AGRICULTURE

HL Deb 29 March 1961 vol 230 cc119-41

2.57 p.m.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

rose to call attention to the state of agriculture; and to move for Papers. The noble Viscount said: My Lords, in rising to deal with the Motion on the Order Paper with regard to the state of agriculture, may I say at the Outset that it had been the intention of noble Lords on this side to transfer this Motion to the name of a new Member. my noble friend Lord Williams of Barnburgh, a former Minister of Agriculture, whom many of us believe to have been the Minister most sympathetic to the farming industry in the whole of our Parliamentary lifetime, and perhaps more advanced on the 1947 onwards development than any other person. He will speak later because of representations which were made to me through the usual channels and on which I have acted. I am looking forward eagerly to his participation to-day. More than that, I regard him as our principal agricultural brain for the future.

The state of agriculture to-day has given rise to a considerable amount of anxiety in the industry, and this anxiety has certainly not been outside the consideration of the Minister himself. I would say at once that, since he assumed office, the Minister has I think shown a keen interest in the condition of the industry, and although I may not all the way through what I have to say agree with what he apparently is trying to do, nevertheless I should like to recognise that fact. He has considerable experience since the war, being an agriculturist himself.

The state of the industry, however, gave rise, as your Lordships will remember. to discussions between the Ministry and the National Farmers' Union which resulted in the publication of the White Paper, Cmnd. 1249. The discussions had gone on between June and December, 1960, and, so that I may not perhaps overlook it later in what I have to say when we come to deal with what has really led to this debate to-day, the publication of the Annual Review and Determination of Guarantees, 1961, I should like to make one or two comments on this White Paper, Cmnd. 1249. Clearly, the discussions between the Minister and the Farmers' Unions over the last nine or ten months have been partly because, at long last, more of the Farmers' Union people—there have always been some—have been pressing upon the Government for a proper recognition of the position of the agricultural industry in the general economy; and that becomes prominent in the very first page of the White Paper.

The position was revealed that at that time we were growing almost half the total food requirements of the nation; it was also revealed that we were producing up to about two-thirds of the food that could be grown in our kind of climate, leaving out of account foods grown in rather different types of climate. But when we look at the percentage figure given in paragraph 4 of the White Paper we see it stated: This is the result of a 70 per cent. increase in net output since pre-war. which is estimated to be worth some £300 million a year. The more I look at the state of the national economy in relation to agriculture, the more I ask myself: "What was the real value of that 70 per cent. increase? From what date was it actually calculated? What is the relationship of this increased output to the net income which is referred to in the Appendix to the Annual Review White Paper? And what is the true position of the individual farmer to-day, on his net income, in relation to the spending power required having regard to the depressed value of the pound? "Most farmers say to me, as I am sure they say to their union branches: "Although we may appear to have £x, as shown in a national return in astronomical type figures, when we come down to actually spending the income we have left to spend, we are worse off than we were a decade ago."

There has been this tremendous decline in the purchasing value of the pound; and if we take the net income of a farmer of, say, 216 acres (which takes into account the labour of the farmer himself, the labour of his wife, if she is working, and also, charged as a profit against the farmer, what food grown on his own farm he uses in his own house—although no occupier of a backyard is ever charged on what he produces for himself) we see that there is a good deal to be said for the farmer's claim that he is worse off to-day, and that his net income has not risen in anything like the same degree as that of the rest of the community. Almost every other section of the community has had advantages in wages and salaries and, in certain respects, tax relief—things which have not affected the farmer one iota. Farmers, therefore, in their net position, are worse off to-day, except for the few very large farmers who have capital behind them, and are able to take part in the Government's plan—a very good one—for practical improvement, and also in long-term stocking and so on. But two-thirds of the farmers are not in a position to take the best possible advantage of that situation. That is what I wanted to say, first of all, about the general position of the farming industry.

I could have added something from paragraph 10 of the same Paper, which says that the support system which is running was worth about £160 million a year on the price guarantees. That has to be taken into account when we are considering the position to which I have just referred on income; and if you work on the value of the pound ten years ago it is not worth anything like £160 million. Then we are told that there is a constant objection in the minds of a large proportion of the non-farming community to the fact that we have this subsidy system at such a high cost to the Exchequer. I very much welcome the statement at the beginning of paragraph 13, that: While the volume of agricultural output has increased, the cost of Exchequer support in recent years has remained fairly steady at about five per cent. of total Government ordinary expenditure. Perhaps, therefore, I might say, on the same grounds that I have been quoting, that while the volume of output has been going up and up, Her Majesty's Government apparently say in this that there has not been any substantial increase of cost to the Exchequer on account thereof. We know full well how much has been taken into account—a quite nominal figure, a nominal assessment. It is admitted in the White Paper from time to time that no one knows on what basis £25 million a year is to be taken off the consideration of the Review of Prices for increased efficiency. Nobody knows that. I shall be very happy if, in the course of the day, either of the Government speakers can tell us exactly how they arrive at the idea that the farmer can be depressed in the ordinary Annual Review of Prices to the extent of £25 million in respect of increased efficiency.

