European Community (Milk Quotas)

HC Deb 03 July 1984 vol 63 cc159-242

[Relevant documents: Draft Dairy Produce Quotas Regulations 1984 and EEC document No. 6059/84.]

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

Mr. Speaker

Before I call the Minister, may I say to the House that there is great interest in the debate? No fewer than 35 right hon. and hon. Members have indicated their wish to take part in it. I make a special plea for brevity today. There is no profit in coming to the Chair. I have done my utmost to balance the various parts of the country and also to take into account those who have spoken in previous debates.

4.6 pm

The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling)

In the debate today, hon. Members and the House will, I am sure, be mainly concerned with the milk supplementary levy, and I intend to direct most of my remarks to that issue. We had wide-ranging debates on CAP prices and other related issues in the House on 1 December and 22 March.

I reported to the House on several occasions earlier in the year on the progress of the negotiations, including the final settlement. Detailed notes on the price fixing have been given in an explanatory memorandum in document 6059/84 and in a note on the settlement prepared by my Department which is available in the Library of the House.

Nevertheless, today's motion enables us to have a wide debate, and if hon. Members wish to raise points on the price fixing not concerned with the supplementary levy I am sure my hon. Friend will do his best to answer them when he winds up the debate. For the moment I shall simply record that among the important decisions taken at this year's price fixing, apart from the milk supplementary levy, were the non-revaluation of the green pound, thereby meeting the NFU's primary negotiating objective, a reduction in cereals prices which will aid livestock producers, and retention of the beef premium scheme in the face of widespread and total opposition within the Council.

At the same time, common prices were reduced by an average of about 0.5 per cent. and, taking account of "green" currency changes, real prices will be reduced in all member states. Guarantee thresholds were introduced for several extra commodities. The effect of the price fixing on the retail price index was negligible; if anything, it is expected to be beneficial. All this marks a major step towards reforming the CAP and containing its costs.

Other important decisions were taken recently which will benefit agriculture, including the extension of less favoured areas in the United Kingdom to include 1.2 million hectares of marginal land, the doubling of the suckler cow subsidy and a 5p per kilo increase in the wool guarantee.

We should also note the major achievement gained by the Prime Minister at Fontainebleau last week. It was a major achievement for Britain and for the Community. We now have a fair and durable solution to a problem that has preoccupied the Community for a long time. As a result, agriculture can begin to look ahead with greater certainty. Of course, there remain difficulties still to be sorted out in Brussels, but the problem of rapidly increasing expenditure on agriculture must continue to be tackled, and negotiations in Brussels can now proceed in a more orderly way.

One major benefit for us is that other member states will in future have a greater interest themselves in making more rational expenditure decisions, since they will have to make a larger contribution. This can only be good for the long-term interests of the Community.

The European Community has, for a number of years, recognised the problem that the milk sector posed. Genetic improvements in dairy cows, leading to higher yields, as well as improvements in the management of dairy herds, have resulted in the increase in production. At the same time, consumption of milk and milk products has not grown at anything like the same rate. Supplies of milk have continued to rise faster than consumption. The surplus of milk has grown, and so has the cost of dealing with it.

Efforts have been made to try to keep the growth of milk production under control and to find outlets for more milk and milk products, through, for example, schemes to encourage farmers to abandon milk production and to convert to beef production and through a wide range of subsidies on milk and milk products aimed at increasing consumption generally and at stimulating the use of skimmed milk and skimmed milk powder in feeding livestock. Markets have also been sought outside the Community both through general export refunds on milk products and through offering milk products as food aid.

The combined effect of the various measures, including price policy, as well as the massive expenditure directed towards stimulating consumption and facilitating exports, have not brought the European Community's milk market into a better state of balance. On the contrary, the gap between supply and demand continued to grow and so did the cost of disposing of the surplus.

Mr. Ron Leighton (Newham, North-East)

Has Britain any surplus of dairy products?

Mr. Jopling

The hon. Member will see from page 185 of "Dairy Facts and Figures, 1983", published by the Milk Marketing Board, that in 1982 the United Kingdom was self-sufficient to the extent of 131 per cent. in solids not fat, and 91 per cent. in butter fat. If we add to that the extra production in 1983 of about 3 per cent., and take into the account the fact that successive Governments, including the last Labour Government, have taken the political view that part of our butter market should be reserved for New Zealand, we end up with the rough estimate—I accept that it is an estimate—that in 1983 we were about 103 per cent. self-sufficient, including New Zealand, for butter fat and about 131 per cent. self-sufficient in solids not fat.

Last year we reached the point where expenditure on the milk regime was about £3 billion, representing one third of expenditure of the CAP. The milk surplus in the Community represented more than one fifth of milk production, and was continuing to grow. The Community budget was simply not in a position to absorb the cost involved in maintaining this milk regime.

At the price fixing in 1982, a threshold was set at the level of milk production in 1981, plus 0.5 per cent. At the price fixing in 1983, this threshold mechanism was implemented by scaling back the general level of price increase to contain the cost of the milk regime within the threshold. In July 1983, after the Stuttgart summit, the Commission made proposals for changes to the common agricultural policy to respond to the need for the most efficient use of the Community's financial resources.

The Commission concluded that there was a need for radical action to correct the milk situation. World market prospects offered no possibility of further significant increases in the Community's exports, even with high levels of subsidisation. The grave market imbalance which had existed when the guarantee threshold for milk was first introduced in 1982 had deteriorated even further.

The Commission recorded that the price decisions over the past 10 years had not been sufficient to redress the market balance. It concluded that the guarantee threshold, if applied to offset fully the additional expenditure likely to arise from excess production in 1983, would require the milk price for 1984–85 to be abated by as much as 12 per cent.

The Commission thus came to the view that the only practical alternative to action on a drastic scale through the common price mechanism was the introduction of quotas. It announced last July that there would be a reference quantity established from each dairy based on 1981. All deliveries in excess of the quantity would be charged a levy which would, in turn, be passed on to producers.

We must recognise that the Commission made its proposals, having examined other possibilities, concluding that only a supplementary levy system would operate sufficiently quickly and effectively to stem the rising surplus and contain the cost of the milk regime, without at the same time creating unacceptable consequences for producers or member states.

The possibility of a much increased and graduated co-responsibility levy was an option which several member states believed to be highly attractive. Let there be no doubt that that would have been a disastrous response to the milk surplus for the United Kingdom. It would have entailed a high rate of levy on larger enterprises and a rather low rate for small enterprises. But the various thresholds would certainly have had to be set at levels which would have left us with a disproportionately high part of the burden of the levy.

We joined the Commission in strongly resisting that option during the autumn. We also forced the Commission and other member states to examine fully the possibility of cutting back prices as the primary mechanism for tackling the surplus. That route would have avoided the complex and difficult arrangements needed to operate quotas and would have given consumers an immediate advantage.

However, as I warned the House in the debate on 1 December, it became clear that price cuts on the scale needed to curtail production quickly and to make the necessary savings could not be agreed by the great majority of member states. We therefore pressed vigorously to ensure that the supplementary levy system was introduced in a way which, as far as possible, would meet our requirements.

The Commission had no intention, for example, of covering the substantial part of milk production which is used to make direct sales. In some member states, such sales are quite substantial. If such sales had not been covered by the super levy, producers would have taken advantage of the gap and switched sales away from dairies. There would have been a flood of sales direct on to the market, thus undermining the levy system itself and jeopardising the existing businesses, both of the dairy sector and of those involved already in direct sales. As a result of our continued pressure to bring direct sales within the quota system, the proposals were amended in that way.

We also secured provisions so that the quotas would be set taking account of the special circumstances of individual producers who had suffered some setback in their base year or who were engaged in developing their milk production.

I should remind the House that in its proposals for the milk sector the Commission also included a highly discriminatory proposal to place a special tax on dairy farms where production was more intensive. This measure was highly attractive to several member states, including France, but we successfully resisted it, along with other suggestions to bias the supplementary levy in favour of small producers.

I cannot accept claims that the cutback in milk production faced by the United Kingdom is somehow much worse than that faced by other member states. The major milk producing countries in the Community are France, Germany, the Netherlands and ourselves. We all have quotas based on our production in 1981.

Since 1981, German and Dutch production has increased relatively more than ours and that of France. As a result, Germany and the Netherlands face bigger cuts by comparison with 1983 than do either we or France. However, French milk yields are significantly lower per cow than our own. Therefore the introduction of a quota system will prevent French producers from improving their yields unless, at the same time, there are considerable cuts in cow numbers.

I regret that the milk industry has to face the introduction of these elaborate controls to contain and reduce the milk surplus. It gives me no pleasure that I should be the Minister of Agriculture who, with his European colleagues, has had to face this important challenge and to implement the system which is being imposed on producers throughout the Community.

Mr. Gavin Strang (Edinburgh, East)

The Minister rightly referred to the position in France. He will be aware of the great anxiety in the industry that the French Government are not introducing and applying the quotas in the way that the British Government are attempting to do. May we have an assurance that there is no question of quotas being imposed upon our producers if they are not imposed with equal vigour on the French?

Mr. Jopling

I recognise that concern, which is reflected in all parts of the House and outside. I shall deal with the issue later in my speech.

I entirely reject suggestions that the arrangements that we have negotiated represent a poor deal for our industry. The measures will impinge on milk producers throughout Europe. There is no doubt that our producers have been contributing to the Community's surplus stocks and drawing on the massive funds needed to dispose of them.

I shall detail the action taken since the 31 March. settlement. I am acutely aware of the problems facing producers in changing over to a quota system. Difficult decisions have to be made, and it is important that they should be made in a logical way on the basis of sound information. We therefore sent out initial guidance to farmers as quickly as we possibly could; indeed, we were the first member state to do so. I wrote to all registered producers on 10 April explaining the arrangements for the introduction of the milk supplementary levy. At the same time, a Ministry advisory service note "Coping with the Quota" was distributed to help producers decide how to adjust their enterprises.

On 25 May I announced that I intended to make quotas available as quickly as practicable to assist those small milk producers who wished to stay in milk production, and to provide funds to compensate those farmers who wished to give up milk production. I shall enlarge on the aims and details of this scheme later.

On 12 June a letter was sent to all registered milk producers in England and Wales giving guidance on the types of special case which can be considered under the rules of the scheme. At the same time a notice was sent about the arrangements being made to issue initial provisional allocations of wholesale quotas to producers who started deliveries after 1 January and to producers with mixed wholesale and direct sales businesses.

On 19 June a notice was issued to milk producers who sell direct to the public, giving guidance on how the quota system would be applied to them. It was not possible to issue guidance to direct sellers earlier, because a number of important points had to be taken up with the Commission and these were not resolved until 14 June.

I appreciate that milk producers want and need to know where they stand at the earliest opportunity. This is why the Secretaries of State and I sent out provisional guidance on as many points as possible as rapidly as we could.

I have all along been extremely concerned to finalise the details of the quota arrangements, but, following the agreement in Brussels, it was most important that their implementation was fully considered with all interested parties before draft regulations were presented to Parliament.

The draft regulations were laid before this House on Wednesday 27 June. When they have been approved by both Houses we shall send out forms and implement the detailed arrangements.

Mr. David Penhaligon (Truro)

The Minister accurately summed up the fear in some milk circles when he said that farmers want to know where they were. The Minister has outlined the calendar of events since April. When does he expect the final appeal for the special hard cases to take place? If we had a target date, the farmers would really know where they are.

Mr. Jopling

It is not possible to give a target date, because one imponderable involves when the House decides that it wishes to give its assent. Much will depend on what is said in today's debate. I want to listen to hon. Members' views, and we can then decide how soon we can ask the House to respond to our request.

The other big imponderable is that we have no idea what proportion of milk producers will apply to be regarded as special cases. That is why it is extremely difficult. I am glad to see the hon. Member for Aberdeen, North (Mr. Hughes) nodding. It is difficult to give a date.

I was about to refer to the draft dairy produce quota regulations. Any quota system is inevitably complex. That is one reason why I was in favour of tackling the surplus problem by the price mechanism. Opposition Members have always been suspicious of the price mechanism and have, when they have had the opportunity, tried to circumvent it. I understand why. When they have done so, we have quickly seen the bureaucratic tangles into which one can get when one prevents market forces from operating. It is therefore ironic to hear that Opposition Members do not like the milk quota system.

I agreed reluctantly to introduce the quota system, accepting it as the only way of getting effective Community action to tackle the milk surplus. But I went into this with my eyes open, realising full well the problems and the complexities into which it would lead us, and so it has proved.

I shall be interested to hear any constructive suggestions, but I emphasise that a great deal of work and consultation has been done to produce rules which are fair and sensible within the framework of the Community's legal provisions.

The basic concept behind the draft dairy produce quota regulations is simple. A quota is calculated for each holding on which milk production was taking place on 2 April 1984. Normally, the quota will be the milk production in the calendar year 1983, less 9 per cent.

There are special rules for producers who were not in production throughout 1983, who have moved to a different holding or who have changed the area of land that they are using. There are also special rules for direct sellers —producers who do not sell their milk to a dairy. Because of the way in which the Community legislation is written, these producers will have a different base year —normally 1981.

Mr. David Crouch (Canterbury)

I have just been talking to dairy farmers from Kent, who urged me to ask my right hon. Friend whether it is possible to interchange the wholesale quota with the retail quota. They say that they have a market for selling a certain amount of milk, but are denied the ability to do that even though people want to buy from them.

Mr. Jopling

I shall come to that shortly. One of the difficulties is that the Community's rules, despite our pleadings, do not permit quotas to be interchanged.

The draft regulations naturally also have to cover the position of somebody who is both a direct seller and a wholesale producer—who, for example, may sell some of his milk to the Milk Marketing Board and the rest on his own milk round. But the basic principle is the same in all cases. The primary quota is related to production in the appropriate base period, adjusted by a percentage to ensure that the total of all producers' quotas is contained within the national ceiling.

The Community legislation recognises that extra allocations of quota are appropriate in certain circumstances, and our draft regulations reflect this. They provide for two types of special case. First, there are the producers whose production in the base year was affected by exceptional events such as a natural disaster, illness of the producer or disease among the cattle. These producers are entitled to have their quota calculated from a different base year.

Many producers have said that in the base year their production was hit by bad weather and the Council regulation lists as a special case a serious natural disaster affecting the producer's farm to a significant extent". The new tribunals, for which the regulations provide, will have to interpret that provision and give guidance to the panels reviewing individual cases. When the tribunals are set up, we shall suggest some guidance for them to consider.

At this stage we are inclined to think that, as a rule of thumb, a serious natural disaster might be said to occur if a drop in production due solely to the weather were some 10 or 15 per cent. of the base year sales. I shall be interested to hear the views of the House.

It is clear that the six exceptional events listed in the Community regulations will not cover all hardship cases. Many hon. Members will have heard from individual constituents. I have had their letters and heard of the individual problems. We recognise the problems and are determined to do what we can to help, subject to the recognition that total milk production must be cut back and that we must abide by Community rules. We intend to tackle the problem as soon as it is clearer where the most serious hardship lies.

The second category of special cases is that of the producers who, before 1 March 1984, had made, or committed themselves to make, capital investments aimed at increasing their production. In that case, the amount of extra quota to be given is at the member state's discretion, and we have decided to set a limit on the amount allocated to this type of producer. The first 7.5 per cent. of expansion will be ignored, and only half the next 5 per cent. will be taken into account. Above 12.5 per cent., the full expansion will be counted.

However, that does not mean that producers who are expanding sharply will get extra quota equal to all their expansion beyond the first 12.5 per cent. We have made provision for an amount of extra quota to be allocated to special cases in the wholesale sector. This amount is around 2.5 per cent. of the national wholesale quota.

There is nothing magic about the figure of about 2.5 per cent. It is not the result of a precise estimate of the likely volume of claims for special case treatment; it is simply the remainder resulting from the 9 per cent. general deduction instead of the 6.5 per cent. cutback required. We could have decided by taking a figure higher than 9 per cent., but this would have been at the expense of the generality of producers.

Dame Judith Hart (Clydesdale)

Does the Minister include bank loans in commitments to capital investment?

Mr. Jopling

Such matters will be looked at by the panels and tribunals, and if a producer can demonstrate that he was committed they will be taken into account. I imagine that the panels and tribunals will take a great interest in correspondence that milk producers have had with their banks.

Mr. Charles Morrison (Devizes)

Given that, as my right hon. Friend has implied, there are so many uncertain and unknown factors, given that the quota is an annual quota, given that there is uncertainty about the ability of other member states of the Community to collect the levy, and given that the figures for production are unknown except that we all know that there has been a sharp cut in production in recent months, will my right hon. Friend consider postponing the actual collection of the levy until next spring? My right hon. Friend has already been helpful in terms of the cash flow of individual farmers by ensuring that the levy will not be collected until October, but no one will know what the individual quotas will add up to in relation to the annual quota until next spring. It might be helpful if he could postpone the collection, while, so to speak, giving a warning to farmers in the meantime.

Mr. Jopling

I shall consider that, but my prime consideration is to ensure that other countries in the Community follow the rules and carry out the scheme as well as we intend to. It would not be a good thing at this stage to make it more easy for them to comply. However, let me bear that matter in mind.

Mr. Nicholas Budgen (Wolverhampton, South-West)

My right hon. Friend talks about enforcement in other countries, but, although the Court of Auditors often speaks about the non-compliance of other countries, there is no enforcement mechanism. How can our farmers ensure that there will be any sort of common enforcement?

Mr. Jopling

I have already brought that matter up with the Commissioner, the Commission and the Council on many occasions. My hon. Friend can be assured that I intend to persist in pressing the Commission to make sure that the rules are properly enforced.

The first call on the reserve will be for producers who have suffered from exceptional events. After those producers have been given the extra quota awarded to them, the rest of the reserve will be apportioned among those who are involved in expansion programmes.

I have been conscious, in planning the arrangements for the operation of the quotas, of the importance of ensuring that justice is done, and seen to be done, to individual producers. That is why the draft regulations provide for the setting up of three tribunals—one each for England and Wales, Scotland and Northern Ireland. Except in Scotland, each tribunal will consist of up to seven members, with, below them, a network of local panels.

Appeals for special case treatment will initially be sent to the appropriate agriculture Department which will examine the claims to establish whether they are prima facie eligible. If so, they will be forwarded to the local panel, which will reach a decision. If the producer is unhappy with the panel's decision, he will be able to appeal to the tribunal. Where an application is rejected by the agriculture Department in the initial sift, the producer will be able to appeal to the local panel against the rejection. Thus, every applicant will have the right to one appeal.

Dame Judith Hart

The Minister has explained the position for England and Wales. I do not see a Minister from the Scottish Office in the Chamber. What will be the position in Scotland?

Mr. Jopling

The right hon. Lady apparently does not come here often enough to recognise the Under-Secretary of State for Scotland. If she cares to read the regulations, she will find that there is provision for a tribunal in Scotland, which, I think I am right in saying, will have 20 members, who will sit in panels of three. I hope that that answers the right hon. Lady's question.

The arrangements for direct sellers differ in a number of respects from those for wholesale producers. The Community legislation does not make provision for a specific amount of quota to be set aside as a reserve for special cases in the direct sales sector. The result of that is that, whereas for wholesale producers the calculation of quota is a two-stage operation, the total requirement of all direct sellers for special case allocations will have to be known before the national direct sales quota can be apportioned between direct sellers. That unfortunately means that it will take rather longer to firm up direct sellers' quotas than those for wholesale producers.

The arrangements for direct sellers generally are less satisfactory, and in particular less flexible, than I should have wished. That is the point that I made to my hon. Friend the Member for Canterbury (Mr. Crouch) earlier. I shall be continuing to press in Brussels for improvements to be made in this area. We have made a good deal of progress already, but there is more to be done.

Mr. Mark Hughes (City of Durham)

We all accept that the problem of the direct seller is particularly difficult, but how long a delay is there likely to be?

Mr. Jopling

I have to give the hon. Gentleman much the same answer as I gave to the hon. Member for Truro (Mr. Penhaligon). At the moment we do not know how many people will apply for special case treatment and how much work will be involved for the panels and tribunals. For that reason, it is not possible to give any date. However, the hon. Member for City of Durham (Mr. Hughes) can be assured that we shall move as quickly as possible. I hope that he will accept that.

I move to land transfers and the ownership of quotas. I am frequently asked who owns the quotas. The simple answer is that no one does. A quota is allocated to a holding for the use of the occupier. If the holding passes to a new occupier, the quota goes with it. If the holding is divided into different parts, the draft regulations set out detailed rules for determining where the quota goes. Normally it will go with the part of the holding on which the dairy buildings are situated, but the parties concerned —buyer and seller or landlord and tenant—may agree on a different arrangement if they wish. If they fail to reach agreement, there is provision for arbitration.

As for freer transfers of quotas, about which I have been asked a question already, I have a great deal of sympathy with those who argue in favour of the greater freedom of movement of quotas between individuals. There are obvious attractions in a system of marketing. It would enable us to get back to something more like a free market. However, the Community legislation is restrictive and is based on the concept of quota being attached to the holding. These are difficult issues, but I shall be looking urgently at possible rules for easing transfers.

Mr. Alex Carlile (Montgomery)

Will the right hon. Gentleman give way?

Mr. Jopling

No; I shall not give way to the hon. and learned Gentleman. I have been speaking for some time already, and this is a long and complicated issue.

I move to the outgoers' scheme and the position of small producers. In addition to the steps that we are taking to assist special cases, and as a major element in our efforts to help those who will be most deeply affected by the quota system, we are setting up a non-statutory outgoers' scheme.

We have been well aware from an early stage in the implementation of quotas in the United Kingdom that one group of dairy farmers will be particularly badly hit. I refer to the smaller specialist dairy farmer producing milk from a restricted acreage. I recognise that these producers often have no economic possibility of alternative production. Therefore, to stay within the quota they will have to scale down output. They lack the possibilities open to larger dairy farmers who may have an opportunity of an alternative enterprise or of altering their methods of milk production.

A majority of these specialist dairy farmers quite naturally and understandably wish to continue in production. It is the reductions that they face in order to stay within their quotas that threaten to prevent them from doing so. The most important thing to do, and the best means of ensuring an economic future for them, is to rebuild their quota entitlement as quickly as possible. To do this we need to obtain spare quota very rapidly.

On the other hand, some specialist dairy farmers will wish to quit dairying altogether and could be direct beneficiaries of our outgoers' scheme. Payments will, if they wish, help to give them the means of establishing an alternative enterprise.

In our outgoers' scheme we are helping those who wish to leave. At the same time, their departure from milk production will release the spare quota that we need to help those who wish to stay.

To give an idea of the scale of the scheme, let me give some more precise details. We are aiming to buy up 2.25 per cent. of the total quota in Great Britain, which is almost as much as the initial reserve for special cases, and 5 per cent. in Northern Ireland because of the large proportion of small producers there. We shall be aiming specifically to make extra quota available to dairy farmers who produce less than 200,000 litres annually—broadly speaking, those with fewer than 40 cows. In England and Wales this means some 16,000 producers who, although they produce only 13 per cent. of the milk, constitute about 40 per cent. of all producers.

To restore their 1983 levels of production we need about 160 million litres of milk in England and Wales, or 1.25 per cent. of the total quota, so we expect to have something left over to help other deserving producers, and over the next few months we shall be thinking about how we can use this remaining quota most effectively. No doubt many hon. Members will tell us today where they think the priorities lie for the next stage after we have brought the small producers back to their 1983 production patterns.

In general, tenants will have to obtain their landlords' consent. I am discussing with the NFU and the CLA the circumstances in which consent might be waived. I have taken careful note of the debate in the House on Second Reading and on Report of the Agricultural Holdings Bill, and I have sought to find ways in which we can ease the problem. I have met both the NFU and the CLA to this end. Both have expressed their agreement with the principle that the tenant should discuss with his landlord the terms on which they could agree that the application should go ahead.

We are, of course, imposing certain conditions on producers who wish to take advantage of the outgoers' scheme. Producers who receive payments under the old non-marketing schemes but later resume milk production will not be eligible, and successful applicants will not be able to re-enter milk production, because the quotas on their holdings will be cancelled, so that no milk can be sold from those holdings without liability to levy. In general, tenants will have to obtain their landlords' consent, as I have said. As I am discussing the matter with the NFU and the CLA, I hope that we can arrive at a position where it is not as difficult as my hon. Friend the hon. Member for Tiverton (Mr. Maxwell-Hyslop) suggested in our earlier debate.

As regards the cost of the scheme, we are devoting £50 million to it, at a rate of 13p per litre of quota surrendered or the equivalent of about £650 per cow for the average yield of 5,000 litres per cow. We believe that this is a reasonable incentive.

I wish to express some conclusions about the milk quota arrangements. I have described the quota system which is set out in detail in the draft regulations awaiting the approval of the House. We shall have an opportunity to debate the draft itself very shortly, but I welcome the opportunity of today's debate to go over the main issues raised by the introduction of the new system. I hope the House will agree that, although the problems in introducing a quota scheme are formidable, we have designed arrangements which are fair and practical.

A great deal of work lies ahead of us. All concerned — the agricultural Departments, the milk marketing boards, which will be undertaking much of the detailed work, the producer organisations, the tribunals and the local panels—will be fully occupied in the next few months.

I have made it clear throughout the Community that I attach great importance to the effective administration of the supplementary levy arrangements. At the Agriculture Council on 18 and 19 June in Luxembourg I stressed the need for all member states to implement the arrangements in accordance with the decisions of the Council. I said that it would not be acceptable if some producers were required to pay the levy while some member states were manifestly failing to apply the agreed rules. I am pleased to tell the House that the Agriculture Commissioner agreed with and supported my statement on that occasion.

There have been suggestions that these changes undermine agriculture. I am sure that this is quite untrue. It is necessary to deal with the frightening spiral of CAP costs by cutting common prices and taking other measures. There is no avoiding this, but, at the same time, we must be looking constructively to the future. I shall welcome dialogue with all sections of the industry on this in the immediate period ahead.

We are talking about an industry which has shown remarkable resilience and drive in the recent past. It has achieved notable increases in its productivity and improved our national self-sufficiency in temperate products by no less than 15 percentage points over the past 10 years. I am confident that the industry will adapt successfully to the new challenges of the present and of the future.

4.49 pm

Mr. Robert Hughes (Aberdeen, North)

I welcome the general nature of the debate, and I am sure that I express the views of the whole House when I welcome the opportunity to discuss the draft regulations. That is without prejudice to a full debate on those regulations once a Minister has taken the views of the House into account.

