HC Deb 16 March 1977 vol 928 cc517-46

Question again proposed, That the amendment be made.

Mr. Watkinson

We have to see agriculture in the context of the world need for food, and to this extent I should like to see the Common Market attempting to integrate itself much more into the United Nations programmes for providing food for the needy throughout the rest of the world. This seems to be a very positive approach.

Mrs. Elaine Kellett-Bowman (Lancaster)

Is the hon. Gentleman aware that demand from the third world for dried milk, for example, is fully satisfied and that there is a health risk in giving undue quantities when its use cannot be adequately supervised? It can give enteritis to small children if the water supply is not of adequate quality and if the mixture is not of the correct strength.

Mr. Watkinson

I am grateful to the hon. Lady for pointing that out, but my argument is general, not particular. I take her particular point.

I should like to see the Community developing in a more outward direction. Community preference automatically means that we are inward-looking. The extent to which consumers in this country and in Europe could benefit from cheaper food supplies available on the world market has been discussed at some length this afternoon. I should like to see consumers in this country being able to take advantage of this.

I, too, am a supporter of the deficiency payment system, which seemed to be well suited to the needs of this country. I do not go so far as to say that the system could be applied in Europe, because our European partners are not importers to the same degree as we are, but it was and still is a system that could operate very much to the advantage of people in this country.

It has been argued that, while we are part of the CAP, it must make sense to expand our own agriculture as far as possible. The document "Food from Our Own Resources" is one that we should rely on to give a positive impetus to the development of our home agriculture. Under the old system at least we could obtain cheap imports, but now we are getting expensive imports from the Common Market. It must pay us, and it must be an advantage, to develop our home-based agriculture.

I agree with the hon. Member for Weston-super-Mare in his remarks about the Milk Marketing Board. I suspect that everyone in the House agrees that we should give our total support to the Minister on that point.

I turn now to the crucial area of pig farmers. I appreciate that this is not an integral part of these negotiations, but I must tell the Minister that according to pig farmers in my constituency their situation is desperate. Time is of the essence.

It is vital to get some form of solution on the mca. We have all identified the problem, but it would not help the pig farmers, for example, to devalue the green pound. It would not be of any great assistance to them because they need to lower their prices to sell more. In this case a realignment of the mca based on cereal prices is vital.

My pig farmers feel that they are caught in a political game and are being destroyed while the game is being played out. I hope that my right hon. Friend will go to Brussels soon and negotiate something positive to the advantage of pig producers in this country.

Mr. Jopling

Does the hon. Member recall the speech earlier in the debate by my right hon. Friend the Member for Yeovil (Mr. Peyton)? Does he agree with what my right hon. Friend said—that the Minister, having talked at great length about not being prepared to devalue the green pound unless he gets something in return—a perfectly reasonable attitude—has in the renegotiation of the pig mcas a subject upon which he can make a deal pretty quickly? Does he agree that devaluing the green pound in order to get a new system of evaluating the pig mcas would be a good deal?

Mr. Watkinson

I cannot speak for my right hon. Friend, but I believe that the argument about the mcas stands by itself. It seems that we have a perfectly justifiable case for asking that there 'should be a realignment of the mca. That argument stands alone and is perfectly justified in the terms in which we are putting it.

In conclusion, I wish to emphasise the point that I have made previously to my right hon. Friend. I believe that he is sympathetic to it and it will do no harm to restate it. It is that I hope that in the coming Budget something will be done to reform the way in which farmers pay tax. It would be to the advantage of the farming community to have a rolling tax programme covering three years. That would help it to take the bad years with the good. I ask my right hon. Friend to use what muscle he has with my right hon. Friends the Chancellor of the Exchequer and the Chief Secretary to the Treasury with a view to securing this arrangement.

10.8 p.m.

Mr. Robin Maxwell-Hyslop (Tiverton)

I wish to dwell upon one point which could be overlooked. In the late 1960s the then Labour Government welcomed the report from Little Neddy which pointed out the contribution which British agriculture could make to the balance of payments. The only trouble was that the report recommended a specific cash injection, and though the Government welcomed the report they did not give the cash injection.

Then the White Paper "Food from Our Own Resources" was published. That was updated recently in a Written Answer to me. But it is no good the Government paying lip service to that proposition if they do not provide the financial basis on which we can provide food from our own resources. The Minister made only an oblique reference to it when he said that he would like farmers and their wives to have a fair income. That could mean anything or nothing. What he did not tell us was whether it was Government policy to have import substitution for food. By Government policy I do not mean a statement from a Minister saying that he would like us to save foreign currency by expanding our home production. I mean a commitment to provide profits out of which the investment can be made to secure that extra production. It is not words but cash that talks in this context.

It has been pointed out in the debate that sometimes, paradoxically, when there is a reduction in price there is an increase in output. I agree that that is so, but it is a very short-term phenomenon. To go in for long-term import substitution by increasing the proportion of home-produced food would require a considerable capital injection. The under-recouping of increases in costs by not allowing producer prices to increase by the amount that costs have increased results, of necessity, in the running down of capital instead of the building up of capital.

There is a direct relationship between capital investment in agriculture and total production. That is absolutely undeniable. It is also true that one of the reasons for the present slump in the engineering industry in the Midlands is that many farmers cannot afford their normal purchases of agricultural machinery and equipment. Moreover, these prices are allowed to rise pari passu with the increase in manufacturers' costs. That results in a situation where the consumer—in this case the farmer—is not allowed an increase of price to cover his increase in costs but those who are supplying him are. Inevitably that causes avoidable unemployment in the manufacturing industries that supply agriculture. Therefore, if the Government are interested in avoiding unnecessary unemployment they should not always think of the slightly esoteric schemes such as some of those that the Department of Employment has proposed.

