FOOD PRODUCTION

HC Deb 30 June 1978 vol 952 cc1836-48

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Graham.]

5.44 p.m.

Mr. Peter Mills (Devon, West)

I am grateful for this opportunity of saying a few words about another important subject. Having saved the Government as the only West Country Member here on the important issue of Northern Ireland, I am pleased that I can turn to an important subject about which I know a little more.

I declare an interest in farming and meat plants. When we think of the Government's responsibility for food production, there is one word that is crucial to agriculture and its future. It is the word "confidence". It is more important than many other words. In the last three or four years, confidence has been sadly lacking under this Government.

Food production is of major importance to the country. About two-thirds of our temperate food is produced here. It is easy for some folk to think that we can rely on food from other countries, but this has real dangers. One has only to look at what is happening in Australia, where there is a severe shortage of production, to see that that attitude is wrong.

If we want home-grown food, we must have a confident British agriculture industry. The Government have a responsibility for such matters. How can we expect further investment in British agriculture without long-term confidence? As I hope to show, many aspects of Government policy have had a serious effect on confidence in British agriculture.

Farmers would like to hear the Government trumpeting the value of home-grown food as much as they trumpet the value of home-grown oil. We hear much about home-grown oil and its advantages to the balance of payments. What about trumpeting the value of home-grown food?

Consumers are not aware of the position that British agriculture is in. There is lack of confidence. The effects of the green pound are serious to the pig industry. My message to consumers is that if they want British food we must have a healthy and confident agriculture industry. They might have to pay a slight increase in price sometimes, they might have to pay for some storage costs, but in the long run that is better than being held to ransom by world shortages.

What are some of the major fears which stem mainly from the Government's policies? They are fears which produce a real lack of confidence. First, there is the fear of taxation. Under a Socialist Government farmers have experienced fairly heavy taxation. There are also the prob- lems of the capital transfer tax and the capital gains tax. The Government have made some efforts to help in that direction, but the effect on farms and small businesses is serious.

Extra insurance contributions are to be imposed. That will not help confidence on the part of the small business man, let alone British farmers. One of the most serious articles that I have read in an agriculture paper appeared in the Big Farm Weekly. Under the heading Our future role—AMC Chairman it stated: The main purpose of lending by the Agricultural Mortgage Corporation in the future may be to help the purchase by other farmers of land which some owners will have to sell in order to pay their taxes. That is a most serious matter. Indeed, if there is anything that would sap confidence, it is a statement such as that. I am not blaming Mr. Glyn, the chairman, one little bit for making those remarks. What I am saying is that the Government should not, through taxation, sap confidence in this way.

Then there is the proposed wealth tax. Nothing could reduce confidence more than this. I wonder whether the Minister and the Government realise the effect of a wealth tax on British agriculture. Certainly my party would never introduce this, and such an assurance from the Government would indeed restore confidence to agriculture. If we had this tax, it would be a real body blow.

What about land nationalisation? The Minister of Agriculture himself said the other day that the Government would not be introducing land nationalisation in the life of this Parliament. True enough. But what happens if there is a Socialist Government next time? I am pretty certain that a wealth tax would be on the cards then, and I believe that the farming community should beware.

Then what about future needs in production? The lack of any firm guidelines from the Government has weakned confidence in the future. The National Farmers' Union is quite right when it says "We want to know what is wanted from us in this country as regards food production." The National Farmers' Union would, of course, like to see "Food from Our Own Resources" brought up to date. So would I. I think it is only fair and right that this should be done, so that we know where we are going. Perhaps the Minister will be able to answer, even at this late hour, what exactly the position is as regards bringing "Food from Our Own Resources" up to date, so that the farming community knows exactly where it stands.

All these things which I have mentioned weaken confidence. I believe that it is the duty of any Government to see that confidence is restored by dealing with these matters.

I turn now to the food industry and the processors. The relationship between the processing industry and agriculture is very close, because 70 per cent. of United Kingdom agricultural production is processed before it reaches the consumer. It is therefore important that, before any major decisions are reached on agricultural policy or a review is made of the current position, the interests of the food manufacturers are taken fully into account. I believe that the Government have a major responsibility, because the food manufacturing industry has serious problems.

The profitability of food manufacturers has been severely eroded over the past four or five years through price controls. I speak frankly. The Conservatives were certainly not free of criticism in these matters. One has only to look at profitability when the Conservatives were in power to see that the damage started then. But something needs to be done. The slight improvements that we have had in 1975, 1976 and 1977 have now been completely eroded by the Price Commission legislation introduced on 1st August 1977.

