HC Deb 22 June 1979 vol 968 cc1653-72
The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker)

With permission, Mr. Speaker, I wish to make a statement about a meeting I attended of the Council of Agriculture Ministers in Luxembourg from 18 to 22 June to discuss CAP prices for 1979–80.

The surplus in dairy products has over recent years become by far the heaviest burden on the common agricultural budget and now takes more than 40 per cent. of the total expenditure. I was determined to see that this increasing burden was tackled by obtaining a price freeze for milk for the coming year in spite of increasing costs to producers that are taking place throughout Europe. I am pleased to say that, after prolonged discussions, a price freeze for milk was agreed for the first time since we joined the Community.

The other commodity in substantial structural surplus is sugar and while the cost of financing this surplus is not of the proportions of the cost of the dairy surplus, it is nevertheless a significant burden on the budget.

I supported wholeheartedly the proposals of the Commission to reduce the B quotas, for I believe that this is the most effective way of making significant progress in reducing Europe's sugar surpluses. The Commission decided not to press these proposals for the current year in view of the fact that this year's crop was already being grown. I therefore urged that the Council of Ministers should this autumn consider the quotas for the next growing year, and certainly I shall be advocating proposals that will make a significant step towards reducing these surpluses.

On prices the Council therefore agreed to a freeze on milk and a 1½ per cent. increase in price on other commodities, but in the case of Germany the 1½ per cent. increase would be reduced to ½ per cent. because the Germans agreed at the Council meeting to reduce their positive MCAs by 1 per cent. In the case of the Benelux countries the increases will be reduced to 1 per cent. as a result of ½ per cent. reduction in their positive MCAs.

The Commission, with support from some member States, pressed for the introduction of an increased milk co-responsibility levy with a reduced rate for production below a certain level, which would have discriminated heavily against the United Kingdom. I was not prepared to accept this proposal and the Council eventually agreed that the co-responsibility levy should remain unchanged on its present flat rate basis of 0.5 per cent., thus preventing any discrimination against British farmers.

At my request the Commission put forward a proposal for a 5 per cent. devaluation of the green pound. This will take effect on 2 July for milk, beef, and pigs and sugar, and at the start of the next marketing years for all other commodities. The effect of the devaluation will be to make British agriculture more competitive both at home and abroad.

I argued strongly the case for an additional 5 per cent. green pound devaluation in pigmeat MCAs, but, as I warned the House when we debated the CAP price negotiations last Friday, the Council refused to give a special green currency devaluation again for a specific commodity. However, the devaluation that I was able to secure will assist our pigmeat producers and processors in competing with subsidised imports because the devaluation obtained will mean that the remaining monetary compensatory amount is only 6.5 per cent. compared with 28.2 per cent. four months ago.

The Council also agreed on small devaluations of the green French franc and the Italian lira. The Council agreed to a regulation confirming the use of the ECU under the CAP.

The FEOGA budget is currently running at £6,650 million. The 1½ per cent. increase in prices will add £75 million in expenditure. But Britain's green pound devaluation will reduce Community expenditure by £90 million.

One of the main objectives at this meeting was to lighten the burden of the CAP on the United Kingdom and to bring some substantial benefit to consumers. The Council agreed to a special United Kingdom butter subsidy with 100 per cent. Community finance at a rate of 38 units of account per 100 kg. This subsidy, which will take effect immediately, is equivalent to 12p per pound at the retail stage. The Council also agreed with my proposal that the cost of reducing the price of New Zealand butter by the equivalent amount should be brought about by a reduction in the special levy rather than a direct United Kingdom Exchequer subsidy. The Council also agreed to an increase in the Community subsidy on school milk to 100 per cent. of the full target price of 7p a pint.

The butter subsidy is by far the highest one that the United Kingdom has ever received from the Community and more than double the subsidy that ends in June. It will not only more than offset the effect on butter prices of the 5 per cent. green pound devaluation but will meet the increase in butter prices resulting from the devaluation obtained by the previous Government in March. A subsidy of 12p per pound on butter reduces the food price index by 0.56 per cent. The Council agreed to authorise for a further year the payment of a special subsidy to Northern Ireland milk producers.

