§ The Minister of State, Department of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith)
I beg to move.That this House takes note of European Community document 9280/80 concerning proposals for Council Regulations restricting investment aids for milk and pig production and while welcoming the objective of the proposals to institute useful measures to reduce the cost of the common agricultural policy, particularly in the dairy sector, supports the Government's intention to safeguard the essential interests of United Kingdom producers.The proposals contained in the document to which I have just referred originated in a much wider package of measures, which first emerged from the European Community Commission in March 1979, just over 18 months ago. The main objective of that package was—and is—to make the existing structural directives more effective and to find ways of assisting agricultural development in those parts of the Community that are too poor for the directives to be of much effect.
The Commission's general policy over the years on agricultural structure has been to encourage capital investments where they lead to increased and improved efficiency on those farms that after modernisation, can reach a level of income comparable to that available in other sectors. This policy has been supplemented by various other measures. Overall, it is a policy that the United Kingdom has felt able to support. We have always held the view that any increased efficiency that might result could contribute to a reduction in the pressure for price levels which are too high to achieve a reasonable balance between supply and demand.
As the House knows, the fundamental problem with which the Community is grappling in the CAP is the tendency for it to produce surpluses. When those surpluses are produced heavy costs are entailed in disposing of them. It is in our interests and those of the Community to achieve a sensible policy, and our efforts in the budget restructuring must be to get on top of the problem of surpluses and the costs that they involve. This is the background against 967 which we must look at the proposals to restrict assistance to investment in dairying and pig production.
The Commission has been the first to admit that modernisation of farms, in some areas of the Community, has led to an intensification of production. Its concern that structural policy should not increase production capacity for products already in surplus has found expression in its proposal to confine aid to investment in dairying to farmers undertaking a development programme under Directive 72/159, or a farm improvement plan under other common measures. Its proposals for restrictions to pig investment arose from its concern that dairy farmers might turn to pig production as an alternative enterprise, thus creating conditions for an upsurge in production in pig products that would upset the market.
Let me turn now to the proposed restrictions on aid to investment in dairying. These started 18 months ago as a proposal by the Commission to suspend from 1 January 1980 all grant in respect of investments related to the production of cows' milk, with exemptions only for those farmers not increasing their dairy herd and who had at least 35 per cent., of their utilised agricultural area permanently under grass. The discussion was carried forward by technical experts and it pointed up how discriminatory such a proposal would be between different member states. As a result, the proposal was modified to allow aid to continue to those farms pursuing development plans or receiving some other form of aid under Community schemes. The restrictions will not affect all aid paid to dairy farmers, but only specific items related to dairying such as dairies, dairy parlours and dairy cow buildings. Dairy farmers would still be able to receive aid on many other investments that contribute to general farm improvement such as land drainage.
After examination by technical experts, the subject came up again at the price fixing in the spring of this year, and the Council agreed then in principle that, as a contribution to Community efforts to diminish surpluses, aid to investment in dairying should be limited in the modified way I have described, and that even in the case of farmers with a development plan aid should be restricted to that 968 part of their programme needed to achieve a comparable income for 1½man-work units.
Perhaps I should explain that a farmer with a development plan has a programme of planned investment that over a period of years is intended to raise the income for each of his man-work units to the level enjoyed by others outside farming. In the context of the dairy restrictions this aid would be confined to investments necessary to get to this level of income for the first 1½ man-work nits only.
One has to use the technical phraseology of the Commission proposals, but perhaps I may describe them in more comprehensible terms. Expressed in cow numbers, it was calculated that a farmer would need up to 60 cows at the end of his development plan to have achieved the appropriate income comparable to that of 1½ man-work units. The figure of 60 cows was altogether too low to be acceptable to the United Kingdom, where our dairy herds tend to be much larger. My right hon. Friend pressed hard in the Council for an alternative, and succeeded in getting agreement on an alternative relaxation whereby aid would be given to farmers increasing their herds by up to 15 per cent. In other words, a 15 per cent. increase in an existing herd number would qualify for aid.
The agreement in principle to restrictions was taken as part of the price fixing, and therefore there can be no going back on that principle at this stage. However, I think that all countries agreed that some effort had to be made as a contribution to tackling the problem of milk surpluses. I accept that a measure of rough justice is involved, but we were certainly prepared to accept the arrangement at the time in the light of the modifications that we had achieved to the original proposals and because the 15 per cent. increase in dairy herd numbers recognised the particular problems that our larger farmers would otherwise face.
We therefore hoped that by getting the 15 per cent. increase—although it imposed restrictions on our dairy farmers—across the Community as a whole our dairy farmers would not be put to any relative disadvantage compared with other Community farmers. However, there is some uncertainty about how the provisions of 969 the draft regulations should be interpreted and implemented on a Community basis. The issues here are how the different elements should interact—the restriction to 60 cows or an increase of up to 15 per cent. of a farmers' herd, and the condition that aid should be restricted to that part of an investment necessary to generate a comparable income of 1½ labour units.
These issues have not yet been settled. They will be discussed at the next Council of Ministers on 10 November, when the Council will have to take a view on them. Those items are, however, still open for discussion now, and we shall be dealing with them in Brussels next week.
Given this background, I hope that the House will support my right hon. Friend in seeking, in relation to the restriction proposed on investment, to get the best deal possible for the United Kingdom dairy farmer in the interpretation that is eventually worked out next week when the Commission's proposed regulations are discussed.
§ Mr. Douglas Jay (Battersea, North)
Will the Minister be more specific? I understood him to say that the British Government are not satisfied with the proposals as they now stand.
§ Mr. Buchanan-Smith
I should like to be able to answer the right hon. Gentleman's question more directly—I am not seeking to evade it—but there is doubt about where the Commission's proposals stand. We must seek clarification on that first. The interpretation of the different standards—a 15 per cent. increase in numbers, and 1½ man-units—has yet to be done. In obtaining those interpretations we want to make sure that, given the larger size of herd in the United Kingdom, our farmers will not be made relatively worse off than dairy farmers in Europe.
§ Mr. Roger Moate (Faversham)
I am grateful to my hon. Friend for suggesting that he is endeavouring to make these regulations more comprehensible to the House. It is clear from the regulation that the aids will positively encourage a farmer either to increase his herd beyond 60 cows or by 15 per cent. At the same time, are there not a whole host of other schemes designed to encourage that same farmer to go out of dairy production, receiving compensation for the slaughter- 970 ing of his milk cows? Are we encouraging or discouraging the farmer to increase his herd?
§ Mr. Buchanan-Smith
With respect, my hon. Friend must distinguish between the two different elements. In relation to trying to restrict the overall surplus of milk production in Europe—an objective that has been supported by both sides of the House—it is true that hitherto we appeared to have contradictory schemes. There were two schemes to encourage dairy farmers to go out of production, and an investment scheme, common across the whole of agriculture, from which dairy farmers as well as other farmers were able to benefit. At the last Council of Ministers' meeting it was agreed that of the two schemes to encourage dairy farmers to go out of production one should be suspended and the other discontinued in the spring of next year. It agreed to remove that element. We supported that because we believed that it was not cost-effective. We are left with one scheme, which, as of now, encourages dairy farmers to expand production in that, like all other farmers, they can qualify for grants to carry out improvements.
In the regulation before the House today we are dealing with a restriction on that scheme which will apply to the dairy farmer but not to other farmers. From that, my hon. Friend will understand that there is no inconsistency in the Commission's proposals. It has removed the two schemes encouraging farmers to go out of production because they were not cost-effective in the use of money.
My hon. Friend asked whether it was consistent to give any encouragement to dairy farmers to expand in any circumstances. That is a fair point. As I said at the beginning of my speech, the objective of the Community structure proposals is to encourage those farmers who are below a certain level of income to invest so as to come up to that level, and to bring the size of their herds and the structure of their farms to a level that will enable them to earn a proper income, so that the smaller farms do not continue to use that excuse for higher and higher pressure on prices. To that extent, the measure is a sensible element that has underlain our own farm improvement and development schemes for a great number of years.
971 If, in the Community, we use money to try to bring the smaller farms to a better level of efficiency, it is equally fair that the British dairy farmers should not be at a disadvantage compared with those in the Community. That is all that we are seeking to do. I believe that there is a good future for our dairy industry. The farmers have to modernise, and often modernisation involves a modest expansion of some sort. If we achieve the 15 per cent. increase in cow numbers wilt-ten into the restrictions it will put the British dairy farmer in at least a comparable position with his European counterpart.
I apologise for answering my hon. Friend's intervention at some length, but I think that the House will realise that this point is fundamental to the regulation and the way in which we shall approach the issue at the Council of Minister's meeting next week.
§ Mr. Moate
I am grateful to my hon. Friend for his answer, and also for allowing me to intervene again. He has made a clear case for the regulation. However, I am not clear about the contradictory element in policy. Is my hon. Friend saying that we are no longer pursuing a policy of encouraging the slaughter of milk cows? Has that policy now ended?
§ Mr. Buchanan-Smith
There are two schemes. One scheme has already finished and the other will finish in the spring of next year. Both schemes are being removed. That has been supported by the British Government because we believe that the money used in support of those schemes did not produce a return comparable to the number of cows taken out of production. It is a separate issue, but I accept that as a policy objective it may have appeared that some contradiction was involved.
§ Mr. Buchanan-Smith
That is precisely what we are doing. As I said a few moments ago, we are restricting the investment to try to contain the surplus of milk production. The co-responsibility levy is another leg of that same policy. There is nothing contradictory in those two policies; they work hand in hand 972 together because both are aimed at the objective of restricting the production of milk in the Community.
I turn to the regulation on restricting investment in pig farming. I am glad to say that the position is not quite as complicated as that for dairy farming, where the regulation is still subject to interpretation and must be clarified. We shall do that next week. There are still one or two items outstanding on the regulation relating to pigs, but they are more straightforward. As the House knows, it is not new for the pig farmer to have restrictions on investment in pig production. Restrictions on investment have been in existence since 1972. Currently, aid is restricted to investment that lies within a minimum and maximum capital sum, the current minimum being £8,140 and the maximum £41,263. So there is already that restriction on investment in pig production. There is a further restriction, in that aid is restricted to those holdings capable of producing 35 per cent. of the feeding stuffs required that can be grown on the holding itself and fed to the pigs. In general, pig producers in the United Kingdom have found that they have been able to live with those restrictions, although I know that some would prefer to do without the 35 per cent. feed limit. That is the basic scheme at present, and it is not matter for negotiation. I thought that I should mention it, because it helps the House to understand the existing restrictions.
When the Commission came forward with new proposals to restrict investment in the pig sector its original proposal was to suspend all aid for pig farming, with exemptions only for farms not increasing their fatstock or breeding sows by more than 10 per cent., or those farms that had more than 65 per cent. of their utilised agricultural area under crops—a further underlining of the feed rule that I mentioned earlier. In addition, it was proposed that the financial limits within which grant aid could be given were to remain unchanged, as were the requirement that a farm should be capable of producing at least 35 per cent, of its own feeding stuffs.
As with the dairy regulations, there has been considerable discussion at a technical level. As a result, the proposals have been modified, and an agreement 973 reached in principle at the price-fixing Council in the spring simply provided that aid should be limited to the volume of investment necessary to reach 550 pig places—not exactly a felicitous phrase—per farm. In other words, it is an actual physical restriction on the number of places that can be provided on a farm.
As inflation has made financial limits unrealistic as a means of control in many parts of the community, the 550 pig places to replace the existing financial minimum and maximum within which aid is to be granted. The proposal replaces the financial standards by a physical standard related to the physical capacity of the holding.
§ Mr. Tam Dalyell (West Lothian)
As a member of the former indirectly elected Assembly's Budget Committee, I know that there were considerable misgivings about the realism of many of the financial limits in the agriculture sector. Has not the time has come for a general review of the system of financial limits, which often leads to the most hideous distortions?
§ Mr. Buchanan-Smith
I believe that the system has the effect that the hon. Gentleman has described. I hope that he will be encouraged because in this instance the financial limits are being replaced by a physical limit. That sometimes applies even to our own national schemes in various areas—not only economic but including such matters as housing. We have heard in debates how limits of eligibility for certain aids have been left at a certain level and have been eroded by inflation. Many people would like to see them related to physical matters. I am sure that the hon. Gentleman will welcome what is proposed as being a more realistic approach.
We have contributed to the discussion in the Community. We hope that a physical standard can be applied relatively uniformly.
