HC Deb 17 March 1967 vol 743 cc944-56

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

4.3 p.m.

Mr. John Pardoe (Cornwall, North)

The subject which I wish to discuss this afternoon raises a principle of the highest importance. It is a scandal which has been before the House on and off in debate and Questions for several years. It has been the subject of two inquiries by the Committee of Investigation for Great Britain, has exercised the interest of the Press greatly from time to time, and yet, in spite of all this attention, there is a very grave danger that, as a result of the unholy alliance forged between the Ministry of Agriculture and the British Egg Marketing Board, justice will not even now be done.

In order to put this matter into its context it is perhaps necessary to give a brief historical summary of the events leading up to the present time. The bakery trade has for a long time used liquid egg. By 1960 the Egg Marketing Board decided that there were sufficient facilities in the country for breaking out all surplus first-quality eggs and it discouraged further firms from going into the market. However, second-quality eggs were freely available and imported shell eggs from the Continent were fairly cheap, so that firms outside the Board's ring of contractors were able to continue to work.

A Government Working Party had by 1960 established and perfected a pasteurising technique for liquid eggs. It was becoming clear that it was only a matter of time before the Government would make the pasteurising of all liquid egg compulsory. The Egg Board was well aware of this. Between May and September, 1962, the Egg Board secretly prepared a scheme to control the processing of all liquid egg, whether from first- or second-quality eggs.

This is where my two constituents come into the story because in December, 1961, Messrs. Uglow, of Plymouth, a large firm of bakers, discussed with Mr. William Baker the possibility of his supplying them with pasteurised second-quality eggs for use in their baking trade. He decided to do this and he went into partnership with Mr. John Roose to found a company to do it. On 5th October, 1962, they signed the necessary hire-purchase agreement for machinery costing £6,000.

Unknown to Messrs. Baker and Roose, however, between May and September, 1962, the Board had secretly prepared a scheme to restrict the manufacture of liquid egg from second-quality eggs to 12 plants in the United Kingdom. On 24th October, 1962, the Egg Board announced that that would be the situation and that thereafter it would be necessary for a licence to be obtained from the Board to deal in such eggs.

In November, 1962, Messrs. Baker and Roose made their first application to the Board for such a licence. They told the Board in their letter that they had entered into a hire-purchase agreement for the purchase of the necessary machinery. On 19th November, the Board replied that adequate facilities already existed and that it did not consider that there was any need for further firms to come into the business. It invited Messrs. Baker and Roose to meet the Board's officials. On 1st December, Mr. Roose wrote again to the Board saying that he wanted an assurance that his company would be able to get "seconds" if and when the scheme came into operation. On 6th December, Dr. Knowles, of the Egg Marketing Board, replied that there was still a great deal of preparatory work to be done but he repeated his statement that there were already adequate facilities.

On 11th December, Messrs. Baker and Roose met Dr. Knowles. When they had put their case to him, he said that he would put their application before the Board but stated that in any event, with so much preparatory work to do, the Board would not be making its selection of plants until September, 1963. At no time during that conversation did Dr. Knowles suggest that the plant would possibly not meet the Board s requirements. Indeed, the quality of the plant was not discussed.

Therefore, Messrs. Baker and Roose went ahead with their plans. They went for advice to their Member of Parliament, who was then Parliamentary Secretary to the Ministry of Agriculture. His advice—coming from the Ministry itself—was that there was nothing that the Board could do to stop their supplies. Because of this, they went ahead with their negotiations.

The matter went on for many weeks—indeed months—and letters went backwards and forwards between the Board and the company's solicitors until, on 6th November, 1963, the company's solicitors wrote once again to the Board saying that the company wished to be included in the Board's list of contractors. Thereupon, on 19th November, a year after the first application had been made, the Board finally stated that there would be no supplies of eggs for the company. No mention was made in that letter of the Tightness or wrongness of the plant.

On receipt of that letter, the company forwarded a copy to the Ministry of Agriculture and on 8th January the Minister put the complaint before the Committee of Investigation for Great Britain. The Board realised at that time that it was in considerable trouble and had taken part in a monstrous carve-up of the second quality egg market. Even before announcing the new scheme, the Board had secretly made under-cover deals with some of the lucky firms which were to get the contracts.

