HC Deb 10 March 1960 vol 619 cc652-61
The Minister of Agriculture, Fisheries and Food (Mr. John Hare)

With your permission, Mr. Speaker, and that of the House, I would like to make a statement about the guarantees to agriculture for the coming year, which the Government have now determined in the light of the Annual Review.

Good weather last year helped our farmers. The net output of the industry increased substantially and for 1959–60 is forecast at 68 per cent. above pre-war, the highest it has ever been. Actual net income for the year is forecast at £356½ million—£41 million up on the previous year. If we adjust the figures to normal weather conditions, the forecast for the year is £355½ million compared with £362 million for the previous year.

Farming costs, particularly labour costs, continue to increase, and on Review commodities are up by nearly £13 million in the year. On the other hand, the industry is continuing to increase its efficiency.

The cost of Exchequer support has gone up from £241 million to £259 million. This is a continuing heavy burden on the taxpayer. It also affects trade relations especially with the Commonwealth. Moreover, the cost of support may increase still further if production continues to expand more rapidly than demand. We have had to consider how the industry can reduce its dependence on the Exchequer while maintaining its position in our market and increasing profitability.

Taking all these factors into account, we have decided to make a net reduction of about £9 million in the total value of the guarantees. The maximum reduction we could have made was about £19 million. This means some reductions in the prices for the main cereals, and for sugar beet, eggs, sheep and wool; and also for milk—though in consideration of the dairy industry's success in increasing sales for liquid consumption, we have increased the standard quantities by 19½ million gallons.

We are also making a small reduction in subsidy rates for fertilisers from next July. There will be no change for fat cattle. There will be an increase for potatoes. For pigs, we have increased the standard price by 3d. We have also removed the cost of the quality premiums from the guarantees—an arrangement which, in effect, adds another 6d., making, in all, an increase of 9d. in the standard price—and we have adjusted the stabilising limits so as to reduce fluctuations in returns to pig producers and to facilitate long-term contracts.

These changes should give the industry confidence to bring about that moderate increase in pig numbers which I have often said I would like to see. The full details are given in a White Paper which will be available in the Vote Office when I sit down.

These determinations meet the requirements of national policy regarding the production of the guaranteed commodities. We consider that they provide a fair and balanced answer to the twofold problem of, on the one hand, enabling agriculture to maintain its prosperity and, on the other, protecting the taxpayer from an increasing burden.

Mr. Willey

The right hon. Gentleman has made a somewhat general statement. A more detailed and, no doubt, accurate statement appeared in the Daily Express yesterday. I am the last person to suspect collusion between the right hon. Gentleman and the Beaverbrook Press, but will he make inquiries, as this might seriously prejudice these negotiations in future?

The right hon. Gentleman has not acknowledged his debt to the National Farmers' Union in these negotiations. Do we assume from that that this is not an agreed settlement? If that is so, is it not regrettable that on the last three occasions we have had an imposed settlement, when we know that the farmers' unions, for very good reasons, are most anxious to seek an agreed settlement?

Of course, we agree that the farmers have had a good year. The Minister is too modest to claim credit for the weather, but, in view of the fact that, notwithstanding the exceptional circumstances of last year, the net annual income of farmers was less than it was two years ago, is it not surprising that a reduction of £9 million in the value of guarantees is a very serious blow to the farming community?

The right hon. Gentleman referred to subsidies. Will he consider publishing the details of the subsidies and, also, as the taxpayer is a consumer as well, publishing the corresponding and comparative figures in retail prices? It is most unsatisfactory that we have a position about sheep, for instance, where the taxpayer is providing half the market price, yet is getting very little advantage in the retail prices of lamb and mutton. We have not an opportunity to deal with the review commodities—we have to look to the White Paper for that.

In dealing with pigs, we appreciate the steps that he has taken, but it does not seem to us that they will be adequate, in view of the very real depression which is now facing the industry. I hope that the right hon. Gentleman will consider very seriously taking some steps, at any rate in the fairly near future, to seek to improve pig marketing.

Mr. Hare

Inquiries are being made to ascertain whether there is any evidence of unauthorised disclosure from Government sources, and I understand that the farmers' unions are also making inquiries to see whether there is any reason to suspect premature disclosure on their side.

We have not achieved agreement with the unions, but we have had, as usual, full, frank and very friendly discussions with them. They have not, however, been able to accept our determinations. The hon. Gentleman will see that in the White Paper I have anticipated his desires and have included this year details of the subsidies, commodity by commodity.

Mr. Willey

What about retail prices?

Mr. Hare

Naturally, I will consider what the hon. Member has said on that. He referred to pigs. Do not let him become a prophet of woe. I believe that these measures will do very well.

Sir C. Thornlon-Kemsley

Has my right hon. Friend been able to estimate the effect of the determinations upon the farmers' incomes?

Mr. Hare

On the figures as we see them, the industry's net income should, we believe, be more than maintained. We estimate that there will be an increase of about £25 million, on account of increased efficiency, and a reduction of £22 million made up of the reduction of £9 million in the guarantees, plus £13 million increased costs, which leaves a net increase for the industry of about £3 million. It is very difficult, looking into the future, to pontificate about this. These are the figures as we see them at the moment.

