CEREAL PRICES (Hansard, 18 July 1972)

§ The Minister of Agriculture, Fisheries and Food (Mr. James Prior)
With permission, Mr. Speaker, I would like to make a statement concerning cereals.
As Ministers have always undertaken to do on their return from Brussels, I would like to inform the House that we have now agreed with the Council of the European Communities the starting points for the transitional arrangements for cereals from 1st February, 1973. These will take the form of two regulations. One sets out the principal intervention centres and the prices at each, in the case of the United Kingdom, for wheat and barley. The second sets out the compensatory amounts applicable in each of the acceding States, except Norway, for these and other cereals.
409 These amounts have been calculated by reference to present parities. It is understood that they will be adjusted, should there be any change in the parity of any of the member States concerned, in order to achieve the objectives of the transitional mechanisms in the Act of Accession.
The aims of these regulations are: first, to secure that our own prices rise by no more than the normal monthly increases when we adopt the pricing system of the European Economic Community.

§ Mr. Maclennan
On a point of order, Mr. Deputy Speaker. The statement being made this afternoon is a very important and complicated one. It is rather difficult to hear what the Minister is saying. Can we have a little more silence?

§ Mr. Deputy Speaker (Sir Robert Grant-Ferris)
I am doing my best to get hon. Members to keep order. I hope they will.

§ Mr. Prior
The second aim is to establish the principal intervention centres and the initial levels of prices at each on a basis which will support, but not replace, marketing outlets for our producers, maintain and develop sound patterns of trading, and provide the necessary incentives for the disposal of feed wheat through de-naturing.
On prices, as the House already knows, we have agreed with the Community that our market prices will be progressively increased during the transitional period until by the beginning of 1978 they reach the full Community levels. During the transitional period, when prices will be at the different levels in different parts of the Community, it will nevertheless be necessary to ensure that trade within the Community flows freely without causing market confusion. This will be achieved by the system of compensatory amounts, which represent the difference between our starting prices and Community prices.
The regulations prescribe only principal intervention centres, but additional centres may be established.
Coming to intervention prices, we have taken the Duisburg price for the West, which is the area of greatest deficit. The prices at Belfast, Glasgow, Liverpool and Avon mouth will be £28.31 for wheat and £24.39 for barley a long ton.
410 On the East side, the surplus side, we have taken different bases for prices for wheat and barley. Hence at Tilbury, our largest importing port, we have a Rotterdam wheat price, this giving £28.03 a long ton. For the smaller East Coast ports, we have a price related to Antwerp, this giving £27.81 at Aberdeen, Leith, Newcastle, Hull, King's Lynn and Southampton. Cambridge has been chosen as the principal inland centre, and the price there will be £26.50. These prices are all for wheat.
For barley, we have agreed to a price a little above Rouen, which is the lowest-priced port in the Community. This will result in a price of £23.52 a long ton at the same ports as those listed for wheat on the East and South Coasts. The Cambridge price will be £22.25 a long ton.
All these prices will increase on the first of each month until 1st July by the increase in the Community scale; namely, 45p a ton for wheat and 36p a ton for barley.
The same increases will apply to the threshold prices—which are the same as our old minimum import prices—which will determine the level of external protection against third country imports and which on 1st February, 1973, for wheat, barley and maize will be respectively £31.20, £27.07 and £28.30 a long ton.
I am sure that producers, traders and users will welcome the fact that we now have agreement to the arrangements that will apply initially in the transitional period. These do not involve any substantial change, and will produce a smooth adjustment of prices. For consumers, these will be only marginally higher than under present arrangements.

§ Mr. Peart
The Minister has said that he will introduce two regulations. Although this is a matter for the Leader of the House, we should be grateful if he could tell us something about the timetable for debating these, because naturally we shall have to study them carefully.
As my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) rightly said in an intervention, this is an important and complicated statement affecting the cereal industry and, in the end, the consumer. How many people will be employed at the intervention centres? This is an import- 411 ant matter as there are to be additional centres.
According to the report in today's Financial Times, in the discussions with the Commission Britain wanted a higher intervention price for the West Coast than the 66.86 units of account proposed by the Commission. What has happened about this? What was the Commission's attitude?
As to the percentage increase, the Minister said that our own prices would rise by no more than the normal monthly increase when we adopt the pricing system of the European Community. What is the normal monthly percentage increase?

§ Mr. Prior
These are draft regulations which have been agreed with the Council of the European Communities but which have now to be approved. The House, as will become the custom, will have to consider how best to debate draft regulations. This is not a matter for me. It is a matter for active consideration between the two sides of the House.
The intervention centres will be places where grain can be brought in at the intervention price. I see no reason why in the early years of transition there should be any need for intervention centres to operate to buy grain. I think that they will become much more points of reference for intervention in its other forms, such as de-naturing and admixture. The present staff at intervention centres is small. The Home Grown Cereals Authority will be responsile for this work.
The report in this morning's Financial Times about the Government wishing for a higher intervention price on the West Coast is accurate. We wanted to get as high a price on the West Coast for intervention as we could to make it possible for grain to be shipped from the East of England, which is the surplus area, to the West. In the course of negotiation we accepted what we thought was a fair compromise, both sides moving to what they regarded as a reasonable position.
As for the percentage increase, just as in past years since the introduction of minimum import prices for wheat and barley our minimum import price has gone up each month, so from 1st February onwards there will be the increase I have mentioned of 45p a ton for wheat and 36p a ton for barley. That is a very small increase over and above that which 412 would have occurred under our own arrangements. Of course, in the five years of transition our prices will have to rise to Common Market levels, and, as the House will know, there will be considerable increases in prices over that period. [Interruption.] I have never tried to dodge this issue and I do not believe anyone else has. There will be considerable increases in the prices of feeding stuffs and this is exactly as forecast in the 1970 White Paper.

