AGRICULTURE (SOUTH-WEST ENGLAND)

HC Deb 27 January 1970 vol 794 cc1489-502

6.0 a.m.

Mr. John Pardoe (Cornwall, North)

It will not have escaped the notice of the Minister of Agriculture that a considerable part of the farmers' militancy has emanated from the South-West of England. If he wanted confirmation of that, he must have got it on his recent visit to Exeter for the annual general meeting of the Devon County branch of the N.F.U. It is not sheer coincidence that the most vocal and lucid spokesman of the new militancy, Mr. Wallace Day, is a West Countryman.

Agriculture generally faces serious problems, but it is not too much to say that agriculture in the South-West, especially in Cornwall and Devon, faces a crisis. The difference between the problems faced by the farmers in the South-West and those faced in the rest of the country stems partly from the geography and partly from the structure of agriculture there. The South-West is ideally suited for the growth of grass, which is the dominant crop. As a result, dairy farming is the dominant type of farming. In Cornwall, 48 per cent. of full-time farms are dairy farms, compared with 39 per cent. for England and Wales.

The important of livestock generally can be seen from the fact that less than 3 per cent. of Cornish farms are "cropping farms" compared with 16 per cent. in England and Wales. Moreover, the size of the farms in the South-West is smaller than in the country generally. The pro- portion of holdings of less than 50 acres in Cornwall is twice that for England and Wales.

Not only are the farms physically smaller, but farm businesses are smaller, too. All these factors mean that the general pattern of agricultural economies in Britain has hit the South-West farmers harder than most. The smaller farmer can increase the size of his business by going intensive, but this requires capital resources and usually he is less able to obtain such resources than the larger farmers.

In 1967 a document produced by the South-West Economic Planning Council, "A Region with a Future", made the somewhat facile remark that It is not possible to say for certain, but it is a reasonable assumption, that farmers and growers in the South-West are no less able to borrow and are in the main no less willing to invest than farmers elsewhere. That gem of wisdom does not take us very far. A little further on, it said: If farm incomes in any part of the Region are significantly lower than the average, it is more difficult for the farmers concerned to make the investment necessary to increase their size of business or to modernise their equipment. Moreover, it would be difficult for such farmers to borrow capital for improvements. Elsewhere, the report said: Probably the largest single source of funds for investment is farmers' profits. Taking these points together it is true that because of the size of farms and the structure of agriculture in the South-West, it is more difficult for farmers to find capital. It is more difficult for them to find that capital out of income because they do not have a large enough income to have a surplus for investment. They are more dependent on short-term borrowing than large farmers; on borrowing from banks and merchant credit. In the conditions of a prolonged credit squeeze, such as we have had, they are hit hardest. They are less able to rub along on cash flow in bad times, and they cannot finance their necessary investment out of cash flow because it is not large enough.

Those are the problems that differentiate the South-West farmers in this new mood of militancy. The protest is not new, but it is much more widespread. Mr. Wallace Day even threatened to stand as an Independent candidate in my constituency, in the early 1960s, against the then Conservative Parliamentary Secretary to the Ministry of Agriculture. He did so primarily on a farm protest and an anti-Common Market ticket. His speeches then were as critical of Government farming policy as in recent weeks. Why did this militancy not blow up before? I do not think that it is primarily for political reasons, although I can understand that a Labour Minister might suspect this. It is probably true that farmers are predominantly Conservative, and are loath to admit that Tory policies are quite as bad as their accounts would have them believe.

The row did not blow up before, too, because of the red herring of the Common Market. N.F.U. took a very negative attitude to our entry from the beginning and spent so much time fearing for the future of agriculture in the Market that it failed to see that it was losing the present. By focussing farmers' attention on Britain joining the Common Market it was leading the industry up a blind alley.

In the West Country the older generation of farmers was probably more content, and perhaps still is, with a somewhat lower standard of living, and certainly more content to live without luxuries than farmers elsewhere. Very few of the older generation of farmers in the West Country ever thought of taking an annual holiday, while the younger generation tends to think it is something it ought to have. The younger generation has higher expectations.

There is far less protest, too, from those who have inherited farms, simply because most of them are not thinking in terms, as they ought to, of the return of capital invested in the land.

Agriculture, particularly in the South-West, is in crisis. This stems from a long history of mad farming economics, not in the last four or six years, but over a much longer period. As a layman, when I have had to examine farmers' accounts in those years I have never failed to be mystified by the nonsense with which I am confronted. As a layman I have tended to turn to the farmer and shake my head and ask, "Why do you stay?" The answer is never simple and it is rarely for the money.

