GLASSHOUSE INDUSTRY (HEATING COSTS)

HC Deb 23 May 1980 vol 985 cc903-16

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

9.35 am

Mr. Stephen Ross (Isle of Wight)

I am grateful for the opportunity to raise an important matter relating to the glasshouse industry in the United Kingdom. I had a telephone message this morning from the hon. Member for Chichester (Mr. Nelson), who regrets that he cannot be present, and I know that the hon. Member for Harlow (Mr. Newens) would also wish to be associated with the debate. It is an all-party matter. Those hon. Members represent constituencies that are deeply involved with the glasshouse industry in West Sussex and the Lea valley.

There are many modern glasshouses in the Arreton valley, in my constituency. Growers have been attracted there, largely from the Lea valley. There was always a horticulture industry in the Arreton valley, but it has developed substantially over the past 20 years with the assistance of grants from the Ministry of Agriculture. Growers are particularly attracted to that part of the country because of the soil structure and the light intensity.

I hope that I can claim to speak on behalf of all horticulturists, whether in West Sussex, the Lea valley or even Northern Ireland, who are finding their livelihoods threatened by the huge increases that have taken place in the price of energy, particularly oil, over the past 18 months. About 90 per cent, of growers heat their glasshouses with oil, and I was told last night that oil prices have risen by 160 per cent. in the past 16 months. I also heard on the radio this morning that the British National Oil Corporation is about to increase its prices yet again. The future outlook for the glasshouse industry is filled with gloom.

The industry is also suffering to a substantial extent from the effect of subsidised imports from the EEC, largely from Holland and lately from France, and outside the Community from countries such as Columbia and Israel. Until Thursday last week I was anticipating some action by the Minister of Agriculture to assist our growers, if only temporarily. Such assistance was given three or four years ago. It helped then, and I hoped that something similar would be done by this Administration.

From replies that I had received from the Minister I had been led to believe that help was on the, way. On 24 April I asked whether the Minister was aware of the profitability problems in agriculture. In his statement that day he had not dealt with the £12½million horticulture subsidy that Germany has just introduced to assist its glasshouse growers in terms of energy costs because they had been suffering from dumping from Holland. It was rumoured at the time that the French intended to take similar action, and they have now done so.

I asked what the Government would do to protect our producers. The Minister's answer was that at the previous Council of Ministers' meeting it had been agreed by a number of members, including the United Kingdom, that there was a need for the Community to adopt a common approach to the glasshouse industry and that the Commission had promised to produce a paper on the subject.

The Minister said that he had spoken to the Commissioner at the previous meeting and had been informed that a paper had been prepared, and that it had been promised that it would be brought forward at the next Council meeting. The right hon. Gentleman concluded that the only sensible way to tackle the problem was to have a common standard for the Community as a whole.

I was bitterly disappointed, therefore, when I put the question again on 15 May, when I asked the Minister What progress has been made in establishing a common European Economic Community policy for subsidising fuel supplies to glasshouse growers. The Parliamentary Secretary told me in reply: I am not aware of plans for a Community policy for subsidising fuel supplies to glasshouse growers."—[Official Report, 15 May 1980; Vol. 984, c. 1734.] It appears that the door has been shut on any direct financial assistance in the United Kingdom. In the meantime, both the French and the Germans have introduced fuel subsidy schemes. I know that the intent is to enable their growers to change their heating systems. Nevertheless, the money is being made available. In France it is about 45 million francs.

All the complaints have been about the fact that the Dutch have had the benefit of cheap gas. I believe that 95 per cent. of the growers in Holland heat their glasshouses with gas. It is true that the Dutch have started to increase their gas prices, but their prices are still extremely favourable to their producers—well below the costs that our growers are being asked to bear, costs that have just taken yet another upward lurch.

The nub of the matter is that we are the country with the oil. I heard the Prime Minister say not long ago that over half the oil going into Europe now comes from the North Sea. Surely occasionally a little charity could begin at home, or is that asking too much of the present Government?