The average price increases of 1.2 per cent. are by far the lowest we have ever achieved. The freeze on the milk price is an important first step towards reducing the surplus production which has grown out of hand in recent years. We succeeded in the negotiations in preventing discriminatory arrangements proposed by the Commission as far as the milk co-responsibility levy was concerned. The negotiations produced substantial benefits for our agriculture industry through the green pound devaluation and substantial improvements for the consumers through the doubled butter subsidy. Of all the price fixings since we joined the Community, this is the one with the lowest increase in prices and the greatest increase in consumer subsidies.

Mr. Mason

I thank the right hon. Gentleman for that statement. However, is he aware that a week ago he spoke with great confidence in the House about what he would demand when he went to Luxembourg? In spite of all the camouflage in his statement, he has returned after being whipped in Europe. He has left behind the title of the Weak Man in Europe from Britain. The right hon. Gentleman went for a price freeze on all food products and he failed, in spite of the whole Commission's backing. We had a price freeze on all products until 1 July, and he has sold that out. To add insult to injury, he gave way to a 1½ per cent. increase on all food products except milk, where he has a freeze instead of pressing for a cut in production by inefficient producers.

The right hon. Gentleman went for a 10 per cent. devaluation on pig meat and again he failed. He went for a reduction in quotas, especially for sugar, and again he failed.

Where was the right hon. Gentleman's attack on the food mountains? All the evidence flowing from the recent conference shows that food mountains are likely to grow even larger. Perhaps he will tell us—he purposely omitted this information—the increases in price for the next 12 months for beef, sugar, cereals and bread.

The right hon. Gentleman's only success has been the 5 per cent. devaluation, That is the real success of his package. The 5 per cent. devaluation in April and the 5 per cent. devaluation now, on top of the 17½ per cent. inflation rate in the autumn, mean that the housewife will suffer considerably from increased foodstuff prices. The two 5 per cent. devaluations will mean an increase in retail food prices of 2 per cent. Agricultural wages are bound to increase. The cost of agricultural machinery, fertilisers and agricultural products is bound to increase. That means increases in foodstuff prices.

Apart from betraying the Commission and personally betraying Mr. Gundelach, the right hon. Gentleman has also betrayed the British housewife. We have now turned to a dearer food policy in Europe and we shall regret the day that the right hon. Gentleman went.

Mr. Walker

I congratulate the right hon. Gentleman on becoming the agriculture spokesman for the Opposition. I hope that he enjoys that role. I also hope that he does rather better in future than he has done this morning.

First, I shall examine the justice of the right hon. Gentleman's remarks. Perhaps he has not had time to study the record of his predecessor.

Mr. Mason

It was a better one than the right hon. Gentleman's.

Mr. Walker

During the previous Labour Government's term of office there was an average increase in prices in the Community of 7.6 per cent. a year compared with 1.2 per cent. on this occasion. Over the past two years the previous Administration, that tough, courageous Government, negotiated as the mountains accumulated. Those are the mountains that we inherited after five years of the Labour Administration negotiating price increases.

The year before last the Commission proposed a price increase of 3 per cent. for milk. The right hon. Gentleman's predecessor agreed to an increase of 3.5 per cent., and last year an increase of 2 per cent. That was agreed at a time of ever-increasing milk surpluses. Never once did the Labour Government seek or obtain a freeze on the price of milk. Every year milk prices increased as surpluses rose. For the first time the Government have obtained a check on milk prices.

The right hon. Gentleman spoke about letting down the Commissioner. Am I to understand that the right hon. Gentleman wanted me to support the Commissioner in a 4 per cent. co-responsibility levy? The Commissioner's remarks that we have added to the budget had nothing to do with the price freeze. Those remarks were due to his disappointment that we did not agree to a 4 per cent. co-responsibility levy. I gathered from the Opposition that they were opposed to that.

