluded.
The Government have made their determinations on the guarantees to the industry in the light of the review and of the long-term assurances announced last November. The details are set out in a White Paper which is now available.
The general production policy of the Government continues to be to foster economic production, by encouraging the maintenance of a large arable acreage with the main emphasis on feed crops, the maintenance of a large livestock population with greater reliance on home-produced feeding stuffs, the production of more good quality beef, and lamb, but no more milk, eggs, pigmeat or wheat.
The net output of the industry in 1956–57 is forecast at 59 per cent. above pre-war as compared with the revised figure of 56 per cent. for last year, largely as a result of a rise in output of livestock products. This is the highest level of net output so far recorded. I am sure that the House will agree that this reflects credit on everyone concerned, particularly when one recalls the difficulties of the harvest.
The actual net income of the industry, which is forecast for 1956–57 at £317 million out of a gross income of nearly £1,500 million, is slightly below the revised figure of £325 million for 1955–56. The forecast of net income adjusted for normal weather conditions, on the other hand, at £334 million, is about equal to the highest previously recorded, in 1952–53.
There has been a substantial further increase in costs, of about £38 million in a full year for review commodities. Although there will be a considerable offset in continuing improvements in the efficiency of the industry, on balance the industry requires an increase in the value of the guarantees if it is to continue to make its proper contribution to the economy.
560 On the other hand, the Exchequer cost of agricultural support is rising and the national economic situation demands a strict view of the needs of the industry. The new long-term assurances to which the Government have undertaken to give effect require this year an increase in the total value of the guarantees. The Government have considered all relevant factors, including these assurances, the cost to the taxpayer and the place of the industry in the national economy. They have decided that the essential needs of the industry can be met by an increase in the total value of the guarantees of about £14 million. This is about £6 million above the minimum required by the long-term assurances.
The determinations now made are for livestock products for the year April, 1957, to March, 1958, and for crops of the 1957 harvest. The most important aims of the determinations for individual commodities and production grants have had to be to reduce the profitability of egg and milk production, to maintain that of fat cattle and fat sheep production, to encourage continued stability in output of pigmeat and to encourage production of home-grown feeding stuffs.
The determinations for livestock and livestock products accordingly comprise a substantial reduction in the price guarantees for eggs; an increase of no more than ¼d, a gallon in the guarantee for milk—which, in view of the increased costs, will mean a net reduction in profitability per gallon; no change in the price guarantees for pigs and wool; but increases in the price guarantees for fat cattle and fat sheep, including a higher rate of guarantee for the better quality cattle.
The determinations for crops include and supersede those previously made after the 1956 Annual Review under previous procedure. They comprise reductions in the price guarantees for wheat and rye and increases in those for barley, oats, potatoes and sugar beet. It has also been decided to increase the subsidy on nitrogenous fertilisers and to make minor extensions in the scope of the ploughing grants and the lime subsidy.
The Government are satisfied that the determinations now made will enable the industry to maintain its progress in improving efficiency and to secure a 561 reasonable level of remuneration for economic production, and, at the same time, accord with the present stringent requirements of the national economy.
Mr. T. Williams
May I ask the right hon. Gentleman first, whether, as I hope is the case, this was a happily agreed decision? I think the right hon. Gentleman said that the increased costs of production amounted to £38 million in the year, of which £14 million are to be recouped. I assume that we take it from this statement that the industry is expected to bear £24 million worth of the increased costs over the year. Secondly, will the Minister say what is the "substantial reduction" in the price for eggs? Thirdly, can he tell us how much of the £38 million increased costs are due to increased fuel prices?
I am glad to say that the determinations have been agreed with the leaders of the farmers' unions. In the light of the national considerations at the present time, the leaders of the farmers' unions have agreed that the Government's determinations give due weight to the relevant factors at this Review and are in full accord with the Government's long-term assurances.
The cost increases for Review commodities amount to about £38 million. An addition of £14 million has been made to the guarantees, which leaves a net figure of £24 million, as the right hon. Gentleman says, but a substantial part of that figure has been absorbed already in the net income of the industry. As for the remainder, we believe that to be more than fully covered by the normal increase in efficiency in the industry, which we estimate at about £25 million a year and which, I am glad to say, looks like continuing.
The reduction in the figure for eggs is 1¾d. per dozen.
On the question of fuel prices, I think that the figure is about £4½ million, represented by the tax increase and something additional for other increases. We hope that the tax increase will be of a temporary nature.
§ Sir R. Boothby
While congratulating my right hon. Friend upon the general result achieved, and also upon the specific changes he has made, particularly the increased guarantees for fat cattle of good 562 quality and for barley and oats, may I ask him whether he thinks that these annual bouts of horse trading between his Department and the National Farmers' Unions, of which the House knows nothing until the final bargain is announced, will prove in the long run the best way of conducting the agricultural policy of the country? Will he give his mind to devising a better method in the future than this regular wrangle which takes place—I admit, usually with fairly satisfactory results—in order to get a long-term policy which will suit the needs of the country better?
