§ 10.10 p.m.
§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy)I beg to move,
That the Amendment of the Milk Marketing Scheme 1933, as amended, a draft of which was laid before this House on 29th October, be approved.
§ The Milk Marketing Scheme—[Interruption.]
§ Mr. SpeakerOrder. We still have more work to do.
§ Mr. HoyThe Milk Marketing Scheme for England and Wales came into operation in 1933. Since then, all producers of milk for sale have been required to register with the Milk Marketing Board. The board controls the sale of milk off farms and ensures that it is sold so as to secure the best obtainable return for producers. It buys all milk produced for sale by wholesale and grants licences to those producers who wish to sell their milk by retail. Distributors and manufacturers buy from the Board.
My right hon. Friend controls both the board's first-hand selling price and the maximum retail prices of milk for liquid consumption in England and Wales, as well as the margins allowed by the board to distributors and depots; the board negotiates the best prices it can get for milk going for manufacture; these vary according to the product for which the milk is to be used.
Demand for the liquid market in England and Wales is steady at something over 4 million gallons a day. But milk production is highly seasonal, so that providing for this consumption in winter means that a surplus arises in spring and early summer. Further, the total output over the year cannot be precisely controlled. So it is essential to have a reserve of production over the requirements of the liquid market. At the seasonal peak, the flow of milk coming off farms can be so great that manufacturers may be hard pressed to deal with it. For all these reasons the board undertakes some manufacturing regularly, and also owns factories and plant which are brought into use at peak periods only.
176 The board also has a large transport fleet and some wholesale and retail depots. Its transport consists, to a large extent, of tankers designed to collect from bulk tanks on farms; these tankers are specialised and expensive and the board has not found private hauliers very ready to invest in them. The board originally acquired retail businesses in settlement of debts for milk supplies: it then took a small interest in wholesaling and has since acquired more retail businesses to keep its wholesaling viable.
But these interests are small. Board wholesaling accounted in the year ended 30th September, 1969, for only 3.5 per cent. of all liquid milk sold by wholesale. The board is not empowered to issue shares on the market, though it may borrow. It therefore finances its capital investments by raising money from registered producers. Under the original scheme of 1933, the board could require each registered producer to contribute up to 1s. annually for every milch cow. From this, the board had to finance its investment, administrative costs and all other expenses.
In 1955, the scheme was extensively amended, with the approval of Parliament. One of the amendments abolished the original method of financing the board: instead, the board was empowered to finance its operations from its trading revenues. It could also require each registered producer to contribute up to one farthing for each gallon of milk he sold during a year. Both these provisions still apply. I will refer to the first, for convenience, as the revenue method and to the second as the levy method.
The board raises finance under the revenue method by reducing the price which it pays to producers for their milk. Its revenues from trading in milk are thus increased, but these, of course, are subject to tax in the hands of the board. Up to 1964, the board raised all the money it needed in this way. In 1964, however, the Inland Revenue ruled that money raised from producers by the levy method and used solely for capital purposes would not be subject to tax in the hands of the board. The principle governing the treatment of contributions for capital purposes is one of general application, but its relevance to the 177 Milk Marketing Board levy was in doubt trail the Inland Revenue gave its ruling.
The board therefore began to raise finance from producers in this way, using the proceeds for capital purposes only. By this means, a given amount of board capital expenditure could be financed at a lower cost to the producers than would have been the case if the money had been raised by the revenue method. The board continued to finance its current expenditure by the revenue method. The board now needs extra capital for development.
I have already referred to the need for seasonal manufacturing capacity to supplement that available within the trade. The board has acquired seventeen new creameries and dairies and two cheese stores since 1961 and further developments are planned. Substantial re-equipment and modernisation is also proposed. In other directions the board's activities have also expanded in recent years. New transport depots have been set up and the number of lorries owned has increased. More tankers, also, have had to be added to the board's fleet as a result of the growth of bulk collection.
The board expects further developments in this particular field and in certain of its other interests, for instance, in artificial insemination. This is why it needs more than the £2¼ million yielded annually by the present farthing levy. The amendment now before the House would raise the maximum rate of levy to ½d. per gallon, which would produce on present sales a total of £4½ million annually.
