HC Deb 01 December 1986 vol 106 cc715-40
Mr. Speaker

Before I call upon the Minister of Agriculture, Fisheries and Food to move the motion, I should announce to the House that I have selected the amendment standing in the name of the leader of the Liberal party.

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

I beg to move, That this House takes note of European Community Document No. 9161/86 concerning emergency measures in the dairy sector, the Commission proposals described in the Ministry of Agriculture, Fisheries and Food's un-numbered Explanatory Memorandum of 18th November on the same subject and the Government's intention to seek agreement on arrangements to bring production in the milk sector into closer balance with consumption. Whether the amendment is ever moved remains to be seen. However, I should perhaps start with a word of explanation of why this debate has been arranged in the absence of some of the formal documents.

The House will know that the Commission recently produced what it described as an interim report on the application of the quota system in the milk sector. That report has not yet formally been received by the member states, although we have obtained advance copies, and these were made available in the Vote Office on Friday. The report outlines a number of measures which the Commission believes would help to restore the balance in the milk market. These measures are the subject of my Department's unnumbered explanatory memorandum referred to in the motion now before the House, which the Scrutiny Committee recommended for debate.

In view of this recommendation and the widespread interest that the Commission's ideas have aroused, I was anxious that the House should have the opportunity of making its views known before this matter was discussed in the Council of Ministers next week, even though all the Commission's formal proposals have not yet appeared. Incidentally, I notice that Liberal and SDP Members have not appeared either. Where are those great enthusiasts, who put motions on the Order Paper and never turn up?

It would be difficult for me to overstate the importance of the sector whose problems we are debating tonight. The House will recall that there are 1.4 million milk producers in the European Community. In the United Kingdom milk accounts for more than 20 per cent. of the value of agricultural output. I see that the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), a Liberal Member, has now joined us.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

The debate started five minutes early.

Mr. Jopling

No doubt the hon. Gentleman can pick up its threads as we go along.

Milk tends to be particularly important for smaller farmers and, indeed, it is the type of production that one associates most readily with the small family farm. It has the advantage of bringing in a regular income month by month, although that is achieved only by the hard physical grind of milking two or three times a day, seven days a week, and it demands a high degree of skill and stockmanship.

It is clearly essential for the well-being of agriculture as a whole that we look after the dairy sector. The problems which the milk industry is facing now must be dealt with in a way which shows an understanding of the long-term nature of investment in milk production. This is not to say that the solutions can be painless, but they must take full account of the specific conditions of the sector.

The House will recall that for many years before milk quotas were introduced in 1984 British Ministers had argued strongly in Brussels for price restraint in order to bring milk production back into line with demand. I still believe that this would have been the best solution for the industry, particularly in the United Kingdom. Sadly, our partners in the Community in those days were unwilling to accept price cuts of the magnitude necessary to make the market work properly, and as a result quotas had to be brought in to stem the mounting surpluses.

Although the introduction of quotas gave rise to many problems, and to difficulties for many producers, the system was successful in reining in production. Whereas deliveries to dairies increased by 7.4 million tonnes m 1982 and 7.3 million tonnes in 1983, in the first quota year in 1984 there was a fall of 5 million tonnes. In fact, deliveries were 400,000 tonnes less than the total Community quota, but because milk production remained profitable and the levy penalty was too light, it soon became evident, after the quota system had begun to settle down, that there was a strong financial incentive on many producers to exceed their quotas. In the second quota year, 1985–86, the total Community quota was exceeded by around 900,000 tonnes. In the first six months of the third quota year, April to September 1986, it is estimated that deliveries were I per cent higher than in the same period of 1985.

I am glad to say that the hon. Member for Brecon and Radnor (Mr. Livsey) is now in his place, so two Liberal Members are present. There is still no SDP representation in the Chamber.

It is evident that milk production is still highly attractive to many farmers. This fact is demonstrated very clearly in England and Wales by the extremely high prices producers are offering for quota in connection with land transactions. Many hon. Members will have seen press reports of prices as high as 20p to 22p per litre, and in some cases as much as 26p per litre.

In the meantime, consumption of milk and milk products is stagnant. It is clear that, even with quotas in place, Community milk production subtantially exceeds all market outlets. The Commission has estimated the surplus at 9.5 million tonnes or 9.5 per cent. of production, and this is certainly no exaggeration. Indeed, it is based on the assumption that there will be a continuing high volune of subsidised exports and subsidised disposals on the Community's internal market. If these artificially created outlets are taken out of the equation, the House should remember that the surplus is now at least 20 per cent.

What this means is that the Community is offering milk producers very high prices in order to fill a quota which is far above what consumers are willing to buy. The result is that intervention stocks of butter have risen to 1.5 million tonnes and stocks of skimmed milk powder are about 1 million tonnes. The cost just of storing this surplus is currently running at about £1 million a day.

Mr. Colin Shepherd (Hereford)

With the cost running at £1 million a day, which is £365 million a year, has my right hon. Friend estimated what the cost of storage will be if he is successful in reducing production in the United Kingdom by 9.5 per cent.?

Mr. Jopling

My hon. Friend should realise that I am intent on reducing production throughout the Community and not only in the United Kingdom. We cannot have discrimination.

The present situation clearly cannot be allowed to continue. In its paper, No. 645 of 1986, the Commission has therefore proposed a two-pronged attack. In the first place it wants to tighten up on the quota system, both by direct and indirect means, and in the second place it wishes to reduce the attractiveness of the intervention system so as to make producers and traders bear some of the risks of the market, from which they are, at present, effectively insulated.

The United Kingdom has clear reservations about some of the methods that the Commission proposes, but we have to agree with its basic aim. We cannot dispute—as I do not believe anyone can rationally dispute—the need to reduce the size of the Comunity quota and to reduce the absolute security of the intervention system. The Commission is aiming to reduce milk production by 9.5 million tonnes. I think it reasonable to accept that this should be our target. Of the 9.5 million tonnes, 3 million tonnes is to be found by the quota cuts which the Council agreed in April this year—that is to say the 2 per cent. quota cut scheduled for 1 April 1987 and the further 1 per cent. that is scheduled for 1 April 1988. The Commission now proposes doubling these cuts to achieve a further 3 million tonnes reduction. I do not think that it is possible to dispute the logic of this, although I fully understand the difficulties that it will present to many producers.

Like some other member states, the United Kingdom sees merit in paying compensation at a reasonable level for all quota cuts. We shall be looking for changes in the arrangements for to quota cuts already scheduled, as these do not permit at the moment the payment of compensation for across-the-board cuts. This is one of many points where I guess there will be a great deal of discussions in Brussels before the Council eventually reaches a decision.

Mr. Michael Latham (Rutland and Melton)

First, will my right hon. Friend assure me that he has no intention of seeking any changes in the current marketing year? Secondly, will he assure me that he understands very well that any drastic measures would have a major ripple effect through the rest of agriculture? Does he agree that there is a need, therefore, for an overall policy statement from him on the future of British agriculture?

Mr. Jopling

I appreciate that. At the moment, cuts in quotas are not envisaged during the course of the current milk year—that is, the year from 1 April to 31 March. I am aware of the ripple effect, particularly in view of my meeting with farmers this morning at the Smithfield show. They firmly pointed out to me the effect of reduced milk quotas on the beef sector. That is particularly what my hon. Friend spoke about.

Mr. Teddy Taylor (Southend, East)

Will my right hon. Friend give way?

Mr. Jopling

I really must continue. I shall not give way. This is a short debate, and I must make progress.

As well as these quota cuts totalling 6 million tonnes, the Commission proposes various changes in the rules of the quota system to produce a further reduction of 3.5 million tonnes. I fully understand why the Commission is suggesting this, but, however clear the need to cut production, we must be careful that the urgency does not push us into uncritically accepting every proposal that is put forward by the Commission. I have to say that I have serious doubts about some parts of this section of its proposals.

I have no great difficulty with the first of the changes that the Commission proposes. This is the abolition of the arrangements which allow quota undershoots in one region to be offset by the levy liability of other regions. That is known in the regulations as article 4a. This facility has been of some limited value to the United Kingdom in the first two quota years. It has been of considerably more value to other member states, but it was not part of the basic milk quota scheme as originally worked out. It was introduced during the first quota year as a temporary concession to enable the industry to adjust to the new system, and I do not believe we can quarrel with the ending of it.

