Sheep Variable Premium (Hansard, 7 November 1983)

§ The Minister of State, Ministry of Agriculure, Fisheries and Food (Mr. John MacGregor)
I beg to move, That the Sheep Variable Premium (Protection of Payments) (Amendment) Order 1983, a copy of which was laid before this House on 15th July, be approved. This order enables us to give effect to a Community regulation—[Interruption.]

§ Mr. Mark Hughes (City of Durham)
On a point of order, Mr. Speaker. May we have a little silence while the Minister addresses the House?

§ Mr. Speaker
Order. Hon. Members will leave the Chamber as quickly and as quietly as possible.

§ Mr. MacGregor
This order enables us to give effect to a Community regulation which requires all sheep on which sheep variable premium is paid to be slaughtered or exported within 21 days of certification for the premium.
Although the variable premium was designed as a premium on animals sold for slaughter, when the regime was set up we were not required to set a limit to the time for which lambs could be kept after certification for premium before being slaughtered. A slaughter rule has been in operation under the beef variable premium scheme for several years. Under that scheme, cattle certified for the premium are to be slaughtered within 15 or 28 days, depending on the season.
The Commission became worried that the practice of retaining certified lambs for further fattening could be detracting from its original intentions. Although we were not fully convinced by the Commission's arguments, we accepted the introduction of a slaughter rule as part of a 1983 price fixing settlement which was generally satisfactory. At our request, the Commission has undertaken to monitor our markets and to review the slaughter rule if there is evidence that it is causing disturbances. We are monitoring market movements closely and will draw the Commission's intention to any unfavourable developments that we believe can be attributed to the slaughter rule or any evidence that it is leading to greater market disturbance.
The Community regulation came into effect on 1 August. The order, which has been operative from the same date, provides the necessary powers to enforce it in Great Britain. It has been framed to cause the minimum disturbance to traditional patterns of livestock marketing in this country.
This is a fairly simple order.

§ Mr. Donald Stewart (Western Isles)
I see that part of the title of the order is "Protection of Payments". I have received complaints recently from sheep farmers that the payments have not been forthcoming. Will the order expedite those payments in any way?

§ Mr. MacGregor
That is a different subject. This order deals with the variable premium scheme. I believe that the right hon. Gentleman is referring to the annual ewe premium which last year was settled at about this time of year. It is still being discussed by the Commission.

§ Mr. J. Enoch Powell (Down, South)
Will the Minister clarify a point relating to the new article 6A(2) (c) of the principal order removed from Great Britain to Northern Ireland. 113 Am I correct in thinking that there are reciprocal regulations for Northern Ireland which do not require affirmative procedures in the House which provide for a reciprocal removal from Northern Ireland to Great Britain?

§ Mr. MacGregor
I believe that there is no need for this as the variable premium scheme does not apply in Northern Ireland, but I shall check to ascertain whether I am correct and write to the right hon. Gentleman if I am wrong.

§ Mr. Geraint Howells (Ceredigion and Pembroke, North)
The right hon. Member for Western Isles (Mr. Stewart) made a valid point, and I believe that he should be given an answer. He was trying to say that the deficiency payment which is owed to farmers from selling lambs at auction is paid out by this scheme. Is there any delay in paying the farmers the deficiency payment?

§ Mr. MacGregor
I understand that we are talking of rumours in the press, which some hon. Members have raised with me, about delays as a result of the Community budget and its cash flow problems in relation to the annual ewe payments. Discussions are still in progress about the annual ewe payments and therefore there is no delay in that context. The payments were settled in October or November last year. The settlement will be a little later this year, but under the regulation it must take place in the marketing year which ends in March. I expect the settlement to be within the marketing year.

§ Mr. Dafydd Wigley (Caernarfon)
Wales produces one out of every 10 sheep in the Common Market. May we have an assurance that when these matters are discussed in the EC in Brussels Welsh Office Ministers will be present?

§ Mr. MacGregor
Some of the matters are not discused in the Council of Ministers but are dealt with at an earlier stage. Whenever Welsh interests are affected we shall ensure that Welsh Ministers are fully consulted. It may not always be necessary for them to be present, but when it is crucial I am sure that they will be. The Under-Secretary of State for Wales nods in agreement.
We have endeavoured to minimise the administrative burden on the industry and to keep administration as simple as possible. The existing requirement in the principal order that people buying or selling certified sheep should keep records has been extended. The new requirement is that purchasers of certified sheep must be notified of the slaughter requirement attaching to these animals. The purchaser then has the responsibility for ensuring that the animals are slaughtered, or exported, within the specified period. When they are slaughtered or exported, the owner is required to keep a record of the date. Although that may sound cumbersome, most of those records are already kept in accordance with the provisions of the principal order and sound commercial practice. Records are available to enforcement officers within the constraints set down in the principal order. Offences for breach of the rules and penalties are specified in the Agriculture Act 1957. With that explanation I ask the House to approve this order.