§ Mr. Peter Hardy (Rother Valley)
Can the Minister explain the imprecision in the proposals? They appear to talk about 550 pig places. One presumes that those are fattening places. There is no satisfactory or clear reference to the question of the breeding herd.
§ Mr. Buchanan-Smith
I am grateful to the hon. Gentleman for that informa- 974 tion. He precisely anticipated the point that I was coming on to.
There remain a number of serious issues still to be resolved—issues that are rather more straightforward than the restrictions on dairy investment. We shall discuss those issues next week. One is that to which the hon. Gentleman referred—the definition of what is meant by a "pig place". Another is whether farmers expanding to more than 550 places will at least qualify for aid for that part of investment that is related to the 550. Those are the two main issues of detail that are still outstanding, and they are important issues.
A third element still to be discussed is the derogation authorising a member State to adjust the pig number in specific cases where 550 proves insufficient to ensure a comparable earned income, because we are still at the earned income level of 1½ man-units. In the Council we shall seek clarification of the crucial matters of pig investment that are outstanding. We shall work to ensure that there is no discrimination against the United Kingdom pig producer and the structure of our industry.
§ Mr. Leslie Spriggs (St. Helens)
I have listened with great care to what the Minister said about the proposals, which have not yet been finalised. He said that further meetings would take place before they were. When the hon. Gentleman returns to the European Minister's meetings will he take great care to protect the British dairy farmers and pig producers, and also do all in his power to protect the British housewife against increased prices?
§ Mr. Buchanan-Smith
I can give the hon. Gentleman a firm assurance on both those points. The hon. Member for Durham (Mr. Hughes) shakes his head with incredulity and looks very worried. No doubt he will say later why he is so worried. I am glad that the hon. Member for St. Helens (Mr. Spriggs) intervened, because he enables me to end on a happy note my introduction of the discussion of the document.
The restriction on investment aids in dairying is to try to bring about a better structural balance in dairy production in the Community, so that we do not go on producing surpluses that become very costly to dispose of. The restriction on 975 pig investment is to try to ensure that we do not upset what is a fairly delicate balance in the pig market by people who go out of dairying seeking to transfer to the pig sector.
In both sectors we are trying to keep the correct balance within production in the Community and to contain surpluses. My right hon. Friend and I will have that objective very much in mind in our discussions on those regulations.
We have dicussed many regulations in the past, and I have no doubt that we shall discuss many more in the future. We have constantly to be on our guard, because of the very different structure of agriculture in the United Kingdom compared with some other parts of the Community. We must ensure that restrictions do not discriminate against the producer in the United Kingdom.
It is precisely the points that are still open for discussion—indeed, still open for definition—in both the dairying and the pig sector that I have highlighted today. I hope that what I have said shows our concern and our awareness of the problems.
I hope that my right hon. Friend and I will have the support of the House when we go to Brussels next week to make sure that the restrictions are applied fairly across Europe and do not discriminate against the efficient British dairy and pig producer.
§ Mr. Gavin Strang (Edinburgh, East)
Is there no limit to the trivial gobbledegook in which we are prepared to engross ourselves? When British industry is collapsing; when mass unemployment is at a level unheard of since the 1930s; when there are two economic reports in today's newspapers from authoritative, independent sources that unemployment, although massive, will rise further and more sharply in the year ahead; and when we understand that the Government are deeply divided over whether to implement more policies that they know will increase unemployment further, the people must wonder why we are discussing as the main item of business today measures concerned with limiting EEC aid to milk and pig producers.
976 I am not suggesting that Parliament should not consider these matters. I shall not dispute the Scrutiny Committee's recommendation that the regulations warrant further discussion. But let us keep the matter in perspective. On these aids in the milk sector, EEC expenditure last year in the United Kingdom was less than £25 million, and in the pig sector it was less than £2 million, although it is difficult to extract these figures from the budget. They compare with about £450 million that the Government are putting into British Leyland, and are very different from the well over £2,500 million that the Government will spend this year on unemployment benefit and supplementary benefit.
§ Mr. Nigel Spearing (Newham, South)
I do not disagree with what my hon. Friend says, but does he not think that what is even worse is that the EEC expenditure on slaughtering cows in this country is—according to an answer to me by the Minister a few days ago—£.19 million? Is not that just as scandalous?
§ Mr. Strang
My hon. Friend is absolutely right to make that point. The whole position arises because of the chaotic state of the management of the Government's business this Session.
The proposals before us are relatively minor, although I accept that they are important to the producers involved. But the issue that lies behind the proposals is important. That issue is the common agricultural policy. The starting point for any discussion of the CAP must be a recognition that it represents a monstrous misuse of resources and a massive level of expenditure, which does not achieve in any significant way the objectives that its supporters, particularly on the Continent, argue in favour of it.
We cannot help the small producers of Europe by high prices and open-ended intervention. The latest figures for 1980 for the milk sector—the important sector that we are discussing this afternoon—show that the EEC will spend about £3,300 million coping with the surplus. Where does that money go? A large amount is spent on subsidising exports to the Soviet Union and elsewhere at ridiculous knockdown prices, a net transfer of resources from the Community to third countries, subsidising the consumption 977 of milk by livestock, and the cost of storage. That is not a sensible or efficient way of helping small producers, whether in the United Kingdom, France or Italy. [Interruption.] Hon Members ask why we agreed to it. I assure them that the milk regime long predates the Labour Government of which I was a member.
§ Mr. Mark Hughes (Durham)
Will my hon. Friend inform the House when the Council of Ministers agreed to subsidise skimmed milk powder for animal feed, and which Minister agreed to that?
§ Mr. Strang
The subsidisation of skimmed milk for pigs was authorised by the previous Labour Government. But perhaps I am not making myself clear. I am not complaining about that. I am complaining about the nonsense of the surplus. I am not asking about the measures that were taken to cope with it. I am making the point that the starting point for any discussion in relation to the CAP—[Interruption.] I do not understand why Conservative Members do not recognise the nonsense of the CAP, or how they defend a policy of open-ended intervention that tells producers that the State will buy whatever they produce regardless of how much they produce.
It is not my intention to be controversial. I assumed that my points were accepted by most hon. Members. The CAP is not simply a misuse of resources. It may be argued that if the Prime Minister had been successful in rectifying the budget issue we would at least be getting back as much as we were putting in, but although the Prime Minister and the Government have made some progress in that area we are still getting back less, financially, than we put into the Community.
That brings me to the point relating to the two proposals before us. Because of the structure of our agriculture industry, because our industry has larger units in some areas—which are relatively more efficient—and because the Community has large numbers of small producers in particular areas, measures that cut off aid beyond a certain scale of operation inevitably discriminate against the United Kingdom.
While it is true that, thanks partly to the work of ADAS—it was the previous 978 Labour Government's policy to get as much as possible out of schemes such as the investment aid scheme—our share of expenditure in this area is relatively high, considering our relatively smaller agriculture industry. But if we continue down this road that benefit will be lost, and even in that area the balance of advantage will be pushed further against us, because fewer and fewer of our producers will be eligible for EEC-backed assistance, a higher proportion of which will go to producers on the Continent.
We should be concerned about this measure, small as it is. I do not wish to go into any further detail, except to say that it is disappointing that a Minister has to tell the House that the proposal is possibly even more restrictive and discriminatory against the United Kingdom than the first reading of the proposal would suggest. It suggests that a dairy producer with more than 60 cows who makes the investment will receive support provided that he does not expand by more than 15 per cent. The Minister is now saying that there is some confusion about that, and that it is possible that no producer with over 60 cows will receive assistance. That is disturbing, but I am glad that the Minister said that the Government would do their best to make sure that the matter is sorted out satisfactorily.
§ Mr. David Myles (Banff)
May I ask the hon. Gentleman whether he is following his national instinct or his Socialist instinct? That would be interesting.
§ Mr. Strang
I see no conflict between my national and Socialist instincts. We are talking about wasted money. No doubt it will be argued in the Council of Ministers that we must be careful about cutting back expenditure on the CAP because of the high level of unemployment that will be created, but if we want to tackle unemployment I can think of no more inefficient way of doing so than to spend thousands of millions of pounds on putting food into store and giving a guaranteed commitment.
The Opposition do not propose to divide the House on these proposals, although we are unhappy about them. We are unhappy about measures that discriminate against investment generally, although there is clearly a case in principle here, given the surplus looked at 979 in Community terms. But above all we are unhappy to go down a road that means that our share of EEC money towards Government-assisted new investment declines in the future.
§ Mr. Peter Mills (Devon, West)
I welcome the motion, particularly the last part of it, which I support fully, and whichsupports the Government's intention to safeguard the essential interests of United Kingdom producers.It will be very difficult for the Government to do this, and the House ought to support the Minister wholeheartedly in the matter.
The speech of the hon. Member for Edinburgh, East (Mr. Strang) was most amazing. I have been in this House for a long time—for probably too long, some people might say—and I have listened to almost every debate concerning food, agriculture and fishing for many years, but I have never heard such a peculiar speech as the one made by the Opposition spokesman. In the Labour Government he was one of the team dealing with these matters. I remind the House of the word "renegotiation". Has the hon. Gentleman forgotten what happened? The Government of whom he was a member played a role in this. They could have done more and they did not do it. It ill behoves him, therefore, to come to this House with the sort of material which he presented in his speech today.
The hon. Member started by saying that this is not an important matter. Not important? What about all the dairy farmers, the dairy workers and the hundreds of people who work in various dairy plants, as in my constituency, where some of them are being laid off because of a shortage of milk? That is at a time when we are just getting under way for a tremendous drive to export our dairy products into the Community, and when the Milk Marketing Board's export figures amount to £100 million or more. Not important? If the hon. Member comes to my constituency and speaks to my dairy workers in Torrington, he will get short shrift from them.
§ Mr. Strang
I was not, of course, suggesting that the milk industry was not important. On the contrary, it is enormously important. But the hon. Gentleman should look at the figures and talk to some of his producers. They would tell him that if they could get just 1 per cent. off the rate of bank interest it would be a hundred times more beneficial to the industry in terms of cash than these grants will be.
§ Mr. Mills
With respect to the hon. Member, he has bypassed or forgotten what I said. He has raised another matter; indeed, I tend to agree with him on it.
I hope that the House will not forget what was said earlier by the Opposition Front Bench, especially when we think of renegotiation. The hon. Gentleman has said that these things are not all that important. They are important to very large sections of the rural community.
I said at the beginning that I support the motion, and particularly the latter part of it. The Minister mentioned—I hope that he will not mind my saying this—that these matters are very complicated. They are very complicated. I noticed the faces of some Opposition Members during the Minister's speech. They were confused, and rightly so. But if these matters are so complicated, there will be loopholes which will enable other people in the Community to get round the regulations. The more complicated the regulations, the more the French and others will try to bypass them and work them for the advantage of their own farmers. The Minister should watch this aspect very carefully. Some time ago there was talk of co-responsibility. On that occasion it was the French Government who paid and not the producers. I hope, therefore, that the regulations will not be too complicated, otherwise the French in particular will drive a horse and cart through the whole lot.
A great deal of nonsense is talked by the Socialist Party and by the media about surpluses. I have said this in the 981 House many times. Of course, we do not want structural surpluses—and perhaps milk comes into this category—but surpluses are not always bad. Sometimes it is good housekeeping to have surpluses. Sometimes it is important to have a surplus in one year in order to deal with the problems of a shortage in the next year.
I bet that the Russian Government would like to have a surplus of grain year in and year out, and a surplus of meat. We have to be very careful—this particularly applies to the Socialist Party and the media—about continually condemning surpluses. We hear talk about butter mountains. It is great stuff to put in the newspapers. We read about powder mountains and milk lakes. I can imagine how the people concerned with these stories would scream if there were no milk on their doorstep or butter on their toast. I can imagine how they would scream if they had skinny babies because there was no milk for them. They would soon be asking what was wrong with British agriculture and British food production.
I am pro-CAP. There are many things wrong with the CAP, but the essential concept is absolutely right. The idea is to enable people to produce food that is necessary, and perhaps to be able to feed other hungry people in the world. We should not be talking all the time about surpluses.
§ Mr. Mark Hughes
Self-sufficiency is one thing, but if the cost of a 17 to 20 per cent. surplus in dairy products is so heavy that it bankrupts the EEC, does not the hon. Gentleman accept that at that point we have to consider the question rather carefully? Providing butter to the Russians at less than half the price at which it is provided to the hon. Gentleman's own constituents is surely a little difficult to justify.