In general, the Opposition's position is best expressed in early-day motion 850, which states: That this House, whilst accepting the need for a reduction in the production of milk within the European Economic Community, deplores the disproportionate share in that reduction which the United Kingdom is having to bear, the failure to adequately protect small producers, the lack of time for producers to adjust, the confusion which has accompanied the introduction of the scheme, the inadequacy of the financial help which is being made available and the failure to accommodate many genuine cases of hardship; and asserts that the attempt to deal with the problems of the Common Agricultural Policy on a commodity by commodity basis and in terms purely of budgetary control without proper planning does not constitute that fundamental and comprehensive reform of the Policy both in its funding and methods of support without which such problems will, inevitably, continue and multiply to the disadvantage of producers and consumers alike. Up to today that early-day motion has been signed by 126 hon. Members, and I know that many others in other parts of the House wish that they were free to sign it.

In our opinion, the Minister got a bad deal in Brussels, and, within the confines of that bad deal, the Government have mishandled the application of quotas. That opinion is not confined exclusively to the Opposition. I have with me two quotations, one from a farming organisation that does not want to be named. However, the more perspicacious of Conservative Members may have an inkling as to its source. It was sent to me on 29 June. It states: The Council of Ministers introduced the present system of quotas with under two days' notice. We have been engaged in discussion with the Minister and warned of the many problems now facing us, some of which are peculiarly difficult for our country. Despite every effort being made from then onwards to work out and to administer the new system in this country, a process in which we have, of necessity, co-operated in order to protect our members, the result has been chaos. The Minister and the Government must bear full responsibility for the result of their hasty and ill-judged actions. The Farmers Guardian of 29 June stated: Without question, managing the milk industry's financial affairs at the moment is a task of fantastic difficulty. The other danger is that the board"— the Milk Marketing Board— and the union should be blamed for mistakes made by the Government itself. So let us be clear about two things: first, that it was first and foremost the Government's responsibility to consult with those who would have to make quotas work before it agreed to them and this it manifestly failed to do; and, second, that our national interpretations of quota detail have been entirely in the hands of the Ministry and it is at that door that responsibility for the present confusion must be laid … There have been few administrative blunders of this dimension in agriculture's modern history. It is clear that there is much apprehension about the way in which things have worked out. We have landed in this position because we got a bad deal in Brussels.

The deal was bad in general because the 1984 CAP guarantee fund is 7.8 per cent. higher than the 1983 revised budget. So much for the much vaunted claim about reform of the CAP. Secondly., the latest estimates are that the fund will be overspent by a further 12.9 per cent. That means that spending on agriculture support in 1984 will be 21.7 per cent. above the revised 1983 budget figure. In fact, agricultural spending continues to grow at an alarming rate.

In a written answer on 9 April, at column 78 of the Official Report, the Minister pointed out that half of the CAP expenditure in 1983 was devoted to disposal of surpluses, and, even more alarming, that this represented 34 per cent. of all EEC expenditure—much more than the social and regional funds put together. Furthermore, the milk quota scheme institutionalises surpluses for the next five years and does nothing whatever to eliminate them. The Minister might have proceeded more productively had he got a deal spread over two or three years, with larger overall cuts in EEC milk production to give people time to adjust. That would have been a much better way of proceeding than simply arriving at the present deal.

Mr. Jopling

The hon. Gentleman advances an interesting proposition. As he knows, the proposal this year is to reduce Community production from a projected 106 million tonnes to fractionally under 100 million tonnes. Where, within the next five years, does he think we ought to have taken it to below the projected figure of just under 99 million tonnes? Is he saying that we ought to have taken it right back to 86 million tonnes, which is the actual level of consumption within the Community?

Mr. Hughes

I would not go as far as cutting back to the level of self-sufficiency. There must always be some sort of reserve to deal with matters outwith our control. However, instead of arriving at a panic decision, it would have been much better had this been spread over a longer period so that people could have had more time to adjust.

The milk quota deal was particularly bad for the United Kingdom. No one can deny that, although today the Minister sought to put a gloss on it. We have accepted too high a reduction, given our position vis-a-vis other Community producers.

On self-sufficiency, I use the Minister's information. In a written answer on 4 June, at columns 71–72 of the Official Report, he pointed out that we were only 91 per cent. self-sufficient in butter fat compared with 122 per cent. in France, 126 per cent. in Germany, 206 per cent. in Ireland, 199 per cent. in Denmark and 121 per cent. in the Community as a whole. Even if one takes the figures for milk solids not fat, we are still only mid-table and fractionally above the Community average, yet our cut in production is to be greater than that of any other member state.

The French example is particularly bad, because it has been asked to take only a 2 per cent. cut this year and a 3 per cent. cut next year, although it is quite clear that the French are more self-sufficient than we are.

We are entitled to ask why the Minister conceded so much in Brussels. How did he land in that position? It is clear that he was under pressure from No. 10 Downing street to get a CAP settlement by a given deadline, otherwise the summit negotiations on our overall budget rebate could not continue. Indeed, all the other agriculture Ministers were well aware of that pressure, and used it to full advantage.

Sir Peter Mills (Torridge and Devon, West)

In order to have obtained a better deal, would the hon. Gentleman have conceded the sheepmeat and beef premiums, because that is what was at stake?

Mr. Hughes

That is not what was at stake. The hon. Gentleman ought to reflect on what he has just said. If I have misinterpreted his words, he will correct me; but he is almost saying that, in order to protect the sheepmeat and beef premiums, the Minister gave more in terms of milk. That may well be the case. In the event, despite the efforts to settle the common agricultural policy, the general budget discussion was not concluded. We had to wait until the meeting at Fontainebleau a few days ago before it was settled. Two things happened before the settlement was reached, although it was not to our advantage. First, the Government had to concede an increase in own resources of 1 to 1.4 per cent. Hardly had the ink dried on the paper when Gaston Thorn said that 1.4 per cent. was not enough and that 1.8 per cent. was needed to keep the Community solvent.

The problem for the future of agriculture and of the CAP is that such a growth in own resources will take the pressure off the move for reform of the CAP. If we do not reform it this year, we must do so in the future. We may be forced to put off consideration of other commodities until, once again, the Community runs into financial crisis, and a panic decision will be taken.

The view that that should not be allowed to happen is well summed up in the editorial of the current issue of the Country Landowner. Hon. Members know that I am totally addicted to that publication. It says: Never again must the future of a major industry be left to compromises reached at midnight by exhausted politicians trying to meet an arbitrary deadline. That is why the Minister has had trouble this year, and that is why, unless we examine the matter generally and on a long-term basis, we shall face difficulties in later years.

Coming to the draft regulations, the least uncomplimentary thing that can be said about them is that they will provide a feast for the lawyers and paradise for them in terms of interpretation. The other factor to bear in mind is that they are enabling regulations. Regulation 5.2 states: The Minister shall, by advertisement published in the Gazette and farming press, announce … the regions into which the United Kingdom is divided for the purposes of article 1(2) of Council Regulation 857/84 (which deals with regions), and … any change, in respect of any quota year, of the regions into which the United Kingdom is divided. Regulation 5(3) states: The Minister shall, in respect of each quota year, announce by advertisement published in the Gazette and the farming press — …the implementation of a formula, and … the allocation from the national wholesale quota of a regional wholesale quota. It goes on for several pages.

The first major point is that, once the regulations return to the House and have been adopted, there will not be an opportunity for further parliamentary scrutiny of the decisions. Whatever complaints people have about the regions or the quotas, it simply remains for the Minister to publish those decisions in the Gazette and farming press. We really should have proper parliamentary scrutiny.

I understand why the Minister cannot produce in the regulations any details of the formula, of the regions, or of other matters. That would mean the whole lot being produced each year. I hope that the Minister will at least consider an amendment to the regulations, so that they will state The Minister shall publish in the Gazette and fanning press details of the formula for consultation for 30 days and thereafter subject to the approval of both Houses of Parliament", or such form of words as the parliamentary draftsmen use to cover the point.

The point at issue is simple. The Secretary of State should publish his quota schemes, give 30 days' notice of consultation, and bring the final details to both Houses for approval. After that, they can be published in their final form.

The second major point that the Minister touched upon, although not satisfactorily, is that the regulations fail to cover the transfer of a producer's quota from retail or direct sales to wholesale sales, and vice versa. That issue has been raised with me in almost all representations, whether from the Aberdeen and North-East of Scotland Milk Marketing Board, the Scottish NFU, the English NFU or farmers in Wales. They have all made the same point.

The NFU, for example, is particularly concerned at the position of direct sellers. It has pressed for reasonable terms for individual quotas. It believes that the regulations will permit that. I believe that the regulations do so, although they do not recognise problems facing direct sellers who wish to increase sales to satisfy market demand. As matters now stand, individual producers cannot reduce their deliveries to the Milk Marketing Board in order to increase sales without incurring levy charges on the over quota of direct sales at the end of the milk year. The NFU considers it vital that quotas should act only as production control and that direct sellers should be able freely to interchange direct sales and wholesale quotas, always within the fixed total.

The NFU says—and the Opposition will continue to press the point—that the Government should introduce sensible arrangements to interchange the two types of quota. The NFU goes on to say that if such an interchange is not allowed, both existing and potential direct sellers would be tempted to break what they regard as a totally unacceptable restriction.

Mr. Albert McQuarrie (Banff and Buchan)

My right hon. Friend has said that the quota belongs to the land and the holding. That means that it does not belong to the individual farmer. If that is right, why is it not possible, as the hon. Gentleman is trying to illustrate, for someone with a direct or a wholesale quota to have that interchangeability? As the cow is producing a quota, which in turn is related to the land, why should it not be possible to have that necessary interchangeability, either for direct sales or wholesale to the Milk Marketing Board?

Mr. Hughes

That is exactly the point that I have put. I shall return to the question of where quotas should go, whether to the land or to the producer.

So that there is no doubt about the matter, I think that the best explanation has been given in a letter that I have received. I shall not quote from it in detail, as time is moving on rapidly. I do not wish to name the producer who wrote to me as that would be invidious. He says that he has already cut back his production by 8 to 10 per cent., so that he is within what he would expect to be his 1984 quota. He says: My real problem is I had a contract to supply local hospitals with 100 gallons daily, but I lost this contract to a big distributor on 1 April 1984. Now I am sending this milk to the Board. Therefore I am now well over my wholesale quota. The Aberdeen Milk Board informs me I cannot move milk from my retail quota to wholesale quota or vice versa. If we have to live within the confines of the MMB (which we support) we must have this crazy situation changed. To sum up, I am not alone in this situation, and we must be able to move milk from one quota to another. After all, if a distributor needs more or less milk, he could just lift his phone and say so. I do hope you can make some Civil Servant see common sense in this matter. That producer has been outbid in a contract by a bigger producer. He has been beaten by a lower price and finds that his quota has been adversely affected. That cannot be allowed to happen. The Minister knows there are many similar producers up and down the country whose circumstances are changing for some reason. The Minister might well say, as he has said today, that he is tied by the EEC regulations about the matter and that he is trying hard to resolve the problem. The Minister should have foreseen that this would happen. He should not have signed such an agreement. If he is tied to the extent that he says he is by the EEC regulations, he should get on his bike PDT) to Brussels and get it sorted out.

I turn to the issue raised by the hon. Member for Banff and Buchan (Mr. McQuarrie). Incidentally, in view of the time, I shall not give way to other hon. Members as interventions will simply prolong my speech and make it more difficult for other hon. Members to speak. Thus, I turn to the vexed question of in whom the quota should be vested. Should it be vested in the producer or the land? The NFU says that it recognises the interest of the landlord. Of course, interests vary enormously over a wade spectrum, from the landlord who invests heavily and provides the capital equipment and buildings to the tenant who invests in the equipment, and so on. The NFU firmly says that the quota should be vested in the tenant and that, if there is a dispute between the tenant and the landlord, it should be referred to arbitration in the normal way.

Not unnaturally, the Country Landowners Association adopts a different stance and believes that the landowner should have an opportunity to determine the fate of the quota on his land. So far the Minister has not made it clear that the landlord will not have a veto in this matter. I hope that the Minister will do so as such a veto would not be right.

The producer should be defined in the regulations in definite terms that are not capable of different interpretations. I think that there are about five or six pages of definitions, and the Minister should add to them the definition that the producer should be a person or persons who carry out the business of milk production. That would cover an individual farmer, a company farm, partners, or whatever.

As the Minister has pointed out, six hardship cases are set out. The first case involves a serious natural disaster affecting the producer's farm to a substantial extent. I shall not go through all the cases, because I could talk on each of them for a long time. But it is clear that the first case is the most significant. My understanding of the regulations is that that cannot possibly include weather variations. I am not talking about three months of snow. I know that the Minister said that he was looking at the matter, but, as the regulations stand, I do not see how they take care of normal, or even slightly abnormal, weather variations. A natural disaster i s quite capable of definition. As currently expressed, the provision is highly restrictive.

Farmers up and down the country, and particularly from my part of the country, say that production was down significantly in 1982, and more particularly in 1983, by 8, 9 or even 10 per cent. because of adverse weather conditions. The significance of the Minister's statement RS that he said he thought that the first case might be dealt with on the basis of a 10 or 15 per cent. reduction due to weather variations. However, that would not cover the majority of farmers who lost production in 1983. The Minister had better write 10 to 15 per cent., or some other figure, into the regulations; otherwise he will find himself in trouble in Brussels, although he will be in difficulty when someone says that he lost 9.5 or 10.5 per cent. Indeed, otherwise, the Minister will have to judge each case on its merits. That might seem to be a good idea, but, in the interests of justice, we had better try to be as clear as possible.

I have received many representations over the hardship issue, especially on the reserve of 2.5 per cent. It has been quite frankly put to me that 2.5 per cent. cannot hope to compensate all the hardship cases. It has also been pointed out that it will take at least 12 months, and possibly longer, to work through all the hardship cases.

The Minister was quick to seize on the fact that I was earlier nodding my head. He is looking for agreement and allies wherever he can find them. If I nod my head, he thinks that that is a marvellous step forward. However, I was nodding my head in agreeing with him that he cannot know how many hardship cases will apply. Thus, when he is perfectly fairly asked when he is going to resolve the hardship issues, he is bound to say that he does not know. It is not unreasonable to suggest that it will take at least 12 months to sort out and process all the hardship applications, so the Minister must take some account of how things will work.

The Country Landowners Association may find it strange that I quote it with approval, but it says: No levy should be charged on any producer who has not received a definitive statement as to his entitlement to quota. How does the Minister respond to that? Does he accept that? Will he state quite clearly that, if someone makes a hardship claim or seeks to get the quota altered, no levy will be charged until the matter is resolved?

I come to the outgoers scheme. Once again, I regret that the Minister has far too narrow a perspective in considering the problems faced by the milk industry. Nothing that the Minister has said, either inside or outside the House, takes any account of the fact that farm workers will lose their jobs as a result of the changes. Not a single word, nor penny of compensation, has been mentioned. I accept that he mentioned compensation to those whom he wants to buy out. The figure is £650 per cow per annum for as long as they stay out of the scheme — [HON.MEMBERS: "Five years".] I apologise to the House and accept the figure of five years. However, the earlier press release that the Minister sent out suggested that the compensation would go on for as long as the scheme existed. The figure of five years does not detract from the point that the Minister did not consult farm workers.

I am sure that the Minister has received a letter from Jack Boddy, the national secretary of the agricultural workers trade group of the Transport and General Workers Union, asking to meet him to discuss the problems that will face farm workers as a result of the cuts in dairy production. I hope that he is prepared to meet Jack Boddy and his colleagues and to hold a proper discussion.

One factor common to all our debates is that there has not been any mention of the problems of those who work in the creameries. Many are losing their jobs as a result of the cuts. Hardly a day goes by without a mention in the newspapers of redundancies. Indeed, today's edition of The Times mentions such redundancies. However, I am sure that one of my colleagues will dwell on that point. I have received letters and spoken to people from many creameries and they all tell me the same thing—that there will have to be staff cuts in order to cope. I do not want to be an alarmist, but the viability of some creameries will be threatened by the scheme's operation and whole creameries may close. Again, there is nothing in the Minister's statement about compensation or assistance for them. I wish that he would interpret his mandate as Minister much more widely.

The Minister appears to be extremely proud of the £50 million over five years, or £10 million a year. The truth is that that compensation is paltry when compared with what the Germans and the French are providing. The Germans are providing £25 million per annum to those who give up production. The French are providing £200 million over the next three years. Compared with that, £50 million over five years is pretty mean. Furthermore, as an illustration of the way in which the whole thing is to be carried out, the Germans are implementing quotas on a sliding scale to help small producers. I wish that the Minister had adopted that course instead of his present one.

I have put a much better scheme to the Minister. According to figures published in the annual review—the Minister's own review —there are 57,700 dairy holdings, of which 35,600, or 61 per cent., have herds of fewer than 60 cows. However, the average size herd is 59, and 69.9per cent. of cows are in herds of 60 or more. Producers with herds under 60 account for 30 per cent. of total production. Above that herd production, the distribution is different. We propose that all holdings with an annual production below 300,000 litres should be exempt from the levy, provided their production does not exceed the 1983 level, because 300,000 litres is approximately the yield of an average-sized herd.

Sir Peter Mills

What about the French?

Mr. Hughes

We are considering how the Minister applies the scheme in the United Kingdom. There is no point in evading responsibility by asking about the French. The French can apply this scheme in their way, and, provided they do it within the rules, we cannot complain about it.

No one has told me that my proposed scheme is outwith EEC rules and regulations. We have acceded to an agreement which sets a total amount of production for us. If we do not produce more than that total, we do not pay a levy. If that is the case, we can adapt the scheme to our own advantage and to the best advantage of small producers. My proposed scheme would exempt about 60 per cent. of producers. Every succeeding 200,000 litres of production above that level would attract a levy at a successively higher rate—for example, 20 per cent., 25 per cent., 30 per cent., and so on.

My scheme is simple, straightforward and easy to understand. People would know where they stood. It could be said that the problem with such a scheme is its simplicity. If I had the same back-up as the Minister—the same number of public servants—I could have come up with a more sophisticated and complex scheme. Had I done so, I would have undoubtedly landed up in the same mess and chaos as he has.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor)

The hon. Gentleman said that small producers should be exempted from the super-levy. Is he aware that that would not be permitted within the regulations? If we had sought such a scheme, it would have given greater exemptions to the French.

Mr. Hughes

The Minister has persistently sought to misrepresent the point. We are proposing that small producers in Britain should be allowed to produce up to the 1983 quota, not beyond it. If they went beyond the 1983 production level, the levy would apply. If the Minister says that he failed during negotiations to grasp the fact that the application of the scheme in the United Kingdom is outwith the regulations, he should have got the regulations right. We are not proposing to base the national quota on small producers. We accept that we have a bad deal and have taken a big cut in production, but within the present quota allocation agreed by the Minister it is perfectly possible to adapt my scheme to better effect.

The Germans are adapting their quotas to suit smaller producers. Their scheme is more complicated than the one that I suggested. If the Germans can do that, why cannot we protect our small producers?

The Minister's scheme is uncertain. He rightly said that he did not know whether its aims would succeed, because he does not know how many people will apply. Our scheme would be more certain. The Minister will not succeed, although his objectives may be laudable. Furthermore, the outgoers scheme is non-statutory. Parliament will not scrutinise the scheme, nor will its approval be sought. I hope that the Minister will be prepared to convert the scheme into a statutory scheme so that hon. Members can decide such issues in Parliament.

The acute problems raised by the reductions in milk production will be repeated and multiplied as time goes on. There must be a fundamental, comprehensive reform of the common agricultural policy. However, that is as far away as ever, and even receding further into the distance because the Prime Minister gave ground on own resources. Many more people are coming to the views that we have consistently advocated. In considering the CAP, we need to have an examination of the environment, a plan to control production, to include consumers in the consultation and to encompass wider questions of rural development.

Support has come from surprising sources, which would disavow any connection with the Labour party and would object if it were hinted that they had a taint of Socialism about them. I refer to the Country Landowner. If this goes on, I shall have to apply for a commission! The editorial in the June edition states: There is no point in defending the indefensible. The CAP is in a mess and has to be extricated. It would be absurd, however, to go about the job blindfold. The whole question of land use in the countryside is at stake… Matters of Government organisation are boring, but deficiencies in that organisation can have painful consequences. Better to put any weaknesses right before the faults claim their victims. Do the different departments with their separate responsibilities know what Government actions are going to do to the countryside and will they be ready and able to work together to handle the situation that Government itself has created? These questions require immediate consideration and urgent answers. So say all of us.

The need for a widespread, fundamental and comprehensive reform of the CAP is now well understood in many quarters. We need to consider the consumers, the farmers and those who work in the industry. We need to change the method of support. We need to control the CAP budget and to consider the overall rural environment and land use.

The Government have palpably failed on those counts. They have failed to protect British interests, and they bungled the application on the deal, to which they acceded. We shall therefore vote against the Government this evening.

5.28 pm

Mr. Edward du Cann (Taunton)

I apologise for the fact that other parliamentary engagements —long arranged—prevented my being present for all of the debate.

First, I shall follow the intervention of my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). The fact that the debate is chiefly concerned with the worrying problems of the dairy industry should not be allowed to obscure the appreciation which the agricultural industry feels for the several real successes which my right hon. Friend the Minister has achieved in his term of office. It is good that the green pound has not been revalued, that beef and sheep variable premiums have been retained, that the suckler cow premium has doubled and that support for less favoured areas has been extended. That is a substantial catalogue of successes at a time of economic difficulty, and it should be acknowleged. I am, however, at present corresponding with him about a matter of argument in Brendon hills in my constituency.

I should like to congratulate my right hon. Friend on the way in which he has withstood the barrage of criticism, which has often been unfair and frequently ill informed, with dignity and humour. My answer to what the hon. Member for Aberdeen, North (Mr. Hughes) said at the beginning of his speech is that, in my view, and I believe that of many others, the industry is fortunate to have at its head at this difficult time Ministers who are unusually sympathetic to its aspirations and knowledgeable about it.

It is true, however, that one cannot deny or disguise the fact that the new quota arrangements are a matter of anxiety for our dairy industry. In some respects, it is for the United Kingdom an unsatisfactory system for dealing with an undoubted problem m the European Community. However one looks at it, the system is arbitrary, capricious in its effect, distorts the market, and will establish a new bureaucracy and control apparatus at a time when the general thrust of Government policy is in the opposite direction. It favours the larger producer at the expense of the smaller. On that subject, incidentally, United Kingdom milk producers declined in number from some 150,000 in 1960 to 53,000 in 1983—almost 100,000 fewer. That is a shocking statistic to those of us who believe in the ever-widening diffusion of ownership.

If the outgoers scheme attracts the smaller producers, as it is designed to do, it must accelerate that trend. How many producers will there be in 1985? There will certainty be under 50,000—one third of the number of a mere 25 years ago. It is pity to see more small producers quit the industry. I should rather see Government policy working in the opposite direction.

The quota arrangements will discourage new entrants to the industry and will undoubtedly give rise to bad feeling for a long time. My right hon. Friend was correct when he said that the scheme was bound to be painful for farmers, but it is bad for Great Britain also. The quota system will assuredly discourage Great Britain' s burgeoning export efforts in dairy produce to which so much energy has lately, and in my view rightly. been devoted. News that Dairy Crest is to cut exports by some 50 per cent. to maintain milk supplies for the home market is most discouraging. We shall lose exports.

There is another unpleasant side to this unattractive coin. According to the chairman of the Milk Marketing Board, if the United Kingdom's self-sufficiency falls from 89 to 83 per cent, imports will rise by 6 per cent. To a simple chap like me, a proposal which discourages exports and encourages imports is economic madness.

Last, but by no means least, as the hon. Member for Aberdeen, North said, the quota system will cause unemployment. We have had this morning's news, and in Somerset unemployment is already happening—one or two redundancies here and there, and 50 employees went from the feed compounders, Pauls of Radstock, last week. There will be others. The knock-on effect is inevitable, and what a depressing list it is.

I do not believe that the United Kingdom should have agreed to the quota system. I am aware, of course, of the desperate need for a consensus within the European Community with all the problems of surplus, the cost of agricultural support and the like, but the pressing need to reach agreement among Ministers in the European Community — whether we discuss this matter or any other — should never have a higher priority than agreement on sensible systems.

We have a system, and the question for us today is: what should we do now? First, in the long term, I am sure that my right hon. Friend should bend all his energies and his considerable talents to reaching an agreement to scrap it, and replace it, as he proposed earlier, with the price mechanism. I hope that he will discuss that seriously during the process of the reform of the common agricultural policy. Until that time, the worst effects of the present arrangements must be mitigated. That is the duty all of us in the House of Commons must discharge towards an industry whose only crime, it appears, is that it has been too efficient, and whose reasonable aspiration was to a better share of its home market and a developing export trade. It is not —I remark in parenthesis —the only British industry to be devastated by a combination of Community and domestic state regulations. The private sector steel producers, of which I had some unhappy experience, was another.

I shall make some specific proposals to mitigate the dreadful unhappiness and uncertainty with which we are living at present. I make five points, but in no special order. Some of them have already been made by the hon. Member for Aberdeen, North. The first is that, surely, no super-levy should be collected from any farmer until all hardship and special cases have been sorted out and everyone has been given a quota; and until the Government can be certain that the system is being applied properly and fully in every other EEC country.

Secondly, I can think of a multitude of cases of hardship beyond the catalogue that my right hon. Friend described. I come to the specific point of disaster. I have made the point to my right hon. Friend and other Ministers on other occasions that for us in Somerset the weather pattern in the spring and summer of 1983 was a disaster. We had the wettest spring for over 100 years, followed immediately by the driest summer, barring one, for over a century. Such extraordinary conditions mean, as everyone knows, lower yields and lower feed production.

The production of at least 150 dairy farmers in Somerset was more than 5 per cent. down on the figure for 1981. National production increased by 8 per cent. during those two years. Therefore, those Somerset farmers are 13.4 per cent. worse off than the national average. My right hon. Friend was good enough to quote figures to us this afternoon. Surely it is reasonable that any producer who can show that his production was more than 10 per cent. out of line with the national average should be allowed to choose a different base.

Mr. Jim Spicer (Dorset, West)

Does my right hon. Friend accept that in the neighbouring county of Somerset exactly the same figures would apply for the west and other parts of Dorset?

Mr. du Cann

I accept that, and I dare say that it applies to other counties.

I hope that significant variations in weather conditions should be allowed as a criterion of treatment of hardship cases. Southern Ireland is regarded as a special case. Counties such as Somerset should also be so regarded. Milk production is every bit as economically important to us in Somerset and some other counties as it is to southern Ireland. In any case, I believe that charity begins at home.

Thirdly, direct sales quotas were mentioned by the hon. Member for Aberdeen, North. It seems extraordinary to me that the Government are seeking to impose a quota on the amount of milk which producer-retailers and processors are allowed to sell to their customers. I see no justification for that. Surely we want to encourage more sales. If we do not take care, some producer-retailer businesses will be forced to close. Some are at risk in Somerset. That will benefit no one.

