Agriculture Council

HC Deb 14 March 1984 vol 56 cc401-7 3.56 pm

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

With permission, Mr. Speaker, I wish to report to the House on the meeting of the Council of Agriculture Ministers which took place in Brussels on 11, 12 and 13 March. I represented the United Kingdom together with my hon. Friend the Minister of State.

The Council discussions mainly focused on milk and monetary compensatory amounts.

I am glad to tell the House that a substantial measure of agreement was reached on an important scheme for tackling the growing milk surplus and the horrendous increase in the budgetary costs of this sector. The principal element in that scheme is a supplementary levy. This will be charged on all milk produced above a specified quantity. This Community-wide quota for deliveries to dairies is 98.2 million tonnes for 1984–85 and 97.2 million tonnes for the succeeding four years of the proposed five-year agreement. I should add that 97.2 million tonnes represents the total of Community milk deliveries in 1981 plus 1 per cent., and the quotas will be divided between member states on that basis. The agreement provides for the levy to apply either at the level of the dairy, in which case deliveries in excess of the quota will be charged at 100 per cent. of the target price for milk, or at the level of the individual producer in which case excesses will be charged at 75 per cent. of the target price. Allocation of the quota in member states can be made on a more recent basis than 1981.

It was one of my main priorities to ensure that all producers without exception should be brought within the scope of the supplementary levy scheme. I am glad to say that that objective was achieved. There is no provision for exceptions for small producers or any other special category; and milk not delivered to dairies is also liable to the supplementary levy. The special aid to small milk producers was agreed for an additional two years. This will help with the income problems of small milk producers, but does not exempt them from the supplementary levy.

I know that the industry was concerned about having to face the full rigour of the basic quota immediately. I was therefore glad to accept an intermediate step for 1984–85. In order to finance the additional 1 million tonnes involved, I agreed to a 1 per cent. increase in the co-responsibility levy for one year only.

Under the agreement there would be no intensive levy on milk producers. This was a major objective for me because this would have discriminated seriously against the United Kingdom milk industry.

The agreement is related to a freeze on the common price for milk in 1984–85. There is provision for the butter subsidy to be reduced. But the United Kingdom price of butter to consumers will not increase.

The main outstanding issue relates to possible special arrangements for individual member states. There is reference to a Community reserve of 600,000 tonnes in addition to the basic Community quota. The Irish have maintained their demand for exception from the supplementary levy to enable them to continue to expand up to the average yield levels of the Community. I have maintained a reserve on the whole idea of a Community reserve and the linked question of any special arrangement for the Irish or other member states. The Irish made it clear that they wish to pursue this issue at the European Council.

The negotiations on monetary compensatory amounts centred on the German suggestion for dismantling existing positive MCAs, and for avoiding the creation of new positive MCAs at future EMS alignments. I have made it clear throughout that the United Kingdom is concerned about the budgetary implications of the German idea, but this is an issue of high importance to certain other member states. The text which was worked out in negotiation would provide for the dismantlement of German and Dutch positive MCAs in three steps. It does, however, recognise the special position of sterling as a floating currency.

If implemented, the United Kingdom positive MCAs would be reduced in the first stage by about 3 percentage points, but I am glad to say that there would be no effect on the level of support to United Kingdom farmers in terms of sterling. I have maintained a reserve particularly in relation to the budgetary costs of this arrangement. Because of these budgetary implications, the issue will be put before the European Council.

The texts on milk and MCAs are subject to a number of reserves, including a reserve related to the overall agreement on agricultural prices which will need to cover other commodities. The Agriculture Council will be resuming its work on Friday. But the agreement on the implementation of a supplementary levy is, I believe, a historic step forward in bringing sanity to the common agricultural policy. It marks a recognition by the Council that the milk sector cannot go on expanding and adding to the waste of Community resources. My concern now will be to discuss in detail with our own industry how we can most sensibly implement these arrangements in the United Kingdom.

Mr. Mark Hughes (City of Durham)

On behalf of the Opposition, I give a general welcome to the Minister's success in reaching an agreement which curtails surpluses and contains budgetary costs. Beyond that we will not go. A number of serious questions pertaining to the dairy industry in the United Kingdom must be asked as a consequence of the statement.

Does the Minister accept that about 150,000 milking cows will have to be taken out of production as a consequence of the agreement and that many dairy farmers will be forced into bankruptcy? Does he accept that these cows are among the most high-yielding, prized and best genetic cattle in the Community and that no differentiation is being made under the agreement between good quality cows, good dairymen and good stockmen, and bad cows, bad dairymen and bad stockmen?