The right hon. Gentleman spoke about the effect on prices, and I noted that he made the same remark as he made last night, which was made before he had heard about the butter subsidy. It is interesting that he has not mentioned the greatest consumer subsidy ever obtained in the Community. It is a subsidy that for butter looks after not only our devaluation of the green pound but the devaluation of the previous Government.

The total effect of a 1.2 per cent. increase—that is the increase as it averages out through the Community—in the retail price index is 0.25 per cent. The effect of a 12p butter subsidy is 0.5 per cent. The subsidy outweighs the increases by exactly double. Therefore, as the housewives' champion, I am sure that the right hon. Gentleman rejoices.

Mr. Mason

Will the Minister now answer the question I posed? In the next 12 months, as a result of this package, what will be the increases in the prices of beef, sugar, cereals and bread?

Mr. Walker

The increase in the price of flour—1.5 per cent.—is so small that it will not affect the price of a loaf. That is the effect on bread. There will be an increase of 1p per kilo on sugar and an immediate reduction of 6p per 1b. in the price of butter.

Mr. Charles Morrison

Is my right hon. Friend aware that his statement makes a welcome change from the series of statements made by his predecessor, which resulted in food prices being more than doubled under the previous Labour Government? Will my right hon. Friend say what the cost to the milk producers would have been if he had accepted the co-responsibility levy proposed by the Commission?

Mr. Walker

I cannot, alas, give my hon. Friend an exact figure. The view of the Commissioner is that his greatest loss of revenue occurs as a result of the failure to obtain agreement to his co-responsibility levy. The main proposal before the Council would have excluded 50 per cent. of the milk production of France and Germany and only 9 per cent. of the milk production of Britain. That was why I was totally insistent throughout that we would not agree to any discriminatory co-responsibility levy. I am delighted that it has not been increased.

Mr. Stephen Ross

Is the Minister aware that we greatly welcome the further devaluation of the green pound by 5 per cent., which must be right if there is to be an efficient agriculture industry in this country, and also his resistance to any increase in the co-responsibility levy? What steps are being taken by Germany—and to a lesser extent by France—to reduce milk production in those countries, and how long is the butter subsidy timed to last?

Mr. Walker

The butter subsidy will last for the whole of the remainder of the farm year—that is, nine months. Therefore, for nine months we shall have the subsidy—which will be double the existing subsidy for that period—100 per cent. financed by the Community.

At one stage in the negotiations on the restrictions on milk production, seven out of the nine Ministers demanded yet a further increase in the price of milk. It was only after several days that we got to the position that eight out of the nine agreed that there should be no increase in the price of milk. They are, quite reasonably, arguing that, with costs rising by 8 per cent. and 9 per cent. throughout Europe, this will mean a reduction in the incomes of milk producers. But such is the size of the surplus that I believe this is necessary. Obviously, it will have its effects—but slowly. We cannot adjust a surplus of this size other than over a period of years. I am only sorry that over the past few years, in spite of the surplus, price increases for milk have been granted every year.

Sir Brandon Rhys Williams

I congratulate my right hon. Friend on taking part in the summit agreement, which is eminently sensible and humane. Will he take every opportunity of pointing out to the Opposition that agriculture on the Continent is a problem industry, with over-manning and many human and social difficulties which must be taken into account? We are dealing, not simply with a battle of wits over prices, but with people's lives and livelihoods.

Mr. Walker

I agree with my hon. Friend. I believe that in tackling these problems we must recognise that social difficulties have been created. However, in the longer term we cannot tackle them by means of inflated agricultural prices. We should try to develop social and regional policies that meet some of the social problems, and not just rely upon the common agricultural prices. The decision was made in the Council for the first time to take determined action on the worst of all the surpluses. I very much regret that there was total unwillingness to take a decision on the other surpluses. However, I am sure that that will be done in the decisions taken this autumn. If we can tackle those two dominating surpluses, the common agricultural policy may have a positive advantage throughout Europe.

Mr. Jay

In spite of all the Minister's explanations and excuses, is it not the reality that on the issue of the general price freeze he has run away almost at the first sight of the enemy? As a result, there will be a considerable increase in the EEC budget. Consumer prices will rise further here. The right hon. Gentleman showed little concern for the interests of the consumer in this country. As it is pretty clear that there will be no drastic reform of the common agricultural policy under the Government, the number of people who will think it is time for us to leave the Common Market altogether will increase rapidly.