I believe that, because of the position of the food processors and manufacturers, consumers are very much at risk, and this is very undesirable. Again, the Government have a real responsibility in these matters.

I now turn to the poultry inqdustry. More and more consumers are turning to poultry meat, and it is extremely important that the industry is not only profitable but has fair treatment. The poultry meat industry is one of the rare sections of agriculture that has to stand on its own feet. It does not get a lot of help, and at present it lacks confidence. Something ought to be done to help the poultry meat industry to restore its confidence.

What do we find when we look into the problems and difficulties of the poultry meat industry? We find that the industry is facing considerable expenditure in adapting to EEC requirements of inspection. The United Kingdom industry did not oppose this. Indeed, it has gone to great lengths to co-operate in regard to these standards. But fundamental to this support was the requirement to have parity with the poultry meat industries in the Community. That is not happening, and this is why the industry is in serious difficulty. It is causing lack of confidence.

It is true that the Government are now prepared to make about £1 million available to help with the cost of training the poultry meat inspectors. Although we recognise the value of what the Government are doing in this respect, what is required is parity with the poultry meat industries in the Community. I hope that the Government will deal with the anomalies and disadvantages from which our poultry meat industry suffers. Representatives of our poultry meat industry have told me that it is small wonder that the industry doubts the Government's good faith in their protestations of an intention to protect and promote the industry's interests. That is a very unpleasant thing to say, but the Government should have discussions with representatives of the industry and try to allay the doubts and fears which exist, because it is important for the consumer that in the long term the industry is stable and viable.

The Government have a major responsibility for the present state of the pig industry. The National Farmers' Union is right in pointing to the Government's failures in this respect. Numbers and profitability are down. Worse of all, Community farmers are gaining a much greater share of the market. I recently toured a very well-organised farm at Dorchester. Its killing-out percentage is 70, with a 3.2 to 1 conversion ratio. However, despite all the knowledge and skill available on the farm and the good-quality pigs, the farm was losing about £1 a pig. How British farmers must hate the headline in the Big Farm Weekly which said German pig herd is set for a boom". I did not join the Common Market to see the Germans, the Danes and the Dutch taking a larger share of our pig-meat market. The Government should have done more to help the pig industry in its difficulties, particularly with the composition of the monetary compensation amounts. It is not only the pig producers who are affected but the processing industry, which produces bacon and tinned hams and other products, and jobs are at stake.

I therefore hope that we shall hear from the Minister that he intends to redouble his efforts to save our pig industry so that those working in it can be assured that they will have a profitable job. The problems of the pig industry demand and deserve great attention from the Government.

5.59 p.m.

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

I have listened with interest to the hon. Member for Devon, West (Mr. Mills). In addressing ourselves to what he said, we should, I think, first look carefully at the present position in United Kingdom agriculture.

The hon. Gentleman is right, of course, to emphasise the importance of confidence in the industry. I am tempted simply to read at length from a recent article by a national newspaper correspondent who, after visits to the Devon County Show—a show in the hon. Gentleman's own area—and other shows, described farmers as having renewed confidence and being increasingly hopeful about the winter wheat harvest and busily planning to expand dairy herds and sheep numbers, with a boom in dairying and perhaps a memorable year for horticulture in prospect. He advised the "gloom stirrers", as he called them, that they had secured quite a lot from the efforts of my right hon. Friend the Minister.

However, I shall not pursue that but will give my own assessment. In May, we secured a very satisfactory outcome to the price negotiations which represented a fair balance between the interests of consumers and producers. The hon. Gentleman was kind enough to mention that relationship. The increase in common prices implied an increase in returns to producers, net of extra feed costs, of some £35 million to £40 million, in addition to the £150 million to £200 million resulting from the green pound devaluation on which the Government had earlier secured a sensibly phased timetable for change. This takes into account the effect on cereal costs and so on.

But the confidence in the industry goes a long way. The hon. Gentleman, I know, is interested in the dairy herd, and this is an important aspect of agriculture. The price package was notable for the agreement which fully and permanently safeguards the Milk Marketing Boards, which was widely and warmly welcomed. I am sure that this was of considerable interest to the hon. Gentleman, who has expressed his concern about the boards from time to time. We also secured better arrangements for the United Kingdom butter subsidy than had been proposed and a reduction in the MCAs for pigmeat, to which reference has been made, which is coming into effect within the next few days.