The Commission's proposal to abolish what are known as formula B arrangements is much more difficult for us. The effect of formula B is that producers do not have to pay super levy unless the purchasing dairy which they supply is itself over quota. Even then, the amount per litre which producers have to pay is much less than the full rate, because quota unused by producers who undershoot their quotas is offset against excess production by those who overshoot. It is true, as the Commission points out, that this makes it more likely that national quotas will be fully used, but formula B was an integral part of the quota system agreed in March 1984. It brings a much-needed element of flexibility into a very rigid system, in that, within the area of any one Milk Marketing Board, it allows the evening-out of variations in supply between individual producers.

A major problem with any quota system is its inherent tendency to ossify the industry. We need to find ways of offsetting this tendency. One way that we have advocated from the start would be to allow the sale of quota separately from land, having due regard, of course, to the interests of landowners as well as milk producers themselves. Sadly, the Commission and other member states are not yet ready to go down this road. Therefore, in this context, we shall have to insist upon the retention of formula B. Many other member states feel the same as we do on this point.

The objective must be to get the total quota down to a reasonable level and to ensure that this new ceiling is respected, but within the new ceiling we should allow the operation of market forces to determine the development of the industry. It would not be wise to reduce the quota to a level still substantially higher than demand and then hope to rely on the rigidities in the system to ensure that production remains significantly below the ceiling.

As part of this strategy, I see a strong case for a substantial increase in the rate of super levy. The Commission's proposal on this point does not seem to be quite adequate, as it relates only to formula A. An increase for formula A and formula B would be appropriate.

In Brussels we shall be arguing that we should reduce quotas to bring them more into line with demand. I agree very firmly with those hon. Members who have said in the past that changes of this sort must be made with full understanding of the time it takes to alter production patterns in agriculture. In discussing the proposals, and particularly in looking at the timing of their impact, I shall have very much in mind the need to look at the effect of the whole package on individual producers.

Mr. Nicholas Winterton (Macclesfield)

Does my right hon. Friend accept that if we introduce further quota reductions when we are only 75 per cent. self-sufficient in liquid milk we shall inevitably suck into this country additional liquid milk from the continent? How can that be good for this country or for our balance of payments? How can it be good to put our dairy farmers, who are not contributing to the annual surplus, out of business and automatically reduce their incomes?

Mr. Jopling

My hon. Friend, for once, has not done his homework particularly well. He said that we were 75 per cent. self-sufficient in liquid milk. Of course, we are 100 per cent. self-sufficient in the liquid milk market, with the exception of that tiny amount, which is imported, of UHT and sterilised milk. I am sure that my hon. Friend will be interested in the latest figures which my Department has worked out. In 1985 the United Kingdom was 98 per cent. self-sufficient in butter fat, which includes that part of our market reserved for New Zealand. If we exclude New Zealand—

Mr. Winterton

I do.

Mr. Jopling

We are 89 per cent. self-sufficient in butter fat. In 1985 we were 112 per cent. self-sufficient in solids non-fat, the other element of milk. The two figures are 89 per cent. self-sufficient in home production of butter fat and 112 per cent. self-sufficient in solids non-fat. My hon. Friend knows a great deal about the dairy industry. As he well knows, the composition of milk is roughly one part fat to two parts solids non-fat, so he will be able to work out the figures for himself.

In talking about quota cuts, I shall be insisting that they must apply equally in all member states. There is no basis for any member state, including the United Kingdom, to argue for special treatment, as the original allocation of quotas was very fair. It has been suggested that the United Kingdom could make a claim for special treatment on the basis that we do not produce all the milk products that we consume. It is important to bear in mind, however, that if we were to re-open that question, several member states could claim much more than we could. One major member state is not even able to supply its own liquid milk market in full, so it cannot be in our interests to pursue that line of argument. I shall therefore be insisting that the quota cuts should be by the same percentage for every member state.

Having achieved the cuts required, our firm aim should be to ensure that member states' total quotas are not exceeded. However, we should aim to permit the maximum possible flexibility between individual producers within the overall total.

Mr. Keith Best (Ynys Môn)

Does my right hon. Friend accept that there is a wide disparity in the capacity of farmers in different parts of the United Kingdom to survive? I represent a part of Wales which was caned especially hard last time by the quotas. What does my right hon. Friend say to those farmers—one of whom has written to me saying that with 30 cows he is trying to live on an income of £3,225 a year—who proved to the tribunals that they were living at subsistence level with the last imposition of quotas and who are now asked to take a further 9 per cent. reduction?

Mr. Jopling

I have no doubt that my hon. Friend will recall that when the original quota system was put in place we paid particular attention to the needs of small farmers. I am sure that my hon. Friend has already pointed out to his constituents that, after the tribunals had done their work, we were able to take steps that brought virtually every small farmer—that is, farmers with fewer than 40 cows—back to the level of production, with quota, that they had had before the quota was introduced.

The second prong of the Commission's attack on the milk surplus is its proposal to restore the intervention system to its original function. Intervention was originally conceived as a safety net to protect producers and traders from market fluctuations. In recent years, however, that purpose has been perverted, and instead intervention has become a major outlet in its own right. During the first nine months of 1986 approximately 35 per cent. of all butter produced in the Community was bought into intervention. In the same period about 31 per cent. of skimmed milk powder production was also bought into intervention. That clearly cannot be allowed to continue.

Mr. Robin Maxwell-Hyslop (Tiverton)

My right hon. Friend's memory has let him down disastrously. Intervention was sold to the British farmer as a substitute for the deficiency payments system that we had before not to even out market fluctuations. My right hon. Friend cannot get away with that new theory, which purports to alter history.

Mr. Jopling

If I may argue with my hon. Friend, he will recall that he and I stood in the 1966 and 1970 general elections on the basis of a straight swap from the old-fashioned deficiency payments and guaranteed price system to a system based on import levies. That was the balance. The method of supporting the market by intervention was a separate matter and, although it was an integral part of the Community system, my hon. Friend would remember that in the original changeover it was the swap for import levies which was part of that.

The Commission is therefore proposing that permanent intervention for skimmed milk powder should be ended in the winter months. For skimmed milk powder during the summer, and for butter at any time of the year, it is proposed that the Commission should itself have the power to suspend intervention buying if the balance of the market can be guaranteed by other measures.

I see little difficulty for the United Kingdom in agreeing to these proposals for skimmed milk powder. Provided the price is right, it is possible to dispose of very large volumes of skimmed milk powder for inclusion in animal feedingstuffs. It makes little sense for intervention authorities to buy in large stocks of skimmed milk powder, store it for many months, and then sell it for animal feed. It would be far more logical for the powder to go direct from the manufacturer into animal feed with the help of a subsidy. It is even better if liquid skimmed milk can be sold direct for animal feed without first being converted into powder.

Mr. Teddy Taylor


Mr. Jopling

Provided the subsidy is sufficient to make the skim genuinely competitive with alternative proteins, I see no difficulty with that method of proceeding.

I do, however, have reservations about the Commission's proposals as regards butter intervention. Despite the intensive search which has been made, there is as yet no outlet capable of absorbing large volumes of butter, as there is for skimmed milk powder. That being so, I find it difficult to see precisely how the Commission intends to operate without intervention. I would very much like to be able to support the Commission on this point, as its objective is so obviously logical. So far it has not been able to give me the reassurance I would need, but I hope that it will be able to do so as the discussions proceed.

Sir Peter Mills (Torridge and Devon, West)

Has my right hon. Friend considered the serious affect that that would have on dairy milk factory workers? The Milk Marketing Board has said that it would probably have to close nine plants. As well as giving compensation to the farmer on the lost quota, what about the dairy workers too?

Mr. Jopling

My hon. Friend will understand that if one cuts milk production—we are no likely to cut the amount of milk going to the liquid market—that must inevitably mean that there will be less milk available for manufacturing. I do not know how many factories or industrial plants might be affected by whatever reduction might occur. That is a matter for the dairy trade, as it will clearly have implications.

With regard to the specific point raised by my hon. Friend, I must stress that there is a statutory arrangement for redundancies. I know that many companies and the Milk Marketing Board have their own supplement to the normal basic redundancy arrangements. These applied during previous quota cuts. I have no announcement to make with regard to further redundancy arrangements other than those that are available for all industries.

