Agricultural and Horticultural Co-operation Grants

HC Deb 01 May 1986 vol 96 cc1176-82 8.57 pm

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

I beg to move,

That the draft Agricultural and Horticultural Co-operation Grants (Extension of Period) Order 1986, which was laid before this House on 23rd April, be approved. The Agriculture Act 1967 provided authority for a scheme of grants to encourage and develop co-operation in the production and marketing of agricultural produce. There have been three extensions, in 1977, in 1980 and again in 1983, the latter ending on 14 May 1986. We propose to extend the period during which a co-operative grants scheme may operate by a maximum of five years, compared with three on previous occasions. I believe that the agricultural and horticultural co-operation scheme has done much over the years to encourage producers to come together and to undertake imaginative and forward-looking investments.

Since 1981–82 expenditure under the AHCS has more than doubled, from about £2 million to over £4 million. Over the same period launching aid paid to new fruit and vegetable co-operatives under EC legislation has risen from virtually nil to £1.2 million. Other grants payable to forage groups in the less favoured areas brings the current annual level of expenditure on co-operative grants to over £5.5 million. Given the growth in expenditure, we have looked at the AHCS in relation to other claims on the limited resources available. We have concluded that there are simply not the resources to allow unlimited further expansion of expenditure under the scheme and that some steps should be taken to bring it under greater control.

We believe that the necessary additional control of expenditure can be brought about by laying down a number of objective criteria by which applications will in future be assessed and by identifying some of the consequences flowing from them. One of my officials has, therefore, written today to the chief executive of Food from Britain setting out the criteria. Copies of the letter will be placed in the Library of the House. However, hon. Members may find it helpful if I outline the main criteria and the effect that they will have on the grants awarded.

The criteria include the funds allocated by Ministers in each financial year to pay grant claims. For 1986–87 the total provision for co-operative grants is about £5 million, about £4.8 million in 1987–88 and about £4.4 million in 1988–89. There is a time lag of up to two years between the award and the payment of the grant. In order to keep expenditure within the provision, therefore, we will need to tailor the level of approvals currently being given to match the money available for later years. One way in which we will do this is to place an upper limit on grant on any individual project of £100,000.

Ministers already restrict the amount of AHCS grant awarded to successful co-operative applicants under EC regulation 355/77. Successful co-operatives can now obtain up to 50 per cent. of the cost of projects from these two sources, which we consider too high when overall resources are limited. We shall therefore in future be limiting AHCS grant in such cases to 15 per cent., which, together with grant under regulation 355/77, will still total up to 40 per cent. of the cost—a substantial incentive.

The supply and demand position of each commodity will also be taken into account. This is very much part and parcel of the Government's policy to bring into the equation the realities of a world which is now in surplus rather than in shortage. As a result, we do not expect capital grants to be made to co-operatives in the cereals sector in future.

The criteria will be applied to applications received by FFB after today and prospective applicants will also be informed of them. We will, of course, continue to make grants available under the scheme for non-capital expenditure, which includes formation costs, feasibility studies, initial managerial salaries and marketing agents fees. Such grants can help to ensure that co-operatives get off to a good start and employ good quality staff to run their businesses.

For a number of years there has been a ceiling on the level of non-capital grant recommendations which FFB can make to Ministers in any one year. This has stood at £450,000, and we are reducing it to £350,000 for 1986–87 in order to stay within the financial resources available. As I have indicated, if we do not take this action now there is every likelihood that expenditure will soon outstrip resources. Nevertheless, expenditure on grants will still be substantial at around £4.4 million in 1988–89.

I am sure that the House will welcome the continuation of the AHCS and will recognise the widespread benefits which it has brought. I am sure that the House would also want it to be carried forward within the new situation brought about by the surplus production, which is now a continuing feature of our agricultural and horticultural life. Therefore, it seems perfectly right that we should make the sort of changes in administration which I have outlined, and I felt that this debate on the statutory instrument ought to give us a chance to acquaint the House with them.

I commend the statutory instrument to the House as a means of ensuring that these grants are available for a further period, but within the context of the overall resources we have to apply, and also with the new situation which we must constantly take into account now that we are concerned with surpluses, not only in this country and Europe, but in the world.

9.5 pm

Mr. John Home Robertson (East Lothian)

The Minister of State referred briefly to the need to deal with the new situation that confronts the agriculture industry because of the surpluses that are a new feature of this type of market. It would be helpful to the industry and to many other people if the Government could give a clearer lead about the direction the industry is supposed to be taking. The Opposition support the order. There is a strong case to be made for promoting co-operatives and assisting change to take place, where appropriate, in the agriculture industry.

The only point that I want to put to the Minister relates to the body that has been charged with the task of disbursing funds, Food from Britain. The Minister said that an official in his Department had today written to the chief executive of Food from Britain. Some of those who are involved in the agriculture industry might wonder whether his letter will be returned to him- tomorrow marked "Not known at this address." There is an air of crisis about Food from Britain. A meeting of that organisation has taken place today and it would be useful if the Minister could say something about it.