What is the problem in relation to butter? Where is the price differential when we lose the subsidy so that the consumer and the producer of butter have access to an efficient and effective market? What is the meaning of the words, there would be no intensive levy on milk producers"? Does the Minister mean that there will be no levy on intensive milk production or no extra levy on milk production? His statement is unclear.

Can the Minister satisfy the House that there is no undercover arrangement for a tax to be imposed on oils and fats? That suggestion, which appeared in the press as the other side of the equation, would be wholly unacceptable. Does the Minister accept that the reserve that he has placed on MCAs requires a great deal of elaboration and that the reserve as it stands does nothing to secure the position either of the consumer or the farm producer? Does he accept that it leaves a great deal to be desired?

Does the Minister accept that, with all those problems, he has managed to arouse the total opposition of most of the National Farmers Union, the Farmers Union of Wales and the dairy industry and that he is bereft of friends on the agreement? Will he therefore ensure that all the reserves on all the other matters are carefully considered at the next meeting?

Mr. Jopling

I am grateful to the hon. Member for City of Durham (Mr. Hughes) for his general welcome of what amounts to controls over surpluses and costs. I noted what his hon. Friend the Member for Livingston (Mr. Cook) said from the Opposition Front Bench about the previous statement by the Foreign Secretary. It was then suggested that more stringent methods should have been used to control surpluses. We can discuss that on another occasion.

The hon. Member for City of Durham asked nine main questions. Farmers will have to decide whether to keep the existing number of cows and have them yield less or take some out of production. They are technical matters to be decided by farmers. The hon. Gentleman should not say that 150,000 cows will be taken out of production, because that is a matter for farmers to decide. The hon. Gentleman said that there is no discrimination between good and bad cows. Farmers will not find that a difficult problem to solve.

The hon. Gentleman mentioned the butter subsidy. We are in the middle of the negotiation and I am now making a progress report to the House. The proposal is to cut the butter subsidy by 75 per cent. It is currently worth about 15p a pound. The Commission proposal before the Council is to reduce the intervention price of butter. The two proposals will balance out. On that basis we are able to say that we do not anticipate consumers having to pay more for butter as a result of the arrangements.

I refer the hon. Gentleman to Commission document No. 500 of July last year, in which the intensive levy is explained. It deals with farmers who produce milk from relatively few acres. It would have been bad for Britain, because it would have hit 6 per cent. of our milk production. We have been able to resist it, because it would have been much worse for the United Kingdom, and perhaps Holland, than others.

I can assure the hon. Gentleman that we remain totally opposed to the oils and fats tax proposition. It was not discussed in the Council this week. I expect that we shall deal with it on Friday, Saturday and Sunday, if we stay that long.

The hon. Gentleman asked me to elaborate my reserve on MCAs. The difficulty with the first stage of the German proposal, which is to revalue the ECU and reduce the level of positive MCAs without reducing the prices of farm produce, is that, at the other end of the scale, it increases the negative MCAs and gives an opportunity for a devaluation in negative MCAs to the countries concerned. That could be extremely expensive for FEOGA funds. We estimate that in a full year it would cost about 401 million ECU. That is what we are especially concerned about, and that is my reserve.

The hon. Gentleman said that our proposals were opposed by the NFU and the dairy industry. The proposals for a milk super-levy at farm level are supported by the Scottish NFU and by a great many individual farmers. I believe that there will be a general welcome for the fact that, unlike the original Commission proposals, the arrangements that appear possible now—although they are not decided clearly—would not imply a decrease in United Kingdom farm prices, as was originally proposed and about which the NFU was rightly anxious.

Several Hon. Members

rose——

Mr. Speaker

Order. I must protect the business of the House, and a great many right hon. and hon. Members wish to take part in the debate on the Chancellor's Budget statement. I shall allow questions on this important statement to continue until 4.25 pm.

Sir Peter Mills (Torridge and Devon, West)

I am sure that the whole of the agriculture industry is grateful to my right hon. Friend for what he has done on the MCAs and the green pound. However, will he bear in mind that, because of the measures, the dairy industry will he in serious difficulties and any cut will be unpleasant, even though it must be made? Will he also bear in mind that it would be far worse if there were any unfairness or cheating by other countries. The extra 600,000 tonnes that will be allowed must not go to the Irish dairy farmers, making it even more unpalatable for British farmers. Will my right hon. Friend bear in mind that fairness in future is the keynote?

