COMMON AGRICULTURAL POLICY

HC Deb 12 February 1976 vol 905 cc705-86

7.30 p.m.

The Minister of Agriculture, Fisheries and Food (Mr. Fred Peart)

I beg to move, That this House takes note of Commission documents R/3166/75 and R/3271/75 and, in respect of R/3166/75, of the Government's intention, taking account of the needs of producers and consumers and the importance of restraining public expenditure, to seek both satisfactory levels of agricultural support prices and further improvements in the operation of the common agricultural policy, especially in the milk and cereals sectors, and to maintain the provision for variable slaughter premiums in the EEC beef regime along the lines of the arrangements secured as part of the renegotiated terms of EEC membership.

Mr. Speaker

I have selected the amendment in the name of the right hon. Lady the Leader of the Opposition. With that amendment the substance of the amendments in the names of the hon. Member for Cardigan (Mr. Howells) and the hon. Member for Southampton, Test (Mr. Gould) can be discussed. Those amendments are, respectively, at end add but regrets the continued existence of the Green Pound, which is a major impediment to fulfilling the expansion envisaged in the Government's own White Paper, 'Food from our own Resources'. and at end add and urges Her Majesty's Government to oppose proposals for the compulsory use of skimmed milk powder in compound animal feedingstuffs".

Mr. Peart

The issues that we shall be considering in our debate this evening are many and complicated. We must all be grateful for the work done by the Scrutiny Committee in producing its clear and helpful Report. As one who has appeared several times in front of the right hon. Member for Knutsford (Mr. Davies) and his colleagues on the Committee, I say to the right hon. Member that I have always found it a pleasure. I have often heard it said by some Ministers, of all persuasions, that sometimes it is a bore to go to certain Committees. However, I find it a worthwhile experience, because the Committee has been constructive, and my staff and civil servants who accompany me have always been received with great courtesy. It has been a successful operation. I am grateful for the work done by the committee.

The Report itself identifies the main aspects of the European Commission's proposals on Community agricultural support and prices for 1976–77. I shall try to deal with each of the sectors to which the Scrutiny Committee has drawn attention.

It is clear from the motion that the Government have tabled for our debate that more is at issue in the negotiations in Brussels than the level of support prices in 1976–77. The level of support prices is important enough. We are also concerned, however, to follow up our stocktaking discussions last year. We want to see further improvements in the operation of some of the more important commodity regimes in the Community.

I should like to deal with the Opposition amendment quickly, as it has been mentioned by Mr. Speaker. Naturally, the Government always attach importance to maintaining the competitiveness of United Kingdom agriculture. In the forthcoming negotiations I shall certainly be concerned to avoid arrangements that would undermine our industry's competitive and structural advantages. I have no difficulty in accepting the amendment.

I have set out on earlier occasions the Government's general approach to agricultural support in the Community. The common policy should provide effective support to efficient producers without imposing undue burdens on either consumers or taxpayers. For this reason we have always emphasised the need to fix support prices in a way that takes account both of the needs of efficient producers and of the market situation for individual commodities. We have to set prices that ensure as far as possible that there is no shortage for consumers. On the other hand, the accumulation of structural surpluses for which there is no effective demand is wasteful. I think that there is agreement, certainly in our industry and in the House. This is not in any way a matter that divides the two sides of the House, because there is agreement here.

For some products within the Community the imbalance between supply and demand could be so serious that changes in the support regimes are necessary as well as restraint in the level of support prices.

I now turn to the Commission's 1976–77 proposals. In these proposals the Commission has made an effort to respond to the problems. I think that it was wrong to propose the phasing out of the beef premiums and I have stated in Brussels that I cannot agree to this. Indeed, I have reported back to the House on this matter and have declared my policy and my intention. Otherwise, however, the Commission does seem to me to have addressed itself to the major issues, particularly in its package of measures in the milk sector and in its approach on the intervention price for feed wheat. We have some reservations whether the Commission has always satisfactorily followed through the logic of its own analysis. Moreover, we need to examine closely whether many proposals would be cost-effective and practical.

I turn first to the proposed average level of increase in support prices, of 7.5 per cent. in terms of the unit of account. I was glad to note the Commission's efforts, in assessing the necessary level of support, to estimate the requirements of modernised farms. This was discussed in the stocktaking document. We have always stressed it. I declared it to be one of my aims in securing improvements, and I believe that the CAP is better for this.

The Commission's work to improve this aspect of its price proposals is to be encouraged. Because of other elements in the package, such as the proposal on skimmed milk powder intervention, effective support prices even in units of account may not rise by as much as 7.5 per cent.

We have also to recognise that the effective increase in support prices in most member States will be considerably less than 7.5 per cent. in terms of their national currencies, because of the proposed monetary changes. Indeed, only the United Kingdom, Denmark and the Irish Republic would have the full increase in their farmers' common support prices in national currencies. None the less, the increases proposed in Community prices seem to us to be on the high side and, in the forthcoming negotiations, we shall continue to look for restraint.

The Commission's monetary proposals are primarily of interest to other member States. The Scrutiny Committee rightly mentions that no change in the green pound is proposed, but I should remind the House that the Government have made four changes in the green pound since October 1974. We made three changes last year. The sterling monetary compensatory amounts are now only 6.4 per cent. and have been steady at that level for some time.

Decisions on the green pound always involve a difficult balancing of different interests, because of the effect on food prices. We shall continue to keep the level of the green pound under review. We have shown that, when the need is there, we are ready to act.

I turn now to specific commodities. I start with beef. Last year, as part of renegotiation, we secured revision of the EEC beef regime to enable premiums to be used as an alternative to complete reliance on permanent intervention. The new arrangements have worked well this year. We have avoided the waste of excessive support buying. Consumers have benefited, and so have producers, who have had more assurance on the level of their returns.

The European Commission has now proposed to phase out premiums for the next marketing year. It foresees stronger prices and, in the forecast market situation, it does not think that premiums will be necessary. I have made clear that I do not accept this reasoning. Provision for premiums is necessary. If, contrary to what the Commission expects, market prices are inadequate, we do not want excessive intervention. We need to assure producers that their returns will be made up to satisfactory levels.

The Council in Brussels has no doubt where I stand. The House, also, can be confident that I want to see arrangements that do not rely solely on permanent intervention—support buying—and which provide for premium payments to producers if market prices are depressed.

Mr. Douglas Jay (Battersea, North)

Will my right hon. Friend give an undertaking that for all the reasons he has given he will not agree to the phasing out of the variable premiums system?

Mr. Peart

I have repeated my position. I do not know why my right hon. Friend should be anxious. I believe that I have the support of all hon. Members. I am glad to say that I have the support not only of the National Farmers' Union but also of its European equivalent—COPA. I am supported by a strong body of opinion. I am grateful to have the support of my right hon. Friend and others. This is a matter for negotiation.

Mr. Neil Marten (Banbury)

If it is a matter for negotiation, what is the area of negotiation?

Mr. Peart

The hon. Gentleman questioned me on this issue in the Scrutiny Committee and he must accept what I said. I made clear what I want to secure, and I cannot go beyond that. I cannot be tied to every comma in the negotiations. I have given a forthright declaration. I am rather surprised that some hon. Members still want to fight some of the old battles of the past.

_Mr. Nigel Spearing (Newham, South)

We want change.

Mr. Peart

I have said that I have achieved change in the CAP. In the renegotiation I achieved the variable premium system. Despite what the Commission has said, I intend to fight for that system. I believe that it has worked well for British farmers. I cannot go beyond that. I hope that hon. Members will realise that I am grateful for their support on that issue.

I turn now to the question of milk. The Community faces a serious problem of over-production of milk products, particularly skimmed milk powder. A combination of measures is necessary. I am naturally concerned that any proposals should not bear inequitably on producers here. Within the Community system there should be an expansion by our efficient producers, notwithstanding the need for restraint on Community support and for a better balance of supply and demand on the Community market as a whole.

The Commission has put forward a very complicated package. It has proposed a below-average increase on support prices and its implementation in two stages. There would be a 2 per cent. increase in the target price for milk in March and a 4.5 per cent. increase in September. Because of monetary changes, dairy farmers in most of the Six would get no effective increase at all until September. The two-stage approach is a sensible recognition of the higher costs of winter production.

In September, the intervention arrangements for skimmed milk powder would also change. Fixed-price intervention would stop. Instead there would be a tendering procedure, and support buying prices would be liable to vary within a range according to available supplies. This is a move to more flexible intervention, in line with our stocktaking objectives. I know that producers have expressed some concern. Some action, however, to discourage production for intervention is essential.

I shall certainly be concerned to ensure that the Council's decisions on support prices and the intervention mechanisms adequately reflect the serious imbalance in this sector. The restoration of a balance in the market is the best longer-term assurance that our own milk producers can have.

The Commission has also proposed a scheme to encourage producers to stop sales of milk. The so-called non-delivery premiums would apply to farmers producing as much as 120,000 litres of milk. Such farmers might have up to 30 cows. I think that the scheme, if adopted, needs to concentrate on smaller producers. As proposed, its coverage seems too wide. Moreover, there are many administrative problems which must be solved. We are still examining in Brussels whether the scheme would be cost-effective or practical.

The Commission has also made proposals intended to reduce the accumulated stock of skimmed milk powder and to stimulate consumption in various ways. An important and controversial feature is its plan for the incorporation of skimmed milk powder in animal feed for a limited period.

Mr. John Watkinson (Gloucestershire, West)

On the question of milk production, which is of some concern, how does my right hon. Friend marry up the undertaking given in the White Paper about the expansion of milk production and the possibility of adopting proposals from the Commission that we should cut back milk production? How does my right hon. Friend think that the Commission's proposals will affect our milk industry?

Mr. Peart

I know that my hon. Friend takes a deep interest in these matters. He will know that I have been questioned on this specific matter over and over again. I see no inconsistency in a policy that enables our efficient industry to produce more milk and to increase production even though milk products on the Continent have accumulated. We have not been responsible for that accumulation. There is no contradiction, and that is known to the Community.

Although there is a need to stimulate our own production, there is some controversy about the incorporation of skimmed milk in animal feed. The scheme will be for a limited period. It is designed to dispose of about 600,000 tons of powder. Livestock producers whose feed costs will be increased are understandably concerned, as are the feed manufacturers themselves. There are problems of principle and practice, including the consequences for overseas suppliers.

The Commission is considering some alternative mechanisms. I must emphasize, however, that the disposal of these stocks inevitably involves considerable cost. That is not just true for the Community; it applies to New Zealand, Australia and America. Many other countries throughout the world have a skimmed milk problem. It is not something peculiar to a wicked Community and a harmful CAP. The accumulation of skimmed milk stocks has occurred in many countries throughout the world.

Mr. Andrew Welsh (South Angus)

Will the right hon. Gentleman give the House an indication of the amount of money that is involved in this process?

Mr. Peart

Much depends on the market price at which producers are able to dispose of it. There is over 1 million tons of skimmed milk. That is a considerable amount. I can get the figure, but I do not think that I can give an accurate answer immediately. Outlets for the powder other than for animal feed are limited. The Commission has proposed raising to 200,000 tons the Community's disposal of skimmed milk powder for food aid. This is clearly to be welcomed. The basic issue in considering the Commission's proposals for the disposal of skimmed milk powder in animal feed is whether there is a better method or a fairer way of distributing the costs. I shall be interested to hear what is said in the debate.

We are disappointed by the Commission's proposals for the butter subsidy.

Mr. Marten

When the right hon. Gentleman appeared before the Scrutiny Committee, and when we were discussing the extra 200,000 tons going to aid, he told the Committee that it had not been decided whether it was additional aid which had to be paid for on a supplementary budget estimate or whether the cost had to be taken from existing aid. Has the financing of the extra 200,000 tons been resolved?

Mr. Peart

No. This is a detail which still has to be worked out and finalised. [HON. MEMBERS: "Oh."] I do not know why hon. Members are chortling. We are discussing basic proposals, many of which will be accepted or modified in negotiation.

I shall be in Brussels on Monday, Tuesday, Wednesday, and possibly Thursday, of next week. I am not saying that we shall achieve a final result, because that may come in the next session, but these matters will be carefully scrutinised and discussed. Although I am talking about the Commission's proposals, I do not assume that those proposals will remain as they are now. There may be modifications. However, we shall discuss costs including the cost of the food aid proposal. I shall report back to the House when we reach a final decision.

As I have said, we were disappointed at the butter subsidy proposal. The net effect of the proposal would be to reduce the contribution from Community funds to our subsidy. I have pointed out in Brussels that we face serious public expenditure constraints and that any cut in our butter subsidy could adversely affect the outlet for butter here. This would be to the disadvantage of our Community suppliers. I hope that the Commission's proposals can be reconsidered.

The Scrutiny Committee has also drawn attention to cereals. The Commission has tried to establish a new pattern of support prices. Its detailed proposals are closely interrelated. The intention is to remove the need for a denaturing subsidy and to reduce the incentive to put feed grains into intervention. I welcome the basic principle that feed grains should be supported at feed level. It seems to me sensible to reduce the basic wheat intervention price with a view to aligning this more closely with the maize and barley intervention prices. Too high a level of wheat support, when applied to high-yielding feed wheat, imposes unnecessary costs on livestock producers and, through them, consumers.

I question, however, the size of the Commission's proposed increase in the target prices for cereals. These target prices affect the level of the Community's threshold or minimum import prices. The Commission has proposed increases of up to 9.5 per cent. In my view, the Community should not put up unnecessary barriers against imports.

I have also questioned the Commission's proposals on breadmaking wheat. We are not clear how the Community will be able to differentiate in practice between feed and breadmaking wheat. This is a very complicated and difficult area. I shall certainly be concerned to secure that if arrangements are introduced they will be fair and practicable and set at a sensible level.

I think that we have made some progress in our general objective of seeking improvements in the operation of the common agricultural policy for some of the commodity regimes in the Community. We shall pursue this vigorously in the present negotiations on support for 1976–77. It is equally an essential national objective to maximise our receipts from Community funds. We have been successful in achieving this recently. In 1975 our expected total receipts from the guarantee section of the Community's agricultural budget are £339 million.

By far the greater part of our receipts were Community payments which benefited our consumers—in particular, the Community payment of our import subsidies on food, the contribution to our beef premiums, the special import subsidy on sugar, the contribution to our butter subsidy, and Community expenditure on our social beef subsidy. In 1975 our receipts from Community expenditure on the common agricultural policy exceeded our contribution, leaving us as net beneficiaries.

Mr. Bryan Gould (Southampton, Test)

Do the figures given by my right hon. Friend represent gross or net receipts? Do they take account of our contribution to the funds that produce those payments?

Mr. Peart

Of course they do, and I have said so on previous occasions.

I have drawn to the attention of the House some of those points on which we should like to see changes in the Commission's proposals on agricultural support. I shall press hard for these changes—in particular, on the beef premiums—in the negotiations later this month.

We should recognise also, however, that there are good features in the Commission's package. It would produce a saving of about £92 million on the Community's agricultural budget in 1976. After taking account of changes in receipts, the United Kingdom's net contribution in 1976 would be about £25 million lower than it otherwise would have been. There is the prospect of useful changes which would restrain the level of support on feed wheat and skimmed milk powder.

The proposals are estimated to result in an increase of only 1 per cent. in the food price index here by the end of 1976.

Our efforts to maintain—or, if necessary, to restore—the balance in the markets for individual commodities must continue. Tackling the imbalance in the dairy sector is particularly important. Overall, the common agricultural policy will develop and evolve in response to circumstances from year to year. I shall certainly take careful note of the views that hon. Members may express in this debate. I shall bear them in mind in the forthcoming negotiations in the Council of Ministers.

I hope that the Council will be able to reach decisions at the meeting on 23rd and 24th February and I shall of course report them to the House at the earliest opportunity.

7.58 p.m.

