§ 3.30 p.m.
§ The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames)
With your permission, Mr. Speaker, and with that of the House, I should like to report the results of the Annual Agricultural Review. They are set out in detail in a White Paper which will be available in the Vote Office.
The industry's forecast net income for 1962–63, adjusted for normal weather is £407 million, compared with £413 million last year and £390 million the year before. The forecast of net output shows a further increase.
The cost of agricultural support in the Estimates for 1963–64 is £364 million. That figure was put in before this Review, but compares with an expected out-turn this year of £321 million.
Turning now to individual commodities, I take, first, milk, which accounts for nearly a quarter of farm income. The trouble in recent years has come from ever-rising production causing an increasing proportion of milk to be sold at low manufacturing prices thus reducing the return to the producer. Now, at last, there are signs that the rise in milk production is coming more into line with the rise in consumption of liquid milk. Moreover, the latest returns show a levelling off in the size of the dairy herd and a significant reduction in the number of dairy heifers in calf. We are, therefore, raising the guaranteed price for the standard quantity of milk by ½d. a gallon. An increase in this amount should not stimulate further excess production, but any greater increase would involve this risk. The higher price will be of particular benefit to many small farmers who rely on the milk cheque for much of their income.
With beef, mutton and lamb, production is running at broadly the same level as last year and for most of the year market prices have been higher. The guaranteed prices for fat cattle, sheep and wool will be left unchanged.
Pig production, however, has risen to a very high level which has depressed the market price and caused a big increase in the cost of support. At the 1360 1961 Review we introduced a flexible guarantee arrangement which increased the guaranteed price if there were too few pigs in prospect and reduced the price if there were too many. But the number of pigs has increased beyond the scale then devised. We are now strengthening the arrangement by expanding the scale and making larger price changes at its higher and lower ends. The effect of this will be a deduction of 3s. 6d. a score from the basic guaranteed price on the latest forecast of pig numbers instead of the present 1s. 6d., but as marketings fall the basic price to the farmer will rise again. We are not altering the basic guaranteed price, but we are relating it to a higher level of marketings to take account of the upward trend in consumption.
For all commodities the form of the guarantee arrangements is no less important than the guaranteed price. We are making a number of improvements in the detailed fatstock guarantee arrangements for this year and are giving notice of others. Details of these are given in the White Paper.
As with pigs, the course we are following for eggs is not to alter the guaranteed price, but to adapt the machinery of the guarantee arrangements to ensure that support does not encourage production to a point which undermines the market. We are making new arrangements, the intention of which is to limit the deficiency payment to what would be payable to the Marketing Board in conditions where the market is in reasonable balance. If the average selling price is below this level, a proportion of the loss will initially be borne by the Exchequer though this will be phased out over the years. Provision will also be made for additional payments to the Board if imports rise above a normal level.
For cereals, production of wheat and barley continues to rise. We are already largely self-sufficient in barley and a high proportion of the wheat crop is having to be sold for animal feed. The trend of market prices is generally downwards. We are reducing the guaranteed price of wheat by 5d. per cwt. and of barley by 1ld. per cwt. There will be no change in the guaranteed prices for other cereals.
The guaranteed price for potatoes will be raised by 10s. a ton in order to encourage a further increase in acreage, 1361 which is at present on the low side. There will be no change in the guaranteed price for sugar beet.
As regards production grants, we intend to reduce the fertiliser subsidy by £2 million. New schemes are being introduced to encourage the production of winter keep in livestock-rearing areas and the renovation of permanent grassland. We propose to reduce the rate for the main ploughing grant from £7 to £5 per acre.
To sum up. The maximum reduction in the value of the guarantees under the terms of the Agriculture Act, 1957, would this year be £22½ million. In fact, the effect of this year's determinations is to leave the value of the guarantees virtually uncharged. The saving to the taxpayer, however, will be about £14 million. This is largely because the cost of the milk increase is not met from revenue, and because the change in the pig guarantee arrangements will cause a reduction in the coming year of the cost of this subsidy.
