§ 10.24 p.m.
§ The Minister of State for Agriculture, Fisheries and Food (Mr. Anthony Stodart)
I beg to move,That the Bacon Curing Industry Stabilisation Scheme 1973, a draft of which was laid before this House on 1st February, be approved.May I first apologise for the absence of my right hon. Friend, who has suffered a sudden indisposition, and, secondly, for my own shortcomings in this matter, as the subject was handed to me three hours ago. I am certain that I shall not be able to satisfy the House on every point although, naturally, my task will be, as usual, to do my best.
This is one of very few subjects, to quote the hon. Member for Durham (Mr. Mark Hughes) in an Adjournment debate, which can arouse the House. No more delicate and difficult point, as the hon. Gentleman said, is involved in British farming.
This scheme provides for the continuation of assistance to the bacon curing industry and will apply to bacon produced by curers in the United Kingdom between 28th February and 31st May next.
The stabilisation arrangements were introduced in 1967. It was hoped that, under the arrangements, payments to curers and levies upon them would, over a period, be self-balancing, with the industry receiving Exchequer support when it was making losses but paying levies back to the Exchequer when it was working at a profit. Under successive arrangements arrived at, £43 million was spent up to 1970–71, including nearly £22 million in that year. In return, levies of only £57,000 were received. Since 1970–71 expenditure has been progressively reduced to an estimated £11.3 million for the present financial year, and during it a further £375,000 was collected in levies. There is little prospect of more of the total expenditure being offset by further levies. Something in excess of £77 million will have been spent on this aid over about 6½ years.
1210 It is true that substantial changes have taken place in the bacon industry since the stabilisation arrangements were introduced. The quality of our bacon pigs and Wiltshire bacon has improved dramatically. For example, the proportion of top selection British Wiltshire bacon sides has improved from around 70 per cent. in the early years to over 92 per cent just now. Compared with 1967, home bacon production has risen by no less than 30 per cent. and bacon imports have fallen by over 15 per cent.
The stabiliser is, however, a national aid to production of a sort which the European Economic Community has sought to control by its rules on State aids. Such rules are essential if there is to be fair competition within a common market. Because of these rules, our fellow new members were required to get rid of all their national support in the pig meat sector immediately from 1st February. We, however, can phase out our deficiency payments system, but subject only to that our partners were understandably anxious to establish unsubsidised trading in pigmeat as soon as possible.
At the same time we were determined to ensure fair trading conditions during the transition. The result was agreement on what I think everyone would agree was an admittedly complicated package, under which, after 1st February, we were able to phase out the bacon stabiliser; and the compensatory amounts necessary to secure fair trading were phased in. From 1st June, the stabiliser must disappear and the compensatory amounts will be restricted to levels justified by differences in feed costs—apart, that is, from the separate monetary compensatory amounts justified to offset parity charges.
That is the background to the draft scheme before the House today. The present scheme applies to bacon produced up to and including tomorrow. The draft scheme, as I have said, takes over until 31st May. Apart from this, the draft scheme is identical to the 1970 scheme. Like the latter it only establishes the framework for the operation of the stabiliser
The basic formula used in administering the scheme provides for a comparison of curers' returns from the market less their raw material costs, with a target 1211 margin which allows for curing costs and return on capital. Payments are made to curers when the difference between their returns and costs is less than the target margin. Levies are payable if the curers do better than the margin.
In considering this margin for the next three months, account has been taken of a recently received confidential report by independent accountants on curers' costs and profitability. This report is based on a sample of the nine largest factories. It indicates that the sample as a whole had enjoyed a return on capital comparable to the average for United Kingdom manufacturing industry as a whole over the period 1967–71. This return was inclusive of stabiliser. Without the stabiliser contribution the nine as a whole would have shown a loss.