Mr. Francis Pym (Cambridgeshire)

I beg to move, as an amendment to the motion, at end to add: 'and urges Her Majesty's Government to ensure that the competitive and structural advantages of United Kingdom agriculture are maintained'. I wish wholeheartedly to endorse the thanks conveyed by the Minister of Agriculture to my right hon. Friend the Member for Knutsford (Mr. Davies) and his Committee for the way in which they have discharged the onerous responsibility placed upon them by the House. The fact that they have given the House an immensely helpful report, which so assists hon. Members in seeking to deal with European legislation, is to their lasting credit.

I am grateful to the right hon. Gentleman the Minister for saying that he is prepared to accept the Conservative amendment. I am sure that it expresses the correct spirit, and it is a relief to the House to know that he will approach the remaining stages of the negotiations on the basis of the words we propose to add to the Government's motion.

I am certain that it is right that we should have this debate at this stage before negotiations have been concluded so that the Minister can take heed of the views of the House. We agree that the right hon. Gentleman and all successive Governments will continuously be involved in improving the common agricultural policy. There may have been a little disappointment in the sense that a number of questions raised with the Minister in the Select Committee were not accurately clarified. I wish now to repeat some of those points. The documents cover a very wide field. Naturally, I cannot possibly deal with all of them, but I want to make some general observations and to raise some questions on particular aspects of the Commission's proposals. We know that the negotiations are in progress now, and it is hard to exaggerate their importance.

Far from wishing in any way to damage the right hon. Gentleman in the negotiations, I want positively to put more fire and resolution into him to strengthen his hand. I wish it were stronger already. Indeed, I wish the Government of which he is a member had taken a different attitude to the European Community all along, but that is past history. We all, whatever our views, want him to conclude the best possible package for our producers and our consumers alike, for they share a joint interest, and it is a matter of balance. I have never liked the way in which the responsibility was divided between the Minister and his right hon. Friend the Secretary of State for Prices and Consumer Protection, but that is how the Government decided to do it.

The review is extremely important, because 1974 and 1975 were painful years for agriculture, for horticulture and for fishing. The decline in farm incomes has been marked—perhaps 30 per cent. in 1974–75, and probably not up in 1975–76. It could even be down. There has been too little investment, and there is too little potential for increased income, but, hopefully, 1976 will see a recovery. That recovery must be the start of a long-term process of regeneration in the industry.

The review and these negotiations provide the opportunity for the Government to make their own White Paper a reality. I say that despite what the Minister said about the possibility of surpluses of certain commodities in the Community. The White Paper last year was a non-event, and at this review the Minister has to turn that non-event of 1975 into a gold medal for 1976. Unless he does, there will be no restoration of long-term confidence. Happily, the immediate situation in farming is not as bad as had been predicted, because we have had a very mild winter once again.

Nevertheless, there is a lack of long-term confidence, nor, unless the Minister gets a satisfactory review, can we look to that expansion which the Government themselves want, no less than the Opposition. The publication of the White Paper, without action at the same time to give it effect, has made the situation worse today, because that White Paper raised expectations which have not so far been realised. I think it will cost the Minister more now to live up to those expectations than if he had taken action earlier.

There are two matters of overriding importance at this juncture—a reduction in taxation, and fair prices for food that is economically produced. These two go inseparably together, and are fundamental to any sound policy for agriculture. Therefore, the Chancellor of the Exchequer is involved—and, indeed, the Labour Party—in its present excessive mood of anti-capitalism. Incidentally, I hope the right hon. Gentleman will take the first opportunity to assert in public in forthright terms his opposition in principle to any suggestion of nationalisation of the land.

The spirit and basis of the European Community is that of fair competition in trade. Therefore a broad equality of taxation between member States is a basic requirement. The levels of taxation are not now equal, and the Chancellor of the Exchequer must have regard to this fundamental imbalance.

This leads me to the first specific matter in these documents that I want to raise—

Mr. Norman Buchan (Renfrewshire, West)

Is the right hon. Gentleman's suggestion that we should cancel the various fiscal and taxation measures that we have regarded as necessary for the well-being of the people of this country, in order to harmonise with the Common Market?

Mr. Pym

If the hon. Gentleman thinks that the present level of taxation is for the benefit and welfare of the people of this country he really has a very funny view of how things stand. I do not think that anybody else here takes that view.

Mr. Buchan

With respect, the right hon. Gentleman did not answer the question. I, too, should like to change the taxation system, although the way I should like to do it would not be welcome to Conservative Members. My point is that the decisions made by the Government of this country in their taxation and fiscal policy are designed, rightly or wrongly, to serve the interests of the people of this country. Is the right hon. Gentleman saying that these decisions should be rejected in the interests of harmonisation?

Mr. Pym

I do not mind on what basis it is done, but taxation in this country overall, taking all taxes together, is higher than in any other member State. That is unreasonable, unfair and absurd. Although it is not particularly related to agriculture, it affects agriculture, just as it affects everybody else, and it is completely fundamental to the basis of fair competition. Unless taxation is reduced all round, and the threat of further taxation removed altogether, there will not be very much left of the United Kingdom.

Turning to the monetary measures, the Minister referred to the green pound, and we acknowledge that he has made a number of adjustments. We have thought that they were not always enough, or always at the right time. The Minister says now that he will keep the matter under review. I hope that when he adjusts it next time it will not be too late. Even though he has made many adjustments, it might have been better if he had made bigger adjustments less often, but in any case the feeling of unfairness remains. The feeling of resentment in the industry still exists.

British farmers, thanks to their own hard work and to the support of successive Governments, have achieved a competitive and a structural advantage that is a really valuable asset to the industry. We know what efficient producers they are, and how high is their productivity. I have no doubt that their structural advantage is one reason why they consistently, from the early 1960s onwards, supported the proposition that the United Kingdom should join the European Community, but many of our farmers are getting a feeling now that, through no fault of their own, they are being denied some of those advantages. They had no cause or reason whatever to expect this in advance.

I know that the compensatory amounts are designed to reduce and compensate for currency differences. Nevertheless, misalignments persist. Misalignments distort trade, and not only for producers. Butter is an example. Germany has been able to become a big exporter of butter, and will very likely supply as much of our own market this year as we do ourselves, if not more.

Bacon and ham are other examples. Our producers are under-cut, due to misalignment, by 3p or 4p a pound in the case of bacon, and 7p or 8p a pound in the case of ham. One of the consequences of this is that redundancies are being caused in the manufactured meat products trade. Incidentally, the profits of these traders are being squeezed in some cases virtually to zero.

There is no doubt that the green pound is distorting competition to our disadvantage, and this poses a real threat to the increased production of home-grown food.

As sterling has declined against other currencies, our industries have benefited with their exports—except for agriculture, which has special constraints upon it. There are growing opportunities in Europe, as well as elsewhere, and it is in the national as well as the agricultural interest to expand exports. I am glad that the Government are taking action in this connection. The export drive has my support, but the green pound is relevant to it.

This brings me to the proposed price increases. I have already mentioned the decline in farm incomes over the last two years, some of it certainly due to the weather, but the inflation of costs certainly cannot be laughed away. That inflation has been severe and merciless. It has affected wages, machinery, fertilisers, and very nearly everything else. Those increases have not been recovered through prices, which have failed to keep pace. Rising costs just cannot be ignored.

Hon. Members will have seen a month or so ago an article by Lord Rothschild on wheat. He estimated that the cost of growing an acre of wheat is £102, and that on average yield it requires £76 per ton to show a profit. Let us look at the figures contained in these documents about the relative increases in costs in the member States of the European Community. In the United Kingdom last year the figure was up by 13.2 per cent. The next highest was France, with 10.5 per cent. The next two, Germany and Belgium, were only just half the increase in United Kingdom costs and, in the case of Denmark and the Netherlands, they were a third.

That cannot be laughed off. It is all very well for the Consumers Association to speak of the rising problems of food prices, which are very real, but they cannot be explained away from the point of view of the farmers getting too much. Although the great campaign launched by the Secretary of State for Prices and Consumer Protection may be marginally helpful it is a great mistake to expect too much from it in the light of escalating costs. Unless the end prices are realistic we cannot get expansion, and the supply of food itself could be put at risk.

I do not think that the 7 per cent. to 8 per cent. proposed increase will be enough to recoup the higher costs. The Minister said that he hoped for a lesser figure, and I notice that a number of speakers in the European Parliament thought that 9.5 per cent. was a more realistic figure. I think that something in that direction is more appropriate. We can look, too, at consumer prices and the increases there in relation to our neighbours and friends in Europe. In 1974 the increase over 1973 was 16.1 per cent., which was broadly at the average level of other countries in the Community—slightly higher, but somewhere near the average. In 1975, over 1974, we are far and away the highest with an increase of 26.6 per cent.

Mr. Buchan

We did tell the right hon. Gentleman.

Mr. Pym

The hon. Gentleman likes to think that this is because we have joined the Community. It is not. It is due entirely to the economic policy of this Government. It is due entirely to their laxness on the economic front in 1974 for political reasons. It has nothing to do with our joining the Community.

Mr. Jay

The right hon. Gentleman knows that that is nonsense. One of the reasons for the rise in food prices here was the inevitable increases that we had to make in the prices of butter and cheese, for instance, as a result of the Treaty of Accession.

Mr. Pym

I am afraid that I do not accept that argument. Let me give the House the figures. The increase in consumer prices in the United Kingdom last year was 26.6 per cent. The next highest was 18 per cent., which was in Ireland. The next was in Italy, with an increase of 13 per cent. In all the other countries it was less. The highest of all was in the United Kingdom, and that is the end product of galloping inflation. The producers of our food were not responsible for that. They have suffered as much as any; we know that their incomes have fallen.

Mr. Buchan

Taking the amount of saving on costs due to the ACAs and MCAs, during the year 1973–74 it was of the order of £1,200 million on food prices, which means that in two years we have had to put an additional £1,200 million on food costs.

Mr. Pym

I am sorry, but I do not accept that. Nor could it conceivably account for the incredible differences in 1975 in consumer price increases.

I want now to say a word about cereals, although I shall be brief on this because, broadly, I agree with the Minister. The proposal to align cereal prices more realistically with their feed value is logical and capable of development, but the obvious problem with the two-tier system is how to identify the bread-making and feed qualities of wheat. Unless this question can be answered I do not see how the scheme can work. This is of especial importance in the United Kingdom where our grain is stored on farms, where sales take place throughout the year and where every bin will have to be correctly identified. The Minister said that they must find a fair system. They must find an accurate system, which can be accepted and thought completely fair by every farmer in the country, and a method which is reasonably simple to operate. Experiments are being done on this, but is not there a case for postponing the introduction of such a scheme? I should have thought that that could be achieved, because obviously more work needs doing on it.

The other point on cereals is that there has been circulated to right hon. and hon. Members a short paper from the National Farmers' Union indicating that the United Kingdom guaranteed prices for wheat, barley and oats are due to end this summer. If that happened it would mean that the floor of the market would be provided by intervention prices. I am sure that the Minister will be able to give the House an assurance that if the United Kingdom guarantees are phased out or abolished there will be no question but that the Government will operate the intervention system, and no question of a unilateral abrogation of the system will be considered. I am sure that that is an undertaking which is required.

Next, I come to milk. Again I agree with the Minister that the seasonal target price is a sensible move. It is no new idea to dairy producers in the United Kingdom. What the Commission proposes this time is to decide the winter price at the beginning of the milk year and not, as was tried before, making the winter price subject to variations in the light of subsequent events or production levels in the summer. That is very necessary.

There is concern amongst dairy producers at the possibility of abolishing the intervention price for skimmed milk, and I know that the Minister is anxious about it. There are many questions to be asked about its proposed replacement by something rejoicing in the extraordinary name "orientation price" and a tender procedure. It is not clear how it will work. It is not clear whether there is any commitment on anyone's part to accept any tender, and it appears to us at the moment to be a vague and uncertain arrangement with the possibility of considerable fluctuations and the consequential undermining of confidence. I hope that we shall hear more about that before the end of the debate.

Then, I deal with the compulsory addition of 2 per cent. skimmed milk powder in animal feed. This is a new surplus disposal device with a number of unattractive features. There is no denying that surpluses are a headache. However, they are not so bad as shortages. The SMP surplus is not of our making. We do not have a surplus. If, therefore, this scheme, or anything like it, were to come into operation, we should have to import it, which does not seem a good idea from the balance of payments point of view or any other.

Then there is the question of cost. The proposal would put up the price of feeding stuffs by 5 per cent. or 6 per cent., or £450 a ton, which would have repercussions all down the line and bear hard on pig and poultry producers. Neither of those sectors has had anything to do with the surplus of milk.

Is it possible for the European Community to bear the cost of this? If so, the addition of skimmed milk powder would not alter the price of feeding stuff per ton, but it would dispose of the surplus and not create many difficulties. It would have another advantage in making the proposal equitable as between those farmers who mix their own feed and those who purchase their feed.

On the non-marketing premium, it is clear that the better structure of the United Kingdom dairy industry makes the United Kingdom less susceptible to this scheme than our continental neighbours. The surplus of production is across the Channel where there are many more small producers. We are short of milk, despite the fact that we are more efficient producers. There is a strong case—and the Minister supported it tonight—for increasing the United Kingdom's milk output, but I do not think that it can all be done by the medium-size or large herds. The small producer has a very important part to play. In relation to the size of his business and in relation to his land, often, in his own way, he is just as efficient and economical as the larger producers. For this reason I have reservations about a scheme such as this which applies to the land. I know it is a voluntary scheme, but we ought to be very careful before we close any options.

I come next to beef. We have consistently supported the scheme on these lines during transition. I myself put forward in 1974 a scheme not exactly the same but similar in principle and pressed it last winter; and I still support, as do my right hon. and hon. Friends, the right hon. Gentleman in his fight to continue it. His determination to retain this scheme must not lead him rashly and unnecessarily to pay, or to have to pay, an excessive price. He has some strong bargaining counters. We want to achieve a package that is satisfactory all round, not one that achieves a beef premium at the expense of everything else. We must always bear in mind as well the relative position of our meat.

That brings me back to the question of structure. I believe we would like to hear more by way of explanation and justification of such large transfers of funds from the guidance sector to the guarantee sector. We are all agreed in this House about the fundamental importance of agricultural structure, and however tempting it may be to raid this pool, one questions its wisdom. It seems to me to be a case of short-term considerations versus long-term considerations, and both have to be right. It would be far better, both in the long and the short term, to reduce taxation, to restore incentives, to stop threatening the very capital of the agricultural industry by the threat of a wealth tax, than to leave tax at its present level and try to shore up the situation by short-term palliatives.

The challenge to the right hon. Gentleman, which is in some respects a self-inflicted one, is to restore buoyancy and enthusiasm to the industry of food production. No one supposes that his task will be easy, but our land, worked hard as it is by farmers, growers and farm workers, is one of our greatest national assets. It will still be there long after the North Sea has yielded up all its oil. It is capable of producing more. Those who work on the land are eager to see that it does. A heavy responsibility rests on the right hon. Gentleman. He is to come back in a few weeks to report to the House what he has achieved. The outcome and the results will affect tens of thousands throughout the United Kingdom who produce our food, and every single family as consumers whose interest in supply is certainly no less than in price. He is in the hot seat at the moment and, therefore, we have to rely on him to bring back a fair deal.

8.23 p.m.

Mr. Bryan Gould (Southampton, Test)

The common agricultural policy is so inefficient and wasteful that one searches in vain for any justification for it. There is, however, one fundamental, underlying fact which offers not justification, but perhaps at least explanation. That simple fact is that food prices in general are for the time being, and will be for the foreseeable future, higher within the Community, with its relatively inefficient agriculture, than they are in the world outside, particularly in the cheapest, most efficient food-producing areas. That simple fact was well recognised by those who formulated the CAP. If it was not, one would wonder for what other reason they inflicted upon us all the paraphernalia of the CAP with its import duties, levies, controls, subventions—

Mr. Geraint Howells (Cardigan)

rose—

Mr. Gould

—I shall be glad to give way to the hon. Gentleman when I have finished my list—surpluses, possibilities for fraud, all these things that have been inflicted upon us for the simple reason that European farmers, and particularly French farmers, need protection against cheaper food imports from outside the Community.

