§ Mr. Michael Colvin (Romsey and Waterside)I am pleased, as a result of the luck of the draw, to speak so early in the Adjournment debate following the Consolidated Fund measures, when the House voted a further total of about £146 million for Government expenditure by various Departments of State. If my hon. Friend the Member for Tiverton (Mrs. Browning), the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, who is to reply to the debate, could have won just one tenth of that amount for the pig farmers of this country, my speech would not be necessary.
It is no bad thing to start a speech with an undisputed fact. British farmers are the most efficient in the world. However, farmers everywhere have a reputation for being prophets of gloom. Even so, no one can deny—not even I, as a farmer, and one with an interest to declare in that respect, though not as a pig farmer—that in the past two years agriculture has received considerable benefits from the devaluation of the green pound and that on the whole business has been very good. Arable farmers did well this summer because the weather was kind for once.
Things have not, however, been good for the pig industry, whose fortunes are very low at present. Peaks and troughs have always been a feature of pig farming, but the current trough has been deeper and longer than any others that I can remember. Pig producers financial losses, coupled with existing and pending legislation on nitrates in water, slurry storage and sow stalls is making them consider carefully whether they can continue as pig farmers.
It was clear to me from talking to pig farmers in my constituency only last Friday that specialist pig producers are losing money for the second year running and some may even face bankruptcy. Many of them farm on quite a small scale and quite small acreages and do not have the luxury of being able to diversify into other farm enterprises.
The continuing low level of pigmeat prices has been largely due to a long period of oversupply. The pig herds of European Union states have increased, while here the size of the herd has remained static. The latest EU survey now anticipates a Community-wide fall in the breeding herd which may lead to reductions in 1995, but that is unlikely to result in a big enough increase in prices to stave off a disaster facing the UK pig industry.
To illustrate the problem on prices, I quote from a note from the National Farmers Union provided by Dafydd Owen, the NFU pig adviser. I thank him for the help that he has given me with the figures. He says:
The cost of producing pigmeat in Britain is estimated at around 105 pence per kilo when fully costed and including depreciation of capital. The Average All Pigs Price, which is a weighted average of the prices paid for pigs in the UK, has only exceeded this for one month out of the last 16. The AAPP in the week ending 10 December"—just recently—is 102 pence, producers are therefore continuing to lose money on the pigs they produce.Those losses are market related, but the market has been distorted, first by unfair competition from Europe, particularly Holland, Denmark and France, and secondly, by the self-inflicted burdens of British legislation.1186 I know that the Government are committed to ensuring fair competition among member states. The common agricultural policy rules must be obeyed at home and when other member states cheat they must be punished. I welcome the fact that as a result of pressure from the Government the European Commission has opened proceedings against a package of state aids to French pig farmers and that the Commission has ruled against the schemes and has demanded the repayment of aid paid illegally. That is welcome, but there is further action that I would like to hear that Her Majesty's Government will take.
In 1991, the House approved regulations which ruled that breeding sows should not be kept in close confinement systems as they were detrimental to the welfare of the animals. I accept that those regulations will not be revoked, but their economic impact can be reduced without compromising the principles that they encompass.
I am also happy that the Government have undertaken not to introduce any further unilateral farm welfare measures which could undermine the competitive position of our producers. That is precisely what the Welfare of Pigs Regulations do. They ban the use of stalls and tethers but give the industry until 1998 to phase them out. Those regulations have been followed by action in Europe and an EC directive now bans the use of tethers in the EU from 1 January 2006. It does not ban the use of stalls. A ban on tethers will therefore not come into force until seven years after the Welfare of Pigs Regulations 1991 have banned the use of stalls and tethers in the UK.
Imported pigmeat produced using restricted systems will have a cost advantage over our domestic product and imports are likely to win an expanded market share. The economic impact of the regulations on the UK is devastating. The Meat and Livestock Commission estimated that the additional cost of the regulations will be up to £2.70 per pig sold. That is the equivalent to between 15 and 50 per cent. of the annual profit margin. The ban will therefore absorb a significant proportion of the profits, if any, in good years; and when the pig cycle is on the downturn it will merely exacerbate the losses.