Mr. Walker

The right hon. Gentleman could not be more wrong in almost every statement that he made. The effect of the price increases on the common agricultural budget will be £75 million. The effect of our green pound devaluation is a reduction of £90 million. The right hon. Gentleman is therefore totally wrong about the Budget

In terms of consumer prices, again the right hon. Gentleman is completely wrong. He probably had the misfortune of reading one newspaper today which said that the result of my agreement would be to put up the price of butter by 7p—when in fact it brings it down by 6p. I do not blame him for being deceived by those remarks. Of all the Community price-fixing arrangements in which we have ever been involved, this is the one with the lowest price increases and the highest consumer subsidies.

Mr. Emery

Does my right hon. Friend accept that this is the first statement on EEC agriculture, certainly for the past five years, in which the Minister has been able to combine a major satisfaction for agriculture while at the same time providing massive support for consumer prices? Will he bear in mind the major problems of the pig industry and the pig producers? He has gone a long way with the devaluation of the green pound and the level of the pound sterling. However, if the pound sterling fell by 10 per cent., the problem would return. There are many farmers and industrialists concerned with pig production who have had to stop their operations. If that happens, would the Minister consider perhaps taking action under the protective factor of one of the articles of the Treaty of Rome which would allow special consideration to be given to the pig industry?

Mr. Walker

I am grateful to my hon. Friend. I inherited a pig producing and processing industry in a desperate crisis. Therefore, I am surprised that a political party that displayed an interest in jobs should have opposed not just the special application I made for a pig meat price devaluation but even the basic 5 per cent. devaluation, which is so vital to the industry, and which has made a substantial difference to the MCAs.

I was saddened that at a previous Council meeting, before this Government came to power, when France obtained a special dispensation for its pig meat industry, the previous Government took no advantage of the opportunity to obtain a special dispensation for our pig industry. Alas, after that concession was made, the Council decided that no further dispensation should be given. That was the problem that I faced in Europe.

As to any other process under the Treaty of Rome, if a crisis develops in any sphere of agriculture I shall consider every possible means of trying to take action.

Mr. Denzil Davies

Will the right hon. Gentleman be a little more forthcoming about the budget? What will be the net effect on our budgetary contribution to the EEC of the whole package that he announced today?

Mr. Walker

The total figures of the package—they have not been costed—depend to some extent upon crops. This is an important statement. A number of newspapers reported this morning the existence of a statement to the effect that what the Council did would add £900 million to the budget problems.

The Commissioner argued that the failure to get agreement on his proposals—the biggest of which was the co-responsibility levy—left him that amount of money short. In terms of price increases and devaluation, the figure was £75 million.

In terms of the total contribution, if we take the butter subsidy into account, Britain will be better off than it was before the agreement was made.

Mr. Lawrence

Is my right hon. Friend aware of the widespread satisfaction that will greet his statement this morning in Burton-on-Trent and Uttoxeter? The farmers and consumers will be well satisfied with the first step that he has taken in Europe, in contrast with the irresponsibility and harvest of sour grapes from Opposition Members who, of course, do not like to see the Government implementing the first parts of their election pledges?

May I press my right hon. Friend further regarding the pig industry which is going through a bad phase and will continue to do so, notwithstanding the reduction of 5 per cent. in the green pound? What prospects does he see of improving the position of the pig industry in the next 12 months?

Mr. Walker

I thank my hon. Friend for his general remarks. This is certainly the first time, since we became a member of the Community, that we have had a subsidy worth £80 million to consumers over the next nine months. That is a very considerable advantage to consumers in this country.

Regarding the pigmeat industry, I believe the substantial reduction by over three-quarters in the pigmeat MCAs will be a great help. I also want to do all that I can as a Minister, and my Department will do all that it can, to see whether we can make improvements in the marketing and processing aspects of the pigmeat industry so that we are certainly equal to any of our competitors overseas.