However, for the south-western area the Board had already, in September, 1962, promised another firm a monopoly of the trade for the whole area. This was done some weeks before the Board's public announcement of its scheme. In an effort to justify its actions, the Board requested on 2nd February to be allowed to inspect the Camelford plant. It carried out this inspection on 6th February.

On 5th February, however, the Board actually submitted its representations to the Committee of Investigation, stating that the plant and the premises were totally unfit. This meant that the Board had condemned the plant a full day before inspecting it. Indeed, the representations condemning the plant were in the hands of the firm's London solicitors two hours before the inspection was carried out.

The Committee of Investigation substantially rejected the Board's grounds for condemning the company and found that South-Western Egg Products had been virtually selected as the Board's sole agents for the area in September, 1962, a month before the scheme was made public. But the Board concluded that … there are no grounds for the complaint that the Board has in any way acted unreasonably in refusing either to appoint the complainants as agents or to make arrangements, assuming that this is practical, for them to be supplied with seconds. Having failed to obtain any help from their own Member of Parliament, then the Parliamentary Secretary to the Ministry of Agriculture, Messrs. Baker and Roose went to their Liberal candidate for North Cornwall, who was then Mr. Maddon Bruton, who took them to see my right hon. Friend the Member for Devon, North (Mr. Thorpe), now the Leader of the Liberal Party. He raised this matter during an agricultural debate on 29th June, 1964, and the Minister made no reply at all on the point.

My right hon. Friend then instructed the firm's solicitors to lodge a further complaint to the Ministry and ask for a further Committee of Investigation to look into the wider aspects. It took a great deal of time to get the Committee set up because a substantial amount of money had to be raised, but at last this was done and the Committee met between 29th and 31st March, 1966. We are thus more or less up to date.

When the report of the Committee came to the Minister on 20th July last year, we did not expect immediate action. On 11th August, my right hon. Friend and I saw the Minister. He said that he had asked the Board for its comments and would have to consider these before taking action. I saw the Minister again with my right hon. Friend on 7th November. Much correspondence had passed between the Minister and myself during that period.

On 11th August, the company's solicitors wrote to the Minister, also. On 22nd August, I wrote to him myself thanking him for meeting me and confirming the points that I had made. However, none of this got us anywhere, we were left with the impression that the Minister was stalling on behalf of the Board. He had received the report on 20th July and in answer to a Question by me on 14th December in the House, he said that he had now received the recommendations and comments of the Board. That was 20 weeks after the report was laid on his desk.

I should make it clear that the conclusions of the second inquiry were highly favourable to my constituents and critical of the Board's action. These conclusions were, first, that … the Board's actions were contrary to the reasonable interests of the complainant. This is in direct contradiction of the conclusions of the first inquiry when it was said that there were … no grounds for the complaint that the Board has in any way acted unreasonably … The second inquiry also found that … the Board's actions were not in the public interest. It added: We are of the opinion that urgent consideration must be given to the possibility of a system of tendering, and that, in any event, the opportunity to compete for the processing of seconds should be generally available. But then the Committee made the rather curious and unfounded statement that In any event, had a system of tendering been employed we have no doubt that the plant of these complainants would not have satisfied the Board's requirements either as to the processing capacity or specification. The Committee had no right to make that statement. Nor had it any evidence on which to base it.

During the second hearing, Dr. Hocking, the Cornwall county pathologist, was cross-examined about tests he had carried out. He said: This is an efficient and well conducted plant, suitable for the processing of pasteurised eggs. Of the results of an analysis of the product he said: I would say that these results are exceptionally good … the plant is doing its work extremely well. Even Dr. Knowles, of whose opinion presumably the Ministry takes note, said of these tests: They are very good indeed—exceptionally good if I may say so. Messrs. A. Johnson and Company, Limited, which supplied the plant, had considerable negotiations with the Ministry about the specifications for the plant and had meetings with the Ministry throughout this period and at no time was it given any indication that the plant did not measure up to Ministry specifications.