§ Mr. Mills
Yes, I did. If the hon. Member will read Hansard tomorrow morning, he will find that that is exactly 982 what I said. The matter of aid is greatly complicated by having such a tremendous milk surplus. I was simply trying to paint the picture clearly and to show that surpluses are not always bad. Sometimes it is good housekeeping to have a surplus.
On the surface, it looks ridiculous to give aid to producers when we have an overall surplus of milk within the Community. It seems to be a strange policy to add to our surpluses and to lead to even greater problems by stoking up the surpluses and encouraging farmers to produce more. But there is rather a subtle point involved and the Minister has explained it very well indeed. If many of the small and inefficient farmers were brought up to a higher standard of efficiency, the overall end price would not need to be so high. That is the simple truth of the matter.
But it goes much deeper than that, and I want to address my remarks not only to this House but directly to some of our European colleagues. We must point out to them time and again that in the United Kingdom we are not creating the surpluses. We are not upsetting the equilibrium in milk production. The figures released recently show where the trouble lies. In Germany the increase last year was 5 per cent. and in France it was 6 per cent., whereas we shall probably have a minus figure. When the Minister is on the Continent of Europe, he should drive home to the other Ministers the fact that we are not producing the surpluses.
Are the proposals fair to British producers? I do not think that they are. I welcome the Minister's assurance that he will watch the matter very carefully. I hope that he will make the necessary adjustments. In this country as a whole we are producing, I believe, only 70 per cent. of our milk needs. The other countries of the Nine are producing well over 100 per cent. Surely that factor should be taken into account in the negotiations next week. It is fair to say that we are not being treated as fairly as we should be and that we are not producing the surpluses. We are pro-clueing only 70 per cent. of our needs.
I do not want to see any cutback in United Kingdom production. That trend has gone too far already. We have the climate, the grass, the quality stock, the dairy workers and the cowmen. We have an excellent system of distribution and 983 collection under the Milk Marketing Board. Our milk factories are first class. In my constituency there is a large plant at Torrington, one of the largest in the United Kingdom. It was an old Unigate factory. It was taken over by the MMB.
Milk production is falling and men are having to be laid off. That is crazy when we are producing only 70 per cent. of our requirements and our export of dairy products is getting under way so well. I do not want to see more unemployment because of a further cutback in milk production. It will be a disaster if the present trend continues. If falling production in the United Kingdom continues, there will be less milk available for manufacturing, which is essential if we are to maintain our export drive.
The Minister has rightly been asking us to be export minded in a variety of food products. He has been urging us to seize the opportunity in the same way as the French. If we weaken our production and reduce it, we shall not be able to fulfil what we want to do, apart from lowering the profitability of British farms and making it impossible for British dairy farmers to pay the wages, and the increased wages, that are needed for dairy workers and others.
I understand the dilemma. We must accept that we are in the Community, that we must not seek always to exempt United Kingdom producers and that the Minister is one of many Ministers. I accept all that and I realise that there are difficulties. However, the problems that I have mentioned are basic, and I urge my hon. Friend to redouble his efforts to ensure that we are not penalised by the sins of others. That is why I support the motion. We would not have a leg to stand on if we were producing far more than our requirements. We cannot shout too much about grain and potatoes because we are producing more than we require.
I shall suggest some positive measures that we may have to adopt in future. I was amazed when the Opposition spokesman did not advance anything positive to deal with the structural milk surplus and to lead to changes. Are the Opposition barren of ideas? As we look to the future, we should more and more consider national quotas. Some time ago my hon. Friend and I produced 984 some papers on quotas. Much of what appeared in those papers is worthy of consideration.
If we could obtain a reasonably high national quota, we could protect our farmers and reduce surpluses where surpluses are being created. There is nothing strange about the concept. For example, we have sugar beet quotas, and I see no reason why we could not have national dairy quotas. Such a system would have its disadvantages as well as its merits. I feel that it would be of benefit to the United Kingdom. These issues need to be discussed and considered afresh.
Farmers throw up their hands in horror when the co-responsibility levy is mentioned. I can understand that. In the United Kingdom we are, in a sense, paying two co-responsibility levies, one to the Community and the one that we have always paid to the MMB. The money that is paid to the MMB has been used to publicise milk and to try to sell more of it. That is what should be done with the money. I wish that the Community's co-responsibility levy was used far more to sell liquid milk to the housewives on the doorsteps of every house in France, Germany and the rest of the Community in the same way as in this country. The co-responsibility levy should be used in that way.
I have received a letter from Mr. Tugendhat in which he makes it clear that if a super levy had been created the United Kingdom would have benefited.
§ Mr. Mills
Our milk producers are slightly below 99 per cent. while other producers of the Nine have gone up to 105 per cent. and 106 per cent. If a super levy were introduced, it would hurt them and not us.
That is all right on the surface, but there would be problems. It would be said "Why should British producers be below the levy? Why should we be allowed to expand when we produce only 70 per cent. of our requirements?" In the long term a super levy would not help us, though it would be helpful in the short term. The result of our having had no super levy is that the United Kingdom Treasury will have to pay another £50 million into the Community's 985 coffers to pay for surpluses that we have not produced. That is an anomaly that needs to be sorted out quickly and carefully.
Between March 1979 and March 1980 3,500 milk producers left the sector. That is a tragedy. The hon. Member for Edinburgh, East shakes his head, but it was a previous Labour Government who caused that to happen.
§ Mr. Mills
I believe that the trend has gone too far. If we are not careful, our agriculture will get out of balance. More and more farmers are going out of stock farming. More and more are going out of dairy farming. More and more are producing cereals. It is getting topsy-turvy. I remind cereal producers—I declare an interest as I am one of them—that if we do not have a market for our grains, for example, to feed to dairy cows or pigs, we shall be in real trouble. I warn the Minister, the House and the Community that agriculture will get out of balance if the number of dairy producers now going out of business continues.
Over the years, and before this Administration came to power, we have been witnessing the collapse of the pig industry. We did not hear very much from the hon. Member for Edinburgh, East about the industry. Who caused its collapse? It is as well to remind the House and the country who did.
§ Mr. Hardy
Does not the hon. Gentleman recall that when the Labour Government took office in February-March 1974 they saw a completely demoralised and depressed pig industry? The first action they took was to introduce a pig premium scheme. When the cycle changed again and pig producers faced misfortune, that Government sought to introduce a similar scheme. They were prevented from doing so by the Community. That refusal was greeted not with dismay or sadness by Conservative Members but by choruses of amusement and enjoyment.
§ Mr. Mills
Has the hon. Gentleman forgotten the MCAs? Has he forgotten the damage done because there was no devaluation of the green pound? As there was no devaluation of the green pound, the right hon. Member for Deptford (Mr. Silkin) had to bring in a subsidy of 50p per score. The House, the country and pig producers must not forget the role that the Labour Party played in destroying the pig industry. When the Conservative Party came to power, it devalued the green pound. Unfair competition is coming to an end. We face a tricky problem which the Minister will have to watch most carefully. The more complicated the situation is, the more fiddles there can be. Watch it, Minister!
§ Mr. Peter Hardy (Rother Valley)
I am tempted to take up the suggestion made by the hon. Member for Devon, West (Mr. Mills) to the effect that we should not adopt a partisan approach. As the hon. Gentleman said, he has been in the House a long time and as the years pass he seems to prepare his speeches less carefully. What he thought to be a nonpartisan speech became, as the minutes passed, excessively partisan. His description of pig production was a travesty. In a previous Conservative Administration, the hon. Gentleman was a Minister in the Department of Agriculture, Fisheries and Food. He seriously misled the House when he suggested that the pig industry was doing superbly in February 1974. Pig producers were in a state of demoralisation and despair.
I remember meeting pig producers in my constituency in March 1974. They were gratified when the Labour Minister introduced his scheme. It greatly assisted them, and within a few months the price of pigmeat had improved. I also remember meeting Yorkshire pig producers on the day that the pig price reached £6.42 a score. That gave them great hope. Various economic forces then depressed the position, and when the previous 987 Labour Administration sought to assist they were prevented from so doing by the Community and by the action of some of our partners. Unfortunately, Conservative Members were not as non-partisan as the hon. Member for Devon, West and his hon. Friends would have us be now.
§ Mr. Hardy
I recognise that the question of the MCAs was difficult. The hon. Gentleman will recall that I sometimes participated in debates on agriculture and spoke about the interests of pig producers. I agree that pig production in Britain was badly hit as a result of those actions. A recovery could now take place. When the Europeans talk about discouragement, decline and limitation, I become suspicious. It would be unfair if Britain were to be limited in its recovery as regards pig production. It would also be unfair if the Europeans were to adopt an unhelpful attitude towards dairy production.
Concern has already been expressed about the principle behind the CAP. If the CAP is to contain any wisdom, it will have to demonstrate to Britain and to the rest of Europe that it contains sensible priorities. I am not a farmer, although I have long been interested in agriculture. One of Britain's principal resources is its grasslands. The Community should regard Britain and Ireland as the principal grassland producers. Any development in the CAP that inhibited the recognition and use of that grassland would be contrary to the interests of Britain and, in the long term, would not help the Community.
I hope that the Minister will secure a sensible interpretation of the proposals as regards the expansion of our herds. We must achieve the balance to which the hon. Member for Devon, West referred. That is important, because as the Government pursue their silly policies, as industrial employment disappears and as great swathes of havoc are wreaked on our traditional industries, agriculture will become more important. When oil—which is partly responsible for the destruction of British industry—has gone, agriculture may be the only remaining asset. It behoves the Conservative Administration to be more careful than the 988 previous Conservative Government of 1974, of whom the hon. Member for Devon, West was a member. They should remember the destruction of hope that took place in the dairy industry and the damage that they wreaked in pig production.
One thing bothers me. Successive British Governments have been remarkably careful, cautious, prudent and docile in their interpretation of the regulations. Perhaps the Conservative Government will be a little bit more of the buccaneer than we have so far seen. I doubt it. Given the present plight of our economy, the Government should be more privateering in their approach to Europe.
§ Mr. Hardy
I would not mind the "sense of enterprise", the "spirit of adventure", and the rest of it, but, as my hon. Friend knows, very little is possible in the industrial sector. Indeed, tractor manufacture in Doncaster is being assailed as a result of the Government's economic policies. If the Government were to show some energy and were to make some imaginative approaches towards the European regulations, my right hon. Friend's constituency and mine might derive some benefit.
The House will shortly consider other EEC documents on agriculture. The documents before us today, and those that the House will consider, give rise to great concern. There are several complicated proposals before us, and later we shall consider others. I spoke to a farmer in my constituency whom I have known for many years. He is an experienced and extremely intelligent man. He has been studying France with great interest. A few weeks ago he visited a French egg-packing station. The farmer noticed that the French egg-packing station was labelling last week's eggs with next week's date. That is serious. Although I do not wish to mention his name, I am happy to give it should it be required, and he is willing that I should give his name to the Minister.
Britain observes every dot and comma. We are always obedient. We are the only member State to behave like that. As a result, people take advantage of us. We can no longer afford to be in that position. I hope that the Minister will ensure not 989 only that the definition of "pig" or "pig place" is rapidly agreed to the benefit of Britain but that our European colleagues are quickly convinced of the need to pursue sensible priorities. If sensible priorities are pursued, acknowledgment of the importance of the grasslands of these islands is vital. If that is not achieved, there will be a further decline in agriculture and our industry will be ruined. That would be disastrous.
The hon. Member for Devon, West referred to agricultural wages and to the need to promote a return. As I travelled to the House I listened to the car radio and discovered that one reason why farm workers will not receive the awards which perhaps they should enjoy is that farm incomes have fallen substantially this year. That suggests two things. First, farmers may have been disappointed by the Government's failures during the past 12 months. Secondly, given that farm workers cannot receive their awards today, why did they not receive a little more last year when farmers had more at their disposal? I hope that the Minister will bear that in mind should he offer any advice to the appropriate wages board.
I hope that the Minister recognises that it is essential that the Government should pursue sensible agricultural policies. We cannot afford to have nonsense in agriculture as well as appalling dereliction and despair in industry.
§ 5 pm
§ Mr. John Farr (Harborough)
I congratulate the Minister on the way in which he put the case this afternoon. It seems that he has a certain amount of resolution which my hon. Friends and I hope to fortify in our remarks. The Minister has a considerable battle on his hands. The task is not easy and, as has already been pointed out, there are a number of pitfalls ahead.
