HC Deb 20 December 1974 vol 883 cc2087-98

2.59 p.m.

Mr. Michael Marshall (Arundel)

I should like to begin with a few words of thanks.

I express my thanks to the Chair, through you, Mr. Deputy Speaker, for selecting this topic for debate. It is a particular pleasure for me to see you in your place. Nine months ago, when I mads my maiden speech, I had the opportunity of referring to the fact that over one-tenth of the glasshouses in the country lie in my constituency, west of Chichester and east of Worthing, and I told you, Mr. Deputy Speaker, that in my constituency we have the largest glasshouse producers of flowers and vegetables. Therefore, this is a very important constituency matter.

I express my thanks to my hon. Friend the Member for Blackpool, South (Mr. Blaker), who is Chairman of my party's Horticulture Committee, for being here to represent the wider interests and reflect the feeling, which goes across party lines, about the problems which face the glasshouse industry.

I extend a welcome to the Minister. I am glad that he has been able to spare time to answer this debate. I am not at this stage prepared to offer him thanks. I shall first await the answer he gives to the points which I raise. I am also glad to welcome my hon. Friend the Member for Chichester (Mr. Nelson), who has travelled to the House specially to support me as a neighbouring Member.

Although I have a strong constituency interest, I wish to raise problems which apply to the glasshouse industry generally. There are three main problems which affect the industry. I shall touch briefly on the first two. They will come as no surprise to the Minister. The first concerns inflation. In this context, inflation means a massive cash flow crisis.

At a time of price restraint and increased foreign competition, the figures given at the national glasshouse energy conference in October this year showed starkly the problems of rising costs for the industry. Labour costs have increased by 50 per cent. in the last two years. Fuel costs have increased 100 per cent., fertiliser costs by 65 per cent. and packaging costs by 60 per cent. These figures mean that there is a dramatic increase in the need for working capital to maintain the same level of business. This is happening at a time of high interest rates and poor prospects of raising capital on the market.

The second main problem arises from Government action. I do not intend to be contentious, but it is fair and, indeed, reasonable to point at the obvious factors. In recent months payments of advance corporation tax and legislation have put the squeeze on the glasshouse industry and on small businesses. There is particular concern that the increased national insurance contributions for self-employed people will hit very hard many small businesses and, in some cases, privately-owned businesses.

I have touched briefly on those two broad areas because I realise that the Minister cannot be expected to resolve such massive issues today. I therefore turn to the heart of what I wish to say.

I seek the views of the Minister and the Government on the energy crisis as it affects the glasshouse industry. We urgently seek the Minister's assistance. I refer specifically to the oil subsidy, which is due to be discontinued on 31st December if the Government maintain their present line.

There are three aspects on which I want to touch in appealing directly to the Minister to re-think this matter and accept the case for continuing the oil subsidy until at least 30th June 1975. First there is the competitive and subsidy situation in the European Economic Community. Without getting sidetracked into a debate on the EEC, it is right that I should declare that I am a firm supporter of Britain's EEC membership. But, whatever view one takes, we are members of the EEC and we must consider the facts as they are in the EEC.

Let me turn immediately to the competitive situation and the way in which other EEC countries are treated by their Governments in the matter of oil subsidy. Eire is seeking a similar extension to that for which we are asking. Belgium already has a subsidy in force until 31st March. Denmark announced a package in November which included State guarantees for bank credits and a subsidy on interest payments. France has already said that subsidies are to continue until June 1975. Germany has earmarked 25 million deutschemarks in the budget for the glasshouse industry in 1975. Most significantly, Holland, the most important of our competitors, has in two ways great competitive advantage over us. The oil subsidy is to continue for Dutch growers in 1975, and for the 80 per cent. of Dutch growers who have the built-in advantage of natural gas, special gas prices have been approved recently by the Dutch Government.

Moving to the second main area of the problem, we have to look at the prospects of future EEC co-operation. That is why I am particularly concerned about the date of 30th June 1975. The growers in this country and in the rest of Europe have shown a refreshing willingness to get together in trying to agree a system which breaks away from the widely varying forms of Government subsidy. For that reason I welcome the acceptance by Mr. Lardinois of the principle that subsidies might continue until 30th June 1975. I do not intend to deal in detail with problems within the EEC and within the negotiations which the glasshouse industry has had with Mr. Lardinois, but the basic fact is clear-cut. Subsidies are acceptable until June next year.

