§ 3.45 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (LORD ST. OSWALD)My Lords, with the leave of the House, I will make a statement about this year's Annual Agricultural Review, which my right honourable friend is making in another place. If I may I will use his own words:
§ "Before coming to the actual determinations, I would remind the House of the progress made in adapting our support system on the lines I announced on May 22 last.
§ "For bacon, agreement has been reached with our overseas suppliers for the regulation of supplies on the United Kingdom market. For cereals, our principal overseas suppliers are in principle willing to co-operate in the introduction of minimum import prices. Subject to their final agreement we will be introducing new guarantee arrangements this year for 864 wheat and barley which include standard quantities. The effect of these two steps will be to increase market stability, and to bring under control the present open ends of the cereals subsidy. Details of the new arrangements are given in the White Paper which will now be available in the Vote Office. For beef and lamb, we were unable to reach agreement with the overseas suppliers for the regulation of supply to the United Kingdom market. In these circumstances we are not introducing standard quantities at this Review. But we will be discussing with overseas suppliers the phasing of meat imports, and are making changes this year in the mechanism of the price deficiency system for cattle and sheep which will lead producers to pay greater attention to market forces.
§ "The Government consider that these changes in our support system will contribute to its continuing successful operation in the circumstances of world trade in foodstuffs which exist to-day. These are very different from those that existed when the system was first devised.
§ "In the Review we found that the forecast for actual farm income for this year just ending was appreciably lower than last, largely on account of the long winter and its after effects in 1963. Adjusted to a normal weather basis, the forecast is for £430 million this year, compared with £438 million last and £420 million the year before. Increased costs for Review commodities taken into account at this Review amount to £24 million, of which the recent wage increase forms the major part.
§ "In examining each commodity in turn, we found that, while the situation in some warranted no increase in the guaranteed price, and in one case a reduction, others called for increases.
§ "The most important commodity in this Review has been milk. The House knows that increasing production beyond the needs of the liquid milk market has led to a falling pool price to producers over a number of years. Recently the production situation has changed. The ½d. increase given last year did not lead to increased production, and output has 865 actually been lower with the milking herd 3 per cent. down. In these circumstances, the Government can bring about a much-needed improvement in the incomes of milk producers and the guaranteed price will be raised by 2¼d. a gallon. In addition, as already announced, a ¼d. will be added to help finance, for the time being, the Milk Board's schemes for the improvement of compositional quality, and the standard quantity will be raised on the basis of liquid consumption during 1964. In consequence of these changes, the retail price of milk will be raised from 8½d. to 9d. with effect from April 5.
§ "The flexible guarantee arrangements for pigs have also needed adjustment. The demand for pork is strong and we have our share of the bacon market to supply. In to-day's circumstances, the middle band, which must reflect the quantities of bacon and pork which the market can absorb at reasonable prices is too low. We are raising it by three-quarters of a million. At the same time, the guaranteed price will be reduced by 6d. a score. The net effect will be an increase in the producer price of 1s. 3d. a score.
§ "There are signs that the rate of increase in home production of beef is declining. With the continued strong demand we think the price should be improved to maintain supplies from the home producer. We are raising the guaranteed price by 3s. 0d. a cwt. and increasing the calf subsidy for steer calves by 10s. 0d.
§ "No change is being made in the guaranteed price of lamb, but the guaranteed price of wool will be raised by 2d. a 1b. Although the Hill Sheep Subsidy is outside the Review, the House may like to know that the standard rate of subsidy this year will be 25s. 0d. a ewe.
§ "Production of eggs is increasing notably faster than demand and the guaranteed price will be reduced by ld. a dozen.
§ "There will be no change in the guaranteed prices for cereals. There will be an increase of 5s. 0d. in the price of potatoes and of 3s. 4d. in the price of sugar beet. The fertiliser 866 subsidy will be reduced by £2 million. The Winter Keep Subsidy will be increased by £1 an acre.
§ "Taken as a whole, this Review increases the value of the guarantees by some £31 million of which by far the major part is for milk."
§ LORD WILLIAMS OF BARNBURGHMy Lords, although it is difficult, in listening to a statement of that description, to understand what it all implies, I am bound to confess that this Price Review settlement—and perhaps I might ask the noble Lord whether it was an agreed settlement—
§ LORD WILLIAMS OF BARNBURGHI am delighted to hear it. It is the first out of the last four. The Government are well down on thinking, in terms of an even balance. The noble Lord said that the bacon agreement has been reached with our overseas suppliers. Will he tell the House what proportion British producers of bacon have in our own market? Secondly, the reference to wheat and barley in the next paragraph says "to include standard quantities". Does that mean standard quantities of wheat and barley to be imported, or to be produced from our own acres? To which head does that refer?
At the bottom of the next long paragraph, referring to changes in the price deficiency system for cattle and sheep, there are these words:
… which will lead producers to pay greater attention to market forces".Will the noble Lord kindly tell us what is meant by those words? I notice that the total increase in cost of services, or whatever they may be, to the industry is £24 million, but, according to the last paragraph, increased prices tot up to £31 million. So that this year, at all events, the farmers are not called upon to carry all the burden of increased costs. But noble Lords in the House will recall that the 2¼d. per gallon increase in the price of milk costs the Government nothing; that is paid for by the consumers. So I hope the noble Lord will not claim a good deal of credit for that. Perhaps the noble Lord will kindly answer the three questions I have put.
LORD ST. OSWALDMy Lords, may I answer one set of questions at a time? The noble Lord, Lord Williams of Barnburgh, asked what the home producers' proportion of supplies under the bacon market sharing agreement would be. The answer is, slightly over 36 per cent. He also asked me whether "standard quantities" referred to home-produced wheat and barley, or to the imported products. The answer is that it refers to home-produced wheat and barley.