§ Sir Robin Turton
Surely my right hon. Friend the Minister can say if he intends to table a Motion under the affirmative Resolution procedure so that we can have a proper debate on the regulations? Has he laid down any minimum quantities of de-natured wheat that can be sold by any one farmer?

§ Mr. Prior
On the latter part of the Question I have already announced minimum quantities for grain being bought under intervention. I think I am right in saying that minimum quantities for de-naturing by incorporation has been fixed at 30 tons in a single month. My right hon. Friend's first question is a matter for the House to decide, because it involves not just these two draft regulations but the whole gamut of regulations which the House will have to approve over the period from now onwards.

Mr. Mclennan
I understand from what the Minister said that the amounts of the intervention prices have been calculated with reference to existing parities. What advantage was there in doing this in view of the uncertainty about what the parity will be when these prices become operative? Was it not a little premature, if not unnecessary? Will the Minister say what consultations he has had with the National Farmers Union prior to reaching agreement with the Community? He has said that he thinks that producers will be satisfied but has he any prior knowledge of what the National Farmers Union was looking for?

§ Mr. Prior
My right hon. Friend the Chancellor of the Exchequer has said that we hope to return to a fixed parity by the time of accession. For the moment, therefore, we have taken the parity as it existed and we shall make any necessary adjustment when we enter. If we had waited to fix prices, as the hon. Member suggests, 413 until the parity was stabilised it would have been impossible to reach agreement now, and agreement is of vital importance to the grain industry and farming industry generally. I was very keen that we should take this step. It is a perfectly normal step to take, and it has happened before when other currencies have been floating.
We have had the closest contact with the National Farmers Union. I have not been in touch with it this morning since I have been back only a few hours but I have no reason to think it will dissent greatly from the intervention centres we have chosen or from the prices.

§ Mr. Body
My right hon. Friend will agree that there is a wide range in the quality of cereals. Will any regulation be needed to impose a system of grading or other tests for quality? Can the Minister further confirm that in the Community most of the intervention centres impose very high standards before the grain is accepted and only pay the intervention price on high quality grain?

§ Mr. Prior
That position will apply just as much to us. We shall have high standards applying to moisture content and the quality of grain. I very much hope that farmers will not regard the intervention price as the price which they will get for their grain. If they market it properly they should do considerably better. For us as a deficit supplier of grain on our own market, we should get a better price than the intervention price and it will only be in times of surplus that we shall be driven back on to intervention. I am hoping very much therefore that farmers will seize the opportunity to market their grain more effectively or to use it themselves and take advantage of the premium which will come about from de-naturing.

§ Mr. Pardoe
Will the Minister agree that by far the best area for specialisation is in the production of meat in the enlarged Community and that therefore it is in our interest to get the feed stuff prices, particularly barley prices, as low as possible? The Minister has said that for the five-year period our prices will have to rise to the Community price. Has he entirely discounted that both European and world factors may over that period bring European prices down?

§ Mr. Prior
I have not discounted that and nothing I have said should in any way convey that I necessarily expect Community prices to stay at their present level. It would be unrealistic to expect them to fall far, but we believe that it is in our interest to keep cereal prices as low as is consistent with a reasonable return on capital invested. I believe that Community grain prices are too high, so we shall certainly be exercising all our powers of persuasion to stabilise the position.

§ Mr. Charles Morrison
I congratulate my right hon. Friend on reaching these agreements. They are necessarily somewhat complicated. Will he therefore ensure that the figures are made available to small farmers, possibly in leaflet form in as simple a way as possible so that they are fully informed about what is involved? Will he say whether the centres will be reviewed annually or are they fixed permanently? Will he confirm that cereal deficiency payments will continue during the transitional period, because there is still some doubt among some farmers on the matter?

§ Mr. Prior
I willingly confirm the last part of the supplementary question. Guaranteed prices will go on just as normal until the intervention price or the market price exceeds the guaranteed price and there is no longer a need for it. This year, therefore, and I imagine next year too, farmers will have a period in which to run themselves in on the new system without any fear that their prices are unprotected by guarantees. As for trying to explain the system to farmers and the trade, we are considering every means of publicity on what is, by its very nature, a complicated scheme.

§ Mr. Jay
Will the Government's battle against inflation be assisted by this policy 415 of artificially and unnecessarily raising food and feeding stuff prices?

§ Mr. Prior
The right hon. Gentleman is merely repeating arguments that he has adduced for a long time. I believe that both in the national interest and in the agricultural interest we shall achieve higher standards of living for our community as a whole by entry into the Comon Market, and that is what counts.

§ Mr. Shore
These are complicated matters, and we are grateful to the right hon. Gentleman for explaining them to us. But can he clear up a point about approval of the proposals? When he spoke of regulations, was he referring to what we normally understand by regulations—matters requiring approval by the House—or to Euro-regulations, about which we have no opportunity to express our wishes?

§ Mr. Prior
The right hon. Gentleman has examined and debated this topic over a period of several months. He knows perfectly well that these are regulations of the Community. [Interruption.] Of course they are regulations of the Community, otherwise what on earth did I go to Brussels for? They are in draft form, and it will be up to the House to decide how it wishes to debate these matters.

Several Hon. Members
rose—

§ Mr. Deputy Speaker
Order. I must safeguard the business of the House. We have a most important debate ahead, and we must get on.