In conclusion, I should like to stress that I fully understand that many hon. Members, producers and others in the dairy industry will have serious apprehensions about the proposals now under discussion in Brussels. I do not wish to deny that the effect of the proposal will be painful for many people.

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


Mr. Jopling

There is no getting away from that fact, and I would be deluding the House if I pretended otherwise. However, I ask all hon. Members to realise that the difficulties that we are now facing are very largely the result of a failure in earlier years to take difficult decisions to prevent the position from deteriorating.

Mr. David Penhaligon (Truro)

All thanks to the right hon. Member for Worcester (Mr. Walker), and his produce, produce, produce.

Mr. Jopling

Hon. Members should remember that successive Ministers from both Conservative and Labour Governments have continually warned the Council of Ministers of the folly of giving larger and larger price increases and encouraging more and more production.

The British Government have for many years stressed the dangers. Sadly, others were not prepared to heed the signs, and when eventually action was taken in 1984, the new system had to be imposed much too quickly, causing serious difficulties for many producers.

I am determined that that mistake should not be repeated, and it is for that reason that I shall be pressing my colleagues in the Community to agree now to measures that can be introduced at a reasonable pace. Progress on that issue will be a priority for us at the meeting of the Council next week. Only once that nettle has been grasped will it be possible to remove the uncertainty that has plagued the milk sector for so long. Only then will it be possible for the industry to get on to a more stable footing for the future.

Mr. Speaker

Before I call the Opposition Front Bench spokesman, may I say that many hon. Members have an interest in the debate, and I appeal for short contributions.

10.22 pm
Mr. Brynmor John (Pontypridd)

I shall try to make a shorter speech than the Minister. First, I understand why, in the absence of any official text, the Minister has sought to bring the matter before us. I believe that to be able to debate this matter before negotiations take place is valuable to the House.

It must be said that the first approach to the dairy regime by the Ministers and the Commission has not been a success. Costs have continued to rise and stocks have also risen. We can put the matter into perspective by stating that this is the most costly of all the common agricultural policy regimes, commandeering about 30 per cent. of total agricultural spending. We have heard about Europe-wide stocks, but in this country stocks of butter have risen by a third in the past six months.

In April, the Commission, realising that something was going badly wrong, put forward a scheme whereby 3 per cent. was to be reduced from quotas until April 1989. Now, hardly six months later, it has doubled that figure and proposes to change the other quota rules which would effectively add another 3.5 per cent. minimum to the cuts—a total of 9.5 per cent. I put it to the Minister that changes of that magnitude can hardly be passed off as technical adjustments to a fundamentally sound scheme. We must be certain that, in building on that original scheme, we are building on a sound foundation and on a scheme that is fair to the United Kingdom. If not, we should re-examine the basics of the scheme. I know that the Minister is unwilling to re-examine the original agreement for fear that other countries might be nasty to him, but the inadequacies of that scheme owe a great deal to the Government's refusal to contemplate quotas up to and including the eve of the meeting at which they accepted them. The basic problems must be taken up again by the Government.

Were we allocated a satisfactory initial quota? The only parallels that we can take are other large CAP countries with comparable populations—France and the Federal Republic of Germany. The disparity is immediately obvious. France received a quota of 27 million tonnes, Germany 24 million tonnes, but the United Kingdom only 16 million tonnes. Again, the Government are to blame, but it may not be too late to rectify the matter. The disparity was caused by accepting 1981 as the base year rather than taking average production over a number of years. As 1981 was acknowledged to be a bad milk year for this country, if everything continues to be built on that one year we shall pay for the initial blunder many times over.

Mr. Jopling


Mr. John

I am reluctant to give way, because many other hon. Members wish to speak, but I will give way to the Ministers.

Mr. Jopling

I wish to make just two points. First, whether we chose 1981 or 1983 when the decision was taken in 1984 would have made a difference of about one-fifth of 1 per cent. in our national quota, so it was neither here nor there. Secondly, the hon. Gentleman said that we got a raw deal compared with other nations. The House may be interested to know that member states whose cutbacks were greater than ours at that time accounted for 42 per cent. of milk deliveries in 1983–84 and those with smaller cutbacks also accounted for 42 per cent., so we were exactly in the middle.

Mr. Nicholas Winterton

Which countries are contributing to the surplus?

Mr. John

I shall not intrude unnecessarily into that private grief, but I do not resile from my position. We did not get a raw deal in those negotiations. We got a bad deal, for which the right hon. Gentleman, despite his apologia, cannot escape responsibility.

Another point requires clarification. Responsible people in the dairy industry, including the Milk Marketing Board, which I imagine has sent a brief to most hon. Members present for the debate, consider the United Kingdom to be a deficit country in terms of production.

Mr. Winterton

That is right.

Mr. John

I have constructed an argument based on that deficit——

Mr. Robert Jackson (Wantage)

Will the hon. Gentleman give way?

Mr. John

You, Mr. Speaker, have appealed for brevity and I know that many hon. Members wish to speak—[HON. MEMBERS: "Chicken!"] I am called "chicken", but if I give way and shut someone else out of the debate I shall be highly unpopular. I have given way to the Minister and I now propose to finish my speech. We can then hear some of the universal criticism of the Minister from the rebels on his own side.

The Milk Marketing Board believes that we are a deficit country. We need urgent clarification because, if that is so, we are the only large deficit country and that fact should be recognised in the negotiations, even though it was not taken into account at earlier stages. I understand that the smaller deficit countries obtained a special arrangement and naturally hope to continue it in years to come. We therefore fall between two stools in being a deficit country, but not a small one.

I was reassured to hear that the Minister would express outright opposition to formula B. I hope that it will be more outright than the occasion on which he said that milk quotas would not be introduced, except over his dead body. If formula B is abolished, instead of a 3.5 per cent. reduction in milk production over and above the 6 per cent., I believe that it will be between 4.5 and 5.5 per cent. In fact, compared with a European average of 9.5 per cent., our dairy production will be cut by about 10.5 or 11.5 per cent. As the Minister strongly suggested that he believed in an equal cut across the board, I do not see how he could accept that. We shall have to look at the results of that negotiation very closely.

The Minister has said—we all realise it—that cuts in the dairy sector will have a dire effect on rural economies. Therefore, none of those cuts should be undertaken lightly. He made a valid point when he mentioned the horrifying nature of the budget. We currently have an agriculture budget which is estimated at 23 billion ecu for the coming year, with a projected overrun of a further 3 billion ecu. Those are enormous sums, and those who offer the prospect of no change in dairying hold out the cruellest deception of all. We must fight for the fairest quota system, but cuts in the budget will, and must, come.

That brings me to the milk outgoers scheme which, it is rumoured, exists on a voluntary basis in this country. I say "rumoured", because one would have to be pretty lucky to have met a farmer who has taken advantage of that scheme. As ever, the figures are shrouded in mystery. When I question the Minister he takes refuge in the number of applications or interested inquiries. However, I understand that the take-up figure for the voluntary outgoers scheme is between 10 and 100 throughout the whole of the United Kingdom. In any event, the number is miserably few.

The reasons are not hard to understand, given that farmers are offered 18.6p per litre over seven years, whereas milk quotas are being sold at an upper rate of 26p per litre.

Mr. Geraint Howells (Ceredigion and Pembroke, North)

Twenty-nine pence.

Mr. John

It may be 29p, but the Minister mentioned the upper limit of 26p. That has meant that people are using milk quota sales as a subsidy for a decent outgoers scheme. That cannot last for long, and with our knowledge of the Commission we know that it will not. We must therefore insist that as part of this package there should be a fair outgoers scheme that will recompense those who are leaving dairying. An estimate of 5,000 has been placed on the number of milk producers who will go out of production if these proposals go ahead. These people must be treated fairly, and so must those who are dependent on them, whether they work in creameries or directly on the farms.

The Minister has hidden behind the statutory redundancy schemes for far too long. He has said that there is some topping up. It was pointed out to him that these days very few employers top up the statutory schemes. In the case of coal and steel, the EEC has recognised that where structural change has taken place there ought to be special compensation. In my view, those who work in the creameries and on the farms who will be displaced as a result of these schemes ought to be so compensated.

Of course, the number depends on the dairy trade industry, but the estimate that I and other hon. Members have seen is about 2,000 jobs. These creameries are large employers in rural areas, where alternative work is simply not available. Recognition of this hardship must therefore be granted both by the Government and the EEC. I hope that the Minister will say something about that when he replies.