I suspect that the Parliamentary Secretary will claim that the Dutch have increased their prices by 51 per cent. The increase is to be phased in at six-monthly intervals over a two-year period. I declare an interest, in that I am a member of the National Farmers Union, though I do not practice agriculture any more. Calculations provided to me by the NFU clearly demonstrate that the Dutch increases will not close the gap. I understand that the Dutch gas price will be increased by 9 cents a cubic metre over two years, having gone up by 3 cents on 1 April—an increase of 17¼ per cent. It will go up by another 1½ cents on 30 September, 3 cents on 1 April 1981 and 1½ cents at the end of September 1981.

The Dutch growers know exactly where they are. They know when the increases are coming. They are not having extra increases suddenly forced upon them because Mr. Gaddafi in Libya decides to put up his price, and we follow suit.

The equivalent price per gallon of oil after the increase just introduced in Holland is 24.15p. On 30 September, after the next increase, it will be 25.89p; 31 March 1981, 29.38p; and at the end of September 1981, 31.12p. Therefore, even when all those increases have been made the Dutch grower will be paying the equivalent of only 31.12p a gallon.

Before the recent increase the Dutch gas price was 18p below English heavy oil prices. If oil prices in the United Kingdom rise by an average of only 12½ per cent. a year over the next two years, which is possibly being a little optimistic, the gap between the Dutch and United Kingdom energy costs will not narrow.

This information was given to the NFU's glasshouse produce and flowers committee on 9 April, which passed the following resolution: The average UK tomato grower made a loss in 1979 and will make a greater loss in 1980, due to increased energy costs. I have seen some of the returns of my growers, and I know that it is a fact. The average Dutch grower did not make a loss in 1979, and is unlikely to do so in 1980. Unless Dutch energy costs are brought into line with energy costs in the EEC by November 1980—the start of the 1981 growing season—the UK glasshouse tomato industry will cease to exist, apart from the few very efficient producers who have the financial resources available to support them until Dutch energy costs are equalised with the rest of the EEC. One can imagine the traumatic problems that growers are experiencing, not only faced with huge energy costs but having bank managers breathing down their necks, and bearing high interest rates and ever—increasing labour costs.

It appears almost certain that the existing gap between oil prices to growers in this country and gas prices to Dutch growers will remain. This is borne out by the further recent price increases and the high exchange value of the pound, which has just risen again.

Therefore, it is not unfair to look at the position as it was two months ago, before the Dutch price increase, when several hon. Members received a detailed exposition of the current position from Mr. Ian Cummings, chairman of the NFU glasshouse produce and flowers committee. The House should be reminded of some of the sober facts revealed in that letter. He said: The recently published Annual Review of Agriculture 1980 estimates that although total tomato production rose from 133,200 tonnes in 1978 to 134,000 tonnes in 1979, value declined from £52.7 million to £49.7 million "— increased production, but lower returns. The review forecast that imports from the other eight EEC Member States would increase from 45,000 tonnes to 57,000 tonnes, much of this increase being attributable to the Dutch, who sent 39,142 tonnes in 1979 as against 29,293 tonnes in 1978. The average UK tomato grower made a loss in 1979 and will make a loss in 1980 due to increased energy costs in excess of 80%. Fuel accounts for 34% of direct production costs. The union made representations to the Minister of Agriculture, Fisheries and Food and the Secretary of State for Energy in February, and more recently, pointing out that UK growers were facing intense competition from Holland since the Dutch glasshouse industry obtains its energy supplies (primarily gas) at much lower prices than UK energy costs. As at 1st March 1980 the Dutch tomato grower had an advantage in production costs, assuming a 100 tonne per acre crop, of £70–£75 per tonne over the heavy oil user, £90.00 per tonne over the UK medium oil user and £150.00 per tonne over the UK gas oil user. These differences, which are in excess of £10,000 per acre, are greater than in the autumn because of the minimal increase in oil prices during the winter months. UK growers' fuel costs are in excess of £16,000 per acre. The differences described in that letter are enormous. I have seen some of the returns from my own growers. They are frightening. The letter continues: You will know that in the UK some 90 per cent. of the fuel used for glasshouse heating is oil. Oil prices have risen dramatically during the past fifteen months, primarily as a result of the OPEC oil price increases, though the strength of sterling has also had the effect of holding those prices up. By contrast 95 per cent. of the Dutch growers use natural gas and the Dutch national gas concerns have been maintaining gas prices at much lower prices than the equivalent oil prices … The intense competition faced by UK growers from Holland was fully ventilated at the recent ' British Growers' Look Ahead' Conference and Exhibition. It was then reported that the German Government had agreed to provide the sum of approximately 50 million DM (about £12½ million) as assistance to glasshouse producers in the purchase of heating oil. That assistance has now been confirmed, as has the French Government's assistance of 45 million francs. The letter continues: At the last two meetings of the Council of Agricultural Ministers the Danish Minister of Agriculture has drawn the attention of the Commission to the grave concern felt in Denmark at the intense Dutch competition. He has urged that steps be taken to eliminate the energy cost differential and in this attack on the Dutch he has been joined by Belgian, German and British representatives. The Commission pointed out that a report on energy usage in horticulture in EEC Member States has been prepared and that it was intended to be available for the next meeting of the Council of Agricultural Ministers on 26–28 March. Apparently, that report still is not available. No reference has been made to it, apart from the Minister's comment on 24 April. What has happened to it? What action is being taken upon it?