The fact that the halfpenny has been demonetised is, of course, immaterial in this context, since the halfpenny is not to be paid over physically—in this connection it is merely a calculating factor. Nor does it follow that the full amount will be levied. This is the maximum rate per gallon which can be imposed on a registered producer in any year and the board has announced that it has no intention of proceeding to the maximum straight away.
In view of questions raised in another place I should perhaps also explain that the levy is not one of the items taken into account in calculating the cost of milk production for Price Review purposes.
I have already pointed out that the levy is used for capital purposes such 178 as the provision of creameries and transport depots, and this is why it cannot strictly be regarded as a production cost.
In effect, dairy farmers co-operate by way of the levy to finance investments which will return profits. The fixing of the rate is, therefore, a transaction internal to the industry, and is unlike changes in the cost of wages or feeding-stuffs, for example, which arise from external factors beyond the industry's control. In this connection, it may be of interest to draw attention to the Milk Marketing Board's statement that over the four years to 31st March, 1968, the sum of £6 million was raised from the levy, while over the same period the board paid back to producers nearly £7¼ million in profits, mainly from its creameries.
It might be for the convenience of the House if I now explain the procedure for amending this scheme. The Agricultural Marketing Act requires that, in normal circumstances, a marketing scheme may be amended only on the initiative of the board concerned, and the board must first notify all registered producers of the proposed amendment. In the case of the Milk Marketing Scheme, if any 200 registered producers, within one month of being given notice of an amendment, request that a poll of producers be held on whether or not the amendment should be submitted to the Minister, the board must hold such a poll. It may submit the amendment only if not less than two-thirds of those voting are in favour of this course, and are together capable of producing not less than two-thirds of the quantity of milk which all those voting are capable of producing.
The present amendment was circulated by the board to all registered producers on 1st May, 1968. A poll was demanded, and held in October, 1968, and the necessary majority was easily obtained. The amendment was accordingly submitted to my right hon. Friend and, as the Act requires, he published it. Had no objections been made, my right hon. Friend could then have proceeded to effect the amendment by Order. Two objections were, however, made. These were not, in my right hon. Friend's opinion, frivolous, and neither could have been met by modification of the Amendment.
My right hon. Friend therefore directed that a public inquiry be held and he and 179 my right hon. Friend the Secretary of States for Wales appointed Mr. David Stinson, barrister at law, now Judge Stinson, to conduct it. He heard evidence on 4th and 5th June, 1969, and reported to the Ministers on 4th July, recommending that the amendment be approved. The report was published on 4th September: copies are available in the Library.
In considering Judge Stinson's report and the objections, my right hon. Friends have recognised that, while the amendment would enable the board to increase its capital resources at the lowest possible cost to producers, it would also enable the board to take further advantage of a tax arrangement which does not apply to its competitors in the private trade. But it is the board's duty to carry out its functions at minimum cost to producers, and the board, unlike its trade competitors, has no power to issue shares on the market.
My right hon. Friends therefore concluded that they should recommend this amendment to the House. They were satisfied that to refuse to do so would hamper the board in its efforts to use producers' money to the best advantage. They also believe that consumers can benefit from an increase in the board's manufacturing capacity, in that the establishment of board creameries at places where seasonal surpluses arise avoids the need for milk to be transported long distances, at a cost which ultimately falls on the consumer.
To sum up, my right hon. Friends are, therefore, satisfied that this Amendment will conduce to the more efficient operation of the Milk Marketing Scheme and should be approved. I therefore seek the approval of the House for the Amendment.
§ 10.25 p.m.
§ Mr. Peter Mills (Torrington)I must declare an interest, as I am a milk producer and I shall have these deductions from my monthly milk cheque. No one likes deductions from his milk cheque. Nevertheless, I very much welcome the scheme and wholeheartedly agree with what the Minister said. This is a small sum of money to pay for a benefit which will accrue to the industry and to producers.
180 Over the years the Milk Marketing Board has done a remarkable job for dairy farmers. The work of its various milk factories has been of great value. The private factories—there are three or four of the largest in the country in my constituency—have also done a first-class job, but the board has a special rôle to fill, particularly in dealing with the surpluses, and we in the South-West have benefited considerably from the board's factories in Cornwall. We know that large sums of money are being set aside for new factories to deal with surplus milk and that this will be of great benefit to many small producers in the South-West.
