HC Deb 02 June 1980 vol 985 cc1058-70
The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker)

With permission, Mr. Speaker, I wish to make a statement about the Council of Agriculture Ministers' meeting in Brussels on 28 to 30 May, at which I represented the United Kingdom with my hon. Friend the Minister of State. At that meeting the Agriculture Council completed its consideration of the 1980–81 agricultural prices and related proposals.

We have pressed for and secured important modifications to the original proposals of the Commission. We have removed those elements of severe discrimination against our industries and we have secured a number of parts of the package from which we will derive substantial benefits.

The Commission had originally excluded any continuation of the special butter subsidy currently worth 13p a pound on butter. We have succeeded in obtaining the continuation of this subsidy for the coming marketing year, 100 per cent. financed by Community funds.

For five years we have failed to obtain substantial refunds on cereals used in the export of whisky. We have been successful in obtaining the refunds, backdated to the period since accession, and this will bring us in a net benefit of £40 million this year and approximately £16 million per year thereafter. We did argue for no price increases upon those products in surplus. On sugar, however, the world price has now gone well ahead of the European price and therefore there will be no cost of disposing of Europe's sugar surplus in the present circumstances. Britain will retain the same sugar quotas as last year.

The wine structural reform package agreed earlier this year is designed to make a major impact on the structural surplus and will impose an important discipline on producers in France and Italy.

At the Council meeting in Brussels last week I insisted on a further discipline of a limit being placed for the first time on the amount of wine eligible for end of season distillation, and this will impose a limit of 18 per cent. on any individual producer whose production goes into store.

The price increase on milk is offset by an increase in the co-responsibility levy so that the net increase on milk prices will be 2½ per cent. This increase does not affect the liquid milk sales in the United Kingdom. During the marketing years 1979–80 and 1980–81 the average increase in the price of milk in the Community net of co-responsibility levy will be 1¼ per cent. per annum, and this, compared with the substantial increase in input costs of dairy producers, will mean that there will be a substantial reduction in real terms of the incomes of dairy producers throughout the Community. The total effect of the whole of the CAP package on the consumer will be an increase of 0.7 per cent. on the food price index and of 0.15 per cent. on the retail price index over a full year.

The package includes the introduction of a new suckler cow subsidy worth about £12 a cow, financed 100 per cent. from Community funds. The original Commission proposal, limiting this subsidy to smaller herds, was successfully eliminated. We also managed to retain in the package, contrary to the Commission's original proposals, the right to continue the variable beef premium scheme. As Britain provides 26 per cent. of the specialist beef herd in Europe, those measures will be of net benefit to the United Kingdom.

I obtained agreement that at an early Council meeting the Council would consider structural proposals to benefit the agriculture of Northern Ireland. At Luxembourg eight countries had agreed upon a sheepmeat regime based upon intervention throughout the Community. I believed that this would be bad for the British consumer, bad for the British producer and bad for New Zealand. I informed the Commission that there was no way that the British Government would accept such a scheme, in spite of its being backed by eight other member countries.

I succeeded in persuading the Commission and the Council of Ministers to accept United Kingdom proposals whereby there will be no intervention in the United Kingdom and the arrangements will so operate that there will be no incentive for any British lamb to go into intervention in France or any other part of the Community.

I succeeded, for the first time in the history of the Community, in persuading the Community to provide Britain with a full deficiency payment system financed 100 per cent. from Community funds. The only previous major example of the Community accepting the principle of deficiency payments was when the previous Government negotiated the beef premium scheme, but that, whilst hailed as a triumph at the time, is a scheme that still enables intervention of British beef to take place and is financed only 25 per cent. from the Community funds and 75 per cent. from the British Treasury. The housewife will benefit because British lamb will tend to stay in Britain, to be eaten by the British consumer at reasonable prices instead of being sucked into intervention overseas as would have happened under the Commission's Luxembourg proposals.

British producers will obtain a 17 per cent. improvement in their guaranteed prices this year and can look forward to a secure future as the Community guaranteed price converges to a common price. Those improved producers' returns will be financed 100 per cent. by the Community with deficiency payments, and I anticipate that on the completion of the first four years of the scheme we shall receive an annual benefit from the Community to the order of £100 million per annum.

