Milk (Cessation of Production) Bill

HC Deb 10 January 1985 vol 70 cc915-67

Order for Second Reading read.

4 pm

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

I beg to move, That the Bill be now read a Second time.

Last May, when I declared the Government's intention to introduce an outgoers compensation scheme for milk producers as part of the milk quota arrangements, I said that I should seek legislation as soon as possible to provide the necessary statutory authority for the payments that we intended to make under the scheme. The primary purpose of the Bill is to provide that authority.

The outgoers scheme is one element in the Community supplementary levy arrangements for milk. The introduction of the arrangements after last year's price fixing was intended to achieve an immediate cut in production in most member states in an attempt to restrain the growing surplus in the dairy sector and the ever-growing expense to the Community of disposing of that surplus. In 1983–84, the milk sector alone was supported under the common agricultural policy to the tune of more than £3 billion of Community money, with the prospect that this would rise to about £4 billion in 1984–85 and exceed budget provision unless drastic measures were taken to curb over-production.

As I have often told the House, we argued strenuously in Brussels for action via the price mechanism, but it became clear that other member states would not agree to price cuts of the severity necessary to deal with the problem. The only prospect for effective action to tackle the surplus was therefore through a quota scheme, and agreement was accordingly reached on a package of measures involving quota for each milk producer and a supplementary levy on milk produced in excess of quota.

In the United Kingdom the introduction of quotas required an immediate cut in production of 6.15 per cent. by comparison with the 1983–84 marketing year if producers were to avoid supplementary levy. In addition to this we felt it necessary, in accordance with provisions in the Community legislation, to provide a reserve of wholesale quota for reallocation to producers who satisfied special case criteria. About 2.5 per cent. of the United Kingdom quota was held back to fund the reserve for special cases. Overall, then, with the production cut and the amount withheld for the special case reserve, United Kingdom wholesale producers' primary quota allocations—that is, their basic quotas—have been set at 9 per cent. below their 1983 production levels.

It is a matter of common consent that one group of producers has been particularly hard hit by the imposition of production quotas — the small specialist producers who have no alternative to milk production because of the kind of farms that they occupy and little scope to adapt their dairy enterprises to lower levels of production under the quota system. We wanted to do something to help those smaller producers. In England and Wales, those producing less than 200,000 litres per year represent about 40 per cent. of all milk producers. Our aim is to enable those producers to return to their 1983 levels of production without becoming liable to supplementary levy. We also decided, particularly in the light of the views expressed by hon. Members in the debate on 3 July, to make provision to help producers who might suffer exceptional hardship because of the introduction of quotas.

On the other hand, we felt that there were many producers, especially small producers, who would be willing to leave dairying altogether if means were found to make it easier for them to give up production and to move into some new enterprise or, for those of retirement age, to leave agriculture altogether. The quota released by those producers could then be reallocated. We estimated that for Great Britain about 1.25 per cent. of total quota would be needed to meet our objective of helping those small producers who wished to stay in milk production.

Mr. Geraint Howells (Ceredigion and Pembroke, North)

The Minister's tone of argument seems to suggest that the Government want to get rid of small producers and look after the interests of the big ones.

Hon. Members

No!

Mr. Jopling

The hon. Gentleman has misunderstood, as the reaction of my hon. Friends shows. That is not what I was saying.

We added a further 1 per cent. to the 1.25 per cent. to assist other categories of producer particularly adversely affected by the introduction of quotas. The objective, therefore, was to buy up 2.25 per cent. of the total quota in Great Britain. In Northern Ireland we set the objective at 5 per cent. of quota in view of the greater reliance on dairying, the rate of expansion in the past few years and the number of small producers there.

The quickest and most effective way of releasing the extra quota needed was to introduce an outgoers scheme under which producers would receive compensation in return for surrendering their quota, which would then be reallocated to those in particular need. Our outgoers scheme accordingly came into operation on 24 July.

Naturally, it has been necessary to impose certain conditions on participants in the scheme. First, they must surrender their quotas in full and will not be able to return to milk production so long as the quota scheme is in operation. Secondly, tenants in England and Wales will have to obtain their landlords' consent to surrender their quota. I am aware that this has led to difficulties for some tenant farmers, but in many cases it has been possible for landlords and tenants to reach amicable agreements allowing the tenant to become an outgoer. The House may be interested to know that 45 per cent. of the payments that we have made under the scheme so far have gone to tenant farmers. That is an important figure, which may surprise many hon. Members. Many tenants have therefore been able to reach agreement with their landlords and I am grateful to the president of the Country Landowners Association for recommending to his members that before any decisions are taken they discuss them with, and consult fully, any of their tenants interested in becoming outgoers.

As regards the cost, we are devoting up to £50 million to the scheme over five years at a rate of 13p per litre of quota surrendered, or the equivalent of about £650 per cow at a yield of 5,000 litres per cow. The response shows this to be a reasonable incentive.

The last feature of our outgoers scheme to which I should like to draw attention is its non-statutory nature. There were several reasons why we felt it necessary to introduce the scheme without specific parliamentary authority.

First, it was vital to the success of the scheme that it be brought into operation urgently so as to encourage outgoers to surrender their quota before they had used up too much of their 1984–85 allocation. There was, however, no existing United Kingdom legislation on which we could base an outgoers scheme. The Community provision allowing the payment of compensation to outgoers is permissive only and member states are not under any Community obligation to introduce outgoers schemes. For this reason, section 2 of the European Communities Act 1972 did not provide powers for the introduction of a statutory outgoers scheme, although it provided for the introduction of other parts of the supplementary levy arrangements through the dairy produce quota regulations 1984 which were made under section 2 of the Act.

We therefore decided that it would be best to introduce the outgoers scheme on a non-statutory basis and to introduce legislation providing full authority for payments at a later date. Until this legislation was obtained, payments could be made under the authority of the Appropriation Act and the payments that we have made so far have been made under that Act. It is, however, a general principle that the extent to which, and the time for which, payments are made under the Appropriation Act should be minimised. As we had made provision to spend up to £50 million over five years, it was clearly right that specific statutory authority should be obtained as soon as an opportunity in the legislative programme could be found. I made it clear at an early stage that I would seek this authority as soon as possible. Hon. Members may recall that in the meantime I put copies of the Milk Supplementary Levy (Outgoers) Scheme in the Vote Office and the Library prior to our debate on the Dairy Produce Quotas Regulations 1984 on 18 July last year.

I hope I have explained to the House in sufficient detail the need for the Bill. I now turn to the Bill itself and outline clause by clause—there are only seven clauses—what it is intended to do.

Its primary purpose, as I have indicated, is to provide the necessary specific statutory authority to pay compensation to milk producers who agree to discontinue milk production and to surrender their quotas to our reserve. This power is contained in clause 1 and gives effect to part of article 4 of Council Regulation 857 of 1984. This article allows member states to grant to producers undertaking to discontinue milk production definitively compensation paid in one or more annual instalments". This article of Community legislation is the fountainhead of the outgoers scheme.

As far as the existing scheme is concerned, payments made in pursuance of the scheme once the Bill is enacted will then be made under the authority of the Bill. Until that time, as I have said, the Appropriation Act will provide the necessary authority. The power to pay compensation contained in clause 1 will cover not only payments made under the existing scheme but also payments under any future scheme.

In addition to this general authority to pay compensation, clause 1 also contains powers which will enable any future outgoers scheme to be made by statutory instrument.

Although no further schemes are planned to succeed the scheme currently in operation, I believe that, as primary legislation is being sought at this time, the opportunity should be taken to provide for statutory schemes should there ever be the need for another outgoers scheme in the future, and I hope the House will agree to that.

Clause 1 also provides that any money paid out under a scheme may be recovered if the person who receives the payment fails to comply with the conditions of a scheme. I am sure hon. Members will agree that public funds should be protected in this way. It would not be right for a producer who had received public money to retain that money after failing to comply with any undertakings he had made to qualify for payment.

I am sure that hon. Members will also appreciate on similar grounds the need for the powers of entry on to land and inspection of records contained in clause 2. The purpose of this clause is to enable checks to be made to ensure that recipients of compensation under an outgoers scheme are not involved in milk production.

Mr. J. Enoch Powell (South, Down)

Before the Minister leaves clause 1, will he make it clear whether there is any obstacle under the Bill or under Community legislation to the use of a quota bought in any particular region to inure to the benefit of producers or purchasers in other regions in the United Kingdom?

Mr. Jopling

I shall check the answer that I give to the right hon. Gentleman, but as I understand it there is no immediate bar to a quota bought in one part of a member state being transferred to another. I shall check that and, if it is mistaken, I hope that the right hon. Gentleman will allow my hon. Friend the Minister to refer to it in his winding-up speech.

I can assure the House that we have taken care to draft as narrowly as possible the powers provided by clause 2 consistent with the aim of enforcing the conditions of our scheme and of preventing the abuse of public money.

Clause 3 deals with offences and the penalty to which people will be liable if convicted of those offences. A person will commit an offence if he gives false information or obstructs an authorised officer in order to obtain or retain payment whether on his own behalf or on somebody else's. On summary conviction, the penalty will bea fine of up to level 5 on the standard scale, which currently stands at £2,000.

Clause 4 provides in the usual way that payments made to producers in accordance with clause 1 shall be made out of money provided by Parliament, and that any money recovered where producers fail to comply with the conditions of payment shall be paid into the Consolidated Fund.

Clause 5 defines the Ministers who may exercise functions under the Bill. It means in effect that any future schemes should be made by the Minister of Agriculture, Fisheries and Food, the Secretary of State for Wales or the Secretary of State for Scotland acting either individually or together in any combination.

Clause 6 applies only to Northern Ireland. Our existing outgoers scheme applies throughout the United Kingdom, but for constitutional reasons this Bill does not apply, with the exception, of course, of this clause, to Northern Ireland. This clause simply provides that an Order in Council which is made for the same purpose as in clauses 1 to 3 of the Bill shall be subject to the negative resolution procedure.

Normally, an Order in Council in the transferred functions field would be subject to the affirmative resolution procedure, but as the order which my right hon. Friend the Secretary of State for Northern Ireland intends to lay before the House immediately after the enactment of the Bill will replicate its main provisions, we have thought it appropriate to provide that the order may be made subject to the quicker negative resolution procedure. This will make it easier for the main elements of the Bill to be given effect in Northern Ireland as nearly as possible at the same time as the Bill comes into effect in the rest of the United Kingdom.

As a safeguard, the wording of the clause ensures that the negative resolution procedure may be used only where the Order in Council does what the Bill does.

Clause 7 deals with the short title, commencement and extent of the Bill. It provides that, with the exception of clause 6, the Bill will not come into effect for two months after it is enacted. The purpose is to allow my right hon. Friend time to obtain his Order in Council to introduce similar arrangements in Northern Ireland.

Mr. Douglas Hogg (Grantham)

The Minister has referred to the possibility of future schemes and, as he will be the first to appreciate, future schemes will be introduced by way of statutory instrument subject to annulment. As my right hon. Friend knows, such a statutory instrument procedure is not subject to amendment in the House. Would he feel able to give an undertaking to the House that, if there should be a future scheme, he would always lay before the House draft regulations which would be the subject of discussion and subsequent amendment?

Mr. Jopling

I shall certainly consider my hon. Friend's point, and it is an issue I would clearly expect to be discussed in Committee of the Bill. If I might ponder on that point, we can them come to our conclusion and announce it to the House at the appropriate time in Committee.

I hope that I have provided the House with a clear exposition of the Bill now before us.

Mr. Robin Maxwell-Hyslop (Tiverton)

Before my right hon. Friend is too sure that he has done that, will he tell the House where the legislative provision is to be found entitling the recipient to compensation under the outgoers scheme to elect for tax purposes whether it is treated as capital or income? I cannot see any such provision in the Bill. Where is the legislative provision for that circumstance which he described in introducing the original regulations, although not on a statutory basis?

Mr. Jopling

I am sure that my hon. Friend will be aware that matters of taxation are for the Chancellor of the Exchequer and not for me. That is the reason that, as a matter of consequent taxation, this does not come into the Bill. While I cannot do it off the top of my head, I am sure that it is possible to think of many precedents for arrangements to be made in one Bill and the tax treatment of them to be dealt with in existing or future legislation. I can give my hon. Friend the assurance that that point will be covered in other legislation that will be available to enable that situation to occur.

Hon. Members will see that it is a short and relatively straightforward Bill. As my hon. Friend the Minister of State in my Department made clear in our debate on quotas on 18 July last year, its purpose primarily is to put the payment of compensation to milk outgoers on a firm statutory basis. I am aware that certain sections of the media have misunderstood the purpose of the Bill as setting up a new outgoers scheme in addition to the one we already have. This, as I hope I have made clear in my remarks today, is not the case. The Bill is intended to cover the existing scheme and although it would allow another scheme to be set up on a statutory basis, neither I nor any of my right hon. Friends are considering introducing a further new scheme at the present time.

The closing date for applications to take part in this scheme was 28 August 1984. As we are now right in the middle of processing applications and inviting selected producers to make firm offers, I think this is an opportune moment for me to report to the House what progress we are now making with the outgoers scheme.

Sir Geoffrey Johnson Smith (Wealden)

My right hon. Friend will be aware that many hon. Members received, either yesterday or today, representations from the National Farmers' Union concerning the present outgoers scheme, and asking that the Bill should be passed as speedily as possible. However, it also pointed out that our attention should be drawn to its inadequacies, especially with regard to meeting the hardship of development cases. In that respect we have been invited to urge the Government to consider an extension of the present scheme. Will my right hon. Friend comment on the NFU's suggestion? If he cannot do so now, perhaps his colleague can do so at the end of the debate.

Mr. Jopling

Given the difficulties of extracting the original £50 million from the Treasury and the problems—[HON. MEMBERS: "Oh!"] Any one who has ever tried to extract £50 million from the Treasury knows that that is no mean feat. But given the Government's desire—which has my full support — to reduce Government expenditure, I can give no promise of an extension of the scheme, as that would mean that more public money would be needed at this difficult time.

Mr. Robert Hicks (Cornwall, South-East)

Will my right hon. Friend give way?

Mr. Jopling

Yes, but I think that this had better be the last time.

Mr. Hicks

Bearing in mind the very traumatic experience that the whole principle of imposing milk quotas has had not only on individual producers but on the countryside as a whole, is it not a desirable objective to allow those who wish to take advantage of the outgoers scheme to do so, so that, conversely, those who wish to remain in milk can get as large a quota as possible?

Mr. Jopling

In theory my hon. Friend has brought us a worthy objective from Cornwall. But there is the problem of public spending. However, I hope to give some idea now of how the scheme has gone—

Sir John Farr (Harborough)

Will my right hon. Friend give way?

Mr. Jopling

This must be the last intervention.

Sir John Farr

The House is a little uneasy about what my right hon. Friend said to my hon. Friend the Member for Grantham (Mr. Hogg), inasmuch as a parallel order introduced in relation to another subject is not in any way amendable. Surely it would be an inappropriate vehicle to use unless there was a draft order first. In echoing what my hon. Friend the Member for Grantham said, may I ask whether, if a similar order was introduced, it would be likely to relate to milk or to some other agricultural commodity?

Mr. Jopling

My remarks so far about powers for any further scheme apply to milk and not to any other commodity. But I must now get on with my speech.

The initial response was very encouraging, with producers expressing interest accounting for almost nine per cent. of total United Kingdom quota. Thus, in national terms, the scheme was heavily over-subscribed, though regionally the response varied, and overall we expected a significant number of applicants—for example, those whose special case claims were successful—to drop out once they had clarified their exact position. That is, in fact, precisely what has happened.

In England and Wales, 4,826 producers came forward with offers of 1,186 million litres in a full year, which is about four times the planned target of 289 million litres, In Scotland, offers amounted to 9.5 per cent. of quota for Scotland, which is about four times the planned target of 29.8 million litres. We decided, therefore, to give priority to the smallest producers most dependent on dairying, that is, those with fewer than 200,000 litres in England and Wales, and with fewer than 268,000 litres in Scotland. A small number of producers for whom milk is a relatively small part of their total enterprise have also been excluded.

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

rose—

Mr. Jopling

I have given way much more than most hon. Members do, and I must now make some progress.

