MILK (CHEESE-MAKING) (Hansard, 11 July 1961)

§ Mr. Goronwy Roberts (Caernarvon)

The question which I wish to raise is one of considerable importance to the dairy industry of the country as a whole and of vital interest to hundreds of dairy farmers in my constituency. It is the question of the allocation of milk to various depots and creameries for the manufacture of cheese and, in particular, as I hope to show, the unfair and wasteful manner in which the allocation procedure operates against the small dairy farmers of my constituency and against the creamery they set up thirty years ago which they own and manage with great efficiency, namely, the South Caernarvonshire Creameries Ltd., at Chwilog.

It would be difficult to exaggerate the importance of milk in the farm economy of areas like South Caernarvonshire. It has proved to be the economic salvation of the vast majority of farmers in the area. In view of the criticisms which I shall have to make of the Milk Marketing Board in some respects, I should like to take this opportunity of paying it a warm tribute for the fine contribution which it has made to the revival of agriculture in our part of Wales.

Before the advent of the Board, ours was an area of profound agricultural depression. The Board has been more responsible than any other agency for changing the situation from one of penury to one of reasonable prosperity. It is all the more disappointing and, indeed, sad that recent actions and attitudes of the Board should threaten to undo some of its good work in Caernarvonshire and to dissipate some of the good will which we have all felt and still feel towards it.

As a result of the marketing Acts of the early 1930s, the farmers of South 352 Caernarvonshire, very few of them holding more than 40 acres of land, joined together to establish their own milk depot and creamery. As I have said, it has proved to be a great success, partly because of the spirit of enlightened cooperation among the members of the association and partly because of the excellent secretary and staff whom it was able to assemble in its service. Here, as in other parts of the country, production increased very greatly in response to the new market guarantees, and in the mid-1950s this creamery, like others, was urged by the Board to install equipment for the manufacture of milk products so that the growing surplus of liquid milk could be utilised.

Our creamery agreed to this course, and in 1958 a fine new factory, equipped with eight 1,000-gallon vats with the necessary secondary vats and presses, and so on, was built at a total cost of £50,000, a quite large investment for an association of small farme. When they were ready to go into production they were informed, without warning, that they would not receive the full allocation of milk for manufacturing purposes which was normal in the case of other creameries.

For the past two years they have protested against this discrimination—because that is what it is—but have not been able to elicit from the Board or its agency any cogent reason why this discrimination should be applied. Nor have they succeeded in persuading the Board to change its attitude and to increase the allocation. The position is that since May, 1959, when the creamery finally got going, it has been allowed an average allocation of 7,000 gallons a day for the manufacture of cheese. This is less than half the proportion allowed to other creameries for this type of manufacture.

Let me put it this way. In November, 1960, all cheese manufacturers used on average 54.8 per cent. of the amount of milk they used for this purpose in the preceding May. The figure for South Caernarvonshire was nothing like 54 per cent., but was 25.2 per cent., or less than half. Moreover, the indications are that by next November we shall be using only 15 per cent. of the amount used last May.

353 The reasons given by the Board for this discrimination are, to say the least, curious. First, it was claimed that the machinery at the factory could not cope with any more than 7,000 gallons a day. This is nonsense. There were then six vats, soon to be increased to eight, of a capacity of 1,000 gallons each. They can be used twice or even three times a day. The capacity is, therefore, anything between 16,000 and 24,000 gallons a day. Moreover, the factory and its equipment was, and is, regarded by the Board as a model. One official wrote to the secretary of the factory that It impressed me very much indeed. He wanted to know whether the Board's cheese expert and its architect could come over to see the place. The efficiency and capacity of the creamery has never been in doubt.

Then, it was gravely explained that in March, 1958, just before the creamery began production, a scheme of allocation of milk for cheese production had been set in motion throughout the country under which only those creameries which manufactured cheese in 1957 were allowed a full allocation. This very neatly draw the datum line a few months before the South Caernarvonshire creamery began production. It seemed a valid reason for discriminating against the creamery until one carefully examined it. There are at least two answers to it. First, to be frank, the reason why the creamery did not begin production until after March, 1958, was entirely because of the almost incredible indecision, hesitancy and delay on the part of the Board.

