§ Mr. Robert Maclennan (Caithness and Sutherland)I welcome this opportunity to initiate a debate on the sector of the farming industry that is, at this time, under the greatest pressure. I very much regret, however, that the Government have seen fit to depart from the longstanding practice of enabling the House to debate, in its own time, the proposals of the European Commission for the annual price settlements before they embark upon the negotiations. I have checked the records and, so far as I can discover, 1979 was the only time that a Government have not provided such an opportunity. On that occasion it was due to the fact that the then Labour Government were on their last legs. It may be that the present Administration are similarly on their last legs and I have no doubt that that is increasingly the wish of the farming community.
This debate focuses on the position of the beef sector because of the crisis that the Government's action and inaction has induced. I was moved to tell the House at Question Time last week that the Minister's reply on the subject of beef to my question and those of other hon. Members, Conservative Members as well as Opposition Members, was complacent. As a consequence, I said that I would seek to raise the matter on the Adjournment. Therefore, I am doubly glad that it has proved possible to have this debate so soon after the Minister's rather astonishing utterances.
The Minister has demonstrated a smug indifference to the predicament of the beef industry since he came back to report on the December package in the House on 17 December. In the statement about the deliberations, he said:
Taken with the other measures, the beef producer must accept that this is a much more satisfactory agreement than anyone would have thought possible."— [Official Report, 17 December 1986; Vol 107, c. 1218.]He also said that he was sorry that people—I assume he meant farmers—took an excessively gloomy view when it was such an extremely good deal.In the weeks that have elapsed, the National Farmers Union of England and Wales, and that of Scotland and all those who are associated with the industry have agreed that their initial judgment about the impact of the package on the industry was right and that something pretty close to a disaster stares the beef industry in the face.
Around the country and, to some extent, in this House, the Minister has tried to suggest that he did a good job for Britain in comparison with what was done for other member states. However, that must be set against the level of farming incomes in this country, compared with those in other European countries. The figures provided by the EEC Committee of Professional Agricultural Organisations show that the purchasing power of the net income per farmer in this country between 1984 and 1986 was, on average, 40 per cent. below the average for the years 1973 to 1975. That is a bigger fall than has been experienced in all other European countries, where the average decline has been about 25 per cent.
Real farming incomes in this country during this Government's period of office, since 1978–79, have suffered a larger fall than those in any of the then 10 member states. That fall has been just over twice that experienced by nine member states, and two and half times 260 the average for the other eight. Those figures show that the Government have presided over a progressively worsening situation for farmers and one which is worse in this country than in any other member state.
The Minister should not brag about his success, or rather failure, in Brussels relative to what was achieved by other countries, especially about beef. He should not quote again the misleading figures that he has sought to give the country, which make comparisons with the settlement in the Federal Republic of Germany, where carcase weights are about 20 per cent. heavier and support levels are about 20 per cent. higher than in this country because of their positive monetary compensatory amounts. The position is broadly comparable to that which has been achieved in this country. The position in Ireland and in France was substantially better.
It is important to consider beef in the context of agriculture as a whole and in the context of the incomes of those who are peculiarly dependent on beef, and to consider the ways in which their incomes have changed during the past few years. Page 38 of the Government's annual review shows that the index of average net income per farm in the United Kingdom for lowland cattle and sheep, which is greatly influenced by the beef market, now stands at one quarter of its level in the Government's base year of 1982. The slightly more advantaged farmers who are less heavily dependent on beef and for whom sheep play a larger part— that is to say, those in the less favoured areas who make returns based on their cattle and sheep—have seen their incomes drop by a quarter since 1982.
§ Mr. Malcolm Bruce (Gordon)My hon. Friend will be aware that I represent an area where beef is important. Is he aware that within the past month I have been advised of two substantial farmers who have pulled out of beef altogether because they are losing too much money and that they have said to me, "If we are in difficulties, small farmers who depend more heavily on beef are facing a catastrophe."? Does he agree that that is the reality that is creeping over the beef industry in Scotland?
§ Mr. MaclennanScotland is peculiarly hard hit, as beef output constitutes 25 per cent. of total agricultural output, which is a high proportion. Relatively speaking, the Scots are certainly suffering greatly, but the position is bad in Wales, the south-west, Yorkshire and all beef-producing areas. There is no part which does not face a stark decline in income where beef has been a traditional product.
The Minister's sponsorship is hard to understand, in view of the evident shortfall in incomes and the shortfall between the total return and the target price for beef, particularly since the December package became operative—in other words, in the first three months of this year. The shortfall between the total return and the target price has ranged from 11.43p per kg in the week ending 11 January to the most recent shortfall of 16.31p per kg. Over the whole marketing year, that amounts to an appalling shortfall on the target price. At present, it stands at about £73.7 million.
It is evident from the Government's figures that the position is acute. Even the most partisan Minister in the Government—the former chairman of the Conservative party— cannot shrug it off. Indeed, perhaps his partisanship is surpassed only by his successor in that 261 office. Even he cannot be indifferent. I hope that tonight the Minister will take the opportunity to tell the industry what he intends to do about it.
A few further facts are necessary to bring home the plight. Despite the 5.1 per cent. increase in support prices which took effect on 5 January, market prices today are lower than they were a year ago, at 93.5p per kg. That is the lowest average monthly price since 1981. The industry is most deeply alarmed about its prospects after 6 April when the December package becomes fully operational with reductions in intervention.
It is necessary to consider closely what the 16 December agreement brought about. The Government sought to congratulate themselves then and now on what they achieved. But in reality, the basic level of support from intervention which, admittedly, in this period has not been providing an effective bottom to the market will be further reduced by up to about 13 per cent. from 6 April.