§ LORD WILLIAMS OF BARNBURGHMy Lords, does that mean that we are applying a standard quantity to home-produced wheat and barley, but leaving imports free?
LORD ST. OSWALDThis is balanced by the import price control system which will come into effect after the passing of the Agriculture and Horticulture Bill which is now before your Lordships' House. The standard quantity arrangements form a quid pro quo for agreement with our major grain suppliers. The noble Lord asked me what was the incentive for fatstock producers to pay more attention to the market forces. I hesitate to take up your Lordships' time on this matter—it is most complicated. It is in the White Paper, and I think it would perhaps be for the convenience of the House and the noble Lord himself, since he has already told me that he will be here on Wednesday of next week if he would take up with me anything that he wishes to raise after he has read the White Paper. The noble Lord pointed out that the major part of the award did not come from the Exchequer. Of course, that is true. He did not ask me, but in fact the increased cost to the Exchequer as a result of the award will be about £7 million.
§ EARL ALEXANDER OF HILLSBOROUGHMy Lords, do I understand that the Government are actually going to limit the amount of wheat and barley to be grown by the farmers? When does this commence? Have they been given any notice to restrict their sowings if necessary, either the winter or spring sowings, for the forthcoming harvest?
LORD ST. OSWALDNo, my Lords. These arrangements will start at the 868 beginning of the next cereal year. The noble Earl the Leader of the Opposition used the word "restrict"; but the matter is far more complicated than that. It means that the deficiency payment will be diminished by a pretty complicated mechanism, if the standard quantity is exceeded.
§ EARL ALEXANDER OF HILLSBOROUGHThen the farmer does not look forward to a level price, which the Minister previously described as being no change in the price of cereals. This is a curious situation. Have the Government had sufficient regard to the necessity for constantly increasing our output at home, in order to help the balance of payments?
LORD ST. OSWALDYes, my Lords; this matter is naturally taken into account by the Government in making the determination. The levels of the standard quantities will, in point of fact, comprehend the likely grain production in the coming cereal year.
§ LORD DOUGLAS OF BARLOCHMy Lords, could the noble Lord say what will be the total effect on the consumer of the various measures he has announced? Will the consumers have to pay more or less; and how much?
LORD ST. OSWALDMy Lords, the only thing which will make any noticeable difference to the consumer will be the ½d. on milk. Otherwise the consumer will scarcely be affected.
LORD HENLEYMy Lords, I wonder whether I might make one or two comments from the Liberal Benches on this Price Review. I know that we are to have a debate on agriculture next week, and that a good many of the points can be made then, but I think it might make it easier for me before that debate if I pose one or two questions on the Review to the Government. With regard to this net increase, which amounts to about £7 million, what percentage, in terms of "Neddy's" suggested figure of increase for agricultural production, does this amount to? It seems to me to be a very small one. The N.F.U. are talking in terms of an increase of something of the order of £30 million or £40 million. The Government have given us a figure of £31 million, which in net terms amounts to £7 million. But I think this falls a long way short of 869 "Neddy's" figure. On the question of milk, I am glad that the Government have increased the price by 2¼d.—in fact, it is 2½d. with the amount that goes to the Milk Marketing Board. I regard this as a minimum. Could not the Government go further than this? It is, after all, less than the 1956 pool figure and the costs have gone up astronomically since then. Does this not indicate that the reduction of this figure since 1956 was a great mistake? Would not the Minister feel that this increase is too small?
My third question applies to the phasing of meat imports. I am sorry that the Government have not been able to reach any agreement on the beef and lamb arrangements, thought I am glad that they have done so on bacon. What do the Government mean by "phasing" here? Do they mean tariffs, or is it just going to be the name thing that they did with cereals; that is to say, suggest to the foreigner that they put up their prices? If it is only going to be that, then certainly we on these Benches would deprecate that very much. I also want to make one comment about one of the things that have increased—
LORD HENLEYPerhaps I am taking up too much of your Lordships' time on this point, and it could be raised in the debate next week.
LORD ST. OSWALDMy Lords, I cannot help thinking that most of the points raised by the noble Lord would be better brought up for discussion on Wednesday, if the noble Lord wishes. But I would answer briefly two of his direct questions. The percentage income increase is about 7½. We do not think it would have been wise to go further with milk, because we think any larger increase in the guaranteed price would lead to a further danger of increasing surpluses.
THE DUKE OF ATHOLLMy Lords, may I ask my noble friend whether the Scottish N.F.U. agreed with this February Price Review? Secondly, may I ask whether it would be possible to pay the hill sheep subsidy of 25s. per ewe—which I air delighted to hear about— before the end of this financial year, as many hill sheep farmers will 870 otherwise show a very large loss on this year's operations?
LORD ST. OSWALDMy Lords, in answer to the first question asked by my noble friend, the answer is Yes, the Scottish National Farmers' Union—all three National Farmers' Unions—were in agreement. If I may, I should like to consider the noble Duke's second question.
§ LORD WALSTONMy Lords, could the noble Lord tell us whether the standard quantities for wheat and cereals which have been referred to have in fact been laid down, and, if so, whether the quantities themselves were agreed with the National Farmers' Union; or is that quantity still left in the air to be decided later?
LORD ST. OSWALDMy Lords, they have in fact been agreed. Of course, the National Farmers' Union have been consulted at every point in these negotiations, and they have appreciated that if we were to obtain voluntary import controls from our major suppliers then, naturally, standards of quantities would have to be part of the bargain. They have conceded that, and they have been very helpful.
§ LORD WILLIAMS OF BARNBURGHMy Lords, do we understand from the noble Lord's reply to that question that they have actually told the National Farmers' Unions the Government's decision as to the acreage?