§ 2.40 p.m.
§ Order of the Day for the Second Reading read.
§ THE EARL OF BUCKINGHAMSHIRE
My Lords, in rising to move the Second Reading of this Bill I must start by declaring an interest in that I am chairman of a forestry co-operative in the Chilterns; and, with the greatest respect to the noble Baroness opposite, Lady Summerskill, perhaps she has noticed that I have declared that interest. She was quite right the other day. This Bill is a small but an important Bill, and in another place it received support from both sides and from the Government. Its purpose is to remedy a situation which 427 has developed but which was never intended, under the Restrictive Trade Practices Act, 1956, and it is to avert a risk to the progress of agricultural and forestry co-operatives, possibly, in some cases, to their very existence. The risk arises from the definition of the words, "trade associations and restrictions" in Part I of the 1956 Act—that is to say, restrictive terms in trading agreements. At that time, nobody foresaw that the Act was open to the construction that any agricultural or forestry co-operative was a trade association, and that almost any term in their trading agreements with other parties, and especially with their own members as provided in their constitution, could be held to be restrictive.
The Restrictive Trade Practices Courts have probably interpreted the Act more severely than was expected in 1956. The simple fact is that an anomaly has arisen, and if it is not corrected it could have serious repercussions. It was never intended that ordinary commercial enterprise should be impeded by the provisions of the Act. Major or minor curtailments of activities of any agricultural or forestry co-operatives resulting from an adverse decision by the Restrictive Trade Practices Courts could be a disaster to them.
Noble Lords in this House who are particularly interested in agriculture and forestry will be aware of the importance of co-operatives. They number nearly 400, nine of which are forestry co-operatives. In another place it was stated that the figure was nearly 1,000; but this figure included rabbit clearance societies and machinery syndicates, and those do not come under the Bill. I regret to say I have not given notice of this particular point to the noble Earl who is to reply for the Government, but no doubt he has it in mind.
The House may have noticed in the last Price Review Her Majesty's Government's decision to allocate £1,500,000 to market research. While this was primarily intended for market research, it was also partly to assist in the development of farming co-operatives.
The market itself has changed. We all know that farmers sell in a competitive world. The demand is now for 428 high and uniform standards of quality, good packaging, and regularity of supply. Smaller farmers have become progressively handicapped. However, they can help themselves these days by becoming members of a co-operative, and so help provide larger regular supplies of standardised produce, which they themselves could not do individually. So far as forestry cooperatives are concerned, although their major job is probably supplying and planting young trees and giving advice, they also sell. In the particular case of the co-operative in which I am interested, we do a great deal of both in our own area. In the original draft, it was stated that the major activity of the forestry co-operative must be selling. This was a mistake and it was an unnecessary limitation. I am glad to say that this impression was corrected in another place.
May I now come to the Bill itself and its clauses? Clause 1(1) exempts cooperatives from Part I of the Restrictive Trade Practices Act, 1956, provided they satisfy three conditions. The first is that they are registered under an appropriate Act. Normally this is the Industrial Provident Societies Act, but in some cases they may come under the Companies Act. If they do, their Articles will need to contain certain provisions to ensure that they are co-operatives. Secondly under Clause 1, there must be an overall majority of person occupying land used for agriculture or forestry. And, thirdly, the main purpose is to market members' produce, or to provide requisites for use in farming or forestry, or, in the case of forestry co-operatives, for members to carry out operations on their land. Clause 1(2) defines the kinds of agreements which can be entered into by co-operatives which will be exempted from the 1956 Act. They are the kind which are normally made in connection with the sale of members' produce, or the supplying of requisites for use in farming or forestry. Under subsection (3), Ministers—and I use the term "Ministers" advisedly—can make orders limiting the scope of exemptions in order to prevent abuse of the exemptions made, which are necessarily in wide terms.
