HL Deb 26 June 1961 vol 232 cc816-29

2.55 p.m.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE)

My Lords, there are two Orders here which I beg to ask your Lordships to approve, and it may be convenient if we take them together. There is the Cereals (Deficiency Payments) (Amendment) Order, 1961, which is numbered 1072, and the Cereals (Protection of Guarantees) (Amendment) Order, 1961, which is numbered 1071. Both of these Orders apply essentially to barley, whereas the main Orders, which they amend, contain provisions for all the cereals on which guarantee is paid—that is, wheat, rye, oats and barley.

My Lords, these Orders give statutory powers to the agricultural Ministers in the United Kingdom to bring into effect the proposals for adjusting deficiency payments on barley which were announced by my right honourable friend on May 17 last. The general intentions of this new scheme are, I believe, understood and approved on both sides of the House. We are providing growers here with an incentive to reduce the proportion of the barley crop which they market early in the season and to spread marketings over the remaining months. This is to be achieved by varying the rate of deficiency payments according to the time of year in which the grower delivers his barley to the buyer. In this way we hope to reduce pressure on the market at harvest time, when heavy sales usually lead to a fall in prices. The details of the scheme have been worked out in consultation with representatives of the growers and the main users of barley, and I should like to express my appreciation of the help they have given us in working out these arrangements.

I will take first the Order numbered 1072. Under the main Order, the Cereals (Deficiency Payments) Order, 1955, Ministers are empowered, with the consent of the Treasury, to make deficiency payments on an acreage basis on barley, harvested as grain. In this amending Order, under sub-paragraph (a) of Article 2, authority is given to make deductions from the acreage payment of any grower who delivers barley off his farm, after sale, in any period which may be prescribed, and to make additional payments for deliveries in other prescribed periods. This power will be used in such a way that deliveries of barley made to another farmer who uses the barley on his own holding will not attract deduction or qualify for premiums. Similarly, growers who retain their barley, or part of it, for use on their own holdings will not have their deficiency payments adjusted in respect of such retentions.

The Order itself does not lay down either the periods or the rates of deduction and addition to be applied: it merely gives Ministers authority to determine these periods and rates as necessary. The adjustments for the 1961–62 season and the periods in which they will apply have already been announced, but they can be changed in subsequent years in the light of experience. It may interest your Lordships to know what are the rates and periods for this season, as announced 'by my right honourable friend on May 17. In July, August, September and October there will be a deduction of ninepence per cwt.; in November and December there will be no deduction or premium; in January and February there will be a shilling per cwt, premium; and in March, April, May or June there will be a premium of 1s. 6d. per cwt.

My Lards, it is a fundamental principle of these new arrangements that the total sum payable by the Exchequer as deficiency payments on the barley crop shall continue to be determined by the method laid down in the main 1955 Order—i.e., the difference between the average realised price and the guaranteed price. The amending Order therefore provides, really, for a redistribution of the deficiency funds, and not for any change in the amount of the Government's liability under the guarantee. With the help of the Advisory Committee, we have fixed the rates for the 1961 crop so that the totals of the deductions and the additions should balance, provided the barley comes on to the market at the rate forecast. But this Order, in subparagraph (b) of the proviso set out in Article 2, makes provision for Ministers to take account of any difference between the total deductions and the additions when deciding the basic rate of acreage payment. For instance, if at the end of the season the total additions exceed the deductions, the basic rate of acreage payment to all growers will be reduced. Conversely, if the total deductions are more than the additional payments, then the basic rate of acreage payment to all growers will be increased. It is intended to make the deductions when making the advance payments to the growers concerned, and every effort will be made, even though there is this new arrangement, to issue these advance payments as early as possible. Additions for barley delivered later in the cereal year will have to be made at the end of the cereal year.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, do I understand from that that the advance payments for this year, because of the new arrangements, are likely to be much earlier than the advance payments on oats and barley have been in previous years?

