HC Deb 12 December 1979 vol 975 cc1313-23
The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker)

With permission, Mr. Speaker, I should like to make a statement about the Council of Agriculture Ministers in Brussels on 10 and 11 December. My hon. Friend the Minister of State in my Department and I represented the United Kingdom at this meeting.

At my request the Commission proposed a 5 per cent. devaluation of the green pound in order to boost the resources available to British agriculture. The devaluation will take effect on 17 December for all the main commodities except cereals and eggs and poultry, where the change will take place at the start of the next marketing year on 1 August 1980. For wine, the devaluation will not take effect until December 1980. This devaluation will be of great importance to British agriculture and it will add about £150 million to farmers' returns in a full year. The effect on consumer prices will amount to one quarter of 1 per cent. on the retail price index, but it will be many months before the full effect of the0.25 per cent. increase reaches the shops. The Council also agreed a 5 per cent. devaluation of the Italian green lira.

The Council agreed a mandate for the Commission to negotiate voluntary restraint arrangements by third countries exporting sheep meat to the Community. The mandate was in accordance with our insistence that any agreement should be a totally voluntary agreement on the part of New Zealand and that there would be no unbinding of the GATT tariff arrangements. We rejected a French proposal that there should be a threat of unbinding the GATT for any country that refused to reach a voluntary agreement.

We and the Commission also rejected a French request to the Commission that no action should be taken by the Commission in respect of the illegal French measures on sheepmeat imports. We again made it clear we would not accept any sheepmeat regime that failed to give a net benefit to Britain or included intervention.

Proposals were before the Council for a wine package designed to restore balance in the wine market and to avoid surpluses. The package was such that Community payments of £32.5 million per year would have resulted in equivalent Community savings of £32.5 million per year. We succeeded in negotiating a substantial reduction in the Commission's proposed FEOGA payments so that the savings will outweigh the payments and produce an anticipated net reduction in the Community budget of £6.5 million per year over the period of the programme. We also resisted French pressure to bring into the package, at the very last moment, an extension of present temporary arrangements protecting producers from low market prices at the end of long term storage contracts.

We secured an agreement that at the end of the current seven-year programme of restructuring, with its ban on new plantings, there would be a review by the Commission. This should ensure that planting controls will be maintained if there is any further risk of surplus production. The package finally agreed will therefore reduce the contribution of the United Kingdom towards Europe's wine regime.

Agreement was reached on a group of animal health measures, which fully meet the United Kingdom's requirements, and we obtained an extension for a further six months of the derogation enabling the United Kingdom, the Irish Republic and Denmark to maintain their national swine fever requirements for imports of pigs and fresh pigmeat.

Mr. Mason

I am obliged to the right hon. Gentleman for that report. Is he aware that with a 17 per cent. inflation rate and a record high minimum lending rate these factors are forcing our farmers into their present difficulties? Government policies are forcing the Minister to go for quick devaluations and to appeal to his agricultural colleagues in the Community who then blackmail him on other measures. It is the British consumer who suffers every time as a result.

Is the Minister aware that in the last six months since he came to office his devaluations and food price increases have increased the food price index by at least 2 per cent. and that the weekly food bill of the average family has increased by 50p? Does he accept that though the farmers may have benefited by £300 million it is likely that the cost to the British consumer will be over £450 million?

The British housewife now realises that she has been conned. That is the reason for the 9 per cent. swing recorded today against the Tories by the women of Britain. Will the Secretary of State say specifically what this devaluation has added to the national food bill and what are the separate food increases?

The wine package appears to be a good deal. We hope that the reductions mentioned by the right hon. Gentleman will be realised. The Minister still seems to be standing firm on the issue of sheepmeat. Does he still maintain that any new regime to assist the French will not be at the expense of the Community but will come from the national French pursue? Will he continue to stave off any threats to New Zealand lamb exports to the United Kingdom?

Mr. Walker

The right hon. Gentleman surprises me with his reasons for the increased farm costs. He did not mention the biggest increase that farm workers have ever had in their wages. If farm workers are to benefit by £220 million—a much better wage increase than they ever obtained under a Labour Government—the right hon. Gentleman must expect some increase, since the farming industry has to meet the Bill.