Our first invitations went out to some 2,747 producers with 200,000 litres or less of primary quota allocation in England and Wales, and to 168 producers in Scotland with 268,000 litres or less. As soon as it became clear that a significant proportion of these producers were not going to become outgoers after all, we sent out further invitations in England and Wales in tranches of 25,000 or 50,000 litre increases, beginning with those having between 200,000 and 250,000 litres of quota on offer. Our last batch of invitations went out to producers with between 275,000 and 325,000 litres.

In Scotland invitations have now gone out to producers with up to 300,000 litres. If current trends continue in Great Britain as a whole, we may eventually be able to invite producers with up to 500,000 litres to join the scheme. As we gradually work our way towards the target, full allowance is being made for applicants who are unable to decide whether to become outgoers because their special case appeals or exceptional hardship claims have not yet been finalised. Once their claims have been dealt with they will have four weeks to make up their minds one way or another.

Although the drop-out rate has been fairly high, the scheme is operating satisfactorily in Great Britain. The objective is to take up 289 million litres of milk in England and Wales, and nearly 30 million litres in Scotland. By 4 January, 1,186 producers had committed themselves to the scheme in England and Wales. In total they will surrender some 136 million litres of quota on a full year basis. In Scotland at the same time, 77 producers had committed themselves, providing a total of 12 million litres of quota in a full year.

We therefore now have 148 million litres of quota out of a planned total of 319 million litres already committed in Great Britain. Many producers still have to decide whether to proceed with their applications, and there is still a substantial number who have not yet been invited to join the scheme. There is therefore a good deal of slack to be taken up, and I believe that we shall reach our target of 319 million litres in Great Britain.

In Northern Ireland the position is less satisfactory. Indeed, 565 producers came forward offering 52.9 million litres of quota. This amounted to only four fifths of the target of 66 million litres—which of course represented 5 per cent. of the total quota rather than 2.25 per cent. as in Great Britain—and all those applicants were therefore invited to proceed. As expected, some did drop out, but by 4 January, 166 producers had committed themselves and they will surrender 10.8 million litres of quota in a full year. A further 131 have special case or exceptional hardship claims outstanding and we will not know how much quota will be available from these producers until their claims have been settled.

Thus it is difficult to say what the final position will be in Northern Ireland, but there seems likely to be a substantial shortfall in the quota made available by the scheme. That is disappointing and has obvious implications for small producers and those meeting the exceptional hardship criteria. My colleagues and I are looking to see if there are ways of dealing with the difficulties that arise from the poor response to the scheme in Northern Ireland, but we are not yet in a position to reach decisions.

The precise arrangements for re-allocation of outgoers' quota will vary somewhat between England and Wales, and Scotland and Northern Ireland in the light of local circumstances and priorities. In England and Wales, our intention is, as I have previously made clear, to help exceptional hardship cases and all producers with less than 200,000 litres of quota. In 1985–86 we expect, subject to re-examination of the figures when the outgoers scheme is completed, to be able to give exceptional hardship cases the full amount of quota determined by the tribunal.

Wholesale producers in England and Wales with less than 200,000 litres quota will, subject again to re-examination of the figures, have their quotas for 1985–86 increased by 11 per cent.—these are important figures—that is, sufficient to offset the 9 per cent. cut made in 1984–85 and the 1 per cent. cut to be made for all producers in 1985–86 in accordance with the original agreement last March.

A corresponding increase will be made in the quotas of direct sellers with under 200,000 litres. However, no producer's quota will be raised above 200,000 litres. The adjustments will be tapered to avoid anomalies for producers just above or below the 200,000-litre mark.

Any quota available in 1985–86 after meeting the needs of exceptional hardship cases and increasing the quotas of small producers may be used to help producers who are awarded development quota by the tribunal—that is, producers engaged in expansion programmes, whose awards will have been pruned back in 1984–85 to keep within the total amount of quota available. This figure will be of great interest to the House: in 1984–85 it looks at present as if the cut in those awards in England and Wales may be of the order of 35 per cent. Next year we hope to be able to reduce the cut by this use of the outgoers quota, which is spare.

Because producers who became outgoers will have used a significant part of their quotas before joining the outgoers scheme, the total amount of quota available for re-allocation in 1984–85 will be substantially less than that available for a full year. In 1984–85 we envisaged using all the quota becoming available to help exceptional hardship cases.

Obviously, the United Kingdom is not the only member state to have an outgoers scheme. All other member states, with the exception of Denmark, Greece and Luxembourg, have announced details of their own schemes. Naturally, they vary in character considerably to reflect different circumstances and different aims. For example, Germany hopes to buy 4 per cent. of national quota as against 2.25 per cent. in Great Britain. In Italy payments will be made not for quota surrendered, as in other member states including the United Kingdom, but for each dairy cow slaughtered—the aim being to reduce the size of the national dairy herd by 5 per cent.

Mr. D. E. Thomas

rose—

Mr. Jopling

I must finish my speech.

The main differences between the various schemes illustrate the difficulty of drawing direct comparisons between them. For that reason, I do not think that an attempt at comparative analysis would help the House. Nevertheless, compared with other schemes, we are satisfied that our scheme is advantageous for individual producers. The French scheme, for example, offers considerably lower payments to producers than does ours.

Mr. D. E. Thomas

In his progress report on the outgoers scheme the Minister gave us statistics for Scotland, Northern Ireland, and for England and Wales together. Will he ensure that he gives us the statistics for Wales separately from those for England because his right hon. Friend bears equal ministerial responsibility to that of the agricultural Ministers for Scotland and Northern Ireland?

Mr. Jopling

I cannot do that now. I have provided a mass of statistics because I wanted to give the House the best information I had. If the hon. Gentleman cares to table questions about specific points, we shall see what we can do to help him.

Certainly, the encouraging response in Great Britain shows that the rate of payment for the surrender of quota was pitched at about the right level to provide sufficient incentives. Some other member states appear to have been less successful in attracting an adequate response from producers. Both Germany and the Netherlands have had to extend their deadlines for outgoers into this year. In Great Britain, on the other hand, the outgoers scheme closed on 28 August—well over four months ago—and we certainly do not expect there to be any shortfall in the amount of quota offered.

The outgoers scheme is going well, and I hope that hon. Members will agree that the Bill should have a smooth and rapid passage through the House. My hon. Friend the Member for Wealden (Sir G. Johnson Smith) referred to the NFU documents, and hoped that the Bill would soon be enacted. The Bill is short and narrow in scope, but for all that it is extremely necessary because of the large amount of public money involved. It will benefit individual producers and the country if that money can be disbursed under the authority we seek to provide through the Bill. I have pleasure in commending the Bill to the House.

4.36 pm

Mr. John Home Robertson (East Lothian)

We welcome the opportunity for a further debate on the dairy industry. We were interested in what the Minister had to say, especially in the intriguing insight into negotiations between the Minister and the Chancellor of the Exchequer. We are always grateful for such information.

If I cannot compliment him on the contents of his speech, I can at least compliment the right hon. Gentleman on the frankness of the short title of the Bill: Milk (Cessation of Production) Bill. We get a lot of upbeat but fundamentally dishonest, short titles to Bills, but with characteristic finesse the Minister gives us a "cessation of production" Bill. There is nothing like calling a spade a shovel. No doubt we can look forward to "cessation of production" Bills for the coal and engineering industries as the Government continue their lunatic progress through the British economy.

Before I turn to the details of the Bill, I appeal to the Minister of State when he replies to say more than his right hon. Friend did about the progress, or lack of it, of the quota system throughout the European Community. That is inextricably tied up with the Bill's provisions. The outgoers scheme is an inextricable part of the quota system.

From previous debates the Government know that we regard the entire business as a dog's breakfast of expediency and incompetence. I do not know where the right hon. Member for Worcester (Mr. Walker) got his reputation for being a wet. First the dairy farmers and now our miners have come to know him for what he really is. It is the misfortune of this particular right hon. Michael that he has been left with the job of rowing this boat ashore. Many dairymen earnestly wish that he was doing something else.

The right hon. Gentleman and the country know that the previous Minister negotiated a lousy deal for the British dairy industry last March. He gave the industry 15 days' notice to reverse the stated objectives of successive Governments for the previous 40 years. Forty years' progress was thrown into reverse virtually overnight. He added insult to injury by selling 6.2 per cent. of our production when the overall European cut was to be only 4.1 per cent. Britain had the best case, but the Minister managed to obtain just about the worst deal. He must be condemned for that failure.

The Minister will have a final chance to redeem himself in the eyes of the industry during the 1985–86 price-fixing negotiations. He should try to ensure that the additional 1 per cent. cut in production that is due in April will not apply to Britain. That may or may not be possible, but the Minister should at least fight for it. He has given away more than enough already, and our producers have suffered more than enough already. We are entitled to demand that he should retreat no further.

The Opposition understand perfectly the need to restrain dairy production in the Community and the need to restructure the industry, but we have consistently pointed to the fact that over-production is not a significant problem in Britain. There was no need for the Minister to make the concessions that he made last year. The Minister of State should say something more about that when he replies.

Against that background, may I ask the Minister for the clear undertaking that the British dairy industry will not be penalised for undershooting its 1984 quota? He has spoken about that in the past, but production has decreased significantly, partly because of drought during the summer, but largely due to the panic measures that were induced in the industry when the quota scheme was sprung on it last year. As a result, there could be a significant shortfall. I was alarmed to read a report in The Scotsman on Tuesday this week, written by its highly reputable agricultural editor, which stated: There are now fears that unless quotas can be met dairy farmers will face another imposed production cut this spring as part of the EEC's 1985 farm price package. If the Minister wishes to nail that point here and now, I should be only too happy to give way to him. He has said that Britain should not he penalised for undershooting the quota this time, and doubts have been expressed again this week. I hope that at some stage we shall be reassured by a Minister, if not by the Minister himself.

The Government are motivated by many primitive fetishes, one of which is that the state should not intervene in the economy. That is probably why the Government always make a mess when they become involved in restructuring industry. In this case, the Minister has one hand on the throat of the dairy industry and the other hand across his eyes because he cannot bear to see the effects of what he is doing, and no wonder. There has been a succession of hasty decisions and rough justice, and the outgoers scheme is a case in point.

The Labour party would support a properly funded and sensibly drafted outgoers scheme. I should explain why we regard this scheme with considerable disdain and how we believe it should be altered. As the Minister said again today, the objective is supposed to be to buy in enough quota for redistribution to small producers to enable them to return to their 1983 production level. That is all very well as far as it goes, but other people need extra quota. If the Minister has any doubt about that, he should consult the members of the panels and tribunals that he set up to deal with claims for secondary quota. There are some extremely pressing cases.

As an example, let us consider the hypothetical small farmer with 50 cows who may have made plans, as he was encouraged to do until 1983, to build up his herd to 100 cows. Events overtook that hypothetical dairy farmer, and he was caught on the hop when the Government introduced the quota scheme. However, he was told that there was an opportunity to obtain secondary quota, so he presented his case to the tribunal, which had to accept it. However, the tribunal had to ignore the first 10 per cent. of the increase applied for, so it could recommend only a further 45 cows. So far, so good. That would be tolerable, but it is not the end of the story. The Government will be able to satisfy only about two thirds of the additional quota recommended by the tribunals. The Minister confirmed that fact today. The figure for Scotland, which has been finalised, is 57.5 per cent. of the additional quota which the tribunals regard as being justified.

Therefore, the hypothetical small farmer who has invested heavily in machinery, buildings and equipment for a herd of 100 cows may be allowed to milk only 80 cows. Such dairy farmers could face bankruptcy. The Minister must recognise the urgent need to obtain more quota for redistribution to such farmers. I could cite umpteen cases of disturbing examples of farmers who are not covered by the criteria laid down for special cases in the present scheme, and the Minister should he worried about that.

We must release more quota for distribution to farmers, who must be allowed to expand if the industry is to have any future. The only way to achieve that is through the outgoers scheme. The Opposition say that the scheme is cheap and nasty. It is nasty because the target of quota to be bought in for redistribution is inadequate and badly defined; it is cheap because the compensation to outgoers is inadequate. As we know, the scheme has been heavily oversubscribed.

The National Farmers Union estimates that there is a need for about 50 per cent. more quota than is covered by the present scheme. That figure may or may not be reasonable, but it appears that the quota the Minister intends to buy in is inadequate. If we need an additional 50 per cent. on top of what is already provided, that would cost an extra £25 million over five years. That is not an unduly high price for a secure future for an important industry such as the dairy industry, and it is far below the amounts provided in other countries, no matter how the Minister may try to avoid those facts.

The Minister's scheme will cost £50 million in compensation over five years. The first year of the scheme in France will cost £80 million, and a total of £200 million over three years. In Germany, the first year will cost £25 million, and the next 10 years will cost £206 million. On another basis, under the British scheme, outgoers will receive £130 a year for five years for each cow relinquished, which is a total of £650 per cow over five years. We should compare that with a possible payment of up to £940 per cow over two months under the Italian scheme. I recognise that that is an odd scheme, but it represents much money—

Mr. Douglas Hogg

The comparisons are interesting, but they do not take into account the fact that Italy, Germany and France have many more small producers.

Mr. Home Robertson

I accept that point, but what I am trying to say is that, once again, the Minister has sold short British producers. In most cases we are talking about small producers. They are the people who the Minister is encouraging to come out, so in that respect they should be treated equally.

The Labour party feels especially strongly about the fact that the scheme includes nothing for employees who will lose their jobs because of the process. Many creamery staff are being made redundant, and the Transport and General Workers Union estimates that about 250 dairy stockmen on farms will lose their livelihoods because of the scheme. There is no special compensation to help those people to make new lives. The Dutch and Danish outgoers schemes provide some compensation for dairy stockmen, and we demand that the British scheme should contain similar provisions.

Mr. Nicholas Baker (Dorset, North)

The hon. Gentleman seemed to be suggesting that anyone losing his job as a result of a farmer going out of business would be entitled to redundancy payment. Is he suggesting that the redundancy payment should be artificially high, say, similar to that offered to coal miners?

Mr. Home Robertson

There are parallels in other industries, but these are exceptional circumstances. This restructuring was introduced as a result of European Governments' policies, and there are grounds for suggesting that if the farmer receives compensation, the employees who lose their jobs should also receive some.

The Minister should consider further the consequences of the scheme for the people concerned, and for the communities where those people live and the land that they farm. The current scheme is designed to move about 80,000 cows off existing holdings, or, in other words, to take about 150,000 acres out of dairy farming. We understand that, on the whole, smaller farms will be affected.

For the sake of argument, let us say that between 1,500 and 2,000 small dairy units will disappear under the provisions of the scheme. We accept that part of the scheme may be necessary, but we would approach the problem in a different way. Let us consider again the hypothetical small farmer with 50 cows. Instead of struggling on and trying to get some additional quota, he may decide to opt for the outgoers scheme. Dairy farming will then be banned on that farm for the foreseeable future.

The pay-off for the farmer will be £6,500 a year for five years. That sum will be taxed in one way or another, and a substantial proportion of it may well be committed to the bank because of previous borrowings. The final figure of £32,500 is not very substantial. It will not be adequate for the establishment of alternative enterprises and employment in the areas affected. Most of the farms concerned will be in traditional grassland areas in the west of the country. What is the alternative land use in such areas? Beef production, which might seem to be the most obvious answer, is in surplus too. The Minister will therefore be throwing those areas into turmoil.

Some older farmers may well retire on the outgoers scheme. What will happen to their land, and the fragile rural communities in which it is situated? I fear that rural depopulation may be aggravated. I have personal experience of what that would mean, as I live in the Scottish borders, which have suffered from rural depopulation for many years. The rural areas are entitled to more civilised treatment from any Government.

The Minister may achieve his short-term objective within the constraints laid down by the Treasury. He was kind enough to tell us how such matters are arranged. However, I wonder whether he understands the consequences, and I seriously doubt whether the Chancellor of the Exchequer cares about them. We are debating the major restructuring of a major industry, which, sadly, will entail taking some land out of dairying. The Minister's policy is to buy in quota at the lowest possible price and then to wash his hands of the consequences. That is not good enough. He should be offering positive incentives and responsible guidance on alternative enterprises suitable for the former dairy units.