Mr. Cummings went on: British growers see a marked contrast between the approach of the Dutch and German Governments in encouraging their glasshouse sectors and that of the British Government, which has been pursuing the policy of actively encouraging increases in both gas and oil prices. We know that gas prices are going up. It is reported this morning that they will increase by about 75 per cent. over the next two years. Thus the British Government has deliberately decided to increase North Sea oil prices in line with OPEC oil prices. The recent instructions to the Gas Boards to raise their prices during 1980 by more than the expected level of inflation is another case in point. That causes a dilemma for growers. If they switch from one to the other, they will still be caught by an enormous increase. It appears to British growers that the UK Government's policy is one of maximising short term profits to be gained from sales of North Sea oil and gas. The inevitable consequence of such unequal treatment of British and Dutch growers is that an increasing proportion of UK glasshouse growers will be forced out of business. It is inevitable that eventually Dutch energy prices will rise but such a rise will almost certainly not take place quickly enough to prevent the Dutch industry from driving a significant proportion of British producers out of business. That is my belief. It is the belief of most growers that they will go to the wall if they do not receive help. Our markets would be thrown wide open to competition from the Continent. That would be a disaster when growers have spent so much money on modernisation and making themselves efficient. I would argue that our growers are extremely efficient.

The chairman of the glasshouse produce and flowers committee asked that measures should be taken to harmonise energy costs in horticulture throughout the Community and that artificially low Dutch prices should be eliminated. Secondly, he requested that the Community authorities should ensure that the EEC—protected crop sector had adequate supplies of fuel, particularly in an emergency, and thirdly, that Community authorities should encourage and develop alternative energy sources and research into energy conservation. This is an area in which our Ministry could assist. Finally, he called for the Government to provide additional financial encouragement for energy conservation, particularly through the use of thermal screens.

Last year the United Kingdom glasshouse industry had an output estimated at nearly £200 million, more than £150 million in food crops. The total number of people employed in the industry is 20,000. New capital costs are high. An acre of glass today can cost about £100,000. I feel sorry for those people who have invested an enormous amount of money in the acres of glass erected in the last 10 years in my constituency. They deserve better. There is already evidence of what is happening to growers due to high energy costs and increased imports.

The hon. Member for Chichester telephoned me to say that he would be unable to be present. I should like, however, to quote an example from his constituency with which I am sure he would concur.

