§ Order for Second Reading read.
§ 11.12 a.m.
§ Mr. Derek Page (King's Lynn)
I beg to move, That the Bill be now read a Second time.
The Bill refers to a change which is being proposed for legislation applying to all co-operatives, but the provisions will, in practice, apply solely to agricultural and horticultural co-operatives because it is here that a certain difficulty has arisen with regard to the raising of capital. Therefore, my remarks will he confined to agricultural and horticultural co-operatives, with a short review of their position and problems and the part that it is hoped the Bill will play in helping to solve the problems.
There are in this country, excluding a large number of past clearance societies, about 400 to 500 agricultural and horticultural co-operatives registered under the Industrial and Provident Societies Act, 1965. Their functions are twofold, to pool the buying requirements of their members, on the one hand, and to co-ordinate the marketing of their produce, on the other. In 1965, their estimated turnover was £295½ million, and this was more or less equally divided between the two functions of buying and selling.
It is interesting to note that the first agricultural co-operative was registered in this country on 10th July, 1867. We are, therefore, approaching the centenary of this movement, and we look forward to the establishment in 1967 of a Central Council for Agricultural and Horticultural Co-operation, a statutory body with wide powers to organise, promote, encourage, develop and co-ordinate co-operation in the agricultural and horticultural fields. It will be apparent from the growth of the movement that it is beginning to get into its stride, and I believe that the House is well justified in giving attention to the problems of the movement and particularly to removing any artificial barriers that stand in the way of its development.
What is co-operation about? Why do farmers co-operate? It is often over- 860 looked that, although agriculture is the biggest industry in the country, it is in a unique position in that it has the largest number of individual production units. It is entirely different from the big manufacturing industries in that respect. According to the latest estimate, in "The Structure of Agriculture", published by Her Majesty's Stationery Office last September, there are about 220,000 farms in the country providing full-time employment for their owners and tenants and, of course, many of them employ other workers as well.
The number of farms has fallen slightly, but only very slightly, because it is certainly not clear that productivity goes up strongly as the size of farms increases. Indeed, there has been evidence to the reverse. The industries with which agriculture deals are on an entirely different footing. The supply industries, which supply the inputs into agriculture, such as animal feedingstuffs, fertilisers, farm machinery and fuel, are among the largest industrial giants in the country. In each of the groups I have mentioned, I believe that we could name the main producers on the fingers of one hand. This puts them in a strong bargaining position.
At the other end of the scale, there has been a steady amalgamation of the outlets for agricultural produce with the growth of supermarkets and with the dairy industry becoming more highly concentrated. The number of milling and brewing firms has also been reduced. Chain stores are springing up. I do not oppose these moves, but it seems clear that there is a need for the agricultural industry, particularly among the small units, to protect its bargaining position. This is why farmers find it advantageous to co-operate.
Co-operation falls into three sections. It enables producers to enjoy the benefits of scale in buying and selling. It protects them against possible exploitation. It introduces a great deal of order into the grading system by setting standards of quality and by helping to eliminate the worst effects of over-supply or undersupply—and this is of great importance to the consumer as well as to the industry itself. From these three points of view, co-operation amongst producers deserves to be encouraged and any unnecessary 861 disability in the law relating to co-operation deserves the sympathetic attention of this House with a view to its removal.
I turn now to the raising of capital by co-operatives. The capital of co-operative societies comes from three main sources. The first is the members' own shareholding and reserves, which are the main equity and risk capital and which arc used for financing fixed assets. The second is the credits, which are essentially short-term. The third is the bank overdraft, which is supposed to be short-term but in practice is often used for longterm finance.
Long-term finance becomes more important as co-operative societies and activities develop from being mere collecting points of goods and produce, as they were in the early days, and as they begin to enter other activities such as packaging, grading and transport on behalf of their members.
The English societies, which I quote because their statistics are more complete, have been particularly good in building up their capital. In each of the three years 1962 to 1964, the net addition of new capital represented over 40 per cent. of the profit distribution in the form of share interest and bonuses during the preceding year. This is a very creditable performance indeed—a very worthy performance in self-help.
Nevertheless, the general financial situation of these societies is still basically unsatisfactory in that the capital for development on this basis depends absolutely on the farmers and growers continuing to be able to invest their own earnings—and, as we know, the position of earnings and profits has not been too happy during the last year. Undoubtedly, from time to time the situation is liable to recur. Certainly, growers and farmers have found themselves hard-pressed in the last year or two.
Ultimately, the remedy for this state of affairs will have to be found, in the opinion of most farmers and growers who belong to societies in the setting up of some form of credit organisation for the industry, possibly with something along the lines of the functions that the I.C.S.C. performs for the manufacturing industry. Even if such an organisation were in existence now, however, under the law as it 862 stands the co-operatives would not be able to take advantage of the facilities, and this is one reason why we need to alter the law. The Bill seeks to correct this disability.
Because the laws of Scotland and England are different, the Bill falls into two separate parts. I should like, therefore, to direct my remarks first to the position in England and then, more briefly, to the position as it applies in Scotland. The object of the two halves of the Bill is to bring the facilities for co-operation in the two parts of the United Kingdom into line so that similar facilities are available to both.