There seem to be prospects for a reasonable rundown from that situation and of agreement between the growers thereafter. We know about the progressive proposals which have already been put to the EEC, and I believe that those further negotiations augur well for reasonable stability in the industry after the middle of next year.

Thirdly, I ask the House to consider the implications if the Government are unwilling to continue the subsidy after the end of the year. Let us get it into perspective. We are talking about £7 million over the whole of 1974. Against that must be set the glasshouse industry's pro- duction, according to the latest figures which are available over the last full year, of £70 million, which would be dramatically reduced if the subsidy were discontinued.

Some companies are already in severe financial difficulty, and I know that the Minister is aware of that. No doubt same would go out of business, but those which remain would inevitably be forced to cut down on their energy consumption, and that would have critical results in a highly seasonal business.

Mr. Anthony Nelson (Chichester)

I thank my hon. Friend for bringing to the attention of the House this important question which affects my constituency as well as his. Will my hon. Friend mention the land settlement associations which are so important in the Chichester area? They operate on a small tenancy basis and, because their business is more specialised, they will be especially hard hit if the Government are unwilling to see reason on the question of subsidies. Will my hon. Friend also refer to the consequences of a particularly bad winter? A bad winter will cost my growers about £1,000 per acre of glass more.

Mr. Marshall

I agree very much with what my hon. Friend the Member for Chichester said. Since he made the first point so succinctly, I do not think I need develop it.

He mentioned the problems arising for the industry resulting from a bad winter, and that is the very point to which I am addressing myself. If we get slower growth and later ripening, growers will miss the spring markets for both flowers and vegetables. The effect on vegetables will be dramatic. Out of a figure of £70 million for glasshouse production in the last full year for which I have figures, some £25 million comprises tomatoes, £15 million cucumbers, and £25 million mushrooms. If our growers miss the early spring market for tomatoes, they will allow the Dutch, who are their main competitors, to move in, and this will have great disadvantages for our industry.

Surely at a time when we are being urged to produce more food to save foreign exchange, a continuing oil subsidy is money well spent. I appeal to the Minister to think again on this matter. I have tried to show the difficulties which the industry will face over EEC competition since many EEC members continue to receive subsidies from their Governments. But, more seriously, the jobs of 135,000 people will be directly affected if the industry goes bust. Many more people will be affected in ancillary industries, many of whom have built up a substantial amount of capital investment.

I emphasise the question of capital investment because the Government bear special responsibility. It was a Labour Government in the mid-'sixlies who adopted the course that cheap oil was to be the energy source for the future. I accept that successive Governments since that time have implemented that basic decision in subsidising £100 million of capital investment in the United Kingdom under the horticultural improvement schemes. I seek to make no party point on this matter for I am sure that the country is in a position to obtain a reasonable return on that major investment.

The Minister will be aware that in today's issue of the Grower it has been estimated "on the highest authority", to use that publication's term, Government Ministers have managed to extract £3 million from a reluctant Treasury to provide a continuing subsidy next year. I hope that the Minister will be able to help us on that matter and will be able to give the House the facts in regard to the situation I have described. If he can give the House that information, I assure him that the continuation of subsidy will be fully justified. Therefore, since we are so near Christmas, I hope that he will be able to make that happy announcement this afternoon.

3.14 p.m.

Mr. Peter Blaker (Blackpool, South)

The House is grateful to my hon. Friend the Member for Arundel (Mr. Marshall) for raising this important subject of the glasshouse industry. I am also grateful to him for allowing me the opportunity to take a few minutes of his time to put a few points to the Government.

The problem outlined by my hon. Friend is not confined to West Sussex but is nation-wide. I refer to the urgent problem of the industry's energy requirements. A motion on this subject in my name has attracted the signatures of 70 hon. Members, mostly from the Conserva- tive Party but some from two other parties in the House. So far, however, the Government have shown no willingness to extend the subsidy beyond the end of this year to next June. That is the period to which my remarks will related. I do not press the Government to say what will happen after June because consultations are taking place in the EEC on that topic, and I appreciate that it is too early to expect the Government to say anything about the situation, but the time is long overdue when the Government should be able to say something about what will happen after the end of this month.

The glasshouse industry is full of gloom about its ability to survive. That is true not only of the big firms but of the little firms. The industry's anxiety has been increased by the recent increase in the cost of oil. My hon. Friend has given the facts clearly, and they have also been given to the Ministry by the National Farmers' Union.

