HC Deb 17 December 1976 vol 922 cc2067-85

6.5 p.m.

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

I beg to move, That this House takes note of Commission Document No. R/2866/76 on Skimmed Milk.

Mr. Deputy Speaker (Mr. Oscar Murton)

Mr. Speaker has selected the amendment in the names of the hon. Member for Renfrewshire, West (Mr. Buchan) and his hon. Friends, including the hon. Member for Newham, South (Mr. Spearing). It may be for the convenience of the House if both the motion and the amendment are discussed together.

Mr. Bishop

The subject of our debate today is EEC Document No. R/2866/76. This is a draft Council regulation that would enable the value of milk powder that has been held in intervention agencies on 31st December 1976 for more than one year to be written down by 30 per cent. of the intervention price. It may be helpful to the House if I begin by explaining a little of the background to this proposal and in particular the broad outline of the arrangements for accounting for stocks held by member States' intervention agencies.

At the end of each year the stock of most commodities held in intervention stores is revalued on the basis of intervention prices valid on 1st January of the following year. However, this draft regulation would depart from the normal pattern by extending to the valuation of stocks of skimmed milk powder the principle of depreciation which is already applied to stocks of butter and beef and veal. It would do this by writing down by 30 per cent. below the intervention price on 1st January 1977 all stocks of skimmed milk powder held in intervention for over a year at the end of December 1976.

This write-down recognises the large amount of skimmed milk powder held in intervention and the difficulty of disposing of stock which has been held for a relatively long time. Such stocks cannot hope to command the same price as "younger" stocks and will probably have to be sold for animal feed. The Commission has taken the view that some 600,000 tonnes will be affected by the write-down and that some 400,000 tonnes of this will be sold in 1977 and the remaining 200,000 tonnes in 1978.

Mr. Ivan Lawrence (Burton)

The Minister said that 600,000 tonnes of skimmed milk powder were in intervention. In the debate on 22nd October the Secretary of State said that there were nearly 1,300,000 tonnes of skimmed milk powder in intervention. What has happened in that one and a half months to reduce the amount? Is there some inaccuracy in the figures and, if so, whose fault is it?

Mr. Bishop

The amount affected by the proposal is about half the total and we refer to stocks that are over 12 months old.

The loss on sales which the write-down represents would be met out of the 1976 budget instead of the budget in the year in which the skimmed milk powder is expected to be sold. This timing suits the United Kingdom very well since our contribution to Community expenditure in 1976 will be at the key rate of 16.3 per cent. whereas in 1977 the rate will be 19.24 per cent. and in 1978 it will be higher still.

In addition the Commission estimates that there will be a saving to FEOGA over the next two years of some £4.6 million—11 million units of account—on interest charges which it pays member States on the value of stocks held in intervention stores. The estimated overall effect of this proposal for the United Kingdom would be a saving of about £3 million up to the end of 1978. I am sure that honourable Members will agree with me that this proposed regulation is a sensible, realistic and useful measure.

Now I come to the amendment that appears on the Order Paper in the name of my honourable Friend the Member for Renfrewshire, West (Mr. Buchan). The Government have no difficulty in accepting it. We, too, deplore the circumstances which have given rise to the need for this measure. We, too, deplore the continual creation of unwanted and costly surpluses under the common agricultural policy. We do not pretend that we are going to be able to reform that policy overnight, but we intend to maintain the pressure on the Community for a more sensible and saner use of resources in the agricultural sector.

We cannot subscribe to an approach to agriculture which produces far more than consumers are prepared to buy and at a cost which reduces demand. We shall therefore continue to support moves designed to bring a better balance into the milk market and, in doing so, we shall know that we have the support of this House and of the country. I therefore recommend the House to accept this amendment.

6.11 p.m.

Mr. Nigel Spearing (Newham, South)

I beg to move, at the end of the Question, to add, but regrets that the high level of stocks of milk powder make this measure necessary; and urges the Government to secure a modification of the CAP in order to avoid the continual creation of such structural surpluses". There may be 1 million tonnes of dried milk powder in intervention stores, but to some of us it seems that we have been waiting almost 1 million minutes for this debate. If someone wanted to invent a way to get some business through the House quietly, he would give 24 hours' notice, put it down for the Friday before the Christmas Recess and arrange for it to be taken after an open-ended Irish debate. That is precisely the situation in which we find ourselves.