While the industrial and provident societies in England, consisting in the most part of wholesale, retail and agricultural co-operative societies, can borrow money for the furtherance of their business to whatever limits are set within the rules they have drawn up, it is, of course, in practice necessary to provide some sort of collateral for the money so that the creditor is safeguarded.
The societies have been under a disadvantage compared with ordinary companies registered under the Companies Act in that they are subject to the Bills of Sale Acts, 1878, and 1882. Security for a loan can be given by way of mortgage on any land owned by a society. The value of the land owned by it, however, may be comparatively small, while it may and often does have considerable value in stock and other movables such as vehicles or plant. A common way of securing a loan is to create a floating charge on all the property, whether land or movables, of the concern in question. Such a charge affects not only the property which the concern owns when the charge is given, but also property which may later come into its ownership.
In a trading concern, the movables of which are subject to considerable change from time to time by the disposal of existing property and the acquisition of new property, the floating charge provides the best way of being able to offer the whole of the concern's property for the time being as security.
Companies are able to create floating charges covering both land and movables under the provisions of the Companies Act, 1948, which exempts them from the provisions of the Bills of Sale Acts in 863 this respect. Industrial provident societies, however, because they are subject to the Bills of Sale Acts, cannot, in practice, create effective floating charges over their personal chattels—and this is the nub of the problem.
The reason for this is that the Bills of Sale Acts require that any charge on personal chattels—that is, most property other than land—should be registered as a bill of sale before it can be valid and as a condition of such bills of sale the chattels are to be listed item by item with the documents in question. It will be readily appreciated that, because it is in the nature of a floating charge to attach itself not only to property owned at the time the charge is created, but also to property which may come into ownership of the society thereafter, it is impossible to specify this property item by item. In practice, therefore, these societies are unable to have the advantage of the most usual forms of raising capital which is used by companies registered under the Companies Act and with which the co-operative societies are very much in competition.
It puts them at a disadvantage. The other way in which a disadvantage comes to the societies is simply because the charges, fixed as opposed to floating charges, in respect of which it is possible to specify the property to be charged, have to be registered as a bill of sale as a condition of their validity. The registration of these charges as bills of sale has proved to be not only a practical inconvenience, as we have shown, but also damaging to the credit of co-operative societies. Once again, companies registered under the Companies Act. being outside the Bills of Sale Acts, do not have to register these charges as hills of sale, although they have to register them with the Registrar of Companies for the protection of their creditors.
These disadvantages have existed ever since the Bills of Sale Acts have been enforced but have not been seriously felt until recently. The reason for this no doubt lies in the nature of the trading activities of co-operative societies and their financial structure which, up until recent times, has not lain heavily on borrowed money. But with the need for capital, including loan capital, increasing among agricultural co-operatives, this dis- 864 advantage is becoming very real and it is highly desirable to remove any artificial barriers against the raising of funds in this way. It is, therefore, proposed, without weakening the protection of creditors which the Bills of Sale Acts supply, to do away with their inhibiting functions for societies and to bring co-operative societies' practical borrowing abilities into line with those of companies registered under the Companies Act.
The Bill provides that floating or fixed charges on personal chattels, if registered with the Central Office of the Registry of Friendly Societies, will not be subject to the Bills of Sale Acts. This, in effect, will do all that is necessary to remove the disadvantages I have referred to.
Clause 1(1) is the substantive provision which will have this effect. Under this subsection, the instrument charging the assets of the society registered in England or Wales which, if it charges personal chattels is at present a bill of sale, shall be deemed not to be a bill of sale and shall not be invalidated by the Bills of Sale Acts if an application to record the charge is duly made with the Registrar of Friendly Societies.
Clause 1(2) provides for the manner of applying to record the charge. The application must be made within 14 days but provision is made under subsection (5) for this period to be extended at the discretion of the High Court, and the registering of the charge would be by the sending of an authenticated copy of the instrument in question and any prescribed particulars to the Central Office of the Registry of Friendly Societies. The fee will be determined by Treasury regulation.
Subsection (3) deals with the acknowledgment of delivery of the instrument of charges, its filing and with providing that it is to be open to public inspection. This last point is important because it protects the creditors. It ensures that any persons interested in the affairs of a registered society, such as a lender or trader, can learn to what extent it has charged its personal chattels in favour of creditors.
Subsection (4) provides for the possibility of noting on any instrument of charge on a registered society's file any discharge or release of any charge, and the Treasury is empowered under this 865 subsection to make regulations to deal with the matter in detail.
Subsection (5) enables the High Court in appropriate cases to extend the time for applying to record any particular instrument, and also gives power to the High Court to introduce rectification of any omission or mistakes inadvertently introduced at the time of registration.
In Scotland, the position is somewhat different and the position about the charging of the personal chattels, which, in Scotland, are called corporeal moveables, by registered societies is relatively simple. I must offer some sort of apology to Scottish hon. Members for daring to intrude on their territory, but it would have been unfair to have omitted similar provisions for Scotland if the Bill is to be of benefit.
As the law is at present, societies cannot lawfully raise such charges at all, except by parting with the possession of the actual chattels—a very strict attitude. The purpose of Part II is to put Scottish societies substantially in the same position in relation to the charging of chattels and moveables as societies registered in England and Wales, and Clause 3 makes it lawful for them to create fixed or floating charges over corporeal moveables.