While considering what happens to the money paid under the outgoers scheme, I should like briefly to refer to the skullduggery engaged in by landlords in some areas. I refer the Minister to a report in Farmers Weekly of 21 December. Under the headline Rent 'blackmail' for milk outgoers", the report states: In Yorkshire, complaints of blackmail are being applied to demands on tenants wishing to quit milk. The owner's signature of consent"— that is, the landlord's signature— for a tenant to take the Outgoers' Scheme is being made conditional upon the tenant first agreeing to a hefty rent increase or to paying a cash sum to the landowner … More immoral still was the action of one landlord, working through nationally-known agents, who had not only made owner's consent conditional on agreeing a rent increase, but had insisted that the existing rental should operate for only two years, rather than the legal minimum of three years. The Secretary of State for Scotland is not renowned for oppressing landlords, but he has at least managed to prevent that particular abuse in the case of Scottish tenant farmers. There should be similar safeguards for tenants in England and Wales. The payments are mean enough already. There is no justification for allowing landlords to get their hands on any of the money. The Minister was warned about that possibility during the debate on 18 July. He sought to sidestep the matter. The problem has now arisen, and he should tell us more about it when he replies to the debate.

We had hoped that the Minister would say more about the question of transferring quota from one farm to another. Clearly, more flexibility is needed. We have our views as to how that flexibility should be achieved, but I wish to refer in detail to two aspects of the scheme that seemed to us to be too restricted.

First, the Minister has decided to restrict the outgoers scheme to small producers, and he is taking a very long time to decide which applicants to accept. As the months go by there is tranche after tranche, and the uncertainty that afflicts the industry is prolonged.

Mr. Jopling

indicated dissent.

Mr. Home Robertson

The Minister may shake his head, but many people who applied six months ago are still waiting for a response, and that is causing uncertainty.

The Minister should buy in any quota that any producer wants to relinquish, within reason, and subject to alternative enterprises being available for the holdings concerned. Such a policy would be more flexible and might encourage some bigger producers to give up dairying in areas where feasible alternative enterprises are available. In that way a significant amount of quota could be bought back under the scheme, and the quota thus made available could enable proportionately far more smaller dairy farms to stay in business. That would be better for the broad rural economy.

Secondly, I cannot see why clause 1 has to compel producers to stop milk production altogether. The Opposition agree with the submission made by the Farmers Union of Wales that partial surrenders of quota should also be covered by the scheme. Such a scheme would make it possible to encourage dairy farmers to diversify their enterprises instead of abandoning dairying altogether. I urge the Minister to consider that point further. It is one to which we shall certainly return in Committee.

The Opposition are far from impressed with what the Bill does with the outgoers scheme. Every organisation representing farming interests has expressed the view that the scheme is pitifully inadequate. We are appalled by the way in which the Government have treated the dairy industry in the past year. Together with a number of Conservative Members, we voted against the quota regulations at the outset. The industry needs sensible restructuring. What it is getting is closer to rapid strangulation.

We do not oppose the principle of compensating outgoers, so we will not vote against Second Reading. However, we shall seek significant improvements in the Bill in Committee.

4.58 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

The most important positive aspect of my right hon. Friend's introduction of the Bill was the flexibility that there will be. As there are, of course, pressures on legislative time, the best compromise is certainly for future additions to the existing scheme to be effected by statutory instrument. However, as my hon. Friend the Member for Grantham (Mr. Hogg) suggested, there should be a draft laid, so that hon. Members can respond to the Minister's ideas, which will then come before the House, as in the case of the quota regulations themselves, in a form in which they can pass rapidly into law. That is the best compromise for the further development of the scheme, and there is no doubt that there is a dramatic need for further development.

My hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) is not able to be here today because of a twice postponed meeting with farmers in his constituency. He has asked me to cover points that he would have wished to raise had he been here. There is no doubt that there is special hardship for those who have invested in development at the direct encouragement of the Government agency, the agricultural development advisory service. We should not be mealy-mouthed about this. Right up until the day before quotas were introduced, officers in the Ministry for which my right hon. Friend is responsible encouraged farmers to expand and paid a grant from public funds to enable them to do so. That is the justification for putting public money into the outgoers scheme, additional to what has been announced. It is clear that the 2.5 per cent. which is being held back, and which made the total of a 9 per cent. reduction on the 1983 figure, is inadequate—as my right hon. Friend admitted—to meet the assessment made by the panels and the tribunals of those who have applied for secondary quota on grounds of development, the Government being party to the encouragement of that development.

I am glad that today, unlike his earlier appearances at the Dispatch Box, my right hon. Friend did not pretend that farmers should have foreseen what he himself did not foresee. He adopted that wholly unacceptable posture last year. We should commend such progress. I am afraid that my right hon. Friend must go back to the Treasury and say that the litreage that he has been able to buy in through the outgoers scheme—he knew what the maximum would be, because it was limited by the £50 million—is not adequate to meet the full exceptional development conditions which are set out in his own regulations.

Although the regulations provide for scaling, in acknowledging the need for this secondary quota my right hon. Friend is acknowledging the case for buying back, at public expense, enough quota to meet those needs as assessed. I cannot press him to do that too enthusiastically. He will have to do it in the end—the sooner and with the better grace, the better.

We should consider the case of other aspects of Government policy that are equally unavoidable. I am not pretending that the EEC surplus is the result of the Government's policy. Successive Governments have endeavoured to persuade the EEC to tackle this wholly visible problem long before it did. Some of us—I can say this as it is a matter of public record—called for quotas seven or eight years ago, before the massive expansion in France and Ireland, which has resulted in quotas being introduced so agonisingly for many of our small producers.

I should be grateful if my hon. Friend the Minister would comment on my next point. A pool was held back by the EEC for extra distribution to areas that are especially dependent on milk production. I never heard from the Dispatch Box by what formula such areas were to be recognised. Was it a matter of political pressure, or was it one of overt formula which can be tested in other areas, including the United Kingdom, to see whether they qualify as much as, for example, the Republic of Eire? Consideration of income tax to which producers are liable in the United Kingdom and the notorious absence of taxation of farmers in Southern Ireland reveals that what matters is not just net income—the difference between gross returns and gross expenditure — but post-tax income. Producers' standard of living, their ability to undertake capital development or to reduce debt, whether in southern Ireland, the United Kingdom or Luxembourg, depends on how much money they have after tax. On what formula is the held-back litreage allocated?

The outgoers scheme is rendered necessary by the quota system, so it is wholly in order on Second Reading to discuss matters without which the Bill would not have come to the Floor of the House. This is our only opportunity of a Second Reading on this matter as there will not be subsequent Bills. The implications of the Bill depend on the future of the quota system in the EEC, even after Spain and Portugal join, as they are likely to do. One of the prime reasons for present circumstances is the pressure on the EEC budget. It is highly likely, I hope, that quotas might be imposed on olive oil and wine as well. If so, it is probable that France will press for Algeria's right to send wine to the EEC not to be taken out of the French quota but to be treated as an obligation of the EEC because it has come in for many years. That has been recognised since Lomé. A similar analogy can be drawn with regard to New Zealand dairy produce. It has come to the United Kingdom for many years for reasons that are widely known. It is just as much an habitual inflow to the EEC as Algerian wine. My right hon. Friend should be working towards treating the import of milk products from New Zealand to the EEC not as a charge against the British quota. That is the best way in which to resolve the dilemma. Without such a resolution it will not be Britain but one small section of people in Britain—our dairy farmers — who will pay for New Zealand imports. A national obligation should be a Communitywide obligation. It is to that end that I would encourage him to work.

I wish to stress the strong resentment felt about the delay in the results of appeals. It is believed that there is inadequate secretarial staff on the panels and the appeal tribunals so that people have to wait eight, nine or 10 weeks for the result of appeals. It is also widely believed that although there is a common law throughout the United Kingdom, panels, often adjacent to each other, decide on widely different allocations of secondary quota although the factual bases of the cases may have been similar. This leads to considerable resentment.

I wish to draw to my right hon. Friend's attention one category of claim for secondary quota that has been dealt with parsimoniously by tribunals and panels. Where a small farmer has extended his premises with his own hands instead of employing a contractor he has not been treated well. In other words, his commitment to expansion has been out of his own resources, in some cases without the use of any Government grant. The pattern in these cases is that the panels have been conspicuously parsiminious in allocating a secondary quota although, had the physical expansion of facilities been financed even partly by Government grant and had there been bills to show from a contractor, it seems that there would have been a much greater allocation of secondary quota. I hope my right hon. Friend will agree that this is unjust.

So long as the facts are demonstrable about the expansion of equipment or buildings or the purchase of cattle, it should not be relevant to the determination of secondary quota whether the expenditure was part of an ADAS-approved scheme, or whether money was lent by a bank. Even though those may be supporting evidence, that is not the essence of whether someone was committed to expansion. There is greater hardship when a farmer has paid 100 per cent. of the cost out of his own resources than when part has been paid by grant.

As many of us knew when it was introduced, the scheme is imperfect. It will be tolerable only if my right hon. Friend and his right hon. Friends the Secretaries of State for Scotland, Northern Ireland and Wales—he is not on his own in this battle—can extract from the Treasury the tiny sum of about £25 million—we are not talking about a large sum — to buy enough quota to allow the allocation of secondary quota to go through without diminution. That is the most important point that needs to be made in the debate so that the Bill can be welcomed for its ability to bring in quickly an extension of the existing scheme.

5.13 pm

Mr. Geraint Howells (Ceredigion and Pembroke, North)

It is well known that, although the milk quota system has been in effect for more than nine months, the whole scheme appears still to be a complete shambles and, in the opinion of the majority of farmers, far from satisfactory. When one talks to members of the National Farmers Union, the Farmers Union of Wales, the Country Landowners Association and others involved with the industry, one finds that they are all despondent and will never forgive the Minister of Agriculture for making such a political blunder as he made last year.

There may be a lull in the protests, but this is only because of under-production due to various factors. I predict that in a year's time the position will be far worse if drastic action is not taken by the Government. As one who represents an area where the majority of dairy farmers have small or modest holdings—this is true of Wales as a whole and of many parts of Britain—I feel strongly that the Government have signally failed to protect the interests of small farmers and have stood by seemingly indifferent as the rural economy has deteriorated as a direct result of the quota system.

The Bill is unlikely to help and should be modified drastically to ensure justice to an industry that has received more than its fair share of knocks in the past year. My colleagues and I will not vote against the Second Reading because it is the wish of many people that the Bill should pass through the House with all possible speed, but unless the Government will accept amendments to the benefit of dairy producers it is more than likely that my colleagues and I will vote against Third Reading.

I understand that by mid-December only 1,060 producers had applied to go out of milk production, and of those the majority appeared to be farmers with 30 to 50 cows. As the Minister did not like what I said earlier in the debate, it would be useful if he could confirm this when he is replying and also give a breakdown of how many farmers in Wales, in Dyfed particularly and in various regions of England and Scotland have gone for this option. If the correct figures are given on the Floor of the House, we shall know whether the Government are trying to persuade small farmers to give up dairying.

Because of the provisions outlined in the Bill and the operation of the quota system in general, it is inevitable that it is the small producer who will be forced out of business while the larger farmer, because of the nature of his enterprise, will be able to carry on with just a small adjustment in production. Like many other hon. Members, I feel that it is fundamentally wrong for this discrimination against the small producer to continue. Ways should be found to alleviate the hardship that many of them face. There should be more flexibility.

As it stands, the Bill makes it a condition of the outgoers scheme that a producer must surrender his quota in its entirety if he wishes to participate in the scheme. If farmers were given the option of giving up only part of their quota there would be a much greater response from the larger producer who would be more able to diversify. This would release more quota for use by the smaller producer who is not able to diversify.

If the scheme is to be successful, the terms for outgoers should be more generous. I do not think that 13p per litre or £650 per cow is sufficiently attractive to make the scheme effective. The sums involved should in all fairness be tax free as the money would be needed immediately for investment in other agricultural ventures. It should not be treated like ordinary income or profit.

I was disappointed when the Minister did not say specifically that the money handed over to the producers would be tax free. He should consider this again, because these farmers will sell the cattle directly off the farm and will be starting a new enterprise the following day. Consequently, this will merely be passing a sum of money from an old business to a new one. That is why it should be tax free. That is food for thought for the Minister during the next few weeks while the Bill is in Committee.

It would also be helpful if at this stage, with his hand on his heart for once, the Minister could reassure agriculture that if a farmer chooses to go out of dairying and into sheep or beef production, for example, he will not be faced this time next year, or in the near future, with another quota system on those products. What guarantees can he give on that point?

Many hon. Members are aware that there are many county council smallholdings throughout the country. I have received a letter from my hon. and learned Friend the Member for Montgomery (Mr. Carlile) who received it from Lord Hooson. It has been written by Andrew Thomas, group secretary of the NFU in Newtown, and states: On behalf of our member Mr. E. J. Davies, Cefncanol, Penstrowed, Newtown I should like very much to bring to your attention his situation as regards being a tenant farmer on a County Council small holding producing milk. Mr. Davies applied to go out of milk, wishing to take advantage of the Outgoers Scheme. Powys County Council his landlord, have stated that he cannot take advantage of this benefit and go out of milk, unless the quota to which he is entitled was to stay on one of their holdings. Please find enclosed a copy of a letter requested from Powys County Council on behalf of Mr. Davies which sets out his position. I am sure that you have received many such letters as a result of the implementation of milk quotas, but the problems amongst Tenant Farmers are very prominent. These problems need sorting out urgently. It is a very uncomfortable, and distressing situation to have land lord set against tenant in a way such as this, and the sooner the position ends the better for all parties concerned. Mr. Davies requests that the matter be pressed with the powers that be, until a favourable reply is forthcoming. We are sure that we can rely on your support at this time. Yours sincerely, Andrew Thomas Group Secretary P.S. Mr. Davies has gone out of milk, has refused to sign a Milk Marketing Board letter in order to resign his licence, and is awaiting guidance on his position. We hope some favourable outcome will be forthcoming.

Mr. Alex Carlile (Montgomery)

Does my hon. Friend agree that the problem highlighted in that letter causes difficulties not only to tenant farmers but also to the Powys county council in the management of its substantial smallholdings estate, and that the county council as landlord in that case shares the anxiety of the tenants and feels that it cannot satisfactorily manage its estate until some provisions are made to compensate tenant farmers for coming out of milk production?

Mr. Howells

I entirely agree with my hon. and learned Friend. We are both aware that many dairy farmers are tenants with various county councils throughout Britain. I am sure that they will read with interest the advice which the Minister will give.

We in this country have always believed in fair play and justice, and these qualities are manifestly absent from the arrangements proposed for getting rid of milk surpluses in Britain. I hope that the Minister of Agriculture, the Secretaries of State for Wales and Scotland, and the Minister responsible for dairy production in Northern Ireland will go to Brussels this spring and make a special plea on behalf of these farmers to ensure that we get an additional quota for small producers who are so dependent on the milk industry for their living. Following this debate, I hope that Ministers will assure us that they will have another look at the content of the Bill and will do what they can to improve it in order to ensure that British dairy producers are well looked after in the future. They deserve that, because they have had a very rough treatment during the last 12 months by this Government.

5.26 pm

Mr. Charles Morrison (Devizes)

I entirely agree with the appeal of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) that there should be flexibility in the application of the quota scheme. That is what the debate is all about, even though it is secondary to the fact that we are generally agreed that the Bill should be given a Second Reading. In that respect, I welcome the measure.

By way of introduction, I hope that my few brief remarks will be considered as an intervention rather than a speech, in the pious hope that as a result it will not be counted against my quota of speeches in Mr. Speaker's computer.

All of us, perhaps, have major reservations about the quota system. It was introduced at the worst possible time of year and with the most regrettable suddenness. As my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) has already pointed out, it was also introduced at a time when ADAS, as the organ of the Ministry of Agriculture, was encouraging milk production. Even so, and in the realisation that in saying this the wrath of God if not the NFU might be brought down on my head, it is a miracle that the introduction of the scheme has been so relatively smooth in such a short time.

All of us representing large numbers of dairy farmers were inundated with letters to start with. My response to most of them was, "I appreciate all the problems and difficulties with which you are faced, but let us give it a little time for the system to settle down. After all, it works in some other parts of the world, and there is no reason why it should not work here."

