HC Deb 30 November 1967 vol 755 cc797-806

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

10.45 p.m.

Lord Hamilton (Fermanagh and South Tyrone)

At the outset I must make it plain that I have no objection to the principle of the Anglo-Eirean Free Trade Agreement. On the contrary, I am in favour of full co-operation with Eire in trade, commerce and tourism from which both countries can derive considerable economic advantage. I am also aware that in any trade agreement there must be some degree of quid pro quo.

My main criticism lies in the lack of implementation, or rather enforcement of the Agreement by the Government. There is no doubt that British industry has derived considerable advantage from the Agreement at the great expense of the Ulster farmer. The Agreement has had an adverse effect on every section of the industry, and it has hit in particular the beef producer who at present is being paid approximately 20s. per live cwt. less than his English counterpart. This is particularly serious since the beef industry amounts to £20 million per annum of the total agricultural production of well over £100 million, with current exports running at £78 million per annum.

Our grassland is our greatest national resource, the production of livestock and livestock products being the backbone of the agricultural industry. Beef production is steadily increasing for the prospects of increased production of fat cattle and sheep are better than for other commodities, which are far more dependent on essential imported feedingstuffs. Since in Ulster there is no cheap home-grown barley market, if the United Kingdom should enter Europe at a later date, there is no doubt that there would be a sharp rise in imported feeding costs, resulting in beef production being the lone benefactor of all the commodities which we produce in Ulster.

I fully appreciate that the findings on page 52 on the "Production and Marketing of Northern Ireland Meat," identifies several reasons for the current depression in the dead meat industry, but I am convinced that the main reason for the present state of the dead meat industry is the failure of the implementation of the Agreement. This is clearly and clinically emphasised in the paragraph on guaranteed payments: The effect of making payments to meat plants in Eire and to producers in Northern Ireland is to give a financial advantage to meat plants in Eire because the guarantee payments enable them, if they wish, to pay higher prices for their cattle and/or sell at lower prices. The increase in guarantee prices which became effective on 28th March, 1966, has aggravated the situation that existed previously as there is only an advantage to the meat plants in Eire during a period when guarantee payments are being made. It is implied by the Anglo-Irish Free Trade Agreement, which came into force on 1st July 1966, that the United Kingdom Government has accepted the way in which guarantee payments are distributed in Eire. This perpetuates a situation which is extremely detrimental to Northern Ireland's meat plants. The deficiency payment, therefore, enables the Eire meat plant operator not only to attract greater supplies but also to capture a bigger share of the British market. During the year July, 1966, to June, 1967, 67,000 tons of meat were sold in Britain by Eire, as against the 25,000 tons referred to in the Agreement.

I draw the Minister's attention to Article 4 on page 75 of the Agreement, dealing with store animals and carcase meat, in which it is clearly stated that the number of store cattle exported from Eire into the United Kingdom in any one year should not fall below 638,000. To date, this figure has not materialised. However, prior to the Agreement, 635,000 were exported in 1964, 437,000 were exported in 1965, and in 1966, the first year after the signing of the Agreement, only 425,000 animals were exported. I understand that the agreed figure will not even be achieved in the current year.

I am fully aware that the Eire Government were subsidising their meat plants as from February, 1965, prior to the implementation of the Agreement. At that time, the subsidy was relatively small, but it is now running at a far higher level as a result of the deficiency payment being paid by the Eire Government to the Eire dead meat plant operator as opposed to the fat cattle producer. The result of the misuse of the deficiency payment is clearly shown in the quoted figures.

Furthermore, I contend that it is impossible for any Ulster plant operator to compete against these conditions. The price of cattle has been approximately the same in Ulster and Eire, but in Northern Ireland the farmer gets the deficiency payment whereas in Eire, the plant operator receives this payment. Let me illustrate what happens by example. Let us assume that the price of cattle equals 2s. per pound meat value. The Ulster plant operator pays 2s. per pound, and the Ulster farmer gets a deficiency payment, which rose to 11d. a pound in July. I take 11d. per lb., therefore, as the yardstick. The Eire plant operator pays the same 2s. per lb., but he receives a deficiency payment of 11d. for himself, making the cost of cattle not 2s. but 1s. 1d. per lb. for meat.