It is difficult to calculate the full effect of that on the market. To some extent, that depends upon the triggering mechanisms of the Commission's management arrangements. I hope that the Minister will pay attention to this point because I believe that a great deal depends upon the signs that he gives of how he expects to see the market managed and whether he is prepared to use any of the resources that he boasted on 17 December were available for export refunds and private storage aids. We heard a lot about that at the time and about the more than 400 million ecu that were to be made available to smooth out the market as and when additional culling of dairy cows came about. The Minister has some explaining to do. Is that money genuinely available? If so, when does he propose to have it spent to stop what appears to be a spiralling decline in the market?
Another effect of the December package was the quite extraordinary preference extended to Irish beef imports which, as a result of the arrangements for introducing a special beef premium at 12 per cent. and the retention of the right of the Irish exporters to enjoy our variable beef premium, has meant a considerable enhancement of their unfair discriminatory advantage in our markets.
Because of the additional cow culling that has come about as a result of the additional dairy quota cuts, in the months of January and February there have been about 27 per cent. more cows on the market when compared with last year's figures. Of itself that would be enough to explain the disruptions in the market which are already prevailing even in advance of what happens in April. The introduction of the new beef premium throughout the other member countries of the Community, but not in this country, will have a further adverse effect on our international trade. Whereas our producers have to pay the clawback on their exports, those who receive the premium in Europe are not similarly penalised.
The variable premium scheme was extended for two years—that was welcomed at the time—but it must be acknowledged that that has made precious little impact on the actual incomes and returns of producers. The stark reality is that the shortfall that I have described exists notwithstanding the continuation of the premium scheme. It must be clear now to the Minister that reliance on the variable premium alone, without suitable intervention arrangements, at this time cannot be sufficient to sustain a healthy beef sector.
In December the Minister boasted of the 6 per cent. green pound devaluation. His self-esteem was not entirely 262 merited. That devaluation was introduced to rectify the distortions that had flowed from the much earlier devaluation of the green punt by the Irish that should have been rectified by the Government earlier. Despite the recent depreciation of the pound, the green pound gap for beef is still running at more than 17 per cent.
The combined effect of all those measures agreed with such acclaim by the Minister in December is the prospect of a reduction of £50 to £60 per head in the value of beef cattle following the April implementation of the intervention arrangements. That means a loss for virtually everyone engaged in that business.
It was a thoroughly bad package. It took some measures to protect the dairy industry, but at the expense of the beef industry. The Minister must rectify that soon. He is going to Brussels next week, and the opportunity to obtain a more satisfactory agreement is available to him. There are measures which he can take at his own hand, and there are matters that he must clear up tonight. There are ambiguities about the Government's intentions. Above all, he must show that the Government appreciate the industry's condition. So far, he has shown no sign of that.
What necessary steps must be taken? First, there is the possibility of paying the suckler cow premium at the increased upper permissible limit. I believe that that money can and should be paid without delay. All headage payments need to be raised to the full extent of the present limits, but, when the Minister goes to Brussels next week, he must seek a further increase in those limits. Secondly, the Minister must immediately take special measures to remove from the market the culled cows which are causing the distortion to which 1 referred. The time has come to find the 400 million ecu for private storage and assistance to the export market.
The overriding priority, as perceived by not only the producers but the representatives and spokesmen of the meat trade, is a major devaluation of the green pound. This would have a threefold beneficial effect. First, it would increase the support prices. Secondly, it would reduce the negative MCAs which are making exporting of our products so difficult at this time. Thirdly, it would increase the ceilings on headage payments on beef cows.
The Government have been oblique about their attitude to the green pound. It is true that the Parliamentary Secretary, in an extremely interesting aside in a speech he made on 12 March in Exeter, said that it was the Minister's intention to seek a green pound devaluation of three or four time the 4 per cent. proposed by the Commission. If the Minister succeeds in obtaining three to four times that proposed, he will have staved off the worst of the crisis. But there has been no confirmation of that intention from the Minister, and the Minister of State has tried to make a virtue of secrecy about the Government's intentions. I put it to the Minister that, if confidence is to be restored in the industry, the industry must know that the government intend to seek a substantial devaluation of the green pound. This is just as much a matter of managing the market as any of the matters to which I have referred.
It would be unforgiveable if the Government simply refused to show their support for the industry through this proposed devaluation, lest they fail to achieve the full amount that perhaps they and we would consider necessary. If the Minister achieves the devaluation which I have suggested is appropriate and which his junior Minister has said is the target, he will get nothing but plaudits from both sides of the House. We all recognise 263 what a serious predicament this is. It is not one on which cheap partisan points ought to be made. The rural economy is at stake. The Minister has deprived himself, by the refusal to hold a debate on this matter, of the normal opportunity which Members of Paliament have had to offer their views about what is needed. Unlike the past, the Minister cannot go to Brussels with the support of a united House of Commons, because he has deprived himself of that opportunity.
In addition to the substantial devaluation of the green pound, further action is needed in respect of intervention coverage to halt the downward trend in market prices. Representatives of the trade and producers have suggested that the R4H category should be included in the group to which intervention applies. We look forward to hearing the Minister's views on that proposal.
We also advocate the recalculation of the basis on which beef MCAs are determined in line with reduced support levels that will flow from the December decision. The Minister could give the commitment to action necessary to remove from the market the additional cows from the dairy herd. It is time that the Minister faced the inequity in the arrangements on clawback and recognised that it is unfair and unreasonable to extract this clawback from our exporters while the Irish have the advantage of obtaining the variable premium. An abatement of that clawback to make it at least equal to the new beef premium is another step that the Minister should take in agreement with his colleagues in Brussels.
The Scottish National Farmers Union has made an urgent call—I believe no less dramatic than the vote of censure against the Minister of Agriculture, Fisheries and Food at the annual general meeting of the union—to avert the collapse of hundreds of businesses in the rural economy. It is alarmed by the evident collapse of the real returns of specialist beef producers. Last year in Scotland, those returns fell by a further 10 per cent.