I have set out what I believe the Government should be looking for in any negotiations. I wish the Government well in such negotiations, because I do not believe that any Government, of whatever party, would wish to inherit a dairy industry that has been shattered. There are difficulties which must be faced, but those difficulties are increased because Agricultural Ministers are still tackling what is an across-the-board problem on a sector by sector basis.

We have heard something of the fears of other sectors of agriculture because of changes in the dairy industry. We are aware of the fears of the beef producers if the proposed changes to the dairy industry take place.

The CAP must be altered, not by palliatives but by a set of genuinely different measures which tackle and try to solve the whole problem without damaging the other sectors of agriculture. Above all, I believe that Agriculture Ministers must come to grips with the problem and shed their interminable delays. It is said that procrastination is the thief of time, but it is also the enemy of sensible solutions. I believe that the CAP badly needs those sensible solutions.

10.35 pm
Mr. Robert Hicks (Cornwall, South-East)

I do not believe that the proposals are simply about the future levels of milk production and dairy products in Europe or indeed Britain or even about the levels of income of individual dairy farmers—although such considerations are important. The proposals are not solely about the need to restrict the cost of the Common Agricultural Policy to an acceptable proportion of the total European budget.

In my view, there is a further and more fundamental dimension—the social and economic structure of the British countryside. That is what is at stake and what we should be worried about. I was saddened by the reply that my right hon. Friend the Minister of Agriculture, Fisheries and Food gave to the intervention by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). The Minister talked about possible lay offs purely in terms of the dairy trade. It is much more fundamental than that.

The Milk Marketing Board—I am associated with that body—has suggested that if these proposals were to be implemented in full—I know that my right hon. Friend has expressed reservations about that and I will return to it in a moment—approaching 5,000 dairy farmers could find themselves in jeopardy. Butter and skimmed milk production and manufacture would be down significantly. Possibly up to six or seven creameries might have to close involving 2,000 jobs based in rural areas.

My hon. Friend the Member for Torridge and Devon, West has already referred to the other adverse effects which may occur, and it is suggested that there would be a total loss of some £250 million from the rural economy. I find that depressing and frightening. I look to the Minister not only to provide us with assurance this evening but also, subsequently, to ensure that this assurance is backed by action in Brussels.

There is no argument about the fact that the upward trend of milk surpluses should be reversed, and that must involve some reduction in milk production. The Commission has proposed that, in addition to the 2 per cent. cut in milk production in this milk year and a 1 per cent. cut in the following milk year, there should be an additional 3 per cent. milk quota reduction across the board. I do not object to that.

The Commission has also said that there should be a change in the rules and across the board in Europe, that would mean a reduction of some 3½ per cent. in production. But if that involved the abolition of the quota B scheme the net effect for Britain would be a reduction of at least 4½ per cent. possibly 5 per cent. as mentioned by the hon. Member for Pontypridd (Mr. John). That would be positive discrimination against the United Kingdom.

Mr. Tony Speller (Devon, North)

Does my hon. Friend agree that we are really talking about rural depopulation? That cannot be solved by taking or ***************not taking note of documents, but only by national action to promote our dairy farmers.

Mr. Hicks

My hon. Friend is correct. Indeed, my hon. Friend the Member for Torridge and Devon, West expressed those sentiments.

The west country is essentially a livestock area, very dependent upon the smaller milk producers. We know of the contribution that the dairy sector makes to rural economies. No doubt other hon. Members—should they catch your eye, Mr. Deputy Speaker—will make identical points.

I am also worried that the Commission appears to see the problem purely in terms of potential cuts. It is incumbent upon it to think in a more positive manner—otherwise the individual dairy farmer will derive little encouragement from and have little confidence in the future. If a similar position occurred, he could expect only further cuts.

Therefore, it is essential both for the Commission and my right hon. Friend as chairman of the Council of Ministers to come forward with more positive parallel suggestions, otherwise the smaller milk producer will be justified in thinking that he may have no future within the dairy industry. Will my right hon. Friend examine some parallel suggestions that I believe are worthy of consideration?

It is important to tackle the problem of the existing stocks—1.5 million tonnes of butter and more than 1 million tonnes of skimmed milk powder. Surely a mechanism is available to Europe to move that over a phased period to those countries in the Third world that need such products, and that could have or already has developed an infrastructure involving distribution and processing, so that they can, at least, take some of the surplus stocks.

Intervention accounts for 40 per cent. of the cost of the CAP, which is a total waste of financial resources. If we could remove that cost, we could look at the whole question of milk production in a more positive light.

The next point is generic advertising. We know that the United Kingdom is the only country that drinks at least 50 per cent. of its milk output. Other European countries have a much lower percentage. In the United States, demand for dairy products has increased by 12 per cent. since 1980, in part due to promotional activities.

We should look positively, and in a financially attractive way, at a policy of set-aside. It is important that the farmers are financially compensated. I can tell my hon. Friend the Member for Southend, East (Mr. Taylor) that that could be offset by a lower proportion of the budget of the CAP going to support intervention stocks. I hope that when my right hon. Friend goes to Brussels he will be prepared to consider that point—not only in the context of negative milk quota reductions, but by looking at the whole issue more positively.

I return to my central theme, which is that it is not just the CAP and the European budget that is at stake, but the future fabric of the British countryside as we know it.

10.44 pm
Mr. Richard Livsey (Brecon and Radnor)

I beg to move, at the end of the question to add, 'but calls on the Government to introduce measures to protect small dairy producers and those who face extreme financial hardship, while providing greater compensation for outgoers and those who work in ancillary industries, and to resist the abolition of Formula B quotas where Britain is concerned.'. The Minister stated that there was crisis in the European Community budget caused by the over-production of milk. We certainly accept that analysis, but he must realise that by implementing these proposals he is party to wielding an axe on the British dairy industry, which is already in a state of crisis and reeling under it. That applies to dairy farmers and the dairy manufacturing sector alike. By so doing the Minister is also adding to the balance of payments deficit and wrecking the social fabric of the countryside and the rural economy.

Obviously, we must try to bring milk production into closer balance with consumption—[Interruption.]—but are the Government going about it the right way? We doubt it. [HON. MEMBERS: "Tell us."] I will tell hon. Members later in my speech. At present according to Milk Marketing Board figures, Britain is 91 per cent. self-sufficient in milk and dairy products. Only Italy and Britain are not self-sufficient. What is one to make of Ireland which is 264 per cent. self-sufficient, of Denmark which is 224 per cent. self-sufficient, or the Netherlands——

Mr. Speller

Would 100 per cent. self-sufficiency mean that one could neither export nor import? Self-sufficiency within a club is a meaningless figure.

Mr. Livsey

Considering the severity of the crisis facing Britain that is an academic point.

Mr. Colin Shepherd

Will the hon. Gentleman give way?

Mr. Livsey

I will not give way. I have already given way and I have not much time.

In 1984 our cut was one of the most swingeing at minus 6.2 per cent. When that is compounded with the base year of 1981, which was a bad year, these proposals contrive to hit the industry below the belt when many dairy farmers are on the ropes and some are taking the count. Since 1984, 1,500 dairy farmers have gone out of business and 7,000 employees' jobs have been lost in the dairy industry. That has been a disaster for the western and northern grassland producing areas, particularly Wales and Scotland.

In the county of Dyfed, 18 per cent. of the population depends on agriculture for its living. That is almost identical to the percentage of the population dependent on it in Ireland. Many are dairy farmers. Creameries have been shut and farmers have being going out of business. For those who remain the going is increasingly tough. [HON. MEMBERS: "Hear, hear."] I can understand why Tory Members are so anxious about the situation: their Minister has caused their anxieties.—[interruption.]

From an ADAS report the Minister must know that in Dyfed 25 per cent. of dairy farmers are financially insecure, 7 per cent. are threatened now with bankruptcy and 37 per cent. have serious financial problems. Therefore, 60 per cent. of the dairy farms in Dyfed are under threat. [Interruption.] Machinery manufacturers have had to close and agricultural merchants have made lasting cuts. Many small dairy farms are unviable, and 200 farms on the county council smallholding estate in Devon are in jeopardy as a result of further proposed cuts in quota. If a further 3 per cent. cut in quota is implemented, a total quota reduction of 6 per cent. will result.