I am not surprised that the Minister was a little briefer than usual in moving the motion because there is a great deal more to the document than meets the eye. It is not just a matter of saving this country £3 million. It is right to explore this matter further and I shall reinforce and underline why my hon. Friends and I tabled the amendment, which I am pleased my hon. Friend has accepted.

Can the Minister tell us a little more about the reasons for this becoming virtually an emergency debate? In the agenda of likely events to come before the Council of Ministers provided for us in November, the Agriculture Ministers' meeting is scheduled for 20th and 21st December, but there was no notification of this item. Why must it be taken at the second meeting in December? Why could it not have waited until January? Why was it not put on the notional agenda?

I presume that the basis of the document is that the Community has to decide to write off this amount of money now or pay a subsidy later. Whichever way is chosen, dried milk is being subsidised.

The Minister said it was being done this way for accounting reasons and that we should have to pay £3 million less for this onerous burden. The Community will save £4 million through interest savings on the money due to members.

I cannot quite follow that argument. Perhaps he could explain it in more detail when he winds up the debate. Presumably we make interest savings on a loan. The milk will be there whether it is written down or remains at its original price, so I do not see how these notional savings arise.

This debate, though brief, is part of the continuing saga of the milk sector of the EEC. On 12th April the House disapproved a regulation which had already been approved by the Minister of Agriculture in Brussels. In an Adjournment debate on 22nd October we had before us Documents Nos. R1734/76, R2295/76 and R2387/76 to 2391/76, all of which dealt with the milk sector. Unfortunately, the House could not approve or disapprove those documents, nor could any Member move an amendment to them. That was not possible because, unlike today's debate, the documents were taken on a debate on the Adjournment.

If my hon. Friend cannot do so now, perhaps he will tell me in correspondence what happened to the proposals in those regulations. Is it that this regulation in part displaces some of the proposals in that package, or is it entirely auxiliary to it?

The milk sector is not unimportant in the CAP. It varies between 37 per cent. and 41 per cent. of the total FEOGA budget. That is no mean sum. We are talking about a sector of the CAP that takes up a high proportion of the total support funds of the Community. As my hon. Friend has said, we share part of the burden.

There is no obligation in terms of the Treaty to maintain these stocks. Articles 38 and 39 of the Treaty of Rome do not provide that there shall be intervention buying. Article 39 states: The objectives of the common agricultural policy shall be". It then lists a number of items. Item (e) states: to ensure that supplies reach consumers at reasonable prices. Surely we are bound to ask ourselves whether the consumers within the EEC milk sector get their supplies at reasonable prices.

On 22nd October 1976 my right hon. Friend the Member for Battersea, North (Mr. Jay) quoted The Times, which reported a Consumers' Association statement. The association stated: The real problem is the high price fixed in Brussels. Butter in the EEC is now 270 per cent. of world market price; skimmed milk powder 330 per cent.". My hon. Friend says that it will be written down by a third. Presumably it will be written down to a value which is still about 200 per cent. of the world market price.

In that respect the consumer in the British Isles pays three times. He pays the original price of New Zealand butter, of which we get all too little, and that price is nearly doubled on the levy to bring it up to the EEC price. Thirdly, through various own resources and taxes, consumers pay their contribution towards the subsidy which is keeping the skimmed milk in store, and then pay a higher than market price for it. Clearly, the objectives of the Treaty of Rome that I have quoted are not being fulfilled over a wide range of the Community's agricultural activity.

The subsidy which is being paid is not evenly spread. I see from the FEOGA annual report that about two-thirds of the dairy herd of the EEC is in France and Germany, but only a quarter of the production of those two countries' herds is used for liquid drinking milk. That is in marked contrast to our own market. Of the 2,000 million units of account that are used in support of the milk sector, a very high proportion will go to dairy herds and farmers in France and Germany, yet there is no such support for British farmers. Therefore, there is a great difference between the two milk sectors producing the enormous stockpile of which we have heard and to which our farmers have not contributed.

However, Britain has contributed in the writing down of the values and in the maintaining of stocks. I understand that our share is in the region of £140 million. Many of the costs stem from storage. The storage of 1 million tonnes of dried milk, whatever its price, is not a cheap affair; nor is the paperwork that goes into ensuring that it is there, that it is in good order and that the people who store it, let alone those who sell it, are being paid.