To read the full transactions—they have been recorded very fully indeed—is to be confronted with such a picture of time-consuming vacillation by the Board that one wonders how these small farmers ever got their factory going. One of their letters to the Board went unanswered for six months. I do not see why the interests of small farmers in South Caernarvonshire should be sacrifived to the administrative vagaries of Thames Ditton.

It is a rather cynical business when the very people who were responsible for the delay in production cut down the allocation because of that delay. It is rather more than cynical when another creamery in the North of England, which was not manufacturing cheese in 1957 354 and which came to production at about the same time as South Caernarvonshire, was granted a full allocation. Why this discrimination? Is it a case of one creamery being owned by an association of small farmers and another being owned by big business combines?

Then there is the argument that there is a shortage of milk for this class of manufacture. It is agreed that not too much milk should go into this type of manufacture if the price level is to be maintained. There is the suggestion all the time that there is a shortage of milk for cheese-making. But what do the Board's figures show? In 1959, according to its annual report, 161 million gallons were made available for cheese throughout the country. By 1961, two years later, the figure was 207 million gallons. That is to say, during the past two years when the allocations to South Caernarvonshire has been held down to less than half of what it ought to be, the bulk supply for manufacturers throughout the country has gone up by 25 per cent.

Nor was there a shortage locally. There might be some argument if we asked that milk should be transferred from the Midlands to West Wales; but that is not the position at all. The exact opposite has been the case. The intake of this depôt is about 16,000 gallons a day. About 7,000 gallons only is allowed to be retained there. What happens to the rest? It is actually transported over a distance of 100 miles or more to other depôts and at a high and wholly unnecessary cost for transport. Between 1st July, 1960, and 30th June, 1961, 2,327,826 gallons were moved from South Caernarvonshire creamery to these far away depôts for manufacture and other purposes. The cost of haulage was £19,406.

It was all supposed to go into the butter and liquid markets, but there are proven instances of some of it finding its way into cheese-making. We are, therefore, faced with the fantastic situation of a creamery with idle cheese-making equipment having to send its own milk to other depôts 100 miles away, where the equipment is often overworked, and the public having to finance this pointless transfer to the tune of £20,000 each year. Of course, not a drop of milk ought to leave South 355 Caernarvonshire when it can be processed there on the spot, thus saving heavy transport costs. That is a fair and economic thing to do, and the Board knows it. In 1957, it issued a Memorandum on Marketing Principles, Clause 3 of which states: The volume of milk needed to balance the requirements of the liquid market should be drawn from the nearest available depot sources", to cut out what the Board itself called "irrational and unnecessary" transport costs.

That is very sensible, but why is that admirable dictum ignored in this case? It would save money and create employment in a district that sorely needs more industry. South Caernarvonshire is a development district under the terms of the Local Employment Act, 1960. For many years it has been an area of very high unemployment, running to as much as 10 per cent. or 12 per cent. of the insured population in winter, and it is not easy to attract new industry to such a remote area.

The Parliamentary Secretary's colleagues in the Board of Trade continually press us to exercise local initiative, to set up our own industries, based on our own raw material. We have no coal or iron, but we have a drop of milk. That is our raw material and that is precisely the kind of industry which ought to be encouraged in our part of the world. By dint of wise management, it already employs nearly 150 men. It could employ many more if raw material, milk, were retained in the district and the idle men and idle machinery were fully used to process it. The Board itself, in its last annual report, states that the market for cheese is good, that consumption is rising, that the price level is well maintained, but instead of the creamery taking on more men a lot of men will have to be dismissed at the end of the summer under the present allocation policy.

This is not just a constituency matter. It raises other questions and other issues. One is bound to ask a number of questions of the Minister. For instance, through what agency does the Board make its allocations? Who are the members of the operating agency? How are they chosen? Can we have their names and the business interests they represent? What is the procedure of 356 allocation? Why should it be rigidly applied to the South Caernarvonshire Creamery and waived in the case of another creamery which started some time later in another part of the country?