We are facing a crisis, and the Minister will enjoy the support of the House if he stands up for the interests of our producers and our industry. We eagerly look forward tonight for some evidence that that is the Minister's intention.
§ Sir Hector Monro (Dumfries)1 am glad to follow the hon. Member for Caithness and Sutherland (Mr. Maclennan) because, for once, we find ourselves on the same wavelength. We both represent constituencies with substantial hill cow numbers in less favoured areas. We face much the same problems. I shall pick up some of the points that the hon. Gentleman made, and certainly the main burden of my remarks will be towards the same end—to help the beef producers in this country to obtain better prospects for the future than look likely at present.
The hon. Member for Caithness and Sutherland finished his speech by talking about the National Farmers Union of Scotland. I wish to begin my remarks by saying that I have been greatly impressed by the work of the president of the Scottish NFU, Mr. Ian Grant. I appreciate the difficulties south of the border, but he has given a constructive lead to the farmers in Scotland. He has pointed out the important issues that the Government should consider and has given the Government support 264 when they have responded. He has commented on past developments and has expressed his expectations for the future.
We all accept that 1985 was a devastating year for Scottish farmers because of the miserable weather. Scottish farmers are still paying a heavy price for that year, despite the bad weather payments that the Government were able to introduce. However, those payments represented emergency support rather than the offer of long-term stability, which is so important. It is not surprising that incomes dropped by about 70 per cent. Fortunately, incomes rose substantially last year, but farmers' incomes are still far below those for 1983 and 1984.
The debate is about beef, but I think that it should cover livestock rearing generally. For example, the sheepmeat regime is as important to those who engage in sheep farming in Scotland, England and Wales as beef prices are to those who farm in beef. I suspect that most beef farmers have ewes, and they appreciate what the Government have done through the sheep premium and sheepmeat regime. They are probably engaged in the most profitable sector of livestock at present. Farmers in my constituency and in that of my hon. Friend the Member for Galloway (Mr. Lang) for example, appreciate and welcome what the Government were able to offer in compensation following the Chernobyl disaster. I understand, of course, the seriousness of the position in Wales.
The Government are right to fight support for beef against the background of price fixing in Europe. There has been a marked improvement in the hill livestock compensatory amount and in the suckler cow subsidy, which have been most important support grants for the industry. It is right, however, that the Government should consider moving to the maximum grant for the suckler cow and do all that they can to help with the compensatory amount. That will do something to retain that fast-disappearing beast, the suckler cow, which is bread and butter to Scottish beef producers. If the end price is not right, the suckler cow, including the multiple sucklers, will go.
When talking about end price, I hope that the Government will carry out an effective review of the Meat and Livestock Commission to ascertain whether it is carrying out its grading work adequately and whether its marketing operations are as successful as they should be. There must be a much more enlightened approach by the MLC to helping the beef industry throughout the United Kingdom.
All these issues relate directly to the green pound, and it is imperative for beef producers, rearers and finishers that it is devalued by about 16 per cent. That moment cannot come too soon. I have written personally to my right hon. Friend the Prime Minister to highlight the need for this to happen and to ask her to join the Minister of Agriculture, Fisheries and Food in taking that course. I realise that it will cost money, but beef production is a long-term industry. If we kill off cows, it will take years to build up the beef herd, particularly if it is to match the quality of the present herd.
There is no other issue in farming that is so clear-cut. If the green pound is not devalued, beef will go bust, as it were. I have been impressed by what my hon. Friend the Member for Argyll and Bute, (Mr. MacKay), the Under-Secretary of State for Scotland, has been doing for Scottish 265 farmers and by the way in which he spoke to the annual general meeting of the National Farmers Union this month. I give my full support to him and to my right hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food in their determination to try to obtain the maximum devaluation of the green pound that they can. I appreciate that they have their troubles, but I wish them every success in rifling what they can from the Treasury.
I hope that both my hon. Friend and right hon. Friend understand that farmers are infuriated over the unfairness that results from the system in Eire. It is incomprehensible to farmers. After all, we can only go some way towards explaining why farmers in Eire, and indeed in Northern Ireland, can land their beasts on the mainland of this country and obtain a better income from the operation. It is intervention gone mad. I shall be grateful if my hon. Friend and my right hon. Friend will explain how the Irish can get away with it. It is important to find a way to stop it.
I cannot accept that the United Kingdom should suffer on account of Ireland's practices. We cannot go on looking into the future for ever, as though decisions may he made next month or next year in the European Community. We must determine just where we stand at present and where we should head in the next couple of years, so that we have confidence to go ahead with beef production. My right hon. Friend and his colleagues are doing their best to get constructive decisions made in Europe. I appreciate the difficulty of having to get some unanimity among the 10 nations, hut, during a period of price fixing, we must come up with some firm decisions, not only on the green pound, but on other matters that presently affect farming.