Miss Maynard

Consequent upon the Minister's negotiations, more money will flow into the pockets of farmers, prices will rise in the short term and certainly in the long term, and the people who will be worst hit will be the lower paid. Amongst the lower paid are, of course, farm workers, who are the largest group of low-paid workers in the country. They will have to pay more for food, in addition to paying more for many other items because of the recent increase in VAT to 15 per cent. As they are rural workers, they will also have to pay more because of the extra 10p on petrol.

In view of the fact that Members of Parliament are asking for an increase of £95 per week, will the Minister support farm workers who are asking for a wage of £100 for a 35-hour week?

Mr. Walker

First, I believe that farm workers throughout the country will be rather relieved to at long last have a Government who are in favour of the expansion of British agriculture instead of a Government determined to see British agriculture do nowhere near as well as its foreign competitors. I believe that farm workers will welcome that. They will also benefit from the immediate reduction in the price of butter of 6p a pound. I am sure that they will rejoice about that.

Regarding the conditions of farm workers, certainly I shall always take a positive interest in their affairs. One of the first things that I did on becoming a Minister, as the hon. Lady probably knows, was to see the union leaders of the industry, and I shall, throughout this period, keep in close contact with them.

Mr. Body

Can the Minister give us some idea why Roy Jenkins should describe this package as disastrous? Is it anything to do with the increase in the amount of money that will come out of the Community budget to subsidise the surplus that is being exported?

Mr. Walker

I repeat to my hon. Friend that, when the Commissioner failed to obtain agreement to his favourite proposal for a very substantial co-responsibility levy, he expressed his anger at this money not being available to him. I personally think that the Council of Ministers was right and I am totally convinced that we were right to stand firm on the co-responsibility levy.

Mr. Spearing

Will the Minister answer three points? If he cannot do so now, will he undertake to let me have some answers later? First, will he confirm that the 5 per cent. devaluation effectively halves the gap between United Kingdom and EEC prices? Secondly, will he tell the House the increase in farm gate prices of those commodities in the EEC regimes which will be affected by the 5 per cent. and the 1½ per cent. on top?

Thirdly, the Minister has told the House that the price of bread will not be affected. Is it not a fact that the 5 per cent. devaluation will increase grain prices by between £7 and £10 per ton which must have an effect upon the price of bread and also the cost of feed for cattle? Therefore, does he agree that the amount of grain going into intervention will increase, thereby increasing the 15 million tonnes which the EEC expects to export this year?

Mr. Walker

Regarding the point about the reduction of our MCAs, the hon. Gentleman is right, that this basically halves the gap which exists between ourselves and our European competitors. After this 5 per cent. devaluation, with regard to our farmers, we shall still have the lowest prices in Europe. As to the argument about the increase in the price of bread and the devaluation of the green pound, the overall effect of a 5 per cent. devaluation of the green pound is, as was the view of the previous Government, an increase of 1 per cent. on food prices and one-fifth of 1 per cent. on the retail price index. I am glad to say that the effect on the food price index of this biggest ever butter subsidy is half of 1 per cent.

Mr. Douglas Hogg

Does my right hon. Friend agree that one of the ways to assist United Kingdom pig producers is to reform the MCAs so that they are more closely linked to the price of cereal? If my right hon. Friend does agree, will he please press for such reform?

Mr. Walker

Certainly I am in favour of reforming the MCAs. Unfortunately, changes in the MCAs, and the method of calculation, were agreed by the Council before I was a member. I regret that. The current calculation of MCAs having been agreed, it is quite difficult to persuade eight other Ministers, a number of whom have a considerable advantage because of the present calculation of the MCAs, to change them. However, I shall keep on pressing for a change in the recalculation.

Mr. Skinner

Is the Minister aware that he presents a picture today, at least to me, of someone knocking at the door selling a Slater Walker insurance policy and hoping that the consumer will not read the small print? Is he further aware that, when his statement is stripped of all its political verbiage, what he means is that once again the taxpayer will have to contribute more in terms of the budget in the long term, and the consumer will have to pay more for food?