There has rightly been reference to the matter of the Budget and taxation. The Budget was another event of importance for the farming industry. Last year, the hon. Member for Devon, West advocated a system for allowing profits to be averaged over a period of years. My hon. Friend the Chancellor of the Exchequer must have heard his pleas, because he announced a change on these lines on 11th April. The provision for averaging tax over two years is worth some £10 million to the farming industry in a full year. Farmers are helped also by the increased first-year capital allowance for agricultural buildings and works and the measures to aid small businesses, especially the so-called roll-over facility for capital gains tax on gifts of assets used in a business and the extension to all business assets of the 50 per cent. relief for capital transfer tax.

We have said time and again that there is a relationship between taxation and industry, especially the agriculture industry, and I think that my right hon. Friend has had well-deserved tributes for his response to the representations and for the results on this score. These developments give grounds for satisfaction to the farming industry. But, of course, there are always complaints from time to time—and rightly so—and in considering these it is helpful to look at what is actually happening in practice in the various sectors.

In the milk sector, I do not see any signs of lack of confidence. Production continues month by month to exceed even last year's record levels. Prices for cows in milk are very high, calf prices are high, the number of artificial inseminations has risen and profitability is high. We shall in any case be reviewing the position when we fix the maximum wholesale prices for the coming winter.

The hon. Gentleman did mention the beef sector, but this is another part of agriculture in which confidence is important. The new target price scale means that the average support price for 1978–79 is some 11 per cent. above the average for the previous year, itself some 16 per cent. above the average for the year before that. Market prices are firm, and, indeed, they have recently been at record levels.

I accept that there is some concern among producers about Irish imports and the size of the Anglo-Irish net MCAs, but, while it is true that Irish imports last year had an undue effect on our prices, this year we have a rather different situation, with a firmer market which so far has had no difficulty in absorbing the imports of Irish carcase beef and cattle. Producers have in any event the dual protection of intervention and the variable premium system.

The hon. Gentleman was right to mention today, as he has on many other occasions, the problems of the pig industry. In the pig sector, producers' returns are much improved this year. I have in mind that the Cambridge Economics Unit shows an average profit of £15 per £100 output in the six months ending in March. Meanwhile, the breeding herd is showing signs of a recovery.

I know that the bacon curing industry is facing difficulty, but the cuts in MCAs have helped to improve its competitive position. The MCA calculation on bacon sides is now £66 lower than it would have been without the green pound devalution.

The hon. Gentleman should not overlook, in his fair assessment, the work already done for the pig industry. In November 1976 we had the basis of the MCA calculations modified in a way which reduced the pigmeat MCAs by 8½ per cent. Then, because we did not think that that went far enough, we introduced a subsidy which, until the European Court forced its suspension, was worth £17 million to the pig industry. That subsidy was greatly welcomed at the time when the industry was facing the greatest pressure.

All these matters should be taken into account. They include the 7½ per cent. phased devaluation of the green pound this year, which does not apply to cereals until 1st August. Therefore, that has given extra help.

The hon. Gentleman did not mention the sheep sector, but I know that he has an interest in it. Last year our mutton and lamb exports increased by just over one-third, and the June and December returns showed a slight increase in the breeding herd, which was encouraging. I think that producers' confidence is well founded. As members of the most efficient sheep industry in the Community, they can look to the future with assurance. Discussions on a Community regime will, of course, go on for some time and all concerned can be certain that we shall seek a fair balance between the interests of producers and consumers, with a fair and economic return for our producers, but not the kind of price increases would would damage consumption.

The other sector which is important to the industry, particularly to my own constituency, is the potato sector, where there have been many uncertainties in recent times because of the Commission's failure in the past two years to decide what it wants about the potato regime. We have been closely in touch with the industry, and we have now come to the conclusion that there can be no Community regime for potatoes in time for the 1978 crop. Nevertheless, we have just announced that the guarantee will continue to next year. This will give a valuable degree of support and, I hope, confidence to producers in a year when their costs are lower, owing to the very big drop in the price of seed compared with last year.

My brief survey of farming shows an industry in good order. The net product was certainly hit by the drought in 1976. We must not forget the drought and the difficulties of the year before in some sectors, especially the potato and sugar beet sectors. The net product was certainly hit by the drought in 1976, but last year it rose by over 25 per cent. and we expect a further increase this year.

Whatever theories hon. Members press about green currencies—we are lectured on this matter from time to time—and the effects on profitability, what is happening in practice gives reassurance. The Government take seriously their responsibilities towards agriculture and the food industry and are providing the right climate and framework for helping development. We are not always in control of the climate, but that is the kind of climate which helps the industry, when the other form of climate is so unpredictable. This is important for those who work in the industry and for consumers.