Assuming that the deficiency payment is 11d. per lb., the Eire operator has 11d. per lb. in his pocket, to use it to manipulate the market according to his desire. He can keep the whole of the 11d. or he can reduce his price in the United Kingdom to cover a portion of the 11d. or he can pay the whole 11d. or a portion of it to the farmer. He has, in fact, used the a portion of the 11d. during periods of heavy supply to help himself, also paying the farmer something from time to time.

What is more disastrous, he can use it to undermine selling prices. For, assuming the Eire plant operator keeps the whole of the 11d., and assuming his meat costs come down to Is. ld. per lb., as I have already explained, the Eire plant operator could sell at any price over the equivalent of 1s. 1d. per lb. This, of course, is totally disastrous to the level of English meat prices, and, what is more, ensures as a result that the British Ministry of Agriculture pays a far higher deficiency payment than it would otherwise do.

To illustrate the extent of the deficiency payment remaining in the hands of the Eire meat establishments, it is estimated fairly accurately that with the 10,000 ton shipment in August, and the payment retained by the plants in August was approximately two pence per lb., the gift to those establishments amounted to about £200,000 in that month alone.

The Eire Minister of Agriculture said recently in the Dail that payments to licensed meat exporters during the 22 months from 1st February, 1965, to 17th November, 1967, solely on meat shipped to the United Kingdom, amounted to over £6 million. No further comment should be necessary to proms the seriousness of the current situation. No one can contend that this detrimental situation constitutes fair competition as agreed by both parties in Article 13 of the Agreement. Eire has so far failed to export to the United Kingdom the agreed figure of 638,000 store cattle per annum. That is contrary to the spirit of the Agreement. The principle is simple; it is that Eire should supply the stores and the British farmer should finish them off. Both the Ulster farmer and the dead meat operator are waiting impatiently for a genuine effort by the Government to ensure that the Eire Government produces the necessary fair competition, as described in Article 13.

If the Government cannot administer this part of the Agreement, it should never have been entered into, since Eire has obviously no intention of respecting this part of the Agreement. Before signing it, the British Government should have decided with the Eire Government the exact way in which the deficiency payment would be used, and have it clearly stated in the Agreement. The need for consultation in Article 23 would then have been minimised. I do not understand why the Government have not been more successful in their protracted consultations with the Eire Government and have failed to enforce the implementation of the agreement, since about 70 per cent. of Eire's trade is still directly linked with the United Kingdom. Surely the Government are in a position to negotiate and consult from strength?

The Government must also realise that at present the agricultural fund of the Common Market is being used to assist the expansion of the dead meat industry on the Continent, and that the Ulster dead meat industry has an export potential of virtually 100 per cent. of its production. If the industry were really thriving and fully competitive it could export carcase meat to practically every country in the world, thereby earning much-needed foreign currency, instead of selling livestock to Eire for sterling.

As a result of the 1958 Northern Ireland Diseases of Animals Act, which is being stringently and effectively applied by the Northern Ireland Ministry of Agriculture, Northern Ireland is in a most favourable position for exporting disease-free meat, a most important factor resulting in markets that are closed to Great Britain being open to Northern Ireland.

Through the rapid development of containerisation and air freight, combined with spiralling freight costs, especially to the Continent—there was an increase of 15 per cent. last week—the export of meat on the hook must be regarded as a vital outlet of the future, both by the farmer and the Government. The old-fashioned method of exporting fat cattle on the hoof is not only uneconomic, inconsistent and inefficient but also thoroughly inhumane. Shipment on the hoof costs 13s. per cwt., compared with 8s. per cwt. in carcase form.

I am convinced that the existing disparity in the price of fat cattle between Northern Ireland and England could be minimised if our meat plants operated at full capacity and maximum efficiency since when it is necessary to ship fat cattle on the hoof, it is obvious that the shipper must at least recover his costs for transportation and marketing of the animals, and the result is that a lower price is being paid to the livestock producer. I look forward to the day when this method of transportation is nothing but a relic of the past.