The cost of agricultural support to the Exchequer has risen steeply in recent years and further changes are needed to bring this cost under more effective control. Accordingly, during the months ahead, the Government will be discussing their proposals with the leaders of the industry and with Commonwealth and other countries who supply foodstuffs to this market.
§ Mr. Peart
May I ask the Minister whether the Review was agreed, or whether it was imposed on the industry? Can the right hon. Gentleman give details of the unions' attitude on particular commodities?
Will the Minister give the House the forecast for the agricultural net output for 1962–63, and if possible, two sets of figures: first, using the new index which has been agreed upon; and, secondly, can he relate it to the pre-war average?
May I ask whether, despite the cut in the fertiliser subsidy, and in the ploughing grant, of £2 per acre, there will still be an increase over the year in farm grants and subsidies? Are the Government intending to switch more support in this direction?
The egg subsidy is to be paid on a certain amount of production. How will this operate in the absence of import control?
1362 It seems that the Minister is making a flexible guarantee for pigs less flexible. How will this operate in the absence of import control? When are the Government likely to reach a decision on this matter? When will they announce their policy on broad import control?
Is it not a fact that this Review confirms that farmers' net incomes are down, and yet, in the end, the consumer may have to pay more for certain commodities?
Finally, will the Government announce when they can find time to debate the details of the White Paper and their underlying policy, or lack of policy, for agriculture?
§ Mr. Soames
On the net output figures, the increase over the pre-war figure is about 86 per cent. Barley provides the best example of the increase in crop production. The figure is more than seven times what it was pre-war. The production of wheat and sugar beet has doubled.
The figure this year for farm grants is £111 million, which is broadly the same as last year. We have brought in two new farm grants, the grassland renovation and winter keep schemes, which we discussed in the Agriculture (Miscellaneous Provisions) Bill. The ploughing grant is being reduced, but the total is roughly the same.
We have fixed a figure for imports of eggs. If the import figure rises above that level, and the price falls below the indicator price, there will be an additional payment by the Exchequer to the Egg Marketing Board.
The figure for pigs over the last three years shows a considerable increase in home production, from 620,000 tons to 720,000 tons. The figures for imports over the same period are 427,000 tons and 419,000 tons. Here, the important thing is to keep the market in balance. In recent years, there has been a considerable increase in home production. Regrettably, there has been a small decline in net income from £413 million to £407 million. I commend the hon. Gentleman's attention to table C appendix 2 in the White Paper which gives details of how this comes about.
There is nothing in the Review which will result in increased expenditure to the consumer, except in respect of milk. The increased price will mean a pint more for one month of the year. Last year, the consumer was paying 8½d. a 1363 pint for seven months of the year and 8d. for five months. Now it will be 8½d. for eight months and 8d. for four months.
In the past we have frequently had debates on agriculture following on Reviews. We did not have one last time. These have usually taken place in Opposition time, on a Supply Day. But doubtless this matter can be discussed through the usual channels.
§ Mr. Bullard
Will my right hon. Friend say how the figure of net income has been affected by the exceptional winter experienced by farmers and others?
§ Mr. Soames
The weather could be taken into account only up to the end of January, when the figures have to be compiled. The figure of £407 million is on the basis of a normal year. But my hon. Friend will see from the table that in this movement of net income there is a movement of gross income for the horticultural industry which has suffered from the weather.
§ Mr. Woodburn
During the past year the industry has been led to believe that this year serious changes would be made in connection with the negotiations over the Common Market. Does the Minister's statement mean that now the industry may settle down to things as they were before, and that it is unlikely that the Government are contemplating making violent changes?
§ Mr. Soames
Had we entered the Common Market, the common agricultural policy would obviously, to a large degree, have dictated the agricultural policy of this country. But outside the Common Market that is not so. We have our own agricultural policy. All we are saying is that our present system was devised in times of food shortage in the whole of the Western world. We are now in times of plenty and there are certain changes and adaptations which we need to bring about in the existing system in order to match the present circumstances.
§ Sir A. Hurd
May we take it that this Review, which seems to be fair and 1364 reasonable—[HON. MEMBERS "0h."] Well, it is—should result in the overall income of the farming industry being maintained at the level at which it stood during the year now ending, with grain growers getting rather less and milk producers slightly more? Will my right hon. Friend give the House a hint whether this arrangement for eggs—whereby if heavy imports undermine the level of the home market there will be some recompense to home producers—foreshadows more effective import control policy by the Government?