Clause 4 provides for the effect of charge on such property and Clause 5 provides for delivery of the instrument of charge to the Assistant Registrar of Friendly Societies and for ancillary matters in the same way as applications to record a charge in England are provided for by Clause 1. A charge, the instrument of which is not delivered to the Assistant Registrar within the specified time, is void. Clause 6 deals with matters which for England and Wales are dealt with by Clause 1 and the rest of the Bill provides for commencement, interpretation, citation and extent.
§ Mr. Peter Hordern (Horsham)
Will the hon. Gentleman say why the Bill does not apply to Northern Ireland?
§ Mr. Page
I should require notice of that question. If the hon. Gentleman will bear with me, I will make sure that he is acquainted with that information.
We can get a fairly accurate idea of what the practical effect of the Bill will be. There is no doubt that capital investment is by far the biggest single 866 factor in the increase of production and productivity in any industry, and agriculture is no exception. It is a fact that in non-co-operative agriculture bank advances increased from £225 million in 1958 to £510 million in 1966, an increase of £285 million in eight years, or roughly £35 million a year increase.
In addition, extra capital has been raised by way of debentures. There have been several notable examples to be seen in the Press and I remember seeing one issue of debentures at £1.7 million. All this adds up to a considerable increase in the loan capital going into agriculture. It compares with the £2 million a year of the co-operatives coming from their plough-back of profits.
It seems quite plain that we need to allow a more rapid capital build-up and it has been estimated that the Bill is likely to free as security or collateral the best part of £16 million of goods and chattels and stocks which at the moment cannot be used as security for floating charges. This would be equivalent to a very considerable shot in the arm, equal to several years' plough-back of profits.
Of course, the Bill will not cure all the problems of the agriculture co-operatives. The N.A.P. report pointed out a number of things which needed to be done, such as an increase in the size of co-operatives. The Bill will certainly not do that by itself, but it would be impossible to do the things which need to be done if the Bill were not approved. It is essential to the solving of the problems of the agricultural and horticultural co-operatives.
It is not uncommon in this place for back benchers to feel that they are frustrated from time to time and are nothing but "Lobby fodder", but now and again there come times when one suddenly feels that here is something which is worth while and which justifies one's being here, and I sincerely feel that to be so with the Bill. I have the greatest honour and pleasure in commending it to the House and in asking hon. and right hon. Gentlemen to join me in helping to strike the shackles of a 19th century economic system from agricultural and horticultural co-operatives and allowing them to have a 20th century system of finance which will put them on a proper competitive footing in this world of industrial giants.
§ 11.36 a.m.
§ Mr. Paul Hawkins (Norfolk, South-West)
I have the greatest pleasure in congratulating my neighbour the hon. Member for King's Lynn (Mr. Derek Page) on producing the Bill, to which I was very glad to add my name. He was extremely brave to go into Scotland and to try to explain Scottish law, although I noticed that he did not get as far as the Act of Sederunt mentioned in Clause 6. However, I gladly support what he described as these modest provisions which will particularly help agricultural co-operation, about which I want to say a few words. Agricultural co-operation is a part, which is not opposed by the Opposition, of the Agriculture Bill which has just come through a long Committee stage and whose Third Reading is to be early in the New Year. This Bill will help towards the objectives of that part of the Agriculture Bill.
Co-operatives are greatly handicapped by the restriction on capital investment. Investment is often restricted entirely to members of the co-operatives and sometimes goes as far as being limited to the extent of £1,000 per member. Without sufficient capital, these organisations cannot give the lead which they should give and many are being affected by what could be harmful pressures from organisations outside agriculture.
In this connection, the vertical integration in the egg and poultry industries has reached a dangerous stage and international interests in the frozen food business and the food processing industry bring great pressure on the farming community. Capital is needed for many kinds of expansion. One of the societies which I know—although I am not a member—is the Eastern Counties Farmers' Co-operative of Ipswich, which covers most of the eastern counties. It has built up a worthwhile export business to the Continent in wheat and barley. This is an important and growing part of its activities, but it is hampered because of its lack of the large amount of capital needed when selling abroad, with the necessity to finance the purchase of corn in the Eastern Counties before receiving money from the Continent. It is hoped that over the coming years, particularly with the possibility of entering the Common Market, as I sincerely 868 hope we shall, there will be a growth in the export of barley, which is tremendously important to the Eastern Counties. Thus capital is badly needed to be increased.
The export of corn will be very important over the next few years, particularly next year, because I believe that, given reasonable weather conditions, there will be a glut of barley on the market next year. This autumn wheat sowings, certainly in the great wheat belt near my home, have been very low. In consequence, a large amount of extra barley will be sown this coming spring. Thus exports will be doubly valuable this coming year.
Another side of co-operation which is very important and which will be of growing importance over the next few years is in horticulture. Here we shall face, if we enter the Common Market, intense competition from highly organised co-operative bodies on the Continent. I have spent quite a time in Holland watching some of the activities of the co-operatives there. Their excellent packing and marketing arrangements can well be a matter of great concern to British horticultural interests. We must catch up with them in the shortest possible time, and I believe that the Bill will facilitate one method in which we could help the growth of co-operation in horticultural produce and the better marketing and packing which are so badly needed.
