HC Deb 28 April 1986 vol 96 cc665-76 3.48 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)

With permission, I will make a statement about the meeting of the Council of Agriculture Ministers which took place in Luxembourg from 21 to 25 April 1986. I attended this meeting with my right hon. Friend the Minister, who is, unfortunately, ill and not able to be present in the House. After negotiations which lasted throughout the week, the Council reached decisions on farm support prices and related measures for 1986–1987.

The basis of the agreement is a freeze in common support prices, with substantial price reductions for certain Mediterranean products, in particular tomatoes and tobacco. Following recent currency developments, some changes in green rates were indicated. It was, however, important that these were not of such a size that they undermined the policy of price restraint. For this reason, the United Kingdom supported devaluations of the green pound, the green franc and the green punt which will increase support prices in national currencies by 2.75 per cent. in the livestock sector and by 1.35 per cent. in the arable sector.

Turning to specific commodities, the United Kingdom has been particularly concerned about the growing surplus of cereals, and we made it clear at the beginning of the negotiations that we intended to press for effective changes to the existing regime on a fair basis. I am pleased to say that the changes we have agreed in the intervention arrangements and in quality standards, together with the introduction of a 3 per cent. co-responsibility levy, will have the effect of substantially reducing the effective level of support. The co-responsibility levy has been agreed for five years, with provision for a report by the Commission after two years on how the system is operating. As the House knows, we would have preferred a straight cut in the price for cereals. However, the co-responsibility mechanism as agreed is a substantial improvement on the simplification of the Commission's original unsatisfactory proposals.

The levy will apply to cereals sold into intervention and act as a direct price cut, with a real effect on the market. The levy will be collected at the processing stage, but cereals processed on the farm will be excluded. We would expect to pay a proportion of the total levy which is close to our share of Community cereals production. An aid for small cereals producers will be introduced. The detailed arrangements for this remain to be decided.

The Commission's original proposals included an unsatisfactory price structure for barley and a big increase in the average threshold price for maize. We secured changes in the Commission's proposals to remove the barley price distortion and to provide for a lower increase in the average maize threshold price.

The support levels for rapeseed and sunflower seed will also be reduced, if the crops in the Community exceed a prescribed maximum guaranteed quantity.

The reduction in cereal prices will be of particular benefit to pig and poultry producers. The final form of the monetary compensatory amount reductions in this sector have yet to be decided, and the Commission will be submitting proposals on this in the near future. In the meantime, increases in negative MCAs for pigs, eggs and poultry resulting from the recent realignment will be suspended until 1 June 1986.

For milk, I am glad to say that we resisted considerable pressure for a price increase. In addition, the Commission's proposal to change the fat-skim ratio was dropped. This will avoid adding to the costs of those food manufacturers who use skimmed milk.

Despite the very real steps taken by the European Community to reduce the milk surplus, culminating in the introduction of quotas, the Community is still a substantial over-producer of milk. Therefore, the United Kingdom was determined to secure a further reduction and so to cut this surplus. We were, however, insistent that the burden should fall equally on all member states. I am glad to say that, in the face of strong opposition from a number of countries, a further 3 per cent. cut in milk quotas was agreed. This will be effected over the next three years, initially through a Community buyout scheme, but if this voluntary system is not effective in all member states, it will be underpinned by compulsory reductions.

The maximum compensation chargeable to the Community budget for this scheme will be about 18p a litre over seven years. But each member state will be able to set the rate of payment according to its own circumstances. There is also provision for national schemes to continue alongside the Community scheme. We secured a provision which allows larger dairy farmers to sell part of their quotas under this scheme. Additionally, the arrangements to offset under-production of quota in one region against over-production in another will continue for a third year. This has given useful flexibility in the United Kingdom in each of the first two years of quotas.

For beef, we succeeded once again in securing an extension of the beef variable premium scheme unchanged. The maximum rate expressed in sterling will be increased as a result of the green rate devaluation. The Commission's proposals for reforming the regime for beef are to be further studied by the Council, with a view to the decisions being taken by the end of this year.

For sheep, we insisted on the removal of the proposed limit to the number of ewes per farm qualifying for the annual premium. We also secured the removal of the proposal to amalgamate Northern Ireland and the Irish Republic into a single region for the purpose of calculating ewe premium.