I turn to the question of resources. We have heard mention of our document "Food from Our Own Resources". It will be clear from what I have said that we are concerned to provide the right framework of assurance in the farming industry about the longer term as well as the short term. It was because we recognised the need for confidence among farmers about the longer term prospects that my right hon. Friend announced the review of "Food from Our Own Resources." Perhaps it might be better named "Food from Our Own Devices", which would give the right initials. We have collected together all the evidence and are considering it. The industry will recognise that it is a job which should not be rushed and that it is not sensible to press us to go faster.

I admit that the hon. Gentleman was not doing that. He is right in suggesting that the industry wants to know about the future and about the guidelines. We hope that it will be possible to publish something in the autumn.

The hon. Gentleman mentioned poultry meat. In this sector supplies are high and the United Kingdom is self-sufficient. The export trade, which had been growing, has been more sluggish in recent months, but internal demand should remain keen.

The hon. Gentleman referred to problems facing the British poultry industry and to various factors. One of these is the Poultrymeat (Hygiene) Regulations 1976. I should first like to pay tribute to the co-operation that the industry has shown in the arrangements for phasing in the poultry meat inspection service. We have recognised its concern that the whole cost of recruitment and training of inspectors should not be borne entirely by the industry.

I have announced today details of the Government's assistance towards the cost of meat inspection. The Government have decided to provide assistance towards the setting up of the local authority poultry meat inspection service, which is required to be in full operation by August 1979. Grants at the rate of 50 per cent. of the eligible expenditure will be payable in respect of staff employed and trained for this purpose.

The detailed arrangements are to be discussed with the appropriate organisations. These are very important points. We estimate that the Supplementary Estimates will be presented in due course and that the great bulk of this expenditure will be incurred in England, and to take account of it the appropriate Ministry cash limit for 1978–79 will be increased by about £1 million.

I am aware, of course, of the concern also about the economics of small-scale egg production if implementation of the regulations leads to significant difficulties amongst slaughterhouses specialising in the processing of spent hens. The NFU has been in touch with us on this matter, and I understand that it is trying to assess what the scale of the problems could be nationally. I find it interesting to refer to these matters because in my constituency I have sugar beet and potato growing, arable farming, the usual mixed dairy farming, and, of course, one of the biggest poultry and egg producers in Europe.

I want to say a few words about issues relating to the common agricultural policy. When talking of the future of our industry, we must remember that we cannot be in the situation now where we are completely responsible for what happens. We are a member of the EEC, and we want to be sure that the framework within which our industry functions is the right one.

Earlier this year, the hon. Gentleman advocated the gradual devaluation of the green pound to reach parity with the Community. If by this he means aligning the green rate for the pound with the market rate used for MCA purposes, he is calling for an increase in United Kingdom farm support prices of about 30 per cent. Does he really believe that our agriculture needs an increase of that kind, which could produce an additional 6 per cent. increase on food prices, and thus an additional cost to the consumer of over £1,000 million, at a time when the Conservative Front Bench are criticising the Government for the increase in food prices?

I am very pleased that recently, for a period, food prices have been remaining steady, and, indeed, have been falling. The Government's policy is clear. We do not believe that MCAs should be phased out unless common prices can be set in a representative unit—the EUA—rather than the present unit, which is based on the currencies of the joint float, and unless they can be set at a sensible level.

These are some of the important points that we should take into account, and we have made this point clearly in the discussion of MCAs which took place in the context of the price fixing, with the result that the Council of Ministers eventually agreed that the reduction of MCAs should be pursued in the light of a satisfactory price policy and the development of a more stable relationship between Community currencies. The hon. Gentleman was right to focus attention on the importance of British agriculture. Over the years, under successive Governments, from the time of the Minister who brought in the 1947 Act—Tom Williams, who is still held by all parties as being the man who laid the foundation stone—all parties have been doing their best to give confidence to the industry.

In the changing times in which we live, with our position in the Community, I believe that my right hon. Friend has done a great deal to give the United Kingdom industry confidence despite the uncertainties.

I hope that I have said enough about our farming industry and the CAP. The Government do carry out their responsibilities successfully—responsibilities towards the food-purchasing industries, which are such an important part of the whole economy. The Government balance the interests of the various sectors, seeking to follow policies which are in the national interest, looking after the interests of both the producer and the consumer.

I end by quoting from the Modern Farmer—

The Question having been proposed after Four o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at fourteen minutes pass Six o'clock.