Potato Marketing Board

HC Deb 08 February 1985 vol 72 cc1300-8

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

2.31 pm

Mr. Roger Gale (Thanet, North)

Last June, I came before the House with a request for an inquiry into the activities of and proposed amendments to the Potato Marketing Board. That inquiry was held in August and September last year, and the inspector's report was published in December. I am grateful for the opportunity to readdress the Minister's attention, in the light of that report, to a subject of escalating importance to many potato growers in my constituency and throughout the country.

The purpose of the inquiry was to determine whether the Potato Marketing Board and its schemes were effectively aiding English potato farmers. The lengthy hearings conducted by Mr. Brian Capstick QC concluded that the board, especially in the light of its new proposals, would benefit the traditional grower of main crop potatoes —those farmers who lift their crop after 30 June each season. However, the report did not address itself to three vital areas of concern: the position of the first early grower, the quality control of imported potatoes, and the growth in imports of processed potatoes. I shall discuss those three matters.

First, I shall try to explain the cause of the estrangement between the early growers and the board. The original purpose of the potato marketing scheme was to create and protect an economically stable potato market, especially in years of surplus and of drought. Generally speaking, those who subscribed to the scheme abided by the board's decision to grant or curb acreage and so control production. In theory, that notion appears beneficial, but empirically it is not. The process has become the antithesis of success and has destroyed the fair competition of a free market.

Through embracing the scheme, the English potato growers have become the only growers in the European Community to be reined so tightly, and it refutes entirely the policy of the National Farmers Union, which appeared in "The Way Forward" published in September 1984. It states: There will always be scope for a competitive UK industry to improve its place in the market as long as it is allowed to compete on equal terms. British farm policy can only be administered within EEC legislation. Any farming restraints must apply equally throughout the Community. A free competitive market does not exist for English early potato growers. They are subject to acreage quotas; their Common Market counterparts, the French and the Greeks, are not. While the Potato Marketing Board continues to control and police domestic production, it has absolutely no control over imports. So we learn that for the past four years since the EEC ruling — between the critical harvesting and marketing dates of 1 and 30 June—almost a quarter of the new potatoes that the British household consumes come from abroad. In short, we are giving away my constituents' livelihoods.

My hon. Friend will tell me that the position is about to change. In his most courteous reply to my Adjournment debate, he said that the board was aware of the anxiety of early growers and is drawing up proposals under which additional basic area can be allocated annually to first early growers." — [Official Report, 4 June 1984; Vol. 61, c. 137.] Mr. Brian Capstick, in the report that we are discussing, says: If producers intended to lift potatoes in May and June additional basic area would be made available if they could demonstrate a capacity to grow economically additional potatoes for lifting by 24th June". I do not doubt that my hon. Friend believed, as the inspector believed and as my constituents believed—that is why they did not make more of the matter at the inquiry — that this meant that a freer rein would be given to first early growers, but not so. The writing was on the wall for those who wished to see it, for the terms and conditions under which this gift of additional acreage would be granted had been spelt out—and carefully fudged—by the time the inquiry started, although not, I must make it absolutely plain, by the time my hon. Friend made his statement in this House.

In Potato News in July of last year the scheme was published: The Board has approved the provision of one year grants of additional basic area to enable those producers who grow first earlies, intended for marketing during the month of May and the first part of June. This will enable them to achieve an optimum share of the potential market in competition with imported new potatoes". So far, so good — exactly what we want. The requirement for grant will be the ability to economically grow for lifting by June 24 the additional area sought in addition to that normally grown". The Potato Marketing Board will need to consider whether the increase can be economically accommodated not only by the individual but by the industry as a whole". I assume that it means the French, the Greek and the Egyptian industries. But the position gets worse.

A first letter to Mr. Arnold Hitchcock, the chairman of the board, produced a reply referring me to Potato News. A second letter on 13 December — prompted by the realisation that my first early growers were not being granted the additional acreage they had sought — came closer to the truth that we now all know. Mr. Hitchcock certainly made the same points, although offering no explanation of what was meant by "economically grown". Potato News had said that the extension of the area intended for May and June marketing will be made cautiously and the area granted to any one grower may be restricted". It may indeed; it may be restricted to no additional area at all.