One way to increase employment is to ensure that the large home market for the output of our own engineering industry is not artificially attenuated by depriving the industry of the capital that it needs not only for the current purchases of equipment but for import substitution, which I believe is still, in theory, the Government's policy to achieve.

10.12 p.m.

Mr. Leslie Spriggs (St. Helens)

My right hon. Friend the Member for Battersea, North (Mr. Jay) referred to the deficiency payments to our farming industry. I refer to that again because Opposition hon. Members said that my right hon. Friend had criticised the CAP but had nothing to put in its place. They said that he had no alternative to the CAP. That is untrue, because my right hon. Friend made a case for the deficiency payments, which worked well before Britain joined the EEC.

We should understand that the Common Market does not involve the CAP alone but concerns a new European policy and a new balance of economic and military power in Western Europe. To those who have referred to the CAP and to nothing else I suggest that they look at that carefully in the light of changing events in Europe and of the responsibility being placed upon the shoulders of each member State in the Community.

My right hon. Friend was correct when he referred to the increased cost of living as a result of the CAP. No one has denied that. I regret that so many right hon. and hon. Members believe in the high price policy. Those of us who travelled in Europe before Britain entered the Common Market knew full well that there was a big difference between our pricing policy and that of the countries of Europe. Our prices were much lower than theirs. That was known by all concerned in Government circles.

Because of the importance that Governments attached to the replacement of American forces leaving Europe for other parts of the world, it was realised that there was a vacuum to be filled by the nations of Western Europe. I believe that that is the principal reason why Britain joined the Common Market.

My right hon. Friend the Minister referred to what would happen if the green pound were devalued. I have had the opportunity of looking very carefully at the figures. If there were a 6 per cent. devaluation, it would mean to British housewives and the consumer at home in general an increase in the cost of living, on basic foods, of about £225 million a year. There is a very strong case for my right hon. Friend explaining to his colleagues in Europe what Britain and the British Government are faced with at present. There can be no doubt that unless we get a third round of the social contract, Britain will be in serious economic trouble.

Mr. Jopling

We are in trouble already.

Mr. Spriggs

No matter which party is in power, unless there is a social contract and an agreement serious trouble will be brewing in Britain. The hon. Member for Westmorland (Mr. Jopling) may think that this is funny. Let me tell him and his hon. Friends that a great amount of the present social unrest and the opposition to the social contract results from the rising cost of living, especially the cost of basic foods that the ordinary people of Britain require. If he can laugh that one off, he can laugh at anything. This is a deadly serious matter, and I plead with the hon. Gentleman not to laugh at matters that are so important.

Making his report this afternoon, my right hon. Friend the Minister gave an indication of the problems with which he is faced when he attends meetings in Europe. Anyone who listened to him when he spoke about the fishing agreement will have heard him state that as President of the Council he had been able to make a statement first and then to take instructions from the Council and, from there on, he signed the document.

We should all be interested in Britain's fishing industry. It is not a matter merely for those who make their living from fishing or who live in our fishing ports. Fishing is a matter that concerns all of us. Fish is a very important food. Britain relies to a great extent on fish. The Minister was able to tell us that we have reached agreement with the countries of Europe. [Interruption.] If the hon. Member for Westmorland does not know that, I want to appeal to all hon. Members—

Mr. Jopling

On a point of order, Mr. Speaker. We seem to be merging into a fishing debate. I did not think that any of the documents we are discussing had anything to do with fishing. I have listened to the hon. Gentleman talking about fishing for quite a time, but he is going on about fishing. Is that in order?

Mr. Speaker

I think that the hon. Gentleman is just about to cline back to the point.

Mr. Spriggs

I am grateful to you, Mr. Speaker, for explaining to the hon. Gentleman, who did not understand, that I was making only a passing reference to the Minister's report.

The case made out for the amendment, which I shall support, is sound. I appeal to hon. Members on both sides to go into the Lobby tonight to support it.

10.21 p.m.

Mr. Nicholas Winterton (Macclesfield)

I am pleased that the Minister, the Minister of State and the Parliamentary Secretary have been present during most of the debate. I believe that this is helpful to the House, because perhaps the Ministers will heed some of the constructive comments made. Agricultural debates are all too infrequent, particularly those in which we can range widely as we are able to do in this debate today.

I shall direct my remarks to three main areas—milk, beef and pigmeat. Before I do that I want to refer to a comment made by my hon. Friend the Member for Holland with Boston (Mr. Body.) He is a practising farmer, and those of us who listened to his excellent speech know that until 1st January 1976 he was a pig farmer. But he left pigs just in time. He said that farmers kept quiet about the fact that their existence was subsidised by the taxpayer. On behalf of the British farmer, I object to that remark. I believe that my hon. Friend was being less than fair.

We have had systems of agricultural support and food prices support which have meant that the British farmer has been able to obtain only a part of the economic cost of producing food directly from the consumer. The balance, in one way or another, is made up by the taxpayer.

I was interested in the remarks of the hon. Member for Gloucestershire, West (Mr. Watkinson), who said that a green pound devaluation would not overall help British farming. I am not sure that this view is supported by the National Farmers Union. If he holds that opinion he should tell the House and his hon. Friends on the Treasury Bench how British farming is to receive a fair return for its work and investment. He stated, as did other hon. Members, that farming incomes were falling and costs were rising, and, as a result, farmers were not receiving a fair return for their investment and work.

This situation automatically leads me on to "Food from Our Own Resources". The document was launched by the present Administration, and we were delighted to support it. It clearly stated that we should produce much more of our own temperate food than we have done in the past. This would produce a substantial saving for us on our balance of payments. I think that all hon. Members were wholeheartedly in favour of that objective, but has Government policy since then set out to achieve that objective? I do not believe that it has.