So far as one can see, this is the only industry to be penalised, year after year, on increased efficiency. On the contrary, we see every other class of industry with every increase in efficiency increasing its profits, widening its distribution to shareholders and engaging in take-over bids and getting very large capital increases in gains as a consequence. The farmer gets none of these things. He has always been left dragging his heels at a slower rate than the rest of the community, in spite of the assistance which has been given.

I wanted very much to say that to the House this afternoon. I also want to ask, once more, whether, in regard to this Review of Prices which is to be dealt with this afternoon, the Government are truly able to say, as they say in paragraph 15 of their White Paper, Cmnd. 1249, that: They have stood arid stand by all their obligations under the Agriculture Act, 1947. That is a fairly strong question. The Government make that claim in that White Paper and it is just as well to remind your Lordships (because probably most of you have not reinforced yourselves with this extra White Paper before coming into the House) of what those obligations are—namely, to promote and maintain: a stable and efficient agricultural industry capable of producing such part of the nation's food and other agricultural products as in the national interest it is desirable to produce in the United Kingdom, and of producing it at minimum prices consistently with proper remuneration and living conditions for farmers and workers in agriculture and an adequate return on capital invested in the industry. I believe my noble friend Lord Williams of Barnburgh will remember the origin of those particular words; and the task that Parliament has, along now, is to see whether that wise and sincere obligation has properly been carried out by the succession of Conservative Governments.

The next matter to which I want to pay some attention arises on paragraph 29. I was going to say a word on paragraph 28, but I think I have already covered that in what I have said. But I want just to point out the wording used by Her Majesty's Government in paragraph 29. The Government agree with the Unions that it would be wrong to regard £25 million, or indeed any other sum, as a scientifically ascertained figure representing year by year the precise amount by which the industry's resources are increasing through greater efficiency. It is no more than an indication of the amount which, taking one year with another, the industry may be expected to secure from improvements in this direction. At any rate, if that is an admission, it is part answer to the point I raised upon a previous paragraph in the White Paper. But I am bound to say that when I look a the calculations in wide astronomical figures in the White Paper each year, and at the details in the Appendices and the various tables, I cannot help feeling that we ought to have some sort of an inquiry as to how this constant deduction from what would otherwise be a straight Review of Prices on costs takes place: some real assessment showing how this calculation of increasing efficiency is arrived at, especially in view of the words in the White Paper.

My Lords, I thank you for your patience, and I should like to turn now to the Review White Paper, Cmnd. 1311. I must say that prima facie there are good things in this White Paper from the point of view of the farmer, but there are bad things, too. I think that the worst possible thing with regard to the White Paper is the uncertainty which arises from a number of the decisions which it conveys to Parliament. I say at once that I myself am very much indebted to the B.B.C. Television Service for the exposition of the White Paper that was enabled to be given, under the chairmanship of a very large farmer, Mr. Cherrington, last Sunday week. The main witness, as it were, of that examination was Mr. Selly, of the Sunday newspaper, the Observer; and I feel very much in agreement with the line of approach to the general subject adopted by a Conservative correspondent on this occasion. I also listened with great care to the answers of the Minister of Agriculture himself, in the same showing, in answer to questions put not only by Mr. Selly but by Mr. Cherrington and other members of the panel.

It is clear to me, having read the White Paper itself very carefully, and having also gone back over what I heard said upon the television broadcast, that a number of points stand out. It was said during the course of that debate that there were many loose ends in the White Paper that remain still to be tied up; many issues, in other words, that are left unresolved as a consequence of the issue of this White Paper. Mr. Selly's view was that, as it will take some four to six months for the industry, both as a producing industry and as including those who in part depend upon the industry for their livelihood (milk distributors and the like) to digest fully what it means with regard to milk and certain other branches of agricultural produce, by the time that is all fully digested this White Paper, which was so much welcomed in respect of some individual announcements on changes in price, will be regarded as one of the most controversial in the history of the issue of these White Papers.

I was very concerned—and I declare my interest in this matter, because on my mixed farm I have a dairy herd, and I never speak on these matters without declaring an interest—about what had arisen in regard to the milk problem. In the White Paper it is said that there is to be an increase of 0.8d. per gallon; and that is to be dependent, apparently, also upon the maintenance during the summer months of the price of 8d. a pint instead of there being a reduction to 7½d. a pint. Of course, with the (shall I say?) co-equal action of the Government in increasing the standard gallonage which is to come within the fixing of the standard price by a small percentage, the net return to the farming industry, on paper, will be altogether 0.8d. plus 0.2d. per gallon. In fact, the whole cost of this is to be passed on, presumably, to the consumer; because if we take the extra ½d. a pint for three months of the year and work it out on an annual basis, that will amount, even to the consumer, to an increase of ld. a gallon over the whole year.