We oppose the abolition of formula B quotas because, although it would cut quotas in the EEC as a whole by 2 per cent., it would affect England and Wales by minus 5 per cent. Therefore, we would lose out by a further 3 per cent. in quota compared with elsewhere. That will hit Britain most unfairly indeed.

I and the Minister know that France and Ireland are resisting the abolition of B quotas and I am pleased to hear him say this evening that he is also against B quotas being abolished in Britain. [Interruption.] I trust that those Conservative Members who are so noisy will assist us in the Lobby tonight to stiffen the Minister's resolve and ensure that B quotas will not be lost for Britain.

The estimated consequences of the full EEC proposals could result, as has been said, in a possible 5,000 further dairy farmers going out of production. The figures have already shown that that would have a devastating——

Mr. Albert McQuarrie (Banff and Buchan)


Mr. Livsey

I may be boring, but I am sure that it will make for an exciting election.

This would be a devastating blow for our rural areas and the proposals tonight are inevitably pushing us in that direction. Before taking such severe steps the Minister should do his own calculations. The knock-on effect on the rural areas socially will be immense and there will also he a knock-on effect in the beef sector. It has been estimated that if the full weight of the EEC proposals come in there could be a further additional production of 600,000 tonnes of beef in a market that is already swamped with that product.

We must get production and consumption in balance. We agree with the Minister on that, but he must proceed with caution and sensitivity. [Interruption.]

Mr. Deputy Speaker, I demand a hearing.

We must positively identify the small dairy producers and certainly protect from further cuts those producing 250,000 litres per annum and less—[HON. MEMBERS: "How? Tell us."] We must give them direct payments to assist them in their incomes without additional production. [Interruption.] That proposal will not increase surplus production. [Interruption.] If Conservative Members will listen to what I am saying, they will hear that I am putting forward positive proposals.

We must identify producers facing extreme financial hardship and assist them, too. We must have a vastly improved outgoers scheme. We have heard that few producers have taken that up and we must at least pay the current quota sale price rate. We must introduce a scheme for cow purchase at much more attractive prices than in the market at present to get more cows out of production. That can be done over a short period.

We must, as has already been said, sell out more of our dairy stocks. Why cannot pensioners in Britain, for example, share more of the surplus butter that we have in our stores? We must have a crash scheme of destocking into some of the poorer countries, and that should be linked to developments in their own agriculture. We must also give incentives to New Zealand to market its product elsewhere than in the EEC. There are opportunities in the far east and we must encourage it to market there. The EEC should accept responsibility to give incentives to do that.

The alliance has tabled an amendment and—[Interruption.]—judging by the furore created by Conservative Members, they will not support the amendment in the Lobbies tonight and their words about the destruction of the rural economy will prove to be empty indeed.

Mr. Paul Marland (Gloucestershire, West)


Mr. Livsey

I shall not give way.

The rural areas are watching Conservative Members carefully. I plead with the Minister not to abandon those areas. Their future is already in the balance, and if the Government do not act sensitively, they will stand condemned in the dock. The rural areas, and especially the western dairy-producing and grassland areas, will lose tremendously, which will be a great tragedy.

10.55 pm
Mr. Robin Maxwell-Hyslop (Tiverton)

I must confess my astonishment, on reading through the documents that purport to be those that we are debating, to see them innocent of any mention of the effect on beef production. The document in the name of Lord Belstead contains a section entitled "Policy Implications", but one reads through that section in vain to find anything about beef. The same is true when one reads through the EEC document in the name of Mr. Lorenzo Natali. Were the people who wrote those documents wholly unaware of the collapse which these proposals would produce in the beef market?

When milk quotas were introduced, it was feared that there would be a greater rush of culled cows on to the beef market than occurred. The reason was that a large proportion of milk producers went from a high concentrate feeding system to a low concentrate feeding system, but that slack has now been taken up, so a reduction of 9, 9.5 or 10 per cent. in milk quotas will inevitably result in a rush of about that proportion—[Interruption.] Perhaps I may have the attention of my right hon. Friend the Minister of Agriculture, Fisheries and Food and my right hon. Friend the Minister of State. The debate, of which less than an hour remained for the Back Benchers, is about the future of our dairy industry and our beef industry. Perhaps that is not too long a time to hold their attention.

The reduction will affect not only milk producers and their investment, which they were encouraged to make under successive Governments, but beef production, which is only marginally profitable, it at all. Collapse the market with the sort of proposals suggested by the EEC, and there will be devastation. Of course, it will not be limited to beef production. What will people do with their grassland? They will go into sheep, and we shall have the collapse of the sheepmeat economy. We cannot collapse those two sections of the foodmarket—that is what it is—without a knock-on effect on pigs and poultry, because they are the alternative meats to beef. Poultry is certainly the alternative today.

How is it possible for my right hon. Friend the Minister to address the House on these measures without taking the House into his confidence and explaining his thinking about how he will deal with the consequences of such a policy? The EEC could end up paying far more money for the support of beef, sheep and pigs because it starts with a foolish policy—foolish not in the total quantities necessarily, but in the time span over which they are implemented. Producers say, "Give us time to adjust." It is precisely that which the Community's proposals are so obviously denying.

The Community must have an overall agricultural policy. So must we. If we squeeze just one commodity at a time, the effect will be to destroy the whole balance and the rest of the agricultural economy. That, in a nutshell, is the problem to which my right hon. Friend has not addressed himself in the House, but to which he must address himself in Brussels.

It seems that my right hon. Friend cannot or will not bring home those truths to the Commission, including the foolish Mr. Pooley, the second in command of the Commission's bureaucrats, who was shooting his mouth off in Devon last week. He referred to 25,000 dairy farmers getting employment in the electronics industries. None of us happen to have noticed electronics industries in the rural areas waiting to take 25,000 farmers. It is that sort of dangerous nonsense upon which my right hon. Friend is relying for executing the EEC's policy and, indeed, for drawing it up.

While Britain is in the Chair, until the end of this month, my right hon. Friend's prime ambition must be not to make short-term savings at the cost of long-term devastation, but to bring home to the bureaucrats, as well as to the Council of Ministers, the inter-reactions within the totality of agriculture. That must be his task. A debate of 55 minutes for Back Benchers is not long enough for my right hon. Friend to persuade the House, which he has not yet started to do, that he is even aware of it, let alone that he will make it his business to instruct the Community in these basic facts of life.

I do not believe that many of my hon. Friends will be able to contribute to what must be said in this debate. The hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood) is making remarks from a sedentary position. Had he been in the House a little longer, he would have some slight understanding of its procedures, but that he still lacks. He would know that if there is a vital question—which this is—and that if many hon. Members want to contribute to the debate and the time for it is ludicrously short, it lies within the power of the Chair to refuse to put the Question when the hour for the closure of the debate comes.

Although I have had the good fortune to catch your eye, Mr. Deputy Speaker, I believe that there are many other hon. Members who still have a duty to contribute to the debate. It must continue on another day this week, in prime time. It must not be allowed just to meander into the ground at 11.30 tonight.

11.3 pm

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I came here this evening to ask the Minister a few simple questions. How can he conceivably justify to the small farmers in my constituency, many of whom on the Cheshire plain were brought close to bankruptcy last year by the imposition of completely unacceptable quotas, the suggestion that he will now apply an even more unacceptable blow to their already straitened finances? I must also ask him a question which to me is politically much more important.

I listened with amazement to other hon. Members who argued that we ought to subscribe to an agricultural policy that was a manifest "con" when we joined the Common Market, and that has not improved since then. I leave aside the irony that the Milk Marketing Board was created in the 1920s, when a Conservative Government had contributed to the destruction of British agriculture—something which we see being repeated this evening.

I shall ask the Minister some simple questions. First, if the Commission and the Council of Ministers do not accept the reservations that he has expressed this evening about the suggested imposition of extra quotas—these quotas are entirely unacceptable and deeply unfair—what will he do to protect the interests of our agriculture? As he no longer has the veto, will he return to the House and tell us that, having taken account of the views of the other member states, he is sad to say that, like the good democrat that he is, he has had to give way to other pressures and to those who outvoted him? If not, what alternative national rule does he intend to apply? What alternative opposition scheme does he have to put to the Commission that will provide sufficient money for the farmers who want to join an outgoers scheme and begin to deal with the real problems in our creameries?

