FATSTOCK (GUARANTEE PAYMENTS) ORDER, 1957 (Hansard, 5 March 1957)

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL ST. ALDWYN)
My Lords, your Lordships will recall that last October we debated an amendment to the current Fatstock (Guarantee Payments) Order when the authority of this House was sought to the making of supplementary payments to producers of fat cattle during the 1956–57 fatstock year. At that time I said we should be introducing a new system in the fatstock year beginning 25th March this year which would make supplementary payments unnecessary in future. The purpose of the Order which is now before the House is to give effect to these new arrangements. Like the Fatstock (Guarantee Payments) Order, 1955, which it replaces, it is entirely procedural. It covers fat sheep and fat pigs as well as fat cattle but it does not state the price guarantees or define the different classes of fatstock. These are matters which are determined following the Annual Review, and they will be announced separately in a White Paper which will be presented to the House when the Review has been concluded.
Before I set out the main details of the new proposals, I think it might be helpful if I were to remind your Lordships of the considerations which led up to this change of system. The present system of calculation, which is based on a 52-week rolling average, has been used since the decontrol of meat and livestock in July, 1954, and by and large it has worked reasonably well. Last year, however, the sharp and sustained decline in cattle prices showed up one of its main defects, namely, that the rates of guarantee did not reflect sufficiently quickly current changes in market prices. This had the result that many producers 177 in the early part of the year lost money, and the whole prosperity of this very important part of the farming industry was at stake. It was for that reason that supplementary payments were made to cattle producers last year, and in order to avoid similar difficulties in future I said that we should be introducing a new Scheme under which the rates of guarantee would respond much more quickly to fluctuations in market prices. Because of this greater responsiveness, the rate of guarantee under the new Scheme will fluctuate from week to week to a much greater extent than hitherto, but producers' returns over the year as a whole will approximate much more closely to the standard price.
The Order which is now before the House embodies the new arrangements which will come into effect on March 25. Briefly, the changes are as follows. The standard prices for cattle and sheep will vary seasonally, thus reflecting variations in costs and marketings. The standard price for pigs will not vary seasonally but will continue to be subject to adjustment for changes in feed costs, which account for over 75 per cent. of total pig production costs. Under the present system, the rate of guarantee is announced in advance for periods of four weeks. Under the new system it will be announced in advance, but as a weekly rate for each class of fatstock; and in order that the guarantee payment shall reflect as nearly as possible current marketing experience, it will be calculated each week by reference to forward market trends, as well as to recent market prices.
The calculation will be as follows: the guarantee will be related to an 8-week period, and the rate for any week will be the difference between, on the one hand, the average of four weeks actual plus four weeks estimated market prices, and, on the other, the standard prices averaged over this same 8-week period. The stabilising limits, which have proved their value in the present Scheme, will be retained in order to guard against sudden and unexpected short-term price movements. This will mean that the returns received by producers cannot fall below a prescribed limit from the weekly standard prices. The stabilising limits, which will be closer to the standard price than at present, will be determined after the Annual Review and will be announced 178 in the White Paper with the seasonal standard prices.
Last October I said that my right honourable friend and I had had very helpful and amicable discussions with the producers' representatives about possible new schemes. I am glad to say that the scheme which is to be introduced in a few weeks' time, and for which authority is sought in the Order now before the House, was the outcome of these very helpful discussions, and it has the fullest support of the National Farmers' Unions of the United Kingdom. I feel confident, therefore, that this new system will be as well received by the industry as a whole as it has by its leaders, and that it will provide a sound basis on which to build an expanding and prosperous livestock industry in this country. I beg to move

§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, we are very glad to know that the Order has been produced and that the producers' associations which have been consulted are largely in agreement. The noble Earl, however, in his explanation, raised one or two points which make me wonder. I gather from him that there are to be wider fluctuations than would actually be the case at the present time but that the system would work under a formula. It seems to me, from the figures quoted, that the ordinary farmer will not understand the formula very clearly. Using that formula, with four weeks included in the consideration, the ultimate guaranteed price will be announced weekly—that is, in the week after the known average sales have come to hand. I suspect that that system will certainly be very much better than was: the case twenty-one months ago, a period which provided a shocking experience for farmers, who then lost, on their fatstock cattle, money which has never been recouped.