Does the Minister accept that, while my right hon. Friend the Member for Deptford (Mr. Silkin) got his analysis right, he got his conclusions wrong in terms of the Common Market, and that the British people will regard it as a triumph when someone comes to the Dispatch Box and says "This is the day when we should leave the Common Market in its entirety."?

Mr. Walker

Probably the result of this package will be to please many of the constituents of the hon. Member for Bolsover (Mr. Skinner). I am sure that they will welcome the reduction in butter prices which will take place next week. In fact, this is the best price fixing for British consumers since we joined the Community. It appears to me that the hon. Member has become even more chirpy since his majority was halved at the last election.

Mr. Jim Spicer

Is my right hon. Friend aware that the 45,000 to 50,000 people employed in the pigmeat processing industry felt that they had been betrayed by the previous Government and that nobody cared about them? Will he accept my assurance that many of those workers in West Dorset feel for the first time that they have a Minister working on their behalf and seeking to ensure that their jobs are retained?

Every milk producer will welcome the fact that the co-responsibility levy has not been increased. Did the Commissioner give my right hon. Friend any reason for having changed his view on the co-responsibility levy? The Commissioner was determined 18 months ago to see it phased out completely. He now seems to have changed his tune and to be for an increase. Will the Minister give us an assurance that he will press for the abolition of that co-responsibility levy at future meetings of the Council of Ministers?

Mr. Walker

As hon. Members know, I personally think that a much better way to deal with the milk surplus would be to have a reduction in the price, rather than using methods such as the co-responsibility levy. I am pleased that at long last we have reached a stage where we have been able to freeze prices. As to the Commissioner's changing views on the situation, I am afraid that that is a question which will have to be addressed to the Commissioner.

I am grateful for my hon. Friend's remarks about the pigmeat industry, because I know that no one has taken a greater interest in this problem than he has. I believe that we have made a start, but I personally regret that we did not take action some time ago which would have put our pigmeat industry on equal terms with those in the Community.

Several Hon. Members

rose—

Mr. Speaker

Order. I must ask hon. Members to put briefer questions, because we are consuming a lot of time.

Mr. Mark Hughes

Does the Minister visualise, as a result of this package, that milk production in the Community will decline during the next year? If he visualises that, what will be the effect within this country, and where will the decline take place if it is not here? Also, will he readdress himself to the question put by my right hon. Friend the Member for Llanelli (Mr. Davies) on the budgetary consequences of this package, because I believe that the increase in the levies—import duties—will have to go straight to the Community?

Mr. Walker

The hon. Gentleman will understand that, the negotiations having been completed at 3.30 this morning on the finally agreed package, the detailed costings are not yet available, but obviously I shall make these available as soon as they have been calculated.

In terms of the effect on milk production, it is obviously impossible to calculate that because it depends upon many factors, including even the weather, the state of grass and conditions such as those. I agree very much with the right hon. Member for Deptford (Mr. Silkin), who previously occupied my position, that the actions over the course of one year will not in themselves have the desired results concerning the surplus. That is why I am pleased that we incorporated into a Council resolution the fact that, if the current price freeze does not have the desired effect, the Commission should come forward immediately with further proposals to try to diminish the production of milk. Therefore, the Council, in that way, made clear that it believes that this is a long-term process and not just a one-year price freeze.

Mr. Hill

I congratulate my right hon. Friend on bringing good news back from the Community—[Interruption.]—at the same time, obviously, having got it right, judging by such wrath from the Opposition Benches. I should like my right hon. Friend's opinion on the major collapse that has taken place within the pigmeat industry in the Isle of Wight and Hampshire. Feed prices have risen in the last few weeks. Prices are very static in the market. Will he press his colleagues in the Council of Ministers, again and again, for a further individual reduction for the pigmeat industry?

Mr. Walker

I agree with my hon. Friend that it is a very serious situation, but I must repeat that it will be considerably helped by the fact that the current MCA is now only 6.5 per cent. compared with 28.2 per cent. four months ago. That is a very substantial improvement. As my hon. Friend knows, I should have liked to go further. That was not a possibility. But I shall certainly continue to do all that I can to bring about changes that will benefit our pigmeat industry.