Fourthly, to encourage new entrants, there should be some flexibility in the ownership and transfer of quotas. A completely free market would enable larger farmers to buy quotas at the expense of the small producer. I should not favour that. I hope that my right hon. Friend will arrange soon for quotas to be made saleable within a county or smaller area.

My fifth point is about timing. Today is 3 July. Proposals were agreed by European Community Ministers on 31 March. That is over three months ago. I regard it as intolerable that uncertainty remains. The guidance given to producers by our Ministers has been prompt and full, but the same urgency has been by no means shown by Community officials. Who do those people think they are? Who are those faceless Community bureaucrats who are responsible for the delays? What reprimands have been given to them for their dilatoriness? Has anyone been dismissed or demoted? Bearing in mind that we face other changes in the future, what have Ministers done to ensure that there will be no repetition of such delay? We must learn lessons from this unhappy experience and see that it is not repeated.

I leave my greatest anxiety until the end. I can best express it in two questions to my right hon. Friend. The first is: what will we do if the new system does not work properly? To put it another way, is my right hon. Friend certain that supply and demand will now for ever be in rough equilibrium in the European Community and, if there continues to be a surplus, what further action is proposed? I feel—I am sure that I carry right hon. and hon. Gentlemen on both sides of the House with me—that it would be unbearable if in a year or two this upheaval, all this agony, for whatever reason, proved to have been in vain. Let us never go through an experience like this again.

Secondly — perhaps not entirely relevant to the debate, but nonetheless much in everyone's mind—what other proposals does my right hon. Friend think will come out of the European Community — for example, for cereals? We all know what deputy director-general Mr. Pooley said the other day in this country. I thought that the threats he made to grain producers were intolerable. We know that we have to go through a period of reform. If there are other proposals to come for other commodities, the best service that my right hon. Friend can do agriculture is to make sure that we know about them as soon as possible. The sooner we know what they will be the better; the sooner we get rid of uncertainty the better, for uncertainty is bad for any business, and especially for farming.

I ask these questions not in any carping spirit, but out of a real anxiety for my friends and neighbours, for their standard of life and for their way of life in the county that is my home; and because I believe, and always have believed, that a thriving and prosperous countryside is an essential part of the United Kingdom's economic and social fabric. To provide it and to maintain it is a trust for us, and especially for my right hon. Friend. I hope that we shall all be worthy of it. If I may end as I began, I am sure that my right hon. Friend will be, and that is the one factor that gives me confidence at this time.

5.41 pm

Dame Judith Hart (Clydesdale)

I follow the right hon. Member for Taunton (Mr. du Cann) with some pleasure because I agree with a great deal that he has said, although I may put it a little less tactfully and with less discretion than he has done. He has spoken for Somerset, with the assistance of his hon. Friend the Member for Dorset, West (Mr. Spicer). I think we know what the Welsh farmers think about all this.

I represent a Scottish constituency in which there is a high concentration of small dairy farmers. I was approached first by my local branch of the National Farmers Union when the Minister made his arrangements within the Community, and since then I have been approached by individual small farmers.

I wish to begin by giving the picture as it effects one of the typical small dairy farmers in my constituency. I should say that in Lanarkshire—and a large part of the rural area of Lanarkshire, though not all, is in my constituency—there are 440 dairy farms. The average size, according to the local NFU, is between 150 and 200 acres. In my part of Scotland there are not many options, and farmers are growing grass. On grass, they can raise sheep and beef and dairy cattle. They cannot switch to wheat and other grains. They have a limited choice in what they can produce on what is essentially hill and marginal land. The reliance is on grass.

I should like the Minister to consider the following, as I think that it does not quite fit into his careful explanation of the outgoers' scheme. I have a constituent who farms 200 acres. He has 50 milk cows, 120 sheep and between 10 and 15 store cattle. He works the farm with his wife. They have no employed labour. He has gradually built up to the position of having 50 cows. Indeed, he did not have those when he began. At that time, he did not borrow. Now, however, he has an overdraft of £67,000, because he has been carrying out drainage and other improvements on the land. Last year he had a total income, after tax, for himself and his wife—his wife is a full-time worker on the farm, and, indeed, his young daughter helps to raise the calves — of £10,600. As his wife is a full-time worker, that means that each of them is earning less than the average industrial wage. What is he to do? If he takes advantage of the outgoers' scheme, what does he do? Does he go out of farming altogether and into the ranks of the unemployed? He has no capital, he is unskilled, and he has no qualifications to do anything else. I think that he does not quite fit the right hon. Gentleman's definition.

Mrs. Elaine Kellett-Bowman (Lancaster)

The right hon. Lady says that he is unskilled.

Dame Judith Hart

Perhaps the hon. Lady was not present when the outgoers' scheme was outlined. I said that he was unskilled in any other occupation. He is a farmer. He does not have engineering or computer qualifications. He is not qualified to go into the sunrise industries that the Prime Minister proclaims so much in Scotland. He has qualifications only for farming, which he is doing well. The hon. Lady should give me more credit than to assume that I was saying that he was unskilled at farming. He farms well.

The Minister said that "difficult decisions have to be made." I do not envy him the difficult decisions that have to be made on "how to adjust." He has "no idea how many milk producers will apply for special case treatment." It is surely not so much that he does not know how many will apply as that he has set aside a certain amount and, until he knows how many will apply, he does not know how much he can give to each one. That is the fact of the matter. He then said, "Let us go back to a free market situation." This afternoon, the right hon. Gentleman said that "agriculture can look ahead with greater certainty," and he expressed his concern for the small producers.

There are certain expressions that we are not allowed to use in the House, but when I hear the Minister speak of his concern for the small producers, greater certainty for agriculture and a free market solution, I must ask him where he thinks he stands in relation to his own Conservative philosophy of protecting the small man. We have a Government apparently dedicated to encouraging small businesses. What about small farmers? What a contradiction there is between Government policy, as it is expressed, and what he has achieved for the small business people in his own industry.

The solution is to be found not in improvements in the regulations, improvements in the quota arrangements and amelioration of the conditions that will be provided for small farmers who find themselves in difficulty, but in going back to Brussels and fighting back, and there ate ways of doing that. I have been in Brussels at meetings next door to my right hon. colleagues who were in the Council of Ministers with Sir Henry Plumb, now MEP, and I know exactly what goes on in the Council. I know perfectly well just what the French would do. What do they come away with? They come away with a percentage adjustment of less than 3 per cent. compared with ours of over 7 per cent. If the French were in our position, they would not be playing cricket, as the right hon. Gentleman is doing, at a cost to our small farmers. The French would be going back to Brussels and saying "Look, we have to face difficulties all along the line in other areas, but this we cannot accept. This has to be changed because of the effect that we find it has on our milk production."

I am afraid that the right hon. Gentleman is part of a sacrifice that was made at Fontainebleau. In those negotiations—which were supposed to be so tough, but which have turned out to be so fragile—we seem to have sacrificed the concept of total reform of the common agricultural policy to which apparently the Prime Minister was dedicated. The Minister may be part of that sacrifice. The right hon. Gentleman and his colleague the Secretary of State for Scotland must surely be ashamed of themselves when they think of what will happen to small farmers as a result of their easy acceptance of things that they should not have accepted.

The big people can look after themselves. They have enormous acreages in the better parts of the country where it is possible to switch crops. The small dairy farmers on hill farms and marginal land cannot switch out of grass, and the Minister will bear a tremendous responsibility for their fate.

Mr. Robert Maclennan (Caithness and Sutherland)

Can the right hon. Lady help the House by saying what the hon. Member for Aberdeen, North (Mr. Hughes) did not attempt to say: what kind of reform of the CAP would the Labour party seek, which would at the same time secure farming incomes?

Dame Judith Hart

My personal opinion may go a shade beyond what is in the Labour party manifesto, as I am not certain whether the reforms that I would wish to see can be achieved within the context of the Community. However, within that context, I would wish to persuade the whole Community to adopt intervention and support schemes such as we had before we entered the Community. Those schemes were infinitely more satisfactory for farmers, producers and consumers.

Like other hon. Members, I have received a brief from the Worcestershire dairy farmers. The interest in this debate extends from Somerset, Dorset, Wales, Scotland and Worcestershire to Cornwall. I should like to quote from the brief: The quota imposed is completely unacceptable. In the U.K. we should be allowed to produce the milk to make us self sufficient in all milk products"— the right hon. Gentleman's figures do not meet that point— and only when this point is reached should there be any restriction on U.K. output. I have a recent document from the National Farmers Union of Scotland which points out the knock-on effects.

The Under-Secretary of State for Scotland (Mr. John MacKay)

Will the right hon. Lady give way?

Dame Judith Hart

No, I am about to sit down.

The union points out the knock-on effects on the beef market. It states: It would be unrealistic to expect that a substantial cutback in milk production could take place without knock-on effects on the closely related beef market. We believe that the current weakness in beef prices is directly due to increased slaughterings in the dairy herd.

Mr. John MacKay

Would not the right hon. Lady accept that, unlike the NFU in England, the Scottish NFU urged the Government to try to have quotas set for milk production?

Dame Judith Hart

I am afraid that I have in my hand a copy of the brief from the Scottish NFU, which is headed Note for Meeting with Minister (copies to Milk Committee)". Its contents do not agree with what the hon. Gentleman has just said.

I apologise for taking up so much time, but I have had to deal with interventions. Does the Minister wish to intervene otherwise than from a sedentary position?

Mr. John MacKay

I am not interested in the recent document to which the right hon. Lady refers. If the right hon. Lady had been involved in Scottish farming in the period leading up to the time when decisions were taken about quotas, she would know that the Scottish NFU urged my right hon. Friends to aim for milk quotas.

Dame Judith Hart

This document is dated 11 April 1984. I will send the Minister a copy, and he may challenge me then. To the best of my knowledge, the Scottish NFU has opposed the scheme. I have written to the Minister of State in another place because my local branch of the Scottish NFU, in Biggar, is highly critical of what the right hon. Gentleman has said, which contradicts what was promised to the Scottish NFU.

We could have a long correspondence about this matter, but I will not take up the time of the House on it now. The right hon. Gentleman has done tremendous damage to people in the farming industry, upon which this country depends, and in particular to the smallest people. He has damaged his own philosophy of protecting small people, and deeply damaged the working class in farming.

5.55 pm

Sir Peter Mills (Torridge and Devon, West)

I welcome the chance to speak in this debate, which I believe—having taken part in most of them—is one of the most serious debates on agriculture that we have had for a long time.

These regulations clearly show how right my right hon. Friend was to try to achieve an end price reduction. There is no question about it. He was right, and the rest of the Community Ministers were wrong. The Community will regret the decision that has been taken.

This is a sad day for me. I heard today that 60 workers in the milk factory at Torrington have been laid off because of the reduction in the amount of butter being made. That is particularly sad because the factory is one of the largest and most modern in the country. I am very sorry for the men who have given long and devoted service there.

I do not often criticise the Milk Marketing Board, but I believe that it is highly dangerous to restrict a factory to butter production. When something like this happens, there is no other product that it can turn to. I have urged that a wide range of products should be produced at Torrington, but unfortunately that has not come about.

When we consider the regulations, we must admit that British farming is facing an entirely new situation. Farming has to adjust to being treated like other industries, and that is painful. There must be a reduction in milk production, but the method and the speed with which the Community has brought about the change is bound to result in unfairness and in many problems.

I do not blame the Ministry officials for the fact that the regulations are a jungle—they have had to conform to the legal requirements—but the Community should be condemned once more for taking action before giving any thought to what would happen as a result. It is very difficult for farmers to change and to adapt with the speed required. It is difficult for urban people to remember that it takes nine months to produce a calf and two years or more to produce a milking cow. One cannot turn the tap on and off as in other industries, or in the home.

Much is at stake for each dairy farmer—the future of the farm, the profitability of the farm, the value of the assets. That is why the regulations are so important.

I am not in favour of hurrying through the regulations. At present, not a single farmer has suffered any penalty. I hope that that will continue. There should be no deductions. We should ensure that the regulations are right. That will take time. Some hon. Members cry that the arrangemens must be made soon, so that the farmers shall know where they are. I believe that the farmers will be better off if, when they know where they are, they are in a fair situation. If the Minister will take his time, the result will be better in the long run.

I have a joke to tell about the regulations. An American attending a European Community conference wore a lapel badge bearing the letters "BAIC". On being asked what they meant, he replied, "Boy, am I confused." I and many others are confused, too, by the difficulties and complications. I wonder how many other Community countries impose such regulations on their farmers. I doubt that many do.

I repeat what has been said time after time: there must not he a single deduction from British farmers until we ascertain whether the measure is working in the Community. I am told by the Milk Marketing Board that, if the regulations are implemented as proposed, there will be a great deal of unfairness. Individual cases have been put through the computer, showing that there will be massive reductions to some farmers and large unexpected increases to others. I am told that anomalies exist. I hope to have further meetings with the MMB so that I can give my right hon. Friend more examples of the difficulties caused by the regulations in their present unfair form.

I hope that my right hon. Friend will carefully consider my strong points. The regulations contain many unfairnesses, and there should be a general clause to cover the most difficult cases. It is necessary to go beyond the guidelines to deal with the hard cases. I know that it will not be easy to include such a clause and that Ministry officials will not like it. I know that such a measure will give the Minister great power, but he will need such a clause to deal with the special cases that are not covered by any of the other regulations.

The Minister of State should make a clear statement that no dairy farmer will be penalised by more than minus 9 per cent. of his 1983 production. I hope that, in the interests of fairness and increased milk production—we should not forget that we do not want milk production to drop by too much—that will be a reality.

Many of our troubles could be overcome, especially those affecting the producer-retailer, if we did not have two types of quota—direct and wholesale. In its brief to me, the MMB makes it clear that the provision of two types of quota is likely to cause more problems than any other issue. That is true, and I hope that my right hon. Friend will turn his attention to that matter to ascertain what can be done. He may have to return to the Commission and fight the cause again. That would be in the interests of the producer.

The producer-retailer who supplies bottled milk faces a grave problem. Although most farmers produce milk for manufacturing, and therefore for butter and skimmed milk powder, and store it, thereby incurring the cost of intervention and of getting rid of the milk, the people dealing with the lakes of milk are those who are retailing it and putting it on doorsteps. On a Saturday, they may have to say, "I am sorry, but I have run out of my quota. I cannot deliver any more bottled farm milk." That is absurd, and it must be put right. There must be more flexibility. Admittedly, there is not a great deal of such milk. The way to get rid of surpluses is to encourage more people to drink milk. Some Opposition Members often ask for that to be done, and that is the solution.

The position of tenants has to be cleared up. The regulations will be a thorn in the flesh of many small farmers who are tenants of county councils. We must be clear about how the Treasury will tax farmers on the total income of £650 spread over five years which has been given to them to get out of the industry. Farmers should be able to choose. I hope that my right hon. Friend will examine that matter.

My right hon. Friend should look carefully at the proposals aimed at helping some farmers find an alternative means of production—for example. with a pure beef suckler herd as well as a dairy herd on a holding. There will be little cheating, especially now that there is a quota system. It should be possible for farmers to turn to a beef suckler system.

I doubt whether all the measures can be implemented in October. People in Europe will certainly not he ready for them. My message to my right hon. Friend is get all the groundwork done, but do nothing else until we see other countries doing something. Only then should we start to apply the penalties.

I must draw the attention of the House to the extraordinary difficulty facing the Minister and all who are concerned with the problem of surpluses. In south-west England there was a 14 per cent. drop in milk production in April, May and June, caused by a combination of dry weather and over-reaction by farmers. If the dry weather continues, a serious problem will arise.

Mr. David Harris (St. Ives)

Does my hon. Friend accept that, on top of the cut in production that he mentioned, last month — this will be repeated next month—farmers experienced a serious reduction in their income because of the seasonally adjusted scheme of the Milk Marketing Board? For many, that means a drop of more than £1,000 in the milk cheque.

Sir Peter Mills

That is true. It imposed an added burden on farmers. The farmers knew that that would happen, because there was at least a year or two's warning. Nevertheless, that does not help when one is putting the milk cheque in the bank.

I am worried about the possibility of supplies drying up. My right hon. Friend will correct me if I am wrong, but I believe that a 9 per cent. quota really means an 18 per cent. cut in the use of milk for butter and cheese. Most milk goes, as a first priority, for bottling and, therefore, doorstep selling. If that scheme continues, we may have a lot of egg on our faces because of the lack of milk for manufacturing and so on.

This is a difficult problem, but my right hon. Friend is trying desperately hard to deal with the matter. I shall certainly support him tonight and I urge my hon. Friends to do the same. However, we clearly reserve our position on what will happen between now and when the regulations return, because there must be some changes.

6.8 pm

Mr. Geraint Howells (Ceredigion and Pembroke, North)

This morning I read in one of the Welsh national papers that the president of the National Farmers Union said yesterday to the Minister of Agriculture, Fisheries and Food at the royal show that fanners were very angry about the quota system that was being imposed on them. He went on to say that he hoped the Minister during the debate today would bring forward constructive proposals to save the dairy industry from collapse. After listening to the Minister, I wonder whether he has impressed the president of the NFU and his team. I doubt very much whether he has impressed the Conservative Back Benchers. They have been very quiet. One or two Conservative Members have said that they oppose the quota system.

Like many other right hon. and hon. Members on both sides of the House, I have had the pleasure of representing a constituency for more than 10 years. I am sure that many hon. Members will recollect that the Tory Government of 1973 decided that the beef sector would survive without a guaranteed price system for the end product. In 1974 calves were being given away and best beef was being sold at extremely low prices. It was against that background that Members of all parties persuaded the then Minister of Agriculture, Fisheries and Food to introduce a variable premium scheme. I give due credit to the actions taken by the Labour Minister of Agriculture, Fisheries and Food while the 1974–9 Labour Government were in office. Of course, Lord Pearl is now in another place.

We have learnt that the agriculture industry will not survive unless we have a guaranteed price system for the end product. I agree with the hon. Member for Torridge and Devon, West (Sir P. Mills) that the way forward for the industry is not by means of a quota system for milk or any other product that comes from the land. The sooner we do away with the quota system, the better it will be.

The Government have been guilty on many occasions of introducing hasty and ill-conceived measures, but the introduction of the milk quota system is the most blatant example yet of their appalling lack of sensitivity to the plight of entire sections of society. It is proof yet again of their ignorance of the way in which the rural economy works.

I represent a rural constituency in Wales in which nearly a quarter of the work force is involved in agricultural production. Nearly 70 per cent. of the farm holdings are run by dairy farmers, who are directly affected by the new quota system. Many more of my constituents are employed in industries related to agriculture.

As I am a Welshman representing part of Dyfed, I shall confine my remarks to Wales, especially to Dyfed, as other hon. Members will confine their remarks to their own constituencies and their own countries.

The majority of the holdings in south-west Wales are small family farms with an average herd of 50 to 60 milking cows. Given the nature of the land, the climate and the market conditions prevailing in other commodities, those who are forced out of milk production will have little hope of making the grade in any other sector. If we accept the principle of a quota system for milk, the Government of the day may be forced to accept quota systems for other commodities. Therefore, the milk quota system must be rejected.

The future for the majority of farmers in Dyfed is presently bleak. There is a heavy dependence in the area on the agricultural economy, and every man, woman and child in the region can be expected to feel the effects of production cuts. Such is the concern throughout the county that on 30 May the Dyfed county council called a meeting to discuss the crisis facing the entire community and the implications of the collapse of the industry. It invited members of the National Farmers Union, the Farmers Union of Wales, the Country Landowners Association and members of the district councils. I cannot believe that the Government are aware of the real fears of the people of south-west Wales. If they are so aware, they are slow to respond.

Figures prepared by Dyfed County Council show that farmers in Dyfed will have to cut back, mainly because of the rapid expansion encouraged over recent years, up to nearly 15 per cent. on current production. This has led to a direct loss in farmers' incomes of £13 million. That loss will lead directly to job losses on farms and indirectly to job losses in related industries. We have heard only today of many redundancies in creameries throughout Wales and other parts of Britain. Other local businesses will similarly be affected as income and spending power decline severely. There will be a shedding of labour in an area in which there is already an unacceptably high level of unemployment.

We have been told today that more than 34 employees will be made redundant at the Felin-fach creamery. In Whitland, Carmarthen, another 24 will be made redundant. There will be 19 redundancies in Anglesey, and in the Maelor area of Wrexham there will be 49. About 125 full-time and part-time employees in creameries will be made redundant. The total will be 400 if we take the whole of England and Wales. It is a great pity that southwest Wales has such a high rate of unemployment.

The collapse of the economy in south-west Wales will have far-reaching effects, as the viability of many rural services is based on the farming families which populate the district. The rural shops, sub-post offices, village shops and policing and medical facilities will be under even more severe pressure. The future of the family farm is under threat, but so is the very fabric of society in the rural heart of Dyfed. This naturally includes its social and cultural traditions. Its very existence is at threat.

We are fighting for fair play, justice and a way of life. There is a sense of outrage among the farming community that they should have been so easily and complacently betrayed by the Tory Government. The sense of injustice is the stronger because of the concessions won by the Irish Government for their farmers. Our farmers have made strenuous efforts, with encouragement from the Ministry, to improve standards and increase production over the past few years. We see Governments in other parts of Europe making greater concessions to their farmers. The general background tells us that there was no need to impose quotas across the board with little or no warning. It seems that economic and social consequences were not considered.

Mr. Patrick Nicholls (Teignbridge)

The hon. Gentleman has criticised the Government for making concessions, but will he acknowledge that the package was one that had to be taken for agriculture as a whole? Good features such as the beef premium and the suckler premium were trade-offs which had to be made. Bearing in mind the constituency which the hon. Gentleman represents, it is understandable that he wants to talk about dairy farmers, but if he wants to assist the House, the country and the farmers in his constituency he must talk about the consequences for agriculture as a whole.

Mr. Howells

If the medicine is too strong for the hon. Gentleman, the best thing is for him to leave the Chamber. What I have said is the truth and the hon. Gentleman knows it. He knows that the Government have let down the dairy farmers over the past few months.

It is imperative that action is now being considered by the Government to alleviate the effects of the quota system. It is essential from the Welsh point of view that the Secretary of State for Wales takes his responsibilities seriously and responds to the representations that have been made to him by farming unions and other interested parties. I say with regret that the Secretary of State for Wales, who represents Welsh agriculture, has not been to Brussels once on behalf of Welsh farmers to take part in discussions or negotiations during the price fixing of our commodities. It is a great shame that he has not lived up to his responsibilities and has failed to look after the interests of Welsh dairy farmers.

There must be a concerted effort by the Government and their agencies to improve employment prospects in rural areas, and to make due allowance for that in their overall policy. Rural Wales needs financial aid—and without delay. Confidence in the agriculture industry is now at its lowest ebb since the war. Land values have fallen drastically. Many of my constituents are in deep despair.

The fact that the Ministers responsible for the agriculture industry did so little in Brussels to protect our interests or to seek other solutions to the problems of surpluses has destroyed the credibility of the Government. The claim of the Tory party to be a friend of the farmers in rural areas is now greeted everywhere with hollow laughter.

Let us look at a few statistics—we have not had them today. Perhaps many people who are not interested in the agriculture industry are not aware that in 1983 the dairy farmer paid a levy of approximately £18 per cow on every cow that he kept. In 1984 that levy has been increased by £11 per head to approximately £29 per cow. It is almost unbelievable—very few people are aware of it—that under the quality payments scheme, introduced on 1 April this year, the levy paid is now equivalent to £50 per cow. Based on a 40-cow herd, that levy is £2,000. So the dairy farmer is paying an extra £61 per cow this year as compared with last year. How can the dairy farmers survive with all the pressures that are on them? Via quotas and levies a dairy farmer with a 100-cow herd—I have worked it out with other farmers and with the farmers union — will make a loss of over £10,000 this year. Therefore, the position is not very good.

We have been told that the Minister has a scheme to give £50 million in financial help to dairy producers over five years, but, according to my figures, the dairy farmers in my constituency will make a loss of between £7 million and £10 million. There will not be much left for the farmers of Devon, Cornwall and Scotland once I have taken the quota of £7 million to £10 million for my Cardiganshire farmers. The sooner the Minister goes back to Brussels for more money, the better it will be for everyone concerned.

I was told yesterday that the Minister of Agriculture, Fisheries and Food will not be coming to the royal Welsh show this year. I wonder what is the reason for that decision. If he does not accept the figures that I have given, I advise and invite him to come to the royal Welsh show, and to bring with him the Secretaries of State for Wales and for Scotland. If they were to go into the members' tent they would soon find out whether dairy farmers in Wales are willing to accept the present proposals.

Farmers are not very good at dealing with figures. I make the odd mistake now and again, and I am sure that many farmers do as well. If a farmer with a 100-cow herd were by mistake to send an extra 10 gallons of milk per cow to the Milk Marketing Board—it is easy to make that simple mistake—he would have sent 1,000 gallons to the MMB. But the board would not pay a penny for those 1,000 gallons, and the poor farmer would have had to pay more than £800 for the board to collect the milk. I wonder who would get the profit from the extra 1,000 gallons sent to the board.

Like others, I have received many complaints from the producer-retailers. Many of them in various parts of Britain are worried about the draft regulations. I hope that the Minister will ensure that their future interests and the consumers' interests will be protected under the scheme that he is to introduce. Further clarification is needed to ease their worries.

There is only one way out of the dilemma. Long ago the farmers unions and others pressed the Government to accept a quota system for a short period, on one condition — that the farmers would be given three years to put their house in order. It would not have been too bad if we had been given time to adjust our system of farming.

Mr. Edward Leigh (Gainsborough and Horncastle)

Farmers in the eastern counties will be interested in the hon. Gentleman's earlier comment that he is opposed to quotas in all sectors of agricultural produce. Would he care to tell the House, for the benefit of farmers in my constituency, how he would deal with over-production in cereals? Would it be by a massive cut in the intervention price? I think that they are entitled to an answer from the official spokesman of the Liberal party.

Mr. Howells

The best advice I can give the hon. Gentleman is to wait for four years, when my colleagues will be sitting on the Government Front Bench.

Looking ahead, I suggest that there is only one way out of the difficulty. I have consulted the National Farmers Union, the Country Landowners Association, the Farmers Union of Wales, my colleagues on Dyfed county council and Ceredigion district council and others within Wales. We are all convinced that the Minister should not accept the present draft proposals. He should go back to Brussels once again—taking with him this time the Secretaries of State for Wales and for Scotland—and propose a new scheme under which dairy farmers in Britain will be adequately compensated for loss of business for the next three years. That is the only way forward. The whole package should be put back in the melting pot. We should start all over again. This time, the Government have made a bad mistake; they have made a political blunder. They are well aware of it, and all their supporters in the country are aware of it.

