§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. G. Campbell.]
§ 12.48 a.m.
§ Mr. Forbes Hendry (Aberdeenshire, West)I apologise for raising this subject at such a late hour of the night. I am rather unfortunate in timing my interventions. The last time I mentioned it we had a full House instead of the empty House that I now have. On that occasion the whole House was tense waiting for the Prime Minister to make a most important pronouncement when I asked a Question of my right hon. Friend the Secretary of State for Scotland about fat cattle and caused great amusement thereby.
I make no apology for raising the subject now and keeping you out of bed, Mr. Speaker, because either a very grave injustice is being done to my constituents in West Aberdeenshire, and, indeed, to persons throughout Scotland, or a great deal of public money is being wasted contrary to the will of Parliament, and the Minister must make up his mind one way or the other about what has actually happened.
I apologise to my hon Friend, the Under-Secretary, because in 10 minutes the train he intended to catch at Kings Cross will be steaming out without him.
1427 Some years ago the Government announced their policy to give guaranteed prices for the purpose of enabling farmers to budget ahead, and year by year they say to the farmers, "It does not matter whether the market is good or bad; you will at least get on average a certain price for your cattle and other products." In the Price Review this year the Government announced that on average a guaranteed price for fat cattle would be 167s. per live cwt. That is a very reasonable price and ensures that the farmer does not have to worry about depressions in the market such as have occurred since the Review. The effect of the payment is striking, because according to today's Scotsman the average price of fat cattle in the United Kingdom this week was only 110s. 2d. per live cwt. But for the fact that the Government guaranteed the price the farmers would have been in a miserable state.
In the week before—the last figure available—the Government agreed to a deficiency payment of 66s. 6d. per live cwt., and the effect in that week, subject to small adjustments, was to make the price of fat cattle available to the farmer 167s. in accordance with the Government's guarantee. It is not always possible to work out the guarantee price per live cwt. and, as an alternative, the Government announced last week that they would pay 13⅓d. per pound dead weight for cattle graded after slaughter.
There is a difference between one cattle beast and another after it has been slaughtered. Live weight includes the hide, horns and feet, which are not saleable from the butcher's point of view, and there is considerable difference between that and the dead weight which is what interests the butcher. Cattle vary a great deal, and some may have a dead weight of only 50 per cent. of their live weight. Other cattle which are better reared may kill out, as the saying is, at 60 per cent. of the live weight. In the north of Scotland, and particularly in my constituency, that is not an unusual figure, although according to the figures supplied by my hon. Friend the percentage throughout the United Kingdom is graded at about 56 per cent.
I am told that no cattle beast is eligible for a deficiency payment unless in the opinion of the grader it is likely to kill 1428 out at not less than 54 per cent. If we do a proportion sum and compare the live weight figure fixed by the Government of 66s. 6d. per live cwt. with 13⅓d., we find that they are basing the killing out percentage at an average of only 53.4 per cent., which is remarkably low. So if a farmer has a poor beast he has it graded for subsidy after it is dead and he will get his deficiency payment on the dead weight. If he has a good beast he will get a good deal more.
There are four ways of selling cattle. The most common way, both in Scotland and in England, is by live auction, where the beast is sold in an auction mart. It is graded live and the deficiency payment is so much per live cwt. There are a small number of beasts sold live and graded live by private bargain, but they are not of great importance. The third way, which is very important, is by private sale based on dead weight. In that case, the farmer sells the beast to a butcher or fatstock marketing commission, for example, for an all-in price which includes the subsidy, and the subsidy goes not to the farmer who reared the beast but to the butcher who slaughtered it.
There is a fourth way, in which the beast is sold to the butcher at what is known as grade and dead weight, and in that case the farmer is paid so much a 1b. dead weight and he gets the subsidy. That method is rather important in England but of little importance in Scotland.
