HC Deb 28 March 1973 vol 853 cc1306-16
The Minister of Agriculture, Fisheries and Food (Mr. Joseph Godber)

With permission, Mr. Speaker, I should like to make a statement on the meeting of the Council of Agricultural Ministers in Brussels this week.

The Council had a preliminary discussion at its meeting in Brussels yesterday on the Commission's proposals for farm prices for 1973–74. These proposals, full details of which are being made available to the House in the normal way, include a substantial increase in the price of beef, and smaller increases for pigmeat, rye and milk.

On top of these increases, it is proposed that the prices of almost all products should be raised by a margin of 2.76 per cent., representing the amount by which the currencies of the Benelux countries have appreciated in relation to the Community's unit of account. By adding this amount to the price proposals and by adjusting by a similar percentage the rate of exchange used by Benelux and Germany in converting their currencies for CAP purposes, it is proposed to eliminate for Benelux, and substantially reduce for Germany, the need to compensate for the present disparities between their actual rates of exchange and their official rates. Although the immediate effect of these proposals on United Kingdom consumer prices will be very limited, the longer-term effect on our prices could be more serious.

In putting the British point of view, I stressed the importance of avoiding anything that could lead to higher food prices for consumers and of looking to means of support other than raising end prices in order to make necessary adjustments between commodities. I acknowledged the need to find a solution to the difficulties which currency differences create. But I urged that it would be wrong to seek to overcome the problems which such differences make for the CAP by raising prices. To attempt to do so would greatly add to the difficulties of settling the Community's agricultural pricing policy for the coming year. The Council will resume consideration of the proposals at its meeting in Luxembourg on 9th and 10th April.

The Council agreed to suspend the common tariff on imports of old crop potatoes until 1st June, and we shall take corresponding action to suspend our own small tariff of £1 per ton as soon as practicable. Further consideration is being given to a Commission proposal to suspend the common tariff on new potatoes until 1st May. I also raised in the Council the question of a refining margin for Commonwealth sugar.

As I said in my reply to my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) on 23rd March, the refining margin resulting from the arrange- ments agreed by the Community in January is not currently adequate to ensure the refining and marketing of the sugar we are committed to take under the Commonwealth Sugar Agreement. I reminded the Council that I had told it in January that, if this happened, measures would have to be taken to rectify the situation. I informed it that I should be making supplementary payments to refiners in the United Kingdom. In my view these payments could not be regarded as contrary to Article 92 of the Treaty of Rome as they could not bring about distortion of trade between member States.

In respect of the period 1st February to 30th June, these payments are expected to total about £3.5 million. They will not represent extra cost to the Exchequer because they will be more than offset by receipts of import levy on the sugar concerned. A Supplementary Estimate will, however, be necessary and will be presented in due course. Pending approval of this, recourse will be had to the Contingencies Fund. The payments will be designed to bring the margin up to £17 per ton, on the basis of a yield of 95.6 per cent. I am discussing with the refiners the precise arrangements involved. I have also informed the Commonwealth Sugar Agreement representatives meeting in London today of the position. I shall be considering later what may be necessary to meet any continuing requirement after 30th June.

Mr. Shore

I welcome the Government's conversion to the view that it is of the utmost importance to avoid doing anything that will further increase the high prices which are already being paid for food by consumers.

Is the right hon. Gentleman aware that many take the view, having looked at the course of prices in Europe and noted the increases that have taken place in CAP prices during recent years, and noting, too, that the actual cost of the CAP has risen from over £1,000 million to £2,000 million in three years, that it is not just a question of preventing CAP prices going up higher but that they have already gone up far too high and that they should be brought down?

Will the right hon. Gentleman confirm that the reason for the proposals to increase across the board agricultural prices or food prices by 2.76 per cent., in addition to the individual price increases for individual commodities, is that the Community managers in the Commission wish to bring together in relation to the unit of account the different prices which national Governments, because of the changes in their own currencies around the unit of account, are now having to charge? In other words, is it not the case that these proposals have no agricultural justification and that they belong entirely to the requirement to unify prices on the basis of the unit of account? Will the right hon. Gentleman confirm that?

