HC Deb 01 December 1966 vol 737 cc796-808

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Fitch.]

11.30 p.m.

Mr. Alick Buchanan-Smith (North Angus and Mearns)

I imagine that you for one, Mr. Speaker, will be glad to exchange buses for pigs after the events of the last hour-and-a-half. The only thing I can see in common with our earlier debate is the fact that, as I said then, I represent a constituency in the north-east of Scotland. It boasts many famous and efficient pig herds and, close by, is the biggest bacon factory in Scotland, the well known and progressive firm of Robert Lawson, of Dyce.

I have a considerable interest in this matter as a bacon producer. That is why I am glad to have the opportunity to discuss the present crisis in the bacon industry. I use the word "crisis" advisedly. The industry is facing a crisis. I am not exaggerating when I say that the situation is probably the most critical which the industry has faced since the end of the war.

During the six months to the end of September, curers have been losing an average of 24s. on every pig they have handled. It is estimated that the present loss is running at a figure much nearer 35s. per pig. Over the same period, curers have paid out for pigs £1,600,000 more than what they have received in the sale of bacon from those pigs. The total to date is likely to be much nearer £2 million.

At the same time, bacon production has fallen by almost 25 per cent. from 2,900 tons a week in the spring to 2,100 tons, which is the figure the Ministry announced today of the estimated production of bacon for next week. This tonnage represents about 16,000 fewer pigs a week going to bacon production.

As a result of this, there is no hope of home producers taking up their share of the bacon sharing understanding. Any talk in present circumstances of increasing our share becomes nothing more than an academic exercise. I deplore that this should be the case and the situation into which the bacon industry has been forced.

In the light of this, it is no wonder to any of us concerned with the industry that there is talk of a crisis. It is no wonder that there is talk of bankruptcy among firms. Many factories are going on short time. Men are being paid off—sometimes in areas where, as my hon. Friend the Member for Ayr (Mr. Younger) will vouch, there is little alternative employment. Some factories have already been closed at Reading, Cirencester and in Yorkshire.

It is true that, at Question Time on 2nd November, the Minister of Agriculture acknowledged the difficulties in which the industry finds itself. But, after all, so he should—

Mr. J. E. B. Hill (Norfolk, South)

He caused them.

Mr. Buchanan-Smith

—because the facts are there for him to see and, as my hon. Friend says, he has created the situation. The facts are staring the right hon. Gentleman in the face and the industry has lost no opportunity of letting him see how serious they are.

Where the Minister has failed is in his diagnosis of the situation and in believing that the action he is taking is adequate to deal with it. In the agricultural debate on 3rd November, the right hon. Gentleman said: The remedy for the present troubles is simply more pigs."—[OFFCIAL REPORT, 3rd November, 1966; Vol. 735, c. 702.] That statement demonstrated the folly and the incompetence of the Minister. Does not he recognise the basic imbalance between the pork and bacon market? Is he not aware that curers have two forces to deal with—the high price of pork, and competition from the import of overseas bacon—over which they have no control? Therefore, for guarantee price purposes, is it right to treat pork and bacon as being the same commodity? I hope that the Joint Parliamentary Secretary will answer that question.

Even if the shortage of pigs is the whole problem—and I do not accept that it is—does the proposal to raise the middle band answer it? If the Minister believes that it does, he must be a very simple man, and he shows himself to be naive and complacent. He is naive if he accepts that this is the whole answer and complacent if he believes that this solution will work.

I ask the Parliamentary Secretary to look at the Price Review of last March. Then the Minister raised the middle band. I should like briefly to go over the events which followed. They demonstrate beyond doubt that this action by itself is totally inadequate to deal with the kind of situation facing the industry.

I should like to refer to the report, which must have been available to the Minister, by the group of leading economists who give independent advice to the Pig Industry Development Authority. This group produced its most recent report on 15th November, only two weeks ago. In that report, these economists from all over Great Britain point out that the total number of breeding sows in the United Kingdom in September this year was 14 per cent. below the comparable level at the same time in 1965. They also point out that the total number of sows and gilts fell by 4 per cent. between June and September. In other words, the decline in the size of the breeding herd was still continuing.

I wish to project this further into the forecasts of slaughterings over the next few months because these figures show that this decline still continues. It is estimated that 400,000 fewer pigs are likely to be slaughtered in December this year than in December last year. We find that in the first quarter of next year, particularly in February and March, it is expected that this decline will still continue. It is forecast that in each of the months of February and March total slaughterings will fall below 1 million. This will be the first occasion for a very long time that they have fallen to such a drastically low level.