Mr. Jopling

I am grateful to my hon. Friend for his kind words, especially about the proposals on MCAs, as far as they have gone. Of course, I accept and agree that to cut milk production, as will be necessary throughout the whole Community, will create major difficulties for milk producers. But, as my hon. Friend said, it has to be done. The problems will have to be faced as soon as possible.

I take on board entirely what my hon. Friend said about the danger of cheating in other countries. We will do all that we can to ensure that these matters are properly controlled. I noted his remarks about exceptions for Ireland and other countries. That is a matter on which we put a reserve, and which will no doubt be discussed by the European Council next week.

Mr. Geraint Howells (Ceredigion and Pembroke, North)

Will the Minister inform the House and the dairy producers of Britain whether the proposals are short or long-term measures to help the industry on its way? Perhaps he will clarify the sentence in his statement: Allocation of the quota in member states can be made on a more recent basis than 1981. Does that suggest that British dairy farmers can be based on 1983 production?

What has the Minister in mind to help those dairy producers who have entered the industry since 1980?

Mr. Jopling

The milk proposals involve a five-year scheme with a review in three years. The split-up of the national quota can be done on 1983 or any other up-to-date yardstick, so that hard cases can be dealt with. There will be provision for the Government, the Milk Marketing Board or whoever will be responsible for running the schemes—that is a matter that we must discuss—to make a reserve to deal with the hard cases that the hon. Gentleman has in mind.

Sir Hector Monro (Dumfries)

Will my right hon. Friend bear in mind the fact that this is a complex issue? Now that the decision has been taken, is it not important to restore confidence to the dairy industry? Will he say a little more about the timing of the proposals? Even if it is hypothetical, can he say what might be the drop in income of a 100-dairy-cow farm?

Mr. Jopling

I agree with my hon. Friend about the need for confidence. I have told the House previously of my anxiety about the uncertainty throughout the agriculture industry, which does not quite know what is happening but realises that something must be done.

I cannot help my hon. Friend on timing. Clearly those are matters about which we shall embark on early discussions with trade interests and the NFUs. We need to carry out a great deal of consultation.

It is impossible at this stage to make assumptions about the effect on individual farmers. That will depend on many matters—for instance, the price of cereals.

Mr. Thomas Torney (Bradford, South)

Will the Minister explain or justify his remarks to the angry lobby of British farmers—as reported in The Times this morning—that he believed that the agreement on milk was right for Britain? I ask that question because The Times also reported that the percentage cut in milk from France was 2.95 per cent., whereas for Britain it was 7.32 per cent. Should we not remember that France produces most of the surplus while Britain produces no surplus at all?

In view of the excellent questions put to the Minister by my hon. Friend the Member for City of Durham (Mr. Hughes), outlining the seriousness of the proposals, will the right hon. Gentleman arrange a full debate in Government time with a vote at the end?

Mr. Jopling

The hon. Gentleman's last point is a matter for my right hon. Friend the Leader of the House who, no doubt, will say something about that tomorrow.

The basis of all this is that, during the past few years, French milk production has been relatively stagnant compared with ours. The French have been pressing for an exemption from super-levy for their small producers. I am glad to say that no exemptions have been agreed for small producers or for any other special categories. France and some other countries have substantial off-farm sales of milk and milk products. Those do not go through dairies. In France they account for almost 5 per cent. of deliveries. We have insisted, and it has been agreed, that they must be included in the levy system.

The French were insistent about the levy on intensive milk production. As I said earlier, that would have hit 6 per cent. of our milk production. We have insisted that the matter be dropped, and it has been.

I can sum up the matter by saying that I read in the French press that the leader of the main French farmers' union said: The French Government has yielded too much and accepted too many restrictions while France's European partners have not accepted the same sacrifices. I believe that he is right.

Mr. Ralph Howell (Norfolk, North)

I congratulate my right hon. Friend on at last accepting the idea of production restraint and on-farm quotas. That arrangement has been long overdue. It will save the dairy industry in Britain and is the only way to proceed.

Mr. Jopling

I am grateful to my hon. Friend. I know of his long belief in on-farm quotas. I remember the wise words of the Howell report some years ago.

Mr. Robert Maclennan (Caithness and Sutherland)

We recognise that this is the first step in what the Minister described before the Brussels meeting as the "painful adjustments" that the industry would have to make. Is the right hon. Gentleman determined to ensure that reduction of the positive MCAs will not place our industry at an unfair competitive disadvantage with other member countries? What is the time scale for the German proposal? Why has the right hon. Gentleman spoken only of the impact on farm incomes in Britain during the first of the three periods?

