HC Deb 25 March 1970 vol 798 cc1561-74

10.0 p.m.

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

I beg to move, That the Bacon Curing Industry Stabilisation Scheme 1970, a draft of which was laid before this House on 12th February, be approved. The aim of the bacon curing industry stabilisation arrangements is to provide such assistance as the industry may require in order to maintain and improve its position in the British market. This Scheme will continue the present arrangements and will apply to bacon produced during a period of approximately three years from 1st April next. This is the maximum period which the Act allows.

Hon. Members will recall that a Scheme was approved by the House at this time last year for a period of six months and this was subsequently extended for a further six months. Schemes were made for these comparatively short periods because the Industrial Reorganisation Corporation was conducting an investigation into the structure of the industry and also into the effect of the stabilisation scheme, and of other possible forms of support, on the performance of the curing industry.

As hon. Members will be aware, the I.R.C. has completed that part of its investigation which relates to the stabilisation payments and has reported to my right hon. Friend. It is still considering with the firms concerned its ideas about the structure of the industry. As is the normal practice, the report and advice given to my right hon. Friend by the Corporation was of a confidential nature, but it may be helpful to the House if I indicated their general lines, as they form the basis of the Scheme which is now before us.

In so far as it covered the same ground, the Corporation found itself in all material respects in agreement with the views expressed by the Committee of Inquiry into the Bacon Curing Industry which was set up by the E.D.C. for Food Processing under the chairmanship of Mr. R. S. Worth. It considered that the pig processing industry as a whole was neither more nor less efficient within its sphere of operation than most other sectors of British industry, although some sectors of the industry might be better managed.

The more successful United Kingdom companies were no less advanced in technical or managerial performance than overseas pig processors, although it was probable that a major advance in the industry would be achieved if pigmeat production and processing were more closely integrated.

Mr. Michael Noble (Argyll)

When the Joint Parliamentary Secretary and I were on the other side of the channel about a fortnight ago, I was informed by the French that the British were far ahead of any other European country, even the best of them. I am merely querying the right hon. Gentleman's statement that we were not worse.

Mr. Hoy

I said that it was probable that a major advance would be achieved if there were more integration, but I was not denigrating the industry. As the right hon. Gentleman knows, opinions were expressed about our industry's ability at the function which he and I were attending.

The Corporation concluded that there was a wide range of performance by individual companies but there were several successful and well-managed smaller companies in which the smaller scale was offset by flexibility and other advantages. Although the I.R.C. is considering further the question of structure, it does not consider that there is an urgent need to promote mergers among these smaller companies.

The I.R.C. came very firmly to the conclusion that the stabilisation arrangements should be continued on a more permanent basis to give both bacon curers and pig producers the confidence to invest; it did not consider that there would be any advantage at present in making any radical alterations in the formula for determining payments and levies.

As the House will be aware, neither the present Scheme nor the one before us tonight includes any actual figures since a certain amount of flexibility must be allowed in the Scheme given the continually changing prices of bacon and the need to be able to make minor changes in the operation of what is a fairly complicated formula. What is laid down are the criteria which Ministers must take into account when making payments or collecting levies.

One advantage of this method is that it made it possible to introduce at the beginning of January this year the changes recommended by the I.R.C. These changes took account of increased costs and provided for some return on capital and also made allowance for a better conversion rate from pigmeat to bacon and a higher return to curers from the sale of offal. These various changes to some extent cancel each other out, but the net effect is that curers on average would receive something of the order of 6s. more per cwt. In the light of the careful investigation—especially of curing costs—made by the I.R.C. and all other relevant factors, the Government were convinced that an increase of this size was justified.

I should like to take this opportunity to express the thanks of Her Majesty's Government for the prompt and efficient way in which the Corporation carried out its investigation and for the clear way in which its advice was expressed.

It is, of course, wrong to look at the payments under these arrangements simply as a dole or a sort of cushion for the industry. We hope that it will be a spur to greater effort.

We recognise the long-term needs of the industry. The Government want the supply of British bacon to increase if this can be achieved on the basis of increased productivity and increased competitiveness. To a large extent, of course, this will depend on the industry's own efforts but, as well as making the new Scheme for the full period permitted by the Act, the Government, in any future consideration of policy affecting the bacon industry, will continue to pay full regard to the industry's need to plan ahead for investment, development and research. Account will also continue to be taken, among other relevant factors, of the arrangements for bacon production and the level of support prevailing in the main supplying countries.

