MILK (MAXIMUM PRICES) (Hansard, 27 June 1969)

§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Hoy)
I beg to move, That the Milk (Extension of Period of Control of Maximum Prices) Order 1969, a draft of which was laid before this House on 12th June, be approved. The Order, although it has a long title, is very short. Its purpose is simply to extend for five years from the end of this year the power of the Minister of Agriculture, Fisheries and Food or the Secretary of State for Scotland to control milk prices.
In practice, the Minister of Agriculture and the Secretary of State act jointly to lay down maximum retail prices for the whole of Great Britain, and the Minister of Agriculture, acting on his own, lays down maximum retail prices in Northern Ireland.
Section 6 of the Emergency Law (Reenactment and Repeals) Act 1964 put the Power to control milk prices on a permanent footing, subject to renewal by Order in Council at intervals not exceeding five years.
In the debates in 1964 this provision, like all the others, was accepted with very little comment and, indeed, was given the reception of almost complete silence which is traditionally reserved for the self-evident; the provision for renewal makes it desirable for me today to explain the justification of the provision in the circumstances of 1969 and to say what considerations make milk a special case.
First, milk occupies a unique place in the national diet. It is an essential item in the diet of very young children and expectant and nursing mothers, so much so that the Health and Social Service Departments have provided consumer subsidies to bring it within the reach of the whole of this population group. It is indeed a very important element in any diet. It is the only food containing in a well-balanced proportion some elements of all the necessary nutrients. It is a particularly valuable source of protein and calcium, and has been estimated to contribute something approaching 20 per cent. of the protein and half the calcium in the national diet.
1938 Second, it is a very important item in the cost of living. Currently about 1,640 million gallons of milk is consumed annually in liquid form, at a retail value of almost £600 million. With the exception of meat—if all types of meat are bulked together—it is the largest individual component in the food prices index; if meat is split up into its various categories, then milk is the largest component of all. Of the current total in the food index of 254, fresh milk accounts for 23 units. It is evident that in relation to living costs milk occupies a special position.
In these circumstances it would in our view, and I believe in the general view on all sides of the House, be imprudent to abandon the power to impose maximum prices. Superficially, when statutory control has been given up in relation to all other foods, this may appear anomalous. But in the circumstances of the milk industry this would be a mistaken view.
The milk industry has over the years become highly concentrated, particularly on the processing side, and is dominated by a small group of very large concerns. This has brought benefits in terms of efficiency and service and has been associated, in particular, with standards of hygiene and keeping quality which will stand comparison with any other country in the world. But these gains have not been won without some loss of competition. It is on record as the view of an independent committee, the Thorold Committee, that the lack of competition, which has made these benefits possible, is such that decontrol of milk prices will not be practicable for some time to come.
For all these reasons, both social and economic, we are proposing to maintain the Government's control over milk prices, at least for the time being. I therefore ask the House to approve the draft Order.