Mr. Geraint Howells

If I correctly understood the hon. Gentleman, he spoke of cheap food-producing areas in other parts of the world. I wonder whether he could say where those are.

Mr. Gould

I would be very glad to give the hon. Gentleman a formidable list but I will simply point out that in New Zealand one can obtain butter, according to the very documents we are now debating, at prices two or three times lower than Community prices, and similarly with beef and lamb. One could go on. The point that I am making is not denied but is, indeed, confirmed by the documents we are debating. I hope this much at least will be common ground in this debate. If this is a fact, it was to some extent obscured, partly fortuitously and partly deliberately, in the period leading up to the referendum but I hope that we can accept, whatever may be the merits or demerits of the CAP, that it is a simple fact that in general terms food is now and will be cheaper outside the Community than within it.

It is in this context that we must look at this particular exercise in price review. The Commission proposes a general average increase of 7.5 per cent. Inevitably, that does not satisfy the farmers; but the consumer interests have rightly pointed out that that level of increase, which they have condemned, has quite unnecessarily put up food prices. I am a political realist. We have heard all too clearly from my right hon. Friend the Minister tonight how limited is the room for negotiation and manœuvre when he goes to Brussels, so I do not expect him to be able to press for a figure lower than 7.5 per cent., however much his colleagues in the Department of Prices and Consumer Protection might wish he could; and I am delighted to see a Minister from that Department on the Front Bench in this debate.

I hope, however, that when my right hon. Friend goes to Brussels, if he is at all tempted, beyond 7.5 per cent., to compromise in some way at an even higher figure, he will bear in mind that on this occasion at least the Commission is on his side and that our colleagues in the European Assembly have actually persuaded the whole Socialist Group in that Assembly to endorse 7.5 per cent. and to resist any higher figure, and that that figure itself represents a compromise which stretches to the limits of acceptability the sacrifices which consumers are expected to make on the altar of the CAP.

We in this country have more to fear from the greater disparity between world and Community food prices than anybody else, because we are major importers of food and we have traditionally had very close trading relations with cheap food producers. Therefore, as this disparity widens, not only do we pay more for every individual item of food but the total effect on our food import budget is enormous. It is also worth bearing in mind that we are at this point only part way through a transitional phase which will make this disparity even more punishing and damaging than now appears; and no amount of mumbo-jumbo about securing supplies can possibly obscure the simple fact that for many staple items of the British diet we pay two or three times more than we need pay to our traditional suppliers who are only too willing to provide on a long-term basis.

Mr. John Davies (Knutsford)

I take it that the hon. Gentleman would make as a complete exception to what he has said our experiences with our traditional sugar suppliers over the last 18 months.

Mr. Gould

The right hon. Gentleman takes the example of one commodity, but even in that, world prices are now lower than Community prices. One is hard put to find any commodity which is now more expensive outside the Community than within it.

Mr. Frank Hooley (Sheffield, Heeley)

Would my hon. Friend agree that it was precisely because we deliberately destroyed the CSA that we got into the absurd position in which my right hon. Friend had to pay £250 a ton, when the going price is now about £180?

Mr. Gould

I am grateful. It is, of course, true that if we are to say to our traditional long-term suppliers that we are no longer interested, we shall run into short-term difficulties.

Mr. Peart

But would my hon. Friend be fair on sugar? He is wrong here. The deal that we did on sugar was welcomed by the ACP countries. There was no antagonism from that surce. They recognise that they now have a long-term agreement which is of great value to them.

Mr. Gould

My right hon. Friend is correct to say that our traditional suppliers, once we told them that we are committed to membership of the Community, have had to face the inevitable.

There is a further reason why the common agricultural policy is unsuited to this country, apart from the question of price. That is that one of its major objectives is a uniform agricultural industry. In many senses, in many structural details, our own agriculture is quite different from anything on the Continent. As a result, many of the measures taken in the Community interest to deal with Community structural problems—one thinks of wine, milk, glasshouses, beef, and so it goes on—are wildly inappropriate for British agriculture.

Nowhere does one see this more clearly expressed than in the dairy industry. I pass over the myriad problems which the agricultural policy is posing to producers and consumers alike of dairy products in this country, to say nothing of the difficulties caused to our traditional suppliers, particularly New Zealand, whose dairy farmers are at this moment receiving just over 50 per cent. of the price paid for their products by our consumers. I pass over all these problems and single out perhaps the most bizarre problem of all, which has attracted the attention of both Front Bench speakers.

That is the question of the enormous surplus of skimmed milk powder. My right hon. Friend correctly says that other dairy producing countries have precisely this problem, but no one will suggest that the scale of the problem—1 million tonnes of milk powder—is even remotely approached in other countries—

Mr. Peart

Of course it is.

Mr. Gould

Relatively, perhaps, but certainly not in absolute terms.

Mr. Peart

The skimmed milk stocks held by New Zealand, considering the size of that country and equating it with the whole of the Community, are evidence that my hon. Friend is not thinking realistically.

Mr. Gould

It may be useful in that case for my right hon. Friend to consult his New Zealand colleagues to see whether they have reached a more sensible solution than the one which we are now debating.

What is being suggested here is not only that we should give away 200,000 tonnes—there are varying views on that and some of us may regard it as a good way of dealing with the surplus—but that from the stock of 600,000 tonnes 2 per cent. skimmed milk powder be added to feed-stuffs in other sectors of agriculture so as to reduce that surplus. This is an extraordinary suggestion. Not only is it compulsory, which is objectionable in itself, but it must produce one or two results.

The first is that which was severely criticised by the right hon. Member for Cambridgeshire (Mr. Pym). This skimmed milk powder will inevitably be more expensive than the sources of cheap protein which are normally used. That will mean that the poultry farmer will either be compelled to pay more for his feedstuffs from the Community itself, or the Community must subsidise it in some way. I think that the right hon. Gentleman suggested that that would be a painless solution, but in its own document the Commission suggests that this might require a subsidy of up to 450 million units of account.

Who will provide that money but the very consumer who is also losing out on other aspects of the CAP as it affects the dairy industry?

Mr. Marten

Is not the hon. Gentleman saying that in this effort to dispose of its surplus the Commission is passing on the entire cost of the surplus to the consumers?

Mr. Gould

The hon. Gentleman is right.

In our own case it is more remarkable than that, As has been said, we have had no part in producing this surplus. Our own dairy industry is rightly calling for expansionary measures. Such a policy is endorsed by my right hon. Friend in his own White Paper. So we are being asked to bear this burden for which we have no responsibility, when we are ourselves trying to expand dairy production. I know that my right hon. Friend's freedom for manoeuvre is limited in Brussels, as we all foresaw, but I hope that he will resist on this issue to the bitter end.

Mr. Spearing

When my right hon. Friend the Minister opened the debate he implied that there was a new feature. My hon. Friend has implied that the subsidies would be a new and extra cost. But the document makes clear that 72 per cent. of the dried milk sold last year was sold at a reduced price as a result of substantial subsidies for the manufacture of animal feedstuffs. Are we now to pay even more?

Mr. Gould

I am grateful to my hon. Friend for the further elaboration of the point I was making.

I shall make a brief mention of sheep meat, because the Commission has proposed a sheep meat regime and we wonder why. This country dominates in both consumption and production of sheep meat. It is mentioned in the second document—the survey of the CAP.

Mr.

There is no proposal.

Mr. Gould

There is a proposal, but it is referred to only obliquely. The proposal clearly stems from the fact that the French are concerned at the possibility of cheap imports of sheep meat threatening their domestic meat situation. The European Court of Justice recently decided that the controls which the French imposed on imports of Irish and British lamb were illegal and could not be continued. We need, therefore, look no further for the reason for this sudden interest in sheep meat and the sudden proposals for a sheep meat regime.

The price which the French propose to exact from us for allowing free access to their markets is that in addition to the duty already paid on lamb, which is currently running at 16 per cent. and is to rise to 20 per cent. next year there should be the possibility of imposing extraordinary controls if there are to use the rather quaint expression—disturbances in the market. Presumably what is meant by that expression is the possibility that French or British housewives should be able to buy lamb at a price reasonable for them and for the producers.

We should resist the French proposals. They would sound the death knell for the New Zealand lamb industry and mean, according to the Consumers Association, an increase of 50 per cent. in the price of lamb in this country to the consumer. The price of lamb would be put up beyond that of beef and take lamb off the plates of the British consumer.

I hope that my right hon. Friend will accept that it is important to fight for matters such as the continuation of the beef premium. I hope that he also accepts that the CAP is a hydra-headed monster and that, while he should fight what is already there, he should also resist growths like a sheep meat regime, which would be equally damaging.

8.39 p.m.

Mr. John Davies (Knutsford)

I agree with the hon. Member for Southampton, Test (Mr. Gould) in a certain amount of what he has said, although I think his basic approach to the CAP is erroneous.

I thank the Minister for his comments about the Scrutiny Committee and I am also grateful to my right hon. Friend the Member for Cambridgeshire (Mr. Pym) for what he said about the Committee.

The debate enables me to return to something about which I feel deeply. It affects the broader spectrum of Community affairs, although it is illustrated most effectively within the framework of the CAP. It is that the Community, to paraphrase a very good Conservative remark, is either a Community for all its people or it is nothing at all.

One of the things which worry me still about the Community's actions in certain sectors, notably in action in the Commission in relation to agricultural matters, is that its quite correct regard for the unity of the market, or the endeavour to achieve unity of the market in agricultural products, leads it to assume that there is that unity existing already, and that it can, therefore, deal dispassionately with the whole Community as though it were but one single market. This leads inside the Community to what seems to me to be slightly damaging proposals which require the British Minister to go forward as though he were begging amendments or as though he were constantly in some measure of hostility to the Commission. I find this a troublesome factor in the relationship between any Government and the Commission.

I am well known as an ardent believer in the future of the Community and in the development of the unity of the market. I am, for instance, a deep believer in the development of a system of economic and monetary union as soon as it can be achieved. But never for a moment would I imagine that it was possible to embrace the proposition of monetary union and disregard that of economic union. They are essentially hand in hand. In the same way, it is not really practicable in agricultural affairs to assume the unity of the market in terms of its pricing and guarantee function and, in relation to the structure of the market and its nature, to disregard the fact that it is by far not unified. This is an important problem with the proposals that the Commission has put up.

I can illustrate it well in relation specifically to the issues about which the hon. hon. Member for Southampton, Test has been speaking. It is to me clear that, in relation to skimmed milk, the Community's proposals take regard of eight-ninths of the market but not of the remaining one-ninth. That seems to me to be wrong. It seems to me to be quite wrong that the Community should seek to work on a unified basis to correct what is undoubtedly, at the moment, an extremely unsatisfactory characteristic of the Community and the milk market, and visit upon the one-ninth, which is totally dissimilar to the other eight-ninths, exactly the same provisions. That does not seem to me to be reasonable.

It is noticeable in the changes in the intervention arrangements. I have always been a supporter of the principle of intervention, because it has enormous value to the farmer in that it ensures that in all circumstances there is a market. The value to a farmer of being sure that he does have art outlet for his products is of very great importance, as I know.

But I think that it is equally true to say that the change that is now envisaged is a right correction, in the sense that one thing which has been noticeable in the continental dairy market for some considerable time is that a substantial number of milk producers, by virtue of the fact that their own milk outlets are not at all comparable with our own, have worked consistently to assess at what marginal cost they can produce milk in the certainty that it will go into intervention. This is, in itself mischievous in that, because there is an underlying scheme which assures the farmer that he will not find himself in misfortune, there should be widespreadly those who regard it, on the contrary, as being in some ways a kind of soft touch in the Community.

I therefore welcome the arrangement that the Commission has put forward to overcome this abuse. But I point out that it is totally unsuitable from the point of view of the British dairy market, and, therefore, to provide it blandly as though our market were entirely with the continental one in this respect is not carrying out the task for which the Commission is there, and does not take into account fully all the members of the EEC in seeking to ensure that its proposals are those which meet the overall needs of the market, including our own.

I feel that the same objection has to be made in relation to the methods of disposal of existing stocks. It is all very well to accept 200,000 tons of skimmed milk to be put into the aid programme. I welcome that. I do not find it disagreeable. But this 200,000 tons of skimmed milk has come from no part of our market and has no expectation at any future date of doing so. It is hard that it should be automatically assumed that we must bear the financial consequences of that. The same is true in relation to the 600,000 tons which is going into feeds, because it seems that that quantity does not arise from our market and is never likely to do so. It may well be that a substantial part of our proportion of that load will have to be met by imports from the very market which has produced in excess, in circumstances in which the producers are simply taking advantage of the intervention system and are not regarding it as the basic assurance system which they should.

For these reasons, therefore, I return to my original theme. It is not that I feel expert or competent enough to discuss the question of skimmed milk in great depth, but a Commission which fulfils its task properly should not put British Ministers in the position where their sole course is to combat what is put before them because it is wholly inapplicable to our arrangements.

This is a very serious concern about the Commission's work. My right hon. Friend the Member for Cambridgeshire and others pointed out that at the end of 1975 there was a major transfer of funds from the guidance to the guarantee system. In fact, 59 million units of account have been transferred in order to meet an unexpected but serious deficit in the guarantee section of the fund. I should point out to the hon. Member for Test that this was to a very large degree in order to pay for our sugar subsidies. However, if it is possible to find such a large amount from the guidance section of the fund in order to meet such a problem, it might well be appropriate for that section to be devoted more effectively to matters which are concerned with the structural side of the industry. In particular, it should take into account the differences between a country like ours which is still the biggest food importer in the world, and the eight countries on the Continent which are, if not balanced, then surplus producers.

The Community has rightly produced a regional policy in order to try to develop a better economic balance in industrial terms within the EEC. It provides funds to ensure greater equilibrium. In the same sense, the Guidance Fund should not be ignored as a means of trying to cure the basic imbalance between this country as a vast food importer and the other members which are surplus producers, so that these things could be put on to a more rational basis.

I believe that the Minister's wish is to hear the views of hon. Members and to try to strengthen him, if he needs strengthening, by knowing what we feel. Here, he has the views of an ardent pro-Market man but one who is not completely happy with the comportment of the Commission in this respect as it affects British interests.

8.49 p.m.

Miss Betty Boothroyd (West Bromwich, West)

As a Member of this House and of the European Parliament I am conscious of continually being educated in all sorts of agricultural matters, and I, no doubt, still have a long way to go. I have no pretensions about being an agricultural expert, of knowing my way around the CAP, or of knowing about the technicalities of the price review. I do know, however, that farmers and farm workers make up a certain percentage of the 250 million or so people in the Community, as do postmen and plumbers. And I approach the whole problem of farm prices as a small particle of that enormous force which makes up 100 per cent. of the Community—the consumer. The consumer always foots the bill.

I wish to comment on this year's farm price proposals from the point of view of the consumer and the impact the proposals will have on shop prices. The proposal is to increase farm prices by 7.5 per cent. I believe that should be the maximum, and I hope my right hon. Friend's hand will be strengthened by this debate and the decision taken in the European Parliament. Even so, I suspect that the proposed price increases will mean higher prices for the British consumer because of transitional and monetary arrangements and because the Commission's figures are based on the assumption that only about 70 per cent. of foods are affected by the price review. In fact, a great deal of food which is not included in the review is indirectly affected.

The Secretary of State and other hon. Member have mentioned methods of reducing the milk powder surplus. One suggestion has been that something like 2 per cent. should be put into animal feeding stuffs. This will surely lead to increases in the price of feeding stuffs of perhaps more than £4 per ton and will result on large price increases especially for poultry and pigmeat. The consequences will go wider still with an effect on all kinds of animal products which in turn will have an effect on prices to the consumer. It will eventually mean the British consumer being penalised for over-production. That is why I am emphatic that there should be no increase above the proposed 7.5 per cent.

Mr. Marten

If the Socialist Party from this Parliament agrees to the 7.5 per cent., does the hon. Lady know whether the other Socialist parties in the European Assembly will support it? How does their view compare with that of the non-Socialist groups?

Miss Boothroyd

I understand that the decision of the Socialist group in the European Parliament is to accept the 7.5 per cent. I have not been in the Parliament this week. Perhaps hon. Members who have just returned will be able to answer the hon. Gentleman's point.