It is the Government's belief that, given the improved opportunities for home supplies provided by the determinations that have been made under the Bacon Market Sharing Understanding, given the greatly improved payments under the stabilisation arrangements, and given the controls that have been put on the export of its raw material—pigs and pigmeat—the bacon industry should be able greatly to improve and strengthen its position.

I should stress that the stabilisation arrangements have—from their very beginning in December, 1966—been on the basis that when there is a marked improvement in their position, bacon curers would be required to pay a levy which would, over time, recoup the Government for expenditure incurred through the stabilisation payments. The proposed Scheme maintains this basis.

The Scheme is based very much on the Scheme which was approved by the House last year. Some minor changes have been made in the light of a year's experience of the working of the Scheme. The main change has been the omission of the words: and any other considerations which appear to the Ministers to be relevant in paragraphs 8, 9 and 10. These words have been considered to be too general, and to leave too much discretion in the hands of Ministers.

We have therefore tried in the new versions of these paragraphs and in the definition of bacon to specify all the considerations that the Ministers will take into account.

I should emphasise that we are not making any changes in the basis of the calculation of payments. The Scheme will continue to be based on the weekly application of a standard operating margin to the current cost of pigmeat and the sale price of bacon. The Select Committee on Statutory Instruments has drawn attention to the fact that paragraph 6 of the Scheme does not specify the kind of records, returns and other information that the Minister may require under notice. I think it right to point out that precisely the same wording was used in the previous Scheme, and no objection was taken then.

It is, indeed, not easy to specify in precise terms all the possible types of records that might be required, but I can give the House the assurance that only information will be required of curers that is absolutely essential in order to make payment or collect levies under the Scheme. I do not believe that there have been any complaints from curers that we have placed any inordinate burden on them in obtaining the information we must have to operate the Scheme and to make payments to them. I think that there can be no doubt that a long-term scheme of this sort is what the bacon curing industry needs to allow it to develop sensibly and with confidence, and I therefore commend the Scheme for the approval of the House.

10.15 p.m.

Mr. James Scott-Hopkins (Derbyshire, West)

It is difficult to deal with this Statutory Instrument without having had a sight of the I.R.C. report. I am grateful to die Minister for giving us the details that he has of what the report contains, but unless we see the report it is difficult to make a proper assessment. Naturally, the Minister has extracted those parts from the report which support the Scheme that he is putting forward.

I stress that this Scheme is to run for two years and eleven months. The Minister has argued that this is necessary, and the I.R.C. report has suggested that it is necessary, to give stability to the industry. The 1969 Scheme has been in operation for about a year, yet there seems to be no question of stability being brought about in the industry. Does the Minister think that by this Scheme running for two years and eleven months stability will be introduced into the industry? Or, after that period, shall we have another of these Statutory Instruments giving yet another subsidy to the bacon-curing industry?

I have always queried whether this was the right method, or whether we in this House should say to the bacon-curing industry: "When you make a loss, or when you are liable to make a loss, we will give you a subsidy; but when you make a profit, we will take some of that profit from you."

Paragraph 8 contains some extraordinary wording. I agree that it is the same as paragraph 8 of the 1969 Scheme. I accept the Minister's criticism that I did not criticise the 1969 Scheme. Perhaps I should have done. But there is no mention of what percentage return on capital is considered adequate for the calculations that the Minister is making for the stabilising payments. The Minister should tell us, because this is part of the calculation which is needed. The capital employed is an essential factor for the purpose of calculating whether a bacon-curing firm is or is not making a profit.

We have a similar situation in paragraph 10. Again the criteria have not been laid down. At least, we have had no explanation of what the criteria are—nor had we in the 1969 Scheme. I took the trouble to read through the short debate on the original 1969 Scheme. I am not talking about those who are already registered, but those who might wish to apply for registration in future. The Scheme is drawn so widely that anybody who cures bacon can apply to be registered. No criteria are laid down whether the Minister shall or shall not accept them.

I draw attention to an oddity to be found in paragraph 5 of the Scheme. The opening words are: Every person who carries on business as a bacon curer … A little lower down in the same paragraph the reference is to a person who is "curing bacon". Those two different expressions are used, but they do not mean the same. I do not wish to flog the point, but there is a difference between a person who carries on business as a bacon curer and a person curing bacon.