Before I develop my argument, I wish to call attention to the appalling condition of the translations of the documents that we are supposed to be able to decipher. If this is the best that the EEC can provide, all I can say is that there is in my constituency a printer who will do the job properly and legibly and for about a quarter of the price without all the appalling blotches and hieroglyphics.
In this debate we are dealing with two absolutely critical British farm products 990 —dairy products and pigmeat products. These are the only two areas in which, if British farms are to expand at home, there is any potential. In dairy products we are, according to my hon. Friend the Member for Devon, West (Mr. Mills), 70 per cent. self-sufficient. I thought that it was 65 per cent. In pig-meat we have about one-third deficiency potential.
When the Minister goes to Brussels, it is absolutely essential that in his talks with his counterparts in the EEC he in no way impairs or trammels the possibility for expansion of British farmers in these two vital areas. It does not matter so much in sugar, because we have Third world responsibilities. Neither does it matter so much in beef or potatoes in which we are pretty well self-sufficient. It does not matter so much in cereals either in which overall we are near enough to self-sufficiency. But in pigmeat and dairy products there is still potential for expansion on the farm at home. It is vitally important for the Minister to bear that fact in mind every minute of the day, both in the House of Commons and in Brussels when he is negotiating with our partners. Hon. Members on both sides of the House want to see British farmers close this one-third self-sufficiency gap in dairy and pigmeat products if this is possible.
In relation to the regulations that we are discussing, it is vital to have the interpretation of what the Minister will discuss in Brussels made more clear than it has been. On the dairy regulations, the Minister said that these were still open to interpretation. But it seems to many of us that the proposed Council regulation restricting investment aids for milk production imposes greater restrictions than were intended by the Council in its statement. It seems also that the drafting removes most of the flexibility of the provision for a maximum increase in the herd of 15 per cent. Why has the Minister settled for a figure of 15 per cent.? Should not the potential be there so that we can aim for a higher increase of, say, 20 per cent.? Economic conditions being what they are, a farmer, almost overnight, can be forced out of one commodity and into another. An increase of 15 per cent. is not necessarily the right figure. I should like to see it increased to 20 per cent.
991 I turn to the pigmeat document. It is not absolutely clear on the definition of a "pig place", but this is absolutely critical. Again, these words should be defined as soon as possible. As the document is drafted, it allows for 550 pig places. That appears to be unfair to the United Kingdom because it would certainly affect United Kingdom producers more harshly than their EEC counterparts. It is vitally important to let United Kingdom producers expand so that they may have a chance to close the gap between present home production and self-sufficiency.
The dairy document provides for an increase in the maximum number of cows—more than 60 cows or 15 per cent. The pigmeat document provides for a maximum of 550 places. Perhaps the Minister could incorporate a percentage increase there as well so that the larger pig producers in the United Kingdom will not be prejudiced by the size of the herd.
I should like an assurance from the Minister that, if the figure of 550 is agreed and a producer has 600 pigs, he will not be debarred from a grant in total. I want an assurance that he will get grant aid on the first 550 pigs even though he would not qualify on the balance.
I want to stress the importance of the theme of self-sufficiency. As I said, in a number of products there is no room for expansion. I do not wish to see great expansion in sugar because we have commitments to the Third world countries to allow their sugar in. In pigmeat and dairy products we still have potential for home expansion. We are not self-sufficient in pigmeat or milk products to the tune of 30 per cent. or 35 per cent. When one takes account of the fact that last year we had a deficit of £3,000 million a year in our general balance of trade with the EEC, and compares it with a surplus of £200 million in 1970, one sees how vital it is to fill the gap in these areas, not only to assist British farmers to expand and to give them hope for the future but to help our country generally in its grave economic problems and its balance of trade with the Community. It is staggering that we have dropped from a surplus in 1970 to a deficit of £3,000 million. We 992 can do a little to help by allowing people to produce more of those two commodities at home.
I hope that the Minister will keep my remarks in mind when he is talking to his Community colleagues in the next few days. I support the proposals.
§ Mr. Wm. Ross (Londonderry)
As I listened to the speeches of some hon. Members I wondered whether they had forgotten the title of the motion:Proposed pig and dairy restrictions.The intention behind the Community documents is to restrict EEC output of pig and dairy products. Some hon. Members appear to believe that the measures can help to increase production. However, a definite effort is being made to cut down total EEC production, including that of the United Kingdom.
The effort should be directed to dealing with the Continental structural surplus, which is none of our affair. It has its roots in the small farms on the Continent, where the farmer cannot make a living in anything other than the intensive production involved in poultry, pig and milk products.
The motion states that the Government's intention isto safeguard the essential interests of United Kingdom producers.However, the surplus in the EEC is not evenly spread, and even within the United Kingdom production is not evenly spread. There are peculiar regional problems, especially in my part of the United Kingdom, as the Minister knows. The proposals will have an adverse effect on producers in those areas.
The United Kingdom has a deficit in the two products. What case is being made in Europe for a reduction in the United Kingdom production? Long ago the battle was lost. It was lost with regard to milk on the day that we accepted the co-responsibility levy. By that we admitted that we must shoulder part of the burden for overproduction on the Continent. As a representative of the British people and as a farmer, I cannot accept that. United Kingdom production is efficient and helps our entire economy. Since we accepted that responsibility, Ministers have one hand tied behind their 993 backs. That is not a reasonable way to proceed over these proposals.
We cannot allow production in this country to restricted. It will not help the producer or the country. By accepting the draft document, we will deny producers just below the limit the necessary economies of scale and specialisation. That will apply especially to the producer with 40 or 50 cows who wants to replace equipment.
When a farmer has to replace equipment he chooses more up-to-date and efficient equipment. I remember hand-milking in the smaller farms. Such farms either vanished or installed milking machines. The next step was to install a milking parlour. Today we have the rotary parlour. The more efficient milking machinery the farmer chooses, the higher the cost. It requires massive investment of many thousands of pounds to move from a straightforward milking parlour to a rotary parlour, not only for the equipment but for the stock to make it viable. The proposals will block the young, thrusting farmer who wants to improve his enterprise and become profitable. That is what concerns me.
Therefore, will the proposals succeed and restrict United Kingdom production? Undoubtedly the climate will be less favourable for the farmer wishing to increase his stock. However, at the end of the day it comes down to money. If the enterprise is profitable and it is worthwhile making the quantum leap and paying the bank for the money, the young, thrusting farmer will go ahead.
The entire proposal is a house of cards. It is nonsense; it cannot succeed. Like everyone else, farmers are ingenious. A farmer who has 50 cows will aim for 60, 70 or 80. If he cannot do that honestly, he will find a way around the regulations. The more complex the regulations, the more loopholes there will be, and there will be more people looking for those loopholes and finding them. A plant that is constructed to deal with 50 or 60 cows can just as easily deal with 70, 80 or 90. If a young farmer wants to make money, he has to work long hours. The extra hours spent in the milking parlour are neither here nor there for a few years. He is prepared for that. Thousands of young farmers are doing it.
994 The Minister said that the proposal concerning pig production was more straightforward. I do not agree. It is much more complex and difficult. Like a cactus, it bristles with problems. In regard to the 550 pig places, what does the term "pig place" mean? By greater efficiency, better quality of stock, buying his pigs a little later or keeping them for a shorter period a farmer may raise his throughput. What standards will be laid down for the size of pens? Can they house 10, 11 or 28 pigs? What is the position with sows, boars or rearing young stock?
The language is inadequate to deal with the complexity of the situation. If the intention is to cut down production, why not set an upper limit for the number of pigs per farm?
What will be the definition of a farm? Will it be a holding restricted to a certain number of pig places, or will there be a definition of a farm business? Will a farmer, his wife and two or three sons all be able to run such a unit? There are so many holes in the proposed system that it is not so much a scheme as a roll of netting wire. I do not believe that it is workable.
The nonsense of the system will become increasingly apparent, and eventually the EEC will have to look for something else. It may turn to other means of restricting United Kingdom production. We already have the problem of the super levy on milk and in Northern Ireland we face the problem caused by the failure to get the Italian levy on grain, which is having a major effect on our pig production.
Is not the most effective way of bringing down milk production to increase the levy on overproduction? If so, why have the Government, the Community and everyone else shied away from that? Why do the Government continue to accept that we, who have a deficit, should pay that levy? Why are the areas of overproduction not squeezed? We do not want to reduce our own production. We need that. We must reduce other people's production. Let us be a little like the French and adequately look after our own interests first.
There are considerable social implications in all this. It is intended that we should create the same income and the same size of farm production per unit.
995 That is the sort of social and economic engineering on farms which I thought the Conservative Party would not welcome. If there is one lesson from history, it is that imposed sameness cannot work.
Farm incomes are vastly different in every country, for many reasons—climate, land tenure systems, the individuality of farmers, their attitude to life and so on. Seeking to get a sameness of farm incomes would be like trying to get a sameness of income among all the industrial workers in this country. It would be impossible. Too many people forget that farming is not one enterprise but a series of industries with different interests, incomes and needs. Trying to treat them as the same, even with specialised production such as milk and pigs, is the road to nowhere. It cannot succeed.
The practical difficulties have been clearly illustrated in our experience of green money and the MCA system in the Common Market. Those were internal tariffs in what was supposed to be a free Common Market and they made a nonsense of the CAP system. The Government's motion does not solve the problems of agriculture in the EEC, any more than did the internal tariffs.
As always, the Minister was smooth, helpful and willing to make the best of a bad case, but he could not make a silk purse out of this old sow's ear. He tried hard, but he missed the bone of contention of the farmers and the country generally. A proper defence of the interests of our farmers requires a swing back to a national farm policy for our own needs rather than an attempt to look after the national needs of our trading opponents—not partners—on the Continent.
§ Mr. Paul Marland (Gloucestershire, West)
I am a practising farmer, and I commend the motion to the House. I support my hon. Friend the Member for Devon, West (Mr. Mills) in his well-merited attack on the hon. Member for Edinburgh, East (Mr. Strang), whose memory seems to be so short. When the hon. Member was at the Ministry a mere 18 months ago, he had the opportunity to do something about the problem, but he seems to have forgotten that and prefers to point the finger at the Government 996 for everything that appears to be going wrong.
The United Kingdom farming industry is one of the success stories of this country. It never fails to react to any offer, and I am sure that it will react to the new grants in the way that the Government hope. Its record is second to none, whether on output per man, increased productivity, return on capital or anything else. Our farming industry is second to none.
Nevertheless, the ravages of inflation have had their effect on agriculture in this country as in every other country, and I welcome the idea of structuring the grants to physical limits rather than to financial limits. The suggestion that they should be limited to 550 pig places is slightly unclear. I hope that it refers to 550 sow pig places, because if that were the yardstick there might be considerably more incentive for farmers to expand their herds.
The 15 per cent. increase in dairy herds is also welcome. It has been suggested that the limitations would reduce the output from our farms, but the EEC committee that studied the matter said:The Committee note that any proposals to restrict the benefits to smaller enterprises is discriminatory against the United Kingdom where the farms are generally of a larger size than those of other member States.There is no thought of restricting output in this country.
There is no doubt that surpluses are in the interests of our people. There would be far more screaming and protesting if there were shortages rather than surpluses. We should look at surpluses as being a good harvest and be glad of that rather than continually being upset by them.
§ Mr. Marland
If we have a bad season, there will not be grass available to produce butter, cereals or whatever. We are sensible to maintain a surplus, because if we have shortages the situation will be considerably more serious. There is not a housewife in the land who does not keep a bit extra in her larder or a farmer who does not seek to put more hay in his barn than he thinks he will need 997 just in case things go wrong. It is a reasonable insurance policy which we should support.
Another aspect of the team who negotiate on our behalf which I welcome is that it is prepared to grip the more difficult problems of the CAP and do something about them. Labour Members have complained for a long time about the CAP, but when the Labour Government had the opportunity to influence it they did nothing. They seemed to specialise in giving away the opportunities of our farmers to those in Europe.
We must put the interests of United Kingdom farmers on a par with those in Europe. It has been said that we are the only country in the EEC that abides by the letter of the law. In many ways, that is something to 'be proud of, but we must seek to ensure that all the other countries act in the same way. We must put ourselves on an equal footing with our European partners. I hope that the Minister will bear that in mind when he next goes to Brussels.