If this and other marketing schemes that are the responsibility of Food from Britain are to continue—I stress that there is universal support for a national promotional organisation for agricultural produce and for its funding not only by the Government but by the industry—help is needed. The funding of Food from Britain is in a state of crisis. The organisation has been unable to secure the £4.8 million that it needs to run a credible operation during the current year. The Government have guaranteed £3 million, which is welcome and appropriate. The Meat and Livestock Commission is to provide £265,000, but that is considerably less than was envisaged. As yet, nothing has been promised by the Milk Marketing Board, and a poll of cereal producers has yet to take place to find out whether they are prepared to contribute towards the organisation. There needs to be more certainty about the future of Food from Britain. Nevertheless, it might be argued that, because of the uncertainty surrounding it, the agriculture industry is not in a good position to take on this additional burden.

It would be helpful if the Minister could say whether the Government intend Food from Britain to survive and to succeed and whether, if necessary, they are prepared to tide it over. This would be an appropriate opportunity for the Minister to say something about the matter. It would be relevant to this order, because Food from Britain is the organisation through which these funds will be channelled. Again I stress the Opposition's general support for the objectives of the order. I hope that the Minister will be able to allay some of my fears.

9.7 pm

Mr. Colin Shepherd (Hereford)

I commend my hon. Friend the Minister of State for directing resources towards areas of need that are not covered by those commodities that are in surplus. He will have commended himself and his ministerial team to the public as a whole who are casting a careful eye over the agriculture industry and its support mechanisms. What he has done is right, and I congratulate him on doing it.

I have a specific point to put my hon. Friend about the draft order. Previous orders have run for a period of three years. This order is to run for five years. In the light of the remarks of the hon. Member for East Lothian (Mr Home Robertson), I should be grateful if my hon. Friend would explain the reason for this extension.

9.8 pm

Mr. Richard Livsey (Brecon and Radnor)

I welcome the extension of the AHCS support. It is essential for the industry. However, further development of such grants is needed. In the context of the surpluses to which reference has already been made, there is a need to develop new markets and new products. We are depressed by the surpluses, but they should not allow our vision to become clouded. We may be able to produce new products that secure new markets. We should not ignore that.

Undoubtedly, there is under-funding of Food from Britain. However, the industry must be grateful for £3 million this year. That is obviously a help, but there is an immense task ahead. For example, New Zealand promotes its lamb in Britain at a cost of something like £7 million and that shows one of the problems we face in marketing our own food, but there is vast scope here too for us. The Minister said that there were limits on the amount of money that could be spent. I understand that, because for purposes of good housekeeping he has to work within a budget. However, I should not like to think that the Treasury has placed a dead hand on co-operative grants for agriculture.

As has been said, the industry is in something of a crisis. I have visited co-operative and marketing units on the continent, and it is obvious that a lot of money has been spent on co-operatives there. Continental farmers have advantages because of investment in the past, and we have not caught up with them. I was recently in western France and saw a co-operative that was developing new products. It was bringing forward six new meat products a month and selecting one of them for marketing. As I was leaving the building I noticed that many of the products were stamped and destined for Sainsbury's. We have serious problems to face in competition and marketing and if Food from Britain is in something of a crisis we need to pay attention to that. This is not a contentious issue in terms of politics across the House. The industry needs support, especially in marketing. I support the renewal of the AHCS grants but they need to be beefed up.

9.12 pm

Mr. Gummer

I should like to answer the points that have been raised and to thank Members on both sides of the House for their support.

My hon. Friend the Member for Hereford (Mr. Shepherd) asked about grant extension. We have sought to extend the period from three to five years because we believe that it is helpful for the industry to have security and to know that grants will continue over a longer period. Where we have the chance, it is necessary to give agriculture and horticulture such reassurance. That is because it is much more difficult to operate in a world where the security that comes from shortage has been replaced by the insecurity that is bound to attend surplus.

It is a curious fact within the industry, and one that we must face, that when people no longer have the assurance that they can always market what they produce because of shortage, they have to learn to live in a new kind of world. We want to make sure that there is no danger of people feeling that at some point in the future they will find themselves without these grants. That is why we have extended the period from three to five years.

The hon. Member for East Lothian (Mr. Home Robertson) asked whether, if the industry was unable to come up with the extra funding for Food from Britain, the Government would tide it over. The Government are already supplying £3 million. We have also agreed to provide additional sums next year, and in future we will supply matching funds on a generous basis, but we are not prepared to come up with more funds if the industry is not prepared to back Food from Britain. That is because Food from Britain works only if the industry is deeply involved in it and shows backing for it. We have no reason to doubt that the industry will produce the money that is necessary.

The hon. Member for East Lothian talked about a state of crisis. The way to create a state of crisis is to say that. There is no state of crisis in Food from Britain. It is continuing to operate successfully. However, it does not have the assurance of its future funding that we had hoped, not because it is not there, but simply because, as so often happens, the agriculture industry takes longer to come to the necessary arrangements. Reasonably, it has been suggested that until the poll among cereal producers has been carried through it is difficult to see what will come from that area. It is true that the milk marketing boards have not yet fixed a figure, but they have said that they will give generous support in line with the support given by other people.

