EUROPEAN COMMUNITY (AGRICULTURE MINISTERS' MEETING)

HC Deb 20 February 1980 vol 979 cc452-63

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 which took place in Brussels on 18 February. My hon. Friend the Minister of State and I represented the United Kingdom at that meeting.

The Council had a preliminary discussion of the Commission's price proposals for 1980–81, together with the package of economy measures which the Commission presented to the Council in November. Several member States argued that the proposed price increases were far too modest, and they pressed for much higher increases. I emphasised that as we are by far the largest net contributor to the Community budget we had a special concern to see the cost of the CAP brought under control. I pointed out that the Commission's proposals would produce only a relatively small overall saving on the estimated budgetary cost of the CAP and that that was acheived only by the raising of substantial additional revenues through the proposed levies on milk. I said that firm price restraint was necessary, particularly for those commodities in structural surplus, including milk, sugar and wine.

On the main problem commodity, milk, I argued that the Commission's proposals were intended to prevent further surplus, and that they would do nothing to tackle the level of the existing surplus.

I said that the Council needed a plan to achieve a steady reduction in surpluses. I opposed the exemptions from the co-responsibility levy which would discriminate against the United Kingdom, as well as the Netherlands and Denmark, who supported my stance. The details of the milk proposals are now to be studied further by a group of senior officials.

The Council had a further discussion on sugar, but it did not reach agreement. I supported the Commission's proposal to cut maximum quotas by 1.3 million tonnes. However, I made it plain that even the Commission's revised quota proposal for the United Kingdom discriminated strongly against the United Kingdom, in that it would still involve a 24 per cent. cut in our present maximum quota, compared with a cut of only 5 per cent. in other member States, and in France and Germany. Other countries objected to the quota allocations, and any decision was deferred until the next meeting of the Council on 3–4 March.

Again we opposed any extension of the existing temporary scheme for high priced end of season distillation of wine, stored under the long-term contracts.

In a further discussion of sheepmeat there was wide recognition in the Council of the serious consequences for the Community which resulted from a failure of one member country to obey the law. There was some discussion of possible interim arrangements to apply until a definitive sheepmeat regulation could be agreed. I made clear once again that the obligation on the French Government to respect the Court ruling was quite distinct from the question of Community arrangements for this sector.

I asked for and received from Vice-President Gundelach an assurance that whatever further discussions might take place on interim arrangements the Commission would play fully its role as guardian of the Treaty. I also said that I would not accept any arrangements under which one set of member countries gave financial aid to another member country to enable it to obey the law. Nor would I accept any endorsement by the Community of intervention in the sheep-meat sector.

Mr. Mason

I am sure that the House is grateful to the right hon. Gentleman for that report. Is he aware that last year he told the council that the Commission had the wholehearted support of the British Government for a general freeze on prices? He failed in that, because thereafter food prices were increased. This year the right hon. Gentleman stated again that he wanted a price freeze but only for those products that are in structural surplus. That will include milk and sugar. We are pleased to note that the right hon. Gentleman is resisting the Commission's present proposals. I hope that he can assure the House that he will not give way again. This time he must be as tough as the French have been against him on the question of lamb.

Is the Minister prepared to accept increases in beef and cereals, because there is no mention of them in his statement? Does he intend to argue for retention of the butter subsidy which he obtained last year? What are his views on retention of the beef premium? Further, is he aware that the British consumer and taxpayer now want a total freeze on prices, an end to subsidised food mountains, and a promise from the Government that the CAP will be reshaped to give us a better deal?

Finally, even if the Commission's proposals—as distinct from the farmers' demands—for a 2½ per cent. average increase on prices are accepted, it will cost the British consumer £150 million. Price restraint is important, and we hope that the right hon. Gentleman will fight for it.

Mr. Walker

I find the right hon. Gentleman's questions quite extraordinary. He was a member of a Cabinet which in all discussions on price fixing agreed to price increases for every commodity. His Cabinet agreed further price increases on every commodity that was in surplus, including milk and sugar. He was a member of a Government under whom the cost of the Community budget rose from £l½ billion to £7 billion. I do not want lectures from the right hon. Gentleman on how to conduct price negotiations, particularly as the last price negotiation was the only one at which Britain gained a net advantage.

We have made it clear that we are in favour of a price freeze on milk and sugar. The Commission has put forward a proposal for a beef cow subsidy limited to the first 15 cows in any herd, which would discriminate considerably against the British beef herd. We have said that we are willing to consider such a beef cow subsidy, provided that it applies to all beef cows and not to a limited number so that British industry would benefit.