In his letter of 13 December—this was not published in Potato News—Mr. Hitchcock says: The Board … excluded all those clearly unable to grow and lift by 24 June. It … further excluded producers who grow both early and main crop varieties and who had lifted less than 80 per cent. of the early varieties by 24th June 1984". So what is the result? Fewer than half the applicants were granted a quarter of the additional acreage applied for—a grand increase of 6 per cent. of the acreage of early potatoes planted in a normal year. What is the anticipated yield from that extra 6 per cent.? What proportion of the minimum 22 per cent. of our market that we are currently giving to foreign producers will that win back? The Potato Marketing Board does not know. Asked for the answer this morning, a spokesman for the board said: The anticipated increase in yield in tonnes per acre has not been formulated". So upon what basis has the increase in acreage been calculated?

Such increase in allotted acreage as there has been has been matched against a decrease in the time available to lift early potatoes, now 24 June instead of the second Saturday in July. Again, the marketing board said this morning that that meant that there would be a decrease in the first early potato yield, and, therefore, presumably yet more imports from abroad. The deal begins to look like agriculture's answer to the three-card trick—now we see it, now we do not.

Let me refer briefly and specifically to one Thanet grower, Mr. Rex Goodbar. In evidence to the inquiry, counsel for the marketing board said that Mr. Goodbar would qualify for quota reinstatement and one-year grant. That is down in black and white. On 29 January the marketing board wrote in final response to Mr. Goodbar that because the basic area committee was not entirely confident that the criteria could be met Mr. Goodbar did not qualify. But in reply to the straight question: Is your refusal based on evidence proving that I cannot comply with the criteria? it said: No. You may be able to prove your ability to comply with the criteria which would improve the chances of you having a successful application in the future. I know that my hon. Friend the Minister made his statement to the House in good faith. He is an honourable man. But I believe that he, the inspector and the early growers have been sadly and profoundly misled by the Potato Marketing Board.

On processed imports the inspector, in his report, says: Although I have heard a mass of evidence this is not an area in which I can make any helpful comments in this report beyond saying that the situation calls for continuous vigilance and, if need be, a flexible and resourceful response from the board. The processed potato is the growth area of the market. It suits the modern housewife, restaurateur and hotelier. Frozen and dehydrated potatoes, suitable for chips and crisps, are infinitely easier to transport than seasonal potatoes and that convenience has obviously attracted our foreign competitors.

Quotas are enforced by the Potato Marketing Board to maintain high prices for English products, but European growers, who are not restricted by such quotas, are profiting by transporting huge quantities of processed products which retail at a lower price, having been transported and transport costs having been paid, than British potatoes.

Giving evidence to the inquiry, Mr. Young, the director of Scott and Newman Limited, insisted that the foreign penetration in processed potatoes had not been halted and considered that the higher levy (pressed upon domestic produce) might be an advantage to European growers by raising UK prices so that they could compete more easily —they being the European producers. He concluded: It would take management of the very highest skill and good fortune to keep the GB prices within a narrow band which did not attract imports, particularly of processed potatoes. Clearly, within the present regime, that skill does not exist.

I refer to the figures given in a written parliamentary answer yesterday. The figures show a growth in domestic consumption in the past four-year period of 377,000 tonnes of processed potatoes. Over the entire period imports accounted for more than two thirds of that growth and in the past disastrous year imports not only accounted for the entire market growth but encroached upon our home production by 11,000 tonnes.

Quite simply, the processors, because of the board's regime, cannot buy their raw material economically here so they have gone abroad. Even the figures for home-processed potatoes do not reveal what percentage of ware potatoes processed here were originally imported from abroad.

We are talking not about dry statistics, but about British farmers, British industry and British jobs. The Potato Marketing Board is driving those jobs abroad. It is simply not good enough for the inspector to say: This is not an area in which I can make any helpful comments". My hon. Friend is charged with the awesome task of promoting and protecting our home industry. I beg him to do just that before it is too late.

I represent today, I hope faithfully, the views of many potato growers and many hon. Friends as well. My hon. Friends the Members for Gedling (Sir P. Holland) and for Norfolk, North (Mr. Howell) have particular constituency interests in this matter. My hon. Friend the Member for St. Ives (Mr. Harris), another major first early area, has been as staunch in his defence of his constituents' interests as I hope I have been of mine.

