§ 2.32 p.m.
§ BARONESS ELLIOT OF HARWOOD rose to call attention to the problems which face the agricultural industry; especially those posed by the Price Review, and the proposed selective employment tax; and to move for Papers. The noble Baroness said: My Lords, I rise to move the Motion which stands in my name on the Order Paper. Your Lordships will remember that last Wednesday we had a very interesting debate on television. In the course of that debate one noble Lord described himself as "a simple country gentleman". This caused some merriment on the Government Benches. I should like to describe myself today as "a simple commercial farmer", and so declare my interest. I understand, from a paragraph I read in The Times newspaper yesterday, that this is not apparently done in our debates on agriculture. I speak as someone who is engaged in this industry, and I shall try to be both short and practical.
§ I am glad to see that a considerable number of noble Lords are to follow me in this debate, and I am sure they will deal with the points with which I do not deal. I am particularly glad that my noble friend Lord Nugent of Guildford will be making his maiden speech from the Opposition Front Bench. Your Lordships will remember from his record in another place that he is a practical farmer and a great expert, and I am glad that he has chosen this debate in which to make his maiden speech. I would also say that I am sorry the noble Lord, Lord Hughes, cannot be here today (he is in Denmark), as I think that several noble Lords, myself in particular, will be speaking about agricultural conditions in Scotland. But I know that the noble Lord, Lord Champion, who is to reply, is perfectly equal to dealing with agriculture both North and South of the Border, so I know that we shall have all the answers we hope to get.
§ I should like to begin by asking the Government one or two questions. What part do they want agriculture to play in the National Plan? What amount of production of food do they want the industry to be responsible for? And what figure of import saving are they hoping 298 the farmers of Britain will make in the future? I should like to look at that part of The National Plan—this large !book which I have in my hand—which deals with agriculture. In all this enormous volume, there are exactly seven pages devoted to this, as I think, the most important industry in the country. However, in these seven pages there are some encouraging proposals. Paragraph 9 points out that in ten years our industry has saved the nation £250 million at 1964 import prices. I believe that to be no mean figure. And we could still further increase the saving in imports if the Government would say how much more of the home market they are prepared to allow the British farmer.
§ I come to my second question: how much food production do the Government want industry to be responsible for? Paragraph 14 of the Plan hopes for an increase of 1.3 per cent. annually, or of 8.4 per cent. between 1964 and 1970. But this would actually be a reduction in farm production, because over the last five years the net output of agriculture has increased by 4.4 per cent. And there is no doubt in my mind—and I am sure noble Lords who are engaged in the industry will bear me out in this—that with modern techniques and machines, and by giving a decent return to the farmers, we could produce more than 1.3 per cent. per annum above what we already produce. But we must know what the plan is. Is it to increase food production, or is it to remain more or less static?—because 1.3 per cent. a year is hardly an increase.
§ This country, as your Lordships will know, is practically self-supporting in certain commodities—milk, eggs, poultry, pork and main-crop potatoes. There is a table in The National Plan, No. 32, which gives an estimate of what will be required in the next five or six years. The biggest demands for increases are in beef, veal, fruit and vegetables, and the figures appearing in the table for commodities like mutton, lamb, eggs and sugar are by far the smallest. From this table there is no doubt that, given the right encouragement, the British farmer could supply a much greater proportion of these further demands.
§ Here comes my third question. What figure of import saving do the Government want the industry to provide? And 299 here comes the problem of international trade. In paragraph 20 of The National Plan, the case is argued for free imports from the old Commonwealth countries and from EFTA countries. Here, it seems to me, is the nub of the problem, and here is where the Government must make up their mind. Otherwise, farmers will find it difficult to carry on in existing circumstances; and many of them will go out of business, even though they do not want to, simply because they cannot make ends meet. This is a big problem and one which must be solved, if the future of agriculture is to be as important as we all hope it to be.
§ May I now look at one or two of the individual commodities which are important in this industry? I will take livestock first, because that is what I am engaged in and know best; also it forms the basic production of Scottish agriculture. In Scotland, two-thirds of the land is hill and heath. The hill farmers produce cattle and sheep, maintain them on the hills and then sell them in store markets to the farmers with better land to fatten them. There are hundreds of thousands of acres carrying sheep. They breed hardy animals, and hardy folk-shepherds and their families, some of the finest people in Scotland. I want to see these people given as good a deal as we can for the work they do and for the splendid families they rear under these hard conditions. They put the interest of the stock first and their own interest second.
§ I am sure your Lordships will agree with me that these skilled men are hardworking and do everything they can to be as efficient as possible in that section of the industry with which they are dealing. But there is one thing they cannot do: they cannot mechanise the breeding of sheep and, they cannot mechanise themselves. The cycle of birth is not controlled by man, even though one reads of experiments in the breeding of animals to increase the number of twins, for instance, in ewes. These experiments are nowhere near a commercial proposition as yet, and I am somewhat sceptical as to whether they ever will be. In any case, if the desired increase in, let us say, mutton and lamb is to be only the £5 million, which is in the table to which I have 300 referred in The National Plan, this could be achieved by the existing methods of raising sheep and mutton and is quite a practical proposition. But to make it a remunerative proposition is, of course, a different thing.
§ I have here a few prices (I will try not to bore your Lordships with too many figures) which show that in 1957 the average price of mutton and lamb was 39.5d. per lb.; in 1958–59, 39.76d., and in 1964–65, almost ten years later, 39d. This is slightly less. It does not need me to tell your Lordships the difficulty of increasing production and getting a return when the price received for the product is less than it was ten years ago. On the subject of costs, I might put in, in parenthesis, the question of the cost of labour, because in this type of farming it is high in relation to the product.