The report suggested that £3.40 per cwt. might now replace the figure of £2.71 per cwt., which is the target margin at present, but this had not, in the present study, been examined in depth. We have decided that it would not be right when we are phasing out this scheme to increase the target margin for subsidy purposes. However we do accept that as a counterbalance levies should not be payable until curers are earning more than £3.40 per cwt. mentioned in the accountants' report. Thus we propose to operate a neutral zone centred on £3.40 within which neither subsidies nor levies will be payable. As a result curers will not be required to pay levies unless their margins exceed £4.10 per cwt.
In all other respects the existing stabilisation arrangements will be continued unchanged.
The Government recognise that if stabilisation payments are to be phased out curers must be allowed to obtain more from the market. There is no doubt that this Government achieved significantly lower retail bacon prices on average through the standstill on United Kingdom bacon than would otherwise have been the case. However, the industry and the bacon trade are, I know from personal experience, very concerned at the effect of the price premium that imported bacon is now receiving at firsthand. They have pointed out the marketing difficulties that this is causing.
1212 Moreover the industry has argued that some relaxation of control on British bacon prices should bring forward more British bacon and help to check the recent trend in imported bacon prices. It is against this background and bearing in mind the desirability of phasing out the stabiliser as smoothly and progressively as possible that the Government, as already announced in another place, are prepared to accept as a first step limited price increases of up to £25 per ton in the first-hand price of home-produced Wiltshire bacon sides in the present week. Comparable increases in first-sale prices of other types of bacon can also be made.
Taken with the increased pig prices to be used in the stabiliser calculation made this week, a £25 per ton increase in firsthand prices would reduce stabiliser payments from a little over £66 per ton to about £58.5 per ton. The effect of this increase in home bacon prices at retail is likely to be small. With constant distribution cash margins on supplies of United Kingdom bacon, which represent some 43 per cent. of all bacon supplies, a £25 per ton increase in all grades at first-hand amounts to less than ½p per pound overall on retail bacon prices.
What is basically before the House is the draft scheme renewing the stabiliser. This I commend to the House. It is the basis on which we can continue for another three months our support to our curers and thus is the means whereby we can gradually adjust the industry to its new unsubsidised situation after 1st June. It is also the means by which we can avoid a large immediate increase in British bacon prices. For all these reasons I ask the House to give their approval to the draft.
§ 10.36 p.m.
§ Mr. David Clark (Colne Valley)
In spite of the lucid words of the Minister of State, he does not make the scheme more acceptable to this side of the House. Important matters often arise in the House in seemingly innocuous ways, and this is an example. We are debating an apparently technical scheme which could eventually change the whole pattern of the British breakfast. One wonders whether we are approaching a point at which the British breakfast of bacon and eggs is a thing of the past.
1213 In spite of the hon. Gentleman's reassurance, I want to try to show that the scheme will lead to quite an increase in the price of bacon.
I am sorry that the Minister of Agriculture is not present. When he answered a Private Notice Question by my hon. Friend the Member for Renfrew, West (Mr. Buchan) this afternoon, he implied that there could not be a subsidy without rationing. Yet we are discussing a scheme which has in the past produced a subsidy on bacon. Therefore, in the last few months especially, due to this subsidy from the Exchequer, bacon has been available at below the market rate. The right hon. Gentleman's implication is therefore false. We can also see the corollary of it in this case, in which the removal of a subsidy will create a type of rationing for some people—rationing by price.
Like most agricultural decisions, this one obviously affects the farmer, the industry and the consumer all in different ways. We are discussing a scheme which, as the hon. Gentleman said, relates to a very sensitive part of the agricultural scene. Many will claim, as my hon. Friend the Member for Durham (Mr. Mark Hughes) does, that this is probably the most sensitive part of the British scene.
The pig cycle has caused tremendous difficulties throughout the world. At the end of 1966, in an effort to stabilise this cycle, the previous Government brought in what turned out to be a temporary stabilisation scheme, which, following the Worth Committee Report and the report of the IRC, was adopted more or less permanently and was due to expire in two days' time.