Mr. Eldon Griffiths (Bury St. Edmunds)

Does my hon. Friend realise that the Government describe this as selective expansion?

Mr. Buchanan-Smith

If this is selective expansion, it is time that the industry noted what it means.

If this is not a deteriorating situation, I challenge the Parliamentary Secretary to tell us what it is. If this is the pattern of events which followed the last Price Review when the middle band was raised, and when the forecast of slaughterings falls to a rate at which we cannot even reach the middle band as it stands at the moment, it bodes very ill for the Minister's decision to raise the middle band again next spring.

Like so many pronouncements we have heard from the Minister—over the last few months we have had pronouncements on credit and other very important matters affecting agriculture—it looks all very well on paper; but I remind the Parliamentary Secretary that the pig industry cannot survive on paper. What we need is tangible results, and that is what we look for from the Government. But we certainly do not see them.

The Minister must be realistic. He has to face the facts of the situation. He should go out and talk to some of the producers. If he did so, he would find that talk in general terms about the middle band, and so on, means very little to the ordinary producer. If it is related to prices and the producer was told what the prices were to be, he would be more likely to understand the situation. The Minister must act now and act quickly. He must give a categorical assurance to producers about what the prices will be, an assurance that they will get a fairer return from their outlay than they are getting at present. He must take action of a positive nature. If he does not do that, he has no hope of regaining the confidence of producers, a confidence which he has so sadly lost. If he does not do this, I believe he might just as well fly to the moon if he thinks that raising the middle band will answer the problems of the industry.

In any case, if he does raise the middle band, it does nothing at all to help the curers in their present crisis. Nor does it deal with the basic imbalance between the pork and bacon markets to which I referred earlier. Even if this were some- thing worth while, the effect would be so long delayed—the time factor is so great in the production cycle that very great damage will be done to the industry before any good can come out of it.

While the Minister sits back and basks in his complacency, factories are closing. Secondly, the Danes and others are increasing their strong hold on our bacon market. Does not the Minister recognise that during the first eight months of this year imports of bacon cost £10 million more than the same period in the previous year? Does he not know that there is a balance of payments crisis?

The third point is utterly vital to producers. Next year, curers will be extremely unlikely to enter into long-term contracts, and this is where the real crunch comes for producers. Most of this pressure on the Minister so far has come from the curers, but let me warn him that when the present contracts run out in April he will be subjected to far greater pressure from the whole industry and not simply from the curers.

In the north-east of Scotland the factory of Robert Lawson & Son has already announced that it will not enter into contracts next year. Who can blame them? But what a tragedy this is for producers. In Committee on the Agriculture Bill a number of hon. Members laid emphasis on the importance of contracts in order to bring stability to the industry, and what industry needs it more than the bacon industry which is subject to so many fluctuations and to so many cycles? We stand to lose an important stabilising influence.

What should the Minister do? I should like to suggest four things. All of these things have to be done. It is no use doing just one and believing that one will work. The Minister has to tackle the short-term and the long-term problems. I suggest that these four things are: first, in dealing with the short-term problem he has to assist the curers. They need financial help if they are going to get out of their present plight. I would warn him that if the confidence of the curing industry is lost, then the bacon industry in Britain is finished.

Secondly, he has to gain the confidence of the producers, and the only way to do that is to relate his proposal to increase the middle band to prices, to give a categorical assurance that producers' returns will be improved. If he does not do this, he has not a single hope of expanding production in any way.

Thirdly, he has to look seriously at the question of separate pork and bacon markets with regard to the guaranteed price scheme. Finally, if the United Kingdom producers are to increase their share of the bacon market, and I believe that they should, I would ask the Minister to examine in detail the price at which the Danes send bacon into Britain. Can he, for example, explain how, during the first nine months of this year, when 180,000 tons of British barley were exported to Denmark, on which the Danish farmer paid a levy, and which went in part to the pig producers there at a cost of £27 per ton—I obtained those figures from the Ministry—yet despite those figures, they can still undercut the price of our pigs?

