HC Deb 17 March 1986 vol 94 cc138-44

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

12.1 am

Mr. Geraint Howells (Ceridigion and Pembroke, North)

I shall not delay the House much longer at this early hour. We have had a busy day debating important issues. I am glad to have the opportunity to discuss the intervention buying system that operates within the Community. I shall be brief, but I shall ask some probing questions of the Minister to which I hope he will give a favourable reply.

My firm belief is that the intervention buying system for agricultural products is responsible for much of the bad publicity that surrounds the EEC and gives unnecessary ammunition to those who oppose our membership. In the past few years many hon. Members who are opposed to our being a full member of the European Community have raised this matter.

Nothing is more calculated to arouse the anger of the ordinary person in the street than reports of tonnes of butter being sold off cheaply to the Russians because of intervention. The Government apparently are reluctant to supply cut-price butter to Britain's old-age pensioners, even though that would cost less than half the subsidy needed to dispose of it to the Russians. That kind of economics is incomprehensible to most people, and offensive to those who wish to see a proper marketing effort for EEC goods that would benefit consumers and producers.

Are the Government planning to make the butter available to the old and needy in Britain, or to Third world countries, as a short-term food aid measure in difficult times? Many of the elderly people in our society would be delighted at the opportunity to buy cheap butter and many people would be complimentary to the Government and Ministers if they decided on that course in the near future.

The intervention system is basically wasteful. My purpose is to find out whether the Government support the system or whether they have given sufficient thought to alternative forms of marketing that would provide more efficient results. We are well aware that many European countries, especially Germany, are keen to retain the intervention system. We have been told on many occasions that the present Minister for Agriculture, Fisheries and Food is keen to hold on to the system. Let us hope that we can persuade the right hon. Gentleman to change his mind and to try to introduce a different marketing system for what we produce in Britain.

The intervention system creates problems for producers, makes some commodities too expensive and denies the British consumer the right to have fresh and reasonably priced food. Can the Minister give us an idea of the storage costs for various products within the Community? Have the Government suggested to their European partners a more efficient marketing method than selling surplus products to the Russians? I read with interest an article that appeared in one of the leading Sunday newspapers a few weeks ago. Is it true that beef cattle are bought for £500, for argument's sake, slaughtered, put into intervention for about six months and then sold to the Russians for the equivalent of £50? That would produce a colossal loss and that sort of marketing should be stopped forthwith.

Is the Minister able to tell us how much food is sold to Russia from the European Community every year? Secondly, can he tell us how much this costs the British taxpayer? Has the Minister given any thought to introducing a deficiency payments scheme for beef cattle to help beef producers? The deficiency payments scheme worked well in Britain for decades until the Tory Government of 1973 did away with it. During 1973–74 we did not have a guaranteed price for beef produced in this country and I am sure that the Minister will remember those days when the store market and the beef markets in many parts of Britain were in dire trouble. We have been told that the intervention buying for beef cattle will be abolished within the next 12 months. Can the Minister give an assurance to beef producers in Britain that the variable premium will be safeguarded and that it will remain, whatever happens to the intervention system?

Has it been calculated how the intervention system affects the British farmer? For example, if there had not been intervention, would there have been the necessity for the damaging quota system that has been imposed on British farmers to deal with the surpluses that have accumulated? Would there have been a different position for Welsh farmers, who have suffered especially badly from the imposition of quotas? With the massive surpluses of grain that are now in storage, it is likely that cereal growers in Britain will face similar quotas. Has the Minister any plans to introduce quotas for cereal growers?

Is there not a case for an improved marketing division within the European Community that could ensure the disposal of European produce to world markets without harming Third world markets, or for working out better ways of marketing within the Community? I have said for years that we can blame our own Government and other Governments within the Community and argue for days on end that we are overproducing in Britain, but it must be realised that the real fault lies with the marketing division within Europe. If we could only control our marketing structure and methods in Europe of disposing of our surpluses, I do not think that British producers would have any need to worry. I am sure that the Minister will agree that confidence is now at a very low ebb in the agriculture industry. When the industry loses confidence in its leaders and in the policy being pursued by the Government that confidence must be restored if the industry and rural life in Wales and elsewhere are to be maintained.