We would all admit that there have been difficulties with this scheme in spite of the changes since 1970. But its abandonment raises certain difficulties, not only for the consumer but also for the farmer. We believe that, in spite of its imperfections, the scheme was basically a good one.
With its abandonment we are left wondering what effect it will have on the British bacon industry. Does the Minister envisage that we shall be able to maintain the present share of the domestic market? I wonder whether he feels that this scheme will have any 1214 marked effect on the pig population of of this country. I wonder whether he can give us his thoughts on what the effect of the scheme will be in consideration of the tragic swine vesicular disease we are all hoping the Ministry will be successful in combating. Has he seen the most recent edition of "Agro-Europe", of 21st February, which shows there is no sign of a pig glut? These are questions we feel we are entitled to have answered, and to which the industry, too, is entitled to have answers.
Furthermore, did the Minister see the table in the Appropriation Accounts and the statement.The Ministry consider that for the third and fourth quarters of 1972 Danish support may well be in excess of that in the United Kingdom and that the level of support has been substantially higher in both Ireland and the Netherlands."?I mention this because we are entitled to ask what effect this scheme will have on our competitors abroad.
That is the industry's side and the farming side of the matter, but there is also the consumer angle, and the Minister rightly emphasised it. We are all concerned with it. We see inflation all around and we all recognise the dangers of inflation. The working people of this country are undergoing a wages freeze and a so-called prices freeze.
Following his visit to Europe the Minister explained how successful he had been in coming to good terms with the Council of Ministers at their meeting on 22nd and 23rd January. In a written reply on 24th January, he said:I am satisfied that these arrangements adequately cover the interests of both consumers and producers."—[OFFICIAL REPORT, 24th January, 1973; Vol. 849, c. 182.]I have looked through the scheme, through the statements and estimates, and I cannot see how the consumers benefit one little bit from this scheme. I wonder whether the hon. Gentleman can explain to us how the scheme benefits them.
It seems to me that the most obvious effect of the scheme is to put up the wholesale price of bacon as from tomorrow and probably as from next week the prices in the shops where, obviously, most housewives will feel the effect. As the hon. Gentleman said, the Minister in another place explained that the price of 1215 British bacon is to be allowed to increase by about £25 per ton in the near future. He said that the Ministry expects the price of imported bacon to fall. That is hypothetical because if our competitors, the Danes, wish to keep their increased compensatory amounts there is no reason why they should not.
The Minister in another place talked of averaging out the prices, but there is no reason to suggest that a cut in prices will be passed on to the British housewives. On my figures, £25 per ton works out at a little over 1p per pound wholesale. It is British bacon I am talking about now. I emphasise that that is a wholesale price. I do not think that that is in itself is the true figure because I believe that many housewives next week will find their bacon even more expensive than that.
For example, it has been estimated that the best British back bacon will be costing 2p to 3p per pound more next week. I accept the point that there will be a lesser increase on the more inexpensive cuts. On this matter we are entitled to an answer from the Minister. Will the housewife next week be charged only an extra 1p per pound? If she is charged more will she be entitled to take that up with the Department of Trade and Industry? We want answers to these questions. It is simply not good enough to say, as the Minister in another place said, that bacon will probably go up only ½p per pound.
As the Minister said, there will be further increases in March, April and May. This is only the beginning. Yet it is sad at this time, when the Government are urging working people to exercise restraint in wage claims in an effort to beat inflation, that fresh food prices should be going up, causing anguish and frustration to the housewife which are passed on to the wage-earner.
Repeatedly, Ministers have argued that the increases in food prices are caused by factors which are beyond their control. We constantly hear the "Red" scare of the failed USSR harvest. With this scheme we have the chance to keep down the price of food prices—there could be no more psychological time—yet the Government will not do it. They may say that they cannot afford to, but according to my calculations they are 1216 saving more than £50 million this year on the livestock guarantee. Why not use some of this money to keep down the price of bacon, if only for the period of the freeze?