The sum of £2.70 per pig is equivalent to more than £1 per sow per week or £2,000 per month for a 500-sow herd. It is estimated that at least 40 per cent.—about 300,000 sows—of the British breeding herd are still kept in stalls with tethers. The total cost of the ban will amount to more than £15 million a year across the industry and will seriously damage the competitiveness of British pig production. In comparison, 90 per cent. of Danish sows are housed in close confinement systems and discussions with Danish industry representatives show that a ban on the use of tethers is not expected to have a major impact.
The MLC estimates that a 10 per cent. fall in pigmeat production in the United Kingdom would weaken our balance of payments by about £100 million—and that excludes the impact of any loss of employment and added value in the processing and manufacturing sectors. There will also be a tremendous impact on individual businesses. The production of pigmeat has become specialised and the backbone of the industry is the hard core of large and efficient producers. Within the UK, 80 per cent. of pigmeat is marketed by fewer than 20 per cent. of producers. The impact of the ban will not be even; those most affected will be the innovators and the committed pig producers, rather than the laggards in the industry, of which there are a few.
1187 What am I asking the Government to do? First, they should amend the regulations to allow the use of stalls for 35 days post-weaning to ensure maximum protection for sows immediately after weaning and during the service period. Secondly, the re-phasing of the ban should be timetabled to harmonise with the European Union tethers-only ban, which does not come into force until 1 January 2006. I should like a firm commitment this evening that Ministers will press to have the EU directive reviewed at the earliest opportunity, with a view to the rules being brought into line with our own, or the ban on the use of stalls and tethers in the UK should be delayed until 1 January 2006.
The third action relates to financial help for pig producers. The amendments that I have suggested will not remove the need for reinvestment by most pig producers of more than £200 per sow. Financial support is necessary to offset that cost. That could be achieved either by introducing a grant scheme or through the taxation system. Currently, expenditure on capital investment may be depreciated at only 4 per cent. per annum when calculating the tax liability of the business. That should be increased to at least 10 per cent. All external fixtures and fittings necessary to replace stalls and tethers should be treated as plant and machinery so that they can be depreciated at a rate of 25 per cent. per annum. Better still, such expenditure could be treated as revenue expense and entirely offset against the earnings of the business.
The other financial help that could be given to pig producers is through the farm and conservation grant scheme operated under objective 5a. That EU regulation allows grant assistance for investments made to improve welfare, but that is not included in the FCGS. I should like the Government to extend the FCGS to include the reinvestment necessary to meet the requirements of the welfare of pigs regulations.
One other measure, which is a Treasury rather than MAFF matter but on which I should like my hon. Friend the Minister to comment, would be to enable the industry to carry back losses for three years to bring its personal taxation into line with corporation tax. The last measure that I want the Government to consider is a degree of compensation from EU farmers for those being forced to leave the industry because we have been unable to level the pig playing field.
On the positive side, at the Smithfield show a year ago I was pleased to see the launch of the British quality assured pigmeat initiative—BQAP—in which all parts of the British pigmeat industry have co-operated. There are already encouraging signs that that initiative will develop successfully.
Britain's processors, retailers and producers are working to distinguish British pigmeat from that of our competitors on the grounds of higher quality and welfare standards. They also take every opportunity to add value to their pigmeat products for the -benefit of everyone in the production and marketing chain. That will help to improve pig prices, but many producers will not be there to enjoy the improvement if the Government do not seriously consider and, I hope, implement the measures that I have outlined this evening.
On Friday I went to see my pig farmers. I have always enjoyed going to a pig roast. I do not enjoy being the roast, but that is what I was last Friday evening. I am pleased that my hon. Friend the Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food, is replying 1188 to the debate. I did a little in 1992 to help to get her elected and I hope that she will do a great deal to help the pig farmers of the United Kingdom.
§ Mr. Martyn Jones (Clwyd, South-West)I congratulate the hon. Member for Romsey and Waterside (Mr. Colvin) on obtaining his debate early in the evening. It certainly helps me, and I am sure that it helps the Minister.
The Labour party's view is that it will be best for the animals if the ban on sow stalls and tethers is maintained in Britain. We appreciate the position of the Government on the issue. They made a stand vis-à-vis our European Union allies, but possibly they went a little too far. I cannot criticise the Government for doing that. However, we should press strongly to have the same rules within Europe. It is not right that we should protect our animals if we can then import animals from the European continent which have been treated far worse.