I recognise that any proposal for extra public spending these days must be looked at with great care. But the industry has invested £100 million since 1960 and has a turnover worth £70 million a year. The danger is that if nothing is done about the period until next June, many people in the industry will go out of business. That will mean higher prices and extra imports. All that is needed is about £3 million or £4 million, to be compared with the £500 million that the Government are now spending on food subsidies. Comparing those two figures, it is starkly clear that that would be £3 million or £4 million well spent.

I recognise that the Government must consult the EEC, but bearing in mind that the money would come from United Kingdom Government funds I cannot believe that if the Government put their shoulder into the effort they would find difficulty in persuading the EEC to agree to the subsidy continuing until June.

The last time that a debate on this subject was initiated from this side of the House—by myself earlier in the year— the Minister responded by announcing the subsidy that is now about to end. I hope that the Minister of State, whom I am glad to see here today, will be able to do the same again by announcing a subsidy from January until June.

3.16 p.m.

The Minister of State for Agriculture, Fisheries and Food (Mr. E. S. Bishop)

I am pleased to reply to the debate initiated by the hon. Member for Arundel (Mr. Marshall) and also to take note of the comments made by his hon. Friends the Members for Blackpool, South (Mr. Blaker) and Chichester (Mr. Nelson). I assure the hon. Gentlemen that their observations will be taken into account. Whether they will be satisfied with the reply that I shall give depends on what I have to say, but I assure them that their points are very much in the minds of my right hon. Friend and the Government at this time.

I should not like the hon. Member for Arundel to think for one moment that we are unaware of the problems he has described and are not concerned about them. The importance of the West Sussex area and the rest of the South Coast as a centre of the glasshouse industry is well known. Indeed, the hon. Gentleman made a point about the significance of the contribution from that area, which accounts for about one-seventh of the glasshouse acreage of England and Wales.

With significant help from the Government, growers in the area and elsewhere have invested considerable sums in modern glass in the past few years. It is understandable that they should be concerned about the increases in their costs, especially those due to higher fuel prices.

The fuel subsidy, to which the hon. Gentlemen have referred, which we announced last April to help glasshouse growers, provides evidence that this concern is shared by the Government. In a situation where fuel prices rose sharply and unexpectedly after growers had decided upon and begun their cropping programme for 1974—it is significant that the growers had planned and begun their programme when these increased costs came in—the Government stepped in and announced a subsidy worth £7 million over the year to cushion growers against sudden increases. That was greatly welcomed by the industry and by others. It made a significant contribution to lessening some of the problems then facing them.

Although at the time other member States of the EEC announced that they would provide help, my right hon. Friend was quick off the mark with his firm and specific announcement, and the first instalment of the subsidy from 1st July was made retroactive to 1st January. The hon. Member for Arundel said that the subsidies in the other countries concerned were continuing much later than ours. Some of those countries started later than we did. We were quick off the mark.

While the introduction of the subsidy was welcomed by the farmers' unions and the industry at the time, concern has subsequently been expressed about aid after this month. This has culminated in proposals by EEC producers' organisations for a degressive subsidy payable over six years. The Commission did not accept these proposals, and we cannot accept that glasshouse growers alone among users of energy should be protected against the impact of higher fuel costs until the end of the decade. I am sure the hon. Gentleman will accept the logic of this situation, but I ask him to restrain himself for a little longer because I am merely making an observation on the effect of higher energy and fuel costs on all industries, and not on only one.

The subsidy that we provided was designed only to provide a breathing space during which growers could decide how best to adjust to the higher oil prices which, in common with other users of fuel oil, they will need to face in the future. I emphasise here that to provide long-term subsidies, as we are being invited to do, would create a situation that was altogether artificial and one that would militate against economies in the use of fuel.

I think we have to fit this situation into the wider context of high energy costs anyway and the need for economy. My right hon. Friend the Chancellor of the Exchequer has made it clear that, despite the difficulties, we must adjust to a pattern of high cost energy, and the sooner the better. This is unfortunate but it is a situation that has to be faced. This advice must apply to the glasshouse industry as to industry generally.

Having said that, I go on to assure the House that the Government are considering the subsidy position, and in this context my right hon. Friend will take into account the observations which have been made today.

It has been implied that the willingness of the Commission to extend its guidelines on national aids for fuel oil should determine our decision, but I do not necessarily agree. Our original decision to introduce a subsidy and its announcement pre-dated the guidelines, and our decision on the future of the subsidy will be taken on the basis of national considerations within the context of any wider guidelines that are drawn, but it is a fact that the guidelines will not necessarily determine the position.

I think I have dealt with the subsidy point and given the assurance that we are actively considering the matter.