Will the right hon. Gentleman give an undertaking to the House and to the country—this is what my right hon. and hon. Friends want—that he will not allow and will not consent to increases in food prices in the common agricultural policy this year, and that if need be he will use what we were assured during our long debates on the European Economic Community that the British Government would have in the Council of Ministers—namely, a veto on any proposals so to raise such prices?

Finally, will the right hon. Gentleman now agree, having had his first experience of CAP negotiations, that he would have been in a far better position if he had not in the first place gone inside the cage of the CAP, in which he now finds himself rattling the bars from the inside, and had negotiated change from the outside?

Mr. Godber

If we had not gone inside the EEC we would have had no opportunity to influence the price structure within the EEC.

I have made it quite clear that in my view some of the prices are too high. We are seeking to bring them down. That is one of the matters with which we are concerned. It has been proposed as part of the package to bring down the price of butter. That has been proposed by the Commission. That is a proposal that will have our support.

It is not true to say, as the right hon. Member for Stepney (Mr. Shore) suggested, that the 2.76 per cent. has no agricultural content. The Commission feels that it is entitled to some increases. It is utilising that figure as a means of helping to simplify the problem, as I indicated in my statement, concerning Benelux and Germany in particular. The main impact will be more severe on Germany and the Benelux than on other countries. It is, therefore, difficult to quantify this whole approach.

I said yesterday in Brussels that I thought it a mistake to involve agricultural and monetary matters in one proposal. We in the United Kingdom feel that it would be useful to have a separate arrangement for scaling down the disparities in monetary affairs and to look at agricultural prices separately. I am advocating this course in Europe.

The right hon. Gentleman referred to our use of the veto. It is our firm intention to use our full influence within the Community, but we do not go into the Community talking about vetoes because that is not the way to make progress.

Several Hon. Members rose—

Mr. Speaker

Order. I would like the help of the House, if it will give it to me. We have an extremely important debate to follow. Nearly 40 right hon. and hon. Members have indicated their wish to speak. There is also a Ten Minute Rule Bill. I hope, therefore, that hon. Members can be fairly brief in questions to the Minister of Agriculture on his statement. I am sure the House will understand if I endeavour to keep them brief.

Sir Robin Turton

Does my right hon. Friend appreciate that he has the support of the housewives of Britain in the stand he is making against price rises? But if, as he said in his reply, he is not going to exercise a veto at a later time, that weakens his position. I hope that he will revise that reply in order to make it clear that, on 19th April, if the other nine members will not give way, Britain will exercise her right of veto.

Mr. Godber

I did not specifically say that Britain would not exercise the veto. I said that it is not appropriate to talk at this moment in terms of exercising it. I believe that we can influence—and the whole purpose of my speech yesterday was to do so—thinking in the Community in the direction which we believe is not only in the interests of the British housewife but also in the economic interests of the Community, because it is against producing surpluses.

Mr. Alfred Morris

How will these proposals affect the determinations recently negotiated with the National Farmers' Union in this country? In the light of these developments, what are we to make of the statement by the Prime Minister to the Conservative Central Council on 14th July 1971, when he said that British entry into the EEC would not mean an increase of more than a halfpenny on the cost of living in each of the first six years? Should not the Prime Minister be here to apologise for so grossly misleading the British people? Where is he?

Mr. Godber

It is not a question of grossly misleading the country. The estimates of the present Government on this matter were similar to those made by the Labour Government. The effect of these price increases, if made, would not make a very great difference in total on top of the estimates which we have made and of which the hon. Gentleman has quoted part. If these proposals were implemented, the impact on Britain at the moment would be very limited. It would affect the intervention prices for all commodities but not market prices, except insofar as if world prices were to go down. It would affect the price for butter but this would be compensated by some degree of subsidy. The total impact on the British housewife of these proposals if implemented would be minimal. That does not mean that we do not think that in the long term they are disadvantageous, and that is why I opposed them yesterday.