The hon. Gentleman has been long enough in agriculture to accept that. It is always true that various sectors want to make sure that others are contributing before they put down their money. I can understand that. That and the innate conservatism—if I may use that word—of the agriculture industry taking a little longer to decide what to do override and run against the enthusiasm which we on both sides of the House have for Food from Britain.

I beg the House to accept that it is only if the industry itself shows enthusiasm by putting its money where its mouth is that we shall get the Food from Britain that we want. An enormous sum is not needed, but what is needed must come from the industry.

Mr. Colin Shepherd

Would not the industry do well to refresh its memory by looking at the experience of the French marketing co-operatives to see what can be done? Over the past few years, the progress that the French organisation has made may have been forgotten. Food from Britain was modelled on it. It may have been forgotten how persistence will produce similar results of a dynamic nature.

Mr. Gummer

I am sure that my hon. Friend is right, and that everyone in the House agrees that the agriculture industry would do itself and the nation a great disservice if it did not take seriously the need to provide the funds so that food can be presented with the same enthusiasm, panache and expertise as so many other products are produced. We are spending less per head as a proportion of our income on food than we have in the past. It is important that we ensure that the public are aware of the benefits, particularly of British-grown and produced food.

Mr. Home Robertson

I assure the Minister that, as a cereals producer, I shall vote for a levy when the poll takes place. The fact remains, however, that if the Minister has been reading the papers he will recognise that it is not I who have suggested that there is a crisis, but that it is broadly acknowledged that there is a crisis in Food from Britain. The scale of the crisis could mean that that organisation may not even be able to take part in the Paris show, which would be a tragedy.

Will the Minister give an undertaking that the Government will use such influence as they have with public organisations, such as the Meat and Livestock Commission and milk marketing boards, to ensure that they take their share of the burden? It is not good enough if Food from Britain has to stagger from crisis to crisis. There must be a guarantee to ensure that it can continue to succeed, as it has begun to succeed.

Mr. Gummer

My objection to the word "crisis" was that it is an inappropriate word. It suggests that it might be a continuing crisis of the sort to which the hon. Gentleman refers.

The organisation was a creation of the Government, and my right hon. Friend the Minister of Agriculture, Fisheries and Food and his predecessor put a great deal of personal support into it. There was also great support from elsewhere in the House—I am not talking on a party political basis. That had not been done before in Britain. It was an important innovation. It should have been done a long time ago. Now that we have got it going, I agree with the hon. Gentleman that we want to continue it. It is not a crisis, but merely a function of moving from one system to another, and of that new system being a necessary way to bring the industry to the next stage. The industry must be deeply involved in Food from Britain if it is to succeed. That is what I am concerned about.

I do not wish to use the word "crisis", first, because it is not true even if other people outside may have used that word, and, secondly, because such talk is depressing for an industry which does not need to feel depressed. Many people have shown considerable support for the organisation. The Government will continue to make it clear that it is our view that Food from Britain should go from strength to strength. We want it to increase its ability to serve the farming and horticultural community. Therefore, we will go on saying to those in the position of making decisions that they ought to support Food from Britain. We shall not force them to do so. That does not work unless they can recognise the importance of it and provide a good proportion of the funding, with a generous return from the Government.

I welcome the support of the hon. Member for Brecon and Radnor (Mr. Livsey) for Food from Britain and his desire for it to succeed. It is true to say that we are late in the business of selling British agricultural products. We have a remarkable range, which is increasingly finding its place in the markets of the world, and we are selling better at home against imported goods. This is because we are beginning to understand much more that food has to be presented and sold with the same expertise as anything else. I wish to see that continue, and I am glad to note that we have all-party support for it.

My response to the first comment made by the hon. Member for East Lothian is that I am concerned about the constant requests that he makes about the need for guidance. Of course the Government must give guidance on what the agriculture industry should do. The aim should be to find opportunities and to encourage people to take up those opportunities.

The purpose of the statutory instrument is to ensure that there is an opportunity to provide grants for goods and services, to the benefit of the industry. The one thing that the Government must not be led into doing, and must not be pressed to do, is to produce some kind of blueprint that suggests to people what they ought to grow and what they ought not to grow. First, if the Government did this and everybody followed what they said, one would be in surplus very rapidly. Secondly, it suggests that the Government are better at doing the farming than is the farmer himself. That I deny, and I think it to be quite wrong. We must not try to recreate the kind of security which, inevitably, is associated with shortage in a world which, by its very nature, cannot have that security in future. We must, however, ensure that where security can be provided, it is provided.

The purpose of the statutory instrument and the extension of the period is precisely to give some security where we can guarantee it, but not to give the false security provided by the White Paper "Food From Our Own Resources". That suggested that we ought to do things when, almost as soon as that document was printed, we learnt we should not have done at all.

Question put and agreed to.

Resolved, That the draft Agricultural and Horticultural Co-operation Grants (Extension of Period) Order 1986, which was laid before this House on 23rd April, be approved.