I ask the Minister to direct his attention "Food from Our Own Resources" and to tell the House, which is concerned about the amount of food we produce, where the money will come from to enable farmers to play the vital part in our economy which they are fully competent to do. It is wrong that their investment should be so badly remunerated and that they should suffer such disincentives from the Government Benches.

It would appear from some of the things said particularly by Labour Members, who are totally consumer-oriented and have little understanding of the production of food, that the much-mentioned surpluses are massive mountains, accounting for months of consumption within the EEC. I hope that the Minister will confirm that even the largest surplus in Europe has accounted for only about five weeks' consumption of a particular commodity. They are not mountains at all: we need to get this matter into perspective.

An editorial in a recent edition of the Daily Telegraph clearly emphasises that, while we might be unhappy about surpluses and might want some modest amendments to the CAP, just because we do not like things as they are does not mean that we are anti-Europe. To use a comparison for the benefit of my hon. Friend the Member for North Angus and Mearns (Mr. Buchanan-Smith), I will quote the editorial: But is is not as simple as that. It is perfectly possible to criticise Exchequer subsidies for Glasgow council tenants or Highland crofters or what you will and yet remain firmly in favour of the Act of Union. I am not getting at my hon. Friend when I refer to the Act of Union: I hope that he believes in it as firmly as I do. I am trying to establish that, as a member of the EEC, this country should set about trying to amend the CAP to produce an acceptable system.

I would say to the right hon. Member for Battersea, North (Mr. Jay), who has always been consistent in this matter, that we have an efficient agricultural industry. I want to see us produce as much food from our own resources as we can and not allow sectors of our industry to be undermined and destroyed by European inefficiency. I hope that on that point I shall have his full support.

Mr. Jay

indicated assent.

Mr. Winterton

I am a pro-economic European, although not in favour of a federal or monetary union.

One of the three areas about which I want to speak is pigmeat. A friend of mine in my constituency is a substantial pig farmer. He visited the House as part of an NFU delegation recently, meeting hon. Members on this side and members of the Government. He is a highly efficient farmer, with anything between 1,500 and 2,000 pigs at any time. He said that, despite recent Government assistance, on every pig he produces he loses £1.86.

That situation cannot continue. How right the hon. Member for Gloucestershire, West was to urge the Government to take some action over pigs. The basis of the MCAs should be cereals rather than the pigmeat intervention price. I hope that in the near future this change, which would be welcomed by all in the industry, will be announced by the Minister after negotiation.

I have a major constituency interest in milk. Some statistics might help. There are 2,703,000 dairy cows in England and Wales, owned by 56,081 producers, giving 6.8 million gallons daily, of which 2.6 million gallons are used for manufacturing purposes and 4.2 million gallons are pasteurised, filled daily into 32 million bottles for distribution in 40,000 vehicles by 40,000 salesmen to 15 million homes, representing 92 per cent. of households. Those salesmen collect £20 million a week from the English and Welsh public.

Those figures clearly indicate that the dairy trade is a substantial industry. It worries me that we shall tinker with the system, that we shall not act when necessary, and that the doorstep delivery service in this country—which is so important to British housewives—may disappear before the housewives and consumers of the country know what is happening. We are the only country in the EEC that has a daily doorstep delivery. It is a valuable service and is balanced on a knife edge financially. If our particular interests were not understood within the EEC and the wrong policies were carried out, the service could quickly disappear.

The milk producers of this country are not happy with the proposals that we are debating tonight, because dairy farmers have incurred substantial additional costs during the last 12 months. The price increases that they are likely to receive as a result of the EEC proposals are not likely to be sufficient. I am aware that I may not have the full support of the Opposition spokesman in this, but I have discussed the proposal with my local branches of the NFU and with farmers in my constituency, and they are not happy. They believe that it will be difficult for them to remain in business and keep the number of milking cows that they now have.

Finally, I refer to beef. Many people believe that beef can be separated from the dairy sector but, in fact, they go together. Therefore, I hope that I shall be understood if I speak about beef after talking about the dairy and milk sector. There is no doubt—and I hope that the hon. Member for Londonderry (Mr. Ross) will also raise this point—that there has been serious undermining of the position of the United Kingdom beef sector by the unloading of cattle from the Republic of Ireland on to the English market. The situation has now improved, but it could well happen again.

There is a differential in the green pound between the Irish Free State and the United Kingdom, and it enables producers in the Republic—to their advantage and to our disadvantage—to unload beef cattle on to the British market. I know that we have made special arrangements for Ulster to try to deal with the matter, but the industry here has been undermined. It has suffered severely from the dumping of beef cattle on to the United Kingdom market from the Irish Free State. I hope that this matter can be attended to.

The farming industry in this country wants to play its full part in the recovery of the United Kingdom economy. The industry can do that, but only if it is given the weapons and the wherewithal to do so by the Government. I make this plea. The debate has been interesting and useful contributions have been made from both sides. I hope that the reply at the end of the debate will be worthy of the Ministry and that it will give encouragement to the United Kingdom farming industry.

10.34 p.m.

Mr. Peter Hardy (Rother Valley)

I had not intended to speak in the debate, but the hon. Member for Macclesfield (Mr. Winterton) has driven me to it, particularly by his suggestion that hon. Members on this side are consumer-oriented. By implication, he suggested that his party represents the farmers and the rural areas. If that is so, it is a pity that there are only three Back Bench Tories present during such an important debate.

The hon. Member for Macclesfield raised a number of points about areas in agriculture where there are serious problems. Like him, I have met farmers in my constituency recently. I meet them regularly, and I am well aware of the problems that they have to face. It is unfair of the hon. Member not to acknowledge that when the Labour Party took office in the hard winter of 1974—hard in economic terms if not in climate—there were areas of British agriculture that were in dire trouble. I remember talking to pig farmers in my constituency during the February 1974 General Election. I have kept in touch with them fairly diligently while I have been a Member of this House. I know that the attempt by the Government to give assistance recently was not as successful as some of us might have wished.