Britain grows the finest potatoes in the world. But even our quality controls are not transferred to imports, and that brings me, in conclusion, to the third aspect of the report of the inquiry, sadly lacking by omission. While our home-grown produce is, rightly and in the consumers' interests, subject to rigid standards, no such standards apply to imported potatoes. Answering that point in June, my hon. Friend said: I have undertaken to study the matter and I hope to be able to say something about it shortly."—[Official Report, 4 June 1984; Vol. 61, c. 137.] In a written answer yesterday, he acknowledged, with characteristic honesty and candour, that Following a comprehensive examination of the feasibility of extending quality controls to imported potatoes I have concluded that it would prove very difficult to take action … the introduction of legislative measures would almost certainly carry with it the threat of Community legal challenge. To avoid challenge, we should have to proceed on the basis of the lowest standard obtaining in other member states of the Community, which would not necessarily help our growers." — [Official Report, 7 February 1985; Vol. 72, c. 693.] My hon. Friend might have added — and I am sure that he believes—that it would not help the consumer, either.

The Potato Marketing Board was set up to create an economically stable potato market and to protect quality. We have established this afternoon that since the EEC ruling four years ago, the board has been unable to control the market, because it cannot control imports, and cannot control quality. Faced with the need in the early potato market for flexibility and resource, it has responded with rigidity and timidity.

I commend the diligence of Mr. Brian Capstick for the many hours of painstaking and expensive hard work that he put into his report. Working with one hand tied behind his back, he has produced a document that will, when the statutory instruments have fought their way through the House, improve the electoral processes of the Potato Marketing Board. However, the product of his diligence and hard labours has not satisfied those who were most to benefit — the growers, who are continually battling against foreign imports. The only solace is an adamant desire for a stringent effort by the Potato Marketing Board to co-operate and support the growers.

My hon. Friend the Minister will say that the new regulations, when introduced, will make it easier for the growers to call a poll and make their opinion heard. Mr. Goodbar writes this morning—I think that we can take it that he is not a lone voice—that Whilst accepting that we may call a poll of producers after 1st July, we are concerned that the board will conduct a massive publicity campaign to all producers giving yet more assurances—which may or may not be honoured—in order to get a vote for its continuance. We are concerned that we have neither the addresses nor the finances to match this. In order to have a fair assessment by growers they should be able to have the full facts and hear both sides of the case. Even allowing for Mr. Goodbar's personal strength of feeling, his point is well made.

My constituents and many others look to my hon. Friend for urgent help. For the first early growers and the processors, the board has had its chance.

2.47 pm

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

I am grateful to my hon. Friend the Member for Thanet, North (Mr. Gale) for providing this opportunity to bring up to date the developments in the potato marketing scheme since the Adjournment debate that we had together last June. That was before the public inquiry, which was held last August and September to consider the Potato Marketing Board's proposals to amend the potato marketing scheme.

The debate is particularly timely because shortly we shall be seeking the approval of both Houses—indeed, I believe that it will be next week — to the draft scheme amendments which were laid before the House on 20 December and to two orders giving effect to revised support arrangements for potatoes, which were laid before the House on 23 January.

My hon. Friend concentrated on three issues, none of which is specifically covered by the amendments which we shall discuss in the House next week. They were debated at the inquiry, but they were not the main thrust of the inquiry. I hope that my hon. Friend will forgive me if I say a little about the inquiry and developments since then before I refer to his three points.

My hon. Friend talked about many potato growers throughout the country being concerned about the points that he raised. I do not deny that some potato growers are worried. However, it is important to do this — and I have to do it. We must look at the matter in perspective. My hon. Friend did not say how many growers were much more supportive of the board's proposals. It is worth making the point that the chairman of the inquiry estimated that about three quarters of 1 per cent. of the total number of registered producers objected to the board's proposals. That puts the situation into perspective. Therefore, I must consider the matter as a whole and take into account the views of other growers.

For the sake of completeness, let me set out the background to the public inquiry. I shall do so briefly, because I referred to it in the Adjournment debate in June. Towards the end of 1982 the Government decided to conduct a thoroughgoing review of the support arrangements that we apply to potatoes. There is, of course, no Community regime under the common agricultural policy for potatoes, and we are therefore free to operate our own national arrangements, subject only to keeping the Commission informed of the measures adopted. Our present system of support is based on powers contained in the Agriculture Acts of 1947 and 1957, which enable Ministers to provide guaranteed prices or assured markets for potatoes. Our arrangements are founded essentially on the annual determination of a guaranteed price and the making of a deficiency payment if the price received by producers falls below the level of that guaranteed price.