To turn to Clause 2, this is a simple clause dealing with definitions, the coming into force of the Bill, and its 429 application to Scotland and Northern Ireland. As I understand it, the Bill will come into force three months after it is passed. The Bill relates to the position in Part I of the 1956 Act only, and I emphasise the word "only". So far as Part III of the Act, which deals with monopolies and the 1948 Monopolies Act, is concerned, the position is completely unchanged. Co-operatives are not monopolies. If they were, or became so, they would have no protection under this Bill.
My Lords, to sum up, co-operation in farming and forestry is in a different category from that which the activities of the 1956 Act were ever intended to deal with, and all the present Bill seeks to do is to put agricultural and forestry co-operatives in the same position as private persons engaged in the same class of trade. It gives no advantages or privileges; it merely removes hardship never intended. In other words, it is merely doing what Parliament would have wanted in 1956 if they had had subsequent experience of the possible interpretation of Part I of the Restrictive Trade Practices Act. My Lords, I hope the House will give this Bill a Second Reading, and I beg to move.
§ Moved, That the Bill be now read 2a. —(The Earl of Buckinghamshire.)
§ 2.49 p.m.
§ LORD WISE
My Lords, I rise to support this Bill, which I think had the support of all Parties in another place, and I am very glad that it was carried through the other place by the honourable Member for Bury St. Edmunds, a place with which I have intimate connections. It is the centre of a great agricultural district; it is the centre of a co-operative district; and I think it is appropriate that this Bill should have been moved in another place by a Member from that area of the country.
As the noble Earl said, it is a short Bill, but an important one. It is an exempting Bill. It seeks to amend in one particular the Restrictive Trade Practices Act, 1956, an important and lengthy Act, which was keenly considered both in another place and in your Lordships' House before it was passed into law. But, as so often happens with long Bills, there was an oversight, which this Bill now seeks to remedy, in the principal Act. The Bill 430 seeks to simplify and legalise the cooperative marketing of agricultural and forestry produce.
The expression "produce" seems to have a very wide interpretation in this Bill. I will read it to your Lordships. Clause 2 (1) says:'produce' means anything (whether alive or dead) produced in the course of agriculture or forestry.I do not know how to interpret the word "dead" in regard to produce, because ancillary commodities which may be manufactured from dead produce are not covered by the Bill, and I am wondering whether the expression "dead" in the definition should not be altered in some way.
§ THE EARL OF BUCKINGHAMSHIRE
My Lords, I have not been advised on this point, but may I suggest, as a forester, that one can sell dead wood?
§ LORD WISE
My Lords, With that I agree, but I was thinking mostly of agriculture. Perhaps the noble Earl who is to reply for the Government or the noble Earl, Lord Buckinghamshire, may be able to say whether "dead" is the correct word in this respect. The phrase "marketing" or "preparation for market" occurs in two places. Any action taken in regard to co-operation which will improve agricultural marketing is commendable. Agriculture suffers no greater disadvantage at the present time than the haphazard system of marketing, of cereals and livestock, and also of horticultural produce. At present, marketing is the brake that holds back agricultural prosperity and security. This Bill looks forward to co-operative marketing, but co-operative marketing is not the full remedy for the ills under which we suffer. It has been suggested that co-operative marketing will help producers to get a footing with the big retailers and supermarkets. Even that does not remedy the situation. Sales to supermarkets and big retailers are fixed more or less by the price which prevails in the ordinary markets in the country. If co-operators are allocating their produce to co-operative associations and are submitting to some system of control, in my view, in order to safeguard marketing, in both agriculture and forestry, the Government must exercise some additional control in order that, as I 431 have often tried to argue in your Lordships' House, there may not be violent fluctuations in the day-to-day operations of the market.
There are two other points which occur to me in looking through the Bill. I do not raise them in any critical sense and they may not be of much material value. In Clause 1 (2) (a) there are words in brackets to which I wish to call attention:(with or without similar produce not so produced)".Does that mean not only the marketing of the produce which is allocated to the co-operative organisations by the producers themselves, but also that the associations are able to deal with produce which comes from outside the associations? Obviously, "not so produced" means not so produced by members of the association. The other point is on page 2, line 20, where reference is made to an agreement "(whenever made) between members of an association". Later on, the last two lines of the page refer toagreements made before as well as after the coming into force of the order.This refers to orders which may be made by the Minister after the passing of the Bill.