I read with great interest the speech made by the president of the National Farmers Union of Scotland in Inverness on 12 March. He set out the union's farming manifesto. It is interesting to compare it with what we have achieved and are achieving. The first point was:
Removal of the green pound distortion to permit fair competition amongst EEC farmers.That is what I and other hon. Members ask for, and that is what Ministers are trying to achieve during the present discussions.The second point was:
Defence of our beef industry to enable the continuance of Scottish quality beef production, beyond the problems of the next two years.That is what other hon. Members and I ask for. We want long-term decisions to be made in the industry.The third point was:
Adequate funds to permit the uptake of woodlands as an alternative form of land use, and to finance other practical ideas of diversification.266 That highlights the new policy that my right hon. Friend announced earlier this month about alternative land use. Again, it relates to forestry, particularly broadleaf forestry, and other ideas relative to a slightly more flexible approach to planning and developing the rural economy. Again, the president of the NFU and I are at one on this issue.The fourth point was:
Commitment to an attractive voluntary set-aside proposal for cereals.That matter has a high priority for the Government at present. Perhaps we shall decide on a sum of, say, £75 an acre, as opposed to planting ground with cereals. That is an interesting possibility.The fifth point was:
Immediate research into alternative uses for crops.Of course, that is being done.The sixth point was:
Encouragement for alternative crops.Again, that is a high priority for the Ministry of Agriculture, Fisheries and Food.The seventh point was:
Reduction in interest rates to reduce the debt burden.That is one of the many successes of the Budget, including the two 0.5 per cent. changes in interest rates, and perhaps something more in view of the Chancellor's prudent economic policies. A 1 per cent. increase in interest rates probably means more to the average farmer than, perhaps, additonal allowances for Buckler cows or hill cows. Unfortunately, many farmers have high overdrafts to finance, and interest rates are of prime importance.The manifesto went on to state:
Extension of the ADP principle.I know that my hon. Friend the Minister and my right hon. and learned Friend the Secretary of State for Scotland are keen to do just that. With the farming manifesto very much in mind, we should try to resolve the important green pound issue. By doing so, we shall move an important step towards uniting the agriculture industry.The new policies on alternative land use, forestry, workshops, flexible planning and particularly conservation that have been announced this month are very important. During the last five years there has been a remarkable transformation. Farmers now think in terms of conservation. Environmentally sensitive areas and management agreements are now accepted by the thoughtful farmer. He knows that they will help him to maintain his income. I agree with the hon. Member for Caithness and Sutherland that the key issue is the devaluation of the green pound by 16 per cent. If my right hon. Friend the Minister of State can achieve such a devaluation, it will be of great value to agriculture, and particularly to beef producers, in the United Kingdom.
§ Mr. Richard Livsey (Brecon and Radnor)I welcome the fact that this debate is being held this evening. There is an immense crisis in the United Kingdom beef industry. I sincerely hope that in his reply the Minister of State will take seriously what has been said. The livelihood of many farmers, particularly in the upland and fattening areas, is being affected.
A number of things are radically wrong with the beef industry. The lack of profitability, above all in the hill beef enterprise, is causing major problems. That is not particularly new, but during the last 12 months it has reached crisis proportions. During the last 10 years the beef suckler herd in England and Wales has declined by 25 per cent.—from 1.7 million to 1.3 million cows. The local NFU branch in my constituency estimates that in the last nine months the proportion of suckler cows has declined by 5 per cent. The number of suckled calves sold in my constituency has also declined. The annual total of 7,000 animals marketed in the autumn sales dropped by 1,500 this year. That is a significant decline. We are mortgaging our beef industry for short-term objectives. We have to overcome that problem.
The green pound problem has already been mentioned. As for the upland areas, we have not been promised an increase in the hill land compensatory allowance for beef suckler cows in the coming year. This is very serious. Recent reports on the profitability of the finishing of cattle make depressing reading. The Meat and Livestock Commission calculated recently that the profitability of the 18-month beef finishing system is now so poor that it is advising farmers not to indulge in it, even though it was previously one of the most profitable beef systems in the country. Its profitability has now reached a 10-year low.
The position on the continent is very different. Prices for beef cattle are approximately one third higher per head than they are in this country. This is due mainly to the distortion that is created by the green pound. It proves that for beef it is not a Common Market. Working on prices at the beginning of February, a 450 kg beast in this country would fetch £450, including the variable premium. A similar size of animal in France, at continental prices, would make £622, and in West Germany £633.
I heard the Minister of Agriculture, Fisheries and Food, at the annual general meeting of the NFU, say that as a result of the December agreement British producers would fare better than their continental neighbours in that they would experience less of a reduction as a result of the reduction in intervention prices that come into operation in April. Continental producers— particularly France and West Germany, which are two of the major producers— have a more profitable system of beef production anyway, so they can sustain slightly increased reductions in the intervention price of their product.
I do not regard the December agreement as a great success. It was a victory for the Treasury, but it was not a victory for British beef producers. The 13 per cent. reduction in intervention price will reduce the price by at least £50 per head, and that, unfortunately, has already been anticipated by buyers Of store cattle, who have already discounted that £50 before the reduction in intervention price comes into being. The result is that upland producers who are selling store cattle have suffered in anticipation of that happening.
268 The green pound reduction of 6 per cent. in December was totally inadequate in relation particularly to what happened to the imports of Irish beef before December, and we have already heard that there is still a 17 per cent. figure line with regard to monetary compensatory amounts. This discriminates against United Kingdom beef producers and it is producing unfair competition.
Tied in with that in the December agreement is the disposal of dairy cull cows as a result particularly of the 8.5 per cent. quota cutback commencing in April. Estimates have been made that 600,000 tonnes of beef will come on to the European market in the next two years. The EEC Commission disputes that figure. I should like to hear from the Minister what his estimate is of surplus beef coming on to the market. Is it 600,000 tonnes, as was forecast in December, or is it 250,000 tonnes of additional beef from the dairy sector, about which the EEC Commission is now talking? As I understand it from figures calculated in this country, there may be an additional 75,000 tonnes of dairy cull beef coming on to the market.
That surplus will depress the price of quality beef and is already forcing people to sell up their beef enterprises. The net result of this is that in two years' time—after this surplus dairy cull beef has gone through the system quality beef producers will have been forced out of production—we will then not have enough beef in this country to supply our own market, and that could put a strain on our balance of payments.
The Minister should take that point extremely seriously. We must, looking at our objectives in the beef industry over the next two years, hold the line. First, our upland beef herd must not decline any further while this surplus dairy beef is on the market. We must hold on now while this temporary surplus is occurring. Secondly, we must hold our beef prices at levels at which farmers can at least make a profit—which certainly is not the case at the moment—or we are likely to see a shortage in two years' time.
In the long-term we must maintain our suckler cow population, particularly in the hills, as that is an enterprise that complements the sheep industry, which is friendly to the environment and utilises some of the resources of the upland areas. The problem is that there is so much capital invested in beef cows, and with the high interest rates that have been obtaining in recent years it is extremely difficult to get a worthwhile return on the capital investment in a beef enterprise.