The Government act jointly with the Potato Marketing Board over market support arrangements, but I stress, in view of what my hon. Friend has said, that the board is a producer organisation and is independent of the Government. That means that if producers wish to oppose, for example, the amendments put forward or to revoke the scheme, they have the opportunity to do so if they can get sufficient support from other growers. Effectively, the decision is theirs.

I am sure my hon. Friend welcomes the fact that one of the amendments put before the House by the marketing board makes it much easier for producers to object to proposals or to demand a poll to revoke the scheme. That amendment proposes to reduce the number of producers needed to demand such a poll from 1,000 to 400 and to reduce the qualifying area from 8,000 to 4,000 hectares. That is a small proportion of the number of producers.

The objectives of the review to which I have referred were to consider whether our support arrangements were still relevant to the current and future needs of the industry and to re-examine the need to continue to commit public funds for potato market support. That is relevant to what my hon. Friend said, because the review led eventually to the proposals considered by the inquiry. Therefore, the review was a fundamental stage in the arrangements that we propose for the next five years.

The review was conducted against the background of the Potato Marketing Board facing severe financial difficulties resulting from its inability to raise sufficient income from producers to meet its full share of market support costs, and a consequent need for the Government to provide additional funding to help the board meet the cost of its 1982 crop support operations.

From the review, we were looking for ways of ensuring a stable, efficient and competitive potato industry, while securing the financial self-sufficiency of the marketing board and limiting the extent and hitherto open-endedness of the Government's future commitment to market support financing.

I announced the outcome of that review to the House on 29 February last year. We concluded that we had to take into account the fact that the potato market is highly volatile and that yields can vary dramatically from season to season. For example, this season main crop yields are almost 8.5 tonnes per hectare higher than last season. We therefore concluded that a sudden switch to a free market would significantly increase the chances of price instability and could adversely affect levels of production and consumption.

Our second conclusion was that stabilisation of the potato market, within a limited managed market framework, would help to avoid disruption, would retain producer confidence in the crop and would, thus, give consumers some assurance of supplies at reasonable prices.

The Government's aim was to reduce our commitment to the costs of market support by the end of a five-year running-in period for the new arrangements. That was, and is, an important part of our review. We felt that a greater responsibility should be placed on producers for meeting the costs of market support in years of average surplus and that the Government should contribute to such costs only when exceptional surpluses arose. As a first step to achieving that aim, the board agreed to increase its levy on producers to around twice the current level. That will enhance the size of the board's own resources and facilitate the building up of reserves.

As I announced to the House on 29 February last year, the Government agreed to help the board along the path to financial self-sufficiency by making grants to meet any shortfall in producer funding of market support during the five-year running-in period. Moreover, because the board cannot increase its income from producers, through the higher levy, until the second half of this year, we are making similar shortfall grants available to cover this season's support buying obligations.

The Government's share of this season's support costs under the financial agreement with the board cannot be calculated until after the season is over and the average producer price has been determined. In the meantime, the Government will advance such money as is necessary to keep the board solvent. The House will be kept informed of the level of expenditure through the normal financial procedures.

The 1984–85 spring Supplementary Estimates include £5.869 million for this purpose. This commitment was undertaken to give the new package of support measures a fair wind and to enable the Potato Marketing Board to enter 1985–86 without a heavy debt burden which would severely undermine its ability to pay its way in the future.

There are two further elements in the financial package which I refer to briefly and put on the record. My right hon. Friend the Minister informed the House on 24 June 1983 that the Government were making loans of up to £7.4 million available to enable the Potato Marketing Board to meet its 1982 crop support obligations. In the event, only £5.9 million of the facility was drawn upon. If the House approves the package of measures now before it, we shall make appropriate arrangements to have the amount written off again so as not to saddle the board with heavy indebtedness as it enters the new arrangements.

The final element in the package changes the emphasis of market support from the current system of deficiency payments to the provision of an assured market for a much smaller element of the crop. The House will be asked to approve the continuation of the deficiency payment arrangements, which are extremely open-ended, applying as they do to about two thirds of the crop, and impose a potentially very high commitment on the Government. Instead, we shall provide assured markets for less than 600,000 tonnes of potatoes in the United Kingdom and will redraw the cost-sharing formula to bear more heavily on producers in seasons of average surplus.