Mr. Nicholas Fairbairn (Perth and Kinross)

I notice that the party that is so much in favour of devolved government has not taken into account the attitude of the Scottish Farmers Union, although the hon. Gentleman mentioned it briefly. We have been in favour of a quota system from the start.

Mr. Howells

I am not disputing the hon. and learned Gentleman's statement. If that is the fact, it is a fact. I have not said a word to the contrary.

Figures produced today show that we have 144 days supply of butter in intervention stores, and that we have 692 days supply of skimmed milk powder. We are all aware that it cannot go on. [Interruption.] Wait a while. You are in government and you should have done your homework before now. [Interruption.] We all knew that this would come and I say to whoever was in charge of the marketing division in Europe, if there is one, or of the marketing division in your Government, that you should have known——

Mr. Speaker

Order. It is not my Government.

Mr. Howells

Unfortunately not, Mr. Speaker. I apologise.

Had the Government looked properly at the problems facing the dairy industry, they could have forecast the marketing system that would prevail. Do not hon. Members on both sides of the House believe as Christians that we should do something about the surpluses by selling them or giving them to the Third world? [Interruption.] Many Conservative Members disagree with that. If we believe in what we preach—that we should look after those in need throughout the world—it is our duty to reconsider the marketing system. There may be a way to dispose of our surpluses in the Community. There may be no need to turn skimmed milk into skimmed milk powder.

What is happening at present can only be described as the result of bad management, and it is costing the British taxpayer large sums of money. The Government should be ashamed of themselves. I hope that the Minister will assure the British dairy farmers that the quotas now to be proposed will not be increased in the next two years. Who knows whether the Minister will make further cuts of 10 per cent. in two or three years' time?

We on these Benches will be voting against the regulations tonight. If Conservative Members spoke their minds, they would express the same views and vote with us.

6.32 pm

Sir Hector Monro (Dumfries)

I hope that the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) will forgive me if I do not comment on his Welsh story, particularly as Scotland won a grand slam. Accordingly, I shall put Scotland first in my speech. I hope that he will also remember that we shall not be voting on any regulations tonight—this debate is taking place on the Adjournment—so he may decide to think twice about how he votes and leave any action of that sort until the regulations are published.

I congratulate the Minister and the Leader of the House on providing a whole day in which to debate this matter so that our views can be considered by the Government prior to the normal debate before the relevant provisions become law. I also congratulate my right hon. Friend the Minister on his achievement relative to a whole host of matters that are vital to farming, such as the green pound, the beef regime, the increase in the price of wool, the increase in the suckler cow premium—which I hope will be considered for extension to beef projects within dairy herds—his work for the less favoured areas, the hill compensatory allowances and what he has done in respect of interest rates and the national insurance surcharge.

I hope that in his consideration of the sheepmeat regime, which is an important aspect of farming, my right hon. Friend will remember that the great fluctuations in price this year have made marketing extremely difficult. If we can find a better system next year, with a more even level of pricing, that will be welcomed by farmers, dealers and the general public.

The price review this year has disappointed the farming community. Incomes have fallen and, with lower prices, they must fall further. It was rash of the Minister of State, Scottish Office, to have said a few weeks ago, so early in the farming year, that there would be a substantial recovery in earnings this year. I hope that he is right, but, to achieve that, there will need to be a remarkable increase in farm gate prices.

I wish to speak mainly about milk. I represent the important dairy area of Dumfries, and my hon. Friend the Member for Galloway and Upper Nithsdale (Mr. Lang) wishes to be associated with my comments. This whole issue is bound up with the manufacturing of milk products. Like all hon. Members, I am concerned to ensure that consumers have plenty of high quality milk at a reasonable cost. Consumers have been well served by the dairy industry, with milk prices rising by less than the rate of inflation. The dairy industry, with farming generally, has made an important contribution to the national economy.

I am concerned at the fall this spring in milk production, in the area of the Scottish Milk Marketing Board, by about 7 per cent. Do we have ample supplies in reserve to keep the manufacturing processes in Scotland running this year? I am equally concerned, with other hon. Members, about any drop in employment which may occur in this important industry, remembering that dairy farming often takes place in areas of high unemployment. May we be assured that the fall in milk production, coupled with the serious news today about redundancies in south-west England, will not have a dramatic impact on exports?

Every thinking milk producer anticipated reductions in output, even though White Papers over the years encouraged more production. However, it would have been foolhardy of farmers to cut production voluntarily in a period of high costs and inflation—happily, much lower now—as output was the only way by which they could maintain their profitability.

The cuts have been severe, but I have no doubt that with good husbandry and wise advice from the colleges, and from ADAS in England, the majority will overcome the setback and find a profitable way forward. We must not panic during this period of uncertainty, even if the colleges have forecast that net margins will be down by about half this year, with perhaps worse to come in 1985.

Uncertainly lies at the heart of the lack of confidence in the dairying areas. Farmers want to know why, if restrictions by quota or price were inevitable, the EEC Governments had not made preparations for that well in advance of the administrative details that were introduced in April. Contingency plans for either system should have been ready. Had they been ready, that would have helped to cushion the dramatic surprise that the announcement of the cuts had on most dairy farmers.

Meetings arranged by the Scottish Milk Marketing Board and the Scottish NFU have been of enormous help to farmers, as has been the advice of the colleges and the efforts of other boards in Scotland to provide information. Scotland has accepted that if there must be reductions in production, a quota system is the best, and the right hon. Member for Clydesdale (Dame Judith Hart) should have known better than to say otherwise.

Dame Judith Hart

I have been outside the Chamber clarifying the information that I had been given. The NFU in Scotland, at its meeting with the Minister, accepted the quota system, provided that there was equality of treatment for all nations in the EEC. As there is blatantly not, it is now hesitant about the whole thing.

Sir Hector Monro

I am glad that the right hon. Lady has at least tried to clarify what she said, and I shall not delay the House by quoting from the brief which has been provided by the NFU. It is clear that if there must be restrictions the union favours quotas, and it was a pity that, in her original remarks, the right hon. Lady got it wrong.

If we are to have a quota system, we must look after those who have not expanded, because they will be hit hardest of all. The system must be fair, and be seen to be fair, and I am glad that the Minister went further in giving explanations about the issue of self-sufficiency, bearing in mind New Zealand imports. The problem that arises time and again is the unfair position into which Ireland has got itself as a result of the scheme. The Minister should do all that he can to bring home the exact relationship between this country and others in the EEC. We need to be reassured that we are being fairly treated. The Minister has been helpful, particularly when he said that we had reached 100 per cent. self-sufficiency.

Mr. Paddy Ashdown (Yeovil)

Will the hon. Gentleman give way?

Sir Hector Monro

No, we must press on. The hon. Gentleman has his own party spokesman.

May we have an assurance that all the EEC countries will adopt similar schemes to ours and that no super levy will be paid until every EEC country is ready to do the same? I believe that no super levy should be paid until special cases are resolved, although I accept that that might take until the end of the year. The Minister must keep flexibility up his sleeve for exceptional cases of hardship that are not covered by the regulations as drafted.

I am glad that my hon. Friend the Parliamentary Under-Secretary of State for Scotland, the hon. Member for Argyll and Bute (Mr. MacKay), is on the Front Bench, because I wish to mention one or two Scottish matters. According to the letter from the Minister of State, Scottish Office, which I received on 28 June there are to be four panels of three members for the whole of Scotland. I wonder whether that is enough to get through all the paperwork quickly, because many farms will have to be visited.

The Minister's letter does not make it clear whether an appeals tribunal will be set up. It would be valuable to know whether such a tribunal is to be established. The impression is that the panels will make the decisions and that there will be no subsequent appeal. Farmers' livelihoods are at stake and, as my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) said, the value of farms and farmers' futures are also at stake.

The producer-retailers face the hardest future. On their own initiative they have built up good milk rounds, goodwill and prospects for further development. In 1983 the Scottish Office introduced compulsory pasteurisation. Producer-retailers had to buy expensive machinery to fulfil the new duty. It led to a reduction in producer-retailers to under 100. Yet that 100 in 1983 picked up all the milk sales handled by the previous 200. They need a substantially increased quota over the 1983 level if they are to remain in business and provide high quality liquid milk for consumption.

An astonishing anomaly exists in the two-quota system for producer-retailers. They have quotas for the board and quotas for direct sale. If a producer-retailer tries for a contract for 100 gallons with a hospital, or school, for instance, he may win it or lose it, but he cannot transfer from one quota to another. We are striving to increase liquid milk production, so I hope that we can find a way round the problem. It is one of the most important issues for the Minister to consider before he redrafts the regulations.

The regulations give the impression that the farming and horticulture development scheme is under discussion for 1984–85. I should like similar facilities to be available for 1985–86 and for further into the future. The matter needs clarification.

We also need clarification on the special issues relating to production on 2 April. Several tenant farmers whom I know negotiated freely with landlords last winter to take on farms at the Whit Sunday term—at the end of May. Their predecessors went out of production in February or March prior to handing over the farm. Technically there was no production on 1 April. Special regulations must be formulated so that such farmers come within the quota system at the end of May.

I advocated the outgoers' scheme when the quota system was announced. I have several matters about which I should like the Minister to think. Are farmers to be taxed on income over five years, or on capital on the original payment? Is the herd basis to be brought into operation, or will the farmer have the option between income and capital?

We must also deal with the outgoes between landlords and tenants. We must be fair to both. When a dairy farm is let and the landlord is involved in the capital provision of equipment, he has a right to know what the tenant is doing in relation to outgoes and he has a right of veto. When the farm is let on an open tenancy, for whatever type of production — arable, beef or dairy — the landlord should have no veto. I hope that arrangements can be made between the Scottish Landowners Federation and the NFU that are fair to both sides.

I support the Government motion, but I hope that note will be taken of my constructive criticisms and that better draft regulations will be presented as soon as possible. I should certainly find it difficult to support the regulations as drafted. Knowing my right hon. Friend's feeling about agriculture, I hope that he will meet the criticisms and that he will present us with better regulations in a fortnight's time.

Several Hon. Members

rose——

Mr. Speaker

I remind the House of the great pressure of time in this debate. Shorter speeches would be generally acceptable to most hon. Members.

6.47 pm

Mr. Thomas Torney (Bradford, South)

"Farmers have been led up the garden path by EEC policies." They are not my words. According to The Times this morning they are the words of the Minister of Agriculture, Fisheries and Food yesterday at the royal agricultural show. It is ironic that the Minister should at last, after all these years, come round to the fact that EEC policies lead not only farmers up the garden path, but taxpayers and many other sectors in our society.

During the referendum campaign, the Minister and I stumped the country together, but on opposite sides of the fence. Even in those days I was trying to convince him of the inadequacies of the Common Market and in particular of the disadvantages for Britain of the common agricultural policy. Now we have a glint of hope. The Minister is beginning to see the light.

Successive Governments have exhorted the farmer to increase production. That was the right policy. We had to try to be self-sufficient in food. A year or so ago I went to the Barbican for the launching of the Food from Britain campaign. Farmers, food manufacturers and all connected with food, including shopkeepers, were exhorted to improve marketing and production techniques and to produce food competitively with nations inside and outside the EEC.

The milk quota scheme must put farming back where it was before the Government started exhorting it. It must at least put the industry back where it was when I first entered the House in 1970, when it was producing but a tiny proportion of the butter that Britain required. I cannot see how the farming industry can get out of the scheme. In such a position no farmer can have any confidence to plan ahead. [Interruption.] I am asked where my farmers are. I do not have a lot of farmers, but I do have a considerable interest in the food manufacturing industries, and they affect farming. I have a few farmers, some of whom will be the hardest hit by the quota system.

The farmers on the perimeter of my constituency are producer-retailers and right hon. and hon. Members from both sides of the House have said conclusively that the producer-retailer—the small man with a few cows and a small parcel of land that cannot be converted to something else — will be hardest hit. So I say yes to that interjection from a sedentary position. I do have a few farmers and they will be the worst hit. Because of my interest in agriculture and food I have also received representations against the scheme from the Yorkshire NFU. As a Yorkshire Member of Parliament, I have a perfect right to put its case.

It is all very well for the Minister to bring his little book out and to explain to us that we are self-sufficient in this, that and the other, but I am sure that he knows full well when he is talking about reducing milk consumption that we do not have huge surpluses. They are to be found in the other EEC countries, not in Britain. I am sure that farmers, when they gather on their farms, in their local pubs or at their NFU meetings, must be asking themselves why in heaven's name Britain, which does not produce a surplus, should be called upon to cut its production. Why should we be called upon to shoulder a greater burden than, for instance, France?

Mr. Jopling

The hon. Gentleman said that we did not produce surpluses. I remind him, quoting figures of 28 June, that in the United Kingdom there were almost precisely 150,000 tonnes of butter in intervention stocks, constituting 177 days of consumption, and there were 170,000 tonnes of skimmed milk powder, representing 621 days of consumption.

Mr. Torney

The Minister can quote such figures, but the surpluses that he is talking about still do not match the surpluses that we have been hearing about; not just the recent ones on the milk quota question, but those when butter and other commodities have had to be sold to east European countries at give-away prices, subsidised by the British taxpayer. We do not produce massive surpluses. If we are in surplus at the moment, it is only temporary and, with a quota system, it will not happen again.

It is well known in farming circles and everywhere else that the United Kingdom has the facilities to implement the quota scheme if the Minister so desires, as he does. We will play cricket as it is played at the Oval and Lords. We will play properly. We will not fiddle in any way. At a meeting of the NFU at Knightsbridge only last week, a responsible executive member told the assembled company that he had just returned from France and that the French farmer did not know anything about quotas or cuts in his milk production. If the French will not cut their production, the Minister should see to it that we do not cut ours. Over the years, France has had massive surpluses. It has sold butter cheap to Russia. If France will not cut —it would not surprise me in the least if it ignored the rules and played the game its way and did not cut—what will he do about it? I challenge him to tell us. Surely we are justified in saying to him that if France does not play to the rules neither shall we. We will not see our dairy industry destroyed while the French do nothing about the quota system despite the fact that they are supposed to be as much part of the bargain as we are.

There is no policing in the EEC, and I am sure that the Minister knows that well. In Brussels recently I asked the Commission representatives a specific question about policing. I was amazed to discover that they had no system of policing at all. That related not so much to milk production as to cereals and other things. They have no system for finding out what is happening. They read newspapers to find out what is going on. To digress for a moment, feelers are being put out by the people in Brussels to discover the reaction of the Governments of member states to a quota system for cereals. There will already be a slight reduction in the price charged for cereals, but that sort of reduction will not be enough—the EEC knows that it will not be enough—to offset the massive stocks of cereals within the EEC.

I am anxious about the knock-on effect. I must declare an interest in that I am sponsored by the Union of Shop, Distributive and Allied Workers. We organise people in the creameries that were referred to by the hon. Member for Torridge and Devon, West (Sir P. Mills). We also organise workers in the milk distribution and milk processing industries. The dairy quota system will hit our members. It will probably cause far more unemployment among our members in the milk processing and delivery industries, in the creameries and butter factories, than among the workers on the farms. That is not an attack on the farm workers. It will create some unemployment among them, but at the moment more people are employed in milk manufacturing than on the farms. For that reason we shall be worst hit.

Mr. Ashdown

I am grateful to the hon. Gentleman for giving way. Such small courtesies seem more in evidence among Opposition Members than among Government supporters. The hon. Gentleman knows that I have lost 60 jobs in a creamery in my constituency only today. Does he not agree that the greatest contributing factor to the damage being done in the industry as a whole is the uncertainty surrounding the future? In the light of that, the Minister's comment that he does not even have a target in mind for when the matter shall be resolved and has not even announced when the review boards will sit will do even more damage and create even more job losses not just in farming but throughout the ancillary industries about which the hon. Gentleman spoke.

Mr. Torney

I agree entirely with the hon. Member for Yeovil (Mr. Ashdown), and I sympathise greatly with the position in which he finds himself. But that was my very point, and the hon. Gentleman's intervention is further evidence that what I say is true.

As the Minister knows, during agricultural Questions, I have attempted to question him about the knock-on effect not only on milk distributors, milk processors and butter manufacturers but also on the feed side of the industry. Considerable unemployment will result because farmers will cut down on artificial feeds to their cows. They will put them out to grass more to reduce the amount of milk given by their cows and this will affect the feed industry.

I appeal to the Minister to examine the position in these other industries and see whether the Government can come up with some aid to those industries. They must be maintained for the future. They were a vital part of the exhortation to farmers to produce more. They are a vital part of the Food from Britain campaign introduced only a short time ago. The Government should be prepared to assist them in some way to get over this very difficult period.

We have too much unemployment already. This package will, albeit in small measure, add to the terrible effect of unemployment in the United Kingdom. That alone is a good enough reason for the Government to attempt to deal with the knock-on effect on other industries tied up with farming. They are being affected already. We have heard evidence of that today, and there will be more in the weeks to come. I implore the Minister to do all that he can to help.

7.3 pm

Mr. Neil Hamilton (Tatton)

It is a great encouragement to me to know that the flagship of the Conservative Back Benches, my right hon. Friend the Member for Taunton (Mr. du Cann), is steaming in the same direction as I am. I must tell my right hon. Friend the Minister that I agree entirely with what my right hon. Friend the Member for Taunton said, especially with his five or six prescriptions for making improvements in the scheme.

I have with some difficulty ploughed through the document that we are debating. I came to the debate as a simple tax lawyer, and I had certain difficulty with the Eurospeak and the rather turgid prose. It is one of the few documents where it is necessary to read the full text to understand the explanatory memorandum.

My major criticism of the package is that we have tried to reform one sector of the common agricultural policy in isolation from the rest. In my view, this is a recipe for disaster. I know the difficulties involved, but we should have dealt with a comprehensive reform package.

I regret that the increase in own resources granted by the Government will make matters more difficult in the months and years ahead. But it has made matters more difficult for the dairy sector, which is very important in my constituency, that this sector has been taken in isolation.

Milk accounts for about 30 per cent. of expenditure on the CAP. Therefore, 70 per cent. of CAP expenditure occurs in other areas of agriculture. That being so, it is unfair that we should have singled out this one sector, In particular, it is a shame that, as soon as one begins to compare the incomes of dairy farmers with those engaged in other forms of agriculture, it becomes clear that dairy farmers should not have been singled out for first treatment.

In a written answer to a question by my hon. Friend the Member for Penrith and The Border (Mr. Maclean) on 30 March the Minister gave the figures. Taking the position seven years ago and looking at what has happenend to farm incomes in the intervening period, we see that dairy farmers' incomes are down to 65 per cent. Those of cattle and sheep producers are down to 64 per cent. By comparison with those two livestock sectors, in the cereals sector incomes are up by two thirds and in other cropping incomes are up by 230 per cent., although pig and poultry producers are down to 25 per cent. If any sector of agriculture should have been singled out, the dairy part of the industry comes fairly low down the list.

It would have been much fairer to deal with the whole of agriculture rather than with one sector in isolation, because in that way, although we could have dealt with the surpluses in milk and its associated products—and they need to be reduced—we could have brought down the costs of the dairy farmer at the same time as we brought down his income. That would have equalised the position. I know that there is a 1 per cent. reduction in cereal prices this year, but I agree with the hon. Member for Bradford, South (Mr. Torney) that that is nowhere near enough to produce any significant reduction in the amount of cereals that will be produced.

Surpluses must be cut throughout the CAP, and I applaud the desire of my right hon. Friend the Minister to rely upon the price mechanism to achieve that. However, I regret that we were about the only member state in the Community to pursue that seriously.

It may be of some comfort to my right hon. Friend to know that in my discussions with farmers, although he has been unfavourably compared with his predecessor, my righ hon. Friend the Member for Worcester (Mr. Walker), I have defended him strongly for his work over the last few months. The many benefits in other areas have been catalogued, and I shall not go into them now.

The main reason why farmers perhaps look at my right hon. Friend in a less favourable light than they did his predecessor is that the budgetary problems of the Community are much more acute than they were in previous years. He has to grasp the nettle, which his predecessors did not have to do. Therefore, I have some sympathy with him, but not too much.

The national quota that my right hon. Friend negotiated was probably the best figure that he could have got. I do not criticise him on that ground, because I know the difficulties of persuading the other member states to agree with us. It is only in fairly tales that the frogs turn into Prince Charmings. Certainly it does not happen in the Community.

We are now self-sufficient in most dairy products and in many aspects more than self-sufficient. However, the great expansion in British dairy farming has occurred mainly in the last two or three years. We are in the process of catching up, which is inevitable as a result of our late entry into the Community. Dairy farmers have been increasing production with official encouragement, up to and including recent weeks. I have a great deal of sympathy with them, because they have relied on official advice, only to find the carpet being pulled from underneath them.

Through the dairy settlement, we are institutionalising the inefficient European farms. Three quarters of British herds have 50 or more cows. In France, only 10 per cent. have 50 cows or more, and in Germany only 7 per cent., and France and Germany together are responsible for half the total milk production in the Community. The figures which will apply to the Community in future years are institutionalising inefficiency, and that is regrettable.

The most valid criticism may fall on the application of the quota in this country. United Kingdom farmers—and there are many of them—whose production has not increased since 1981 are understandably aggrieved because they feel that they have not contributed to the surpluses in the Community, yet they must reduce their incomes to pay for profligacy elsewhere. What sympathy does the Minister have for them?

One suggestion is that, instead of going for 1983 minus 9 per cent., we should have taken an average of the years 1981 to 1983. What are the arguments against that?

We are all greatly concerned whether the quota will be policed properly in other Community countries. I agree with the hon. Member for Bradford, South that it cannot be policed properly because of the high proportion of direct sales to the consumer, whereas in the United Kingdom it goes through a monopoly purchase of the Milk Marketing Board.

It will also be impossible to police because I doubt whether we have accurate figures for current production levels for individual farmers. Therefore, how can we tell whether Community farmers are keeping within the new quotas? If, at the end of the day, we decide that there is cheating elsewhere in the Community, will the British Government take unilateral action to prevent the destruction of the British dairy sector? I hope that they will.

It was Austen Chamberlain, a former Conservative Minister, of whom it was said that he played the game and always lost. I hope that it will not be said of this Conservative Government that we played the game and lost. Conservative Members who represent strong dairy constituencies will not be prepared to allow their industries to go to the wall merely to allow other member states not to abide by the letter of the law.

On special cases, the 2.5 per cent. was insufficient to accommodate many of the hard cases that will arise. I hope that that figure can be revised upwards.

My right hon. Friend the Member for Taunton said that in order to qualify as a special case some attention must be given to weather conditions last year. I reiterate that point.

I was grateful when my right hon. Friend the Minister of Agriculture said that he may be prepared to accept that anyone whose production was 10 to 15 per cent. below the average would be considered as a special case. That will not necessarily cover many of the hard cases that will arise among Cheshire farmers.

I have spoken today to a farmer constituent whose production was 9 per cent. down in 1983. As he must now reduce his quota by another 9 per cent., his production will be down by a total of 18 per cent. of what it was in a bad year. Consequently, it will be impossible for him to continue, and he will have to leave the industry.

The quota pays insufficient regard to farmers who cannot turn their land over to other forms of production —for example, those who have farms in wetter areas or where the soil is heavy and cannot be ploughed up. My hon. Friend the Member for Horsham (Mr. Hordern) has made this point in earlier debates. It will be impossible for such farmers to stay in business. Therefore, there should be a bias in the quota in favour of wetter areas or areas where the soil is difficult to till.

The speed of transition was well covered by my right hon. Friend the Member for Taunton. We have had four months of uncertainty, which is intolerable for those who must make business decisions for many months ahead. Those people were told that they would have to adjust over a weekend. The original decision was made on a Friday and was to apply from the following Monday, yet four months later we still do not have the details of the scheme. That is disgraceful.

Farmers are now faced with assets that are unsaleable and debts which are unserviceable. Therefore, they will face great difficulty when the payment of the levy comes to be made in October. I hope that my right hon. Friend will bear in mind the possibility of staggering those levy payments to help farmers with their cash-flow problems.

I have in previous months made all these points in correspondence with Ministers, and I shall not therefore detain the House for much longer. I ask the Government to listen carefully to what I and other hon. Members have said. I shall not be able to support these proposals. At present I am minded not to go into the Government Lobby, although I shall not vote against them tonight. However, when we debate the substantive proposals in a few weeks' time, and if there has been no significant improvement, I regret that, for the first time in this Parliament, I shall have to go into the Opposition Lobby.

7.15 pm

Dr. Roger Thomas (Carmarthen)

About two months before this quota agreement was clinched, the annual review showed that last year farm incomes fell by around 15 per cent. In the livestock sector the fall was even greater, so that livestock and arable farmers continued to exist in totally different economic worlds. This agreement has undermined the existence and the viability of the former even further.

Farmers, particularly those in my constituency —where there are 1,800 milk producers— feel that the changes now taking place are more complex and far reaching than any of the other changes which the industry has had to face in the last 50 years. Naturally, farmers are extremely angered that there has been no sensible transition period. Had there been a three-year period to adapt and to adjust there would have been far more cooperation and far less opposition. Unfortunately, the opposite is the case. Farmers feel that these derogatory measures have been introduced by politicians and can be answered and ameliorated only by politicians.

The whole dairy industry in my county is extremely confused, and it is no exaggeration to say that it has been whipped into turmoil. I am sure that the Secretary of State saw that for himself when he visited the small county town of Llangadog.

The industry finds itself in this ridiculous situation because of ministerial failure to understand an essentially on-farm matter. Carmarthenshire milk producers are extremely aggrieved at the co-responsibility levy, because it is only a tax on production. They feel that it should be reduced forthwith to its original level of 0.5 per cent. to finance, marketing, development and promotional programmes.

Through lack of information and directive, the part of the scheme most confusing to farmers, their agents and advisers is the quota assessment and the transfer of quotas. It will be some time before we are able to arrive at a clear objective, if that will ever be possible. People committed to new farms have no idea where they really stand, and that is especially so of the smaller farmers of Carmarthen.

What about the creameries of Carmarthen and Dyfed? In the autumn of 1983 there was the closure of a creamery at Newcastle Emlyn—one of the six creameries in the constituency—with the loss of 250 jobs. In the four constituencies which make up the new county of Dyfed, 1,250 people are now employed in these creameries. Today we have heard of the loss of 10 per cent. of those jobs — 84 full-time and 46 part-time jobs. People are now extremely concerned, because in these areas of southwest Wales there is no alternative to farming. Farmers there are being coaxed and cajoled, through an ineffective and insufficient scheme of £50 million over five years, to leave the industry, which has been part of their heritage for decades.