Next, how did the Minister arrive at the figure of 6s. per cwt.? What makes 6s. the right sum? Perhaps the hon. Gentleman will explain.

At this late stage, after having had a Scheme running for a year, one cannot say that there should not be continuation, but I want to know why it should run for almost three years. Would not one year have been better? Is there to be a permanent subsidy for this part of the farming industry which is a purely commercial operation? Is the Minister certain that there is not too much capacity? I am not for a moment suggesting that the I.R.C. should go in and merge firms compulsorily or even bribe them to merge, but is the hon. Gentleman certain that capacity—which, presumably, has increased by over 32 per cent. from the time when I occupied his post—is right and that there should not be a further contraction in the industry to make it more efficient? How much more money do we have to pour into it to allow it to continue to supply bacon for this country, presumably at a loss?

I wonder whether the Minister has thought the matter through sufficiently and whether this Scheme is right in the long term for the bacon industry.

10.18 p.m.

Mr. Peter Mills (Torrington)

We welcome the Scheme, though with some reservations. My hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) seems to have more reservations than others have, but it is true that the Scheme has been of benefit to curers and to the industry as a whole.

We have several questions and observations to put to the Minister. In the preamble, there is a reference to Section 38 of the Agriculture (Miscellaneous Provisions) Act, 1968— for the purpose of avoiding undue fluctuations in income arising from carrying on the business of curing bacon … This is really the reason for the Scheme, to stop these fluctuations. The fluctuations depend very much on Government policy towards pig producers. This is the main point I make. Pig producers have a considerable part to play in stopping the fluctuations. Sufficient pigs must be produced to meet curers' needs; otherwise, violent fluctuations will occur, the exact opposite of what the Government want and what the Scheme is designed to achieve.

We have already seen fluctuations due to an insufficient number of pigs. The simple truth is that there are not at present enough pigs to meet the needs of the bacon curing industry and the pork market, let alone the export trade. One would like to do all three, but there is not at the moment enough raw material to satisfy both the curing industry and the pork market.

The Government have sought to stimulate the production of pigs. I question whether it is enough.

It is vital to get this matter of raw material right, and to get the right numbers. We cannot expect the bacon curing industry to fulfil its commitments without the raw material. We want it to take a larger share of the home market. That has been the Government's intention, and we welcome that. But it looks as though the target will not be reached. The bacon curing figures at present are disturbing. They show a drop of about 600 tons a month over the summer months. The current level of production is 2,800 tons.

Is the Minister satisfied with the level of production of store pigs, the raw material for the industry? Is he satisfied that the bacon curing industry has enough to produce the high quality bacon that the nation requires? The December returns show a one per cent. drop in the number of sows and gilts, which are the beginning of it all. Without the sows and gilts we cannot get the store pigs, and without the store pigs we cannot have the bacon.

The sample survey on 14th January showed that there are 83,000 fewer pigs under two months old—a very significant drop in the numbers. I welcome the three-year period proposed in paragraph 1. It is a fairly Icing extension of the stabilisation period. We realise that the curers are now relying on the Scheme, and the proposals help to promote confidence in the industry, which is so important. This confidence will soon disappear if the curers cannot find the necessary pigs. We do not want a situation in which we have insufficient pigs to meet the requirements. This would spoil the opportunity we have to supply an increased proportion of the home bacon market under the new understanding. If we can do that it will make a substantial contribution to import saving.

I am slightly disturbed to see that South Africa is allowed to have a share, small though it is, in the agreement. I do not believe that this will help confidence in the industry. Indeed, confidence will slip away if that sort of thing continues on a large scale.

I notice that under paragraph 6 returns have to be made and information given. What is the latest position on the total tonnage of bacon cured? Perhaps my fear is unfounded, but are we still slipping back in the production of home bacon?

What is the number of registered curers? Has the industry started a further programme of rationalisation of factories? My hon. Friend the Member for Derbyshire, West is rightly concerned about that. One of the original intentions of the financial contribution by the Government was to help the industry into a position where it could look after itself. We should know what progress has been made in the rationalisation of factories. There has been over-capacity for a very long time, and the scheme was designed to have these matters put right.

