HC Deb 11 February 1970 vol 795 cc1227-31
1. Mr. Biffen

asked the Minister of Agriculture, Fisheries and Food how many representations he has received on the adverse effects on home agriculture deriving from the current rates of credit; and what answers he has given.

45. Mr. Chichester-Clark

asked the Minister of Agriculture, Fisheries and Food what representations he has received from the farming industry about current rates of credit; and whether he will make a statement about the situation in the North-West and in Northern Ireland.

The Minister of Agriculture, Fisheries and Food (Mr. Cledwyn Hughes)

It is not practicable to identify how many of the numerous representations received by me and my Department in the course of business have made reference to interest rates. I have no special points to make about the situation in Northern Ireland and the North-West.

Mr. Biffen

Does the Minister recall that when he last answered a Question of this character by my hon. Friend the Member for Shrewsbury (Sir J. Langford-Holt) on 10th December he displayed considerable complacency? Will he recognise that the trading methods of agriculture make it uniquely vulnerable to a policy of protracted high and tight credit?

Mr. Hughes

I showed no complacency, and I feel no complacency today. All these matters are for discussion in the Annual Review, which is now proceeding. But, in recognition of its import-saving rôle, agriculture, like exports and invisible earnings, has priority for bank lending. The effect of tax relief reduces the nominal rate of interest by about one-third. These are matters which the House would wish to bear in mind.

3. Mr. Wiggin

asked the Minister of Agriculture, Fisheries and Food what was the amount and cost of overdrafts to the farming industry during 1968.

Mr. Cledwyn Hughes

In 1968 bank lending to agriculture, forestry and fishing varied between £505 million and £550 million. Interest is estimated at about £45 million without allowing for reductions for tax relief.

Mr. Wiggin

While not wishing to divert the Minister from the urgent necessity of increasing overall prices for the industry, may I ask if he will bear in mind that the high rates of bank lending at present are an extraordinary burden to some of the more leading members of the agricultural community? Will he investigate ways of giving assistance in this respect at the current Price Review?

Mr. Hughes

These are matters for the review. As I have said on previous occasions in the House and in the country, I recognise that there are certain pressures on the industry at present, but we should not lose sight of the fact that agriculture's share of lending under the bank ceilings has been increasing.

Mr. Stodart

Is not the figure the Minister quoted, together with the figure of the amount which farmers owe to the merchants—which probably is not far short of that figure—the highest figure on record? Were expansion taking place, this might not be so worrying, but when there are very high overdrafts together with virtual stagnation of production, is the Minister not seriously concerned about this?

Mr. Hughes

The hon. Member is not right. In fact, the level of bank lending is high, but it has remained fairly steady over several years.

12. Mr. Turton

asked the Minister of Agriculture, Fisheries and Food what was the average return on agricultural capital in 1967–68 and 1968–69, respectively.

Mr. Cledwyn Hughes

Estimates of return on agricultural capital have not been made over the years because they would have to depend on a number of arbitrary assumptions.

Mr. Turton

Does the Minister recognise that until he tackles this problem and makes the return on agricultural capital commensurate with the return on industrial capital he will never get the selective expansion programme going?

Mr. Hughes

I appreciate the importance of that point. I repeat that there are arbitrary assumptions involved. There would have to be assumptions about the value of land, buildings and works—for example, land drainage—and for tenants' capital it would mean imputing a value to manual labour and to the managerial labour of the farmer and his wife. The report of the Select Committee accepted that it is not possible to define "right" level of return on capital invested in agriculture. However, I take the point, and in the course of the studies I am making in the review I will bear it very carefully in mind.

Mr. Henry Clark

Is it not reasonable that a farmer who is paying 9 per cent. or 10 per cent. on his overdraft should have a return of 5 per cent. or 6 per cent. on the capital he has invested in his farm? Will the Minister keep this in mind during the Price Review negotiations?

Mr. Hughes

All these matters are taken into account in the Price Review, but, again, in relation to the points made by the hon. Gentleman, there is a variety of very important assumptions.

15. Mr. J. E. B. Hill

asked the Minister of Agriculture, Fisheries and Food to what extent he considers the ceiling on bank lending is limiting the credit required by farmers to cover outgoings until next harvest; and what steps he is taking to increase the industry's immediate cash resources.

Mr. Cledwyn Hughes

I understand that the banks are generally able to meet requests from credit-worthy farmers for short-term borrowing. As for the second part of the Question, the hon. Member must await the outcome of the Annual Review.

Mr. Hill

Does the right hon. Gentleman realise that at least one bank operating in East Anglia, whilst willing to advance further credit to farmers—here I must declare a personal interest in being one of them—cannot do so because it is up against its ceiling? Will he speak to the Chancellor of the Exchequer about this situation?

Mr. Hughes

I would be grateful if the hon. Gentleman would give me particulars of that case. Credit-worthy farmers are generally able to obtain credit from the joint stock banks in accordance with the directives issued by them.

16. Mr. J. E. B. Hill

asked the Minister of Agriculture, Fisheries and Food what investigations he is making into the sources of capital for agriculture; and whether he is satisfied that the current flow of new capital investment in the industry is sufficient to sustain the Government's expansion programme for an extra £160 million import saving by 1972.

18. Mr. Dudley Smith

asked the Minister of Agriculture, Fisheries and Food whether he will institute a departmental inquiry into the financial structure of the farming industry, with particular reference to the decline in individual farming incomes relative to other occupations and the growing difficulty of the small and medium farmer in financing his operations.

Mr. Cledwyn Hughes

Points put by the hon. Members are matters for the Annual Review, in the light of which my colleagues and I will decide what action to take.

Mr. Hill

Bearing in mind that most of the annual total of nearly £200 million a year in the Ministry's tables is gross fixed equipment and, therefore, goes in depreciation, and that the Government's own expansion programme must require an additional sum of over £150 million of new capital investment, can the right hon. Gentleman say whether that new capital is going in? We have now done two years of the programme.

Mr. Hughes

A great deal of new capital is going in, as the hon. Gentleman must know. Improvement work is being carried out at a high rate. In September, 1969, the estimated gross cost of live applications for grant under the Farm Improvement Scheme, which is very important for his constituency, was £50.6 million compared with £51.5 million in 1968 and £45.6 million in 1967. A good deal of investment is going on.

Mr. Dudley Smith

Is the right hon. Gentleman aware that most farmers work the longest hours of practically any section of the community and yet have consistently seen their standard of living going down? Is it not time for a bit more fairness and a change in the system?

Mr. Hughes

I recognise the problems of agriculture. I know them well. All the matters to which the hon. Gentleman and his hon. Friend have referred will be discussed in detail in the Annual Price Review negotiations which are now proceeding between the farmers' unions and the Government. All these questions will be carefully gone into.