§ 3.1 p.m.
§ LORD NUGENT OF GUILDFORD rose to call attention to the limitation which the 1969 Agricultural Price Review places on the Government's expansion programe for home food production; and to move for Papers. The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. In doing so, I would make the observation that in his Budget speech yesterday the Chancellor of the Exchequer stated that one of his main reasons for giving our economy yet another squeeze and freeze was the failure last year to substitute home produced goods for imported goods on anything like the necessary scale, and I suggest that this makes our debate to-day about the imports saving role of our farming industry particularly relevant.
§ Your Lordships may remember the warm welcome we gave last November to the Minister of Agriculture's Statement, repeated by the noble Lord, Lord Beswick, that he adopted in substance the N.E.D.C. Report which he had commissioned to advise on the import saving role of our farming industry. This Report, generally known as the "Little Neddy" Report, found that our farmers could increase production over five years up to 1972–73 by an extra £345 million gross per annum, thus making a net import saving of £220 million per annum by the fifth year out of the total food import bill of about £1,000 million per annum. The Minister of Agriculture scaled down his target of net import savings to £160 million over four years, but otherwise he adopted this major expansion programme with all the implications which it entailed. Those who have read the Report will have observed that it has spelt out in great detail the increase which could be achieved in each commodity—the main ones, of course, being cereals and meat—and the extra capital which would be required to produce it. The Minister assured the farming industry that the necessary extra resources would be allocated.
§ I should like to give your Lordships the main features of the Report's estimate of 75 the extra finance needed for this expansion. The cereal expansion was expected to yield in five years an extra 3½ million tons, a very substantial increase from our farms, mainly by bringing under the plough an extra 1.7 million acres out of the existing 13 million acres of permanent grassland (incidentally this would still leave the total tillage acreage at less than the wartime peak, so it is obvious that scope is there) and partly by increased yields on the existing acreage. Of course, most of the new arable acreage would be outside the traditional arable areas and would be in the Midlands, the South, and the West, and perhaps to some extent in the North.
§ The Report estimated that the extra finance needed for this cereal expansion would be on new fixed equipment that is to say, buildings, grain stores and machinery and so on, at £36 million in total—and the extra working capital required for fertilisers, extra labour, seeds and so on running at about £22 million per annum over the period. Of course, there is an implication here which is obvious: that is, that the new acreage which would be ploughed would be less productive than the existing arable land, and therefore the new cereal prices would have to be increased sufficiently to make the land profitable, as well as to cover the extra finance. In passing, I would say that the price increases in the Price Review are far from achieving that.
§ The other main expansion predicted was the meat production expansion. I suppose we should all regard the expansion in beef production as the most important element. That was expected to run up to a total of over 150,000 tons per annum, although rather more than five years would be taken to reach that level. Similar quantities could be expected in pig meat, poultry meat, and in bacon, but for the beef expansion alone—most of which would come from the extra cows in our dairy herds—extra capital equipment would he needed to the tune of about £46½ million; and for variable costs, labour, feedingstuffs, and so on, an extra £22 million per annum would be required.
§ Each commodity was dealt with in detail in this very comprehensive and very expert Report. The Report concluded that the total new capital required for the whole expansion programme 76 would be fixed assets, £220 million, and variable assets, building up to an additional £110 million per annum at the end of the five-year period. These very large sums of additional finance were justified in the Report by the large net import saving of £220 million over five years; £160 million on the Minister's target over four years. I need only add that in the farming industry the only source of new capital is from the increased prices in the Annual Price Review Award, which gives an immediate increased cash flow; and, secondly, and perhaps equally important, the confidence that these higher prices are to continue in order to finance the completion of the expansion over the ensuing years.
§ Perhaps it is worth mentioning in passing that probably the Minister had in mind that in recent years there has been a tendency for the total production of the industry and the net income to level oil, particularly in the last four years. Production in the past four years has increased only by a total of about 3 per cent., compared with an increase of about 3 per cent. per annum over the previous 13 years, euphemistically known as the "Thirteen wasted years". The Minister was obviously aware of this trend when he decided last November to adopt the "Little Neddy" expansion policy. This is the background to this Price Review Award.
§ May I outline what this Award has given? The Price Review finds that there have been extra costs for the industry amounting to £40 million per annum, and to meet that the Award has given price increases amounting to about £34 million per annum. I concede the point made by the noble Lord, Lord Beswick, when we discussed this matter on his Statement, that in so far as there have been price increases they are in the right places. The problem is that they do not go anything like far enough. The Review stated that the annual increment due to increased productivity—there is a convention for this in the Price Review—amounting to £30 million per annum would cover the gap in increased costs and leave something in hand to start the expansion. In a normal year it is possible that it would have done something in that direction, but last year was such a phenomenally bad year—with the weather so bad that hardly any of us can remember anything as bad, and the losses 77 through foot-and-mouth disease, which of course were very heavy indeed in the western part of the country—that the actual net income of farms fell by some £40 million less than the forecast figure. So the farms generally are very short of cash. Even if no expansion had been needed this year, this would have been regarded as a tight Review. The fact is that it does not provide any extra finance at all for expansion, and it is not surprising that the National Farmers' Unions see it as what they call a postponement of the expansion programme, and have refused to agree it. The National Farmers' Unions have added very strong words about the blow to confidence, but I spare the noble Lord, Lord Beswick, a quotation from those now.
§ It must have been as disappointing to the Minister of Agriculture as it is to us to give up his expansion policy, and I ask the question which I am going to try to answer: what has obliged him to do it? I suggest the answer is that the Minister is really the prisoner of his own policies, the prisoner of his own agricultural support policy against the background of the Government's overall financial policy. Even with the limited Award in this Review, the estimated cost to public funds is £318 million, which falls direct on the Exchequer for public funds. In practice, I would say that any figure over £300 million is some embarrassment to the Government, especially in a year when the Government's first financial objective is to control money supply. So one can see that if the Government had included a capital injection of, say, £40 million, as, to its credit, a Labour Government did for an expansion programme twenty years ago, they would thus have put up the cost of the total award to about £360 million. This we can easily see could have triggered off another round of inflationary wage demands, as well, perhaps, as prejudicing the Chancellor's prospect of persuading the I.M.F. representatives who are now here to give us more time to repay our debts.
§ In fact, this Price Review Award bears all the marks of being determined on short-term financial grounds, rather than on longer-term agricultural grounds, and in my judgment that in itself is a very serious reflection on the present system. Maybe this Government have got our 78 finances into such a condition that they had no alternative but to take the short-term financial view, but that is a point which, naturally, I am not pursuing now. What is certain is that the cost to the nation of taking this view is the loss of a substantial expansion of home-grown food which would have made a reduction in our balance-of-payments deficit of £220 million in five years or £160 million in four years. And the cost to the farming industry—and it is fair just to remember them—for achieving the most consistently high productivity record of any industry in the country is that their net earnings have remained virtually stationary for the last four years, while the average earnings of those engaged in industry and commerce have increased by about 25 per cent. I would say that both for the nation and for the farmers it is a very heavy price to pay for Government following the wrong policies.
§ Financial policies will, of course, be discussed on some other occasion, but I should like now to turn to what I believe would be the right agricultural policy for us to follow. The present policy is, in principle, the same as was introduced by the Conservative Government of 1951–55, when the noble Lord, Lord Crathorne, was the Minister and my noble Leader Lord Carrington and myself were the Parliamentary Secretaries. We introduced this policy then as the best means of ending State trading and rationing and restoring a free market in foodstuffs, at the same time giving a choice over the counter to the housewife. Its basic features are an open market to imports of food, and support by means of a deficiency payment from the Government to give farmers a fair return and a fair income.
§ I believe it was the best policy for our country at that time, but condition; have changed completely in the last 17 years. Seventeen years ago most European countries, and many others as well, within the limits of their purchasing power, were free importers of food. In fact, they were scrambling for everything they could get. Contrast that, my Lords, with to-day, when the United Kingdom market is virtually the only open market for the import of foodstuffs left in Europe and, I believe, anywhere else, too. All the others are hedged about with levies, tariffs and controls to keep out food imports 79 and boost home production. Seventeen years ago food shortage was still with us. To-day there are food surpluses in many countries.
§ The combination of these factors means that from time to time excessive quantities of low-price imports arrive at our ports, sharply depressing the market price here and thus causing the cost to the Exchequer of deficiency payments to soar. This has happened not only under this Government but also under the previous one. Livestock products have been particularly hard hit. At the same time, we here are prevented from shifting temporary surpluses into European markets. The effect on agricultural production has been a progressive tightening of the Treasury purse-strings in recent years, and the strongly rising production of the 'fifties has been checked and flattened off. Apart from the handicapping effect on the farming industry, I believe this is also a handicap to our national economy.
Here I should like to refer briefly to another Report which the Government have recently commissioned. This is the Report of the Select Committee on Agriculture which was set up two or three years ago in another place by Mr. Richard Crossman, when he was Leader of the House. It is perhaps interesting to notice that this Select Committee ran into difficulties early on by showing a rather enterprising interest in the agricultural structure of the Economic Commission. Attempts were made by Ministers to restrain its adventurousness, and it has now met the classic fate of all adventurous youngsters with its premature demise. When I was thinking of this I was reminded of Shakespeare's Richard III, when Richard was nettled by his young nephew Prince Edward making some show of spirit. He sneered at the boy,
So wise, so young, they say, do never live long.",
and then followed that up by saying,
Short summers lightly have a forward spring.
As your Lordships will remember, poor young Prince Edward was strangled three months later on his uncle's orders. That has now happened to this Select Committee; it has been abolished.
But this unfortunate history does not alter the value of the Report. It is a
unique Report. No such Select Committee has ever been set up before, no such document produced by Members of Parliament, with a majority, of course, of Labour Members, has ever before been made. It is of exceptional interest. Its approach to the problem is naturally political rather than economic, which the "Little Neddy" Report was, but it reached the same conclusion: that a major expansion of home production to save imports would be in the interests of the national economy. I should like to read three lines from it. Its first conclusion is:
That it is desirable that expansion which has hitherto been intended to keep pace with the major part of the increase of home demand should go further and aim at a positive substitution of home grown food for part of the present imports of temperate foodstuffs.
It could hardly have said more clearly what I am trying to say to your Lordships to-day.
§ The Committee sharply criticised the handicaps under which they had to work, but they succeeded in probing deeply both into the Ministry of Agriculture and into the Board of Trade, and into their policies with regard to food imports and home production and exports generally. They discovered that the higher policy thinking of Whitehall on these matters was that higher priority should be given to cheap food imports than to expanding home production, and the Select Committee roundly declared that they think this is a wrong priority. The traditional Board of Trade argument—and those of us who have been in Government are, at any rate, vaguely familiar with it—is, first of all, that cheap food imports reduce the cost of living here, which is agreed, and, secondly, that they automatically give Great Britain a customer for our manufactured exports and therefore, on balance, improve our balance of trade. The Select Committee came to the conclusion that that simply does not happen to-day. All too often now exporting countries sell us their foodstuffs, but then go and buy their manufactured goods elsewhere. This happens again and again.
§ The Committee's Report therefore concluded that the balance of trade would be more effectively helped by expanding home food production and so reducing total imports: one might say, transposing the old adage "A bird in the hand is worth two in the bush", that "A cow 81 in the field is worth "—I was going to say "two on the production line", but it is two cars on the production line. This is particularly true, of course, if the production line has stopped; but even then you have to sell them. That is the conclusion of this Report. As I say, it is a Report of exceptional interest and authority, and it powerfully supports my belief that we should change to a system of import controls to protect home agriculture, which would allow a major expansion of home production and a major saving of imported food.
§ I feel sure that the noble Lord, Lord Beswick, will remind your Lordships that the change from deficiency payments to import controls, including import levies, would increase the price of foodstuffs, and I must readily concede this point; it would. We estimate that the increased cost in food prices would be about 6 per cent. spread over three years. Foodstuffs make up about a quarter of the total cost-of-living index; therefore, the total effect on the cost-of-living index would be an addition of 1½ per cent., and this is a serious addition of cost. But the benefits of the change are so great that the balance of advantage is substantially in favour of the national economy.
§ A major reduction in imports, and therefore a major improvement in our balance of trade—and we are talking about a major improvement—would have a greater influence upon the cost of living than anything else. I have only to remind your Lordships of the history of the last 15 months. Last year the cost of living rose by 6.2 per cent. and it is still rising, mostly as the result of devaluation, which was forced on us by a continued heavy balance-of-trade deficit; and an agricultural policy which made a substantial contribution towards saving us from another devaluation would be of maximum benefit to the cost-of-living index and, indeed, to the whole economy. In addition, the change would relieve the hard-pressed taxpayer of something that he has not heard about for a good many years: of over £150 million worth of his present tax burden, because we should be abolishing the deficiency payments. My Lords, in conclusion may I say that the Government are already committed in principle to making the change when their application to join the Common Market is accepted. The only difference between 82 us must be one of timing. Let me press the noble Lord, Lord Beswick, to be a little more adventurous and a little less conservative in his agricultural policy. I beg to move for Papers.
§ 3.23 p.m.
My Lords, we have heard from the noble Lord, Lord Nugent of Guildford, a most interesting speech about the Price Review, with which I am in almost complete agreement. He told us how four weeks ago, when we heard from the noble Lord, Lord Beswick, the details of the Price Review, some of us were so disappointed that in our comments about it we were perhaps not quite fair to it. I myself did not realise that in some respects it was quite a good Review—a good Review on the old formula, as it were—and that those awards which the Minister of Agriculture had got for agriculture were in fact going in the right direction. The noble Lord, Lord Beswick, was quite hurt when we did not recognise this and when we made rather sharp comments about it, and pointed out that it was the best Review—or the third best Review, I think—for 22 years. But, my Lords, that is rather like what the newspapers say about a hot day—you know, "the third hottest Wednesday after Easter since 1882". It really means almost nothing at all. But if it was, in fact, the third best Re view for 22 years, then it seems to me that it is a very strange reflection upon the life and hard times of agriculture that, at the same time, the Review was accepted on all sides as not even measuring up to the added costs of agriculture. Here, we are told, we have what is the third best Review, and yet at the same time it is one which is accepted as not in fact covering the costs.
My Lords, I would not go quite so far as to say that all this makes nonsense of the "Little Neddy", but I find it extremely difficult to reconcile it—not only to reconcile it with what was said by the "Little Neddy", but also to reconcile it with what the Select Committee on Agriculture said. The noble Lord, Lord Nugent, has pointed out what a formidable Report this was. Not only is it difficult to reconcile the Price Review with both the "Little Neddy" and the Select Committee on Agriculture in what they felt could be done with regard to 83 import-saving; it is also difficult to reconcile it with what the Minister himself said on November 12. Was the "Little Neddy" Report wrong? Was the Select Committee also wrong in what it said? Or was the Minister himself wrong in going some way to meet both those two suggestions on November 12? Or is the Minister of Agriculture going as fast as he reasonably can? I do not know what the noble Lord, Lord Beswick, is going to say when he speaks after me, but I suspect that he may well take the line that the Government are going as fast as they reasonably can in the direction in which they indicated on November 12 that they were going. The noble Lord, Lord Keswick, may be satisfied about that, but I wonder whether the Minister of Agriculture himself is satisfied.
On November 12 the Minister of Agriculture, who I suspect is far from satisfied about the outcome of events, went some way towards accepting what "Little Neddy" had said. As the noble Lord, Lord Nugent, has pointed out, he did not go the whole way. "Little Neddy" thought we could save something of the order of £220 million; the Minister of Agriculture suggested we might really try for £160 million. He may have been right in approaching this matter in a rather cautious way, because I think there still is a good deal of difference of opinion in economic circles as to how much saving agriculture can bring about. I think there is a movement among all economists towards saying that we could do more by way of agriculture than in fact we do. It might be put in this way: that practically all economists, so far as I can understand, are agreed that if we were to reduce by £100 million our home production of agriculture it would damage our economy quite considerably. That is accepted, so far as I can make out, by nearly all agricultural economists. But what they do not agree upon is what would happen if we put £100 million more into the production of home-produced foodstuffs—and here there is, I think, quite a considerable divergence of opinion on what the result would be, varying from virtually a minus quantity to a considerable saving.