We agree with the hon. Member for Romsey and Waterside that use of stalls should be allowed for 35 days after birth. Research seems to show that that is best for the offspring of the sows. If it is confirmed that that is the case, we shall support such a proposal.
We believe that the tax regime should be exactly the same in Britain as in our European competitor countries. I hope that the Minister will agree to do everything that she can to make sure that the tax regimes will be the same.
"Level playing field" is perhaps a phrase that should be banned within these four walls. However, it is possibly the best way of describing what should be the case. It helps no one and it certainly does not help the animals if unfair treatment is exported to other countries. The animals suffer just as much in other countries as in Britain. Our animal welfare conditions are on the whole better than those of any other country in Europe. It is important that we in Britain make sure that our animals in Britain are treated as well as they can be. Our farmers would support that. Animal welfare organisations do so, but I hope that there is no support for exporting to other countries poorer treatment of animals. I am sure that the Minister will consider that point.
§ Mr. ColvinI take the hon. Gentleman's point, but one of the most active animal welfare organisations is Compassion in World Farming. Should it not turn its attention to the world, rather than concentrating—as it seems to do—entirely on the United Kingdom? Ports are picketed and ferry companies are threatened in order to prevent the export of live animals. Yet the UK animal transport regime is probably better than any in the world. Would it not be a good idea for welfare groups to turn their attention to the continent, where so much abuse continues?
§ Mr. JonesI agree that concerned individuals in the UK concentrate on conditions in this country. Sadly, if they got their way the conditions that they deplore would be exported to other countries, whose products the UK imports. The compassion that such organisations display should be directed at animals in other countries as well. By and large, British farmers have the interests of their livestock at heart. I should be loth to see the practices that the hon. Gentleman cited exported to other countries.
1189 We have a responsibility to see that our animals are well maintained. It does no animal good to suffer the unfair treatment that the hon. Gentleman described in other countries. I welcome the Minister's response.
§ The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Angela Browning)I am grateful for the opportunity provided by my hon. Friend the Member for Romsey and Waterside (Mr. Colvin) to debate the pig industry, and I thank him and the hon. Member for Clwyd, South-West (Mr. Jones) for their contributions.
Both mentioned sow stalls and tethers, which have been discussed under the EU directive. I am disappointed that it allows the continued use of tethers in member states until the end of 2005 and does not address stall systems. The UK voted against that directive because it falls far short of our high standards of animal welfare, which we have sought to extend throughout the Union.
My hon. Friend and the hon. Gentleman stressed the importance of the UK's high standards and the need for unanimity among EU states so that competitive difficulties are not created between Union countries and the UK. I assure the House that we will continue to pressurise the EU to raise its standards to our high level.
We accept that farrowing crates make a valuable contribution to the welfare of piglets. We are funding research into alternative systems, but the risk of piglet mortality is too high to recommend any of them yet.
The Government appreciate the importance of our pig industry. It is a vital sector of agriculture, with total annual production amounting to 1 million tonnes of meat worth around £1 billion at the farm gate. It is a considerable industry. It runs neck and neck with poultry meat as the most popular meat in this country, and leads in most European countries. Annual production of pigmeat in the European Union is a staggering 14 million tonnes, twice the European level of poultry meat production.
I am, of course, aware that pig producers have had a very difficult time. My colleagues and I regularly meet individuals from the industry and the representative organisations. Hon. Members have, moreover, been assiduous in their representations on behalf of the industry. We are, therefore, very fully briefed and I have a great deal of sympathy for the industry's case, which my hon. Friend the Member for Romsey and Waterside has outlined tonight.
My hon. Friend mentioned the pig cycle, whereby good profitability leads to herd expansion, increased supplies and, ultimately, falling producer prices; it is characteristic of the market. The recent period of low prices and poor profitability, which has affected pig industries throughout Europe, not just in Britain, has come about for exactly that reason. On this occasion, the trough in the pig cycle has lasted much longer than anyone in the industry expected. Cycles have their ups as well as their downs, and the signs are that a long-delayed improvement may now be under way. I am sure that we are all aware that the improvement is somewhat fragile. It is only in the past three weeks that we have seen a small rise in average pig prices, but that is most encouraging and we hope that the rise will continue.