A press release issued by the Farmers Union of Wales on 7 March following a meeting between its president, Mr. Huw Hughes, and Welsh Office agriculture department officials at Aberystwyth on 6 March reads as follows: Mr. Hughes said that, against the current background in the EEC, the Union was well aware of the problems facing the Community. The estimated value of UK intervention stocks of foodstuffs— excluding feedwheat and barley—at the end of 1985, was £678 million calculated on the basis of the buying-in prices valid at that time. The estimated value of EEC intervention stocks at the end of November 1985 was around £6,000 million. The most recent estimate of storage and related costs in respect of UK intervention stocks amounted to £102 million. That is a colossal sum to keep our products in cold storage.

The press release continues: He emphasised, however, that as far as European overproduction was concerned, the problem sectors were wine, cereals, sugar, and milk. The Community was only just over self-sufficiency levels in beef and veal, and the position was expected to improve by the end of the decade. If that is true, it is very good news for the livestock sector in Wales and other parts of Britain. The press release further states:

As far as the sheep sector was concerned, the EEC was well below self-sufficiency levels and was not expected to be self-sufficient by the end of the decade. I still blame the intervention system. Meat used to be hoarded in biblical times and all these years later we are doing the same thing. We should devise a system within Europe to stop the best products of our agriculture— beef, butter and other commodities— from being put into cold storage for months at enormous cost to taxpayers here and in Europe. Instead of falling out about whether we should have a common agricultural policy, whether we should stay in Europe and what to do about overproduction, if all the European countries got together to discuss marketing as the top priority that would be far more help to all concerned.

12.13 am
Mr. Richard Livsey (Brecon and Radnor)

I support my hon. Friend the Member for Ceredigion and Pembroke, North (Mr. Howells) in raising a most important subject.

One of the reasons why farming has acquired such a bad image in recent years is the reference on television and in the other media to mountains of surplus food. Good housekeeping should involve keeping a little surplus, but we now have vast amounts of surplus food. The cost is about 10.5 million ecus and the main surpluses are in dairy products, grain and beef. In the past 12 months the butter surplus has increased by 1 million tonnes. That is a vast quantity, which we feel should be going to the pensioners, not only in Britain, but in other European countries. That would be a far more preferable way of dealing with our surplus products than exporting them to Russia.

The dairy product surplus represents about 31 per cent. of the costs of the surplus, whereas grain costs represent about 14 per cent. of the cost. It is noticeable that the French, in particular, seem to get rid of their surpluses through national aids and apply export credit guarantees for the export of grain by their own grain producers. That is something that we do not seem to be prepared to do. I would like to see international co-operation in the disposal of grain, particularly in relation to the Third world. I would favour the creation of something like an international grain fund, which would operate rather like the International Monetary Fund and would bring surpluses of grain to a central fund so that it could be distributed to those countries most in need and the starving in those nations could be rescued.

There are 750,000 tonnes of beef in surpluses and I believe that we need to attack the system of support in Europe. As we all know, in this country we have a very good system of variable premiums supporting beef. There is no reason why the rest of Europe should not adopt that system, whereby the consumer can get beef at a reasonable price and less beef is placed in store. I believe that at present we are being placed under unreasonable pressure by fellow members of the Community to scrap the variable premium system. That is not in the national interest and it is certainly not in the interests of the European Community, which should be looking at that system as a method for reducing its vast stocks of beef and ensuring that the consumers of Europe receive that beef at a reasonable price.

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

I think that it is useful for us to be able to discuss the issue of intervention buying. However, it seems an odd way to approach the European Community. It is rather like saying that one will blame the lifeboats for the storm. The idea that it is the intervention system which is at fault instead of the surpluses seems to be an odd concept.

I share all the desires of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells). I am a great supporter of the European Community and I am very keen that Britain should not only continue to be a member but should contribute more and more to the growing unity in Europe. However, we will not help the Community if we begin by saying that the system is wrong, rather than the amount that we are producing.