The Portsmouth evening newspaper The News of 20 May stated: Growers in the Chichester area complain that they are being forced out of business by imports from the Continent and rising costs, particularly of oil. Spring lettuce was ditched because it was uneconomical to market and the prospects for the tomato season do not look good. A number of nursery workers have had to be laid off. ' We are fighting for our lives ' said Mr. John Francis, chairman of the Land Settlement Association Sidlesham and Batchmere Estates Growers Association. ' Imports have hit us, the price of oil for heating has doubled in the last year and wages have increased by nearly 40 per cent. in two years.' Owner of the independent Cowdry Nursery in Sidlesham Lane, Birdham, Mr. Ian Wilson said bluntly: ' I have been forced out of business. We cannot even scratch a living because we cannot pay the overdraft.' About half—a—dozen growers met Chichester's M. P., Mr. Tony Nelson, and told him of their plight. He has demanded urgent action from the agriculture minister, pointing out that the Dutch have an unfair advantage over our growers. The report goes on to describe how the three—acre Cowdry Nursery is up for sale. The report states: With the closure of two—thirds of an acre of glass his 12,000—gallon heating oil tanks stand empty. Both cars have been sold. 'The nursery is up for sale but nobody will buy it "he said … ' but I protest that when we do not over—produce, the Government opens the flood—gates from the Continent. ' In January there were 60 per cent. more Dutch lettuce on the market than in 1979. Last July there were 10,000 extra tons of tomatoes on our market than in the previous year. The price of tomatoes was as low last year as it was in 1971–72. ' If we did not have the imports we should be able to cover our overdraft. We accept either a low price or a high bank rate, but we cannot exist with both.' Pointing to the effect of the doubling in the price of oil, Mr. Wilson said that when he started it was 7p a gallon. Wages rose 20 per cent. this year, following a 19 per cent. rise last. year. ' We grow, then beg for a Jiving. For the last year we have not made even a living. The Conservative Government let imports of foreign lettuce increase this winter—by 60 per cent. in January. This lowered the market price dramatically. ' We do not over—produce lettuce and tomatoes in this country, we over—import.' Growers in my constituency are saying much the same. If the situation is allowed to continue, more glasshouses will stand empty and their produce will rot, while the Dutch and French walk all over us. With a little help and a fairer share of our market, our growers could continue to hold their position and provide the quality of produce that we have rightly come to expect. My plea is that these hard—working, industrious people should not be deserted. They ask only for equal treatment. Surely that is not to be denied them.

Like the Minister, I have attended many meetings of farmers. They are not always friendly affairs. I always find growers are most reasonable people. They are hardworking and understanding. I feel desperately for them.

I believe that the Ministry of Agriculture would like to help but that the Secretary of State for Energy is opposed to such a move. If that is so, I urge the Minister to press the case in Cabinet. Otherwise, he will go down in history as the man who allowed the glasshouse industry to be destroyed.

I have already asked about the Commission's long awaited report. I should also like to know what will be the effect of the Gas Bill on the glasshouse industry. Will the industry be adversely affected by the proposed tariff rates? If no reply is available now, I would appreciate a written reply from the Minister. The National Farmers Union would certainly like clarification. It is known that there are to be price increases. Will the recently introduced Gas Bill add to the problems? If there are to be further price increases through taxation of gas profits affecting growers who have a gas supply—that will not apply in my constituency for another five years—they would like to know. I hope that the Minister can give growers some ground for optimism. Time is of the essence. Growers in this country are very near the point of no return.

9.56 am

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Jerry Wiggin)

I congratulate the hon. Member for Isle of Wight (Mr. Ross) on his success in the ballot and on presenting his case clearly. I acknowledge also the interest in this matter expressed by my hon. Friend the Member for Chichester (Mr. Nelson), by the hon. Member for Harlow (Mr. Newens), and by a number of hon. Members who have glasshouses in their constituencies, particularly those who have Land Settlement Association estates in their constituencies. The hon. Member for Isle of Wight will know that my Department is landlord to the Land Settlement Association. It is one of my responsibilities to oversee the welfare of that organisation. Its difficulties are substantial. I am familiar with them.

I welcome the opportunity of this debate to explain the Government's position. The hon. Gentleman mentioned on two occasions that imports of French tomatoes were causing difficulties. The problem really concerns Dutch, not French, tomatoes. In fairness, for a change, perhaps, we should not blame the French for something that is not, on this occasion, a problem. Indeed, the problems in France are not dissimilar to those in the United Kingdom.