The hon. Member for Arundel referred to a quotation from the Grower. There is no basis for the Press statement that he has seen. My right hon. Friend is still considering the position.

Mr. Michael Marshall

I understand what the hon. Gentleman has said, but will he confirm that if there is clear-cut evidence that other countries in the EEC are continuing subsidies beyond the 12-month period—I know about staggered dates—the Government will seek to match any subsidisation beyond the 12-month period?

Mr. Bishop

The Government will take all aspects into account. They will consider the economic position of this country and the system in the EEC. I am saying that regardless of the willingness of the EEC to give approval to a continuation of the subsidy we shall have to consider our national position. It is difficult to compare aids in different countries, because they have some aspects and special problems which we do not experience, and we have our own national characteristics which will have to be taken into account.

There are other aspects to bear in mind. I understand that many growers along the South Coast are achieving improved yields of glasshouse vegetable crops. The Ministry's Agricultural Development and Advisory Service—ADAS—gives advice to growers, for example, through articles in horticultural and other publications, on ways of making the most efficient use of heating in glasshouses, and grants are available for eligible improvements to this end.

With regard to the activities of the Ministry itself in this respect, as might be expected greater emphasis is being given in the agricultural research programme both at the Ministry's experimental stations and in the ARC-sponsored research to using energy more efficiently.

The Engineering and Buildings Board of the Joint Consultative Organisation on Research and Development in Agriculture and Food has been considering ways of making better use of energy sources in the long term. Among the areas being considered are the utilisation of wind power, solar power, waste heat from nuclear power stations and the production of methane gas from animal waste. Savings through better insulation of farm buildings and better use of farm machinery are also being considered. It is expected that the JCO report will be produced in due course.

An ADAS committee has been considering also the practical measures that farmers can take to save energy in the short term. The advice incorporates results of the research programme and is available to farmers through ADAS. A hand-out was made available at the Royal Show entitled "Focus on Fuel—How to Save Fuel". There have been other ways of passing on the advice from the Ministry.

Glasshouse production consumes a major part of the oil used in agriculture and the producers have been particularly hard hit by the rise in oil prices. I can accept what hon. Members have said about that. A national glasshouse energy conference attended by 700 or 800 growers was, as has been said, held in Little-hampton in October, largely on the Ministry's initiative, to discuss ways of saving fuel. There have also been regional meetings in Yorkshire, Lancashire, East Anglia and the West Country.

It is important to bear in mind that, apart from wanting more financial help by way of a possible fuel subsidy or in other ways, the industry should do all it can, with the Ministry's help, to use energy more effectively.

Mr. Nelson

I was privileged to attend that dinner at Littlehampton. Would the Minister accept—this may be regarded as a political point, but it is very real—the strong feeling of growers in our part of the world against the Government handing out over £600 million in indiscriminate food subsidies while shirking giving to the West Sussex growers the much more needed and direct help of barely £3½ million, to keep them going at least into the middle of next year?

Mr. Bishop

The hon. Member claims that food subsidies are indiscriminate whereas the help that he advocates would be specific. Nevertheless, food subsidies help to keep down the level of cost-of-living rises which have been pushing us through the thresholds and increasing inflation, which has harmed glasshouse growers as well as other people.

Mr. Michael Marshall rose—

Mr. Nelson rose—

Mr. Deputy Speaker (Mr. George Thomas)

Order. We cannot have everyone on his feet. To whom is the Minister giving way?

Mr. Bishop

The hon. Member for Arundel (Mr. Marshall).

Mr. Marshall

We have so little time, and I want to be clear about the subsidy. Is the Minister saying that a decision has not been finally reached? That is somewhat different to Oral and Written Answers that have been given. Can he say that the matter is still under consideration?

Mr. Bishop

A decision has not been reached in so far as all the processes for agreement have not been completed. What I have said, and I can say no more, is that the matter is very much under consideration. I should not want to go further than that.

However, I assure hon. Members that the Government are very much aware of the industry's problems. In some ways the West Sussex industry is probably in one of the most favoured climatic areas and is well placed for the main London markets. Its market is the entire United Kingdom. It has the facilities which make for efficiency and it is well supported by the ancillary services which have helped to make it economic much more easily than many other areas. I think also, however, that we should not overlook the help given by the Horticul- ture Improvement Scheme and in other ways.

I want to assure hon. Members that I appreciate the observations they have made today, that their comments will be considered with those of the industry generally and that we shall certainly take them into account in coming to a decision as to the future of the oil subsidy or any other financial help which may be borne in mind.