Since livestock is one of our few raw materials, it is not only obvious but also essential that the maximum amount of processing should take place in Northern Ireland, providing the maximum amount of employment. At present there are about 1,000 persons employed in the industry, but if our plants were working to full capacity at least 3,000 would be employed in this vital sector of the industry. This, however, must be regarded as a conservative figure as the potential employment in meat boning for the United States market alone could well exceed 1,000 additional jobs, and the eventual manufacturing of meat canning, castings preparation and possible expansion of the leather industries should provide literally hundreds more jobs.

This potential, however, will not materialise unless the Government ensure that the Exchequer subsidy is paid direct to the livestock producer and not to the Eire dead meat operator, for unless the present system of payment is changed, there is only one inevitable outcome—the death of Ulster's dead meat industry and, with it, the hopes of reducing Ulster's unemployment problem. Doubtless the Minister is fully aware that Emdal's of Newry was forced to cease production and that Ulster's dead meat industry receives considerable capital investment grants amounting to well over £1 million to date. Thus there is the ridiculous situation at present whereby the Treasury is cutting its own throat.

Finally, I remind the Minister that unless the Government take the necessary action that I have called for this evening, Ulster will sink into a farm economy purely to supply cattle and other livestock for the subsidised Eire meat plants. This would be tragic for, as I have already intimated, Ulster is ready for a big expansion of beef production. It already supplies 28 per cent. of the British market. But the benefit of such an expansion, if it should occur under the present system, will accrue solely to the owners of the Eire dead meat plants and not to the Ulster fat stock producer.

11.3 p.m.

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

I am grateful to the hon. Member for Fermanagh and South Tyrone (Lord Hamilton) for raising the subject tonight, and also for the way in which he delivered his speech. May I add my thanks, too, to him for telling me previously a great deal of what he intended to raise in the debate. That is helpful to an Adjournment debate, and the more there is of it the more we can exchange views.

I liked the way in which the noble Lord opened his speech, because he made it clear that he believed in the greatest co-operation between Ulster and Eire and that he wanted nothing but friendship and interchange of trade, not only between Ulster and Eire but between those countries and ourselves. Because of that opening of his speech, I also listened with interest to what he said about the Anglo-Irish Free Trade Area Agreement, and the difficulties of the Northern Ireland meat plants, which he claimed have flowed from it. The only point on which I would seek to differ from him arises from his comment that great industrial benefits had come to Britain as a result of the Agreement. I will not at the moment say "yea" or "nay" to that, but when he went on to say that this was at the expense of agriculture in Ulster, he and I parted company.

Let me say at the outset that I am well aware that the dead meat industry in Northern Ireland has very real problems which have to be met and overcome. I would not seek to dispute that. What I cannot accept, however, is that the Anglo-Irish Free Trade Area Agreement, or more particularly the Agreement on Store Animals and Carcase Meat, which came into effect in July 1966, just 17 months ago, is in itself the cause of all the troubles which the Northern Ireland meat plants are facing.

We must be clear what this Agreement involves. First, we agreed that the period for which store cattle and store lambs have to be resident in this country before they qualify for our fatstock guarantee scheme should be reduced from three months to two months. The hon. Member said that we should encourage trade in stores, and this is just what this does. It clearly increases the attractiveness of our store market to the Irish producer. At the same time, the Irish Government represented to us that their meat plants were then already at a disadvantage in getting supplies of cattle because of the pull of our store market and that this change would make it more difficult for them to get their supplies.

In the light of this, we undertook, under Article 2 of the Agreement, to pay the Irish Government—not to their meat plants, not to the producers, but to the Government—a sum equivalent to the average rate of our guarantee in respect of up to 25,000 tons of carcase beef and 5,500 tons of carcase lamb imported into the United Kingdom from the Republic in any fatstock year.

Mr. Henry Clark (Antrim, North)

In addition to the provisions of the Anglo-Irish Free Trade Agreement, one of the advantages which my noble Friend failed to mention was that for three Years, and not just 17 months, Southern Irish meat plants have enjoyed the advantage that cattle coming from Northern Ireland received the export rebate. This has been a material benefit when bidding for cattle in a tight market.