But even that small increase has a particular string attached, for the Minister insists that, in view of the expanding nature of the production of milk and the consequent disturbance of the old balances between milk sold for liquid consumption and that sent for manufacture, it is likely gradually to reduce the overall net return to farm milk production and lead to further requests for State help and the like. And, apparently, although there is no mention of this at ill in Cmnd. 1249, coming like a bolt from the blue almost into the discussion of the Review prices, there is the condition attached to this very small increase that there must be by July 31 a new scheme for marketing milk, produced by discussion between the National Farmers' Union, the Government, the Ministry of Agriculture, and the Milk Marketing Board.

What an extraordinary thing it is to have to read from Mr. Trehane, the chairman of this enormous State collective Marketing Board, that during all these discussions of Review prices, and discussion of this tag attached with regard to producing a new quota scheme by July 31, failing which there is a threat of withdrawing the increase of 0.8d. in the next Review, the Milk Marketing Board were never once consulted. That seems to me extraordinary. I suppose it can be argued—I like to put both sides of the case—that the National Farmers' Union have a Milk Committee and probably there was some means of conveying the general view of the Milk Marketing Board on any such proposal as might arise to that Milk Committee of the National Farmers' Union; but that is a very widely stretched round procedure to go through. It seems to me that this was a very great pity indeed.

I hope that the Government will have second thoughts about this date, July 31. It is not merely the producers' interest that has to be considered. You will have to consider what might be the effect of any possible system upon the trade outside handling the milk; and I see no mention of that anywhere yet in the discussions which are taking place. No doubt the marketing officers of the Milk Marketing Board may have something to say about it, but I should like to see the conference go much wider than that, so that, in fact, the farmer, producer and distributor alike can see to what kind of goal we shall be brought collectively in the industry, productive and distributive, as a result of any quota scheme introduced at the request of the Government.

I do not quite understand what the Minister's own personal attitude is, be- cause at one moment he seemed to deny that there was any real thought of a quota, but under examination it seemed to me he was going very close to it, and Mr. Trehane, of the Milk Marketing Board, seemed to he quite convinced that that was the real objective. However the Farmers' Unions were pressed into a conditional acceptance of the position, it was quite clear from the answers given by the Minister to his cross-examiner during his television interview that he had determined himself to tackle this subject and to put his views through to operation. I am sure that it is as likely as not that the milk industry will be split from top to bottom on this, unless a new approach can he made—an approach different from any that I heard or saw in that television interview; and I hope you will look at it again.

Then there is the decision about barley. The marketing price of barley is to be reduced by 1s. 2d. a hundredweight. To put it in tons, it is a reduction of £1 3s. 4d. a ton in the standard guaranteed price. I observe, first of all, that this is at the maximum rate of reduction which is provided for in the 1957 and 1958 legislation—the maximum rate, 4 per cent. That is a very sharp reduction to make. It also means that there will be a consequent reduction in the acreage payment for barley, and that will be affected a good deal if the other proposals in the White Paper also come about. Over the last few years I have talked with a great number of grain producers about this. A few years ago, the National Farmers' Union consented to the setting up of a kind of working committee to meet at the beginning of the farming year, before the current, ripening harvest was put upon the market, in order to forecast the kind of world price that was likely to obtain and what would be the effect on the market of that world price. Most of the farmers I have talked to about it seem to think that that has been one of the most depressing influences on the ultimate price inclined to be paid, especially in the early stages of the home buying of coarse grain and of wheat.

Now, apparently, you want to check the acreage of barley from going up; and you want, at the same time, to give special favouritism to the wealthier farmers, who have been able, either by their own capital resources or by the sheer economic value of the size of their farms under arable cultivation, to hold their barley off the market for six months or more in order to get a better price for it by not flooding the market. At the same time, what must be very nearly two-thirds of the remaining arable farmers will be unable to stand up to those conditions, and will have to go on putting their barley forward at the early part of the season. They are to be penalised, apparently, in consequence, by the reduction in acreage payment as well as by the actual working of the market conditions.

I do not know whether or not these two loose ends are going to be tied up, but if you take the man who is being encouraged to go on holding his barley for longer in the season, what comfort can he gain from the experience of, say, the 1960–61 marketing period, and what assurance that he will gain any marketing advantage at all? I followed the market prices for barley, oats and wheat pretty closely during the last twelve months, and people who held on to their products until, say, February last, gained very little because of the different dates of marketing over those who were selling last August and September. Therefore, I do not quite know what is going to come out of it. I think that perhaps we ought to have a little guidance from the Ministerial answer as to what is really the effect of this matter in the White Paper. Certainly I think it is one of the ends which is not tied up very well.