Turning to the budgetary costs, the Commission indicated that the package as a whole will produce a total saving over 1986 and 1987 of 777 million ecu, a saving of 118 million ecu greater than would have been achieved under the Commission's original proposal. There remains, however, a serious problem about the substantial additional costs resulting from changes in the relationship between the ecu and the dollar and from the realignment of currencies. In supporting the settlement, we made it clear that its budgetary implications would have to be referred to the ECOFIN Council. They are being considered today by the Council, which my right hon. Friend the Chancellor of the Exchequer is attending. We shall continue to seek a thorough examination of the scope for savings to minimise any supplemental budget this year.

Overall, this price fixing has produced a highly satisfactory outcome and one that follows closely the approach endorsed by the House, without opposition, on 10 March. The pressure on support prices in the Community has been maintained. In particular, the effective reduction agreed for cereals marks an important step in the battle against surplus production. The outgoers scheme for milk is the next stage in bringing about a better balance between production and consumption.

By devaluing the green pound, we have ensured that our farmers are treated fairly in relation to producers elsewhere in the Community, including particularly France and Ireland. We have removed from the original package those key elements of discrimination to which this House rightly took such exception—the 25 tonne exemption for cereals and the limits on headage payments for beef cattle and sheep. Moreover, this settlement will have a negligible effect on food prices, which are, in any case, continuing to rise less than the rate of inflation. The package therefore represents a further significant step towards improving the common agricultural policy while safeguarding the competitive position of our own farmers. It is therefore good for Britain and good for Europe.

Mr. Brynmor John (Pontypridd)

I thank the right hon. Gentleman for his statement, the arrangement of which was conducted with all the consideration that we have come to expect of the Government.

Is the figure which the right hon. Gentleman has cited of 18p a litre over seven years correct? In my copy of the statement the figure is 17p a litre. The right hon. Gentleman will appreciate that other additions to the final draft were not communicated to me.

Will the right hon. Gentleman pass on to the Minister of Agriculture, Fisheries and Food our good wishes for his recovery from illness? Clearly, the Minister was suffering from the long Report and Third Reading stages of the Agriculture Bill. I am sorry that he is not in his place.

I welcome the ewe premium, which I thought at first was the first step in the Government's farm woodlands policy because "ewe" was spelt "yew" in my copy. I welcome the retention, however temporarily, of the beef variable premium. It would make no sense in the present climate if the Community scrapped the only policy among all its regimes that is good for farmers and consumers. I welcome also, because the measure was included in our amendment to the legislation on the milk outgoers scheme, the ability to surrender part of the milk quota.

The central judgment on this package depends on what it does to solve the long-term problems of the common agricultural policy. The Minister of State did not merely say that that was the best we could do in all the circumstances; he rhapsodised about it, saying that it was good for Britain and good for Europe. Other comments suggested that the package was a major step forward. It seems to be a case of optimism overcoming experience.

To describe the package in that way, the right hon. Gentleman must have some vision. Will it lead to a cut in the production of surplus commodities and, if so, by what percentage? If the right hon. Gentleman merely says that he will cut the rate at which the surpluses increase, I must tell him that that cannot possibly justify his description, because surpluses will continue to increase at a slower rate than previously. If the measures will not lead to a cut in production, does that not mean that, once again, Agriculture Ministers have dodged their responsibilities for a further year and have just looked at the matter on the basis that it will never arise?

What is the budgetary effect of all the measures? I have heard a great deal about the savings which are supposed to be effected. Does the Minister confirm that the effect of the loss in value of the American dollar means that £1 billion will be added to the agricultural budget of the EEC or, is it, as Agra Europ said this morning, E1.5 billion? If that is so, how is it to be paid for? Is it to be paid for by even further cuts in the present miserable regional budget or is it to be paid for by extra income? Will the right hon. Gentleman give an assurance to the House that under no circumstances will the EEC raise the take it has from the VAT in the current year, at present 1.4 per cent.? That is a crucial question. It was raised during the debate on the subject and it is a question which I think that the Minister has to answer.

On the milk outgoers scheme, is the Minister satisfied that the amount under the European scheme, whether 17p or 18p a litre over seven years, is sufficient to attract voluntary yielding of the amount of production? A large number of people believe that it is not. Therefore, resort to compulsion will be necessary. In which case, how is that to be done? I hope that the tenants' share of the milk quota is not to be based upon the formula that was suggested in the new clause to the Agriculture Bill for outgoing tenants.

