§ 24. Mr. P. Browne
asked the Minister of Agriculture, Fisheries and Food by how much he estimates pig producers will be underpaid in the present year as compared with the guarantees given in the 1963 Price Review; how this comparies with the outturn for the previous year; and if he will make a statement.
§ Mr. Soames
I do not estimate that producers of pigs will be underpaid the guaranteed price this year, taking account of the adjustments for feed and the flexible guarantee. I assume, however, that my hon. Friend is referring to the effect of the operation of the flexible guarantee arrangements for pigs, and as the explanation is unavoidably long and technical, I am having it circulated in the Official Report.
§ Mr. Browne
My right hon. Friend assumes correctly, but may I ask him one supplementary question? I have been given to understand that the amount by which pig producers may be underpaid is about £8 million. Will he therefore make a supplementary payments order, as was done in 1956, in order to implement the guarantees given in the Price Review?
§ Mr. Soames
I cannot accept what my hon. Friend said. The flexible guarantees are designed on an assessment of production potential and there is a formula which has been worked out and which is used. As the assessment of production potential is for a period of between ten months and 12 months ahead, nobody can expect it always to be accurate. The weather and the incidence of swine fever, for example, have an effect. But this formula is accepted by leaders of the industry as being the right and proper formula.
§ Mr. Maxwell-Hyslop
Surely if the flexible guarantee works in a manner which is not considered satisfactory by many people in the agricultural industry, this is likely to influence their judgment 839 in any further use of the standard quantity system for other commodities.
§ Mr. Soames
The whole point of the flexible guarantees is to act as an incentive or a disincentive at a time when it can have an impact on the quantities produced in the months ahead. In order to do that it must be taken upon the production potential as opposed to the number of pigs actually coming on the market in any month. That is its whole basis and its main feature. It is a valuable feature. I think that it is appreciated that from time to time estimates will prove to be too large and at other times too little. In the latter case there might be more differences of opinion than there are in the former case.
§ Following is the statement:
§ Under the flexible guarantee arrangements for pigs, the basic guaranteed price is related to forecast annual certifications of 10½ million to 11 million and is subject to adjustment up or down at quarterly intervals on a predetermined scale in accordance with quarterly forecasts covering fifty-two weeks. At the time of the Price Review, the current forecast, which was for the fifty-two weeks from 24th December, 1962, was 12¼ million to 12½million certifications and the basic guaranteed price was accordingly reduced automatically by 3s. 6d. per score from 1st April, 1963. Certifications have been running at a lower level, but I cannot accept that this has meant an under-payment of the guarantee.
§ The forecasts are, with the support of the farmers' unions, derived from a formula which operates automatically Such a formula cannot allow in advance for the effects of exceptional events like the hard winter and slaughter for swine fever. Such effects are taken up in the formula as time goes on. It follows that actual certifications may sometimes be above the forecast level to which the price adjustments are related (as was the case last year) and sometimes below, with the variations tending to cancel each other out over a period of time. There is the further factor that forecasts cover a period of 10½ months ahead. By the end of this time the effects of a price adjustment may be showing in the number of pigs coming on the market. This is to be expected, for the flexible guarantee arrangement is designed to operate as a forward regulator of production. For all these reasons forecasts and actual certifications cannot be expected to coincide and it is to the forecasts that the price adjustments relate. From what I have said, I think it will be apparent that no meaningful comparison with previous periods can be made.
§ On the basis of the November forecast, which is for 12 million to 12¼ million certifications in the fifty-two weeks from 30th September, 1963, the reduction in the guaranteed price has automatically become 2s. 9d from 18th November, in place of 3s. 6d.