§ On the general subject of labour costs, between 1947–48 and 1964–65 the cost of living went up by 89 per cent.; the general farm worker's minimum rate went up by 126 per cent., and the average actual earnings (and these are slightly different, due to overtime and so on) by 149 per cent. Yet in the same period the industry's net income went up by only 90 per cent. So that farming, particularly in upland areas, is facing a growing problem of keeping an adequate skilled labour force to meet the requirements, and yet still paying, as we want to pay, a proper wage for the skilled work which the men do. The selective employment tax, which your Lordships discussed a short time ago (I am not going into this to-day, because I had my say on it then), and the proposed loan which the farmer will have to make in order to pay this tax, is not going to help, in the way in which we should like to see, in the remuneration of farm workers.
§ Then there are the costs of agricultural machinery, because even on a hill farm you must have some machines: you have to make hay; you have to buy balers, tractors and so on. Then there is the cost of feeding for certain breeds of sheep on the hill; there are the fertiliser and liming costs, and the cost of hill drainage, which we all try to improve as much as we possibly can for the grazing of sheep and cattle. The cancelling of the grants for lime and for ploughing has not made these things any easier.301
§ Another product of the hills which is important is wool. The value of the wool clip in 1965 was £16½ million. The price of wool has fallen. In the last Price Review the guaranteed price was reduced by 2d. a lb., and although (and for this I am grateful to noble Lords opposite) there is to be an increase of 1s. on the ewe subsidy, it is rather doubtful whether this will make up for what I believe to be a heavy drop in the price of wool.
§ So we are now seeing something happen which I believe is not in the interests of this country or of this industry—namely, that, owing to the fact that our prices arc lower now than they were ten years ago, there is a decline in the amount of stocking which is going on at the present time. In Scotland alone last year there were 16,000 fewer ewes. I do not know what the figures are for the highlands of Wales, but I was in Wales not long ago and I know they are in some difficulty; I imagine that they are down, too. This is something which will not be helpful, and it is something that we in the industry do not want to see happen. I ask the Government whether they would expect nationalised industries to survive if they were trying to sell their products at a little less in 1966 than in 1957. What about coal, gas and electricity? Is there one of those industries which is trying to sell its product at 1957 prices? I do not think there is. So we are really facing a big problem.
§ The other product which the Government are keen to see us increase is beef. This is a subject which I think is of importance, and I know that the industry is anxious to co-operate and do all it can to increase the production of beef. And we can do it. On the hills we could grow more beef and we could produce more calves. But the difficulty is that the price at the end of the product so often does not cover all the costs, and one sees thousands of young animals slaughtered when they should be kept on and reared for beef. If only we could get a slightly better price for the product, then I believe that thousands of these young calves, which in my opinion should not be slaughtered, would be kept on for two summers and grow into beef, which would provide a considerable amount more for the public to eat. I should like 302 to see this stressed in any plans that are put forward for the industry. I know that a number of people, including some of your Lordships, have gone in for barley beef. It began by being very profitable, but I think now, owing to the increase of costs, it is not profitable.
§ As I said, I do not intend to go through all the products, because there are noble Lords here—and the noble Lord, Lord Netherthorpe, in particular—who know far more about milk, cereals and so on. But there is one other commodity that I should like to mention, because it also affects Scottish agriculture, and that is potatoes. The growers last year produced a record of ten tons of potatoes to the acre—that is, a ton higher than in any previous year. But what happened? They produced a surplus of 700,000 tons of potatoes, which were disposed of at throw-away prices which proved disastrous to the growers. In no other industry of which I can think could you have record production which proved disastrous for the grower. These are matters of which I am sure the Government are cognisant, but I cannot help stressing them.
§ Then there is the question, which again comes up in the National Plan, of the industry releasing labour. We in the agricultural industry have released 20,000 men and women a year over the last ten years. This has not prevented us from increasing our production. We have saved, as I have said before, £250 million in imports, and the actual increase in the rate of production is double that of the economy as a whole. We have helped the country by providing cheap food and a home market which has grown to £1,000 million a year. At the same time, by the purchase of agricultural machinery, and the help that we have given to the machinery industry, that industry is now able to export £125 million worth of exports a year. This is also helpful to the economy of the country, but it would be a serious thing if, as I read The National Plan, we are to be asked to allow another 140,000 men to leave agriculture—a figure which I personally do not think the industry could stand, and certainly not the section that is breeding cattle and sheep or producing mutton or is concerned with any of the hill lands. If we have to give up our shepherds, our cattlemen, and so 303 on, we shall not get the increased production which we could get if the question of giving up labour on this scale were not mooted.
§ Of course, on the farms where machinery and mechanisation is possible on a very big scale great quantities of machinery can be bought. But it is very expensive. Traditionally, the money for this investment came from the incomes of farmers. In 1950, the Minister of Agriculture said that farmers reinvested 5s. 9d. out of every pound they made on their farms. To-day, the figure is only 3s. 3d., and there has been an enormous increase in farm loans and credit from the banks. Agricultural borrowing has increased from £221 million to £503 million. This is very difficult at a moment when the banks are reluctant to lend money to the farmer, and he must try to find his own investment just at a moment when men are being taken off the land and the need for mechanisation, for modern buildings and equipment, becomes more urgent. This could be serious, and to cut off our noses to spite our faces by letting the productive capacity run down would be a great mistake.