What are the criteria? Are they subject to revision? Or are they frozen for ever, no matter what developments may take place in milk production in various parts of the country, to the continued detriment of small undertakings and the increasing advantage of large combines? Have any new applications for allocations been granted since March, 1958? If so, to whom? Have there been cases of increased allocations during that period to concerns already participating? Moreover, what has happened to the directive of 1957 from which I quoted and which lays down quite clearly the policy of concentrating manufacture in source depots to avoid unnecessary transport costs?

We have seen about £20,000 spent annually to carry milk from South Caernarvon to Cheshire and Lancashire to be manufactured. In how many other cases in the country does that happen? What is the total cost of such pointless operations in a year and over the years?

This is a matter which should be put right. It must be put right in so far as South Caernarvonshire Creamery are concerned, and I rather think it will be put right, but it must also be put right on the national level. The present method of allocation is inequitable and uneconomic. My hon. Friends the Member for Carmarthen (Lady Megan Lloyd George) and the Member for Aberavon (Mr. Morris) and I will return to this question unless we get an assurance from the Minister that the whole procedure of allocation will be looked into and revised where it is necessary to do so.

I do not expect the Parliamentary Secretary to judge this matter tonight. One understands his position in relation to a board of this nature, but I do expect him to do two things, first, to put right the position of South Caernarvonshire Creamery in regard to its allocation for the manufacture of cheese, and, secondly, to make an inquiry into the whole method of allocation, which is clearly in need of revision and which some people are beginning to feel is subject to influence and pressure 357 which the originators of the Milk Marketing Board never envisaged.

I speak as a friend of the Milk Marketing Board and as a strong supporter of it, and I would not like the Board to begin making the mistakes which would forfeit for it the good will and support of the farming community, and, indeed, of the public generally.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. W. M. F. Vane)

The hon. Gentleman the Member for Caernarvon (Mr. G. Roberts) was good enough to tell me some of the points he intended to raise this evening and to give me an outline of what he feels had gone wrong. I hope to try to help him at least in part. First, I should like to make clear that what we are discussing tonight is definitely the Milk Marketing Board's allocation of milk to individual manufacturers and nothing to do with any possible method of payment to producers to implement Government guarantees.

The hon. Member is concerned in particular with the allocation of supplies to manufacturers of milk products by the Milk Marketing Board. I am glad that he paid tribute to the Board because I, living in a rather remote district, and the hon. Member for Workington (Mr. Peart) living in a somewhat similarly remote district, can both agree with him that the operations of the Milk Marketing Board over the last few years have brought very great benefit to the farmers and particularly to the small farmers in those districts. Here and now I can say that there is no intention on the part of the Milk Marketing Board, as policy, to discriminate against the small man or against the run of small men, as he put it, as opposed to the larger combine.

As to the small points of administration which the hon. Member has mentioned, and not least the question of delays in correspondence, he cannot, of course, expect me to say what happened to every individual communication, but I am sure that the Milk Marketing Board will read the OFFICIAL REPORT and will take note of his comments.

What the hon. Gentleman wants to ensure in the future is that this particular creamery should have sufficient supplies to keep plant and labour force fully employed. I am told that the alloca- 358 tion that this creamery has had has not so far departed from the national average. He asked me towards the end of his speech whether there were any applications from new creameries since March, 1958.

I gather he understands that creamery's recent allocation has been based on what one might call a more arbitrary figure, because it was not manufacturing during what is called, in the jargon, the datum year. I can assure him that there has been only one other such allocation since March, 1958, and that was to a creamery in Appleby. There was certainly no attempt at favour or pressure on my part in that respect.

I should like to make two points to the hon. Member, but before doing so there is the important matter of the background and the constitutional position. During the war, and after the war ended, as we know, the Ministry of Food was closely concerned with the marketing of milk and was responsible for allocations. Then in April, 1954, there was the decision to decontrol milk supplies, and marketing powers were restored to the Milk Marketing Board. The powers of the Board in England and Wales are exercised under an amended Milk Marketing Scheme which came into operation after a public inquiry in 1955, subject to safeguards.