§ THE EARL OF BUCKINGHAMSHIRE
My Lords, may I interrupt to point out that it is "Ministers", not "Minister", because this affects Scotland and Northern Ireland.
§ LORD WISE
My Lords, shall I then put them in the plural? They are better in twos and threes. In connection with these two expressions, I am wondering whether the same wording should not be used in both places.
I wish the Bill well. I hope that your Lordships will pass the Second Reading this afternoon. I hope that the Bill will be effective in helping agricultural co-operation and safeguard farmers not only in marketing their produce but also in obtaining necessary supplies through agricultural co-operative societies.
§ 3.0 p.m.
§ LORD STONHAM
My Lords, I warmly support what has been said on behalf of this Bill, both by the noble 432 Earl who moved the Second Reading and by my noble friend Lord Wise. Unquestionably it will, as it were, legalise the position of a large number of associations of farmers and horticulturists whose position had become, or would have become, almost impossible without this Bill. Indeed, my only regret with regard to the Bill is that it is so restricted in its application, and I should welcome an enlargement of its scope.
My noble friend Lord Wise put to the Minister one point with regard to prepackaging and sales to the supermarkets which is of great importance to horticulture, and in particular to the further development of horticulture. As I understand it, the Bill will cover the position of a co-operative which sells at a fixed price. Indeed, there is a great increase in the fixing of prices to be current over a season, or a month, or for quite a long time. That is something which is likely to develop still further, and I understand it will be covered by the Bill. What I am doubtful about, however, is the kind of agreement that used to be made in some parts of the country. For example, in Worcestershire the plum growers would get together and make an agreement with the merchants for a seasonal price for different varieties of plums, and things of that kind.
I should like to put to the noble Earl, Lord Waldegrave, a particular point of which he may have some knowledge, and that is the standard price agreement which is operated by willow growers in Somerset. I should like to know whether that will be covered by the Bill. The noble Earl will be aware that the inter-war years were very disastrous for the willow growers. Their acreage under willows declined from 9,000 to about 1,500, but at the outbreak of war willows became a commodity in short supply and a strategic material. When that happened, the willow growers very wisely and far-sightedly declined to take advantage of the situation, and they voluntarily fixed maximum prices by agreement with the manufacturers. Both the Willow Growers' Association and the Basket Federation, which consumed all their output, soon found it desirable to recommend to the Government that there should be a fixing of prices by 433 Statutory Order. This was done, and then at their instance over the next four or five years prices were varied from time to time; indeed, the Statutory Orders continued until 1948. Allocation and distribution was done through a voluntary body which was set up with the Government's full approval and support.
Those arrangements greatly benefited the willow growers and the workshops for the blind, who were the main customers. The acreage, quality and grading improved, and prices were always mutually agreed and closely related to costs. For the ten years after 1948 there was complete absence of control, and the industry again began to decline. In 1958, just over four years ago, the Willow Growers' Association was disbanded, and its members formed a special Willow Growers' section of the Somerset County Branch of the National Farmers' Union. When that was done, they immediately entered into negotiations with the Manufacturers' Federation for an agreement on standard prices for a specified standard quality and grading. The manufacturers agreed to these proposals, although they were then in a position to force prices down to uneconomic levels. But they took the view that it would be extremely shortsighted, and certainly not in their interests or in the national interest, to destroy this small, but ancient, and by no means unimportant, section of agriculture.
Since 1958, there has been an Annual Price Review, which takes place every December and which has regard both to costs and to crop reports. There is no reduction in price for increased efficiency. Prices remained unchanged for the first three years, but at the end of last year there was an increase, again entirely related to costs. This is a purely voluntary arrangement on both sides, and there are no sanctions against either growers or manufacturers who might seek to break the agreement. It is, in fact, a gentlemen's agreement which is kept, and it has the great advantage that both manufacturers and growers know what prices they have to pay and what prices they are going to get for a year in advance. It has effected a great improvement in quality. We are as near as we can possibly get with a natural product to a standard article.