If one examines farm accounts, as I have been doing in recent weeks in Cornwall, one comes across some extraordinary figures, figures that no businessman would tolerate for any length of time. This is not new. It is about 15 years since my brother purchased a farm in Somerset. He borrowed nearly £20,000 to do this, and after three or four years of mixed farming he found that he was making no headway at all, although he was working on the farm from morning to night. Eventually he had to get out or "go intensive". He was able to "go intensive" into broilers, and it worked. But it cannot work for everybody, and many people have been or will be forced out.

I examined the accounts of one particular farmer who farms a 50 acre farm valued in 1969 at £20,500. That figure is written into the accounts at £10,800, but this is something that tends to happen with farm accounts. Nevertheless, that is its value and he would get £20,500 if he was to sell it.

When one looks at his accounts and averages his capital in the years from 1953 to 1968, one finds that on the whole the capital employed was about £13,000. His average profit was £770, which is a return of 6 per cent. This to my way of thinking is an extremely poor return and one I would not wish to contemplate if I was thinking of investing money in any business.

There has been a progressive decline in the situation. Here again. I emphasise strongly that this decline has not come about just in the last few years. Conservative Price Reviews were disastrous. Since the war there have been 23 Price Reviews, 10 under Labour Governments and 13 under Conservative Governments. The average under-recoupment per Labour review was £6 million; the average under-recoupment per Conservative review was £13½ million.

If one looks at the increased Price Review determinations as a percentage of increase factor cost of review commodities, one sees that in 13 Conservative reviews farmers got only 40 per cent. of their increased costs and in the last five Labour reviews they have got 80 per cent.

But this is not the whole story. It is not just a matter of how much money you can pump into the industry through any particular Price Review. Other factors are of immense importance. However, by 1964, as a result of bad reviews under successive Conservative Governments, the agricultural industry, particularly in the South-West, had been squeezed until the pips squeaked. It was a policy of paying them less to produce more.

I do not believe there is a case for saying that Labour Price Reviews have worsened the situation, but they have not retrieved it. The credit control enforced by the Government has undoubtedly exacerbated the problem. Yet even now I find an extraordinary willingness on the part of some farmers to believe what they are told by the Conservative Party. A recent editorial in the British Farmer, under the heading "A month to remember", states: Than there was the announcement by the Conservative Party, showing that it had been convinced by the Union that realistic price guarantees are needed if the party's agricultural policy is to command farmers' confidence. That statement seems to me to be a woeful piece of optimism.

The idea that the N.F.U. has squeezed "realistic price guarantees" out of the Conservative Party is effectively shot through by the Spectator on 29th November where, in an editorial, it says of Tory policy: …either the price levels at which the guarantees are eventually set will be so low as to be meaningless, in which case the farmers will quite reasonably denounce the retention of the guarantees as a fraud. Or the guarantees will be high enough to be effective, in which case both the tax savings and the removal of Treasury control over the level of home production will fail to materialise—in other words, the entire raison d'être of the change of policy in the first place will disappear. What are the basic complaints which have emerged from the farmers, especially in the South-West, in recent weeks? I have field discussions in my constituency both with the official N.F.U. and the somewhat less official groups which have been formed. Basically, they can be summarised as these.

First, farmers have failed to share in the rising living standards of the rest of the community. This is a fact of which the farmers are far more conscious than they were. They know, for instance, that between 1958–9 and 1968–9, personal incomes rose by 46 per cent. while farm incomes rose by only 7 per cent. They know, too, that between the mid-1950s and 1968, agricultural prices went up by 6 per cent. while the price of manufactured goods rose by 30 per cent., and that, since 1964, agricultural prices have risen by 8 per cent., whereas the prices of manufactured goods have risen by 13½ per cent.

They then look at their own commodity prices, especially those which are of interest to us in the South-West. Dairying is the predominant type of farming in the South-West. To the housewife, milk went up by 31 per cent. in the last decade, but to the farmer by only 11½ per cent. Compare that with beer. To the consumer, it went up by 63 per cent., whereas the farmers' barley went down by 13 per cent. If we look at beef, where the returns have been better than in many other agricultural products—and beef is very important to farmers in my constituency—the price of retail sirloin has gone up in the last decade by 46 per cent., but the price to the farmer for fat cattle has gone up by an average of 28 per cent. Leg of lamb has gone up by 47 per cent. to the housewife: Sheep to the farmer have gone up by 7 per cent. Leg of pork has gone up by 26 per cent. to the housewife: fat pigs to the farmer have gone up by only 5 per cent.