EARL WALDEGRAVE

No, my Lords; I do not think it will be much earlier or much later. I hope the advance payments will be made at about the same time. We generally get most of then paid in January.

To turn for a moment to the second Order (which rather confusingly has the first number on it, Order 1071—that is, the Cereals (Protection of Guarantees) (Amendment) Order) this introduces the amendments necessary to the main 1958 Order to protect the administration of the new arrangements by enabling Ministers to obtain from growers and buyers of barley the information on which to adjust the acreage payments to individual growers.

The most important change is that every person who, for re-sale or in the course of a trade or business other than farming, buys barley from a registered grower, has to be registered by or on behalf of the Minister before buying. A farmer who buys barley from growers for use on his own holding need not be registered, of course, as a buyer. The Amending Order also provides for the keeping of records and the furnishing of returns by growers and buyers, and I will not weary your Lordships with the details of those returns. We have done tour best to make these requirements as simple as possible, to keep them to the minimum necessary to operate the scheme effectively, and to safeguard the interests of the Exchequer.

This is a new scheme, and it is designed to contribute to the orderly marketing of the home barley crop. In the White Paper which followed this year's agreed Price Review, it was stated that new arrangement for barley marketing would be introduced. The arrangements have now been worked out and agreed with the farmers and the corn trade, and these Orders, therefore, give effect to them. I beg to move.

Moved, That the Cereals (Protection of Guarantees) (Amendment) Order, 1961, be approved.—(Earl Waldegrave.)

3.4 p.m.

LORD WISE

My Lords, the two Orders we have just heard the noble Earl discuss are of great interest. Before I say anything about what I call the "main Order" may I say, in regard to Order 1071, that there cannot be any possible disagreement in regard to that. It is helpful to the producer in the fact that he does not have to submit such comprehensive returns as he did in the past; but there is an obligation on the purchaser to forward additional information to the Ministry which I think will be helpful to the Ministry in deciding what should happen later on. Order 1072 will probably arouse more interest and discussion than the agricultural Orders which we discussed last week. It looks simple on the face of it, but it should be considered in the light of present and future trends in the barley market, and in prices.

I say this because I noticed a few days ago that the Minister himself expressed concern in another place at the barley market at the present time. Reading from the Commons Hansard of June 12th [col. 52], I find that, among other things, the Minister said: But, since the Review the barley market has taken a hard knock which, if it continues, would nullify our efforts to bring about a more orderly marketing of the crop. Nobody can be complacent about the present state and prospects of the barley market. I certainly view with great concern a price for barley of around £15 and £16 per ton. These very low prices nut a serious strain on our whole system of support.… It is agreed that this Order is the outcome of the alteration in the barley subsidy envisaged in the Price Review for this year. It is due to come into operation next week, and covers not only the barley of this year's harvest which still remains unsold, but also the barley of last year's harvest which remains unsold. At the end of last month, this unsold barley reached a figure of 5 per cent. of the total of the 1960 harvested crop, and totalled 190,000 tons—a very considerable quantity to have in hand at this period of the year. At the end of May, 1960, the percentage was 13 per cent. of a lower harvested quantity, against 5 per cent. this year of a greater quantity. On the basis of 9d. per cwt. for what is left in the stores of the farmers or others at the beginning of July, that runs into several thousand pounds. This arose, I expect, owing to the difficulty in finding, customers for barley after harvest, and much of the crop had to be stored on the farms. Merchants should not, or would not, take delivery after harvest. Since then prices have dropped considerably, and those farmers who could not sell at harvest or soon afterwards have had to face difficult markets, imports from other countries, and lower prices.