What is the total amount of levy that has been paid by the industry? What is the total amount of the stabilising payments that have been made by the Government? Who is doing best out of the deal? We would like to know the exact figures.

I take note of what was said in the Press notice given out by the Ministry on 29th December when it referred to changes in the bacon curing industry stabilisation arrangements. I notice, however, a small paragraph which states: A fuller statement of Government policy in this field will be made when the new Scheme is laid before Parliament. We have not had that statement. There may be a reason for this, but we are entitled to know something more about the Scheme. We had that firm promise in the Press notice that before the Scheme was laid before Parliament, we would be given that information.

It is interesting to note that the Press statement also said: This will also cover the other aspects of the I.R.C.'s report. Perhaps, therefore, the Minister can help us and let us know——

Mr. Speaker

Order. The Minister would be out of order if he discussed other things than the Scheme.

Mr. Mills

Yes, Mr. Speaker, but this is intimately connected with the Scheme which is before us tonight. That is what was stated in the Press notice about the Scheme, but perhaps I am wrong again and I bow to your Ruling.

The Ministers have considered the advice which has been given by the Industrial Reorganisation Corporation, but I think that the industry as a whole is concerned that the Ministry has not discussed this matter with them. The Farmer and Stockbreeder of 6th January this year said that The curers are unhappy that the I.R.C. reported direct to the Government without discussing its conclusions with the industry, but further talks are to be held with the Minister on other recommendations which may be in the unpublished report. We have to accept from the Minister that the full report cannot be publicised, but, at least, the main points could be discussed with the industry. All this is again a matter of confidence, which is vitally important to the bacon-curing industry.

We note tonight that as a result of the advice from the I.R.C. report, the curers have had a weekly payment of about 6s. per cwt. in return. It would be interesting to have from the Minister replies to the points raised by my hon. Friend about how that sum is made up and why. When can we expect something back from the curers in return? This is another considerable sum of money. It is adding up all the time. We want to hear something about the reorganisation of their industry.

We thus have an industry which is seeking expansion. It has put much of its house in order although we believe that there is much more to be done. The industry now has the confidence of the Scheme, which is to continue for three years, and this should help considerably. I repeat, however, and I do not apologise for over-emphasising, that quality raw material is essential, otherwise the industry cannot make the progress that it could—it has the strength, the possibility and the know-how to do it—and must make in the interests of the country and to help in import saving.

We welcome the Scheme. We have reservations. We want to see signs from the industry that it is putting its house in order. Perhaps the Minister will be good enough to answer the various points that have been raised.

Mr. Noble

On a point of order. I find myself in some slight difficulty, Mr. Speaker, as perhaps do other hon. Members. In commending the Scheme to the House, the Minister referred several times to the report which he has had from the Industrial Reorganisation Corporation. My hon. Friends ask, quite rightly, what else is in the report which the Minister has not, perhaps, confided to the House. I hope that in replying the Minister may be allowed to refer to that report. If not, the House will be in difficulty when the Minister bases his argument on a report which the House has not seen.

Mr. Speaker

The right hon. Gentleman is on a good point. I said that the Minister could not refer to that part of the I.R.C. report which had nothing to do with the Scheme. He may refer to those parts which have to do with the Scheme which we are now debating.

Mr. Noble

Further to that point of order. So far as I know, the I.R.C. report is concerned entirely with the Scheme. That is why I asked for your guidance, Mr. Speaker.

Mr. Scott-Hopkins

On a point of order. You will notice, Mr. Speaker, that this Statutory Instrument has no date. I have not met that before. Other Statutory Instruments have a date. It is the practice of the House for Statutory Instruments to state the date when they are laid and the date of their coming into operation. As the date when the Scheme was laid before Parliament is not included, does not that mean that it is invalid?

Mr. Speaker

It is usual to have a date, but it is not invariably the case.

Mr. Scott-Hopkins

But is not the Scheme invalid? Is not that the precedent.

Mr. Speaker

The hon. Member asked for my Ruling and I have given it. If the House passes the Scheme tonight, it will have been passed and it will be valid.

10.33 p.m.

Mr. Hoy

It will be remembered that I gave the date when the draft Scheme was laid and I am surprised that the right hon. Member for Argyll (Mr. Noble) should have raised the point. As regards the I.R.C. report, he knows that many Governments have had inquiries of this kind, involving confidential reports to Ministers. He is himself connected with an industry which has supplied information, and I am certain that he would have taken it ill if any confidential information which had come the Government's way had been made public.

