HC Deb 04 April 1973 vol 854 cc551-60

8.50 p.m.

The Minister of State for Agriculture, Fisheries and Food (Mr. Anthony Stodart)

I beg to move, That the Calf Subsidies (United Kingdom) (Variation) (No. 2) Scheme 1973, a draft of which was laid before this House on 21st March, be approved. We move from drugs to calves. The draft scheme which we have before us gives effect to the changes in the rates of calf subsidies announced by my right hon. Friend on 21st March. I ought to explain, perhaps, that the scheme is called the No. 2 scheme because earlier this year we had a variation scheme which dealt with technical legal changes which had to be made as a result of the ending of the guarantee for fat cattle.

The scheme would have the effect of reducing the rates of calf subsidy in the following way: that for steers would be reduced from £11.25 to £8.50, and for heifers from £9.00 to £6.50. These new rates would apply to calves born on or after 16th April 1973. As the subsidy is generally paid on calves when they are eight months old or more, the reduced rates would not become effective until the coming autumn.

The essential purpose of the calf subsidies has been to encourage the rearing of calves for beef production. This is made clear in the 1971 Calf Subsidy Scheme, which sets out the requirements and specifically links the payments of subsidy to calves which are suitable for beef. In the past, many calves were being slaughtered as young bobbies and as a result we were losing potential productive capacity. Thus, incentives were clearly needed to make it worth while both to produce calves of a type suitable for beef production and to encourage farmers to rear them. Over the years the scheme has been effective in reducing the number of calves slaughtered from as many as 870,000 in 1962 to 150,000 last year, and in encouraging the trend towards breeds suitable for beef. We now have a national herd which is much better geared for beef production than ever before.

I readily accept that the calf subsidies have been a valuable production grant, improving returns at a key point in the production cycle when returns from end prices were not enough to bring about the necessary expansion. But the situation over the past year or so has changed markedly as a result of the shortage of beef supplies. This has increased returns from the market and has had the effect of making this subsidy less necessary.

For example, the prices of bull calves less than three weeks old were £10 or more higher in February this year than last. The increase is seen again in the prices for yearling steers of beef breeds which, over the same period, rose on average from £93 to £123 a head. And yet again, if we look at the prices of two-year-old animals we see increases of about £50 apiece.

Along with these improvements in returns from the market we have seen a sharp increase in the rate of expansion of the beef herd, which rose by 10 per cent. last year. Clearly, therefore, the market is giving farmers a good return for their calves and cattle at all stages in the production cycle, and farmers are responding well to it.

A reduction in the calf subsidy is, in my view, therefore, a reasonable and logical change at the present time, and I do not think that it will prejudice the returns of producers. The size of the reduction is quite modest—£2.50 for heifers and £2.75 for steers. These are about one-quarter of the present rates of the subsidies and would save about £8 million in the cost of the scheme in a full year.

I commend the scheme to the House. It represents a worthwhile saving in Government expenditure in a sector where the market has already more than compensated for the reduction in subsidy.

8.55 p.m.

Mr. Gavin Strang (Edinburgh, East)

There can be no argument about the need to expand our beef production. There is a shortage of beef in the United Kingdom, in Europe and in the United States—indeed, there is a world shortage of beef which will last for some time, particularly with the increasing demands being made on the world market by Japan. If we are in favour of expansion, as I believe both sides are, at present no commodity is a better bet, in terms of expansion, than beef. Although we may have some reservations about other commodities, possibly even cereals, there can be no ground as yet for talking in terms of an over-supply of beef in the market. The Government's policy should be to maintain and encourage the present expansion in our beef herds.

I acknowledge that the expansion in beef cow numbers—in calf heifers particularly of the beef type—has been considerable and commendable in the last year or two. Therefore, at a time when we should be encouraging even greater beef production it is illogical to proceed by cutting some of the important production grants which are aimed at achieving an expansion. For this reason the Opposition deplore the Government's decision to cut calf subsidy.