For these reasons and many others, I have great pleasure in supporting the Bill.
§ 11.42 a.m.
§ Mr. John Rankin (Glasgow, Govan)
It is almost six years to the day since I introduced a Bill entitled "Industrial and Provident Societies Bill" for exactly the same type of purpose as that which my hon. Friend the Member for King's Lynn (Mr. Derek Page) has in mind. Therefore, I am very happy to congratulate my hon. Friend on being fortunate enough to be able to take what I might call this very necessary sequential step. One hon. Member asked why Scotland is in the Bill. The simple answer is that Scotland cannot be kept out of the Bill. Scotland has been in from the very beginning and is part of our national co-operative movement.
A question has been asked about Northern Ireland. My hon. Friend will 869 give us the answer to that question. I think that Northern Ireland was mentioned in my Bill, because Northern Ireland is the traditional home of the agricultural and horticultural movement.
The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James boy)
Northern Ireland has its own legislation on this matter. Ours does not extend to Northern Ireland. If Northern Ireland wishes to make a change of this kind, it will be for the Northern Ireland Parliament to do so.
§ Mr. Rankin
That clears the matter up. As I did not have my Bill with me, I could not say for certain whether it included Northern Ireland. I am sure that my hon. Friend recognises that Northern Ireland has been the traditional home of this development. I regret to say that Scotland has somewhat lagged behind in the development of agricultural and horticultural co-operation and such schemes as do operate are largely confined to the Scottish Highlands. There are exceptional difficulties in Scotland militating against the development of agricultural co-operation.
As I said six years ago, my Bill hadtwo ma in purposes. The first is to raise the maxi num value of the shares which an individual member may hold in a society registered under the Industrial and Provident Societies Act, 1893. The second is to enable agricultural and horticultural co-operative societies to make advances of money to their members without security.I had to assure the House on that Friday morning thatthe consumers' co-operative movement does not seek power for its own societies to lend money without security".—[OFFICIAL REPORT. 9th December 1960; Vol. 631, c. 1579.]Nor does any agricultural society.
If in 1960 I had tried to go the length to which my hon. Friend has gone—this seems a strange statement to make—I do not think that my Bill would have got through, although that is perhaps a matter now to ponder over, because the response to my Bill amongst the farming community was tremendous. There was an attempt on the Tory side to oppose my Bill when it came up for First Reading. It actually was opposed, but at the following weekend there was such an enormous concourse of farmers visiting 870 that particular objector that on the next occasion when the Bill appeared he found it convenient not to be in his place, and so I secured a Second Reading. That showed the desire amongst farmers for the Bill.
My hon. Friend and the House will discover that farmers are supporting this effort as strongly as they supported mine, because this movement has grown, as has co-operative farming. My hon. Friend has said that his Bill is chiefly concerned with the farming element in the community, but he knows that his Bill gives exactly the same powers to the consumers' co-operative movement as it does to the producers' co-operative movement, I am certain that the new power to borrow money will be welcomed by the consumers' co-operative societies. Whether they will exercise the powers or not, is a matter for them; but today, they, too, need new capital just as farmers need it. Nowadays new capital is not coming so readily from the consumers' membership as it used to do.
They will hail my hon. Friend for this Bill, giving them this new power. Farmers too will greet this Measure. I hope that when my hon. Friend the Joint Parliamentary Secretary comes to reply he will give us more accurate figures than I am able to quote, but I know that the total output of agricultural produce has risen immensely since my Bill was introduced six years ago. The figure, in England alone, must be about £2,000 million a year, or very near it.
At the same time this is also happening to formers associated with the co-operative movement. Their percentage of the total agricultural output in England alone is nearly 10 per cent., if not more. It was 8 per cent. in 1960, and I am assured that it has grown considerably since. There is an urgent need for new money. This expansion is taking place, and it is not right that the financing of this added increase of such a necessary commodity should be laid wholly and solely on the shoulders of those who are members of these societies.
Because this offers new means of raising further capital for these essential developments, I welcome the Bill and I hope that it will have a speedy passage through Committee. Sometimes Bills are 871 very closely examined at that stage; quite rightly and properly. I am sure that this Bill will receive the same examination, but that it will be friendly and that its progress will be assisted by hon. Members on both sides of the House.
§ 11.53 a.m.
§ Mr. Patrick Wolrige-Gordon (Aberdeenshire, East)
We would all wish to congratulate the hon. Member for King's Lynn (Mr. Derek Page) for the clarity and brevity with which he introduced what I must say seems to be, at first sight, a fairly complicated Bill. The value of co-operation in agriculture today goes without saying. Farmers are among the shrewdest businessmen, but they are also very independent-minded. Those are great qualities. All over Scotland they are beginning to find the value of coming together in order to buy goods in order to sell their produce, and, particularly when the farming is done on poor land by smaller farms, in order to provide the facilities such as grain driers and storage barns for grain, which they could not provide individually.
There are many examples of this in my constituency. There is the outstandingly successful example of the Buchan meat producers and the Buchan potato growers, whose turnover has grown very fast indeed and who are now exporting Buchan produce all over the world. This is a movement towards agricultural co-operation which is of great value. Anything which assists it, such as this Bill is deserving of the commendation of the whole House.