§ Sir Peter Mills (Torridge and Devon, West)
I declare an interest as a farmer. Recently I have not bought sheep 114 because I have turned almost completely to arable farming, but I used to buy many punch sheep and sell them later. It was profitable.
I am somewhat worried about the order and about what the Minister said, simply because we in the south-west of England, particularly in Devonshire, are great producers of mutton and lamb, at a particular time of the year. Most of our lamb production starts at Easter. Large numbers of lambs are available in markets of which there are five in my constituency—North Taunton, Tavistock, Bideford, Holsworthy and Hatherleigh. They are packed from Easter onwards. It is important to realise the effect of the order on the marketing of sheep.
We should encourage the production of sheepmeat. Other products are overproduced. The question for the farming community is — does the order help in the orderly marketing of sheep? Does it help the sheep producer? I have doubts. I shall not vote against the Government, but the Minister must realise that doubts exist in the minds of practical farmers like myself with many years experience, and by the National Farmers Union. I welcome what he said about monitoring the situation to see how it develops.
Let me explain to the House my fears and the problems that can come about. There are advantages at peak times for buyers to buy in sheep that have been punched, to graze them on at another farm and then to supply the market when there is a shortage of sheep later on in the year. The problem is that if there are large numbers of sheep or fat lambs in a market waiting to be punched and to receive the subsidy, and if there are farmer buyers in the ring buying, that helps the price upward. If one does not have those buyers in the market, the butchers and the dealers get the fat lambs much cheaper. Who suffers? The Government do, because the increased subsidy has to be paid. Therefore, there is a point in having farmer buyers to take some of the surplus out of the market and for them to come back later. In other words, it is easier to store on the hoof than it is to kill the lambs and put them in cold store, with all the expense that that entails.
I have done this myself in years gone by, and it is a common practice. The 21 days is nothing like long enough to deal with this problem. The Minister will find, as he monitors this, that at the peak times there will be fewer buyers in the market for the lambs and, therefore, that the subsidy will increase rapidly. There is no danger of sheep being put through twice and therefore attracting a double subsidy. They have been well and truly punched and one can see that when they are alive and when they are dead. I am not prepared to oppose the order, but I point out its possible results to the Minister. Therefore, monitoring is crucial.
I welcome the proposal that records should be kept. This is a step forward through the various points raised in the schedule. I hope that the Minister, and particularly the officials, will look into this important point about the peak production of lamb and what happens at that time in an auction market.

§ Mr. Geraint Howells (Ceredigion and Pembroke, North)
I welcome the order, which is long overdue. We are aware that the hon. Member for Torridge and Devon, West (Sir P. Mills) is a very wealthy man, and tonight we have found out how he makes his money—by selling fat lambs the second time round.

§ Sir Peter Mills
Withdraw.

§ Mr. Howells
There is no need for me to withdraw, as the hon. Gentleman has just said that he bought the lambs and sold them for a profit.

§ Sir Peter Mills
I am grateful to the hon. Gentleman for giving way, but I am sorry that the hon. Gentleman, who is a farmer as well, does not understand what a beneficial practice this is at peak periods.

§ Mr. Howells
I still disagree with the hon. Gentleman, because I know that many people take full advantage of buying lambs when they are cheap and taking them back to the market when they can get over the guarantee price for them.
Since August of this year the order has benefited our hill farmers. Here I declare an interest, as I keep a few sheep on the hills of Plynlimon. The order has been beneficial in the past few months, because producers who want to fatten lambs in the lowlands come to the hills to buy store lambs and do not have to go to the fat auction to buy lambs that are ready for slaughter.
I am grateful to the Government and their counterparts in Europe for introducing the order. Farmers in general, and sheep farmers in particular, are worried that our European counterparts will try to dismantle the sheepmeat regime, which has been very successful in the past few years. Farmers are worried about what the future holds for them and the scheme. I hope that the deficiency payments scheme is here to stay and that the French, Germans and other interested countries will do everything in their power to help the Government retain the sheepmeat regime when the final discussions take place next year. The ewe premium has been debated, but I hope that the Minister will clarify how much money—

§ Mr. Deputy Speaker (Mr. Ernest Armstrong)
Order. The hon. Gentleman knows that we must deal with the order before us.

§ Mr. Howells
With respect, Mr. Deputy Speaker, we are discussing the same scheme in referring to the order. I take heed of what you have said. If I have strayed too far, I shall try to return to the order.
I hope that the Minister will give some advice on marketing to the farmers of Britain. Bearing in mind that our farmers are providing good lambs for the European market, will the Government try to introduce further measures to ensure that lamb consumption in this country and in Europe is increased during the next few years? I welcome the order.