On the beef premium, the position is such that we must wait to see whether there is a satisfactory interevention system, and a satisfactory beef cow subsidy system which would retain the confidence of British beef producers. Unless that happens, we consider that it is essential to continue with the beef premium system.

We are opposed to the eradication of the butter subsidy for the United Kingdom while the Community continues to give export subsidies to the Soviet Union.

Mr. Peter Mills

Will my right hon. Friend bear in mind that the retention of the butter subsidy is extremely important for the consumer? It is also a matter of clawing back some of the finances that we have paid in to the Community. Will he also bear in mind that it is a matter of principal? It is better and certainly fairer to ensure that consumers within the Community are subsidised rather than the Communist world.

Mr. Walker

The British Government have stated firmly that we are against providing subsidised foods for the Soviet Union. We have constantly pursued that view. Under the previous Labour Government a great deal of subsidised butter was exported to the Soviet Union. In the price fixing discussions last year that were denounced by the right hon. Member for Barnsley (Mr. Mason) we obtained the best butter subsidy ever obtained for the British consumer. That was one small way of remedying the injustice of the British contribution to the CAP. I pointed out to the Council of Ministers at the meeting on 18 February that as the biggest contributor to the budget, in spite of our benefit under the butter subsidy, we expected the best possible restraint in CAP expenditure.

Mr. Geraint Howells

I welcome the Minister's statement, and I agree entirely with the stand that he is taking in Europe. I believe that he should stand firm in support of the dairy and sheep producers in Britain, which he has done. When does he believe that we will be able to reform the CAP? What plans has he to help our beef producers?

Mr. Walker

Obviously I, too, would like to see speedy reform of the CAP. It is obviously operating against the interests of Britain. I believe that it is also operating against the interests of Europe as a whole, because of its domination of the entire European scene. Other matters of importance could be undertaken by Europe if the CAP was not such a dominant issue. However, the speed with which the reform is achieved is not in my control; it is in the control of nine member countries, of which Britain is only one. I can assure the hon. Gentleman that we will do everything in our power to hasten that reform.

Regarding the beef producers of Britain, I was shocked that the Commission, which had mentioned to me, in discussions prior to its price fixing proposals, the potential of a beef cow subsidy in the current state of the market, put forward a proposal that limited the number of cows to the first 15 in any herd. Britain produces 27 per cent. of the beef herd in Europe, and therefore such a subsidy should be of net benefit to Britain. However, because of the manner in which it has been framed, Britain would be a net loser. I am unwilling to accept that proposal.

Mr. Hardy

Does the Minister agree that the Council meeting did not make sufficient progress in preparing for the necessary adaptations that are required for the widening of Europe? Does he agree that the adaptation has to begin and that the maintenance of the present level of surpluses is quite unhelpful?

Mr. Walker

As I made clear in my statement, it could be argued that the Commission is proposing for the first time to limit future surpluses in the milk sector. However, when those surpluses are of the present gigantic proportions, I agree that that is not sufficient action. We require proposals that will reduce—not immediately because of the economic and social effects that will have—over a tolerable period the massive existing surpluses that are costing the taxpayers of Europe so much.

Mr. Kimball

Is my right hon. Friend aware that fat lamb this spring is fetching less per kilo than store lamb fetched last autumn? That is a serious situation. Does he agree that if the French could be made to comply with the European Court ruling we would have no need to set aside taxpayers' money for intervention in either the sheepmeat or the beef market.

Mr. Walker

We are the biggest producers and consumers of sheep in Europe and, as such, under the Treaty, we should have enjoyed the rights of freedom of marketing throughout the Community. Eight of the nine member countries agree with that theme and the Commission also agree with it. That is why I hope that the undertaking that I quoted in my statement from the Commission will be carried through and that the Commission will seek an interim injunction against the French for their continuing illegal practices.

Mr. Spearing

Will the Minister confirm that the continuing stance on the prices that he has mentioned today is in no way linked to fisheries policy? Will he tell the House whether it is linked to any other policy, in particular to the arrangements for the import of New Zealand butter and lamb?

Mr. Walker

As far as we are concerned, it is totally unlinked. I cannot guarantee and I will not prophesy that other countries in their arguments for price fixing will not use—as they have always used in every price fixing argument—the position of New Zealand. If Europe pursued a policy that destroyed an economy such as New Zealand, that would do immense damage to the Western world and, in the longer term, to Europe as a whole.

Mr. Nicholas Winterton

I welcome my right hon. Friend's statement, which, I am sure, will be welcomed by the farming industry, but will he give a firmer commitment not to make any concessions on milk which would be disadvantageous to the dairy farmer in this country? Will he also indicate what discussions he has had with his European colleagues about the use of some of the European funds for the promotion of liquid milk and milk products?