Several Hon. Members

rose—

Mr. Speaker

I shall call those hon. Members who have been rising in their places, plus the Opposition Front Bench.

Mr. William Hamilton

Despite all the verbiage, is it not the case that, before the right hon. Gentleman went to the Council, he said in very forceful terms that he was going to press for a complete price freeze, and to that extent it has been a disastrous failure? The right hon. Gentleman is well known as a professional con trickster—[HON. MEMBERS: "Oh."]

Mr. Speaker

Order. I think that the hon. Gentleman probably went further than he meant to do, because that is a reflection on the right hon. Gentleman's honour.

Mr. Hamilton

No, Mr. Speaker, it is not a reflection on his honour—[HON. MEMBERS: "Withdraw!"] It is a matter of taste. [HON. MEMBERS: "Oh."]

Mr. Speaker

Order. If anyone called me a "con trickster", I would know exactly that he meant that I was dishonest. I must ask the hon. Gentleman—I have already given him the opportunity—to withdraw that charge, which is not in character with him.

Mr. Hamilton

If that reflection is implied, I withdraw it.

However, does the right hon. Gentleman understand that Roy Jenkins, the President of the Commission, has said that this package is a disaster for the Community budget, and that many of us pay great attention to what Roy Jenkins says in these matters? In so far as the right hon. Gentleman has retreated from his former position, is it not the case that he has made that concession in the hope that there will be a pay-off to the Prime Minister in Strasbourg today, and does he think that that will happen?

Mr. Walker

First, as to the hon. Gentleman's remarks about the effect on Strasbourg and his question whether this was done for that reason, they are as totally inaccurate as his earlier remarks were nasty, personal and cheap.

However, concerning the increased prices, had the hon. Gentleman been at our debate last week he would know that I said that I was particularly concerned about the prices of those items that were in major structural surplus. I made it perfectly clear that on the evidence available to me, which was the Commission's proposals made more than six months ago, I would support a price freeze across the board. I also made clear in that debate, and at other times, that I would obviously have to consider the change in costs and other factors that had taken place from seven months ago, when those proposals were originally made. I have never at any stage, when cross-examined on many occasions on this matter, said that I would go into those negotiations demanding, whatever happened, a total freeze on every commodity. I did say that I would demand a freeze on those commodities in structural surplus. I am glad that, at long last, a British Government have achieved a freeze on the major item of surplus.

Mr. John Mackay

Does my right hon. Friend realise that the hill farmers, especially in the Highlands of Scotland, will particularly welcome his decision to devalue the green pound? Does he further realise that under the Labour Government the number of cows on the hills drastically declined? Will he give further help to the hill farming industry by considering increasing the hill livestock compensatory allowances?

Mr. Walker

I am grateful to my hon. Friend for his remarks. Certainly I have no doubt that the 5 per cent. green pound devaluation will give a very substantial boost to British fanning, including that in the hill areas. The hill areas had particular problems last winter. I can only say that I am currently in discussions with my right hon. Friends the Secretaries of State for Scotland, Wales and Northern Ireland to discuss what measures should be taken on this matter.

Mr. English

I am sure that the right hon. Gentleman does not wish to mislead the House, and common agricultural semantics is rather a specialised field. Does he agree that to use the term "butter subsidy" might give people the incorrect impression that they are paying less than the free market price for butter, instead of more? Will he say what the new levy on New Zealand butter will be, since that is a better guide to the level of prices above free market prices?

Mr. Walker

The new levy will be identical to the degree of subsidy. It will operate at 12p per pound, exactly the same as the subsidy.

Mr. English

The levy, not the reduction.

Mr. Walker

I am sorry. The reduction in the levy will be such as to keep the price of New Zealand butter equivalent to the price in the British market. That is what will happen.

I find very surprising the deep depression on the Opposition Benches at getting double the butter subsidy.

Mr. English

Answer the question.