The hon. Member for King's Lynn made a point about the size of farms which is worthy of re-emphasis. There is always talk about the need to amalgamate and to join into larger and larger units. There is enough truth in this to make it sound attractive but it is not the whole truth. There are some units which can be worked as efficiently, if not more efficiently, on a smaller scale. There have been movements before, and large farms have been broken down again into small farms. This is something happening throughout the history of agriculture and what matters in the long run is not the size of the farm but how well it is being 'farmed. It is often the case that productivity per acre, which is really the 872 important figure, is better on a small farm than on a large farm.
That being so, the smaller the farm the greater the necessity for co-operation in order to meet the large financial interests, as the hon. Member has said, at both ends of the farming sphere—the man who produces for the farmer and the man who buys the farmer's produce. There are very large financial interests indeed and there is a great need, particularly for smaller farmers, to co-operate in order to meet them. This Bill seeks to assist co-operative societies to do that by placing them on the same footing as companies, by enabling them to give a charge over all of their assets as security against borrowing and not, as at present, only to some of them.
There is the additional point today that if agricultural co-operative societies still rely only on funds which their members are able to provide, they will make too slow progress. It is undoubtedly true today that individual members are very short of capital for their own requirements, let alone the requirements of their co-operative societies.
I was sorry that the hon. Member did not say more about the Common Market and the consequences of it in the production of this Bill, for these three reasons. First, whatever may happen to the present probings, there is no doubt that agricultural and horticultural competition from Europe will grow. We will have to meet this competition. In many of the countries of the Common Market there is considerable development towards agricultural co-operatives. This is based on a strong central financial institution and it is that point, rather than any greater predisposition towards any greater co-operation which enables them to handle their production and marketing in the way that they do. This is a point which this Bill is seeking to meet, to a certain extent, but the hon. Member did not say much about it. The co-operatives are well aware of the difficulties which may face the industry, and the competition that they will have to meet. They are now taking steps to survey the funds of their societies and their capital needs. The Bill will be a help to societies in the raising of capital, and I give it my support.
§ 12 noon.
§ Mr. Bert Hazell (Norfolk, North)
I add my congratulations to my hon. Friend the Member for King's Lynn (Mr. Derek Page) on the introduction of his Bill, and I am glad to note that all sections in the House have given it support, as is shown by the names of those hon. Members who have joined with him as sponsors. This general support is understandable because all of us associated with agriculture in one way or another are convinced of the need for greater co-operation between producers. In recent years, there has been a considerable move towards co-operation among farmers, and this movement will un-doubtedly gather impetus. In the further development of both agriculture and horticulture, the need for producers to buy and sell collectively will become a central feature, the more so, as the hon. Member for Aberdeenshire, East (Mr. Wolrige-Gordon) reminded us, if Britain joins the Common Market.
The Government themselves have recognised the need for co-operation within the industry. In the Agriculture Bill now passing through Parliament, to which the hon. Member for Norfolk, South-West (Mr. Hawkins) referred, Clause 56(2) provides for a definite measure of responsibility for the co-operatives of the future, laying down thatIt shall be the function of the Council"—that is, the Central Council for Agricultural and Horticultural Co-operation—to organise, promote, encourage, develop and co-ordinate co-operation in agriculture and horticulture, including co-operation and mutual assistance in production, storage, preparation for market, marketing, transport, the provision of buildings, equipment and services for farmers and other producers, research and other incidental activities"—not the least of which, of course, is the matter of research.
When that Clause of the Agricultural Bill becomes law and begins to operate, a great many problems for agriculture will be created and great responsibility will be put upon the co-operative societies. Undoubtedly, it will lead to a considerable expansion of co-operative societies in both horticulture and agriculture. I hope that this will come about through an expansion of the existing 874 societies rather than the creation of a lot of small co-operatives which may not be able to keep the pace for very long, either because of faulty management or because of severe lack of funds. I am sure that development by expansion of existing co-operatives would be the best way to achieve the object set out in Clause 56 of the Agriculture Bill.
All these developments will require a large amount of money, and this is one of the objects which my hon. Friend the Member for King's Lynn has in bringing forward his Bill. He has already reminded us that the co-operative societies are regarded as industrial provident societies, and this puts a limit on their borrowing powers. In these days, it is essential that the societies, with their growing importance, should be given the same opportunity to borrow moneys as is open to private companies. This is the Bill's purpose, and I am sure that the Government will give it sympathetic support.
Shortage of capital is one of the main barriers at present against the expansion of agricultural co-operation. The societies have to rely upon their members—in the main, farmers and horticulturists—for moneys with which to develop, and there is no denying that many farmers and horticulturists are short of loose cash for investment in co-operative undertakings. This is not to say that all the poverty which one sometimes hears about in the farming fraternity necessarily exists, but it is true that the amount of loose money available for investment in this way is at present limited.
Furthermore, there is at present a restriction of £1,000 invested per member imposed on a number of societies. A few years ago, for instance, when my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) introduced his Bill six years ago, £1,000 represented a fairly substantial sum.
