HC Deb 17 March 2000 vol 346 cc692-8

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

2.30 pm
Mr. Steve Webb (Northavon)

This is a very appropriate time for this debate. We had a national report from the Agriculture Committee at the end of January that concluded: There is without doubt a crisis in dairy farming and, sadly, there are likely to be more casualties before any real recovery is felt. This week, we have had a mass lobby of Parliament by dairy farmers, and a farming summit is coming up in a couple of weeks at Downing street. Within the past 48 hours, the Minister has been at the Dispatch Box tackling the subject of dairy fanning, and I read the report of what was said in the early hours of the morning. I will try not to go over all the same ground, and I hope that she will feel able to do the same.

The debate is also timely for me locally, as a constituency Member. Dairy farmers in my area have been expressing their anger. A couple of weeks ago, more than 250 farmers from my constituency and beyond met in Thornbury to protest about their situation, and about a third of them went on to protest outside a local dairy. There were remarkable scenes—I understand that the protest was very orderly—and at 11.30 at night the dairy management arrived and were willing to talk to the local farmers. I welcome that dialogue, but it is an extraordinary situation.

I was very struck by that demonstration, because it showed that the farmers felt that writing to me or to the Government or talking to the National Farmers Union might not achieve very much. They felt so frustrated at the worsening situation and the fact that no one seemed to be getting the message that they were driven to protest in a very visual way. It brought me up short and made me question whether I had been doing enough to represent their concerns. That is one of the reasons why I sought this Adjournment debate.

The farmers clearly want action. I attended Agriculture questions yesterday and noted the response of the Minister of Agriculture, Fisheries and Food to a question about the milk price. He took the view that it was a matter of market process, and he used the phrase "supply chain" two or three times. There is an element of truth in what he said, but it will not have heartened the farmers in my constituency. I hope that the Minister will tell us today what the Government can do and are doing to help my constituents.

I want to sketch out the national picture and to focus on the concerns of one farmer in my constituency. I visited Mr. Kevin Kingston, who explained to me that the three main sources of income for dairy farmers have all been hit—a triple whammy. First, cull cows, for which farmers might have got some value in the past, are now virtually worthless because of BSE, and the unrealistically restrictive weight limit on the over-30-months scheme is putting further pressure on farmers.

Secondly, there is now little or no market for dairy bull calves, which would perhaps have been exported in the past. There was Government assistance until last summer under the calf processing aid scheme, but that has now ended. Typically, a bull calf will now be shot at birth—often by the local hunt, apparently.

Thirdly, and perhaps crucially, the real price of milk is now about half of what it was 30 years ago. Farmers in my constituency are talking about a price of 8p a pint, which is clearly below even the cost of production.

Nationally, incomes in the dairy sector fell by 21 per cent. last year, but they have fallen by three quarters since the mid-1990s. I recognise that one can pick any very high base and show a big fall, but for those of us on secure salaries, having to cope with a quarter of what we had five years earlier is unimaginable—yet that is what farmers have had to do.

The factors behind the fall in the milk price are well known and are clearly not all under the direct control of the Government. I want to identify three, all of which suggest some possible response. The first is the strength of sterling against the euro, both its direct effect and—as the Minister remarked a day or two ago—the indirect effects, such as the price support mechanism.

The second factor is the weak position of the sellers in the market. Much comment has been made on the competition report on Milk Marque. Farmers give a hollow laugh at the suggestion that they were somehow terribly powerful in the milk market. Given the long-standing decline in milk prices, the idea that Milk Marque was a powerful factor in the market seems overstated. The third factor is that there has been a fall in demand for milk products in overseas markets such as Asia, the former Soviet Union and elsewhere.

That is the national background against which farmers are having to work. Locally, I wish to draw the Minister's attention to particular concerns. Dairy farming is important in my constituency, and yet it is in significant decline. I am aware that there is a national decline, but it seems to be quite marked in my area.

One farmer in Pilning wrote to me to say that, 15 years ago, there were 11 viable dairy farms within a one-mile radius of his farm. He expects that, by the end of the year, it will be down to one or two. A point made forcefully to me by farmers in my constituency is that it is not just the old who are retiring and going out of the business, and it is not just the inefficient who are being forced out. It is very often the most efficient and the best farms that are going under. Some of those which have invested and overstretched are most vulnerable to a downturn, to interest rate rises and so forth. It is not just the weeding out of the weak, but the collapse of the very businesses that we would want to keep going.

