AGRICULTURE (CEREALS PAYMENTS) (Hansard, 17 June 1968)

§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy)
I beg to move, That the Cereals (Guarantee Payments) (Amendment) Order, 1968, a copy of which was laid before this House on 22nd May, be approved. The provisions of the Order are quite straightforward. They concern the arrangements for calculating and paying to growers deficiency payments on wheat and barley which were originally set out in the Cereals (Guarantee Payments) Order, 1964, when the standard quantity/ target indicator price arrangements were first introduced.
The need for this amending Order arises from the changes in these arrangements following the determinations of Ministers which were announced following the 1968 Annual Review. In the 1968 Annual Review White Paper, the Government set out the measures to be taken to give effect to their policy of encouraging a further expansion of cereal production, particularly of wheat, to meet the growth in demand, while maintaining necessary safeguards for the Exchequer.
In the Order now before the House, provision is made for the abolition of the standard quantity for wheat, the ending of the arrangements under which, in certain circumstances, the deficiency payment on wheat or barley is increased if the average realised price exceeds the target indicator price, and the ending for wheat, but not for barley, of the arrangement under which, when annual production is below the standard quantity and the average realised price is below the target indicator price, the deficiency payment is abated within a range of production determined by Ministers.
The provisions relating to rye, oats and mixed cereals remain unchanged.
I commend the Order as a necessary step in the fulfilment of the Government's announced intention of promoting the expansion of cereals production and, in particular, that of wheat.

§ Mr. Michael Jopling (Westmorland)
We are grateful to the Joint Parliamentary Secretary for explaining what the Order does. A number of questions arise. One of our difficulties is that of understanding the jargon that has grown up in the cereals deficiency payments scheme. Odd phrases like " target indicator prices", " minimum import prices ", " realisation prices " and " standard quantities " do not help to make for a simple system of agricultural support.
These "in" jargon phrases seem to bring with them all sorts of other complicated calculations. Even the Parliamentary draftsmen, who are usually streets ahead of us in their thinking, can make a mess of drafting these Orders. I expect that the Parliamentary Secretary will remember something that occurred two years ago on the Order, which is referred to in Article 2 of this Order. Following an error which occurred in that Order, the relevant provisions are consolidated in Article 2 in the new 4(2)(a). The original Order allowed the Government to pay out more deficiency payment than farmers were entitled to.
I remember having a great argument with the Joint Parliamentary Secretary. I said that if farmers demanded more subsidy than had been paid and which everybody agreed they should be paid they would be entitled to get it. The phraseology of the original Order has had to be changed. We never got an answer as to whether it should read that the deficiency payment be made on the proportion that the annual production bears to the standard quantity or the other way round, as it used to be.
I remember my hon. Friends the Members for Runcorn (Mr. Carlisle) and for Norfolk, South (Mr. Hill) supporting me on that occasion in arguing that, if a farmer had wanted to be tiresome, he would in law have been entitled to extra deficiency payments in view of the mistake earlier made.
The Order is intended to help orderly marketing through the use of the target indicator prices referred to. Here, in the context of target indicator prices, the background of our cereal market at the moment is one of uncontrolled imports of French wheat which are making orderly marketing almost impossible. 861 Our markets today are being ruined by completely uncontrolled imports of wheat, particularly from France. The restitution price in France, in the European Economic Community, has sometimes been greater than the export price which our importers pay. The Government have shown themselves indifferent to the blatant dumping which has been going on and about which we on this side have protested.

§ Mr. Speaker
Order. We cannot discuss import controls on this Order.