The scheme is a deliberate move by the Government to put up the price of food. It is part of their declared policy to shift the burden from the Treasury to the housewife. The Prime Minister promised to cut prices at a stroke, but here he is deliberately increasing bacon prices. In the context of the freeze this will rightly be seen as unfair.
The Opposition are in a difficulty tonight. The scheme gives limited and diminishing help until May 1973. Any help is better that none in keeping down the cost of food. Part of a loaf is better than no bread. In spite of that, we find the scheme extremely unsatisfactory and completely unacceptable, but we shall not vote against it because at least it gives some help until May when the subsidy is abolished altogether.
§ 10.48 p.m.
§ Mr. Charles Morrison (Devizes)
The hon. Member for Colne Valley (Mr. David Clark) made a gallant effort to find a reason for not voting against the scheme, but the House knows that the Opposition are not voting against it because they have already been beaten by 60 votes on three occasions tonight and do not want to chance their arm again. I do not blame them, but I hope the electors of Dundee, Chester-le-Street and Lincoln will have taken note of the inadequate performance of the Opposition.
The hon. Member for Colne Valley commented on the Minister's remark that we could not have a subsidy without rationing. He claimed that we could, and said we had only to take the example of the bacon stabiliser. Bacon is in a somewhat different category from other commodities because alternative supplies have been available until now from Denmark and other countries from which we obtain that portion of our bacon requirements that is not produced on the home market. Ordinarily, food subsidy is impossible without rationing because alternative supplies are not available. The hon. Gentleman wrongly referred to the bacon stabiliser as a subsidy. It was never meant to be a subsidy. It was meant to 1217 be a balancing, financially self-supporting device to smooth out fluctuations in the bacon curer's return.
Nevertheless, it has become a subsidy, and has cost the taxpayers between £70 million and £80 million. This sort of unplanned increase in public expenditure should not be allowed to continue, whatever other merits the scheme might be thought to have.
The right hon. Member for Stepney (Mr. Shore) laughs. I remind him that one of his colleagues is chairman of the sub-committee of the Public Expenditure Committee which, just before the weekend, protested about increases in public expenditure. I think that he also might have regard to this point.
Therefore, apart from any Common Market consideration, there are perfectly valid reasons for considerably amending the scheme and probably for getting rid of it altogether.
I have no doubt that it was well-intentioned when it was first launched, but it has become outdated, because of the factors that I have mentioned and because of the change in the world meat supply situation. In the changing world meat supply situation, the scheme would be a distorting agent and for that reason it should now be gradually phased out.
§ 10.52 p.m.
§ Mr. Eric Deakins (Walthamstow, West)
As hon. Members will know, I have an interest in this matter having worked in the industry for 15 years and still being connected with it.
This is an unexceptional scheme so far as it goes, as my hon. Friend the Member for Colne Valley (Mr. David Clark) made clear, but some doubts have been raised, particularly by the hon. Member for Devizes (Mr. Charles Morrison), about its total cost and whether this form of public expenditure was not, so to speak, running away with itself.
The Minister told us that over the six or so years of operation the scheme has cost £77 million. However, that is not the net cost of the scheme. In fact, there has been a considerable compensatory saving to both Labour and Conservative Governments over the past six years on pig guarantee payments. This was not noted by the Public Accounts Committee which looked into the matter a few 1218 years ago. I do not want to go into the details. Indeed, I probably could not do so at this stage. The complications of the pig guarantee payments are well known to both Front Benches. I think that everyone would agree that there has been a considerable saving which probably could be quantified—it would not be £77 million—which would reduce the net cost of the scheme to no more than £30 million or £40 million which, over six years, is not a large amount.
The scheme could be, and I think has been, criticised for the fact that both the Labour and the Conservative Governments did not exercise the degree of control over its operation that they might have done. This is a general criticism of Government aid to private enterprise. I do not think that there was anything particularly peculiar about the way that the bacon stabilisation scheme operated in this respect. But the Government could have been criticised over the past year or so because that is when the price gap between the wholesale prices of Danish and English bacon has increased and reached astronomical proportions compared with what is traditional in the British bacon market.