Mr. Jopling

The German proposal is that there should be a revaluation of the ECU this year, but that would not mean a reduction in farm prices for those countries for which there was a positive MCA. It would, however, give the opportunity for countries with weak currencies to devalue their new negative MCA.

The second stage of the German proposal is for a revaluation of the German and Dutch positive MCAs, but allowing them to compensate their farmers through value added tax for the reduction in farm incomes that would be implied by that. That stage would not apply to sterling, as I said earlier.

The final stage of the German proposal is that the remaining part of their MCAs would be taken out of annual price increases through the so-called gentleman's agreement.

Mr. Nicholas Winterton (Macclesfield)

I congratulate my right hon. Friend on his courageous presentation of the matter at the negotiations. Is he aware that this is a sell-out of the British dairy industry? He may be able to quote the Scottish NFU, but no other farming body is prepared to support him on the agreement which he has made, which will result in at least 5,000 British dairy farmers going out of business. Is he aware that not one dairy farmer in my area will give him support for the announcement that he has made today?

Mr. Jopling

I am surprised to hear my hon. Friend make those remarks. For many months he has expressed his opposition to a supplementary levy. In the debate on 21 November, my hon. Friend expressed his view on that matter. On that occasion I invited him to tell me how we should deal with the over-production of milk, to which he gave me the sage reply that that was a matter for me, not for him.

Mr. Eric Deakins (Walthamstow)

Once the Community's own resources are increased, what will prevent the Council of Agriculture Ministers from meeting to modify the agreement substantially in the interests of European milk producers?

Mr. Jopling

These matters are not finalised. As I said, we shall be having further meetings on Friday and Saturday to discuss the other products which are an integral part of the price package and of Commission document No. 500. Clearly some matters affecting milk and MCAs are reserved for the European Council. This is a progress report. There remains a good deal to be settled.

Mr. Jerry Wiggin (Weston-super-Mare)

Is my right hon. Friend aware that, given the complexities and difficulties of the milk surplus, to have reached any agreement is most commendable? Is he further aware that a reduction in production need not necessarily lead to a similar reduction in profitability? Will he bear in mind the words of my hon. Friend the Member for Dumfries (Sir H. Monro) that it is important to get this over in clear language to our farmers, because the mumbo-jumbo of Brussels will strike fear, perhaps unnecessarily, into many hearts?

Mr. Jopling

I am totally in sympathy with what my hon. Friend says. I reject the suggestion that this is a sellout. I agree with him that a drop in yield does not necessarily mean a drop in profit. I also agree that it is important that as soon as possible farmers should know where they are going and what the implications are.

Sir Anthony Meyer (Clwyd, North-West)

Does my right hon. Friend accept that if there must be an agreement, clearly there must be some concessions, and that even so deserving a body of people as the milk producers must be involved in that process? Is he aware that there will be general support for the fine agreement that he has managed to bring home?

Mr. Jopling

I am particularly glad that from the point of view of exemptions—and I always said that my principal concern was that this arrangement should not discriminate against British farmers—I have not had to make concessions. Therefore, concessions will not be given. I remind my hon. Friend that farmers in this country have the major advantage of living in a state which has a relatively low level of inflation. Farmers in other countries—such as France, with 9 per cent. inflation—will have many more troubles than our farmers.

Mr. Ron Lewis (Carlisle)

Is the right hon. Gentleman aware that in his county, Cumbria, farmers are very disturbed about this agreement? Is he further aware that many of them believe that they could be put out of business? Will he give an undertaking, at least to Cumbria, that there will be no cuts in milk production?

Mr. Jopling

If the hon. Gentleman was in his constituency on Saturday—he probably was—and heard BBC Radio Cumbria, he would have heard that, following my meeting with the Cumbria NFU, the chairman of that body was kind enough to say that he had no major disagreement with me.

Several Hon. Members

rose——

Mr. Speaker

Order. In the interests of balance, I shall call one more hon. Member. Mr. Hicks.

Mr. Robert Hicks (Cornwall, South-East)

In view of the constraints that are to be placed on the dairy producer, may I ask my right hon. Friend to say how this fits in with his oft-declared objective of correcting the imbalance that has occurred between the livestock and grain growing sectors?

Mr. Ron Lewis

He cannot.

Mr. Jopling

I can do that very well because I have been arguing—and I was arguing last night in the Council of Ministers—for a reduction in grain prices. Grain prices are too high, and the livestock sector has been very hard hit.