The right hon. Gentleman is absolutely right when he talks of the negotiations for green pound devaluation resulting in the threat of blackmail. The negotiations resulted in a threat of blackmail that was totally unsuccessful. The French demanded that if they agreed to the green pound devaluation they must have a major concession on wine and a major agreement on sheepmeat. Even the Commission's proposals on wine were reduced by 20 per cent. as a result of the skilled negotiations by my hon. Friend the Minister of State. The resulting wine package is of net benefit to Britain.

No concession of any kind was made on sheepmeat. After starting with what the right hon. Gentleman described as a "blackmail" technique the French finished the day having achieved absolutely nothing. As for price increases, I do not think that I can do better than refer to the previous 5 per cent. devaluation by my predecessor, the Minister of Agriculture in the last Labour Government. When introducing his 5 per cent. devaluation he stated that when that devaluation—which was necessary for the well-being of British agriculture and to help safeguard employment in our pig-meat processing plants—had eventually worked through into prices it was expected to increase the retail price index by one-fifth of 1 per cent.

That was the view of a Labour Minister on a 5 per cent. devaluation. I am therefore surprised that his successor as spokesman on agriculture should take a different attitude. In relation to assurances about the position of New Zealand and sheepmeat, I guarantee that there will be no support from the British Government, which will provide Community financing for French farmers. Any premium system that we agree to must bring a net benefit to the United Kingdom. If there is no such system there will be no agreement on a system for sheepmeat. I categorically state that under no circumstances will the British Government change the conditions for the entry of New Zealand sheepmeat unless it is by voluntary agreement and based upon a decision by the New Zealand Government.

Mr. Peter Mills

I congratulate my right hon. Friend on what he has achieved. He has given nothing away, contrary to what is said in The Guardian today. What further steps can he take in the immediate future to open up the lamb export market to France? Does he agree that the present situation is damaging to farmers, particularly in the South-West of England.

Mr. Walker

I agree that the position has been exceedingly damaging. During the last year not only have the French pursued their present policy on sheep-meat; they have substantially reduced the quota compared with the allowance for 1978. The final rejoinder of the French Government to the Commission's legal procedures is due to take place today. I am glad to say that the Commission confirmed yesterday that it is its duty to ensure that the law is obeyed.

Mention has been made of the interpretation of the wine package. Credit is due to the Minister of State. Not only did the wine producers not receive what they required; even the Commission's proposals were cut by 20 per cent. through the Minister of State's efforts. That brought about a saving of £45 million on the total wine package over the period. I do not see how that can be interpreted as giving way.

Mr. Stephen Ross

I congratulate the Minister on his determined efforts to give the farmers a much-needed boost to their incomes. Will the Minister point out to his Cabinet colleagues that because interest rates are running as they are, the package of £150 million is worth probably only £75 million? Does he agree that there is a need to bring down interest rates? I congratulate him on his resistance to the French demands, but when will there he help for the horticulture industry? Am I correct in believing that fuel subsidies are paid to Dutch and French horticulturists?

Mr. Walker

I agree that there are problems in the horticulture industry. Only one country has obtained benefit, and that is due to the provision of cheap gas in Holland, which is of particular help. Dutch horticulturists are angry because the Dutch Government have made substantial increases in the price of gas, in line with their undertaking to bring the price up to the price of oil. The Dutch Government are genuinely trying to achieve an appropriate adjustment in the Community in that respect.

Interest rates impose a heavy burden on the farming community. All my colleagues in the Cabinet hope that as a result of our policies we shall be able to reduce the interest rate in the near future. This boost to British agriculture is not just of direct financial benefit; it takes away the unfair competition for those countries with positive MCAs. I hope that that will provide a further boost for the agriculture community.

Mrs. Dunwoody

Does the right hon. Gentleman accept that he skipped rather rapidly over the question of health regulations? What will happen to milk on 1 January 1980? The British consumer must be protected.

Mr. Walker

I am grateful to the hon. Lady for asking that question. I should like to make it clear that the general impression that our health regulations for milk will expire at the end of this year is untrue. The regulations on the metric pack end then, but the health position continues. In our view, and in the view of the Advocate General of the European Court, those health regulations are totally justified until such time as a European regulation is introduced. There is no prospect of a European regulation being introduced before 1982. Any such regulation will be applied only two years after that date. In our judgment there is no threat from milk imports.