I could not accept my hon. Friend's description of the Annual Price Review. I ant glad to say that it was held in a very friendly atmosphere this year. I think I can say that as a result of the long-term assurances the field for argument and discussion has proved, as I hoped, to be considerably narrowed, but as the hon. Member knows, the Annual Review is at present a statutory provision under the Agriculture Act.
§ Mr. Dye
Is it not the case that a year ago the right hon. Gentleman guaranteed that the price of the 1957 wheat crop should be 28s. 3d. a cwt. on average throughout the year? Do I understand him to say today that he is reducing that figure after the crop has been drilled? If so, is not this the first time that any Government have dishonoured a guarantee in respect of any agricultural crop?
Secondly, may I ask the right hon. Gentleman about the price of milk? Is he aware that for January this year the producer received 8d. a gallon less than for January of last year, but that the consumer is charged more? Are we to understand that there is a further reduction in the average price of milk, but that the price to the consumer may be still further increased?
In reply to the first part of the hon. Member's question, the results are the opposite to what he thinks. At our last Price Review we reduced the price of wheat for the 1957 harvest by 1s. 6d. At this Review we have put it up 4d. on that, making a net reduction of 1s. 2d.
As to the second part of his question, as the hon. Member knows, the guaranteed price is related to a standard quantity only, and above that standard quantity 563 the main part of the loss that results, unfortunately, from the sale of milk at a considerably reduced price falls, and is bound to fall, on the producer.
§ Mr. Hurd
Can my right hon. Friend give an assurance that this Review carries forward the Government's policy of assisting the small producer by way of production grants, and so on, and to improve their efficiency and economy so that, over all, the industry will progressively need less subsidy? Will he also tell us whether the price arrangements now made will result in any increase in prices to consumers in the shops?
We bear particularly in mind the position of the small farmer, who is quite heavily dependent, in many cases, on pigs, eggs and milk. As my hon. Friend will have noted, we have, in our determinations, increased the price of oats, beef and sheep, and we have increased the value of the fertiliser subsidy. We have maintained, we believe, the profitability on pigs. Part of the reason that led us to give the ¼d. extra on milk was consideration for the small producer, who must inevitably base his husbandry, in many cases, on the production of milk.
As to the second part of my hon. Friend's question, which I understood to refer to the consumer, the increases which we have made in the guaranteed prices should not affect the consumer in any way directly at all, because the prices of the products in the shops depend on the market price and not on the guarantee price.
Mr. T. Williams
Since the most disturbing feature of the whole situation is the persistent increase year by year in the overall costs of production, apart from wages, may I ask the Minister whether his Department is looking into those persistently increasing costs of every kind, increases which help to capsize the best-run ship?
I agree with what the right hon. Gentleman says, that continually rising prices bedevil a satisfactory answer to almost every problem. That is why the Government are giving such a high priority to once and for all dealing with the problem of inflation.
§ Mr. Baldwin
May I ask whether my right hon. Friend, having now dealt with a very substantial proportion of agricultural production, will now turn his attention to the horticultural industry, which has to stand the increased costs but does not get anything in the way of deficiency payments? Will he consider that, because it is a very important part of agriculture?
I hope that horticulture will benefit directly from the increase in the nitrogenous fertiliser subsidy—[HON. MEMBERS: "Potash."]—made in this Review. Of the two, there are a good many grounds for saying that nitrogen is more important than potash, even to horticulture.
§ Major Legge-Bourke
May I ask my right hon. Friend whether he will bear in mind that, although none of their commodities are Review commodities, horticulturists have from time to time been able to benefit from production grants, fertiliser subsidies, and so forth? Is he aware that all growers are united in believing that the subsidy on potash is far more important than that on nitrogen? Finally, will he bear in mind that during the past year increased costs to growers have been particularly heavy owing to fuel price increases?
I must have an argument with my hon. and gallant Friend about the rival importance of potash and nitrogen fertilisers. As he knows, the main method of support for horticulture is through tariffs. I am very conscious of the considerable increase in cost—part of which, I hope, will be very temporary—which has fallen on the glasshouse section of this side of the industry owing to the increase in fuel costs over recent months.
§ Commander Sir P. Agnew
Will my right hon. Friend, in concert with the President of the Board of Trade, review at the earliest opportunity the levels of the tariffs on horticultural produce at dates and times more nearly relating to the Annual Price Review that the agricultural side gets, so that the horticultural producers are not left out of whatever improvements in their conditions the Government can give them?
It is open at any time, of course, for the horticultural producers to put forward a claim for an increase in tariff protection. I can assure my hon. and gallant Friend that any claims that are put forward will always be sympathetically and very thoroughly considered.