I put to the Minister the fundamental irrelevance of the co-responsibility levy on cereals. It did not work on milk, so why should we think that it should work on cereals? What will the scheme do? As I understand it, it imposes only a percentage tax which is half as great as that which is necessary to make it self-supporting and after all, that is the basic tenet of a co-responsibility levy.

The Minister has mentioned the effect on consumers of devaluation of the green pound. One thing is clear, although he said that the overall effect is minimal; we will have to wait and see, but, according to the Minister, butter is to go up by 1p to 1½p a pound. How will that affect the hard-pressed dairy industry? We talk about a surplus to requirements of 16 per cent., but, if raising the butter price reduces consumption even further, will he not be compounding the problem of the dairy industry?

I conclude that the Government have been a party to a package which shirks the underlying long-term problems of the farm industry. When will the Council face up to the problems? Does it not mean that agriculture deserves more candour from its Minister, Europewide, than it is getting at present?

Mr. Gummer

If we were to have said in advance of the price fixing that we would have moved so far and made such major changes, many Opposition Members would have denied that possibility. They would have said that we were suggesting a major change which could not have been achieved. Therefore, I think that it is a little churlish of the hon. Gentleman to talk about a situation in which we have ensured that every nation has accepted what could be, if they did not get a voluntary agreement, a compulsory cut in their production of milk.

We have a co-responsibility levy which will have a direct effect on prices, we have stopped the pressures for price rises in milk, we have seen that there have been substantial price cuts in Mediterranean products and we have seen that there has been a 777 million ecu reduction in what would otherwise have been the cost. We have done all those things and we have set this example within a change in the green pound rate which is less than might have taken place and less than many countries pressed for.

I agree with the hon. Gentleman that we will not solve all our problems by what we have done. When one is trying to move from massive surpluses, one can do so only in a way which gives the industry the time to make the necessary changes. There are limits to the weight one can put on farmers in any one year. If one looks at the substantial reduction in the price of cereals this year—cereals which have already been planted and the input costs of which have already been carried—one has to say that there is another side to the argument.

The hon. Gentleman will have to answer the farmers who will ask whether he was suggesting that, despite the increase in import costs and the reduction in the price of cereals, he would have increased the burden on farmers in this country. That is what the hon. Gentleman is saying. I hope that he will say that now in West Derbyshire and Ryedale and make clear exactly what he means. He clearly means the kind of weight reduction which it would have been impossible for farmers to bear in one year.

Of course, the hon. Gentleman is right to push us and see that we go on pressing for this change. However, there is a substantial change which we might not have expected otherwise. It would have been right for him to mention the extension of the BVPS. He made it sound as if that was an easy operation. Every year it causes difficulty because it is a system which we approve of but which other countries do not find acceptable. On this occasion, not only is it unchanged but clearly, its continuation is linked to the emergence of a new beef regime. It will be for us to see that we get a beef regime which suits the Community and Britain especially.

The hon. Gentleman specifically asked about the VAT. There is no question of breaking the VAT ceiling in 1986 and 1987. The Commission recognises that both the 1986 and 1987 budgets must stay within the 1.4 per cent. ceiling. We made that clear and it was clearly written into the minutes.

We believe that there is a difficulty with the milk outgoers scheme. I am sure that the hon. Gentleman will agree that, whatever price it is fixed at, one does not want to be spending more money than one needs to spend to get milk producers out. However, one must have enough, and we think that we have struck the right balance. We will be holding discussions with the National Farmers Union.

Of course the co-responsibility levy is not the way we would like to have done it. The hon. Gentleman is right. We would have preferred to have a direct price reduction. However, we have established a form of co-responsibility which is much fairer between the countries and which has many more of the effects of a direct cut in prices. That must be good.

The hon. Gentleman is right about the amount of the rise in the price of butter. It will be balanced by other reductions. I agree that we would like to have seen a reduction in the price of butter; that was our policy and we failed to achieve it. However, we achieved almost every other item on the milk side. I agree with the hon. Gentleman's comments about the increase in the price of butter. However, I think that it is only fair for him to say that it is just as certain that there will be certain other reductions. That is why the situation generally will be somewhat neutral.