Now I come to compensation. As a result of the second scheme, my constituents were put out of business and had to spend substantial sums on the costs of the two inquiries. There is no doubt that any reasonable man would believe them to be entitled to some compensation. Under the Agricultural Marketing Act, 1958, the word "producer" is denned as meaning … in relation to any scheme any person who produces the regulated product. A "registered producer" means a producer registered under the scheme. There is no doubt that my constituents were producing the regulated product—liquid egg derived from the breaking out of second-quality eggs. The Minister denies that they were registered producers, and Section 13 allows for compensation to be paid only to a registered producer.

The fact that this company did not become a registered producer is no fault of its own. Section 4 states: Every scheme shall provide for the registration of any producer who makes application for that purpose. The firm certainly made application for that purpose, but it was refused. From all this it is clear that the firm is indeed entitled to compensation. The Minister has persistently refused to face his responsibility and to use his powers under the Agricultural Marketing Act to force the Egg Board to pay compensation. Instead, he falls back on the suggestion that my constituents should take the matter to a court of law. He knows that the firm has already exhausted all the funds available for legal action.

The Minister also knows that unless some sort of compensation is paid this small firm will not be able to get back on its feet—and that is precisely the solution that he desires. In opposition, he declared some sympathy for my constituents' case, but since he has been in office he has, like Proust's M. de Norpois, become imbued with that negative, methodical, conservative spirit, called governmental and which is common to all Governments". It may be thought that in the light of all these machinations the word "scandal" which I applied to this case earlier in my speech has been fully justified. But far, far worse is to come.

I turn, finally, to the Egg Board's current proposals. I do not know whether the individual members of the Board, who, for the most part are honourable men, realise how far they are being dishonoured by these proposals. There are to be two contracts. No. 1 contract is to be awarded to processors who are wholesalers and who are to be guaranteed sufficient eggs to cover 90 per cent. of their production of liquid eggs during the last 12 months. In other words, 90 per cent. of the eggs going into liquid egg production will be carved up among the existing companies who have already enjoyed this monopoly.

No. 2 contract is to be awarded to processors who will be given no undertaking or guarantee of any annual supply. Specifications which the Board states for plant and equipment is such as to demand a capital expenditure far in excess of what my constituents can afford. That is the intention. The proposals have one aim and one aim only—to legalise the present situation, which the Committee of Investigation has already declared to be against the public interest and against the reasonable interests of my constituents. There is to be no opportunity to compete for the processing of seconds in the sense in which the Committee of Investigation spoke of it.

The proposals are crooked, and if the Minister has anything to do with them, he will be condemned as a man whose "honour rooted in dishonour stood". It should be made quite clear that the 12 companies which have enjoyed the monopoly of the seconds pasteurising market for so long have made huge and totally unjustified profits. Indeed, in September, 1965, the Egg Board took fright and had to claim back between £200,000 and £300,000 excess profits from these firms. This was approximately twice what would have been a reasonable figure.

The return on capital has been outrageous. A witness at the second Committee of Investigation produced a balance sheet showing that one firm had made a net profit of about £100,000 on a capital outlay of £45,000. If commercial television is a licence to print money, this second-quality egg scheme is a licence to forge money.

It is not too late for the Minister to take action. He must realise that it is no longer any good palming me off with patronising phrases about how well he realises and appreciates the anxieties I have on behalf of my constituents. That sort of rubbish has had its day. If the Minister cannot stand up to the people who perpetrated this carve-up, there is more of mouse than man about him. I have some faith in his good will. I realise that it is based on rather tenuous foundations, but the main thing is that there is need for urgent action. Unless he acts immediately my constituents will be driven into bankruptcy by sheer force of circumstances.

I want the Minister to order the Board to pay compensation for the legal costs incurred by this small company. I want him to order the Board to grant this company the contract for processing all the second quality eggs from the County of Cornwall, which its plant is quite adequate to do. I want him to set up a full-scale inquiry into the actions of the Board, not only in this case but in a whole host of others.

