HC Deb 01 March 1972 vol 832 cc413-23
The Minister of Agriculture, Fisheries and Food (Mr. James Prior)

With permission, Mr. Speaker, I would like to make a statement on the Government's determinations following the Annual Farm Price Review. This year I am sure it would meet the wishes of the House to do so at once.

The background to this year's review is our approach to Europe. It is important that the industry should be in a position to expand competitively in the enlarged Community and so help the country to save on its overseas food bills. For this, investment is essential, particularly as early expansion is, in our view, important. We have examined with the farmers' unions the resources available.

The industry is today in a much healthier position than it was. The Government's policies are clearly succeeding. Output, productivity and aggregate income have all risen again. The cash position and the confidence of the industry are being restored. If we are going to get the quick expansion we need, further resources must be provided. We have decided to increase the value of the guarantees by well above the cost increases falling on the industry. The determinations thus provide a cash injection for further investment additional to the resources generated by the industry's own efforts and increasing scale. We believe that the industry will respond as it has done in the past.

We have put the main emphasis on the livestock sector, particularly on cattle, where the time lag between the decision to expand and the actual increase in production is inevitably longest; and we have put the money on end price guarantees. We have also decided to switch about 60 per cent. of the fertiliser subsidy to end prices. This will give the industry greater flexibility in the application of resources. In the case of horticulture, the fertiliser change will be offset by increasing the combined grant rate under the Horticulture Improvement Scheme from 35 to 40 per cent. Hill farmers will be helped by increasing the winter keep subsidies. We also propose to retain under the Farm Capital Grant Scheme the 10 per cent. supplement on drainage; at the same time, a few small items will be eliminated from that scheme.

The main increases in the guarantees are as follows:

  • Milk—1p per gallon;
  • Beef—85p per cwt.;
  • Sheep—2p per lb.;
  • Pigs—5p per score;
  • Wheat—9p per cwt.;
  • Barley—11p per cwt.;
  • Oats—7p per cwt.; and
  • Sugar Beet—40p per ton.
These changes represent an increase of some £70½ million on the value of the guarantees. The capital grant changes I have mentioned are worth some £1½ million in addition. They will not add to consumer prices in this year.

I will circulate a note on these changes in the OFFICIAL REPORT. Further details about the review will be given in the White Paper, which will be published in the normal way on 15th March.

Mr. Peart

My first question does not necessarily concern the price review itself. Why is there not a White Paper for our colleagues in the House? I cannot remember a previous price review when a White Paper has not been issued giving the details. Is the omission because this is a good, or a bad, price review, or because there has been a leak? Or is it because the Government wish to hurry a decision for other reasons? This is a break with tradition in the House, so I hope the right hon. Gentleman will tell me in detail why there is no White Paper. No Member of the House can clearly appreciate fully what the right hon. Gentleman has said unless he has carefully read a White Paper to go with it. This omission never occurred in the time of the Labour Government, in which I was Minister of Agriculture.

My second question relates to the background to the review. Is the Minister thinking in terms of entry into the European Economic Community? I hope he will not be so arrogant about this matter. After all, the House not not yet decided. Is he preparing his review in relation to entry now or at a specific time, or is he prepared to wait and see what Parliament decides?

Thirdly, is this the last price review that we are to have. Is this why we have no White Paper? Is this why hon. Members opposite have cavalierly adopted such an attitude towards the annual review procedure? Is this the last price review that we shall be able to debate fully on the Floor of the House?

Fourthly, what is the total effect of the determination which the right hon. Gentleman has made? What is the increased Exchequer commitment? Is it about £50 million? This is a very important matter.

Fifthly, what will be the true effect on the consumer? The country will not believe that there is to be none. The consumer will have to pay directly in some form for the end price, or otherwise, as a taxpayer, he will have to pay through increased Exchequer expenditure.

I turn now to specific aspects. The first is the case of the hill farmers. Winter keep affects the Scottish uplands very much. What about the hill farmers of the North of England and Scotland? What does the right hon. Gentleman estimate as the cost of the switch of 60 per cent. fertiliser subsidy to the end price? Is this an agreed price review on the basis of the E.E.C.'s acceptance of our entry or is it because certain people on the producer side are prepared to acquiesce?

Mr. Prior

I will answer the right hon. Gentleman's last question first. The price review is agreed between the farmers' unions and ourselves. I have made the announcement a fortnight earlier than usual in order to give hon. Members a fair chance of having the information first and not having inaccurate reports of the sort which have appeared year after year, particularly during the lifetime of the Labour Government. The White Paper will follow in a fortnight's time. We have made our announcement two weeks early so that there should be no confusion amongst farmers or hon. Members.