Just outside my constituency 100 men and women are losing their jobs. That is happening now. The reason is not that they were inefficient or that the creamery was doing a bad job. In fact, the creamery had been returning an increasing profit over the past 12 months. They are losing their jobs because of the mad, Alice-in-Wonderland, incomprehensible rubbish that is called the common agricultural policy.

Let the Minister answer one question. If the Minister's reservations, which he has so modestly put before the House this evening, are not accepted by those in Brussels, what will he do for British farmers, farm workers and creamery workers? Are we to take it that this is a cynical demonstration of how to win votes in the rural areas, on the assumption that the dairy farmers will not even notice that their next step is the bankruptcy court?

11.7 pm

Mrs. Ann Winterton (Congleton)

It is the duty of hon. Members who represent rural constituencies to try to participate in this brief debate on an extremely important subject. I shall begin by establishing the common ground, which is that the Community is over-producing dairy and agricultural products generally to the tune of 9.5 per cent. I shall try to cut a swathe through the plethora of figures which have confused us this evening and to spell out in clear terms what the proposals will mean for the dairyland and grassland areas on the western side of Britain.

We are all aware that something must be done to curb production throughout Europe, but Britain is not contributing to the surplus in dairy products. Unfortunately, that cannot be said of many of our European neighbours. We are being branded with them when we should not be, which is entirely unjust. To attempt to cut production in Britain by 10.5 or 11 per cent. is disproportionate and unjust. To do so would be unfair to the United Kingdom, and we should not he contemplating doing so this evening or later.

We are not yet self-sufficient in liquid milk annually, and the House should remember that we consume 44 per cent. of our milk production in liquid milk sales. West Germany and France consume only 11 per cent. and 9 per cent., respectively.

Mr. Jackson

Will my hon. Friend give way?

Mrs. Winterton

No, I will not.

The House will know that 29 per cent. of our milk production goes into butter making, compared with 46 per cent. in West Germany and 49 per cent. in France. We are a net importer of butter, as all hon. Members will be aware. Last year, we imported 139,000 tonnes of butter, of which 78,000 tonnes came from New Zealand under our quota agreement with that country. In fact, if that butter had not come into the country, we would not have contributed to the butter mountain. No butter from this country would have gone into intervention.

If the present proposals are agreed, we will force our own farmers to cut back. We will force them out of business to enable the likes of the south of Ireland, France, West Germany and others to make assaults upon our own market, which is the only major one in deficit. Whatever cuts are agreed within Europe, they must not put our producers at a further comparative disadvantage. To revive a modicum of confidence in the industry, the cuts must be seen to be fair and equitable. Some hon. Members reminded the House that, as a direct result of the imposition of quotas, about 7,000 dairy industry jobs have been lost since 1984. Several thousand jobs have also been lost in ancillary industries, and about 1,500 dairy farmers went out of business.

What could we expect if this package were passed unamended? It is likely that the western areas of the country will be decimated. They will suffer greatly as the rural economy, which is based on agriculture, declines even further. The Milk Marketing Board estimates that 5,000 more milk producers may go out of business. There will be further job losses in creameries. In that respect I agree with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody). In my constituency, 112 jobs were lost in the closure of a whey factory at Haslington.

As our manufacturing capacity falls to approximately 40 per cent., many jobs in creameries will be lost. Who would dare at this stage to estimate the knock-on effects on allied industries when we consider that, for every job in agriculture, there are at least three jobs at stake in the allied trades. Having faced up to this sad and tragic but realistic picture, what can be done to help to solve the problems and cover the cost of storing more than just sufficient, strategic food reserves?

For example, the present butter mountain could be reduced by approximately one third by reprocessing some of the older stocks, which are becoming unfit for human consumption, and using them in other ways. Certain developing countries would be prepared to relieve us of a further one third of butter stocks, and that would save storage costs.

Difficult but necessary decisions must be made, as in any other business, to clear away the old stocks, while preventing their build-up and balancing their supply and demand in future. Agricultural policy must take the long-term view not just react sharply to the present crisis, thereby causing as many new problems as those that it attempts to solve. For example, the cow cull—my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) mentioned this matter—resulted from the imposition of quotas and distorted the beef market. The fewer the livestock, the fewer cereals that are consumed. The knock-on effects continue throughout the agriculture industry.

The Minister must be seen to fight for the best interests of our industry, not just settle for the sake of a settlement within the Council of Ministers. I welcome his commitment to the flexibility of balancing quotas between producers under formula B. We all know that without this balance we shall be further disadvantaged. We must soon face the fact that if we have to choose between the survival of New Zealand farmers and our own, we must support our own; we must supply our own market and not suck in any more imports.

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

We have noted the incredible phenomenon that there has been no speech from the Government Back Benches supporting the Government's line. We shall see the equally incredible phenomenon that no Conservative Back Bencher will have the courage of his convictions when it comes to the Division. I support the alliance amendment because my prime concern is the knock-on effect on agriculture.

I am appalled that there has not been a single Welsh Office Minister or Welsh Office civil servant anywhere near this debate. Once again we are seeing the failure of the Welsh Office and its agricultural department. The Welsh Office has taken no role in the formulation of agricultural policy. The Secretary of State for Wales has never represented Wales in Brussels. Clearly, the Welsh Office has abdicated its responsibility for the future of Welsh agriculture. The Welsh Office attendance contrasts with the presence of at least one representative from the Scottish Office earlier in the debate.

We have already suffered, especially in Dyfed, from the social effects of the quota system. We have seen redundancies in milk production, with self-employed farmers going out of business. The incredible report by the Agricultural Development and Advisory Service, which was half-published last week, shows that as many as 25 per cent. of farms in Dyfed are thought by ADAS and the banks to be financially insecure. It is a deepening crisis for those involved in the industry.

The knock-on effects have included redundancies. I was appalled to hear the Minister, in replying to a question about redundancies, just cite redundancy schemes. He does not seem to understand the social effects of the loss of jobs and of production, and all that they imply for the manufacturing base, which is already thin enough, in rural areas.

I emphasise the social effects of the quota system, including redundancies, and the Government's failure to tackle the issues and ensure that they have an input in Community policy which takes account of the real needs of people in the west of Britain. I endorse all that has been said by Conservative Members, and I appeal to them to support the amendment.

11.16 pm
Mr. Paul Marland (Gloucestershire, West)

It was hypocritical of the hon. Member for Brecon and Radnor (Mr. Livsey), when going on about the plight of the dairy farmers and the small farmers, to forget completely that the Liberals on Gloucestershire county council have passed a resolution to rate agricultural land and buildings. The hon. Gentleman's argument would have been more convincing if he had said something about that.

Although this is only a short debate, it is obviously one on which the eyes of dairy farmers will be focused, because there is no doubt that it may set future trends. There is not a dairy farmer in Europe who does not recognise the problem of overproduction that our Ministers are facing. This is highlighted by some figures and facts that we have already heard in this debate.

Mr. Clement Freud (Cambridgeshire, North-East)

Who wrote that?

Mr. Marland

I did. However, this is a recent problem, and recognition must still be given to the fact that until 1983 farmers were being urged by politicians to continue producing as much as they could. Although the initial impact of quotas has now been more or less digested by farmers, it takes time to change direction and develop new enterprises. It is with the need for new enterprises in mind that I cannot agree with the Commission's proposals that there should be no new transfers between direct sales and wholesale quotas. We must do all that we can to help farmers find new outlets and leave open all possible opportunities. In the same vein, I cannot agree with the scrapping of the formula B quota system. Mother nature and mother cow are very temperamental animals and, with the best will in the world, it is exceedingly difficult, if not impossible, to hit a 100 per cent. target when budgeting.

While urging more flexibility in fulfilling quotas, I accept that the Milk Marketing Board must demonstrate the same quality of flexibility. Last weekend, in Gloucestershire, we heard that 60 per cent. of the Milk Marketing Board's butter produced last year had been put into intervention, yet at the same time it had apparently won a contract for supplying cheese and was unable to get the milk to manufacture that cheese. Why was the Milk Marketing Board not flexible enough to switch the milk from one form of production to another?

I approve of the drive to achieve quota reduction by voluntary means and welcome the Commission's suggestion that more money should be made available to extend the outgoers scheme. I believe that that, along with some topping up by my right hon. Friend the Minister, will produce many more volunteer outgoers than any of us might imagine. In my constituency I have seen it working in other industries, and it has been surprising to those running the industries how many volunteers have come forward when they have been necessary. Voluntary reductions are in everybody's best interest.