434 I should like to know whether an agreement of this kind will be covered by the Bill. Willows are certainly included in the definition of agriculture which was referred to in the Bill, but although the growers, for whom I am speaking, are not a trade association— they in fact disbanded their trade association—they have not formed themselves into a provident society. The noble Earl will be well aware that our mutual friends in the Isle of Athelney are probably the most insular and independent people in the world. Having told King Alfred "where he got off", they have not entirely accepted the fact of the Norman Conquest, and they are unlikely, therefore, to be all too ready to obey the behest of something which seems unreasonable and foolish to them and happened only a few years ago. I hope it is within the scope of the Bill. But if it should prove to be outside the Bill, I should be glad to know. Assuming the noble Earl who moved the Second Reading is willing, I shall be glad to know whether the Government will look favourably on a suitable Amendment to the Bill so that highly sensible and beneficial arrangements of this kind can be given legal sanction. There is nothing evil in this, no attempt to force things up, but an attempt to preserve the industry and make things better for everybody concerned, both those who create the material and those who use it.
§ 3.10 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE)
My Lords, I am pleased to welcome this Bill on behalf of the Government. It will effectively remove the fears of agricultural and forestry co-operatives that their ordinary activities—I stress the words "ordinary activities"—might be held to fall within the prohibitions of Part I of the Restrictive Trade Practices Act, 1956. It has not, of course, been established that this is so. So far as I am aware, the courts have not yet heard and decided on a relevant case, but unless this is put beyond doubt. The cooperatives cannot contribute as fully as we all wish to the improvement of agricultural marketing. Noble Lords will know what value and emphasis we put on agricultural marketing, for, as the 435 noble Earl who has moved the Second Reading has mentioned, we have made an agricultural marketing grant in this year's Price Review and that there is to be £1½ million of Government money set aside over the next three years. I must admit to your Lordships that it is unfortunate that the present position has arisen, but the drafting of the 1956 Act must have been extremely difficult—I do not make any criticism there—and the stringent definitions were no doubt designed to avoid evasion.
But perhaps I might say a word or two about the third subsection of Clause 1 because this is our safety net if it is found that the present Bill has not been sufficiently stringent in defining the associations and kinds of trading agreements which are to be exempted from Part I of the 1956 Act. We do indeed intend, and expect, to make an Order when this Bill becomes law. It is too soon to forecast all the contents of the Order, but it will certainly include two matters which I should like to mention. One will be to exclude from the provisions of the Bill—that is, to leave under the ægis of the 1956 Act —certain agreements which go beyond the ordinary concept of the collective marketing of farmers' produce. The sort of thing we have in mind is the factory production of cider from apples or of furniture from timber. We think that the Restrictive Practices Court should have the opportunity of examining agreements of that kind. We naturally accept that virtually all farm produce requires some preliminary processing and that will, of course, be protected.
The other matter will be to exclude from the provisions of this Bill multilateral arrangements between co-operatives which could lead to the rigging of prices or the sharing of markets. This would clearly be an abuse which would be a matter of much concern to private traders in farm produce.
I do not think that I have very much else to say about this Bill, Which has been so lucidly moved by the noble Earl, Lord Buckinghamshire. But perhaps I should comment on the points about willows, made by the noble Lord, Lord Stonham. I am not sure that I shall be able to give the noble Lord a completely 436 satisfying answer, although he gave me notice that he was going to raise this question. I share his views on the importance of the willow-growing and basket-making industries and, although I speak without knowledge of the precise facts, I should be open to be convinced that the price agreement between willow-growers and the basket-makers actually infringes the letter rather than the spirit of the 1956 Act. I do not know the terms of the agreement.