Mr. Nelson

Was not the green currency system originally introduced partly to provide a subsidy to the consumer but mainly as a means of protecting the farmer against sudden fluctuations in the value of the currency in which he is paid? Is it not clear that the green currency system has worked to the detriment of British farmers? In view of that, and as we are approaching the devaluation parity of the sterling exchange rate, does my right hon. Friend have any views about the long-term future of the green currency system? Would it not be better to move towards discontinuing it?

Mr. Walker

The question whether we discontinue the system is not a matter for us alone. When there are large variations in currencies, without an adjusting mechanism there can be no common agriculture prices policy. At present we certainly do not have a common agriculture prices policy. After today's 5 per cent. devaluation the prices paid to British farmers will be the lowest or the second lowest, in the European Community. The whole operation of this mechanism has been bad for British agriculture. It was particularly bad during the period when we had a Government who allowed MCAs to develop against British farmers at 20 per cent. and 30 per cent.

Mr. Meacher

Can the right hon. Gentleman confirm that nothing in the package, even in the interim, will permit the French to impose temporary import levies on British lamb? Will he confirm that any such action will be strictly illegal and outside the agreement.

Mr. Walker

Yes, Sir.

Mr. John Wells

I am grateful to my right hon. Friend for this action on the horticulture scene. Did he put any questions to his colleagues about intervention in the apple industry? Did he begin to investigate the possibility of fostering the British apple juice industry, which is dear to the heart of the NFU?

Mr. Walker

No, Sir. This was not on the agenda at the meeting but I recently met representatives of British apple producers. It was the most encouraging meeting in that sphere that my Department has had for many years. There was an appreciation that if we are to succeed in reviving that industry we must have better marketing and be as effective as the best in the Community. We must investigate the possibilities of the apple juice industry developing in Britain. I promise to work in close co-operation with the apple producers. I hope that we shall make substantial progress.

Mr. Jay

Is not the latest wrangle with the French further evidence that in Brussels issues are not decided on their real merits? Would not it be better for us all if each country decided its policies according to its own needs and paid for them itself?

Mr. Walker

That is the classic view of someone who is totally opposed to the European Community—and I understand it. The periods when some countries were not part of the Community were not noted for the brilliance of their Governments or their dramatic economic successes.

Mr. Maxwell-Hyslop

Will my right hon. Friend confirm that since Britain's payments to the Community are related to the level of food imports the 5 pet cent. devaluation of the green pound that he has gained for milk will help to protect Britain from excess contributions to the EEC budget?

Mr. Walker

Yes, Sir. The budgetary effects are relatively small, because, theoretically, in budget terms they are compensated for by adjustments in the MCAs—but that depends upon one's attitude towards MCAs. I have never shared the view that they are of great benefit to the country against which they are exercised.

Mr. Dalyell

Is the Minister aware of the wide discussions on the ethyl alcohol directive? Is he aware that my hon. Friend the Member for Stirling, Falkirk and Grangemouth (Mr. Ewing) and myself are concerned about the possibility of damage to the £60 million BP chemical project at Grangemouth? Can the Minister say anything about that difficulty?

Mr. Walker

The alcohol regime was on the agenda, but it was decided to delay discussion on it until the next meeting.

Mr. Kimball

Was my right hon. Friend able to resist further blackmail on the question of sugar beet? Did he make it clear to our European partners that we cannot accept a reduction in the acreage of this valuable crop?

Mr. Walker

There was a discussion on sugar beet and on the Commission's proposals for milk. I said that a system of allocation based upon the previous four years—two of which were bad drought years for Britain, and when positive MCAs operated against us—would be totally unjustified. The crop this year takes up virtually the whole of our A quota. One should examine future resources on that figure and not on the average of the last four years.

Mr. Spearing

Will the Minister confirm that the 5 per cent. devaluation of the green pound will halve the difference between United Kingdom and EEC prices, raising United Kingdom prices to a higher level than they would otherwise be? Will he also confirm that that will increase the cost to farmers of imported cattle feeds, such as maize, which is now running at over £50p a ton, and that therefore the increased income to the farmers will have to be offset against levies that go direct to Brussels?