I appreciate that the matter must be looked at in perspective. There is a hill cow subsidy of £18.75, a beef cow subsidy, and a winter keep hill cow supplement. More important, there have been sharp increases in the prices of fat cattle and store cattle. From March last year to March this year store cattle prices increased by £5 per cwt. This means £30 in the case of a 6 cwt. beast, and it can be even greater for a larger beast.

There is no doubt that beef producers are experiencing significantly increased returns as a result of what has been happening in the market in the last year. Therefore, I cannot see how the Government can justify a cut in the subsidy at the present time. The Government are underestimating the effect which this will have upon agriculture. Time and again we have been exhorted to expand, but this attitude seems to have fallen away. We cannot blame the industry for beginning to wonder why the Government say, on the one hand, that we are desperately in need of beef expansion, and yet, on the other, cut the calf subsidy for the first time since it was introduced in 1952.

The Minister has acknowledged that this has been a useful grant in increasing the supply of calves for beef. I do not think one can attribute the reduction in the percentage of calf slaughterings to subsidy alone. The fact that producers have changed to the Friesian as opposed to the Ayrshire, and the increase in the value of Friesian steers, must have been a large factor in what has happened in agriculture.

Nevertheless, it is worth bearing in mind that it is more than 20 years since the calf subsidy scheme was introduced. When it came in it was £5 for steer calves and £2 for heifer calves. The subsidy was increased by the last Conservative Government, and increased again by the last Labour Government. Now, more than 20 years later, at a time when we are crying out more than ever for increased beef production, the Government proceed to cut the calf subsidy.

Why are the Government cutting the subsidy? Are they saying that beef is too profitable? Are they saying that producers are making too much out of beef? I have never seen production grants as providing a way of bolstering farm incomes. They provide a way of achieving the right level of supply in specific commodities. But this production grant's function is not to help farm incomes. It is not a good way of supporting farm incomes. It is aimed specifically at increasing the supply of beef.

I am reminded of the antics of this Government just after Christmas, when we had the "instant" beef prices report. We had a great deal of misguided comment about the wicked farmers making a big killing in beef and holding the consumer to ransom. The Government rather basked in this. They liked the idea that criticism was being directed to the farmers rather than to themselves. I cannot help wondering whether this cut in subsidy has its origin in some of the discussion which took place at that time.

Everyone knows that the farmer sells the bulk of his fat cattle on the open market and takes the price that he gets. He takes the highest price, of course, just as anyone selling a house does. The extent to which cattle are sold dead does not affect the argument. The fact is that any producer takes the price that the market will give him. It is nonsense to argue that it is somehow the producer's fault that we have high beef prices.

That is not to say that high beef prices are inevitable. The Government could control them if they wanted to. They may decide that the cost of legislation and the difficulties of the intervention required are not justified. That is arguable. But they cannot say that they are unable to take action to contain beef prices. If the political will is there they can get over the administrative problems.

There can be no doubt in any one's mind, however, that present beef prices will not be helped by cutting production subsidies. Cutting production grants makes the producer even more dependent on market prices. If the Government are serious about trying to reduce beef prices, and if they hope that the slight fall-back in fat cattle prices will continue—I believe that it is only temporary—that is all the more reason for continuing the production grants.

Are the Government saying that they do not want beef to be profitable? Are they saying that beef is too profitable? Do not they accept that we need to put everything that we have into expanding beef production, and that it was misguided of them to give grounds for apprehension among beef producers? It was that, coupled with the economic loss, which caused the farmers' unions to deplore the cut in the calf subsidy.

In addition to talking about the reduction in the subsidy, the Opposition believe that there is every justification for making some reference to the future of the calf subsidy, and we cannot talk about that at the present without looking at it in the context of our membership of the EEC.

I recall the arguments and discussions that we had, throughout the negotiations, on the need to obtain adequate guarantees on these production grants. I wrote to the Minister about this matter and received a reply. I concluded from that reply that the Government had not had any specific assurances for the production grants, but had received only a general assurance that the Community recognised the need—

Mr. Deputy Speaker (Miss Harvie Anderson)

Order. I hope that the hon Gentleman realises that the motion is not very wide.