The board has a statutory responsibility—a heavy burden—to market all the milk that is produced. No matter how much is produced, the board has to deal with it by processing and marketing the surplus milk. That is a heavy burden, especially in the peak periods in spring. Consequently, the board must have capital to maintain and re-equip plant, and to extend its facilities to keep pace with the level of milk production. Every producer should realise how important is this function of the Milk Marketing Board. In 1959–60, 77 million gallons of milk were dealt with by the board's creameries alone. In 1968–69, the figure had risen to 178 million gallons, which is an enormous increase in 10 years and indicates the great work which has been done. There is no wonder that the board seeks permission to increase the levy to ½d. per gallon.
Not only are new factories required to deal with the surplus milk, but the board faces the important task of modernising its transport fleet. The Government have rightly laid down that lorries should be of a certain standard—plated lorries —which means that the board must modernise its fleet and bring it up to the requisite standard. Moreover, I hope that a fair proportion of this money will be used for the purchasing of bulk tanks for collection purposes, and that I am very much in favour of.
There is great advantage in this to the factory and to the producer, and also to the consumer because of hygiene. That must not be forgotten. It is obviously far more hygienic than using, if I may so call them, rather messy churns, to use bulk tanks, but these need a lot of 181 capital, and this is where some of the money will go. It is also true that the board, having, as it were, its own factories, its own problems, and its own manufacturing difficulties, gains considerable experience and, therefore, is able to deal with the rest of the trade in a far better way.
Lastly, there is the whole programme of development by the board of the services it: gives to milk producers. I am thinking of artificial insemination, milk recording, and consultancy services. These have been of the highest order, and every farmer in the land must be grateful to the board for what it has done in this way. I can think of no other way which has increased more the quality of the cattle and the cows in our land than the A.I. service. To increase it, and to use the most modern techniques, means the board has to have enough money for research and improvements. I would welcome this scheme if it were only for just that one thing, that it may improve the A.I. service, because it is of tremendous value to the agricultural industry.
Then there is the business of milk recording and consultancy services. The Minister may not be very happy to hear me say so, but it is true that if ever there was a time when the industry needs some help and guidance, it is now, with the low price we are getting for milk, which is causing extreme difficulty at present for milk producers in trying to make both ends meet. Again, I speak from experience. Here we have the board trying to help the milk producers to become viable and to understand more of their costs and difficulties. This section of its work is absolutely vital. Prices have not increased, and that means farmers have to look at every single little detail of their costings. The board is doing a first-class job in this service.
It is for these reasons that we should support this amendment. It will be of benefit to the industry. With these new factories we get the best of both worlds, because even though there is a deduction, as the Minister has rightly pointed out, we do get the benefit of the profits which a re made through them, and this is a very good thing indeed. I cannot understand anybody in this House not welcoming this amendment. Certainly, if he were a milk producer, as I am, he 182 would be thankful at this amended scheme being brought in.
§ 10.34 p.m.
§ Mr. John Farr (Harborough)I, too, welcome this Motion, although I should like to introduce a pinch of salt into the argument, because, let us face it, the board has been established by the producers to give them services, which, by and large, have been adequate over a number of years. I accept the argument which has been put forward from both sides that the board's costs have increased considerably in recent years, but do not let the House forget for a moment that the producers have also had to face the same financial problems over the same period.
May I give one or two figures to underline my anxiety about the 100 per cent. increase in the levy. As the Parliamentary Secretary said, the scheme was first introduced in 1933 on the basis of 1s. per milch cow per annum. In 1955, this was changed to ¼d. a gallon, and 14 years later we are suggesting it should be changed to ½d. a gallon, an increase of 100 per cent. During this period the price which the producer has received for his milk has gone up by only about 20 per cent. It has increased from 3s. 1.2d. per gallon in 1955 to 3s. 9.26d. per gallon today.
If the levy goes up by 100 per cent. and the gallonage price to the producer has gone up by only 20 per cent., taking into account that the value of the £ in the same period has dropped to under 14s., or 33⅓ per cent., it will be seen that many milk producers have great difficulty in making financial ends meet. This is a problem which is faced by small and large producers, with the result that almost daily the smaller producers go out of business and amalgamations have to take place.
The Parliamentary Secretary said that the revenue to the Milk Marketing Board will increase by over £2 million—I think by £21 million—if the House approves the amendment, and that the 100 per cent. increase would be introduced gradually. Will he assure the House that the increase to this maximum figure will be as gradual as possible? I do not mean by that that it should go up just a little next year and then by the full 100 per cent. in the year after. Every extra penny 183 that a milk producer has to pay can make the difference between financial success and failure.