Mr. Brewis

Did my right hon. Friend call the attention of the other agricultural ministers to the great increase in cereal acreage in the United States and point out to them that this might lead to a big gap between Common Market and world prices?

Mr. Godber

The whole question of the United States' proposals for increased costs and the question of supplies generally will be matters for discussion in the GATT talks later this year. We have already had preliminary discussions with the United States and are having discussions with our EEC partners. There will be an important meeting of the OECD in Paris next month which I hope to attend.

Mr. Russell Johnston

In a part of his statement which appeared to be relatively extempore, the right hon. Gentleman said that he expected that the effect on prices might be minimal in the short term but might be disadvantageous in the long term. He repeated that view a moment ago. Can he now tell us when he thinks that this "long term" begins, and why he thinks that there would be more serious and more disadvantageous effects in the long term?

Mr. Godber

I am sorry if I did not make it clear. We have a five-year transitional period. The full impact of the proposals, if implemented, would not take effect until five years from the date of our joining. The reckonable increases are 2.76 per cent. across the board plus specific proposals for beef, rye and milk. If one applies this over the five years, one sees that the immediate impact is small, but the impact grows and will amount to a maximum for most commodities of 2.76 per cent. at the end of the five years —the end of the fourchette arrangements under which we went into the Community. In other words, these arrangements will extend over the next four years of the fourchette arrangements. It is a gradual process and the total effect would be 2.76 per cent. for most commodities but a bit more for beef, rye and milk.

Mr. Marten

My right hon. Friend said that it was only because we were in the Common Market that we could use our influence to change the policy. Surely if we had not joined the Common Market in the first place we would have had no need to change the policy.

On the question of the sugar refining margin, my right hon. Friend rather joined the payment or subsidy for the margin with the quantity of Commonwealth sugar that we have to take in. May we have an assurance that this refining margin will have no long-term effect on the Government's eventual bankable assurance to take 1.4 million tons of Commonwealth sugar?

Mr. Godber

I think that it is right that we should be in a position to influence this policy, whether inside or outside the EEC. I believe that, with food prices and world conditions as they are today, it is important that the trading blocs should understand one another's point of view. One cannot isolate oneself from these effects, whether one is inside or outside the EEC.

My hon. Friend asked about the sugar refining margin. The point is that the position remains as it is under protocol 17 leading up to the end of 1974 under the Commonwealth Sugar Agreement. I was reaffirming in the arrangements that the danger which had arisen in regard to the inadequate refining margin is being met in the way I have described. I have explained the situation today to the Commonwealth sugar producers in London. I think they are satisfied.

My hon. Friend also raised the wider question of protocol 22 as it appears after the end of 1974. This is another matter we are discussing in Brussels but what I have announced in my statement will have no impact at Brussels on the arrangements under protocol 22 or on the Lancaster House agreement of 1971.

Mr. Torney

Is the right hon. Gentleman aware that the Government's attempt to freeze the price of food has been an utter failure and that it makes complete nonsense of the wages freeze, particularly for the lower-paid workers and pensioners? In areas such as Bradford, people want to know what the Government are going to do about it.

Mr. Godber

I am not sure how that question relates to my statement.

Mr. Tomey

Because food prices are going up.

Mr. Godber

I remind the hon. Gentleman that when we introduced the prices standstill we made it clear that fresh food was not included, for reasons of which the hon. Gentleman is well aware —world food prices and conditions, and so on. World prices have risen. We are doing all we can to steady the rise. I would have thought that my statement in Brussels yesterday would help in this regard.

Mr. Charles Morrison

Is my right hon. Friend aware that we think he is putting up a strong fight on behalf of British consumers? Does his statement imply any change in time towards farmgate prices here or towards the expansion of home agricultural production?

Mr. Godber

I am happy to give the assurance that this means no change in our attitude. What we have to do over the five years is to get our prices to the Community price level. What I announced in the price review determinations last week was part of that package. But in addition we have recognised the absolute need to increase total home food production as a major help to the British housewife. If only the Labour Government had done a bit more of that when they were in power, the housewife would have been better off.