Most farmers will, perhaps realistically, concede that the EEC decision cannot be changed fundamentally at this stage. Indeed, the priority is to ensure that British dairy farmers will be treated fairly within the quota system and that surveillance of how other countries apply their levies and quotas will be paramount and decisive. The aim must be to keep the maximum number of producers in the industry.

For farmers in my part of south-west Wales, adaptation and versatility are words that fall on stony ground. They are both impractical and financially impossible. Warnings that a reasonable transition period was imperative are still being waved aside. Our farming unions have pressed for all they are worth the economic damage of such cuts on the rural economy, which discriminate especially against the smaller, specialist producers.

Unless there are better safeguards and conditions than are envisaged at present in parts of south-west Wales, many farmers will not survive and will be forced to capitulate. That will be tragic. The dairy industry in that area will be shattered as a result of nothing less than a major agricultural retreat. As in any retreat, the fittest will probably survive, but only by trampling upon their weaker brethren. Even at this stage, when ameliorating measures are probably flagging, measures should be introduced to help smaller producers in a practical manner, through quota reallocation and transitional compensation.

What were, and still are, needed are measures to help farmers to stay in milk production. They do not need to be given money to get out of milk production. Those measures should be coupled with special aids to assist the grassland livestock producers to keep going. There is already heavy pressure on the beef market, so what alternative is there for hard-pressed dairy specialists? Should they go in the direction of intervention stocks, which are likely to rise and which are at high levels already? No part of the agriculture industry is immune from the damaging effect of the milk quotas, which are applied so rigidly and implemented in such an arbitrary and discriminatory way.

In my opinion, the £50 million involved in the cessation scheme would have been better spent on compensating producers to continue in milk production. Let us remember that many milk producers in south-west Wales have been encouraged to expand in the past two years. Therefore, they must carry a disproportionate share of the quota burden. The Minister is probably adamant and insists upon the cessation payments, but the current scheme must be improved greatly and made comparable to those of other member states. It should not necessarily be used to prevent a producer from producing milk for ever.

It is very provocative for the Secretary of State for Wales to say that because of the success of dairy farming in Wales we are a prime cause of these restrictive measures because we are self-sufficient in butter fats and are a substantial contributor to intervention stores. Welsh farmers feel very aggrieved about that, and also about New Zealand quotas. Producers have been infuriated by the fact that the recent five-year access for New Zealand butter will be continuing at a high level. Farmers have expressed their distaste of the idea that New Zealand imports are included in the United Kingdom's figures to camouflage the real position.

We are not self-sufficient in the United Kingdom. We produce approximately 88 per cent. of our milk and milk products. That situation faces the farmers of south-west Wales. Some of the them have organised demonstrations. According to the papers, they have been rather a rowdy lot. Some of the farmers' wives have been very accurate, or inaccurate, in their use of farming missiles. But that is beside the point.

Hundreds of farmers in south-west Wales do not demonstrate or get themselves in incidents of that sort, but they have written me some passionate, sincere and very heartful letters, in which they say that unless the quota schemes are changed fundamentally they will be out of business in a comparatively short time. They will be out of business in an area which has had chronically high unemployment for many years. I appeal to the Minister, as I appeal to the Welsh Office Minister, to act and stand up for Wales in the agricultural corner. If they do not, I am sure that the farming sector in south-west Wales will remember that at the next general election.

7.27 pm

Mr. Colin Shepherd (Hereford)

I am grateful for the opportunity to participate in this important debate. I feel certain that the hon. Member for Carmarthen (Dr. Thomas) will forgive me if I do not follow him closely, but, coming from the other side of Offa's Dyke, I have a slightly different set of problems with which to deal. However, I must make it clear to my right hon. and hon. Friends the Ministers that there is no shortage of anguish and agony among the dairy producers on my side of Offa's Dyke, in the Marches.

I should like to dispense with rhetoric. I draw the attention of my right hon. Friend—I have written to him on these points—to the very sensitive and constructive contributions from Herefordshire farmers suggesting how the problem might be resolved. I know that my right hon. Friend and my hon. Friend the Minister of State have given careful consideration to and answered some of those points. I have no doubt that other replies will be forthcoming.

I was impressed by the immense wealth of wisdom that exists in the Marches of Herefordshire, and in south Worcestershire. The farmers there have suggested how to examine the problems from another direction. I shall not go into that tonight, because the significance of tonight's debate is as a breathing space within which the Minister and his team can review what has been said tonight and decide how the draft regulations might be amended before they are laid before the House as a statutory instrument.

That was a wise move. To have laid draft regulations before the House as a statutory instrument without this consultative period would have been to invite deep distrust and disturbance among Conservative Members. I know that the Opposition have been totally prejudiced from the beginning—[Interruption.] I have yet to hear anything but prejudice from Opposition Members.

Mr. Ron Davies (Caerphilly)

rose——

Mr. Shepherd

I shall not give way, because I do not want to detain the House if I can avoid it.

I must express some regret, because when, in November, I asked my hon. Friend the Minister about the self-sufficiency levels in the United Kingdom and urged him not to adopt any path that would lead to ossification or stultification of the industry, I was assured that that would not happen. At the time, I knew that my right hon. Friend the Minister and his hon. Friend the Minister of State were actively and vigorously pursuing the policy of trying to achieve a price-type settlement. However, since we now have an arrangement that will lead to ossification and stultification of the industry, we must concentrate on two things.

First, we must consider how we can make the present set of arrangements as fair and understandable as possible; and, secondly, we must consider the future. We must recognise that the Community is still 10 per cent. over production on present consumption levels, even after this reduction, and we must consider how to tackle the next stage. We can either increase sales or make a further reduction in production. The money will not flow ad infinitum. Indeed, Opposition Members and most of my hon. Friends agree that there should be control of agricultural expenditure.

I look forward to seeing how the regulations rate in the gobbledegook competition of the year. I should think that they are odds-on favourites to succeed. That is not necessarily a reflection on the parliamentary draftsman or the Minister. It is a pity that they had to be so complex. Anything with 80 definitions as well as a certain number of minor definitions beforehand is a masterpiece of the first order. It would be interesting to see how they could be streamlined and made more comprehensible. The regulations raise as many questions as they answer. The aim of today's exercise must be in part to pull out the questions so that any further points can be incorporated into the amended regulations.

I hope that my right hon. Friend the Minister will take seriously the question of amending the draft regulations in the light of this debate. During his opening remarks, I thought he indicated that that would be so. If that is his intention, I should be most grateful if he would nod his head at me, as that would be very reassuring. I see a half nod.

One of the particular problems facing the industry is the uncertainty and lack of confidence. That is reflected in a wide variety of ways. Bank managers must also be getting very bothered. It is important to do all that we can at this stage to ensure that the price of land is not undermined by any precipitate pulling out of rugs by bank managers. I hope that those bank managers who read the report of this debate will consider that point. Although times are already uncertain, anything that led to an increase in that uncertainty would not prove helpful to an industry that is having painfully to readjust itself.

Part of that lack of confidence is based on the track record of countries in the Community. It is feared that some countries might seek to circumvent the arrangements agreed in the Council of Ministers. In the past few months several cases have been quoted to me of arrangements under which national Governments have paid levies so that they did not fall on producers. I can understand producers in Britain being concerned. However, with their magnificent efficiency and effectiveness, the Ministry and the industry—which have worked very hard to produce these regulations—may be so far ahead of the game that the question of the levy comes up before other countries have got their own schemes into order. As has been said, it would be wrong to pay any levy before other countries are clear as to whether they are going to pay.

I should like to go a little further, and ask my right hon. Friend the Minister to ensure that no producer in this country parts with a penny of levy from his cash flow until such time as we can see that the other countries have got things organised. That would be a reasonable sanction. If we had to cut back production in the dairy industry because Community money had run out, the lack of levy money going back into the Community might help to concentrate the minds of the other countries and the Commission on the fact that action must be taken to maintain fairness.

There is a conflict of timing and interests. As has been said, producers are anxious about when the hardship cases and expanders will be dealt with. Indeed, the Minister has been asked to say when they will be dealt with. However, he cannot do that until the House has agreed to the statutory instrument and the necessary procedures. But, like my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills), I urge my right hon. Friend not to be in too much of a hurry to get the regulations out. It is far better to get the regulations right and understood than to bounce into play a ball that is bent, crooked or otherwise imbalanced. My message to my right hon. Friend is to take a little time getting the balance of the regulations right, despite the fact that there will be a longer period of uncertainty. At the same time, I urge him to give dairy producers the concrete assurance that they will not be asked to take a bigger cut in production than that indicated by their present provisional quota. That would enable them at least to know where they stand if they are already in production.

Mr. Robert Hughes

Does the hon. Gentleman agree that the regulations merely empower the Minister to prescribe regions and to prepare schemes, but that what we really need is parliamentary scrutiny of both the schemes and the regions?

Mr. Shepherd

I understand the hon. Gentleman's point. The value of this debate lies in the fact that such points can be made.

Given the uncertainty of the present year, may I have an assurance that, if a producer fails to make his provisional quota, he will not be penalised by anyone trying to clutch in quota from somewhere else? In the first year, no one yet knows where he stands. It is important that there should be some confidence that if, by accident, there is a fall below the level of provisional quota set, no penalty is indirectly incurred.

The producer-retailers have already been mentioned, and I shall not rehearse the arguments except to say that that important group deals with the consumption of liquid milk. It is vital that the regulations should be adjusted to enable a producer-retailer to buy from another producer with a wholesale quota on a properly accounted arrangement without necessarily going through the Milk Marketing Board, so that he can meet the sales that he has made. It would be ridiculous if a producer-retailer could not meet his milk round. It would surely be simple to make that small adjustment, which would be properly accounted for, so that nobody's quota was bent and so that the French did not drive a coach and horses through the exemptions for small producers, and so on. We could keep the provisions cast iron but make it possible for a producer-retailer to top up, and thereby encourage him to build on his success. To a certain extent, that would overcome the problem of stultification and ossification. As producer-retailers are also involved in the farmhouse cheese business, they are capable of encouraging additional consumption.

I would prefer to see no tax on the £50 million payment or £650 a cow. That would be reasonable compensation, especially in view of the small amounts in macro terms. If the Treasury is adamant——

Mr. Robin Maxwell-Hyslop (Tiverton)

No "If".

Mr. Shepherd

I have sympathy with my hon. Friend.

The scheme must make it more attractive for farmers of larger herds than for farmers of small herds to go out of production. I am anxious that the small man should not be caught in a cleft stick. We can help him best by ensuring that it is slightly more attractive for the bigger rather than for the smaller man to go out of business.

Sir Geoffrey Johnson Smith (Wealden)

Why should the payment be taxed? The compensation is exceedingly small, and could be eroded by inflation.

Mr. Shepherd

My heart goes out to that argument. I agree with it. I hope that the Treasury will hear that we would prefer not to see the payment taxed. It is a straight compensation, which will enable justice to be done within the industry.

I do not understand why there are no dairy farmers on the panels. It is not too late to change that. I cannot see how the panels can understand the nature of the industry if there are no dairy farmers on them. [Interruption.] If dairy farmers are on the panels, perhaps the Minister will put me right when he replies. I should like to see dairy farmers on the panels so that they can give their expertise to that specific provision.

In future we shall have the problem of deciding how to deal with the next 10 per cent. I make a plea to all interested organisations not to sit back and wait for the Government to do something only to complain that they have got it wrong. All sectors of the industry should put forward positive contributions and proposals, and that debate should be extended to the Community. It is not sufficient to be negative. We must make positive proposals about the way forward and bring wisdom to bear on the problem. The same problem. exists for all commodities in the temperate foodstuffs range. That is the problem facing agriculture.

I shall be delighted to support my right hon. Friend tonight. I understand that he is reviewing the draft regulations in the light of our debate. Because of my critical appraisal of the state of the industry, I shall have to consider carefully any consequences before deciding how I shall react at a later date when the regulations are again brought before the House.

7.43 pm

Miss Joan Maynard (Sheffield, Brightside)

It is clear that shock waves are going through our dairy industry. The shocks are even greater because a Tory Government have caused them, and farmers traditionally support the Tory party. The best teacher is always experience, and therefore I hope that farmers will learn from this experience.

The hon. Member for Torridge and Devon, West (Sir P. Mills) said how sad he was that certain people in his constituency had been made redundant. The Opposition appreciate his sadness, but that will not help them to find another job. He talked about the importance of planning to the agriculture industry. My father was a small farmer, so I know something about the importance of planning in agriculture and the need to have security and guarantees. That is why the Labour party introduced the 1947 legislation. We remembered the 1930s, when people were dependent on the end price, when there were more than 3 million unemployed, and when, despite the virtues of private enterprise, farmers were going bankrupt faster than anybody else. The legislation gave farmers the opportunity to plan and to know that they would sell their produce at guaranteed prices.

Britain's entry into the Common Market meant that control was taken out of Parliament's hands. My hon. Friend the Member for Bradford, South (Mr. Torney) said that farmers had been led up the garden path, and he was right.

Mr. Torney

The Minister said that.

Miss Maynard

Both of them are right. The impression was given that there was an open-ended commitment, but that was not the case. The Minister has had to face that. One of his problems in reaching a settlement was that many matters were outside his control. How many times did he say in his speech that the Common Market did not allow this or that? Hon. Members who were opposed to our joining the EC objected because we said that it would take control away from the House and the country, but that is exactly what has happened.

On all three aspects of the milk issue the Minister appears to favour the larger farmers at the expense of small dairy units, which often employ no labour, and farm workers. Many people share my view that the bigger farmers will be protected and the smaller farmers and the farm workers hardest hit. What plans does the Minister have to protect the jobs of farm workers, and what compensation does he propose to give to the unfortunate ones who will lose their jobs? I remind the Minister that farm workers have as great a stake in the industry as the farmers. They invest their labour, skill and commitment, and have as much right to consideration as anyone else in the industry. Therefore, I hope that in future the Minister will consult the union that represents farm workers as well as the union that represents farmers and landowners.

Under the outgoer scheme farmers will be given £650 per 5,000 litres over five years. It is clear that the option is unattractive for small dairy farmers, especially in areas where the scope for alternative crops is limited. Hill farmers and marginal farms will not be able to swop over to other crops and commodities. On the other hand, the larger farmers may be inclined to reduce their herds, get rid of stockmen and then claim the money. I have only one example of that, but it is an obvious loophole. It is most aggravating that money is being offered to farmers, but that no compensation will accrue to the stockmen, through whose skill the farmer qualifies in the first place.

For hardship cases, the six grounds on which a dispensation can be claimed are likely to be rigorously checked, especially when small dairy herds are involved. The fact that inclement weather was originally excluded but has now been tentatively accepted is a small sop to west country farmers, for whom 1983 was a bad year. Most of those affected were the medium-sized and small farmers.

On quotas, the 1981 level plus 1 per cent. would have helped the small dairy men more than the 1983 level minus 9 per cent., because of the allowances available within the agreement for those who have recently started production. In addition, the present confusion over the position of the producer-retailer is likely to hit the small operators hardest.

The United Kingdom Government have badly bungled what was not a brilliant agreement in the first place. It is also necessary to observe that the National Farmers Union elite are unlikely to suffer unduly. The Minister pointed out that grain quotas were unlikely to appear on the agenda next year, because of the problems of milk quotas. Milk producers who heard the right hon. Member for Worcester (Mr. Walker) when he was Minister of Agriculture, Fisheries and Food say, "Produce more," will doubtless smile wryly at that, because after milk products the costs of the grain regime are the next highest item in the CAP budget.

Mr. Nicholas Baker (Dorset, North)

The hon. Lady mentioned the effect of the regulations on west country fanners. Does she agree that if my right hon. Friend is considering including weather as a factor for special cases, he should carefully consider regions as they will be defined under the regulations? For example, Blackmore vale, which is part of Dorset, should be considered, rather than the whole of Dorset, which was not all affected by the weather in the way that she is describing.

Miss Maynard

I have no doubt that the hon. Gentleman knows more about the details of that county than I do, although I was there recently. It is a county that I like very much. I know that west country farmers would be likely to benefit most from help in relation to weather conditions. Clearly, the "barley barons", ably represented by the Minister, are unlikely to accept quotas in relation to grain as meekly as the NFU has allowed the Ministry of Agriculture, Fisheries and Food to interpret the new ground rules.

The United Kingdom is still not self-sufficient in liquid milk supplies. There are repeated stories of a rise in milk imports, particularly across the Six Counties' border. A large proportion of the surplus skimmed milk could be used as pigfeed. A great deal already is. The cardinal point is that it is nonsense and obscene to talk of "food mountains" when two thirds of the world is starving. Bad policy by the Ministry of Agriculture, endorsed by the NFU, coupled with the mean attitude of the United Kingdom Government, means that food stocks are likely to be "denatured" rather than given in emergency food aid. Vietnam is a good example. It has been asking for milk, yet we are talking about restricting output. Surely that is not the way to run our society.

There is NFU complicity and CLA duplicity in the way that the new milk regime is to be made to work. Tenant farmers will have to obtain the landlords' permission to discontinue milk production, but where is the requirement to consult farm workers whose livelihood is being destroyed? The NFU has opted for the path of least resistance, cynically noting that small dairy farmers do not count for much in NFU elections. There is an alliance of Tories, NFU and the CLA that treats consumers, workers and tenant farmers with disdain.

I thought that the Tory party was supposed to be the champion of the small business man. Why is it not helping the small dairy farmer? Does it feel that he does not count? If he is not a small business man, who is? The small farmer must be a small business man. I come from a family of small farmers. I know the long hours that they put in to make a living. If anyone should have had help, it should be the small farmers.

The people who will suffer most from this shabby deal are the farm workers, who will receive no compensation for losing their jobs as the wealth creators in our agriculture industry, and the small dairy farmers, because they are usually in areas where they cannot switch to other crops, and because they are more financially stretched.

This deal spells out the need to leave the Common Market as soon as possible, in the interests of most people in this country. I know that hon. Members have been saying today that we must work for reform. We have been working for reform for more than 13 years and have got nowhere. If I believed that we could reform the Common Market I should argue for that, but I cannot see any hope for that. I believe, therefore, that the best solution for the majority of our people is for Great Britain to leave the Common Market as soon as possible.

7.53 pm

Mrs. Elaine Kellett-Bowman (Lancaster)

Last Wednesday, as soon as the draft regulations were laid, I obtained a copy and ploughed relentlessly through them. As the House will be aware, I have been a member of the European Parliament for nine years and I am not unaccustomed to reading EEC documents. When I reached page 73 of these draft regulations, I found that they raised more questions than they answered. What, for example, will happen to the farmer who has developed since 1983 without a farm and horticultural development scheme or an agricultural or horticultural development scheme and who is now geared to producing more milk than he did in 1983?

We are all aware of cases where a man, often with family help, has worked all the hours that there are converting old buildings to modern requirements, but that effort is not reflected in any figures that an accountant or anyone else could certify. What will happen to him? He could face an enormous cut in his permitted production and be driven out of business. Although the suggestion made by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) that no producer should face a cut of more than 9 per cent. would not solve the problem of such a man, it would ease his position somewhat, and I hope that it will be accepted.

Hardship cases worry me most. There are many genuine cases of hardship that will not come remotely within the six rigid categories that have been outlined. I know of a case of two brothers who were running a small farm. It was too small to keep two families. One brother managed to obtain the tenancy of another farm and went off, with his brother's full agreement, to farm on his own. He took half the family herd with him. The brother who left home will be all right, because he will count as a "new starter". What of the brother left behind? Half his herd was not stolen. He can scarcely describe his brother as a natural disaster! Yet, at the crucial time for deciding quotas, his milk production will be down to half the normal production on that farm. What happens to him?

What happens to a man who wants to progress up the farming ladder—if such still exists—who finds another larger farm which has no quota? Can he take his quota with him and progress, or must he stay put for the rest of his life on a holding that he has outgrown? That brings us to the wholly unsatisfactory and unclear matter of who owns the quota, which the Minister discussed but did not clarify in his speech. I hope that when my hon. Friend replies he will clarify the point a little further.

Three tenant farmers came to see me the other day and pointed out that they had put up buildings at their own expense. They felt that they were entitled to sell their quotas on the lines of the Canadian scheme, or to pass them on to their sons as "tenant's fixtures". Others have pointed out that if that were allowed, the farm could be sterilised in regard to milk production, which may be the only form of husbandry for which it is suited. Where does the balance lie? The draft regulations do not tell us. I support those hon. Members who say that speed is not of the essence. Getting it right is what counts. Much more discussion is needed if unfairness and hardship are to be minimised.

The Minister has properly tried to introduce a little flexibility into the scheme to help small farmers who can least afford a cut in income by introducing his outgoers' scheme. As many hon. Members have said, it is important that such payments should be treated as redundancy payments and not taxed. Other people receive £25,000 free of tax and up to £50,000 with a minimal tax payment. All the outgoers' payments should be free of tax.

What is the time scale for hearing appeals? How can farmers conceivably plan their autumn production if they do not know whether their quota appeals will be allowed? Hon. Members on both sides of the House have acknowledged that the most complicated issue is that of producer-retailers of whom a high proportion farm in the north-west. There are nearly 1,000 in Lancashire. That is roughly one third of the total. Many have gone to a great deal of effort to persuade housewives to buy more milk. Their efforts over the past three years will be brought to nought with their frozen quota. That could spell the end of doorstep deliveries. The big five, who in the past have hesitated to withdraw deliveries from an area because, if they did, a producer-retailer might step in, may now decide that it would pay them to sell entirely through supermarkets because the housewife with no alternative source of supply would be obliged to buy there. Producer-retailers must be allowed to expand genuine sales without penalty. Moreover, if a producer-retailer loses one of his contracts to a hospital or to another retailer, as the regulations stand, he cannot put that milk in his bulk tank, although overall he is producing no more milk. This ridiculous situation must be changed.

Many farmers agreed that quotas were becoming inevitable. Whatever they felt about that, however, all are agreed on two things. The first is that in no circumstances must British farmers be asked to pay levies until machinery has been set up in the other nine member states to ensure that their farmers also pay levies. The second is that our scheme must be fair and take proper account of exceptional conditions which go well beyond the limited hardship categories so far offered.

I shall be supporting the Government on this take-note debate, but, like many of my hon. Friends who have a deep and abiding interest in agriculture, I shall expect substantial changes and much greater clarity if I am to vote for the regulations when they are laid before the House.

8 pm

Mr. James Nicholson (Newry and Armagh)

We have travelled far through the United Kingdom in the debate. We have been to Wales, to Scotland and to nearly every county and shire in England. I propose to take the House across the Irish sea to Northern Ireland, and to bring to its attention the serious problems that face Northern Ireland producers.

I have listened with interest to the speeches of hon. Members. Every hon. Member seems to have the same problem. Each hon. Member's area is more important and faces greater hardships than those of other hon. Members who have spoken. I, too, am in that position. I believe that I can prove that Northern Ireland has been treated worse than any other part of the United Kingdom.

Milk quotas in Northern Ireland for our farmers and for those involved in ancillary industries will have far-reaching consequences for the agriculture industry. Indeed, on many occasions those involved in ancillary industries have been forgotten about in this discussion, which has been going on since the early days of April. Quotas are objectionable. It seems that we shall have to learn to live with the problem for some years to come, but it is important that the rules and regulations laid before Parliament are capable of controlling and correcting the problems as they arise.

The Minister will doubtless be aware of the feelings of anger, resentment and deep frustration of the dairy farmers in Northern Ireland since the Brussels agreement, the subsequent decision on how that agreement would be implemented and the quota divided, and whether we received in full the 65,000 tonnes which we were supposed to receive.

The dairy sector of agriculture in Northern Ireland is most important. Our dependence on grass-based farming is paramount. I should like to bring to the attention of the House, as I did in the Adjournment debate on 7 June this year, the role played by the small family farms in Northern Ireland. The average herd size in Northern Ireland is 38. Sixty five per cent. of dairy herds in Northern Ireland contain fewer than 40 cows. Alternatives to dairy farming in Northern Ireland are nil. The Minister of State, Northern Ireland Office, the right hon. Member for Bosworth (Mr. Butler), told the Northern Ireland Assembly that eventually there are no alternatives for grass-based production for 90 per cent. of Northern Ireland farmers. Since the entry of the United Kingdom into the EEC we have watched the collapse of our pig and poultry sectors, and many farmers were advised at that time to develop and expand their dairy enterprises by building new silos and milking parlours. This they did effectively and efficiently, and now they find all this hard work and dedication disintegrating round them. The situation in which many farmers have been placed because of the Department's encouragement angers me most. They were encouraged to produce more and more, and to invest more and more, and many now find themselves in serious financial difficulties.

The Minister spoke yesterday about farmers being led up the garden path by the EEC. They were led up more than the European garden path; they were led up garden paths back at home as well, I hasten to add. Many young farmers who are tryng to make a start in agriculture are the hardest hit by quotas. I ask the Minister what advice I can give to such young farmers in my constituency. Northern Ireland is littered with many instances of hard cases, just as I am sure are other areas throughout the United Kingdom.

One young man, after completing his college studies, came home to the family farm. After considering the options available to him, and in consultation with Department officials, he decided to enter into a five-year programme. He entered into a scheme, built a silo and milking parlour and graduated progressively over five years to owning 40 cows. That seems a sensible course for any young man to take, as I am sure most hon. Members will agree. Having taken that responsible attitude, the young man finds himself with buildings erected, money invested and both tanks sitting in his farmyard, which the Milk Marketing Board will not install because he has no quota. The Department of Agriculture will not give him a licence because he has no bulk tank installed. He is currently milking 10 cows and disposing of the milk. Young men such as that must be given consideration. They are the future of the agriculture industry, and some hope must be held out to them if agriculture is to survive.

The information—or should I say lack of information —available to farmers since April has been deplorable. The Minister must realise that farmers cannot change their pattern of farming month by month and, at a stroke, cut back 9 per cent. or, indeed, in the case of Northern Ireland, from 2 April cut back 13 or 14 per cent.

In Northern Ireland, our reliance on milk production, our investment in the industry, our ability to conserve and utilise grass to the maximum and our inability to diversify add up to our being the hardest hit. In the long term, of course, the Minister's buy-out scheme will be of some assistance, but we must wait and see what response it receives. However, it adds no extra quota; it means only the redividing of two other farms or existing amounts available.

I am concerned that there will be further erosion of our small farms and small producers. This will be seriously detrimental to Northern Ireland and, indeed, to any region where more and more farms are being gobbled up by the larger ones.