§ In the Government's new Agriculture Bill there is a proposal to reduce the level of grant under the Farm Improvement Scheme—a scheme under which many of us have improved our buildings, and so on—from 33⅓ per cent. to 25 per cent. and there is, of course, the scrapping of the Hill Farming Scheme for other and, I think, probably less effective schemes. It really will not help at this juncture if men are to go out in the quantities that the National Plan seems to wish. If we could persuade the Government in the next Price Review, when they are discussing all this, together with the Hill Farming Scheme, which is part of their new Bill, to cover such things as fixed equipment and cottages for farm workers, where the scheme was of enormous help, this would be a great help indeed.
§ There is one other difficulty about investment in machinery where this industry is at a greater disadvantage than almost any other industry I can think of. If you are a textile manufacturer and you put new power looms into your factory, you know that those looms will work all day and, if the demand is very great, probably all night. But that does not happen in 304 agriculture. If you buy, as we do, new farming machines (except for possibly the basic tractor, which you must have, and which is basic to the whole mechanical procedures of farming) those machines are often used for only a very short time in the year: they are used for the harvest, for sowing, for making silage, or something else which comes up only once a year. For the rest of the year they are in a shed waiting for the next term, when they will be used again. In that shed they are naturally deteriorating, not so much physically, but because in the same period these clever mechanical producers are inventing new machines which many of us long to buy. But we have to weigh up whether the return is worth the capital outlay.
§ I was at the Highland and Agricultural Society Show in Edinburgh yesterday morning and, like a child pressing its nose against a toyshop window, I walked around the agricultural machinery lines longing to buy some of these enormous, greatly improved, machines which come out every year. But, my Lords, it is no good, because the return that I or many other farmers would get on new machinery would not be worth the capital expenditure. The investment allowances which were allowed in previous Bills are to be abolished in this new Bill. I know there is going to be a new incentive investment allowance, but we do not know exactly how that is going to come out. Being a somewhat conservative farmer, I feel doubtful whether it will be as good as the one we have just lost. Those are some of the problems which face us, either on the side of industry where efficiency can be got by mechanical means, or on the side of industry where labour is the great point.
§ There is one other question I should like to ask the noble Lord to answer when he is replying, and that is whether he could give me a little more information about the rural development boards. These might be very good if they could really speak up with authority for agriculture and forestry, and if they were not slanted all the time towards industry and all the other chapters in this great Report which deals only with manufacturing industry. I should like to see these boards more helpful and useful to the agricultural industry.305
§ May I ask—and this is a point on which I know the noble Baroness, Lady Summerskill, will support me—that from time to time, when they are thinking of members of these boards, they consider appointing on occasion some women to them? As to the last one which was appointed in my own area in the Borders—it was an enormous great board; I forget how many members there were, twenty or thirty—not one single woman was appointed. And that in an area where, if you take manufacturing industry alone, the big proportion of those employed are women because of the textile trade. That is only a sideline to my speech, but it is really extraordinary that we should have this great number of members, but on this board not only is there no woman, but it has only one man who could be said to represent agriculture. It is heavily weighted against the industry. I shall watch it very carefully in the area where I live, and I hope to be able to speak up for the agricultural industry if and when its report comes out. I have stressed the difficulties and problems which face the farming industry to-day because I believe that, as an industry, we can help the country better than almost any other industry, but we must know what is desired of us. The public are dazzled by headlines of what the Press call farm subsidies. They should be called consumer subsidies, for that is what they are.
§ To sum up the position of the farmers to-day, farm prices in general are slightly lower than they were ten years ago. Over the same period there has been an enormous increase in farm costs. Rents and wage rates are nearly twice as high, and farm machinery prices have risen by about 25 per cent. Looked at in another way, farmers' costs have risen by slightly over £290 million during the past ten years of the Price Review, while the total of the Review awards over this period is £56¾ million. Farmers have had to carry £152½ million of higher costs by increasing their output and their efficiency. In fact, they have done so, as I have tried to show. Their output has increased by 42 per cent. and without this, of course, they could not possibly have carried the costs which have been allotted to them. But they are increasing all the time, and I do not know how long the industry can go on unless something is done to help. Despite all the 306 efforts that the farmers have made, their real income, after allowing for the fall in the value of the pound, is only 1 per cent. higher than it was ten years ago. This is in sharp contrast to that of the community as a whole, whose income has risen by 43 per cent. in relation to an increase in output of only 32 per cent. This is a basic situation which I believe must be altered if agriculture is to carry out the heavy investment needed to play its part in the National Plan and to have any confidence in the nation's willingness to give it a fair reward for its efforts in so doing. My Lords, I beg to move for Papers.
§ 3.1 p.m.
My Lords, may I thank the noble but "simple commercial farmer" for having got this Motion on the Order Paper at this time. Just before the Recess her name was near the top of the queue of Motions for "No Day Named". Then I noticed that two other debates, apparently of greater importance—and one of them, I will say, was a Liberal Motion—appeared to have got in front of her, and I thought "Poor old agriculture; Cinderella again!" But, my Lords, I did not reckon with the noble Lady. She was not going to have any queue-barging of this kind. She did not tell us, but perhaps I should tell your Lordships that she is also a noble and bluff chairman of auctioneers. May I also say how sorry I am not to be lucky enough to be third on the list of speakers, so that I could congratulate the noble Lord, Lord Nugent of Guildford on his maiden speech? I need say no more. We all know what services he has rendered to agriculture.