The present Order seeks to remedy this state of affairs. But will it? The prospects of the effectiveness of the Order appear to me to be very uncertain. It starts on its course at a difficult time in agriculture. Many factors will find its possible success, and these cannot be ignored in our consideration. So far as prospects go at the moment, we are likely to be in for an early harvest. Winter-sown barley will soon be on the market. The lowering of the guaranteed price, as agreed to in the Review of Prices, provides no incentive for the farmer to keep the crop. What is gained by keeping it is lost by the lower guarantee. A shortage of money and curtailment of credit in agriculture are also likely to affect the situation. We may have to meet an additional bank rate. We have to meet a new credit squeeze and we do meet the higher cost of borrowing. There is also the farmer's necessity to sell at harvest. He becomes short of money; he owes a considerable amount to the merchants; and it is necessary, therefore, for him to find a ready market as soon as possible.

At the moment, too, we are in competition with imported barley, and the farmers who kept their barley last year and were not able to sell it are not likely to want to keep it this year for the very small—in fact, I would say niggardly—increase in price which the Government have outlined. In addition, there are the rising costs and overheads which we have to meet. If the Government wish the farmer to keep his barley, he would have to stack it and bear the cost of threshing, which cannot be met out the 1s. 6d. per cwt. increase in price that he is likely to get.

In spite of the lowering of the guaranteed price, it is foreshadowed that the cost to the taxpayer of the subsidy may rise to no less than £40 million. Two years ago, it was £25 million, and last year,—133 million. This further increase seems probable by reason of the additional acreage and the competition with imported barley and its effect upon the price of our homegrown crop. The question of importation, apart from its bearing on our exports, warrants our attention. Why cannot the Government devise and operate some new scheme to curtail foreign importation and afford some protection for the home producer? Why should the producer always suffer, if he is in farming? Who is responsible for the present situation of low price and importation of foreign barley? Can we lay it at the door of the brewers, of the merchants or of the commodity speculators? If an import restriction scheme cannot be operated, is the British taxpayer to be faced with a rising bill for subsidies, while the British farmer is denied a fair price for his products and is dependent upon subsidies to enable him to live sand to farm? Surely it is not beyond the wit of the Government to throw the burden of a fair price upon the purchaser or, in default, to ensure that the deficiency payment comes from him.

By this Order, the Government are seeking to regulate the farmers' date of sale. I suggest that some regulation of the operation of purchase would be to the advantage of producer and consumer. It is a queer state of affairs when a subsidy may be half the price at which the product is sold. Recent events in regard to barley point in that direction. Can anyone envisage a better outlook for the future, if present con- ditions prevail? In the speech which I have mentioned, the Minister suggested that negotiations were taking place with the National Farmers' Union in regard to the "dumping" (as it is described) of barley from Russia, France and elsewhere. Possibly the noble Earl may be able to tell us that these negotiations have reached their finality. This Order is part of the Price Review and I know of no precedent for holding it up; but I thought that discussion—and I hope that discussion will take place—would be beneficial to consideration of the Order.

3.15 p.m.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, I am greatly indebted to my noble friend Lord Wise for having made his comments in such quiet and comprehensive terms. However we may look at it, and however it may be argued that the central body representative of farmers have more or less agreed with the Government on this scheme, it seems to me to contain great injustices. In the new treatment proposed for barley offered on the market in the early part of the marketing season, the scheme deliberately imposes, in the interests of so-called better marketing, a severe penalty on the farmer who puts his barley on the market then. As my noble friend Lord Wise said, this is necessitated by his lack of capital, which compels him to rely, first, on credit from the merchants and, second, an overdraft at the bank. In August and September, the farmer has not only to face the relief of those commitments as soon as his product is available but also the extra wages, overtime and other expenses of harvesting. Therefore, a penalty is laid upon this section of the producers.

In the light of what my noble friend said about the general situation in the barley market at the present time, and the nature of conditions in various parts of the country, this scheme seems to me to be unfair. During the last growing season many farmers were unable to plant a sufficient quantity of winter barley. In many parts of the country, they were not able to get on to the land until the middle of March—and in some parts it was later than that—and in consequence we may have a larger percentage of spring-sown barley and other grains to be sold in the coming season. Moreover, because many farmers in those parts of the country where spring wheat is not usually a good investment have this year turned a larger acreage into barley there will be further quantities offered in the market this year.