The British housewife has not had the benefit of cheaper British bacon as a result of this wide differential between the first-hand prices of Danish and British bacon. The reason is that grocers, rather like butchers, tend to average their prices, and the fact that they were able to buy British bacon cheaper did not mean that it would be on sale on the shop counter at cheaper prices to the housewife. I guarantee that if someone went into a shop selling both Danish and English bacon he would find that, quality for quality, he would pay the same price for both, although on the wholesale market there is a price gap of about £80, Danish being £550, per ton, and English being £470. Therefore, the Government could be criticised on that score. The housewife, even during the operation of the scheme, did not get at retail level the full benefit of the subsidy being paid to bacon curers.
The hon. Member for Devizes has considerable knowledge of farming interests, particularly the producing interests, and I am sure that he has them very much at heart. I am sorry that he did not bring up the point that the main advantage of 1219 the scheme is that, because of it, since December 1966 bacon curers have been able to offer long-term contracts for the supply of bacon pigs, which they would not have been able to do had the scheme not been introduced by my right hon. Friend the Member for Workington (Mr. Peart) in the emergency of December 1966, and which was adapted and put on a permanent basis in March 1967.
We are told that the scheme is to be phased out in the next three months. We are told that it is illegal under Articles 92 to 94 of the Treaty of Rome which prohibit State subsidies except in certain conditions. We were told none of this during the Common Market negotiations. When the right hon. and learned Member for Hexham (Mr. Rippon) was constantly reporting back to the House and those who knew something about the industry—and they were on both sides of the House—were questioning him, he said that the bacon industry was a special problem, that the Government recognised the special nature and characteristics of it, and he eventually reported back to us before the negotiations were complete that this was something that would be looked after.
Bacon curers as such will not be adversely affected by the phasing out of the scheme, except to the extent that the rise in prices allowed under phase 2 of the prices and incomes policy does not compensate them for the loss of the stabiliser, but it is probably the Government's intention that one should more or less balance the other. However, there are two sections of the community who will suffer. One is the producer, and the other is the housewife.
The latest move will make it impossible—I say that advisedly—in three months' time for any section of the British curing industry to offer long-term fixed-price contracts to bacon pig producers. I am sure that the hon. Member for Devizes shares my high regard for these contracts and the stability which they have brought to one of the most important sections of the pig meat industry in this country.
Pig producers over the next year, and from now on in Common Market conditions, without any Government support will have to face greater instability of 1220 return, especially as the Government have done another thing which I find incredible in view of the general knowledge about the pig cycle, and that is to get rid of the flexible guarantee arrangements. Housewives, too, will be adversely affected, because even if the forecast of a rise of 3p per pound in bacon prices comes about between now and June, that will not be the end of the matter.
The Danish price is now £550 per ton. The Danes have made it clear to the trade that they expect to get £600 a ton by the end of 1973, and that means putting several more pence per pound on the price of bacon in the shops. For the benefit of those who do not know the full story of bacon, let me tell them that the Danes are very much the price leaders since they dominate the market in terms of their share of total supplies. That is something else to which the housewife will have to look forward this year.
My hon. Friends have said that the Government could have used part of the saving on livestock subsidies during 1972–73—£50 million plus—to aid housewives—even if this amount had been used only to help housewives during the freeze. It is unfair that prices should be deliberately forced up by the Government when wages and incomes are frozen. The reason why the Government are unwilling to part with that £50 million and other savings this year on guarantees to farmers is that they are not interested in the housewife and that the money will go to offset the cost of concessions to surtax payers in this year's Budget.