Nevertheless, there is, I think, a sufficiently growing feeling among economists to have warranted the Government in 84 taking not quite so pessimistic a view as they have taken. I think they are wrong in having taken the pessimistic view rather than the optimistic one, because agriculture in these last few years has, by its accelerating efficiency and production, shown that it would be worth while putting more money into it. There is very little evidence leading to a similar conclusion so far as the rest of industry is concerned, but I think one can say that the growth in agriculture has been faster in terms of production and in terms of efficiency than that of any other industrial activity. Moreover, one can also say that our agriculture holds its own in terms of production per man with American agriculture and with American industry, and that it is in fact the only industry in England which does so. That seems to me to show that the Government, instead of taking the rather more pessimistic view as to what agriculture should do, should have taken the more optimistic one. If, as the noble Lord, Lord Nugent said, they were taken out of a position of being optimistic by short-term forces, it is very unfortunate.
The old-fashioned view, so far as agriculture in this country is concerned, was that we must have cheap food at any price. I think that here I would go further than the noble Lord, Lord Nugent. I would say that I suspect that "any price" here means a price which is much more expensive than most of us realise. We are not getting cheap food. We think we are; but we are paying for it, by roundabout methods, more than we suppose. There is the other old view—that of the "old believers" whom the noble Lord, Lord Nugent mentioned—about our balance of overseas production. So far as I can see, all the countries who sell us temperate foodstuffs are in an adverse balance of payments with us. In particular, this is the case with regard to the biggest of them all, Argentina. There is probably no conceivable likelihood of this state of affairs being altered.
Even if this were not true, even if it were not true that these countries were in an adverse balance, it still seems to me to be a very doubtful way to promote trade. I cannot believe that, in the long run, trade is promoted by artificially keeping down the prices of particular commodities. But this view, which seems 85 to me to be a nonsense, seems to be tacitly accepted by a great many people who I should have thought ought to be trying to think along different lines. The third "old believers'" view is that there is still an enormous pool of labour in agriculture in this country which, if it were released, would immediately go into industry and would be very much more productive. This may have been so a hundred years ago, but it is not so now. These three views—outdated as they seem to me—are views which appear to prevail at the Board of Trade. And it seems to me that it is the views of the Board of Trade and not those of the Ministry of Agriculture which have prevailed in Government thinking.
My Lords, it may be true that these three beliefs—that is to say, cheap food at any price, the balance of payments and the pool of labour—were true in this country during the first hundred years of the Industrial Revolution, which was financed out of agriculture. During the second hundred years the position changed. Agriculture fell into a decline from which it was only partially rescued by the reversal of these old views in the shape of protection on about the same scale as all other industries in this country. Agriculture is not in a favoured position; it is in almost the same position as any other industry. What has been happening in the last hundred years is that agriculture, having financed the Industrial Revolution, was saved by a partial protection policy from complete collapse; but that policy does not go far enough to-day. If we are going to make the best of our land and agriculture I think we must get rid of these "old believers'" views.
It seems to me that probably the first thing to do is to get ourselves out of the straitjacket of the negotiated agreements that we already have with a great many countries 'and to re-negotiate them. These agreements, which are supposed to advance our balance-of-payments position but which in nearly every case are disadvantageous to us, must go. It is these agreements that are the greatest single factor in preventing expansion. They constitute a factor more important even than that of putting capital into the industry. The noble Lord, Lord Beswick, will tell us that it is to this aspect—to- 86 wards trying to get out of this straitjacket and to re-negotiate some of these arrangements with foreign countries—that the Government are now turning their mind.
My Lords, the second thing is that we must put more money into both land and farming than is proposed in this Review. I want to make a distinction between land and farming; because it is not made often enough with regard to the capital injected into the agricultural industry. May I remind your Lordships that the fixed capital, that is to say, the land and buildings, accounts for 70 per cent. of the industry, although most of what money we put into agriculture—and what we have been doing recently is in terms of the end product—goes into the farming side of the capital, which represents 30 per cent. We are not putting enough into the fixed capital.
There is one hopeful sign here, and I hope that the noble Lord, Lord Hughes, may turn his mind to this at the end of the debate. Your Lordships will remember that yesterday's Budget proposed that interest on overdrafts should no longer be permitted to be set against income for tax purposes, but that this should not be so so far as land and buildings are concerned—and this applies not only to maintenance, repairs and improvements but also to the purchase of land and buildings. In such oases, interest payable on borrowed money may continue to be set against income. This is a very valuable concession by the Government and one which if it means what I think it means, will be extremely helpful from the point of view of putting money into the fixed capital of the agricultural industry.
Thirdly, I think we shall have to do something about wages. I am very glad to note that this feeling is coming into agricultural circles. Farmers are not thinking to-day in terms of being unable to afford extra wages; they are now thinking in terms of the relations between agricultural wages and industrial wages being rather disgraceful. Of course, if there were an enormous pool of labour which one wanted to get out of agriculture, as might have been the case a hundred years ago, there would be good reason for a wage differential of something like 20 per cent. But this is no longer the case. I think we must all 87 get round to the idea of paying higher wages in the agricultural industry.
Lastly, I turn to the question of how we support agriculture. I myself should prefer, like the noble Lord, Lord Nugent, to see us go on to some system of import levy. I know that "The devil you know is often better than the devil you don't know", and I think that the N.F.U. are nervous about any possible leaving of the old system of subsidies and grants which has worked extremely well for a generation. Nevertheless, I think there are advantages in the import levy system. First, I am attracted by any system which gets away from the present disguising of what is in fact a consumer subsidy and making it appear to be something which "feather-beds" the farmers. I should like to get on to a different system, even if it cost more, in order to prevent that state of affairs.
Next, I should like a system (and I think that the Blue Book from the Select Committee mentioned this) which means that the money does not have to be found by the Treasury itself; for this seems to induce some kind of wrong thinking; and makes it difficult to make a correct appraisal of what is in fact the subsidy going to the agricultural industry. Such a system, moreover, would tend to get us more in line with Europe. I know that it may be many years before we get there, but anything which can get us on to the same sort of basis as the rest of Europe is a good thing.
Lastly, my Lords, a system in which the money does not have to be found by the Treasury makes it easier to avoid dumping. If you talk to any agricultural merchant you will find that there is a great deal of dumping. I suspect—and so do the Select Committee: they virtually said so—that the Board of Trade connives at this; and any system which made it less easy for the Board of Trade to wink at this would be a good one. As I say, the Farmers' Unions are uneasy. The Liberal Party, having been a strong supporter of the import levy system, is beginning to weaken a little. Some of its members think that we ought to stick to the old system; but that is not my view. I should like to see a change. The Country Landowners' Association, of which I am also a member, has not yet expressed an opinion on this issue, and 88 the Select Committee said they were not allowed to have time to consider it—which is quite a point. So I think it is reasonable to go cautiously. Nevertheless, what the C.L.A. and the Liberal Party and, so far as I know, the Conservative Party also (and I am not sure that it is not mentioned by the Select Committee), all agree on is that we must put more money into that side of the industry which represents fixed capital, and that it is no use thinking all the time in terms of the end price of agricultural commodities. This may help—not that I think that this Review does much to help—the farming side capital, but it will not help the two-thirds which represents fixed capital.
My Lords, I started by saying that possibly I was a little unfair in attacking the Price Review when it first came out because in certain respects it is an attempt to steer the money in the right direction. By the standards of any ordinary year it would have been quite a good Review. Nevertheless, as the noble Lord, Lord Nugent, has said, in terms of the sort of thing we expected when the Minister committed the Government, as he did in November, we were all deeply disappointed in the Review. I shall be very surprised if anything said by either the noble Lord, Lord Beswick, or the noble Lord, Lord Hughes, persuades many of us in the agriculture industry to the contrary.
§ 3.42 p.m.
§ LORD BESWICK
My Lords, I should like to thank the noble Lord, Lord Nugent of Guildford, for bringing this Motion before the House and to congratulate him on the tone which he set by his opening speech. The noble Lord, Lord Henley, also was fair-minded in his approach to these matters. I confess that I could not quite understand his reference to the best Wednesday morning we have had since 1882. I find that when the sun shines I enjoy it tremendously and I should like to think that the spring sunshine is a good augury for the expansion of cereals, as indeed most people think it may well prove to be.
My Lords, I am particularly glad that the Motion has been brought forward because it gives me this opportunity to explain the background and the considerations which led to the Government's decisions on the 1969 Review Award. In 89 the final analysis continued expansion in agriculture depends upon the response of individual farmers and the decisions they make about their production plans. Their decisions are decisive. But it does seem to me important that no one in Parliament or in the Press should try to build up an atmosphere of unnecessary pessimism in which the farmer has to make his decisions. I am glad to think that, despite the efforts of some Opposition politicians, not in this House—at any rate, not so far—and the rather pitiful sour writings in some sections of the trade Press, the farmers themselves have made a characteristically hard-headed and fair appraisal of this Review. Leaving aside the froth of political comment, the reports we have received from all the sources open to the Agriculture Department indicate that farmers' reactions have centred on two main themes. First, farmers feel disappointment at the size of the overall award of £34 million. But, secondly, when they come to look at the details of the determinations, they can find very little seriously to quarrel with. It seems to me that the reports received in Whitehall are largely justified by the very gracious way in which the noble Lord, Lord Henley, said that, on reflection, he thought that he too had been a little hasty and unfair in what he said about the Review Statement.
Of course the industry may have hoped for more. But basically farmers are realists, and their reactions underline this. One can ask for more, and indeed say that more would have been justified, or would have been even more productive; but to say that this Award is ungenerous is quite wrong. As the noble Lord, Lord Nugent, said, after all, this £34 million is not the amount of the Award; it is not the only figure. It is an extra figure, and the total support is now running at over £300 million a year. I believe that the farming community can see this award in perspective and before I go into detail on the determinations I would invite the House also to look at the problem in the broad.
Agriculture is one of our major industries; it plays a vital part in import saving; our farmers produce about half of all the food we eat. This is a massive contribution to our national well-being. But at the same time its contribution overall is only some 3 per cent. of our 90 gross national product. No Government, of whatever political complexion, can overlook the effect of any decision on the other 97 per cent. Of course there is often an apparent conflict of interest before final figures are reached. Of course other Government Departments appear to be more concerned with the 97 per cent. than with the 3 per cent. But to make out, as some have tried to do, that this year my right honourable friend the Minister of Agriculture has just been overridden by the Treasury is both inaccurate and unfair. Speaking as one who has watched development; over recent weeks, and taken part in them, I hope objectively (and after all I have the privilege of speaking in your Lordships' House for both Agriculture and the Treasury), I should like to record my admiration at the way in which the Ministers for Agriculture have stuck steadfastly to what they rightly believed were the essentials of an agricultural expansion scheme.
I said earlier that the agriculture industry contributes only about 3 per cent. of our gross national product. But it is also interesting and essential to realise that this 3 per cent. is produced by about 3 per cent. of our labour force. As the noble Lord, Lord Henley, said, this ought to be compared with what has happened in other countries. I have not the figures regarding the position in the United States, but I should have thought they compare very favourably with ourselves. If we compare our achievements with other countries in Europe we come out very favourably indeed. In France, for example, although agriculture accounts for just under 10 per cent. of the gross national product it employs rather more than 16 per cent. of the working population. In Germany, about 5 per cent. of the national product comes from agriculture, but nearly 10 per cent. of the working population is engaged in producing this proportion. Clearly, therefore, this industry is efficient, and I am sorry that the noble Lord, Lord Nugent, appeared to be diminishing the productivity achievements of the farmers when he said that in the last four years the increase in output was only 3 per cent. Of course, it is possible to say from the table that this is so, but it is also possible to say from the same table that if one takes the three years, 1965–66 to 1967–68, the increase is 7 per cent. 91 The figure is distorted by last year's abnormally bad return.
I think it can be said that the policy which was initiated by a Labour Government in 1947 has paid off, so far as the productivity of the industry is concerned; and that is what the Select Committee and the E.D.C. Reports said. The policy has been the right one and the Government acknowledged this when, after completing their examination of the industry's contribution to the national economy in the light of the E.D.C. Report, my right honourable friend the Minister of Agriculture was authorised on behalf of the Government to announce the policy of continued selective expansion to 1972–73. I emphasise that selective expansion is still the firm objective. It is quite wrong for the noble Lord, Lord Nugent of Guildford, to say that this has been given up. This is not so. I also emphasise that the continued growth of productivity was a key element of the programme and its extension to 1972–73.
I want to say something about the industry's efficiency gain, since there seems to be some misunderstanding about this element in the assessment of this year's Award. The current figure of efficiency gain is assessed at £30 million a year, taking one year with another. There has been some criticism of the figure because the industry could not have achieved the extent of the gain in 1968–69. This is perfectly true, but over a period it represents the best assessment that can be made of the growing efficiency of the industry. It is shown by such features as increasing gallons per cow, better cereal strains, larger and more efficient production units and greater output per worker. It is reassessed periodically with the Farmers' Unions and is agreed by them.
So there can be no question of the industry's continuing gain in efficiency, and the industry is rightly proud of its achievements. But it is said that it is unfair or unreasonable for the industry to be called upon to give up a part of the benefit of this gain in efficiency. I wonder whether we can really say it is unfair. As the noble Lord, Lord Nugent of Guildford, and I have already said, the cost in Exchequer support for agriculture is running in the region of £300 million a year. This is apart from other 92 important advisory services, provided free of charge, and the cost of providing a stable market for some of the industry's output, as, for example, bacon. It is surely reasonable to expect the taxpayer and consumer to benefit in some measure from the industry's use, and efficient use, of resources made available to them.
The noble Lord went on to say that we could go over to some new policy and he brought forward this panacea of levies. The noble Lord put this forward to-day in a most intriguing and persuasive way and I was sorry that the noble Lord, Lord Henley, appeared to be wavering a bit in his attitude to this. It has been put forward by others in the country as being a painless and profitable support to farmers and to consumers as well as to the taxpayers. I am not going to get bogged down in a detailed argument about levies, but I urge strongly on those who have to consider the attraction of different schemes that it is all too easy to over-simplify. In the first place, our present system, based on that great agricultural landmark, the 1947 Act, is much more flexible and adaptable than the noble Lord opposite is prepared to concede. He talked about the industry being a prisoner of this policy—I think the word used by the noble Lord, Lord Henley, was "straitjacket"—but I feel that both noble Lords overlooked the flexibility and adaptability of the policy that has been pursued by successive Governments since 1947. We have built up over the years a system which suits the circumstances and needs of British agriculture and the British economy as a whole.
It is misleading to regard the system as based on deficiency payments and production grants alone. These are supplemented by a wide variety of other techniques. There is import regulation over a whole range of important products. This year alone has seen the new Bacon Market Sharing Understanding which provides greater freedom for the industry to expand. Sharply reduced import quotas for butter were announced only a week or so ago. Voluntary agreement has been reached with our major cheese suppliers and we are pushing ahead with our consultations with other suppliers. On eggs and egg products, the Government have announced their proposal to introduce minimum import price arrangements.
93 My right honourable friend has been studying with the Farmers' Unions the possibility of providing greater market stability for fat cattle by improved phasing of supplies on to our market. He is now examining the wider implications involved in such a scheme. None of this suggests the conception of a straitjacket or of a prison cell. It really is unwise to think that there is a simple clear-cut money-saving technique which can replace the present complex of supports. I ought also to mention that we have been looking at the grant system to see whether there is scope for further streamlining. In particular, we have much in mind the opportunities of better administration and economy in paper work. If we can do more in that direction, I am sure that every farmer in the country will welcome it.
I have listened carefully to the arguments for support through import levies and I have yet to be convinced that a number of major issues have even been adequately explored by the Opposition. There is the question of assurance of market for our producers, the cost to consumers, the implications for public expenditure and the effect on our international obligations—to mention but some.