In the light of all that, it seems to me that the scheme to amend the existing scheme is unfair. After all, the acreage payment system was adopted, after careful thought, as being fair to growers of barley and other cereals. It meant that a sufficient number of people with capital had to withhold their grains from the market and get a much higher price, in order that the acreage payments to growers as a whole would be averaged so as to be of mutual benefit to the industry at large. But in this kind of process it seems that although you have had to give quite heavy special subsidies to the small farms, you may be partly helping to drive some of them out of business. That seems to be a great pity.

The only other question that I should like to ask is this. Have the Government now come to the state when they can say whether or not they are going to meet the specific demand of the National Farmers' Union for action to be taken under the anti-dumping laws to meet the extraordinary situation which was apparently viewed almost with horror by the Minister himself in the statement which was read out to your Lordships this afternoon? When shall we know that the Government are going to take action to deal with this unwholesome physical condition of the market at the present time, and so close to the first days when the British grower will be offering some of his product?

3.21 p.m.

LORD WALSTON

My Lords, my noble Leader and my noble friend Lord Wise have most politely pointed out some of the weaknesses of this scheme; but I should like to be much blunter. I think that this is (and I am sure that in his heart of hearts the noble Earl feels it, too) a useless scheme. What are we trying to do? The noble Earl said that we are trying to achieve more orderly marketing. That is a good thing to achieve, and by all means let us try to do it. But to do that what is being offered is a differential of 2s. 3d. per cwt., from minus 9d. to plus 1s. 6d., over twelve months, which is approximately 10 per cent. You are trying to encourage farmers to keep their barley, and not sell it during the autumn, by paying them 10 per cent. more than in the guaranteed price. But most farmers, particularly at that time of year, want an overdraft, and this at the present time will cost them 6— per cent., with every indication that it will be more before harvest comes.

But to take the reasonably optimistic figure of 61 per cent., that leaves 3— per cent. with which to cover the enormous wastage on drying out of the barley, which may show a 5 per cent. loss in weight during that period, and the enormous hazards that come from damp and rats getting in, or whatever it may be, together with the actual cost of the equipment in order to make it possible to store the barley. But that does not include the biggest risk of all, which is the risk of a fall in price. What would have happened if this had come in twelve months earlier and a farmer had been encouraged by this 10 per cent. to save his barley until June instead of selling it in September or October? He would probably have been able to sell his grinding barley at 18s.—it even went a little higher, if he was lucky, at that time. That would have been subject to a deduction of 9d., resulting in a figure of 17s. 3d. If he sells it to-day he will be lucky if he gets 15s. or 15s. 6d. for it at the outside. That 15s. 6d. plus ls. 6d. makes 17s. Therefore, this year he would have been much worse off if he had followed this Government advice and accepted their incentive to keep his barley.

Farmers are not fools: they see what has happened in this last year, and they will learn the lesson for next year. In my opinion, it is idle to think that this scheme of a very minor differential, good though it may be in principle, will have any effect whatsoever. The only way in which we can regulate the marketing of barley, as experience is proving to us, if we open our eyes now, is by being prepared to regulate the import of barley. There is no ducking that if we are to have guaranteed prices and a guaranteed market which mean anything at all. We must be prepared to say at certain periods that barley or other cereals will not be allowed to come into the country. I am very much in favour of the efforts that are now being made to prevent the clumping of foreign barley—and that goes almost without saying. Let me remind your Lordships that French barley, which is to-day coming into this country at 15s. or 15:s. 6d. a cwt., or £15 or £17 10s. a ton, is what the French farmer is being paid l5 per cent. more for: he is getting £23 a ton for it. If that is not a clear case of dumping, I do not know whether anyone can produce a case that will satisfy Government Departments and officials.