Moving on from the prices which they get, they look at their own costs. Farmers are being encouraged to look at their accounts in a more sophisticated manner than in the past, and they are more cost conscious than ever they were. They find that, in the last decade, the cost per worker employed In agriculture rose by about 75 per cent., while rents more than doubled. In the last four years alone, labour costs rose by 30 per cent., rents went up by 30 per cent., fuel and oil went up by 20 per cent., fertilisers by 25 per cent., feedingstuffs by 10 per cent., machinery services by 10 per cent., and so on. The average over the four years was between 17 and 18 per cent., whereas the increase in agricultural prices during the same period was only 8 per cent.

They are squeezed at both ends, and they know it. Naturally, they are wont to complain about it. I have already quoted the figures from one farmer's accounts. I met a group of farmers in my constituency just after Christmas, and they provided me with their accounts on the basis of seven or eight farms and I was able to do an analysis of them. We had a long discussion about returns from particular types of farming. One thing which shattered me was a chart which they drew up for the return per cow from milk. This showed the margin per cow in pence over food and labour. Averaged across a group of 19 farms, the margin in 1969 was 11d. per cow less than in 1967. This has been brought about partly by the low price of milk and partly by substantial increases in the costs of feedingstuffs.

The farmers tell us that they must have a larger share of the milk market. They cannot have a larger share of the liquid milk market, because that is virtually taken up already by home production. However, when we look at butter we find that the home producers' share of the British butter market is extremely low. We have international agreements with New Zealand and many other countries. We also know that if we were to increase the amount of home-produced milk that goes into butter and were, therefore, to limit the amount of butter coming into the country, we would inevitably have to increase the price substantially.

If we take it that about two and a half gallons of milk go into a pound of butter, it would not be selling at 3s. per pound; it would have to sell at something over 10s. per pound. The British housewife, faced with this situation, would undoubtedly bring her butter consumption down to the levels that we see in those countries where butter is at this kind of price and where consumption per head is substantially below the level in this country.

All these problems can be discussed with farmers, but they come back to one basic issue, namely, that they are terribly short of credit, and credit is immensely expensive even when they can get it. Notwithstanding certain competing claims by various sections of the agricultural community, it is probably credit that has brought about the immediate crisis in agriculture in the South-West. Certainly a long period of bad returns—poor returns for their labour and poor returns on their investment—has ensured no investment and brought farmers to the point where they can be squeezed no longer. It is now an urgent matter of injecting more credit for investment and expansion into the industry.

There has to be a definite decision by a Government of this country that we should make fuller use of one of our few natural resources—land. There has to be an acceptance of the vital role that agriculture plays in import saving and the consequent healthy effect on our balance of payments. This rôle is accepted by British industry; not just by the farming lobby. There has to be a realisation that with a world population explosion there may be a seller's market in foodstuffs in future.

No Government have really accepted that the role of a flourishing countryside is very considerable in maintaining a healthy balanced society. This is difficult, if not impossible, to quantify, but I am convinced of it.

There must also be recognition of the immense capital that is invested in British agriculture and knowledge of the part played by farming in constituting the essential home market for the ever-increasing export market for agricultural machinery.

On the credit side I think that the Government will have to increase the ceiling to which banks can lend. They may have to take urgent measures to reduce rates of interest for agriculture. It may be asked why I should single out one industry for this favoured treatment. I reply in the terms that I used to the Minister of Technology the other day when it was announced that the Government were proposing to extend cheap credit to the shipbuilding industry. If the Government can persuade the banks to provide the shipbuilding industry with an extra £200 million at 5½ per cent., there is a good argument for putting this kind of money, or more, into British agriculture at that rate of interest.

This is the only kind of measure that can really save a very large number of farmers, particularly in the South-West, from going to the wall. I should like to see, as a long-term development, a Land Bank, with preferential interest rates.

It is extraordinary that for the first time, certainly in my experience, I have found farmers in recent weeks prepared to talk seriously about the future nationalisation of the land as a possible solution to their problems. I do not think that that view is widespread, but it is the kind of proposal—and it did not come from me—that would have met with sheer horror five years ago from those involved in agriculture.

It is interesting to note that a predecessor of mine, Tom Horobin, who won Cornwall, North for the Liberal cause, fought the 1945 election, and won by a substantial majority, on the platform of land nationalisation. I do not think that any Liberal candidate has done so since, and I certainly hope that I shall never be forced to do it. But unless the Government can improve the credit flow into British agriculture, and substantially improve the returns which farmers get for their capital and their labour, that kind of solution might even be discussed seriously by a majority of farmers at some time in the future.

I hope the Minister will be able to assure me that his right hon. Friend has the interests of farming very much at heart, that the Government are aware of the problems facing farmers, and that they are prepared, within the next few weeks, to ensure that farmers get a fair deal.