Unfortunately, as the House was told on 19th July, there is no satisfactory method of checking the accounts and the operations of the European Agriculture Guarantee and Guidance Fund. Document R118 of 1976, the Audit Board report of the EEC, states on page 69: only very limited examination by the Audit Board of the operations of the Guarantee Section of the EAGGF has been possible. As in previous years, the Board has not been in a position to form its own judgment of the manner in which the operations have been conducted or to give an opinion on the reliability of the financial management of this sector of expenditure. Such a circumstance is irreconcilable with the specified task which Article 90 of the Financial Regulation requires of the external audit body and should receive attention from the Council and the European Parliament. I have asked my right hon. Friend the Chancellor of the Exchequer what the Treasury is doing about this matter of public financial importance. In a Written Answer the Under-Secretary said: The Audit Board has complained that, while it has been able to be present during inspection visits carried out by the Commission of the European Communities in member States, the Board has not been able to carry out its own independent audits there. The Financial Regulation of 25th April 1973, which lays down the powers of the Audit Board, does not provide for the Board to carry out independent audits in member States. The Audit Court, which will be set up when the Treaty signed on 22nd July 1975 has been ratified by all member States, will have the power to carry out independent audits. It is the hope of Her Majesty's Government that ratification will be completed in the near future."—[Official Report, 13 December 1976; Vol. 922, c. 549.] While I am not opposing the measure, I point out that there is still grave dissatisfaction with the way in which the 600,000 tonnes, the 400,000 tonnes and the 1 million tonnes of dried milk powder are assessed, and the way in which moneys are paid to those who store it and to those who sell it. The Chancellor of the Exchequer, I hope, will be answering another Written Question of mine to tell us what the British Government are doing about the Treaty to set up the Audit Board. I hope that we shall get value for the £3 million.

The system is not sacrosanct. As I said, Articles 38 and 39 of the Treaty of Rome do not require this particular system within the CAP. It was arranged by regulations that were passed in the late 1960s, and that we have had to accept willy-nilly. There are questions which the British people have asked and will wish to ask again about the milk machine.

My hon. Friends, who have always been opposed to the working of the CAP, cannot be accused of being entirely negative. We all know that there are other ways in which agricultural endeavour on the mainland of Europe can be properly supported. It is not beyond the wit of man to devise other ways acceptable to other member States. A possibility that has already been widely canvassed is a dual support system relating to prices and to soil, climate and agricultural conditions.

Another area in which there might be some improvement is in feeding surplus milk directly to pigs. Why must it be made into dried milk powder? Traditionally, bacon has been a dairy-based product. In smaller dairies in the United Kingdom many years ago skimmed milk was fed to pigs. Why must there be a considerable increase in the production of dried milk?

The House of Lords Select Committee report on milk, Document No. 326, published on 30th September last, drew the attention of their Lordships and the House to a significant matter. It states: The most significant factor has been the increase in the skimmed milk powder manufacturing capacity of the Community's dairy industry, which is understood to have risen some tenfold in the last few years. It may be that some adjustment can be made in the other direction. We all know of the success of our Milk Marketing Board. In a recent debate Conservative Members were unanimous in their praise of marketing boards, which do not find a great deal of support on the other side of the Channel. There is this line of argument which I hope my hon. Friend and his hon. Friends will pursue around the table at the Council, because the price which the housewife has to pay in this country, and the way in which we write down these stocks, should be associated with improvements in the system. If we cannot talk about them at the time when we vote the money, we shall not be able to talk about them at any other time.

Another thing that my hon. Friend might like to do is to find out exactly where the distribution of milk production is, particularly in the more remote areas of the European mainland. This is no doubt something which the agronomists, both in this country and on the mainland of Europe, have at their fingertips. Is there any way in which the Commission and the Government can sustain agriculture in these areas without having to sustain it by high subsidies to the milk sector?

In moving the amendment and asking these questions of my hon. Friend I do not wish to do so in too critical a manner. Those of us on this side of the House who have been in opposition do not always want to appear negative.

I hope that I have said enough in this short intervention to provide some positive suggestions whereby the needs of the agricultural community and the rest of Europe can be met. I understand their needs, and I am not saying that they should not have a decent return, but that it should be met in ways that do not fall upon the consumer in the way that they do in the milk sector, and at the same time they should provide farmers with a reasonable return for their efforts.