There is a fear that more is on the way within the local area. The chairman of Chipping Sodbury National Farmers Union, Mr. Michael Weaver, wrote to me this week saying: I am at the sharp end of the industry and know that another price cut in milk will be the end for many producers, especially tenant farmers still paying high rents. There is very much a local fear that what has gone on is set to continue; there is no sense that we have bottomed out yet. The milk price may be nearing the bottom—it probably could not fall much further anyway—but there is still a sense that there are many more closures to come unless urgent action is taken.

It is clear that my constituents are talking not just about those who work on the farms, but those in the ancillary industries. Another farmer wrote to say: I've spoken to people in the ancillary trades, feed merchants, vets, auctioneers and they are all seeing their farming related business falling substantially and they are very worried about the future because many dairy farmers are considering packing it in. I understand that a local firm manufacturing trailers closed a few months ago, and an agricultural engineering firm at Thornbury in my constituency closed only last month. That is a further local pressure that is causing concern.

Another local factor links to the demonstration that I mentioned earlier, which is the strengthening position of purchasers of farmgate milk. The Minister will be aware of the merger of Dairy Crest and Unigate, which gives them an important market share nationally. In addition, it has been estimated to me that, within the south-west, they may have as much as a 60 per cent. market share in milk; that is what the local NFU believes.

Given the Government's concern about fair competition, I am concerned that a 60 per cent. share in purchasing will do only one thing to farmgate prices—put further downward pressure on them. That is particularly acute in the south-west. The Prime Minister and other Ministers tell farmers that they want a stable, long-term framework, and clearly we are all of one mind on that. However, many, if not most, of those farmers will not be there in the long term, and short-term measures are needed as well. I want to touch on four very briefly.

Agrimonetary compensation is regularly mentioned, and I am aware from the Minister's comments of 48 hours ago that this is not free money. We are aware that there is a cost attached to it, and an issue of prioritisation. One farmer told me that that must be measured against the cost of unemployed farmers and the knock-on effect on the ancillary industries. There is a temptation to characterise this as a large sum of money and, obviously, only a part would feed through into the dairy industry. Clearly, there are savings from investing the money now, and I hope that the Minister can reassure me on that. I know that the Secretary of State said yesterday that it is still on the table, but the deadline is getting tight and farmers want to know. I hope that the Minister will offer some reassurance.

The second thing that the Government can do is, metaphorically, to bang heads together—they can get people round the table, such as the supermarkets, the dairies and the farmers, who, perhaps, have not always worked together effectively. The Government can encourage them to see their common interest in having a long-term secure supply of British milk to the British market. Government have a role to play in co-ordination and in emphasising the need to work together, and I hope that they will do more of that.

Thirdly, the Government should give farmers more freedom to work together in producing milk products. I have read the Minister's comments on that, but one of the advantages that has not been stressed enough is that if we could move milk output from the liquid milk market into milk products, we could affect the surplus in the overall market that is depressing the price. As well as assisting farmers in competition, co-operation in processing would also improve the milk price as a beneficial spin-off.

Finally, the Government should take measures to stimulate demand generally. The issue of free school milk was mentioned in the earlier debate in a negative context, in the sense that the Government are trying to stop a subsidy scheme being removed, but I hope that the Minister will talk to her colleagues in the Department for Education and Employment about extending free school milk. It is good for the health of our children and probably for their education, because well-nourished children study better. It is a win-win situation that would help the domestic dairy sector. I welcome the Minister's suggestion for generic milk campaigns, such as the "Drinka pinta milka day" campaign. I hope that she will say how much the Government will put into that and how long it will take to come on-stream.

Local farmers in my constituency have, regrettably, lost faith that anyone is listening to them. I have sought to be measured—I note that the earlier debate was measured, not hysterical—but I wish also to convey a sense of the anger and frustration that dairy farmers feel. I am aware that the Minister receives many invitations, but I invite her to visit south Gloucestershire to meet the farmers and to hear about the pressures they face, including the particular local factors that I have mentioned. I hope that she will be able to offer them reassurance that the Government understand their concerns and are taking action that will have an effect in the short term, as well as the long term.