Is the Minister satisfied that competition from abroad is fair? I believe that it is to these matters that the Minister has to apply himself. We know the way he dealt with the hill farmers. Pressure was put on him from this side of the House, and despite all that he said to begin with, he eventually gave in to the pressures that we put upon him. He took some time to do it, and it will take some time to get this through to him, but it is not too late if he acts soon—

Mr. J. E. B. Hill

Does not my hon. Friend agree that a new factor has come into the situation? The consumer is now wanting more quality British bacon and is willing to pay a premium over Danish bacon ranging in Suffolk between 19s. and 6s. according to quality over the Danish equivalent? Is it not highly important that this home demand for home produce should be satisfied?

Mr. Buchanan-Smith

I hope that the Parliamentary Secretary will answer that point.

If the Minister does not take action such as I have suggested, he will go down in history as the man who murdered our bacon industry and sold it to the Danes. Nowhere will his reputation be worse than in Scotland, where 80 per cent. of pigs slaughtered have to go for bacon.

11.46 p.m.

Mr. Ron Lewis (Carlisle)

I cannot claim a personal interest in the subject, but I have in my constituency one of the largest independent bacon factories in the country and it, like most others, is suffering from the present crisis. The products of the firm are well known throughout the country under the "Cavray" brand-name, and the firm plays a very useful and important rôle in the City of Carlisle and in the country as a whole.

The management has stated that although at the moment there is no redundancy, if the present problem is not solved quickly redundancy may rear its ugly head, because, inevitably, bacon production will have to be stopped, and that would be a sad day for the workers there, and for Carlisle as a whole.

As I see it, the position is one of shortage of pigs to meet the requirements of the pork and bacon manufacturers. Something must be done quickly, and I appeal to the Minister to raise the middle band forthwith instead of waiting until the February price review so as to stimulate production to meet the shortage. That would be at least a first step towards solving a problem which has been with us for a considerable time.

11.48 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy)

I am grateful to the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) for raising this topic. Even though I do not seek to compete with his extravagance of language, I treat the matter very seriously. I note the point made by my hon. Friend the Member for Carlisle (Mr. Ron Lewis), and hope to be able to convince him, at least, and the House that we do not regard this problem lightly.

I accept that the industry is facing real difficulties. I recognise that the curers have been losing money on every pig turned into bacon, because the price they have been paying for pigs is too high in relation to the price they have been getting for bacon—high though this is—to cover costs. We should consider the reasons for it. Clearly, it would not exist if the curers could get more for the bacon they sell, or paid less for the pigs they buy, or materially reduced the costs of their operations.

Within an industry the size of this one, it is to be expected that there will be some firms which are less efficient than others and, therefore, scope for reducing costs through greater efficiency. But that cannot be done in the short term. I believe that our curing industry has considerably improved its efficiency and competitiveness, but in the present conditions even the most efficient firms are unable to make bacon except at a loss.

What, then, about increasing prices of bacon? Prices at present are high, and have been for much of this year. Supplies of imported bacon are not running in excess of allocations under the Bacon Market Understanding. In practice, therefore, prices could be raised only if we were deliberately to try to cut back supplies from overseas below these allocations. Higher prices for imported bacon would obviously be to the disadvantage of our balance of payments, and I was glad to note that hon. Members gave some importance to that. To force up prices by cutting supplies could only be to the detriment of the British consumer, and I do not think that any hon. Member would deny that.

This leaves the cost of pigs. The present supply of pigs is not sufficient to meet the needs of the bacon, pork and manufacturing markets. We have said that frequently. As a result, prices are high, and to obtain supplies curers have had to offer high prices under contract or even on the open market. Because pig prices are high, guarantee payments have been reduced until at present they are nil, and this has increased the difficulties of curers who purchase pigs on inclusive contracts. I think that it will be seen from this analysis that the fundamental solution lies in getting more pigs.

It was for this reason—and I am sorry that the hon. Member thought that this was unimportant—that my right hon. Friend announced that the middle band of the flexible guarantee would be raised by 400,000 at the coming Review.

Mr. J. E. B. Hill rose—

Mr. Hoy

I listened carefully to the hon. Member, and I hope that he will not mind if I now make my speech.

The importance of this quite exceptional step of announcing a major change in advance of the Review has not, perhaps, been fully appreciated. The current forecast annual level of marketings is just over 12 million pigs. The Minister's announcement therefore means that production can increase in the months ahead by some 1½ million pigs above this forecast without the flexible guarantee operating on that account to reduce the price below the full guaranteed price.