As a consumer, I want enough food to eat and I want to be assured of its supply. Naturally, as a woman, I want it to be provided as cheaply as possible, but not so cheaply that those who earn their living on the land do not get a fair return for a fair day's work.

This having been said, a few questions remain. Is the consumer getting value for money from the agricultural policy, and is the policy fulfilling its declared objectives of increasing productivity, promoting technical progress, ensuring a fair standard of living for farmers and farm workers, stabilising markets and ensuring an adequate supply for the consumer at reasonable prices? I believe the answer is a qualified "No". I qualify the answer because there have certainly not been failures as total as some would like to believe. There has been a shift in agricultural policy from that which had as its prime objective the protection of the producer to a policy which takes a more balanced view of the interests of producers and consumers alike. However, in the short term, the consumer is not getting a very good bargain.

I wish to make observations on the longer term and the working of the system which produces these prices. First, Community producers cannot go on believing that they can produce as much as they like of any given commodity regardless of world prices and consumer needs. Nor should they believe that the price the consumer eventually has to pay is of no account. The building up of surpluses is a considerable indication of the extent to which support resources have been misallocated and where there has been little, if any, forward planning.

If we are to solve the problem of costly surpluses it must be tackled at source. Difficult though that is, it must be done by reducing the incentives to produce what is not required. Surely at this stage of our association with the common agricultural policy we should be on the way to defining more precisely a modern viable farm, and seeking to set prices at a level which reflects the needs of a modern, efficient unit, taking into account world prices.

Mr. Spearing

Is my hon. Friend aware that a problem—mentioned some years ago—is that the variation in the nature and background of farms in Europe makes it impossible for a small farmer in a backward area to get a reasonable return without the more efficient farmer getting an enormous return? That is a dilemma which no policy can meet.

Miss Boothroyd

Yes. I am aware of that. Improvements will not happen overnight.

Many small farmers on the Continent have already been phased out. It takes a political decision to see that producers who cannot make a living move out of the industry, or that the industry is restructured into larger groupings. All people, in whatever job, are reluctant to change. Hardships arise, and individuals must be cushioned against those hardships. This is a social, not an agricultural, problem. A social element is also involved when production which is fundamental to our well-being has to be supported and when there are justifiable social and regional reasons for keeping non-viable producers still producing. Then the cost of support must be met through general taxation and various regional and social funds.

What is wrong with the present system is that the support cost is being added to the consumer's food bill. The poorer the family, the less it is able to carry that type of taxation. That is what is wrong. It is that hidden analysis of the price the consumer has to pay that has been neglected in arriving at farm prices for food.

Mr. Hooley

Does my hon. Friend realise, in addition, that while we have an intervention system such as we have at present there is no incentive to producers to adapt, because, by definition, anything they produce will be bought?

Miss Boothroyd

I do not accept that. Conversely, the consumer has a responsibility too. I do not accept the argument put forward by some of my hon. Friends. We can no longer look to other countries to supply us with cheap food whenever the domestic production falls or domestic prices rise. I want to be assured of adequate supplies at all times, good harvests or bad, world shortages or world surpluses. Levels of agricultural production must cater for that, and we must also cater for over-production, and this, too, must be paid for, but over-production must take the form of manageable molehills rather than immovable mountains. I look upon manageable surpluses as an insurance policy. No householder complains if, having insured his house against fire, it does not burn down. Similarly, no one can complain about a system which ensures against shortages, and ensures that there is food in the store cupboard during hard times.

As I see it, the major task is to work out forecasts of consumer needs for major products, not annually or in the short term, but over the long term—over perhaps a five-year period. The needs of the consumer must be balanced alongside the ability of the producers to produce what can be produced within our society. Naturally it would be only prudent to plan for surpluses so as to ensure supplies. A five-year plan, which is modified perhaps each year in terms of needs and world conditions, is basic to agricultural policy. It is a difficult task, and I am always told that it is dangerous, that we must proceed with caution, and that forecasting is impossible. Of course, it is difficult. However, it has to be done, as it is already done with some commodities.

It is only when we have this type of long-term planning that the farming community will receive a substantial degree of stability. I pay tribute to the British farming industry. It is highly efficient. It is only with long-term planning that the consumer will receive protection against excessive surpluses and inefficient production.

Finally, so far in decision making the consumer's voice has been very weak. It is only after decisions are taken in Brussels that consumers are consulted. Consumers are no longer concerned only about hygiene, quality and labelling. They are also interested in food costs and prices, the cost of production, the cost of storage, and in how surpluses are disposed of. I ask my right hon. Friend the Minister for Agriculture, Fisheries and Food to ensure that the consumer's voice is heard in the early stages of decision making, particularly when those decisions fundamentally involve the consumer.

9.02 p.m.

Mr. Geraint Howells (Cardigan)

Although we take note tonight of the EEC documents, I am grateful to you, Mr. Deputy Speaker, for accepting our amendment to the motion in the name of my colleagues and myself.

Mr. Deputy Speaker (Sir Myer Galpern)

Order. The hon. Gentleman is under some misapprehension. We are allowing the amendment to be debated together with the Opposition amendment, but no one has accepted it. The Secretary of State accepted the Opposition amendment but not the Liberal amendment.

Mr. Howells

Thank you, Mr. Deputy Speaker. I misunderstood Mr. Speaker's remark at the beginning of the debate. However, we can discuss the Liberal amendment to the motion.

First, I congratulate the Minister on clarifying the EEC documents. I confess that he is gradually getting to grips with the situation within the European Community. Tonight we are reviewing the agricultural situation within the EEC. We are reviewing not only what is written in the documents but also what is left out, which should be included. We should be planning ahead. I have not read all the documents but I have read many of them and I still hold the view that I have held for many years, that many changes must be made in the framework of the common agricultural policy within the next 10 years if farmers are to accept the challenge to increase food production in this country.

We need a 10-year plan for the agricultural industry so that farmers can plan ahead, know exactly where they are going and, in turn, can invest their capital accordingly. Many of my colleagues are well aware that in Wales in particular the majority of farmers are confined to dairy farming or livestock rearing of cattle and sheep because of climatic conditions. One thing is certain. Farmers will not expand unless they are adequately recompensed for their costs, and unless we have a favourable review this year, production will decrease. We are all waiting for the annual price review to be disclosed for this year. In my view the annual price review should be made known at the end of every year, so that farmers can plan ahead better.

I am sure that the Minister is very well aware of the figures released a few weeks ago by the Meat and Livestock Commission, which estimates that lamb production will be down this year by 7 per cent. and beef production will be down by 17 per cent. This downward trend must be stopped at all costs, otherwise the nation will be heading for disaster. We are already spending too much money on food imports. Production in many parts of the country could be increased by up to 100 per cent., given the right incentives and encouragement.

I reaffirm on behalf of my Liberal colleagues our total support for the Minister in rejecting the EEC proposals to phase out the beef regime introduced by the Government in 1974. It is working satisfactorily—as long as the price guaranteed is increased year by year according to the increased costs of production. I am sure that as a practical farmer I am voicing the opinion of nearly all livestock producers in Britain when I say that the present scheme must be retained at all costs.

I hope that one day the Minister and his colleagues will be able to persuade his counterparts in Europe to accept our method of support, which safeguards the interests of our producers and consumers alike. We had operated the old system very well for many years, but we all know what happened in 1974 when the guaranteed price system was done away with. Confidence was lost overnight. Many farmers are still finding it difficult to overcome the financial difficulties that came upon them in that year, that is now history, but it must not be allowed to happen again. What happened in 1974 spelled disaster for the livestock sector of the agriculture industry.

Turning to the hills and the marginal land of Britain. I agree entirely with the brief of the NFU. The proposal to increase the FEOGA contribution from 25 per cent. to 40 per cent. for the payment of hill subsidies under the provisions of the directive on mountain and hill farming and farming in certain less favoured areas, is to be welcomed. I am sure that the Minister knows my views quite well. Although I accept the present system, it was a sad day for me when I learned that 500 small hill farmers in Wales would not qualify under the new scheme and that many more throughout Britain would not qualify. Once the Government have accepted this order in principle—I know that it was only 3 hectares, or 7.14 acres—I hope that the 3 hectares will not be raised to 20 or 50 hectares in the years to come, otherwise many hill farmers and marginal farmers will be thrown out of business.

I want to make a suggestion to the Minister. If we are to increase production from the hills we must maintain our support system. Perhaps many right hon. and hon. Members will not accept my suggestion, but I suggest that to increase production we plant one acre in 10 of all the land in the less favoured areas, or 10 acres in every 100 or 100 in every 1,000. I believe that it would be a worthwhile exercise, and I hope that the Minister will pursue that suggestion.

I am sure that the Minister is aware that there is another aspect that worries me in relation to increasing production. We must all confess that the ground is honest. It is much more honest than we are. I am sure that the Minister is aware that because of lack of confidence in 1974–75. British farmers did not feel able to plough back into the land from their profits. In the past few years the tonnage of basic slag put down has dropped by two-thirds compared to 1971–72. There has also been a reduction in the amount of lime that has been spread throughout Britain during the past few years. If we do not feed the land, the land will not feed us.

Mr. James Kilfedder (Down, North)

That is common sense.

Mr. Howells

I am grateful that at least one hon. Member agrees with my views.

I hope that the Government will not accept sheepmeat regulations that do away with the guaranteed price system now operating. I have tabled an Early-Day Motion urging the Government to retain the system. I am grateful to right hon. and hon. Members from both sides of the House for signing the motion.

Mr. Marten

Not at all.

Mr. Howells

I am afraid that one day we shall have to accept sheepmeat regulations, but I hope that the Minister, in accepting them, will retain a guaranteed price system for lamb.

As a member of the Standing Committee on the Agriculture (Miscellaneous Provisions) Bill, I am grateful to the Minister for accepting my suggestion that we have a land bank to help young farmers entering the industry. The right hon. Gentleman has agreed to consider the matter, and to do so in a European context. I hope that he will be successful in his deliberations. I know from experience that many genuine young farmers and farm workers would like to farm 20, 50 or 100 acres, but due to a lack of capital they are unable to be small farmers and eventually large farmers. I am grateful to the Minister for saying that he will consider my proposals within a European context.

The Minister said that many adjustments were made to the green pound last year, but the day is coming when we shall have to do away with it. I am wondering whether the Minister is in a position tonight to give us an assurance that he will do everything in his power to abolish it. It has been in existence for far too long. That view is shared not only by many farmers but by whole farming organisations. The disparity in value is the cause of great concern. I hope that the Minister will be able to answer the few points that I have raised.

9.14 p.m.

Mr. John Watkinson (Gloucestershire, West)

I was pleased to hear the hon. Member for Cardigan (Mr. Geraint Howells) speak of the necessity and desirability of creating a land bank. That is an idea which will find fruitful ground among my hon. Friends. I support the idea that farmers might be able to pay their CTT by handing over land to the State so that we can create a land bank, but that is another matter.

I can understand the frustrations that are felt by Ministers when they feel that in debates such as this we are returning to the old debates about whether Britain should join the Common Market. They feel that we are bringing alive once more the arguments against the common agricultural policy. Ministers cannot complain, because the CAP is a hydra-headed monster and there are many grounds for criticism. I serve as a member of the Public Accounts Committee, and we have considered the nightmare of monetary compensation amounts as well as problems involved in smuggling between Ireland and this country. It is such a tangle that it is almost beyond human understanding.

The right hon. Member for Knutsford (Mr. Davies) let the cat out of the bag when he said he looked forward to economic and monetary union because he felt that only in that way would the CAP function. I agree that it would function more easily if there were such a union, but I warn the House about the consequences of the proposal. If the right hon. Gentleman were here, he might wish to consider some of the arguments put forward by SNP Members in terms of the effect of any monetary union between their country and ours. He might consider the effects of such a union between the United Kingdom and the rest of Europe.

In debating the common agricultural policy, it is worth remembering that world commodity prices have evened out. In the great referendum debate the case for entry was given impetus by the fact that there was said to be a marked increase in world commodity prices and that our entry into the EEC would enable us to obtain a secure and stable market. We are now in the EEC, but it must be remembered that world prices do not always remain high, and, indeed, have fallen. Therefore, had we still been outside the Common Market we would have had access to cheaper foodstuffs.

I am worried about the fundamental philosophy underlying the CAP, particularly the intervention price system which envisages production only in terms of the end price. The net result of such a system can only be surplus production. A German economist who has studied this matter has suggested that food consumption in the Common Market is increasing at about 2 per cent. per annum, whereas food production is increasing at a rate of 2.9 per cent. per annum. Therefore, by 1980 there could be 10 per cent. over-production unless we do something about the situation.

I have criticised the Common Market, but we have recently debated the stocktaking documents and there are one or two facets of negotiation that meet with my approval. These facets are now written into the whole basis of the common agricultural policy. Whether we are for it or against it, we have to live with it for the next few years.

Mr. J. Enoch Powell (Down, South)

indicated dissent.

Mr. Watkinson

I do not anticipate our coming out of the Common Market as rapidly as the right hon. Member for Down, South (Mr. Powell) expects. We have to live with the CAP, but at least we have established that the test whereby farmers' incomes are set will be based on the efficient farmer. This is a vital concept, and I am pleased to see it ingrained in the basic thinking of the Common Market. I hope it really is the efficient farmer that we are talking about, because in bygone days it was the inefficient French farmer.

We have also to accept that a new concept has entered into Common Market thinking, in terms of co-responsibility for the production of surpluses. This responsibility is being placed to a limited extent upon those farmers who produce surpluses. They will be penalised in years after. I believe that already in this year cereal farmers, sugar farmers and olive oil producers have been affected in this way.

I emphasise the point that I raised with my right hon. Friend about the problems of milk production, because it is absolutely vital to us in this country. It is in milk production that our comparative advantage lies.

It is very disturbing for me, coming from an agricultural constituency, to see a proposal in the documents suggesting that we shall be paying people to go out of milk production in this country, for milk production is one of our great natural assets. I find that suggestion as repugnant as glasshouse producers in my constituency being paid to smash up their glass.

This brings me to horticulture. I know that the Minister had a big brief and did not have time to mention it, but horticulture is a significant part of our agricultural system in this country. I know from my own constituents that they are very concerned about what the future holds for them.

Mr. Richard Body (Holland with Boston)

Hear, hear.

Mr. Watkinson

I am grateful to the hon. Gentleman for that intervention. These people have been faced with an increase of over 300 per cent. in fuel costs in the last two years. They have also had to face the effects of the cataclysmic gale at the beginning of the winter. They are worried, too, about the lack of any Common Market policy in this matter which we would accept in this country. They complain that, while they are getting no support, their competitors abroad seem to be getting it. They point to Holland in this respect. I hope that my colleagues on the Front Bench will consider this.

I should like to revert to my reference to the complexities of the nightmare world of the CAP in which we now have to live. I have the honour of serving on the Public Accounts Committee, in which we have considered the modernisation of farms. Hard though it is to believe, there are farmers in this country who are entitled to money from the Common Market under the scheme for modernisation but are not taking it up—this is admitted by civil servants in the Ministry of Agriculture—because they simply do not understand the procedures. Yet these are areas of expenditure in which the taxpayers of this country could be helped.

I am no great expert on agriculture, but as a result of my attempt to understand the operation of monetary compensation amounts, and the green pound, I feel that there really is a need for a Select Commitee on agriculture, so that we can be better informed of these matters.

I have had a certain amount of experience in economics, and as a lawyer, but when I try to understand agriculture I find myself literally on the frontiers of human knowledge.

In these circumstances, it might be of some assistance to me and to my colleagues in the House—and, indeed, to the nation at large—if we had a Select Committee on Agriculture. I hope that my right hon. Friend will take this message back to the Leader of the House and give us an answer in due course.

9.25 p.m.