We hear a good deal about the allegedly undignified annual haggle of the present Review system. But surely it is Ï to think that under an alternative levy system all will be sweet delight. Whatever haggle there may be now, about how to keep prices down, will be as nothing if it came to an argument about how much we were to put prices up. Who will fix target prices? There are Departments of the Government very much concerned with the impact of these levies on friends and trading allies overseas. There are departmental champions of the consumer. The Department of Employment and Productivity cannot be disinterested in the effect of food prices on wage agreements. The Treasury will still be involved. If the noble Lord sees the present system as lining up agriculture against the Treasury, I can only say that his proposals are likely to line up an even more formidable opposition. And this is bound to be the case, irrespective of whether there is a Labour or a Conservative Government in power at the time.
94 Finally, on this aspect of the matter, I make one political point. It seems to be disingenuous, to say the least, for some members of the Conservative Party to go round talking of the hundreds of millions to be saved by ending the present system, while others anxiously explain to farming audiences that there will be transitional periods and support buying operations to sustain the farmer. They cannot save money for the taxpayer and still spend it on these transitional support arrangements.
I now turn to this year's Review determinations: not spelling out all the details again but dealing with some general aspects. First, there has been specific criticism that the overall award of £34 million is too small. It is maintained that the total should have been larger because of the cost increase of £40 million and last year's had year when net output and net income fell back. The Farmers' Unions have placed especial emphasis on these aspects. I must, however, make quite clear that the Government took these developments fully into account as they were bound to do under the Review system. I would add this one point, and I put it rather delicately. Much has been said about the Statement last November having encouraged expectations which were not realised. I have tried in my own mind to work out what would have been the result if that Statement had not been made. Of course, the implications of that Statement of last November were taken into account when this year's Review awards were finally agreed. We accept that last year was a bad one in many respects for British farmers, and particularly for many cereal growers. But we must look deeply at longer-term trends, and the basic trends in output, income, and efficiency are firmly upwards. It is on this basis that the determinations have been framed.
Your Lordships will recall that under the E.D.C.'s assessment of the technical possibilities of expansion, the priority commodities were beef and pigs and cereals. It is these commodities which offer substantial import saving possibilities, and it is precisely these commodities which are featured in the extended selective expansion programme. It is, I stress, a selective expansion programme. No one has seriously quarrelled with that. We 95 have the priorities under that programme. No one has quarrelled with these. So at this year's Review we have concentrated incentives on the priority commodities, beef and pigs, wheat and barley. And people have found it difficult to quarrel with that list of priorities. All this is part of the logic of the selective expansion programme. For other commodities, where we are generally self-sufficient, the aim has been to keep production progress in line with expansion of demand. So there is less case for providing encouragement to expansion at too fast a rate.
There have been some criticisms of the "neutral" award on milk. This is a sector where the demand of the market for liquid milk—the most remunerative outlet—is amply met. Further supplies must go to increased manufacture of milk products at much lower prices. It would be unreasonable to give greater impetus to milk production to run ahead of remunerative outlets. It is in essence a question of maintaining a balance and control over increasing output. I know that many dairy farmers feel that, in a sense, they have been let down. But the dairying sector is perhaps the most buoyant, the most efficient sector of the industry. Efficiency is rising with the concentration into larger herds, improving yields and better management generally. So, while returns per gallon may fall as production increases next year, the return from total sales will tend to expand. In addition, the award on beef should encourage dairy farmers to breed more calves suitable for beef.
My Lords, if the noble Lord will allow me to interrupt, would he not agree that the so-called "neutral" award on milk is going to weigh particularly heavily on the smaller farmers? Secondly, since this "neutral" award is not encouraging in any way, how can he expect better calves for beef herds?
§ LORD BESWICK
My Lords, the noble Lord will have an opportunity later on to expand this point, which he has made before and which I have previously tried to answer. As I was trying to say, I accept that this section of the industry has some reason to be less satisfied. I was going on to say that the 96 dairy farmer will after all have the safeguard of the dilution assurance relating to the dilution of the milk price resulting from increased beef production. This assurance has been rolled forward for the period of the extended expansion programme. Moreover, dairy farmers should benefit, as I put to the noble Lord when he last raised this point, through the action taken by the Government on butter and cheese.
My third point on the Review is this. Apprehension has been expressed at the loss of workers from the land. This has been going on for a number of years and in fact has been a major contribution to the industry's gain in productivity. It has, of course, been accompanied by increased investment. The Government recognise this. They recognise, too, that if the rate of loss becomes too high it could become a restraint on expansion. Both the E.D.C. and the Select Committee have warned on this. At present the expressed fears have not been realised, although there can well be local problems. Nevertheless, the situation needs to be watched carefully and this the Government are doing.
I hope I have said enough to show that this year's Review Award does not merit the cries of woe and despondency that we have heard in some quarters in recent weeks. I maintain that the award is positive, and consistent with the Government's policy of extended selective expansion. The determination must be seen as part of the broad strategy for a balanced and integrated expansion. They provide resources where they are needed. They give them now, early in the programme period, so that the necessary expansion can take place. While in 1968–69 the industry suffered a setback, the underlying trend is firmly upward. At the Review, the Government have set out to ensure, as far as can be achieved, the recovery of expansion and a further advance this coming year.
My right honourable friend the Minister of Agriculture has been criticised because he allegedly promised the industry more than has been given. But there were no unqualified assurances in the November Statement. The Minister made clear then that expansion would require additional resources and farmers would need increased rewards for their efforts and skills. At the same time, he 97 made it clear that the case for expansion and of the Government's support for this was on the basis of the industry's previous record of increasing productivity. This, I stress again, was the basis of the November policy Statement, and it is also the basis of this year's Review Award. The Government believe in the fundamental soundness of the industry and its productivity gain. This belief warrants continued support and resources for the achievement of the objectives to 1972–73.
No one, I suggest, looking seriously and objectively at the Review determinations can talk of limitation on the expansion programme: 15s. a cwt. on the end price of fat cattle is not unreal or inadequate. The award on pigs clearly sets the course for continued steady expansion. Similarly, the award on wheat and barley is not an empty gesture but real encouragement to expand production. The Award demonstrates that the aim is clearly for continued selective expansion. This was the message of the Government's November Statement, it was confirmed by this year's Review Award, and I hope that from this House this afternoon the message to be sent out will be one of constructive optimism.
§ 4.10 p.m.
§ LORD BALERNO
My Lords, I am indeed grateful to my noble friend Lord Nugent for initiating this debate and for casting his net so widely over the principles of the Price Review and the prosperity of agriculture, a line followed largely by the noble Lord, Lord Henley, and dealt with chiefly in the main part of his speech by the noble Lord, Lord Beswick. I hope that your Lordships will forgive me if I do not follow those lines, because we must understand that British agriculture is made up of many enterprises; it is an amalgam of different aspects, some of them unrelated to the others. Unless it is examined in detail, item by item, one cannot fully understand the implications of any single figure of the Price Review.
For myself, I wish to dissect two of these enterprises and to show what I think, and what many farmers would agree with me in thinking, is really happening. At the risk of boring your Lordships, because it is a fairly complicated subject, I should like to start with 98 pigs. The Annual Price Review says that the Governmentwant the industry to have the necessary confidence and resources to expand steadily, but they do not want a runaway expansion".Now let us examine how they propose to accomplish this double objective: creation of confidence and resources and also the prevention of a runaway expansion. This is to be done by raising the guaranteed price by 6d. a score or about ¼d. a pound deadweight. I will come back to this point.
The Government also propose to raiseboth the lower and the upper ends of the middle band by a further 400,000 pigs.That sounds an awful lot of pigs, 400,000—but is it? I reckon it is of the order of 3 per cent. of the present production—not all that generous. But let us for a moment examine what happens to these 400,000 pigs. Do the Government realise that they will all be required to cope with the increasing demand for fresh pork, and for fresh pork alone? Therefore, so far from helping the farmer, the Government are merely trying to meet this increased demand, and if they do not do it then most certainly there will be a shortage and the price of pork will rocket. I use that word "rocket" advisedly, because it will come at a time when beef, mutton and lamb are in short supply; and the price for pork will go right up. So much for the raising of the middle band.
Let me return to the question of 6d. a score, for it is now the only possible incentive to the producer of bacon pigs. At whatever stage a Government may inject an incentive into livestock production, unless that incentive is in some measure passed on to the breeder there will be little or no response. Is this 6d., or even half a sixpence, likely to get anywhere near to the farmer who keeps sows for bacon production? I submit that not one penny of that 6d. will get to the breeder of bacon pigs. Indeed, I do not think that one penny of it is going to get to the feeder of bacon pigs.
Let me tell your Lordships what is going to happen to the Government's 6d. The story is a little involved, but I will try to simplify it. Every bacon pig is graded and the price per score is fixed by its grade. The grading standards for the top grade have gone up, have been made more severe, and so fewer pigs will reach that grade. I am not quarrelling 99 with that. We must improve quality. And, quite rightly, the price for this top grade is up—up by 7d. per score, a penny above the Government Award. Let us now consider the next grade. Here the price is down substantially; it is down by 1s. 5d. a score, and the price in the lowest grade is reduced by 11d. a score. It is anticipated that 33 per cent. of bacon pigs will make the top grade. For these the curers add 1d. of their own money to the 6d. award. But for the other 66 per cent. of the bacon pigs they buy, the curers will be giving the farmer more than 1s. a score less than he is obtaining just now. Thus, the whole of this Award sticks with the curers, and so far from the producers obtaining any benefit, they will actually receive substantially less cash return overall than they did before this so-called Award was made.
I know that the bacon curers have been experiencing bad times, and I for one do not altogether blame them for not passing this 6d. a score on to the producer. But I blame the Government for not getting hold of this problem. They should have moved immediately after the "Little Neddy" Report. This Report confirmed the report by the farm economist. Dr. Rickard, which had been commissioned by the Pig Industry Development Authority. But, instead of taking action, the Government are now referring this problem to the Industrial Reorganisation Commission for yet another examination of the structure of the bacon industry. This they are doing despite the assurance they gave to the curers a long time ago that the curers' position would be reviewed within four months of the curers' introducing their new bacon selections, which they did last May. Meanwhile, the curers are believed to be losing £2 million a year.
With all this tangle, what does the Minister mean when he says that he wants Britain to have a bigger share of the bacon market? How can one think that the farmers are going to congratulate the Government on being generous when they are giving them 6d. which they will never receive? How in these circumstances can the Government possibly expect to get an orderly expansion of the pig industry? I would draw the attention of the Government to the fact that no other field of agricultural expansion is so closely bound with new capital 100 investment as is pig production; and I am very glad that my noble friend Lord Nugent laid such emphasis upon the importance of new capital investment if we are going to obtain any expansion. The specialists in whose hands pig production is now mainly concentrated are almost all using their buildings and equipment to the full. With bank rate at its present level the outlook for pig expansion is therefore bleak—I do not mind being called a pessimist; I am facing the facts—and it is being made bleaker still by uncertainty about the rating of the modern buildings without which we are most unlikely to get any economic expansion on a large scale.
In Scotland we produce a far higher percentage of bacon pigs than is produced in England. We are also being far more strictly examined by the valuation assessors. When the last Agriculture Act was going through this House I remember receiving some encouraging words from the noble Lord, Lord Hughes, that the Government were looking into this matter. So far nothing has happened, but we are not without hope. I should, however, like to ask the noble Lord why Scotland must wait for these iniquities to be discovered by the English, or to be imposed on the English, before Scotland herself can obtain justice. The British pig industry has now become as technically advanced as is any pig industry in the whole world, but it cannot be expected to compete with those countries which have a two-price system for their pigs: a high price at home and a cut price for Britain. With some control of imports the pig industry of Britain can expand quite easily by 25 per cent., and save a lot of imports. But as things are just now the aim to market 16 million pigs in 1972 is nothing but another mirage of wishful thinking.
My Lords, I will turn now to the dissection of another aspect of agricultural production. I am afraid that I cannot agree with the noble Lord, Lord Beswick, who used the term "buoyant", as the Minister has done, regarding the dairy industry. I disagree with him profoundly on this point. Before going into detail I would remind your Lordships that the dairy industry is responsible for something like 35 per cent. of the total marketed output of British agriculture—that is, in milk, milk products and calves 101 for beef. No other commodity reaches anything like that proportion. Put grain and other farm crops together and they amount to only 18 per cent. This is my excuse for drawing the attention of your Lordships to this problem of the dairy cow.
In outlining the objective for farming the Minister of Agriculture, Fisheries and Food in his—and I would use the adjective "notorious" guidelines statement on November 12 last, said:… for these important commodities, beef and milk, we are aiming for increased output, similar to that suggested by the Economic Development Committee …"—[OFFICIAL REPORT, Commons, 12/11/68, col. 212.]However, in his speech on the Price Review on March 31 the Minister stated that any addition to the guaranteed price greater than 0.4d. per gallon would be "imprudent". I would ask your Lordships to spare a moment to examine the prudence of this so-called addition of 0.4d. per gallon. Under this Review the dairy farmer is expected to bear the whole of his increased costs; and these are estimated to be of the order of 0.9d. per gallon. Then the price forecast for milk for the current year is reckoned to be down on last year, owing to increased production and to lower consumption. It is reckoned that on this score a dairy farmer will drop another penny per gallon.
If my arithmetic is right, this means that throughout the coming year, despite the Award, the dairy farmer will get 1½d. per gallon less for his milk than he did last year. The Government have called this a "neutral" award. This is adding insult to injury, with a vengeance! But this is not the first time the Government have played this trick on the dairy farmer. The 1968 Award ostensibly gave the producer an increase, but he did not get one single farthing of it. The Government must realise that there is a limit to which the producer can be pushed.
I find it difficult to follow the Government when they claim that the higher price for beef will increase returns to the milk producer by something of the order of £1 per calf, which means 0.25d. per gallon. When compared with increasing costs, that farthing is a ludicrously small sum. But I very much doubt whether anything like that £1 per calf will find its way down to the farmer. Consider 102 through how many hands this award to the beef producers of 15s. per cwt. has to pass. Supposing that, on the average, it put £7 on to the price of a fat beast, this has to be spread through so many hands that it makes one wonder whether those who think that the farmer will get as much as £1 of it for his calf have any experience or understanding of the problems of livestock production.
No other industry, not even a nationalised industry, is kept under such strict control as the British dairy industry. Government decisions shape its policy, determine its size, fix its prices and control its profit margins. The Government keep it under such a continuous and searching scrutiny. In the Price Review it is written:It would not be in the interests of this section of the industry for output to go ahead faster than increased supplies could be economically absorbed.Why is increased production so sinful, when more than half the milk products which are needed by the country still have to be imported at the expense of our balance of payments? Dairy farmers cannot be expected continuously to accept dwindling incomes with much of their output being marketed at less than the cost of production.
My Lords, I will conclude by reminding your Lordships that British agriculture is the one industry that goes along without strikes. In the last twenty years it has doubled its production with half the manpower. I should like to reinforce what my noble friend Lord Nugent of Guildford said about the efficiency of British agriculture, and I would add that both the wages and the return on capital are well below the national average. The noble Lord, Lord Henley, has reminded us that British agriculture can hold its own with American agriculture, and is the only British industry to do so. What right has the country to expect that this goodwill of the farmer and farm worker will continue indefinitely, and what right have the Government to presume that it will continue?
§ 4.27 p.m.
§ LORD CONGLETON
My Lords, I ask your Lordships' indulgence, and in rising to address your Lordships' House for the first time I must also declare an interest. As an owner-occupier I operate two separate farm businesses: one in 103 the County of Dorset, and the other in Wiltshire where I live. Further, I am concerned in an advisory capacity with the running of two other large farm businesses. I am also a member of N.F.U. and the C.L.A. For the past ten years I have been exclusively occupied with the management of farm businesses. I mention all this by way of explanation of my intervention this afternoon, since agriculture is a subject upon which I may reasonably claim, if only a small measure, at least a measure of specialist knowledge. I will not take up much of your Lordships' time this afternoon, but there are two or three points I should like to make concerning fundamental realities upon which any farm business must be operated.