I cautiously welcome the Amendment, and I hope that the board will implement the powers which the House will give it as cautiously as possible, bearing in mind the grave difficulties of many milk producers.
§ 10.38 p.m.
§ Mr. Bryant Godman Irvine (Rye)I thank the Parliamentary Secretary for his careful and full opening speech which dealt with most of the difficulties. I am sure that he will be glad to have on his side my hon. Friend the Member for Torrington (Mr. Peter Mills), especially as he was speaking as a milk producer. For many years my wife and I had a dairy herd, but I no longer have to declare an interest.
The vital point made by my hon. Friend the Member for Torrington is that the Milk Marketing Board has to accept the surpluses, and this is essential if we are to have the milk which we need at various times of the year.
My hon. Friend the Member for Harborough (Mr. Farr) expressed anxiety about the Amendment, but he will recall that 81.26 per cent. of the registered producers were in favour of the scheme and 18.74 per cent. were against it. Whatever anxieties my hon. Friend may have, at least the registered producers who bothered to vote had a fairly good idea of what they wanted. There were 27,051 in favour and 6,240 against.
The Chairman of the Milk Committee of the N.F.U., Mr. Paul Francis, said, after the vote had been taken:
..the strength of the vote would show any opponents of the Board's plans the solidarity of the producers' front".The Minister can feel, therefore, that this Motion is well supported.When the inquiry was held, only two objections were raised, and the Minister dealt with them. One was more substantial than the other, as the Minister pointed out, and it was dealt with with the greatest care by Mr. Stinson, now Judge Stinson, and there is no need for me to go over that ground again.
However, I draw the attention of the House to a leading article in the 184 Farmers' Weekly of 12th September, 1969, which said:
As a rider to his report, Mr. Stinson called attention to the M.D.C. 's continuing' nervous, not to say hysterical, attitude to the board. 'His suggestion that the Minister, the board and the council should get together to hammer out better relations in the industry is as sensible as his recommendation that the board should get the levy powers producers demand. The time to work out a better understanding between milk producers and milk processors and sellers is now. Sales have had one knock after another: dearer welfare milk, cutting off free secondary school supplies, the impact of the susbtitutes and, lastly, the Ministry-ordained penny-a-pinta increase. Political heat will not sell a single bottle of milk"—a factor which, I am sure, the Minister will bear in mind—nor will nightmare fantasies about the big bad monopoly bogey under the dairyman's bed. The biggest promotion drive yet, which starts this month, needs the backing of a united dairy industry if the producers' money put into it is to pay a dividend".I hope, therefore, that that spirit is now being increasingly accepted in the industry.In commending the Motion to my hon Friends, there are certain points I urge hon. Members to bear in mind. The Minister quoted certain things that the Milk Marketing Board had done. They were somewhat different from the points I had intended to cite, but they are none the worse for that. If, as is the case, the industry has been working on the basis of a farthing levy for many years, it is not for us to complain if a little more is sought.
According to the figures I have, since 1961 the board has put in 33 new transport depots, 98 new lorries, 452 bulk containers costing £6,000 each and has made an increase from 1 per cent. of milk going away in bulk in 1960 to 36 per cent. in 1969. It appears, therefore, that the board has been making real strides.
The Minister referred to 17 creameries having been acquired by the board. I wish to refer to only one, and that is the creamery at Alfreton, in Derbyshire, which was set up to deal with surpluses, but in a way not designed to appeal to members of the trade since it was established purely for that one purpose. As my hon. Friend the Member for Torrington pointed out, it is good for the board to have experience of the difficulties involved in running creameries and vehicles 185 connected with them. But there is no need for worry over the amount being taken by the board. It cannot be considered too high a percentage of the total trade because the retail trade done by the board is only 1.3 per cent. of the total.