Reverting to the Common Market point, the fact that the scheme will be for only three months represents the abandonment by the Government of their promise to the bacon pig industry, producers as well as curers, not only that their interests would be looked after but that the special problems of the industry would be kept under review during the transitional period. Special problems demand special treatment and special attention. The stabiliser may not be the right way of giving this to the bacon industry, but certainly something needs to be done.
Unfortunately, nothing is to replace bacon stabilisation payments when they are phased out at the end of May. There is nothing in the scheme or in what the 1221 Minister said to give confidence to bacon pig producers, who have the heaviest investment in breeding stock, buildings and management techniques. They are by far the elite of British pig producers. Here we are letting them down. They deserve much better than this shoddy treatment. I hope that the Minister will have at least some kind words for them.
§ 11.1 p.m.
§ The Under-Secretary of State for Home Affairs and Agriculture, Scottish Office (Mr. Alick Buchanan-Smith)
I congratulate the hon. Member for Colne Valley (Mr. David Clark) on what is I think, the first occasion on which he has spoken from the Opposition Front Bench. I think that I speak for everyone in the House when I say that in speaking not only with such confidence and ability but also with such knowledge of a highly technical and difficult subject, he has won the respect of all of us this evening. Certainly I hope that we can bring this standard of debate to these sometimes rather complicated schemes. I welcome him to join the late night squad on farming matters—those of us who over the years have taken part in these debates. I hope that we shall have many more occasions on which we can deal both so constructively and so sensibly with topics such as these.
A number of points have been raised about this stabilisation scheme. I join very strongly with the hon. Member for Walthamstow, West (Mr. Deakins) in paying tribute to the assistance that the stabilisation scheme has been to the bacon industry. Of its value there can be very little doubt. Looking at it over the whole period for which it has operated, there is little doubt that if it had not operated in that way, the curing industry would be in a very much weaker state than it is, in consequence the production of bacon might have been lower, bacon prices might have been higher and our bacon import bill larger. The connection between all those things is no chance connection. I shall return to that connection shortly.
The hon. Member for Walthamstow, West also rightly said that but for the stabilisation scheme and the money spent in it, the deficiency payments bill would have been higher. It is entirely right to offset the one against the other. Therefore, I should be one of the first to pay 1222 tribute to the benefits that this scheme has brought to the curing industry and the pig producer. Indeed, I took the precaution of looking back to a certain day in 1966, when I had an Adjournment debate. I am sorry that the then Minister of Agriculture is no longer with us. I claim at least a little credit, I hope, through that debate and other efforts, for bringing the then Government to make their announcement concerning the stabilisation scheme. Although the scheme did not develop until rather later, I thought then that the Government recognised the problems which faced the industry.
At the time the curers were in a serious financial position. Today they are in a much stronger position. Looking to the future, the important question is not just that the curing industry is doing well but that certain changes must be considered if the long-term health of the industry is to prevail.
Although we believe that the money has been well spent on the industry, I must mention the loans which took place right from the beginning of the scheme. As my hon. Friend the Minister of State said, there is little prospect of recovering any more of the expenditure which occurred by means of loans and thus it will be necessary to write off the outstanding loans made in the early years. These, with interest, amount to £1.8 million. The fact that we are prepared to write this amount off is further proof of our confidence in the industry.
Next comes the relationship of the scheme—and the fact that we are introducing it for only a limited period—to the Community. Putting the Community on one side, it must be remembered that the rise in the Danish and world price of bacon has happened and would have happened regardless of entry into Europe. A rising world price would have tended to extinguish the stabilisation payments.
§ Mr. Deakins
This is one of the peculiar commodities—it may be the only one we import—where the world price is the British price. There is no market for bacon except Great Britain. It is a little misleading to say that the Danish price rise in the last six months, for example, has had nothing to do with the Common Market. One reason the Danes have had to increase their price on the British 1223 bacon market is to compensate their producers for the higher price of feeding stuffs.
§ Mr. Buchanan-Smith
Usually I admire the hon. Gentleman's logic in economic matters. But that was not logical. The phenomenal rise in grain prices, which the Danes and the British have had to endure, had nothing to do with the Community.