Mr. Stephen Ross

I was referring to French lettuce, as opposed to French tomatoes.

Mr. Wiggin

I shall keep an eye on the matter, but the problem with which we are trying to deal relates to Dutch tomatoes.

The questions raised by the hon. Gentleman reflect the present concern felt by the whole glasshouse sector of the horticulture industry. I assure the hon. Gentleman that we are well aware of the glasshouse growers' worries about fuel costs and the effect of Dutch competition. My right hon. Friend, who, I am delighted to see, has found time to be present this morning—it reflects his deep concern about the matter—has been in close touch with the president of the National Farmers Union on these matters. My right hon. Friend the Secretary of State for Energy attended the British Growers Look—Ahead Conference in Harrogate in February and dealt with the question of fuel supplies and costs, and I had an opportunity at firsthand last Friday to talk to growers in Gloucestershire when I visited the Land Settlement Association's holdings at Newent.

The hon. Gentleman asked about the situation in Europe. The best thing that I can do is quote a rather long extract from a letter that my right hon. Friend wrote to the president of the National Farmers Union on 9 May, which succinctly deals with this point: I, and indeed other Agriculture Ministers have spoken in the strongest possible terms at meetings of the Council of Agriculture Ministers about the distortions of competition which have emerged in the energy field because of differences in energy pricing policies. In addition, I have impressed on the Commission the urgency with which they should complete and present the report which they have promised on comparative costs and aids. I can assure you that I shall continue to press for a full report to be presented for consideration by the Council of Ministers as soon as possible. I fully appreciate the problems being faced by the glasshouse sector and that the recently announced gas price increases to Dutch growers will not necessarily provide a satisfactory solution. I am sure that a solution must lie in seeing that growers throughout the Community are able to compete on equal commercial terms by paying realistic prices for their fuel; they cannot be shielded from the harsh realities of the energy situation which has become a fact of life for the whole of industry. With this in mind, I am determined that this whole field shall be subject to the closest scrutiny within the Community. The hon. Gentleman will understand that I must once again say that the Government do not fix the day—to—day price of oil. North Sea oil is priced at world levels, and the vast majority of our growers use oil fuel. In the few cases in which growers use gas, prices are negotiated individually between the grower and the gas board.

I cannot answer the hon. Gentleman's question about the Gas Bill, but I shall write to him. This applies to only a few growers, because of the nature of the industry.

The NFU has requested, as is predictable and well known, an increase in the grant for assistance to growers, but that has to be considered against the general background of overall energy policy and not solely as a measure of assistance to horticulture. It has to be accepted that energy is a scarce resource. The high price of fuel today reflects its scarcity value. Although the real price of oil might ease from time to time, as I have said was the case between 1975 and 1978, there can be no doubt that the era of cheap energy is over. Realistic pricing of energy also has a role to play in energy conservation.

In this situation of high—cost energy there are many industries that would like assistance with their fuel costs, even for a short period, but even temporary relief would make the eventual adjustment much more difficult when the reality of current costs had to be faced. Moreover, a fuel subsidy, even if it could be restricted to the protected crops sector, would cut across the Government's public expenditure policies. We are determined to bring about a reduction in public expenditure. There are many calls on available funds, and the horticulture industry already receives a not unreasonable share of Government assistance. In short, the Government have decided that an exception cannot be made for the protected crops sector to the policy of realistic energy pricing.

I should mention that horticulturists receive full rebate on excise duty on oil for glassheating and soil sterilisation, and their supplies are zero rated for VAT. These aids are in addition to assistance through the capital grants schemes operated by my Department.

The solution to the industry's problems must lie in seeing that growers throughout the Community are able to compete on equal commercial terms by paying realistic prices for their fuel. As I have already shown with the letter that I quoted, my right hon. Friend is determined that this whole field shall be subject to the closest scrutiny within the Community. He has spoken forcefully in the Council, and I hope that he will be able to get some view from the Commission in the near future.