The solutions to the problems that we have at the present time are as follows. First, we must increase the beef cow premium by a further £6 per cow, which is allowed under the European Community rules as a result of the agreement negotiated in December. If the Government do not do that, they can rightly be accused of dragging their feet and it can be said that the Treasury, rather than the Ministry of Agriculture, Fisheries and Food, is controlling policy. Secondly. we must see an increase in hill land compensatory allowances to keep hill cows in the less favoured areas for the next two years. As my hon. Friend the Member her for Caithness and Sutherland (Mr. Maclennan) said, this should be increased to the maximum possible amount.
Thirdly, at the earliest possible opportunity we must join the European monetary system, because this will undoubtedly benefit interest rates. It has been calculated that if we were to join the European monetary system there 269 would be a 2 per cent. reduction in interest rates and that this would save the farming industry £240 million. That is a significant sum. Fourthly, as soon as possible we must devalue the green pound by the outstanding 17 per cent., about which there has already been comment. A failure to devalue will penalise British beef producers and place them at a further disadvantage in relation to continental producers.
The ability of the Government to see through a major devaluation of the green pound is a test of their sincerity to British livestock producers, and especially to beef producers. If they do not do that, they could stand accused of keeping down the retail price index prior to a general election and of holding farmers to ransom. I am sure that that is not the case, but I should like the Minister's assurance on it.
Finally, I should like to draw the Minister's attention to a statement this week in Agra Europe which challenges the amount of cash promised for the industry in the December agreement. I shall quote shortly from Agra Europe. It says:
Concern is growing in the UK that elements supposed to have been included in the December beef and dairy package arc now not going to the implemented. England and Wales National Farmers Union President Simon Gourlay drew attention in particular at this month's NFU Council meeting to the 435 million ECU said by UK Minister of Agriculture Michael Jopling to have been earmarked for the disposal of the beef that would result from additional dairy cow cullings. Gourlay said that this sum was not and never had been set aside, and he quoted Agriculture Commissioner Frans Andriessen as saying that the sum had been talked about but that there was no provision for it in the 1987 budget".I should like an assurance from the Minister that the sum of 435 million ecu is in the budget. Is the England and Wales president of the NFU accurate in saying that that money has not been provided for at all in the 1987 budget? If the Minister does not act rapidly in the price negotiations next week, much of the beef industry will collapse. The industry is being pushed back on its heels. Some abattoirs have recently been forced to close and we must keep our meat industry alive. I plead with the Minister to act, in view of the state of the British beef industry.
§ 11.3 pm
§ Mr. John Home Robertson (East Lothian)Like all hon. Members who have spoken in the debate, I have a constituency interest in the beef industry. All hon. Members who have taken part in the debate have expressed a strong feeling for, and genuine concern about, the future of this important industry. The hon. Member for Dumfries (Sir H. Monro) quoted from the speech by Ian Grant, the president of the National Farmers Union of Scotland at its annual general meeting in Inverness on 12 March. The-hon. Gentleman omitted to quote the interesting passage in which Mr. Grant described the Government's present position as
A botched up incoherent and chaotic set of policy decisions on the Commission's December package proposals.There are strong feelings in many unlikely areas. The Government ought to respond to the clear and legitimate concern felt by many about the future of this important industry. I welcome the opportunity to consider the serious problems that face the beef industry. I urge the Minister to take steps to protect this important and strategic industry now in its time of need. Many marginal 270 agricultural areas in the north and west and in the uplands are heavily dependent upon the beef sector. Beef accounts for 25 per cent. of Scottish agricultural output. In many cases that beef is produced on land that is suited only to grazing enterprises, in areas that are most vulnerable to economic change.
The Government have a duty to protect that sector of industry in such areas. Long-term policies have to be deployed in an industry of this nature, where it takes years to build up a breeding herd. While it is easy for farmers in an immediate financial crisis to cull some of their breeding cows, it can take a very long time for the industry to replace that capacity. The beef herd has declined every year since the Government came to power. Since 1985 the specialist beef herd in Scotland has declined by one fifth, and production fell by a further 10 per cent. last year, and no wonder, because the real returns for beef production are now, on average, £14 a head less than they were in 1985.
The background to this issue is not very encouraging. The December package—of which the Minister of State has been so proud in his recent statements — could actually cut the basic level of market support by up to 13 per cent. from 6 April. That is disturbing, because many of our beef farmers are already heavily in debt and there is no sign of an immediate let up for them.
I acknowledge that the Minister has succeeded in retaining the beef variable premium. Sadly, farmers in other parts of Europe are about to get a new rearing premium that will further distort the competitive position of our producers. The position of the British beef sector will be further eroded unless urgent action is taken. Indeed, the National Farmers Union of Scotland has expressed the fear that £50 or even £60 a head could come off the value of beef cattle in the coming months. That is a disturbing set of circumstances.
The preferential position of Irish producers in our market is likely to be enhanced by certain aspects of the Minister's December package. We know that there has been a flood of Irish imports for some months, in addition to the beef that is coming on to the market as a result of dairy cows being taken out of production and culled as a result of cuts and milk quotas. These circumstances are playing havoc with British beef producers.