Mr. Gummer

Will my right hon. Friend help my rural constituents by explaining how the Labour Party reconciles a constant demand for healthy Government intervention to help work in industrial areas with its total opposition to his package, which will help my farmers and farm workers to keep their jobs?

Mr. Walker

I am not here to answer for the strange views on agriculture held by the Labour Party. All that I know is that, during the period when the Labour Party was in office, there was a very substantial reduction in farm incomes. The pigmeat industry, as my hon. Friend will know from his constituency, was totally depressed, and there was a remarkable lack of confidence throughout British agriculture.

Mr. Straw

Does the Minister remember that in the Conservative Party manifesto there was a categorical statement that We will insist on a freeze in CAP prices for products —not just milk— in structural surplus"? Does the right hon. Gentleman further recall that only at the beginning of this week he made a statement in Luxembourg to the effect that he would support wholeheartedly a general freeze on prices? In the light of that, does he not accept that this is a further representation of Conservatives breaking their manifesto promises and statements only a week old?

Further, does the right hon. Gentleman recall that there was a statement in the Financial Times this morning that British prices to the housewife will rise by 3 per cent.? Is that statement right or wrong?

Mr. Walker

When the Financial Times wrote those articles there was no knowledge or information of any description on the biggest butter subsidy that we have received in the history of the Community. One newspaper also said that butter prices were to rise by 6p. That too was totally wrong.

On structural surpluses and maintaining a freeze, the area in which I am most disappointed and have so far failed to make any advance is sugar. That is the only item that one could argue is definitely in structural surplus at present. At the end of the negotiations I could have refused to come to an agreement on sugar and there would have been a standstill on prices because one member country refused agreement. The issue is 1.5 per cent. on sugar, which affects the price by only 1p a kilo. If I had refused agreement, next week British housewives would not be getting the butter subsidy. In order to maintain that one point—which must be tackled this autumn—we would have prevented the best deal that the British housewife has yet had from the common Market.

Mr. Leighton

Is the right hon. Gentleman aware that many of us favour a reduction across the board of CAP food prices rather than an increase? Has he noticed that this morning responsible organs of the British press have described his efforts as a sell-out? Has he also noticed the comment of the Commission that that will increase the overall cost of the Common agricultural policy by at least £600 million? That must mean an increase in the British contribution to the Community Budget of at least £50 million? Lastly, will he answer the question from my hon. Friend the Member for Newham, South (Mr. Spearing) that these arrangements will increase the cost of grain by £7 to £10 per ton?

Mr. Walker

The increase of 1½ per cent. in the price of grain on the package mentioned here will make—

Mr. Spearing

Five per cent. devaluation.

Mr. Walker

It will make little difference to the price of grain because of the present levels of intervention prices and state of stocks. As far as devaluation is concerned, the effect will be identical to the 5 per cent. devaluation that my predecessors took in March without any compensation for consumers.

Mr. Strang

Is the Minister aware that it was thanks largely to the efforts of the last Government that the Commission put forward for the first time a complete freeze on common prices? His failure resolutely to support the Commission not only on the general freeze but also on the sugar proposals, which involve a product in massive structural surplus, is a breach of his undertaking to the House last week. It will increase the price of food to the housewife and massively increase the cost of the CAP to the British taxpayer.

Is the Minister further aware that the argument that the sugar quota should not have been cut because the sugar is already in the ground will not stand up? That Commission proposal was put forward last January, and the sell-out on sugar not only damages the interests of our refinery workers but is also a set-back to the developing world. The right hon. Gentleman may well be the toast of the French sugar lobby tonight, but as far as the British people are concerned he is a walking disaster.

Mr. Walker

We have just been listening to a person who was a Minister in my Department in the last Government. I believe that he took part in the negotiations when last year, for example, there were substantial sugar surpluses. When the Commission was proposing an increase of 1.16 per cent. on sugar, he and his right hon. Friend agreed to an increase of 2 per cent. He was also a member of a Government who, during the period when the milk surplus that I have inherited was building up, agreed to a price increase of 3.5 per cent. when the Commission was proposing an increase of only 3 per cent. I do not want any lectures on sell-outs from the hon. Gentleman.

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