§ Mr. Jopling
I am sorry, Mr. Speaker.
The Order itself falls broadly into two parts. What will be the net effect on agriculture of the two principal parts and the changes which the Order will make? I know that the details of the Order were agreed with the National Farmers' Union during the Price Review negotiations, but what does the effect of the Order add up to?
The standard quantity for wheat is abolished by the Order, and we on this side welcome the opportunity to be given to farmers to grow more wheat. There is scope for more wheat to be used in feeding stuffs than in the past. I am sure that most compounders will agree that we have not been putting enough wheat into our feeding stuffs and that there is great scope there. Again, we all hope that millers will in future be able to use a larger proportion of home-grown wheat in the grist. There are new techniques which will allow this to happen. The incentive to grow more wheat which the Order will give will, I hope, allow more to be used in both feeding stuffs and in the flour grist.
There is a financial advantage to the farmer in the abolition of the standard quantity for wheat. Taking the average over the last four years, and, perhaps, giving the figures separately, I should like the Minister to tell us what the abolition of the standard quantity will be worth to agriculture.
The second part of the Order is not on the positive side from the point of view of the farmer's financial status. Where the deficiency payment for wheat and barley is greater than the realised price and it exceeds the target indicator price, the present arrangement will be ended. Here I refer to the Price Review White 862 Paper for 1968, which foreshadowed the alteration now made in this Order. In part of paragraph 49 we read: … in consideration of the abolition of the standard quantity for wheat and the increase in the standard quantity of barley, the arrangements under which, in certain circumstances, the deficiency payment on wheat or barley would be increased if the average market price exceeds the target indicator price will be ended. The appropriate words there are: … in consideration of the abolition of the standard quantity for wheat and the increase in the standard quantity of barley … The White Paper makes it quite clear that this is a debit to the farmer's financial account to take off the advantage he is being given by the abolition of the standard quantity.
Having asked the Minister to tell us how much the farmers will be better off by the abolition of the standard quantity for wheat, I must ask him how much they will be worse off, by the ending of this arrangement which we have had over the years. I think that there will be a considerable loss to farmers through the second part of the Order which ends the previous arrangement whereby the deficiency payment is increased if the average realised price exceeds the target indicator price.
I have been looking at some figures the Minister gave me in a Written Answer today, for which I am grateful to him. They show very vividly how much the average realised price over the three years for which we have figures —the harvests of 1964, 1965 and 1966— exceeded the target indicator price. I have worked it out that over those years, ending in the harvest of 1966, the average excess of the realised price over the target indicator price was Is. 3d. a hundredweight for wheat and 2s. 2d. a hundredweight for barley. This arrangement is to be ended. In the past we have had an increased deficiency payment because farmers had marketed their grain rather better. Therefore, the effects of this part of the Order will be a debit in the farmer's financial status. How much will that be? I do not want to make a great issue of this, but it is important for us to know.
I understand that the Order must be seen in the context of the Price Review and the alterations in the guaranteed prices for cereals which accompany it, 863 which are referred to in the paragraph of the White Paper that I quoted. Although we must see it in that proper context, we must question what the Order concerns itself with and how it will affect the future. Great changes are taking place at present in cereal marketing. The Order deals very much with the effect of the target indicator prices and the arrangements for paying the deficiency payments, but it is quite clear that the target indicator prices will be changed in the next few weeks, because the White Paper also envisaged alterations in the minimum import prices. We on this side of the House are opposed—

§ Mr. Speaker
Order. We cannot debate the White Paper on the Order.

§ Mr. Jopling
I am aware of that, Mr. Speaker. I was about to say—and I have here a note that says—" but I will be out of order if I refer to that." I do not want to enter into the thorny argument you have heard many times as to whether our agricultural support programme should be based on levies.
Whether we do it by levies or minimum import prices, it is the target indicator prices that are so much a part of the Order that set the tone in the market, and since devaluation they will have to be changed. Negotiations are going on between the Government and our overseas suppliers of cereals about changes in the minimum import prices, but the harvest is only four weeks away. I spoke to a Member tonight who said that he thinks that in four weeks' time he will be starting to harvest. Why have not we been told what the new level of minimum import prices will be? The lack of warning given to the industry about the new bottom in the market, which is so important to the working of the Order, is scandalous. Adequate warning is not to be given to agriculture and the trade in particular.
Why have the Government not already announced them? They began the negotiations in February or March, but we have heard nothing yet and we are in face of the harvest.
The Government are prepared to be very tough with Rhodesia. I hope that we shall be assured that they are prepared to be equally tough with our 864 grain suppliers and that we shall know very shortly what is to happen.
We have to accept the Order tonight, but we must use the opportunity to draw attention to the indecision and shillyshallying which are upsetting the market and, in face of the harvest, are not giving farmers proper warning of the tone of the market they may expect in the new year.