They were the result of the world shortage of grain. The hon. Gentleman, by making that point, has, like his hon. Friends, sought to make the Community the whipping horse for everything. If Opposition Members have anything good to say about the Community, let us hear it. Let us not introduce extraneous arguments that do not relate to what is happening within Europe.
As it appears not to be recognised by hon. Members opposite, I repeat that the rise in prices has nothing to do with the European Economic Community as such. In a time of rising prices, the stabilisation payment would have become self-extinguishing as time went on.
There is another matter about which Opposition Members seem to be confused. When my right hon. Friend returned from the meeting of the Council of Ministers in Brussels a few weeks ago, he said that we were required under the Common Market rules to phase out our stabiliser. Equally, however, what Opposition Members fail to recognise is that in response to the industry, we are phasing out our stabiliser and national aids to the pig industry over a period, while other EEC countries, notably Denmark, Eire and Holland, are immediately stopping their national aid to pig producers. The difference between us is that they are stopping their national aid immediately, from 1st February, whereas we gain by phasing out our national aid over a period. To this extent we improve the competitive position of our industry.
I take the argument a stage further. We may argue about what has been agreed and its effect on what is happening, but what matters is the competitive positions of this country's pig industry and that of our main competitors, particularly Denmark, with whose industry we are most in competition.
1224 I make no comment on the unrest in Danish agriculture in recent weeks, but the plain fact is that Danish pig producers have enjoyed national aid to the extent of about £70 per ton of bacon produced, which, in effect, has been an export subsidy for Danish producers sending their bacon to this country. The compensatory amounts that we have agreed for March mean that the Danish bacon producers will be getting £60 rather than £70. To that extent the British producer will be in a more competitive position, and that will result from our entry into the EEC. Opposition Members have failed to recognise that effect of our entry into the EEC—
§ Mr. Peter Shore (Stepney)
The hon. Member has made a wholly producer argument. I do not dispute that, having gained some four months during which to continue our subsidisation via the bacon stabilisation scheme, producers are marginally better off than the producers in other EEC countries who have to phase out their national aids at once. But it is a wholly producers' argument.
What the House and the public want to know is how, in the middle of a price freeze, in the middle of a period of hyperinflation, the Minister can justify the abandonment of a subsidy arrangement when the result of that abandonment is that bacon prices are bound to go up, and for no reason except that the Minister has decided to phase out that arrangement, not because it is his best judgment, but because he has had to do it because of the superior law of the Common Market.
§ Mr. Buchanan-Smith
The right hon. Gentleman anticipates the argument to which I was about to come. He asks a fair question, but I think that he ought at least to listen to the argument on the points which his hon. Friends have raised. One of his hon. Friends said that promises had been made to pig producers that our aids would be phased out over a longer period, and I was dealing with that question, demonstrating that what we are doing is in no way putting our producers at a disadvantage but, rather, is putting them at an advantage in relation to their main overseas competitor. The question was put in the producer context, and I was answering it in that context. The hon. Member for Walthamstow, 1225 West, wanted to know whether our home producer would be put in a disadvantageous position, and I have explained that, in fact, he has been put in a marginally better position in relation to his main overseas competitor. It is important to have that clear.
I come now to the effect on the consumer. In opening the debate, my hon. Friend the Minister of State did not try to duck the issue. He made absolutely clear what the effect of our proposal would be. I must say at the outset that I am a little concerned at the rather loose talk of prices going up 2p and 3p a pound. I should be interested to know where that comes from. My hon. Friend pointed out that the overall effect on bacon prices would be rather less than ½p a pound. I emphasise that that is the overall effect. If one were concerned only with British bacon, the effect might be greater, but, as the hon. Member for Walthamstow, West, pointed out—I seem to be calling him in aid a good deal, but he has great knowledge of the industry—on the retail side during the period of freeze there has been an averaging effect between imported bacon and home-produced bacon. When an increase happens like this, there is that averaging effect, and in such circumstances my hon Friend gave a perfectly fair assessment of what is happening.