§ Mr. Peter Mills (Torrington)
We come to the last of these agricultural Orders. Although up to now we have given a welcome to these Orders and there has been a friendly atmosphere on both sides—I do not say that we are being unfriendly now—it is right and proper that we should disagree slightly on this Order because we recognise the problems of the milk industry.
1939 This Order controls the maximum price of milk for another five years. The control has existed for a very long time, in fact in one form or another since 1933. The Government are now seeking to continue this practice for a further five years.
We have some reservations. In the past we have called for a freeing of Channel Island milk from the control to see what the effect would be and to test out the reaction. It would be interesting to know why the Minister considers that a term of five years is suitable. What lies behind it? Why not a period of one year or two years? Or does the Minister wish to have a permanent control over the industry?
Obviously we are all concerned about the effect of price on consumption. This is the fear of the industry and the nub of the problem. All sections of the trade are rightly sensitive about the matter.
Milk, as the Minister has said, is a marvellous food with many health-giving properties, and I remember in the past waxing strongly about milk and the benefits it gives to people who drink it, but one sees from the figures that milk consumption has fallen. The Milk Marketing Board report shows that in 1967–68 1,750,000 gallons of milk per day were used for liquid consumption; in 1968–69 the figure had fallen to 1,722,000.
This is a serious trend. It is a serious matter for the industry and serious for the dairy farmer. I must as a dairy farmer express my concern that the liquid consumption has fallen. We all know that as the consumption of liquid milk falls the lower is the pool price at the end to the farmer. This is a serious matter in these days of rising costs.
It can be argued that as the price of milk increases so consumer resistance grows. In August milk will be allowed to rise ½d a pint to allow for the increased costs resulting from S.E.T. This Order, which controls the maximum price, will be lifted so that another ½d. a pint can be put on. We shall watch with interest and concern the effect of this increase on consumption, which is our real fear.
More research and experimentation should be carried out on milk distribution and the maximum price and control of price. It is not good enough to continue 1940 the Order for a further five years. It may be the right sort of provision; it may be wrong. That is my fear. I should like to hear the Minister say why the period is one of five years and why no experiment or research is being conducted into distribution.
It is not only milk that suffers from maximum control; bread is in the same category of price control. To quote from the Farmers Weekly of 28th March this year. The Government keep a tight fist on the milk business. No other major industry—not even many nationalised industries is kept under such close control. Government decisions shape its policy, determine its size, fixe its prices and profit margins and keep its operations under a searching scrutiny. That is the sort of Government control of the milk industry. I am not saying that it is not right, but I want to know why it is going on. It is important that we should know.
The Thorold Report, which was issued in 1962, says on page 11, paragraph 37: This fact has led us to consider whether there are valid reasons for the retention of this form of control. I should like to echo those words as to whether there are valid reasons—

§ Mr. Deputy Speaker (Mr. Harry Gourlay)
The hon. Member is getting a little out of order. The provision for controls is in the Act. It is only a question of whether or not they should be extended.

§ Mr. Mills
I had an awful feeling that I was getting out of order. I hope that I have made my point, and I hope that the Minister will tell us why he is continuing the Order for a further five years and why there is no real research into the distribution of milk.
I am certain that everyone concerned in the production and distribution of milk is in for a difficult time. We have already had experience of competion from milk substitutes, the rising costs of delivery and allied problems which, together with many other factors, make life extremely difficult. The problem is to give producers and distributors a reasonable return and at the same time reach a price which is not too high for the consumer. If the final price is too high, resistance will grow and consumption will drop. This difficult equation is one which the Government have to solve. If they 1941 do not solve it, our milk producers will be in a serious position and those who distribute milk will find it increasingly difficult to carry on. But, in the end, the person who really matters is the consumer. If the price is too high, consumer resistance grows and consumption drops. That is the problem, and it must be solved.
I believe that far more research and probing needs to be done into this very difficult equation to get the balance right.

§ Mr. Hoy
If I may reply briefly to the hon. Gentleman, I think that he came near to answering his own question in his concluding sentences when he spoke about the difficulty of serving all the interests and meeting their needs. He is quite right when he says that there has to be a fair price for the producer, the transporter, the processer, the deliverer, and so on. This is one of the many reasons why the Government have to look at this question very closely.
In moving the Order, I outlined in a positive way certain of the reasons for it. Milk occupies a unique place in the national diet, and it is an exceedingly important point in the cost of living. If those two factors are married to all the points made by the hon. Gentleman in his concluding remarks, he will get the answer to his question.
As for the timing of the Order and whether it should be at an interval of one, two, three, four or five years, it is always difficult to make a judgment. However, it is laid down in the principal Act that it has to be at intervals of five years. That being so, it has to be done in this way. However, that is not the complete answer, because the hon. Gentleman will remember that in the debate which immediately preceded this one one of his hon. Friends complained to me that six months, nine months or a year is of no use to the industry and that it has to know some years ahead what the programme is and whether it will be able to operate it. Apparently I am meeting his request with this Order, but, as I have said, there are other reasons.
This is a very important industry, and I would not deny that the Order is vital to it and to the consumer. It is for those reasons that we make the Order—

§ Mr. Hoy
If the hon. Gentleman is about to remind me of the point that he made with regard to research, that does not come within the Order, but perhaps I may be allowed to go outside it for a moment. I can assure the hon. Gentleman that this work is going on all the time, and we are hoping to find a solution to some of the problems which have confronted the industry for very many years. I can only hope that we shall be a little more successful than our predecessors. If we are, I know that the hon. Gentleman will be grateful for it.