§ Mr. Marcus Kimball (Gainsborough)
This Order arises out of the Price Review and the little importance attached by the Minister to the Price Review is shown by the fact that we have not yet debated this year's.
I am in a minority in saying I am sorry to see the standard quantities go for wheat. The system had far greater merit than most people admitted. The whole essence of the Order and its effectiveness depend on the fixing of minimum import price levels. We do not yet know what those levels will be.
There was an article in the Financial Times by its Agricultural Correspondent on Thursday which made it clear that, in his judgment, the announcement of the minimum import prices by the Government was already too late. He produced a complicated argument to show that, even if they were announced now, they could not be effective until the middle of September.
In view of the sort of harvest we look like having, this will be far too late. All the indications are that we are in for a bumper harvest. We have had the best growing summer for a long time. The Government will be embarrassed by vast quantities of grain and the least they can do is to put a bottom into the market by giving confidence to the agricultural community and announcing the minimum import prices as soon as possible.

Mr. John Fan (Harborough)
Contrary to my hon. Friend the Member for Gainsborough (Mr. Kimball), I welcome the ending of standard quantities for wheat because there is need to encourage more production, especially in all the new and exciting varieties which can possibly be substituted for imported hard wheats.
The question of minimum import price levels is of vital importance. Already 865 in my view it is too late possibly to be of real use to announce what these price levels are to be.
While I welcome the Order generally, I believe that great importance will be attached to the target indicator prices. I hope the hon. Gentleman will give us more information on the mechanism by which these will work. How will they be calculated? Who will do the calculations and how often? This is of great importance because the payment received by the grower will depend in many cases on the target indicator price level.

§ Mr. Paul Hawkins (Norfolk, South-West)
I am glad that this Order shows that the Government want us to grow more wheat. I come from an area where large quantities of wheat are grown, not only on the traditional Fenland, but in area which ten years ago were quite unsuitable for wheat. They are sneeringly referred to by my friends as the Highlands of Norfolk—they are about ten to 15 feet higher than the Fens. This summer on many of the lighter lands of Norfolk there are some wonderful wheat crops. But we still have large quantities in the corn merchants' hands and they cannot get it to the miller.
Our concern is that while we are asked to grow larger crops, and being encouraged to do so by this Order, which I welcome, the practical effect of Government policy over the past winter has been that masses of corn remains in the hands of the corn merchant, who are penalised because they cannot deliver it to the millers. This is because the millers are full of French wheat. I have had complaints from merchants and fanners about this. I hope that the Minister will give us some assurance that a "bottom" will be put into the market.
There is mention of the target indicator price. The minimum import price level has to be announced. Without it we will not have the confidence to grow more wheat. We can grow a lot more per acre, and a lot more on land which would have been unsuitable ten years ago. In my constituency and home town, the major miller, which is part of a large concern, buys nothing but English wheat for biscuit flour. There has been uncertainty during the winter, when we have put up silos and built stores at great expense to farmer and taxpayer, through 866 grants, only to find we could not get rid of the wheat. Fanners will not grow more unless they are certain of being able to sell it. We want some announcement about prices.

§ Mr. Peter Mills (Torrington)
I, too, welcome this Order. I find it slightly complicated, perhaps because I am rather tired. It is the sort of Order that it is necessary to explain to the farming community in the trade Press. I hope that the Minister will do this. Most farmers know the meaning of " standard quantities " and " deficiency payments ". The phrases "target indicator prices" " within the range of reductions determined by the Minister" and other phrases ought to be carefully explained to the farmers to enable them to understand the Order.
The Order is not of much use unless import prices are dealt with. The two go together; they cannot be separated. The Government have failed to deal with the minimum import prices. I read in my Daily Telegraph today that this is due not only to this Government but to pressure by the American Government, and that it is causing chaos in Britain's grain market by refusing to agree to reasonable minimum import prices for cereals sent to Britain. We ought to be told what the Government propose to do about minimum import prices, otherwise the Order will not be of much use.
I understand that British farmers have been advised by their unions not to sign forward contracts for this year's grain until the minimum import price has been agreed. The harvest will soon be upon us in some favoured areas, and it is time the Government made up their mind whether to resist the pressure from the Americans. I do not blame farmers for refusing to sign forward contracts. They do not know what the position will be, and if they signed now and there were an increase some farmers would suffer considerably. If the Minister cannot tell us tonight, he ought to say that he will let us know within the next week or so what he proposes to do.
On the question of the abolition of standard quantities, I disagree with my hon. Friend. The position has changed so rapidly that standard quantities ought 867 to be eased, and I welcome the relief that the Order provides. British agriculture needs confidence. It is no use producing wheat and barley if the more that is produced the more the price is diluted. The Government have said that they want us to produce more, but what is the use of doing that if the price is to be diluted? British agriculture would be prepared to expand even further the production of wheat if invited to do so. The official estimates show that expansion has slowed down overall, and this is why the Order will help. There is no doubt that British agriculture could expand and help with the balance of payments position. The productivity of the British farmer is such that £4 worth of imports can be saved for £1 worth of materials, wages and work. No other industry can produce comparable results, and in this way British agriculture can help with our balance of payments.