It has been pointed out that the announcement was made without prejudice to the other determinations to be made at the Review, and that is right. At the Review the Government must look at all the relevant circumstances and make their determinations in the light of them. If, for example, they should then decide that a further increase is necessary, they will be free to make it. It has also been suggested that the decision to raise the middle band should have been implemented at once.

The present need is not for higher returns to producers, but rather to assure producers that if they expand their herds to produce more pigs, the flexible guarantee will not operate forthwith to cut back returns below the guaranteed price. The Minister's announcement gives this assurance. As hon. Members will have noted, since the Minister made his announcement the flexible guarantee has itself operated automatically to raise the standard price to 9d. above the basic guaranteed price, so that the standard price, as adjusted under the flexible guarantee, is now 3s. higher than it was at the beginning of the year.

Although greater production is a prerequisite of better times for the curing industry, it must be some time before more pigs will come forward to the market. Production has indeed been slower to respond than we had hoped. The recent forward look by independent economists—mentioned by the hon. Member for North Angus and Mearns—advising P.I.D.A. suggests that the size of the total breeding herd may continue to fall until at least this month. This is not out of line with our own analysis of the figures, which indicates that the previous downward trend in the herd is being checked, although a positive upturn has not yet begun to show itself.

In the meantime, the curers are faced with immediate difficulties. Bacon production has been cut back. There are fears that it may be reduced still further. Producers, particularly those who have gone in for specialist production geared to the requirements of the bacon trade, and who rely on contract sales, are concerned about their future. These very anxieties may be holding back the expansion of production necessary to bring about conditions in which both curers and producers can operate successfully and with confidence.

The Government have made clear that although we cannot accept the suggestions previously put to us by die curers and any suggestions for a direct subsidy to curing, we are ready to consider new ideas for meeting present difficulties. The Minister is examining as a matter of urgency new proposals recently put to him by the British Bacon Curers' Federation. I am not going to speculate about the outcome, but I can say that the decision will be announced as soon as possible. Moreover, we shall be considering with the producers whether any changes should be made in the guarantee arrangements themselves at the coming Review.

I have taken note of the points made in the debate and I will keep the suggestions in mind. All industries must expect some ups and downs in their fortunes. Last year, the curing industry did not have too bad a time, but producers were feeling the pinch. This year, it is the other way round. The Government's aim is to create conditions in which both may see a reasonable prospect of earning a proper reward for efficiency and enterprise. Both curers and producers have been concerned lest a temporary shortfall in British bacon production should lead to a permanent reduction in our share of the market under the Bacon Market Understanding.

I am glad to be able to announce that there will be no change in the shares for next year. Each country's percentage is to remain as it was before. In other words, the United Kingdom industry will again be entitled in the year beginning on 1st April next to supply 36.88 per cent. of the minimum total quantity and of any addition that may be made to that total out of the reserve. We have also decided, after international consultation, to make no change in the minimum total quantity required from all the participants. So the target set before each participating country, including our own, will be the same next year as this in tonnage as well as in percentage terms.

Our obligations of consultation have only just been completed and we had not expected to be able to make an announcement until tomorrow. My Department will, of course, be publishing the details then, but I thought it right in a matter which I know has been affecting the confidence of producers and curers alike to make this report now to the House.

Mr. Eldon Griffiths

How can the curing industry reduce its costs? S.E.T. makes no sense at all for slaughtermen.

Mr. Hoy

I shall take note of what the hon. Member said, but the decision I have just announced must be seen together with the decision to raise the middle band. This is important to the industry with the guarantees which go with it. The two indicate clearly that it is the Government's desire to see a viable home bacon industry making a direct contribution to our food supplies and in so doing assisting our balance of payments.

For their part, the Government have committed themselves to underwriting at the full value of the guarantee the increased level of pig production necessary to maintain adequate supplies of raw material for the bacon industry as well as for other users of pigmeat and at the same time have given to producers of pigs an assurance against which they can build up their herds with confidence.

I repeat what we have done. The Government have promised to raise the middle band by 400,000 at the next Review. This means that production can expand substantially above its present level before there is any reduction in price on account below that the level of the full guaranteed price. Secondly, there is no change in the United Kingdom share of the market under the Bacon Market Understanding next year. The minimum total quantity is also unchanged. These decisions surely give real assurance to both producers and users of pigmeat. Thirdly, we are studying, as a matter of urgency, proposals made to us for relieving the immediate difficulties of curers.

I want, finally, to say that no one needs to remind us of the difficulties——

The Question having been proposed after Ten O'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Twelve o'clock.