In many widespread quarters there seems to be a misunderstanding of the purposes of, and the justification for, the Annual Price Review. The 1947 and 1957 Agriculture Acts require that Government shall:at such date as the Ministers may determine, review the general economic condition and prospects of the agricultural industry".And in the preceding paragraph of the 1947 Act we have the oft-quoted sentences—and I make no apology for quoting them again, my Lords, because it is not a bad thing to remind ourselves of them—relating toa stable and efficient agricultural industry capable of producing such part of the nation's food as in the national interest"—not just the farmers' or the consumers' interest, but both together—it is desirable to produce in the United Kingdom, and of producing it at minimum prices consistently with proper remuneration and living conditions for farmers and workers in agriculture and an adequate return on capital invested in the industry.There is no mention, so far as I am aware, of any handout by the State to the farmers. As I understand it, the Annual Price Review is an economic climate-fixing operation designed to create an economic situation wherein farmers may set about producing the level of foodstuffs which the State requires. The idea that these Annual Reviews constitute some sort of end-of-term school prize-giving session—and one has a vision of glittering trophies abiding on a baize-lined table before the headmaster—is erroneous. There is this belief that at the conclusion 104 of the discussions the farmers, ungrateful and undeserving, receive a monetary pat on the back for past services rendered. One hears the adjective "niggardly" or "generous" applied to Price Review determinations. If I am correct in my belief that these discussions are an attempt to fix a climate and a framework for a certain level of production in farm businesses, then such adjectives as those are without meaning in that context. Certainly one can have a climate so fixed as to be favourable for the expansion of an enterprise, or unfavourable. That is a matter which is highly controversial and I do not intend to touch upon it.
It is my understanding of the situation that the State, having decided what level of home production it is desirable to reach and maintain over a given period of time, will, by manipulating the price guarantees—they go up as well as down and down as well as up—seek to ensure that that objective is put within reach of the producers. Argument may then properly take place over whether the State has made a correct or incorrect assessment over two points: first, whether the objective is achievable anyhow, given present resources and technical knowledge, and, secondly, whether the price levels fixed are adequate to bring that objective within reach of the farm businesses of the country. If it is true that one swallow does not make a summer, it is surely as true, I submit, that one Price Review does not make a feather-bed. A series may afford a safety net, no more. That, then, is one point to which I should like to draw your Lordships' attention.
My second and third points, which are so intertwined that I cannot disentangle them, concern the time scale upon which any farm enterprise is to be operated. I am going to take as my example the growing of wheat in this country, to try to illustrate what I mean. In our present state of knowledge about diseases, fertilisers, crop sprays and so on, it is fair to say that two or three wheat crops may be taken in succession on some lands, whereas in other areas only one can be contemplated with safety. But a single crop of wheat is only one part of a continuing sequence of crops and in my view must be regarded only in this way. I am including grass as a crop in this context. The point I want to make is that by raising 105 the guaranteed price for wheat an increase in total wheat sowings is not thus assured, since the farm business must have regard to the long-term ecology of the farm.
There is inevitably a conflict between the desire to increase the production of, in this case, wheat and the necessity to maintain all those desirable features in the ground which are generally referred to quite simply as fertility. The rules of good husbandry, which have not changed as much as some would like to believe, must not be cast aside for short-term financial reasons. That is a sure way to disaster for any farm business if it is the intention to maintain that business as a going concern for any length of time. There seems to me to be some danger that this problem is not fully comprehended. And it is a problem which faces a farm business of any size.
My Lords, I promised to be brief and I have come to the end of what I wished to say. Your Lordships are considering this afternoon the affairs of an industry of importance to the nation. I have one figure that I should like to mention. I am reminded that the forecast of total gross output for 1968–69 for this industry is £1,970 million. It is a great industry. In making my contribution to-day I hope that I have kept faith with the admonitions and counsels of my predecessor in title, my late noble friend and brother, whose respect and regard for the traditions of your Lordships' House were profound and whose life was so tragically and savagely taken from him some 18 months ago.
§ 4.37 p.m.
§ LORD WALSTON
My Lords, it is good that the noble Lord, Lord Nugent of Guildford, has given us this opportunity of discussing agriculture, and we are grateful to him for that. But we are doubly in his debt because by this debate he has tempted into making his maiden speech somebody who I think has impressed all your Lordships with his manner of speaking and, what is more important, with the contents of his speech. The noble Lord, Lord Congleton, obviously speaks with a very genuine knowledge of the real problems of agriculture. He clearly has given much thought to it, and he is able, if I may say so—something which is rare among professional farmers—to raise his eyes from his own fields and furrows and to 106 look at this problem in its wider and still more important context. He comes from an area where (I hope he will not mind my saying this) the arable farmers are almost as good as any that can be found in East Anglia, and he has shown us that his capabilities as a parliamentarian are certainly equal to any of those who come from East Anglia.
We who are concerned with agriculture, who know about agriculture at all, can be in no doubt that farming can make a far larger contribution to the national economy than it does at present. Right now the climate (and the noble Lord, Lord Congleton, was right to remind us of the importance of climate in the Agriculture Acts) is not right for any substantial increase. But before looking at what is required for achieving this increase, if indeed it is in the national interest that there should be such an increase, I should like to say a few words about the social rather than the economic aspects of agriculture. There will always be some areas where farmers are going to find it hard to produce economically, the areas of the marginal farms, and those will always be a problem to us.
This problem has to some extent been tackled by the retirement grants and the incentives for amalgamations which Her Majesty's Government have introduced during the last few years. In my view, that is one of the greatest contributions that the Government have made to the agriculture problem. It is a really new initiative. They have started to look at this problem in a new, different and realistic way. And I would once more—I have done it already—congratulate the Government on having taken this step. All I would say now is that I hope that they will go further than they have gone up to the present time and will increase this movement, which is both economically and socially important, to encourage the creation of larger farms out of small and uneconomic units, and to help those who find themselves in the difficult position of being marginal farmers either to become bigger and non-marginal farmers or else to find some sort of job elsewhere which will give them a better standard of living.
But although the step the Government have taken is a valuable and important 107 step, there are, and always will be, some who do not want to retire or amalgamate, or who for some reason or another cannot do so. These farmers must not be abandoned. We simply cannot say to them, "You are economically unnecessary, undesirable, and we will forget about you." But, equally, we cannot say, "Because your costs of production, through no fault of your own, are so much higher than those of other farmers, the whole price structure will be raised in order to give you a reasonable standard of living." That would require too much money, and the taxpayer is the one who has to provide that money.
If the taxpayer is going to hand out money it is only right that he should get at least something of what he wants. With all respect to the noble Lord, Lord Balerno, the taxpayer does not want to have produced a whole mass more of unwanted milk which will have to be turned into butter costing the taxpayer and the consumer a great deal more than if he were to buy it from New Zealand and from Denmark. Nor does the taxpayer want to encourage the production of wheat which he can buy more cheaply not only in Wiltshire and in East Anglia—where it can be produced more cheaply—but also from Australia or even from France. Those are not the things which the taxpayer wants, and it is not reasonable to expect that lie should pay his money, or that money should be taken from him by the Government and paid out, in order to bring this about.
What the taxpayer does want, in increasing quantities, is something quite different. He is now enjoying an ever-increasing standard of living. He is enjoying a larger amount of leisure. He is suffering from an increased amount of urbanisation, of fewer and fewer areas where he can really get out into the country with his family. I do not think it should be beyond the wit of man, of those concerned with these problems, to figure out some means whereby taxpayers' money can be expended in a way that will give the marginal farmer (who by no stretch of the imagination can ever produce economically unless prices of all commodities in this country rise astronomically) a standard of living which is reasonable and at the same time help him to enable his paymaster, shall I say?— 108 the taxpayer, his clients, his customers—to enjoy some of those things which he himself enjoys automatically all the time. Why should there not be a subsidy for improving these rural farmhouses so that they can provide bed and breakfast for the urban dweller who can come out and spend a week-end or his holiday there? Why should there not be subsidies which will make it easier for the farmer to open some of his meadows, full even of lovely buttercups and cowslips, which can be enjoyed by the urban dwellers, if not by the cows, and so that the visitors can have their picnics down by the stream? Why should there not be subsidies for the farmer to put in cattle grids, in place of the gates which at present are so often left open?
I do not know the details and even if I did it would not be right for me to weary your Lordships with them. But I do suggest that the Government should give serious thought to trying to marry those two needs: the need of the marginal farmer who can never be economic, to live in the way that he likes, in the area that he likes, and the need and the desire of the urban dweller to get some of the pleasures of real rural England.
My Lords, would the noble Lord forgive me if I interrupt him for a moment? There are no pleasures of "real rural England" in the flat Eastern Counties in which he farms. If we on the tops of our hills are to have our livings eked out by providing bed and breakfast, perhaps the urbanisation people would like to go and have bed and breakfast with him, too.
§ LORD WALSTON
My Lords, I should be delighted to have people having bed and breakfast with me, especially if I received a Government subsidy in order to make it easier for them to do so. But I cannot pretend that the bulk of the Eastern Counties are in need of that form of assistance. In fact, as the noble Earl knows well, there are many farmers who on their own, particularly in the West Country, are indulging in this sort of thing, and it is wise of them to do so. But I think it would help in regard to the social problem if more specific encouragement were given to them.
Now let me turn to the economic side, which is what we are primarily discussing this afternoon. What is it that agriculture now needs in order to increase its 109 economic contribution to the country; and how can this best be given? I should like to suggest quite forcefully to your Lordships that the Annual Price Review has now become a farce. It serves no useful purpose whatsoever, and it takes up an inordinate amount of time of highly intelligent and busy people who would be far better employed doing something else.
We have listened to an admirable speech by my noble friend Lord Beswick, and to a lot of talk (we have heard it on many other occasions, and we have read it) of this enormously delicate manœuvring and negotiation that has to take place to decide whether the price of milk should go up 0.4d. or by a farthing; whether there will be a flood of unwanted milk or a shortage of milk this winter if this delicate calculation is done wrongly. And we know that similar negotiations go on as to whether there should be 6d. more for wheat, or 4d. more for barley, or whatever it may be.
But, my Lords, those of us who are practical farmers (again, the noble Lord, Lord Congleton, made this point) know that in fact we are not influenced one iota by the Price Review in the year in which it takes place, largely because we cannot be influenced by it. The price of wheat which was decided in February is for wheat that is already in the ground. The price of barley which was decided in February is for barley which, if not already in the ground, should have been—that is not the farmers' fault, but the fault of the weather. In any case, the plans have been made for it. So it is with all the arable crops; and no farmer is suddenly going out into the market place to buy another five or ten cows because the price of milk has gone up, or to sell them because it has gone down. It does not happen that way.
The Annual Price Review does not in any way affect the actual production of our farms. To some extent it creates the climate which it is supposed to create, but the climate is the sort of climate which one hears on the weather report so often in the morning, which is quite different in different parts of the country—there are bright patches with occasional showers, or there is rain with a few bright patches. It is not a clear-cut climate that is created. So we cannot really pretend and fool ourselves into thinking as practical farmers that the 110 Price Review, as we have it to-day, is of any significant importance.
What is more, if you take the trouble to look at the statistics, you will see that this common-sense point of view is borne out completely. In the White Paper (Cmnd. 3965) there are a whole mass of extremely interesting statistics. On page 20 we find the United Kingdom meat supplies, home-produced, of beef, mutton and pigmeat coming from home-fed stock. On page 41 of the same White Paper we see the changes in guaranteed prices for the same fat cattle, fat sheep and fat pigs over a period from 1960–61 to 1968–69. There are similar graphs giving similar statistics for the yields of wheat and barley, and the guaranteed price for wheat and barley. Similarly for milk. In fact, the full price for milk is not given; that has to be found from the Milk Marketing Board.
Now if it is true that the Annual Price Review had any effect on production, when you superimpose the graph of production on the graph of prices you would expect to see some fairly close correlation—possibly with a slight lag—between the two. But if you take the trouble to do that you will find that there is absolutely no correlation whatsoever in any of these commodities. It is a completely random superimposition, with the one exception of barley. From 1961–62 until 1967–68 the price of barley has dropped consistently, while during the same period the yield and the acreage has risen equally consistently. In other words, in the only case where there is any correlation at all it is of an inverse nature. I am not going so far as to say that if you wish to have a steady increase in barley throughout the next ten years you should consistently reduce the price of barley. I think that is carrying the argument too far. The only point I wish to make here is that the Annual Price Review does not influence in any significant way the production of the commodities that it is supposed to influence.
In my view agricultural production can only be significantly altered by long-term security, and this does not mean on a year-to-year basis. Only if there is this long-term security will farmers have the confidence to borrow and banks the confidence to lend. That is what the Review should aim at doing; to bring this long-term security and confidence back into agriculture. I suggest that that can best 111 be done by having, instead of an Annual Price Review, a Price Review every five years. At that time the pattern, the climate, should be set for the ensuing years. For instance, it might be decided in the year of the quinquennial review that the price of meat, wheat, and barley—and pigs, too, if the noble Lord, Lord Balerno, wishes it—should be increased, and that milk, eggs and potatoes should stay steady. In that case, the price of meat, wheat and barley would be increased by a given amount, not just over one year but over the five-year period; possibly by 2½ per cent. in the first year, 3 per cent. in the second year and 3 per cent. in the third. It could be varied according to what the experts thought was most likely to bring about the desired result, while the guaranteed price for the other commodities would remain the same—and some might even decline.
I would suggest that with livestock in particular, rather than fixing the guaranteed prices for the years and relying entirely or primarily on the price of the finished product, it would be far better to make payments year by year on the livestock on the farm on the basis of the present calf subsidies so that there is, as it were, some interim payment made to the farmer to help him with his very substantial cost of finishing off a beast until it comes to slaughter weight.
The quinquennial review should be in terms of cost and prices, but of course we all know that the actual prices change from year to year. Wages go up, feeding stuffs go up, fertilisers go up—occasionally a few things come down, but most of them go up. It would not be a very difficult operation every year to have not a Price Review as we know it now, but an adjustment of the already announced and agreed prices based on the ascertained increase in costs, less a given factor, if you wish it, for the increased efficiency which is already agreed between the Ministry, the Government and the N.F.U. I believe that this kind of thing will give farmers a far greater confidence and will create the right sort of climate for the expansion which is needed, of whatever size that expansion may be, and will avoid a great deal of the wasted effort and unnecessary acrimony which takes place every year in February and March.
112 Some twenty years ago the Economist told the then Minister of Agriculture—an old and lamented friend, Tom Williams, who, as your Lordships will remember, had been Parliamentary Secretary to the late Lord Hudson—to stop playing the by now somewhat cracked record of his late master's voice. I should not in any way be justified to give the same advice to the present Minister, but I urge my right honourable friend—for whom I have the greatest respect and in whom I have the greatest confidence—to free himself from the concept of a form of agriculture that was right for the mid-1940s, and a form of organisation of that agriculture and deliberation concerning prices and size and all the rest of it that was right for the mid-1940s. He should free himself from that concept and instead devote his very great ability—and the very great ability which is to be found among the officials of the Ministry of Agriculture—to working out the means by which the British farmer can best serve the nation not in the 1940s, 1950s and 1960s, but in the 1970s and the 1980s. That will be possible only if the Government move on from the ideas and methods formed 25 years ago and give new thought and bring forward new ideas to deal with the new problems that confront us.
§ 4.57 p.m.
My Lords, I have not addressed your Lordships for some years now, and then it was on a different subject, but I feel rather strongly, as one who is proud of some 20-odd years of raising sheep and cattle and corn, and there are several points which have arisen in the course of the debate in your Lordships' House this afternoon on which I should like to comment. There is one subject I had intended to deal with, but in view of the news which appears in some of the evening papers to-day I think it would be injudicious of me to comment on the outcome of the activities of the Training Board for training agricultural employees. Here there is one comment I would make which I think would be in order, and that is that the art of government—as a great and well known administrator, who shall be nameless but who is a Member of your Lordships' House, said to me when he taught me a little bit about administration—is not to make laws but 113 to know what laws you can make. The outcome of the Training Board's activities over the last two-and-a-half years is a notorious example of the sort of legislation which is otiose, mischievous, and, indeed, expensive.