We cannot have a debate on agriculture without referring to efficiency. Mr. Stinson referred to two things about efficiency to which reference might usefully be made now. In page 6 of his report he said that the result of efficiency in the milk industry is that there is an
…increasing surplus in time of surplus.That is why this draft amendment is so important.In page 10, he states:
The larger the surplus over the standard quantity the lower the producer's overall price is depressed. The more efficient the producer the greater his loss.That is one of the reasons why I feel that the work being done by the board at present is so important.I remind the Minister that there are two ways in which this surplus could be increased. I do not think that we on this side were ever entirely convinced that either is working as perhaps the Minister had hoped. We have been told from time to time that there is to be an increase in the beef herd, and we on this side have on many occasions asked the Minister how he will have an increase in the beef herd without an increase in milk. Again, I am not entirely persuaded. The problem of dealing with surplus milk will be increased.
Another matter to which we ask the Minister to give his attention is import saving. If we are to have a selective expansion programme which enables us to save imports, the only way is by having more milk, and if we have more milk and can save imports it will mean that these surpluses will be increased.
As my hon. Friend the Member for Torrington emphasised, the really distinctive factor about the Milk Marketing Board is compared with the trade is that the board has to take all the milk that is produced. Those who are dairy farmers—and, indeed, those who are not —must be aware that however one lays one's plans it is not always that the lactation starts on the day one hoped that it would. Equally, it does not always 186 happen that the available food is at its maximum in the month one thought it would be.
Those are just two of the factors which make it difficult to forecast exactly how we will get the level production of milk that we would like. If the general public do not get the milk they want and there are shortages, they will complain. If there are surpluses with which the Milk Marketing Board cannot deal, there will also be complaints. So, for that fourth and last reason, I commend the draft Amendment to the House.
§ 10.48 p.m.
§ Mr. HoyI am very grateful to the hon. Member for Rye (Mr. Bryant Godman Irvine) and the hon. Member for Torrington (Mr. Peter Mills) for the part that they have played this evening. I will not be too grateful to the hon. Member for Harborough (Mr. Farr), who was really looking for an excuse to oppose; but perhaps I ought to be grateful to him, after all, because he was trying so very desperately to dissent from the unanimous opinion of the House that he resorted to the exaggerated tactic of saying, "I warned them there would be a 100 per cent. increase in this levy."
What the hon. Member did not say was that the increase which he is trying to equate with 100 per cent. amounted to only ¼d. a gallon. I ask him to believe that the producer will not pay any attention to it—
§ Mr. Farr—but when that is multiplied by some hundreds of millions of gallons it is a very considerable sum a year.
§ Mr. HoyWith all respect, I know equally well that 1d. on a gallon of milk means £9 million. We were being a little taunted tonight for only putting up the price of a "pinta", as I think the hon. Gentleman called it, by 1d. but, as I say, that represents £9 million to the consumer. On the other hand, to use emotive language about this increase, saying that it is a 100 per cent. increase after 14 years, is going too far.
I agree with the hon. Member for Torrington that the ¼d. is a very small 187 amount to pay. Although £6 million was raised from the levy, in the same period producers received back £7¼ million. The hon. Member mentioned that. Producers have been dealt with fairly. I agree with the hon. Member that the Milk Marketing Board has done a very good job for the industry. I am sure the chairman did not think that he would get such praise when this debate started, but he and the board are entitled to it. Whatever deficiencies there may be, I beg hon. Members opposite to compare the record of our industry with that of neighbours whose industries are not in such a good position as ours.
In answer to the hon. Member for Rye, this increase was overwhelmingly supported. This proved that those who have to pay the ¼d. are in support. As to better relationships, I can assure the hon. Member that if there is any way in which the Ministry can help to put them right, we shall do all we can. I agree that efficiency is the keynote. I only wish that certain other industries were as efficient as the agricultural industry. Then perhaps we would not have so many economic problems confronting us.
I will not reply to the comment he made about beef from the dairy herd. We have had all this before, but the present Motion merely puts up the levy by ¼d. to a permitted maximum of ½d. The hon. Member for Torrington spoke about import saving. For this the industry is grateful. I read in the Scotsman recently that the chairman of the Scottish cheese industry said how grateful he was to the Government for the arrangements made to get agreement both on cheese and butter imports. It has been of great value to the industry.
I am grateful for the reception given to this scheme and to all hon. Members who have taken part in the debate. I express the hone, I am sure on behalf of all hon. Members, that the Milk Marketing Board will continue to do as well in future as it has in the past.
§ Question put and agreed to.
§
Resolved,
That the Amendment of the Milk Marketing Scheme 1933, as amended, a draft of which was laid before this House on 29th October, be approved.