Broadly speaking, the system is beginning to settle down, and we must now look to the future and try to smooth off some of the rough edges. It must be evolved sensibly and realistically so that the disadvantages that exist are tackled in the best possible way in the interests of farmers, and small farmers in particular.

I strongly support the NFU's plea that changes in the system should be introduced to enable an interchange between wholesale and direct sale quotas. Several of my constituents are deeply concerned about this. I know that my right hon. Friend and his colleagues are sympathetic, but I hope that somehow they can twist the arms of their ministerial colleagues in the Council of Ministers and obtain some concessions. Presumably this must be of some advantage to European farmers just as much as to our own.

Secondly, there is the question of the transfer of quotas and also the question of the relative importance of the interests of the tenant farmer and the landlord. The National Farmers Union has said that it is vital that quotas should be vested in the producer and should be made saleable on conditions which would include the reasonable protection of the landlord's interests. I agree entirely with that. Quite unwittingly, it is, unfortunately, a fact that the balance of advantage lies with the landlord. I say that in no critical spirit; it is just how it has worked out.

I agree strongly with the Minister that the president of the Country Landowners Association has spoken with maximum responsibility about trying to ensure that his members are as objective as they can be in responding to requests by tenant farmers that they should be allowed to join the outgoers scheme. Nevertheless, as one tenant farmer of the Ministry of Defence in my constituency pointed out, at present the tenant under the system is worse off and the landlord inadvertently is better off, since the quota system enhances the value of a let dairy, not only as of now but looking to the future, should a tenant farmer retire and a collection of potential new tenants tender for that farm. Therefore it is important that the balance should be redressed, hopefully as a result of agreement between the Ministry of Agriculture, Fisheries and Food on the one hand and the NFU and the CLA on the other.

My next point is that there is some criticism of the rules and operations of the tribunals. A number of my constituents have complained to me about this aspect of the scheme. One point which was drawn to my attention by one tenant farmer was that the tribunal before which he appeared apparently always based its judgment on numbers of cows rather than on the efficiency of the producer. The farmer who came to see me said that he had invested a considerable amount of money in modernising his dairy with the intention partly of increasing the number of cows in his dairy—he was quite prepared to accept that he would not be allowed to do that—but mostly with the intention of increasing the efficiency of output of his existing herd. He claimed that that point was not fully taken account of by the tribunal before which he appeared.

Another farmer grumbled justifiably about the delays in obtaining decisions from the tribunal. In a letter which he wrote to me recently he said: The quota scheme came into operation on April 2nd last year. It would seem that I have to wait patiently for nearly ten months before I can have any indication of the parameters upon which I have to plan my business in future. Even then I shall have to wait at least another month before I can even hazard a guess as to the possible cutback in any secondary quota award. Such treatment is quite unacceptable". I think that we would all sympathise with the point he is making. I realise the difficulties, but what he has done is to emphasise the need for speed in drawing these matters to a conclusion.

Finally, I make a strong plea for the interests of new entrants into farming to be taken fully into account. Many new farmers, whether owner-occupiers or tenants, go into farms which, for one reason or another, are not in good order. Perhaps they have been run down because the previous farmer was getting old and was not quite so enthusiastic as he had been in his younger days. Account has to be taken of considerations of that kind. Therefore I hope it will be possible to give special consideration to new entrants.

In other words, I am emphasising the need for flexibility, common sense and a steady evolution of the scheme. I believe that it is beginning to work reasonably well. I think that, as time goes on, it can work much better. Such a system works perfectly satisfactorily in other parts of the world. I hope that we shall learn from others. I have great confidence that my right hon. and hon. Friends in the Department will ensure that the scheme continues to make progress.

5.35 pm

Mr. James Nicholson (Newry and Armagh)

I should like to refer to that part of the Bill which relates to Northern Ireland. As the Minister said, Northern Ireland legislation will go through by Order in Council but will follow fairly closely the Bill which is before us today. As other hon. Members have said, the Bill is a bad Bill. It does not go far enough. I agree with previous hon. Members who said that the Bill does not do sufficient to entice farmers to go out of milk production. There is no tax allowance. If a farmer turns from one part of the industry to another part of the industry, consideration ought to be given to that fact.

May I also draw attention to the serious lack of attendance at this debate by Ministers from the Northern Ireland Office. This is not the first time when a major debate has taken place that not one Minister has appeared on the Government Front Bench to represent Northern Ireland agriculture or to hear what is to be said. This happens continuously. On behalf of those whom I represent and on behalf of all those whom the Ulster Unionist party represents I have to say that we find this deplorable and disgraceful. Especially on a day when Northern Ireland questions have been asked and Ministers are here, it is deplorable that they cannot make time to attend this important debate. It is small wonder that Northern Ireland agriculture is in the position it finds itself in today if Ministers cannot make time to come to listen to this important debate on the most important industry in Northern Ireland.

I should much prefer it if measures such as the outgoers scheme were not necessary. We are putting small farmers out of business. Many of them do not wish to go out of business but they see no alternative. In the longer term this can only have a damaging effect on the industry. Small farmers in Northern Ireland are the backbone of the agricultural industry. Many of them, as I hope to demonstrate, have no alternative. This is to the detriment of dairy farmers in Northern Ireland. Some of these small producers, who are making a living by producing milk from 16 or 25 cows, find that those cows are more important to them than the 200 cows belonging to another farmer. From that point of view the scheme is very important to the small farmer in Northern Ireland.

When the Minister of State addressed the House on 3 July 1984 he said that he proposed to buy up 5 per cent. of the total quota in Northern Ireland because of the large proportion of small producers there. In his reply he said: 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." — [Official Report, 3 July 1984; Vol. 63, c. 235.] I do not for one moment doubt the sincerity with which those statements were made, but with hindsight, as the Minister has recognised today, we can say that the scheme never got off the ground in Northern Ireland. It has been a disaster there.

The Department of Agriculture received offers in the region of 4 per cent. of total production and to date has only had firm offers in the region of 10 million litres—one sixth of what the Minister proposed to buy out. Placed against the Minister's original intention to purchase 66 million litres in Northern Ireland, that 10 million litres pales into insignificance.

The Minister recognised today and in earlier debates the importance of the scheme to Northern Ireland dairy production and dairy farmers, especially the small farmers. What proposals has he to rectify the position? Will he assure the House tonight that no farmer in Northern Ireland will be placed at a disadvantage by the scheme's failure?

No doubt many would ask why there was not the same enthusiasm for the outgoers scheme in Northern Ireland as in other parts of the United Kingdom. The main reason, as I outlined earlier, is that the dependence of the small farmer for his livelihood on milk production with no alternative to turn to means that he had to have second, and indeed third, thoughts about even considering entering the scheme. The fact that the present uptake has been only 10 million litres and that few farmers are likely to come forward in the next few months as they receive their results from the tribunals, shows that they will, if at all possible, try to continue and do their best. Farmers felt that they had no alternative. The will to survive will have to remain with them as they get the results in future.

Most will agree that the famers placed in the worst position of all in Northern Ireland — perhaps in the United Kingdom it would be different—are those with fewer than 40 cows or 200,000 litres. In many instances they were not expanding. They did not contribute in any way to the surplus. The vast majority of them had the same herd size five or six years ago. Consequently, they received no allocation of secondary quota from expansion. It has also been extremely difficult to achieve anything for them under the hardship scheme.

Those with 16 to 25 cows have come out worst of all. For such a farmer the loss of one cow in any given 12 months will hit his income hard. But a farmer with 100 or more cows who loses 10 can sustain that loss. That is why I am most angered about the position of the small farmer in my area.

On 3 July and again today the Minister said: We shall be aiming specifically to make extra quota available to dairy farmers who produce less than 200,000 litres annually".—[Official Report, 3 July 1984; Vol. 63, c. 168.] Broadly speaking, that is what I have been referring to in my remarks.

I could support that proposal and I have no doubt that my colleagues could too. It would effectively restore the small farmer to the 1983 production level. Will the Minister exercise equality for all and extend the proposal throughout the United Kingdom because it has great merit? If it were extended to Northern Ireland it would go part of the way to solving many of the problems of many of our small farmers.

This afternoon, the Minister said that he hoped to bring farmers in England and Wales in the region of over 200,000 litres up to the 1983 production level. For Scotland he referred to figures—I stand to be corrected — in the region of 250,000 litres. Northern Ireland is entitled to the same consideration and to the same proposal. I hope that when the Minister replies he will deal with that point.

I want to take this opportunity to assure the Minister that I do not propose to refer to the long-debated 65,000 tonnes which we never received in the first place. But that does not mean for one moment that we accept the situation or agree with the explanations which have been given. The issue is still at the forefront of our minds. Instead, I want to deal with the buy-out scheme in particular.

The main effect of quotas is when they fall on the shoulders of those who may be forced to pay levy at the end of the time. To the best of my knowledge Northern Ireland is the only part of the United Kingdom at present where levy is due. It is hard to get up-to-date figures because of the holiday but the best figure that is available is for the first six months where collection is due. At that stage farmers were due to pay over £5 million in levies in Northern Ireland. Agriculture in Northern Ireland in the present climate, certainly dairy producers, cannot afford that sort of figure. It is bad enough to have to pay the co-responsibility levy, which should not have been imposed in the first place and is no longer achieving what it was brought in for, but it is even worse to have to pay the levy. Unfortunately, some farmers are beginning to come to the conclusion that it will disappear. Let me make it clear—I hope that the Minister will do so when he replies—that it will not disappear and farmers will eventually have to pay that levy at whatever level is finally worked out.

I have attended a fair number of tribunals and panels while representing my constituents over the past couple of months. Some farmers are in an unfortunate position. There are those who, under the regulations, do not qualify for claims for development, hardship or epizootic disease. To coin an old phrase, they have fallen between two stools. Everyone recognises that they should receive something, but there is nothing. There is no way under the regulations by which they can receive any consideration for quota at all. They are mainly the medium size farmers with between 50 and 80 cows in a herd. They are the farmers who appear to be hit hardest.

As has been said, no Government have the right to put a farmer, who has to change within 15 days or even one day, out of business, and certainly the EEC has no right to do that.

I implore the Minister to give further serious consideration to the plight of Northern Ireland's small dairy farmers and to introduce new sound proposals which will enable us to tell our farming constituents that this House recognises their difficulties and is reacting accordingly.

5.51 pm

Mr. Nicholas Baker (Dorset, North)

I am grateful for this opportunity to speak on an important subject. I welcome the Bill because the outgoers scheme was announced in reply to a letter from, and parliamentary question tabled by, me.

As my right hon. Friend said at the outset of his remarks, the scheme has been introduced because of the category of small farmers whose land can be used for nothing but dairy farming. Faced with the dramatic cut imposed on them by the quota scheme, some of them, perhaps because of the stage they have reached in their farming careers, have no alternative but to get out, and it is right that the Community should have a scheme to help them leave agricultural production.

Still well to the fore in the minds of all hon. Members who represent areas with a heavy concentration of dairy farmers is the suddenness with which the scheme was introduced and the shock that it presented to dairy farmers, not to mention the difficulties they encountered in trying to plan their businesses following that shock. However, I do not share many of the criticisms that have been directed — particularly from the Labour Front Bench, although there was an element of tongue-in-cheek in some of those criticisms—at my right hon. Friend.

I direct my criticism at the Council of Ministers, at the EEC, because I have great sympathy for a dairy farming constituent who wrote to me during this dramatic time saying, in effect, "I read the writing on the wall. Some years ago I realised that such a scheme would have to be imposed because I, like my dairy farming colleagues, recognised that we could not continue, as members of the EEC, indefinitely over-producing. I have not pushed up my production and I hope that you will not introduce a scheme that will help bail out those who have done so." I have sympathy with his foresight, but we also have a responsibility to those who were directed to increase production under some of the development schemes.

Any institution such as the EEC which is responsible for running an industry such as dairying and which gives those working in that industry so little time to prepare for change — change introduced in a sudden, almost retrospective, way—leads one to question the viability of that institution. If the CAP cannot be changed in a more business-like, gradual and farsighted way, we are right to question the institution. People who run businesses must be able to plan their future in a better way than dairy farmers have been able to do.

We must consider the effect of such sudden change not only on dairy farmers but on ancillary industries. Some of the most heart-rending cries to which I have listened have come from those engaged, for example, in drainage and dredging, industries that help with the clay soil of Dorset, which is suitable for few other forms of agricultural production.

I had hoped that a way would be found to resolve the problem of the quota belonging to the landlord and therefore remaining with the land. I hope that the Government will continue to devote to this the attention that they were devoting last autumn to securing agreement between representatives of landlords and tenants so that the quota can be transferred from one genuine producer to another. That is particularly relevant to tenants of county council farms, where it should be easier to arrange such a compromise.

Reference has been made to the difficult position faced by those who raised their production under one of the development schemes, who have been, in a preliminary way, entitled to secondary quota but who have been told that that quota must be cut. I hope that my right hon. Friend will see what he can do to help people in that position, particularly those who, as part of raising their production, have changed their breed of cows. There seems to be no provision for farmers who have changed from one breed to another, yet that category of farmer is being unfairly treated.

I support what has been said about the interchange between wholesale and direct sale quotas. I appreciate that in other EEC countries this alleviation of the scheme might be abused more than would be the case here, but that problem should not be incapable of resolution and I hope that my right hon. Friend will find a way of dealing with the matter.

May we be told what other EEC countries are doing and how far they have progressed in implementing their schemes? United Kingdom dairy farmers are watching how their counterparts are applying the schemes in their countries. If they are not implementing them adequately, we shall have to revise the way in which we look at the whole issue.

I consider the Bill to be an essential element in making the quota scheme fair and tolerable and in helping those who leave dairy farming, and for that reason I wish the measure a speedy passage.

5.58 pm

Mr. David Penhaligon (Truro)

I take issue with the hon. Member for Dorset, North (Mr. Baker) on only one point. He was critical of the way in which milk quotas had been introduced by the European Community and suggested, in effect, that we should consider the whole decision-making process of implementing measures of this kind.

To be fair to the EEC, one sees from examining the documents that the Commission must be given credit for saying that a quota system would have to be introduced some time before it was implemented by the British Government. Our Government, in splendid isolation at one time, argued that the whole matter could be resolved by the price of milk. The result was the the British Government had to make the change overnight, whereas the European Community had recognised that a measure such as this would have to be introduced. It is worth getting on the record exactly who made the overnight change. It was not the European Community but our Government.

This Bill is of a type I have seen all too frequently in my years here—one against which one would love to vote but cannot do so. It offers far too little to the dairy farmers, but to vote against it would be to give them nothing. Being a good, sensible west country man, given the choice between very little and nothing, it would not take me long to make up my mind which of the options I would prefer. However, while I am willing to go along with the Bill, it still gives cause for much dissatisfaction.

If I had to describe the Bill in a few lines, I would describe it as a Bill to buy out small producers to help to satisfy other small producers. The net result in our dairy producing areas will be fewer small milk producers. That is why my hon. Friend the Member for Ceredigion and Pembroke, North (Mr. Howells) and my other colleagues on the Liberal Bench take the view that this Bill is anti the small farmer. In the end, he will be annihilated and will be made an even rarer part of our mixed economy when those of us who live in the country know just how important he is. The Government could have dealt with the matter differently if they had so chosen.

There is no point in rehearsing the economic effects on rural areas. If I wanted to select 20 or 30 hon. Members who knew and understood the effect of such measures on the rural areas, I would select the 30 hon. Members who are in the Chamber now. Sometimes I wish that I could press a button to move out all the hon. Members who are here and bring in the ones who are not interested enough to come to listen to the debate, because they are the ones we have to convince of the logic of the argument. I fear that the problems in the industry have only just started.

One of the most unfortunate parts of the Bill, and the regulations that go with it, is the Government's decision on the relevant merits of the tenant and the landlord. I am aware that there are just about as many relationships between tenants and landlords as there are tenants and landlords. In some cases, the landlord has built the cowhouse, invested the capital and ensured that the farm is efficient, and should have control over the quota. However, the Government have not said that they will recognise the landlord's position in that case, but have legislated on the basis that in every tenant-landlord relationship it is always the landlord who has invested the money to build up the farm.