As for competition from the Dutch, we have to recognise that the Dutch growers at present enjoy a real advantage in their supplies of cheap gas. It is not surprising that, given its close proximity to the supplies, 95 per cent, of the Dutch glasshouse area is heated by gas. Over a long period I have received many complaints that this represents unfair treatment. I repeat what has been said many times in this House and to growers and their representatives—we have no evidence that the prices charged to Dutch growers are below the cost of production and are therefore "unfair" in terms of the provisions of the Treaty of Rome.

The Dutch Government have expressed concern about the relatively low price of their gas. In 1978 the Dutch announced a policy for parity between Dutch oil and gas prices by April 1980. Parity was in fact achieved early in 1979, but the gap almost immediately reopened as a result of oil price increases, and the Dutch growers once more had a considerable edge over their competitors on fuel costs. However, last month the Dutch authorities announced that the price of gas to Dutch horticulturists, fixed for a year last autumn, would be increased by 51 per cent., in four stages, by 1 October 1981. The first tranche of 17¼ per cent. was to take effect from 1 April 1980.

On present oil prices in Holland, this package will restore parity by 1 October 1981, assuming that oil prices remain stable. Before the hon. Member intervenes, I hasten to say that I realise that it is most unlikely that oil prices will be held at current levels. Indeed, in the news this morning there is an indication that prices are going up. But I understand that the Dutch authorities have said that they will be prepared to look at gas prices before 1 October 1981 if oil prices increase significantly in the interim. The House can be assured that we will be monitoring fuel costs closely in the coming months, and keeping a watchful eye on reactions in Holland to oil price increases.

It has been suggested that we should impose restrictions on imports of Dutch produce. I understand the feelings of those who advocate this course. Unless the Community rules on competition are breached—when redress could be sought—it would be contrary to our Treaty obligations to impose quantitative restrictions on intra—Community trade. I know that hon. Members will draw comparisons with actions taken by other Community members on another front, but I am sure that the right way is to seek to solve this problem constructively, not obstructively.

I have touched briefly on the question of energy conservation. In this connection, COPA COGECA sent a motion to the European Commission last month seeking a Community programme to help producers to invest in energy saving and conservation. The Commission has yet to react to this motion. It was on that subject that my right hon. Friend wrote to the president of the NFU. We were pleased to see that the NFU has announced the setting up of a working party under the chairmanship of its vice—president, Mr. Christopher Righton, to review the impact on the agriculture and horticulture industries of the steeply rising cost of fossil fuels and that, as well as looking at the rising costs, the working party will examine the scope for greater efficiency in the use of fuels, ways of cutting energy losses and switching to alternative fuels. This is a very constructive approach to the problem, and my Department will be happy to assist that committee on the technical side as best it can.

It is, of course, the Government's policy to encourage more efficient use of energy. The capital grant schemes operated by my Department provide assistance to growers investing in energy saving improvements. Grants are available for the installation of thermal screens, insulation of buildings, boiler conversion and improving boiler efficiency, in addition to the grants on more general capital investments growers make. Current rates of grant ranging from 15 to 32.5 per cent. under the various schemes represent a sizeable incentive to growers to invest in energy saving measures. In addition, a substantial research and development programme is under way in this area. I am seeking to visit the glasshouse research establishment myself next month, with a view to seeing some of this work at firsthand.

We are not only examining existing energy saving methods to determine whether they can be improved, but are looking into the possibility of using alternative sources of energy. Some of this work—such as the use of double skin rigid plastic structures—could turn out to be of real practical value to individual growers. If the work is successful we would, of course, consider adding it to the list of items eligible for grant. Meanwhile, local ADAS officers will, of course, be ready to give advice to growers on how best to adapt their existing facilities to make the most efficient use of energy.

Finally, I stress that we are anxious to see an efficient horticulture industry, able to compete with all comers, but we see no advantage in seeking to shield the industry from what I fear must be the harsh realities of present—day energy costs. But we will do everything possible to make sure that its competitors within the Community are also brought face to face with those realities so that competition is on reasonable commercial terms so far as energy costs are concerned.