§ Mr. Hazell
I am obliged to my hon. Friend for that comment. Today of course, £1,000, when considered in relation to the need for expansion and the 875 burdens to be imposed upon the movement under the new Agriculture Bill, is seen to be a very small sum indeed.
The Eastern Counties Farmers' Co-operative, to which the hon. Member for Norfolk, South-West referred, has a membership of 10,000 but it urgently needs capital to consolidate its position and to meet further demands for expansion from its own membership. The society is keen to develop co-operative plans for helping to maintain an independent poultry industry in the region, to assist in co-operative marketing of potatoes, and so on.
My hon. Friend the Member for King's Lynn referred to the report in The Times, in 1963, of the issue of £1.7 million debenture stock by the Company T. & A. Eastwood Limited. At that time, this one company had gone to the public three times within 14 months. But that single issue was only a little less than the new share capital provided by farmers and growers for their own agricultural and horticultural co-operative societies throughout the whole of Great Britain in 1963. That was three years ago, and since then the position has become even more heavily loaded against the societies because members have experienced the need to use whatever loose cash they have available for investment in their own farms or undertakings.
The hon. Member for Aberdeenshire, East compared the position in this country unfavourably with the position of the co-operative movement on the Continent. There is no doubt that co-operatives on the Continent are firmly based financially, and, if we do enter the Common Market, unless we can reinforce the financial basis of the producer-owned co-operative structure in this country, we shall run into difficulties. It is our hope that the Bill now before us will receive the Government's blessing and soon find its way to the Statute Book. As my hon. Friend said, it will not solve all the problems of producer co-operative societies, but it will give them material help. We look forward to giving it a speedy passage.
§ 12.10 p.m.
§ Mr. Christopher Norwood (Norwich, South)
I rise briefly to support the 876 excellent Bill which has been introduced by my hon. Friend the Member for King's Lynn (Mr. Derek Page). I do so first of all in the knowledge made apparent in the course of this debate this morning that there is a very wide measure of acceptance for the Bill on the basis on which it stands. I do not wish, as some other hon. Members have, to go beyond the question of dealing with agricultural corporations in this country; I do not want to use this as a method of talking about the European Common Market, because I believe that this Measure would be justifiable whether we enter the European Common Market or whether we do not, and it must be looked at in that light.
One thing which the words spoken about Europe acutely bring to mind is the point made by my hon. Friend the Member for Norfolk, North (Mr. Hazell), the fact that it is remarkable how much progress has been made in the growth of agricultural corporations in a number of European countries. I do not think that it would be denied by agricultural societies in this country that the growth of the movement here has been comparatively, and perhaps even somewhat disappointingly, slow. There are reasons for this.
One hon. Member asked what share of trade the co-operative societies receive. The answer to that of course is that it varies very greatly from one field to another. In certain markets it would be as high as 30 per cent. to 40 per cent. and in certain others it would be 10 per cent., 15 per cent., 20 per cent. Therefore, if agricultural co-operation is substantially to improve in this country—and I think most of us are agreed that it is a development which ought to be encouraged— in so far as the farming community is concerned it is very necessary to encourage the technical developments and changes which take place.
Having said that it is a desirable principle, and having noticed, too, that the growth of agricultural co-operation in this country has been comparatively slow compared with that of many countries abroad we turn to one of the central problems which the movement has had to face, and I commend the Bill for the 877 simple reason that it goes some way towards meeting one of those problems.
I should like to add to what has been said already about this, that I should like to see, as I think it is fair to say many of us would like to see, some form of central financial arrangement which would be of tremendous assistance to the societies, and I believe that this is under consideration, and I hope that it can be brought to a satisfactory conclusion, because this is a movement which I would very much like to see expanded.
The present situation is—what? As I understand, there is something like a £300 million a year turnover among them. The figure includes Northern Ireland unfortunately, but I have not had time to remove that figure, I say for the benefit of the hon. Member for Horsham (Mr. Hordern), but it is a smaller figure for agricultural co-operative societies there. They are operating on a turnover of £300 million. Their trading capital, again, I am afraid, including Northern Ireland, which I think has a very small proportion. only some £1 million or £2 million for Northern Ireland, is about £40 million. There is no doubt that they have consistently been over the last few years under heavy pressure for capital, first because of the limitation on investment which my hon. Friend the Member for Norfolk, North mentioned, and, secondly, because of the tremendous increase in the amount of capital required for farming under modern conditions.
I must say that it surprised me when I learned—as I have no doubt it has surprised other hon. Members who were not aware of this— that it takes roughly twice as much capital per acre today than it would have done five or six years ago. This is a staggering fact and means that the amount of money which can be made available to co-operative societies is limited to their own needs. It is, therefore, I think, very desirable that this first step should be taken for giving freedom to the societies, a freedom which, because of a quirk in the law, they do not at the moment enjoy, but which, I trust, they shortly will enjoy, to mortgage various assets to raise capital.
I commend the Bill for this reason, that it is a step in the right direction. I 878 do think they specifically need some form of central financing arrangements, and I think that the Bill will be of assistance to farmers and co-operative societies.
§ 12.15 p.m.