Mr. Best

Is my hon. Friend aware that not a single person in Wales has applied for the outgoers scheme because it is so farcical at the moment because it is not being topped up as it is in other countries?

Mr. Marland

That is a helpful intervention. [HON. MEMBERS: "It is true."] It adds fuel to what I am saying. Voluntary reductions are obviously in everybody's best interests.

I have scorned the co-responsibility levy in the past as a method of trying to reduce output. It seems to be a ridiculous way to go about it. As other hon. Members have said tonight, we are discussing the balance of the whole market, and it is the whole market which will be in the balance in the future. I ask my right hon. Friend to approach any further quota reductions in the light of what has gone on before in the United Kingdom, in order to achieve fairness for the United Kingdom in the future.

Whatever may be said, it is the impression of British farmers that they got off to a bad start in the setting of dairy quotas when 1981 was taken as the base year. We are led to believe, at least I am, that the United Kingdom dairy industry's annual output that year was 3.5 per cent. below the previous five-year average. However, 1981 was a good year for French and German dairy farmers. Therefore, the United Kingdom farmers started off, as they see it, with a proportionately bigger cut than others. The same vagaries of weather and difficulties of production can be seen with cereal production this year in the United Kingdom. British farmers have done so much better than those in southern France and Spain.

If that low start is looked at in the context of supply to home markets, which was discussed earlier in the debate, we see that Holland over-produced to its home market by 307 per cent., and Eire over-produced to its home market by 223 per cent. However, we under-produced to our home market by supplying only 88 per cent. of the home market needs. To put it mildly, that makes the Gloucestershire farmers stamping mad. I believe that a reduction in export support mechanism may well help us to fulfil our home market.

Of course, marketing still needs to be improved and more opportunities for selling milk need to be created. On the subject of finding new outlets, it is interesting to note that, in the rapidly growing fast food business, McDonald's Hamburgers Ltd. last year sold 2.5 million gallons of flavoured milk. In addition, it processed 115,000 beef cattle and made them into beef patties. That seems an enormous number of beef patties, but that is what we are told.

It is widely accepted that production cuts have to be made, but the British farmer wants to see fairness; fairness in the fact that we got off to a low start and that we are under-supplying our own market. There will be a crisis in the countryside, as my hon. Friend the Member for Cornwall. South-East (Mr. Hicks) has already said, unless we can get it right.

On his return from Brussels, I urge my right hon. Friend the Minister to keep up his long-lasting fight on behalf of British farmers, for which in the past, in many respects, he has not had the credit due to him. He should not allow it always to be the French, German or Irish Ministers who stick their toes in. We have a good case this time, and I ask my right hon. Friend to go to it with a vengeance.

Mr. Nicholas Winterton

On a point of order, Mr. Deputy Speaker. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) put a proposition to the House earlier. Bearing in mind the interest in the subject, he asked whether you would allow the debate to be resumed on another day.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

The hon. Gentleman is taking up valuable time. I shall decide at 11.30.

11.24 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)

I shall first tell the hon. Member for Pontypridd (Mr. John) that I believe that the question of deficit is made much more difficult by the fact that last year we put 92,000 tonnes of butter into intervention. That means that we were not even able to sell that butter, no matter what the deficit figures make out. The deficit figures show that quite clearly. Today I visited a Tesco store and I discovered that we were still selling our butter more cheaply than Anchor, Lurpak and Wheelbarrow. However, the housewife does, on occasion, choose to buy someone else's butter. Unless we are prepared to state that she shall not have that choice, we must accept that 92,000 tonnes of butter—30 per cent. of our present production—is going to intervention. In those circumstances, I must say that the argument for self-sufficiency is difficult to sustain.

I clearly accept the point that we have to fight extremely hard for Britain's interests. Several of our interests would not be served by the proposals set before us today. They are presented in draft form and we are having the debate properly, before the negotiations have begun. It is right that we should take full notice of the points that have been raised and that is why the Government have allowed the opportunity for this debate.

I entirely agree with my hon. Friend the Member for Cornwall, South-East (Mr. Hicks), who made it clear that he is not prepared to accept that the formula B should be removed. That point was also made clear by my right hon. Friend the Minister of Agriculture, Fisheries and Food. However, I do not think that it is possible to go on to say that there is some simple way of getting rid of existing stocks unless those stocks are not refilled. It is not sufficient to claim that the stocks can simply be removed. As the Opposition conceded, there is no simple way of emptying the warehouses and expecting them to stay empty unless there is a method of bringing the supply of dairy products more into line with demand.

That is why I thought that the hon. Member for Brecon and Radnor (Mr. Livsey) deserved the question that was asked of him. It is all very well to list the difficulties and refer to the problems, but how will the hon. Gentleman solve those problems?

Mr. Penhaligon

My hon. Friend told the Minister how he would do that.

Mr. Gummer

I listened carefully to the speech by the hon. Member for Brecon and Radnor and I was lucky enough to read his comments in his speech to the Farmers Union of Wales, when he explained what he would do. He said that there would be a standard quantity of production which, if applied, would mean a sharper cut in the real quota than anything proposed by the Commission today. The House should be aware that that is the Liberal party policy in so far as that is comprehensible from the speech made by the hon. Member for Brecon and Radnor. The hon. Gentleman went on to complain that 2,145 dairy farmers had gone out of production during the past two years. He did not mention the fact that the average for each of the two preceding years was 3,593. The hon. Gentleman has fudged the figures yet again. I notice that the party that was just as enthusiastic about our membership of the European Community, is now ratting on all the results of the movements that it supported.

I have much more respect for the position adopted by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), who at least attempted to put forward an alternative series of propositions which the House must take seriously. Of course we cannot deal with the problem unless we deal with the time-span within which it can be resolved. That is why my right hon. Friend made very clear his strong reservations about the proposition that the package should be adopted without reference to a time-span and stressed the need for arrangements to help farmers as individuals and not to treat them as figures on a balance sheet.

I also agree with the comments of my hon. Friend the Member for Tiverton about the whole policy for agriculture. That is why this presidency has insisted that the debate in Europe during next weeks' discussions will be about beef, milk and about structures following together, one after the other. It is impossible to discuss these matters without covering them all.

The hon. Member for Crewe and Nantwich (Mrs. Dunwoody) was long on complaints but short on answers. That was a typical speech from the hon. Lady. My hon. Friend the Member for Congleton (Mrs. Winterton) must consider what will happen to the stock if the amount going back into intervention is increased. The Government would not be prepared to forget what the New Zealanders have done for us in two world wars and we are not prepared to cut off this market.

Several Hon. Members


Mr. Deputy Speaker


Mr. Maxwell-Hyslop

On a point of order, Mr. Deputy Speaker. Two propositions are clearly true: first, that many hon. Members still wish to contribute to the debate and, secondly, that the subject is not one of passing importance but is one which goes to the heart of the survival of one of Britain's industries. I put it to you, Mr. Deputy Speaker, that, on the precedents, you would be amply justified in declining to put the Question so that the debate can be continued—[Interruption.] Some Members may not wish the debate to continue, but many others do. I believe that the greatest service to the House would be to allow the debate to be resumed on another day.

Mr. Teddy Taylor

Further to that point of order, Mr. Deputy Speaker. The debate has been limited in time. Not one hon. Member has spoken who does not represent an agricultural area. Surely the interests of all the parties involved, including the taxpayer, should be voiced. Could we not have one further short debate so that we may hear at least one Conservative Member support Government policy?

Mr. Nicholas Winterton

Further to that point of order, Mr. Deputy Speaker. I support my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), who has made a most enlightened contribution to the debate. Many of us represent constituencies of which vast parts depend entirely on the dairy industry. It does the House no good if those with such an important contribution to make are not able to speak on an important matter such as this.

Mr. Best

Further to that point of order, Mr. Deputy Speaker. I endorse what my hon. Friends have said in urging you to allow time for further debate as a considerable number of hon. Members have not had a chance to take part. As many hon. Members have said, this is a matter of critical importance to the small farmer and to rural existence.

I am also in some confusion because my right hon. Friend the Minister of State has told us that the proposals are not satisfactory——

Mr. Deputy Speaker

Order. The hon. Gentleman must not go into the issues.