1190 The August pig survey results show that in most member states, weak prices have led to cuts in the breeding herd. This is most important. The total EU breeding sow numbers were 3 per cent. down on a year earlier and there were reductions in all countries except Italy, the Netherlands and Portugal.
Pig producers are in a sector that is very much reliant on the market. I know that, for the most part, they are pleased to operate with minimal interference from Government and from Brussels. For that reason, we are determined to ensure that our pig producers are not disadvantaged by other member states of the European Community paying illegal subsidies, however well hidden, to their industries. Hon. Members have mentioned that point; we consider it to be a matter of great importance.
When market conditions are poor, there are always rumours of illegal assistance. If we have any evidence at all, we take it up with the country concerned and with the European Commission. It is, after all, the Commission which has direct responsibility for policing the rules of the Common Market. We have questioned a number of countries—some have already been mentioned in the debate—including Spain, Italy, Denmark and Ireland. So far, only in the case of France have we obtained firm evidence of illegal aids to the pig industry. The example of the illegal French aid scheme demonstrates our commitment and enthusiasm on this point.
We first came across evidence of the French scheme in September 1993 and raised it in that month's pigmeat management committee. We have not let up since. My right hon. Friend, the then Minister, regularly raised it in the Council of Ministers and with Commissioner Steichen. We also pressed the point in every monthly management committee. The Commission eventually took action, under article 93(2) of the treaty, against a FF30 million interest relief scheme and the Stabiporc price stabilisation scheme. The Commission has ordered the French Government to recover aid paid illegally.
I hope that both my hon. Friend the Member for Romsey and Waterside and the hon. Member for Clwyd, South-West will be encouraged by the fact that we relentlessly pursued the matter because we believed that we had good evidence. We are pleased that the Commission has the evidence before it. We are now awaiting confirmation from the Commission that recovery of the money has started. We will not let France off the hook. French producers should not be able recklessly to expand their herds in the knowledge that their Government will rescue them. I assure the House that, if my Department is given information that stands up about any evidence of fraud or subsidies that put our industry at a disadvantage, in this or any other agricultural sector, we shall pursue it too. The free market works well in the pigmeat sector, and we are determined that it should operate without interference.
Concern exists, and has been expressed tonight, about the phasing out of sow stalls and tethers, particularly because our welfare requirements are stricter than those set out in the EC directive. The current rules stem from a private Member's Bill introduced in 1991 by the hon. Member for Holland with Boston (Sir R. Body), with overwhelming parliamentary support. That Bill would have banned stall and tether systems within five years: it would have come into force in 1996.
1191 We took the view that such a short phase-out period would be damaging to the industry, and pressed for a deadline that would give the industry time to make the adjustment at a containable cost. As a result, our regulations required the replacement of stalls and tethers by 31 December 1998. The Bill was withdrawn.
The recent long period of low profitability has, of course, affected the ease with which pig producers can comply with that extended timetable. We have received many representations on the point, some of which my hon. Friend has echoed tonight. It has been suggested, for instance, that the timetable should be extended to correspond with the EC directive; that would ban tethers by 2005. but not stalls. Such a proposal, however, ignores the clear view of Parliament, expressed in 1991 and confirmed in a debate on welfare regulations earlier this year. My hon. Friend recognised that there was unlikely to be any change, and I see no realistic prospect that the House will now adopt a different timetable.
It has also been put to us that sows should be kept in stalls during the early part of their confinement, on welfare and productivity grounds. The National Farmers Union recently produced a paper arguing exactly that point. We are reading the paper and taking veterinary advice on it; my officials will discuss it with the. NFU shortly.
My hon. Friend mentioned the campaign for higher tax investment allowances. As I think he recognised, that is a matter for the Chancellor, and I am sure that my hon. Friend and other hon. Members will draw it to his attention. Many of the letters sent as part of the industry's campaign arrived too late this year to influence the Chancellor before he had made up his mind; in fact letters are still coming in, even after the Budget speech.