Wheat is one of the things which are left unchanged. It was priced at something over 20s., and is going down to 18s. That was so for the last year. The wheat market, in itself, fell a great deal in the early stages last year. We should perhaps wait until April and May to see whether there will be any substantial increase in the market price of wheat for the farmer during the later periods of the selling year. I doubt it very much; but the farmer who is in the main an arable farmer, and who produces a substantial quantity from his wheat acreage, has had to meet all his increased cost and, having covered the lowering in price, receives, apparently, no support at all. I never seem to find at any time in these agricultural Price Reviews a reference to what is exactly the nature of the competition that we are subject to in each commodity, and how much that commodity is subsidised at the other end before it is exported to here. For example, I should like to hear what is the latest position with regard to the French subsidy on their wheat. It moves from time to time. At any rate, there is no change in the price of wheat proposed in the White Paper.

The 5s. a ton increase for potatoes leaves me with a sense that it is something and nothing—merely 5s. But what is extraordinary, as was pointed out on the television, is how much of this 5s. is to go into the new market support fund. The answer then was, "We do not know". What will be the answer this afternoon? Is the whole of the 5s., that very tiny advantage, to go to the farmer, or is it to be hived off into the market support scheme? I should like to know. To come to something else which is of general importance, you are going to reduce the subsidy on fertilisers by £2½ million, but we are not told on which branch of fertiliser this is to be done. Is it on compound; is it on potash; is it on, perhaps, the top dressing particularly, especially if it is nitrogen? Is it going to be almost all on top dressing nitrogen?

Is it part of a scheme to depress still further the people who are in the dairy industry, and who rely to a great extent upon the improvement of grass production by the late top dressing, especially in the parts of the country which have the climate for grass growing—the North-West, the South-West, the middle-West and Wales? Those people can make very great use of a top dressing of nitrogen. Is this all going to come off that? Perhaps the Minister will tell us this afternoon exactly which fertilisers are going to be the subject of this reduction of £2½ million. I have not been able to "think that one out" yet, from our information. It might even arise in part, indirectly, from the Government's anxiety to keep down the production of milk, if they are going to stop the fertiliser subsidy all in one direction.

The only straight increase in the Price Review, so far as I can find, is the increase of 10s. per hundredweight on beef. From the views expressed during the television interview, to which I keep on coming back—it was so powerful; the subject was so well covered in all its aspects—the impression I got was this. If you were to give this 10s. per hundredweight extra to the man who has a self-contained beef herd, home-bred from beginning to end, he would get, in the long run, a very good benefit indeed, but in the interim period, anyone else handling beef cattle would probably be getting not very much worth while out of it. But what I am far more concerned about is this. Is this kind of subsidy on articles going straight to an auction market being administered in the right way for which the subsidies were originally intended? The subsidies were intended to create a constant demand for British agricultural products, to make them a vastly more important part of the national economy. But in the circumstances in which we were placed, and which we expected to continue, they were to enable us, in spite of all conditions in the world at large, to give a constant, steady price to the consumer.

Now, what is happening? I talked to two or three farmers during the course of the campaign in the recent Colchester by-election, and they were very cautious about it. One of them said to me: "I wish I had taken your advice a couple of years ago and kept out of pigs". I asked why. He said: "Because we get down to the market, and there are about eight or ten pens of pigs and about four buyers. They allocate to themselves a couple of pens each, and there is no real competition. We get a small subsidy, and the public pays more for pork and bacon, if it is British, than it ever has before". That is how the Government's marketing scheme of subsidised products is carried on.

In the case of beef, there is no possible difference in the result of the Govern-merit's policy. I am all in favour of giving the farmer a decent-sized subsidy in relation to the product as a whole, so that he can go on producing the best beef. As I say, in Essex I get sonic of the best beef I have ever had in all my life. But what a price it is in the shops! It is nothing to pay 5s. 6d. a lb. for very good straight beef joints. If you come to purchase steaks, the price is much more than that. The whole system of marketing under the Government scheme is obviously inferior by half to the original scheme of marketing under the Labour Administration of 1947–51. That is the fact, and I should be prepared to prove it with figures at any time the Minister cares to ask me to get them: because I will get them if necessary.