I think the central theme of the noble Lady's speech was the falling profitability of the industry, and this is the point that I want to "plug". The fact is that it is not yielding a fair return to those who work in it; and any industry, if it is to be healthy, must do this. It is becoming too difficult to make a living out of agriculture. Of course I do not mean to say that it should be made easy, but at present the smallest reverse, the smallest piece of bad luck or bad weather, is enough to turn a year's hard labour into a loss; and this is a loss which can be made good only by eating into diminishing capital. And an industry is not healthy where it is becoming as difficult to avoid such a state of affairs as it is in agriculture. This 307 applies to all aspects of agriculture, on some of which the noble Lady has already touched.
It is not only the farmer's income that is falling so heavily. We do not need all the statistical surveys which have been made in the past year or so to tell us, but at any rate they have left us in no doubt that the farmer's real income is falling, and the return on his capital. It is not happening in quite the same way, but this applies also to labour. Agricultural labour is still among the most poorly rewarded in this country, although, unlike the farmer's returns, it is at least keeping pace with inflation. The same also applies to the return to the owner of land. I need hardly remind your Lordships that land and fixed equipment represent more than half the total capital investment in agriculture, and in fact the return on this more-than-half of the whole capital invested in agriculture has not yet quite caught up with the return that land yielded in 1870, before the first great collapse of the industry.
If the return on this half of the agricultural industry is too low, a state of affairs will arise in which proper maintenance and proper improvement falls by the wayside, and I think that many owner-occupiers—who have increased by enormous numbers in the last 25 years—are beginning to find that this is so. The owner-occupier is finding that the part of his capital which is represented by his ownership of land is yielding so small a return that he is not able to improve the land as he should.
I wonder whether the Price Review could have helped us here a little more than it did. We must remember that the Price Review this year could have been a great deal worse than it was. Under the statutory arrangements, the guarantees could have dropped by £6 million, instead of rising, as they did, by £23 million. Nevertheless, I do not think it helped enough, in view of the difficulties through which the industry is now going. I think we ought to remember, and indeed manufacturing industry ought to remember, that agriculture was the only industry asked to make good nearly all its increased costs by higher efficiency, without passing on these higher costs to the consumer in the form of higher prices. 308 It could do this only because agriculture, unlike the rest of manufacturing industry, which increased its efficiency by something like 3 per cent., increased its efficiency by 6.6 per cent. It was only as a result of this that it was able to absorb its costs in the way it did. I think this is worthy of note.
Agriculture is the only industry in the United Kingdom that can stand on equal terms with its opposite number in the United States of America. I am not quite sure how many men it takes to produce a ton of steel in the United States, but in this country it takes something like three times as many men to produce a ton of steel as it does in the United States. So far as agriculture is concerned—and it is the only industry to which this applies—agriculture has managed to hold its own with America in this context. The Minister of Agriculture did his best for us in the face of what was, I believe, probably very tough opposition in the Cabinet, and I do not think we ought to forget that.
If the Price Review did not help us very much, the selective employment tax has helped us far less. I do not want to talk a great deal about this, because we had a debate on it a week or so ago, but I want to "plug" one or two points. First, I accept the arguments that have been put forward for putting agriculture in the premium zone; that is to say, the zone of manufacturing industry which gets the 7s. 6d. premium. I accept that it is illogical and paradoxical: in any case, why should anybody have a premium? But if manufacturing industry is going to be insulated from this direct cost increase which results from the tax on the service industries, and which those service industries will pass on to agriculture, then agriculture, with its import savings role, ought to be insulated as well. Agriculture cannot, like industry in the premium zone, pass that on to the consumer; nor can it pass it on as its colleagues (if one may use the term, in the "neutral zone", that is to say the Civil Service and the transport industry, can do.
I accept all those arguments. The situation seems to make nonsense. Nevertheless, I believe that there is no point in pressing this issue; there is no point in trying to make the Government put agriculture in the premium zone. I think this 309 would put the Government themselves in the position of having their own illogicality. I think they made quite a good case in the National Plan for saying that agriculture is a labour-loss industry, and should be a labour-loss industry, as things are at present.
I enter one or two warnings, as I think the noble Baroness did, too. The Government want to be rather careful they do not go too fast here. This happened in France. France felt they had a bottomless reservoir of labour and set about diminishing it, and found they were going faster than they should have done. Already we have made up the 6.6 per cent. in efficiency, which nobody else has, and the law of diminishing returns must set in if you are not careful; there is a limit to how far you can take up the slack, and if we lose too much labour I think it will not be possbile to increase still further on our 6.6 per cent., as we are expected to and take up the labour-loss slack in that way. Also I should be sorry to press this point about putting agriculture in the industrial zone because it raises rather ticklish problems of the re-rating of agricultural land which are best left alone. I think there is a very strong case indeed for not rating agricultural land because you are not rating land in the same way as you are in an industrial context; you are rating a raw material. But be that as it may, it is probably something we should do well to leave alone.
We ought not to be pressing the Government to bring us into another zone, but trying to recoup our costs, both direct and indirect. The Minister of Agriculture has undertaken to do this. First of all he has undertaken to repay the tax itself. I hope he will do this through his own Ministry, and not through housing or pensions or some nonsensical way of that kind. I hope also that he will try and put all agricultural estate workers under a single umbrella. This is very important. There are a great many people on agricultural estates, part of the agricultural industry, some of whom at the moment do jobs which come under the premium zone—that is to say, if they were in another industry they would be getting the 7s. 6d.—but, in other cases, they are doing jobs which would not be recouped and the 7s. 6d. would have to be paid. I think the right thing would be for the Minister to 310 put all these estate workers under one agricultural umbrella so that they can claim back the tax. If he does not do this, there will be all sorts of subterfuges such as calling the job of one kind of worker by a wrong name. I do not, of course, mean only butlers. We all hope that this kind of situation will not go on under this new selective employment tax. But I think all who are agriculturists in this House know what I mean by trying to get it all under one agricultural umbrella.