I cannot believe that the Minister wishes to live through the rest of his Ministry dogged by headlines about the Board's incompetence, its chairmen's resignations, the unsatisfactory nature of its elections and its generally disreputable nature. That is why I beseech him to act now.

4.20 p.m.

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

The hon. Member for Cornwall, North (Mr. Pardoe) said that he would make a sensational speech. If he has not provided many facts he has certainly made something sensational, but it is quite unworthy of him.

Mr. Pardoe

rose—

Mr. Hoy

The hon. Member has had plenty of time and he had better listen for a minute. He has been saying plenty—

Mr. Pardoe

rose—

Mr. Speaker

Order. The hon. Member must contain himself.

Mr. Hoy

Indeed he must.

The hon. Member opened by accusing my right hon. Friend of collusion with the British Egg Marketing Board, and he knows that to be absolutely untrue—absolutely and completely untrue. Let him ask his right hon. Friend the Member for Devon, North (Mr. Thorpe), who first raised the matter. Indeed, I hope that we proved helpful. All this took place prior to this Government's coming into power. It was under our predecessors in another Government, a Conservative Government, that it took place. The hon. Member knows, when he accuses my right hon. Friend, that that is totally untrue.

Indeed, when he makes allegations against processors and Board members he knows that to be untrue. He made these allegations, which had been made before the Committee of Investigation, about persons who were not even there to defend themselves. Part of the hearing was taken up with these allegations that certain processors had abused their position on Committees with which the Egg Board discussed the seconds scheme. But, as the Report points out, no evidence whatever was advanced in support of those allegations, none at all—and eventually they were all withdrawn.

That is the test. It is no use the hon. Member shaking his head. They were all withdrawn at the Committee of Investigation. The Report also concluded that there was no evidence of the slightest impropriety on the part of any member of the Egg Board or its staff. As far as I am concerned, this question of misconduct is closed. I hope that as it has been withdrawn even by the counsel for the hon. Member's constituents, he will not go on repeating it.

I want to say one or two words about the Committee of Investigation. This Committee is one of the safeguards written into the agricultural marketing legislation to protect the interests of those who may be affected by the various marketing schemes. Let me make it quite clear that it is entirely independent of Ministers and of marketing boards, that it has as its Chairman a distinguished Queen's Counsel, Mr. David Karmel. I do not think that anybody would care to challenge that.

This Committee has reported twice on complaints by the Western Egg Pasteurising Co. Ltd. On the first occasion, Western Egg complained that the Egg Board had refused to appoint them as processors under the Seconds Scheme introduced in January, 1964. In its Report, made on 22nd June, 1964, the Committee concluded: There are no grounds for the complaint that the Board have in any way acted unreasonably in refusing either to appoint the complainants as agents or to make arrangements, assuming that this is practicable, for them to be supplied with seconds. We think that any adverse effect of the operation and consequences of the Seconds Scheme on the interests of the complainants has arisen from their own actions, and that their request for the Scheme specifically to be amended in their particular interests is unreasonable". Now I come to the second report about Western Egg, which is the subject which the hon. Member has raised for debate today. The concluding part of his speech had nothing to do with this complaint. He was then dealing with the Egg Board's new scheme which has been submitted to everyone concerned for their comments—

Mr. Jeremy Thorpe (Devon, North)

Would the hon. Gentleman not also agree that, in that first Report there was a clear finding that the monopoly for the South-West had been carved up before the scheme even began?

Mr. Hoy

This was the Committee's finding. I merely refer to what the Committee found out and make no comment.

This Report was made on 20th July, 1966, on complaints made by Western Egg and four agricultural co-operatives that certain aspects of the Seconds Scheme were contrary to their interests and not in the public interest on the grounds that it was not introduced in a proper manner; that the plants chosen to process the seconds were not selected in a proper manner; and that a monopoly was created.

It is important to bear in mind that the report of July, 1966, was not about whether the Egg Board should have allotted a contract to Western Egg for egg processing in 1964. It was not about the Seconds Scheme as a whole, nor about its effect on prices. The complaint under investigation concerned the way in which the Egg Board introduced and operated its processing arrangements under the Seconds Scheme.