I can do no more than conclude with a quotation from the group secretary of my local National Farmers Union, Mr. Robin Winfield, who wrote me a short letter in advance of this debate. He said: with the price of milk forecast to drop even more, it clearly has reached an unsustainable level, and the flow of dairy farms that we have seen going out so far will, I feel, shortly become a flood. I hope that the Minister will come and meet my farmers and tell them what she plans to do to ensure that that prophecy does not come true.

2.42 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin)

I congratulate the hon. Member for Northavon (Mr. Webb) on securing this debate. I understand the concerns that he has expressed on behalf of his constituents, and I assure him that I have already met farmers from Gloucestershire on a couple of occasions. He mentioned that many farmers in his area felt that no one was listening, but my right hon. Friend the Minister of Agriculture, Fisheries and Food personally met farmers who took part in the demonstration and the march that came to Westminster this week. Indeed, he spent some time listening to their concerns.

The hon. Gentleman's concerns match those that have been raised by several hon. Members, including some of my hon. Friends, this week, both in the debate that took place earlier in the week and in the exchanges in Agriculture questions yesterday. At least the hon. Gentleman can take some satisfaction from the fact that his debate is at a more reasonable time of day than the one to which I had to respond just 48 hours ago.

The hon. Gentleman urged me to try to address some different issues during this response, and I shall certainly try to avoid stale repetition of what I have said before, but the essentials of the situation remain very much the same and I shall have to refer to, and perhaps amplify, some of the same issues today.

I shall begin, however, by placing on record the Government's pleasure at the good news from Germany today. The German Parliament has voted in favour of lifting the ban on British beef. We are very pleased at that, and I am sure that the news will be widely welcomed in the agriculture industry.

It is good news for two reasons. It shows that the rules of the single market are being respected. It is also important in terms of the signals that it sends to the world beyond the European Union. Third-country markets can have increasing confidence in the safety of our beef and in the measures taken to render it among the safest in the world. The Government take satisfaction in the German vote, and intend to build on it in the coming months to regain export markets world wide.

Understandably, the hon. Gentleman spoke movingly about the problems in his area. South Gloucestershire is one of the country's most important dairy production areas. The region has more than a third of the total English dairy herd, and dairy farming is, in terms of size, the most important of our agricultural sectors. It is a regionally important economic activity, in terms of direct employment and in terms of the numbers of allied jobs generated both upstream and downstream.

I know that the hon. Gentleman's constituents take events and developments in the sector very seriously, and he referred earlier to protests at local dairies about the price that local farmers receive for their milk. I am also aware that bovine tuberculosis causes concern in the hon. Gentleman's area. That is one of the most complex and controversial animal health problems, and the rising incidence of TB in cattle is a serious matter. The Government are seeking a science-based solution that will be in the long-term interests of farmers, wildlife and the taxpayer.

The Government's five-point research and control strategy is designed to examine all aspects of the disease and to provide a sustainable solution for the long term. The various elements of the strategy include research into transmission, the hunt for a vaccine and the protection of public health.

Research is also being undertaken into the controls that affect cattle, and into those that affect badgers. The trial involving badgers is the most controversial element of the research, but we must try to determine once and for all the role that badgers play in cattle TB. For that reason, we are determined to proceed as quickly as possible. Yesterday, my noble Friend Baroness Hayman, the Minister with responsibility for this area of policy in the Ministry of Agriculture, announced that a further two triplet areas had been enrolled in the trial.

Interference with the trials helps no one, but merely delays the achievement of a science-based solution.

Mr. Webb

I recently took a farming couple from my constituency, whose livelihood had been wiped out by bovine TB, to meet Baroness Hayman. Will the Minister update me on the progress of the trials, as part of my constituency is in the trial area?

Ms Quin

As the hon. Gentleman knows, the trials have three elements, which make up the triplet. I have nothing further to announce with regard to the details of the trials. It is true that part of the hon. Gentleman's area is one of the areas in the trial process.

We are aware of the financial difficulties faced by farmers following a TB outbreak. We compensate the farmer for 100 per cent. of the market value of the animal. We are also in discussion with farming interests at the TB forum about what more can be done. The forum includes conservation and veterinary interests. We are keen that all parts of the forum work together to ensure that we make progress and that the various elements are taken into account.