I deal next with the draft regulations, and in particular, regulation 5(b). I welcome this regulation. It makes it clear for the first time that the quota will apply to wholesale deliveries made during the 1983 calendar year. Some hon. Members may wonder why I welcome the regulation. From Northern Ireland's point of view, it is particularly important. I find it interesting, because I have been told continuously that 1981 was the base year. Indeed, in a reply to me the right hon. Member for Bosworth stated: The allocation between the regions of the United Kingdom was initially based on 1981 levels of production, to which was added the special quota of 65,000 tonnes agreed between the EEC Agriculture Ministers. A further addition of almost the same amount was then agreed between the Ministers responsible for agriculture in the various regions of the United Kingdom."—[Official Report, 26 April 1984; Vol. 58, c. 875.] Therein lies the answer. It is that Northern Ireland received the extra quota negotiated by the Minister for us plus — with the generosity of the other parts of the United Kingdom—an extra bonus. If we had received what we should have received— the 1983 production plus 65,000 tonnes—Northern Ireland would not have needed any extra amount to be added. On 2 April the Minister said: I have obtained for Northern Ireland an additional quota of 65,000 tonnes."— [Official Report, 2 April 1984; Vol. 57, c. 661.] The Minister has not said how the distribution of quota within the regions was carried out or what method of calculation was used. We have a right to know what happened to the 65,000 tonnes obtained by him in Brussels for Northern Ireland.

The 1,321 million litres which Northern Ireland has been awarded should, on the basis of the draft regulations based on 1983, be 1,315.7 million litres, plus the special allocation of 63.1 million litres, giving Northern Ireland a total of 1,378 million litres. That figure is some 57.7 million litres greater than the figure announced by the Minister. That is the amount that Northern Ireland should have received because of the special circumstances which I outlined to the House in the Adjournment debate on 7 June.

I believe that the special quota negotiated for Northern Ireland has been hijacked from us and that we have not received the full benefit of it. I ask the Minister to clarify, once and for all, the situation of that special quota. It is not believed in Northern Ireland that it has been received. The onus is on the Minister to make the position clear.

There is no mention in the draft regulations on dairy produce quotas of the 65,000 tonnes awarded to Northern Ireland, of how that amount should be used and how it should be treated if the quantity is adjusted in future years. The situation is very unsatisfactory. I believe that the method of calculation of the regional quotas should not be left to Ministers. The allocation of Northern Ireland's special allowances and the method of allocation of those allowances within Northern Ireland, and any subsequent adjustment of the quantity, are also matters that should be covered by the legislation.

Regulation 5(9) states that if the regional wholesale quota … is increased in relation to the preceding quota year, the quantity of dairy produce so added shall create, or be added to, the running regional wholesale reserve". There are inherent contradictions between the two paragraphs involved. Paragraph 10 of the regulations states that where regional quotas is reduced reductions shall apply equally to all producers. If there is an increase in regional quota, that increased quantity should be allocated to the body of producers as an increase in their basic quota amounts.

Other hon. Members wish to speak. There are many other matters that I should have liked to deal with. The beef sector in Northern Ireland is facing difficult times because of the variable premium. Perhaps I shall have a chance at another time to discuss that and other matters. In the beef sector, clawback is having a serious effect.

To use a Northern Ireland expression, there is one matter that needles me very much. If one reads the Republic of Ireland press, one finds that farmers in the Republic are constantly told by the farming press and by Ministers to produce more milk because the Republic cannot meet the 4.5 per cent. that it has been given by Europe. Northern Ireland and other parts of the United Kingdom have been told to cut back, cut back and cut back again. It is ridiculous that the Minister should be telling farmers in the United Kingdom to cut production when farmers in the Republic are being told to produce more and more.

I hope that in the light of what has been said tonight—and I appeal to him on behalf of the dairy farmers in Northern Ireland and all the agriculture interests there—the Minister will reconsider the allocation. We do not believe that we received it. In future, the Minister must make sure that farming interests are paramount and are given the highest possible priority in negotiations.

8.17 pm

Mr. Charles Wardle (Bexhill and Battle)

I am grateful for the chance to speak in this debate, because it has a direct bearing on the livelihood of many of my constituents who farm in east Sussex and are predominantly dairy farmers.

Two or three weeks ago I hoped to speak in the debate on the arts and the heritage. I had hoped to mention the "1066 Country" initiative launched with a great spirit of enterprise in east Sussex. Because there was a long queue of senior Members who wished to participate, I did not get a hearing. That is a part of life that new Members accept and understand. Sometimes, like Gracie Fields, we take our harp to the party but nobody asks us to play. I am doubly pleased to be able to speak now on behalf of the farming community which I represent.

For some dairy farmers of east Sussex, the notion of enterprise has been pushed into the background over the past three months. The immediate preoccupation has become breaking even and survival. That preoccupation has arisen not only because of the scheduled cuts in milk production but also because of the difficulties involved in switching the basis of a business to different forms of agricultural production.

In complex negotiations at the meeting of the Council of Ministers late in March, my right hon. Friend the Minister of Agriculture played a shrewd hand on behalf of British farmers and won many advantages which were listed earlier today by my right hon. Friend the Member for Taunton (Mr. du Cann). Inevitably, however, the initial reaction to the long overdue decision to tackle the problems of the CAP has been confusion and uncertainty. What is in no doubt is that a remedy must be found for the worst excesses of CAP spending on unwanted food surpluses. We need a system of reducing production in an orderly fashion without making casualties out of thoroughly efficient specialist dairy farmers. I am sure that my right hon. Friend and most farmers would agree about that, and that is why the Government have rightly placed the emphasis on the outgoers scheme and on the room for manoeuvre in special cases.

In Sussex and parts of Kent, however, both those measures should be carefully considered in the context of local farming conditions. In a reply to my hon. Friend the Member for Horsham (Mr. Hordern) in an Adjournment debate on 18 May, my hon. Friend the Parliamentary Secretary referred to a report by the agricultural development and advisory service of January 1983 entitled The Weald—Problems and Opportunities". That report makes it clear that alternatives to dairy production in the Weald are not promising. On page 1 we read: Dairy … performance appears as good as in other areas. This is not the case with cereals, beef and sheep. All farm types show much higher financing charges. This reduces dairy profit and gives low profits from other enterprises. The report continues: Cereal yields are generally lower than the regional average due mainly to soil structure and drainage problems. The report took a pessimistic view of horticulture. It stated that only about 10 per cent. of full-time holdings rely on beef cattle and sheep. The report stated emphatically that dairying is still the best option for many Weald and grass farmers.

What happens to the farmer in the Weald. who, nevertheless, opts for the outgoers' scheme? I shall use a hypothetical, but typical, example of a tenant farmer who purchases 40 Friesian cows with the aid of a bank loan to build up his herd. Let us assume that he purchases those cows at £600 each. He will owe the bank £24,000. It is a fair assumption that he will have spent money on his milking parlour, dairying equipment and so on, bringing his total loan from the bank to £40,000 or considerably more. Like everyone else, that farmer will be paid £650 over five years per 5,000 litres. Let us assume a yield of 5,300 litres per cow, so that his compensation will be roughly £5,500 each year for five years.

If that farmer sells his cows as part of this scheme, they are likely to fetch on the present market no more than £400 each, and if he postpones the sale until after September, when consideration of feed content over grass comes into play, he will receive less. He might receive £16,000 lo repay his loan. The tenant farmer has a high rent to pay for his highly desirable Sussex property, has to find working capital for his new, non-daily farming venture and still has £24,000 outstanding on a capital loan in respect of a business he has dropped and for which he can offer no security to the bank manager.

Mr. Maxwell-Hyslop

My hon. Friend is using a tenant farmer as an example, but he has forgotten to say that that farmer cannot receive even a halfpenny of that compensation if his landlord does not agree with him going into the scheme.

Mr. Wardle

I was going to make that point later. I simply wanted to illustrate the arithmetic and get rid of it, and I have nearly done that.

I have also left out taxation for the purposes of this illustration. Let us assume that that tenant farmer receives £5,500 gross, whatever his status as a fanner. In the first year under that scheme he will be paying £3,000 in interest alone. One solution to his problem would be to allow more of the outgoers' compensation to be paid at the outset, instead of in equal instalments over five years, on condition that it is applied to the repayment of the certified bank loan that had been raised to finance the original dairy business

I hope that my right hon. Friend the Minister will consider the merits of such a change in the regulations. I hope also that, if a farmer decides to continue in dairy production instead of taking the outgoers' route, my right hon. Friend will interpret the rules for the special case arrangements as constructively as possible—or should I say, as flexibly as possible with particular regard to the main category of cases comprising those producers committed to significant capital investment, leading to increased milk output on their holding. I hope that, even when the farmer is not the beneficiary of an approved development grant but has the use of a bank loan to allow expansion of his home, his loan will be taken into account, as my right hon. Friend implied might be the case.

Whether farmers concentrate on the outgoers' scheme or on an application for consideration as special cases, the central and pressing consideration is one that is basic to any business—cash flow. Nowhere is cash flow more crucial than in the proposed timing of the super-levy collection. That point has been made by many hon. Members on both sides of the House. I cannot see much sense in collecting a levy based on total annual production quotas on a quarterly or half-yearly basis. I am worried that somehow we shall adopt a PAYE approach to the regulations while our European partners are looking at it on the basis of the never-never. It stands to reason that I share the view expressed on both sides of the House that control of the scheme in other countries is vital to the morale and long-term well-being of our farmers.

Dairy production may well account for 3.5 per cent. of gross domestic product in the Republic of Ireland, but the proportion of GDP taken up by dairy farming in farming villages — there are many in my constituency — is virtually 100 per cent. That means that there simply is nothing else.

There is a need for a long-term plan. Although there will be substantial savings in 1984 from the introduction of milk quotas, the supplementary levy and the reduction in common prices, the full savings from those measures will be seen only from 1985. That fact, together with the carry-over of a large proportion 1983 capital expenditure into 1984, means that, at the end of this year, either the CAP budget of 16.5 billion ecu will be overrun or member countries will resort to buying into intervention with their own money with the aim of collecting compensation from CAP next year, which will, of course, cause an imbalance to the 1985 budget. It is a safe bet, therefore, that further cuts in other forms of agricultural production will be needed sooner rather than later. Following that will be the question of how to deal with the £2 billion per year still being spent on surplus milk production.

Those factors give urgency to the need for an overall policy directive, outlining the scale of the changes that are probably still to come and inviting farmers to consider the ways in which they can adapt competitively to tomorrow's market place. I hope that that is a point that my right hon. Friend will consider, with the object of reducing the present inevitable confusion and strengthening the resolve for overhauling the CAP.

8.27 pm

Mr. D. E. Thomas (Meirionnydd Nant Conwy)

I shall follow only one point made by the hon. Member for Bexhill and Battle (Mr. Wardle). He issued an important warning to the Government about the operation of the quota system. Already a number of agricultural economists are saying that the present volume of 99 million tonnes of milk on quota is substantially greater than the 87 million tonnes produced in the Community. I am worried that we are introducing a quota system which will prove ineffective in its overall objective of curtailing milk production but prove super-effective in the way in which it undermines the livelihood of farmers and of farm, agricultural and manufacturing industry workers who are involved with milk production in many regions, especially in Wales.

I agree with the statements made by the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) and the hon. Member for Carmarthen (Dr. Thomas). The Government must face up to a serious problem. The Minister of State told the House that he preferred a price reduction. Is the right hon. Gentleman seriously saying that the 12 per cent. reduction demanded by the Commission or the 20 per cent. reduction that was proposed by some agricultural economists would have been acceptable to milk producers?

The quota system, whether operated according to production or to a substantial reduction in the pricing system, is a direct result of the CAP system. Our system encourages high institutional pricing for farmers, which is passed on to the consumers, and unlimited intervention. That system still applies, because the quota scheme is not a reform of CAP. It means a limitation in production within which the CAP system remains intact. That leads to the type of over-production and quota system at the European level which the Government have accepted. The EEC has told us that it looked at the Canadian system, which is more flexible and provides for compensation through a pricing and direct subsidy system. Clearly that is not possible in the EEC context.

The Minister of State cannot get away with telling the House that he favours a price reduction system unless he realises that that price system might have the same disastrous consequences as the CAP system is having.

It has already been stressed that the dairy industry is the largest sector of Welsh agriculture. It represents 65 per cent. of Welsh farm output and production worth £200 million a year. Given the present agitation in Wales, it is important to stress that our debates in this place do not reflect the extent of feeling and concern about the interests of dairy farmers. That is normally so, unless an hon. Member has experienced the personal anger of farmers in Dyfed. The Secretary of State for Wales has made visits to the area and he has made the same speeches when talking about the miners as he has when talking about farmers. He uses exactly the same words and it is not surprising that Dyfed farmers are sending their milk to striking miners. That shows the depth of feeling on the issue throughout the agricultural areas of Wales.

We have heard this morning's news that the quota system is already operating. The amount of milk going into the creameries has already been reduced. It has fallen by 15 per cent. already in the Welsh creameries and it seems that there will be a reduction of up to 20 per cent. by March 1985. We have heard that there will be 125 redundancies at Felin-fach, Maelor and Whitland. Further redundancies are likely among transport drivers. That is the direct result of the way in which the quota system is operating.

Some Conservative Members, including the hon. Member for Clwyd, South-West (Mr. Harvey), have been quoted in the press as viewing the announcement of redundancies with deep concern. We shall read the Division lists with interest to learn whether the hon. Gentleman voted with the Government tonight. In agricultural debates there is often cross-party agreement between Opposition Members and Conservatives Members who are critical of the Government, but there is now an unwillingness on the part of Conservative critics to stand up and be counted. I urge Conservative Members to take seriously the criticisms that have been levelled at them by the farming community, who allege that they are trying to have their milk and drink it. They tell us that they are critical of the Government's policy but they are not prepared to abstain or to vote against the Government following debates of this sort.

Dyfed is a good example of the regional effect—I am glad to see that the Secretary of State for Wales has joined us — of the quota imposition. It has had an especially harsh effect in Dyfed. I agree with the hon. Member for Newry and Armagh (Mr. Nicholson), who stressed the differential between the support available in the Republic of Ireland and the lack of support in the United Kingdom. The dairy farmers in the Republic will be able to increase their output by 4 to 5 per cent. but there will be a decrease in production of between 4 and 5 per cent. in Northern Ireland and Dyfed. The arguments that were deployed effectively in the ministerial negotiations by the Republic of Ireland about the essential role played in its economy by the dairy industry apply with equal force to areas of Northern Ireland and areas such as Dyfed.

The situation is so serious in Dyfed that there could be a contraction of the milk manufacturing industry, which is so crucial to the area, leading to the loss of 1,200 jobs. A contraction of that order could lead to the Republic of Ireland and its manufacturers taking advantage of Dyfed. They could well set up manufacturing plants in Dyfed as they have in the beef industry in the north of Ireland.

I warn the Minister of that likely consequence, not because I am jealous of the enterprise of the Republic of Ireland or the ability of its ministerial team to get various concessions but because I am concerned about the differential in the treatment of the republic when contrasted with that of Wales. Dyfed county council has produced a major report on the effects of the milk quota scheme on Dyfed. The cut in production in Dyfed will be between 12 per cent. and 17 per cent. because of the rapid expansion in previous years. That will produce a direct loss to the local economy of about £30 million. The capacity of Dyfed's five creameries is rising to 4.42 million litres with the upgrading of Whitland. There will be an excess capacity for production of 1 million litres a day in the use of milk in Dyfed and this will have major implications for the creameries.

The Secretary of State is aware that I know the area fairly well and that I am aware also of the consequences of the closure of the Newcastle Emlyn Creamery. That knowledge forces me to say that there will be severe economic consequences for the rest of Dyfed's economy. If farm workers are caused to be unemployed and if farmers go out of business, there will be severe consequences for the 1,200 who are employed in creameries and for the 250 or so who are employed in the agricultural feed business. The consequences of the scheme will have a multiplier effect in Dyfed.

The Secretary of State should have been well aware of the consequences for Wales of operating a scheme that would bring about reduced production of milk. I have argued that the scheme will not be effective overall, but the Secretary of State for Wales should have secured a deal to ensure that the regional consequences of sectoral decisions would be reduced in their impact on the economy of areas such as Dyfed. As long as we remain in a common agricultural policy which operates in an open-ended way towards the reduction of production, there will be moves further to reduce production levels and to introduce further quotas. In France, for example, there are differential quota systems within the less favoured areas. We should have considered ways in which a United Kingdom quota system could have been introduced more fairly to ensure that local economies that are dependent on the dairy sector, such as that of Dyfed, do not face such appalling consequences. The manufacturing industry and those who use milk as a raw material could have been protected far more effectively. There is anger that the Secretary of State for Wales, a Dyfed Member, who is responsible for agriculture in Wales, was not able to obtain that protection for the region. I am certain that that anger will be reflected in the forthcoming Carmarthen by-election.

8.37 pm

Mr. Gerrard Neale (Cornwall, North)

I am grateful to you, Mr. Deputy Speaker, for calling me to contribute to the debate. I am aware that other hon. Members wish to speak and I shall try to keep my remarks as brief as possible. I shall address myself mainly to milk, but I wish to be associated with the remarks of my hon. Friend the Member for Dumfries (Sir H. Monro), who listed the benefits that my right hon. Friend the Minister of Agriculture, Fisheries and Food has been able to obtain for the agriculture industry in the recent negotiations in Brussels.

It is tempting, even at this stage of the debate, to rehearse in detail the arguments that have been advanced by others. However, I shall resist doing so.

I wish to be associated with many of the comments of my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). Many in the farming community of Cornwall, North are grateful to him for the enormous amount of work that he undertakes on behalf of the west country's farming community. He outlined ably the producer-retailer argument and the desperate need to ensure that there is a minimum cut in production in all cases. He touched on the deep concern that is felt in my area about retaining every form of dairy production that goes straight to the consumer. I have redundancy problems in my constituency similar to those that he addressed to my right hon. Friend. I also share my hon. Friend's concern about the drop in milk production that we have seen recently in the west country. There is real concern in Cornwall about the differential between Ireland and the United Kingdom. It is strongly felt that we have not safeguarded our own position sufficiently and that it could give rise to considerable anomalies.

It is tempting to limit one's remarks to one's own area, but in an area such as mine and that of my hon. Friend the Member for Torridge and Devon, West we find more or less every possible example of farms which could be affected by the regulations. I know that my hon. Friend the Member for Penrith and The Border (Mr. Maclean) could speak of similar instances.

In the formative stage of the negotiations, the farmers were waiting for the change. They knew that there must be change and they were ready to accept it, as my hon. Friend the Member for Hereford (Mr. Shepherd) said. They were coming forward with all sorts of constructive suggestions. The two main things for which they were asking were clarity as to what the Government expected of them in the future, and to be given a little time in which to put the changes into effect. They said that if those two conditions were met they would co-operate with the change.

In his opening speech my right hon. Friend clarified several points. He said that at various stages detailed letters had been sent to milk producers. There is no doubt about that. I have also no doubt that in that respect my right hon. Friend has done more than his colleagues in the other Community countries. However, there is one aspect that I have found depressing. My right hon. Friend has been to my constituency and helped me on several occasions. I know his commitment to farming and the amount of energy that he has applied—and continues to apply—to resolving its problems. But, unfortunately, there is a considerable lack of awareness in the dairy community of how much my right hon. Friend does and cares, and of his determination to do something about the problem. I have to tell my right hon. Friend that it arises in no small measure from the fact that when individual cases have been put to his Department—where farmers have been petrified by the threats to their livelihood as they imagine them to be—there has been no clear indication as to how they as individuals stand.

In a situation in which there are so many different cases and different sets of circumstances affecting different farmers, large and small, there has been no proper access to the sort of advice that should have been forthcoming. Dairy farmers have not been able to get the necessary details from local offices of MAFF, where they are usually told that the matter is still being sorted out centrally.

I should like to mention the case of a Mr. Rackham from a village called Lanivet. He purchased a farm at an auction prior to the announcement of any quotas. There was a Milk Marketing Board guarantee that he would get his certification, and he duly obtained it. Obviously, there was no stock on the farm, because he had only just purchased it. In addition, the previous owner, who had been ill, had run down the herd to about nine cows. When the new owner had his certification guaranteed and confirmed, he was then told by the MMB that he was unlikely to obtain any quota whatever. Having bought the farm and incurred a considerable overdraft, he has had no indication whatever from the local office of MAFF as to where he stands. I have to tell my right hon. Friend that I have still not yet had a detailed reply from the Ministry.

I feel very strongly that my right hon. Friend should consider setting up an advice centre within the Ministry so that people can telephone and get advice or comment on their cases. My right hon. Friend may say, "How can I face that sort of prospect with the number of dairy farmers that there are?" It is interesting to note that similar arrangements have been made by the National Coal Board in the present difficulties.

I submit to my right hon. Friend that when people understand the truth, when they know how much he is doing, and understand something of the complexities of the argument, they are remarkably understanding. It is because they cannot get the feeling that their own problems are being addressed that they lose patience and tolerance.

With regard to timing, from hon. Members on each side of the House we have had questions concerning the payment of compensation for going out of milk production. There have been doubts about eligibility to claim compensation and with regard to tax. There have been doubts as to who is the owner of the quota. I think my right hon. Friend's words were that the ownership would attach to the holding for the use of the occupier. I can envisage all sorts of questions arising from that definition.

Doubts have also been expressed as to the definition of hardship cases. My hon. Friend the Member for Torridge and Devon, West mentioned several points in that connection with which I should like to be associated.

Several right and hon. Members have expressed grave concern about the fact that other EC countries so far appear to be well behind us in the detailed application of the regulations. As my hon. Friend the Member for Torridge and Devon, West said, it is essential that we should not rush the regulations, but should make sure first that we get them absolutely right. At the same time, I urge my right hon. Friend to give the House an undertaking that he will not enforce any of the penalties until all the detailed and highly complex points have been resolved. As several hon. Members have said, as long as doubts prevail within the industry it is utterly impossible for anybody to plan. It is also impossible for bank managers and others to advise farmers on how to cope with the situation.

Therefore, with regard to timing, I ask my right hon. Friend to wait until he has all the details clarified before enforcing any of the penalties. He should also wait until he is certain that other EC countries are ready to apply equal measures of restraint.

8.48 pm

Mr. Gavin Strang (Edinburgh, East)

The House has listened with interest to the speech of the hon. Member for Cornwall, North (Mr. Neale). No matter how energetic and active the Minister is in dealing with the issues before him, ultimately he will be judged, as he should be judged —and as previous Ministers have been judged—on the results of his policies. The reality is that the results of his policies are serious and depressing for the dairy industry.

In listening to the debate I could not help think of the occasions when I had the privilege, as Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food in the last Labour Government, to represent Britain in the Council of Agriculture Ministers, often with my right hon. Friend the Member for Lewisham, Deptford (Mr. Silkin). I remember, year in and year out, drawing attention to the huge surpluses and to the grotesque cost, particularly of the milk sector of the CAP. I recall that regularly the agricultural price fixing was settled in the early hours of the morning. During breaks in the meetings one would hear the words, "Yes, we must do something about this," but nothing was done. The Labour Government, and the Conservative Government who followed them, were basically committed to the reform of the CAP, but I do not think that we can regard ourselves as blameless.

In a sense, the then Labour Government were committed to the reform of the CAP. Indeed, they achieved some modest changes, such as the introduction of the variable premium, but unfortunately we were prepared to be fobbed off with concessions, such as the butter subsidy. Perhaps if we had stuck to our guns we might have got there in the end, but we never really dug in for decisive changes in the CAP.

The same applies, though with even greater strength, to the present Conservative Government, because, rightly or wrongly — time does not permit me to argue the merits of the case—they have focused their whole effort of late in the EEC on reducing Britain's net budget contribution. The situation has gone on and on, year after year, and we have a grotesque waste of resources with a huge and costly surplus policy of reduction, particularly in the milk sector.

We must not kid ourselves into believing that what is now being implemented has anything to do with the reform of the CAP. In no way can the quotas be described as reforms. Indeed, they are a negation of a common policy because they impose a straitjacket on producers. Successive Governments, particularly the last Labour Government, of which I had the honour to be a member, have been firmly committed to the expansion of the British dairy industry. We in the then Labour Government did not see that as being inconsistent with the need to tackle the CAP. We argued, I believe rightly, that if we could win a greater share of total Community milk production, that would be good for Britain and our dairy industry, consistent with reforming the CAP, with freezing prices, reducing production and the rest.

This morning I was re-reading the second of the White Papers which the last Labour Government published on their agricultural policy. Entitled, "Farming and the Nation", it said—we believed that it was in the national interest to expand the milk sector — in the section dealing with milk: The Government will maintain their pressure for sensible Community milk production. An effective common agricultural policy should encourage specialisation of production in the areas best fitted for it. In view of its natural advantages, better industrial structure, and marketing arrangements designed to sustain a high level of demand, the home industry should be in a position to produce a greater proportion of Community milk supplies and so to provide a bigger share of the United Kingdom demand for milk and milk products from home production. That was written in February 1979, just before the end of the last Labour Government. That policy was continued by the incoming Conservative Government, and it has been our policy to encourage British producers to produce more milk. That is what we should have been doing, because that policy has been in the national interest. After all, by producing more milk, we are providing employment in important areas and at the same time meeting the needs of the people.

It is tragic to think that in this debate we are discussing the reversal of that policy without achieving any reform of or improvement in the CAP. It is already clear that Britain's dairy industry will suffer disproportionately as a consequence of these policies. I am not suggesting that they do not hit the German and Dutch industries hard, but the British industry will suffer disproportionately. Compared with France and Ireland, our two most immediate competitors, our industry will really be screwed down.

Proof of that is already becoming available. A report in today's Financial Times quotes statistics from the Commission in Brussels and statistics collected by German farmers showing the disproportionate cuts in United Kingdom milk production. Also in the Financial Times this morning is news of 400 jobs at the Dairycrest company being destroyed. We are talking about the destruction, not of hundreds, but of thousands of jobs taking into account the farmers, farm workers, dairy men, transport workers and the general decline in the level of demand as a result of the cuts and consequent unemployment.

The Minister was wrong to agree to a policy of quotas. We should have gone down the road of holding prices and having cuts in prices. We could have argued about what level of cuts there should have been, or what freeze might have taken place on prices. The worst of all worlds is a policy which screws our industry but which does not achieve any real improvements in the CAP. Unfortunately, that is the road down which we are going.

Mr. Maxwell-Hyslop

rose——

Mr. Strang

I shall not give way, because other hon. Members wish to speak and I am about to conclude my remarks.

If we find that not only does the quota system hit our dairy farmers more than others in the EEC but that those others, such as the French, hardly apply the system, the whole thing will not be on, and the sooner the Government recognise that the better.