We are aware of the strong feeling in the industry. The Chancellor has made it clear that he does not wish to disturb the neutral tax policy that he has established so carefully, whereby tax allowances reflect the actual life of buildings rather than providing distorting incentives. I can reassure my hon. Friend, however, that the Department considers Budget representations relating to agriculture very carefully, and that if representatives of the industry make known their views in good time for the next Budget we shall consider them carefully when the Department discusses tax changes with the Chancellor.
We are proud of our high standards of animal welfare. I am grateful to both hon. Members who have spoken for their endorsement of those standards. We believe that they are an example to the rest of the Community, and want them to be extended throughout the Community. We are disappointed that our objective has not yet been achieved. In the meantime, I assure my hon. Friend that the Government have undertaken not to introduce further unilateral welfare measures that would undermine the competitive position of our producers.
To help the industry, we are funding a substantial and wide-ranging programme of pig research amounting to some £1.6 million in the current year 1994–95. Of that, £447,000 is being spent on research into alternative systems of husbandry in response to the stall and tether ban. We have also contributed to advisory booklets produced by the pig welfare advisory group and have sponsored meetings organised by the Agricultural Development Advisory Service on our behalf to provide additional advice to pig producers on alternative systems.
1192 I am sure that the future of our industry lies in getting across to consumers the message about the unrivaled quality and value of the British product and the high welfare conditions under which British pigs are produced. It would be helpful if the welfare organisations could use some of their formidable powers of persuasion to demonstrate to consumers the high welfare standards employed by British pig producers.
We apply high standards but the fact that the consumer often chooses imported products made from animals that have not been raised under such high standards of welfare sets us all the challenge of raising the consumer's awareness. The consumer must be made to realise that when he buys British pork and bacon he is buying meat from animals that have been reared under humane conditions.
The recently announced British quality assured pigmeat initiative, in which all parts of the British pigmeat industry have co-operated, is equally important in getting the message across. We want it to develop successfully and there are encouraging signs that it will do so.
Our processors, retailers and producers are working to distinguish British pigmeat from that produced by our competitors on the grounds of high quality and welfare standards. Only recently I attended the food fair in Sial in Paris and was enormously encouraged that the British charcuterie stand was very successful and the subject of great interest.
It is important that our producers take every opportunity to add value to their pigmeat products to the benefit of everyone in the production and marketing chain. I know that some British processors are using high-quality traditional pigmeat products and innovative ones to increase our market share and exports.
We are self-sufficient in pork and have achieved record levels of exports in the past two years, but we still have much ground to make up in the bacon sector. The efforts of the industry through the charter bacon scheme, which is now part of the British quality assured pigmeat initiative, have established the British product as a major supply. We have around 43 per cent. of the market share, the remainder being in the hands of the Danes and Dutch. I wish that when people are deciding what to buy in the supermarket or the butcher's shop they would bear in mind not only the quality but the welfare standards behind British products.
We have recently heard of a number of enterprising processors taking back markets from the imported product, which is an encouraging trend. I am sure that it is within our industry's capabilities to make further gains so that we become wholly self-sufficient in pigmeat and perhaps even become a net exporter.
The signs are that in 1995 we shall see better returns and improved profitability for our pig producers although I do not dismiss, and assure my hon. Friend that I share, the concern which was perhaps behind his recent roasting when talking to the producers in his constituency.
I am confident that the British industry has a sound and promising future and I am extremely grateful to my hon. Friend for raising the subject.
§ Mr. ColvinI intervene because I was under the impression that my hon. Friend was coming to her peroration but had not answered my question about grant aid. Under objective 5a, money would be available from the European Union. I think that the current rates are 1193 about 25 per cent., or 40 per cent. for eligible capital investment. I wondered whether the case could be made for grant aid to carry out the improvements that the debate is about.
§ Mrs. BrowningI am sorry that I did not respond specifically to that point in my hon. Friend's speech. I am not in a position to make pledges on grants or other financial assistance tonight, but I can assure my hon. Friend that his question will be considered. I shall certainly take that message back with me and when grants are being considered in future, if there is a possibility of giving assistance we shall certainly study it seriously. I shall have to return to my hon. Friend on the subject at a later date.
I am grateful to my hon. Friend for the opportunity to discuss that important sector of agriculture tonight, and I thank him and the hon. Member for Clwyd, South-West for their supportive contributions.