PRICE STABILITY OF IMPORTED PRODUCTS (SPECIFIED COMMODITIES) ORDER, 1964 (Hansard, 30 April 1964)

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (LORD ST. OSWALD)
My Lords, I think it might be convenient to your Lordships if we considered the Price Stability of Imported Products (Specified Commodities) Order, 1964, and the Price Stability of Imported Products (Minimum Import Price Levels) Order, 1964, simultaneously. Section 1 of the Agriculture and Horticulture Act, 1964, enables the three Agricultural Ministers to introduce by Order minimum import price and levy arrangements for the purpose of maintaining a stable market for agricultural and horticultural produce of any description produced in the United Kingdom. During the passing of this legislation through this House, it was explained that the Government intended to exercise these powers in rela- 1048 tion to certain cereals and cereal products.
Your Lordships will recall that there are basically three stages in introducing a minimum import price and levy régime on particular commodities under the powers in the Act. First, the Ministers must specify in an Order the commodities in relation to which they wish to be able to exercise the minimum import price and levy powers. Secondly, the Ministers prescribe the minimum import price levels to apply to the different "specified commodities" or subdivisions of them. Thirdly, they prescribe the arrangements relating to the charging of levies on individual commodities for the purpose of maintaining the minimum import price levels. When these arrangements have been prescribed by Order, levies may then be charged as necessary in order to maintain the minimum import price levels.
The two Orders which are before your Lordships cover the first two of the stages I have outlined. The Order specifying the commodities has the effect of defining the precise field of commodities in relation to which the minimum import price and levy powers may be exercised by the competent Ministers. The initial list of cereals and cereal products covers the main cereals, the cereal flours, various worked cereals and cereal offals. The secondary products have, of course, had to be covered in order to prevent imports of these from undermining the market for the main cereals. But the arrangements have been confined to only those secondary commodities which it was considered essential to cover in order to achieve the basic purpose of greater stability in the United Kingdom cereals market. If in the future it were found necessary, in the light of experience, to add to the initial list of "specified commodities", this would involve the laying of an amending Order, which would also require to be approved by Affirmative Resolutions in both Houses of Parliament.
I come now to the second Order which is before your Lordships. This prescribes, in the Schedule, the levels of the minimum import prices for the different "specified commodities" and for certain sub-divisions of them. The Government have made it clear that the intention of the minimum import price 1049 arrangements on cereals is to cut out the unrealistically low-priced imports which have from time to time come to the United Kingdom market. The minimum import price levels have, therefore, been pitched towards the lower end of the range within which import prices have normally fluctuated but at levels which cut out the troughs. Each of the main cereals, with the exception of wheat, is subject to a single minimum import price. Wheat and wheat flour have, however, been sub-divided and different minimum import price levels are being applied to the different subdivisions in order to take account of the wider quality differentials which exist between the different varieties of these commodities. As to the relationship between the minimum import prices for the main cereals, this has been based on such factors as differences in quality and feeding value; the normal market differentials; the competitiveness of the imported product with our own home grown cereals, and other factors.