However, leaving that out, I will come back to the main subject on the ascertainment raised by my noble friend Lord Nugent of Guildford and some of the speakers who have followed him. May I say immediately that I am sorry to find myself in complete disagreement with the noble Lord, Lord Henley, about his apparent wish, at any rate in part, to substitute a system of levies for the existing system we have here. I have had enough experience of how levies work in certain countries on the Continent to know that it is one of the most difficult of all the forms of control which can be exercised by any Government, however honest and well meaning it may be.
Under our system of direct subsidies, category by category, we at least know what is being spent on which, and who is getting the benefit, but under the levy system, as operated in France and Germany, for example, it is impossible to discover who pays for what and who gets the benefit. I believe that to be true of every system where any commodity is passed from hand to hand, and whether or not one has a plus value system of checks; it is impossible to know who makes the money. But it is perfectly clear that the cost of subsidies on the Continent is absolutely outrageous—that is the most modest word I can find to describe them.
However, to come back to the main issue, I think the noble Lord, Lord Walston, implied that there was a wasteful expenditure of energy by many people in agreeing upon the annual assessment. We have had experience of this system for many years, and on the whole I think it has worked extremely well. Whether or not we like a particular assessment depends upon our own foibles and prejudices for or against one element in agriculture. At one time in my life I was a civil servant—in fact, I served under seven Ministers—and I know the difficulties in which any Government find themselves in arriving at assessments of the kind we have. They will never satisfy everybody, and if they could satisfy everybody they would not satisfy the taxpayer.
However, there is one aspect of this year's assessment which causes me con- 114 siderable disquiet, both on the agricultural side and, oddly enough, on the industrial side. I should like to take up your Lordships' time for a little on the subject of sheep. Sheep are not only sheep; sheep are wool, and wool is Bradford and the West Riding. More than in most other agricultural products there is a dual product in sheep: meat and wool. With cattle there is only beef or milk, with a by-product of hides or something like that, but in the case of sheep the element of wool is of the greatest possible importance to this country, not only agriculturally but also industrially.
It is said in the White Paper that the Government wish to provide incentives to produce more meat in this country. We are producing more beef and, in spite of the inability of the noble Lord, Lord Walston, to correlate guaranteed prices with production—it is very difficult, because so many other elements enter into it—it is nevertheless true that production of beef has gone up and, at worst, is holding its own, while, broadly speaking, the amount of imported beef has fallen.
§ LORD WALSTON
My Lords, may I interrupt the noble Lord for one moment? He said that the amount of home produced beef has gone up, but he did not tell us from what years it has gone up. In 1968–69 the figures were 894,000 tons, compared with 909,000 tons in the previous year. It would be out of order for me to read all these figures, but the noble Lord might do well to refer to them.
My Lords, if the noble Lord will turn to page 21 and draw a line between the production of home produced and the amount of imported beef and veal from 1961–62 to 1968–69, he will find that there is a rising trend in home produced meat and a slightly falling trend in imported meat.
Meat is not only beef; it also includes mutton, lamb and pork. If your Lordships will turn to page 22, you will see that the amount of home-fed mutton and lamb has been more or less steady, whereas the amount of imported mutton and lamb has risen slightly. That is a pretty poor result of an incentive to produce more meat in this country. This 115 is a very complicated matter and perhaps I should divide it into two parts. The production of lambs, and eventually sheep, is to a very large extent dependent on climate, but in the last two years the climate has been very bad for the production of lambs. However, production is also dependent on shepherding. It is a trite and platitudinous saying that in farming the way to make money is not to lose money. That may be a statement of the obvious, but what it means is that the death of any ewe is a dead loss to everybody concerned. If any ewe is saved, even if her lambs are lost, the farmer has the hope of a recovery in the following year.
The sheep population on lowland farms has fallen by about 2 per cent., but there has been a slight rise in the population on hill farms. Obviously, the climatic conditions affect the hill farmer a great deal more than the lowland farmer, and the lowland farmer is in a much better position to look after his sheep properly. But the cost of shepherding enters into this matter and, although it has not increased very much on the high hill farm, it can increase or decrease on the lowland farm. I am aware that this Government and previous Governments have tried very hard to increase sheep production in the hill farming areas, and with some slight success. But there has also been a great deal of criticism, because it is arguable whether the hill farming subsidy is economically well-based. It has led to subsidies on ewes, a great many of which ought not to exist, merely because you count so many heads of ewes over so many acres; and living, as I do, in England but on the edge of Wales, I am aware that there are a very large number of subterfuges by which you can get a hill farming subsidy. I regret to say that I do not receive a hill farming subsidy because my highest land is 25 feet below the level at which I become, in part, a hill farm. There are subterfuges by which one can get a hill farming subsidy which one cannot get otherwise.
The easiest way, it seems to me, to provide an incentive for increasing the sheep population, and therefore the production of mutton and lamb meat, is on the price. In the Review this year, the price of fat sheep has been put up by 1½d. per lb.; on a 60 lb. carcase that amounts 116 to 7s. 6d. That, my Lords, is not enough to pay a shepherd's wages, or to induce people to keep more sheep; and in the lowlands, where there are possibly more profitable agricultural products to produce, it has led to the decline of 2 per cent. in the sheep population referred to in the White Paper. Personally, I consider this a tragedy, not only because it means less meat but also because of the ultimate fertility of the land, of which Lord Walston will be, more than any of us, aware. Indeed, on my border it is said that you cannot keep a farm in good condition without sheep. The way to keep your farm in good condition with good sheep is to have sheep which will survive and will not die. In order to do that, they have to be looked after. You cannot put sheep out like corn in a furrow and expect them to look after themselves.
The second thing that arises on the question of the price of meat—that is to say, the price of mutton and lamb—also arises out of the question of wool. Here we are dealing with a very complicated issue, because, as your Lordships know, the production and the sale of wool in this country is entirely in the hands of the British Wool Marketing Board. You cannot produce wool and sell it without selling it through the Wool Marketing Board. In the schedule of prices established by the Wool Marketing Board for different grades of wool, ranging from what they call, broadly speaking, fine wools to carpet wools and coloured mattress wools, which we export to Italy, there is no incentive for anybody to improve the quality of their wool. It is my experience, and it is also well known genetically in breeding sheep and in crossing sheep, that there is no reason why you should not produce fine wool and a good meat carcase, too. In fact, I have done it. I have two flocks, both pedigree, which, in the normal course of events, would cut something of the order of 5½ to 6 lbs. per fleece. By a crossing which is going on now, the fleece has gone up to 10 lbs. instead of 6 lbs. Moreover, the quality has improved, and the meat is still entirely edible. In fact, the Fatstock Marketing Board bought my meat at the same price they would have paid for the best downland sheep.
If I can produce 10 lbs. off a fleece instead of 5 to 6 lbs., and if, instead of getting 5s. a lb. from the British Wool 117 Marketing Board, I was to get something like the price at which I know they are selling my wool in Bradford (because I have other methods of finding out), and if I were to get 7s. 6d. per lb. instead of 5s. per lb., at 10 lbs. a fleece at 7s. 6d. a lb. it would be £4 10s. a fleece instead of about £3 or £2 10s. It would make a great difference to hill farmers if that were guaranteed, or even if they were given an incentive to produce better wool. They are not. In a very long and tedious correspondence, sometimes slightly acrimonious, which I have had with the Wool Marketing Board, they have said, "We buy the wool that we can sell". The main profit, if any, that they have made has been in selling coloured mattress wools to Italy. That is the one, absolutely certain way of ensuring that synthetics will take the place of wool, because anybody who has ever been in that trade, or has been as near it as I have, knows that you cannot produce fine, what is called apparel cloth out of the "run of the mill" wool which you sell, least of all sell as mattress wool or carpet wool to Italy and the Continent.
Curiously enough, the cure for this is a comparatively simple one, which I have been totally unable to persuade the Wool Marketing Board to agree to, and that is to put the price up to that of qualities for which they do not cater. I get 35 to 40 per cent. of my clip selling in the top three classes in the Wool Marketing Board schedule, which is about 65d. greasy and 72d. washed. There is no higher price in the whole schedule; but I know that they are selling the little wool that I can produce on a few hundred sheep for a great deal more than that. If they were to put in their schedule three or four more classes covering what is the equivalent of a cross-bred Merino, which can be produced in England—it has been and is being produced—then you might induce a farmer to take some care to try to get better wool. I can get better wool without paying fantastic prices for a ram. If I can do it, other people can do it, too.
In the Paper and in the related but independent Board, the Wool Marketing Board, there is no incentive to anybody to improve anything—and it would not cost any money, It would not cost any money, that is to say, because if you make better wool you can sell it at a 118 higher price. If you do not offer anybody a higher price if they make better wool, you will not get better wool. It is perfectly simple; and it would not cost the Treasury or the Wool Marketing Board any more to do it. As it is, a culmination of higher wool prices by the Wool Marketing Board, on the one hand, and an increase in the guaranteed price of meat, not by 1½d. but something like 3d. to 6d. on the other, would not cost a very great deal but would make the whole difference to hill farmers. What is more, it would make a great deal of difference to the administration, because we should not need to subsidise the hill farmer in the way we are doing,. allowing all the subterfuges to take place whereby some hill farmers acquire the right to sell hill wool and hill mutton which they ought not to. That, in turn, would allow your lowland farmer to continue to produce sheep, to the greater benefit of his land and to our meat supplies, instead of making him decrease his sheep flocks, as he has been doing by the 2 per cent. referred to in the White Paper.
Those are the comments that I have to make. I think that the incentives in the Paper by way of farming subsidies are about as much as we could have expected this year. I think it is a pretty fair balance; but to say that it produces an incentive to increase production is just not so. The instance I have quoted is one. There are others. Comments have been made about the dairy industry, and therefore the production of calves, which show that there is not a considerable or interesting incentive to farmers to produce more. The noble Lord, Lord Beswick, at the beginning of his interesting address, said that eventually what happens in farming is the result of the decisions of individual farmers. The decisions of individual farmers, even if they cannot be correlated to the price structure of agricultural products, in the long run, do influence the farmers. The noble Lord is perfectly right to say that nobody is going to sell sheep and buy cattle because the price of beef has gone up 15s. and the price of sheep has gone up only 1½d. But, over a long time the farmer will be influenced by the price structure; and I see no evidence in this particular price structure to provide the incentive that I think he ought to have.
§ 5.22 p.m.
§ LORD RAGLAN
My Lords, before he departs I should like to congratulate the noble Lord, Lord Congleton, on his speech. I agreed with nearly everything that he said, so far as he could be specific without being controversial. I should like also to congratulate him on his sunburn. I think that the sun shines more strongly in Wiltshire than in Monmouthshire. He may be interested to know that I managed to grow continuous wheat for five years without any ill-effects, and I hope to go on doing so for many more years.
I would also congratulate the noble Lord, Lord Nugent, who by introducing this Motion has given us the chance to talk about agriculture for the first time in several years. Although many of your Lordships are farmers, I think that I am one of the few Members of this House who is dependent upon his farm for a living. I have an estate of about 900 acres, 200 of which are let at a rather low rent. I have 58 acres of woodland which are a constant expense and which I am trying to plant up; and I hope that one day they may pay. The other 650 acres I farm. I have no other income, not a stock or a share or even a company directorship. I sometimes wish that I had, but usually I am content with what I get from the farm. So what is announced in the Annual Price Review has a direct effect on me; and unlike the noble Lord, Lord Nugent, I am quite content with it.
I do not know whether I agree with the noble Lord, Lord Walston, in his suggestion of a Review every five years: I do not know enough about the subject. But I do agree with him when he says that what we need is confidence. What determines a farmer's programme is the profitability of his enterprise, and its possible productivity depends on so many variables: the size of the farm, the soil, the climate, the topography, the location, whether it is near a suitable market and the availablity of labour. Then there are variables due to that indefinable thing called "management": fertilising, choosing the variety of cereals or stock, coping with disease, selecting the right machinery, getting the best from as few employees as possible, and fighting and chancing the weather. Indifferent or poor performance on any one of these things—and there may be one or two others that I have left out—can make a vast 120 difference to the profits of a farm in a year. To get one calculation badly wrong means that you will not do very well; to get several wrong means that you may have to put your feet up and wait until the next year, hoping that then things turn out better.
With all these variables that the farmer has to cope with, I believe that he should not also have to take too much of a chance with a market that is up and down and all over the place. He must have stability and confidence; otherwise he cannot plan at all, let alone expand. I think that the present system of support goes a long way towards achieving this stability. As a result, the present state of agriculture is as healthy as it has ever been, if not healthier. The market is much less wobbly than it used to be. Not many years ago, before I had taken to coming regularly to your Lordships' House, I used to spend a lot of time hanging over a rail at the market buying cattle. I used to buy 500 or 600 bullocks a year and graze them. In 1956, I can remember buying cattle in March at £8 a cwt., which was the average market price then, and having to sell at four guineas in the autumn, and having to take what I was given. Some of this was due to bad management and some of it I could not avoid. A certain number of cattle for which I refused payment I kept back for two months. One steer in particular—I can see him now—made £55 more because I kept him just for those two months. One cannot plan any enterprise if one fears that marketing is going to be such a frightening lottery as that. As a result of the much better system of support nowadays, introduced in the last two or three years, store cattle prices have risen well beyond the 10s. or 15s. which was put on them in the Price Review. They may be too expensive for me; I shall have to see.
But in spite of the grumbles about the difficulties of getting loans and the expense of them, there does not seem to be any shortage of money for buying cattle. I attribute that to confidence. Money is around if the confidence is there. What about the availability of capital for expansion, about which we have heard so much this afternoon? I sometimes wonder if there is not already too much capital doing too little in farming. The noble Lord, Lord Balerno, said that the return on capital in farming is 121 lower than the national average. It is no good buying cattle if you do not know how to manage them. Stock farmers are like gardeners; it is possible to pick out the "green-fingered" ones from a long way off. Bought dear or bought cheap, stock is only as good as the stockman.
Then there is machinery. I remember that the noble Baroness, Lady Elliot of Harwood, in a debate two or three years ago, spoke of going down the rows of machinery at the agricultural shows saying that she felt like a child wistfully pressing her nose against a shop window looking at the gorgeous things which she could not afford. I think that too many of these machines are toys. I saw with surprise the other day a neighbouring smallholder riding around on a brand new £1,100 tractor which I could not justify having even on my size of farm. I thought of my old pre-war set of harrows, with a gate laid across them, which in the last five years have done 2,000 acres and, with a bit of straightening, will do another 2,000. A great quantity of machinery is purchased for which there is no justification except that the farmer thinks it would be nice to have it or that he would be proud to own it. I do not grudge their buying these things, but they should not at the same time complain that they have no capital for expansion. Except for those who can offset the costs against some other income, farm buildings are the shortest road to ruin.
I plead with the Government to change their policy. A building, or any capital improvement, produces nothing of itself: it is what the farmer does with it that counts. I know of quite a small farm where there is being built a set of cowsheds made of reinforced concrete. They are going to cost £60,000. I am told that they are up to the Ministry specifications and will attract a grant from the taxpayer of £20,000. Yet there is no guarantee of any sort that they will be so productive as to justify that expense. There is no judgment made over some minimum standard of management; and even if there were, there would be no way of knowing that the owner might not sell out in a few years.
I do not think that the taxpayer should be made to put money into—I cannot call it an investment—buildings of this kind. Farming operations are so space- 122 consuming and the produce so bulky that there is the greatest difficulty in bearing the cost of expensive buildings. In any case, what is recommended by the Ministry is far too permanent and elaborrate. I have said that before in your Lordships' House, and I shall say it again if the policy continues as it is. I am lumbered now with 200 and 300 year old buildings which it is impossible to use, or even to convert to modern farming use. My guess is that many of these magnificent new concrete temples will be out of date in less than 20 years. We need new cheap buildings, buildings which are easy to erect and capable of being modified perhaps portable, and certainly disposable.
Is it not true that agriculture is now in the middle of a revolution? Technology has at last caught up with agriculture, a hundred years or more after it hit manufacturing industry; and things are moving so fast to-day that it is a job to keep up. The vast improvement in production mentioned by the noble Lord, Lord Nugent of Guildford, and the noble Lord, Lord Henley, is the result of that technological revolution. This improvement may now be flattening out, but when we talk about amortising a cowshed over 20 years all I would say is that by that time we may be making milk without cows at all, straight from herbage, as is already being done on a small scale. So I think we must look upon all capital schemes with the greatest caution and some scepticism, and fork out only for the ones which we know will pay for themselves in a very few years.