It was vital to defend New Zealand's interests and the whole regime will take effect only if and when New Zealand reaches a satisfactory agreement on the volume of its imports into the Community in exchange for a reduction in the tariff. I have agreed with the Commission that this agreement should and must include a New Zealand agreement as to the possible use of any export refunds. The fact that Britain, which produces half the lamb of Europe, will now have no lamb going into intervention means that, unlike the Commission's original proposals and those agreed by the Eight in Luxembourg, there will be little intervention in the Community. Throughout the negotiations I have kept close to the New Zealand Government and will continue to do so until their negotiations are satisfactorily completed.

Last year I was able to announce a price settlement which for the first time gave the United Kingdom a net benefit. Before making the budget adjustment now negotiated, this year's agricultural price settlement gives a net benefit of £37 million in 1980–81. In addition, the Commission's proposals to eliminate the butter subsidy, worth £108 million a year to British consumers, have been successfully rejected. We have in fact obtained a settlement of benefit to Britain and the success of the negotiations on the budget will mean that in future our partners will have a much greater financial interest in improving the common agricultural policy.

Mr. Mason

The Minister has obviously been a fall guy in this budget deal. The Prime Minister and the Foreign Secretary have used him as a tool during the negotiations. Agricultural policy has become a trade-off, and the right hon. Gentleman knows it. Why did he give way on the 5 per cent. increase on agricultural products? The Commission asked for an increase of 2.4 per cent. He has given way at double that price. According to the communiqué, prices in Britain will rise by between 5.5 per cent. and 7 per cent. Over a full year, that will cost the British consumer up to £300 million, representing another twist in the inflationary spiral. That is the first promise given to the House that he has broken.

Why did the right hon. Gentleman promise a price freeze on products in structural surplus but give way on the increase in the co-responsibility levy on milk from 0.5 per cent. to 2 per cent.? That will increase the CAP budget still further. That is the second promise that he has broken. Why did he promise that there would be no sheepmeat regime with intervention? There will be intervention in France and in the Republic of Ireland. Within 12 months there will be a sheepmeat mountain of about 30,000 to 35,000 tonnes. In order to accommodate that, pressure will be put on New Zealand to curb its exports to the United Kingdom. The right hon. Gentleman is bound to let New Zealand down. As a result of the sheepmeat mountain, subsidised exports on the world market will affect New Zealand's world trade.

Why did the right hon. Gentleman promise during our last debate on this issue to begin a reform of the CAP? The CAP has become worse and will become even more bloated. Why did he allow the common fisheries policy to become part of the deal? Both he and the Prime Minister promised that that would not happen. We do not know exactly what he has given away. Perhaps he has managed to maintain the butter subsidy. However, it applies only for one year, and is likely to fall next year at a cost of £108 million. The right hon. Gentleman, has managed to maintain the beef premium and to give a boost to farmers by means of the sheepmeat deal.

This package is a bad deal for United Kingdom consumers. It is riddled with the Minister's broken promises. It does not make good agricultural sense. He has failed miserably to make a start on reforming the CAP.

Mr. Walker

That is a remarkable condemnation from a member of the previous Labour Government, who never negotiated a common price fixing that gave any net benefit to Britain. The right hon. Gentleman has got the figure wrong. I therefore ask him to withdraw his statement that it will add an extra £300 million to consumption. Total expenditure on food is £26.7 billion and that will be increased to £26.9 billion. The right hon. Gentleman is only 50 per cent. out.

As regards items in structural surplus, the negotiations of the previous Labour Government led to substantial increases on every item in structural surplus, and there was no improvement on the return in the budget. When the Labour Government were in office, the price of milk rose on average by 7½ per cent. per annum compared with an average of 1.25 per cent. under this Government.

The right hon. Member for Barnsley (Mr. Mason) also gave totally inaccurate figures for sheepmeat. This time he was out by 200 per cent. as regards the possible intervention in France. A system that is good for British producers, good for British consumers and protects New Zealand should recieve some gratitude from the Labour Party.

Sir Ronald Bell

Will my right hon. Friend ignore carping criticisms of an agricultural settlement that will hasten the consumation that most people secretly or avowedly desire?