Mr. Walker

Last year, the Commission made proposals which exempted from the co-responsibility levy a whole range of farmers and which operated distinctly against the British dairy farmer. As my hon. Friend knows, we refused to accept that and I made clear that that was totally unacceptable to us.

I repeated at this Council meeting that, having gone through the experiences of last year—when Britain stated categorically that she would accept no levy which discriminated against the British dairy farmer—I was surprised that the Commission came forward with new proposals this year that repeated the same error. I made perfectly clear that in way would we repeat our performance of last year. I categorically stated that if there is to be a co-responsibility levy it will be one that does not discriminate against the British dairy farmer.

Several Hon. Members

rose—

Mr. Speaker

Order. I propose to call those hon. Members who have been rising, but I shall be grateful if questions are kept brief.

Mr. Dykes

Is my right hon. Friend aware that the whole House will support him in pressing for price freezes on some products and restraint on other products? Will he assure the House that he will have the full support of the NFU and the European Parliament in this regard, bearing in mind reports of a change of attitude in the latter body?

Mr. Walker

It is not for me to guarantee constant support from either the European Parliament or the NFU. Therefore, I cannot commit those bodies to the approach that they will make on those matters. However, it is not in the interests of British agriculture or British taxpayers to pay enormous sums of money to finance surpluses that British farmers do not produce.

Mr. Dalyell

Ethyl alcohol? What was the rather laconic reference to the end-of-season distillation of wine in the statement? BP Chemicals, Grangemouth, has to make a major investment decision of over £50 million. What advice should be given in these circumstances?

Mr. Walker

As far as the discussion of the alcohol regime is concerned, I hoped that that matter would be on the agenda. It was at the last Council meeting before the price fixing and it was hoped that such items would be on the agenda. In fact, it was not on the agenda. Only the wine package was on the agenda, in which there is the factor of the distillation of surplus wine into alcohol, which we oppose. Until the price fixing is out of the way, I doubt whether the alcohol package will come on to the agenda. We have made perfectly clear to the Commission the position of the synthetic alcohol industry in this country and our requirement that the potential of that industry should not be handicapped and undermined. To some extent, while the existing situation, which is favourable to our synthetic alcohol industry, continues and until such time as the matter comes on the agenda—

Mr. Dalyell

What about the investment decision?

Mr. Walker

I recognise that. Alas, the agenda is not in my control. There is no doubt that during March, April, May and June price fixing will dominate the agenda. I registered our views on the topic to the Commission at the last Council meeting.

Mr. Speaker

Order. I do not wish to be unfair to the hon. Member for Huntingdonshire (Mr. Major). He was on the point of getting to his feet when I said that I would call only those hon. Members who had been rising. I shall call the hon. Gentleman later.

Mr. Marlow

Is my right hon. Friend aware that, although we are encouraged by what he has said, many people will feel that the Council has been concerning itself with detail? The people of this country are fed up with paying vast amounts of money for the surpluses in richer countries in Europe. Is my right hon. Friend aware that, unless and until radical and far-reaching changes are brought about in the CAP whereby countries pay for their own surpluses, there is a risk that the majority in this country, including a large number of Conservative Members, will wish to take up the French suggestion that we should become an associate member of the Community.

Mr. Walker

There are many political, trading and economic factors which make it important for Britain to remain part of the European Community. At the recent one-day meeting, for the first time in the history of the Community, the Commission made proposals on the milk surplus which mean in reality the imposition of a national quota. Through the extra levy, that will also mean national financing of that extra surplus. As one Opposition Member has already pointed out, that is unsatisfactory from this country's point of view because, while it might deal with extra surpluses, it does not deal with the massive existing surpluses which we are financing. I hope to draw that fact to the attention of my colleagues on the Council of Ministers.

Mr. Stoddart

Is the right hon. Gentleman aware that he will have the support not only of the House but of the whole country in resisting further increases on all products, not only those in structural surplus? Will he point out to his counterparts in Europe that the British consumer is paying £70 per head more for his food as a result of our membership of the Common Market? The British consumer is getting fed up with that and will not stand for it for much longer.

Mr. Walker

Putting the matter into perspective, I hope that the House will recognise that the burden of finance is primarily involved with the financing of the disposal of surplus products. For example, this year's budget is about £7 billion. The total of all price increases, including items in surplus and items not in surplus, is £200 million. Therefore, it is not the dominating factor. The dominating factor in the CAP is the disposal, at massive expense, of surpluses that Europe does not require. We must concentrate on that area.

Mr. Major

I am grateful, Mr. Speaker, for your traditional tolerance.