Mr. Charles Morrison (Devizes)

I begin by echoing the words of the hon. Member for Gloucestershire, West (Mr. Watkinson) about the position of the horticulture industry. There is no doubt that many horticultural producers have suffered considerably from the increase in fuel costs and, more recently, from the very severe gale. The gale was an act of God, but that, coming on top of everything else, has made life very difficult for them. I hope that the Minister will bear their position in mind very sympathetically.

The hon. Member for Gloucestershire, West was also concerned about the possibility of increasing surpluses in production unless, as he said, we did something about it. He was right to be concerned about this matter. However, it has always struck me that one of the fundamental objectives of the common agricultural policy, in addition to its intention to provide an adequate standard of living for people in agriculture and an adequate supply of food, was so to reorganise the structure of agriculture within the Community that it would take account increasingly of consumer requirements, which should have the effect gradually of reducing the possiblity of any vast surpluses of production.

I cannot help thinking that it is rather refreshing to be able to take part in a debate of this kind in the House. It is one of the minor, albeit important, benefits of Community membership. It means that we are able to discuss here the proposal for what now amounts to the annual price review before the decisions on it are made and, in consequence, we have an opportunity to bring some influence to bear upon them. This is a pleasant change compared with the old days, when the Minister of Agriculture made his announcement and we, or more precisely the agricultural industry, had to lump it.

As before, the review provides an opportunity to put the gloss or veneer on the agriculture industry for the forthcoming year. In the old days, this was very important, and it remains just as important. But the veneer is relatively more or less important depending on whether the framework of the industry underneath is healthy.

I have no intention of crying "Wolf", and, in the past, I have criticised some farmers for crying "Wolf" too often. However, I think that the underlying framework of the agriculture industry today gives some cause for concern, for two reasons above all. First, it seems that there has been a considerable fall-off in capital investment. In the year ending September 1975, there was a 41 per cent. decline in the number of applications for capital grants. That must reflect a considerable decrease in the amount of money which farmers intend to put into the industry. If they invest less, in due course it will become increasingly difficult for them to maintain their rate of production, let alone increase it.

There is no doubt that this cut-back has occurred because we have had two years of very low profits. Other reasons are inflation and the huge increases in costs to which my right hon. Friend the Member for Cambridgeshire (Mr. Pym) referred earlier. These together have reduced confidence very considerably.

The second reason for concern is the extent of taxation, especially capital taxation, as it affects farmers.

If the farmers in my county and in my constituency were asked today what is their main worry in agriculture they would all start by saying that it is the rates of taxation. The National Farmers' Union is extremely concerned about this. That has been shown recently by a leading article in The British Farmer and Stockbreeder, entitled "Taxation is Still our Biggest Enemy". Taxation is the deathwatch beetle which could eat away the framework of agriculture. I was not uninterested to note that this has been recognised by some sectors, at least, of the Labour Party.

I have no intention to argue the question whether or not it is the intention of the Labour Party to endeavour to nationalise agricultural land, or even to incorporate that in its policy, but I read a report in one of our national newspapers of a document that apparently originated in the Labour Party Home Affairs Committee, proposing the nationalisation of land. The newspaper said that, anticipating the objection that the proposals would involve very great public expenditure, the document countered by stating that much of the land taken over would be in lieu of taxation. If one takes that the other way round, to me the implication is that there is an understanding amongst certain members of the Labour Party that the level of taxation of agriculture today is such that before too long many farmers will be forced to sell up simply because they will not be able to stay in business any longer.

Mr. Watkinson

Would the hon. Gentleman also accept that there is concern among certain Members on the Government Benches over the effect of capital transfer tax on the forestry market, and the fact that there has been a fall of considerable proportions in the planting of trees in this country. This is of great concern to the Government side, and, I hope, to all others in the House.

Mr. Morrison

I am delighted to hear what the hon. Gentleman said. We shall look forward to receiving support from him when we bring forward amendments to capital transfer tax in respect of forestry, and no doubt other matters concerned with agriculture as well. The hon. Member for Gloucestershire, West has made a very encouraging point, but whilst current rates of capital taxation continue there will be little hope of achieving the White Paper targets and, therefore, as my right hon. Friend the Member for Cambridgeshire pointed out to him, the Minister must emphasise the impossibility of ever having a hope of achieving his White Paper targets unless he can persuade his right hon. Friend the Chancellor of the Exchequer to reduce taxation and to show a little more common sense towards agriculture.

I was very interested in the argument put forward by the hon. Lady the Member for West Bromwich, West (Miss Boothroyd), who seemed to me to try to steer a reasonable path between the interests of the producer and the consumer, but I doubt very much whether an average increase of 7.5 per cent. in prices will be adequate to encourage farmers to increase their production, as again the Minister apparently hopes, according to his White Paper.

Any agricultural policy should be broadly designed to produce a small surplus. It is virtually impossible, with all the uncertainties of the weather and so on, to produce precisely what is required. It is therefore necessary to have a marginal surplus rather than a marginal shortage, with the consequent increase in prices. It is essential to keep any surpluses in perspective. Despite emotive talk about "mountains", they come and go; they disappear as a result of later shortages or of policy decisions, in this case by the Commission.

I am not satisfied that the methods so far adopted to cope with surpluses are perfect. That would be true if the proposals for dealing with the current skimmed milk powder surplus were introduced. I hope that the Minister will succeed in his representations on that subject.

I support the Minister's efforts to retain the beef premium. It is encouraging to know that he has learned from his mistakes in 1974, when he burned his fingers badly. I hope that this time he will achieve success in his continuing negotiations.

We should remember that the incompetence of the Russian agriculture system governs the world-wide availability and cost of wheat. It is important to do nothing to endanger Common Market production. I support my right hon. Friend's request for postponement of the two-tier pricing structure.

I gained the impression, this year, of uncertainty in the Commission's proposals for price changes, but I hope that it is just that it wanted to hear the reactions of the various countries before drawing firm conclusions. In that respect, I hope that this debate will help both the Minister and the Commission.

9.39 p.m.

Mr. William Ross (Londonderry)

As usual in an agricultural debate I want to say a brief word about the green pound. The briefest and best word that I can say about it, especially in relation to Northern Ireland, is that the sooner it is brought to parity the better for all concerned. With that, I will leave the subject for tonight and move on to beef.

All of us and the farmers welcome the statement that the Minister intends to defend the premium system which has been negotiated. It is entirely welcomed in Northern Ireland in view of the special circumstances in which it operates there and of the special need there. But what is meant in the Explanatory Memorandum on beef and veal by the reference to …slaughter premiums on adult cattle and (as alternatives) the payment of cow retention on calf subsidies "? If alternatives are to be discussed, we should know precisely what they are and why, if the right hon. Gentleman intends to defend premiums to the death, he finds it necessary to talk about alternatives in the Explanatory Memorandum.

One of the main problems in relation to less favoured areas is Italy. What does paragraph 3 of the Explanatory Memorandum mean? Does it mean that the Government can increase payment beyond the present level, or can they change the areas covered by the less-favoured areas directive? If it does not mean that, where is the extra 15 per cent. of money to go? Is it to go into things like the meat industry employment scheme in Northern Ireland or in the form of grants to farmers to improve their capital works? Or is it, as I suspect, to go to the Chancellor of the Exchequer? The farming community and the taxpayers would resent that. If money is coming from the Common Market for farming, the agricultural industry should get it. We should be told where in the industry this extra money is to be spent.

I turn now to the pig and poultry industry in Northern Ireland, which imports about 80 per cent. of its feeding stuffs. We have high costs there. They are always higher than those in the rest of the United Kingdom. If to those higher costs we have to add 6 per cent. in the form of a skimmed milk powder addition, how does the Minister expect the egg and pig producers of Northern Ireland to survive? Is it intended that Northern Ireland egg production should be allowed to run down to the point where it will only meet the internal needs of Northern Ireland? What effect will the skimmed milk powder scheme's introduction have on egg production and the finances of egg producers in Northern Ireland? I see no reason for confidence that egg or pig production in Northern Ireland can continue on any reasonable scale. I say that mainly because of the high cost of transport and because the Community has made it clear that each area will produce that which it is most suited to produce. If that is so, the logical places to produce eggs and pigs are France, Germany and the East Coast of England, and not Northern Ireland.

How long will the United Kingdom's guarantee system for milk last? What effect will the proposals for standardisation have on the guarantee system if they are applied here? Like the beef regime, this is of vital importance to the farming community in this country, and it should have a clear and definitive answer. In the end, all it really means is that all that has been done by the Minister and his colleagues in Brussels is to make this nothing more than a hole-plugging exercise, because there are vastly different circumstances in production in United Kingdom and continental agriculture.

Our old guarantee system was very useful in its day, but it came into existence and operated in entirely different circumstances. It operated simply to defend a cheap food supply for the nation, and for no other reason. That system could operate successfully in the circumstances which then existed.

The NFU and all the farmers' unions complain of a lack of overall strategy and a lack of continuity in farm planning. What on earth do the farmers' unions expect? They are trying to reconcile points of view which are so vastly different that they can never meet. However, the situation is becoming more clearly understood by the farming community, and I think that the farmers are altering their opinions about where they now are. They complain of ad hoc measures which in Northern Ireland we call hand-to-mouth measures. They are nothing else, and cannot be in present circumstances.

I now turn to the system under which our old guarantee system for agriculture worked. It operated in circumstances where, because of our population, we were permanently in a food deficit situation. It could be used in these circumstances to even out the hills and level off the tops, such tops as were left after the tax system operated. Now we have to operate with a permanent surplus of all commodities.

We must be clear about that. If, as we all hope, agriculture on the rest of the Continent becomes as efficient as it is in this country, there will soon be a permanent surplus. What are we to do? Are we to use it as a political weapon, or sell it on the world's markets at high cost to ourselves? I should like to know what the leaders of both parties intend to do when that situation arises, be it a happy or an unhappy situation, according to one's point of view. While the present system exists there are bound to be mistakes. They are as inevitable as the food mountains that will result from them. We must be told how we and the Common Market intend to deal with it in a reasonable and economic way.

Farmers' unions are now face to face with the realities of membership of the Common Market. The Minister has done his best, but it is clear that it is only a plugging operation. The effect on small farms in outlying areas of the United Kingdom is simple: they will disappear. There is no way round that, and farmers must be told that this is so. The small farms depend on pigs and poultry. The Minister has said tonight that he can only support efficient farms, but they can only be efficient when they have top quality stock and when they can buy feeding stuffs at reasonable prices. That is impossible at present.

Mr. Peter Mills (Devon, West)

I have listened carefully to the hon. Member's argument. Does he really think that in this country we should always produce food as cheaply as possible to the detriment of many Third World countries which produce protein and other things? That is not what I want.

Mr. Ross

The United States, Canada, New Zealand and Australia would all be happy to sell us food.

Mr. Peter Mills

At low cost of production?

Mr. Ross

They were happy to sell to us before.

The Minister also explained that milk producers with 30 cows at most would be taken out of business. Where I come from, as in many other parts of the country, 30 cows is a respectable herd, and it represents a considerable investment in time, skill, capital and hard work. There are many such producers in my constituency. Is the House to support or bring forward legislation that will force out the small family farm? Are we eventually to work round to a system of vast co-operatives and farming communes? I would deplore and oppose that, and I think that the farming community would do the same.

It is high time that the Government, the House and the Common Market came clean about what the farming and food policy will be. The hon. Member for Southampton, Test (Mr. Gould) said that there was cheap food to be had elsewhere. There was recently a grassland conference in Northern Ireland at which one of the speakers alleged that it was possible by varying systems to produce beef at £6 per cwt. or £85 per cwt. This view was put forward by a member of the Grassland Society of Northern Ireland. Its opinions are not to be taken lightly. In Northern Ireland we have some of the foremost grassland beef producers in the world. I am prepared to believe the figures they put forward and I am also prepared to believe that they can produce beef according to those figures.

Mr. Peter Mills

Rubbish.

Mr. Ross

If the hon. Member does not agree with that let him write to the society, which will give him the facts so that he can read them for himself.

The Common Market and the House must decide whether we are to have cheap food or dear food. In other words, are we to have subsidised production or is the consumer to pay the real price? The percentage of family income spent on food has been falling, but are we not heading for the situation where it must increase? That is the question that the two major parties and the Common Market must answer. The present system is unworkable and will soon be demonstrated to be so.

9.53 p.m.

Mr. Nigel Spearing (Newham, South)

We have heard a powerful speech from the hon. Member for Londonderry (Mr. Ross) which has highlighted some of the anomalies and paradoxes of the common agricultural policy. I agreed with nearly everything that he said, with this reservation. He said that the previous system under the 1947 Act was designed for one purpose only, to enable us to import cheap food. I think he will agree that it had another purpose. That was to give a stable minimum price to the farmer, who, knowing that he had a guaranteed price, could indulge in good husbandry. I do not think there is much evidence that the CAP does that.

The hon. Member for Cardigan (Mr. Howells) referred to the need to look after the soil, but, unlike the previous system, the CAP does not encourage that. If anything, it does the reverse. Our former system also encouraged a wholesome rural society, which all parties in this House want. It also encouraged a variety in crops and stock, which in itself led to good husbandry. I do not want to see a pigless Northern Ireland. That would be a great pity.

I did not agree with the intervention of the hon. Member for Devon, West (Mr. Mills) on the subject of cheap food. Those of us who have consistently opposed the common agricultural policy have not necessarily done so on the ground that we should get food from the cheapest markets. The Commonwealth Sugar Agreement did not necessarily mean, over a period of years, that we would get the cheapest sugar. The Conservative Party voted it away when we joined the Common Market. Many of us would like an arrangement of that sort now, but I will return to the question of sugar later in my speech.

This is a very important series of documents, but when the business of the House was announced last week, the Leader of the House did not tell us what they were about. We are about the annual general meeting of the CAP in Britain. All my right hon. Friend said was that we were to discuss EEC agriculture documents. He did not say that they were the annual price review and survey for 1975. It was only on Monday that hon. Members were able to obtain copies of the documents from the Vote Office.

The form of the documents is very bad—a wad of paper six inches thick. In view of the importance of the policy, we should have had at least some of these papers, I do not say all, printed in English. A very great sum of money is involved. I doubt whether very many members of the public will have access to these documents, and the quality of the debate in this Chamber and in the country, and, therefore, the quality of democracy, is the loser if this information is not more easily available.

The table on page 18 of the main document, No. 321/75, gives credence to the suggestion that food is more expensive within the Common Market. Taking world prices as 100, wheat durum inside the Community is 125, beef and veal are 168, eggs 164, butter 320 and milk powder 140. These are all averages for 1974–75. I suspect they will be even higher next year.

Sugar has been a subject of controversy. It was the delay in banking the so-called bankable assurances which led to the shortfall of sugar imports and the subsequent shortage to the consumers last year. The right hon. and learned Member for Hexham (Mr. Rippon) got his bankable assurances, but they consistently bounced until the eleventh hour—just before we went into the Common Market The ACP suppliers were not assured of their market, and it is not surprising that we had problems in the change-over between that system and the new system.

We are now reaching the second stage of these problems with the publication by Tate and Lyle and Manbré and Garton of the rationalisation problems facing the British cane sugar refining industry. Many people have known these problems were coming for some time. The capacity of the British sugar refiners is over 2 million tons of sugar a year in white sugar equivalents. Because of our entry into the Common Market, we shall have a maximum of 1.4 million tons to refine, leaving a surplus of about half a million tons of capacity per year. That means that there will have to be redundancies. It is not so simple as pro rata redundancies in the six main sugar refineries in the country. Specialities are involved. Each refinery looks after a certain part of the sugar demand and some refineries deal with sugar wholesalers. The matter is extremely complex. The Government have announced their intention to encourage the increased production of beet sugar. That suits the farmers. No doubt most Opposition Members will say "Hear, hear" to that policy, which has been consistently asked for, but it produces many problems.

First, there is the supply problem. This year we have only about 600,000 tons of beet sugar, and the crop in the previous year was low. According to my information, the variation in the yield of sugar can be 30 per cent. up or down. That means that our only sources of sugar are unreliable. The movement in our beet sugar supplies is the same as it is in Europe, especially in Northern France which has a similar climate. So we have an imbalance of shortage and surplus with the European sources as well.