I hope that the House and my hon. Friend will accept the amendment, because this is the only way in which the British Government can go, and they should start going this way when they agree to additional expenditure, to reduce the terrible milk mountain of which we all know and which is the worst imaginable advertisement for the CAP.

6.28 p.m.

Mr. Ivan Lawrence (Burton)

It was only 19 hours ago that I got to my feet and made something of the same speech as I am about to make now. Before I do so may I say that I shall not follow what the hon. Member for Newham, South (Mr. Spearing) has just said. I agree with most of what he said, and I agree with his amendment, but I do not agree with his whole approach to the question of the Common Market, being a stout supporter and advocate of it.

I have attended with a reasonable amount of diligence at all sorts of hours of the night and day at which these Common Market debates come on—not always speaking, mostly listening and learning. When today's debate appeared on the Order Paper I thought that I had discharged my duties quite conscientiously hitherto. We have had a very busy week, and we shall be busy next week right up to Christmas. It being Friday today, I thought that I might be able to do some shopping and help my wife, and because of the kind of money that we are paid as Members of Parliament, which on the last count left me little more after tax had been deducted than I would have received if I were unemployed with two children, I thought that perhaps I need not attend this debate.

However, before I left this Palace I went to the Vote Office and asked for the documents for this debate. I did that because on every other occasion that I can recollect being interested in a Community debate there has been an inadequate supply of the relevant documents. They have either not all been present, or we have had to debate issues on documents that were out of date. Last night, we had the spectacle of my hon. Friend the Member for Westmorland (Mr. Jopling) reading out a letter which an interested outside body had received, commenting on a document which we in this House had not been privileged to receive. I recall a recent debate—the hon. Member for Newham, South brought it to my attention last night—about water. There again, we were debating a document which was not before the House and which had changed the whole picture.

When is this insanity to stop? What is there about the Common Market which makes those responsible for providing the information upon which the House of Commons is supposed to make judgment decide that it really does not matter?

Mr. Bishop

I am still waiting to hear whether the hon. Gentleman has had difficulty in getting the documents for this debate. If he has, I am surprised, because I have been to the Vote Office today and got the documents, which are available to every hon. Member.

Mr. Lawrence

In the Vote Office, there is a translation of the proposal, dated 26th November, an explanatory memorandum, dated 7th December, and an extract from a report, not yet printed, from the Select Committee drawing this matter to the attention of the House. The translation document is headed: Proposal for a Council Regulation amending Regulation (EEC) No. 2306/70. That original regulation has been unobtainable. The diligence of the Library, to which I, as always, give the strongest commendation and praise, has unearthed a copy of the document. But that is not good enough when the Vote Office is meant to provide us with all the documentation which will enable us to make reasonable and balanced observations on the subject. It is not the Vote Office's fault, but the Ministry of Agriculture's fault, because the Ministry is the body responsible for initiating the debate.

The point is not that I have to stand up at 6.30 p.m. on a Friday and to draw this to the attention of the Minister. The point is that it is the second time I have had to do it in 19 hours, and the umpteenth time we have had to do it in such debates. Since I became a Member of this House, I cannot honestly remember —perhaps my memory is in error—an occasion when all the documentation has been present for such debates. It shows that no notice at all is taken of our complaints.

Mr. Bishop

Perhaps I can help the hon. Gentleman and the House by pointing out that the document we are discussing—R/2860/76—begins by saying Please find enclosed a proposal for a Council Regulation amending Regulation (EEC) No. 2306/7. So he has the documentation which is under discussion. I am not unsympathetic to the problems he raises, but he should be careful before apportioning blame in anything before he has the facts.

Mr. Lawrence

I am sorry to inform the Minister that the proposal for a Council regulation amendment is only a summary, as I understand it, of the original document which gives to it a large number of articles but does not appear in any documentation I have received. I now have doubts whether the hon. Gentleman has himself even seen the original document.

I have this in commission, as it were, from the right hon. Member for Down, South (Mr. Powell), to whom I acquainted the fact that I intended to make this point, and who is quite unusually absent, as is my hon. Friend the Member for Banbury (Mr. Marten), who otherwise always graces us on these occasions but must have slipped out for a moment. There are two things that one can do in this situation. One can either shrug one's shoulders and go home or shopping, or one can hang on and complain yet again. Unfortunately, I made the mistake of hanging on. I hope that eventually the point will sink in. The Minister has been good enough to say that he has some sympathy with me on this point.