This review takes into consideration our entry into Europe; not only that, but it is based on giving the expansion now rather than later on. Whether this is the last price review depends on a number of factors, but certainly it will be the last one in the present form.

The right hon. Gentleman mentioned the Exchequer commitment and the interests of the consumers. As I have said, there is no direct increased cost to the consumer this year at all. The increased Exchequer commitment will vary, of course, depending on market prices, but is estimated to be £49 million.

Dealing with winter keep, the transfer of 60 per cent. of the fertilizer subsidy means that we have increased winter keep, which is the same thing as saying that we have increased the hill cow and hill sheep subsidies in England and Wales by approximately £1 million.

Sir Robin Turton

I congratulate my right hon. Friend in that this is the first time a February Price Review has been announced on 1st March. Could he state exactly how much of the £70½ million award is represented by increased costs which have arisen since the last review? Secondly, as the White Paper is not coming out until 15th March, can he say what is the position about the incentive payments scheme, which is due to end on 18th March? This is causing a great deal of anxiety.

Mr. Prior

The change in costs for all commodities, including eggs—it is £54½ million excluding eggs—is £48 million. As for the captal grant scheme, we are taking off the 10 per cent. supplement which was designed to last for two years except for land drainage, for which the extra 10 per cent. is being retained on a permanent basis. The extra 10 per cent. supplement ends on 18th March for all applications put in after that date. There is then a period afterwards for the work to be carried out. My right hon. Friend will be glad to know that investment in the type of work covered by this scheme has increased by 25 per cent.

Mr. Cledwyn Hughes

Is the right hon. Gentleman aware that he has made a totally inadequate statement and that it is scandalous that we have had to listen to it without the benefit of a White Paper, especially as the details appeared in the newspapers this morning? Dealing with costs, does he recall that last year he excluded milk and eggs from the standard quantity and that this amounted to £24 million? Has he excluded these sums from the determination this year, and if so, to what extent? Turning to the fertiliser subsidy and the switch of the 60 per cent., can he say how much money this involves? Is he aware that the subsidy was of considerable assistance to farmers?

Mr. Prior

It is strange to hear the right hon. Gentleman say that this is a totally inadequate award when I tell him that this is by far the best award since 1948. He has not a great deal to boast about. Dealing with the fertiliser subsidy, the switch from subsidy to the end price represents £20 million out of approximately £32 million, which is about 60 per cent. of the fertiliser subsidy. As for the way the costs are calculated, this is done in precisely the same way as last year, and they relate only to production within standard quantities. For production of guaranteed commodities outside standard quantities there was a net cost reduction of £2½ million. Milk went up by £2 million, pigs went up by £500,000 and eggs went down by £5 million.

Mr. Peter Mills

While it is a fact the confidence has been restored in agriculture, which is in sharp contrast to the mess we had before, would my right hon. Friend make it clear that this system is the best insurance for the consumer and it will ensure that all sections of the farming community, including farmworkers, can now look forward to further prosperity?

Mr. Prior

That is quite true. Production this year is up by 4½per cent. It is on a strongly expanding level. I believe that it is in the best interest of consumers as much as the nation as a whole that we should have a healthy and strong British agriculture. I pay tribute to the agricultural industry for the part that it is playing.

Mr. Pardoe

Is the right hon. Gentleman aware that the complacent picture he has painted this afternoon about the cash position and confidence in the industry is totally at variance with the views of Cornish farmers as expressed in a letter which all Cornish Members received from the chairman of the Cornish N.F.U.? Is he aware that in the light of this his review is quite inadequate to encourage the expansion he wants, inadequate to encourage the investment that is necessary, and a totally inadequate base for a decent living wage for agricultural workers? Is he further aware that there is a real impression among farmers in the West Country that the Government, licking the wounds inflicted upon them at the hands of the miners, have decided to take it out on the farmers and agricultural workers.

Mr. Prior

The hon. Gentleman, as usual, knows far better than the National Farmers' Union.

Sir D. Renton

While welcoming the full recoupment of costs which this Price Review gives, as well as the injection of capital for expansion, may I ask my right hon. Friend whether he can assure arable farmers who have grown a great deal of wheat and barley this year and are finding difficulty in selling it at a profit that the help he is giving them in this review will enable them to overcome their difficulties next season?

Mr. Prior

The increases in the arable sector, particularly for barley of 11p per cwt. and wheat of 9p per cwt., are an indication that we feel that the arable sector should have a fair share of the review this year. I know that things have not been easy for cereal growers in the last year or two, but I am certain that they can look forward to better times from now on.