I think the Minister of Agriculture is in some difficulty here. He does not want to prejudice the overall position of the agricultural industry by making too many involved exclusions from the tax under this umbrella. I am sure he is doing his best. I want to make this point. We have at the moment a Minister of Agriculture who I think bids fair to become as good a Minister as Tom Williams was and that is saying something. In all our arguments and negotiations with him I think we ought to remember that he cares for agriculture; he really "knows his stuff" and is doing his best for us. If he cannot get over this one of getting agricultural estate workers under an all-embracing umbrella, we shall at least know that he has tried. So much for the direct tax he has undertaken to pay.
There remains the problem of the indirect effects. I think we must try to press for them to be repaid in full. First of all, there are the increased costs of repair hills and contract work and so on, which the service industries will inevitably pass on to us and which we cannot pass on to anybody else. I think that they can, and we must accept that they can, be recouped to us by the Price Review, and this is the most sensible way to do it. What we should try to say to the Minister is that he should not leave us to have to make up some of it by increased efficiency. Manufacturing industry is totally insulated against it, as agriculture is not, and it seems a bit hard we should be asked to pay the tax just because we are more efficient than manufacturing industry in general.
The second indirect effect that is going to affect us is this interest-free loan to the Government. I sympathise with the Chancellor of the Exchequer. One of 311 the troubles that beset us is that we are so short of credit, and I do not blame the Chancellor for looking for other means of getting it. But I think he must try to make this good to us. Whatever, happens, the effects of this selective employment tax are at the very least going to be difficult for us. In fact, I feel they cannot be other than bad. The other day President Johnson, in a speech about the problems of the countryside and agriculture, said:Our tax policy should not penalise or discourage conservation…".He meant conservation in its widest sense of making the best use of land. I wonder whether this selective employment tax really falls within what President Johnson meant.
The second problem that impinges very heavily upon agriculture at the moment is the competing claims on the land for other uses—the "your playground, our workshop" syndrome, as it were. The tremendous drive that is being made at the moment for more and better compensation for dispossession is symptomatic of this. I beg you to remember the enclosures. The in closures were an enormous but inevitable dispossession. But in the course of that dispossession incalculable harm was done to a large part of the rural population. I think we have progressed so far that we ought to be able to make the dispossession which is inevitable in the coming world without its being at the sole expense of the agricultural community.
Next, there is the complexity of all the various new bodies—the noble Baroness has asked the Government to expatiate on one of them, but this is not the only one; there are dozens of interlocking bodies already being put on top of local authorities: regional authorities and Heaven knows what authorities; and so far as we in the industry of land are concerned, we do not quite know where we are. In the same context, I am rather sorry—I said this before and I was "shot down" by the noble Lord, Lord Kennet—that the old Ministry of Land and Natural Resources has gone, and I am glad to see I was backed up by the noble Lord, Lord Mitchison, in this connection. I think if you have land and natural resources you ought to administer them 312 as such by some body directly concerned with land and natural resources, not administer them as a sort of utility in the files of some other Ministry like that of Housing. I am sure that a great many of us on both sides of the House feel this.
The third of our problems is in some respects the most important of all, and that is the problem of the relationship of United Kingdom agriculture and the agriculture of the rest of Europe and the E.E.C., and also the relationship of our agricultural industry to the rest of the world's temperate climate agriculture. The expansion of British agriculture has been accepted by the Government, and it has been accepted that a larger proportion of foodstuffs should be home-grown: that is to say, not only the foodstuffs likely to be needed in the future in this country because of the increased population, but also a larger share to take the place of foreign imports. I think we on these Benches have been urging this for a very long time; and we are not for one moment suggesting that elaborate negotiations carefully entered into should he chucked over just like that. But what I do think we all feel—and I am glad to see the Conservative Party now feel this very strongly, too—is that it is time we started thinking about how to renegotiate some of these long-term international agreements so that we can substitute our present system of subsidies (and I am so glad the noble Baroness pointed out that they should not be called farm subsidies at all) to try to change present support prices for import levies.
I think that farmers themselves have been unnecessarily frightened by the prospects of the change from a price support to import levies, and I think we have all understood this. But I say advisedly—and I wonder what the noble Lord, Lord Netherthorpe, would say about it—that, in view of our technical superiority and our technical efficiency, which is so much better than in the rest of Europe, and indeed our structure, which is a problem which is now concerning us greatly, I do not see why we should not be able to do much more than hold our own in any enlarged European Community. I think the Government also have been unduly frightened about this whole business of dovetailing our agriculture into Europe's. May I say that I am not a bit surprised 313 about that? When one looks at the agonising negotiations that have gone on among the Six themselves to agree upon an agricultural policy, I am not surprised at any Government in this country boggling at the difficulties of trying to do it. Nevertheless, I think one can be too frightened of these difficulties, and we should now set about trying to overcome them.
Lastly, I think that the consuming public as well has been unnecessarily frightened by cries of the end of cheap food. I think that this is a sacred cow which it is high time was butchered. If you have artificially cheap food, which is what we have, the taxpayer will inevitably have to pay for it somehow. He will have to pay for it in some rather disguised way, as indeed he does. In fact, the increase in the price of food would not really be large compared with all the other increases that have gone on in the last two or three years; indeed it would be but little compared to what has, in the last two or three years, been added in terms of taxation. If one looks at the matter in proportion the difference is not great.