I want, finally, to echo what my hon. Friend the Member for Devon, West said in pointing out the imbalance that could creep into British agriculture. If we do not seek to maintain the prosperity of the livestock sector of our industry, there is no doubt that, little by little, it will go down to such a level that it may not be sufficient to support our people. If that happens, where will our cereal farmers find a ready market for their output? We must seek to maintain the balance between the two sections of the industry.
§ Mr. Mark Hughes (Durham)
I apologise to the House in general, and to the Minister in particular, for having had to be absent for part of the debate, the reason being the fact that a certain number of the Minister's constituents are engaged in prison activities in my constituency at present in a most effective way. I wish that the activity of successive Ministers of Agriculture had been so successful in coping with the deep problems of the dairy sector.
When I listened to the hon. Member for Devon, West (Mr. Mills), I became aware of a dichotomy. He is in favour of the common agricultural policy and of British membership of the Community, and yet he says that we should do nowt 998 about Britain because we do not contribute to the surpluses.
§ Mr. Hughes
The hon. Gentleman said that we should do nothing about Britain because we do not contribute to the surpluses. Part of the difficulty which we found in the Select Committee when we considered dairy products was that we contributed to the gross Community surplus as much by our falling consumption as by our increase in production. We may pretend otherwise, but if British consumption of dairy products in 1978, 1979 and 1980 had held up to the level of 1972, 1973 and 1974, a lot of the Community surplus of butter, for example, would not have been created.
The price that the Community enforces upon Britain causes consumption to fall. The price that the Community offers to farmers is such that the production of milk which cannot be taken off in liquid form but must be used in the manufacturing sector in butter or cheese increases. Ten years ago, about 80 per cent. of British milk was consumed in liquid form. We are now down to 55 per cent.
Any solution starts from one of two postulants. Either the Community has too many cattle, or it has too many farmers who depend for their income on the milk cheque from the dairy that is consequent upon those dairy cattle.
If it is argued that there are too many cattle, at a desperately and wholly unacceptable level the logic is a slaughter policy, preferably resulting from some virulent form of foot and mouth, because that does not cost too much. That is wholly unacceptable. However, if we could reduce the number of dairy cattle producing milk which is in surplus to the order of about 17 per cent. throughout the Community, that would have a marvellous effect on Treasury balances, Community budgets and the other silly things. But it would not solve anything.
If we look at the reality, we see that, by better breeding and better feeding, the ability of the Community dairy herd to increase the surplus beyond that which can he consumed at the ordinary market price within the Community cannot do other than grow. This affects especially, though not exclusively, the Southern Irish 999 dairy herd. I marvel when I hear suggestions from those who historically are in favour of British membership of the Community that we should go for national quotas. We shall not hold down the Southern Irish to an average yield per lactation of 750 to 800 gallons and quota the Dutch on imported soya and manioc at 1,500 gallons-plus per lactation. That is not the way to reach a decent relationship between potential production in the Community and reality.
We have to realise that the potential production of grass plus imported protein so far exceeds the potential consumption within the Community that the imbalance is permanent, is escalating and is financially and fiscally probably out of control.
There is no point allocating blame as between Commission, Council, this Government, the last Government, or anyone else. We have to realise that, by the mid-1980s, the gross amount of milk produced in the Community will so far exceed the ability of the Community to take it off in the form of cheese, butter, liquid milk or any other product that the Community will be fiscally bust. Politically, its dairy farmers cannot command a respectable vote to continue support at its present level.
That is the crux of the problem. Dairy farmers cannot anticipate political support to be given subsidy from other sectors of the agricultural or non-agricultural economy to keep them in business producing more and more which no one wants and which no one can buy other than with taxpayers' subsidy. The ability of hon. Members such as myself to persuade coal miners and others in Durham that it is right to supply butter to Russia at half the price at which they can buy it is strictly limited. If the market continues to be over-supplied because the price through intervention is too high, we run into that political impasse.
What do we find when we look through the long history of the common agricultural policy? The key is the price fixed on behalf of particularly German but also French feed grain suppliers. It may appear a long loop down an economic chain, but it is easy to raise the price for dairy farmers in the CAP so long as one holds down the feed grain prices.
Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Order. I understand that we are discussing an investment programme, not a question of prices.
§ Mr. Hughes
I accept that entirely, Mr. Deputy Speaker. An investment programme, however, must be geared to profitability. That is the criteria of the investment programmes of the particular enterprise on which one is engaged. To accord with the terms for an investment programme, one must show that within a certain specified time the income per standard man day rises to a particular point. If the input cost of food for cattle goes down, that profitability is reached whatever happens—even if the end price is held constant.
In judging these criteria of investment qualifications and stating that to qualify for this sort of grant one has to achieve a certain income per standard man day, it is essential to recognise that income is affected by the input cost of feed grain. If that input cost goes down, the ability to achieve that standard man day income is materially affected.
While accepting, at the first stage in the elaboration of this argument, that it might appear that I was straying, I trust, Mr. Deputy Speaker, that you will agree that the development of the argument is wholly allowable.
The key to the whole common agricultural policy has been the determination of the relativity between European-produced feed grains and American maize. Successive Ministries of whatever political party have never got to grips with that situation. If the input cost of grain is reduced, providing an upward movement of the green pound, that is equivalent to lowering the costs of the livestock farmers. This might not attract the cheers of some of the barley barons. They are shipping it off to Poland and Russia. I have not seen many of them going bankrupt in the last few years.
I am worried about this aspect of the proposals. I question the premise that the price relativity of milk to feed wheat is sacrosanct. I disagree with this Government as I disagreed with the Labour Government. We have held that price relativity to the detriment of pastoral and livestock farming in the United Kingdom for the better part of 10 years. That has been wholly wrong. When we start to 1001 question that relativity and to say that it is not that milk is at too high or too low a price but that the input of protein and other feed grains into milk production is wrong, we may start to find a solution.
Turning to the social problems, we find that the common agricultural policy has failed totally to inhibit rural depopulation in this country, in France, or elsewhere. The exception, curiously enough, is Bavaria where part-time farming produces curious anomalies. A man whose prime income comes out of the Bavarian Motor Works does not care what inhibitions are slapped on dairy farming. He is doing it not for profit but for joy.
Mr. Deputy Speaker
Order. The hon. Gentleman is stretching the motion rather far. I should be glad if he would come back to it.
§ Mr. Hughes
I am most grateful, Mr. Deputy Speaker. We are discussing the restrictions on dairy premiums. It is essential, I would have thought, that her Majesty's Government should not agree to an arrangement under which the same restrictions are imposed on British dairy farmers and their sole source of income as apply against BMW workers who are not affected a tuppenny rap.
I conclude, to your great relief, Mr. Deputy Speaker, and that of the rest of the House, by saying that if the Government continue to pursue a policy of price restraint in the dairy sector and continue to support regulations on restricting aid to the dairy sector, it is clear that the other eight members of the Community will have a more profitable dairy sector, will benefit and survive better than the whole of the United Kingdom. I am surprised at the attitude of the Minister of State. The hon. Gentleman knows the figures for Scotland where the fallout from dairy production——
Mr. Deputy Speaker
Order. That is not part of the order before the House. I ask the hon. Gentleman to confine his remarks to the question of investment.
§ Mr. Hughes
Hardly any dairy enterprise in Scotland can make use of these investment facilities. They are already over the odds. That is why the arrangements under these facilities are disadvantageous to the British dairy industry. The problem is that these arrangements are to the disadvantage of the British 1002 dairy industry precisely because that industry is already so structured that it cannot make use of the arrangements. With the greatest deference to you, Mr. Deputy Speaker, to be told that it is out of order to indicate that this situation hurts the British industry I find a little difficult. I hope that the Minister of State will accept that, in acceding to these regulations in their present form, he will do considerable mischief to the British dairy industry.
§ Mr. Ian Lang (Galloway)
In order to avoid detaining the House unduly, I propose to confine my remarks to the dairy industry. The hon. Member for Londonderry (Mr. Ross) said that the state of the dairy industry is not the same in all the constituent parts of the United Kingdom. I agree with him. As the Minister confirmed in the House last Thursday, production in England and Wales increased in the last year whereas in Scotland it fell. Estimates of how much it fell vary. In different parts of the country it fell between 3 per cent. and 7 per cent.
In my constituency grass grows best. This year there has certainly been plenty of it. However, with the unduly high rainfall the nutritional content of that grass is somewhat open to doubt. The grass is ideal for fattening sheep and cows and for the production of milk but it is of little use for anything else.
Farmers in my constituency have little room for manoeuvre. However, even there, milk output is falling. Close to despair, the farmers are leaving the dairy industry and switching to beef—perhaps out of the frying pan into the fire.
Returns to dairy farmers are down by about 7 per cent. in real terms compared with last year. In order to restore incomes in real terms to the 1977–78 level, about 6p on a pint of milk might be needed. I hasten to add that I am not asking the Minister for that this evening. However, it illustrates the size of the problem.
In answer to a question on the dairy industry last week the Minister said:we have done our best to try to maintain incomes."—[Official Report, 30 October 1980; Vol. 991, c. 688.]I accept that substantial increases in the price of liquid milk have been granted 1003 since the Conservatives came to power. Three price increases have been granted in the last year. However, like Oliver Twist I feel that there is a need to come back and ask for more as a matter of urgency.
In the House last Thursday the Minister said that since May 1979 food prices had gone up by 15.6 per cent. compared with an increase in the retail price index of 25.2 per cent. That is commendable as a reflection of productivity in the farming industry but it also confirms how relatively worse off the industry is, especially when, as I am reliably informed, in the past year farmgate prices have increased by only 4.6 per cent. The dairy industry believes that it has justified the price increase requested in June and that it is needed more urgently than ever. The ½p granted in Scotland out of the 1 ½p September increase was not nearly enough for the industry's needs. Incomes have dropped in real terms year after year. Bank borrowings are increasing year after year, with all the attendant problems of high interest rates.
The chairman of the Scottish milk marketing board, Mr. Robert Lammie, is one of my constituents. He is a wise, sensible and moderate man and yet he was driven publicly to burn the cheque for over £700,000 which represented the July to September quarter of the co-responsibility levy raised in the area for which his marketing board is responsible. He took that action because of the strength of feeling in the industry, that when we are only two thirds self-sufficient sums such as that, drawn off a far from prosperous industry to fund the common agriculture policy, make an excessive demand upon that industry. I do not approve of his action but I understand and sympathise with the strength of feeling behind it. As we contemplate the super levy I ask whether we cannot try to move towards a position where countries are increasingly responsible for disposing of their own surpluses and are increasingly able to react to their own deficiencies.
The Minister recently promoted the slogan "Buy British." That is certainly a good slogan for British agriculture. It helps the farmer by supporting his product and it helps the housewife to whom it commends those products. They are 1004 products of a high quality, in stable supply and available at reasonable prices. How can we urge people to buy British while, at the same time, we are driving down production in an industry which is only two-thirds self-sufficient? "Buy British" might be a good slogan, but "Produce British" is a better one. Unless we encourage that slogan in the dairy industry, soon there will not be much that is British left to buy.
The reduced levy for the first 60,000 kilograms of milk produced in less favoured areas is an almost negligible concession. It is time that we placed the responsibility for co-responsibility levies where it lies. Some hope attaches to the Binder Hamlyn reports on the arrangements for determining the costs of processing and distributing liquid milk in Scotland. I understand that the studies are based upon improving the mechanism for determining the costs, returns and profitability of producers and distributors. I urge my right hon. and hon. Friends, when considering their findings, to try hard to find ways of improving returns to producers.
The situation in the Scottish dairy industry is serious. Productivity and efficiency are unrivalled. I urge the Government to take full account of the present position and to react to it urgently, otherwise, according to the considered opinion of many close to the industry, the industry will have difficulty surviving.
§ Mr. David Penhaligon (Truro)
I am not a farmer, but some people say that I sound more like one than many farmers who have spoken today. I rarely speak in agriculture debates, but I listened with great interest to the Minister explaining the European package. I am more used to him explaining fishing issues. I can see now why he likes fishing, because that is simple compared with this topic.
I cannot see how the package can lead to an overall reduction in the production of milk products. That must be achieved in Europe as a whole. I am prepared to defend marginal surpluses, because they are to the general advantage of the longterm sanity of providing food for our people, but no one can argue rationally that a 20 per cent. surplus in milk products can be defended in the long term, year after year.