I should also point out that this complaint was made to Ministers in July, 1964, and was referred to the Committee in that month, but the Committee was unable to begin its consideration for an- other 18 months because Western Egg did not supply written representations until November, 1965. In view of this, it is rather unfortunate that the hon. Member should now accuse the Government of delay, when it was the company's.

The Committee concluded: We think that the Board's intentions should have been published in greater detail, and we consider that it ought not, from the outset, to have confined the selection of those who were to process seconds to the field of its existing contractors, but should have issued invitations publicly for this work. In these respects we consider that the Board's actions were contrary to the reasonable interests of the Complainants. We also find that the Board's actions were not in the public interest, and … we are of the opinion that urgent consideration should be given to the possibility of a system of tendering and that in any event, the opportunity to compete for the processing of seconds should be generally available. The Committee made one further observation. The hon. Gentleman quoted the first, presumably because he liked the first quotation, but not the second. The second said: In reaching these conclusions it should be borne in mind that we were not required to consider any issue dealt with in the first complaint by the Western Egg Pasteurising Company Ltd. Nevertheless, we think it is desirable to refer to the particular circumstances of that complaint. During that hearing it was not contended that the actual method of selection of the processors was fundamentally wrong in principle, and we did not therefore consider this aspect of the Scheme. In any event, had a system of tendering been employed, we have no doubt that the plant of these complainants would not have satisfied the Board's requirements either as to processing capacity or specification. These, then, were the findings which were presented to my right hon. Friends last July.

After considering them, they decided that the right course of action was to seek a solution that was in the interests of all concerned, and that, of course, means not only processors, but others, such as the users of processed egg. They realised that it would take some time to achieve such a solution, and the hon. Member for Cornwall, North must have realised it, too. Indeed, the hon. Gentleman said as much in one of his several letters.

It would have been foolish to impose a hasty solution on this industry without giving proper scope for consideration and comment. My right hon. Friend told the House on 11th August that he had asked the Egg Board for its comments on the Report, and he further said in the House on 14th December that he had just received the Board's detailed comments.

These comments related particularly to the question of introducing a tendering system. The Board said that it saw many drawbacks in such a system, but that it was considering alternative proposals because it accepted fully that the opportunity to compete for processing should be made generally available. We received these alternative proposals in January, and I might add that they are concerned with the processing not only of seconds, but of first-quality eggs as well.

After carefully considering these proposals, we decided that it would be desirable to obtain the widest comment. It is for this reason that we have published them without comment and have invited everyone with an interest in this subject to send us their comments by the end of April. My right hon. Friend announced this in the House on 7th March. It is, therefore, particularly opportune that this subject should have been raised at this time, since I am able to draw attention to these draft proposals.

Mr. Pardoe

I had been told by the Minister throughout my discussions that he would keep me fully informed. I had not been given the draft proposals and I had to telephone him today for them.

Mr. Hoy

The hon. Gentleman sent many letters to my right hon. Friend and had two meetings with him. I believe that even his right hon. Friend the Member for Devon, North would not dare to accuse the Minister or the Department of discourtesy. They have been considerate and kind to the hon. Gentleman.

It would not be right for me to comment on the proposals now, because the Government have made it clear that they are not in any way committed to what the Egg Board proposes. We hope that people will comment constructively so that a decision can be made in the light of the views of all who may be affected.

The hon. Member for Cornwall, North has certainly put forward a case on behalf of the Western Egg Pasteurising Co. Ltd., but I cannot accept what he has said. As I have already explained, the Committee of Investigation's Report, with which we are concerned this afternoon, commented on the whole question of the contractual arrangements for egg processing that were introduced under the Seconds Scheme. The Report contained nothing which calls for special treatment for individual complainants and I cannot accept that the Government have an obligation to make any special provision for Western Egg.

The Committee did not in any way change the findings of its first Report, which was specifically directed to the affairs of Western Egg. Indeed, as I have quoted, the Committee, using the very considerable knowledge that it had about Western Egg, observed that that company would not have satisfied the Board's requirements even if tenders had been invited when the Seconds Scheme was introduced.

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

Adjourned at twenty-seven minutes to Five o'clock.