The Minister said that he was excited about having obtained this package agreement in December, but, sadly, he failed to tie up some very important loose ends that should have been included. On 17 December he said:
The package helps very considerably. First, there is more than 400 million ecu put aside to get further exports of beef as the cows come on to the market. That will reduce the number of cows in the market."—[Official Report, 17 December 1986; Vol. 107, c. 1217.]This point was raised by the hon. Member for Brecon and Radnor (Mr. Livsey), who quoted the interesting comments from Agra Europe, which were published last week, suggesting that that 435 million ecu, which the Minister held up as being available to soften the blow and to protect the beef industry from the knock-on effect of all those dairy cows being culled, may have been a figment of his imagination. The hon. Member for Brecon and Radnor quoted what the president of the National Farmers Union, Simon Gourlay, had to say about that one.Agra Europe went on to say:
Other items of cash for additional export support that were promised in the package also seem to be in doubt … misinformation … followed publication of the December 271 package pointing out that it was deceitful to say that the 435 ecu was there when it wasn't … What is becoming clear is that the negotiations of the December package were so complex and so lengthy that there is a marked lack of clarity over what was actually agreed and what were merely items for discussion.The Minister would do us and the beef industry a favour if he would take the opportunity of this debate to say whether those funds are available to deal with this difficult position. He has a bit of explaining to do.At the moment, the Minister has on his hands a genuine crisis in the beef sector. This crisis in the market for beef could spell ruin for some producers. The Minister was rash enough to promise specific action to alleviate that situation, and he seems to have been found wanting on this occasion. I hope that when he winds up this debate he will resolve the doubt that has been raised on many people's minds.
I hope that the Minister will accept that the Government have a duty to protect the competitive position of this extremely important sector of British agriculture. The Government should deploy all the mechanisms that they have at their disposal to support the industry in these circumstances. The Minister should use national aids or other measures that may be permitted under European Community agreements, including the suckler cow premium, headage payments, hill livestock compensatory allowances and any other mechanisms that are available to deal with this crisis.
The green pound has already been referred to. I recognise that the present problem may have more to do with the vagaries of the Irish green punt than with the valuation of the United Kingdom green pound, but British agriculture and rural Britain are entitled to expect the Government to take all appropriate action to protect them from any unfair discrimination. That appears now to require a further significant devaluation of the green pound.
On the long-term prospects for the beef industry, I am convinced that the beef and sheep sectors deserve a secure future. Lean beef and lean lamb are healthy foods, produced by an extensive farming system that has an excellent record on animal welfare. If the quality of the product and the price to the consumer are right, there could be scope for a significant increase in the consumption of these products in the future, and that in turn could lead to an increase in the area of grazing land on farms in Britain, to the promotion of a return to mixed farming and to a reduction of cereal surpluses. We must not get carried away. We already have significant, substantial and costly surpluses in intervention stocks.
We wish the Meat and Livestock Commission well in its efforts to improve the presentation and marketing of red meat, and the industry must co-operate in producing quality cattle for those purposes. The MLC should get all possible assistance from the Government in promoting the market for beef. Above all, to achieve that objective, we must get the price of beef right. The beef variable premium is part of the answer, but not the whole one. Our objective in Government, as the Minister well knows because I think that he has had an opportunity to study the Labour party's Green Paper on the future of the agriculture industry, will be to seek to repatriate national aspects of the common agricultural policy, and that must include measures to help our own people enjoy more red meat, which would be 272 good for consumers and for the beef industry. We must press the Government to keep their promises to help the beef sector through the current crisis. That is vital if we are to retain an adequate scale of breeding herd in order to provide for, one hopes, expanding markets for beef in the future.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Gummer)I, like other hon. Members, wish to welcome the debate and the opportunity to discuss this most important sector. I hope that those who have spoken will allow me to say that, like them, I believe that the beef producer, especially the specialist beef producer, is a most important person within the agricultural community. The product that he produces plays a vital part in the economy of some parts of the country which would not find it possible to find alternatives. My hon. Friend the Member for Dumfries (Sir H. Monro) rightly pointed to the serious situation which would arise in those areas if beef production ceased to be profitable. I accept that. Beef is a product of regions that do not have a wide range of alternative possibilities.
I hope that the hon. Member for Caithness and Sutherland (Mr. Maclennan) will acquit me of complacency. I do not believe that I have ever been complacent about the problems of the beef industry. I think that he must follow the argument through from point to point and decide then whether his strictures were justified. The first thing I say to him is that I am determined to do all that I can to ensure that we have a sensible policy to encourage the production of beef, particularly the specialist herd. I want to try to prove to him that that has been the policy of the Government and then to suggest some of the things that we have to do. Perhaps then, if he will let me, I could suggest why I feel that his particular strictures have been far from correct.
I shall first deal with the discussions in Brussels in December. It is not proper to discuss the problems of the beef industry without admitting and mentioning the enormous difficulty that the present system, or at least the pre-December system, placed upon the European Community. The hon. Gentleman is a supporter of the European Community and our membership of it and I know that he would not wish to miss that point. The fact is that the Community beef regime last year was well over budget at some 3.5 billion ecu or £2.25 billion. It has become increasingly expensive to try to deal with the CAP's beef intervention policy. For example, the 200,000 tonnes of Community intervention beef sold to Brazil last year cost FEOGA about £500 million. That is not a sensible policy.
I have to say to the hon. Member for Caithness and Sutherland that it does not give us any confidence in his strictures if he comes to the House and discusses this issue, which he has so rightly raised, without giving us any indication of how he would approach the basic problem of beef within the CAP. There was no word about how he or the alliance would deal with that. I do not think that it is possible to be taken seriously if one does not address the problems seriously. His speech was in stark contrast to the shorter but appropriate speech of the hon. Member for East Lothian (Mr. Home Robertson). I do not agree with the policy that he put forward about repatriation, but at least he attempted to consider the basic problem of the 273 beef industry in Europe. However, the hon. Member for Caithness and Sutherland again failed to tell us what he would do about the problem.
In the decisions taken in December, we sought to reach an agreement that would enable us to begin to produce a beef policy for the Community which would not mean that vast sums of money were spent without adequately supporting the British farmer. As my hon. Friend the Member for Dumfries so clearly said, the real problem is that we spend all that money but his constituents, and others like them, have not seen the support that they should for the enterprises that are so important to those parts of the United Kingdom.