It has been made clear throughout discussions on the new policy for cereals, both before and during the passage of the legislation from which these Orders derive, that the intention is not to apply minimum import prices with the purpose of raising the general price level for cereals in the United Kingdom. But, unless we take steps to control the prices at which imports of cereals can come into our market, we shall continue to face the possibility of disruption from supplies at rock bottom prices and the repercussions which this has on the returns of our own growers and on the Exchequer's bill for deficiency payments.
The House will note that the minimum import price levels in the second Order are to come into effect on a date or dates which are still to be appointed. This is necessary because, as I have explained, the arrangements for cereals have to be completed by a further Order laying down the detailed provisions in relation to the charging of levies. The import price levels cannot come into force until the arrangements for maintaining or enforcing them have been prescribed. But the Government decided to bring the minimum import price levels 1050 before Parliament at the same time as the Order specifying the cereals and cereal products in order to enable them to be approved in advance and also to give the trade the maximum notice.
These Orders cover, therefore, the first two stages which I have outlined in introducing the very important new arrangements for the control of import prices for cereals. They will be supplemented in due course by an Order prescribing the detailed arrangements for the charging of levies, when necessary, to maintain the minimum import price levels. A White Paper which was laid before Parliament on April 15 gave the terms of the agreements which have already been concluded between the United Kingdom Government and the Governments of Australia, Canada, the United States of America and Argentina, under the terms of which these countries have undertaken to co-operate in the operation and observance of the minimum import prices. If, however, any "specified commodity" is available for import into the United Kingdom from an individual co-operating country at prices below the related minimum import price, the United Kingdom Government will have the right to impose levies on such imports so as to maintain the prescribed minimum.
The Government's policy is to proceed, so far as possible, by such agreements, and it is hoped that similar ones will be concluded with a number of our other suppliers. The levy arrangements Order, which will, as I have explained, be brought before Parliament at a later date, will be drafted in terms which reflect the agreements that have been concluded.
I should explain to the House that special arrangements have been worked out for Australian and Canadian wheat flour. It was not found possible to fit these wheat flours into the general arrangements in a way which took account of the special circumstances of this trade and maintained the Canadian and Australian preferences on wheat flour. The special arrangements provide for a related levy on Canadian and Australian flour when there is a levy on the corresponding wheat. They also include certain assurances and other detailed provisions. These arrangements are designed to safeguard the minimum import price system. The details of the special arrangements 1051 for Canadian and Austrialian wheat flour were published on Monday, and the necessary legislative provisions for these flours will be included in the levy arrangements Order to which I have referred, The arrangements for wheat flour as a whole are to be kept under review by a Flour Supervisory Committee, consisting of representatives of the United Kingdom, Australian, Canadian and United States Governments.
The minimum import price arrangements for cereals and cereal products, together with the standard quantity arrangements for domestic production outlined in the Annual Review White Paper, implement the new policy for cereals which was announced by the Minister of Agriculture last May in another place. These modifications in our existing arrangements for cereals are necessary if we are to maintain our system of support in the face of the growing pressures which have from time to time been placed upon it. They are designed to bring greater stability to our cereals market, and so to contain the cost to the Exchequer of the deficiency payments. I commend the two Orders which are before the House for approval, and beg to move the first Order.