1005 Just who will reduce his milk production? It has been said that some of the new investment is to increase the efficiency of small farmers in order to reduce the great price push from them on to the whole European market. I can see the logic of that. We understand the situation. The argument is that the price push comes from the small farmers in Europe, and that if we make them more efficient there will be less price push from that direction, but that will also produce a lot more milk. If I misunderstand the logical outcome of the argument, perhaps the Minister will explain. If my understanding is not incorrect, who in Europe will be asked to reduce milk production by about 20 per cent.? Will it be the British, the French or the Germans; the big farmers, the middle-sized farmers or the little farmers? Clearly, somebody will have to reduce his output of milk. I can assure the Minister that we shall argue that it should not be the British farmer, since we are 60 or 70 per cent. self-sufficient.
When the Minister enters negotiations in Europe, on whom does he have his eye? Who does he believe should reduce milk output by the quantity necessary to bring us to a sensible surplus? I imagine that 5 per cent. would be a reasonable aim. If we managed that figure it would be regarded as a triumph—whether that figure is right or not.
The Government can claim to have discouraged investment in Britain with tremendous success in the past 18 months. Rarely have a Government succeeded so well. Perhaps the Minister would care to hand on to his European friends the suicidal way in which that policy can be pursued. The policy is to expose small businessmen to interest rates of approaching 20 per cent. for investment money. That will reduce investment. That effect can clearly be seen in our industrial sector, and the farmers in my constituency know that the same thing is happening in their industry. The fall in British milk production in the past 12 months is probably much more to do with that than with the various changes and machinations of policy that have flowed from the European Community.
I suppose that it would be out of order to raise the case of the farm worker, but 1006 it is a case that must be pleaded. An answer to a parliamentary question last week revealed that the national average wage in Britain is now £124——
§ Mr. Penhaligon
I should have thought that with a short speech I could have been shown a little tolerance, Mr. Deputy Speaker. There are hardly enough hon. Members here to keep the debate going. However, I have mentioned a certain figure for the average national wage. Farm workers in my constituency constantly talk to me about the investment policies of their farms, with an eye to their securing a greater proportion of the national wealth. When I revealed that statistic to them it produced a response of total and sheer disbelief, a disbelief born of the lack of investment programmes in their industry.
That is a scandal and I am sure that most people wish, more than anything else, that the burden that is imposed upon the farm worker and the rural areas of Britain through lack of a sensible policy could be lifted. The constant excuse that that "cannot be done this year" is just not satisfactory.
I wish the Minister well in the negotiations. I do not see how anyone could oppose the motion. It speaks of the Government's intentionto safeguard the essential interests of United Kingdom producers".Perhaps the Minister will tell us what are the non-essential interests. We might then be a little clearer about his aims. There is no doubt that the backbone of the rural economy is agriculture. It always will be. Other industries may come and go, but agriculture is always there, and that applies to my constituency and those of the good sprinkling of rural Members who are here tonight. Even if the mining boom that I expect for my constituency is realised, agriculture will still be the backbone of our economy, as it is of the economies of Devon, the rest of Cornwall, Somerset, the Borders of Scotland and elsewhere. An intelligent, long-term investment programme is needed.
1007 I wish the Minister well, but he is probably going to Europe in pursuit of an unattainable policy. I conclude with a question: who on the other side of the Channel does he think will reduce his milk output by the quantities that we are discussing to bring the Community back to a more sensible European surplus?
§ 6.4 pm
§ Mr. Colin Shepherd (Hereford)
I agree with the hon. Member for Truro (Mr. Penhaligon) that agriculture is the backbone of this country. It certainly is in Herefordshire. I was sorry that the hon. Member for Edinburgh, East (Mr. Strang) opened the debate for the Opposition by belittling the occasion. It is an important occasion, and it will be recognised as such within agriculture. The debate has been seen by many hon. Members on both sides of the House as an opportunity to demonstrate the importance that we attach to the subject.
I thought that the hon. Gentleman's remarks were remarkably chameleonesque. It was as though he was trying to merge with the colour of the Tribune group below the gangway. Was the small voice of Blackpool telling him: "You had better get any support for the Common Market out of your head if you want to go places in our party"? I detected a remarkable change in the hon. Gentleman's outlook from when he was the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food.
I welcome the remarks of my hon. Friend the Minister of State. The tactics that he outlined are fully in accord with securing what I should like to see—an equivalence of competition between the United Kingdom milk and pig producers and their Community counterparts. That is most important. It is easy to lose the United Kingdom picture within the totality of the Community. We do that at our peril. The Government are Her Majesty's Government of the United Kingdom of Great Britain and Northern Ireland. They must take into account all aspects of their duties in that respect, bearing in mind the total Community context. Therefore, we cannot fault the Minister's objectives in his approach to the Brussels negotiations.
I echo the fears expressed by my hon. Friend the Member for Devon, West (Mr. Mills) that increased complication within the Community regulations could lead to 1008 more shenanigans, more going round the side and more misinterpretation. We have to be careful that that does not happen, and I hope for effective policing and scrutiny of the regulations as they are implemented.
The United Kingdom national interest and the objectives of our Government must remain to optimise our position within the Community framework. Our best aid for milk and pigmeat producers at present must be the positive MCAs, based on the strength of sterling vis-a-vis the basket of currencies. The value of sterling internationally would not necessarily fall with a reduction in interest rates. The strength of the oil base is far greater than we often think, and we shall retain positive MCAs for a considerable time. We need to examine our approach to the Community negotiations and our position within the Community with that in mind.
Another important factor is that our Minister is the Minister of Agriculture, Fisheries and Food and that the agriculture and food components emphasise the need for an even-handed approach between producer and consumer. So often in the past there has been a balance in favour of the consumer, with the producer appearing to be taken for granted or neglected. Otherwise, it is felt that he is getting too much anyway and, we are asked, whoever saw a broke farmer? We should not sacrifice the producer. That is contrary to the longterm interests of British agriculture.
I welcome the second part of the motion, which emphasises the need for the Government to recognise the requirements of the producer in their negotiations. The consumers have not been served well by the neglect of the producers over the past few years. During the period of the last Administration, food prices rose by 120 per cent. Since May 1979, when the Government came to power, food prices, according to the answers to parliamentary questions last Thursday, have risen by 15.6 per cent., against a 25.2 per cent. increase in the RPI. That is a solid improvement in relative terms. That has been achieved against a background of looking after the producer. There have been two devaluations of the green pound to remove the disadvantage under which the producer was working.
1009 We must recognise the way in which farm incomes have been falling. During the last two years of the Labour Administration they fell distinctly, and the trend has continued. I worry about that. It is wrong for the long-term health of British agriculture, and it is bad for the consumer. I see no joy in the British producer being squeezed out of the market, leaving the consumer with a total dependence on imported produce. It is not good enough.
The support for United Kingdom agriculture expressed by the hon. Member for Rother Valley (Mr. Hardy) is important. It means that all is not lost as far as the Labour Party is concerned. There are elements working in that direction. The plea that he made for British agriculture, especially for the producer, will make it possible, eventually, for the agricultural worker to be paid the amount of money that we want to see paid, but while the producer is screwed down he will not be able to recognise properly the services of the agricultural worker. The consumer must recognise that.
Opportunities are open to us because of the 10 per cent. positive MCA position that we now enjoy. Under the Labour Administration the agriculture industry in Britain was crucified by a negative green pound differential—a negative MCA. We saw imports flooding in. The pig meat industry was crucified. It was not good enough for the hon. Member for Rother Valley to deny that that happened under Labour Government. I recognise and recollect that in 1973–74 British pig producers were feeling the pinch, but that is nothing compared with the expressions of fear that I heard from them during 1976–77, when there was a 40 per cent. green pound differential working against them.
It was not convenient to remember that was it? At that time Danish bacon came into Britain with a £240 a tonne advantage, the MCA was split two ways and our producers were undercut every time they tendered for a major hospital or Government contract, so they did not get the contracts. The Association of Bacon and Meat Manufacturers can underline that, because its representatives came to the House and expressed that point of view.
1010 We now have a positive MCA—10 per cent. We have the advantage, and I want to see it used. I want to see the British pigmeat producers and processors taking this opportunity to move both into overseas markets and the markets in Britain which, traditionally, have been taken by importers, and so push back the tide of imports. Import substitution is within our grasp, and that must be beneficial for Britain—not only for the pigmeat producers and processors, but for the overall balance of payments. That is a real contribution that agriculture can make.
There is an export potential for milk products. When I walked around the markets of Brittany in the summer—just across the water from Plymouth—I carried out my own survey. I could not and a single piece of British cheese on the stalls in the markets, in the shops, in the delicatessens or in the up-market supermarkets. It is important that we recognise that we have a financial inducement to export milk products of that sort, If we do not take advantage of that market, our milk industry will not maximise the potential that it now has on a plate.
The motion says that the Houseparticularly in the dairy sector, supports the Government's intention to safeguard the essential interests of United Kingdom producers.That relates not only to the detail of the instruments before us, but to the whole philosophy, and must be taken seriously. Producer incomes have been falling, and we allow that to continue at our peril. Agriculture is contributing to the economy, and we must bolster that whenever possible. We must do so by looking after producers and consumers evenhandedly. That means recognising, sometimes, that it is important that consumers might have: to pay a penny or two more to ensure the continuity of supply.
When we can come to the negotiations for the price review this year, it is important that our Ministers resist any attempts to revalue the green pound, except as part of a package that will benefit British producers and consumers even-handedly. As I indicated, the consumer will not be well served if the producer is squeezed out of business. Ensuring a proper and reasonable return to producers is the best way 1011 to serve both British agriculture and the consumer.
§ Mr. David Myles (Banff)
I welcome the opportunity to contribute to the debate, especially as a farmer—though I hasten to add not as a dairy or pig farmer. I sincerely hope that I shall not stray into other fields.
We cannot debate the motion in isolation, because it is part of the strategy of the Council of Ministers to deal with CAP problems as a whole. Many speak of the necessity for CAP reform. Many point out the weaknesses and anomalies in that policy. Many, especially from the Opposition Benches, but not exclusively—where are they now?—want to wreck the EEC. But few propose constructive actions that will be acceptable to the Community as a whole and to our national interest, our agricultural interest and our consumer interest. All those interests are intertwined, and no one can be pursued to the exclusion of any other.
I realise that the proposals are aimed at assisting the achievement of market equilibrium in those sectors, but I doubt whether they will have much effect in isolation. There is great danger in this piecemeal or bitty approach. The CAP faces two crises—a cash crisis and a production crisis. Much of the debate on CAP reform centres on whether the problem concerns the need to limit production or to find new financial resources. The present danger is that the exhaustion of financial resources will lead to the CAP existing increasingly alongside a black market of national aids. I shall return later to national aids.
A striking fact about CAP expenditure is the high proportion devoted to export refunds—49.3 per cent. Hon Members must ask themselves who benefits from those refunds—the farmers, the exporters or the third country to which the exports are directed. Many of the products exported are in a processed or semi-processed state. A high proportion of Community agricultural expenditure is directed therefore not to agriculture, but to industry, or even to third countries.
I wish to draw attention to the fact that export refunds on butter were fixed at 1,630 European units of account until June 1980. They are now 1,000 Euro- 1012 pean units of account. That is possibly a way in which we can reduce the financial requirements.
Given the constraints on the budget, measures directly encouraging the producers to improve efficiency, so that consumers can benefit from a lower cost of production, should be given priority. I therefore question whether as a result of the proposals we shall hit the right target. Although I doubt the wisdom of all capital investment encouragement, there has perhaps been a little too much of that, especially in the area suggested by the hon. Member for Londonderry (Mr. Ross), who spoke of rotary milking parlours. Such machines—great big things—cost a great deal of money. There was Government support for them, but the machines are now being declared obsolete by a large number of producers.
Surely the way in which we must limit the surplus production of milk and milk products is by exposing producers to some extent to the cold wind of market requirements. In other words, responsibility must be imposed—whether or not one calls it coresponsibility—in areas in which surplus production occurs.
I was attracted by the suggestion of my hon. Friend the Member for Devon, West (Mr. Mills) of national quotas—though I would add "related to national consumption". My hon. Friend the Member for Galloway (Mr. Lang) spoke of the burning of the milk co-responsibility levy cheque by the chairman of the Scottish Milk Marketing Board. That is the marketing board in the south of Scotland. We have a different one further north, and that obeys the law. The action by the French Government to which that act related was taken in the last quarter of 1977, when Labour hon. Members had some say in these matters. Since then the French producers have paid their co-responsibility levy as they were required to do.