My Lords, I have spoken longer than I originally intended to speak, and I must apologise to the House for that. Perhaps I have been too full of my subject, as was once said about an alcoholic, but I feel very strongly about the matter. I hope we shall get a good reply to-day, not merely to myself, but more expressly to my noble friend Lord Williams of Barnburgh. I beg the Government to tackle this question of agriculture in relation to the future. I have said nothing about the Common Market danger. I have said nothing about the new threat to the pig and bacon industry, and about the bacon factories which are waiting to be closed because they cannot get pigs to compete with the Danish. I have had that from the head of the big combines, and also from my own co-operative experience. I fought for two years to get expansion of a bacon factory at Shepton Mallett, and the new bacon factory at Winsford, and to-day they can hardly get enough pigs to carry on, let alone to bring about an economical result. I want the Government to face up to the issues with a firmer feeling in their minds that the British farmer is worth supporting and can play an increasingly important part, even now, in the British economy, if the Government will give him their aid. I beg to move for Papers.

3.35 p.m.

LORD HASTINGS

My Lords, I know that the whole House will be most grateful to the noble Viscount who leads the Opposition for bringing forward this Motion on agriculture this afternoon. We are accustomed to debate this subject at about this time every year, and it is of some interest. I think, to note that last year my noble friend Lord Waldegrave moved an Affirmative Resolution, and that the year before it was the noble Lord, Lord Wise, who drew attention to the Annual Review and Determination of Guarantees, and moved for Papers. This year the noble Viscount has seen fit to draw attention to the whole situation in the field of agriculture, and the Government certainly welcome the wider terms in which this debate has been phrased.

Nevertheless, I think the noble Viscount will probably agree with me that it will be more appropriate if my noble friend the Parliamentary Secretary to the Ministry of Agriculture deals with the wider aspects of this subject which the noble Viscount has brought up; and I am thinking in particular of his general economic argument, which he developed at the beginning of his speech, suggesting that, in comparison with other sections of the population, the farmer is worse off now than he was previously. It is rather my duty to confine myself to the two White Papers which the House has before it this afternoon—the one on the talks between the unions and the Government, and the other one on the Annual Review itself, although I shall hope to answer perhaps one or two of the points brought up by the noble Viscount on these White Papers.

Before I proceed any further, I should like to say one more word by way of introduction. I have had the privilege—might even say the difficulty—of speaking immediately after the noble Viscount on one or two occasions. But then I was speaking from the comforting obscurity of the Back Benches, and I chose the battlefield to suit myself. In other words, I was speaking on colonial affairs, and particularly on Africa. Since then, the winds of change have blown me clean on to the Front Benches, with the result that I now find myself no longer a protected person, but exposed to every breeze which may blow in my direction from the other side of the House.

VISCOUNT ALEXANDER OF HILLS-BOROUGH

My Lords, I hope that we shall not lose our customary enjoyment of the noble Lord's usual independence of mind.

LORD HASTINGS

And possibly, I was about to say, breezes even from behind me! I hope, however, with considerable fervour that this afternoon, on this first occasion when I find myself in this perilous position, those breezes will not increase to gale force.

Now, my Lords, I turn first to Command Paper No. 1249, which deals with the talks between the Government and the farmers' unions, which were spread over a period of six months from June to December last year, and covered a very wide field indeed. I will just mention, therefore, a few of the topics which were discussed, and on which a wide measure of agreement was reached. First of all, the Government and the unions not only agreed on the importance of agriculture in the economy, and the value derived by the nation from a thriving industry but deliberately highlighted this aspect in the opening paragraphs.

I should like to draw your Lordships' attention to what was said in paragraphs 3, 4 and 5, where it was made quite clear that no fewer than one million people gain their living directly from the land, and that considerably larger numbers get it indirectly from ancillary industries connected with agriculture. Secondly, it was pointed out that agriculture itself makes substantial savings of foreign exchange, producing, as the noble Viscount said, one-half our total requirements for food, and no less than two-thirds of those foods which can be grown in this country; and thirdly, that agriculture in this country contributes £40 million a year to our own export trade, not to mention £130 million a year which is contributed by agricultural industries, such as machinery and tractors. The Government's view on this matter is made perfectly plain in paragraph 6, where it is said: … these consideration's fully justify the policy of maintaining a stable and efficient agriculture embodied in the Agriculture Acts, 1947 and 1957, and this will continue to be their policy. I think it is a good thing that these facts and this policy should be known as widely as possible among the public at large.

The next section of the White Paper deals with the system of support. Here the Government and the unions agreed that the present system of agricultural support is the one best suited to the interests of this country, but, of course, they also realise that there is room for improvements, particularly in the detailed mechanism of guarantee arrangements. I shall come to these details in due course. Then we come to the section on production policy. I think that this was the most important subject dealt with in last year's talks. Here both the Government and the farmers' unions faced facts in a realistic manner, and as a result of that the Government made it plain that they want expansion wherever expansion makes sense—in particular, in beef and pigs, as well as in other produce.