§ Mr. Mark Hughes (City of Durham)
In broadly welcoming the order, I wish to ask the Minister four fairly succinct questions.
First, is it wholly unavoidable that the House must pass the order to enable Britain to keep in line with its treaty obligations? Is it true that unless we pass the order we shall have been acting outside our political and legal rights since 1 August, so we are acting retrospectively? Is it correct to say that since 1 August the rule in this country has been as I previously stated and we are now making correct, proper and British legal that which has been legal in Europe since 1 August?
Secondly, does the Minister think that the order is a desirable improvement, both administratively and agriculturally, in the procedures for the sheepmeat regime, 116 bearing in mind the views expressed by the hon. Member for Torridge and Devon, West (Sir P. Mills) about bunching the supply of sheep and sheepmeat on to the market? If the procedures are desirable and beneficial, so be it. If not, what procedures are open to the Minister to alleviate our difficulties?
Thirdly, will the order produce any significant improvement in administrative costs to the common agricultural policy or to the Government, or, via other groups, to the consumer in the price of lamb? Can the Minister tell the British housewife that what we are doing will produce cheaper lamb? If he can, so be it.
Finally, in the long-term, will the lamb producer and the consumer benefit from this modification of what I regard as a fairly erroneous regime? I am not especially well disposed to the sheepmeat regime, but will this minor modification help either the producer or the consumer?
Until we are satisfied on the questions that I have put, we shall be reluctant to support this modification of the regime.

§ Mr. MacGregor
With the leave of the House, Mr. Deputy Speaker, I shall try to anwer the points raised in the debate.
I appreciate the point made by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). As I explained before, this was introduced before the general election as part of the price review, and the Commission was urging that it be done. I also explained the commitment obtained by my predecessor about monitoring. That is the critical point. I appreciate that in certain circumstances in the marketing year the old arrangement helped to push prices up, and hence my hon. Friend's fear that the order might tend to reduce the amount of the variable premium payments, a point to which I shall return in a moment.
I disagree with my hon. Friend the Member for Torridge and Devon, West on just one point. This has no direct impact on the British Government, because the sheepmeat regime is 100 per cent. FEOGA financed, so it is the premium payments from Brussels that are affected. Nevertheless, I take his point that payments may be adversely affected at certain times of the year. That is why we told the Commission that we were not fully convinced by the arguments, and insisted on monitoring. So far, there has been no evidence of adverse effects, perhaps because other factors have had a greater effect on the market this year. My hon. Friend has considerable experience of this sector, which is of great importance in his area, so I have no doubt that if he feels that his fears are corning true he will give me the evidence so that I can take it into account in the monitoring process. I invite my hon. Friend to do that.
The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) raised two points. First, he will be aware that the variable premium is but one part of the sheepmeat regime. He will also know that the Commission has only just published its report on the review of the regime. We are now studying the details. My right hon. Friend the Minister of Agriculture, Fisheries and Food has already made it clear that, as we at present understand it, some aspects of the proposals — for example, limiting the variable premium—could disadvantage British producers as compared with those of other member states. My right hon. Friend made it clear last week that that would be 117 contrary to the basic principles of a common regime and we should not accept any such discrimination against our producers. It is very early days yet, however, in relation both to an assessment of the Commission's detailed proposals and to the discussions that we shall be having with the Community on this.
The hon. Gentleman's second point related to marketing and attempts to increase the consumption of sheepmeat. As he knows, the Government have laid heavy emphasis on marketing in our support for Food from Britain. I entirely agree that in this area we can do a great deal to help primary producers by increasing the marketability and consumption of the product. That will continue.
The hon. Member for City of Durham (Mr. Hughes) asked four questions. On his first question, we are honouring a price commitment by introducing the order. It is not so much a question of whether it has been "European legal", as he put it, since 1 August as of how it applies to the House. I made it clear that as a result of the price fixing we were committed to introducing the order. The price fixing was settled on 17 May and the Commission regulation implementing the slaughter rule was not agreed until 10 June and not published until 24 June. Before making our national regulations we had to discuss with the Commission and trade organisations in the United Kingdom, arrangements for implementing the slaughter rule to ensure that our approach was acceptable to the FEOGA authorities and to cause the minimum disruption to the marketing of lambs. Following that, the order was laid before the House on 15 July — before coming into effect on 1 August. Because the House rose shortly after that, it was not possible to discuss it in Committee or on the Floor of the House. We have therefore taken this opportunity to ensure that the matter is discussed in the House before the order comes fully into effect after receiving parliamentary approval.
The hon. Gentleman's second question related to whether this is a desirable development. I have already explained that we were not fully convinced and the points that my hon. Friend the Member for Torridge and Devon, West made were in our mind when we said that. However, it was a negotiating factor in the price review. We have no evidence so far to suggest that it has been an undesirable development, but that is the point of the monitoring.
The hon. Gentleman's third and fourth questions related to almost the same thing. He asked whether the order would be better for the Community and the housewife. It is difficult for me to answer his question about saving CAP costs now. We shall have to wait and see. If market developments are precisely as my hon. Friend the Member for Torridge and Devon, West said, there could be some increase in the variable premium. We shall have to watch that. On the other hand, the cost to the 118 housewife could be reduced because there is a more immediate supply. It is difficult to be sure about the economic effects now. That will be the purpose of our monitoring. The real point is that we agreed to this in the price review. The Commission's regulation has been laid and the order is now before the House. I commend it.