6.27 a.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. John Mackie)

The hon. Member for Cornwall, North (Mr. Pardoe) has gone over a considerable amount of ground. I agree with much of what he said, but he will appreciate that it is difficult for a Minister, almost in the middle of the Price Review, to say very much about what the Government might or might not do.

I should like to go over the many interesting points made by the hon. Gentleman, and discuss them with him. I think that his main point is that the South-West has problems which are different from those of other regions because of its structure and its climate. It is an area where grass is the main source of fodder for feeding dairy livestock for the production of milk.

The hon. Gentleman spoke about small farms, and about small farm businesses. Within our general policy a good deal of help can be got to this type of area. In the Bill now before a Committee upstairs we are removing from the conditions for grants under the farm improvement scheme the acreage and feed restric- tions on small farms. These farmers, if they want to go intensive, can now get help from the Government. Before, they had to go it alone. The hon. Gentleman says that they cannot go intensive because they have been squeezed for so long, but now if they can raise the credit they will get help.

The hon. Gentleman said that he knew farmers well and had many discussions with them, and he often wondered—taking his own brother as an example—why they carried on. In the last 20 years about 50,000 to 60,000 farmers have gone out of business. When I was first at the Ministry, I asked for a survey of the reasons for quitting, but no real picture emerged, except of the considerable amount of heartbreak and lack of help. We now have the amalgamation scheme, with pensions and grants for people who find that their farms, for one reason or another—too small, bad land, and so on—are not a success and they want to retire. They can get help of up to £2,000, or a weekly pension of between £4 and £5, and this is a considerable help for those who want to retire.

The hon. Gentleman said that farmers could not provide capital out of income. He also said that the South-West is an area of militancy, the main militant being Mr. Wallace Day, who has made it public that he farms 350 acres and, I gather, his overdraft is about £80,000. This is hardly the type of militant to whom the hon. Gentleman was referring. He is their leader, and no doubt he receives support from the farmers with whom the hon. Gentleman is principally concerned.

On the political aspect of the matter, the hon. Gentleman wondered why this trouble had not blown up before, as the pressure had existed, he said, for a long time. My general thesis on that question goes wider perhaps than a milk and stock area like the South-West, and relates to the general squeeze on agriculture before we came into office. The Conservatives claimed credit for a rise in cereal production from 2 million or 3 million tons in 1953–54 to nearly 9 million tons in 1964–65. At the same time the level of stock, particularly sheep, was at best static, and generally declined. An imbalance was created in agriculture, and I make no bones about saying that the Opposition were responsible for it. Our Price Reviews over the last few years show how we have pushed the balance towards stock again in an effort to set the overall balance of agriculture right.

Next, the hon. Gentleman spoke about the "red herring of the Common Market"—I am not sure whether he was being derogatory of the Common Market or not—which had been used to mislead the industry. I do not accept this the hon. Gentleman's statement was that they were being led up a blind alley. It is important that farmers should examine the Common Market. I do not know whether farmers were misled, I am not sure whether he is convinced that we shall be unable to enter the Common Market, but we must not lose sight of the prospect altogether, and this Government have never tried to mislead farmers about it.

I myself think that, on the whole, British agriculture and horticulture will benefit in the long term from our joining the Common Market. There will inevitably be a change of emphasis, but the loser, I think, will be the British housewife if—

Mr. Pardoe

I am a passionate supporter of British entry into the Common Market, and I always have been. I said that I thought that the National Farmers' Union's concentration on the issues of farming in the Common Market had diverted farmers' attention from the Opposition's malpractices.

Mr. Mackie

I take that point.

The older generation of farmers—I am beginning, unfortunately, to count myself as one of them now—remember what conditions were years ago. The propaganda that conditions are worse than in the 'thirties is absolute nonsense. I deprecate such statements. Anyone who lived through the late 'twenties and early 'thirties knows that the guarantees today, however bad things may seem, ensure that prices can no longer drop by half literally overnight. But the newer generation, seeing how the rest of the country live, are demanding a higher standard of living—and they deserve it.

On "mad" farm economics, the hon. Gentleman mentioned a farmer who paid £8,500 for his farm, which would be worth double at today's values, and who, with capital of £13,000 invested, was getting a return of 6 per cent. The hon. Gentleman found farm accounts very difficult, and mentioned his brother, who had gone into broilers. I do not know the conditions under which his brother was farming, but going intensive by going into broilers on a reasonable-sized farm is not my idea of altering the economy of a farm. One can do that with a bit of cement the size of this Chamber. The paradox is that one can sell a farm at a good price, yet farmers are complaining about prices. I have already mentioned going intensive, and help can be got here.