§ Mr. David Clark
The hon. Gentleman asked where the figures came from. I have followed his argument and that of the Government that prices should, on average, go up less than½p. That is wholesale, I take it. I should like confirmation of that. In view of all the comment in the Press about a price increase, however, could the hon. Gentleman give an answer which we could pass on to the housewife, telling her how much extra per pound she should pay—or should not pay—next Monday?
§ Mr. Buchanan-Smith
One cannot give a definitive answer on that because there are so many different cuts of bacon and many different ways in which bacon is prepared. What I am saying is that, on average, the effect should be as I have stated it. That is a perfectly fair figure to give.
§ Mr. Buchan
No, I have been very mild. The hon. Gentleman tells us that from next Monday the average price will go up by about½p. That means that some will be more and some will be less. What price rise will be less than ½p?
§ Mr. Buchanan-Smith
With his outlook on prices, the hon. Gentleman is just not prepared to envisage a nil increase. There are some things on which there could well be a nil increase. That is how one arrives at an average. The arithmetic is simple, and, with his knowledge of arithmetic, the hon. Gentleman should be able to grasp that.
§ Mr. Buchan rose—
§ Mr. Buchanan-Smith
I have given way a great deal in the debate and I should like to deal with the real issue for the consumer. I have spoken about the effect on prices, which was mentioned by my hon. Friend earlier. What I find most worrying are two particular aspects raised by the Opposition in connection with the consumer. The first concerns subsidisation of the consumer.
The stabiliser was never introduced as a food subsidy. I wish that the Opposition would realise that the whole purpose of the scheme is to improve returns to the curers. It has nothing to do with a food subsidy. Whereas the stabiliser may have been appropriate for the particular circumstances of the freeze when prices were subject to the standstill, to use it as a longer term form of food subsidy, for which it was not designed, would be wrong. The scheme is designed to bring stability to the curing industry, in particular, and to the producing side of the industry.
The most worrying point about the Opposition arguments concerned the balancing of the interests of the consumer and the producer. Here the Opposition have made two basic mistakes. First, they have looked at the argument in far too short a term. They have considered the stabiliser. They have considered how in the particular and peculiar circumstances of the standstill it can be used to assist curers at a time when they are not allowed to increase their returns. But 1227 they have ignored the longer-term effect this can have on the bacon industry.
Equally, far too often they think that a higher price for the producer is against the consumer's interest. I refute that at once. The interests of consumers and producers are not in conflict. Nowhere can that be more clearly shown than in the bacon and pig industry. One of the consequences of holding down the price of bacon has been a short-term beneficial effect. But another effect has been to distort the market for pig meat. It has diverted far more pigs to pork and it has reduced the number of pigs going for bacon. In the long term the only effect it can have is to reduce the number of British pigs going forward to the bacon curers, which makes the economic position of curers less secure, reduces the amount of British bacon coming on to the market, leaves more of the home market to the foreign producer—and, as we know only too well from the past, it is the foreign producer who holds the British housewife to ransom. She is at risk if the foreign producer gets too tight a hold on the home market.
If we follow through the logic of the Opposition argument, therefore, it is not the producer who benefits from the slightly higher price of bacon pigs, it is the consumer. The consumer is protected. It is a fallacy in the Opposition argument that they try to put the consumer and the producer in conflict. They should realise instead that by giving the producer a proper encouragement and by making sure that the bacon curer has a proper access to supplies of pigs, they ensure that the housewife stands to gain.
We should get into perspective the average ½p per pound increase of which Opposition Members have spoken. It represents an increase of only 0.045 of 1 per cent. in the food index.
§ Question put and agreed to.
That the Bacon Curing Industry Stabilisation Scheme 1973, a draft of which was laid before this House on 1st February, be approved.