Will my right hon. Friend enlarge on the Commission's proposals for sugar? Is it not a fact that the revised proposals call for a 10 per cent. reduction in our A quota and a 75 per cent. reduction in our B quota? The comparative figures for France are 2.6 per cent. and 11.6 per cent. respectively. As France is in structural surplus—unlike Britain—is not that proposal entirely unsatisfactory? Will my right hon. Friend assure the House that the Government will treat the proposal accordingly?

Mr. Walker

It is a totally unsatisfactory proposal. It is also unsatisfactory that we have to make a considerable contribution towards financing the disposal of those surpluses, despite the fact that we make no contribution to them. I am willing for Britain to accept a cut in its quotas. That would not mean a cut in our production as that has never reached its quota position. The figures for last year show that British agriculture is totally capable of reaching its quota position. It would save us money if there were a cut in the quota for this year, and I am advocating that. However, I do not accept that countries such as France which produce an enormous surplus of sugar should have a cut in their overall quotas of 5 per cent. while Britain which produces no surplus of sugar has a cut of 25 per cent.

Mr. Leighton

In the plainest terms, will the Minister reassure the House that he will maintain his resolute objection and, if necessary, will veto any price increases right across the board? I think that that was the answer that he recently gave to his hon. Friend the Member for Holland with Boston (Mr. Body).

Mr. Walker

I have never maintained the view that all prices—including commodities that are not in surplus—should suffer no increase. There is no logic in that. There are plenty of areas in which the Community can produce more food and become more self-sufficient. That would be of great interest to British agriculture. The price increases proposed are of pretty modest proportions. In a budget of £7,000 million they amount to £200 million in total. The greater part of that £200 million goes on items in surplus. It is perfectly reasonable to say that we shall oppose price increases for those items in surplus, such as milk, sugar and wine. However, I am not willing to state that we should categorically oppose any price increase in other commodities.

Dr. David Clark

Will the Minister protect the interests of the British consumer by resisting any reduction in the butter subsidy with the vigour that the French applied to protecting their interests in sheepmeat?

Mr. Walker

I shall not do it illegally as the French have done. However, on the estimates for 1980 Britain will be in net deficit on the common agricultural budget to the sum of about £1,200 million. The next worse-off country is Germany, which is in net deficit to the sum of about £400 million. All the other countries are beneficiaries. The fact that Britain receives a unique advantage as regards the butter subsidy that I achieved is not just of benefit to Britain; it benefits butter producers in several other Community countries. For example, at the last Council meeting Denmark and several other countries supported the retention of the British subsidy. In the current circumstances, it is perfectly reasonable to continue with that advantage. As the hon. Gentleman has said, it benefits British consumers.

Mr. Spriggs

Is the Minister aware that Britain pays a major part of the contribution to the Community budget? Why does he support the export of butter to foreign countries? Surplus butter could be supplied to the British housewife.

Mr. Walker

The hon. Gentleman's remarks are contrary to everything that I have said this afternoon. At every Council meeting of Foreign Ministers and Agriculture Ministers this Government have been totally opposed to subsidies on foodstuffs—whether on butter or anything else—that are sold to the Soviet Union. That remains the position. Last year this Government negotiated the biggest butter subsidy that the British consumer has ever enjoyed.

Mr. Strang

Will the Minister reconsider his attitude to the variable beef premium? Surely he must accept that a beef cow subsidy and a modification of the intervention arrangements are no substitute for the benefits of the variable premium. Not only does that premium guarantee prices to our farmers; it reduces intervention. As a result, beef is more readily available to consumers at lower prices. In view of the announcement to the effect that there will be no special summit to deal with our budgetary problem, will he bear in mind that agriculture accounts for 80 per cent. of the total budget. As the agricultural price package must be unanimous, that is the one area in which the Minister can exercise leverage over the other member States.

Mr. Walker

I only wish that the hon. Gentleman had exercised that leverage when he was a Minister. Throughout the period of office of the previous Labour Government, the CAP went up and up, as did our contribution to the Community. The Labour Party never used any leverage. Every year the Labour Government agreed to price increases on butter, sugar and milk. All of those products were in surplus. However, I am glad that the hon. Gentleman has had a conversion.

The beef premium scheme was introduced because a Labour Minister of Agriculture, Fisheries and Food decided not to operate the intervention system for an important and crucial period. That tremendously undermined the beef market in Britain. The scheme came in on that basis. Since then the cost of administering it has been far greater than the payments that have been made to farmers. I would not eradicate that system unless I had a better system and one that improved the beef premium system. At the moment I do not have an improvement on that system. I am therefore against the Commission advocating its abolition. If I had an alternative that cost less in administration and that gave more benefit to beef producers, I should be glad of it.