Several hon. Members

rose—

Mr. Speaker

Order. I have to take into account that we have a heavy day in front of us. I will allow equal time for Back Benchers—that is to say, 20 minutes for questions. I hope that in that time I may be able to call everybody.

Mr. Teddy Taylor (Southend, East)

As we were told last year that strict budgetary controls were binding in the Council, can the Minister explain why, in the first year of restraint, he has passed a package which exceeds those controls? Can he also say what steps he is taking to ensure that those who are compensated for moving out of milk production will not begin to produce other commodities which are already in chronic surplus?

Mr. Gummer

On the second point, my hon. Friend knows that there are no rules to stop people from going into other forms of production. We are concerned to get people moving into things which are not in over-production and we are trying to arrange the regime so that we reduce the scope and the advantage of producing in those areas. My hon. Friend is perfectly right. There is no way in which we can stop people moving into another form of overproduction.

On the first point, I made it perfectly clear that the budgetary implications of this are being discussed at this moment at ECOFIN. However, the Commission has made it clear that it is intended that the budgets should be kept within the guidelines.

Mr. Richard Livsey (Brecon and Radnor)

May I first send good wishes to the Minister, who I realised last week was suffering from ill-health. I wish him well.

We welcome the retention of the variable premium, what has been done with the sheepmeat regime and the devaluation of the green pound. That does not seem to be quiet sufficient. None the less, it is a move in the right direction. We are concerned that there appears to be no real resolve in the Community to reduce the surpluses. That especially applies to cereals. I believe that the Minister's estimate of 770 million ecu is somewhat at variance in that he said that it was a reduction. The estimates, by all accounts, appear on the supplementary budget which looks likely to come before us as a result of the settlement, and it could be an increase of 1.5 billion ecu or possibly 2.5 billion ecu, depending on the estimates. That is a serious problem. Sometimes farmers who most need support are not getting it, whereas the support prices are increasing the surpluses. Can the Minister make that clear?

Mr. Gummer

The hon. Gentleman cannot have it both ways. He cannot, on the one hand, object to the fact that the devaluation is not great enough, and, on the other, say that we are not trying to deal with the problems of surplus. He must accept that it was not sensible to have so large a devaluation that it would undermine the price part of the package. That would be unacceptable. The hon. Gentleman must get his act together on this. I realise that it would have been more electorally advantageous among the farming community to have a larger devaluation, but I think that those in the farming community understand that this was the right balance—to take into account the changes in the currencies, and not to undermine the price package. I gave the figures precisely as they are. They are the figures produced by the Commission.

Mr. David Harris (St. Ives)

Although I welcome many parts of the package, particularly my right hon. Friend's success in resisting special pleading by countries such as Ireland for exemptions from quota arrangements, will he try to convince me a little more about the corn surplus? Can he tell me why a co-responsibility levy for cereals might succeed, whereas the co-responsibility levy for milk clearly failed?

Mr. Gummer

It would be wrong to suggest that a co-responsibility levy on its own would have the effect that I hope this package will, but if the co-responsibility levy is taken together with the effects of the changes in intervention and quality, the effect upon the price of cereals is sufficient not only because it hits particularly at the intervention point to lower the general price of cereals, but because it should be the beginning—only the beginning—of a reduction in the attraction of growing cereals. That is the effect of the price process. It is not as much as we should like, nor is it as much as others would press us to achieve.

There is a balance between moving in this direction and laying on the shoulders of farmers who have already put their crops in the ground a burden that they find intolerable. I think that we have got the balance about right, but we must not give up because we must continue to the next stage. This is only the beginning of the stage dealing with the surpluses. My hon. Friend was right to make that point to us.

Mr. Eric Deakins (Walthamstow)

Is the Minister aware that Agra Europ, which, unlike the Minister, is impartial on these matters, described the cereals agreement as a dog's breakfast and a disgrace? Is the right hon. Gentleman now telling the House that the previous opposition of the Minister of Agriculture, Fisheries and Food to a co-responsibility levy on cereals was not based on principle, as the Minister led the House to believe, but was merely one of detail?