The legislation automatically gives an absolute veto to the landlord regardless of the circumstances and the use of the outgoers scheme. There is no logic in that, and I suspect that it is a political reflection of who really has power in the Government. Given an argument between the Country Landowners Association and the National Farmers Union, it is hard luck on the NFU. The Government come down on the side of their friends and the powerful, not of the weak. The Government should have given the presumption — not the veto — to the tenant so that the landlord could have taken his case on appeal to argue it out and if he had made the capital investment he should have control over the quota.

I shall use this opportunity — I think that I am just within the bounds of order, Mr. Deputy Speaker — to draw the Minister's attention to a tragedy in my constituency, which is based on a misunderstanding and which worries me a great deal. It concerns direct sellers. If anything in this legislation is genuinely unsatisfactory, it is the way in which direct sellers have been treated. One of the great enterprises in my county is selling Cornish cream. I was brought up on what is known in Cornwall as thunder and lightning. For those who are not initiated in the delights of this dietary lack of control, I explain that one takes a nice piece of bread and generously spreads across it some Cornish cream until the bread is no longer porous. One then spreads a nice lot of treacle over the top. If ever any hon. Member wants to put on weight, there is nothing in the world to beat thunder and lightning.

The selling of Cornish cream is a great enterprise and many people have set up substantial mail delivery systems. Over Christmas a lot of Cornish cream is sold over the counter. However, it is sad that in Cornwall there are many examples of people selling Cornish cream direct who did not appear to realise that the crux is whether they are over quota on direct sales and not whether they are over quota altogether. A number of farmers in my constituency have been successful this Christmas in selling Cornish cream and have now discovered that they are wildly over quota on direct sales and are therefore likely to be penalised quite seriously.

The confusion has arisen as a result of rumours. I read articles in The Economist and other magazines and have raised the matter myself. The rumours were to the effect that, although a farmer may be over quota this year, because of the drought and the initial reaction to this legislation, Britain was under quota and therefore there was no likelihood of any farmers paying any levy. Therefore, it was thought that that would apply to those selling their product direct. I hope that the Minister will clarify this matter, because I fear that the farmers in my constituency who thought that are wrong and could end up paying for large quotas. I shall draw the attention of the Minister to one or two cases where farmers are in danger of going bankrupt and, given the vagaries of the mail, send him some information.

The lunacy is that if the farmer who is in real danger of going to the wall had merely taken his milk down to the dairy he would be under quota and so in no difficulty. However, because he had the initiative to build up a clientele that would buy his milk—albeit in the form of cream — and to post it off to the customers and to collect the money, he is likely to be fined. Between now and the day that the levy is to be collected, the House and the European Community must be made to realise that that is mad, and that something needs to be done. I give the Minister early warning that a number of these cases will be brought to his attention. I hope that something can be done to relieve such difficulties.

Some interesting questions were put to the Minister about the outgoers scheme and the attitude that he showed in replying to those questions was more revealing than the replies. There is no point in having the appeals procedure — with the hundreds, if not thousands, of hours spent on it — to allocate a number of farmers extra milk but then in the final analysis to tell them that, although they have won the allocation, they still cannot produce that milk. That is manifestly lunatic. We do not have the final figures, so we do not quite know, but if in the end a further quota has been allocated but is not available because there is not enough of the outgoers scheme, the Minister must go to the Chancellor of the Exchequer to get some more money to expand the scheme. To do anything else would be lunacy of the type with which the House is not normally associated. The milk can and must be allocated through the outgoers scheme, and the Government should provide the money.

I recognise that the Minister has some difficulty in getting money out of the Chancellor, but he need only present the House with the opportunity to make a decision on this matter. If the Minister allowed us to vote on whether we want another £10 million or £25 million—the amount is no larger than that — to alleviate this problem, I believe that hon. Members would go through the Lobby to support that provision. If we are given only one of these ghastly negative orders, to which we have become so accustomed over the years, we would have to vote for either a little or nothing and would not be able to give the Minister the backing he needs to go to the Chancellor. I look for an assurance that, if the figures do not match, an attempt will be made to persuade the Chancellor to produce the pennies required.

My point about tribunals is made more on the basis of my role as a representative politician than anything else. There is a number of dairy farmers in my constituency. I have to tell a dairy farmer who explains his case at some length to me that there is no point in me, as his elected Member of Parliament, taking that case to the House and trying to convince the Minister that the tribunal has made a mistake. The Minister has so tied up the regulations that the tribunal is free to act. Even if one could convince the Minister of Agriculture, Fisheries and Food that, for instance, Harry Bloggs at Rosudgeon was unfairly treated, the Minister has so tied up the regulations in this quango—such is the Government's enthusiasm to transfer the power to make decisions from the elected representatives to appointed quangos—that my constituent could not win his case. That is a denial of the purpose of the Bill and of democracy. The Minister has made it impossible for us to argue our case because of the way in which he has tied up the regulations. That is as outrageous a part of the legislation as any other. I suspect that that is something with which the Minister will have to deal repeatedly.

The hon. Member for Newry and Armagh (Mr. Nicholson) referred to the co-responsibility levy. I remember reading the reasons given for introducing this levy. I cannot say that I was ever enthusiastic about the levy, and I no longer see any reason for it. There is a quota regime throughout Europe. I am not especially against the quota regime for solving this horrible problem which should not have grown so large. All the reasons given five or six years ago for introducing the co-responsibility levy have now vanished, yet the levy is still collected. Why? Where is the money going?

I look to the Minister to campaign within the European Community for the scrapping forthwith of the levy. That is one of the few steps that can be taken to give the farmers a real increase during the next three years in the value of their production. If that is not done, there will be an immense and continuous argument in the House about the full impact of the three-year freeze. Why is the co-responsibility levy collected? Is the Minister trying to get rid of it?

6.14 pm

Mr. George Walden (Buckingham)

I hope that the House will forgive me if I do not go on about thunder and lightning — perhaps we could settle for a little fine drizzle instead. My hon. Friend the Member for Devizes (Mr. Morrison) suggested that it was a miracle that the levy system had got off the ground. It would be churlish if we did not pay some tribute to the tenacity of my right hon. Friend the Minister of Agriculture, Fisheries and Food for getting it off the ground. It would be wrong not to be frank about the fact that my right hon. Friend has benefited from a certain amount of divine intervention in getting his miracle off the ground in the shape of the weather. I am slightly worried that we may be developing a false sense of security. Who knows what the weather will be like next year and the year after? That point is often made to me by my constituents.

My right hon. Friend was against the levies because of the inflexibility they imposed upon production. The keynote of this debate has often been the need for flexibility. Flexibility is needed in three respects. First — I join hon. Members on both sides of the House—there should be flexibility with small farmers. I am in favour of the outgoers scheme which provides a type of flexibility. We are asking small farmers to go out of business to encourage other small farmers to stay in business, and that is a paradox. A number of my constituents have said to me that it would be more sensible to raise the threshold to encourage farmers with 60 or 80 cows and who can put their land to alternative use, to go out of business, thereby enabling a number of smaller farmers to stay in business. We should not forget that it is the small farmers who do not have an alternative use to which they can put their land because such acreages do not provide viable alternatives.

Secondly, I should encourage my right hon. Friend to continue to do all he can in Brussels to obtain elbow room on transferability of quota, because that is an important element of the flexibility for which we are looking. Thirdly, I believe that my right hon. Friend should not discard the possibility of being slightly more flexible in dealing with his colleagues in Europe. Because we have this scheme—no one has suggested any other scheme that will work — we must ensure that it operates fairly and quickly. We must not be lulled into a false sense of security because of the way in which matters have gone this year. Although we are right to tell our colleagues in Europe that we will not collect the levy until they sort themselves out, we should be careful about the way in which we play our hand in future, especially when we consider that, for example, the French owe 35 million ecu and we theoretically owe 2.9 million ecu. We do not want to be used by the French as a justification for their not paying that large sum. The object of the exercise is to get them to pay and not to bring down the whole levy system. No one has anything to put in this system's place.

A small farmer, who does not have a battery of secretaries but whose wife acts as secretary, may come into my surgery and spread out before me many incomprehensible documents. He seems to understand them better than I do, being more intelligent than I am. It is extremely difficult to grapple with these documents. I beg my right hon. Friend to do everything he can in the cause of simplicity. No doubt my right hon. Friend remembers what was said by Helmut Schmidt about monetary compensation. He said that only two people in the world understood how monetary compensation amounts work—one was Helmut Schmidt and the other was the deputy governor of the Hungarian national bank. It would be a pity, given that we have no alternative but to implement quotas, for the quotas to be in danger of collapsing under the weight of bureaucracy.

6.19 pm

Mr. David Harris (St. Ives)

I am happy to take part in the debate so soon after my colleague from Cornwall, the hon. Member for Truro (Mr. Penhaligon). The hon. Gentleman was right to concentrate on aspects which especially affect our county, particularly the subject of Cornish cream on which I have corresponded with my right hon. Friend the Minister who, I believe, must do something to alleviate the problem.

I take issue, however, with the suggestion by the hon. Member for Truro that the Bill was somehow anti small farmers. I believe that that is quite wrong. I am sure that the hon. Gentleman would have indulged in one of his famous rants, as he describes them, if things had been the other way round. If those with first call on the outgoers scheme had been the larger farmers I am sure that the hon. Gentleman would have put up a great show of wrath, fury and indignation and convinced the entire House that small farmers should have first call on the scheme if they wished to use it. Therefore, I believe that the Government's approach is right in that respect.

Mr. Penhaligon

I believe that the Government should have skewed the original reductions in production against the big farmers, thus putting the load on the top and saving a strong small farmers' community, if not for all time at least for the foreseeable future. I suspect that the hon. Gentleman himself would agree with that.

Mr. Harris

I do indeed. It is no secret that the hon. Gentleman and I, with others Members from Cornwall, had a most interesting and informative meeting with NFU representatives from our county. I understand, too, that Cornwall was by far the best represented county in the delegation that lobbied the House today, showing the importance of this matter to our county. I venture to suggest, however, that if the hon. Member for Truro had expressed the same view at that meeting the NFU would have been split all ways. Although he and I agree with such an approach, I suspect that the farming community as a whole would have been far from unanimous. That is the reality of the situation.

I therefore sympathise with my right hon. Friend the Minister, who was unfortunate enough to have been left holding the parcel when the music stopped. As he is no longer present, I should also say that I believe that there has been a great deal of unfair criticism of him. As my hon. Friend the Member for Dorset, North (Mr. Baker) has said, the real culprit is not the Minister or the Commission but the Council of Ministers, of which my right hon. Friend is just one member. Successive British Ministers and the Commission have urged the Council of Ministers to face this problem. Had the Council of Ministers done so, the whole business of restraining output could have been carried out in a sane, sensible way without all the aggravation and the awful uncertainty which have made the past year the most dreadful year for agriculture since the war.

Our collective job now is to try to get some sanity back into the situation. I believe that we shall have to live with quotas for a very long time. That makes it all the more important to try to sort out some of the nonsense in the present scheme. In this respect, the House owes a great debt of gratitude to my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) who first drew attention to the vexed question of tenant and landlord. As many hon. Members have said, the Government must give further thought to this. Again, of course, it is to some extent in the hands of the Community. Here, too, the hon. Member for Truro was not quite right, as the original regulation on which the scheme is based makes it clear that the quotas must be invested in the land. I believe that we must change that. I agree with the hon. Member for Truro that we must ensure greater flexibility and a much fairer system, certainly in the south-west, although I gather from speeches so far that the relationship between tenant and landlord is a major source of concern in many other parts of the country.

I hope that my hon. Friend the Minister of State will be able to answer the following question. When will the Government be in a position to redistribute to small farmers the quota made available as a result of the outgoers scheme? When can those small farmers be certain that their production levels will be restored? They are entitled to an assurance on that. After such a traumatic year, there is an urgent need to restore confidence in agriculture and especially in the dairy sector.

In this context, I echo the plea of so many hon. Members for the immediate abolition of the co-responsibility levy. When I tackled my right hon. Friend the Minister on this some weeks ago I was somewhat disappointed, as he gave the impression that, although he would press for a reduction in the levy, he would not—for reasons that I did not understand — press for its complete abolition. The hon. Member for Truro asked why the levy was still in place. It is because the Community looks to the levy as a source of funds for its hard-pressed budget. That is absolutely wrong and we have a duty to see that the levy is scrapped as quickly as possible. If my hon. Friend the Minister of State can assure us today that that will be one of the Government's aims in the next round of negotiations, he will do much to restore confidence in the farming industry.

In conclusion, I welcome the Bill, although I do not believe that it goes far enough. I believe that more must be done and I add my voice to those who have pressed my right hon. Friend the Minister to go to the Chancellor for more money. My right hon. Friend said that the Bill involved considerable amounts of public money. With respect, that is absolute nonsense. We are talking about £50 million spread over five years and we are dealing with the future of a vital industry. I believe that for a comparatively small sum of money we could make the scheme really work. That is what we must set out to achieve.

6.28 pm

Mr. Colin Shepherd (Hereford)

I am glad to be able to contribute briefly to this important little debate on a mopping-up Bill designed to straighten out the existing situation.

I commend my right hon. Friend the Minister and my right hon. Friend the Minister of State on their alacrity in getting the outgoers scheme under way, providing an important anchor of confidence for the industry at a time of turmoil, anguish and anxiety. The fact that the scheme was announced so quickly and was adequately financed, at least for the first stage, was most reassuring.

As the amount of money involved is sometimes described as very little, it is worth putting the matter in context. It is nice to know that the Ministry provided the second most generous scheme within the Community because, if I read the AGRA Europe publication of 29 June 1984 accurately, France is the highest contributor in this respect with a support of £88 million, we come second with a support of £50 million and Germany, which is sometimes vaunted as showing a more generous response to this problem, comes in a poor third with £25 million. I think the response to that German scheme indicates its lack of acceptability.

Much has been said in the debate about flexibility. In the context of quota and the outgoers scheme, flexibility is the key. To maintain flexibility somehow or other within the rigid framework of the overall quota is the fundamental problem that has to be dealt with and resolved. In that structure, I am glad that it has been clearly enunciated by my right hon. Friend that protection of the smaller producer is the most important consideration. I have given much thought to how it might be better undertaken, but I think that the smaller producer on balance has been protected best. Those on the level of 40 cows or below wishing to stay in have been given, or will be given, the bias of support while those on the 40-cow level who are seeking to go out will also be given the balance of preference because of the lack of viability of their particular holding or circumstances.

Another point that has not been made so far in the debate concerning the small producer relates to the movement of quota. Many requests have been made for more flexibility, for a greater ability for quota to move. The National Farmers Union has made a specific request for the saleability of quota, subject to certain safeguards. This worries me. The decision to attach quota to the land seems to me to protect the smaller producer against the depredations of the larger producer, who would have the resources to buy in quota if it were freely available on the market. Therefore, to link quota to the land gives the best possible defence to the smaller producer and ensures that it is not possible for quota to accumulate in the hands of a few large producers.

One or two problems have to be accepted as a consequence. There has been considerable mention of the question of tenancies. I note the point made by the hon. Member for Truro (Mr. Penhaligon) and by my hon. Friend the Member for St. Ives (Mr. Harris), but I think that the answer lies the other way round. If it can be shown that the tenant has made the investment in the dairy, he should have the right of appeal against the landlord rather than the other way round. That secures the fundamental position of the quota being linked to the land. The right way round to tackle the flexibility of quota seems to me to be in terms of leasing. I wonder whether the Minister, in winding up, can give the House some indication of what thought has been given to the development of the concept of leasing of quota on an unsecured basis so that it can return to the land when the circumstances indicate that it should do so. That would give the necessary flexibility, put the proper value on quota and thus satisfy all the requirements.

As a final point on flexibility, the hon. Member for Truro gave the most graphic description of the absurdities that will come about as a result of the inflexibility between wholesale quota and direct sales quota. In my view it is vital that this problem be resolved. We cannot have a situation in which successful sales are penalised; they must be recognised and encouraged. Successful sales mean consumption which has to be set against the present difficult market scene.

My penultimate point relates to what I referred to last May as the knock-on effect. I bear very much in mind the fact that I come from a beef-producing as well as a dairy-producing part of the world. In terms of substitution, the development of the beef herd is obviously important as, indeed, will be the lower production of commercial beef resulting from the dairy herd. It is essential that there be full maintenance of the confidence in that sector of the market for the foreseeable future. I must underline the importance of sustaining the variable beef premium scheme because, as I have said before, the variable beef premium scheme puts beef on plates, and it gets beef down throats and eaten, which cannot be bad, and it also provides the confidence that is necessary to ensure the future of the beef industry at a time when it particularly needs it.