The pig farmers in the Macclesfield constituency may be as efficient as some of those in my constituency. I accept the point made by the hon. Member for Macclesfield that the costs of pig farmers throughout this year will be about 35p or 36p per pound and that their returns will not cover their costs. However, the hon. Gentleman was not sufficiently grateful to the Government for seeking to go some way towards helping them weather this downturn in the cycle.

Returns in pig farming are cyclical, and our experience of Irish pigmeat being available at 28p a pound in recent weeks has not helped. However, this is a temporary phenomenon, and I expect that in the spring and summer the returns and rewards to pig farmers will improve.

The 50p per score premium introduced by the Government as temporary assistance in 1974 substantially increased the returns of pig farmers. In 1975, they were receiving £6.40 per score, which gave them considerable margins. That was the top of the cycle and we are now at the bottom. I hope that we shall soon see a recovery, but it is wrong for the hon. Member for Macclesfield to suggest that farmers entered a period of economic difficulty and, in some cases, destitution because of this Government's policies.

I recall the plight of the dairy farmer in 1973–74 when hon. Members opposite were mutedly complaining to their Government about the dire straits, if not in cereals, certainly throughout the range of livestock farming in many areas.

In 1974, while dairying in Britain was in a very sharp decline, the Government allowed the price of milk to the consumer to rise substantially and the price available to the farmer to rise even more substantially to ensure that the appalling decline in dairy farming which had gone on since 1973 was arrested.

The hon. Member for Macclesfield entertained the House with some valuable and interesting statistics about the importance of the dairy industry. He told us how many cows there are, how much milk is produced and how much of that was available for manufacturing. He should remember that in 1974 and 1975 those responsible for dairy product manufacturing had grave anxiety about where they would get supplies. It seemed that there would be difficulty in meeting the demand for liquid milk, let alone the production of dairy products. Further assistance was given to the dairy farmers in 1975, and it is unreasonable for hon. Members on the thinly attended Benches opposite to pour scorn on this side of the House for being consumer-oriented and having no interest in agriculture. Those of us with rural constituencies seek diligently to maintain an understanding and awareness of farmers' views, and it is a great pity that British fanners too often do not know where their real friends are. If they look back, they will see that British agriculture was brought to the point of ruin by a Conservative Government in the 1930s applying the sort of policies that have always been dear to their hearts. In 1947 the foundations for prosperity in agriculture were laid by a Labour Government.

I welcomed the references to the document "Food from Our Own Resources". It was an important document, and I believe that in the long term this Government—indeed, any Government—will have to observe the policies and ideas embraced in that document. It is important that food should be produced at maximum level. That means that we need to encourage home food production—if only to ensure that other areas of the world can consume the food that we now take from them because we do not produce it for ourselves.

I accept that we shall not meet the targets set out in that document unless there is a proper return to the British economy in promoting investment, but at the same time Opposition Members, if they are concerned with the best interests of this country, have to walk a difficult tightrope. They must ensure that food prices do not explode, because that would not be in the best interests of British farmers. However, if all the claims made by the Opposition were met, the effect on the nation's economy would be disastrous. The Government have to ensure that farm returns are increased as much as is compatible with the economic needs of the nation—

Mrs. Kellett-Bowman

Such as in respect of gas?

Mr. Hardy

If the hon. Lady attended the House more regularly, and more quietly, she would understand that there are important reasons for a national, and, indeed, a global, view on energy matters. However, I must not be tempted to stray into other areas because it is agriculture that is occupying our attention in this debate, and we must not allow ourselves to be diverted. I could go into the subject of coal needs, because that, too, is an important matter in my constituency, but I am seeking to emphasise in this debate that it is the production of food in Britain that should be sustained. No doubt if farm incomes were allowed to soar to the extent Opposition Members would like, the hon. Member for Lancaster (Mrs. Kellett-Bowman) would knock on doors in her constituency and tell her constituents that the Labour Government were letting the farmers have all the money.

Mr. Nicholas Winterton

The hon. Gentleman has made a good deal of play with the milk situation. Will he explain why the Labour Government reduced the price of milk to the consumer and have subsequently allowed it to rise to the highest level ever—and, at a time of difficulty, have removed virtually all the subsidy?

Mr. Hardy

I thought the hon. Gentleman was complaining earlier about the Labour Party's interest in the consumer. Our interest in the consumer was demonstrated by the point he made. He did not make the point that while, by subsidy, the price of milk was diminished the return available to the dairy farmer was not reduced, and indeed that he enjoyed a substantial increase. But the hon. Gentleman must not divert me from the point.

Although the Government cannot allow farm incomes to rise to the level farmers would like, I believe that it is essential for steps to be taken to try to assist them. Farmers have been badly hit by the drought, and that fact may have been forgotten by the Opposition. I hope they have not forgotten that the weather affects farm production, as was clearly illustrated in a recent agricultural Question Time. In many areas of England—Scotland was much more fortunate, as it seems to be fortunate in many areas at present—the farmers suffered a difficult time last year and incurred considerable debt. That may have been a temporary situation but they were hit by the weather. I hope that when my right lion. Friend the Chancellor of the Exchequer comes to the Budget later this month he will find a way of rolling over the tax arrangements for agriculture to help tide the farmers over this difficult period. Fortunately, we face the spring and the summer with rather more water than we are accustomed to and the outlook for production for the rest of the year, and perhaps 1978, is very much better.