Mr. Gummer

The hon. Gentleman must not miss out the fact that I said absolutely clearly that we would have much preferred direct price reductions to the co-responsibility levy. Nobody has ever kidded anybody else on that. We have said that, because we were unable to achieve a direct price reduction, we sought to have the system of co-responsibility levy most likely to produce the effects that we wanted. We therefore got rid of the discrimination against the United Kingdom. We therefore saw that we had a much simpler method of having a co-responsibility levy. We therefore saw that it, together with the rest of the package, had a considerable effect on the price of cereals. We therefore produced not a dog's breakfast but the very best compromise that 12 nations can reach, and that was very much better than the hon. Gentleman thought we could do.

Sir Anthony Meyer (Clwyd, North-West)

Is my right hon. Friend aware that this settlement will be grievously disappointing to the prophets of doom who forecast that it would be impossible to achieve any agreement whatever, and that he and his right hon. Friend the Minister of Agriculture, Fisheries and Food deserve the warmest congratulations on getting the best possible settlement in the real world, which will be particularly welcome to Welsh sheep and beef farmers?

Mr. Gummer

I am sure that my hon. Friend will agree that on a day when we got 12 nations to agree on our agriculture policy, it was interesting that the Liberals produced two policies, one on agriculture and the other on the environment. Those policies were contradictory, the environment policy suggesting that we should go back to peasant farming.

Dr. Roger Thomas (Carmarthen)

As a direct consequence of what the Minister has announced today, what percentage fall will there be in the milk available for cheese and butter creameries? Can we look forward to further creamery closures and a further loss of jobs among people who are really outgoers but have no outgoers scheme of their own?

Mr. Gummer

The hon. Gentleman is right. If one reduces the amount of milk that is being produced by the 3 per cent. that we are talking about, that is bound to have a continuing effect of those who manufacture front milk. But the fact remains that those problems cannot be dealt with merely by ignoring the fact that, as a Community, we are producing about 14 per cent. more milk than we need. In those circumstances, it is proper for all of us to take an equal cut in the amount that we are producing.

Mr. Tony Marlow (Northampton, North)

My right hon. Friend said that it has been a highly satisfactory outcome—good for Britain and good for the Community. That is what has been said by his predecessors every single year that I have been here, yet the problems of the common agricultural policy get worse. In the immortal words of The Examiner, I wonder whether my right hon. Friend could explain? If he can do that, will he also tell the House, keen as he is to bring surpluses under control, by how much the surpluses will be reduced if we have the same weather patterns over the next 12 months as we had over the past 12 months?

Mr. Gummer

But would not my hon. Friend be more effective in his opposition to the common agricultural policy if he said today, "This is good as far as it goes, but it should have gone a lot further."? He does not do that, because it does not matter how far one goes in dealing with problems of moving from a Community that was set up to deal with shortage to a Community in a world with surpluses. However far we go down that road, my hon. Friend will not give at least a little credit where it is due. We have got 12 nations to move a long way down that road. We have much further to go down it. The package will have an impact on surpluses, but my hon. Friend must accept that surpluses grow at great speed as a result of technological change that no one forsaw 10 years ago. A great deal of change is required. One cannot ask the farming community to carry the whole of that change in too short a time, because that is not the nature of the agricultural system.

Mr. Nigel Spearing (Newham, South)

The Minister said that the package is intended not to exceed the budgetary discipline by which the Government have set so much store. When will it be known whether this package breaks that discipline?

Mr. Gummer

The situation is simply this. The Commission has made it clear that this package will not break the budgetary discipline. The discussion that is continuing at the moment in the ECOFIN council is about the exogenous elements, or elements that come from outside the decisions, which are supposed to affect the budget—in other words, things that are seen as extraordinary items. They are being discussed today in the ECOFIN council, and my right hon. Friend the Chancellor of the Exchequer is known to have a strong adverse view about the acceptance of things that are supposedly extraneous but which are in fact part of the system.

Mr. Albert McQuarrie (Banff and Buchan)

I congratulate my right hon. Friend, as well as my right hon. Friend the Minister of Agriculture, Fisheries and Food, on maintaining the variable beef premium and on their determined stand against the ewe proposals which, allegedly, were going to be put forward by the Commission. However, the increase in support prices will not compensate for the increased costs as it will probably result in a 10 per cent. increase to Scottish farmers. In addition, the reduction from 27p to 18p per litre of milk will make the scheme less attractive. My right hon. Friend referred to the fact that all member states have some licence. Will the Government take cognisance of the existence of that licence? If milk producers are assisted in one state, will we in this country give similar assistance to our milk producers, especially since the landlord-tenant sharing scheme is affected by the proposals?