As to the future, my right hon. Friend said that at present no further schemes are planned. When this scheme is completed and all the quotas have been allocated, will he undertake a formal review? I am sure that every other commentator, magazine and, indeed, official body will be carrying out the same exercise, but it would be helpful if the Minister would undertake a full review of the point we have reached to establish whether it is appropriate to consider taking in a further scheme. If he does bring in a further scheme, may I reinforce the point made by my hon. Friend the Member for Grantham (Mr. Hogg) when he intervened in the early stages of the debate to ask that the regulations be brought forward in draft form so that they can be considered and possibly amended in the light of debate in the House? The value of that process was heavily underlined at the start of this whole wretched exercise when the milk quota regulations in my view were far more suitable and enhanced in quality as a consequence of such a process. I look forward to that and to the satisfactory and speedy passage of the Bill so that the situation can be properly formalised.

6.36 pm

Mr. Tony Speller (Devon, North)

I have listened with great interest to a debate during which the Benches of the official Opposition have been empty. I am not surprised. Her Majesty's Government are doing all the Opposition's work for them. They believe in quota controls and all the apparatus of the State, which we are now imposing on one of the last efficient industries in the country, the agriculture industry. I love the fascinating way in which hon. Members who have not been in the House very long today criticise my comments because by their non-attendance they are bringing about the destruction of the industry. Our farmers have the capacity to feed the hungry not only of this nation but of other parts of the world. I am saddened that, in the debate, hon. Members have shown gloom, some despondency and some petty self-congratulation while none of them have queried the fact that in the House we are attempting to go back to a situation, that I thought we left many years ago, in which this Government—and I am ashamed because it is the Government whom I generally support—revert to this terrible system of control upon control.

What do quotas mean? They mean things that are fixed from a paper basis; they mean inflexibility. Of course one can always appeal to a tribunal, which means more tribunals. What do they penalise? They penalise the efficient. Who else do they penalise? They penalise those who wish to grow, to expand, to bring their families into the business to make that growth. What do they encourage? Bureaucracy, of course; form-filling, of course—indeed, much form-filling by farmers who are far better at growing food. The bureaucracy that we are grafting on—for want of a better agricultural word—is one that I find totally unacceptable and, frankly, shameful.

It is quite easy for us to say that we can do nothing and tonight we shall have no vote. All right, there is no vote against this concept because we say that the concept is accepted and we are part of a club. The Government, of course, will not vote against it and the Opposition do not wish to vote against it. Even the Liberal party, which has been present in some profusion, will not vote against it. So we accept, and what do our farmers do? They have to accept it, because we have made the ruling. We, here at Westminster, and they, down the line, will bear the consequences. The consequences are easy to see. We are surrounded by empty green Benches. Soon in Devonshire and North Devon I shall be surrounded by empty green fields because this form of system always supports those who are big enough to have an accountant and to employ a surveyor and who do not have to have the lady of the house do the paperwork. We shall empty our countryside, just as we have emptied other parts of the country. We have pretty well destroyed our manufacturing industry. Everybody will tell me that this is in the cause of greater efficiency—greater Japanese or German efficiency.

So we are now set fair to destroy perhaps the last really superb working part of Britain—the small green-field farm plus, of course, farmer and family. As they are destroyed, so the village, and with it, the village school and pub, are destroyed. In my part of the world more people live off agriculture than practise it. It is not just the farmer or the rapidly disappearing farm worker who is affected, but the man who services the tractor or who sells it, or perhaps the man who sells the car, or the concentrate. It is the professional advisers who are affected. In the small towns in areas such as Devonshire we are sentencing them all, not to a lingering death, but to a fairly quick one.

The big man can, of course, improvise and move into other areas. A big farm is usually fairly flexible and has the advisers and adaptability. But on a small farm a man is trained for a lifelong job and it is that or nothing. It is no different in many industrial areas, where skilled men no longer have work because their skills are no longer needed.

Time is always short just before the wind-up speeches, but I am saddened that there has been no more temper in the debate. Mention has been made of the CLA and the NFU. I have not had the CLA on to me, but the NFU has been here in strength. I know how it feels. It is aware that the big man will survive because he always does. But I thought that Parliament and this House were meant to stand up for and look after the small man. I am not prepared to see the people whom I seek to represent destroyed economically because people say, "Oh well, what can we do about it? We belong to a club." I sometimes wonder these days whether that club is worth belonging to.

I shall make my points briefly. My good friend, my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) cannot be here today. He is in his constituency dealing with farmers and farmers' interests. But as my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said, if £25 million or £50 million is all that is required from national resources, that is very little compared with the vast sums—I play it from Left to Right—that we waste on miners who do not care if their pits fall to pieces, or compared with the vast sums we spend on defence where many of us believe that there are savings that can be made. When we consider the sheer petty-cashery needed to save the way of life of the small farmer, it is unbelievable that a Government who were elected on the promises that they made should no longer be prepared to honour them.

There is to be no Division in which one can show one's shame at the way in which we are treating the industry.

Mr. Home Robertson

Why not?

Mr. Speller

Alas, one hon. Member is not enough to divide the House. Perhaps the hon. Member for East Lothian (Mr. Home Robertson) who shouts out from a sendentary position is too tired to contribute to the debate. But I, for one, am deeply saddened by the tenor of the debate. I know that we are stuck with the system, but some of us now wonder whether, just because we accept the system as it exists, we must also accept that it is good. If it is not good perhaps we should consider changing it, instead of talking about making amendments in Committee or dividing in Committee. We all know very well that in Committee the majority wins.

Today there appears to be a minority of one who says that we are not winning but losing as we destroy the best things in Britain—the countryside, the small farm, and all the beauty of life that goes with them. If we destroy them, we shall be as guilty as those who, over a hundred years ago in Scotland and not so long ago in the north of England, made desolate what was once beautiful thriving countryside. This evening we are contributing to that desolation.

6.43 pm

Mr. Michael Stern (Bristol, North-West)

Thank you, Mr. Speaker, for calling me to speak in the rather unfamiliar surroundings of a debate on agriculture. I understand that the Bill deals with compensation to farmers for the imposition of quotas. I am sure that even my hon. Friend the Member for Devon, North (Mr. Speller) would support that principle. But for those of us not wholly bound up with farming, the Bill does not go nearly far enough.

Until the speeches of my hon. Friends the Members for Dorset, North (Mr. Baker) and for Devon, North no one seemed to recognise that agriculture consists of more than just farmers. Indeed, the ancillary industries which depend on farming have been hit far more severely as a result of milk quotas than any dairy farmer who is to receive compensation under the Bill.

I draw the attention of my hon. Friend the Minister to a company called BOCM Silcock Limited in Avonmouth, in my constituency. It is a mill that manufactures feeding stuffs. For historical reasons, more than 80 per cent. of its production consists of cattle feed. As a result of quotas, that mill will close in the first quarter of 1986 with loss of employment for up to 199 staff. Their jobs will disappear as a result of the imposition of milk quotas. Where in the Bill is there compensation for them?

I am not talking about an inefficient company that is giving an excuse for going out of business. Prior to the imposition of quotas it was economic. The prices of its products were comparable with those elsewhere in the EEC. It achieved a 10 per cent. productivity gain in the years since 1976. It was not overmanned, and shed more than 100 staff in the same period. It was not undercapitalised and in recent years it has built a new silo, a new blending plant and additional bulk loading facilities. In addition, 50 per cent. of its extrusion presses have been replaced. It has improved its warehousing and has computerised vast areas of its operation.

Prior to quotas the company had the option of upgrading its manufacturing unit, and, given turnover continuing at former levels, it would have been economic to do so over a period of two or three years. But then came milk quotas, and in one year its turnover fell by 28 per cent. Consequently, of course, the level of return on capital is unacceptable, the upgrading option is no longer economic and the mill will close. It is worth considering what that will mean to those involved.

All the speeches today have been about people, but they have all been about farmers. I should like to widen the debate's horizons a little and to talk about workers at that mill. The average age of the production staff is 50 or more. The majority of them live within 10 miles of the mill. Within that same area unemployment stands at 30 per cent., which is not large enough to qualify for development area status. There is little alternative employment for those people, and what jobs there are pay substantially lower rates of pay. Therefore, as a result of the imposition of milk quotas, most of them face permanent unemployment.

The average age of the clerical staff is a little over 40. They are mainly female and, because of the special procedures within the mill, most of them will need retraining before they can even consider obtaining another job. But because it is not a development area and because there is no special provision for those parts of the agriculture industry that are not termed "farming", they cannot obtain any retraining grants from the EEC, and there is no provision in the Bill to provide them.

In addition, just to make things slightly worse, the company is a reasonable employer and so will be able to offer the staff some additional redundancy over and above the basic statutory scheme. However, it can do so only on condition that between 80 and 90 per cent. of them stay on until the last day before the mill closes. Therefore, they will not have the option of going out and looking for work. They will have to stay until they are made unemployed.

I am aware that the outgoers scheme is not designed as a form of social payment and I am not suggesting that it should be. In principle, I support the scheme, but it is designed to compensate those involved in agriculture who have suffered as a result of the Government's action in accepting quotas. The Government accepted quotas and are now saying, "It is fair to use taxpayers' money to compensate those who will suffer most." Why should only farmers be compensated? We are told that farmers are entitled to compensation because they have had to cut production by 9 per cent. over the country as a whole. The mill has had to cut production by 28 per cent. Therefore, why should farmers alone be entitled to compensation?

Some farmers are losing the whole of their livelihood because of the quota scheme. As the Minister rightly says, those farmers for whom we have most sympathy are most entitled to compensation. Some farmers will lose only part of their livelihoods, but the mill workers will lose the whole of theirs. Therefore, why are they not entitled to compensation?

Why is the Bill blinkered so that it deals only with compensation to one small part of a large industry? Why does it not take into account the effects of the Government's action on other parts of the industry? The Government rightly set up the principle that those people most affected by Government action should be compensated. For that reason generous compensation was offered to miners, dockers and steel workers. It is now being offered to farmers. Why is it not being offered to the entire agriculture industry?

If the Government wish to compensate only part of the industry, they must accept that they will not earn the support of hon. Members who are troubled by the suffering in other parts of the industry.

Mr. Home Robertson

I have already drafted an amendment to be tabled in Committee which would provide compensation for people who lose their jobs because of the scheme. Does the hon. Gentleman expect to be nominated as a member of the Committee, and, if so, will he vote for such an amendment?

Mr. Stern

No, I do not expect to be nominated as a member of the Committee. However, when the Bill returns to the Floor of the House, unless it _contains provision to compensate people such as those in my constituency I have described, I shall continue to be unable to support it.

6.53 pm

Mr. Richard Alexander (Newark)

It is a pleasure to be called to speak in this debate. My main criticism of the debate is that it has so far been largely a west country benefit. As I am the only east midland hon. Member to make a speech I shall put our case.

The outgoers scheme was introduced to encourage some dairy farmers to go out of milk production to release quota which can be redistributed to farmers who wish to stay in milk production. The problem is that the present scheme is heavily over-subscribed. On behalf of dairy farmers in my constituency I add my voice to those who urge the Government to extend the present scheme. That would encourage more farmers to cease milk production, and thus make available additional quota for those who wish to remain in production and make a good living at it.

That would particularly help producers who have made application to the quota tribunal as development cases. I understand that there will not be a cut in the base year quota awards and that if the present outgoer scheme is successful, there will not be a cut in the exceptional hardship awards made by the tribunals.

We now understand that substantial cuts of awards to development cases, perhaps of 30 or 40 per cent., may be made. Hardest hit if that happens will be the younger farmers and farmers who, before the imposition of quotas, made long-term financial commitments to develop their farming businesses. They feel that before the imposition of quotas they were encouraged by Government agricultural policies to expand, only to find literally overnight that their plans were in ruins and that no alternatives were available to them.

Dairy farmers in my constituency and in my county feel strongly that milk production quotas should be transferable either by sale or by lease, subject to any necessary restrictions and regulations. I disagree with my hon. Friend the Member for Hereford (Mr. Shepherd) on this. The linking of quotas to the land puts farmers in a straitjacket. They feel that that should apply to all farmers in the European Community, but they query whether it does and feel that a more robust attitude on the part of my right hon. Friend the Minister in Brussels could relieve them of the adverse effects of that straitjacket.

I shall be interested to hear whether my right hon. Friend is having discussions with his colleagues in the EC about removing that straitjacket. It can do no harm to his Department, nor to the financial position of this country, and my farmers advise me that it could do good to them if it were removed. I look forward to hearing from the Minister in his reply that he will do so.

6.56 pm

Mr. Brynmor John (Pontypridd)

We have had an interesting debate on a matter which has affected the countryside. All hon. Members will have been told about cases that have created great hardship. However, until the new milk production quotas come into existence, we shall not know the full extent of hardship. There will be a greater effect on rural communities than any hon. Member can guess.

I do not say this in a pejorative sense, but our debate has been rather like a Committee stage, in that all hon. Members, with one exception, have welcomed the Bill, however reluctantly, because it gives a measure of justice to people who, through no fault of their own, will lose their livelihoods. Therefore, we have concentrated on trying to improve the Bill by making suggestions about flexibility.

There has been a fair measure of consensus about those measures. Pleas for flexibility are all very well—I agree with almost every point that was made — but the Government's response to those pleas is what is important. I hope that they will not take our reluctance to vote against the measure, which cushions people who are undergoing hardship, as an excuse for saying that their plan is perfect in every way and that hon. Members will not vote against the Bill because its underlying purpose is good. I hope that the Government will listen to the suggestions of ways to improve the scheme and act on them.

The hon. Member for Devon, North (Mr. Speller) alone went to the root and branch of the Bill in his criticisms. As he is now absent, may I say through the columns of Hansard that he must not take fireworks night too literally when he makes a controversial speech. This evening he lit the blue touch paper and retired. He has left the Chamber and we cannot consult or debate with him. He would have done much better, after firing such a volley, to wait in the Chamber to hear what hon. Members have to say in reply.

The state and the farming industry have been in partnership since the second world war, with the full assent of farmers. That has greatly benefited the country. On this occasion, the Minister of Agriculture, Fisheries and Food, for whatever reason—I accept the defence of him by the hon. Member for St. Ives (Mr. Harris) — changed at short notice the encouragement that the Government have offered for more than 40 years. However, I do not take too seriously his defence of the Minister, who is not so tender a flower as to need people rushing to his aid.

The House should remember that two or three days before he attended the meeting of the Council of Ministers, the Minister pledged undying opposition to the scheme. The only historical parallel that I have been able to find to such a volte face is that of the Duke of Marlborough, who left London at the head of James II's forces and returned at the head of William and Mary's army. With such a short time span and such a radical change in everything that had been expected of dairy farmers for many decades, it is no wonder that there was introduced in the industry instability which bordered on panic for a considerable time.

The introduction of the scheme was an unpleasant shock, and many of us believe that its implementation has been chaotic. There is no question but that many more farmers have appealed against the quotas allocated to them than was foreseen by the Ministry. The Government should have expected many farmers who were faced with the loss of their livelihoods to appeal against the quotas. As a consequence, the tribunals, from their inadequate beginnings, have been stepped up, although they are way behind with their work. We do not know whether their work will be completed by February or March. In the interim, no one has been certain of anything, which must cause great dissatisfaction in the industry. It is ironic that, due partly to the drought that afflicted us last year, Britain will not fulfil its quota.

As my hon. Friend the Member for East Lothian (Mr. Home Robertson) said in opening, we want a specific assurance that under-production this year will not lead to further pressure for an even lower quota. The panic with which bodies of an official or semi-official nature are trying to encourage farmers to increase their milk production for the rest of the year suggests to the industry that that might he a possibility.

The hon. Member for Bristol, North-West (Mr. Stern) said that the Bill does not cover all those who will have to leave the dairy industry as a result of the quota scheme agreed by the Minister in Brussels. First, it does not cover tenants, unless with the landlord's consent. I hope to say a little more about that later. My hon. Friend the Member for East Lothian said that the Opposition would table an amendment seeking an extension of the scheme to cover all those who work in the dairy industry. He used herdsmen as an example, but we believe that the Bill should cover those who work in the dairy products industry, which will have problems different from those of a normal business that fails. It was not that industry's fault that the quota system was agreed; it could do nothing to avoid it.