I must speak of pig production. It is of considerable interest to me, as my constituency at one time was responsible for the production of half the pigs in Scotland. I am glad that my hon. Friend the Member for Hereford (Mr. Shepherd) spoke about the benefit to our pig producers of positive monetary compensatory amounts. Much modernisation has taken place in both the dairy and pig sectors, 1013 but we must ensure that our producers are not disadvantaged compared with our European partners. That point is included in the motion. If sufficient resources are not made available, further national aids will be granted to fill the gap. National aids result in an uncontrolled increase in production.
The size of the present budget, particularly in the dairy sector, can be put down to the effect of national aids. Therefore, it is essential that the Council of Ministers finally has the courage to act to control the competition in national aids, first, by publishing a complete register, and, secondly, by deciding on compatibility with the EEC Treaty.
I share the reservations of my hon. Friend the Minister about the proposals, but I give him the benefit of my confidence in his ability to achieve an agreement that will meet the necessary broad strategy.
Mr. Selwyn Glimmer (Eye)
I am pleased to have the chance to take part in the debate, because my constituency has perhaps the largest pig herd in the country. Therefore, the contents of the document that we are discussing are very important to my constituents.
My constituency is one of the last remaining really agricultural constituencies. Its largest town has a population of only 8,000. Therefore, the concerns of agriculture are vital, as a number of hon. Members on both sides of the House have said.
The subject of the debate is more than the investment arrangements for the pig and dairy sectors. The motion also asks us to have confidence in the way in which the negotiations will be conducted by Ministers. We should start there, because one of the great sadnesses among the agricultural community concerns the way in which, over a long time, it lost confidence in how the negotiations were conducted. There was a time when the right hon. Member for Deptford (Mr. Silkin) appeared to think that it was a kind of virility symbol to come back from Europe having bashed the farmers. It was a very serious matter that a Government who were hopeless at home at defeating inflation would go abroad in order to kick that one section of the community that did not have many votes in the marginal constituencies that the Labour Party was 1014 determined to keep, though, happily, it failed to do so.
This is a valuable opportunity to say that over the past 18 months we have had a Minister who is both the Minister of Agriculture and the Minister of Food, and that the essential balance between the continuation of supply, the encouragement of the producer and the protection of the consumers' interests has existed.
I am pleased that the motion has been framed as it has, because it is important to say that the agricultural community now feels that it has a ministerial team in which it has confidence. It has a number of things to say to that team, but it is important to start by stating that it has confidence, because at least we are negotiating and discussing within a series of given facts. The farmers and our neighbours in the rest of the Community realise that we are discussing these issues on the same basis as they do—in other words, that we are all members of the Community, that we intend to go on being so, and that we want to find the best answer to the problem facing the whole Community.
That is a totally different atmosphere in which to discuss such matters compared with that which obtained before. There were then members of the Community, on one side, and on the other representatives of the Government, concerned to undermine, undervalue and write down any success that might be achieved within that Community.
Therefore, I take seriously, and not as a polite bow in the direction of my right hon. Friend the Minister of Agriculture, Fisheries and Food, the part of the motion which refers tothe Government's intention to safeguard the essential interests of United Kingdom producers.This is not a Conservative Party conference motion in which we thank God for whatever department we are talking about; it is a serious statement about a very important change in the atmosphere of discussion in Europe.
Therefore, I find it sad that Labour hon. Members have shown such a remarkably short memory of the situation up to 18 months ago. We have heard not a word of congratulation about the fact that we now have positive monetary compensatory amounts, a change that helps us compared with that long period in 1015 which our industry was driven underground and agriculture used as the one way in which the previous Government could try to have some hold on the progress of inflation.
§ Mr. Cohn Shepherd
Does my hon. Friend agree that even now the Labour Party wishes us to throw away the advantage of positive MCAs? Does he recall that at Question Time last Thursday the right hon. Member for Barnsley (Mr. Mason) demanded that the positive MCA advantage be thrown away?
§ Mr. Gummer
Not only do I recollect it: I noticed it at the time because it was the first occasion on which I heard a Labour Member refer to the MCAs in a way that showed that he understood how they worked. That was an advantage, but the suggestion that we should use them against the interests of those who have been sat upon for so long was particularly sad.
The British pig industry is seriously affected by these proposals. We have had a good deal of debate about the industry, without any recognition that these investment proposals are particularly interesting because of the special problems facing our industry in comparison with those of other countries. Self-sufficiency, or partial self-sufficiency—we cannot yet supply all our own needs—is a question not just of production, but of selling what we produce. One of our difficulties is that our industry, which is second to none in quality of production, has not been able to accept, or to impose upon itself, the discipline and marketing arrangements that exist in other countries.
We should therefore consider carefully how encouragement is given, to realise that we have a peculiar difficulty which we must put right ourselves and that putting it right will mean a profitable industry, rather than reliance on outside support. It is only from profits that we shall be able to improve our ability to sell our pigmeat. We should ensure that if the industry is profitable it will be able to expand. Positive MCAs present a great opportunity for the pig industry to expand, and we should encourage it.
In those terms, one problem with the CAP is that we have still been unable to draw a distinction between two very 1016 different ends, and these proposals highlight that difficulty. The CAP tries to do two things at the same time: first, to provide reasonable support for reasonably profitable and economic producers; and, secondly, to provide a "social fund" to help those who will never be very profitable, but who should be enabled to continue to live in rural areas where alternative employment is difficult to find.
In trying to do one of those two things, one often fails to do the other. The balance is difficult to strike. I suspect that we are near the best balance that we can achieve for pigmeat. We shall have almost as good an answer as we can hope for if the Minister can achieve the additional objectives that he has mentioned tonight and the system can offer some safeguards.
Some of the producers in my area are worried about the definition of pig places. That is particularly important in an area such as mine, with a large pig capacity. We are also concerned about one or two other concessions that the Minister outlined and about ensuring that the balance is maintained so as to give some help to the small producer. It is no good pretending that all small producers are on the Continent and should therefore be ignored. Some small producers in this country need help, and this proposal is a move in that direction.
However, there are other problems, which these proposals do not meet. If, as the motion says, we are concerned toinstitute useful measures to reduce the cost of the common agricultural policy, particularly in the dairy sector",I hope that the Minister will see this as the beginning of a process and not the end.
If we are prepared to go this far in compromise, we should encourage our EEC colleagues to understand that since we are prepared to take part of the burden of reducing the cost of dairy products and pigmeat, they must be prepared to take some of the burden in other areas. One area in which they could help is sugar. I hope that that will be borne in mind in the discussions. We must take seriously some disadvantages in the proposed system, which I hope that the Minister's proposals will overcome.
1017 Many of us believe that unless we keep a close eye on investment help to the dairy industry, many new ideas will be latched upon too readily without being worked out in practice. The rotary parlour was at one time the agricultural equivalent of the language laboratory. At one stage no one was able to do without one, yet experience has shown that large sums were spent unjustifiably on these machines.
This is the essence of the problem of agricultural support for farmers' capital expenditure. It is important to ensure that one does not make viable a project that would not be commercially possible without help. We must ensure that the Community does not spend money on encouraging farmers to do things that they would not choose to do on a basis of pure commercial profit. These proposals may help to achieve the balance that will avoid such mistakes.
There are some ancillary problems attendant upon any change in the operation of the CAP. Farmers in this country should not feel that farmers in other member States can use these arrangements to circumvent the rules. We hear a great deal about other people cheating. We sometimes overdo the argument that we are whiter than white, while others are always on the fiddle. We must get confidence in the operation of this proposal, as of all other proposals.
I was particularly worried that, having demanded strict controls to ensure that other member States did not avoid the rules, Labour Members in our recent debate on fishing opposed a common control in that area, with shouts about "foreigners checking on the British". We must ensure that the Community can check on all its members. We must be checked as well if we are to demand that the Germans and French are controlled.
I hope that the Minister will not budge from his determination to see that others keep the rules and that checks are made on everyone. We must not only see that these proposals work but ensure that my constituents have continued confidence in the Community's ability to provide fairly for the needs of agriculture.
No one in this country should be able to say, "We are law abiding and others are not", or we shall see more of what has happened in Scotland, with people 1018 either breaking, or pretending to break, the law of the Community—which is, after all, made by ourselves and our neighbours together. That is not the attitude that we want to encourage. I was sorry to hear some hon. Members, even Conservative Members, suggesting that we should start bending the law in order to parallel other Community members. My right hon. Friend the Minister of Agriculture and my hon. Friend the Minister of State must make sure that they do not fall into that trap. They must do their best to ensure that the control mechanisms are clearly there and that we can all support them in saying that these regulations will be laid equally on the backs of all Community partners.
If we are to do so in that way, we must return to the question of individual national aids. It would be no use having Community control, even if it were perfect Community control, of the Community arrangements if that avoided a close note being taken of the individual arrangements of national aids which some countries may seek to use to avoid the effects of these proposals. It is vital that my constituents should know that they they are on all fours in competition with our neighbours in the Community. If we give that fairness, they will then react and win through. If they think that they are being done down unfairly, my constituents will feel that they are not properly represented in these negotiations at Brussels. I ask the Minister to ensure that the agriculture community will have confidence that the European Community will control and regulate these proposals so that they fall fairly upon all member nations.
§ Sir Anthony Meyer (Flint, West)
I am glad to follow my hon. Friend the Member for Eye (Mr. Gummer), with his impressive grasp of agricultural matters and his obviously close eye on the all-important pig industry in his constituency.
I should like to return to two matters about which my hon. Friend spoke: first, the necessity to ensure that controls are effectively policed, and, secondly, the dual role of the common agricultural policy to ensure a steady level of food production in Europe and to look after the interests of poorer, weaker farmers. There is possibly a third role for the common agricultural policy—arresting the drift off the 1019 land. I shall suggest later that it might become an objective of agricultural policy to encourage people, little by little, to go back to the land.
The hon. Member for Edinburgh, East (Mr. Strang) said that he was surprised that this debate should be held in prime time because it was secondary in importance to other matters. His attitude has been borne out by that of Labour Members, only one of whom has been here throughout the debate, and only three of whom have contributed to our proceedings. The attendance by Labour Members has not been marked, as is usual for debates on agriculture——
§ Sir A. Meyer
The attendance is about five to one, but let us not get too bogged down in that argument.
I find some difficulty in intervening in this debate, probably because my knowledge of agricultural matters is slighter than it should be, and also because I find it difficult to understand the implications of the document. I listened carefully to the Minister of State, but I was not clear at the end of his exposition about the direction in which the document was going, about the status of the document or about what sort of policy was likely to emerge.
The common agricultural policy is the favourite answer of all those who dislike the European Community, and, indeed, of many who favour it. I remember that when I argued for British membership of the Community I said again and again that the agricultural policy was the price that we had to pay for the other advantages. Things have changed since then. The other advantages have been slower to come than we expected at the time, but the agricultural policy has proved to be more of a two-edged weapon than it seemed during our negotiations for membership. At first it seemed to consist of nothing but drawbacks, but now that Britain is a member of the Community, although the CAP is cumbersome, and although there are many difficulties, in the 1020 long term it offers this country vital safeguards.
We should not forget the importance of the CAP to the European Community as a whole. It is the only common policy that is working 100 per cent., and which has been working so since the beginning. It may be working badly, but it is in full operation—which is more than can be said for a common energy or transport policy. Therefore, it has an enormous symbolic importance to the other countries of the EEC.
If we want to convince our European partners that we are sincere in wishing to make a success of our membership of the Community, we must be careful about the language that we use in criticising the agricultural policy. I noticed that particularly when I attended the recent Bordeau conference between France and Britain, at which the Prime Minister made a superb speech. One French speaker after another insisted that the CAP must remain. It could be changed, amended or brought up to date to suit modern circumstances, but there could be no question of doing away with it. If we are wise, and if we wish to achieve our other objectives in the Community, we would do well to remember the vital, almost emotional, importance of this policy to our European partners.
Much as the short-term workings of the policy and the prices fixed under that policy have operated to our disadvantage, particularly in producing the enormous budgetary contribution that we were obliged to make until the skill and determination of my right hon. Friend the Prime Minister secured an effective renegotiation—unlike the sham that the previous Labour Government went through—that should not be allowed to conceal the long-term advantage to this country, which is more dependent than almost any other industrialised country in the world on outside food supplies, of being firmly anchored into a community which is self-sufficient in food. We should never allow the temporary difficulties, objections and stupidities to blind us to the single overriding truth. In a hungry world we are part of a community which can feed itself and which has a duty to help the hungry world with its food problems. Many Labour Members feel that the Community has not done that as well as it should have done, but that is not a 1021 reason for pulling out; it is a reason for doing even better.