It was also agreed between the Government and the unions that with such corn-modifies as eggs, milk and potatoes, of which we produce virtually all our own requirements, expansion is sensible only in so far as demand can be increased, and in every case an expansion of the market should be of further benefit to the farmers. The unions recognise the importance of market demand and the need to become eves more competitive in production and also (and perhaps this is the first time that this has come into the White Paper) the desirability of improvements in marketing arrangements and techniques, which would include improved grading and presentation of their produce.

My Lords, I turn to the section which is headed, "Farm incomes and the efficiency factor". The noble Viscount, Lord Alexander of Hillsborough, had something to say about that, and I would direct your Lordships' attention to parts of paragraphs 28 and 31. Here it is made clear that the Government's objectives are those of the Agriculture Act, 1947—that is to say, a reasonable return both for the labour of the farmer and his wife, and for his management, and interest on the capital he has invested. Paragraph 28 says: It is the Government's responsibility to maintain conditions which afford the industry the opportunity of a reasonable standard of living for farmers and farm workers and enable the farmer to pay a proper rent. These are the Government's objectives and they intend to fulfil them. Moreover the Government and the Unions agree that, as the industry strengthens its competitive power and so advances towards its declared objective of reducing Exchequer support to the minimum practicable amount, it is right and proper that it should have the incentive and reward of an increase in its living standards. I know that this point was a matter of considerable discussion and criticism last year, and even the year before, and it is emphasised again in paragraph 31. which states: At the same time, the Government wish to assure the industry that they intend, taking, ore year with another, to leave farmers with a share of the gain from increasing efficiency. I think that one can surely agree now that this is no policy of restriction, and that the Government have not the slightest intention of depriving the agricul- tural community of the gains from their unremitting toil. In fact, Mr. Woolley, the President of the National Farmers' Union, is convinced of that. At the recent Annual General Meeting of the Union, he said: I could not believe that the Government would be so irresponsible, unreliable and hypocritical as to have said the things they have said in the White Paper without meaning them. Nor do I believe any such thing.

VISCOUNT ALEXANDER OF HILLSBOROUGH

My Lords, what we should like is some real evidence in the forthcoming grants that the proper condition of the farmer is recognised until such time as his purchasing power reaches the standard of other industries which enjoy constant protection in other ways.

LORD HASTINGS

My Lords, that is part of the noble Viscount's general argument, about which my noble friend will be saying something when he winds up this debate. But there is one point in this connection, which I had overlooked. The noble Viscount said that the amount of the subsidies had remained static; but that is not really so. Only the percentages remained the same—5 per cent. of the gross national product. But the gross national product has gone up, and in fact subsidies have been larger last year than they were the year before; and they will again be larger this year than they were last. I do not have the precise figures, but if the noble Viscount wants them, perhaps they will be available later on.

However, the talks which I was discussing formed the essential background to this year's Annual Review, to which I now return. They were the framework within which the guarantees were to be determined. The Government had to consider particular features of the past year and the prospects for 1961–62. The actual net income is being maintained at an estimated figure of £359 million, as against £356 million in 1959–60. In view of the appalling weather which farmers had to put up with—the worst that can be remembered for a great many years—this is a very notable achievement. Their actual net income did not fall but rose slightly. If they had had normal weather, it is estimated that their net income would have been £373 million.

Referring again to the weather, the Government realise that it was not only bad during the corn harvest and also during the sugar beet and roots harvesting in autumn, but also bad right up to February, so that in many places the autumn ploughing could not be done and the spring sowing programme has been set back. The Government have borne this in mind. The farmers' extra costs estimated for this year are therefore expected to be in the neighbourhood of £19 million over and above those of last year.

When the Government and the unions came to consider the individual commodities, they were faced with a number of difficult problems, as is quite evident from the remarks of the noble Viscount, who recognises the difficulties. I do not agree with the noble Viscount that too many loose ends have been left lying about. I think that one can honestly say that the Government can claim to have got to grips with these problems, not by just adjusting prices here and there, but by adopting a far more fundamental approach.

The first problem is perhaps the most difficult of all—the beef and milk complex. Beef supplies are actually increasing at the moment, but there has been a falling off in the number of calves retained for beef production. If that tendency is not reversed, we shall see a decline in home supplies in two or three years' time. Therefore, a substantial increase, of 10s. per live cwt., has been made in the guaranteed price of fat cattle, which was justified on its own merits. Here again is a new forward-looking approach to the subject. The farmers have been given an assurance that, unless there is a significant change in circumstances, this new guaranteed price will not be reduced at the next Annual Review.

