§ The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames)
With your permission, Mr. Speaker, and that of the House, I should like to report the results of the Annual Agricultural Review.
As forecast by my predecessor when he announced the last Annual Review, the industry's income has been maintained. The forecast of actual net income for 1960–61 is £359 million compared with the revised estimate for last year of £356 million. When adjusted for normal weather the forecast figure is the record one of £373 million compared with £355 million for last year.
The net increase in costs on review commodities is £19 million, The lamentable weather of last autumn has yet to show its full effect.
1763 The Government's main objective this year was to tackle the problems of beef and milk, which are to some extent connected, pigs, barley and marketing. Too little beef is being produced, and the market could take more. The guaranteed price is to be raised by the substantial amount of 10s. a cwt.
Milk presents the opposite problem. An increasing quantity of milk is being produced which the milk boards can sell only at low prices for manufacture. Under the present system these receipts are pooled with those for sales of liquid milk, and the more that is produced, the lower the farmer's pool price. He, in turn, increases his output to keep up his income. We must try to break this vicious circle. What is needed is a system which brings home to the individual producer that beyond a certain point he only gets the manufacturing price for the milk he produces. The unions have agreed to do their best to devise with the boards a satisfactory scheme. Meanwhile, on this understanding, we are raising the guaranteed price for the standard quantity by a little over ¾d. a gallon. Should it not prove possible to get such a scheme, this increase will have to be reconsidered at the next Review.
Pigs present another problem. We want more pigs, but also, in the longterm, a greater stability. We are, therefore, increasing the basic price by 3d. a score and undertaking not to reduce this at the 1962 Review. Far more important, we are altering the structure of the guarantee. The basic price will be increased automatically by stated amounts when we have too few pigs in prospect, and reduced when we have too many. The immediate effect of this flexible guarantee will be to increase the new basic price by a further 6d. a score.
On crops, our main decision is on barley. Production has almost doubled over the last six years, and the rate of subsidy is now nearly half the market price. This is out of all proportion to the support for any other commodity. We are reducing the price by the maximum amount of 1s. 2d. a cwt. Wheat will be left unchanged. Oats will be increased by 3d. The only other changes are that we are increasing the guaranteed price of potatoes by 5s. a ton and reducing the fertilizer subsidy by about £2½ million.
1764 In sum, we are increasing the value of the guarantees by £14 million. Of this, about £7 million is to be charged to the Exchequer. Following normal practice, the other £7 million required to raise the guaranteed price of milk will be found by leaving the retail price at a level 8d. throughout the year instead of reducing it by ½d. per pint in three of the summer months.
On the marketing side, we are introducing arrangements to give barley growers an incentive to hold their crop from harvest till later in the season. We have new plans for strengthening the potato market in years of heavy surplus and low prices. To encourage co-operation among farmers, we also intend to make grants towards the cost of buildings for machinery syndicates.
In addition, the Government proposed a joint effort with the industry to finance market research and development. The unions themselves are, of course, giving a lot of thought to marketing, and I understand that they have plans of their own. They were not ready to accept our suggestion this year, but are anxious to discuss it further.
Full details of the Review will be found in the White Paper, which will be available in the Vote Office.
§ Mr. de Freitas
Why should the housewife have to pay the milkman an additional £7 million a year for the milk that she buys retail? As for milk producers, the Minister appears to have boldly launched out trying to tackle what he called the vicious circle, but why has he passed the buck now to the National Farmers' Union and the boards? Will not the producer have to wait with a good deal of apprehension until the new scheme is announced? The pig scheme sounds ingenious, but will not we have to wait for some time before we see whether or not it works?
What is meant by the statement that the national farmers unions are not ready to join the Ministry in market research? Is this because the Government are not encouraging the co-operative method of marketing, or because the unions have other ideas?
Lastly, on the fundamental point of encouraging efficiency in agricultural production, does this Review give the producer a larger share of the benefit of 1765 increased efficiency? If it does not, does it not go right back on what everyone understood was the purpose of the December White Paper.
§ Mr. Soames
On milk, the hon. Gentleman asked why the cost should fall upon the consumer. There is nothing fresh in this. Under the arrangements which have been going for many years now, the consumer pays the price of milk produced up to the quantity of liquid milk consumed plus a reserve, and, as the guaranteed price of milk has been increased or reduced, so have the number of months in which milk has been reduced in price to the consumer been increased or reduced.
The hon. Gentleman asked why we should place the responsibility on the boards and the industry. The answer is because it is the responsibility of the boards and the industry. The present scheme of the pooling of milk prices was a scheme worked out by the boards, and the responsibility rests with the industry. Although, of course, the Government and the agricultural Departments will be glad to give any assistance they can in the formulation of such a scheme, the responsibility rests with the boards and the industry.