The Government have given permission for the British Sugar Corporation to put what are called white ends—that is, extra refining capacity—on the sugar beet refiners at Peterborough and Ely. Those beet raws used to come to the port refiners, who will be further reduced at a time when their cane sugar imports are going down. This means a loss to the cane refiners of about 1,500 to 2,000 jobs out of a total of between 5,800 and 6,000 in the industry as a whole.

Those jobs will probably be lost in the next year or 18 months, and they will be lost in Greenock, Liverpool and East London, all places where jobs are not easy to find. The cane refiners have not decided among themselves how these redundancies are to be achieved. Today they published three options, and there will be disagreement as to which option should be chosen. The unions have got together and said that the issue is not between them, but that their quarrel is with the Government for asking the cane refiners to do this on their own. The cane refiners have not been able to do it and the Government have been asked to referee. The Government must take the odium of the choice.

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

I draw my hon. Friend's attention to the Parliamentary Question tabled yesterday by my hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon), to which my right hon. Friend gave an assurance that there will be continuing consultation with the unions and the refining interests on possible reorganisation. The first task is to elucidate the documents which are under discussion. Then there will have to be an assessment before the policy-making is completed. I want to use this brief opportunity to assure my hon. Friends and the industry—both employers and employees—that there is a long way to go before plans are finalised. The documents to which my hon. Friend the Member for Newham, South (Mr. Spearing) refers are purely discussion documents, and we should not read too much into them. There will be considerable consultation with all interests before a decision is reached.

Mr. Spearing

I am grateful to my hon. Friend. I have read the answer in Hansard. What my hon. Friend said does not change the fact that the onus is on the Government to decide. I am heartened by what he said about discussions, because the companies have accepted certain assumptions which the employees and I do not accept. I declare an interest in having the Silvertown refinery of Tate and Lyle in my constituency.

The first assumption is: why put the extra white ends in the beet refineries at Peterborough and Ely? Farmers can produce more beet if they like. We should prefer that they did not. However, why should the country spend extra money on putting white ends in those refineries where the refining capacity already exists and which will have to shed their capacity and put people out of work? That does not make sense from any point of view. Yet both the sugar companies and the Government have apparently accepted the proposals for adding to these sugar refineries.

The second assumption is that there will be no possibility of bringing in beet from the Continent. At the moment the price situation does not make that possible. I ask my right hon. Friend the Minister to inquire whether it is possible to make up our deficit with European beet raws or, better still, by going to countries other than the ACP countries to get more cane. I fear that the Commission will not allow my right hon. Friend to do that, but at least he could try.

The third possibility is to introduce beet growing in Lancashire and Cheshire and convert the Sankey cane sugar refinery to beet refining. Even if we did that we should be in difficulties, because in normal years the EEC has a surplus and the full beet production in Europe is enough to meet all the requirements of the EEC. Therefore, I hope that in his reply my hon. Friend will deal with white ends and the reasons for the policy. It does not make sense. Need we have the high amount of 1.2 million tons of beet sugar? Not only is there the question of the variation in crop, but if we did not grow beet we could perhaps grow something else which might be equally nutritious, if not more so.

Finally, the question of cane and beet is not just of domestic importance but is a matter of relations with the Third World. Unfortunately, our imports of cane have already increased. In two months' time the UNCTAD Conference will be held in Nairobi. If this country is to show its concern for the Third World—if, indeed, the Common Market is to do that—I hope that there will be greater security for the African, Caribbean and Pacific States. Although they have the notional figure of 1.4 million tons, about which everyone has heard, there is no security in price. They must plant extra sugar cane soon, which will reach our sugar refineries after 1980. Unless they are given some security they will not want to send us the sugar.

The reductions in the industry will affect Clydeside, Merseyside and Thameside—areas of nineteenth-century industrial development which are now in great difficulty. It would be for the good of the nation, and ultimately the reputation of the common agricultural policy, if my right hon. Friend were to think twice about pursuing the sort of policies upon which the Government already appear to be set.

Mr. Speaker

I should explain to the House that it is hoped that the winding-up speeches will begin at 11 o'clock. Six hon. Members wish to catch my eye. If hon. Members will bear that in mind everyone who wishes to speak may do so.

10.8 p.m.

Mr. Neil Marten (Banbury)

The hon. Member for Gloucestershire, West (Mr. Watkinson) rather apologetically started his speech by saying that we were bringing back some of the old arguments about the Common Market. That is true. This price review debate illustrates that the Common Market is not working. It illustrates, in a way, what Mr. Tindemans said in the covering letter to his report, that the Common Market will fulfil its destiny only if it establishes federalism. I believe that the common agricultural policy will work only if the Common Market establishes federalism.

I do not believe that the farmers or the consumers will like the price review when it has been agreed. Generally speaking, I believe that quite a lot of chickens will come home to roost after the Minister has been to Brussels and signed on the dotted line.

I have always maintained that the CAP was a bad system. Under the CAP we pay to keep the price of food up. Under our old system we paid to keep the price of food down. If we have to pay either way, frankly I should rather pay to keep the price down than to keep it up. The British farmer would be far better outside this thing and having his own national agricultural policy, under our control, under which we could settle these things in the United Kingdom and not over the other side of the water.

One of the objects of the CAP is security of the supply of food. That matter was suddenly raised during the referendum campaign, although it seems to have died away slightly now because we are rather over-supplied in some items. Another object is to benefit the consumer and the farmer. However, I believe we are paying far too high a price for the security—so-called—of our food supplies, because in the world outside the Common Market there is cheaper food. One has only to look at page 18 of the document mentioned by the hon. Member for Newham, South (Mr Spearing) to see the extent to which the price of food is higher in the Common Market than it is outside it.

Common Market butter is 320 per cent. of world prices. In practice the British consumer at the end of next year will be having to pay 70p for a pound of butter. There will, therefore, be less butter, because consumers will not be able to afford it. They will try to turn to margarine. Already, as we have seen in the Scrutiny Committee, a little draft regulation has arisen about erucic acid. I do not know about this but I am told that it might be in order to keep the price of margarine up so as to force people back on to consuming high-priced butter—at 70p a pound. If that is so—I am just told; I am not such an expert that I know all about it—it rather illustrates the fact that the Commission is using the food standards to keep up the price in order to keep the butter mountain down. Time will tell whether that is what it is all about.

On the subject of skimmed milk powder, about which there has been much adverse comment in this debate, of course this will raise the price of animal feed by £4.50 a ton. That will be paid by the consumer, because that feedstuff is going into bacon, poultry and so on. Ultimately the consumer will have to pay. It is not the farmer who is suffering because of the mountain that he has created.

When we read the stocktaking document we thought that there would be some sharing of the burden of this surplus, but it is not so. Rather cunningly, it is being put all the way back on to the consumer. The Common Market Ministers have failed—

Mr. John Davies

Would my hon. Friend say that that was so in relation to the new system of orientation in terms of intervention?

Mr. Marten

I am sorry. I do not understand the question.

Mr. John Davies

I willingly repeat it. Would my hon. Friend say that it is the consumer who pays in relation to the new intervention system under an orientation system?

Mr. Marten

Under an orientation system? There was some doubt as to what precisely that means.

Mr. John Davies

Oh, no.

Mr. Marten

Clearly, however, if the price of feed is to be raised by £4.50 a ton—[Interruption.] If my hon. Friend the Member for Devon, West (Mr. Mills) has evidence to the contrary, let him produce it. I should be grateful to hear it. Whichever way one looks at the matter, the burden is being passed on to the consumer, ultimately, through the feed. My hon. Friend shakes his head. Perhaps he will deal with that when he makes his speech.

Furthermore, we are recycling this milk back into animal feed. That is just about the craziest thing that one could think of. People are now complaining that we did not create this mountain of dried milk, and therefore, why—as my right hon. Friend the Member for Knutsford (Mr. Davies) was implying—should we pay for it. I thought that my right hon. Friend was in favour of the Common Market and an integrated economy—that is what we are supposed to be aiming at—and that, therefore, if we have a surplus somewhere we have got to get rid of it by cutting down somewhere else. I feel that in his heart of hearts my right hon. Friend is much more of a nationalist than a Community person. I think that he illustrated that in his speech tonight.

The Common Market price of beef, according to the list, is 168 per cent. of world prices. Therefore, in two instances we find that there is cheaper food outside the Common Market. There is a plentiful supply of beef in Latin America, Australia and New Zealand. Once again the consumer suffers because of price rises and because we are inside the Common Market.

My right hon. Friend the Member for Knutsford said with pride that he supported the beef intervention system. I only hope he realises how many thousands of tons of beef are rotting away and will not be able to be eaten by human beings. That is not a very favourable way of treating beef. Anyway, it seems that my right hon. Friend is in favour of eating intervention beef. Beef is produced to be eaten. Let my right hon. Friend have a diet of intervention beef if he wishes. I hope that he will enjoy it.

I hope that the Conservative Party will join the Liberal Party in signing fully the motion which is on the Order Paper objecting to the intervention system for sheep meat. As has been explained, if we go ahead with the draft regulation it will probably increase the price of lamb by 50 per cent., making it more expensive in the shops than beef. If we go through the list we find that in January 1976 hard wheat cost £20 more in the Common Market than outside. Barley cost £15 a ton more and maize cost £20 a ton more. Where is the benefit to the consumer of being in the Common Market?

Where is the benefit to the farmer? I do not think that there is any need to talk about that. When the Price Review is completed the full blast of the settlement will come firmly upon the head of the Minister of Agriculture, Fisheries and Food. I shall leave the farmers to express their opinion about the great benefits that they have received after the price review.

I have no great enthusiasm for the common agricultural policy.

Mr. John Davies

We have noticed that.

Mr. Marten

I know that some of my right lion. Friends have great enthusiasm for it. It seems that they like frozen intervention beef.

Mr. John Davies

There is New York-dressed poultry.

Mr. Marten

Yes, there is that, and many other things. The National Farmers' Union supported entry into the Common Market. If it is a bad price review, the union must take a share of the responsibility. The CAP has satisfied few farmers or consumers, and it has hurt many people. I believe that it is a total and disastrous muddle. Many in this Chamber have made excuses for it, but, as the hon. Member for Londonderry (Mr. Ross) said, we can now begin to draw the stumps and reconsider. Let us consider it again from an all-party point of view. Let us have a Select Committee getting down to that sort of consideration. When that has been done there can be a stop to the argument because we shall know the real truth.

It is the poor who are suffering through the CAP. It is the poorest people who are suffering the most. I was not elected to let the poor suffer because of the nightmare dreams of Continental bureaucrats.

10.19 p.m.

Mr. James Kilfedder (Down, North)

I promised that I should limit myself to a few remarks and, therefore, I can deal only briefly and superficially with a limited number of matters. I know that there are three hon. Members who wish to speak, and I should like them to have the opportunity to express their views to the Minister.

I think that the right hon. Gentleman needs to hear the anger of the House so that he can convey it to the meeting of the Council of Ministers next week. Criticism of the Minister has been expressed but he has done his best in many ways. He is certainly not the worst Minister of Agriculture, Fisheries and Food that we have had. That remark was meant in a kindly way.

The Minister will need to be pretty hard-headed and stubborn next week in the Common Market agriculture negotiations. The people who will benefit from these proposals will be the continental farmers in the EEC—in other words, inefficient farmers who pile up surpluses. These proposals will not benefit United Kingdom farmers.

The Government's White Paper "Food from our own resources" suggested that there would be expansion. I have seen no real signs of that expansion. The confidence of the farming community has not been fully restored, and this has been confirmed by the fall in expected output. Thes reason for this situation is the capital tax, which causes farmers great concern. Some are considering leaving agriculture, and certainly many farmers wonder how they are to obtain a fair return from their labours and a fair standard of living.

Farmers are sometimes blamed for increases in costs and prices, but this is not true. Farmers and consumers have the same interest—namely, a guaranteed and adequate supply of home-produced food. If there is a shortage—as there has been of potatoes—it is the consumer who suffers, but the farmer certainly does not benefit. The farmers want to see a system that ensures adequate output. That will help the consumer because he will be protected in times of shortage and in times of price fluctuations. We must not seek to undermine farming communities. Instead, every effort must be made to persuade farmers to invest more, and certainly to produce more.

The proposals outlined by the Minister do not give the encouragement which is required. Words are not sufficient. Farmers are rightly wary of Government promises. They have heard them before. What incentive is there? Prices everywhere are rising. But farm incomes in real terms have dropped behind other incomes in the past two years. It is not surprising that agricultural production rose by only 2 per cent. in the United Kingdom compared with the far greater increase in some Common Market countries.

It is wrong to agree to a Common Market proposal—and I hope the Minister will not agree to it—providing for the compulsory incorporation of skimmed milk powder in feeding stuffs. This will add £4.50 per ton to the cost of feed. It will raise the costs of pigs and poultry. We must remember that Northeren Ireland imports over three-quarters of its feeding stuffs. It will mean a further blow to Northern Ireland farmers. The National Farmers' Union has already made clear that the Commission's proposals on milk give no assurance of any increase in the return to producers in view of the proposal to withdraw the firm intervention arrangements for skimmed milk powder. This will not promote expansion of dairy herds and will increase uncertainty.

It was wrong for the Commission to propose the phasing out of the beef premium. It is vital to retain that premium. It is particularly vital to Northern Ireland because the present scheme incorporates special protection for Northern Ireland producers when a premium is payable, and Northern Irish market prices fall substantially behind prices in Great Britain. I hope that the Minister will be able to have his way in the Common Market but he will have to fight hard for the farmers.

There is no doubt that a full adjustment of the green pound to the true value of sterling is essential for the creation of fair competitive conditions for British farmers.

Will the Minister examine the position of the horticultural industry? The glasshouse producers should have a subsidy on oil to enable them to compete with the Dutch growers, who have a full subsidy from their Government. Without this help, the horticulture industry in Northern Ireland, and certainly in my constituency, will continue to suffer, and production will decline. It ought to be recognised that the horticulture industry contributes substantially to food production in the United Kingdom.

I urge the Minister to fight hard next week for the farmers of this country.

10.25 p.m.

Mr. Peter Mills (Devon, West)

I count it a very great privilege to be on the Scrutiny Committee, and I should like to pay a tribute to its chairman. If my right hon. Friend the Member for Knutsford (Mr. Davies) were not the chairman, I should not want to continue. His enthusiasm and encouragement keep us going in a Committee which has an extremely difficult and arduous task.

It seems a pity that so many people who have spoken have been anti-Common Marketeers. There is another very real and important side to it, and we ought to be supporting the Minister in his fight in Brussels.

A great deal of nonsense has been talked in this debate. I am sarry that the hon. Member for Londonderry (Mr. Ross), is out of his seat now, because lie actually made a statement that beef could be produced for £6 per cwt. A 10 cwt. bullock costs £60, and the calf costs £20–£25 at least. According to the hon. Gentleman's argument, it means that for two and a half years the rearing has to be done for something like £30. It is really pathetic that anyone should come to this House and make such misleading statements, when one knows that no one could possibly produce a bullock for that sort of figure.

My worry about the green pound is that, because of our poor economic position, this problem could be with us for a considerable time to come. I do not see why the British farmer should have to bear the burden of the green pound. For how many years will this have to continue? Until we improve the economic position of our country, the green pound will continue. I hope, therefore, that the Minister of Agriculture will watch this question very carefully, adjusting frequently so that British agriculture does not carry the main burden of the green pound all the time.

Concerning the general level of price increases, I say to my hon. Friends—and should like to have said to hon. Members on the Government side who seem to have disappeared—that British agriculture is having to bear increased costs, just as the car manufacturers and any other producers are having to bear increased costs. With rising costs everywhere, why is it that British agriculture should not be expected to recover its costs in production? That is the problem.

I hope that the Minister will fight very hard in Brussels to see that at least our costs are covered. We are not asking to become very rich people. We just want a fair price to cover our costs. That is very important.

Concerning the whole problem of surpluses. I can well appreciate that there are people who do not understand it. I understand why those who are against the Common Market criticise this aspect of it, but it is a matter for the Community putting its house into the right order.