§ Mr. Soames
With the no-change, Review, and the increasing productivity and efficiency of the industry, I would hope to see farm incomes rising in the next year, given a reasonable season. What my hon. Friend said about the change of balance is broadly true though doubtless grain growers, with their increased efficiency, will be able to off-set some of the reduction in price.
The arrangement for eggs is the best under existing circumstances. We could all devise different arrangements. But in the present circumstances, and with our import and trading arrangements as they are, we believe this to be the best arrangement.
§ Mr. Hilton
Would not the Minister agree that a reduction of £2 million in the fertiliser subsidy is false economy, especially in relation to small farmers who find it difficult, in any case, to get sufficient fertiliser? Where is the sense in giving the benefit of ½d. a gallon on milk —which is appreciated—and also making this reduction in the fertiliser subsidy? Is not it a case of paying out with one hand and taking it back with the other?
§ Mr. Soames
No, it is not. We have reduced the fertiliser subsidy every year for a number of years. In fact, it has been matched by the increased efficiency of fertilisers and the reduction in price to the fanner, so the actual cost has not risen over recent years. We do not know what the cost of fertilisers will be in the coming year, because we do not know the price at which fertilisers will be marketed by the manufacturers. But even if none of the cut is restored by a reduction in price, the fact remains that this £2 million cut is against a background of fertiliser subsidy costing the Exchequer £37 million in the Estimates this year, compared with 1365 £35 million last year and £33 million the year before. The increase of ½d. on milk, and the increased consumption of liquid milk, represents an increase of £6 million to the dairy industry.
§ Sir R. Nugent
Is my right hon. Friend aware that the new arrangements he is making for eggs and pigs, which will relate the price guarantee, to some extent, to the tone of the market, are much to be welcomed, particularly in view of the heavy total cost of price guarantees to the taxpayer? Will he consider, during the coining year, working out arrangements by which fatstock and cereals guarantees may be linked in a similar way?
§ Mr. Soames
My right hon. Friend has put his finger on the most difficult problem. As he rightly says, apart from fat-stock and cereals we have a broad standard quantity arrangement for all commodities this year including eggs. If my right hon. Friend looks at the Estimates for next year, which have been published, he will see that out of a total estimate for deficiency payments of £234 million, no less than £209 million are for cereals and fatstock. It is this matter which we shall have to look at in order to contain the open-ended nature of the Exchequer support.
§ Mr. Hoy
Perhaps the right hon. Gentleman, or the Secretary of State for Scotland, will tell the House what proportion of the total sum will accrue to the Scottish industry and how it compares with the last twelve months.
May I ask what estimate the Minister made of the additional acreage required to meet the expected potato shortage?
The last paragraph of the right hon. Gentleman's statement seems to foretell that this will be the last of the Annual Price Reviews, as we know them at present. May I ask him to explain what he has in mind? Is it his intention to impose a levy on foodstuffs imported from the Commonwealth and, if so, would this mean an increase in food prices in this country, and so reduce the deficiency payments to our own farmers? If that is so, we should like to know whether the income from this source will be used to meet the cost of the remaining subsidies and what effect all this will have on the cost of living.
1366 Finally, in view of the wide difference between producer and consumer prices, can the Minister say whether, in his discussions with the industry, he has any plans for providing for commodity marketing arrangements which would equip the industry to meet the present situation?
§ Mr. Soames
The proportion of Exchequer money estimated to go to Scotland next year is about one-seventh of the total, which is the same proportion that it has been over recent years, I understand.
We had a debate on potatoes last spring. I said then that the acreage at which the Potato Marketing Board would be aiming would be about 700,000, which would provide on average yields about what is necessary for consumption in the country. At present, it is about 40,000 acres short on this year's plantings.
On the question of future policy, as I have said, we are to have discussions with Commonwealth and overseas suppliers. The Government are, therefore, not in a position today to make any announcement about policy.