Mr. Loughlin

Would the right hon. Gentleman not agree that it is an offence to this House that so many ministerial statements are leaked to the Press before they are disclosed to this House? I am not trying to fix blame, but will he try to see in future that statements to be made to this House are not leaked by anyone in his Department to the Press? Dealing with the review, is it not true that the increases in prices relate to commodities the prices of which at present lag behind those in the Common Market and that he is doing this to cushion the impact of our entry to the Common Market?

Mr. Prior

May I deal with the first point, which I take extremely seriously. I assure the House that I can categorically deny that there was any leak whatsoever from my Department. What is more, the leaks, or so-called leaks, that have occurred are totally inaccurate. One of the reasons why I have announced this review a fortnight before the proper time of 15th March—it has always been around that time—is solely that I wanted the House to have the information first. I have done my utmost to serve the House in this way, and I feel the vast majority of hon. Members appreciate that. As for the relationship between E.E.C. prices and our own, we have put the emphasis of our prices slightly on livestock. This year we are bound to consult with the E.E.C. and it with us. We are in no way bound to take advice from it, nor is it bound to take advice from us.

Mr. MacArthur

Is my right hon. Friend aware that farmers at any rate will be grateful to him for making this statement on the earliest possible day and that they will welcome the encouragement he has given to the investment which is essential for future expansion? Can he give some further information about the review in Scotland, and, in particular, on the help which has been given to hill farmers through the improvement of the winter keep scheme?

Mr. Prior

I am grateful to my hon. Friend for his remarks. As for the winter keep scheme, an extra £1 million is being put into this. I understand that in Scotland it can be taken either in the form of subsidy on forage crops or added to the hill cow and hill sheep subsidies. The way in which this is to be determined is still a matter for consultation. Generally speaking, the farmers in Scotland will be extremely pleased about the high awards for beef cattle and sheep. Both of those are items which Scottish farmers grow extraordinarily well, and I hope they will take full advantage of this.

Mr. Maclennan

Is the Minister aware that this price review reflects completely inappropriate priorities at this time, and, in particular, that he has discriminated against the hills and uplands by a straight cash grant cut of £20 million on fertilisers and has not compensated for that by £1 million on winter keep?

Furthermore, can the right hon. Gentleman say what small items have been removed from the farm capital scheme and when the housewife is going to have to pay this extra 1p—the old 2½d.—for milk?

Mr. Prior

Let me say straight away that the housewife will not be required to pay the extra 1p on milk and that there is no question of any increase in the foreseeable future in the retail price of milk.

Hill farmers in Scotland are gaining every bit as much by the increase in the winter keep supplement as they may lose by the cut in the fertiliser subsidy. In addition to that, for the first time for many years we have seen the price for beef and sheep going right back into the hills and into the marginal districts, and this has given more confidence to hill farmers in Scotland, Wales and the North and South of England than anything done by the previous Government.

Mr. Charles Morrison

There seems little doubt that the vast majority of farmers will warmly welcome the cost plus review, but could my right hon. Friend say how investment in the industry in 1971 compared with that in the previous year, and what the forecast is for the coming year?

Mr. Prior

Investment in buildings and works is 23 per cent. up, not 25 per cent. as I told my right hon. Friend. Undoubtedly, with the grants continuing at the rates I have mentioned we can expect investment to continue at a very high level. When one remembers that for the past two years the industry has been able to keep all the extra cash which it has earned as a result of its own efforts, as it were, and has not had this taken away from it, I think we can all look forward with great confidence.

One of the capital grants which I have abolished is that for the grubbing-out of hedgerows and various pieces of woodland. I believe that on scientific, environmental and ecological grounds this should be abolished.

Mr. Mackie

I do not want to be ungracious to the Minister, but the price of fat cattle has been £ 1 per cwt. above the guarantee for the past year at least and the 85p is not going to do a lot of good. If he is not going to soak the consumer for the new penny on milk, where will he get it—from the Milk Marketing Board or by increasing the prices of cheese and butter? Finally, the psychological effect of taking £20 million off the fertiliser subsidy will reduce production, particularly of the smaller farms.

Mr. Prior

On the fertiliser point, it seems to me inconceivable that, with the knowledge that the optimum use of fertiliser is absolutely essential to maximum production, any farmer should not continue to use the proper quantity of fertiliser. What I believe we are doing by getting away from production grants and putting emphasis on the end price is concentrating farmers' minds on marketing, and this is the real crux of the problem that we are going to face in the Community.