We are over-producing in this country and in the rest of Europe, but it is not just us. It is happening in the United States of America, the Third world, China and India. None of those countries outside Europe has an intervention system. Therefore, it is not the system which has created the surpluses. We have a world in surplus. Last year, for the first time, the Chinese were able not only to feed a quarter of the world's population but to export food. Last year India sent more food aid to Ethiopia than did the whole of the Soviet bloc. Therefore, the idea that there is something special about the intervention system which in some way creates surpluses seems to be a fiction.

The reality is that we live in a world of surplus. Apart from sub-Saharan Africa, and that to a lesser extent this year than before, and the incompetent Soviet Union, there is no major part of the world which cannot feed its own people. However, there are parts of the world in which the distribution, economic system or way of managing the economy means that the surpluses do not reach the poorest people.

We live in a world of surplus, and we have to start there. The idea that by changing the intervention system we would deal with the problem is a falsehood. We have to look at how best to change from a system based on the problem of shortage to a system that will meet the surplus. Intervention provides one of the most sensible ways to deal with a world in which shortfall is feared, in which equality between supply and demand is the aim and where some reasonable method of buying and storage meets that balancing desire.

In other words, that works where one does not have a surplus. Once one has a surplus, intervention becomes an unsatisfactory way of solving our problems, because it is very highly geared. I am sure that the hon. Gentleman will have read the Prime Minister's speech to the National Farmers Union, in which she referred specifically to the problem of gearing. A 4 per cent. surplus in beef means 50 per cent. more beef in intervention, and a 200 per cent. increase in the cost of it. The whole thing is very tightly geared. In those circumstances, we must look not so much at the system that we have, but at how to reduce the surpluses that give rise to that distortion of the system.

The hon. Gentleman is perfectly right to say that those surpluses cause considerable unhappiness about the nature of the European Community. Any of us who are determined to put forward positive aspects of the Community must be concerned about the way in which those mountains and lakes give to the narrow-minded opponents of the European Community an opportunity to attack a fine institution.

If one wants to deal with the problem, I plead that one should not seek to change the symptoms. One has to get down to the disease. The disease is the surpluses that we are producing. They come not from intervention, but from technological advance and the ability to grow four tonnes an acre where once one could grow only two tonnes. The British dairy herd has much the same number of cows as 10 years ago but is producing 29 per cent. more milk. That is the reality of the nature of technological advance, in terms of breeding and husbandry.

If that is so, what do we do about it? In answer to the questions asked by the hon. Gentleman, I have to say, first, that we need to provide a means of support for the agriculture community that does not make those surpluses inevitable, even though technology makes them possible. Therefore, in dealing with beef, the hon. Gentleman is right to applaud the fact that the Commission is putting forward proposals that will move us away from intervention and towards premium. However, the premium that we want is much more akin to the variable premium. We support the variable premium because it has the great advantage of being linked directly to the market—when the market is good the premium is low, and when the market is poor the premium is high—whereas the fixed premium has the disadvantage of giving the farmer too much when the market is high and too little when the market is low.

The proposals are grossly discriminatory against the United Kingdom, because those premiums are available only for the first 50 head of cattle. We are not prepared to accept that, because we believe that one must not discriminate as though it were possible to use one's basic agricultural support as a means of promoting a certain sort of farming against another sort of farming. That is not what we intend to do in Britain. Therefore, we are determined to see that those are non-discriminatory measures.

If we are to do that, the hon. Gentleman is right to say that we should move— we hope to convince our colleagues of it—away from intervention in that area. But it must be on a fair, non-discriminatory basis, with the satisfactory lessons that Britain has had. I hope that the hon. Gentleman will not put forward the case that somehow deficiency payments in general would be a satisfactory answer. If we were to have the same deficiency payments system as before our entry into the European Community, the cost to the British taxpayer would be much greater. The cost is always based on the interpretation of the figures, but it would be up to twice as much as the present cost. It would be an expensive way of doing it.