Finally, I ask two questions of the Minister in relation to this matter. The financial savings about which he has told us are obviously based upon an assumption that 400,000 tons of the stuff would be sold in 1977 and 200,000, I think, in 1978. Upon what basis is he able to make an assumption that either of those two amounts is likely to be sold in 1977 or 1978? Or is it just a guess? If so, it would affect the amount of savings involved.

The second and perhaps more important question from my point of view is this: what on earth has happened to the Commission's scheme to incorporate skimmed milk into animal compound feed, which we debated on 12th April 1976 on a "take note" motion, and of which this House strongly disapproved? Have we been successful? Did it matter? Did anything we did in this Chamber matter? Did it help to change the mind of the Commission, or is it going ahead notwithstanding the united objection on both sides of the House to that particular scheme?

6.37 p.m.

Mr. Tim Renton (Mid-Sussex)

We on the Conservative Benches give a general welcome to Commission Document R /2866/76. Our long-term aim is still to try to solve the problem of structural surpluses within the Community's agricultural production, particularly in the dairy sector. This is the fundamental problem. I think it was very much in the mind of the Minister in opening this brief debate—and in the mind of the hon. Member for Newham, South (Mr. Spearing) in moving his amendment—that in touching on this question of the surplus in skimmed milk powder this evening we are touching only the fringe of the problem.

The underlying problem remains—that of the structural surpluses. In the end it is clear that the Community will have to deal with this. In the meantime, we believe that the draft regulation is a step in the right direction. It shows a degree of realism, and we therefore support as a short-term measure the proposals for writing down the value of powder that was in stock at the beginning of this calendar year.

I wholeheartedly support my hon. Friend the Member for Burton (Mr. Lawrence) in his comment that it is intolerable that the House should be discussing this draft regulation at such very short notice. We on this side of the House heard about it only on Wednesday. We are discussing it—in what I think could be politely described as out of office hours—at 6.30 on Friday evening, when you, above all, Mr. Deputy Speaker, will know that we have had a fairly long week. This has led to my hon. Friend the Member for Norfolk, North (Mr. Howell), who was to reply to the debate for the Opposition, unfortunately being unable to be present due to a long-standing engagement. I am therefore standing in for him and would not pretend to have a jot of his expertise in these matters.

Further, as my hon. Friend the Member for Burton has commented, the original document, 2306, to which the draft is an amendment, was, as he said, simply not available in the Vote Office. I was able to get a copy, as I think he was, from the Library, but it is in French and there is no translation available. Fortunately, some of us realise that the words les interventions sur le marchè intérieur du lait ecremé en poudre refer to the mountain of skimmed milk powder that we are discussing today. But that would not necessarily be an expertise available to all Members of this House if the Chamber were rather more packed.

We are in the position of trying to play Hamlet without the prince, in the shape of my hon. Friend the Member for Norfolk, North, without a script and at a very strange hour of the day. That, I submit, is not the way—this is the point made by my hon. Friend the Member for Burton—in which to treat a draft document which the Select Committee has thought to be of sufficient importance to refer to the House.

In opening this brief debate the Minister referred to the cost. He pointed to the immediate benefit to the United Kingdom because our rate of contribution is only 16.3 per cent. this year and will rise to 19.24 per cent. next year. Therefore there is a saving of £3 million to the United Kingdom. Naturally we support this and are pleased about it, but the Minister glossed over the total cost to the agricultural budget. That involves a figure of 164 million units of account, which by my reckoning amounts to £68.3 million at the old Smithsonian rate of exchange or £100 million at today's rate of exchange. That is what this writing down of the stock will mean because of the excessive quantities now in intervention and they must be disposed of before they become totally useless. Therefore it involves £100 million on that one item. I understand that the matter was discussed in the Agricultural Committee of the European Parliament in November of this year but it was not brought before the European Parliament.

There are therefore a few specific questions with which I should like the Minister to deal in his reply. The first covers the same point mentioned by my hon. Friend the Member for Burton. Why are only half the stocks now being written down? I take it that that was the quantity in store at the beginning of the year. But that is an arbitrary deadline if the Commission has decided that it will not get rid of the stocks taken in since then at the intervention price. Would it not be better to take a realistic attitude and to write down the whole lot now and try to get rid of it before what has already gone into intervention this year deteriorates and has to be sold off in a year or two at a much lower price?