Mr. Gummer

I hope that my hon. Friend will agree with me that in his general stance on the common agricultural policy, he is rightly concerned with the extension and increase of surpluses. He must therefore accept that, if we intend to reduce those surpluses, we cannot continue to increase the prices to farmers for producing surpluses. That would be wrong even where inputs increase. I hope that my hon. Friend does not want us to increase the price of milk and yet in some way to reduce the cut in the price for cereals. We cannot do that and carry out what my hon. Friend in other circumstances has been pressing us to do, which is to reform the CAP.

The Government will look carefully at the additionality of the outgoers scheme and will listen to representations from the National Farmers Union, the Scottish Farmers Union and others, to see that we get the balance right. We intend to ensure that outgoers are achieved voluntarily at a price which is not greater than it need be. If we pay more than is necessary, that will increase the cost to the budget. People have not lost that price; rather, they will be offered a lower price for going out. They still have a choice about going out.

If we are to solve the problems of agriculture, those who want to see an immediate and swingeing reduction which would damage our farmers irretrievably, must stay their hand. Similarly, those who want us to keep farmers' incomes up irrespective of the effect on surpluses, must also stay theirs. The right answer is to be found somewhere between those views; that is why I support the package.

Mr. Robert Maclennan (Caithness and Sutherland)

In giving the Government credit where credit is due, I think that the beef and sheep premia arrangements are useful. However, is not the Minister trying to have it both ways by over-selling the benefits of the package to the European taxpayer and under-estimating the lack of help to the beleaguered farm industry in Britain as a consequence of the decline of incomes—according to the Minister's table 26 in the annual review—since the Government took office? Is it not even more serious that the Government have reversed their position over the cereal co-responsibility levy and are pursuing a chimerical policy which failed for milk and will fail to curb surpluses for cereals? When will the Minister discuss what is to replace the co-responsibility levy for cereals?

Mr. Gummer

The hon. Gentleman, I think, does himself a disservice in not considering the facts and again asking for the two impossibles. On the one hand he asks for more money for farmers for the very products which are in surplus, and on the other he attacks the Government for trying to do something about that. I have been frank with the hon. Gentleman and told him that I would much prefer to have had a reduction in price. However, we were unable to achieve that. We have achieved a package which is much closer to what we wanted than any hon. Member thought possible before we entered into the negotiations. The hon. Gentleman would do himself more credit if he were to recognise that.

The Government will take the hon. Gentleman's contributions on agriculture seriously when he recognises that his alliance partners should stop suggesting to farmers that they should return to being peasants, working with old-fashioned, out-of-date tools in old-fashioned and out-of-date ways.

Mr. David Heathcoat-Amory (Wells)

In an earlier reply, my right hon. Friend seemed to be saying that the price fixing, with its attendant supplementary budget, was in line with the Fontainebleau commitment to financial discipline. Does my right hon. Friend really think that? He can reach that conclusion only by treating the depreciation of the dollar as an exceptional item. But he is a member of a Government who believe in freely moving exchange rates. Does he really think that the depreciation of the dollar and the consequential increase in agricultural expenditure is a truly exceptional item which permits us to break through the 1.4 per cent. VAT ceiling and the large supplementary budget?

Mr. Gummer

My right hon. Friend will accept that being a member of the Government has advantages and disadvantages. One of the advantages is that one can say quite clearly which are the things for which one is responsible and which are those for which others are responsible. I am responsible for ensuring that, when we come to a package of this sort, the package we deal with must be within the budget and that the Commission makes absolute assurances about VAT and its ceilings. We must then consider what we do about the suggestions that some extraneous items are not, after all, written into the Luxembourg agreement. We believe that it is our job to see how much of that can be covered by savings. We will continue to do that, and I stated that clearly in my statement.

In the ECOFIN meeting today and tomorrow, my right hon. Friend the Chancellor of the Exchequer will look very carefully at proposals and suggestions that there are some extraneous items. I have listed what those items claim to be and I have cast considerable doubt upon some of the suggestions that have been put forward. I am also conscious of the fact that it is easier to talk about the disadvantages to the budget when the dollar moves one way, than to talk about the advantages to the budget when it moves in another way. Therefore, I hope that my right hon. Friend will accept that the Chancellor of the Exchequer will be raising the points which my right hon. Friend has just raised with fellow members of the Council.