Mr. Hoy

I was not on that point. In any case, as the hon. Gentleman knows, the export rebate has now gone. At least, he does not have any difficulty on that point.

The use to which this money is put is subject to consultation between the two Governments from time to time. It is not determined in the Agreement, and I want to make that perfectly clear.

For their part, the Irish Government undertook to use their best endeavours, consistent with the circumstances of the trade, to ship at least these quantities of meat, and, as I have already mentioned, to ensure that the number of store cattle sent here should not fall below 638,000—the 1964 figure—in any calendar year. Therefore, the noble Lord and I are in agreement about the numbers which were, in fact, suggested.

In 1965 and 1966 store imports, as he said, fell to much lower levels, but in 1967, the first full calendar year of the Agreement, we expect that imports of stores will be well over 600,000 head; so that he will realise that we are getting very near the figure that they agreed to supply as a best endeavours agreement. This is encouraging, since these stores are an integral part of our pattern of livestock farming. I am certain that the noble Lord would not disagree with that.

I will now turn to the payments which the Government of the Irish Republic makes to its meat plants, the subsidy about which the noble Lord is concerned. These payments began in February, 1965, well before the Free Trade Area Agreement came into effect, and are made out of the Republic's Exchequer. That date should be noted.

Lord Hamilton

I mentioned it in my speech.

Mr. Hoy

The noble Lord may have mentioned it, but I think it well to put it on record that this started before the Agreement was signed.

These payments were introduced as being intended to help their meat factories to compete for supplies against the pull of the United Kingdom market for store cattle. When the Agreement came into effect, we agreed with the Government of the Republic that they should use any money due to them under Article 2 to meet part of the cost of this scheme.

With exports of carcase meat beef to this country at their present levels, we expect our payments this year to represent just about a quarter of the cost of this scheme to the Irish Government. It was the case, therefore—and this is the important point of clarification which must be made—that the Agreement itself did not bring about any change in the terms of trade in carcase beef. This is not to say that we have been unconcerned about the effects of the Eire carcase meat subsidy. Since this was introduced the deficiency payments to which it is geared have often been at high levels, and it has clearly brought about a shift in the balance of trade in this sector.

The volume of carcase meat shipped to this country has increased considerably and, at times, this has had a clear effect on prices on our markets. As hon. Members will be aware, my right hon. Friend has for some time been engaged in discussions with the Minister of Agriculture in the Irish Republic about the whole question of the phasing and balance of supplies of Irish cattle and beef to our market. This point has been raised not only by hon. Members for Ulster but by hon. Members representing constituencies in this country. We have been particularly concerned about the effect of the Eire subsidy when it was running at high levels, and this has been a material point in these talks. The implications of this subsidy for Northern Ireland have also been very much in my right hon. Friend's mind. Discussions are, however, continuing and hon. Members will not expect me to say any more about this tonight.

What I want to make clear, however, is that none of this calls in question the Agreement itself. It is important to keep this matter in perspective. It is clear that the problems of the Ulster meat plants cannot be attributed to a single factor. They arise from a combination of factors. The report on the meat plants in Northern Ireland produced by a firm of independent consultants in Autumn 1966, which appeared as an appendix to the overall review of the meat industry published by the Northern Ireland Government earlier this year, brings this out very clearly.

Primary responsibility for this industry rests, of course, with the Northern Ireland Government. As I understand it, they are taking action to help the plants through their present difficulties and to encourage efficiency and thereby promote a strong foundation on which the industry can develop. These measures show the concern which the Northern Ireland Government have for the future of their meat industry and, if any assurance is necessary, I can tell the noble Lord and other hon. Members for Ulster that that concern is fully shared by us.

We want to do what we possibly can to help, and there is no lack of effort on our part. We shall continue the talks, as my right hon. Friend is doing, and I hope that, as a result of our joint efforts, we will find a solution that will prove satisfactory not only to the people in Eire but to the people in Ulster. If we can, and have achieved something in that direction tonight, I say to the noble Lord once more how grateful I am to him for raising this matter and hope that as a result of the discussions we shall have something further to report. I hope that when we do it will bring him and Ulster some satisfaction.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Eleven o'clock.