Why is there to be a 30 per cent. reduction? The Minister gave us no explanation of that figure. Is it purely a theoretical reduction that the Commission has pulled out of the air? It is not the same as the meat reduction of 25 per cent. or as the butter reduction of 6 per cent.? From the figures given by the hon. Member for Newham, South, I had the impression that the reduction to reach market value should be very much greater.

The hon. Gentleman mentioned that the Commission's intervention price for skimmed milk was 330 per cent. of the world market. If that is so, a reduction of only 30 per cent. in value will not aid the Commission in getting rid of the milk powder. It would be helpful if the Minister could apply his mind to that point and say what in his judgment is the current market value of the stock that has to be sold. The proper way to handle the matter would be to value the stock at cost or market, whichever is the lower. It would be the normal business practice to write down to that value and then to take the whole of the potential loss into the books. I suspect that the Community will not do this but will take a smaller figure to paper over the problem and that that figure will not be large enough to enable the stock to be disposed of.

What are total present stocks in the EEC and the United Kingdom? I also wish to know how, in the Minister's judgment, the incorporation of the skimmed milk powder scheme has turned out since it began. What has been achieved? Finally, do the Government accept Mr. Lardinois' view that the production of milk and skimmed milk powder will be no lower this year than it was last year despite the drought? If that is so, there is every likelihood, despite the dry summer conditions which led to a considerable fall-off in milk production, of the mountain being added to, with the result that we shall have the same problem this time next year. Once again we shall be debating this measure at an unrealistic hour and probably having to write more off the value because the more the consumers know there is in stock which has to be sold the more they will lower the price.

Everyone who has spoken will agree that we are convinced that this regulation will not solve the problem of excess dairy production in Europe. It is acceptable only as a short-term measure. Nor will the problem of excess production be solved by the other measures currently being proposed and due to come into effect only in April 1977—nearly a year after their formulation.

We therefore urge the Minister to press the Council and the Commission for more realism and more positive action to reduce the wasteful and embarrassing production of milk in those Member States who are producing straight from the farm into intervention and who continue to maintain about 2 million cows too many beyond what the market requiries. These are spread particularly between France, Germany and Holland. I repeat, 2 million cows too many.

C'est la vache qui rit! In the days of unemployment and economic difficulties it is clear that, long term, the EEC cannot continue to afford such an extravaganza.

6.47 p.m.

Mr. Bishop

Despite the late hour and the sparse attendance, we have had a useful debate. I begin by giving an explanation of the timing of this debate and the short time that is to elapse before the matter is considered in Brussels.

I draw attention to the fact that the document we are discussing is dated 26th November and was received here the following week. The Department then had to consider it. The memorandum that I submitted to the House was dated 7th December. The Scrutiny Committee saw the document soon afterwards. Time has had to be found to bring this to the House this week despite the important debate that we have had on another matter.

The Commission is to consider this measure and we need to agree it before the end of the year if we are to finance it from the 1976 budget and to save money. I am sorry if the time allowed is short, but the House will recognise that the matter has not been entirely in our hands. It is important that my right hon. Friend will have had the opportunity to consider the points made today before going to Brussels.

I pay tribute to my hon. Friend the Member for Newham, South (Mr. Spearing). Although I sometimes may disagree with him, no one can dispute his tenacity in sticking to this job. He does good work in keeping track of what is going on. This debate is not on the Adjournment but on a "take note" motion. My hon. Friend has had the opportunity to table an amendment to it which I have been pleased to accept. The Government agree that some of the points he has made are relevant.

The current stocks of skimmed milk powder held in intervention by the member States' intervention agencies amount to 1.2 million tonnes. About half—600,000 tonnes—would be affected by this proposal, because of the age of the stocks. When a stock is taken into intervention by an intervention agency, the cost of the purchase is met by the member States' national exchequer, but when the commodity is sold out of intervention, the EAGGF meets any loss incurred. If, however, a profit is made on the sale, it is credited to the EAGGF.

In addition, the EAGGF pays member States a standard rate of interest on the capital that they have tied up in stocks held in intervention, plus storage costs at standard rates fixed by the EAGGF committee after consulting the management committees. The Commission has estimated that the loss which the guarantee section of the fund would have to bear on sales if the write-down did not occur would be £45.4 million—equivalent to 109 million units of account—in 1977, and £22.9 million—55 mua—in 1978. There is a write-down for other perishable commodities—6 per cent. below the intervention price for butter and 25 per cent. for beef and veal. These reflect the extent to which the commodities deteriorate in storage.