§ Mr. Speaker
Would the Serjeant-at-Arms take steps to extinguish the fire before hon. Members are subjected to risk.
§ Mr. Soames
The hon. Gentleman asked me about marketing. We offered to the unions in this Review that the Government should make a contribution towards the financing of marketing research and development of £500,000 a year for three years. As I said in my statement, they have plans of their own and do not yet see how this might fit in, but there will be further time for discussions.
On the efficiency factor, the hon. Gentleman will see, when he does the sums, that the lion's share of the efficiency factor will be left with the industry.
§ Mr. J. Morris
May I ask the Minister a question about the system which he desires to make known to the individual milk producer? He has said that we 1766 must break the vicious circle and has suggested that a satisfactory scheme would be devised. But what has he in mind? Will a scheme be started on a differential payment based on gallonage, not unlike the wartime bonus system? Will the interests of small farmers, who, in Wales, produce nothing else but milk, be protected? He has said that this matter should be the responsibility of the industry. Have the Government no responsibility at all in the formulation of such a scheme?
§ Mr. Soames
Yes, Sir. We hope that, with the agreement of the unions and the boards, a solid effort will be made to work out the scheme. It is our opinion that if such a scheme could be worked out it would be of great benefit to the small producer.
§ Sir A. Hurd
This seems to be a more fundamental review of the guarantees than we have had in recent years and so is to be welcomed. Will my right hon. Friend say whether the N.F.U. agrees to the concept of limiting the price guarantees for set quantities of milk and pigs, which I take it is what is about to happen, and that they will be sold according to market requirements? Will he confirm from experience that keeping the retail price of milk steady at 8d. a pint is more likely to encourage rather than discourage a further increase in the consumption of milk? It is the jobbing about with the price from month to month that is most unsettling to the consumer.
§ Mr. Soames
The N.F.U.s have agreed this review, and have also agreed—as I have already informed the House—about our endeavours to work out a new scheme for milk, and also our new flexible guarantee for pigs. From the experience which we have had already, we do not think that holding the price steady will in any way reduce the amount of milk consumed.
§ Sir R. Glyn
Will my right hon. Friend consider the question of the help he is rightly giving to beef, and see whether some of this could be channelled, more particularly, to beef fattened on grass rather than beef fattened on concentrates, as I think that it would be agreed that grass is the cheaper way?
1767 Will he also agree that selling milk at a level price throughout the year is really as much in the interests of the consumer as anyone else, and that this move, which will be generally welcomed, will be likely to increase liquid milk consumption, rather than otherwise? Finally, could he consider extending the help given to machinery co-operatives to other forms of farmer co-operatives, particularly marketing?
§ Mr. Soames
On the beef point, we have made a flat increase of 10s. per cwt. on fat beasts. I agree with my hon. Friend about the profitability of producing beef off grass. Where it can be done succesfully, it is higher than producing it off concentrates.
I should not like to hazard a guess one way or another whether more or less milk will be consumed, but we have no reason to believe that the levelling out of the price will have an effect on the amount of milk that is consumed. I think that we shall be of substantial help and encouragement to the machinery syndicates in what we have done, but it is limited to the machinery syndicates and not extended to the co-operatives.
§ Mr. Paget
Is it not a fact that if both the agricultural and the industrial forecasts are fulfilled, the effect of this Review will be to still further reduce agriculture's share of the national income? Further, is it not also the fact that since the Conservative Government came in, which is a period over the last ten years, in spite of the fact that agricultural efficiency has increased considerably more than in industrial efficiency, agriculture's share of the national income has fallen to about half what it was before the Government came in?
§ Mr. Soames
It is our belief that this Review will put the agricultural industry in a good position. I see no reason to suppose that there will be any falling off of its share of the national income following after this Review.
§ Lieut.-Commander Maydon
Is my right hon. Friend aware that this level retail price for milk throughout the year will be most welcome in the dairy industry? Is he further aware that the prudent housewife recognises that the retail price for milk has remained about 1768 the same for many years, and that it represents today perhaps the best value for money in the food market?
§ Mr. Peart
The Minister did not mention overall production in his statement, although this is usual in the Price Review. Can he say whether the home producer will have an increased share of our food markets? Is it not a fact that this Price Review on marketing means that the Government are passing the buck to the N.F.U.; and that the Government are also passing the buck back to the consumer, and that, in that sense, it is a very bad Price Review?
§ Mr. Soames
I find it very difficult to understand what the hon. Gentleman is getting at. This is not passing the buck. It is for the industry to work out its own marketing arrangements. We have made an offer to contribute financially towards securing a greater degree of market research and the like. As to passing the buck on to the milk consumer, it has been our system of support for the milk industry, and has been for many years now, that, as I said earlier, the consumer pays the price for liquid milk, plus a reserve.