§ LORD STONHAM
My Lords, I would thank the noble Lord, Lord St. Oswald, for his lucid exposure of the length to which the Government are willing to go in their determination to cut the Treasury costs of supporting the farmers' prices. It was a gallant but unavailing defence of the indefensible. I should like to ask the noble Lord a question with regard to the upper level, if I might put it, of the minimum import prices for wheat. I notice, for example, that those in item 5 of the Schedule are £26 a ton; and in item 6, £26 10s. a ton. They compare with the farmers' guaranteed price of £26 10s. a ton. I wonder to what extent, in fixing these minimum prices—which the noble Lord said were fixed at the lower levels of average recent prices—the Government had regard to the guaranteed prices, 1052 because, unless the noble Lord can give some other explanation, the top level of imported wheat prices have in fact been fixed virtually at the guaranteed prices, which may well produce price stability but will also virtually abolish the subsidy.

LORD ST. OSWALD
I do not want to interrupt the noble Lord, but I think I might help him on this point by pointing out that these prices relate to particular qualities of wheat. Of course, they do not relate to the whole range, as the noble Lord will have noticed.

§ LORD STONHAM
Of course I have noticed that, because it says so in the Order. I did not think it was necessary to read out the Order itself. I referred to items 5 and 6 and to the prices which are given. In fact, the noble Lord has not answered my question. Perhaps he will think about it.
To come to the lower end of the scale—£20 for barley (one fixed price), £20 10s. for denatured wheat, and £22 10s. for other wheat—it seems to me that these regulations are, in fact, nothing more than an insurance policy taken out by the Treasury, for which the housewife will be compelled to pay the premiums. That, as my noble friend Lord Williams of Barnburgh pointed out a few days ago, is strictly in line with Conservative policy. As I mentioned, the minimum import price for barley has been fixed at 20s. a cwt. against the guaranteed price to home farmers of 26s 8d. a cwt.; and for wheat 20s. 6d. as against 26s. 6d.
I would put it to the noble Lord that under these Orders only two possible situations can arise. The first is that the interplay of supply and demand will keep true world prices above those minimum prices of 20s. or 20s. 6d. per cwt. minima. In that case nothing will happen and these two Orders will have no effect whatever. The second possibility, and in my view the far more likely one, is that world prices at least for part of each year, if they are not artificially distorted, will fall below the minima. Indeed, that is what the Order is for, as the noble Lord explained. If that happens, the effect of these Orders, despite the noble Lord's assurance that it was not the intention generally to raise prices in this country, will be to fix world minimum prices for the export 1053 of these cereals to this country. I do not think this can be denied because, as was explained previously, our main suppliers have agreed to take steps to see that their exporters do not sell below the minimum. So we are, in fact fixing a price.
As for the other countries who have not yet come to an agreement, they will not be such fools as to sell at an unnecessarily low price and so incur a levy. In any case, it is obvious that the grain will come on to the home market at an artificially inflated price. That is the whole object of this exercise. Farmers will pay more for their imported feeding-stuffs, and of course housewives will pay more for the end product. And these imposts, though concealed, will in my submission be substantial.
To take just one example, the imports of French wheat over recent years, which are now quite considerable, in 1959 we imported only some 1 million cwt. of wheat from France. There has been an increase every year since then, and last year we imported, not 1 million, but 5.2 million cwt. of wheat from France. That is a fivefold increase in five years. I notice that the minimum import price for European milling wheat is fixed at £22 10s. a ton in this Order. Last year, from April to June the import price of French wheat was an average of £21 10s. a ton; that is £1 per ton below the minimum now proposed to be fixed. The current price was £21 15s.—I say "the current price was", which sound a bit Irish, because I am absolutely certain that as soon as these Orders were laid and the French saw what the minimum import price was, £22 10s., they adjusted their price accordingly. Indeed, it would be doing them an injustice to think they would not do it and did not do it.
That is what is happening and that is what will happen, and I suppose the Government would regard that as a success for the Order. It is a success the noble Lord wanted to see—namely, that the margin between guaranteed price and market price would be narrowed, less subsidy paid to the farmers, and the Minister would not have to secure approval for a supplementary estimate. But it would be a success dearly bought and paid for by the housewife, because 1054 that extra £2 a ton at the ports will become at least £3 or £4 in the shops. It is another fractional increase in the cost of living, an added pressure for increased wages and further inducement to inflation, and the farmers will not benefit by one penny.
We are all agreed on the need for stable markets for agriculture, and indeed no one was more successful at providing it than my noble friend Lord Williams of Barnburgh. This is not the way to secure stability for agriculture. Day by day we get remarkable evidence of the way in which the Government dispense their bounty. To-day it is the turn of the foreign farmer, who can look forward with confidence to millions of pounds of unasked for extra profit provided by the temporarily helpless British consumers. The only consolation is that, fortunately, they will not be helpless very much longer, because when the next harvest is gathered we shall have a Government in power which, while playing a full and responsible part with other nations in sensible distribution of the world's food supplies, will see that our own farmers and consumers do not labour under expensive handicaps such as these—I was going to say very foolish, but I will say reprehensible—Orders impose.

VISCOUNT GAGE
My Lords, may I ask the noble Lord whether he is arguing in favour of "dumping" prices for agricultural products for this country? There is no such thing as a world price for any agricultural product, so far as I know, which is not in some degree a result of artificial aid in the country in which that grain or other product is produced. What I understand the noble Lord to say is that he would like to see these products dumped on the British markets.

§ LORD STONHAM
My Lords, if the noble Viscount had been here at the Second Reading of the Agriculture and Horticulture Bill he would have known better than to ask that question. I hope he will do me the honour of reading the speech I made on that occasion. I am not in favour of dumping—of course not; but I am in favour of a guaranteed market for home farmers built up in a way which does not give foreign producers unasked for profits and impose further burdens on the housewife.