The Community has a lot to learn about how to deal with the problems of production and marketing. In this country that excellent organisation, the Milk Marketing Board, exerts discipline and controls and encourages liquid milk sales, so that we do not have the problems that confront other countries in the Community.

The whole object of my life at the moment is to try to encourage the Community to adopt a similar system, so that milk can be channelled into the right quarters and be sold and marketed in a proper way.

The problems of surpluses in the Community at the present time—particularly dairy surpluses—should be tackled in three ways. First, I want to see intervention prices varied according to the areas of production. This is essential if we are to get anywhere in the Community in dealing with this problem of surpluses. There is no point in making it difficult for us in this country to produce milk, because we need it. What is the use of my having in my constituency a milk factory producing cheese which is working at only half capacity? We need to deal with the problems of surpluses for those who create them, and intervention prices should be varied according to areas of over-production. This is not new. It happens here. The variation between prices in South-East Kent and the South-West is a considerable sum of money per gallon. We have varying prices in Great Britain. Why cannot we have them in the Community? They would act as a discipline on those who are prepared just to produce milk for butter production and thereby create surpluses.

Secondly, the Community needs to put its house in order in terms of a proper marketing system for milk and encouraging the consumption of liquid milk, bearing in mind the discipline which that would create on producers in certain areas.

Thirdly, I want to see a much better regional policy in the Community. Alternative jobs must be provided for the producers in these difficult areas. If they cannot turn to any other form of employment, it is extremely difficult for them to get out of the same old way of a few cows producing more and more milk, resulting in more and more butter and skimmed milk powder mountains. We need to get the structure right in the regions. We need to see that there is alternative employment for some of these people who must get out of agriculture because they are inefficient. We need a real strengthening of our regional policy in the Community. Those are the three requirements: variable intervention prices, a proper milk marketing board system, with all that that means in the Community, and getting the structure of the regions right. They would do far more to deal with these surpluses than any of the proposals before us tonight. I feel strongly that these requirements must be met.

Finally, I deal with the question which my hon. Friend the Member for Banbury (Mr. Marten) asked. Unfortunately, he is not present at the moment. But I hope that he will read my reply in Hansard—[Interruption.] I am glad to see my hon. Friend back with us. I am afraid that he is ill-informed. The change from a mixed intervention price to an orientation price works right back to the producer. More than that, it is a radical change from what has happened in the Community in the past. We have never had such a radical change as regards intervention. This is putting it directly back on the producer, and not the consumer. If my hon. Friend studies these proposals carefully, he will see that it does not even mean that the Community has to buy. It is a very open-ended arrangement, and it could be that the Community might not accept the tenders. That means that a very real discipline is back on the producer, because in certain areas in the Community they must put their house in order, as opposed to us.

Mr. Marten

I had just stepped out for a much-needed cup of coffee. If the producer has to bear the cost, will he not pass it on to the consumer?

Mr. Mills

My hon. Friend has missed the point. It is no use a producer producing purely for surplus. Discipline has to work back to him. That is why I regret that my hon. Friend was not here when I was talking about variable intervention rates, which would again work back to the producer. That would help the producer by allowing him to avoid paying high taxes for this intervention system.

There is a subsidy for the production of whole milk powder, which I regret. The money spent is a terrible waste. The money should be used instead to promote the sales of liquid milk, as British farmers have to bear the cost in this country. We should be encouraging the drinking of more milk in the Community.

I hope that the Minister will bear particularly in mind my three points about surpluses.

10.36 p.m.

Mr. Colin Shepherd (Hereford)

The common agricultural policy is the absolute linchpin of the EEC and it must work to the benefit of the producer and the consumer even-handedly throughout the nine member countries. If it does not do so at the moment, that is no reason for throwing it out lock, stock and barrel. It is all the more reason for working on it to make it achieve the ends for which it was designed.

I should like to congratulate my hon. Friend the Member for Banbury (Mr. Marten) on taking part in the deliberations of the Select Committee although his views are contrary to the common agricultural policy. His Devil's advocacy is of great value to the Committee in throwing up possible weaknesses which can then be rectified.

The Government's own policy at this time must be to achieve the same balance between the producer and the consumer. They published their White Paper as a means to this end. Their objective now must be to achieve a balance on the Common Market front and the national front.

I am an ardent supporter of the CAP, although it is obviously not free from criticism. That is not to say that it is not right to show up some of its short-comings. We know that there is a tendency at the moment to create surpluses without having prepared before-hand a method for dealing with them. There is nothing wrong with a modest surplus, but it is apparent now that intervention alone does not work. It needs some other system with it. There is a tendency to create a climate in which producers produce for surplus alone and not for market needs. The 66 per cent. of Denmark's milk production which shows this very well. There is also a tendency to divorce milk production from orderly marketing, which is giving rise to many problems.

At the moment, EEC prices are generally higher than world prices. That is not necessarily a bad thing, provided that continuity of supply is maintained. Continuity of supply has been dismissed out of hand by many previous speakers, but I take the view that it is like happiness: one does not realise that one does not have it until it is gone. The potato is a great indicator of that. It is well worth a premium for continuity of supply. No one can dispute the considerable success of the Community over the last 12 months in ensuring continuity of supply for a vast range of products—beef, for example. Beef has been in the shops at a reasonable price for the last 12 months, and with a stability of price which has been very acceptable. The Commission has a responsibility to ensure a fair standard of living for the agricultural community as well. But in 1975 there was a net loss relative to non-agricultural real incomes.

The next matter is one that it would be wrong to say my hon. Friend the Member for Banbury has an obsession with, because I think that the CAP has an obsession with harmonisation where none is necessary. Let us allow market forces to do the work. The question of the composition of mayonnaise comes to mind. I personally am a substantial market force when it comes to that product compared with any other hon. Member. Allowing market forces to do the work could save a great deal of bureaucracy and paperwork. I am considering indenting for a wheelbarrow to take away my documents from the Vote Office, or taking shares in the photo-copying industry.

There have been a number of short-comings in Government policy on agriculture, and they must be related to the review. There is a reluctance to press for a devaluation of the green pound, wrongly based on a desire to keep food costs lower than they would otherwise be. As a result, returns to producers have been somewhat lower than they should be, resulting in a reluctance to expand their home production. That is seen in agricultural production for the past year, which was 6 per cent. to 7 per cent. less than it was the year before, although it must be admitted that the weather had an effect.

There is a tendency to confused party dogma with practical necessity. Uncertainty and mistrust over such issues as tied cottages, landlord-tenant relationships and disincentives based on capital taxation have caused an acute lack of confidence among home producers.

These are some of the factors which must influence our consideration of the proposals. It is essential that eventually the Community develops a wide, overall strategic view, so that the need for short-term measures is reduced to an occasional touch on the tiller as the CAP develops. This would cut the ground from under the feet of the detractors of the CAP. We must be careful never to put ourselves in the position that we have been in of late, that for every solution we have had a problem. We must get it the other way round. Let us have solutions to problems.

The Government would do well to grasp the nettle of green pound devaluation firmly right away. It would do substantially less damage to their fight against inflation if they did it now rather than let the matter drag on. I do not think that we are necessarily at the bottom of the slide of the differential between sterling and the other currencies of the world. We might as well catch up now and move towards something like parity. It would be a great help to the producer, and would not have all that dramatic an effect on the cost of living index.

I come to the other related measures. Paragraph 19 of the document R/3166/75 sets out the areas of improvement to be achieved. Paragraph 20, which is relevant to our situation, underlines the need to consider the milk-beef-veal complex as a whole. It says: As regards the milk and beef and veal sectors in particular the Commission is aware of the serious imbalance of the milk sector since 1968 and that the prospects are unfavourable in the medium-term. It is for this reason that it is proposing to the Council a series of measures relating both to milk and to beef and veal and including measures on prices, the organisation of markets and structural adjustments. It considers that it is only by simultaneously implementing a whole series of incisive measures that the equilibrium of the markets in the milk sector will be re-estabslished. That is the correct approach and the first part of the equation must be with the beef industry.

I am delighted that the Minister of State has shown his determination repeatedly this evening to fight for the retention of the variable premium scheme. This is accepted in the beef industry in my part of the world, and it has been successful in developing confidence. It has had the effect of matching production to seasonal needs and variations. It has also had the side effect of creating stable prices to the consumer over the last 12 months. I wish the Minister success on that point, but it may be that he has to give a little in some other direction. If he considers making concessions about the skimmed milk pile it would be best if he were to opt for the recycling approach, asking for FEOGA or Community funds to cover the cost.

This would have the effect of turning the surplus inwards into the market in a manner which the public would understand, rather than selling it off to Russia, which they do not understand. I am certain that a large percentage of the public cannot understand why we sell our surpluses to our ideological enemies to keep them in business when their own lousy management of agriculture has created such shortages.

Solutions are possible. The Community came up with the successful solution to the butter problem with the butter premium. The beef premium had the effect of turning the surplus inwards. There is a cost to this approach, but the cost is preferable to trying to recoup a small amount of visible cash through selling the produce outside the Community.

The other proposal which must be tackled very delicately is that of encouraging small smilk producers to go out of business. Much has been said about the efficiency of milk production in this country. The level of incentive must be selective so as not to encourage the wrong producers, bearing in mind that about 50 per cent. would be eligible. However, it must be sufficiently high-geared to encourage the French and Danish producers to opt out and go into something more worth while. It is not an easy equation to mate up, and I wish the Minister well in his attempts.

I can detect small alarm bells ringing in the back of my mind about whole-milk powder and subsidies for its production. The answer must be to encourage the consumption of milk rather than run the risk of building up another pile of whole-milk powder. The Minister has a tortuous path to tread if he is to obtain for our consumers and the agricultural community a fair balance of supply, price and reward, all coupled with confidence for the future. However, our producers would like to be able to compete on equal terms with those elsewhere in the Community, and here it is vital to consider putting pressure on the Government to accept that the present state of taxation on capital and income is unacceptable as a fair basis for competition. I hope that no effort will be spared in trying to harmonise our taxation downwards.

10.49 p.m.

Mr. Nicholas Winterton (Macclesfield)

We have had a helpful and constructive debate. I believe that the hon. Member for Newham, (Mr Spearing) described the debate as the annual general meeting leading up to the Common Market price review. That is an accurate description of our proceedings, and I hope that the Minister is receptive to many of the points which have been made.

I draw particular attention to the forceful contribution by the hon. Member for Londonderry (Mr. Ross.) I did not agree with many of his opinions or the assumptions on which he based some of his arguments, but he raised some very interesting points which I hope the Minister will take to Europe next week to bring out in the very hard debates which lie ahead.

I should like to congratulate and pay tribute to my right hon. Friend and near neighbour, the Member for Knutsford (Mr. Davies). Like me, he represents an extremely good agricultural constituency, and the work he has done in the arduous task of Chairman of the Select Committee on Secondary Legislation makes the work of the House much simpler. We owe him a great debt of gratitude.

I would remind the hon. Member for Londonderry that, in opening the debate for the Opposition, my right hon. Friend the Member for Cambridgeshire (Mr. Pym) stated clearly his belief that we must not encourage our smaller dairy farmers to go out of business, because they do an extremely good job and they would be sadly missed. The small dairy farmer in this country is very different from the small dairy farmer on the Continent. I believe we need an increase in milk production in this country, and the smaller dairy farmer is important in achieving this objective.

I should like to draw the attention of the Minister and the House to a statement made by one of my constituents who is on the Council of the NFU, was chairman of the Cheshire county branch of the union last year and was previously chairman of the Macclesfield branch. He has said: To those who believe there is no need to expand home milk production because North Sea Oil will buy all the milk products we shall need in the future, I say this: All the surplus revenue from oil in the 1980s will not even redeem our national heritage from the international pawnbroker, and certainly there will be no money available in the near future to buy milk products on a world market in which shortages will, in any case become the dominant feature. He knows the industry and runs a highly successful farm. He takes a considerable interest in European and United Kingdom matters and, in a very few years, has risen to the top rank in the union.

He also believes that the present potato shortage and the recent sugar scare can both be blamed on short-sighted planning by successive Governments which have failed to guarantee fair prices for surplus production.

My hon. Friend the Member for Hereford (Mr. Shepherd) was quite right to bring to the Minister's attention the fact that the British farmer is looking for fair competition—no more, no less.

Cheshire is a large milk-producing area and what happens in negotiations in the next few weeks will be of great importance to my constituents. I hope the Minister will make some comment about standardisation, which is causing some concern in the dairy trades.

I thought my hon. Friend the Member for Devon, West (Mr. Mills) put forward a very constructive suggestion when he proposed a variable intervention price. I hope that proposal will be examined on the European scene, because it holds a great deal of promise for the future.

We do not produce a milk surplus in the United Kingdom. We can scarcely produce enough milk to fulfil all our requirements. We need to import considerable quantities of milk products, and many butter and cheese factories have closed down or are on short time because of the shortage of milk. We need to produce more milk, and I hope that the Minister will take that message to Europe.

I pay tribute to the Milk Marketing Board and the Potato Marketing Board, which do a wonderful job in guaranteeing a fall-back price to the farmer and providing stability of supply for the consumer. The setting up of similar boards might be a future development for the EEC. In the promotion of liquid milk in the United Kingdom the Milk Marketing Board, the Dairy Trades Federation and all involved have done a wonderful job. Europe should follow our example.

From information which has come from interested bodies, including the NFU, there is no doubt that the proposed EEC price review is not altogether acceptable. EEC farm incomes as a whole fell by almost one-fifth in real terms in 1974. The gap between farm earnings and non-agricultural earnings almost certainly widened in 1975. The Commission's proposals for an average increase in farm prices of 7.5 per cent., which is worth much less in practice because of a combination of special measures for certain commodities and various monetary adjustments, would do nothing to reverse this recent trend. I hope that my hon. Friend the Member for Derbyshire, West (Mr. Scott-Hopkins) will comment on that.

Heading the farmers' objections and grievances is the absence of provision for further adjustment of the United Kingdom representative rate of exchange, commonly known as the green pound. Despite adjustments made by the Minister, which we welcome, it remains over-valued, and that is very much to the detriment of our farmers. Although I realise that because of the consumer aspect the Minister is unwilling to make further adjustments, I hope that he will accept that another adjustment is necessary.

May I now refer to an article by Jim Murray of the Farmers Guardian, in which he said: The total of the Commission's package amounts to a rise of about 7½per cent., on average farm prices. Some observers and some participants in Brussels believe that this may be pushed up a few points to, say, 8 per cent. The European Parliamen's rapporteur, the Dutch Christian Democrat Mr. De Koning, has stated in a report to his agricultural committee that this needs to be raised to 9.5 per cent. to cover increased farm costs. Surely it is right that the increased costs which the farmers have had to bear should be met and that the prices guaranteed to them should reflect the additional costs.

My right hon. Friend the Member for Cambridgeshire said that in the past two years there had been a cut in farmers' incomes of about 30 per cent. in real terms. Farmers are unable to provide investment for expansion. In my constituency good livestock farmers who are making a profit tell me that they are unable to keep up with the normal replacement of machinery. The longer they delay in replacing machinery, the more inflation puts it further out of reach. They are worried as to how they will catch up and what will happen when the machinery they are using, perhaps beyond its useful life, finally wears out.

The only way they can re-equip is to borrow heavily at high rates of interest, and the long-term confidence is not there for them to do it. The price review as it stands will not give the farming industry the confidence it needs, and without confidence not only will expansion not take place but there will be grave danger of a further fall in production. The Minister published a White Paper, "Food from our own Resources", putting forward expansion plans. Let him go to Europe next week and ensure that this expansion can take place.

11.0 p.m.

Mr. James Scott-Hopkins (Derbyshire, West)

The debate is most fortunately timed by the Government, although, in the circumstances, perhaps a little inconvenient for me. It is rare, as has been said, that we get an opportunity to put our views to the Minister before he negotiates with his colleagues in the Council of Ministers, as he will be doing next week. He will now have the benefit of the House's views on the proposals of the Commission. I wish we could have done this before the Minister came back with the annual price review proposals in the old days before we joined the EEC. This is a great step forward.