I have spoken long enough, and rather longer than I intended, but I wished to remind the House that, although the pork, pigmeat, dairying and beef sectors referred to by the hon. Member for Macclesfield may not be in the best possible condition, they are now more viable and have received far more encouragement from the Labour Government than they received from the Conservative Administration judging by their state when inherited by the present Administration in 1974.

I urge my right hon. and hon. Friends to ensure that agriculture is sustained, but it must not be sustained at the risk of grave peril to the nation. It is time that that was realised by Opposition Members.

10.47 p.m.

Mr. James Scott-Hopkins (Derbyshire, West)

This has been a long debate and we have covered a great many subjects. As my hon. Friend the Member for Macclesfield (Mr. Winterton) said, it is a debate in which we can range widely over the whole of agriculture. Indeed, the hon. Member for St. Helens (Mr. Spriggs) ranged over fishing as well.

This is an important debate for other reasons. I wonder whether the House has realised what a change has taken place during the time that Britain has been a member of the Community. Before we became a member we had an annual Price Review. Ministers announced the review and there was half an hour of question and answer. If the Government felt so inclined, there was a one-day debate a week or a month later. That took place after the event. It took place after Ministers had made up their minds after consultation with the industry. The right hon. Member for Battersea, North (Mr. Jay) knows that that is true. That was the position in his day and in the days of Conservative Governments.

The situation has changed. We now debate these matters and hon. Members seek to tell Ministers and the House generally what they hope Ministers will do in the negotiations that they are having with their opposite numbers in the eight other countries in coming to a conclusion in the negotiations that set the framework within which farming will have to operate during the next 12 months.

Things have changed since I first came to the House many years ago. I remember being told most strictly by right hon. and hon. Members that, having made a speech, it was considered courteous to stay behind to hear the reply from the Government Front Bench. I look around and I see not very many of the Labour Members who made interventions. Doubtless they have all been taken ill or have pressing engagements elsewhere. As I say, things have changed since I first came to the House. I regret it and say no more than that.

The Minister of Agriculture, Fisheries and Food made a strange speech. He concentrated, understandably, on the level of prices and the position of the consumer. Those are unquestionably important issues. However, as the hon. Member for Rother Valley (Mr. Hardy) said, it is not consumers on one side and producers on the other. We all represent producers and consumers and we all have an interest in both sides. The hon. Member for Cardigan (Mr. Howells) said that consumption and production are going down. Consumers are buying less and producers are producing less.

The Minister concentrated his remarks more on one side than I expected. I was amazed that, as my right hon. Friend the Member for Yeovil (Mr. Peyton) said, he did not get down to the increased costs that the farming industry has had to face in the past 12 months. My right hon. Friend gave the figures. I shall not weary the House by repeating them. There has been a considerable increase.

The Minister signally failed to tell us his view on the Commission's package. It is a package deal, as my right hon. Friend said. Let us consider the package deal. On the one hand, we have the proposal to devalue the green pound. I shall say more about that later. Linked with that are the minimal rise of 3 per cent. and the two transitional steps. Is the Minister prepared to accept that as a package? If not, what part will he throw out of the window and what part will he trade off for what gain? If he considers the green pound to be not so important and he wishes to use it as a bargaining counter—that has been implied—what does he hope to get for it?

The right hon. Gentleman made the point that if we were to devalue the green pound he would want substantial benefits for this country in return. Of course. But what are the substantial benefits that he wants? Would it be sufficient to get a new system of calculating the MCAs for the pig producers? The Minister shakes his head. That is fine. Let him tell the House whether he would consider that to be sufficient in the national interest.

Mr. John Silkin

To save time, if the hon. Gentleman cares to read my speech in Hansard he will see that I dealt with that.

Mr. Scott-Hopkins

I listened to every word of the Minister's speech. I do not think that he was specific enough in what he said. All he said was that he wanted an equivalent amount of what he thought it would be.

I gathered from colleagues to whom I have talked and with whom I have debated in the European Parliament and in its committees in the last 24 hours that they are not prepared to give much to the right hon. Gentleman. As he knows, this country's credit—not his personal credit—is running dry because of our behaviour in the Community.

The House must understand that all the various parts of the package, including the transitional steps, will mean a rise of between 14½ per cent. and 15 per cent. for our farming industry. Many countries in Europe will get nothing like that. So there is a controversy. The right hon. Gentleman will face difficulties when he is negotiating in Brussels, but he maintains that he wants a minimal rise here.

We have heard over the ticker tape what the Minister has negotiated and agreed for those commodities which are outside the common agricultural policy. I shall not weary the House with all the figures. The two main items are an increase of 16 per cent. on Iamb and 31 per cent. on wool. The right hon. Gentleman is saying that he wants to keep everything down and that he sees no excuse for any type of rise. He will presumably argue that this will be on a par, but that is what the rises will be if the Community package is accepted. This must mean that in his mind he is not only accepting the transitional stages but also the devaluation of the green pound. That is the only way in which we can get anywhere near the 14½ per cent. figure.

I turn to the MCAs and the green pound. It is understandable that the right hon. Gentleman should wish to operate the green pound as it is. I am not sure whether it is quite so much of an advantage for our consumers. We get a subsidy from the MCA because of the disparity of the green pound. But this encourages our importers, and their exporters, to sell to us because of the advantages. As my hon. Friends, and some hon. Members opposite, have said, there is an advantage, particularly in selling into the pigmeat market, to countries like Germany, and Denmark.

We must remember that two-thirds of the price of whatever product comes into this country has to be paid across the exchanges in sterling currency. The subsidy to the consumer from the MCA goes to the producing countries like Germany, France and Denmark. Therefore, two-thirds of the cost of the product, sometimes more, goes across the exchanges. That is not to the advantage of this country, because it increases our import bill.