That is the background, and these proposals were accepted by the Potato Marketing Board and by the farmers' unions, which undertook to commend them to their members. There also arose a consequent need for the board to propose certain amendments to the scheme.

One of the principal objectives of the new arrangements was to place the board on a much sounder financial footing for the future. To achieve this, the board undertook to propose an amendment to the scheme which would have the effect of increasing its levy on producers to £75 per hectare in 1985 from its current level of £36 per hectare.

The potato marketing scheme lays down in precise detail the procedures which have to be followed in proposing amendments. I explained these to my hon. Friend during our last Adjourmment debate. Subsequent to that, we decided to hold a public inquiry in view of the objections and representations received following the formal announcement by Ministers that the board had submitted proposals to them. Every objection and representation that we received was passed on to the chairman of the inquiry. In his report he concluded that there were 130 objections, 84 of which were in standard form, and 34 written representations.

I am sure my hon. Friend will agree that it was a very thorough inquiry. Every opportunity was given to every objector to put his case, and they were all thoroughly sifted. I pay tribute to the way in which Mr. Brian Capstick carried out that inquiry.

Following the inquiry, Mr. Capstick came to the conclusion that, with some little modification, the proposals that had been put, with amendments from the board, should be accepted in full. The modifications which he suggested were put formally to the board, which accepted them. It is on that basis that we are putting them before the House.

In the light of the criticism that my hon. Friend makes, I repeat that the most thorough consideration has been given to the whole matter. There was a full opportunity for a poll which, if a sufficient number had demanded it, would have taken place. Every scope has been given to the objectors. It is clear that the vast majority of producers support what the board proposes. That is what the inspector concluded after his lengthy, exhaustive and fair hearing.

I come to the specific matters raised by my hon. Friend. The first concerns early growers. As my hon. Friend will know, this is a matter for the board and not for the Government, but I understand that assisstance is being given in three ways, and I have seen my hon. Friend's correspondence about this matter with the chairman of the board.

The early lifting rebate will be increased from 50 to 75 per cent. of the ordinary contribution paid by growers. Secondly, additional basic area will be allocated to producers who intend to lift their potatoes in May and June to enable them to compete more effectively with imported early potatoes. That is happening this year. Thirdly, arrangements will be introduced for basic area May and June production which will be outside normal quota arrangements. These special arrangements will apply only to established early producers—those who have received early lifting rebate during the previous three years.

As my hon. Friend will understand, I cannot comment on specific cases such as the one that he raised. However, the board is making a genuine attempt to help the early potato growers. This is a start and an experiment for the first year. The point about its insistence on those who have been in early potatoes before is to ensure that we have competitive growers. This is an area which is extremely sensitive to volumes reaching the market. Prices can change very substantially, even in a week. That is the reason for the board's intention to proceed cautiously. On the whole, it seems sensible.

Careful phasing of supplies has been shown in the past to be essential if market disruption is to be avoided. That also is why the board has been having discussions with the importers to ensure that there is not that kind of market disruption.

As my hon. Friend knows, I have encouraged the Potato Marketing Board to co-operate with the processors most closely, otherwise market opportunities may be lost. I take my hon. Friend's point about that, because it is one that concerns me. We should ensure that our own growers are thoroughly competitive and that they meet market requirements such as the processors require.

There is a growth in demand for processed products, in which the United Kingdom industry must compete. Potato producers must take account of the needs of the market to maximise their returns. For their part, the potato processors must work with producers to help them understand their requirements. It is that dual consultation that I have been encouraging. I agree that the Potato Marketing Board has a vital role to play in this area, and I believe that it is responding as my hon. Friend asks it to do. There is now a much greater understanding of the importance of co-operation among all parties, and the processors have told me that relationships are much better. I shall continue to encourage that.

Finally, I promised that I would make a statement about imported potatoes. I told my hon. Friend yesterday about the real problems, especially on the Community side, of going further and that there was a real danger that we would have to proceed on the basis of the lowest common denominator, which would not necessarily help our growers. I can assure my hon. Friend that I have looked at this most carefully, but that for the reason that I gave him yesterday I have not felt able to extend quality and grading controls to imported potatoes.

I believe that the inquiry and the whole process of review has been most thorough. I hope that it will be acceptable to the vast majority of growers.

Question put and agreed to.

Adjourned accordingly at one minute past Three o' clock.