The hon. Member knows there are boards for a number of commodities. It is, of course, for the industry, under the Act, if it wishes, to apply to the Minister for permission to set up more marketing boards for other commodities. There have been no applications in recent years.
§ Sir Richard Glyn
May I tell my right hon. Friend how much the small farmers will welcome the concession on milk? They have had a very difficult time lately and this small increase will be appreciated.
I should like to ask for a little more information about eggs. We shall be having virtually a standard quantity. The home production of eggs has been almost sufficient for the home market during the last few years and is becoming increasingly sufficient for this. The Minister spoke of the average normal level of imports, but could he say whether he was taking as normal the figure for last year or for a number of years, which might be at a lower figure?
Will he also say whether the reduction in the price per score for pigs may not have the effect of increasing the number produced, because specialists in pig production feel the need to keep up their 1367 incomes and this may lead to an increase in the number of pigs and not a reduction? Will he consider that side of the matter?
§ Mr. Soames
I agree with my hon. Friend on the question of milk. I think that this will be of considerable benefit, particularly to the small milk producer. The figure for imports of eggs is 950,000 boxes for the year, which has been the average, I believe, for the last four years, although I stand to be corrected on that. In any event, it represents only about 2 per cent. of the consumption of eggs in the country. I cannot agree that the reduction of 2s. per score for pigs will bring about an increase in their number. I think that we shall see a reduction in the pig herd in the year ahead.
§ Mr. Thorpe
If the Minister envisages a shortage of potatoes, is it not just as important as the 10s. per ton increase to persuade the Potato Marketing Board to lift the quota on acreage? Has he any intentions in that matter? As to barley, does the Minister recall that the 1960 White Paper called attention to the need for a stabilising element in the market? Does he regard this reduction as bringing that about, or does he not agree that this increases the need for a cereals commission as a purchaser in the last resort?
Although the concession on milk will be welcome to small farmers, is it not a fact that it is an increase of only 1d. per gallon on the 1961 figures? May we take it that there will be some stability in the price and that this will not change every year, as that brings about uncertainty to small farmers?
Finally, may we hope that in view of the continued decrease in fertiliser subsidy the Minister will do something about the £4 per ton tariff which has to be paid on imports of fertilisers, which puts up the price of the home product?
§ Mr. Soames
The quota on potato acreage is not the limiting factor. Indeed, this year is not a quota year. The quota did not apply in this year to growers of potatoes. Even so, there was a short fall of acreage. That is why we think that this modest increase will encourage the necessary increase in acreage.
The hon. Member asked about the stabilising element in arley which we 1368 introduced. This was to hold the market more level over the year and to encourage people to hold their barley and not put a greater proportion than is necessary on the market in the early months. This has worked well and we do not intend to alter it.
On the question of milk, as I said in my statement there have been troubles for a long period of years. They were brought about by the levelling off in production being larger than the increase in consumption. In 1961, I was faced with an increase of 140 million gallons production over consumption. Last year, it was down to 60 million and this year it is down to 20 million which, against the background of a total production of 2,550 million, is not an enormous quantity and it obviously is becoming much more into line. Coupled with the increase in the size of the herd and a decrease in the number of dairy heifers in calf, this enabled us to make the increase in the price.
Of course, we shall have to watch future trends of production very carefully. If this is a trend that we are in, obviously the prospect looks rosier for the industry than an up-turn in excess production.
§ Sir H. Legge-Bourke
Will my right hon. Friend say, first, to what extent unlifted sugar beet which will not now be capable of being put through the factory has accounted for the shortfall in farming income this year? Secondly, in considering import policy will he bear in mind that it is not always the amount which comes in, but the time at which it comes in which matters most? Will he consider bringing into these consultations not only Commonwealth countries, but also the Argentine and some European countries?
§ Mr. Soames
I quite agree that it is not only the quantity, but also the timing and the price which are important. In my statement I did not refer only to the Commonwealth, but to all overseas suppliers.
On sugar beet, I could not give my hon. Friend the figure off the cuff, but I remember that the amount of beet estimated to be left in the ground was about 6 per cent. of the total crop. I think—if I may chance my arm—that it was about£1½ million.
§ Several Hon. Members rose—