I fail to understand why the right hon. Gentleman is unwilling to accept the package and devalue the green pound, because the MCAs would gradually get smaller and he would have a little more money available to devote to expanding British agriculture while at the same time honouring his promises in "Food from Our Own Resources" and the previous document. It seems quite logical that this is what he should do.

There would then be an advantage to our farmers—and to the consumers, because more would be available on the home market from our own resources. It is an argument that is certainly worth considering. I cannot understand why the right hon. Gentleman does not accept that this is one way of looking at the problem.

Mr. Spriggs

The hon. Gentleman appears to be in favour of devaluing the green pound by 14 per cent. Does he not agree that if that happened many of the low-wage earners could not live?

Mr. Scott-Hopkins

The hon. Gentle man's intervention was rather like his speech. He did not get it right. I said the total of all the elements in the package put forward by the Commission came to an upward figure of between 14 per cent and 142 per cent. The green pound would be 6.3 per cent., no more.

Mr. Spriggs

That is about £225 million.

Mr. Scott-Hopkins

Perhaps the hon. Gentleman will listen a little more closely.

I come on to surpluses. I agree with those hon. Members who said that we must keep a sense of proportion in this matter. At the moment there is a surplus of butter and skimmed milk powder. The figures given by the Commissioner only last week showed that at the moment there is a surplus of 550,000 tonnes of dried skimmed milk, while the actual amount of butter in surplus is just under 200,000 tonnes. To put into perspective the matter of sales to countries outside the Community, the Commissioner expects that during the whole of 1977 sales of subsidised butter externally will amount to between 120,000 tonnes and 150,000 tonnes.

The hon. Member for Durham (Mr. Hughes) said that it is three times more costly to subsidise internal sales than it is to subsidise external sales. The reason for the subsidies is that there has been production of milk over and above the amount required in the Community. We must have a surplus. The Community's policy should always be to plan to be slightly in surplus of what is required. One of the advantages of the Community's action is that it has guaranteed a constant supply of food to consumers throughout the whole of its existence.

Mr. Jay

If the hon. Gentleman thinks that these surpluses are being built up because it is desirable to have stocks at this level, why are they sold to Russia and others at such absurd prices?

Mr. Scott-Hopkins

As the hon. Gentle-mans knows full well, the butter surplus is just under 2 lbs. per head per person, which is minimal. He probably has more than that in his refrigerator. There is nothing wrong with external trade. It is well known that I would much rather that the Community were able to feed the people within the Community and that the trade that is being done with Russia were done at world market prices.

The recent sale to Russia was not on the same terms as the sale in 1973–74, when the price was specially subsidised. The recent sale was at the world market price. A minimal amount of butter—30,000 tonnes—was sold at absolutely the top price.

It is important to maintain a sense of proportion on the question of surpluses. Mistakes are being made, and have been made, about the level of prices. I hope that in his negotiations the Minister will present strong arguments on the measures to be proposed by the Commission. The Commission says that it hopes to be able to reduce to between 1 million and 1½ million cows. This is what the Commission calculates that its proposals will mean if they are accepted by Ministers at the end of next week. I do not believe that the proposals are sufficient and that that will actually happen. I hope that further measures will be proposed. I hope that the Minister will propose that the intervention system, particularly on milk, be re-examined. I hope that we shall be able to secure that when a surplus arises the intervention level of the guide and target price should vary upwards and downwards: when a surplus arises, the intervention price should fall: when equilibrium is achieved, the price should move to 97 per cent. to 98 per cent. of the guide and target price.

This is only one of many approaches to the problem. I hope that all avenues will be explored. We cannot allow the small, inefficient producer of milk to continue to be supported by a level of prices which just makes it viable for him to keep going. The Commission has produced a package of inducements to encourage the small producer to get out, but I do not think that that will be enough. It is very difficult to tell small farmers to stop producing. About 50 per cent. of milk is produced by farmers who farm fewer than four acres and have two or three cows. These people must be helped out of production, and I hope that certain measures will be taken to encourage them to go. Not all the money for this should come from the agricultural fund, but maybe the Minister could negotiate over this at a later stage.

I do not think that there is any dispute in the House that the Milk Marketing Board must stay. There is a great case for keeping it. I was surprised to hear the questions and doubts expressed by the hon. Member for Crewe (Mrs. Dunwoody). I was in the same room as she was, and heard the same remarks, which were about the legal position. At the end of the transitional period there is a case for the activities of the Board that are not producer-oriented being phased out.

At the instigation of my hon. Friend the Member for Norfolk, North (Mr. Howell), a large and representative contingent of Members and officials of the European Parliament came over here to examine the activities of the Milk Marketing Board. The impression that I have gained over the past six months is that there has been a general understanding of the position in this country, of the efficient way in which the Board works, and of the vital necessity to keep up sales of all milk products that are handled by the Board in the United Kingdom. I believe that the Minister will not have to push very hard on the door in order to get this accepted at the end of 1977. and I am sure that he will succeed.

On the question of the overall situation, the Minister will have a difficult time, and part of that is his own fault and that of the Government. [Interruption.] Of course it is. The reason for our present difficulties is the astonishing devaluation of our currency caused by the Government's economic policies. The currency has lost over 30 per cent. in value, and this is at the root of our problems. Of course we have consumer resistence to the prices being asked when the standard of living is coming down.

On the other side of the picture is the farmer's need to get a fair return for labour and the capital that he has invested in land and stock. I have the figures for farmers in my constituency, which show how costs have gone up—

Mr. Dennis Canavan (West Stirlingshire)

They are capitalists. What about the workers?

Mr. Scott-Hopkins

They are workers as well, and surprising though it may seem to the hon. Gentleman, they are consumers also. They have suffered from inflation and increased costs, and unless we want to see an enormous drop in the level of production in this country, which would be disastrous, something must be done.