Mr. Walker

I know the views of my hon. and learned Friend the Member for Beaconsfield (Sir R. Bell). I am sure that he regrets that we have had a net benefit as a result of the CAP for the second year running.

Mr. Skinner

Is not the truth that, while the Minister was dozing in the corridors out there, the real decisions were being taken by his right hon. and noble Friend the Foreign Secretary on the other matter? Is not it a fact that, if the Government had stood firm on that question, the right hon. Gentleman would not have had to make this statement today about an increase of possibly 7 per cent. in prices, and that he might well have got a 50-mile zone for our fishermen and thereby helped them, in addition to getting a change in the structure of the budget? Instead of the retreat which he has announced today, the Government might have been able to stand firm and get all the taxpayers' money back which the Prime Minister talked about endlessly for three months prior to this settlement.

Mr. Walker

Perhaps I might, for once, congratulate the hon. Member for Bolsover (Mr. Skinner). On his estimate of prices, he has been far more accurate than usual. He estimates that food prices will go up by 7 per cent., when in fact they will go up by 0.7 per cent. By his standards, that is pretty good.

As for fishing, I am glad that my right hon. Friends negotiating in another Council made sure that there was no change in the negotiating position of the British Government. We are in no way compromised on that.

Mrs. Kellett-Bowman

Will my right hon. Friend accept the grateful thanks of farmers in my part of the world, especially the hill and marginal farmers, for the suckler cow subsidy of £12 paid entirely by the Community and for the lamb settlement which will ensure the future of our lamb producers, and the thanks of the British housewife for the butter subsidy, again paid 100 per cent. by the Community?

Mr. Walker

I am grateful to my hon. Friend. She is right in indicating that the provisions in respect of suckler cows and sheep will be of particular help to Scotland and Wales and to some of the most difficult agricultural areas in other parts of Britain.

Mr. Douglas

Does not the right hon. Gentleman concede that what he really means by an improvement in the common agricultural policy is an entrenchment of an economic monstrosity which no one can justify? If I may revert to the statement by the Lord Privy Seal, the escape clauses in the deal post-1982 in effect mean that we shall continue to pay a very high proportion of the Community's budget in underpinning the CAP, which is economic nonsense.

Mr. Walker

In terms of the future of the CAP, one of the most important facts is that over the next two years Germany will be paying an additional £460 million and France an additional £350 million, which I believe will make them far more interested in the sensible reform of the CAP.

Mr. Peter Mills

Although I congratulate my right hon. Friend on his extremely interesting and helpful package, may I ask him to bear in mind that the one feature about which some of us are slightly concerned is the co-responsibility levy, especially as it is rather unfair to British dairy producers? To complete this package, will he assure the House that in the autumn he will look very carefully at the costs of British dairy tarmers and see that they are covered?

Mr. Walker

I am grateful to my hon. Friend for his earlier remarks. As for the co-responsibility levy, it is true that this total package on milk will not be of net advantage to our dairy producers due to the fact that our liquid milk consumption is so large, although, in all fairness, our dairy producers have had the benefit of increases in the liquid milk price and increases due to the green pound devaluations over the past year which in combination have improved—I agree, necessarily improved—their incomes by about £250 million a year.

Mr. Beith

Does the statement made by the Foreign Ministers' Council on fisheries mean anything at all and, if so, what?

Mr. Walker

It means that attempts in the Foreign Ministers' Council to restrict our negotiating position and to write in conditions which would have been against our interests were resisted by my right hon. Friends and that we have total freedom to negotiate.

Mr. Marlow

Does my right hon. Friend agree that there are many costs associated with our membership of the Community, the most notorious of which is the budget—a problem which, to an extent, has been resolved—but the greatest of which is that we have to buy food at Common Market prices rather than at world market prices?

Did my right hon. Friend see in The Sunday Times yesterday a calculation to the effect that, even net of what our producers receive from Community funds, it is costing us an additional £1,500 million a year to pay for Common Market food? This amounts to a cost of more than £2 a week for every family of four and is a hell of a price to pay for allowing the free access into our market of industrial goods from French and German manufacturers. If that is the limit of European generosity, the sooner we pull out of this regime, the better.