Several Hon. Members

rose—

Mr. Speaker

Order. I shall do my best to call those hon. Members who have been rising regularly. I ask for brief questions, as that will lead to shorter answers.

Mr. Paul Marland (Gloucestershire, West)

I congratulate my right hon. Friend the Minister and my right hon. Friend the Minister of State on their tenacity in these negotiations and on the fact that they have arrived at some kind of agreement before the harvest, but I should like to return, without apology, to the co-responsibility levy on cereals. The co-responsibility levy on dairy products did not work. Does not my right hon. Friend think that he is merely tinkering with the situation to introduce one now? Can he assure me that, during the next five years that the levy is to exist, he will look at other ways of curtailing production?

Mr. Gummer

I repeat to my hon. Friend that I see the levy as part of the package and not on its own. We have specifically pressed for and received agreement—there will have to be a report on the workings of the co-responsibility levy within two years—that the levy is not fixed permanently but is for a five-year period. We will, of course, continue to press the Community in the direction which both he and I want, to reduce the prices of surplus products and change the system of intervention to achieve the result we all want, which is to bring production and demand into kilter.

Mr. Tony Baldry (Banbury)

Will my hon. Friend confirm that this year's settlement will be fair to farmers without being a heavy drain on consumers and that it will have a negligible effect of food prices, yet, because of the devaluation of the green pound, farmers will get a reasonable increase in receipts? Does he also agree therefore that the package strikes a good balance between the interests of the farmers on the one hand and the consumer on the other?

Mr. Gummer

I am sure that this is the best balance that can be achieved in circumstances in which we are trying to reduce production. Those cannot be favourable circumstances for farmers. The improvements in farm incomes, which come from the realignments of the green pound, will be offset by considerable reductions which arise from the measures that we have taken. That is a fact of life which arises when we produce too much of certain products. However, I believe that this is a step which the farmer can bear and is a step in the important direction of bringing supply and demand into line.

Mr. D. N. Campbell-Savours (Workington)

How will the small dairy farmer in the county of Cumbria, on the margin of profitability, be affected by the deal, specifically in connection with milk quotas?

Mr. Gummer

The effect on the small dairy fanner, as on other dairy farmers, is that there will be no increase in the price of milk. However, the small dairy farmer will have the opportunity of taking the outgoers scheme if that is what he wants.

Mr. Campbell-Savours

In other words, he will have to go on the dole.

Mr. Gummer

The hon. Gentleman is again very keen to press the disadvantages of the policy which he must want.

Mr. Campbell-Savours

The NFU asked me to ask the Minister that question.

Mr. Gummer

If the hon. Gentleman only knows what question to ask because he has been lobbied, then it would be better for me to answer the lobbyist directly.

Mr. John Carlisle (Luton, North)

Will my right hon. Friend appreciate that many Conservative Members and specifically my farming colleagues, will not like the contributory levy although we appreciate my right hon. Friend's position on that. However, we appreciate that my right hon. Friend came out with the best deal at the end of the day.

Did the Commission and the Ministers consider the problem of the present surpluses? Does he understand that there are great difficulties in export markets for United Kingdom traders against our European counterparts? Was there any discussion of what we will do with the massive surpluses which exist now and of whether he can assist, in export terms, in getting rid of them?

Mr. Gummer

There will be a number of opportunities in the immediate aftermath of the general decisions—in the detailed ones—to consider what my hon. Friend has said. I know that he has some suggestions which I hope that we shall be able to take up with the Commission.

Mr. John

The right hon. Gentleman will appreciate that I am not unused to advocacy, but which of the three defences on surplus production is he running? Is he running the defence that, as a result of all the measures taken together, production of the regimes producing a surplus will fall, or that they will not fall themselves but that surpluses will rise more slowly, or simply that he does not know whether they will fall?

Mr. Gummer

My answer is simple. Our job is to reduce surpluses. That falls into two parts. One is that surpluses are rising all the time and so first we must stop them rising. Secondly, we must bring the total into line with what is needed, partly by increasing consumption and partly by reducing surpluses. All that I have claimed for this package is that it goes further towards the reduction of surpluses than any package which he or anybody else envisaged before we went into the negotiations.

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