Mr. Diamond

Could the right hon. Gentleman explain shortly why it is right that about £25 million of taxpayers' money should be spent on this industry without turning a hair, while it is unthinkable that a very much smaller figure should be spent on providing a similar service, namely, cheap transport and, before that, cheap food?

Mr. Hare

I will answer in a few short sentences. Part of the great contribution that this system of guaranteed prices and the direct Exchequer contribution makes to the people is that they are enabled to enjoy food at world prices. That is why we eat in this country probably cheaper, with a far wider range of food, than almost any other country. The farming community makes a very great contribution to the national welfare, and, certainly, all the ancillary industries of the farming industry are part and parcel of our national life.

Major Legge-Bourke

While welcoming the news that there is to be some increase in the guaranteed price for potatoes, may I ask my right hon. Friend about another commodity which is of great concern to my constituency— namely, sugar beet. Will he say whether the reduction in the sugar beet guarantee has been made because the Ministry has come to the conclusion that too much sugar beet is being grown, or because it has reached the conclusion that too big a profit is being made on what is grown?

Mr. Hare

As my hon. Friend knows, coming from the same part of the country as myself, sugar beet is a very profitable crop. I think we can see that by the fact that yields are going up, as are the acreage figures. This fairly modest cut which we have proposed is, I think. reasonable. The hon. Member will see that it is a cut of 2s. 6d. per ton.

Mr. Mackie

May I ask the right hon. Gentleman a question about potatoes? As he knows, during the last four months a considerable quantity of potatoes moved on to the market has not reached anything like the guaranteed price. In view of the fact that it has not reached the guaranteed price, and of the proposal to add 5s. 6d. per ton to that price— assuming that the article in the Daily Express is right—how does the right hon. Gentleman propose to implement the guarantee to the potato grower? Secondly, the reduction of 2s. a score almost destroyed the bacon industry. How, therefore, does he think that an increase of 3d. will solve the industry's problems?

Mr. Hare

The hon. Member has not been quite fair. First, there is an increase of 3d. in the standard price for pigs, but the effect of taking the premiums out of the guarantees is to produce another 6d., making a total increase of 9d. in the standard price. We are also lowering the stabilising limits, which will enable people to make long-term contracts knowing that they can sell quality pigs —pigs which attract the quality premium —and no more on average than Is. below the guaranteed price. I think that this will give considerable security to the pig industry.

The hon. Member also asked me about potatoes. We tried out the new system this year. I told the Board that if it ran into difficulties I would do the best I could, as representing the Government, to help it out during this period of trial. We have still some time to go. We shall certainly analyse the results. I have said that within the present structure I am perfectly prepared to see, if similar circumstances arise in the future, whether there is any useful action which the Government can take.

Sir A. Hurd

While we regret that on this occasion the National Farmers' Union has not been able to go all the way with the Minister in agreeing that this is a fair settlement, may I ask whether he will make it clear that the price reductions which are being effected by the award are not intended in any way to deter progress in further economical production in this country? May we take it that no ceiling has been set to home production?

Last year, something went wrong with the egg price guarantee which resulted in producers receiving a good deal less than they expected. Can the Minister assure us that, in the new arrangements which he has made with the Marketing Board, that will not happen again and that there will be greater stability in egg prices to the producers?

Mr. Hare

My hon. Friend has put his question in two parts. First, we want agriculture to become more and not less profitable, and we think that there is plenty of scope for that, but, as I made clear in my statement, we also want to reduce the burden on the taxpayer. These aims cannot be achieved simply by producing more of everything, irrespective of market requirements. The right course is for the industry to concentrate on bringing down costs and on producing what the market wants.

I can give my hon. Friend an assurance about the arrangements with the Egg Marketing Board. With the full agreement of the National Farmers' Union we have made changes in the profit-and-loss sharing arrangements, and I think that these will help to reduce the year-to-year fluctuations in producers' prices which we have been seeing. Last year, they worked very much to the disadvantage of the egg producer. Although the guaranteed price was cut by only 1d., the producer suffered a cut of 5d. Details are given in the White Paper, and I think that my hon. Friend will agree with me that the new arrangements will be very much better.

Mr. Harold Davies

Is the Minister aware that hon. Members on both sides of the House appreciate the magnificent increase in agricultural production by our British farmers? Is he aware, however, that the time has come when an examination should be made of this expenditure of public money on agriculture not because we are against increased production, but because the subsidies—although that is not the correct term for them—are not being fairly distributed? It is the very small farmer, such as the farmer in North Staffordshire, who suffers as a result of the cuts in prices for milk, sheep and eggs. The small men are not encouraged at all.

I do not want to take up the time of the House, but I sincerely hope that more attention will be paid to the method of weighting by which this public money is distributed so that the small man is given the encouragement which he deserves for this magnificent productive effort which has been made by the British farmer.

Mr. Hare

I listened very carefully to what the hon. Member said. I think that he will agree that I am not unaware of the problem of the small farmer. He will also agree—he gave assistance in doing it—that we have produced a very interesting experiment to try to help the very man he has in mind. We have many lessons to learn from this, and I do not know what will emerge from those lessons.