Those are three problems which seem to me to matter. If we can solve this third problem, that of integrating our own agriculture with that of the rest of the temperate foodstuffs countries, then I think we are in a fair way to solving what I posed as my first problem, which is that agriculture at this moment is becoming so unprofitable that it is hard to make a living at it at all. If we can solve these two problems, then, with a little good will and give and take, I think there is no reason why we should not solve the second problem which is the conflict between different uses for the agricultural land of this country not only to the advantage of the community at large, but also in such a way as to help to solve the problem of the poor farmer.
§ 3.24 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, I have the honour to make my maiden speech to your Lordships today, and I shall make my remarks as uncontroversial as policy differences allow. First, may I congratulate my noble friend Lady Elliot of Harwood upon giving us the opportunity to have this debate to-day, and upon making such an interesting speech, with her exceptional knowledge 314 of agriculture—because to me the name of "Elliot" has been famous in the field of agriculture for more than a generation, and we still remember it with great gratitude.
This is, in my judgment, a valuable opportunity to review the industry because a number of factors have been changing over the last year or two. I should like to make a comment on each of the three major objectives of agricultural policy as I see them, and a comment on the Government's handling of them. The first one is, of course, to provide a fair living for farmers and farm workers engaged in the industry. Both my noble friend Lady Elliot of Harwood and the noble Lord, Lord Henley, have already dealt cogently with this point, and made clear how poorly the agricultural industry has kept up with the rest of the community. Secondly, I should like to make a comment on the responsibility of agricultural policy to provide the right level of production from our farms, to combine with imported supplies to meet the nation's need, both now and in the future. Thirdly, I should like to make a comment on the need for the policy to support the general economic policy of the country, having particularly in mind the possibility of entry into the European Community.
On the first point, a fair living for farmers and farm workers, I felt that my noble friend Lady Elliot of Harwood dealt most cogently with this, and for myself, I certainly felt that last year's Review was a turning point in the trials of this particular policy. The farmers' resentment reached the highest level I have ever seen—and I have sometimes been on the receiving end in this particular matter. Although this year's Review is easier—as Reviews are wont to be just before a General Election—it has not entirely restored the confidence that was seriously shaken last year. I am sure that the Farmers' Union, in Agriculture House, and maybe even noble Lords opposite as well, look with foreboding to the 1967 Review, for in the year after a General Election there is usually a tough Review. That, I think, is the reaction of both farmers and farm workers—and may I include in any reference to "farmers", farm workers, to whom we all owe so much? Farm workers are skilled men nowadays. The farm worker works long 315 hours in all conditions. His factory roof is, of course, the sky; therefore, he is an exceptionally valuable member of the community, and, of course, farmers' incomes are largely determining what can be paid to him. So to-day it seems to farmers that their incomes are being held static by the Government's policy, while the production and the productivity of farms is rising annually. The result is that they are beginning to feel that the greater their efforts in increasing production, the less their profit margin.
I feel that there is substance in this complaint now. The White Paper on the 1966 Price Review shows that last year the net income of the industry was roughly static—and that in a year when the rest of the community were getting an income rise of about 10 per cent. This really rubs salt into the wound, in an industry which is achieving great things in terms of increased production and increased productivity. To be fair, the increase in income over the five-year period has averaged just about 3½ per cent.—the guiding light. But I should think that farmers are about the only "children of the light" in this country. Most of the rest of us are quite happy to live in darkness and have much greater increases in income.
The fact is that although the bigger farmers are still getting increased production in order to keep up with inflation and tighter profits, the smaller farmers, and especially the smaller dairy farmers, are really feeling the pinch, and it is extremely difficult for them to know where to turn. They can no longer turn to pigs or poultry to help them out, because these are both intensely competitive and it needs big units to make a profit. They are really being squeezed to a point where, apart from their incomes, their production is bound to suffer. They feel that this is very hard when set against the great achievement of the last ten years of a 30 per cent. increase and a £250 million import saving. It seems that noble Lords opposite believe that virtue should be its own reward.
§ LORD NUGENT OF GUILDFORD
The noble Lord, Lord Champion, says "Hear, hear!" to that, but most people 316 feel that there ought to be a little "something" in it as well for those who earn it. The fact is that all Parties are committed to seeing that farmers and farm workers get a fair living compared with the rest of the community, and I should be the first to credit noble Lords opposite with the good intention of wishing to redeem their own promises in this respect. But they are being frustrated by the mechanics of the price support system, which creates an annual conflict between the interests of farmers and the interests of taxpayers as represented by the Treasury. Far be it from me to discourage the Government from striking a blow for the taxpayer. After all, they have struck one or two against him in the past 21 months, with an extra £1,000 million of tax. But the suggestion of my Party is that it is now appropriate to change the agricultural support system in a way to which the noble Lord, Lord Henley, was referring earlier: to transfer the cost of support from the shoulders of the taxpayer to the shoulders of the consumer so that he would then pay an economic price for his food.
I should like to say why I feel the present system no longer serves a national need. It was a good system when we first introduced it some twelve or fourteen years ago. It was the right way to get rid of State trading and the rationing which we inherited and to get back to free markets and choice for the consumer, and at the same time to give the farmer security. I believe that succeeded well, despite the fact that I myself played a small part in it. It is somewhat ironical that Ministers in the Party opposite, who fought so hard to reject the system some twelve years ago, now fight equally hard to retain it. In fact, the noble Lord, Lord Champion, could almost pick up one of my speeches of those days and use it this afternoon, as I could pick up one of his to make my attack on him now—except that my limited dialectic would be far too weak to assist him to defend his case to-day. He will need his most persuasive powers to help him with his case to-day.