My Lords, the term "hobby farmer" is usually pejorative, but I believe that nearly all farmers are hobby farmers. They love their farms and their way of life but, like hobby gardeners, they are always spending on improvements. I believe that I actually save money by coming to your Lordships' House because then I am not at home dreaming up improvements. Keeping his itchy fingers off a cheque book is the farmer's greatest trial of all. It is like shopping is for so many women—either compulsive or a way of passing the time. Thinking up schemes for other people's farms can be the most enjoyable, and at the same time the most wasteful, hobby of all; and the taxpayer has to pay. Improvement schemes nearly always involve capital expenditure, and 123 they nearly always ignore standards of management.
Good and productive farming is not a matter of laying one's hands on a lot of money, as was shown in an article which appeared in the Farmers Weekly three weeks ago. It referred to two young men who started from nothing, or nearly nothing. One of them started keeping stock when at school and made £750, which his father matched with another £750. Now he has managed to get the renting of a 137-acre farm. I should like, if I may, to take a couple of extracts from what he is quoted as saying. He says—and it comes much better from him than from me—A lot of people say you need a big acreage these days, but you can turn over £9,000 to £10,000 on under a hundred acres with a good dairy herd which can leave a useful net margin with proper management.Later he says:It is surprising how far a small amount of capital will go when you are forced to cut out the frills. I know that the more I manage to afford better equipment the lower will be my return on my capital.On one point he was quite adamant:Lack of capital is not the drawback farming pessimists make out, if you have the least spark of initiative and are prepared to work to compensate. What we have done others can do also, and the opportunities are still there.Now, my Lords, there is a good fellow! I have never had to buy or rent a farm, but I have had to work hard, and to think ever harder, to make my farm pay. I have learnt, to my great cost, what it is to throw good money after bad; and I am still learning. Almost no other enterprise, unless it be a visit to a casino, can lose so much money in so short a time as farming. After 20 years in the business I have become convinced that agricultural production will not be increased simply by putting more money into it. In certain circumstances, as we have heard to-day from my noble friend Lord Walston dropping the price can increase production because the farmer has to grow more in order to keep the same income. My own view is that, as the noble Lord, Lord Henley, suggested, the Government are going as fast as they reasonably can, and if all farmers were as good as the best there would be an embarrassing surplus of production; we should not know what to do with it. For 124 increased production we need a higher standard of management, and that is not easy to achieve: it is a very slow process. But what the Government can do, as was said by the noble Lord, Lord Congleton, is to make a framework of adequate, stable price controls and guarantees within which the capable and enterprising may have enough confidence to plan forward. Seen in this way, my Lords, I believe that the latest Review gives an adequate, fair and stable return, and I welcome it.
§ 5.36 p.m.
§ LORD ALLERTON
My Lords, I would join with other noble Lords who have spoken earlier in thanking my noble friend Lord Nugent of Guildford for having introduced this debate, and congratulate him on the clear, able and concise speech with which he did so. I go along with everything he said, and especially his remarks on import control. I would also congratulate the noble Lord, Lord Congleton, on a quite masterly maiden speech which was full of knowledge and wisdom. I am sure that we all look forward very' much to hearing him speak again in your Lordships' House.
I suppose that at this point I should declare my interest, in that I am a farmer, farming what is, to me at any rate, a comparatively large acreage. Like the noble Lord, Lord Raglan, whose speech I am sure was enjoyed by all your Lordships—I certainly enjoyed it—I am a commercial farmer, and I should like to refer to his remarks on the subject of farm machinery. I have said before in your Lordships' House that I think the price of farm machinery is quite ridiculous. I know that it is not sold in great quantity, in the same way as motor cars, for example, but it seems to me that the price is quite ridiculous. It may be that the rate of commission is too high—I do not know. But it seems that if a farmer buys a new machine someone will offer him a ridiculous price for the old machine, which leads one to suppose that the commission rate must be very high.
My experience in the use of machinery has not been quite the same as that of the noble Lord, Lord Raglan, in that such new machines as I have bought recently have paid a very good dividend, especially the wider ones, which cover a much larger acreage in one day with only one man in charge. I find that they are 125 of great value. I should have thought it was not beyond the wit of man to devise some means whereby the sort of large and complex engine that reposes in the middle of a £3,000 combine harvester, which is a seasonable implement and works only for short periods of time, could be fitted into some sort of frame which would allow it to do more than four weeks work, at best, in a year. Perhaps some ingenious farmer—possibly even the noble Lord, Lord Raglan—may be able to devise some means of using the engine in this way. Like him, I am well accustomed to the gates on harrows and the binder twine on the gates.
§ LORD RAGLAN
My Lords, I think that some such scheme as the noble Lord suggested, for using the motive power of combines for more than just a bit of the year, has been tried, but that it has been found to be too finicky and expensive to make such equipment adjustable for use for some other purpose.
§ LORD ALLERTON
My Lords, I am obliged to the noble Lord. I appreciate what he says, but it may be that something on these lines could be developed. Were machines a little more versatile, possibly we might not need so many of them.
It is not my intention to go into the provisions of the White Paper in too great detail, as this has already been done by my noble friend Lord Nugent of Guildford and other noble Lords who have spoken earlier. I am well aware that, owing to the length of the list of speakers, your Lordships will wish me to be brief. In my view, the White Paper is not too bad so far as it goes, but it does not go nearly far enough. I am more concerned with what is not in the White Paper than with what is in it. However, I will refer to the White Paper briefly, as that is what the debate is about.
Paragraph 10 of the White Paper admits that the 1968 harvest was a bad one but very little account seems to have been taken of the weather conditions. Paragraph 15 refers to no more than a temporary setback in incomes. Who on earth is to know that? Long-range weather forecasts, admirable though they may be—and I personally believe in 126 them; everybody laughs at me but it happens to be the case—could not possibly forecast that. Farming is a long-term process and I defy anybody to say that the setback is only temporary. It all depends on the weather we get. Indeed, it sometimes makes one wonder whether the Government are aware of the difference that weather can make to the profit and loss account. Nor do they seem to recognise the elementary farming rule that it takes X cwt. per acre to break level on a harvested crop and anything above or below that figure represents either profit or loss. Clearly this figure is not constant, because it must vary from field to field and must depend on the season. Also, is it recognised that the harvests themselves can be either cheap or expensive? In 1968 it was obviously very expensive because the weather laid crops, delaying operations, with consequent high labour charges, the loss of grain when it was on the floor, the heavy cost of drying the corn and of the poor samples which were eventually produced. Many crops were not harvested at all. The sort of weather which farmers experienced in 1968, and until very recently in 1969, is quite sufficient to bring yields well below the point where loss is incurred, and not much is being done about it.
We have been told to expand but it is not easy to do so unless one has some money with which to expand. I suppose that farmers will have to rely on their old friends, the banks, to whom they owe already some £540 million. And I would ask the noble Lord, Lord Hughes, when he comes to reply, whether he would say if any directive or instruction has been given to the banks with regard to loans to farmers, for we are all only too well aware that the activities of the banks have been severely curtailed in other directions. From what I understand of the Budget yesterday, it would seem that we may hope that we shall still be able to set off the cost of these loans against tax, but perhaps we could have an assurance on that point, too. Even if the banks are permitted to lend money and, moreover, if they are willing to do so, large sums would be needed even to maintain the present rate of production.
Nor should it be forgotten that the burdens of taxation have been intensified 127 by continuing inflation. Because farming is not financed in the same way as industry, where only interest on capital raised has to be paid; loans and mortgages have to be serviced and repaid out of what is left of the profits after having paid taxes. This seems to create a situation where it is virtually impossible for a young man to start up on his own account and where some of the old men begin to wonder whether it is worth their while to continue.
In my view, taxation in its present form is about the greatest difficulty with which farming has to contend. The capital gains tax may well become one of the biggest threats to farming. If this tax remains as it is now—and its effects are not yet really felt—the effects will be felt more and more as inflation continues. It will drain capital out of farming and decimate the family farms. The longer the capital gains tax continues, the harder will farming be hit. This tax is not levied on any real appreciation in values; it is levied on inflationary values. Land is still just the same thing as it was when it cost £30 an acre.
The Government's taxation policy would seem to be directly contrary to their own farm structure policy. As capital gains tax and death duties inevitably will fragment the larger farms, whether they were built up through amalgamation grants or in any other way, any tax on capital value will have to be met either by sales of land or by sales of capital which is vital to the business. It seems to me that this is yet another case of the Ministry of Agriculture, Fisheries and Food being in conflict with the Treasury. I suggest that the capital gains tax should be imposed only when money passes and not on either gifts or inheritance. It is possible also that in some cases the Land Commission levies will make further inroads into farming capital. Let us hope that the Land Commission will not be with us much longer. Certainly it does not seem to be working very satisfactorily at the present time.
I should like to make another suggestion to the Government. I do not expect the noble Lord, Lord Hughes, to reply to it when he winds up the debate this evening, but I should be grateful if he 128 would convey it to his colleagues in the Government. In an industry such as farming, in which incomes can, and do, fluctuate very widely, through no fault of the farmers but entirely due to extraneous circumstances, why should not the farmers' taxation be assessed on a three years' average? Similar concessions are. I believe, given elsewhere—indeed, only yesterday I heard that artists (they are possibly not quite comparable) are to get some form of relief in this way. Of course, there may be administrative difficulties, but I cannot believe that they are insuperable. With an industry in which incomes fluctuate so widely, it would be much fairer if they could be assessed in this way. I am sure that many' farmers would give a more cordial welcome to some concession of this sort rather than to a few pence here or there in the Price Review.
It may not be inappropriate to say a few words about the selective employment tax. Admittedly, this is paid back eventually after a good deal of irritating and time-consuming form-filling. P.A.Y.E. has now gone on for so long that farmers are reluctantly becoming accustomed to being used as what one might term acting unpaid tax-gatherers. But I can assure your Lordships that farmers are even more resentful of being used as acting unpaid moneylenders, which is what they are asked to do with regard to S.E.T. In my view, this is a bad tax: it is inflationary in its effects; it is wasteful of both time and manpower on both sides, and the sooner it is done away with the better. The whole conception of the thing is such a Heath Robinson one that it is almost incomprehensible. You pay one lot of people to collect the money, and you pay another lot to give it back again. The unfortunate farmer has to borrow money at 10 per cent to finance the tax in the meantime.
That most farmers are short of capital is well known; the bank lending figures themselves are proof of this. In most cases grants and subsidies are paid in arrear, and this results in farmers having to finance the amount of the grant or subsidy for quite a considerable time. Farmers have to work on what one of my neighbours described to me the other day as a sort of "pay now, farm later" principle. I appreciate that it may be difficult to accelerate the payment of grants 129 and subsidies, but it would be very welcome if it could be done.
My Lords, the hour is late, and I have spoken for long enough. In conclusion, I would say that although farmers' hopes, if not their expectations, were aroused by the "Little Neddy" Report of last year and the Minister's speech last November, the resources available to make expansion possible must come out of farmers' net incomes and by further borrowing, if it is possible to borrow. The result may well be retrenchment and not expansion.
§ 5.66 p.m.
§ LORD WOOLLEY
My Lords, I should like to join with other noble Lords who have spoken and have expressed their appreciation to the noble Lord, Lord Nugent of Guildford, for introducing this debate in your Lordships' House. I should like also to join with other noble Lords in congratulating the noble Lord, Lord Congleton, on his maiden speech; and I would congratulate him, also, as has already been done, on his tan. I wondered whether he had just come back from a sun cruise, or whether he lived in a more favourable climate, in a better part of the country than we do up in the North. I gather that it is the result of long hours of hard work on the tractor—probably a new tractor, and not one of those old boneshakers mentioned by the noble Lord, Lord Raglan.
We have heard many interesting views, ranging widely from those who think that all is desperate to those who think that all is just as good as it can be in the best of all possible worlds. The truth probably lies somewhere between. I think that the Government are entitled to claim that the outcome of the 1969 Review was a determination considerably better than a great many determinations in the last 20 years in terms of the relationship between the increase in the value of the guarantees to the calculation of increased costs. That is true, and I must declare an interest (if that is what one could term it) in having had to suffer and go through a good many of those Reviews in the past.
I should like to be able to join with my noble friend Lord Walston in his idea of having Reviews quinquennially, but I am bound to say I do not think it is a 130 very practical proposition. It might be, if one could get greater stability in the economy as a whole. If one could get stability in prices and wages and the costs of our inputs and so forth, we should probably welcome it, because I think the lack of this agreement is one of the drawbacks to our excellent system. I would join with Mr. Macmillan, who, when he was Prime Minister, described it as a wonderful system and who fell that whoever thought out the system was a genius. That was the view of the Leader of the Conservative Party in the year 1960. It appears that the view of his Party has somewhat charged in the meantime, and the noble Lord, Lord Nugent, sought to charm us along this inviting new road. I would only say that I am afraid I am rather too old a dog for that particular road. I am not persuaded along it, certainly not into the extremities that the noble Lord, Lord Nugent of Guildford, and his colleagues would have us go, because think it is an extremly dangerous road that might well end up by landing us into a morass so far as agriculture is concerned.
That is not to say that we should be opposed to some of the principles that are inherent in what the noble Lord was saying. We are very much favour of strengthening the import regulations, in so far as those regulations can reasonably be improved. This is not a new idea; it has been going on for years. It was going on with the previous Government; it was going on with Mr. Soames when he was the Minister—he was very active in this regard—and it has been going on with his successors of the present Government. A good deal of the area is indeed covered, as the noble Lord, Lord Beswick, has already said. Let us not delude ourselves that there is no import regulation; of course there is.
We know that there is a very effective and an extremely valuable regulation, a practical regulation, as regards liquid milk without which the dairy industry in this country would be in very desperate straits indeed. We know that there is a very useful regulation in the form of the butter import quota. We know that there is a very useful minimum import price system for barley, for 'wheat and for maize which has enabled the market price to be steadied at a level which has brought down the subsidies. A lot of talk has 131 been going on about the level of the subsidies, that they are of the £300 million mark. I would only say that that figure has been brought down. I think that in 1962 it was running at about £350 million, and it has been brought down to a figure of about £280 million, while money has been losing its value and the volume of production has been going up very rapidly. This is what has been happening. We have not been standing still. As the noble Lord, Lord Beswick, said, there is great flexibility in our system. This is not rigidity.
I think, having said that this is one of the better Reviews in terms of the relationship between the value of the guarantees and the cost figure, one then has to ask: Why, then, are the farming community so severely dissatisfied with it? Is their reaction fictitious? Is this pure histrionics? Or is it a genuine dissatisfaction arising from genuine causes? I have no doubt whatsover, my Lords, that it is very genuine indeed. Of course there will be variation among individuals. Some will think it all right, and for their circumstances it may be all right. Some may even like a hair shirt—that may be their particular form of self-indulgence; I do not know. I was not looking specifically at the noble Lord, Lord Raglan; I see he is examining it. But the general body of farmers are gravely disturbed and dissatisfied. And I have found this situation over quite a long period recently. In recent years there has been this growing dissatisfaction, this growing uneasiness.
I know that the reaction to the 1969 decision may have been acerbated by the political factor of the Minister's announcement on November 12. That particular announcement may well have been "whooped up" politically greater than its real content. The small print may not have been read sufficiently carefully. I think the Minister can turn round and say, "If you will read carefully what I said on November 12, you will see that we did talk about selective expansion. We have indeed given the increase on the commodities as we then indicated." That is true. Nevertheless, a climate of expectation was generated at that time and this was seized on with avidity, the more so because it was, as it were, water in the desert so far as the farming community were concerned.