§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie)
Would the hon. Gentleman reveal the source of that information?

§ Mr. Mills
If the hon. Gentleman cares to look at today's Daily Telegraph, he will see it all set out clearly there. It surprises me that the hon. Gentleman should not be reading the Daily Telegraph and other newspapers and be up to date on the information contained in them. It is clear that he is not doing his homework.
I believe that this Order will help stimulate the growing of cereals, but, unless the Minister is prepared to deal with the minimum import price problem, the Order will not be of much use. If he can deal with it, it will be a success.

§ Mr. Hoy
Mr. Deputy Speaker, I would like to reply to the matters raised in the discussion, and I will take them in turn.
The hon. Member for Westmorland (Mr. Jopling) said that the Minister, "if he is honest", will agree. That is the only comment of his to which I take exception. I have always taken it for granted that he thought that everything that I said was honest. I can only think 868 that it was an example of rhetoric on his part.
There are jargon phrases in connection with this, and I did not think that he would object. Most of them come from the Common Market, and I understood that he was an expert on target prices, indicator prices, and so on. But I agree with those who voiced the criticism that it is sometimes difficult for ordinary farmers to understand.
I turn straight away to minimum import prices, because they are the key to the whole question. We have had the subject raised on a number of occasions, but I object to the hon. Gentleman and his hon. Friend the Member for Torring-ton (Mr. Peter Mills) saying that the Government have shilly-shallied on this issue. That is complete nonsense. We are now working under the arrangements reached between the Government of hon. Gentlemen opposite and those who were parties to the Bilateral Cereals Agreement.

§ Mr. Hawkins
Then, speed it up.

§ Mr. Hoy
It is all very well for the hon. Member for Norfolk, South-West (Mr. Hawkins) to say that we should speed up. What he is really saying is that his Government made a hash of it, and he now wants the Labour Government to put it right.
I recognise the desirability of introducing minimum import prices in time for the harvest, so that fanners know where they stand. I had hoped that it would be possible to announce them before now. However, we are bound by the terms of the agreements entered into by the previous Government in April, 1964, with our four main overseas suppliers of cereals—Argentina, Australia, Canada, and the United States.
The general level of minimum import prices cannot be fixed without the agreement of the four countries concerned. I am sure that the House would agree that it would be undesirable to make an announcement at the cost of accepting unsatisfactory levels for minimum import prices. I hope that I have the House with me on that. It may take us a little longer to get what we require, but, if we entered into a quick arrangement which proved unsatisfactory, while we 869 might get an agreement, it would not be the one that we all desire.

§ Mr. Anthony Stodart (Edinburgh, West)
Is the hon. Gentleman aware that six weeks' notice is required of a change in the minimum price? As my hon. Friend the Member for Torrington (Mr. Peter Mills) said, the harvest in England is due to start in about a month. At what time did the Government begin negotiations on a new minimum import price, and is it not the fact that they have left things far too late?

§ Mr. Hoy
With respect, we started them a considerable time ago, and we are bound by the agreement referred to. We cannot get out of it unilaterally. We have to do this in conjunction with the people with whom the agreement was made in 1964.
We have said that we hoped to give the farming community six weeks' notice of any change in the minimum import price. This, we think, would be absolutely fair. Obviously if people enter into business agreements they have to have notice. This is where the six weeks question came in.
The hon. Member for Torrington said that he had a friend starting harvesting in a month from now. I am sure the hon. Member for Edinburgh, West (Mr. Stodart) will agree that not all harvesting will start four weeks from tonight. We hope to be able to give the industry the six weeks' notice, because we know how important it is.