The fact is that conditions have changed fundamentally, and the major change is the very big increase in home production since that time; production is up by about 40 per cent. since we had the full Review in 1954. At the same time, the trend of world supplies 317 is changing, and our national policy may also be changing. In 1954, at the time of the first full Review, we judged that a £250 million programme was as much as the Treasury and the taxpayer could stand. Production was not rising dramatically in those days, and it looked as if the system could be made to work within that limit. But production has risen steeply by some 40 per cent., and if the same rate of deficiency payment per unit of food were paid to-day as was paid then, the total cost to-day, if production costs went up pro rata, would be some £350 million per annum.
The Review of 1961–62, when the Argentine drought caused meat prices to collapse and the cost of the support rose to about £340 million, showed that that was more than public opinion was prepared to stand in the interests of giving security to farmers. Therefore, I should entirely agree with anybody who said that £350 million was too much. But the fact is that, as production goes on increasing, if workers are to get a fair return there is a built-in necessity, year by year, for the Treasury to squeeze tighter in order to keep the total cost at a reasonable level.
It would be true to say that two battles take place—and this applies to the past as well as to to-day. The first is between the N.F.U. and the Minister of Agriculture, and the second between the Minister of Agriculture and the Chancellor of the Exchequer. And, of course, the Chancellor always wins—give or take £10 million, but it is usually "take". The result is that with strongly rising production it is almost impossible today to give farmers the fair living we should like to see them have. For this reason I seriously suggest to your Lordships that we should now consider changing the system to one where the market price itself would give the farmer a fair return. This would be secured by a system of import levies. It was very interesting to recall, during the speech of the noble Baroness, Lady Elliot of Harwood, that in 1934 her late and distinguished husband introduced a similar system in the Wheat Act which worked very well in the 'thirties to give some stability in those very difficult years. This, in principle, is the system which we think should now be introduced.
318 An example will illustrate how it would work. In regard to beef, for long periods last year market prices were high enough, so that no deficiency payments had to be paid in order to implement the guaranteed price. Under this system, the effect of the import levy would be to secure that the market price gave farmers the desired return. Each commodity would have to be treated differently, and the price of feeding-stuffs would rise, so that we should have to make special, higher price arrangements to deal with the livestock products. But it could be done, and there could be consultation with the industry in the transition period, because it would be most important to do this step by step over a period of five years in order to avoid any dislocation as we phase out deficiency payments and introduce the import levies. When the process is completed the final step would be to introduce a minimum import price for each commodity, to give adequate protection to the home market against any sudden influx. The Price Review would continue and also the production grants, but we should have got rid of this agonising annual confrontation between the interests of the farmers and the interests of the taxpayer. This would make it possible to give additional elbow room to see that farmers and farm workers got a fairer return in terms of what the rest of the community was getting.
The cost of the change was referred to by the noble Lord, Lord Henley, and he thought it would not be unduly large. We estimate that it would be of the order of £300 million per annum. Noble Lords opposite put it higher, at £400 million, but it is something of that order. It would in fact raise the cost of living by some 2 to 2½ per cent. If this were spread over a five-year transition period, that would raise the cost of living by 0.5 per cent. per annum. It is significant, but it would not be so enormous in the perspective of cost of living increases with which we have all become too familiar. Last year it was nearly 5 per cent. and the selective employment tax will be likely to raise the cost of living considerably more. It would also be a welcome relief to the Treasury to the extent of some £125 million. I personally deprecate any increase in the cost of living, and I regard 319 it as significant, but it would be a justifiable change in the interests of what I believe to be a sound agricultural policy.
Secondly, may I turn to the problem of the right level of home production to combine with imports? I believe that we have reached a time when the balance of advantage of our traditional policy, of importing large quantities of cheap food, in the belief that this would assist us to export large quantities of manufactured goods which would pay for them, is beginning to change. In particular, the terms of trade changed in the 1960s. In the 1950s we had a period when it looked as if the traditional policy was paying, but now it appears that manufactures are harder to sell, that food is becoming less plentiful on world markets, and prices are rising against us. It is significant that six out of seven of our major food-supplying countries are running a trading surplus with us; that is to say, Britain is running a trading deficit with them. This indicates that the traditional policy may no longer be serving us well.
When one sets alongside that the fact, which has already been observed, that home production has achieved an efficiency which I would judge to be comparable with the best, certainly in the Northern hemisphere, it really seems that the balance of advantage may be in a positive policy of increased home production, rather than in trying to buy as large quantities of imported food. In this respect, I felt that the assessment in The National Plan was really not right where it said that itexpects home agriculture to meet a major part of the additional demand expected by 1970".As my noble friend Lady Elliot of Harwood said, this, in fact, represents a slowing down of the present rate of expansion compared with what has been happening in recent years. I feel that this is really a mistake in the present circumstances, and likely to operate against the national interest.
The treatment of agriculture under the selective employment tax also indicates that the Government do not rate very high the contribution which agriculture can make to the national economy, both in feeding the nation and in saving imports. I think that the scope for both is progressively increasing year by year. Therefore, I would advocate that we should re- 320 negotiate treaties with the supplying countries. Great Britain will, of course, continue to be a massive importer of food and a very attractive market, but the time has come when we should renegotiate these treaties with a view to progressively increasing our own production and the share of the total food consumed here which comes from our own farms.