132 I know that in talking about farming and its condition one has to talk in generalities, and that to any general statement one makes one can find exceptions, perhaps substantial exceptions. One can find farmers who are perhaps doing very well. There are others who are doing very badly, and I do not think one can draw valid conclusions from the extremes at either end. It is neither safe nor wise to assume that because some farmers who have done the kind of jobs which the noble Lord, Lord Raglan, was talking about are doing well, that situation is generally applicable. I do not doubt what the noble Lord was saying. I remember years ago reading a book called The Farming Land by, I think, one Frank Henderson. My comment, having read that book, was that if this man had gone into the motor industry he would have left Henry Ford standing still, but having gone into farming he has reached a modest income. Of course there are these individuals in life. They do not prove anything, except that there are exceptional individuals. Equally, there are the others at the ether end of the scale. We know that only too well. One has therefore, I suggest, to look at the generality, and that is what is done in the Annual Review as fairly as it can be done.
In my view, at any rate, there is no doubt that agriculture has been subjected to a prices and incomes policy over many years. It is inherent in the whole system—and not a bad thing, either. But I feel that it has been kept on too tight a rein, if I may so describe it. It is not all that much; it is only a matter of degree, and I would qualify what I have said by making this expression of view. I believe that as a result of the strenuous times that agriculture has gone through in having to run hard really to exercise its economic muscles and make a go of things, it is a fitter and tougher industry than most others are in this country to-day. I think that this is true and that it can stand the industry in very good stead. But there is a point where leanness and toughness can go over into emaciation, and that is the danger. I think that some farmers have been feeling financially emaciated in these last few years.
I believe that the Government have made an error of judgment. I have never 133 known a Review which has not involved a whole host of factors, but, having regard to all the factors, I think they have erred on the side of under-doing things, because they have failed to get the positive confidence of the farming community which they could perhaps well have achieved had some people in the Government been a little more imaginative. But I do not think there was all that much in it as regards the amount that might have been needed to achieve what was required. As many noble Lords have said, it is out of the personal income of the farmer that he has both to recoup and to remunerate himself for his managerial and his manual services to his business; out of it he has to pay the interest on his own capital or fund the service charges on his borrowed capital. All this has to be met out of net income as we understand it in the agricultural statistics. That is a very different thing from a company's profit, where the profit is arrived at after many of these expenses have already been paid.
We have a very fine agricultural industry. That is generally acknowledged. It is a great gratification to those of us who have worked in the industry for many years to see a much broader recognition of the value of agriculture; there is much more understanding than there used to be. But there is still some reluctance on the part of (shall we say?) industry and perhaps those Departments of Government that one would say represent industry. There is this natural confrontation with the Treasury, which is one of the drawbacks. We are only too well aware that the Treasury is bound to try to safeguard the purse. Presumably the Treasury feels in duty bound to fight this sort of battle year by year, but I think they overdo things. To the extent that we can mitigate our reliance upon the Treasury's subvention I think everybody will be happy. To that extent I go along with the thoughts put forward in that general context by the noble Lord, Lord Nugent of Guildford.
However, what I could not do—and this apparently is the view of the farming community generally, and certainly the view of the Farmers' Union leaders—is to agree with the proposition that our system as it has operated for many years past, with modifications and adaptations as we have gone along, should be ex- 134 changed for a rather haphazard collection of ideas which have not been very carefully worked out. The idea of having target prices and having support buying if the actual price realised fell too far below the target sounds very good, but if the support buying also fails to bring up the prices to the target, what is the final support and assurance and guarantee to the farming community? I do not believe that with this system the future of agriculture would be nearly so well founded, nor, for that matter, do I believe that the interests of the community as a whole would be so well catered for as they are under the system we have now. I would rather rely on the version of Mr. Macmillan as regards this particular matter.
I would join with the noble Lord, Lord Allerton, in a number of the things to which he referred in his speech and particularly on the question of capital gains tax. One can quite understand the principle behind it, and indeed the necessity for it. When it was introduced the Farmers' Unions made vigorous representation to the Chancellor for exemption or for modification to take account of the agricultural situation, because it is upon his creditworthiness that the farmer can raise the capital to finance development. In my submission there have been two main elements in this creditworthiness. There has been the assurance of the 1947 Act, which was modified and buttressed somewhat by the 1957 Act and subsequently by the 1967 Act, but basically the 1947 Act has been the solid rock on which this industry has been able to build. It has been the assurances that were given there—that the finance organisations knew were there—that have enabled farmers, where they were as individuals creditworthy, to go forward.
The other thing that has enabled the industry to finance its development has been the appreciation in the capital value of its land. In my view these have been the two major elements. I hope that as regards the first of those nothing will be done and that Lord Nugent's Party will think seriously about their proposals, in which there is much good and which I hope they will be able to modify before such time as they might be in danger of putting them into operation. On the other hand, I hope the Government will 135 look seriously at the question of capital gains as it affects the farming industry, along with many other points that have been made by other noble Lords.
§ 6.15 p.m.
My Lords, first, I should like to thank the noble Lord, Lord Crawshaw, for letting me take his place in the list so that I may keep another engagement. I have listened to the noble Lord, Lord Woolley, with great interest and I agree with him in what he said about the desirability and yet the impossibility of having a five-yearly Price Review instead of an annual one. Five years is clearly impossible, but I hope that successive Ministers and their advisers will keep in mind to try as hard as they can not to put everything into the melting pot every year. We should create more stability in that way.
I could not help being reminded, as the noble Lord, Lord Woolley, went on, of the years 1951 and 1952, when the foundations of the present system of agricultural support, which have received so much praise from all parts of the House to-day, were being laid by a Conservative Minister whose Parliamentary Secretary was the noble Lord, Lord Nugent of Guildford. There was opposition at that time from various quarters, including the National Farmers' Union. The line that the noble Lord, Lord Woolley, has taken to-day seems to have woven into it the same thread of suspicion of all change which is natural in all union circles, as Mrs. Barbara Castle is experiencing so very sharply at this time. But I will say that he has always made his position clear, and his dislike of the European Community and his dislike for this change in the form of our agricultural support which I think will come inevitably. He has always been clear on that point. Now, having said that, I will add the thought that the noble Lord, Lord Beswick, was trying to get the best of all worlds.
§ LORD WOOLLEY
My Lords, I wonder whether I might interrupt the noble Lord for a moment. It is true that in 1952 there was this doubt, but it never went to anything like the extent of the present opposition. As regards the Common Market, I do not dislike the European Common Market, I only dislike the idea of our joining—and I particu- 136 larly dislike the idea of British agriculture joining.
My Lords, the noble Lord has made his position clear now, just as he made it very clear 16 or 17 years ago. But I think the noble Lord, Lord Beswick, is not quite fair when he tries to get the best of both worlds, sharply criticising my noble friend and, at the same time, as I understand it, supporting a Government who have made application for Britain to join the Common Market, a step which would inevitably mean accepting a system of agricultural support substantially different from the system we have to-day.
§ LORD BESWICK
My Lords, I understand the noble Lord's difficulties, but surely he will understand that if one is offered certain advantages one can make concessions in order to gain the greater advantages that membership would mean. Moreover, it is not absolutely certain that the agricultural system in Europe will remain as it is now.
My Lords, undoubtedly as time moves on so there will always be change, but this is an agricultural debate. The noble Lord tried to take my noble friend to task, and I did not think it was unfair to make that point. I see, too, he is enjoying the luxury of talking about increased food prices, even if he did not echo the "6d. egg" which he will remember was a popular cry a number of years ago. I should have thought that if we joined the Common Market under the lead of his Government, or any other Government, some increase in food prices must be accepted as inevitable.
I am glad my noble friend has drawn his Motion to-day in narrow terms, and particularly asked us to concentrate on the question of agricultural expansion. It is all too easy, when we debate agriculture soon after the Price Review, for the discussion to fall into bits and pieces and for the immediate issues to be mixed with those of the longer term. To-day we have been invited by both Front Benches to concentrate rather on the issues in the longer term, and they are difficult to understand. None of us wants to do any injustice to the Minister of Agriculture, whom we all like and respect, but he did raise our hopes in 137 November last and then dashed them with a Price Review in a very minor key when its language is compared with the language of his November statement. At the end he spoke of his determinations—and the noble Lord has echoed this same phrase—as a positive review. After reading a great deal and listening a great deal I must admit that I do not know what is meant by a positive review; it seems to be more like a quotation from the Frost Report.
Having been close to the Review negotiations on a number of occasions, I know something of the difficulties, but nothing like as much as the noble Lord, Lord Woolley, or other noble Lords, and I know the temptations to which Ministers are subject. There is always the temptation to complicate the issue inadvertently when endeavouring to be fair to all. There is an even greater temptation to introduce some gimmick at the last minute. This year the Minister has resisted both those temptations, and, further, he has given us a Statement which is shorter than we have sometimes had, which I take as much to his credit. So I should like to pay tribute to him for this, even if I cannot pay tribute to him for facing up to what I think is the main problem.
The clearest statement of the problem I have yet heard has been made by Sir William Slater, who until not so long ago was Secretary of the Agriculture Research Council and who is still in very close touch with agricultural problems both in this country and abroad. He is a practical man and a great scientist. He said to me in a letter:By all means quote me about the food requirements of this country at the end of the century. The facts are simple. The demographers say that the population will have risen by one-third to about 70 million. If we still import the same percentage of our food we shall have to produce a third more at home if the standard of living is to be maintained. If we only import the same quantity as we do now, as distinct from the same percentage, we must find at home an additional third, making two-thirds in all.That is very simply put and it sets out the formidable task which is ahead of us and which we must face. This is a problem not only important to ourselves but important internationally, and most of us believed that the Government had accepted it in general terms.
138 The Government now appear in this Review to have put their faith a td their money on beef. I do not find it entirely easy to assess this, because in Borne of the figures I have seen there is actually a reduction in the cost of the subsidy or only a very small increase. Of course, we all know that the amount of the final outlay depends on the state of the market. We should be thankful that at the moment the beef market is firm and the cost of support likely to be small. Similarly, if we look at fat lamb we find again that there is a small addition to the guaranteed price, but it is hoped there will be only a very small addition, or none at all, in the bill for the Exchequer at the end of the year, because the market is firm and we hope will remain firm. That is well and good, but I am rather doubtful whether the claim for generosity should have been pressed so far.
If we look at milk—and I am going to say only a passing word, and to seek another occasion, because it is too complicated a subject to deploy at this hour—we find the price is likely to fall, but here producers can look in vain for any small help. Last year the market was weak because of much dumped dairy produce. We are all glad to hear that the Government have taken various steps to try to meet these threats, and we can only hope that they will be successful. I shall look forward, too, to hearing that something is being done on the dried milk front, which did us considerable damage at certain periods last year.
Farming in any country cannot be judged on its performance in one year alone. There are far too many factors which vary from year to year, and particularly the weather, with its big influence on production, which some people in some parts of England experienced to an unhappy extent last year. But if we take the last few years together and make the proper allowance for the weather, not just take the last year's figure as it appears in the columns, I still think we ought not to be satisfied by the increase in production, not least in the light of the task ahead of us. I do not think it is wholly wrong here to draw attention to the increases in agricultural production which we achieved during those "13 wasted years".
139 Lastly, when discussing agriculture I think it is wrong for us to give the impression that prosperity depends on the Price Review alone. There is a danger of that in these debates. I do not see why we should be in any danger of doing that to-day, considering we are speaking under the shadow of the Chancellor's Budget Statement and the increase of taxes which has now become an annual routine, and I fear there is every indication that there will be further increases in a year's time. We need finance for our expansion, and interest rates, as we know, are high; they have moved a very long way from the days when cheap money was represented to us from the Benches opposite as being one of the important things. The Government may have changed their mind about expansion since November, 1968. I hope they have not and I believe they have not, but we are all entitled to change our mind as time flows on. But if they have changed their mind they should say so, and if not they ought to face up to the facts that are being brought out in this debate to-day.
§ 6.28 p.m.
§ LORD WISE
My Lords, I speak with very mixed feelings to-day. I still agree with the present system of agricultural support, as does the noble Lord, Lord Woolley: I go all the way along the line with him. I believe that it is by far the best system for agriculture and for the country. However, as a farmer I am bitterly disappointed with its implementation this year. A Review which leaves us £6 million short of our increased production costs can hardly be described as a solid basis for the large-scale expansion that we had been led to expect. Both the Economic Development Committee and the Select Committee recommended this, and the Minister had appeared to accept it as desirable in the national interest and possible to achieve. That has all gone by the board. We have been given a Review which I am afraid has done little to bolster farmers' confidence and has produced, in the main, only disillusionment.
One drawback of the present system, I think, is the image presented to the general public. It is presumed that farmers are being handed money on a plate. I wish it were so. But we are in fact an industry 140 which is forced to work on a cost-minus basis. Do any other industries have to do likewise? I think not. I have listened to business people being interviewed regarding yesterday's Budget proposals, and I have spoken to several others in varying occupations, and all have affirmed their intention to pass on the increased cost to the consumer. There was not one single suggestion that this cost should be absorbed by increased efficiency. Agriculture must be the only industry whose benefits derived from its increased efficiency cannot be ploughed back into the business but are totally absorbed in order to keep the farmers' heads above water.
It has also been stated that, taking into account the supposedly £30 million benefit from increased efficiency, it is about the third best Award in the past 20 years. But where is that illusory £30 million? Due to adverse weather conditions and other factors entirely beyond their control, farmers' incomes fell last year, as we know, by nearly £40 million. That is just one of the natural hazards of the business which we have to accept. The Minister frankly admits in the White Paper that:because of the fall in net output in 1968–69 the industry will not have made in full the gain normally expected from greater efficiency.I believe that that is an under-statement. It is obvious that there can have been virtually no gain at all from increased efficiency during the past year; but in spite of this the Government still insisted on bringing this factor into the calculations.
There is also a suggestion that the fall in income is only temporary and that, given normal weather conditions, incomes will rise again this year. This may have been the case. But we have not had normal conditions as yet during this farming year. Much of the autumn-sown corn has been lying in waterlogged fields. Ploughing on the heavier lands was delayed, bringing its attendant difficulties this spring. Drilling commenced at least a month later than usual and is still far from being completed. It has been a much more costly and difficult job this spring to obtain a less than ideal filth on these particular lands. Again, that is a natural hazard which we have to accept; but it is one example of the numerous hidden expenses that we have to bear. I 141 have read that it is already estimated that the 1969 harvest could be 10 to 20 per cent. below average, and in regard to many cases I would subscribe to that opinion.
I should like to express my own observations regarding a few of the assessments which I think probably coincide with the general feeling of the majority of the farming community. We have heard much this afternoon about these assessments so I will be as brief as possible. I was glad to note the increase in beef prices. This should stimulate production, but I hope that the full 15s. per cwt. increase will reach the farmer and will not be whittled away by involved calculations in supplements and abatements. From my own experience it is interesting to note that the price I have received for fat cattle sold during the first two weeks of this new period has been on average 17s. per live cwt. below the price I received for comparable beasts in the last two weeks of the old period. I wonder if and when, and by how much, the benefits of this reduction in purchase price will be passed on to the consumer. Wheat and barley prices have improved a little, but they are still below the guarantee of ten years ago. I wonder for myself how many professional or businessmen there are who would be delighted, as apparently farmers should be, at the prospect of raising the price of their products or services to something below the price they received more than ten years ago?
I think it is regrettable that it is considered necessary to decrease the fertiliser subsidy. More advantageous use of a reduced grassland acreage is essential, and this cannot be achieved without adequate fertiliser usage. The horticulturists will also be badly hit as they are not in any way aided by the commodity guarantees.
The Government argument that there should be no increase in the price of sugar beet because contracts were fully taken up at the present price is, in my view, somewhat illogical. Farmers have invested large capital sums to enable them to grow this costly crop, not only on account of its profitability, which I am afraid is decreasing yearly, but because it is an excellent cereal break. Why then were East Anglian farmers victimised to the extent of losing 10,000 acres for 142 which we are geared, both farming and factory-wise, to enable, as I think, the Northern farmers to grow this amount'? Surely, had both these areas been permitted to grow these acres imports could have been saved.