§ Sir P. Agnew
May I ask a question about the impact of this Price Review on the horticulture section? In view of the statement of my right hon. Friend that the fertiliser subsidy is to be reduced by £2½million, are we to understand that horticulturists who use fertilisers will have to bear the increased cost of buying that raw material without being recouped anywhere else in the Review?
§ Mr. Soames
All we are dealing with in this Review is the review commodities, and one of them is fertilisers. It happened that last year also the subsidy was reduced. The cost of the guarantee has been rising over recent years—last year it was £29 million, this year it is £32 million—and we have reduced it by £21 million, which will have an effect on the price paid for fertilisers by all users.
§ Sir L. Plummer
Does not the Minister appreciate that the reduction of 1s. 2d. per cwt. on barley is infinitely more severe than it would appear on the surface? Recently, it was announced from his own statistical department that about 900,000 acres less of winter wheat were planted last autumn because of the appalling 1769 weather conditions, to which he also referred. Therefore, willy-nilly, this year farmers will have an excessive increase in the spring barley sown so that they will suffer considerably by this reduction. Since cereal growers have had a bad time in the last three years through floods and droughts, should they suffer as severe a cut as 1s. 2d. per cwt.?
§ Mr. Soames
As will be seen in the White Paper, we are endeavouring to get a better balance in price as between the three cereals. We have to face the fact that the production of barley has increased from 2½ million to 4½ million tons per annum over the past six years. The amount of subsidy which the farmer gets for his barley today represents a high proportion of the price and it is out of balance with the subsidy for any other commodity.
§ Mr. Prior
Is my right hon. Friend aware that the Price Review, broadly speaking, will give great satisfaction to the farming industry? Is he further aware that proper provision for the marketing of barley could very largely compensate for the cut in the subsidy? Will he confirm that were milk being sold at the equivalent pre-war price it would be 10d. a pint, and, also, that in the last two years the price of milk to the consumer has actually fallen?
§ Mr. Soames
There were more months last year when the consumer was paying 7½d. instead of 8d. a pint for milk than in the year before, and to that extent my hon. Friend is right. I cannot tell him what the price of milk should be today to compare with pre-war prices, as I have not the figures with me. It is our hope that farmers will benefit by the more orderly flow of barley on to the market which we hope will result from this new marketing system.
§ Mr. Wilkins
May I ask the Minister whether he will suggest to the Conservative Central Office that it might produce a new slogan, "Milk or medicine—the consumer always pays the increase"?
§ Sir J. Duncan
Speaking on behalf of Scottish farmers, I congratulate my right hon. Friend on raising the price of beef, which will help hill farmers in particular. May I ask, first, whether there is any change in the price of lambs and wool? Secondly, can he give a figure 1770 to compare with the figure in the Estimates of £256 million? What is the figure for this year?
§ Mr. Soames
There is no change in the price of lambs or of wool at this Review. The estimated out-turn for 1960–61 is £266 million. My hon. Friend will have to wait for the Financial Secretary's Memorandum to learn the Estimates for next year.
§ Mr. Thorpe
May I ask the right hon. Gentleman about the intended effect of his Price Review on the small farmer? Does he recollect that in a Written Answer to me last week he said that the average net income of farms of between 50 acres and 300 acres had declined by over 15 per cent. in the years 1958 and 1959? Is it the intention of the Review to arrest this process, or perhaps to restore the cuts which have taken place? Reverting to paragraph 31 of the White Paper relating to the share of efficiency being given to farmers, what is the percentage of the assessed efficiency which will be retained by the industry this year?
§ Mr. Soames
Regarding 1958 and 1959 about which the hon. Gentleman asked last week—as his Oral Question was not reached he received a Written Answer—he must bear in mind that the figures fell considerably from 12½ per cent. to 17½ per cent. and that the year was extremely bad weather-wise. We were talking about actual incomes shown in a period which, though not identical, was the nearest we could get. The official statistics compare a year where there was no less than £40 million, which is very unusual, between the actual net income of the industry and the net income adjusted for normal weather conditions. It was an unusual year from that point of view. It is the belief of the Government that the Review will be of benefit to the industry as a whole and not exclude the small farmers in any way.
Referring to efficiency, we said in the White Paper which was published at Christmas that we did not regard £25 million as the exact figure which would come year by year but from the Estimates and last year's figures, it looks as if it works out at about that. If we take £25 million as the efficiency factor for this year, they will be left with a very 1771 high proportion indeed, about £20 million out of £25 million.
§ Several Hon. Members rose—
§ Mr. Speaker
Order. We cannot debate this matter now. The hon. Member for Yarmouth (Mr. Fell) gave the House notice of an application that he wished to make.