Sales by live auction in Scotland are rather more common than in England; 70 per cent. of the beasts in England are sold by auction, but in Scotland the percentage is 74 per cent. It is the custom throughout Scotland to sell beasts in the auction market and not by private treaty. In Scotland very little is done by private sales of live beasts; and the situation is similar in England. Many beasts are sold through the livestock marketing commission live for an all-in price, but it is rather more common in England than in Scotland; and the position is similar with sales on grade and dead weight. The sales in England by this method are very much greater than in Scotland. The last available figures which I have show that only 26 beasts were sold in this way in Week 5, 22 in Week 6 and 17 in Week 7. It is negligible in Scotland, but many beasts are 1429 sold in that way in England. It is to the advantage of the English farmer to have his deficiency payments based on dead weight but of no practical importance to the Scottish farmer who does not have his deficiency payments in that way.
The effect of that is that the Scottish farmer who is producing a good beast suffers a considerable loss compared with the corresponding English farmer. For example, a 9 cwt. beast this week killing out art 60 per cent. would receive a deficiency payment of £33 14s. On the other hand, if it is a pretty miserable sort of beast the figure would be only £30 10s. and a beast according Ito the national average would get £31 5s. If the same farmer takes the beast, whether good or bad, to an auction sale, he receives by way of deficiency payment only £29 18s. 6d. If it is a very good beast he loses by selling it in this way no less than £4; if it is a miserable beast he loses 10s.; and if it is an average beast he loses 30s.
When Parliament made these provisions it never intended to help the butchers: it intended to help the farmers who are rearing these beasts. But that extra money is going into the pockets of the butchers in the event of these animals being graded dead. If the beast is sold in the Scottish way in an auction sale, then the Government save the money.
How much money is involved? There is a lot. According to the Government's own figures I reckon that on average 11,000 animals are sold dead or are graded dead each week. If the national average figure is 30s., that means that some £16,000 to £17,000 every week of public money is being poured out, in my opinion contrary to Parliament's wishes. That is a lot of money—no less than £750,000 a year which, I submit, Parliament never intended to be spent, because the regulations made by the Minister of Agriculture and by the Secretary of State provide for deficiency payments being paid at so much per live cwt.
Looking at it in another way, let us suppose that the Minister intends that the deficiency payment should be made on dead weight. My constituents and other farmers are being deprived of no 1430 less than £2¾ million a year. The Minister must make up his mind whether he is to continue to deprive these cattle rearers of £2¾ million, or whether he is to continue to pour £ ¾ million per annum down the drain contrary to the expressed desires of Parliament. I calculate that Scotland's share of this £ ¾ is £260,000 a year. That is more than ten times as much as is being spent by the Secretary of State on medical research each year, and I suggest that it would be a very good thing if the Department saved that money in this way and spent it on some better cause.
I have tried to discover why the Scottish Office continues to work on this quite erroneous proportion sum, and the only feasible explanation is that it is administratively convenient to equate 5s. per live cwt. with 1d. per cwt. deadweight. I am told that to get the proportion of the national average would entail going to three places of decimals, but any schoolboy with a slide-rule could work out the proportion sum without difficulty, and I am sure that it is not beyond the capacity of my right hon. Friend to work out conversion tables for the use of his civil servants, even if their arithmetic is not very good.
What is happening at present is that a subsidy is being given to the inefficient farmer who cannot produce a good beast. It is either that, or the man who can produce a good beast is being penalised by not getting the subsidy Parliament intended for him. It is obviously in the interests of the English farmer, and particularly of the in-efficient English farmer, to keep things as they are now, but I ask my hon. Friend to be bold, and to tell the English that in this case their interests are not necessarily the same as the Scottish interests; and to make sure that the Scottish farmers get a fair deal in this connection.
It would not need any legislation whatever to cure this anomaly. The Minister has already made his Order on the basis of a deficiency payment per live hundredweight, but whether it is on live weight or dead weight is purely an administrative matter within the discretion of the Minister, so I ask him to correct this quite unnecessary and nonsensical anomaly.
§ 1.4 a.m.