In addition, this increase in the beef price was necessary because the Government were looking for a worthwhile alternative for those producers who can do so to switch from milk to beef. If I may introduce a personal note hare, that is precisely what I am doing on my own farm. Even before this Price Review came out I had already taken that decision. It is hoped that certain producers who perhaps are not finding milk so profitable as they wish will be persuaded to turn to beef. For milk really is the most difficult problem of all.

Now, I am afraid I must mention a few figures: they are probably known to your Lordships, but I think it is as well to emphasise the position. The total of sales for liquid consumption is a little less than 1,600 million gallons a year, but to ensure an adequate reserve of about 20 per cent. the amount required a year is taken as being 1,900 million gallons. The standard quantity, however, on which the guarantee applies, is already some 2,000 million gallons, which is therefore enough to cover the needs of the liquid market. Total sales of milk are now running at well over 2,300 million gallons a year. They are estimated in the present Review to be over 2,400 million gallons this year, and they are increasing at a faster rate than the consumption of liquid milk.

The consequences of this are surely obvious. These extra gallons can be sold by the Boards only at the manufacturing price of 1s. 6d. a gallon, which is less than half the guaranteed price for the standard quantity. The Milk Marketing Boards pool their receipts, and as a result they pay something like 2s. 10d. per gallon to the farmer. But as more and more milk is produced which goes only for manufacture the pool price is bound to be progressively depressed. When that happens, it is human nature that the individual farmer should try to keep up his income by increasing his output still further to make up for his smaller pool price. But on the national scale, the more be does that the further the pool price will be reduced, because there will be a bigger surplus of milk to be sold at the manufactured price. Therefore it seemed that this situation had to be faced once and for all; and that things should not be allowed to drift on as they are. My right honourable friend wanted to bring home to the individual producers that output beyond a certain level is not in their own interests unless they can produce profitably at the manufacturing price. The unions have undertaken to do their best, with the help of the Milk Marketing Boards and the Agricultural Departments, to work out a system. My right honourable friend feels convinced that the time has come when the minds of those responsible and of those affected should be concentrated on this problem, and Should remain concentrated on it until the solution is found.

The noble Viscount, Lord Alexander of Hillsborough, mentioned the increase in the guaranteed price. Indeed, the Government have agreed to increase the price by 0.8d. per gallon, but they have at the same time made it quite clear—and there is no attempt to hide this—that they will have to reconsider this increase at the next Review if a suitable system cannot be devised and introduced. In the meanwhile, in addition to that increase of price, the standard quantity for milk is being increased by over 20 million gallons, which represents the amount of the increase in sales for liquid consumption in 1960.

Here I am sure your Lordships would wish me to pay tribute to the Milk Marketing Board, who are constantly increasing the sale of liquid milk: in fact, think they have increased the sales of milk and cream combined by some 75 million gallons for the past few years; and long may that trend continue! The effect of that increase in the standard quantity will be to add on another 0.2d. per gallon, which makes a total effective increase of 1d. per gallon. Here the noble Viscount said that that increase—that small increase, I think he called it—was going to be passed on to the consumer. In the first place, I should like to tell the noble Viscount that this is the largest increase given to milk producers for many years; certainly it is the largest for six years, and it is believed to be for longer than that. As for passing it on to the consumer, at the meeting of the farmers' union the point came out that if the public were paying for their milk now a price comparable to the pre-war price it would be at least 10d., if not 1s., per pint.

I know that there are misgivings about this scheme, and one of them is that the small farmer—and, of course, there are many small farmer schemes in the dairy districts—will be the loser. But I should like to point out that the high-cost farmer is the one who will perhaps be pushed out of the market; and that is not inevitably the small farmer, because he is not necessarily a high-cost producer. It is a point to be considered that the extra 1d. per gallon on the guarantee might well outweigh the reduction in receipts by the savings in costs. I hope that I have made that point clear, but in case I have not, I will repeat it. The extra 1d. per gallon on the guarantee which every farmer will get on his milk may more than make up in saving of costs far any reduction in his receipts. He will get a higher price for less milk, but his costs will be considerably less, because he will presumably have reduced his herd.

VISCOUNT ALEXANDER OF HILLSBOROUGH

I should like to follow up that point for one moment. What sort of herd is the noble Lord thinking about in getting this reduced cost by reducing his herd? Is he thinking only of a man with a milking herd of 60 and over, who can reduce from two men to one man on the herd; or is he thinking of anybody below the 30 milking cow limit? If he is thinking of the 30 milking cow limit, those cost reductions will not occur.

LORD HASTINGS

I am, in fact, thinking of the smaller one. However, if other speakers wish to pursue this point, I have no doubt that my noble friend is fully prepared to argue further on this, and I would rather not delay the House on the subject.