EARL ST. ALDWYN
Oh, yes.

§ VISCOUNT ALEXANDER OF HILLSBOROUGH
My Lords, not really—or perhaps I do not know the right fatstock farmers. But what strikes me—and it is a matter to which I hope the Minister will 179 still give consideration, to see what pressure can be brought to bear on the Treasury—is that it would be far better for the country, in the cost of guaranteed prices, and also in guaranteeing prices to all fatstock farmers, and not merely to the large producers, if there were a steady guarantee. The large fatstock producer who can send six large batches of cattle to market in the course of a year is easily able to adjust the low price with the high price, subject to guarantee; whereas the small man, sending in an odd animal at a time, is hit if he sends it in the wrong week. He is not going to be too well off, although he will certainly be better off than he was under the previous Scheme. A steady guarantee, which is what is really needed, would cost the Government less in subsidy, and would possibly lead to a lower average price to the producer; but it would be fair and known and would be a type of price at which a farmer could plan to produce. That is my only quarrel with the Scheme. I welcome the fact that Her Majesty's Government have been trying to repair the situation which arose before, but even now this Scheme does not satisfy my idea of what ought to be done.

§ LORD WISE
My Lords, may I add a few words to what my noble Leader has said in regard to this particular Order? I am afraid that I am quite unrepentant, as I was in October, on the question of marketing and the provisions of this particular Order. The Order is highly complicated, and I think it will be found difficult of understanding by the farmer or anyone else who reads it. But I must say that the arrangement now proposed seems to be better than the one we had last year. I hope that when the Review of prices comes out—as I expect it will do in a few weeks time—the standard prices and the prices which will be paid under this Order will be more satisfactory to the farmers.
The noble Earl said that this Scheme had the approval of the whole of the farming community. I am not quite sure that that is so. My noble Leader has referred to the ins and outs of the marketing system which undoubtedly hit the small farmer, particularly the man who cannot send cattle to market week by 180 week. I am certain that the farming community as a whole would prefer a fixed guaranteed price, on a live weight basis if necessary. The system of marketing, the system of disposing of cattle, as it affects people who are producers and others, is extremely difficult and uncertain at the present time. I hope that in my short lifetime I may be able to see a different system once again coming into the farming industry in regard to marketing. This one is far too uncertain. As my noble Leader has said, we producers are likely to lose money, even though we receive money from the deficiency payments and the stabilising payments and all the rest of it. What I want to see is certainty once again brought into the farming industry.

EARL ST. ALDWYN
My Lords, I am grateful to the two noble Lords who have spoken, and who, I think, have welcomed this Order, in spite of some mild criticism. I think perhaps it may be well if I explain in a little more detail how the calculation will work. It will operate like this. On the Wednesday of each week the rate of guarantee for the following week will be calculated and will be announced on that same day. In other words, every producer will know on the Wednesday before the week in which he is proposing to sell what the rate of guarantee will be—that is, subject to any alteration which may be necessary as the result of the average return to producers in the following week being above or below the margin we have set each side of the standard price. That limitation on each side we have found has been of great value up to now, and we shall, as I said, be reducing the margin quite considerably, so that the variation suffered by the average seller will be very much less than has been the case in the past. I appreciate that the noble Lord, Lord Wise, will always stick to his desire for a flat guaranteed price, regardless of market requirements, consumer desires or anything else. I am afraid that we believe that the consumer should have a reasonable chance of expressing his desires to the farmer, and not just to the Government, so that the farmer will be encouraged to produce what is required by the consumer.