The right hon. Gentleman must honour the pledge given in "Food from Our Own Resources" to increase our own food production—there is no reason why that should not be done—and at the same time give the consumers and farmers a fair deal, and the best way to do that is to accept what the Commission has put forward.

Mr. Canavan

A disgraceful speech.

11.10 p.m.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Gavin Strang)

The large number of hon. Members who have taken part in the debate adequately reflects the importance of these proposals. Before I reply to the many points raised, I want to say something about the important announcement made today by my right hon. Friend in a Written Answer, giving the new rates of guarantee for fat sheep and wool in the United Kingdom.

The sheep industry is an important sector of our agriculture. It has particular significance in certain parts of the country, and the Government want to see production expand as envisaged in "Food from Our Own Resources". There was a slight decline in the breeding herd in 1975 and 1976, but it is encouraging to see that a small increase of 1 per cent. was recorded in the December census.

Market prices for mutton and lamb are good and seem likely to stay firm for some time. Store producers also achieved good prices last autumn. The Government are anxious to maintain this confidence and to give further impetus to expansion. We have, therefore, increased the guaranteed price for fat sheep from 99p. per kilogram to 115p—an increase from 45p. a pound to 52.2p. The wool guarantee has been increased from 84p. per kilogram to 110p., an increase from 38p. a pound to 49.9p. a pound.

The hon. Member for Derbyshire, West (Mr. Scott-Hopkins) seems to see some contradiction between that important announcement and our stance in relation to the Commission's proposals. The important point about the announcement is that it relates to increases in the guaranteed prices. They will have no immediate effect on consumer prices, and that illustrates the case put by a number of my hon. Friends about the basic advantages of our traditional system of supporting agricultural prices. I go further and point out that the announcement refutes the suggestion by hon. Members on both sides that the Government are not prepared to give the industry the support and resources it needs to expand. If the hon. Member for Derbyshire, West does not realise how widely welcomed my hon. Friend's announcement will be, the hon. Member for North Angus and Mearns (Mr. Buchanan-Smith) will confirm it. It will provide a great deal of encouragement to the sheep industry.

I want to refer now to the effect of the Commission's proposals on prices here. It is surprising that hon. Members opposite, particularly the hon. Member for Derbyshire, West, were able to remain almost oblivious to the implications of the Commission's current proposals for consumer food prices in this country. As my right hon. Friend explained, the proposed increase in the common prices and the proposed devaluation of the green pound will increase consumer food prices as a whole by 2 per cent. In addition, we have the 2 per cent. increase which derives from the two transitional steps. This is a major problem, and I do not think that anyone seriously concerned about the level of inflation could accept that increases of that order can be justifield in the current circumstances.

Mr. Scott-Hopkins

The hon. Gentleman must he fair about these increases in the cost of living. The second transitional step is at the end of 1977. The various increases in minimum prices will be in September or October. They will be phased over the year. This is not a sudden increase of 2 per cent.

Mr. Strang

I think that the hon. Gentleman has misunderstood the point. Of course the first transitional step comes at the end of the marketing year, and the second comes at the end of the current calendar year. But I am giving the year-on-year increase.

Let me turn to the impact on producers' prices. The right hon. Member for Yeovil (Mr. Peyton) asked specifically for these figures. We expect that the effect on United Kingdom producers' gross receipts of the proposed package plus transition would be to raise them by about 9 per cent. since some market prices are already higher than the institutional prices and some products are scarcely affected by the package.

So much for the effect on domestic prices, but what about the effect of the Commission's proposals on Community prices? For most member States this is a tough package. The vast majority of the other States do not have transitional steps to take, and, far from the proposed changes in their green currencies increasing prices, in the case of Germany and other countries they will decrease the proposed increase. The package will therefore mean a fall in real terms in producer prices in many member States.

That is why it is not surprising that we find the British delegation arguing quite differently from the other delegations. They are asking for an increase in common prices. We are seeking a decrease. Where the Community is in structural surplus we are justified in seeking a reduction in the common price, not just in the British domestic interest but from the Community's point of view as well.

It was remarkable that the right hon. Member for Yeovil should seek to play down the significance of the current milk surplus in the Community. The hon. Member for North Angus and Mearns did not seem to appreciate the enormity of the structural milk surplus in the Community. The fact is that after the drought there are 250,000 tonnes of butter and over 1 million tonnes of skimmed milk powder in store. Consumption of dairy products is falling while production is continuing to rise. That, of course, is a disaster. Even the Commission has used that word in relation to the milk surplus.

That situation explains why the United Kingdom is arguing that there should be no increase in the common price for milk over the marketing year. That is why, whatever argument there may be for a levy, there is no case for a levy if its effects on producers are immediately to be obliterated by an increase in the price.

As responsible members of the Community we recognise that it is not enough to tackle this problem simply by holding down the price. There is a case for other measures. We are adopting a constructive approach to the Community's milk action programme. We are able to welcome some elements of that programme.

We support the proposed subsidising of school milk. The proposal to accelerate the brucellosis eradication scheme with Community support is acceptable to us. There are, however, other elements in the package to which we are completely opposed, and that is implicit in the Government's acceptance of the amendment in the name of my right hon. Friend the Member for Battersea, North (Mr. Jay).

The proposed levy on fats and oils is unacceptable to the United Kingdom. We cannot accept the exclusive use proposal in its present form. My right hon. Friend the Member for Battersea, North drew attention to the effect which the proposal could have on manufacturers who include non-milk fats or proteins in milk products. The new proposal would not prohibit the manufacture of these products, but it would prevent their being labelled with names suggesting that they are milk products. We have always supported properly developed labelling rules which tell the consumer what he is buying. We consider that the Commission's present proposal would have consequences for our food industry which go beyond these objectives. Much detailed discussion on the Commission's proposal is now in progress in Brussels. We shall fully satisfy ourselves on the consequences of this or any revised proposal before we decide whether it is acceptable.