But that is not the only point on which I rest my case. I suggest that while we must be prepared to take urgent and rapid steps against flagrant clumping of this sort, we must also be prepared, if it is in the national interest, to hold up at certain periods of the year the importation of barley from other sources. It is no good shutting our eyes to this. Barley from Russia can never be proved to be dumped, because nobody knows what price the producer of Russian barley gets; and the exchange rates are so complex that, even if that figure were established. the second could not be arrived at. So purely anti-dumping legislation, even if operated quickly, would be insufficient.

It is not only the farmers in whom we are interested here, because eventually the consumer has to pay. It is a curious thing in all this that, even when we do import food (barley, wheat or whatever it may be) at a low rate—or call it a dumped price—the price to the consumer does not seem to fall. It certainly does not fall rapidly, and it certainly does not fall hand in hand with the lower prices. I should have far less objection if, because we were bringing barley into this country at a cheaper price, the price of beer and other products went down. But in fact the price of beer has just gone up. I should have far less objection when we bring in wheat at extremely low prices if the price of bread went down. But the price of bread has gone up. So we cannot have the justification of saying: "Let us import cheap food, because, although we have to pay a larger sum in deficiency payment, at least the consumer is benefiting". The consumer does not benefit by cheaper prices; and the consumer, as taxpayer, is penalised by having to meet ever greater deficiency payments. I suggest that these items, which are coming up the whole time and being seen by us all, ought to make us think two or three times about whether in fact the present system of attempting to give stability to agriculture and to carry out the principles of the 1947 Act is working as efficiently and effectively as it might.

3.28 p.m.

LORD SILKIN

My Lords, there is little that I wish to add to what my three noble friends have already said, but I want to associate myself entirely with the case they have put forward. I am interested in this matter primarily as a consumer of barley. Of course, I welcome from a personal point of view the present position under which I get my barley at least £10 a ton cheaper than I did in the corresponding period last year. But I derive little satisfaction from that, because it is an indication that there is something wrong. We have attempted in the agricultural industry to plan production and marketing and to ensure that it is carried out in an orderly way. It looks very much as if the attempt has failed. Barley is merely symptomatic of other commodities. To-day it happens to be barley; but the noble Earl will remember that we have had exactly the same problem with pigs at one time or another. There has been over-production of pigs and under-production of pigs. We are now being asked to produce more pigs, and I imagine that it will not be long before we are asked to cut down production. The same has happened with milk, eggs, and with other agricultural commodities.

It seems to me a very curious way of organising our farming industry to have these repeated ups and downs—over-production, under-production, gluts, scarcities, and so on. At the present time, of course, we are suffering from two things which happen to come simultaneously; an over-production of barley and, at the same time, considerable imports, which my noble friends have described as "dumping "(and I have no reason to think they are wrong), of barley. If the British taxpayer has to pay for both the over-production and the dumping, it is a very extraordinary way of planning our agricultural production.

I should like to see the Government dealing with this matter in a way different from that which they are doing, which seems to me rather tinkering with the problem, and not in the best interests of the small producer. The big producer will not mind, but the small producer, who has to carry his barley over a long period, at the risk of penalisation, is not really compensated by the extra subsidy for the cost of keeping his barley longer: so that does not strike me as being an effective or fair solution of the problem. I should like to see the Government looking at this from the point of view of controlling production, as well as marketing, and also importing, so that the country gets the barley or the other commodities it needs while avoiding this over-production and underproduction, and the necessity of juggling with the subsidy, as the Government are doing at the present time.

3.32 p.m.

EARL WALDEGRAVE

My Lords, we have ranged fairly widely round the Orders that we are supposed to be discussing to-day, but your Lordships are generally 'tolerant of that and I have no reason to object. We are dealing here with quite a minor piece of machinery—the adjustment of the deficiency payments on an individual crop of barley. I doubt whether I should follow some noble Lords who have spoken into the far wider criticisms of agricultural policy generally, but there it is.