Mr. Walker

With all respect to the article in The Sunday Times, it was based on what I consider to be a series of inaccurate figures. For example, the sugar figure was based on the world price of sugar two years ago, when it was substantially below the European price, whereas now the world sugar price is £80 a ton above the European price. We are trading at a net benefit on the basis of the world price of sugar. Altogether, the calculations made in The Sunday Times yesterday, for a series of reasons, was £1,000 million wrong.

Several Hon. Members rose——

Mr. Speaker

In case other hon. Members feel that they can emulate the language of the hon. Member for Northampton, North (Mr. Marlow), I remind him that we use parliamentary language in this place.

Mr. Straw

As the additional cost of this deal to the consumer is £300 million and, in return, we have simply got an additional £60 million off the budget, for every £1 that was achieved in Brussels the British housewife will be paying another £5. When the right hon. Gentleman says that food prices will go up by only 0.7 per cent., is he saying that at the end of the year the British housewife will be paying only 0.7 per cent. more in food prices than she is paying today?

Mr. Walker

The hon. Gentleman knows that there is a wide range of impacts on food prices, of which CAP prices are only one. I am dealing with the effect of CAP prices. The hon. Gentleman's figure of £300 million is wrong. It is £198 million. What is more, it is untrue to say that that is what housewives will pay because of Europe. A large amount of that will be paid, quite rightly, to British producers.

Mr. Gummer

Does my right hon. Friend agree that the reason why he has achieved so good a settlement on this occasion is that our Community partners are well aware that he will stand up for British interests and that he and the Government are committed to membership of the Common Market? That being so, are not we much more likely to get a thorough overhaul of the CAP primarily because our Community partners know exactly where they are with us, whereas they did not know where they were with the previous Administration?

Mr. Walker

It is significant that we have achieved a butter subsidy twice that ever achieved by our predecessors and the first major deficiency payments scheme ever operated by the Community.

Mr. James Johnson

The Minister has shown a great deal of optimism today about his farming negotiations. When does he hope to make a more optimistic statement about fishing negotiations, bearing in mind that we have a sympathiser at No. 10 and that there is a great deal of gloom and doom in our ports, about which the right hon. Gentleman must know, which are suffering death by a thousand cuts daily?

Mr. Walker

As the hon. Gentleman knows, it was in mid-March that I agreed to increased aid being paid to the fishing industry. I know that the position continues to be very serious. That is why at my last meeting with the industry I agreed to review the situation at the beginning of July, and I shall be doing that.

As for the fishing negotiations, the next meeting will be on 16 June. I am extremely pleased that the Prime Minister and the Foreign Secretary insisted that in no way would any bargaining be done on fishing as a result of the budget deal.

Several Hon. Members rose——

Mr. Speaker

I propose to call four more hon. Members from each side of the House. That will be a fair run.

Mr. Bruce-Gardyne

Will my right hon. Friend make it clear beyond doubt that whatever the phrase may mean in the Community, we have retained the total right to veto any future agreement on farm prices? Secondly, can he dispose of the report in one newspaper over the weekend that we shall have a positive benefit from purchasing foodstuffs from outwith the Community, because that would not be a very good idea when the Community is generating great surpluses?

Mr. Walker

On my hon. Friend's second point, the situation varies from commodity to commodity. At present there is a great advantage in buying sugar at Community prices. On my hon. Friend's first point, it is true that at the meeting of Foreign Ministers there was an attempt to get Britain to control or restrict its powers of veto over future farm price negotiations. I am glad to say that that was totally rejected by the United Kingdom, and we have freedom in all future price negotiations.

Mr. English

Will the right hon. Gentleman accept that we are all grateful for his answer to the hon. Member for Northampton, North (Mr. Marlow), since that figure has not hitherto been published? Will he place in the Library the details that illustrate that the cost of the agreement to the consumer is less than £2,000 million instead of £3,000 million, as The Sunday Times stated? Furthermore, will the right hon. Gentleman state what sanction has been applied against France for its breach of the law before the agreement was reached?

Mr. Walker

If I may, I shall send the hon. Gentleman, and make available in the Library, the calculation offered by my Department in a Treasury paper which was made public about three months ago and which sets out the current basis of calculation.