I do not doubt the Minister's good faith. I am sure that, as he said, he raised the matter with the Agriculture Commissioner in no uncertain terms, but we have been here before. We have seen how some other member Governments manage to avoid implementing measures such as this, even though they are good at talking about them in Brussels. The Minister must accept that he is on trial, as it were, and that we are not prepared to accept the implementation of quotas if to do so means Britain making disproportionate cuts in its dairy industry.

8.56 pm

Mr. George Walden (Buckingham)

There can be no doubt that Britain's dairy farmers have been badly bruised by what is taking place. Indeed, they have been so badly bruised that I am amazed that they are as objective and realistic as they are when one argues with them the points of view of the taxpayer and the need for budget discipline in the Community.

They are responsive to those arguments. In return, the Government should be responsive to the plight of individual farmers, and I was glad that the Minister expressed sympathy on a whole series of detailed points concerning the problems of British dairymen.

One of the best things to have come out of this whole episode is the realisation that British farmers do not consist of fat cats sitting on broad acres, but that they come in all shapes and sizes and that their problems, as a result of the milk levy, come in various shapes and sizes, too. It is important, therefore, to consider the detail of the issues. That detail is complicated, but it must be considered thoroughly if we are to achieve justice and fair play.

Priority must be given to erecting a safety net for small farmers, those with 40 cows or fewer. It would be wrong, however, to deduce from that that those with a few more cows or acres are sitting pretty. They are not. For example, a number of medium size dairymen do not have the flexibility that some believe they possess simply because they have a few more acres. There are those with 70 cows and 100 acres, but because their acreage is split they cannot go in for other forms of production. County council smallholders moving to other county council smallholdings can find themselves in trouble. They may have a quota where they are, but no quota in the area to which they are going. They find themselves trapped in the middle of the new legislation.

While I enjoin my right hon. Friend to continue to examine the detail of each dairyman, I urge him to keep one eye on the broad picture too, because I am worried about the implications for the whole structure of dairy farming in Britain.

Britain's proportion of small producers is one of the lowest in the Community. We have heard some interesting figures tonight. From the structural and social view it is important to maintain a broad balance between small, medium and large producers. We cannot approach the problem from an accountancy view alone.

The Government are right to allow small producers to get out of milk if they wish, but they must also try to encourage small and medium producers to stay in the business. I recognise the difficult judgment and the importance of getting the balance right involved in that. Squaring the circle is difficult.

A friend of mine, who is expert in the subject, says that the larger producers are not always as efficient as everyone supposes them to be. When my right hon. Friend considers the detailed application of measures for encouraging farmers to move out of dairy farming he should bear in mind ways of encouraging some of the larger producers to move out. I know that the problem is difficult, and that the implications are costly, but we must remember that if the larger producers can be persuaded to reduce their herds the extra quota could help maintain the essential balance of the dairy industry in Britain.

I associate myself with the remarks by hon. Members on both sides of the House about the need for more time. We are in a period of dark uncertainty. We do not know the details or the future structure of the industry. Postponing the collection of the levy until spring next year would give a lot of comfort to a lot of people who are in great need of comfort.

I know from experience that farmers are among the best people in the country. They work damned hard. They are not fat cats. They form an integral part of our social structure.

The rather fashionable question of the conservation of the countryside has not been much discussed tonight. Let us not lose sight of the implications for conservation of what is happening. We need to maintain small and medium farms because they are part of the conservative pattern—in both senses of the word "conservative"—of the countryside. We must keep them there. The poorer farmers are, the less attention they will be able to give to conservation. It costs money to plant trees. They do not grow from nothing. We must bear that in mind too.

9.2 pm

Mr. Ron Davies (Caerphilly)

I welcome the opportunity to take part in the debate, not least because the top half of my constituency is a mining valley and the bottom half is rural and many dairy farmers operate there. I have the difficult task of trying to defend the miners against the ravages of Mr. MacGregor and the farmers in the bottom half of the valley against the ravages of the Secretary of State for Wales and the Minister of Agriculture, Fisheries and Food.

I agree with what the hon. Members for Ceredigion and Pembroke, North (Mr. Howells), for Caernarfon (Mr. Wigley) and for Meirionnydd Nant Conwy (Mr. Thomas) said about the problems in Dyfed. We are all aware of the work done by the farmers' action group there to publicise their case.

The problem is not restricted to Dyfed. The problem exists in Powys and the south Wales counties of mid-Glamorgan, west Glamorgan, south Glamorgan and the county of Gwent, which in part is represented by the Minister of State, Welsh Office. The anger expressed in Dyfed is felt in my county of mid-Glamorgan. It is not synthetic anger. It is not part of a politically motivated campaign whipped up by those who are anxious to defend privilege or to improve their standards of living. It is a very real anger which stems from people whose livelihood is directly threatened. That anger is made worse because they understand that the agreement to which the Minister has referred this afternoon will impose penalties on British farmers, particularly those with smallholdings such as we have in south Wales, penalties which are not being applied equally or consistently throughout the EEC.

Reference has been made to Ireland and its deal. That will prove offensive to the people of Wales. They will see about 2,000 people put out of the dairy industry in Wales and at the same time imports will come into the ports of north and west Wales from Ireland. It will be hard for them to accept that they should be out of work to allow imports from Ireland. It will be hard for them to accept the payment of the additional super-levy when they know that at the moment in France only some 25 per cent. of French farmers are paying the existing co-responsibility levy. It will be difficult for them to accept those penalties when they know that the dairy producers in the Low Countries, particularly in the Netherlands, are some 200 per cent. self-sufficient at the moment. Britain is not self-sufficient, yet our farmers are being forced out of their jobs.

The position will also be difficult to accept because the cut—it is a cut—will be an across-the-board cut. There is no suggestion from the Minister or the Secretary of State for Wales that any defensive action will be taken in support of those least able to bear the burden. I accept that Conservative Members have vested interests to defend and, quite properly, they are doing their job in defending those interests. But I must point out the problems that small farmers will face when they are asked to cope with the 9 per cent. cut. It will not be a 9 per cent. cut in their profits. It will not be a 9 per cent. reduction in their standard of living. In many cases the 9 per cent. quota cut that they are being asked to accept will be the difference between existence in the dairy industry and bankruptcy.

I ask the Minister to appreciate the situation of small dairy farmers. They are dairy farmers because the land that they are farming is capable of supporting nothing else. Those farmers have no option to go out of dairy into beef or sheep production. First, for physical reasons such as climate, the land is not suitable for such alternative agriculture. Secondly, who in their right mind in the agriculture industry at the moment would be prepared to embark on a programme of capital expenditure in the beef or sheep industry when they have seen the dairy industry betrayed in the manner that we have seen in the past couple of weeks? There is no prospect of diversifying.

I want to draw the attention of the Minister and the Secretary of State for Wales to the special case arrangements. I have written to the Minister and I am sure that in his normal way he will reply politely and in full detail. I want to take this opportunity of mentioning a case which faces one of my constituents at the moment. Some six years ago he entered into the FHDS with the Government's active encouragement and assistance. Over the past six years he has committed himself to about £80,000-worth of capital investment in land reclamation, fencing, a new silage pit, a new dairy, new barns and new feeding areas. The purpose of that investment was to ensure that by the autumn of 1984 he would have about 60 dairy cows in full production.

That man's quota is being assessed now on the basis of his production last year. He has committed himself to £80,000-worth of expenditure. He finds himself facing not a 9 per cent. quota cut but a 30 per cent. cut. He cannot tell his bank that he is unable to pay his bank charges. Individuals who rent their farms have those standing charges which have to be met, be they bank overdrafts or rent charges. Unless the Secretary of State takes action, they will have no alternative but to sell, and they will be selling in a depressed market which means that they will lose money. The alternative is to go into bankruptcy.

That is what faces small dairy farmers in south and west Wales. I ask the Secretary of State to heed the arguments advanced during the debate. I ask him to fight his corner for Wales and for the regional dimension. I ask him to recognise that we have communities which are dependent on the dairy industry, in the primary sense with farmers and in the secondary sense with the ancillary industries. I ask the right hon. Gentleman please to look at the regional dimension and to take into account personal circumstances. I urge him to recognise the crisis facing dairy farmers in Wales.

9.10 pm

Mr. Mark Hughes (City of Durham)

I apologise to the hon. Members for Tiverton (Mr. Maxwell-Hyslop) and for Caithness and Sutherland (Mr. Maclennan), who have been present throughout the debate and, because of the pressure of time, have not been called. There are many other hon. Members in the same position.

It is quite clear that the longer the debate went on, the less comfort there was for the Minister of Agriculture, Fisheries and Food and his colleagues on the Treasury Bench. They were desperately short of friends. This set of proposals, both on the generality of price fixing and on the more detailed elements of the milk arrangements, is unacceptable to a very large number of right hon. and hon. Members of all parties.

The Minister and his colleagues are bereft of friends. Yet I open my remarks with a sense of sympathy for the Minister. It is very rare that one's colleagues in the Council of Ministers pass a poisoned chalice, but that: is the reality of the decisions of the Council of Ministers over the last few years. Against the advice of my right hon. Friend the Member for Lewisham, Deptford (Mr. Silkin) and the right hon. Member for Worcester (Mr. Walker), the Council passed that poisoned chalice to the present Minister. The level of milk production had been upgraded to a point that could not be supported by taxpayers' money whether within the Community or on a national basis. The present Minister, poor soul, has had to reap that harvest. If I may mix the metaphor even further, his Cabinet colleagues have now stabbed him in the back. To achieve a budgetary settlement they said, "Sell out our dairy farmers."

That is the suspicion in the dairy industry and in farming throughout the country. The Minister was encouraged to find a settlement to the milk problem which made a subsequent settlement of the budgetary difficulty more easy. We settled for a bad deal for the milk quota arrangements to achieve a worse deal on the budgetary arrangements. That does not seem to be a very sensible way in which to conduct negotiations.

On this price package in general, and on the milk quotas in particular, a British Minister of Agriculture has betrayed the interests of the British consumer. When the Minister of State replies, will he say in which way, if any, the settlement on milk quotas lowers the price of milk products to the British consumer? In addition, is there any evidence to show that this settlement lowers the quantum of money which the British taxpayer must transfer to the dairy sector of the CAP? There is no evidence that in relation to the milk sector either the consumer or the taxpayer has gained, and there is palpable evidence that this deal is a disaster for the diary farmers.

We have upset the dairy farmers and not aided the consumer, and the totality of budget spending on agricultural support within the Community has increased.

Mr. Nicholas Baker

The hon. Gentleman seems to imply that had he been in office today he would have felt that the taxpayer could no longer support this level of expansion of agricultural production. How would he have checked it? Would he have been able to resist the imposition of quotas?

Mr. Hughes

I refer the hon. Gentleman to the speech that I made as Rapporteur on the 1978 price proposals which I made in the European Assembly on 24 February 1979. At that time, I set out the proposals precisely when we had to control the production of more and more milk because it could not be supported.

Mr. Nicholas Baker

I missed that speech.

Mr. Hughes

And how lucky the hon. Gentleman was.

Some hon. Members such as the hon. Member for Dumfries (Sir H. Monro) say that we should do this by price. Over the years various commissioners from Mr. Gundelach onwards have said that we should control milk production by lowering the price. Even elements within the NFU have said that most of the time. The difficulty is that the moment a politician suggested that the farmers said, "Watch it, if you lower the price we will increase our production to maintain our incomes to offset the price loss." They have always said that, and politicians have always pulled back from that course.

An alternative strategy was to screw the price down hard enough for long enough, but that was not available to the Government when the right hon. Member for Westmorland and Lonsdale (Mr. Jopling) became Minister of Agriculture, because by then it was too late. By then the Community had gone too far down the road of using price as an ineffectual method of controlling quantity to be able to retrench via price control to an acceptable level of quantity and budgetary financing.

Had they gone for what Mr. Gundelach always called a prudent price policy four or five years ago, that might have been possible, but it was not possible by 1982, never mind this year. Therefore, it is unfair for the farming community to blame the right hon. Gentleman. It is not easy for the Opposition Front Bench to forgive somebody for that. What is clear is that by that time that master Houdini of escapology, his right hon. Friend the Member for Worcester, had got away with everything he had left before the price had to be paid. He came to the House year after year proclaiming a great victory for the consumer and for the farmer alike, while he left the unpaid cheque to be picked up. I find it unacceptable in the present package that there is no evidence of remorse within the Government for what they have done in the past four to five years.

When we turn to the details, they show clearly that neither the producer-retailer nor the wholesale supplier can be satisfied with the administrative arrangements. Nobody —no intelligible and intelligent man—can be satisfied with the arrangements. I should like to read a paragraph in reply to my hon. Friend the Member for Aberdeen, North (Mr. Hughes), who asked what a producer is. The regulation on page 9 says that a producer is what a producer is in article 12 of the Council regulation, and so on, plonk, plonk.

A producer is a natural or legal person or group of natural or legal persons farming a holding located within the geographical territory of the Community"— colon— selling milk or other milk products directly to the consumer, and/or supplying the purchaser". That is what is in the Commission regulation. That is crystal clear.

I trust that, later this week, the new bishop of Durham will not have such a difficult theological problem to deal with as paragraph 5(a) of the draft regulations. The virgin birth and walking on water are as nothing. I quote: in the case of an applicant to whom the second subparagraph of Article 4(2) of the Commission Regulation"— bracket— which deals with direct sellers in operation for less than 12 months"— end bracket— applies, a quantity calculated by multiplying his base quantity"— bracket— that is to say the quantity of dairy produce sold by direct sale from that holding in the period starting on the first day of the first calendar month"— bracket—we are still in the first bracket— or, where the quantities so sold before the first calendar month"— bracket — this is the third set of brackets in the paragraph— not being April 1984"— end third set of brackets, or first set, whichever— is less than one third of the quantity so sold in the first calendar month, the second calendar month"— end bracket— beginning after commencement of direct sale of dairy produce from that holding and finishing on 30th April 1984"— bracket— where that first day is 1st March or 1st April 1984"— end bracket— and otherwise on 31st March 1984"— end bracket— by a fraction"— here one could only become a precentor to do it properly: by a fraction the numerator of which is 12 and the denominator of which is the number of months in that period and"— bracket— except in respect of a holding in a remote area"— end bracket— reducing the result by 6 per cent."— close quotes, amen.

When the House is involved in the nonsense of supporting and voting for, for example, page 25 of the regulations, we have got things wrong. If that is what those skilled people in the Box and Ministers are on about——

Mrs. Kellett-Bowman

The regulations read better than they sound.

Mr. Hughes

If the hon. Lady were to read them out they would sound better than they read.

That brings me to the fundamental problem at the root of the Opposition's early-day motion. The proposals have given rise to more discouragement, anguish, anger and genuine fear in the agricultural community than anything else in the past 40 years. Nothing done by Government to the agricultural communities in Northern Ireland, Scotland, Wales or England has done as much damage as these proposals have done to the agricultural community's sense of security. They have undermined the consensus advocated by successive Governments, including the Government to whom I gave support from 1974 to 1979. Indeed, I take all the blame for saying then that we should increase production.

It has been said that what happens to the dairy sector this year will happen ere long to the cereal sector, and that if the quotas for one product follow seriatim they will come to another before long. This scheme is ill-advised and ill-considered, and the financial help made available to the outgoer is inadequate. If there is an outgoer scheme, there must be an incomer scheme. The farming industry wants the details of that.

We foresee grave difficulties. We have not been given adequate details about genuine hardship cases, and we do not really know on what terms the tribunals can deal with them. If my last quotation is any indication of the clarity of those terms, they will, as has been said, prove to be a lawyer's paradise and a milk farmer's disaster.

As we say in our early-day motion, any attempt to deal with the CAP's problems commodity by commodity is doomed to failure. It always means that one farmer will be set against another and that one country will be set against another, and the whole process will not work. It is clear that very few British dairy farmers believe that the quota system will be fairly administered as between this country and other countries in the Community. We faced the same problem with fisheries. No fisherman believed that the other side would exercise policing adequately. It is clear that the provision for small farmers and farmers in the predominantly pastoral parts of Wales, the south-west, Cumbria and the west country do not have the opportunities to diversify. The same applies in Cheshire and Staffordshire, where farmers cannot diversify, and personal arrangements for relief are inadequate. Therefore, I commiserate with the Minister and would be reluctant to offer a word of criticism against him personally, beyond saying that the instructions which he received and honourably obeyed were the wrong ones. If they were not, I blame him because few farmers can accept the deal.

Even allowing for the retention of the beef premium and the concessions on sheep levies, the Minister has not done the job properly on the outgoers' scheme. For most tenant farmers, the outgoers' scheme is a snare and a delusion, which they cannot take up, and they cannot enter any other area. The anger that the Minister has created in the dairy sector is not confined to what has happened in parts of my constituency, about which the Minister knows, from having met the few Conservatives that there are there. The Government's policy is crucifying the dairy industry. I hope that Conservative Members will realise that we object to these proposals, not merely because of their longterm inadequacy in dealing with the CAP but because they do a major mischief to the dairy industry which the Government appear not to comprehend.

9.32 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor)

The debate has naturally and understandably concentrated on milk quotas. It is also a debate about CAP reforms and the price review in general. I shall begin by making one or two quick comments about that.

We should remind ourselves that many items in the package are very good for Britain. My right hon. Friend the Minister of Agriculture, Fisheries and Food spelt them out, and my hon. Friends the Members for Dumfries (Sir H. Monro) and Cornwall, North (Mr. Neale) welcomed them. This is the first time that agricultural reforms of the CAP have been properly faced. I do not complain that the House did not concentrate on those gains, because hon. Members naturally wished to focus on problems. However, it is as well to remind ourselves that the package includes many good things.

My hon. Friend the Member for Dumfries asked about the problem of the new seasonal payment scale for sheepmeat. The Government were unhappy about that. We expressed many misgivings and criticisms about it. The Commission promised to review the new scale, and we shall return to the charge at an appropriate point.

The hon. Member for City of Durham (Mr. Hughes) and my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) said that they were interested in the cereals issue. We believe that cereals surpluses and the costs of disposing of them should be dealt with through price restraint. My right hon. Friend the Minister argued strongly in the Council for a three-year agreement on price restraints so that cereal farmers would have a better basis on which to plan for the long term and for planting. I agree with my right hon. and hon. Friends who have talked about the need for long-term planning in the Community. The difficulty about the price review system is that it militates against the chances of achieving long-term planning. Nevertheless, my right hon. Friend and I have taken that point on board.

Mr. Leigh

rose——

Mr. MacGregor

As many hon. Members have asked questions to which I wish to reply, it would be better if I did not give way. My hon. Friend asked about cereals and quotas, to which I am coming.

We believe that the cereals problem should be tackled by prices. My right hon. Friend tried to obtain a three-year agreement this year, but no other member state would go along with us on this occasion. There is no sign within the Commission that quotas are being planned for cereals, and it is hard to see how a quota system could apply for cereals as we are now applying it for milk. I hope that that will deal with the point that my hon. Friend the Member for Gainsborough and Horncastle had in mind.

I come now to the subject of milk, on which I wish to concentrate the rest of my remarks. I am grateful for the welcome which several of my hon. Friends have given to the fact that by this debate we have given the House an opportunity to comment on the milk regulations, without the need for decisions to be taken today. My right hon. Friend and I felt that it was right that the House should do so. I assure my hon. Friends that we have been listening carefully to all that has been said. I shall not be able to respond to all the points tonight, and we shall probably not be able to respond to all the points in the revised regulations, but I assure my hon. Friends and Opposition Members that we shall be studying closely everything that has been said.

One of the acute difficulties that we faced has been highlighted in a number of the conflicting comments made by my hon. Friends. My hon. Friends the Members for Torridge and Devon, West (Sir P. Mills), for Dumfries and for Hereford (Mr. Shepherd) urged that we should take time to get the regulations right and said that a little delay would be desirable in the interests of getting them right and not going too far ahead of the rest of the Community. I believe that that is correct, but we are being criticised for not having given dairy farmers precise guidance as to where they stand. That is a difficult conflict, and one cannot square that circle.

We have tried to give provisional guidance to dairy farmers. We have done so way ahead of other member states, so as to give our dairy farmers at least some provisional idea of how they can plan. We cannot, of course, give final guidance, nor issue the application forms until the House has approved the regulations. My hon. Friends have made it clear that they want us to consider the comments that have been made today. It will take some while to do so and to lay the further regulations before the House. I hope that dairy farmers will realise that we are trying to achieve a correct balance by giving proper consideration to the regulations, while giving provisional guidance as quickly as we can.

My hon. Friend the Member for Torridge and Devon, West asked about provisional guidance for wholesale producers and whether the 1983 minus 9 per cent. was the final figure. As my right hon. Friend said, normally dairy producers can plan on the assumption that that figure is the ceiling — the biggest reduction for which they would have to plan. I say "normally" because some producers will be able to have an allocation that is less than 9 per cent. I can give my hon. Friends the Member for Torridge and Devon, West and for Cornwall, North the assurance that no wholesale producer will have to accept a reduction of more than 1983 minus 9 per cent. I hope that that guidance is helpful.

That brings me to the crucial issue that we faced in the negotiations. Many hon. Members have stressed the difficulties faced by dairy producers. I understand them fully, because I have been meeting dairy producers all over the country. I hope that it is understood—I believe that it is by more of them—that my right hon. Friend faced extremely difficult choices — as the hon. Member for City of Durham was kind enough to acknowledge—in the decisions that had to be taken this year.

I believe that it is known throughout the country and in the House that we did not want quotas. We should have much preferred to act on price restraint, for many of the reasons that have emerged today and because of all the difficulties that we are having in drawing up an acceptable quota system.

Mr. Ralph Howell (Norfolk, North)

rose——

Mr. MacGregor

I am sorry, but I must not give way because I have so much to deal with. Many hon. Members have spoken in the debate and want answers to their questions.

When we faced this issue in the Council, we had the choice of dealing with milk in the only way in which it was possible to get agreement in the Council, namely, quotas, or letting the matter slide with the same kind of increases in costs and the surpluses continuing to escalate in the coming year. If we had not tackled the problem of the surpluses and the costs, we would have faced a situation in which there would have been no pay cheque for any farmer—let alone dairy farmers—in the country from approximately September onwards this year. I think that we would have been criticised much more by the farming community if we had allowed that to happen. In the world we are often faced with a choice between two different courses when neither is ideal. That is what happened here.

I deal next with a number of detailed points that were made in the debate. I direct my remarks first to small producers. The hon. Member for Aberdeen, North (Mr. Hughes) suggested a different scheme for helping the small producers. He was attempting to help the small producer with a herd of under 60, I think he said, but, for the moment, let us consider a herd of under 40 cows. Through the outgoers' scheme, we are finding the quickest way to get the small dairy producer with a herd of under 40 back to the 1983 production level which the hon. Gentleman mentioned. That is the best way to approach the matter. By that means, we are going down the route by which other producers are giving up voluntarily.

If we had followed the hon. Gentleman's course—and I now understand his scheme and apologise for having misunderstood it in my intervention—I hope he realises that this would have meant that all other producers, particularly the large ones, would have faced a bigger cut in their production from 1983, whereas this way we achieve the same objective of putting the small producer back to his 1983 quota level, and doing it in a voluntary way that is more acceptable.

The hon. Gentleman referred to the German scheme. I am sure he will acknowledge that the highest cut in Germany directed at the big producers, because of the way they are doing things, is 12 per cent. less than the 1983 production level. I believe that we have a better balance in the way that we are tackling it. It is much better for Scotland. In England and Wales, 37 per cent. of small producers have herds of under 40, but in Scotland the figure is only 11 per cent. Under the hon. Gentleman's scheme, he would be hitting hard a larger number of Scottish milk producers than we are.

The hon. Member for Sheffield, Brightside (Miss Maynard) completely misunderstood the point of the outgoers' scheme. She complained that we were not helping the small producers. We certainly are. As a former Minister with responsibility for small businesses, I am very keen on this. She should recognise that, under the outgoers' scheme, we will get the quota released that will enable us most quickly to help the small milk producer.

I deal next with direct sales. The hon. Member for City of Durham intervened in the speech of my right hon. Friend to ask about the timing of direct sales, and was concerned about the fact that, because of the way the Community regulations work out, we have a more complicated system of giving the overall quota allocation to the direct sales producers. If all goes according to plan, and depending on when we can get the regulations approved by both Houses, we hope that somewhere around late November, after consideration of all cases and appeals, definitive quotas can be sent to direct sellers. The assessment of the quota level for direct sellers will not take place until the end of the 1984–85 marketing year, so they will not have to face the problem at the end of September. Equally, the levy will not be assessed on them until after the end of this marketing year. Thus, we will be giving them their quotas well before the point at which they have to bring their overall allocations into line.

Many hon. Members have referred to a situation which is certainly not ideal. I refer to the possibility of transferability between direct sellers and wholesale producers, and the associated problems. The Community regulations provide for only limited flexibility, but we shall aim to make the greatest possible use of that flexibility. Producers who reduce or cease wholesale delivery may obtain direct sales quotas, provided that there is sufficient quota available within the overall member states direct sales quota. There are similar provisions for cases in which direct sales are reduced.

We have been asked to press hard on this point about direct sales and wholesale producers. In fact, we fought hard in Brussels for that limited flexibility. We did so because throughout the negotiations on the supplementary levy regulations we have been conscious of the problems that could face direct sellers, under a quota system, in meeting local market requirements. The situation is still not ideal, and we will wish to return to the matter later.

That is the answer to my right hon. Friend the Member for Taunton (Mr. du Cann), who also asked about the possibility of better quota transfer and flexibility. My right hon. Friend also asked for quotas to be saleable. That is not permitted under the present regulations, but we may be able to discuss the matter later in Brussels when we have overcome the preliminary difficulties.

On the question of flexibility in the exchange of wholesale and direct sale quotas, it is planned that the United Kingdom regulations implementing the proposals will he made when we deal with the allocation of quota surrendered by the outgoers. The precise mechanism has yet to be decided. We are alive to the problem and will do all that we can to deal with it.

In a delightful passage in his speech the hon. Member for City of Durham drew attention to some of the drafting difficulties in the current regulations and called for greater clarity, especially in relation to special cases. I share his view. We will be issuing notes of guidance to producers and to all concerned when the regulations have been passed, and I hope that those notes will be much clearer than the regulations. In drawing up the regulations, we are constrained by drafting requirements.

A number of hon. Members referred to the special cases. My hon. Friend the Member for Tatton (Mr. Hamilton) felt that the allocation of 2.5 per cent. for special cases would not be enough to deal with all the hardship cases. However, he also said that he was greatly concerned about the non-expanders. Several of my other hon. Friends drew attention to the problems of the non-expanders, who have rightly pointed out that they have not contributed to increased production in the United Kingdom and to the resulting problems, and do not see why they should suffer from the cuts. My hon. Friend cannot have it both ways. He cannot help the non-expanders and still increase the 2.5 per cent. I believe that the percentage is about right.