The noble Lord, Lord Wise, was, I thought, unable to keep these two subjects separate, as I think they ought to be kept separate. The scheme we have before us now is not a dramatic scheme, but a sensible and practical scheme, to even out the marketing of the home grown barley crop or to help to do so. It is not really proper, on this scheme, to discuss these far wider problems of dumping and imports and whether the deficiency payments system is under strain or not. Of course, I fully appreciate and agree with what my right honourable friend said in another place, that the barley situation now is causing considerable concern. The prices have been correctly quoted—£15 a ton, with the guaranteed price at nearly £28 a ton. Of course, that must cause concern, and noble Lords will know that there is at this moment an application put in by the National Farmers' Union to the President of the Board of Trade for countervailing duties under the anti-dumping legislation, and I could not for a moment comment on what Ministers will decide. All I can do is to reiterate what my right honourable friend said in another place when questioned on this subject: that the Government are treating this application by the National Farmers' Union with urgency, and we shall all be informed of the outcome of that application as soon as possible. I cannot anticipate now what will be said.

The noble Viscount, Lord Alexander of Hillsborough, felt that there were injustices, and that the deduction of 9d. per cwt. from a guaranteed price of 27s. 7d. per cwt. was too severe, and would cause great injustice. I thought the noble Lord, Lord Walston, rather contradicted him when he said that they were not nearly big enough and would not be effective because they were so small. We cannot have it both ways, and I believe that these are sensible adjustments to make in the first year of trying this scheme, and that we should, to use a country phrase, "Let the dog see the rabbit". Let us see whether this will not be much more effective than some of the critics think it will be. There is about 65 per cent. of the barley crop normally marketed between July and October, and we believe that may go down by 10 per cent. to about 55 per cent. as a result of the new scheme, and we feel that that will have a really steadying effect on the market. I do not think this is going to drive small farmers out of business, nor do I think, with the noble Lord, Lord Walston, that it is going to be entirely ineffective and have no use at all.

The noble Lord, Lord Silkin, spoke as a user of barley—as a big pig feeder, I understand. I could not follow his argument, because although he liked having this cheap barley on which to feed his pigs, he thought it was somehow wrong that he should be able to buy this cheap barley to feed his pigs. I do not think it is, provided we can adjust the price to the barley grower by means of the deficiency payment so that he too (this is the whole essence of this policy) can get a fair return on his barley.

The main point made by the noble Lord, Lord Silkin, was that we have these fluctuations—too much barley, or too few pigs—and what are the Government going to do about it? This is much more a biological matter than a Government matter. We are not dealing with a factory here; we are dealing with growing life, and it is not possible, under any system, to prevent a favourable harvest from producing a lot of grain, or a flood of rain from causing a bad hay crop—and the noble Lord knows that. That is the difficulty with which agricultural Ministers always have to deal. There will be fluctuations, and no honest agricultural Minister will ever deny that. What he will say is that because of these fluctuations we will try to put in administrative arrangements that will modify them.

In this barley scheme we are talking about, by taking off these small amounts of 9d. per cwt. at the beginning of the season, and putting it up to Is. 6d. at the end of the season, perhaps we shall level out the market a little more than we think. Let us be optimistic and hope it will be more. Certainly do not let us be pessimistic before we have given it a trial and think it will be less. The noble Lord, Lord Walston, said that in my heart of hearts I did not believe in this scheme. That is not true at all. I believe it is a sensible scheme agreed between both sides—that is to say, the merchants and the farmers.

I do not want to say much more about this now, but I think it is wrong that we should go on record in this House as saying that a scheme, carefully worked out, agreeable to the industry, and brought in on an experimental basis, should be met with as much carping criticism as we have had this afternoon, and I hope that this Order will now be approved without that criticism weighing too much with your Lordships.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, we are not conscious that we have exercised carping criticism. But perhaps one might make a moral judgment at the end and say of the scheme: … unto everyone that hath shall be given; … but from him that hath not shall be taken away some of that which he hath.

EARL WALDEGRAVE

My Lords, I will not accept that as anything like a fair criticism of this scheme, if your Lordships will study it.

On Question, Motion agreed to.