If, as seems only too possible, the common agricultural policy collapses under the weight of its budgetary deficit—it is already knocking at the ceiling of the own resources mechanism of the Community—and if agreement cannot be reached through the mechanisms of the Assembly, the Commission and the Council of Ministers on a revised budget that will fit agricultural expenditure into the amount that can be raised and still leave a margin for the other Community activities, I do not believe that that will serve the interests of anyone. It certainly will not serve the interests of the Community, it most certainly will not serve the interests of the farmers, and in the long run it will not serve the interests of the United Kingdom.
That said, if the common agricultural policy is to survive, it will be necessary for national aids to play a somewhat larger part than they have played up to now. There has to be a larger role for national support to agriculture. That is why it becomes so important to ensure that these national aids do not constitute—or do not appear to be constituting—any kind of cheating.
I was a little sad to listen to so sensible, balanced, reasonable and knowledgeable a Member as the hon. Member for Bother Valley (Mr. Hardy) talking as if he were addressing his suspicious general management committee and was anxious to prove himself more jingoistic and more suspicious of all foreigners and their works than any Right-wing Tory. I am sure that in his heart of hearts he recognises that this kind of attitude is not merely part of a general dislike of the European Economic Community. It all too easily spreads over into something that is prevalent in the Labour Party. Under the disguise of wishing Britain out of the EEC, some Labour Members pander to the crudest kind of xenophobia.
For those of us who do not have any great hatred of the Labour Party and remember that in the past it has stood for some things which even we on the Government Benches can admire, it is sad to see it going over so totally to that crude kind of hatred of foreigners and all their work. We hear a great deal of talk about how the French have been 1022 cheating over national aids in helping farmers to pay the co-responsibility levy. The media are extremely guilty in this respect. Particularly where French matters are concerned, they will fasten on to the slightest allegation and blazon it in the headlines as a fact.
It emerged at Question Time on Thursday that since 1977 the French Government have not been paying the co-responsibility levy on behalf of their farmers, and that occurred under the previous Labour Government. Since the Conservative Government have been in power, the French have obeyed the rules.
This all emphasises the importance of what my hon. Friend the Member for Eye was saying about the value of having effective laws that are effectively enforced, and, even more important, the value of giving our people the confidence that these laws are being observed. That necessarily implies some kind of policing. If we expect other people to accept inspection, we in our turn must accept it. That was clearly demonstrated in the discussions that took place over the enforcement of fishery limits and catches.
In these complicated and turbulent waters, with all their cross-currents, it is extraordinarily difficult for those who navigate to keep the ship going in the right direction and to keep it upright. Like all my hon. Friends on the Government Benches—those who are enthusiastic about our membership of the Community as well as those who are, to say the best, halfhearted—may I say that I have great confidence in the team now in the Ministry of Agriculture and the way in which it is conducting an extremely difficult operation and preserving a balance. We have great confidence in what the team is doing and strongly support the proposal tonight.
§ 6.53 pm.
§ Mr. Buchanan-Smith
With permission, Mr. Deputy Speaker, I should like to reply to the very interesting debate. When we embarked on it this afternoon I scarcely expected either the length in time of the questions or the breadth of the issues raised. The number of contributions and the strength of feeling indicate that, although, on the face of it, this may appear to be a simple matter of investment aids in our dairying and pig industries, it nevertheless raises a great 1023 number of issues which hon. Members on both sides of the House realise are important to their constituents and to the industries concerned. I am therefore, most grateful for the contributions which have been made.
What the House has to bear in mind, and what I have to bear in mind particularly, is that we do not have before us a definitive, precise, proposal from the European Commission. What we have before us—here I apologise to my hon. Friend the Member for Flint, West (Sir A. Meyer), who quite justifiably complained about the complication—is a proposal which at first sight, in terms of its objectives, was relatively straightforward and easily understood but which, in the course of its gestation, has become more and more complicated in one way or another. Indeed, at the Council meeting next week we shall still be seeking clarification of exactly what is meant by it.
It is not a simple, clear "Yes" or "No" that my right hon. Friend and I will have before us next Monday and Tuesday. It is not absolutely clear what we shall have before us. We shall have to consider what is before us and seek clarification of precisely the kinds of point raised by my hon. Friend the Member for Flint, West and others. Then, in the light of that clarification, and in the light of the contributions made in the debate, my right hon. Friend can come to conclusions on how we should deal with this matter in the Council of Ministers. I express my thanks, therefore, to all those who have contributed to the debate. It will certainly help us, in coming to our conclusions, to have had the benefit of the opinion of the House.
I respond to the suggestion of my hon. Friend the Member for Devon, West (Mr. Mills) that we should watch matters carefully. I am accustomed to hearing him say "Watch i "to me in various circumstances. I am alive to this need. That is one of the reasons why we need the clarification—in order to ensure that different countries do not have different interpretations. If that were to happen, it would simply compound the risk of and scope for discrimination against the interests of the British dairy farmer and the British pig producer. I assure my hon. Friend and other hon. Members 1024 that we shall be watching these matters carefully.
In looking at the general background of the two industries, it is important not to get the debate out of perspective. We are talking about aids to investment, but we would be kidding ourselves if we were to feel that the presence or otherwise of an investment aid is the prime consideration of a dairy farmer or pig farmer before he makes an investment. Most dairy farmers and pig farmers that I know are primarily concerned about the profitability of their enterprise or industry.
That is why, Mr. Deputy Speaker, although your predecessor in the Chair was at one point rightly concerned about the width of the debate, in investment matters the general profitability of the industry is relevant. The hon. Member for Londonderry (Mr. Ross) made that point particularly strongly. I accept what he said in relation to some parts of the country where profitability, for a number of reasons—I have not time now to go into them—is not as good as in other areas. Such questions affect the decisions of those farmers to a much greater extent than whether investment aid is available.
My hon. Friend the Member for Eye (Mr. Gummer) also referred to that point. I take note of it and would never regard a simple programme of investment aid as a substitute for what has to be done in relation to prices and to other returns, whatever the economic climate in which the industry is operating and whatever the bank rate may be. That is the background against which an industry has to operate, and what happens in the area of investment aids, although important, is secondary to it.
The hon. Member for Durham (Mr. Hughes) made a fairly penetrating contribution to the debate. I share to a great extent his analysis of the problems in the dairy industry and the pig industry. As he said, over the last number of years in Europe we have got the relativities wrong between the arable sector and the livestock sector. I should be trespassing if I were to embark on that subject in this debate. I accept that we shall not get that right by playing around with investment aid. More fundamental decisions will have to be made. My hon. Friend the Member for Gloucestershire, West (Mr. Marland) also spoke about imbalance 1025 within agriculture. I assure him and the hon. Member for Durham that we are alive to the issue. It is our broader policy to try to get the balance right. When that is achieved, we shall be much better able to tackle the problems of profitability within the different sectors of the industry.
I share the view of the hon. Member for Rother Valley (Mr. Hardy) that we should not be too modest about what we can achieve in terms of dairying costs. We have heard of the difference that high feed and grain costs mean to the dairy producer. One answer is the greater use of grass and grass fodder. A number of farmers have shown already what can be done in that direction. It is a different form of production. In some instances it is less high cost production and in others a more expensive form of production. It is one of the ways in which we can meet the dilemma. The central purpose of the restriction in investment aid is to try to reduce surpluses in Europe and to reduce the cost of the common agricultural policy.
The hon. Member for Truro (Mr. Penhaligon) appreciates that we are seeking to allow farmers who operate on a small scale and who are below the general level of efficiency to achieve a higher level of efficiency. We want to help those farmers. It is not necessarily wrong in a social and economic sense to try to do so. The hon. Gentleman is right to argue that if that policy is successful smaller farmers will increase their production and will add to the surpluses. The hon. Gentleman asks why the policy is being followed and where the crunch comes. If the policy works, it will mean that at each annual price fixing prices will not be pitched at a level to cover returns to less efficient producers.
It is true that smaller and less efficient producers will be increasing production. However, if we can operate greater price restraint at annual price fixings to cover the broad spectrum of producers, that element of price restraint will apply to all producers. If we can cause all producers, especially the larger ones, to exercise more restraint, that restraint will be greater in proportion to the additional production achieved by smaller producers. The argument is not necessarily contradictory. It is right in some instances to encourage smaller producers to increase 1026 their income. I should like to see that happen in the way that I have described.
§ Mr. Penhaligon
I am interested in what the Minister is saying, and his argument fits in quite well with my comprehension of the issues. There will not be many small farms that will produce more milk, but many of the larger farms will be able to do so. Is the Minister going to Europe with a clear determination to return with a package that embodies a substantial reduction of milk production in the United Kingdom?
§ Mr. Buchanan-Smith
No. The hon. Gentleman's argument relates to the second part of the motion. Many more farmers will be exempt from the restriction on investment aid in other countries than in the United Kingdom. We believe that within the narrower band of expansion that may take place there will not be discrimination against the more efficient farmers in Britain. We are accepting a restriction in aid so that those who seek to expand their production with the means of investment aid from the Community will do so within a limit or ceiling.
My hon. Friend the Member for Harborough (Mr. Farr) fairly asked "Why 15 per cent.?" There is an element of rough justice. If misery is to be caused by restriction in investment aid, our assessment is that we should aim at a balance of misery across the different countries of Europe and the different dairy producers in Europe. The implications of the 15 per cent. restriction will equate roughly with what we believe will be the restriction placed on other European producers. We are seeking equality and an element of non-discrimination to ensure that our producers, whether in the dairy or pig sectors, are no worse off than anyone else.
§ Mr. Buchanan-Smith
I shall consider what my hon. Friend has said on that topic. In the pig sector there are already upper and lower limits on capital expenditure. We believe that the 550 pig places 1027 provision, if there is clarification of precisely what that means, will roughly equate with the upper limit. The 15 per cent. provision would be to add another element that would be a relaxation in some respects of the present restrictions.
If we accept in principle that there should be restrictions, we are seeking to ensure that they do not hit our producers harder than other European producers. We shall consider my hon. Friend's proposal in that light.
My hon. Friends the Members for Hereford (Mr. Shepherd) and Eye spoke forcefully of fairness and policing. My hon. Friend the Member for Devon, West argued that, if the scheme is too complicated and uncertain, others will seek a way round it. I hope that I am always frank with the House. As the proposals stand, they are totally unsatisfactory in that respect. I did not try to hide the reasons from the House. There is discrimination and their application is not clear. We shall be entering the negotiations with the object of obtaining clarification. If we get it, we shall do our best to ensure that each country of the Community puts the same interpretation on the proposals so that our producers are on an equal footing with producers in the other countries of the Nine.
If we are to deal effectively with surpluses, are we not playing around with the problem by introducing restrictions on investment aid? Should we not return to more effective methods such as national quotas and more national policies and aids? This is not the time to enter into that argument in great depth. It has been taken up by my hon. Friends the Members for Banff (Mr. Myles) and Galloway (Mr. Lang). Those who follow the debate on agriculture in a wider sense will be 1028 aware that I have spoken on a number of occasions about the need to consider reform of the CAP to deal with surpluses in a wider and more open way than in the past.
One way in which we could approach this issue is through some form of national financing, but I should be wrong to follow that road now. I assure those of my hon. Friends who have raised this subject that the mind of the Government is open not only to suggestions as regards methods of national financing but to any sensible suggestion from the Commission or from the Government of any other country as to how we could more effectively contain such surpluses and thereby the cost of the CAP.
In recent years, debates on agricultural policy, both in the United Kingdom and Europe, have started from the basis of prejudice. That is one of the great problems. If one country favours one system, it says that it must hold to that system. If one party says that one system is right, another says that it is not prepared to consider it. The problems of surpluses in Europe and the reform of the CAP are such that all of us, no matter what our standpoint, must be readier to listen to constructive suggestions, from whatever quarter they may come. It is in that spirit that this Government will approach the problem.
§ Question put and agreed to.
That this House takes note of European Community document 9280/80 concerning proposals for Council Regulations restricting investment aids for milk and pig production and while welcoming the objective of the proposals to institute useful measures to reduce the cost of the common agricultural policy, particularly in the dairy sector, supports the Government's intention to safeguard the essential interests of United Kingdom producers.