That is one of the reasons why the write down percentage recommended has been so apportioned.

Mr. Tim Renton

I do not know whether the Minister intends to return to this matter but does he propose to take up the point about the market value of the skimmed milk powder in stock? He says that 30 per cent. represents depreciation of the powder while in stock, but on what basis?

Mr. Bishop

I was about to come to that.

The stocks that are less than a year old were produced in 1976, a year of great drought, so there is not a great deal. These can be sold for human consumption. The 30 per cent. write-down for older stocks recognises that some, but not all, can be sold only for animal feed. The real value of the powder for pig feed is estimated to be about £100 and for calf feed £300 a tonne. The percentage write-down recognises the general depreciation and what is likely to happen in the deterioration in the feed.

I turn to the question of the quantities which are available. Of the 600,000 tonnes of skimmed milk powder being written down the United Kingdom holds just over 100 tonnes. France and Germany hold the largest stocks in the EEC. The total held in the United Kingdom in intervention stocks is about 12,000 tonnes. Those are the figures for which the hon. Member for Mid-Sussex (Mr. Renton) asked.

With regard to the interest rates paid on stocks held by the member State's intervention agency, as I pointed out, the guarantee section of the fund pays member States a standard 8 per cent. interest rate on the value of all stock held by member states' intervention agencies.

I have been asked about the contribution and how the key rate of the contribution is constructed, and my hon. Friend the Member for Newham, South raised certain points about accountancy in regard to intervention and the Community agency. This is a matter for Treasury Ministers, with whom my hon. Friend has been in touch. However, we are very much involved in the assessment of the situation.

The United Kingdom contributes to the Community budget under the own resources system. The Treaty of Accession provides for a transitional period running to 1980 for the application of the full own resources system. During this transitional period the United Kingdom's relative share of the budget rises in steps each year, from 8.78 per cent. in 1973 to 19.24 per cent. in 1977. I made some comments earlier on how that variation in the budget contribution will affect the saving in relation to the matter now before the House.

Mr. Lawrence

Before the hon. Gentleman moves on, will he answer my question about why the assumption was made that 400,000 tonnes would be sold in 1977 and 200,000 tonnes in 1978? It is referred to in the financial statement on the back page of the document which I have been able to obtain.

Mr. Bishop

I understand that the Commission has made provision for that figure. If the hon. Gentleman wants more information, I shall be pleased to write to him about it.

I turn now to the general policy on surpluses. Although the House will, I am sure, support the motion and the amendment, the real problem which we face has been detailed before many times. My right hon. Friend has stated, and the House agrees, that the surplus problem must be tackled resolutely. Hon. Members will recall that a month or two ago the House had an opportunity to debate the general package of proposals intended to deal with surpluses. This matter is still before the Community. I shall not go now into the seven points which have been detailed and the Government's attitude to them. We feel that the surplus problem is serious and should be tackled at the earliest opportunity, and my right hon. Friend has put forward constructive proposals of which the House is aware.

It is important to recognise also—we have said this on a number of occasions —that within the Community it is for us to ensure that our CAP mechanism is such as to encourage the most efficient producers in the dairy sector while discouraging less efficient producers. These factors will be taken into account in consideration of the milk package.

The hon. Member for Burton raised a question on the compulsory purchase scheme, which was a matter of some concern in previous days to hon. Members on both sides. The arrangements for taking deposits on imported vegetable protein, such as soya, ended on 26th October. It was, I think, the date expected, although there had been fears that the Community would want a much longer extension. The powder remains available until 31st January 1977 for the redemption of deposits put down before that date. About 330,000 tonnes have been denatured in the EEC as a whole and a further 39,000 tonnes have been contracted for. In the United Kingdom over 30,000 tonnes have been denatured. I think that the House will be pleased to hear about the termination of this scheme, which we all deplored at this time.

With those comments, I commend the motion and amendment to the House.

Amendment agreed to.

Main Question, as amended, agreed to.

Resolved, That this House takes note of Commission Document No. R/2866/76 on Skimmed Milk but regrets that the high level of stocks of milk powder make this measure necessary; and urges the Government to secure a modification of the CAP in order to avoid the continual creation of such structural surpluses.