Mr. Mackintosh

Purely on the agricultural side of prices, as by far the largest price increase is in beef, presumably because of the short-fall in beef supplies, will the right hon. Gentleman, when he opposes these price increases in Brussels, link it with a desire for long-term changes by recommending a premium on beef production rather than the use of an end price to stimulate output?

Mr. Godber

I am grateful for that comment. It is precisely one of the points I made yesterday in my speech in Brussels. If we can get more inducement in the early stages of production and hold end prices, that will help the Community and the housewife and lead towards a more sensible balance. I said that yesterday and I shall seek to achieve this aim.

Mr. Farr

Can my right hon. Friend assure the House that, whatever happens on 9th and 10th April, he will agree to nothing which will curtail the present rate of expansion of farming in this country?

Mr. Godber

I can safely say that nothing likely to be agreed then will curtail the expansion of British agriculture. The indications given in the price review which I announced last week show clearly that we are on an expansion course. The prices are designed to encourage that, and indeed it is an essential part of the Governments's policy to produce more food here and to help the farmer and the housewife.

Mr. Jay

After his experiences in Brussels this week, does the Minister still pretend that the EEC has had no effect on the rise in food prices in this country?

Mr. Godber

I do not pretend in regard to this matter or anything else. I tell the right hon. Gentleman that the EEC has not had an impact in regard to consumer prices in this country at this time. He is perfectly aware that the impact is one of world shortage in regard to meat and cereals, which are the basic foods. What I have said is that in fact rises in Community prices are beginning to have some effect now. The first thing affected is butter, and I have indicated that there is a proposal for a subsidy on butter which would help in that regard. But so far as prices in this country are concerned, it is world events, not the Common Market, that have caused these rises.

Mr. Shersby

With regard to sugar, will not my right hon. Friend agree that the amount of approximately £4 which represents the difference between the margin accepted by the Government and the margin agreed at Brussels on 23rd January is not a subsidy but a means of achieving the kind of margin agreed between the refiners and the Government in 1970.

Mr. Paget

On a point of order, Mr. Speaker. Is there not a ruling against reading questions?

Mr. Shersby

Does he not also agree that a levy contributed to Community funds which arose out of the Brussels agreement recognises the efficiency of the cane industry?

Mr. Godber

So far as I was able to hear my hon. Friend, I can confirm that the increase is to meet a shortfall and is certainly not due to a deficiency with regard to our refining industry. The problem arises because of the different situation with regard to the refining in this country and the refining in the Community of cane sugar. The problem all along has been that there has been a different basis in this regard. The amount of cane sugar in the Community is relatively small and is used mainly for speciality purposes and cubing, which attracts a premium. Therefore, it has been difficult to persuade our Community partners that the market price would be lower than they had expected. Because of this, we had to introduce the subsidy, which restored the position to what it was before 1st February this year.

Mr. Michael Foot

In view of the extremely serious statement that the Minister has made affecting the whole question of rising prices and inflation, and in view of the apparent position that the Government are still resisting the proposals that others are seeking to impose upon us—"the strong fight" referred to by his hon. Friend the Member for Devizes (Mr. Charles Morrison)—does not the right hon. Gentleman think that he would be assisted in that resistance before the next meeting in April by a resolution of this House of Commons on the matter? Therefore, will he ask his right hon. Friend to provide for us to enable him to continue his resistance next week? Will he not have consultations to ensure that the House of Commons shall have a chance of influencing this question of food prices?

Mr. Godber

I am always grateful for proposals of support from the hon. Member for Ebbw Vale (Mr. Foot), but in this regard, although my right hon. Friend has heard what he said, there are certainly ways and means for the Opposition to choose if they wish to debate matters in this House. There is no difficulty about that. If he is proposing a vote of censure because we are resisting price increases, I shall be very happy to respond. There are ample opportunities, and in any case I believe that I have been able to make quite clear to the Community the views of the people of Britain.