The hon. Member for Caithness and Sutherland did not address that problem. I must advise him that he will not command respect for his policy if he will not address the real problems. It was to tackle that problem that we had the debate and discussions about the beef industry. In trying to solve the problem of over-production in the dairy industry, we were aware that cull cows would come on to the market. We had to face that problem also.
The result of that deal in December was much better for the British beef industry than it was for other countries. I know that the hon. Gentleman does not believe that. I was interested to check to see what he said about it. In the Scottish Grand Committee on 19 January 1987, he said:
there is not much doubt that other beef producers in the rest of the Community"—he excluded Ireland—are better placed than we are as a result of these negotiations."—[Official Report, First Scottish Standing Committee, 19 January 1987; c. 88.]That is precisely untrue. The fact is that British beef producers are less hard hit than those of other member states.I have given the hon. Gentleman the figures before and I shall give them to him again. I shall then take up the point that he made. Whereas we expect the market support levels to fall by about £36 per head in the United Kingdom, the support level for French bulls will fall by £80 and by £40 for French steers. In Italy and Germany, the drop will be between £115 and £120 a beast. The hon. Gentleman said that their beasts are bigger than ours and that therefore the drop does not count. In that case, let us use the percentage basis. The percentage fall in the United Kingdom is 6.2 per cent. and in Germany it is 12.3 per cent.
Therefore, I stick to my point, that in difficult circumstances, when the Community was spending money that it could ill afford and when it was well over budget, the money was not reaching the people whom it was supposed to help. In that situation, the deal that was done for Britain was considerably better than those which were made for other countries. The hon. Gentleman must accept that those are the facts.
I agree that that does not help the beef producer who looks at his own budget and sees how difficult times are. However, the hon. Gentleman must not say that we did not achieve a better deal than other countries. That could be proved by asking any of the other European Ministers which country they thought did best out of the deal. I believe that they would unanimously say that it was the United Kingdom.
The hon. Gentleman said that somehow or other that deal was bad for Britain. However, he did not mention the retention of the beef variable premium scheme— 274 [Interruption.] If he did so, he mentioned it in a curmudgeonly way. He did not say, "My goodness, we are pleased about this." However, the hon. Member for East Lothian generously and helpfully said that it was a good thing that we retained the BVPS.
I remind the hon. Member for Brecon and Radnor (Mr. Livsey) that, in the debate on the rural economy, he said:
Those variable premiums are essential to buttress our beef and sheepmeat production. I hope that, in their negotiations with the European Community, the Government will stand firm on variable beef premiums which are under threat at present.—[Official Report, 29 January; Vol 90, c. 1029.]Indeed they were under threat. We stood firm and have maintained the BVPS for two years to come, which is a longer period than has been achieved previously. But the hon. Member for Caithness and Sutherland, afraid that the Government might gain any support, said, "It is bad because of the Irish advantage on the clawback arrangements." I am happy to agree with him that in some ways the present relationship between the United Kingdom and the Republic of Ireland is unsatisfactory, but he cannot complain about the Government on this issue. The position on clawback predates our membership of the EC and was maintained in the negotiations which established the BVPS by the Labour Minister of Agriculture, Fisheries and Food who is now in the other place. Therefore, the hon. Gentleman cannot blame this Government for what has always been an integral part of the BVPS, even under the Government whom he supported, although he is right that the present position is unsatisfactory.The hon. Gentleman is particularly difficult to deal with, because he argues that there shall be no party politics but a moderate, reasonable approach and then makes a speech which, until the last three paragraphs, was entirely about party politics and how the Government had not done this, that and the other. In contrast, my hon. Friend the Member for Dumfries put the case for beef producers extremely well and pointed to their problems. He mentioned the need for and importance of the suckler cow premium. I thank him for his support for that other important element of this excellent deal. [Interruption.] The hon. Member for Caithness and Sutherland did not even give us the credit for increasing, with great difficulty and against the wishes of most of our colleagues in the Council of Ministers, the amount of suckler cow premium that could be paid. He is determined to play party politics with anything that comes before the House.
My hon. Friend was right to say that we now have that headroom. It will be part of the package that we must consider for the beef industry during the price-fixing negotiations. It is not for me to say when debates take place, but I meet the hon. Gentleman in his demand that we should discuss these matters, and I hope we shall do so before long. There is a great deal of negotiation to do yet; we are only beginning on the small foothills of this mountain of negotiations. He will have plenty of time to put his points to Ministers.
§ Mr. MaclennanWill the Minister give way?
§ Mr. GummerI shall not give way, because I want to answer the hon. Gentleman point by point. I did not interrupt him, although I was sorely tempted on several occasions.
The hon. Gentleman was not as generous as he might have been expected to be in that he did not acknowledge 275 that in the beef package presented to the House in December the United Kingdom established a system which did least damage to the British beef industry in terms of the effect on the carcase price. It maintained for two years the BVPS, which most thought we would find impossible and which the NFU wanted most. I know that the hon. Member for Brecon and Radnor, with his customary generosity, would support me in that. We increased the opportunity to pay the suckler cow premium and we ensured that a premium was introduced for other countries. The hon. Member for Caithness and Sutherland must not attack that.
The policy of the United Kingdom must be to ensure that we move towards less intervention and more support to help to reduce the price paid by the housewife. The hon. Member for East Lothian is absolutely right. One of the advantages of the beef variable premium scheme is that it enables the price in the shops to be affected so that more beef is eaten. I agree that beef is very good food. It is a proper part of a balanced diet and we encourage the consumption of beef by ensuring that the price is as low as it can be. The variable premium system helps to reduce the price in the shops while at the same time supporting the return for the producer.
We have never been able to convince other people in the European Community that the premium system is a good thing. The fact that they have now taken on a premium system which is nowhere near good enough for us means that we could not have accepted it. It applies first of all only to male animals and has a top headage limit of 50 animals. Of course, it was set at a level far too low to achieve in the market what the BVPS could achieve. Therefore we could not accept that system. However, we could welcome it in the sense that farmers who have grown used to the premium system are more likely to pressurise their Governments to show them that that is the right way forward. All hon. Members thought that that was a good thing.