I must make it clear that the Bill— and this is in Clause 1 (1) (a)—relates only to incorporated associations. It could not have been extended to unincorporated bodies of growers, owing to the obvious uncertainties of membership, constitutions and purposes of such bodies. The risk of abuses would have been far too great. I am also advised that in fact it is generally more satisfactory for a trading body to be incorporated. If the willow-growers were to incorporate themselves it would appear that they would then fall within Clause 1 (1) as occupiers of land used for agriculture or forestry, and that might be the answer. The noble Lord has said that he might wish to bring forward an Amendment at the Committee stage, but I hope he will look at this point very carefully before he does so. I know the difficulties with which he is involved. He and I know that part of the country very well. As he said, those Athelney boys were pretty stern with King Arthur.
Of course, King Alfred. And they have been pretty stern with quite a number of us ever since. If they do not want to change they will not do so. They might treat either the noble Lord, Lord Stonham, or myself in precisely the same way as they treated King Alfred. But if the willow-growers were to incorporate themselves that would be the easy way out, provided that those who have to negotiate this were able to bring it about.
The Basket-makers' Federation, on the other hand, is a rather different problem, because I doubt whether it could be covered by the Bill. Presumably all its members are not persons occupying land for agriculture or 437 forestry, but are persons applying factory or semi-factory processes to produce derived from land in the occupation of others. There is considerable difficulty here. Be that as it may, we shall have to see what we can do down in Somerset because we are aware of the value of this industry.
§ LORD STONHAM
My Lords, would the noble Earl allow me to correct what may perhaps be a false impression? These people are not at present selling collectively; they are merely selling individually at the same price. The other point is that they are all members of the National Farmers' Union, all in one county branch, and I wonder whether that would cover a corporate body.
I should rather doubt it. I think that we shall have to look together into this rather small but important section of a somewhat esoteric industry. To say that an agreement is or may not be protected by this Bill does not, of course, mean that it is invalid. Parliament has provided the machinery of the Restrictive Practices Court, whereby agreements may be tested and declared to be in the public interest notwithstanding that they may contain restrictive features. The Promoters of this Bill have taken the line, I think rightly, that some classes of agreements entered into by agricultural and forestry growers should wholly be removed from the jurisdiction of the court, but—and this is the point—they have not contended that all should be.
I should just like to reply to the points made by the noble Lord, Lord Wise. The words in brackets in subsection (2) (a) of Clause 1 are, I think, fairly clear. The intention is to allow co-operatives to supplement their members' produce by buying in if there is a temporary shortage and, if they wish, to buy from other growers who may not be members of the co-operative. I think that it means no more and no less than that.
The other point that he made was whether there was any contradiction between the words "an agreement (whenever 438 made)" in line 20 on page 2 of the Bill and the words "agreements made before as well as after the coming into force of the order" in the last two lines of page 2. I must admit that, without looking into this, which I certainly will do, I do not think there is any contradiction or that there ought to be any alteration. It is difficult for the noble Lord himself and for me, since we are not expert Parliamentary draftsmen. But perhaps I might look into this. If the noble Lord feels there is something that ought to be put right this would be an obvious thing to raise on Committee stage. As I say, I had not thought there was any ulterior motive or any difficulty or any attempt to take away with one hand what was given with the other. I will ask my legal experts who know about Parliamentary drafting and perhaps we could correspond or the noble Lord will raise it later.
I do not think I need say very much more. I believe that this is a useful little Bill; it is not controversial in its nature. I believe that it will do good and I hope your Lordships will give it a Second Reading and carry it through. It was not opposed, I understand, in another place and I hope we shall find that we can pass it here as well.
§ THE EARL OF BUCKINGHAMSHIRE
My Lords, I sought advice from the Box, and I am given to understand that the particular question the noble Lord, Lord Wise, raised is purely a drafting question; I understand there is no doubt that Parliamentary counsel will take note of what he has said; there is possibly a necessity to look into this further. Meanwhile, I should like to say "Thank you" to all those noble Lords who have supported me, both the two noble Lords from the other side of the House and my noble friend Lord Walde-grave who spoke on behalf of the Government. I am grateful for the support they have given me.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.