§ Mr. Peter Hordern (Horsham)
It is a pleasant task to congratulate the hon. Member for King's Lynn (Mr. Derek Page) upon introducing his Bill. I feel sure that it will provide considerable assistance to the farmers' co-operative movement, and, indeed, to horticulture as well. It is pleasing to think that the hon. Gentleman is following in the steps of an illustrious predecessor of his of a hundred years ago in his obvious concern for agriculture. I refer, of course, to Lord George Bentinck and his attitude to the Corn Laws. On that occasion, however, Lord George Bentinck split the Tory Party. I am happy to inform the hon. Gentleman that on this occasion he has our complete support.
My hon. Friend the Member for Norfolk, South-West (Mr. Hawkins) touched the nub of the Bill when he referred to the integration that was proceeding outside the agricultural industry. He referred to the vertical integration of egg and poultry production and he referred also to how difficult it was to raise capital for various agricultural purposes including the export of corn. It is, of course, necessary for the agriculture and horticulture industries to raise capital, not just for farming purposes but very much for marketing purposes, and in horticulture this is a considerable problem. I know of one particular organisation in home-grown fruit in my constituency which has a really splendid record in the field of marketing, and I feel it has nothing to fear whether we join the Common Market or not.
The primary justification for this Bill is that agricultural societies, unlike public companies, are subject to the Bills of Sale Acts of 1878 and 1882. These mean, in effect, that loans cannot be raised by a floating charge on assets, but only in a particular form which, among other things, must contain an inventory of the personal chattels charged. There is, however, already in existence a precedent for this Bill. It was created by the Agriculture Credits Act, 1928, which allowed societies to create a 879 variety of charges over farming stock, but only through certain specified banks.
The purpose of the Bill is that it should go considerably wider, both in the number of institutions and also the type of assets over which there may be a floating charge. There will be, in other words, far more discretion available to banking and other financial institutions over the type of loans which they can grant or give to the farming co-operative associations.
As the hon. Member for Norwich, South (Mr. Norwood) said, the movement has shown a very rapid increase in turnover in recent years, and now amounts, as he said, to nearly £300 million—that was the figure in 1965—among about 500 co-operative movements.
It is, however, interesting to note a questionnaire which was sent in 1963 to 40 of these co-operative managements, at that time representing 60 per cent. of the total turnover of the societies. There were surprising divergencies in the replies given to this question, "Is there a need for a change in the Industrial and Provident Societies Act? If so, how?" One reply was that no vital change was necessary. Another said that it badly needed modernisation.
Another one said that one of the most important needs was some machinery by which societies registered under the I. and P. Acts should be able to issue a debenture on precisely the terms and conditions as those which applied to organisations registered under the Companies Act, and this, I think, is really what the Bill succeeds in covering. Despite the disparity in these replies, it is clear that there are obvious advantages in the Bill.
In the first place, it is necessary, as has been said to encourage the growth of agricultural co-operatives. This has been a continuing policy under successive Governments. For example, the Horticulture Act of 1960 and the Agriculture and Horticulture Act of 1964 gave specific aid in grants to horticultural and agricultural co-operative movements.
It is a policy, furthermore, which is particularly necessary at the present time. This is because the effect of the credit squeeze has made it impossible for 880 farmers to agree to a large retention of profits within the societies because of their own pressing needs on their farms. It is likely, therefore, that the continued growth of the agricultural co-operative movements will slacken unless some action is taken in their favour soon.
It is more important now than ever before that co-operative movements should flourish. As the hon. Member for King's Lynn said, in recent years there has been a powerful concentration of economic power among those who sell to farmers, and those who process their goods. The farming community needs to organise itself into units to increase its bargaining power, and its selling power as well, otherwise it is in danger of being squeezed between the ambits of the supplier and the customer of the farmer.
Another aspect of the problem—and this was touched on by my hon. Friend the Member for Aberdeenshire, East (Mr. Wolrige-Gordon)—is what should happen should this country join the Common Market? It seems certain to us that the industry will need to be able to use every advantage at its disposal to be truly competitive. Only this week one of my constituents came to see me to ask my opinion on installing computers in the agriculture industry. Computers are already, of course, used to a considerable extent by co-operative movements, but they could be used really economically, and to far greater purpose, if there were more, and larger, co-operative societies, and this again is a reason for welcoming the development of these societies which will be helped by the Bill.
Many societies have large amounts of capital tied up in the accounts receivable, or in other ways, which is not true of agricultural co-operatives in the United States, where I understand the proportion of capital tied up in accounts receivable is only 16 per cent., whereas in our agricultural societies it often amounts to 49 per cent. Thus, that state of affairs is not true of agricultural co-operatives in the United States, nor is it true of public companies in this country, which over many fields are directly competitive with agricultural co-operative societies.
Furthermore, as my hon. Friend the hon. Member for Norfolk, South (Mr. J. E. B. Hill) said, there are special longterm credit organisations in the United 881 States—for example, the Bank of Co-operatives of the Farm Credit Administration; and there are similar organisations in France and in Germany—which cater specifically for agricultural societies. It would be very shortsighted, therefore, if our societies were unable to raise the capital they need because of antiquated legislation. The effect of the law as it stands is to place a handicap on the societies which companies sometimes acting in direct competition with the societies, do not incur. Nor are these restraints to be found in other countries. For these reasons, therefore, we support the Bill.
