HL Deb 11 April 1960 vol 222 cc841-4

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE) rose to move, That the Eggs (Guaranteed Prices) (Amendment) Order, 1960, be approved. The noble Earl said: My Lords this Order, made under Section 1 of the Agriculture Act, 1957, amends the Eggs (Guaranteed Prices) Order, 1957, which provided for the guarantee arrangements to be implemented through the British Egg Marketing Board. It came into operation on April 3 and gives a statutory effect to the changes which were announced following the last Annual Price Review. The new Order is essentially procedural and introduces important improvements in the mechanics of the guarantee. We are never too proud to learn by experience. Full discussions have been held with the Farmers' Unions and the Board, and I am glad to say that we have been able to reach agreement with them on the changes. The value of the guarantee remains unaffected by these procedural changes.

I cannot deny that the details of the egg guarantees are complicated, but it may help your Lordships to understand the significance of the new Order if I briefly explain what part Ministers play in the determinations for eggs. The Government have to determine three things for hen and duck eggs respectively. They have to determine, first, a guaranteed price to the Board for eggs of prescribed quality. I should stress here that the guarantee is to the Board and not to individual producers; the Board makes its own arrangements for fixing prices to producers. The second thing the Government have to do is to make an estimate of the average wholesale selling price for the guarantee year. The procedure for doing this is agreed with both the Farmers' Unions and the Board. The third thing the Government have to determine is a flat rate of subsidy, which of course is the difference between the guaranteed price to the Board and the estimated average selling price. That flat rate of subsidy is then paid to the Board on each dozen eggs qualifying for the guarantee.

In addition, the Board is given an incentive to get the best out of the market by means of a so-called profit and loss sharing arrangement, "profit and loss" having a somewhat academic definition here. Up to last March an integral part of this profit and loss sharing arrangement was what had become popularly known as the "2d. band", whereby the Board bore in full the first 2d. of the loss in any year when the price realised by the Board was less than the estimated market price; and beyond 2d. the Board carried 10 per cent. of the loss and the Government 90 per cent. Similarly, when the Board had been able to realise more than the estimated price it kept the whole of the first 2d. of this so-called profit and one-half of any remaining profits; the other half accrued to the Exchequer.

Experience has shown that these profit and loss sharing arrangements were open to two main criticisms. First, producers' returns were subject to unduly wide and erratic fluctuations from year to year. Second, these fluctuations tended to blur the Price Review determinations. For instance, although the guaranteed price for hen eggs was reduced by only 1d. per dozen at the 1959 Review, producers in fact received, on average, about 5d. per dozen less in 1959–60 than in the previous year. About 4d. of that difference was due to the effect of the profit and loss sharing arrangements, because in 1958–59 the Board secured a bonus of 1.7d. per dozen under the profit and loss sharing arrangements, whereas in 1959–60 they had to bear a loss of 2.2d. per dozen. The figures 1.7d. plus 2.2d. come to 3.9d., or very nearly 4d.

My Lords, the amending Order is designed to remedy these weaknesses. In the first place, the so-called "2d. bands" have been abolished and all losses are shared between the Government and the Board. This in itself will significantly reduce the year-to-year fluctuations in returns to producers. The second point is this. A reserve fund is being introduced with the object of smoothing out still further the year-by-year fluctuations in producers' returns; that is, the Board is not to distribute to producers all the profit it obtains in any one year. At the same time, the shares of the Government and the Board in profits and losses have been adjusted.

Your Lordships will observe that under the new Article 7 profits are shared initially on the basis of 75 per cent. for the Board and 25 per cent. for the Government. But the provision is then made for the Board to pay 30 per cent. of total profits (that is 40 per cent. of its own share, if your Lordships can follow this arithmetic) into a reserve fund. Subject to the arrangements under which the reserve fund will be used for meeting losses, losses up to 6d. are shared on the basis of 40 per cent. by the Board and 60 per cent. by the Government. The Government will continue to bear 90 per cent. of the losses over 6d. I am sorry to have had to go into this matter in such detail. The reserve fund will be used towards meeting losses that may be incurred. Detailed arrangements for all this are being embodied in an agreement between the Government and the Board, which will be placed in the Printed Paper Office.

We believe that these changes which have now been introduced will bring about a greater degree of stability in returns to producers from year to year.

Moved, That the Eggs (Guaranteed Prices) (Amendment) Order, 1960, be approved.—(Earl Waldegrave.)


My Lords, I am sure that the very complicated statement that has just been made will need a good deal of study, but I should like to ask the noble Earl whether the effect will be to diminish what appears to have been the difference between the amount paid to the Board and the amount received by the producers. That seems to have been something like 25 per cent., which appears to have been going, or is thought by producers to be going, in expenses. The other point which I think has worried many of us very considerably is the conduct of the disciplinary proceedings. There was a recent case in Manchester where three farmers were brought before the Committee and fined £20 between them. The fact that two of them were fined only 1s. each, I think, expresses the feeling that the proceedings need not have been brought at all.


My Lords, I may have missed this point. Could the noble Earl repeat what is going to be the cost of the Government support during this current year, or is it unestimable?


My Lords, may I answer my noble friend Lord Hawke first? This Order has nothing at all about prices in it. It is concerned only with machinery and procedure. The sums of guarantee for eggs are set out in the White Paper which we shall be debating later. There is an Appendix in that White Paper, which, with your Lordships' permission, I think we had better take then and which has various estimates of costs.

In answer to the points of the noble Lord, Lord Grantchester, I am sure that on this particular Order it would not be proper to range into the question of the disciplinary powers of the Boards, although this matter is always under consideration, and my right honourable friend in another place gave a sympathetic answer that he was thinking about this subject. As for expenses, the effect of this Order will be, as I said, to reduce the fluctuations that come about by the profit and loss sharing arrangements. Profit and loss sharing arrangements are essential to give the Board an incentive, and they do not directly refer to the expenses the Board may legitimately incur on behalf of their member producers.

On Question, Motion agreed to.