If I may say just one word about world supplies, which I think fortifies my argument, I would point out, first, that there is less coming on the market, and, secondly, that there are heavier demands upon it. Meat is, of course, by far the most exposed commodity, as it were. In pre-war days we used to buy some 80 per cent. of all the meat that came on to the world market. That figure has already fallen below 50 per cent., is falling still and, in my opinion, is likely to go on falling. Countries like the Western European countries—Italy, particularly—are heavily in the market; Japan is heavily in the market; and even the United States is now a heavy importer of meat. Wherever standards of living are rising, inevitably there is an increasing demand for meat; and the very small quantities that come onto world markets make our prospects progressively smaller. I think that we can expect large quantities of New Zealand lamb to continue to come here for many years, but I believe that within the next ten years large quantities of beef coming into this country will be the exception, rather than the rule. So our policy on our own farms ought to be directed to filling, as rapidly as we can, the gap of some 300,000 tons a year.
In this context, I welcome the White Paper's indication that more beef should come from our farms, and that a new subsidy will be provided for beef cows on lowland farms. But my own belief is that by far the best prospect for more beef is in the dairy herds. Even now there are some 750,000 calves wasted annually. Either they die from disease as soon as they are born, or they are slaughtered straight away. Of course, they are mostly from the Channel Islands breeds, but by better hygiene, and by better crossing with suitable beef bulls, most of these calves could be reared to make good beef which, without any increase in the dairy herd, would close a large part of the gap which is now filled by imported beef.
321 I would commend to your Lordships the reverse of the old slogan, "More milk from less cows", turning it round and saying, "Less milk from more cows". I believe that this should now be the slogan on the dairy farm, with the balance of calving for beef, in order progressively to increase our beef supplies. I should have thought that the noble Lord, Lord Champion, and the Ministry of Agriculture, might well have devised some increased subsidy for calves from the dairy herds, sired by an approved beef bull, in order to stimulate just this. If we could get this happening to a greater extent on the small dairy farm, nothing would help more their hard-pressed incomes.
I would expect, also, that in the coming years we shall see dairy products following the trend of beef supplies on world markets. At present they are plentiful; we are able to get what we want, and prices are very reasonable. But as the standards of living rise in European and other countries there is bound to be an increasing demand for dairy products, as there is with meat. The fact is that the amount of money in the dairy industry now is not enough to finance these changes, and some further injection of money by future Reviews is needed. The extra penny last time boiled down to only about 0.18d. net to the dairy farmers, and it simply will not be enough to get the dairy farmers to do what we want them to do.
Similarly, cereals are plentiful at present, and the price is pretty reasonable. But the 10 million tons which are going to India this year are indicative of what is happening in the world to-day, and of what will increasingly happen. I feel great pleasure as I am sure your Lordships do, that this very large quantity of wheat is going to relieve the Indian famine. But this is an example of surpluses of food going to relieve hunger where a cash payment cannot be made. As we know that the world population is expected to double by the end of the century, we must anticipate that there will be literally hundreds of millions of hungry mouths waiting, and competing with us here in Britain for some of these large supplies of cereals which we now import into this country.
322 The trend in the great cereal-producing countries, such as the United States and Canada, in regard to stocks indicates that they are progressively decreasing. However, I am glad to see that the acreage in the United States is now being increased by 15 per cent, to begin to meet this reduction. I am sure that, with more acreage and greater yields, there is great scope for more grain to be produced and this will continue to be so, because altogether, we import some 10 million tons of cereals annually, and I am sure we shall continue to import a very great deal. But I am also quite sure that it would be a sound policy for us to have here a more positive incentive for a growing acreage of cereals with a growing cereal harvest. These are cogent indications of the trend of world food supplies of which we should do well to take note, and against which we should consider our home agricultural policy. I believe that Britain's traditional advantage as the world's biggest food importer is dwindling, and that the balance of advantage between home supplies and imported supplies is changing as well.
Finally, I should like to make the point that agricultural policy should be reviewed to fit in with the general, national, economic policy in regard to the Government's intention of trying again for entry into the Common Market. I understand from a statement by the Foreign Secretary last month that it may be the intention of Her Majesty's Government to try again for entry into the E.E.C., and I look forward with great interest to the debate next week, when this subject will, of course, be fully covered. I hope that some statement may then be forthcoming from noble Lords opposite. But in this debate I wish to make only one point—a point that the noble Lord, Lord Henley, has already made. It is that the E.E.C. system of agricultural support is, broadly, on the lines of the system that I have been seeking to advocate to the House, and it aims, of course, at agricultural free trade within the E.E.C. by 1970. We have all watched the enormous efforts that the Six countries have made to proceed to integrate their national agricultural policies in preparation for this, and the sweat and sacrifice that they have endured in order to make that progress. I am sure I am right when I say that there 323 cannot be the slightest chance of their changing to our system in order to facilitate our entry.
Therefore, if it is Her Majesty's Government's intention to try again for entry, I earnesty hope that the noble Lord, Lord Champion, when he replies to this debate, will be able to tell us that he and his right honourable colleagues will seriously look at this aspect of policy. Agricultural policy cannot be changed quickly. It takes a long time to make a change of this sort, and if it is to be made smoothly, without dislocation to the industry, then the transition must be carefully planned and thought out, and it cannot be done overnight. So I hope Ministers will be able to give us some enlightenment on this point, and that it will be enlightenment which will encourage us to think that they are prepared to revise the system.
May I conclude, my Lords, by summarising the three points that I have made to Her Majesty's Ministers—the three, as I believe, cogent reasons for the Government to review and revise their agricultural policy? The first is to give farmers a fair living; the second is to ensure that there is a sufficient food supply for the country both now and in the future, when world conditions, I believe, will tighten against us; and the third is to prepare the way for entry into the Common Market. I earnestly hope that Ministers will give us an encouraging answer.