On the point about progressive decline, the hon. Gentleman admitted that we had done considerably better than the Opposition—nearly 100 per cent. better in the Reviews. He said that the answer was not just dumping cash on to the end price, that there would have to be some different system of getting cash into the industry, as capital or credit. He pinpointed the difficulties of any Government in supporting agriculture when there is such a variation of farms —the farms in the South-West, the farms that I know in the North of Scotland, large areas of land worth literally shillings an acre, the big arable farms of Lincolnshire and the south and east coasts, and the small farms in the backbone of England, Derbyshire and the Pennines. To define a system of support for agriculture with this fantastic variation is almost outwith the wit of man.

Some areas are far worse hit than others. For two years the potato grower has had a bad time. There have been surpluses and a depressed price. There has been little more—and in some cases a little less—than the guaranteed price. This year, there is about the right amount of potatoes, they are not too cheap and not too dear to the housewife, and the returns on potatoes are almost equal to to last year's Price Review extra into the farmers' pockets. This is going only to one section, but it is a section which needs it, because of the bad price which it has had before. That is an illustration of how difficult agricultural support is.

The hon. Gentleman attacked the Conservative Party—and I agree with him. He then turned to the basic complaint, that the farmers have failed to share in the rising living standards of the country. He instanced some price differences. Although I do not suggest that farmers are using phoney figures, their figures will not bear too much examination. We appeciate the difficulties which face farmers, but there is no reason why, when giving figures, they should not point out the developments which have made for improved output. For example, only a few years ago one might have got 600 gallons of milk a year from a cow. Today one can expect 900 gallons. In cereal production output has increased from one ton to 30 cwt. per acre. These facts should be put in the balance.

A short while ago a cow was brought to the main doors of the House of Commons and certain prices and slogans were attached to its ribs. It was pointed out on that occasion that while there had been an increase of from 6½d. to 11d. in the retail price of milk, the farmer's return had remained virtually static at between 4½d. and 5d. A poster proclaimed, "Retail price up 70 per cent. Producer's margin up only 7 per cent." It is misleading to give a straight comparison between the retail and production prices of liquid milk. One must bear in mind the fluctuation in distributive costs. While we appreciate that farmers have a case, they should bear the pool price in mind and make comparisons relating to all the relevant figures.

I assure the hon. Member for Cornwall, North that I am conscious of the steep rise, to which he referred, in farmers' costs. We have tried to keep costs down. The Prices and Incomes Board examines prices, but we must bear in mind the results of devaluation and what the Prime Minister said about one man's rise in wages being another man's rise in costs. We cannot have it both ways. Rises in costs are always taken into account at the Price Review, as is the efficiency factor.

The hon. Gentleman spoke of the increased cost of feeding stuffs. The Government have done a great deal to help the small farmer by means of the Agriculture and Horticulture Co-operative Council. Some time ago I spoke to a farmer whose cubing machine had broken down. Only then, when he had to buy feed, did he realise that his cubing machine was saving him about £5 a ton on feed.

If small farmers in, for example, the South-West got together in co-operatives of three to five farms for the use of milling, mixing and cubing machinery, considerable economies could be secured, and that goes for a great deal of other farm equipment being used in a cooperative manner. Oddly enough, larger farmers initially took the greatest advantage of the Agriculture and Horticulture Co-operative Council's facilities, but now the smaller men are taking part to a greater extent.

The hon. Member for Cornwall, North questioned me about the share that British farmers might have in the milk products market and he pointed out that at present they were producing less than 10 per cent. of the nation's butter consumption. I am glad that he appreciates that butter gives a return of between 1s. 1d. and 1s. 2d. on a gallon of milk. Thus, if our farmers were to secure the market price in a way to give them a sufficient return, butter would be about 10s. per 1b. The housewife would not put up with that and would turn to margarine, and we would have a large surplus of butter on our hands. Under these conditions, the hon. Gentleman will see why a larger share of the market would be difficult to achieve in the way he suggested.

The hon. Gentleman suggested that part of the answer lay in injecting more capital into the industry by way of cheaper credit. He pointed to the rôle that agriculture could play. At this stage I can only agree with his general remarks and add that I cannot say very much on the subject, as the Review is coming up during the next two or three weeks.

The hon. Member's last point was on nationalisation. He may like to read a pamphlet which I wrote three or four years ago. When we were discussing the subject then, land was costing about £350 an acre. I have tried to give the hon. Member our ideas on the points he raised. I hope that in a few weeks' time the farmers in the West Country will feel better.