My hon. Friends the Members for Torridge and Devon, West and for Dumfries want us to have flexibility up our sleeve. They would like to see a regulation giving my right hon. Friend discretion in certain hardship cases which are not covered by the special case regulation. We shall certainly consider that point, although it will present difficulties.

My hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and several other hon. Members referred to the hardship cases not included among the special cases. We are very conscious that there are people who are not included in the special case categories in the Community legislation, but who would suffer genuine hardship if it was not possible to allocate them some quota beyond their entitlement—or, in some cases, any quota at all.

We must try to find some means of helping such people. At this early stage in the operation of the quota system we cannot identify all the deserving cases—although we are accumulating a sizeable list—or define rules to cover them. The position will become wholly clear only when we have had some experience of operating the arrangements. We will watch the situation carefully with a view to making provision for special hardship cases in the autumn. At the moment we have no quota to allocate to them, because the 2.5 per cent. will be allocated to the hardship cases covered in the regulations. The quota which we hope to be able to allocate to other cases will be that which is released by outgoers and which remains after we have dealt with the small producers with herds of fewer than 40 cows.

My right hon. Friend the Member for Taunton and my hon. Friend the Member for Dorset, West (Mr. Spicer) referred to the effect of the weather. It would be difficult to designate particular regions as special cases because of the weather, because producers vary even within those regions. We are endeavouring, as my right hon. Friend the Minister said, to have a form of filter—to show a 10 or 15 per cent. production cut compared to the previous year — to ensure that not every producer applies to be considered as a special case for weather reasons, otherwise the tribunals will be inundated. A form of filter will establish whether there has been a serious natural setback because of the weather. Once producers have gone through that hoop and have proved their case, they can be considered under the appeals system for special weather reasons. That is probably the way in which we shall proceed.

My hon. Friend the Member for Hereford referred to the clawback on the first year. He asked whether I could say clearly that producers who had not used their full quota at the end of the current year would not find that their production would be cut back in the next year. I agree with him that it would be inappropriate to take the quota from people who produce less than their quota in the current year. We want the quota to be put to good use, for all the reasons that I have just discussed. At some point we must be able to reallocate that type of quota. I entirely agree with my hon. Friend that we must give producers time to get used to the new arrangments. I hope that that answers my hon. Friend's point. My hon. Friend referred also to dairy farmers on the panels. I assure him that dairy farmers can and will be on the panels.

My hon. Friend the Member for Lancaster asked about the time scale of the appeal. I had hoped that more hon. Members would contribute to the debate on this, so that we could obtain feedback. As we envisage the regulations, producers will have four weeks in which to apply under the special cases categories, and so on. If their case i s turned down, they will have 21 days in which to appeal. Some of my hon. Friends may feel that that period is too short. If they feel that way, they should let us know quickly so that we can consider that aspect. That is the present plan.

My hon. Friends raised several matters about taxation. Obviously, I cannot make any announcement about that tonight. I have listened carefully, as has my right hon. Friend the Minister, to all the points that have been made. We shall discuss them with our colleagues in the Treasury, but that is all that I can say at this time.

My hon. Friend the Member for Dumfries asked about Scottish appeals. The first sift of applications in Scotland will be undertaken by the milk marketing boards, unlike in England. They will check the forms for information and will take decisions on exceptional event criteria. The boards, and the Department of Agriculture for Scotland for the areas outside the boards, will act on clear guidelines. All acceptable development claims will be passed to a panel of three members drawn from the pool of 20, who will act as the tribunal. The tribunal will determine the amount of additional quota for which a producer would be eligible if there were sufficient reserves to be put around. An appeal against a decision by the boards or by the DAFS in that minority of cases will be put to the tribunal. Where: comments are sought by the tribunal from outside bodies, the producer concerned will have the opportunity to comment on the representations. I hope that that helps my hon. Friend.

The hon. Member for Newry and Armagh (Mr. Nicholson) referred to the situation in Northern Ireland. The allocation of quota between the regions of the United Kingdom is based on deliveries in 1983, but in the calculations we have taken account of the trend of deliveries since 1981, and that includes the rapid growth in deliveries in Northern Ireland as compared to the other territories. The regulations permit us to do so, because those who were expanding much faster were contributing more to the problem. At the same time, we have given Northern Ireland the full benefit of the additional 65,000 tonnes. The overall effect is that Northern Ireland producers face a slightly smaller percentage cut than the rest of Great Britain compared with 1983 deliveries.

In addition, I hope that the hon. Gentleman has noted that we have selected Northern Ireland for special treatment under the outgoers' scheme. As a result of buying out 5 per cent. of Northern Ireland in the outgoers' scheme, as opposed to 2¼ per cent. in Great Britain, we shall be spending £4.073 million more in Northern Ireland than if we had applied the same percentage as in the rest of the United Kingdom. We have adopted this approach because we recognise the special problems of Northern Ireland, which include an especially high number of small producers. That is why we have given it favourable terms under the outgoers' scheme.

My hon. Friend the Member for Cornwall, North talked about Mr. Rackham. There are many difficult cases, and his is one of them. I shall be writing to him shortly, but perhaps the following guidance will be helpful. This is a case of no production taking place on the holding on 2 April 1984, and in theory there is no entitlement to a quota arrangement. However, we shall consider such cases sympathetically on an individual basis where the producers can provide documentary evidence that they were firmly committed to milk production prior to 2 April. I should make it clear that the draft regulations before the House do not make provision for these cases, and our intention is to make provision for them in the further statutory instrument, which we shall have to introduce under the outgoers' scheme in the autumn. We hope that some of the quotas surrendered by outgoers can be made available for such cases.

Mr. Mark Hughes

The Minister said that there would be a statutory scheme for outgoers in the autumn.

Mr. MacGregor

We wish to get the outgoers' scheme off the ground quickly, and that is why it is not being introduced as a statutory scheme. Provision will be made for it in the Appropriation Acts. We shall wish at a certain stage to legitimise it, as it were. Our purpose is to get it in place as quickly as possible so that we can release the quotas as soon as possible to help small producers and cases of special hardship.

Mr. Ralph Howell

I am grateful to my hon. Friend for giving way at last to a Conservative Member. Is he aware that I have never heard such nonsense talked in years in this place? We have made a most appalling mistake in providing for special cases. We shall be setting farmer against farmer in village upon village. No tribunal will ever be able properly to sort out the various claims. Much more serious thought should be given to this issue. The only sensible approach is to have a uniform quota system for all dairy farmers.

Mr. MacGregor

If my hon. Friend had been present throughout the debate he would have heard many of my hon. Friends say that we were right to provide for special cases, for a host of reasons. We have endeavoured to achieve the right balance.

No one pretends that quota decisions are easy, and that has been obvious throughout the debate. We are endeavouring to get as near to the right answers in every case as we possibly can and we shall reflect on everything that has been said. I recognise the strong feeling in the House that we cannot implement the regulations in Britain by applying the super-levy if it is clear that other member states are not doing so. That argument was advanced firmly throughout the debate.

As my right hon. Friend the Minister of Agriculture has said on many occasions, we have made it clear to the Agriculture Council that we attach the highest importance to all member states applying the supplementary levy according to the agreed rules. It might be for the interest of the House if I read out one or two of the passages of my right hon. Friend's speech to the Council of Ministers on 19 June at Luxembourg. He said: I must say therefore it will be impossible to justify collecting the levy in the autumn if the system is not being applied effectively throughout the Community. In particular my Government could not accept a situation where individual producers in some member states were being required to pay supplementary levy in accordance with the agreement reached on 31 March while those in other member states were manifestly falling short in applying the agreed rules. If it becomes clear that some member states are not meeting their obligations within the time scale laid down, we will immediately press the Commission to take appropriate action. We would certainly insist that producers in some member states should not be penalised when, because of administrative or other failures in other member states, the arrangements are not being applied. I hope that that will make our position clear.

The hon. Member for Aberdeen, North referred to his favourite reading, the Country Landowner. While thinking about his speech I was reminded of a paragraph in the leader of one of my favourite pieces of reading, Farmers Weekly, on 8 June. The paragraph says that their spokesmen have been the severest critics"— that is a reference to the Opposition— of EEC overspending; they would have attacked the absence of a dairy surplus control policy with the same gleeful venom that they display against its implementation. They are not suggesting an alternative; they are offering no lifeline to dairy farmers. But by arguing loudly—and often incoherently—

Mr. James Hamilton (Motherwell, North)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put,put and agreed to.

Question put accordingly, That this House do now adjourn:

The House divided: Ayes 212, Noes 313.

Division No. 389]	[10 pm
AYES
Abse, Leo	Beckett, Mrs Margaret
Adams, Allen (Paisley N)	Beggs, Roy
Anderson, Donald	Beith, A. J.
Archer, Rt Hon Peter	Bell, Stuart
Ashdown, Paddy	Benn, Tony
Ashley, Rt Hon Jack	Bermingham, Gerald
Ashton, Joe	Bidwell, Sydney
Atkinson, N. (Tottenham)	Blair, Anthony
Bagier, Gordon A. T.	Boothroyd, Miss Betty
Banks, Tony (Newham NW)	Boyes, Roland
Barnett, Guy	Bray, Dr Jeremy
Barron, Kevin	Brown, Gordon (D'f'mline E)

Brown, N. (N'c'tle-u-Tyne E)	Hughes, Simon (Southwark)
Brown, R. (N'c'tle-u-Tyne N)	Janner, Hon Greville
Brown, Ron (E'burgh, Leith)	John, Brynmor
Bruce, Malcolm	Johnston, Russell
Buchan, Norman	Jones, Barry (Alyn & Deeside)
Caborn, Richard	Kaufman, Rt Hon Gerald
Callaghan, Jim (Heyw'd & M)	Kennedy, Charles
Campbell, Ian	Kilroy-Silk, Robert
Campbell-Savours, Dale	Kinnock, Rt Hon Neil
Canavan, Dennis	Kirkwood, Archy
Carlile, Alexander (Montg'y)	Lambie, David
Carter-Jones, Lewis	Lamond, James
Clarke, Thomas	Leadbitter, Ted
Clay, Robert	Leighton, Ronald
Clwyd, Mrs Ann	Lewis, Ron (Carlisle)
Cocks, Rt Hon M. (Bristol S.)	Lewis, Terence (Worsley)
Cohen, Harry	Litherland, Robert
Coleman, Donald	Lloyd, Tony (Stretford)
Concannon, Rt Hon J. D.	Lofthouse, Geoffrey
Cook, Robin F. (Livingston)	Loyden, Edward
Corbett, Robin	McCartney, Hugh
Corbyn, Jeremy	McCrea, Rev William
Cowans, Harry	McDonald, Dr Oonagh
Cox, Thomas (Tooting)	McGuire, Michael
Craigen, J. M.	McKelvey, William
Crowther, Stan	Maclennan, Robert
Cunliffe, Lawrence	McTaggart, Robert
Cunningham, Dr John	Madden, Max
Dalyell, Tam	Maginnis, Ken
Davies, Rt Hon Denzil (L'lli)	Martin, Michael
Davies, Ronald (Caerphilly)	Mason, Rt Hon Roy
Davis, Terry (B'ham, H'ge H'l)	Maxton, John
Deakins, Eric	Maynard, Miss Joan
Dewar, Donald	Meacher, Michael
Dixon, Donald	Meadowcroft, Michael
Dobson, Frank	Michie, William
Dormand, Jack	Mikardo, Ian
Douglas, Dick	Millan, Rt Hon Bruce
Dubs, Alfred	Miller, Dr M. S. (E Kilbride)
Dunwoody, Hon Mrs G.	Mitchell, Austin (G't Grimsby)
Eadie, Alex	Molyneaux, Rt Hon James
Eastham, Ken	Morris, Rt Hon A. (W'shawe)
Edwards, Bob (W'h'mpt'n SE)	Morris, Rt Hon J. (Aberavon)
Ellis, Raymond	Nellist, David
Evans, John (St. Helens N)	Nicholson, J.
Ewing, Harry	Oakes, Rt Hon Gordon
Fatchett, Derek	O'Brien, William
Faulds, Andrew	O'Neill, Martin
Fields, T. (L'pool Broad Gn)	Orme, Rt Hon Stanley
Fisher, Mark	Owen, Rt Hon Dr David
Flannery, Martin	Paisley, Rev Ian
Foot, Rt Hon Michael	Park, George
Forsythe, Clifford (S Antrim)	Parry, Robert
Foster, Derek	Patchett, Terry
Foulkes, George	Pavitt, Laurie
Fraser, J. (Norwood)	Pendry, Tom
Freeson, Rt Hon Reginald	Penhaligon, David
Freud, Clement	Pike, Peter
Garrett, W. E.	Powell, Rt Hon J. E. (S Down)
Godman, Dr Norman	Powell, Raymond (Ogmore)
Golding, John	Prescott, John
Gould, Bryan	Radice, Giles
Gourlay, Harry	Redmond, M.
Hamilton, W. W. (Central Fife)	Rees, Rt Hon M. (Leeds S)
Hardy, Peter	Richardson, Ms Jo
Harman, Ms Harriet	Roberts, Ernest (Hackney N)
Harrison, Rt Hon Walter	Robertson, George
Hart, Rt Hon Dame Judith	Robinson, G. (Coventry NW)
Hattersley, Rt Hon Roy	Rooker, J. W.
Haynes, Frank	Ross, Ernest (Dundee W)
Healey, Rt Hon Denis	Ross, Stephen (Isle of Wight)
Heffer, Eric S.	Ross, Wm. (Londonderry)
Hogg, N. (C'nauld & Kilsyth)	Rowlands, Ted
Home Robertson, John	Ryman, John
Howell, Rt Hon D. (S'heath)	Sedgemore, Brian
Howells, Geraint	Sheerman, Barry
Hoyle, Douglas.	Sheldon, Rt Hon R.
Hughes, Dr. Mark (Durham)	Shore, Rt Hon Peter
Hughes, Robert (Aberdeen N)	Short, Ms Clare (Ladywood)
Hughes, Sean (Knowsley S)	Silkin, Rt Hon J.

Skinner, Dennis	Walker, Cecil (Belfast N)
Smith, Rt Hon J. (M'kl'ds E)	Wallace, James
Smyth, Rev W. M. (Belfast S)	Wardell, Gareth (Gower)
Snape, Peter	Wareing, Robert
Spearing, Nigel	Weetch, Ken
Steel, Rt Hon David	Welsh, Michael
Stewart, Rt Hon D. (W Isles)	White, James
Strang, Gavin	Wigley, Dafydd
Straw, Jack	Williams, Rt Hon A.
Taylor, Rt Hon John David	Wilson, Gordon
Thomas, Dafydd (Merioneth)	Winnick, David
Thomas, Dr R. (Carmarthen)	Woodall, Alec
Thompson, J. (Wansbeck)
Thorne, Stan (Preston)	Tellers for the Ayes:
Torney, Tom	Mr. James Hamilton and Mr. Allen McKay.
Wainwright, R.
NOES
Adley, Robert	Cockeram, Eric
Amery, Rt Hon Julian	Colvin, Michael
Amess, David	Cope, John
Ancram, Michael	Cormack, Patrick
Arnold, Tom	Corrie, John
Ashby, David	Cranborne, Viscount
Aspinwall, Jack	Crouch, David
Atkins, Robert (South Ribble)	Dicks, Terry
Atkinson, David (B'm'th E)	Dorrell, Stephen
Baker, Rt Hon K. (Mole Vall'y)	Dover, Den
Baker, Nicholas (N Dorset)	du Cann, Rt Hon Edward
Baldry, Anthony	Dunn, Robert
Banks, Robert (Harrogate)	Durant, Tony
Batiste, Spencer	Dykes, Hugh
Beaumont-Dark, Anthony	Edwards, Rt Hon N. (P'broke)
Bellingham, Henry	Eggar, Tim
Bendall, Vivian	Emery, Sir Peter
Bennett, Sir Frederic (T'bay)	Evennett, David
Benyon, William	Eyre, Sir Reginald
Berry, Sir Anthony	Fairbairn, Nicholas
Best, Keith	Fallon, Michael
Bevan, David Gilroy	Farr, Sir John
Biffen, Rt Hon John	Favell, Anthony
Biggs-Davison, Sir John	Finsberg, Sir Geoffrey
Blackburn, John	Fletcher, Alexander
Body, Richard	Fookes, Miss Janet
Bonsor, Sir Nicholas	Forman, Nigel
Boscawen, Hon Robert	Forsyth, Michael (Stirling)
Bottomley, Peter	Forth, Eric
Bottomley, Mrs Virginia	Fowler, Rt Hon Norman
Bowden, A. (Brighton K'to'n)	Fox, Marcus
Bowden, Gerald (Dulwich)	Franks, Cecil
Boyson, Dr Rhodes	Fraser, Peter (Angus East)
Brandon-Bravo, Martin	Freeman, Roger
Bright, Graham	Gale, Roger
Brinton, Tim	Gardiner, George (Reigate)
Brittan, Rt Hon Leon	Gardner, Sir Edward (Fylde)
Brooke, Hon Peter	Gilmour, Rt Hon Sir Ian
Brown, M. (Brigg & Cl'thpes)	Glyn, Dr Alan
Browne, John	Goodhart, Sir Philip
Bruinvels, Peter	Goodlad, Alastair
Bryan, Sir Paul	Gow, Ian
Buchanan-Smith, Rt Hon A.	Grant, Sir Anthony
Buck, Sir Antony	Greenway, Harry
Budgen, Nick	Gregory, Conal
Burt, Alistair	Griffiths, E. (B'y St Edm'ds)
Butcher, John	Griffiths, Peter (Portsm'th N)
Butterfill, John	Grist, Ian
Carlisle, John (N Luton)	Ground, Patrick
Carlisle, Kenneth (Lincoln)	Grylls, Michael
Carlisle, Rt Hon M. (W'ton S)	Gummer, John Selwyn
Carttiss, Michael	Hamilton, Hon A. (Epsom)
Cash, William	Hampson, Dr Keith
Chalker, Mrs Lynda	Hanley, Jeremy
Channon, Rt Hon Paul	Hannam, John
Chope, Christopher	Hargreaves, Kenneth
Churchill, W. S.	Harris, David
Clark, Hon A. (Plym'th S'n)	Haselhurst, Alan
Clark, Dr Michael (Rochford)	Havers, Rt Hon Sir Michael
Clark, Sir W. (Croydon S)	Hawkins, C. (High Peak)
Clarke, Rt Hon K. (Rushcliffe)	Hawkins, Sir Paul (SW N'folk)
Clegg, Sir Walter	Hawksley, Warren

Hayes, J.	Meyer, Sir Anthony
Hayhoe, Barney	Mills, Iain (Meriden)
Hayward, Robert	Mills, Sir Peter (West Devon)
Heath, Rt Hon Edward	Moate, Roger
Heathcoat-Amory, David	Monro, Sir Hector
Heddle, John	Montgomery, Fergus
Heseltine, Rt Hon Michael	Moore, John
Hickmet, Richard	Morris, M. (N'hampton, S)
Hicks, Robert	Morrison, Hon C. (Devizes)
Higgins, Rt Hon Terence L.	Moynihan, Hon C.
Hill, James	Murphy, Christopher
Hind, Kenneth	Neale, Gerrard
Hirst, Michael	Needham, Richard
Hogg, Hon Douglas (Gr'th'm)	Nelson, Anthony
Holland, Sir Philip (Gedling)	Neubert, Michael
Holt, Richard	Newton, Tony
Hooson, Tom	Nicholls, Patrick
Hordern, Peter	Normanton, Tom
Howard, Michael	Norris, Steven
Howarth, Alan (Stratf'd-on-A)	Onslow, Cranley
Howarth, Gerald (Cannock)	Oppenheim, Rt Hon Mrs S.
Howell, Rt Hon D. (G'ldford)	Osborn, Sir John
Hubbard-Miles, Peter	Ottaway, Richard
Hunt, David (Wirral)	Page, Sir John (Harrow W)
Hunt, John (Ravensbourne)	Page, Richard (Herts SW)
Hunter, Andrew	Parris, Matthew
Hurd, Rt Hon Douglas	Patten, John (Oxford)
Irving, Charles	Pattie, Geoffrey
Jackson, Robert	Pawsey, James
Jenkin, Rt Hon Patrick	Peacock, Mrs Elizabeth
Jessel, Toby	Percival, Rt Hon Sir Ian
Johnson-Smith, Sir Geoffrey	Porter, Barry
Jones, Gwilym (Cardiff N)	Powell, William (Corby)
Jopling, Rt Hon Michael	Powley, John
Kellett-Bowman, Mrs Elaine	Prentice, Rt Hon Reg
Kershaw, Sir Anthony	Price, Sir David
Key, Robert	Prior, Rt Hon James
King, Roger (B'ham N'field)	Proctor, K. Harvey
King, Rt Hon Tom	Raffan, Keith
Knight, Gregory (Derby N)	Raison, Rt Hon Timothy
Knight, Mrs Jill (Edgbaston)	Rathbone, Tim
Knowles, Michael	Rees, Rt Hon Peter (Dover)
Knox, David	Renton, Tim
Lamont, Norman	Rhodes James, Robert
Latham, Michael	Rhys Williams, Sir Brandon
Lawler, Geoffrey	Ridley, Rt Hon Nicholas
Lawrence, Ivan	Ridsdale, Sir Julian
Lawson, Rt Hon Nigel	Rifkind, Malcolm
Lee, John (Pendle)	Rippon, Rt Hon Geoffrey
Leigh, Edward (Gainsbor'gh)	Roberts, Wyn (Conwy)
Lennox-Boyd, Hon Mark	Robinson, Mark (N'port W)
Lester, Jim	Roe, Mrs Marion
Lewis, Sir Kenneth (Stamf'd)	Rost, Peter
Lightbown, David	Rowe, Andrew
Lilley, Peter	Ryder, Richard
Lloyd, Ian (Havant)	Sackville, Hon Thomas
Lloyd, Peter, (Fareham)	Sainsbury, Hon Timothy
Lord, Michael	St. John-Stevas, Rt Hon N.
Lyell, Nicholas	Sayeed, Jonathan
McCrindle, Robert	Scott, Nicholas
McCurley, Mrs Anna	Shaw, Giles (Pudsey)
Macfarlane, Neil	Shaw, Sir Michael (Scarb')
MacGregor, John	Shelton, William (Streatham)
MacKay, Andrew (Berkshire)	Shepherd, Colin (Hereford)
MacKay, John (Argyll & Bute)	Shepherd, Richard (Aldridge)
Maclean, David John	Shersby, Michael
McNair-Wilson, P. (New F'st)	Silvester, Fred
McQuarrie, Albert	Sims, Roger
Madel, David	Skeet, T. H. H.
Major, John	Smith, Sir Dudley (Warwick)
Malins, Humfrey	Smith, Tim (Beaconsfield)
Malone, Gerald	Soames, Hon Nicholas
Maples, John	Speller, Tony
Marland, Paul	Spence, John
Marlow, Antony	Spencer, Derek
Mather, Carol	Spicer, Jim (W Dorset)
Maude, Hon Francis	Spicer, Michael (S Worcs)
Mawhinney, Dr Brian	Squire, Robin
Mellor, David	Stanbrook, Ivor
Merchant, Piers	Stanley, John

Steen, Anthony	Waddington, David
Stern, Michael	Wakeham, Rt Hon John
Stevens, Lewis (Nuneaton)	Waldegrave, Hon William
Stewart, Andrew (Sherwood)	Walden, George
Stewart, Ian (N Hertf'dshire)	Walker, Bill (T'side N)
Stokes, John	Ward, John
Stradling Thomas, J.	Wardle, C. (Bexhill)
Sumberg, David	Warren, Kenneth
Tapsell, Peter	Watson, John
Taylor, Teddy (S'end E)	Watts, John
Tebbit, Rt Hon Norman	Wells, Bowen (Hertford)
Temple-Morris, Peter	Wells, Sir John (Maidstone)
Terlezki, Stefan	Wheeler, John
Thomas, Rt Hon Peter	Whitfield, John
Thompson, Donald (Calder V)	Whitney, Raymond
Thompson, Patrick (N'ich N)	Wiggin, Jerry
Thorne, Neil (Ilford S)	Wilkinson, John
Thornton, Malcolm	Wolfson, Mark
Thurnham, Peter	Wood, Timothy
Tracey, Richard	Woodcock, Michael
Trippier, David	Yeo, Tim
Trotter, Neville	Young, Sir George (Acton)
Twinn, Dr Ian
van Straubenzee, Sir W.	Tellers for the Noes:
Vaughan, Sir Gerard	Mr. Ian Lang and Mr. Tristan Garel-Jones.
Viggers, Peter

Question accordingly negatived.

Mr. Ashdown

On a point of order, Mr. Speaker. We have just had a debate on milk quotas. May I draw your attention to the problem of speaking quotas? I ask you to recognise that we all understand that you have a difficult job in finding a balance in these debates and that that must be done politically, and, I suppose, geographically as well. No fewer than three hon. Members from the 31 county seats of the south-west of England have spoken from the Conservative Benches, but not one Opposition Member. That is notwithstanding the fact that the southwest of England has been among the most affected by this disastrous move by the Government, which will cause major bankruptcies and unemployment.

May I draw your attention to the fact that the Labour party has had a considerable amount of speaking time, but the Labour party is completely unable to represent the south-west of England, where it lost its deposit in every seat? When we come to further debates on this issue, will you, Mr. Speaker, take into account the fact that I and many in the House and outside feel that the voice of the Opposition in those areas of England which have been most affected by the Government's actions have not been heard at all?

Mr. Tim Yeo (Suffolk, South)

rose——

Mr. Speaker

Order. I do not need any more points of order.

If the hon. Member for Yeovil (Mr. Ashdown) is saying that he has not been called, I am sorry. I should tell him that he has spoken 19 times in this Parliament which is not bad going. As he correctly told me, it is difficult to achieve a balance. He must take into account the fact that from the Opposition Benches today I had to call Members of the Liberal party, the Ulster Unionists and the Welsh Nationalists. I have done my best to balance the regions. Those hon. Members who did not manage to catch my eye in this debate will be given priority in the next debate.

Mr. Penhaligon

On a point of order, Mr. Speaker. I recognise your problems. I have been in the House for several years and recognise that Mr. Speaker does not always have an easy task when selecting people to speak. For all that, this has been an important debate for the rural areas of Britain. Constitutionally, we have had a debate when the real opposition in the rural areas of Britain has not had an opportunity to express its views. I cannot recall that having happened before in a debate in the House.

Mr. Speaker

Order. Et is unworthy of the hon. Gentleman to challenge my selection. I have heard plenty of opposition from both sides of the House tonight.