Mr. Strang

I am grateful for your guidance, Mr. Deputy Speaker. I hope that at a time when we are seldom able to debate production grants we can at least ask the Minister why this cut has been made, and whether it has anything to do with our membership of the EEC. Is the Commission at present looking at the calf subsidy to see whether it is incompatible with the philosophy of free competition? May we have an assurance that, regardless of the Commission's views, we can keep the calf subsidy at any level?

Mr. Deputy Speaker

Order. I must bring to the hon. Gentleman's attention the fact that it will not be in order for the Minister to answer a good many of these questions. I hope, therefore, that he will restrict himself to the content of the motion.

Mr. Norman Buchan (Renfrew, West)

On a point of order, Mr. Deputy Speaker. I do not challenge your ruling, but I think that in dealing with motions of this kind it has generally been customary to discuss the implications and the future development of the sphere to which the motion relates. I hope that we shall be able to continue to debate this matter in the customary way.

Mr. Deputy Speaker

We must see now the debate goes. I have issued my warning.

Mr. Strang

Is this the beginning of the phasing out of the calf subsidy? May we have a clear-cut statement from the Minister on this point which I think is relevant? We have a right to know what the Government are driving at here. Is this the first step in the ending of calf subsidies?

In my opinion, the Minister has not justified this cut in the calf subsidy—the first since it was introduced. Why are the Government cutting the calf subsidy? What is the long-term significance of this cut? Is it the first step in the eventual elimination of this well-tried and—as the Minister acknowledged—successful production grant?

9.8 p.m.

The Under-Secretary of State for Northern Ireland (Mr. Peter Mills)

It is a pleasure for me to be able to take part in this debate because, I remind the House, Northern Ireland is part of the United Kingdom and is equally concerned with beef production in every form. Farmers in Northern Ireland are just as interested in what is going on as are farmers in Great Britain.

The proposed reduction of the calf subsidy was announced on 21st March, several weeks ago, and has in general been received as a reasonable reduction, given the market situation which obtains for cattle and calves.

As my hon. Friend the Minister of State said, the prospects looks good. Indeed, the hon. Member for Edinburgh, East (Mr. Strang) has said that as well. The demand for beef is high and there has certainly been a considerable increase in production. The increase in production is very significant. It shows that the farmers have the confidence to produce the much-required beef. The increase in the number of calves retained is also highly significant. Indeed, this is a major test of the farmers' confidence in the future. All this is very encouraging for the consumer, because what we need to do is to produce more and more of our beef at home and not rely on overseas supplies. The signs are good, and I believe the confidence is there.

The hon. Member for Edinburgh, East talked about expansion. He is absolutely right. Expansion is under way and will continue to be under way. The hon. Member also spoke about the Government being illogical. I remind him that we still have the subsidies on the hill cow, the beef cow, and winter keep, all of which are very important. I believe this is the start of it.

I also remind the hon. Member about the high prices for store cattle. Some of the prices I have seen in the markets and have obtained myself have been considerable—£25 per cwt. for store cattle is a very high figure. This is what encourages a farmer to produce, because he is getting such a good return for his store cattle. Coupled with that, a farmer still has the assurance not only of high prices but of the intervention arrangements. I would be straying a long way from the correct path if I continued on that point, but it is a very real assurance to the fanning community.

It is the end price which counts. This is what gives confidence to the farmer. I do not know whether the hon. Member farms, but in the past deficiency payments have not always given the fair return which farmers require. Some of us have often sent cattle, pigs and other animals to market when there has been a slump and the deficiency payments received have never made prices up to a fair figure—

Mr. Strang

They are better than the ones they are getting now.

Mr. Mills

With respect to the hon. Member, that is not so. Future beef production will continue on this high level because of the high end price that farmers are getting, which, the hon. Member admitted, will continue.

The hon. Member asked about the future principles of the calf subsidy. I fear that in commenting on this matter as well I would be straying from the correct path—but the United Kingdom favours the principle of production grants and we are continuing to encourage the European Community to adopt joint measures to promote beef production.