The hon. Member for East Lothian invariably attacks me for many things, but I do not think that he has ever seriously attacked me for deceit. I would not in any way want to mislead the House. The fact is that the 435 inelegantly named "mecu" were included in the budget and they are available to be used to take cull cows off the market. The only problem quoted by Agra Europe is that the figure does not appear separately. But as it would not normally appear so in the budget. There should be no problem in practice.
§ Mr. Home RobertsonWill the Minister give way?
§ Mr. Maclennanrose——
§ Mr. GummerI am trying to answer specific questions. I was asked to give that assurance. That assurance is absolute. There is no difficulty about it. It is available and the Commission will use that money.
§ Mr. MaclennanThe real issue is not whether the Minister misled the House about this. There was clearly some discussion about the matter. The real issue is, will the money be used and when? The farming community believes that it is urgent that the money is used, and used soon.
§ Mr. GummerThe hon. Gentleman is quite right. The Commission quite clearly announced the amount of 276 money concerned and said that it would be used to take the cull cows off the market. That is quite clear and was understood by all members of the Council, and no one denies that. The amount of money is in the budget for that purpose.
The money has not actually been used so far because we have not entered the marketing year in which the effects of the other matters take place. However, I assure the hon. Member for Caithness and Sutherland that the money will be used. There is no difficulty about that and he need have no further worries about it. I will keep him in touch with matters so that he knows how the money is used and the circumstances in which we get the cull cows into third markets.
I want to support the strong demand by my hon. Friend the Member for Dumfries that we should recognise the difficulties of the beef industry. However, I must tell the hon. Member for Caithness and Sutherland that it does not help the beef industry to overstate the problems. We must get a sense of balance here. The hon. Member for East Lothian is quite right to state that there has been a reduction in the herd. There has been an increase in the proportion of the home market that is met by home-produced beef.
One of the reasons for the reduction in the herd is that there has been a considerable reduction in the consumption of beef, although that has now been slightly reversed. It is not true that the beef suckler herd has dropped in size each year since 1979. The December 1986 figures show that the beef breeding herd is 1 per cent. larger than it was in December 1985. That is not a huge difference, but we must not overstate the problems of the industry.
What are we to do about the real problems? I have taken on board what has been said about the green pound. The hon. Member for Caithness and Sutherland came out with a marvellous comment on the 6 per cent. green pound devaluation. He said that it was a distortion which should have been rectified by the Government. If the Government could have rectified it, we would have done so on the day that the green punt was changed, because that change had an inescapable effect on the British market. The hon. Gentleman clearly does not understand the system. We did not rectify it because there can be a change only if the Council of Ministers agrees and the Commission presents the Council of Ministers with a case for change.
The hon. Gentleman sits there comfortably and says that we should have had the devaluation the next day. If the hon. Gentleman had spent as much time as I and my right hon. Friend spent trying to persuade the other countries, all of which opposed us bar one, which wanted a bit extra for itself, he would understand that we were extremely fortunate to have had a result by December.
It is all very well for the alliance to tell everyone how it would have achieved everything at once, but it has not once said what it would have done. That is the real criticism of the hon. Gentleman's speech. He came here to complain about everything that the Government have done and made no reference to what he would have done. We are used to that. I have taken every speech that the hon. Gentleman has made in the past two years, and I can find not one occasion when a coherent alternative policy has been presented.
The hon. Member for East Lothian is not like that. He may have the wrong policy, but at least it is a policy and we know where we are. The alliance has only one policy. 277 It is two-tier pricing, which would mean that beef animals in the area that the hon. Member for Caithness and Sutherland represents would compete with beef produced in the richer east of England. The other part of alliance policy was shown in the Bledisloe lecture, which should be read closely. People who do not like it should read the lecture given by the hon. Member for Brecon and Radnor to the Catholic Institute for International Relations and World Wildlife Fund joint operation. He suggested there that it would be a good idea to have a moratorium on technological advance in western agriculture.
§ Mr. LivseyWill the Minister give way?
§ Mr. GummerThe hon. Gentleman must allow me to continue.
We should consider the effect of such a moratorium on the beef industry. It would have meant that much of what is important to the industry would not have happened. We would not have the quick finishing system, we would not have gone on with the rota-viral diarrhoea vaccine and we would not now be considering the new arrangements to try to find means to reduce losses in beef calves. We would have none of that technology. That is the hon. Gentleman's policy.
§ Mr. LivseyThe Minister is talking rubbish, and he knows it.
§ Mr. GummerI am merely stating what the hon. Gentleman presented to the meeting at which I was present.
My hon. Friend the Member for Dumfries asked me to give an assurance that we will fight for the British beef producer in the coming negotiations. I can assure him of that, and that we will try to get the best possible deal. We have taken close note of his view on the green pound, which will play a major part in our negotiations. We will have to see how the suckler cow premium fits into the negotiations and how alterations to other parts of the policy can benefit the livestock producer generally. There is no doubt that many of the livestock producers' problems have derived from the high prices that have been obtained for feed, and that is an important part of any such policy.
My hon. Friend the Member for Dumfries was also right to remind us that this is part of an overall policy and that it includes the way in which we have supported other livestock enterprises, particularly sheep, and includes the imaginative series of alternatives which have been put before the House in the announcements of recent weeks.
In the end, the Government are determined to do what they can to ensure that the beef industry gets through the difficult period ahead, not least because all the indications are that at the end of some 18 months there will be better times in terms of the market, of the coming forward of cows from the dairy industry and of the forecasts of OECD and other organisations.
This is a difficult period for the beef industry and we have a duty to do what we can to ensure that we support it, for, as my hon. Friend said, it is a long-term industry; it cannot be turned on and off or held up for short periods. It must have secure and sensible support, and that the Government are determined to provide.