As for where the increase in the price of milk is coming from, this will come out of the milk fund, which has been increased enormously in the past year, of course, as a result of what I might call the catastrophic increase in butter and cheese prices. I felt the least we could do was to see that the price of milk to the consumer was stabilised for as long as possible.

Beef prices are very high at the moment. We are underpinning the situation but this sort of award gives great confidence to the beef producer.

Sir H. Legge-Bourke

I hope my right hon. Friend realises that the acceptance by him of the need for capital injection will be very much appreciated. Nevertheless, what really matters here is where it goes, and there are some areas which need it more than others. Is my right hon. Friend satisfied that he has taken fully into account, and that the N.F.U. has also taken fully into account, the points which some of the Fen constituencies have been putting to him in this connection?

Mr. Prior

It is always a matter of some difficulty to get the balance exactly right. I dare say that had I managed to agree to give more to the Fens and perhaps the East of England I should have upset the West of England, and vice versa. I think we have a fair balance.

The position on potatoes, which I know affects my hon. Friend's constituency enormously, is that we have not felt able to increase the guarantees because we have a situation which is costing the Exchequer a considerable amount of money and there is overproduction of potatoes. But we are proposing to carry out a full examination of the guarantee and marketing arrangements in the coming year in consultation with all sections of the industry and meanwhile are consulting all the interests concerned on proposals for making potatoes available to the potato granule industry at very economic prices so as to retain this outlet.

Mr. Buchan

Surely the Minister must realise that he has made a grossly inadequate statement today. In order to avoid a leak presumably, he has come here without a White Paper. So he has the worst of both worlds: he has no White Paper and he has a leak. This annual price review does not have a background of Europe; it is dominated by Europe, because it seeks to unscramble what has been the basic system of support in British agriculture for the past 20 years.

We do not agree with this emphasis on end price. The only result will be that the consumer will pay more, after a year in which prices have risen by 13 per cent. On the Scottish point, would the right hon. Gentleman not agree that the cut of £20 million on fertilisers is not compensated for by the addition of £1 million on the winter keep scheme and that there is no guarantee that the end price will necessarily feed back to the marginal producers?

Mr. Prior

I have covered the last point on at least three separate occasions, and there is absolutely no truth in the hon. Gentleman's accusation.

As far as the publication of the White Paper is concerned, hon. Members opposite are being hypocritical. The White Paper is never published until after the statement anyhow; so as far as that goes they are in no worse a position this afternoon than ever before.

As to the question of end price and the dismantling of our agricultural system, I am quite certain that if any farmer in the British Isles today were asked which system he would rather have he would prefer ours.

Following is the information:

Commodity Guaranteed price for 1971–72 Change from Col. (2) Guaranteed price for 1972–73
(1) (2) (3) (4)
Wheat (per cwt.) £1.63 +9p £1.72
Barley (per cwt.) £1.45 +11p £1.56
Oats (per cwt.) £1.44 +7p £1.51
Rye (per cwt.) £1.08 No change £1.08
Potatoes (per ton) £16.55 No change £16.55
Sugar beet (per ton) £7.60 +40p £8.00
Fat cattle (per live cwt.) £12.35 +85p £13.20
Fat sheep (per lb. e.d.c.w.) 22.3p +2.0p 24.3p
Fat pigs (per score d.w.) £2.93 +5p £2.81(b)**
equivalent (on the basis of the current feed price) to £2.76
Milk (per gallon) 22.1p + 1.0p 23.lp(c)†
Eggs—hen (per dozen) 16.5p - 0.5p 16.0p
Eggs—duck (per dozen) 15.5p No change 15.5p
Wool (per lb.) 22.7p + 0.3p 23.0p
Relevant production grants
Fertiliser subsidy: reduction in rates equivalent to £20 million.
Winter keep subsidy: increase in rates equivalent to £1 million.
Farm Business Recording Scheme: termination in May 1972 as already announced.
Non-relevant production grants
Farm Capital Grant Scheme: continuation of grants for drainage at the enhanced rates of the last two years; elimination of various minor items.
Horticulture Improvement Scheme: increase in rates of grant.
* Changes in the basis of the guarantees will be set out more fully later in the Annual Review White Paper.
** (b) Fat pigs. The middle band under the flexible guarantee arrangements will be 14.35–15.0 million certifications.
†(c) Milk. In addition to the increase shown the guaranteed price for the Northern Ireland milk marketing area will be raised by 0.15p per gallon. The standard quantities for Great Britain will remain at their 1971–72 levels but that for Northern Ireland will be increased by 14.8 million gallon, to 120 million gallons.
Exchequer commitment
These determinations involve an increased Exchequer commitment for 1972/73 of about £49 million