§ The Under-Secretary of State for Scotland (Mr. Gilmour Leburn)I congratulate my hon. Friend the Member for Aberdeenshire, West (Mr. Hendry) on the clarity with which he has expounded this subject tonight. The background to the question that he has raised is a somewhat intricate one, as I believe you, Sir, will already have gathered, and I think that it will help the House if I begin by explaining how guarantee payments for fat cattle are calculated, and how the conversion factor to which my hon. Friend has referred fits into the Fatstock Guarantee Scheme.
The basis of all the calculations is of course the guaranteed price for cattle, which is determined after each Annual Review. As my hon. Friend has said, the figure for this year is 167s. per live cwt. To allow for variations in production costs at different times of the year, and for seasonal variations in the numbers of cattle marketed, this figure is converted into a scale of weekly standard prices per live cwt. which are estimated to be equivalent for the year as a whole to the determined guaranteed price. It is purely a coincidence that in the week my hon. Friend quoted the price happened to be 167s. 6d.
The amount of guarantee paid to those selling cattle in any one week is the sum of money required to make up the difference between the average price per live cwt. at auction marts throughout the United Kingdom, as estimated for purposes of the Scheme, and the standard price. All these figures, in short, are related to the sale of cattle "on the hoof".
Since cattle are also sold by deadweight, we must have a reasonably ready and acceptable conversion factor for applying the guarantee to such sales. The figure in use since 1954, when the Scheme was introduced in its present form, has been 1d. per 1b. deadweight for every 5s. per cwt, liveweight. This figure has long been in widely recognised use by the trade and it was, in fact, used in the thirties for the purposes of the pre-war cattle subsidy.
The factor is purely a conventional one—and no one would claim that it is any other than that—and as with most conventions, it is a round figure. The objective basis for it, to treat it as a strict 1432 piece of arithmetic for a moment, is the postulate that most cattle carcasses, on average, yield in edible meat about 54 per cent. of the liveweight of the animal. This is, broadly speaking, in accordance with the facts and, as hon. Members will see, the equivalence would be exact for a carcase yielding 60 1bs. of meat for every cwt. of liveweight or, in precise terms, a killing out percentage of 53.5714 per cent.
I should like at this stage to emphasise a number of important facts in connection with the Guaranteed Scheme in general and this conversion factor in particular. Firstly, the Fatstock Guarantee Scheme is a guarantee to the industry as a whole. Put another way, it ensures that producers, on average, get the guaranteed rate of return, since this is made up of the average market price plus the guarantee payment. But it follows that some producers will do better than the average and that others will not do so well, depending on their success in the markets.
Secondly, consistent with this approach, the Government's policy is that each producer should be completely free to exercise his own choice about the timing and method of selling his beasts, so as to make the best that his skill and opportunities afford him from the market. The underlying intention is that the guarantee should not interfere with this process.
Thirdly, the minimum killing-out percentage prescribed in the scheme is 54 per cent. Any animal which killed-out at 50 per cent. would not qualify for payment. Until recently, the national average killing-out percentage—so far as it could be reasonably estimated from market observations—was probably, though I cannot be too precise about this, in the region of 56 per cent. I agree that I quoted this figure in correspondence with my hon. Friend the Member for Aberdeenshire, West.
The killing-out percentage is, however, a very fluid notion. It can vary at different times of the year, with different methods of feeding, with the "finish" of the marketed animal and even with its bodily state at the time of sale and slaughter. All these factors have a bearing on the national average at any given time. It is true that for 1433 animals with a high killing-out percentage, particularly at the present time when the guarantee is at an unprecedentedly high level, there is a difference between the guarantee that a beast might receive if it were sold by dead weight instead of by live weight. The higher the guarantee level the more sizeable the difference. As I have said, the present rate of guarantee is unprecedentedly high. Whereas this week the provisional rate of guarantee for Grade I cattle is 66s. per live cwt., over the past two years it has ranged from nil to 19s. 6d. in the year 1959–60 and from 1s. to 30s. 6d. in 1960–61.