Other interests, of course, include buyers of milk for trading and manufacturing purposes. I want to say something about the Board's powers, but first let us look at the safeguards. First, there is provision in the amended Milk Marketing Scheme itself for consultation with dairymen, and under paragraph 66 of the Scheme there is a joint committee consisting of representatives of the Board on the one hand and of buyers of milk on the other. I cannot give the hon. Member all the names of that committee tonight but they are representatives of all the trade interests concerned.

The Board is required to consult this joint committee on various matters, including the terms on which milk is sold and the method of allocating supplies to different categories of buyers engaged in the distribution or the manufacture of milk products, and the Scheme provides that in the case of disagreement between the two sides of the joint committee the matter should be referred to a consultant, or to an umpire if one prefers that word. 359 The present consultant is Sir Herbert Davis, C.B.E. The Board has normally accepted his decision, although it is not bound to do so under the terms of the Scheme.

The buyers' side of the joint committee is appointed by the Central Milk Distributive Committee, the federated body made up of the various trade associations concerned with milk distribution and manufacture and that includes cheese-makers. Every distributor and manufacturer is entitled to join one or other of these.

They have an additional safeguard for their interests, provided by the Agricultural Marketing Act under which the milk marketing scheme has been set up. Even if the Central Milk Distributive Committee and the Board agree on an issue which adversely affects the interests of a particular distributor or manufacturer, the Act provides a means for him to bring his grievances before the Minister for investigation.

Under Section 19 of the 1958 Act, if my right hon. Friend receives a formal complaint from anyone who considers he has been aggrieved by the operation of the scheme, he may refer the matter to the Committee of Investigation, which is a different committee, set up under the Act for that purpose. If that Committee finds that any provision of the scheme, or any act or omission of the Board, is contrary to the interests of any persons affected by the scheme and is not in the public interest, my right hon. Friend may, if he thinks fit, require the Board to remedy the situation if it is within its power to do so; or, he may make an order amending the scheme. I have summarised the wording of the Act, but that is its general purport.

Now if against this background, we turn to the case referred to by the hon. Member for Caernarvon, I said that I wanted to make only two points in my reply. The first is that it is a well-established, and I think generally accepted, doctrine that the Government should not intervene directly in the administrative arrangements or marketing operations of the Milk Marketing Board. The Board has been set up under Act of Parliament to administer a scheme, which itself has received the approval of Parliament, with wide powers to market milk on behalf of the dairy farmers in 360 England and Wales. The allocation of supplies between liquid milk distributors or milk products manufacturers is clearly an essential part of these marketing operations.

Of course the total volume of milk that the Board has to handle is not a constant during the year. It varies considerably from the peak months in the summer to the troughs in the winter, and whereas the creameries and other manufacturing firms may find that they are under pressure at some times of the year, inevitably their machinery is not fully employed at other times. It would, therefore, be quite wrong for us to try to tell the Board how to run its affairs or to say to it that it should allocate more to one manufacturer or less to another. We should find ourselves in an intolerable position if we were to intervene in this way.

I am sorry therefore that I cannot undertake to explain to the hon. Member on what basis the Board allocates supplies of milk for cheese-making to different creameries, or why his constituents cannot get as large an allocation as they would like. These are questions which he, or they, should address to the Board, if they have not already done so.

However, and here I come to my second point, I have explained the constitutional means that are available to purchasers of milk to seek satisfaction, if they feel themselves aggrieved. I suggest that their proper course, in the first instance, is to take the matter up with the joint committee, through the appropriate trade association. If this fails, it is open to them to lay a formal complaint before the Minister, so that he can consider whether to refer it to the Committee of Investigation under the 1958 Act. Meanwhile I cannot intervene because of the quasi-judicial position that my right hon. Friend the Minister may find himself in, nor would it be right for me to express a view on the merits of the case that the hon. Member has presented.