Mr. Latham

Further to that point of order, Mr. Deputy Speaker. If you were to postpone the end of the debate for a few minutes it might allow the two Social Democratic party Members whose names appear on the amendment to come to the Chamber.

Mr. Deputy Speaker

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) has raised an important issue which I have considered very carefully indeed. As he knows, however, Standing Order No. 14 is very clear. I have to decide whether the debate should be adjourned or whether to put the Question. I intend to put the Question.

Question put, That the amendment be made:—

The House divided: Ayes 18, Noes 103.

Division No. 13] [11.32 pm
Alton, David Patchett, Terry
Ashdown, Paddy Penhaligon, David
Beith, A. J. Pike, Peter
Bruce, Malcolm Skinner, Dennis
Carlile, Alexander (Montg'y) Thomas, Dafydd (Merioneth)
Davies, Ronald (Caerphilly) Thomas, Dr R. (Carmarthen)
Evans, John (St. Helens N) Wallace, James
Freud, Clement
Hogg, N. (C'nauld & Kilsyth) Tellers for the Ayes:
Howells, Geraint Mr. Richard Livsey and
Kennedy, Charles Mr. Archy Kirkwood.
Arnold, Tom Griffiths, Peter (Portsm'th N)
Beaumont-Dark, Anthony Ground, Patrick
Biggs-Davison, Sir John Gummer, Rt Hon John S
Boscawen, Hon Robert Hamilton, Neil (Tatton)
Bottomley, Peter Hanley, Jeremy
Bottomley, Mrs Virginia Hargreaves, Kenneth
Carttiss, Michael Harris, David
Clarke, Rt Hon K. (Rushcliffe) Hayes, J.
Cope, John Hayward, Robert
Dorrell, Stephen Heathcoat-Amory, David
Durant, Tony Hirst, Michael
Dykes, Hugh Howarth, Alan (Stratf'd-on-A)
Fallon, Michael Jackson, Robert
Fenner, Dame Peggy Johnson Smith, Sir Geoffrey
Forsyth, Michael (Stirling) Jones, Gwilym (Cardiff N)
Forth, Eric Jones, Robert (Herts W)
Fowler, Rt Hon Norman Jopling, Rt Hon Michael
Fraser, Peter (Angus East) Kellett-Bowman, Mrs Elaine
Freeman, Roger Key, Robert
Gale, Roger King, Roger (B'ham N'field)
Garel-Jones, Tristan Knowles, Michael
Gow, Ian Latham, Michael
Gower, Sir Raymond Lennox-Boyd, Hon Mark
Gregory, Conal Lightbown, David
Lloyd, Peter (Fareham) Sayeed, Jonathan
Lord, Michael Shaw, Sir Michael (Scarb')
Lyell, Nicholas Smith, Tim (Beaconsfield)
McCrindle, Robert Spencer, Derek
MacGregor, Rt Hon John Steen, Anthony
MacKay, John (Argyll & Bute) Stern, Michael
Maclean, David John Stevens, Lewis (Nuneaton)
McLoughlin, Patrick Stewart, Allan (Eastwood)
Major, John Stradling Thomas, Sir John
Malone, Gerald Taylor, Teddy (S'end E)
Marland, Paul Thompson, Donald (Calder V)
Mather, Carol Thompson, Patrick (N'ich N)
Merchant, Piers Thurnham, Peter
Meyer, Sir Anthony Townend, John (Bridlington)
Miller, Hal (B'grove) Tracey, Richard
Mills, Iain (Meriden) Twinn, Dr Ian
Moynihan, Hon C. Wakeham, Rt Hon John
Neubert, Michael Waldegrave, Hon William
Nicholls, Patrick Waller, Gary
Norris, Steven Wardle, C. (Bexhill)
Ottaway, Richard Wells, Bowen (Hertford)
Page, Richard (Herts SW) Wiggin, Jerry
Pollock, Alexander Wolfson, Mark
Powley, John Wood, Timothy
Raffan, Keith Young, Sir George (Acton)
Rhodes James, Robert
Rhys Williams, Sir Brandon Tellers for the Noes:
Roe, Mrs Marion Mr. Michael Portillo and
Rowe, Andrew Mr. Francis Maude.
Sackville, Hon Thomas

Question accordingly negatived.

Main Question put:—

The House divided: Ayes 96, Noes 25.

Division No. 14] [11.43 pm
Beaumont-Dark, Anthony Gregory, Conal
Biggs-Davison, Sir John Griffiths, Peter (Portsm'th N)
Boscawen, Hon Robert Ground, Patrick
Bottomley, Peter Gummer, Rt Hon John S
Bottomley, Mrs Virginia Hamilton, Neil (Tatton)
Carttiss, Michael Hanley, Jeremy
Clarke, Rt Hon K. (Rushcliffe) Hargreaves, Kenneth
Cope, John Harris, David
Dorrell, Stephen Hayes, J.
Durant, Tony Hayward, Robert
Dykes, Hugh Heathcoat-Amory, David
Fallon, Michael Hirst, Michael
Fenner, Dame Peggy Howarth, Alan (Stratf'd-on-A)
Forsyth, Michael (Stirling) Jackson, Robert
Forth, Eric Johnson Smith, Sir Geoffrey
Fowler, Rt Hon Norman Jones, Gwilym (Cardiff N)
Freeman, Roger Jones, Robert (Herts W)
Gale, Roger Jopling, Rt Hon Michael
Garel-Jones, Tristan Kellett-Bowman, Mrs Elaine
Gow, Ian Key, Robert
Gower, Sir Raymond King, Roger (B'ham N'field)
Knowles, Michael Sackville, Hon Thomas
Latham, Michael Sayeed, Jonathan
Lennox-Boyd, Hon Mark Shaw, Sir Michael (Scarb')
Lightbown, David Smith, Tim (Beaconsfield)
Lord, Michael Spencer, Derek
Lyell, Nicholas Steen, Anthony
McCrindle, Robert Stern, Michael
MacKay, John (Argyll & Bute) Stevens, Lewis (Nuneaton)
Maclean, David John Stewart, Allan (Eastwood)
McLoughlin, Patrick Stradling Thomas, Sir John
Major, John Thompson, Donald (Calder V)
Marland, Paul Thompson, Patrick (N'ich N)
Mather, Carol Thurnham, Peter
Maude, Hon Francis Townend, John (Bridlington)
Merchant, Piers Tracey, Richard
Miller, Hal (B'grove) Twinn, Dr Ian
Mills, Iain (Meriden) Wakeham, Rt Hon John
Moynihan, Hon C. Waller, Gary
Neubert, Michael Wardle, C. (Bexhill)
Nicholls, Patrick Wells, Bowen (Hertford)
Norris, Steven Wiggin, Jerry
Pollock, Alexander Wolfson, Mark
Portillo, Michael Wood, Timothy
Powley, John Yeo, Tim
Raffan, Keith Young, Sir George (Acton)
Rhodes James, Robert
Rhys Williams, Sir Brandon Tellers for the Ayes:
Roe, Mrs Marion Mr. Peter Lloyd and
Rowe, Andrew Mr. Gerald Malone.
Alton, David Livsey, Richard
Ashdown, Paddy McKay, Allen (Penistone)
Beith, A. J. Patchett, Terry
Best, Keith Penhaligon, David
Bruce, Malcolm Pike, Peter
Carlile, Alexander (Montg'y) Skinner, Dennis
Davies, Ronald (Caerphilly) Thomas, Dafydd (Merioneth)
Dunwoody, Hon Mrs G. Thomas, Dr R. (Carmarthen)
Evans, John (St. Helens N) Wallace, James
Freud, Clement Winterton, Mrs Ann
Hogg, N. (C'nauld & Kilsyth)
Howells, Geraint Tellers for the Noes:
Hughes, Simon (Southwark) Mr. Robin Maxwell-Hyslop
Kennedy, Charles and Mr. Nicholas Winterton.
Kirkwood, Archy

Question accordingly agreed to.

Resolved. That this House takes note of European Community Document No. 9161/86 concerning emergency measures in the dairy sector, the Commission proposals described in the Ministry of Agriculture, Fisheries and Food's un-numbered Explanatory Memorandum of 18th November on the same subject and the Government's intention to seek agreement on arrangements to bring production in the milk sector into closer balance with consumption.