The hon. Gentleman referred to the all-important issue of the price of milk. Prices paid to milk producers have fallen substantially over the past two years and farm incomes have fallen in consequence. There is no way that we are underestimating the severity of the problem. It is a problem across Europe, although the United Kingdom is particularly severely affected. Some European countries such as Ireland, Spain and Germany have also experienced very low prices for milk.

It is also true that in the single market and, indeed, in the wider world, the competitive situation for commodities such as butter, skimmed milk powder and various types of cheese is difficult. The weakening of certain markets, particularly in Russia and south-east Asia, has had a knock-on effect in making competition even more intense in the European market. Britain has faced that severe competitive situation in very difficult circumstances. There are some specifically British aspects to the situation which have caused difficulty for us. Even though the dairy industry has not been directly implicated in the BSE health scare, none the less, simply by association of ideas, the industry has not benefited from the negative climate surrounding British beef and agricultural products, which we are now addressing.

The industry has also been greatly affected by the strong pound, which affects agriculture in a unique way. Contending with a strong pound is challenging for all exporting industries, but in agriculture the situation is compounded by the fact that we are dealing not just with imports and exports but with the basic support price. The support price is set in euros, and its value falls as sterling rises. The basic price sets a floor, but it means that the floor is even lower in our case when sterling is as strong as it is at present.

The hon. Gentleman, quite rightly, referred to the difficulties surrounding the selling and marketing regime for milk. There was a period of uncertainty surrounding the initial deregulation which has, in more recent times, been compounded by the effects of the Monopolies and Mergers Commission report. The response to the report is crucial. We have welcomed the positive way in which Milk Marque has responded in its proposals for the three successor organisations. However, we are concerned about the ability of companies to be involved in processing. That is a very important element in terms of adding value and helping those involved at the producing end see some real benefits. I believe that the report of the Select Committee on Agriculture is very helpful in this respect. It endorses the views of people keen to see the maximum benefits derived from processing.

The role of supermarkets has been much mentioned by dairy farmers this week. It is right that supermarkets should consider their position in response to the representations made, although they must work within both commercial and anti-competitive constraints. I agree with the hon. Gentleman's stress on the importance of communication between various parts of the food chain. The Government are keen to promote good practice and communication. My right hon. Friend the Minister of Agriculture took an important food chain initiative; the report has been produced, but we shall certainly not sit back expecting problems to solve themselves. We have a continuing commitment to getting different parts of the food chain to work together and to understand the difficulties in other parts. We also seek greater stability and prosperity for basic producers in the chain.

The hon. Gentleman referred to comments made by my right hon. Friend, who rightly made it clear that the Government could not intervene formally to set the price of milk. That said, I would contest any suggestion that my right hon. Friend feels that that should simply be left to the commercial sector and that the Government take no interest in it. In fact, my right hon. Friend is conscious of our opportunities to try to create a better climate for those commercial activities. We want to help both in the short term, and in the medium and long terms. The hon. Gentleman said that we had made several statements about future hopes for development of agriculture. In particular, we hope to advance matters using the rural development regulation. I assure him that we are in no way neglecting short-term problems, and we continue to focus on them.

Many dairy farmers lobbied us hard about their fears for the introduction of cattle passports. I was particularly aware of that concern during my early days at the Ministry. Deferring charges for two and a half years equals £12 million of relief—£4.8 million annually.

Mr. Webb

I met a farmer the other day who pointed out that the Government claim that not having put an extra burden on farmers is help. I appreciate that that burden might have been put on farmers, and that it has not. But if we say to someone who is drowning that we might throw a brick at him, and then do not do it, the person is still drowning. I hope that the Minister understands the point that I am making. The delay was welcome, but it does not make farmers any better off; it just leaves them where they were.

Ms Quin

I understand the point, but I do not accept it. Farmers were worried about the scheme, and they were grateful that we responded by taking that decision.

Many of the recommendations of the red tape review will help the livestock sector, including dairy farmers. Measures to promote generic advertising of milk will also be vital over the months to come. Last week, the scheme to allow such generic promotion was widely welcomed in Parliament. We know how effective such promotions have been in the past, and we should bear their importance in mind. We propose to move forward in months, not years, on that matter. Progress will happen in the near future.

The hon. Gentleman also mentioned the European Union school milk scheme—

The motion having been made at half-past Two o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Three o'clock.