§ Mr. Stodart
Even if that is possible, does the hon. Gentleman appreciate the damage that has been done, and is continuing to be done at the moment, by the utter inability of the trade to buy ahead, because fanners are sensibly not making any advance contracts?

§ Mr. Hoy
The hon. Gentleman does not do us much credit when he asks whether we realise this. Of course we do. What the hon. Gentleman should say is that the Government of the day would be bound by the agreement entered into in 1964. The hon. Gentleman could not have got out of it. Nor could any Government of any political persuasion. We have had to accept the agreement entered into by the party opposite in 1964. It is that which binds us. As a 870 result of what takes place, we hope to get new minimum import prices. We are quite aware of the importance of this to the industry.
We had one or two differences of opinion—

§ Mr. Farr
Is it not a fact that this agreement, which was entered into in 1964, is subject to annual review?

§ Mr. Hoy
Indeed, it is subject to annual review, but it is not for us to fix the annual review when we want it. There is a fixed period for annual review. We cannot suddenly decide we had better have an annual review two months after another year has begun. We have to abide by the annual review decision. This is considered every year. It is done for twelve months. There is a period for doing it, not just when we like.
We have made it clear to the countries with which we entered into negotiations that we want a new minimum import price. We want to do it as quickly as possible, but we cannot do it unilaterally. We have to do it in agreement with the countries which signed the agreement in 1964.
The hon. Member for Gainsborough (Mr. Kimball) said that he opposed the abolition of standard quantities. He thought that they were a very good thing. On the other hand, I think that the country as a whole has welcomed the abolition of standard quantities concerning wheat. Indeed, the country has welcomed what the Government have done. I ask the hon. Gentleman to remember that when we decided to put up the standard quantity of barley by three-quarters of a million tons, this was the biggest increase that there had ever been. I should have thought that that would have commended itself not only to the House but to the farming community.
The hon. Member for Norfolk, South-West talked about prices, and the carry over from one season to another. I do not accept that there have been any real difficulties in disposing of wheat this year. The figures do not suggest that. Imports of low-priced continental wheat have caused some fall in the domestic market price, but the actual quantities have not been abnormal. It must be remembered, too, that domestic wheat growers are protected by the guarantee arrangements.
871 I was a little surprised to hear the hon. Gentleman talking about people exporting to this country. He must remember that it is necessary to have a buyer here. I wonder whether the hon. Gentleman has considered who is buying this wheat? Perhaps he might like to consider that.

§ Mr. Hoy
All I am saying is that there are certain people in this country who are prepared to buy this wheat. It may be the millers from Norfolk whom the hon. Gentleman knows who are buying it. The home grower has the protection of the minimum import price, and I hope that there will be some change in the minimum import price which will give some further guarantee to the home producers.

§ Mr. Hawkins
The point I was trying to make was that there were great difficulties in getting the wheat away to the millers. I have had no end of complaints about this, and so has the Cereals Board with whom I have discussed the difficulties of shifting the wheat. Many people have been made to pay penalties because they have not been able to shift the wheat. The matter which has depressed the price has been the offer of this cheap French wheat to the market.

§ Mr. Hoy
The hon. Gentleman has added nothing to his original statement. Somebody is buying the wheat. It may be the millers about whom the hon. Gentleman was talking. Perhaps the hon. Gentleman can tell me whether they are buying it. All I am saying is that our industry still has the protection of the minimum import price.
I have been asked when the Government will announce their decision on minimum import prices. We realise how important this issue is to the industry. We have been in negotiation for some time, and the matter has to be settled under the terms of the Cereals Agreement. Hon. Gentlemen and the House cannot escape from the fact that we cannot get out of the agreement entered into by the then Conservative Government.
We hope that it will be possible to make an agreed statement very soon. There have been certain limitations with regard to America—I am glad that the hon. Member for Torrington agrees with 872 me—but when the matter has been settled —and a decision was made in America last week—we hope to deal speedily with the matter. I hope that it will be possible to make an early announcement about this project, but I should not like to put a specific date on it. I realise how important this is to the industry. We shall deal with the matter as speedily as we can, and let the House know the outcome.