My major criticism of the Bill is that the existence of the scheme begs several questions that have not yet been answered by Ministers. The first question, which was asked by several hon. Members including the hon. Members for Ceredigion and Pembroke, North (Mr. Howells), for Devizes (Mr. Morrison), and for Truro (Mr. Penhaligon), was whether the Government intended the quota system to protect the small producer and to keep him in operation. If that is the case, it is strange that the scheme is available only to small producers. A Victorian ballad says, It's the poor what helps the poor", but this scheme takes that saying to absurd lengths. The Minister will say, "We have gone from 200,000 to 325,000 litres." He tried to make a virtue of desperation, because farmers are not fulfilling their quotas and are not getting the firm assurances that they wanted. I should have thought that the scheme would be open to larger farmers to facilitate either a whole or—here I agree with the hon. Member for Ceredigion and Pembroke, North—a partial surrender of quota. That would be helpful to the small producer, who could continue with part of his quota as a contribution to a mixed farm, and it would also increase the volume of milk surrendered by some bigger farmers into the pool, which will help the allocation of quotas and avoid some of the hardship that would otherwise be caused to small farmers who specialise in dairy herds.

Secondly, is the Bill intended to protect communities? It is not generally appreciated that the farming industry's most significant role is as the base of rural life. Not only will small farmers face hardship, but, as the hon. and disappearing Member for Devon, North (Mr. Speller) said, many others who depend upon agriculture directly or indirectly will be affected. Gradually, the entire life of a region will be affected if we change agriculture in ways that have not been fully thought out. I appreciated the contribution of the hon. Member for Newark (Mr. Alexander), who is from the east of the country, and I agree that in this case there is no north-south divide, but an east-west divide. There is likely to be a split between east and west, with the dairy industry in the west being disadvantaged, unless the Government are more clear about the communities that they hope to see at the end of the reshaping of the dairy industry upon which they have embarked.

The third and most important question that the Government have not answered is what they envisage as the future for the outgoers from the dairy industry. Do they want them to quit agriculture completely? If so, what will those outgoers do? What other occupations could they have? What other forms of agriculture would the Government advise outgoers to take up, if they wish them to change to another product rather than quit agriculture altogether? If the Government wish outgoers to quit altogether, they should consider the environmental effect of the abandonment of large numbers of smallholdings, many of them in very inaccessible places. If a tenant quits with the landowner's blessing, the landowner can put the land to another use, but if a somewhat inaccessible holding is quit by the small owner-occupier, the land will be sterilised for any useful occupation in the future. The Government must decide whether they want outgoers to quit the industry completely or to produce something else. They must take that decision before we can decide whether they should accede to the pleas for the extension of the outgoers scheme that have been made by almost every Back Bencher who has spoken today.

It may be the Government's intention to encourage some different form of agriculture. However, under the present terms and conditions of the scheme, the outgoer will not have much chance of changing the way in which he gets his livelihood. It seems that the average compensation is likely to be about £32,000. Such a sum will not buy many sophisticated machines designed to facilitate other types of farming. Also, as my hon. Friend the Member for East Lothian has said, much of the money may already be owed to the bank.

I hope that the Minister of State will answer those points. With a scheme that did not achieve any of the desired objectives—a scheme that simply did not work—we would be in the worst of all possible worlds. In his opening speech, the Minister told us that less than half the number needed have firmly declared their wish to take advantage of the outgoers scheme. He said that he was confident that the required number would apply. However, any restructuring of the industry must be carried out in the most sensible way possible. Is the Minister confident that a restructuring based on the present outgoers scheme will help to create the sensible new industry that would provide the best base for the future?

A number of hon. Members referred to tenant farmers. The right hon. Gentleman said that 45 per cent. of those who have a firm intention to stop milk production are tenants. However, do we know how many landlords, in giving their consent, are asking for extra rental or doing any of the other things described recently in Farmers Weekly? How many tenants are suffering changes in conditions because they are taking advantage of the scheme?

In the representations that I have had from farmers, the matter most often mentioned has been the transferability of the quota. The Ministry needs to study more carefully the question of leasing and sale. However, I hope that the simple ability to buy the quota will not be the criterion in consideration of the type of protection to be given. I hope that those who have made a great deal of money out of other forms of agriculture will not be allowed to filch quota away from other parts of the country where it underpins the economy. I think that every hon. Member who has spoken in the debate has called for some safeguard in that area, as well as for flexibility. The Government must consider the matter urgently.

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) and other hon. Members have referred to the Government's obligation to those who took up development schemes because of the enthusiastic encouragement of the Government. In so doing, a number of people became unwisely over-committed to the banks, and poverty is now staring them in the face. The Government have a responsibility to those whom they encouraged to expand their herds. I hope that they will consider the possibility of allocating extra quota to such people.

I also hope that the Minister of State will clarify the figures. I admit that I cannot understand the simplest figures. However, first of all, we were told that where the tribunal had assessed the need for extra quota, about 35 per cent. less than the sum needed was being allowed because of the insufficient supply of extra quota. Then the Minister said that 11 per cent. would be added in future years. I shall be grateful if the Minister will clarify the relationship between the two figures.

The hon. Member for Devizes (Mr. Morrison) and the hon. Member for Truro (Mr. Penhaligon) both asked about direct sellers. Direct sellers were certainly not given clear information when the scheme was set up and many of them — through an inadvertence that they share with many hon. Members as well as people outside—now find that they have exceeded their quota or that their quota is in the wrong form. Unless direct sellers are treated sympathetically, they will suffer considerable hardship.

The situation is volatile. In principle, the Bill deserves the support of the House. The fact that it does not include everyone does not mean that it will not help those with whom it deals. However, I hope that, in Committee, the Government will consider questions such as the extension of the scheme, and will not hold too firmly to the statement in the Minister's opening speech.

As has been pointed out, even under the Labour Government of 1966–70 one had to wait until Cabinet Ministers were Out of office before their memoirs—such as the Crossman memoirs — appeared. However, now we do not have to wait for publication or for the fall of the Government. With a bland disregard for collective responsibility, the Minister of Agriculture tells us what terrible fights he has with the Treasury over sums that are pitifully small in terms of total Government spending or in terms of the Minister's own contingency fund allocation.

Everyone has asked for an extension of the scheme to make it more flexible and to alleviate the hardship that will undoubtedly affect many groups of people in the industry. I hope that the Minister will not regard the sacrosanctity of public expenditure targets as more important than the well being of those who have served the community for a long time. We are discussing comparatively small amounts of money. If the Minister and territorial Secretaries of State cannot form a powerful and noisy wedge in the Cabinet to press the Treasury for extra provision to extend and make the scheme more flexible, I do not believe that he will have discharged the duty to the outgoers that we all recognise.

The Bill should be given a Second Reading. It should be improved vastly in Committee, but the most important thing which should come out of today's debate is not the improvement of the Bill but the improvement of the scheme. It is on the scheme that justice for the dairy industry depends.

7.20 pm

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

I have been asked an enormous number of questions during this comparatively short debate. I shall endeavour to answer as many as I can without going on interminably.

Mr. Home Robertson

The Minister has until 10 o'clock.

Mr. MacGregor

I suspect that the House would think it unwise of me to go on for two and a half hours in response to a debate which was not much longer than that. If I do not deal with all of the issues that have been raised, they can be considered in Committee. Indeed, some of them could equally well have been raised in Committee.

In the opening comments of the hon. Member for East Lothian (Mr. Home Robertson) we had yet again an example of the Opposition speaking with two voices. Indeed, the Opposition have almost literally spoken with two voices as only two Opposition Members have spoken. Only two Opposition Members have been present for most of the debate.

Mr. Home Robertson

There have been three.

Mr. MacGregor

Very well. However, I meant two voices in the more usual sense.

The predecessor of the hon. Member for Pontypridd (Mr. John) as Opposition spokesman on agriculture, the hon. Member for Aberdeen, North (Mr. Hughes), constantly said that agricultural subsidies were too high. I do not believe that the hon. Member for Pontypridd dissents from that view, but having, as usual, criticised the high level of agricultural subsidies, the Opposition take the easy way out on specific issues and call for even more public expenditure and subsidy. Such was the case today when they urged more subsidy for outgoers; yet they criticise the Government for spending too much on agriculture.

The hon. Member for East Lothian showed schizophrenia in his speech. He lamented the fact that the outgoers scheme would result in people leaving the land, thus having a serious effect on rural areas, and almost in the same breath called for even more expenditure to get even more people off the land. He should consider the implications of some of his arguments. He called the payments to producers under the outgoers scheme inadequate. That can hardly be the case as, unlike other member states, the amount that we are asking for will be taken up in full.

I should like to consider the sole policy point that the hon. Member for East Lothian raised and then deal with the many questions that he asked. He said that the Opposition expect us to ask in the price review, for the United Kingdom only, that the transitional arrangement of an extra 1 per cent. in quota for 1984–85 should be continued next year. In other words, our policy should be to ensure that there is not the expected reduction of 1 per cent. The hon. Gentleman is aware that that was a transitional arrangement, that we still have a substantial surplus of dairy products throughout the Community, and that we have to pay for that transitional arrangement through an extra 1 per cent. on the co-responsibility levy. If they knew that there would have to be an extra 1 per cent. in co-responsibility levy, most farmers would have preferred not to have the transitional arrangement. The hon. Gentleman must face up to what he would do about that extra 1 per cent. If he argues that it should be removed, he should consider where the extra money would come from.

The hon. Gentleman asked about progress in cutting production, as a result of the quota system, throughout the Community. One of the problems is that statistics for October and November are only provisional and none exist for December. However, those estimates suggest that from April to November 1984 milk production in the Community was cut by about 4 per cent. compared with the same period in 1983. The important point is that, for the Community as a whole and for individual member states, as the previous agriculture Commissioner made clear at a Council meeting in December, that downward trend is accelerating. It has taken longer for the downward trend to show through in some member states than it did in the United Kingdom, where the drought and the disciplined response of our producers had an impact.

I must emphasise that the figures are provisional. They are not official statistics and will have to be revised. To give an idea, however, I shall give the statistics for member states from April to November, as previous figures to the end of September suggested that many member states were increasing rather than reducing production. The provisional figures show that production in Belgium is down by 4.6 per cent. compared with the same period in 1983, that in Denmark it is down 6.5 per cent., that in Germany it is down 6 per cent., that in France it is down 1.3 per cent., that in Luxembourg it is down 5.1 per cent. and that in the United Kingdom, as we know it is down 8.9 per cent. Although the figures are provisional, they show that the quota system is beginning to bite in most member states and that production is decreasing towards the targets.

The hon. Member for East Lothian also asked for international comparisons. My hon. Friend the Member for Dorset, North (Mr. Baker) asked about international comparisons on the outgoers scheme. I am grateful for what my hon. Friend the Member for Hereford (Mr. Shepherd) said about our outgoers scheme being relatively generous. It is difficult to make precise comparisons, because the schemes have quite different elements. They might range over a longer period or have different purposes or be directed at particular types of producer. For example, the French are concentrating on those they want out of the industry because they want to restructure it. The scheme is concentrated on the over-55s. Comparison is difficult, but there is no doubt that the United Kingdom has a fair and reasonably generous scheme. The German scheme runs for 10 years and the French scheme is less than ours in regard to the amount paid per litre. I do not have time to go into detail but, as my hon. Friend the Member for Hereford said, analysis would show the British scheme to be relatively generous.

It is important to remember, as my right hon. Friend the Minister has said at Question Time, that there is no sin in not cutting milk production. If member states exceed their quotas, they are penalised through the application of a super-levy. There is no obligation to cut production to quota levels but there is an obligation to collect levy on production which is in excess of quotas. That is why the fair application of the super-levy throughout member states is critical and why we have concentrated so much of our attention on it in recent Council meetings.

The hon. Members for East Lothian and for Pontypridd asked for an assurance that we would not be penalised if we were to fall short of our quota this year. That could well happen because of the impact of the drought. There is no such suggestion in any discussions that I have heard on this matter in the Community, and if it were suggested we should resist it.

Indeed, we would point out, as many other Ministers and the previous Commissioner have said, that one of the reasons why United Kingdom production has come down faster than that of other member states is the drought, which was more marked here. That would obviously be a strong argument we could put if there was any attempt to penalise us for under-production. I can give the assurance asked for by both hon. Gentlemen that we would resist that totally.

In regard to redundancy for farm workers and for other employees in ancillary industries, the hon. Member for East Lothian said that he would be putting forward an amendment that the Bill should provide for redundancy payments for stockmen as well as for outgoers. That is not appropriate for this Bill because it does not deal with redundancy payments. We already have a general statutory redundancy scheme, so redundant stockmen and others would benefit from it. It is not appropriate to compare payments under the outgoers scheme with redundancy payments because the outgoers scheme is not a redundancy scheme. It is important to understand this.

The outgoers scheme is a measure to enable the industry as a whole to adjust to the quota arrangements by making the additional quota available in particular to smaller producers but also to others. It is not a redundancy scheme as such. The number of redundancies among farm workers appears to be limited but, as I have said, it is always open to an employer and an employee to agree more favourable redundancy terms than those available from the protection of the statutory arrangements under the Employment Protection (Consolidation) Act 1978. They can agree more favourable terms than the statutory minimum, and this has been done in some cases. The Milk Marketing Board is doing so for its creameries.

It is not right to draw an analogy with what the Dutch Government are proposing. They are making specific provision for redundancy payments for people in agriculture because the Dutch Government have no statutory redundancy scheme. This is the big difference. We have a statutory redundancy scheme which will make redundancy payments available to those who are made redundant.

Mr. Maxwell-Hyslop

Will my hon. Friend tell us how this applies to the self-employed? This is news to me. Generally farmers are self-employed.

Mr. MacGregor

What I was asked about in the debate was the position of stockmen, employees of farmers and employees in ancillary industries. The self-employed farmer will be able to take advantage of the outgoers scheme which is intended to restructure the industry.

My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and the hon. Member for East Lothian drew attention to the uncertainty for the farmers who do not yet know what their secondary quota is. They, like several other hon. Members, mentioned some of the difficulties that individual farmers have had with the panel and tribunal system. We have always had two objectives. The important point was to try to get the balance between them. On the one hand, there was the determination to get as much fairness and thoroughness in the appeal system as we could; but, on the other hand, there was a need to complete the process as soon as possible to let producers know exactly where they stood. That was the balance we had to try to achieve, and I believe that in general we have achieved it.

In regard to the uncertainty for outgoers, we were asked why we had made firm offers to producers in tranches. There are two answers. First, we could not give an immediate offer to all who had applied because the scheme was heavily over-subscribed and we could have found ourselves making offers to too many people. We always assumed that some would not wish to take up the offer, but if we had made immediate offers to all and sundry we could have had more commitments than we could meet.

Another important point is that many people in farming were concerned that if all the outgoers went out of production at the same time there would be a severe effect on the market in beef. We have endeavoured to avoid that and I think we have been successful, in view of beef prices. That was another important reason for staging the tranches.

The hon. Member for East Lothian asked me, as did some other hon. Members, why we were insisting that producers should get out in toto if they took up the outgoers scheme and why we could not allow partial surrender of quotas. The straightforward answer is that Community regulations permit us only to make payments to producers who "discontinue milk production definitively". This means that we had to insist that outgoers surrender their entire quota, which can, of course, relate to more than one farm.

My hon. Friend the Member for Tiverton asked again, as my hon. Friend the Member for Grantham (Mr. Hogg) had asked my right hon. Friend, whether, if there ever were another outgoers scheme, we would ensure that there was an opportunity for the House to comment on draft regulations. I am sure my hon. Friend realises that it is a hypothetical question, because my right hon. Friend has made it clear that we do not intend to introduce another scheme. He drew attention to the fact that if it occurred there was a precedent in what we did with the quota regulations in July where we gave the House an opportunity to comment before we put forward the final regulations. I have noted the feeling in the House on this. I repeat that it will depend on whether there is another outgoers scheme; but whether one should do it in that way will also depend on what that scheme contains.