Different aspects of the calf subsidy have been debated. I trust that hon. Members will now agree that the reductions in calf subsidy which will take place as a result of this order will not harm beef—or, for that matter, dairy producers —or have an adverse affect on food prices. This is an important point, which hon. Members opposite might have mentioned. What we are doing will represent a useful saving in Exchequer subsidy.

9.14 p.m.

Mr. Norman Buchan (Renfrew, West)

I had not intended to take part in this debate, but I should like to take up one or two points which have been made.

It is not sufficient to argue the case for this cut, as has been done this evening, on the ground that the industry is doing well; in other words, basing a change in principle, the beginning of a cut in the production grant, on the fact that the end price is doing well. Production grants have another purpose. I cannot accept this cut on the basis that it is the end price that counts. With respect to the farmer, it is not just a question of the end price. Many farmers prefer a more harmonious relationship between their own returns and the prices being charged in the shops.

One of the difficulties was exactly the point raised by my hon. Friend the Member for Edinburgh, East (Mr. Strang) about the time of the beef price explosion over Christmas and the New Year. The tendency then was to set housewife against farmer. The farmer would much prefer a support system which allowed harmony between himself and the consumer. I do not know why the Minister is shaking his head. I am saying that the farmer would prefer a system which allowed a continuous harmony between the consumer and the fanner. The Minister is now nodding. I hope that he agrees with that. What the farmer is concerned with are his returns and his income, rather than that matters should be based primarily on a price or on anything else. It is a dangerous concept to suggest that all that he is concerned with is the end price. Taking that kind of argument of principle, it suggests that the future of these grants is in jeopardy if it is a principled attitude that the Government are taking.

Thirdly, it is not enough to say that the end price position at present is a sufficient safeguard to the farmer. That was not the case when we scrapped the guaranteed price on beef and replaced it with the Intervention Board system. This does not allow for the kind of fluctuation that could occur in the future. There is far too much confidence on the part of the Government in relation to agriculture that the high price position will necessarily continue indefinitely. That is a wrong and dangerous assessment because it also presupposes a permanent high price policy in this country.

We object to the order and to the arguments advanced. For the reasons I have explained I cannot accept the arguments of the inadequacy of the guaranteed price deficiency payments system. The end point of the chain of structure which we could have used, if it was the correct thing to do, as I believe, was to bridge the gap between the high price of imports, due to high world commodity prices, and the needs of our people for a cheaper food policy. That is another reason why we object to this break in the direct type of grant. It is not true that it has no relationship to price. It has, because in addition to the main function of increasing beef output, it also has the effect of dealing with income and giving a return in this particular way.

These arguments have worried me. The main implication of the order, in view of the principal arguments advanced, suggests that this could be the beginning of a movement towards an ending of production grants of this kind.

I understand the Ministers' interest and concern and their knowledge of British agriculture. I know where their hearts lie in terms of agriculture. I take the point when they say that they would like to see arguments of this kind in relation to production grants within the Common Market continuing. But to what extent is the cut in production grants due to our entry into the Common Market, due to requests made to us by the Council of Ministers? Have there been any demands of that kind? We have seen it happening in relation to other orders.

Mr. Deputy Speaker

Order. I think that the hon. Gentleman heard what I said earlier.

Mr. Buchan

I did, Mr. Deputy Speaker. I am only trying to draw an analogy, rather than to make a new specific point. The analogy may be valid. The other requirement which has been made in relation to beef is clearly related to our entry into the Common Market. Is this order connected in any way with the Government's understanding that production grants will not be allowed at some point during or after the transitional period? If we do not get an answer on that point, we shall have to leave the matter there.

We have expressed a displeasure which will be backed by not only the consumer but by the farming community in this country.

Question put and agreed to.

Resolved, That the Calf Subsidies (United Kingdom) (Variation) (No. 2) Scheme 1973, a draft of which was laid before this House on 21st March, be approved.