Mr. Geraint Howells

indicated dissent

Mr. Gummer

The hon. Gentleman shakes his head. Let me give him the figures as far as I can remember them. Naturally, I was not aware that he would ask that question, but I hope that I am right in saying that the figures are something like this. The Exchequer contribution is about £1.6 billion. With a deficiency payments system, the amount would be closer to £2.5 billion, which would be a considerable increase. That is why the Liberal party does not favour the deficiency payments system. The hon. Gentleman may be in favour of it, but I do not wish to enter into party political issues. This was going to be one of those few occasions when I had an opportunity not to do so. I realise that the Liberal party is divided on this matter, but the official Liberal policy is that we should not return to the deficiency payments system. The Liberals know that the figures do not work out and that, therefore, it would not be reasonable to put that proposition forward.

As for grain surpluses, it is important that the amount of grain produced should be much closer to the amount we need. I beg the hon. Member for Ceredigion and Pembroke, North not to suggest to his farmers the wholly fictitious view that if only we improved the marketing we would be able to sell this grain. That is nonsense. The trouble is that there is no area in which we can sell it or even give it away. The hon. Gentleman wants to give the grain to the Third world, but that is the way to undermine all the incipient farmers there. We are desperate to rebuild those communities. The most imperialist, anti-Third-world policy would flood those markets with wheat and destroy farming in those rural communities. That is opposed by every major aid organisation. Ask the Save the Children Fund, War on Want and even those organisations which have opposing political affiliations to ours what is needed, and they will say that cash is best for aid. Giving large amounts of food aid on a continuing basis undermines the Third world's ability to create its own economy. I say to the hon. Member for Ceredigion and Pembroke, North that if he cares about the Third world he should not lead his farmers down that false alleyway—it is a disgraceful and dangerous path.

Some years ago I spent some time in Mauritania where I saw what happened when there was a constant supply of food aid from outside the country. The result was that indigenous agriculture and nomadic culture and husbandry, which had been the basis of the food supply, were not encouraged. That is what happens if Third world countries are flooded with the over-production of the European Community.

Our job has been to use our surpluses to help the Third world in times of famine when those countries have had no chance of recreating their agriculture, partly because their Governments have purposely destroyed agriculture through their economic policies, as happened in Ethiopia. Where that happens, there is an immediate and urgent, although not a continuing need. The idea that there is a continuing market for food or a proper area to which to give food is contrary to the experience and advice of all those who are involved in giving aid and all those voluntary organisations which we depend for advice.

It is no good telling people that, however sophisticated their markets are, the growing surpluses in Europe can be dealt with, especially the surpluses in perishable goods, such as butter. The hon. Gentleman suggested that we should give butter to the Third world as a means of overcoming the problem, but that is surely contrary to all reason. Many parts of the third world do not want butter. [Interruption.] The hon. Gentleman must look at the record, because I clearly noted that he suggested that butter should go to the Third world and to pensioners. Giving butter to the Third world would be a misuse of our resources, because that money could be much better used in direct cash aid than in transporting the product to the Third world in parts of which, for all kinds of religious and other reasons, it cannot be used.

I come to the question of the pensioners. The hon. Gentleman is right. It would be extremely advantageous if we could find a way of providing this butter for the pensioners, honourably and decently, to give them something that they would not otherwise have. I very much hope that he was not making a play for their support by saying that, without admitting the problem. Let me be absolutely straight. All our experience, and all the efforts, that we have made to check on this, show that if we provide cheap butter for pensioners, they buy the cheap butter instead of the butter that they would otherwise have bought, and that butter goes into the very intervention stocks that we are trying to run down. That increases the costs of the system.

The hon. Gentleman is asking for the circular system by which we spend more and more money, thus increasing the costs of intervention. I hope that he will join us in fighting to ensure that the Community reduces its surpluses. Let us get rid of the disease. Let us not—as is often the case when we deal with Liberals—deal only with the symptom. Let us stop that, let us get down to the real issue and let us stop playing party politics with this important matter.

Question put and agreed to.

Adjourned accordingly at half-past Twelve o'clock.