Turning to the Bill itself, it seems to us that Clause 1 provides adequate safeguards in that a fixed or floating charge has to be registered with the Central Office Registry of Friendly Societies, and Clauses 3 and 4 provide similar safeguards for Scotland, as the House was told by the hon. Member for Glasgow, Govan (Mr. Rankin).
I asked the hon. Member for King's Lynn why the Bill did not refer to Northern Ireland, and he was good enough to give me the reason, in the sense that Northern Ireland has its own powers of legislation. In that case, is it really necessary for Northern Ireland to be mentioned at all in the Bill? Perhaps this point can be considered in Committee.
Government support has up to now been given to help farmers who are prepared to help themselves, and the Bill will enable farmers to use and support co-operative societies in the knowledge that these societies will not in future have to he so dependent on their members for finance. I am sure that the banking system will provide further support to these societies as a result of the Bill. It might, indeed, be the opportunity for them to introduce a system of term loans, which was suggested by the Radcliffe Committee many years ago, but which the banking system has not yet adopted.
There is a requirement for sound longterm finance, whether through the existing system of the Agricultural Finance Federation, or some other system on the lines of the American Federal Land Act system. The hon. Gentleman has introduced his Bill at a time when agricultural and horticultural societies are finding 882 conditions more difficult than they have been for many years. We have always favoured the development of these societies, and we believe that their development is essential to the health of British agriculture.
For these reasons, we congratulate the hon. Gentleman on introducing the Bill, and we give him our full support.
§ 12.26 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James H. Hoy)
I congratulate my hon. Friend the Member for King's Lynn (Mr. Derek Page) on introducing the Bill. I congratulate him, too, on having the courage to explain the legal niceties as between England and Scotland. I do not think that I would have attempted this, but he did it with a clarity which was the envy of the House, and was an example which lawyers might follow in the future, and put things as clearly as my hon. Friend did as a layman.
The Government support the Bill. By removing technicalities standing in the way of co-operative societies which wish to borrow money by creating a floating charge on their assets, the Bill will enable them to take advantage of a procedure that is normal commercial practice.
The measure is, of course, of general application to all industrial and provident societies, and this was rightly pointed out by my hon. Friend the Member for Glasgow, Govan (Mr. Rankin). It is likely, however, to be particularly relevant to agricultural and horticultural societies, since it is co-operatives of this kind which have experienced to a greater extent than others the limiting effects of the present legislation.
It is the Government's policy to encourage the development of co-operation in agriculture and horticulture so as to enable farmers and growers to obtain the benefits of scale in their operations. Producers, particularly small producers, have much to gain by co-operation, and although there has been progress in recent years, there is still a long way to go. Grants have been available for some time to develop and assist co-operative marketing, and, to a more limited degree, co-operative production. They have led to an increase in the number of co-operatives, but the time has come to give a new impetus in this direction.
883 As was said by my hon. Friend the Member for Norfolk, North (Mr. Hazell), the Agriculture Bill at present before the House proposes the setting-up of a Central Council for Co-operation in Agriculture and Horticulture. The function of this Council will be to administer a comprehensive scheme of grants, and will also extend to the important task of actively promoting and popularising all kinds of co-operative activities among farmers. I mention this because it shows that this Bill is in a way complementary to our own proposals.
Although there is much room for future development, the producers' co-operatives in the agricultural and horticultural industries have achieved a remarkable growth, and occupy a position of major importance. Their further growth and development, and their ability to compete against large commercial interests, should not be hampered by restrictions on their activities which are not appropriate in present-day conditions. That is one reason why I am very happy to be able to support the Bill.
I also want to refer to the suggestion that these co-operatives and the English industry must be able to compete with the industry of other countries if we go into the Common Market. I do not want to take this too far, because I was discussing the problem in the House at a quarter to one this morning. We were then dealing with packaging, grading and other questions raised by the hon. Member for Norfolk, South-West (Mr. Hawkins).
We realise that grading, packaging and marketing all play an important part; indeed, as I pointed out in the early hours of this morning, it was for that reason that we were then promoting the Apples and Pears Development Council Order, which will allow this section of the horticultural industry to do all the things that the hon. Member was asking us to do. We are therefore well aware of what might happen in the future.
But whether or not we go into the Common Market it is essential that if our industry is to compete it must be able to do so from strength, and the question of grading, marketing and packaging applies whether or not we go in. The real purpose of the Bill is to strengthen the industry itself, whatever the future 884 with regard to the Common Market. It is because I believe that we should do this that I support the Bill.
I have referred to the hon. Member for Govan. I remember his introducing a similar Bill six years ago. I had a little to do with it. I am sure that he will be grateful for what my hon. Friend the Member for King's Lynn has been able to do this afternoon. I do not dissent from the figures that my hon. Friend gave. Agricultural output today is about £1,800 million per annum, so we are talking about tremendously big business.
So far these co-operatives have had to suffer a handicap which the House believes to be unfair. My hon. Friend has introduced a Bill which will correct this, and I am glad that it has had the unanimous support of the House. I am delighted, on behalf of the Government, to give it a welcome, and I hope that as a result of the support given to it it will find its way very speedily to the Statute Book and become operative.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).