I do not think anyone would wish to argue that we should chop and change the conversion factor to suit changing circumstances. Indeed, we could not readily do so without departing from one of the long accepted notions on which, at least by implication, the payment of the guarantee has always been based. The facts recited by my hon. Friend are, I am sure, reasonably well known to the general mass of producers, and I hope that I have demonstrated to the House that any apparent discrepancy, small in itself, is moreover only one relatively small factor in a highly intricate set of marketing considerations and figures based necessarily for the most part on calculation and estimation. To choose any other level of killing-out percentage would, I submit, be equally arbitrary, just as inequitable on the face of it, and certainly more complicated both to use and to substantiate to producers.
The fact is that around 80 per cent. of cattle are sold by liveweight and, as I have said, every producer is free to choose which method of sale suits him best, with regard both to market price and guarantee. I cannot believe that 80 per cent. of our astute farmers in Scotland, or, for that matter, in Aberdeenshire, would be selling their animals by liveweight if it were on the whole more profitable to sell them by deadweight.
My hon. Friend said that he would not mind this so much if the payment were going to the producer, but he suggested that this was not the case. He suggested that this additional sum of money, which of course is the greater when the guarantee is high, was in fact finding its way into other pockets. I assure him that I have not been able to find any evidence that that is so. My information, for ex- 1434 ample, in regard to the F.M.C. is that while it pays an all-in price, that all-in price clearly reflects to the seller of the beast the killing-out percentage. In other words, if the F.M.C. has an animal of 1,000 1bs.—I am talking of 1,000 1bs. weight, and not a Perthshire animal—and if the killing-out percentage is, let us say, 60 per cent., the F.M.C. pays the all-in price including the guarantee at 600 times. If it is killed out at only 55 per cent. it will pay only 550 times.
The other point that my hon. Friend specifically made was his suggestion that a higher proportion of animals was sold deadweight in England than in Scotland and that, therefore, in some way England was getting some benefit. This, I am bound to say, would hurt me greatly if it were so. But again I must tell my hon. Friend that the figures that I have do not bear that out.
Although I can give total numbers, I think it is easiest to give the figures in percentages. In 1957–58, there were in the United Kingdom 82 per cent. of animals sold liveweight and 18 per cent. sold deadweight. In the same year, in Scotland there were 80 per cent. sold liveweight and 20 per cent. sold deadweight. Obviously, there were more in Scotland than in England. In 1958–59, in the United Kingdom the percentages were 81 liveweight and 19 deadweight. In Scotland, it was 80 per cent. live-weight and 20 per cent. deadweight again. In 1959–60, in the United Kingdom it was 80 per cent. and 20 per cent., and in Scotland the figures were the same, 80 per cent. and 20 per cent.
I agree that there was a period in 1960–61 when the Scottish percentage of deadweight rose considerably, but that was due, we believe, largely to the outbreak of foot-and-mouth disease, when there was a very much higher proportion of animals sold deadweight. I cannot find any evidence for believing that our English friends are receiving some advantage out of this scheme which we in Scotland are not receiving.
My hon. Friend put it that either I was doing an injustice to his farmers or a great deal of money belonging to the Exchequer was being poured down the drain. Here again, I suggest that neither of these things is really happening. My hon. Friend's farmers can choose to sell their animals in whichever way they wish. If they do not 1435 choose to sell them deadweight, they are receiving a fair deal from the Government based on a guaranteed price of 167s. if they sell liveweight. It may be that, on certain occasions, as my hon. Friend said, certain farmers, if they sell deadweight, may derive a little advantage. To that extent, of course, one might have to admit that the Exchequer is having to find a little more money than it would if we could find 1436 an exact way of calculating this business. But the grading of cattle is not an exact science. It is not like dealing with some fine alloy or metal in regard to which one can arrive at very nice accurate percentages to three places of decimals. It is not an exact science, and the figures I have show that, over the years—
§ Question put and agreed to.
§ Adjourned accordingly at eighteen minutes past One o'clock