I turn to some of the other items in the action programme. We should like to see the proposal to ban investment aids modified before we accept it. We should also like to see the proposed subsidisation of the use of liquid skimmed milk and fresh skimmed milk powder modified before it is acceptable. The proposed non-marketing premiums and the beef conversion scheme form the centre-piece of the milk action programme. The hon. Member for Derbyshire, West acknowledged this in winding up for the Opposition, and my hon. Friend the Member for Durham (Mr. Hughes) made some remarks about the proposal, remarks with which by and large I agree.

We support the proposal as it relates to small producers. We should like to see the ceiling reduced somewhat, but we recognise that a modified proposal of this nature could go some way towards tackling a problem which exists in other member States rather than the United Kingdom.

A number of hon. Members raised the issue of the Milk Marketing Boards, as was proper, because the milk section programme is aimed both at reducing the level of milk production and at increasing milk consumption. We have a high level of consumption in this country, particularly of liquid milk. That derives from the existence of the five United Kingdom Milk Marketing Boards. The hon. Member for North Angus and Mearns slightly misunderstood my right hon. Friend, who was not suggesting that the Board carried out the retail distribution of milk, but properly argued that it was only within a highly controlled framework, with out five United Kingdom Boards and a controlled milk price, that we could expect the system of universal delivery to the doorstep to continue. If we were to break away from that planned and controlled system—I would describe it as a good example of modern pragmatic Socialism—to the sort of free market that some Conservative Members advocate for other commodities the system would quickly break down. That is why we have made it absolutely clear that we are determined to retain the United Kingdom Milk Marketing Boards.

I now turn to some of the other commodities which hon. Members touched on. On sugar, we are pressing for the maximum price restraint. The Commission has rightly drawn attention to the possibility of an exportable surplus of about 3 million tonnes next year. Overproduction on this scale when the world market is likely to be oversupplied cannot be justified. We fully support the Commission's proposal for a reduction in the B quota to 25 per cent., and we are pressing for agreement on this in the Council.

My right hon. Friend the Member for Battersea, North and a number of other hon. Members raised the question of isoglucose. I assure them that the Government cannot agree to the Commission's proposal that a substantial levy should be placed on isoglucose production. That could make all production of isoglucose in the Community economically unviable. It could also lead to the waste of sums already invested in the production of isoglucose by some firms and to the loss of jobs involved. We have made our difficulties plain in the Council and we have pressed on the Commission the need for further studies on this difficult and complex subject.

I turn now to the subject of beef. We are also pressing for price restraint for that commodity. Clearly, we are moving into a situation in which the price is becoming so high that consumer resistance is substantially building up. We are determined to retain the variable premiums.

Many hon. Members, including my hon. Friends the Members for Gloucestershire, West (Mr. Watkinson) and for Rother Valley (Mr. Hardy) and the hon. Members for North Angus and Mearns and South Angus (Mr. Welsh), have mentioned pigmeat. The proposed increase in the common price of pigmeat is of no importance because it does not influence pigmeat prices, nor does it have an immediate impact on producers' returns. What is important is the method of calculating the MCAs. My right hon. Friend has raised this issue. He pressed for a recalculation of the pigmeat MCA in September last year, and he has repeatedly argued the case for such a change. Against that background he introduced our own domestic pigmeat subsidy. Hon. Members on both sides of the House supported him in that action.

Mr. Jopling

I do not intend to be offensive but the Minister skirted the main question of the debate in a way to which we are now becoming accustomed. I hope that the Parliamentary Secretary will not do so. The costs of the agricultural industry have gone up by 19 per cent. in the last year. The package proposed by the Commission suggests that prices should go up in recompense by 14 per cent. Before the end of the debate, will the Parliamentary Secretary tell the House how much the Government believe that the industry should have after prices have risen by 19 per cent.?

Mr. Strang

The Commission's proposals would raise United Kingdom institutional prices by 21 per cent. We can modify those proposals substantially and still have the scope to give our producers the return to produce the food that is in our national interest.

I shall now restate the Government's position on the Commission's proposals. My right hon. Friend made the position clear. We take the firm view that the package that is finally agreed must contribute to price restraint and to the reduction of surpluses. We shall continue to press for common support prices to be set at levels that are sensible, that give efficient producers adequate returns and that do justice to consumers. We must work for better and less wasteful use of Community resources.

I have told my collegaues in the Council of Ministers that, in the United Kingdom's view, it is hard to justify any increase at all for those products, such as milk, which are in structural surplus. We recognise that from the point of view of other member States and Community farmers generally the Commission's price proposals are tough. We therefore face strong pressure for price increases that are greater than those proposed by the Commission. But the Government are determined to negotiate a settlement that takes proper account of the need for price restraint and is consistent with our aims for improvements in the CAP. I am confident that these objectives have the support of the majority of hon. Members in the House.

Amendment agreed to.

Main Question, as amended, agreed to.

Resolved, That this House takes note of Commission documents R/360/77, R/360/77 Addenda I and 2, R/2469/76 and R/2673/76; welcomes the Government's intention in respect of R/360/77 to negotiate a settlement which, taking into account the interests of consumers as well as of producers, helps to secure a better balance of the market, particularly in those sectors with a structural surplus; and. In respect of R/2469/76 and R/2673/76, endorses the Government's view that decisions on whether Commission proposals for changes in a member state's representative rate should be accepted are primarily a matter for that member state; further urges the Government to press for easier access into the United Kingdom for efficiently produced foodstuffs from outside the EEC; and opposes the EEC Commission's proposals for exclusive use of butterfat and milk proteins, for a prohibitive levy on the production of isoglucose, and for a tax on vegetables and marine fats and oils.