There is another advantage in having the debate today. I have just returned from Strasbourg, where the European Parliament finalised and voted on recommendations on the various proposals of the Commission. The main recommendation, supported by a two-thirds' majority, was that there should be an increase from 7½5per cent. to 9½5 per cent. in the overall increase in the price review.

I was therefore surprised when the right hon. Gentleman said that he was not only worried about the 7½5 per cent. but thought that it could be a little lower. As my right hon. Friend the Member for Cambridgeshire (Mr. Pym) said, the reverse is true. Farmers' input costs have increased almost 10 per cent. It will be an impossible situation if the Minister starts from a bargaining position of wanting even less than 7½5 per cent. Now that the European Parliament has given him and the Commission more scope in the negotiations, I hope that the right hon. Gentleman will not maintain a rigid view that 7½5 per cent. is the upper limit and that, if possible, the increase should be less. If he does, he will do farming an injury from which it will take a long time to recover.

There has been almost a structural change in the method whereby the common agricultural policy is supporting various products. There has been an increase in the target price of almost all the products. The increase in the intervention price for the main products has been much less, and in some cases the intervention price has dropped. The variation is much greater now between the target and the intervention prices, and that is a good development.

The Minister should not forget that at the end of the day it is the intervention price which is the guarantee. He may not approve of the system, but it is that price which is of maximum importance to the farmer-producer. It is the target price which is of importance to the importers and compounders. The figure of 5½5 per cent., which my hon. Friend the Member for Macclesfield (Mr. Winterton) said was the real increase proposed by the Commission, is the one being advanced. That simply is not enough. I hope that the right hon. Gentleman will start from 7½5 per cent, and go up from there. He has been given room to manoeuvre by the recommendation of his colleagues at the European Parliament.

I want to deal with some of the main products. I am glad the right hon. Gentleman accepts that it is right to bring feed grain into line and to do away with the regionalisation of prices. It will take time to do this and it will have to be done in steps. However, my hon. Friend the Member for Devon, West (Mr. Mills) has proposed—and the Commission is studying it—that there should be a specialisation in the regions so that the regions which are specially suited for particular commodities should grow them. For example, in most parts of the United Kingdom grass grows well, and it therefore follows that dairy and beef farming should predominate. Cereals grow well in parts of the central basin of France and around Paris.

Differentials should be worked out on the level of the intervention price—not on the level of the target price—depending on the priority which the Commission, after consultation with the various national Governments, attaches to a particular region specialising in a particular product. We have put that suggestion forward many times at the European Parliament. I hope that the Commission is studying it. I hope that the right hon. Gentleman will think about it and put it forward in the forthcoming negotiations.

I am a little worried about the lack of emphasis being placed on the production of more feed for the coming season. The farmers have been critical that these changes have been made public fairly late. It would have been better if we had been informed of them earlier.

I am glad that in principle the Minister accepts that feed grain should remain at its present level. Until we get the bread-baking test properly defined—that will be the right hon. Gentleman's responsibility—each country will have to work out its own method. I beg the Minister not to bring in the 15 per cent. premium but to keep things as they are at present. The 15 per cent. premium for milling wheat is the right differential, but unless there is a proper method of testing it will be open to so many frauds that we must have second thoughts about it.

I turn to the important subject of milk. I congratulate my right hon. Friend the Member for Knutsford (Mr. Davies) on the work of his Committee and on his remarks. He mentioned the milk proposals. I hope hon. Members realise that all these proposals have to be taken together as one package. We can discuss the various parts individually—for example, the non-distributive part of milk, what is being done about skimmed milk powder and so on. However, they have to be taken together.

I hope that the Minister will take up the one glaring inadequacy in these proposals, namely, that although the Commission says that it wants to encourage liquid milk consumption—and a small amount is being used in school meals—it is not putting in any money worth talking about. There should be a campaign throughout Europe to encourage liquid milk consumption. It is not easy, however, to change people's habits.

The Commission is also not putting forward any proposals for increasing liquid skimmed milk consumption. The Commission says that it will do so, but there are no recommendations. This is lunacy. If one makes milk, one will have skimmed milk. It is no use consuming energy and power to dry it off and then putting liquid back into it later. It is far better to use it and feed it straight to the animals that need it—in other words, pigs. This will not happen unless there is a reasonable inducement to do it. I beg the right hon. Gentleman to attend to that point as quickly as possible.

There are one or two other points concerning liquid milk. My hon. Friend the Member for Banbury (Mr. Marten) and I have always been friends over these matters. I admire him and his arguments so much that I find it frightfully difficult to say that he was talking absolute nonsense—but he was, particularly about the skimmed milk powder.

Mr. Marten

I must quickly correct that point.

Mr. Scott-Hopkins

No, there is no time. My hon. Friend must listen to what I say. No doubt we shall have a tremendous talk about it later at some more suitable moment.

As my hon. Friend the Member for Devon, West said, for the first time there is a reference guide price for skimmed dried milk. It is to come in from 15th September of this year. That can range between 94 per cent. and 102 per cent. of the target price for skimmed milk. Within that range, tenders will be submitted for whatever quantities are available at the time. If the tenders do not come in, that milk does not get sold.

However, the price can be as low as 94 per cent. of the target price. In other words, the tenders will all be at the market price at present, inevitably—in other words, the bottom price. The farming community is saying "We do not like this much. It gives us no bottom guarantee for this product." My reply—and I hope that of the right hon. Gentleman—is "No, it does not, but at the same time we do not want to encourage any more of this reducing of milk for intervention, particularly dried skimmed milk straight into intervention." If this will stop that or slow it down, as I think it will, it must be acceptable and the right thing to do.

I am delighted that the right hon. Gentleman is going to stick to his guns over the beef premia. In the European Parliament we managed to succeed in keeping a two-stage proposal on milk, but we did not succeed in this respect. Although a healthy number of members, not only from the United Kingdom but from other countries, voted for the premia to be retained, unhappily we did not get a majority. I hope that the right hon. Gentleman will at least maintain the variable element even if he has to give up the fixed element. There is a certain amount of sympathy for this, not only among members of the European Parliament but also in the Commission.

As I understand it, the proposals for a sheep regime throughout the Community have been sent back to the Commission for rethinking again by the European Parliament. New and, I hope, better proposals will be coming forward in the near future. Certainly the Commission's proposals would not have had the effect about which the hon. Member for Southampton, Test (Mr. Gould) was talking—raising the price by 50 per cent. However, they would have given Eire—and, indeed, this country—access to the French market for the first time, without allowing the French to bring down the chopper whenever they chose when the prices got too weak. However, those proposals were not sufficiently sound. They have gone back to the Commission. They will not be before the right hon. Gentleman until they have been thought out again.

As regards horticulture, it was the right hon. Gentleman himself who cut off the support that he could have given and in which he could have had help from the FEOGA funds for glasshouse growers in the United Kingdom. We were the first to give support, but we were the first to cut it. We did so while others were still getting it. I hope that the right hon. Gentleman will think about that again.

An issue that appears to be small but which is important to some, and especially in the West Country, concerns cauliflowers between January and March 1977. I hope that the right hon. Gentleman will try to get an extra 20 per cent on the withdrawal price.

All in all, I hope that the right hon. Gentleman will go to Brussels fortified by this debate. The House has been saying that what has been achieved so far goes a little way on the right road and that there is a great deal more to be done. There is now the opportunity to improve and increase stability and to restore some of the confidence within the farming industry which is so badly lacking. The means exist, and I hope that the right hon. Gentleman will take the opportunity next week to bring about what he and his White Paper have spoken of—namely, improved production from our farms. He can do it, and if he does it I am certain that Members on both sides of the House will wish him well.

11.17 p.m.

The Secretary of State for Wales (Mr. John Morris)

I am grateful to the hon. Member for Derbyshire, West (Mr. Scott-Hopkins) for the good wishes which he, like so many others on both sides of the House, has expressed to my right hon. Friend the Minister of Agriculture, Fisheries and Food for his forthcoming discussions in Brussels. The hon. Gentleman reiterated the comment of his hon. Friend the Member for Devizes (Mr. Morrison) that this is the right timing for such a debate. I endorse that view. I have listened to almost every speech throughout the debate, as has my right hon. Friend, and what has been said will be borne in mind. Comments have been made which will fortify my right hon. Friend, and certain points have been underlined. I believe that the whole of the debate has been exceedingly useful.

Some hon. Members have related their remarks to the whole state of the agriculture industry. I do not want to follow them in that course. It was my hon. Friend the Member for Gloucestershire, West (Mr. Watkinson) who referred to the criterion of assisting the efficient farmer. We believe that the common policy should provide effective support for many producers without imposing undue burdens on consumers or taxpayers.

I believe that the Scrutiny Committee has done invaluable work. I endorse what has already been said about its work. We have made full use this year of our annual review discussions so as to be fully informed of our agriculture industry's views in formulating our approach to the Commission's proposals. I know that it will bring pleasure to both sides of the House, and especially to my hon. Friend the Member for West Bromwich, West (Miss Boothroyd), when I say that we have extended the range of consultations to include consumer organisations. In short, we have integrated our annual review more closely into the preparations for the negotiations in Brussels. We shall be publishing the results of the annual review—it was on this matter that the hon. Member for Cardigan (Mr. Howells) spoke about timing—with the decisions which will be taken here and in Brussels. It is not yet clear whether the Council of Ministers will be able to reach a conclusion at its meeting on 23rd–24th February, but we hope that it can do so.

I think we have all recognised—this has been the tenor of the debate from beginning to end—that there were many problems for farmers last year. The weather was unfavourable until the autumn and especially affected yields of cereals, potatoes and sugar beet. Cost inflation was a burden on farmers as on other sections of the community. Fortunately the open autumn and early winter did much to make up for losses in the spring and summer. We have seen good results already in increased milk production, and there are good signs as regards the planting of winter wheat.

We are all conscious that the better weather will not be fully reflected in agricultural output until 1976–77. Net production in 1975–76 will undoubtedly be hard hit by the large fall in the cereal harvest. Nevertheless, while there were setbacks in 1975, there has recently been a good recovery of confidence and output.

We as a Government are determined to curb inflation, and we have also taken major steps since the last review to improve the support that is available to producers. It is well to recognise that factor.

The green pound changes in August and October and the accompanying increases in the guaranteed price for milk were clear evidence of our continuing commitment to United Kingdom agriculture. I am sure that those decisions have contributed substantially to returning confidence. We intend to build on this by giving our farmers a fair deal in the forthcoming decisions on support for 1976–77.

I turn to the Commission's 1976–77 price proposals. The negotiations on these proposals are particularly important because they represent an opportunity to continue our efforts to secure certain improvements in the operation of the CAP. The Commission's proposals recognise some of the more important issues identified during last year's stock-taking discussions.

My right hon. Friend the Minister was asked on the subject of milk whether there was a contradiction between higher output in the United Kingdom and restraint in Community prices. There is a fallacy in that respect, as some hon. Members recognise. It is essential to recognise that we are still in transition. Community prices for milk and milk products have been running at high levels for some time. Returns to United Kingdom dairy farmers have been moving up but have not yet reached Community levels. Hence the differences in production and aims. It is unrealistic to compare the position of continental and United Kingdom dairy farmers last year as if the transition had been completed. At full Community prices, our dairy farmers should be able to take advantage of their good structure and climate.

There has already been a big swing within the European Community towards milk production in the grasslands areas. In the last 10 years milk production has gone up by 25 per cent. in the grassland areas and has fallen by about 20 per cent. in non-grassland areas. There is no reason why this trend should not continue to our benefit.

The right hon. Member for Cambridge-shire (Mr. Pym) asked for assurances about the use of intervention in cereals. The remaining cereal guarantees will end in July under the transitional arrangements negotiated by the Conservative Government. We already have intervention prices. Intervention will be available, if necessary, for United Kingdom cereal producers. I hope that that is an assurance hon. Gentlemen wish to hear. [HON. MEMBERS: "Hear, hear."]

The right hon. Gentleman also asked, as did other hon. Members, about the proposed new intervention arrangements for skimmed milk powder. As my right hon. Friend said, these represent an important move to more flexible intervention. This was spelt out in the speech of the hon. Member for Derbyshire, West. Some such action to avoid the continuing accumulation of surplus stocks is essential. Producers will not be without any support. Subject to the supplies available, tenders would be accepted within a range of 94 to 102 per cent. of the proposed new reference price. There could also be arrangements to vary the packaging and quality conditions for support buying. I understand the concern expressed by some producers, but we believe it is right that the present intervention arrangements should be altered.

We were asked about compulsory incorporation of skimmed milk powder in animal feed. Again, I understand the concern of those who oppose compulsory incorporation. Such compulsion is, in principle, undesirable. Livestock producers' and feed manufacturers' costs will be increased. The point was made by the hon. Member for Londonderry (Mr. Ross). It will certainly not be easy—I emphasise this—to administer the scheme which the Commission has proposed and to avoid unfair discrimination between different users. There is also the special problem for us that there are only small stocks of skimmed milk powder available here, although the Commission proposes to make an allowance for the extra transport costs involved.

On the other hand, we must face the fact that there are large accumulated stocks of skimmed milk powder. While I hope that the Council will agree on measures which discourage the further accumulation of stocks, the existing stocks must be disposed of. The main outlet available is animal feed. Disposing of these stocks for feed is inevitably expensive. The main question is how and where the cost should fall. A purely voluntary scheme would involve much larger budgetary costs. I have the figures.

I assure the House that, in the forth-coming negotiations on the Commission's proposals, we shall bear in mind the points which have been made tonight. We shall certainly be anxious to secure the fairest and most sensible arrangements we can. The hon. Member for Londonderry expressed his fears, but I am given to understand that my right hon. Friend the Secretary of State for Northern Ireland has just announced a scheme of aid for employment in the pig and poultry sectors in Northern Ireland through higher feed price allowances. I hope that this will be welcomed in Northern Ireland.

My hon. Friend the Member for Southampton, Test (Mr. Gould) mentioned sheepmeat, as did other hon. Members. We do not expect a regime on sheepmeat to be part of the package of measures now under discussion. We have made quite clear that we would not agree to a regime which did not take account of the interests of our consumers as well as of our producers.

Concerning the average level of price increases, we have had comments throughout the debate on the proposed average level of support prices. I emphasise also that the support price increases in national currencies in most member States will be less than 7½5 per cent. None the less, my right hon. Friend said in his opening remarks that the Government regard the Commission's proposals as being on the high side. In the current economic situation, and given the serious problems of over-supply in some sectors, it seems to us that constraint is called for.

There is not the time to go into the argument concerning the existence of and the changes in the green pound, but I am sure that hon. Members on both sides of the House are aware of the reason why it is there and the role it plays, and certainly the need for it. There would otherwise have to be changes with every change in a particular currency's market value, leading to great uncertainty and instability in floating currencies. My right hon. Friend has made quite clear that we continue to keep the level of the green pound under review.

I have dealt with as many of the issues raised as I can in the time available, and I assure the House that all the points which have been made will be kept in mind in the forthcoming negotiations. Indeed, I hope that our negotiating position will be strengthened as a result of the debate. The Council of Ministers will be meeting again next week and is due to have a further session, as I have already told the House, on 23rd and 24th February.

I know that in the negotiations my right hon. Friend will be exerting all his efforts to secure an outcome which is fair both to producers and to consumers and which in no way puts at risk the strategy for agriculture set out in the White Paper "Food from our own resources."

Amendment agreed to.

Main Question, as amended, agreed to.

Resolved, That this House takes note of Commission documents R/3166/75 and R/3271/75 and, in respect of R/3166/75, of the Government's intention, taking account of the needs of producers and consumers and the importance of restraining public expenditure, to seek both satisfactory levels of agricultural support prices and further improvements in the operation of the common agricultural policy, especially in the milk and cereals sectors, and to maintain the provision for variable slaughter premiums in the EEC beef regime along the lines of the arrangements secured as part of the renegotiated terms of EEC membership and urges Her Majesty's Government to ensure that the competitive and structural advantages of United Kingdom agriculture are maintained.