I said that the I.R.C. was considering the whole industry with the firms concerned, and any proposals will have to be considered by Parliament. I pointed out that the evidence was given in confidence, and I am certain that many sections of the industry would take it ill if, having supplied the evidence for the purpose of a consideration of the reconstruction of the industry, they found that it was disclosed for other reasons.

I was asked how the figure of 6s. was calculated. I thought that I made it clear that it took account of increased costs, provided some return on capital and made some allowance for the change in the conversion rate from pig meat to bacon and for a higher return to the curers from the sale of offal.

I was asked why a period of three years was chosen. I was glad to hear the hon. Member for Torrington (Mr. Peter Mills) agree that this was the right period. If the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) had been here at the time, he would have remembered that we were told that one year was no use to the industry.

Mr. Scott-Hopkins

It was not said by me.

Mr. Hoy

As the hon. Member was not here at the time, it would obviously have been difficult for him to have said it. We were told that the industry wanted a longer period for planning ahead. We think that the period of three years will permit the industry to plan with more confidence than would have been permitted by a period of six months or a year.

I was asked about the registration of curers. All people curing bacon are required to be registered because the obligation to pay levies rests on the whole industry even if an individual curer does not want to benefit from the payments. I was asked about the return on capital. The I.R.C. allowed for the capital in its costings on which the new rate of payment is based, but the Scheme is not based only on this, but on all factors relevant to bacon production policy.

Mr. Scott-Hopkins

The hon. Gentleman has said that return on capital is part of the increased cost. It is very difficult for us to follow his argument, since he keeps on quoting the I.R.C. report. We do not know the percentages or figures which that report took into account. Would he please consider placing in the Library a copy of the report, so that we can judge for ourselves?

Mr. Hoy

I could not promise that; it would be the very thing which I said that we could not do, and no government have ever agreed to do it. When the hon. Gentleman himself was in my office, information was supplied to the Ministry which he would not publish because it was given in confidence.

Mr. Noble

The hon. Gentleman has misinterpreted what I was trying to do. Mr. Speaker said that the I.R.C. report had nothing to do with the Scheme, but I asked him to allow the Parliamentary Secretary to answer straight questions about what the I.R.C. had said on specific points. I was not asking the Minister to put the report in the Library. What does the I.R.C. say is a fair return on capital in this industry? I am not asking for confidential information: these are factual parts of the report which the hon. Gentleman should be able to tell the House.

Mr. Hoy

I was saying that we would not disclose certain figures about particular companies.—[Interruption.] The right hon. Gentleman is a little talkative. If he would wait a minute, I might give him some more information. I have to reply to the points made in the debate.

The hon. Member for Torrington asked me whether the pig supply would be adequate. We obviously hope so. Pig prices were increased by Is. a score in the Review. He spoke about a certain amount of under-supply to meet home needs, and indeed I agree about the three needs he spelled out. We had to take action to prevent the export of pigs. This may be one cause of the fall in curing which he quoted. Some people were taking a very quick return and this might not make for a successful industry. I would certainly hope that people will not go too far in this direction.

In answer to the question of the hon. Member for Derbyshire, West, about paragraph 8, the information called for does not differ from what we have required in the past. The hon. Member for Torrington not only welcomed the Scheme but outlined a very good reason for it. This industry went through a period of fluctuation in prices to the curer and the producer, and this is why, in 1966, we introduced a new policy to cure that situation.

He also asked me what the payments were. From December, 1966, to March, 1970, payments are expected to total £23½ million. This is a lot of money. Levies in 1969 produced £60,000. The hon. Member said in the last debate on this subject that some people should not object to paying and I agree. We are introducing a Scheme for three years, which we hope will give confidence and stability to an industry which we all hope will prosper.

Mr. Peter Mills

The right hon. Gentleman has not answered my question concerning the Press notice and a full statement of Government policy.

Mr. Hoy

I referred to it at the beginning of my reply. I outlined what we had done and pointed out that the second part, namely, the structure of the industry is still being considered by the I.R.C. and by the industry itself.

Question put and agreed to.

Resolved, That the Bacon Curing Industry Stabilisation Scheme 1970, a draft of which was laid before this House on 12th February, be approved.