Mr. Walker

I have given the details of the increase in prices. As to the second point, I know that the hon. Gentleman will be delighted to know that the figure of £150 million is net, after taking into consideration any increases in the cost of feeds. It was precisely for the type of consideration to which the hon. Gentleman referred that we arranged green pound devaluation for 17 December for livestock and all the other commodities, but deferred it to August for cereals.

Mr. Dykes

Does my right hon. Friend agree that the sensible and rational adjustments to the green currencies can easily go hand in hand with pressing for agriculture to take a fundamentally lower proportion of the budget in future years?

Mr. Walker

Yes. As my hon. Friend knows, the main reason for the massive increase in the cost of the budget is the cost of disposing of the substantial surpluses that have built up in dairy products, sugar and, to a smaller degree, cereals within the European Community. The tackling of this problem is fundamental. It is easy for Britain to tackle it, because we do not produce the surpluses, but it is vital that more effective action is taken to ensure that more resources are available for other European activities.

Mr. Harry Ewing

Does the Minister accept that the ethyl alcohol problem, raised by my hon. Friend the Member for West Lothian (Mr. Dalyell), is closely related to the French wine industry? When the right hon. Gentleman discusses this matter at the next meeting will he give us an undertaking that he will not agree to allowing the French wine industry to unload fermentation alcohol on to the ethyl alcohol market?

Mr. Walker

I am well aware of this problem. As the hon. Gentleman knows, we are in close consultation with our industry on this matter and obviously we are adjusting our attitude accordingly.

Mr. Farr

Will my right hon. Friend look again at the illegal banning of British exports of lamb to France? Will he also examine once more the alternative policies that are available to him, so that we can stress to the French Government, in more ways than one, how displeased we are with their attitude?

Mr. Walker

One of the reasons why, throughout most of yesterday's talks and negotiations, the attitude that we took had the backing of seven other member States was that they objected strongly to the attitude to the green pound negotiations that the French had taken earlier in that meeting. One of the reasons for the French attitude is that they are currently suffering from having put themselves into this illegal position. It is difficult for a country to claim to be communautaire and at the same time to act illegally. I believe that the French are fast realising that the continuation of their position is against their own national interests.

Several Hon. Members rose—

Mr. Speaker

Order. I propose to call those hon. Members who have been rising in their places since the beginning of supplementary questions.

Mr. Stoddart

I wonder whether the Minister can help us a little more on our net contribution to the total Community budget. When we devalue the pound by 5 per cent., or any other percentage, does not our total net contribution to the Community fund increase, because the levies on food coming from outside the Community are increased? If that is so, does not that undermine Britain's present efforts to reduce our total net contribution?

Mr. Walker

No, Sir. I do not have the details of this, but the figures involved are very small. There are compensating factors both ways. The actual effect on the budget is a very small net figure.

Mr. Crouch

Is my right hon. Friend aware that I would not be against the French or the Italians trying to sell more wine for consumption as wine in this country? However, I agree with Opposition Members who have put questions about the subsidy on wine to turn it into agricultural alcohol. There is a strong feeling in this country that my right hon. Friend should not allow that to be used as a horse-trading measure.

Mr. Walker

I assure my hon. Friend that we shall not allow any of these matters to be used as horse-trading measures. I think that that was shown clearly yesterday. It is not our intention to do that. The alcohol package in its present form would damage whole sections of our industry, and when it comes to the detailed negotiations of that package we shall be closely informed of the effects on our industry.

Mr. Haynes

Is the Minister aware that he has had a fair amount of praise for his disastrous policy, contained in the statement that ate made this afternoon, bearing in mind that the burden will fall on the lower income groups in the future, as previously, unless this disastrous Government change their policies?

Mr. Walker

Presumably the hon. Member supported the Labour Government, under which food prices rose, on average, by 2 percent. per month. Therefore, his criticism of an action that increases prices by 1 per cent. over a year is hard to take.

Mr. Cockeram

Will my right hon. Friend confirm that agriculture is the only British industry that suffers the injustices of the green pound? I welcome this 5 per cent. devaluation, but will my right hon. Friend confirm that it is still his intention to secure further justice for British agriculture over ensuing years, thereby making it fully competitive?

Mr. Walker

Yes, Sir. As my hon. Friend knows, it was pledged in the Conservative Party manifesto that over the period of office of this Government we would eliminate the green pound difference, and we have not made bad progress in our first nine months.