Mr. Bossom

Is the Minister's statement an indication that the Government's policy is intended to be one of restriction?

Mr. Hare

I have already explained that that is certainly not so. I have said that we want agriculture to become more and not less profitable, but we also want to reduce the burden on the taxpayer. There is no point in producing more fresh eggs, for example, than people are prepared to eat, because that merely means that we must sell them to the manufacturer at an uneconomic price. In the same way, if we produce more milk than we can use for liquid consumption, the extra milk used for manufacture is sold considerably below the price for liquid milk. The producer gets a smaller return and the taxpayer has to pay a larger contribution.

Sir L. Plummer

The Minister must be aware that the Danes have today announced a slash in their butter prices to compete with the British butter producer. Will he explain what protection he is giving to the British dairy farmer against this threat by reducing the guaranteed price for milk? Will he tell us whether there is to be a greater reduction in any commodity price than is laid down in the guarantee provisions?

Mr. Hare

None of the cuts, as the hon. Member will see from the White Paper, is as severe as it could have been. The hon. Member tells me that the Danes have announced a reduction in the price of butter and asks how I reconcile that with a cut in the price of milk. As he will find when he reads the White Paper, although I have cut the milk price by ¼d. a gallon, by giving an incentive to increased sales of milk for liquid consumption I am handing back .17 of a penny to the Milk Marketing Boards. The cut is, therefore, not quite as severe as the hon. Member thinks it is.

Commander Maitland

I think that my right hon. Friend said that he had taken into account a figure of £25 million for increased efficiency, which is a very large sum. Was this figure agreed with the National Farmers' Union?

Mr. Hare

No. The National Farmers' Union has never agreed the figure of £25 million, but it has not been disputed very strongly. We have used this figure over a number of years, and I think that it is a very fair and conservative figure when we also take into account the increasing investment from farm improvement schemes and similar measures.

Mr. Peart

The Minister said that farming costs, particularly labour costs, were expected to increase. Can he say anything about farm rents? Can he say whether they have risen considerably and whether that has been taken into consideration? Secondly, in view of the question asked by the hon. and gallant Member for the Isle of Ely (Major Legge-Bourke) about sugar beet, can the Minister give us the amounts of the reduction of the guarantees for all those things listed, such as wool, sheep, eggs, sugar beet and cereals? Is it possible to give the figures now?

Mr. Hare

I think that the hon. Gentleman will get the figures from the White Paper. I think that labour costs came to about £10 million of the extra £13 million, and the rest is divided between rent, interest, and other items. The White Paper gives the total for rents and interest as about £89 million for 1958–59 compared with about £96 million forecast for the current year. I think that the extra labour cost next year will be about £10 million or £11 million.

Mr. Kimball

Is not the net income of the industry already too low to warrant a cut in the guarantees?

Mr. Hare

I have already said that taking efficiency into account, the figure of £25 million is a very fair one. The industry this year will be keeping £3 million of that amount and, therefore, it should be able to maintain its income. It has been maintaining its income at the record level, on a normal weather basis of, about £355 million during the last three years.

Mr. Stodart

Do I understand my right hon. Friend to say that there is to be a reduction in the fertiliser subsidy? If so, is he aware of the tremendous effect that the intelligent use of fertilisers has had in achieving that 68 per cent. increase in production? Is there not a danger that the reduction in the fertiliser subsidy may have repercussions in discouraging their use?

Mr. Hare

I agree with my hon. Friend about the great effect that fertilisers have had in achieving this remarkable increase in production, but these things are relative. The fertiliser subsidy has risen to a very large figure. It is now standing at £29 million a year, and the cut that we are making is £1½ million. If we see that in proportion, it will not have the effect of discouraging the use of fertilisers.

Sir A. V. Harvey

Will my right hon. Friend take into account the enormous profits made by the manufacturers of fertilisers? Would it not be more suitable for them to forgo part of their profits than for the farmers to suffer a cut, even to the extent of £1½ million?

Mr. Hare

As my hon. Friend knows, a Report has been issued on this subject. My right hon. Friend the President of the Board of Trade is consulting the industries concerned and obtaining their reactions to the Report. It would be improper for me to comment on that until my right hon. Friend has allowed these industries to make their representations.

Several Hon. Members rose—

Mr. Speaker

It is easy to realise that there is a lot of material to debate, but I think that we must draw some limit to this.

Mr. T. Fraser

On a point of order. The announcement made by the right hon. Gentleman applies to Scotland as well as to England and Wales. The Secretary of State for Scotland is now on the Front Bench, and I wonder whether I might put a question to him, Sir?

Mr. Speaker

I will allow the wrath of Scotland to rise to that extent.

Mr. Fraser

Is the Secretary of State for Scotland satisfied that the reduction in wool and sheep guarantees, coupled with the reduction in the marginal agricultural grants, will not have serious adverse effects in those parts of Scotland where no alternative employment is available?

The Secretary of State for Scotland (Mr. John Maclay)

I do not think that I can give that assurance, but as far as one can forecast and see the consequences of these things, I do not think that they will have the effect that the hon. Gentleman envisages.