On the hon. Gentleman's second point, the French frontier will now be open to British exports. Individual traders who have paid levies are free to take in the French courts any action that they think fit.

Mr. Douglas Hogg

Will my right hon. Friend confirm what I thought that he said, namely, that there will not be a reduction in the sugar quotas? If that is correct, does it reflect an abandonment or merely a postponement of the Commission's proposal to reduce the sugar quotas? If the latter, how long does my right hon. Friend expect the present level of United Kingdom quotas to continue?

Mr. Walker

I do not know what the Commission's future proposals will be, but they will doubtless depend on future market trends. The world sugar situation has dramatically changed. As I stated, at present Community sugar prices are about £80 a ton cheaper than the world price. It is a matter for considerable conjecture whether demand for sugar and supplies of sugar will continue at the same level. Therefore, I can give no indication. For this year we have the same quotas as for last year.

Mr. Deakins

As the Minister is in such an informative mood, admitting that there was a trade-off between the budget deal and the agricultural prices deal, thereby giving the lie to his right hon. Friend's earlier pledge to the House, will he explain how a policy of raising food prices can contribute towards reducing inflation?

Mr. Walker

I repeat what my right hon. Friend said. The increase in food prices over a whole year will be equal to the average increase every two weeks during the previous Labour Government. The increase should not be exaggerated.

Mr. Pollock

Is my right hon. Friend aware that his statement has already been warmly welcomed by the president of the Scottish NFU, who rightly praises the involvement of Scottish Ministers? Will he accept that his actions will restore much-needed confidence to the sheep sector of Scottish agriculture?

Mr. Walker

I am grateful to my hon. Friend. I hope that he will convey to the farmers of Scotland the ridicule with which his remark was greeted by Labour Members. Our agricultural community has had two years in which its income has substantially dropped in real terms. Our sheep proposals will greatly help Scotland and other areas in the United Kingdom.

Mr. Robert Hughes

The Minister boasts about what he has done for the farmers, but can he explain why in all negotiations the fishermen are made to wait until 1 January 1981, when it is hoped that there will be an agreement about an agreement? Will the right hon. Gentleman accept that that has about as much value as that which it was once suggested attached to the vice-presidency of the United States? It is not worth a bucket of warm spit.

Mr. Walker

As the hon. Gentleman knows, because of his great interest in the subject, I inherited a situation where talks on fishing in Europe had broken down. We were fast approaching the position where a number of legal cases that I had inherited might have been decided in a dangerous way. After the budget negotiations we are now free to negotiate a common fishing policy.

Mr. Michael Morris

Does my right hon. Friend agree that the essential point to be drawn from his statement and the statement of the Lord Privy Seal is that for a 0.15 per cent. increase in food prices we have achieved a two-thirds reduction in our contribution to the Community budget? Will he accept that that will be welcomed by the average British household as showing progress towards a future successful Common Market?

Mr. Walker

In addition to what my hon. Friend correctly says, a substantial part of the 0.7 per cent. increase in food prices will be paid to British producers. This is needed to finance wage increases, such as the 20 per cent. given to agricultural workers in the last wage settlement.

Mr. D. E. Thomas

Will the Minister clarify his statement on sheepmeat policy and indicate what he means by a full deficiency payments scheme? Does that mean the continuation of the present guarantee price scheme, and if so, for how long? Will he confirm that it is only a transitional scheme until the United Kingdom price for lamb approaches the common price in the Community? What will happen to intra-Community trade?

Mr. Walker

There will be free movement of goods across frontiers. The immediate British guarantee price is fixed, at the same price as the French intervention price, and there will be no incentive to export lamb when the French are exercising intervention. When French prices are high, British farmers will be free to take advantage of that trade when it is available. As we converge to a common price, the gap will steadily decrease between consumer prices in this country and the price that we give our producers, which will be met 100 per cent. by Community-financed deficiency payments.

Mr. Strang

In view of the ambiguity in the Council text on fisheries policy, will the right hon. Gentleman make it clear that there is no question of the budget settlement being conditional on a fisheries agreement being reached by the end of the year? Also, will he confirm that his statement means that the New Zealand Government have a veto on the implementation of the sheepmeat regime?

Mr. Walker

"Yes" to both questions.