Dealing with the larger herd, here surely the bigger producers can quite possibly expand production and still make a profit at the manufacturing price for milk. Certainly there is no wish in the Government's mind to be unduly restrictive. They recognise fully that the extent to which quotas, if they are to be imposed, might be adjusted to provide for farmers who have currently been expanding output and would be seriously prejudiced by quotas based on past periods will be one of the problems to be discussed in working out a satisfactory scheme. The Government wish to see the scheme flexible, and they have no desire to make it rigid.

Now a word about pigs. Here, the difficulty was a shortage of pigs. The Government wished to increase the national herd of pigs, without starting a fresh pig cycle and getting into the violent fluctuations which have occurred in the past. So while increasing the guaranteed price by 3d. per score, the Government have related the basic price to an annual output of between 10.3 million and 10.8 million pigs. So there is a figure of 500,000 for which the guaranteed price will be 3d. extra. But it so happens that at the moment there are fewer than 10.3 million pigs in the country and, therefore, there will be another 6d. to add on, and there will be an immediate effective increase of 9d. per score.

The feature of this sliding scale is that the basic price will be increased by stated amounts when we have too few pigs—which is at the moment the case, when we have the extra 6d. in addition—and it will be reduced when we have too many; that is to say, when the figure rises above 10.8 million. It is hoped by this method to be able to prevent the previous violent fluctuations. It has the added advantage of flexibility, in that it will now be possible to adjust the current price between Reviews. Here again, as in the case of beef, even more definitely in the case of pigs, the producers have the further assurance that the new basic guaranteed price will not be reduced at the 1962 Review.

I now turn to cereals. Here the Government's aim has been to bring the guaranteed prices into better balance. I think the noble Viscount overlooked the fact that the subsidy on oats has been increased by 3d. a cwt. But the subsidy on barley, in particular, forms a high proportion of the guaranteed price. It is, in fact, 47½ per cent. of the market price, whereas in case of wheat it is 37 per cent. and in the case of oats 31 per cent. So the Government are putting up oats by 3d. a cwt. and bringing down barley by 1s. 2d. But they are also obtaining this effect to some extent by working out the arrangement about which the noble Viscount spoke—an inducement to farmers to withhold their barley from sale immediately after harvest. Those growers who sell and deliver their barley in the later months of the cereal year will get a higher average rate of acreage payment than those who deliver in the earlier part.

The noble Viscount has fears that they will be the people who cannot afford to store their barley, and who will have to sell because they need the cash. But it is the Government's contention that, by holding back this barley for sale later in the year, the market price immediately after harvest should therefore be appre- ciably improved, and that as a result those growers who have to sell early should get a better price than they otherwise would, and better than they have received in recent years. This sort of scheme was very much in the minds of the National Farmers' Union and is mentioned in paragraph 34 of the first White Paper, the Report on the talks. The Government are therefore devising a scheme which in some measure has been suggested by the National Farmers' Union. It is intended to make the scheme self-financing, inasmuch as it will not involve increased Exchequer payments.

I am afraid that this speech is too long, but there are many points to cover. I must say a word about potatoes. Besides raising the price by 5s. a ton, the Government have decided to establish, if possible, a market support fund to which they will contribute £2 for every £1 provided by the Board. I believe the suggestion is that over a period of five years there may be £3 million a year—that is to say, £15 million—for this support fund. It is considered that this would be of great benefit to the potato producers for the foreseeable future.

Finally, there is the question of marketing. The Government have offered to contribute £500,000 a year for three years for market research and development. It is suggested that the costs should be evenly shared with the Farmers' Union. The Farmers' Union have not accepted the offer this year, but my right honourable friend hopes very much that further discussions which are to take place will lead to grants being introduced as a feature of the 1962 Annual Review. This marketing is a matter of great importance. No one can deny that we need to know a great deal more about the market for our farm produce and the ways in which it can be expanded. Farmers need to know more precisely what the housewife wants; how they can best set about meeting her needs; how they should grade their produce, and how they can present it to the best advantage. There are many signs of initiative within the industry, and greater emphasis on quality produce. Those who are now launching out co-operatively in the field of marketing will presumably be keen to take advantage of the funds when they become available.

I have detained your Lordships too long. In spite of that, I have mentioned only the most important features of this year's Review. Farmers, of course, are deeply interested in the effect of these changes. On this occasion the increase amounts to £14 million. This can be set against the increased costs on Review commodities of about £90 million. So the net result leaves a balance of £5 million to be found by the industry out of the substantial gains to be expected from its increasing efficiency. This is more than the industry has received in this matter from any previous Review. We can say with every confidence, therefore, that this award is fully consistent with the Government's obligations to agriculture, and accords with the spirit of the conclusions that resulted from the 1960 talks. The settlement reached at the Annual Review is fair and just. I hope your Lordships will agree that there are many features in it which are forward-looking, constructive and imaginative. The Government commend this Annual Review to your Lordships on that basis.