My hon. Friend asked me to say what formula was used for the additional allocation of quota this year. He will know that the extra allocation went to Eire, Northern Ireland and Luxembourg, which got a small amount. Basically it went to areas where the total economy was more dependent on dairying than other areas in the Community.

There is no link between the production quotas which have been fixed under the quota system and what was agreed in the price review last March on imports of New Zealand butter. That is why I do not think one could argue the case in future negotiations on the super-levy system because the production quotas were based on delivery and sales levels in members states and not on imports of dairy produce or anything like that. Therefore, there was no link between those two.

My hon. Friend drew attention to a problem which has been raised with me as I have moved around the country and by several of my hon. Friends—the possibility that producers have been treated differently by different panels. In a system that has had to be introduced and carried through with the rapidity that we wanted so as to leave producers clear where they stood on quotas, it is not possible to ensure absolute and complete consistency, but we have made every endeavour to do that. The key point is that the setting up of the tribunal system, where it is easier to achieve consistency, gives producers who feel that they have been treated unfairly the opportunity to appeal. The tribunal system gives that safeguard.

My hon. Friend talked about discrimination against the small producer who carried out improvements without the expander scheme or a loan from the bank. There is no discrimination in the regulations on that point. In general we do not believe that local panels or tribunals are making such discrimination, but producers must be able to demonstrate that they have carried out or committed themselves to investment which is leading to the increase in output that they are claiming. In some cases producers have not been able to satisfy panels that the work they have done will produce the expansion in production which they are claiming.

In regard to my hon. Friend's question about statutory provision for tax treatment, as I think he will know, the non-statutory scheme which will be in existence until the Bill is passed gives producers the choice of two types of payment and gives favourable tax treatment for payments under the outgoers scheme. The tax treatment given to these two types of payment results from the provisions of general taxation legislation and the way in which the outgoers scheme was conceived. The same will apply to any future statutory scheme. Therefore, it is not necessary to provide for the tax treatment in a Bill of this sort.

The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) and I have debated endlessly why the quota system was introduced and whether it is fair to the United Kingdom. He knows why we felt that in the end it was inevitable. He knows why we dispute entirely his charge that the outcome was unfair to United Kingdom producers. In fact, we got a very good deal.

I shall not go into that, but I wish to comment in particular on three of the points which the hon. Gentleman made. He argued that the outgoers scheme did not acknowledge the plight of small producers and did not do enough for the rural areas. He asked for the precise figures on the outgoers scheme in Wales as distinct from the 1,186 which my right hon. Friend quoted for England and Wales. So far, 213 Welsh producers have firmly responded to the firm offer of the outgoers scheme, but the objective of the scheme is to give that extra allocation to small producers who wish to stay in business and to bring them back to their 1983 levels. That is particularly effective in the rural areas such as Wales.

So far, there has been a considerable redistributative effect to small producers in Wales as a result of the outgoers scheme. It looks as though it will operate to the advantage of Welsh small producers, because while Wales accounts for only 15 per cent. of the outgoers so far signed up, about 25 per cent. of the reallocated quota will go to small producers in Wales. That is a clear indication of how the scheme has been directed to help small producers and rural areas in Wales.

Mr. Geraint Howells

I am grateful to the Minister for trying to clarify the position in order to avoid a slanging match. I respect the hon. Gentleman in many ways, and he has been very fair in many of our debates. Out of the 200 small farmers in Wales who have accepted the outgoers scheme, how many have herds of fewer than 40 cows?

Mr. MacGregor

Perhaps the hon. Gentleman will table a specific question on that. I suspect that the vast majority have fewer than 40 cows, because in the early stages the scheme has concentrated on small producers.

The hon. Gentleman also suggested that part quotas should be introduced into the outgoers scheme. As I have already said, we are bound by the Community regulations.

The hon. Gentleman suggested that a producer who had to sell his herd would face a considerable tax payment, thereby reducing the amount available either to start another business or to reduce his overdraft. He knows that, in addition to the favourable treatment in the outgoers scheme, we have through the herd basis on taxation given favourable treatment to the producer who wants to get out and who gets rid of 20 per cent. or more of his total herd. Under the herd basis, the proceeds of selling the herd will be totally tax free. In addition, we made a change in the Finance Act 1984 to enable much greater flexibility this year and last so that the producer could elect for the herd basis and take advantage of it. That is an important point in relation to tax treatment and the proceeds available to continue a business in another direction.

Mr. Geraint Howells

rose—

Mr. MacGregor

In view of the time, I shall not give way. I am fairly certain that the hon. Gentleman and I will have an opportunity to debate this further in Committee.

I am grateful to my hon. Friend the Member for Devizes (Mr. Morrison) for his opening remarks. He said that the system was beginning to settle down. We have tried to operate the scheme as helpfully and flexibly as we possibly could within the rules ever since it was introduced.

My hon. Friend urged that there should be greater interchange between wholesale and direct sale quotas, particularly for mixed businesses. We entirely agree, and for many months in Council meetings we have endeavoured to get a change. We have put forward a proposal to the Commission and the Council which will achieve that without undermining the super-levy system. The previous agriculture Commissioner said that he would consider this, but the previous Commission was clearly reluctant to make any changes in its latter months. My right hon. Friend and I will again raise this point with the new Commissioner Mr. Andriessen, when we meet him tomorrow. We have it very much in mind.

Within the existing rules we have the opportunity, through the MMB, to undertake a swap shop. As my hon. Friend may know, we have now reached agreement on how that will operate, and the information has now gone out to producers from the MMB. That will present a limited possibility at least of getting greater flexibility and interchange between wholesale and direct sale quotas.

My hon. Friend also raised the much wider issue of transferability of quota generally. It was also referred to by the hon. Member for East Lothian, my hon. Friend the Member for Hereford, who called for leasing of quotas, my hon. Friend the Member for Newark (Mr. Alexander) and the hon. Member for Pontypridd. We would like to see much greater flexibility in the quota system and more transferability of quota. The first aim was to get the outgoers scheme operating; that was what we concentrated on. We are now moving to ideas on the transferability of quota, and I understand why so many hon. Members have raised this issue. I agree that it is desirable to try to achieve something.

The hon. Member for Pontypridd suggested that there was almost unanimous agreement about what should be done. It is not as simple as that, because there are many difficult problems. However, this is an appropriate opportunity to tell the House that in the last few days we have issued a consultative document entitled "Mobility of Quota". I have it with me. It goes into all the issues and difficulties raised by hon. Members who have asked for greater transferability of quota, and is a genuine consultation document. There are many issues to be decided and we are also going out to the industry for consultation. I urge my hon. Friends to obtain a copy of this document. It is in the Library. Alternatively, I shall happily provide them with a copy so that we can obtain their views.

Mr. Colin Shepherd

How do we obtain copies of the consultative document?

Mr. MacGregor

I am sure that hon. Members would wish to have copies of their own, and if they contact my office I shall ensure that they get them immediately.

Whatever we finally decide should be obtained for the United Kingdom, it must be agreed by the Commission and in the Council. One way or another we must ensure that it is put on the negotiating table. That will not be easy. But the consultation document outlines the direction in which we should like to go and shows that this is the next stage on which we would like to see action.

My hon. Friend the Member for Devizes also spoke of the delay in informing people of their quota, particularly their secondary quota. I have partly dealt with that, but another important point is that up to September no super levy in England and Wales will be paid this year for producers who overproduced. That may well be the position at the end of the year. For the year as a whole, in England and Wales there is room for some recovery of production. So long as production in the three months from January to March 1985 is not more than about 2 per cent. above production in the same period last year, no levy will be payable by wholesale producers selling to the MMB at the end of the marketing year. That is important for those who still do not know what their secondary quotas are.

The hon. Member for Newry and Armagh (Mr. Nicholson) specifically asked about our proposals for the outgoers scheme in Northern Ireland. We are still assessing the results of the scheme throughout the United Kingdom. We do not yet know the outcome, but we are aware that a shortfall will occur in Northern Ireland. As my right hon. Friend said this afternoon, we and our colleagues concerned with agriculture, including my right hon. Friend the Secretary of State for Northern Ireland, are looking at whether there are ways of dealing with difficulties which arise from this disappointing response.

The amount of payment of levy due from Northern Ireland will be a good deal less than the £5 million at the end of September which the hon. Gentleman suggested. We have made it clear, as has the Prime Minister, that the supplementary levy arrangements must be applied properly by all member states. We are not prepared to see our producers disadvantaged compared with others. The hon. Gentleman is right to say that at the end of the day, depending on the outcome of discussions in the new Council and with the new Commission, we still have a liability to a payment in Northern Ireland up to the end of September.

But we are keeping the situation under review. We have to be ready to collect and pay over any levies which may be due to us once the legal position becomes clearer and we are satisfied that other member states are conforming to the requirements, always depending upon the outcome of further discussions which are taking place currently in the Council.

Mr. James Nicholson

I am grateful to the Minister for recognising that at the end of the day the money is still there and that the Bill is still against the farmers in Northern Ireland. However, will he deal with the point I made regarding the quality of the relationship between farmers in Northern Ireland and the rest of the United Kingdom, especially the small farmers and bringing up to 1983 levels those producers with fewer than 200,000 litres?

Mr. MacGregor

That is very much tied up with the outcome of the discussions which we are having on the outgoers scheme and the disappointing response in Northern Ireland. I can go no further this evening than to say to the hon. Member for Newry and Armagh that we are aware of the problem and that we are discussing it.

The hon. Member for Truro (Mr. Penhaligon) raised a point about direct sellers and asked for clear guidance on the position of direct sellers if they have overproduced by the end of the year. The hon. Member is quite right. Direct sellers are not under the same formula B as the wholesale producers in England and Wales. Therefore, individual sellers who were over their quota at the end of the year would be liable to the super levy. I am very much aware of some of the points which the hon. Member for Truro and other hon. Members have made about the position of direct sellers. We are anxious to obtain greater flexibility for them. I take the point that they are producing for a market. They are not producing for intervention. This is a very important aspect.

The hon. Member also asked about the co-responsibility levy, as did my hon. Friend the Member for St. Ives (Mr. Harris). We have to take into account the fact that the co-responsibility levy raises a considerable sum of money which goes into the dairy products pot in the Community. It was estimated to be £412 million in 1984 for the Community as a whole. It is put to certain uses, such as promotional campaigns, the school milk programme, the normal disposal measures relating to butter, and so on. If the co-responsibility levy disappeared, either we should be back to the budgetary problem or we should have to drop some of those schemes.

There is, therefore, still a problem. We share the hon. Member's view about the co-responsibility levy. We are anxious that its impact should be reduced. Provided that everything else could be sorted out, we should welcome a proposal to abolish it, but it would have to be looked at in the context of the other measures to continue restraint in the milk sector.

Mr. Penhaligon

On the co-responsibility levy, the point which the Minister makes regarding the use to which the money is put to get rid of the surplus—the schools programme and so on—is logical, but what part of the £400 million that is raised would be used?

Mr. MacGregor

All of it would go into those sorts of schemes. A few days ago I saw a precise breakdown of where it has gone in the last year, but I was unable to get hold of it for this debate. If, therefore, the hon. Member will table a question I shall make sure that he receives an answer almost immediately. My hon. Friend the Member for St. Ives asked for more flexibility and said that the quotas should not necessarily be linked to the land. One of the main points of the mobility of quota paper is precisely that. I am sure that he will wish to study the paper and let us have his comments.

My hon. Friend also asked when, under the outgoers scheme, the allocation of quota to bring small producers up to the 1983 level would occur. My right hon. Friend dealt with this point. Briefly, my right hon. Friend said that this year, because most of the producers coming out of the outgoers scheme have already used up a great deal of their quota for this year, there is not a great deal left and that we shall be concentrating on hardship cases. But the small producers may find that there is no levy to be paid at the end of this year and that we have every intention of making sure that the small producers of fewer than 200,000 litres are in 1985–86 brought up in full to the 1983 production levels.

My hon. Friend the Member for Devon, North (Mr. Speller) attacked the quota system as a whole. I dislike the controls and the bureaucracy that quotas entail, bat I hope that my hon. Friend recognises that there is a limit to the financial support that we can give for producing surpluses that cannot be sold on the market and that go into intervention stores. The amount of support for the dairy industry last year—my hon. Friend gave the impression that there was none—was colossal. In 1984 it amounted to £3,400 million across the Community as a whole and to several hundred million pounds in this country. One could do without the bureaucracy of schemes of this sort if we dispensed with financial support of that kind, but I suspect that my hon. Friend's constituents would not appreciate it. Since we could not obtain a solution based upon a reduction in price, which itself would not have been heinous, we had to accept the quota system.

The right hon. Member for South Down (Mr. Powell) asked a question during my right hon. Friend's speech. I can confirm to the right hon. Member, as my right hon. Friend said, that there is no restriction in the Community legislation upon the reallocation of the outgoers quota across regional boundaries. However, we would need to look again at the detailed provisions of our own dairy produce quotas regulations if we wished to do this. We should need to specify precisely how the transfer was to be carried out. However, there is no bar upon it under the Community regulations.

Mr. J. Enoch Powell

Did I understand the Minister earlier in his speech to say that in order to make such transfers we should have to go to the Community for its agreement? Perhaps that was said in a different context.

Mr. MacGregor

No, I do not think that is what my right hon. Friend said. That is not the case. It is possible within the Community regulations.

I come finally to the points made by the hon. Member for Pontypridd. I hope that he will forgive me, in view of the fact that I have been speaking for a long time, if I do not go into some of the wider issues which he raised. They were interesting issues which we shall have to debate later about the impact on rural areas, but on this Bill it would not be appropriate for me to take up the time of the House upon them. However, I should like to deal with one or two of the hon. Member's specific points.

The hon. Member asked whether it is the Government's intention, through the outgoers scheme, to keep the small producer in operation. The answer absolutely is yes. The primary objective of the outgoers scheme is to reallocate quotas to the small producer who is staying in milk production. The hon. Member hinted that because we started by making firm offers to those small producers who want to come out we were, in a sense, letting the small producer help the small producer, but I repeat that the primary objective is to reallocate the quota. Since there was over-subscription of the outgoers scheme, we took the view that it was sensible to allow those small producers who wished voluntarily to come out of milk production to have the first option to do so, but it was in no sense an attempt to say that small producers are helping small producers. If no small producers had taken up the firm offer of the outgoers scheme, we should then have gone on to the next stage—the producers. However, I repeat that the primary objective is to give the small producer who wishes to stay in an opportunity to stay in at his 1983 production levels.

Finally, the hon. Member asked me to clarify the position on two of the figures to which my right hon. Friend referred in his opening speech—the 35 per cent. and the 11 per cent. I well understand the difficulty which the hon. Member has with some of the figures, but there is no real connection between the two. The 35 per cent. is an indication— it can be no more than that at the moment—of the amount of scaling down which may have to happen to the special cases—expanders—when we see finally what the tribunals have awarded and what the panels which have not gone to the tribunal have awarded.

We made it clear from the outset that we should allow a certain proportion to be deducted from the primary quota in order to provide for those special cases but that it was very probable that it would not be sufficient and that therefore there would have to be a scaling down. We made it clear throughout that there may have to be quite substantial scaling down. My right hon. Friend said today that at this stage it could be up to 35 per cent., but we have to be very clear that it is still a tentative figure because there is still a great deal of work to be done as the tribunal figures come through.

The 11 per cent. related to the reallocation of quota to small producers next year. The 11 per cent. figure will enable small producers to return to the 1983 production levels next year. That may sound a little odd since the reduction for 1983 was 9 per cent., so let me explain briefly.

If the original primary allocation of primary quota to the small producer was 9 per cent. below its 1983 level, it has to be rather over 9 per cent. above the 1984–85 level to take him back to his 1983 level. But there is the further point that the additional 1 per cent. that will have to be reduced next year because the transitional period runs out will not apply to that small producer. Therefore, we have said that it will be 11 per cent. to enable a small producer to return to his 1983 production level without any penalty on the loss of the transitional period. I hope that that explains briefly a rather complicated matter.

I hope that I have dealt with most of the issues that have been raised in the debate. It has come through clearly from the debate that there is broad support for the Bill. Some, inevitably, would wish it to go further, but it has broad support. We are anxious to get it on the statute book for the cause of the small producers. Therefore, I hope that it will have a fair and quick wind in Committee.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).