My Lords, the 1969 Price Review has been presented. It is apparent that it favours the larger units, and I trust that it is not the thin end of the wedge for the smaller family farms. Unlike the noble Lord, Lord Walston, I am not wholly convinced that larger and larger units are necessarily more efficient or more productive, either per man or per acre. However, farming is not completely master of its own destiny, and whatever ambitions or aims the Minister may have I think he is finally governed by the rulings of the Board of Trade and the Treasury. On the evidence given to the Select Committee it is evident that a lack of interest in British agriculture is shown in these two Departments. I think that our task throughout the coming year must be to educate these Departments into realising that a prosperous and adequately capitalised agricultural industry is highly advantageous to this country; and that import saving, being certain, is the most valuable contribution which any industry can make towards solving our balance-of-payments problem.
§ 6.37 p.m.
§ VISCOUNT MASSEREENE AND FERRARD
My Lords, I should like first of all to thank my noble friend Lord Nugent of Guildford for introducing this Motion, and also to say that I agree most heartily with everything that he has said. He rather took the wind out of my sails with his opening sentence, because he mentioned what the Chancellor of the Exchequer said in his Budget speech yesterday. I was going to refer to the same matter. The Chancellor said that one of the causes for the bad showing of our economy was the fact that we had failed to substitute home products for imports. That is perfectly true. Before the Government decided on the contents of this Price Review, what an opportunity they had to produce an imaginative Review, by being generous to the farmers and, at the same time, helping our balance of payments!
I was interested to hear the noble Lord, Lord Woolley, say how extraordinary it was that the Conservative Party had 143 changed their views since the introduction of the support scheme system for agriculture, because when it first saw the light of day Mr. Macmillan said what a wonderful scheme it was. All I can say to the noble Lord, Lord Woolley, is that only a fool never changes his mind. After all, we have had this support arrangement now for 15 years, which is a long time.
May I go back to this great opportunity that the Government have missed? In agriculture, we have the only strike-free industry of comparable size in the country. We have an industry that has the greatest productivity in the country. Over the last six years the increase in productivity has been 6.6 per cent. Compared with the national average of 2.6 per cent. that is really a great achievement. Another point is that to a great extent agriculture, unlike any other industry in this country, has to compete with duty free imports. I quite agree that there is some slight help here, but compared to manufactured articles it is almost infinitesimal. We have heard that we still import £1,000 million worth of food. In June, "Little Neddy"—I think another noble Lord also drew attention to this point—said that the farmers of this country could reduce the import bill by £220 million. I am perfectly sure that if the farmers had a really imaginative Price Review which was generous to them, over a few years they could cut this import bill of £1,000 million by certainly a half, and perhaps in time by even more. That would certainly wipe out our adverse balance of payments, and would obviously be of inestimable value to the country.
When we look at this Price Review it is really most disappointing. True enough the Government have increased the guarantees for the Review commodities, as we have heard, by £34 million, but we have also heard that costs—through increased labour costs, the increased cost of machinery, interest and so on—have increased by £40 million. Therefore, in terms of cash the farmers, in an accountant's balance sheet, are £6 million worse off. The Government then say, "But the annual increase in farmers' efficiency is £30 million a year, and therefore in actual fact the farmers have an annual gain of £24 million a year." But to rely on the agricultural industry every year—and 144 when I say every year, the Civil Service and the Minister have relied since 1966 on an annual increase in efficiency of £30 million; and from 1955 it was £25 million—is a most extraordinary argument. It is rather like saying to an athlete, "You must run the 100 yards one second or two seconds faster every year". There comes a stage when saturation point is reached. You cannot go on and on increasing your efficiency. It is not mathematical and it is illogical.
At the present time the signs are that this efficiency curve is levelling out. We had the appalling harvest of last year. Of course, I cannot blame the Government for that, unfortunately, but any efficiency increase for last year cannot be relied upon. Why should agriculture always have to be told, "But you have this £30 million increase in efficiency"? The Government do not say that to any other industry. They do not say it to the nationalised industries. Look at the nationalised industries: the Post Office has just been allowed to increase prices by 25 per cent.; the Electricity Board by 15 per cent.; the Gas Board by 8.7 per cent. Why are not these industries told, "Absorb your costs by greater efficiency and by working harder"? They are not told that. But the agricultural industry is told to work harder and increase its efficiency to absorb these costs. It is a most extraordinary state of affairs and most unfair.
On the question of efficiency, I farm in quite a big way down here and in Scotland, but there comes a point when you cannot replace men by machines. I have made this point in the House until it becomes boring, but you cannot have a mechanical shepherd. Also, the cost of machines has increased a great deal. Above that, as my noble friend Lord Allerton pointed out, farmers now owe the banks over £500 million—I think my noble friend said £540 million. We have this extremely high bank rate to curb consumer expenditure. Economically that may be all right, though personally I think it is rather outdated to-day because the average person who causes expenditure in this country does not have a bank account. But to make the farmers pay this very high interest rate is absolutely crucifying. The farmers do not add to consumer expenditure on imports; the farmers, by producing food, are helping to reduce imports 145 and are therefore cutting down consumer expenditure. Why should the farmers have to bear this extraordinarily high rate of interest? In France the farmers get very favourable interest rates from the Government. Cannot we have something similar in this country?
My noble friend Lord Allerton—or may be it was some other noble Lord—spoke about inflation. Here again we have this £34 million extra on the Review commodities, which, as I pointed out, is really a minus award from an accountant's point of view. We then have inflation, and by the end of the year—if the present time is anything to go by—presumably the pound will have gone down in value by another shilling, so the farmer loses on that. If we turn to paragraph 8 of the White Paper, the Government call for heavier stocking and better management of an increasing number of livestock on a smaller grassland acreage, and call for more land under the plough. We can certainly have more land under the plough, but from my experience I very much doubt whether we can really increase the stocking rate and have any appreciable greater efficiency. Although we have all these new worm drenches for sheep, and very good chemicals and fertilisers to increase yields, I fancy that we have now gone as far as we can in this direction. I doubt very much whether efficiency can be increased, at least in the Eastern Counties, although it may be possible on some farms in the West of England, as the noble Lord, Lord Walston, suggested. Perhaps he has a point about turning the marginal farms into bed-and-breakfast places for the tourist, where they could go and admire the buttercups.
On the whole, I think it would be very hard to keep on improving efficiency and productivity in agriculture to the extent of £30 million every year. There is also the danger, when we now stuff our pigs and poultry full of penicillin and various other drugs to make them grow faster, that if we force growth too much we shall probably end up by poisoning the whole population. That might be one way out of the dilemma, but it would be a most unsatisfactory way.
I do not want to be entirely destructive of the Review, and I should like to welcome the increase of 15s. a cwt. for fat cattle. I think we import £67 million 146 worth of beef into this country, chiefly from the Argentine, and it would be a great help if we could increase the home production of beef and cut down on imports, especially those from the Argentine. There is evidence which rather points to the fact that our last outbreak of foot-and-mouth disease may have come from the Argentine, and the more we can cut down on beef imports from that area, until they put their house in order as regards exporting germ-free beef, the better.
The very valid point has been made that we are importing this extra £1,000 million worth of food from countries which have an adverse balance of trade with us. I should have thought it would have been far more practicable to step up our home production of food and import less from those countries. Our manufactured articles—whether ships, machine tools or whatever they might be—could then be exported to countries which do not have an adverse balance of trade with us. If we exported them at cost, or even perhaps at a loss, the Government could make up any such loss to the manufacturer. If we can produce more food here, and thus save imports from soft-currency countries, we can export manufactured articles to countries whose currencies we need. On the whole, I think it would pay us to do that, even if we exported at cost price, or even less.
I should like to welcome the support for pigs, for I think that we import £124 million worth of pork and bacon foods a year. But we have to be very careful here, because the pig population can soar up very quickly. We have had experience in this country of a glut of pigs, and no doubt a keen eye will be kept on that. But we now have a very good system of marketing for pigs which we did not have before, so the pig situation is probably satisfactory.
I was slightly disappointed that sheep had no further encouragement. We have had 1½d. on fat sheep but, on the whole, sheep have not had any encouragement, although I quite agree that there are reasons for this. If we are going to increase the cereal acreage we have to plough up more of the lowland farms, and there is no point in keeping sheep on heavy arable land. But I am rather frightened that farmers may be induced to plough the lighter lands, the natural 147 sheep lands, the downlands, to get a corn crop for two or three years, and if the sheep go completely those lands will lose their fertility quickly. Of course I have in mind the barley lands. I was very interested to hear what the noble Lord, Lord Rennet', said regarding wool. Clearly, he had a very good point, and there is no real incentive for farmers to improve the quality of their wool by buying the right rams.
I think that we shall eventually have to drop this system of agricultural support. As my noble friend Lord Nugent pointed out, if we dropped it and had proper import duties on food coming in, the cost of living would be raised by only 1½ per cent. By doing that the taxpayer would save over £300 million a year, which is the average cost of support; and it would really be a most satisfactory state of affairs. The £300 million saved could then be used for old-age pensioners, and needy people, to protect them against any rise in the price of food. This change is bound to come. I also feel—and I believe that many farmers feel this, too—that the average member of the public appears to be under the impression that the farmers are "feather-bedded". We do not like this idea of being dependent on subsidies. If we could compete in a free market and, like the manufacturing industries, have import duties on products coming into this country—things which we could produce—I think that the average farmer would feel prouder, because nobody likes subsidies. It is an artificial form of support. It is really, I think, bad economics.
To sum up, I am disappointed with this Review. The noble Lord, Lord Beswick, said that it was not ungenerous, but you really cannot call generous a Review which, in accountants' terms, leaves the farmers £6 million on the wrong side. I would call it ungenerous. But where the noble Lord amazed me was when he said—and his figures are obviously quite correct—that agriculture produces only 3 per cent. of the national product. That is extraordinary. I thought it produced about 7 per cent. But we must remember that in the national product we have such things as insurance, the tourist trade and shipping. I should have preferred it if the noble Lord had 148 given a figure showing the share of agriculture's production as an industry compared with other industries, and not as a percentage of the national product. But he was very fair to agriculture in that he showed how efficient it was. As I have said before, in this country one man on the land produces food for 25 people, which is about the highest in the world. It is a pity that the Government have not been able to be more generous to the farmers. I know that it is hotly denied, but I suppose the Treasury have been breathing down their neck.
My Lords, I fear that this Review may cause a recession in agriculture. I think it will probably make quite a few farmers rather dispirited. They work very long hours; they do not strike, and they sometimes have to contend with appalling weather. I think that the Government might have been more generous. I feel—and I believe that farmers often feel this, though perhaps it is not a very noble thought—that if farmers held more votes they might be more generously dealt with. I should like to end by saying that I am quite sure that in the future this support through taxation will become outdated. It will go, and when it goes I think that farmers, certainly the efficient farmers, will be far better off, and that the inefficient farmers will no doubt take the advice of the noble Lord. Lord Walston, and will open their houses to the bed-and-breakfast trade and allow the tourists to come and see the buttercups.
§ 7.5 p.m.
§ VISCOUNT MONCKTON OF BRENCHLEY
My Lords, I should like to bring your Lordships down to the earth of the farmyard, and I am afraid that to do so I must be personal, because I think I am the only speaker in your Lordships' House to-night who is not an owner or a buyer but a tenant farmer—and being a tenant farmer, particularly a dairy tenant farmer, is not at present an easy life. After leaving school I started work as a farm labourer for a period in Cornwall. I then took a degree in agriculture at Cambridge. There was then a 30-year gap, until I started farming again last year. To do so I had to rent a 450-acre farm in Kent, at £4,000 a year. As I had not the capital to buy the dairy herd. I borrowed £22,500 to buy the dairy herd; I borrowed £12,500 to buy the deadstock; 149 and I got overdraft facilities of £3,000 for that side of my farming enterprise.
On the other side, which is a small fruit farm of thirty acres, I put up a small amount of capital; I borrowed £12,500 from the Agricultural Mortgage Corporation, at 8¾ per cent.; and I got an overdraft from another bank (which did not know that I had got the overdraft from the first bank) of £7,000 to cover me until, one hopes, the crop comes in the Fall. I am pretty frightened, because if you add up those figures they give a total of £57,000 on which I pay interest. From the Chancellor's speech last night, do I "go broke" now, or is there some relief for me as a tenant farmer? I hope and pray that there is, because there must be other small farmers like me who cannot afford to own or buy a farm, and who have had to borrow everything. I think it is worth spelling out That point because it is somewhat frightening to be indebted so much when you have not even the capital to back what you owe.
There are other expenses which in my own case have gone up. Mine is a Friesian herd, half pedigree and half grading-up; and I hope to have it entirely pedigree. I have just put in to become anti-brucellosis accredited, and that has cost money because I have had to adapt loose boxes for individual sick cows. They have to give birth separately, unfortunately, instead of in the natural way, in the field. In the short time that I have been re-farming, foodstuffs have gone up, petrol has gone up and electricity has gone up—not on the straight charge, but because we now have to start milking much earlier, and in the dark. Incidentally, this has caused an increase in expenses to the farm workers, because they have to use their lights much earlier and for longer in the day. The cost of water has gone up, and the interest on my loan (£57,500) itself has gone up, other than the A.M.C. loan, on which the interest rate is fixed at 81 per cent. for the 25 years. In other words, my eldest son takes on that burden when I am gone. Postage has gone up, and repairs have gone up—and all this just in the period that I have been farming again.
Worst of all, my Lords, is this question of S.E.T., because it is going to put up everything else. It is going to put 150 up the cost of tractor repairs. In fact, all the basic service industries that help farming must increase their prices. There is another point—a very simple one, but one that I have not heard mentioned here to-night. I now have to borrow more money in order to pay the Government the extra S E.T. They keep it for three months, and then give it back me without any interest. I shall have paid interest on the loan to pay the S.E.T. to them, but they pay it back to me without any interest. That seems unfair to the farmer, and a most complicated way of setting about things.
On taking this farm I took action at once on seeing from the "Little Neddy" chart that it was intended to increase the dairy cow population by 9 per cent. My Lords, it is impossible to change it back in a hurry. In the case of a cow, breeding takes about the same time as for a human. So it is nine months before one can start altering the breeding policy. It is not like pigs, which take three months, three weeks and three days. Nor can I yet determine the sex of the calf to be born. I believe that Friesian heifers must go down in value as a result of this Price Review, whereas a bull calf may come up a bit because of the help we are getting on the beef side for rearing calves. Until the scientist can implant a fertilised bull calf into the cow (which is already possible, though not yet commercially viable) we shall be in difficulties; we shall still have about a 50–50 ratio of heifer to bull calves in a year. In my case, we have now arranged to breed all the year round and not just in the autumn, summer or spring. It is a twelve-months' operation.
Although the banks were kind to me in lending me this vast sum, I am afraid that the smaller farmers, those who have not yet got the 80 to 100 milking herd, must suffer and the 60-cow man, I fear, must go under unless some help is given for milk. One sees the difficulties. We overproduce milk, yet we import so much butter and cheese. I am glad to see that there are to be some controls—and I hope that they will work—on the import of cheese. I was also grateful to the Government for their decision on the production of bull beef. This will help the dairy farmer who wants to keep the cross-Friesian and Friesian bulls to sell as bull beef. They fatten more quickly 151 and are not knocked back like the horned steer. I think there is a future there. I hope that your Lordships have all read, Have you Eaten your Travel Allowance? This is an excellent brochure produced by the N.F.U. It puts the matter in such a clear public relations way and has the great merit that it is mostly true.
My Lords, I did not want to speak at length; nor shall I. But I think the difficulties I have outlined are clear. I hope that perhaps some answer can be given to night to the questions affecting those who have taken loans both to operate and to purchase their farms.
§ 7.12 p.m.
My Lords, may I too add my congratulations to the noble Lord, Lord Congleton, on his excellent maiden speech, and my thanks to the noble Lord, Lord Nugent, for introducing this debate?—although I cannot agree entirely on substituting import levies for the farm subsidies. What I wish to emphasise is that the country is getting a bad bargain out of the money paid out by the Government in this Review. For at least fifteen years the net returns on all agricultural lands have decreased each and every year. Some examples are that wheat is now 15s. per ton less than in 1955; pig meat is now 20s. to 25s. per pig less; eggs are now 7½d. per dozen below the 1955 prices (or 11s. 3d. per hen per year); wool is now 5d. a lb. (or 3s. per sheep) lower. Of course, the guaranteed price of mutton has gone up. Reduced profit margins created by the above, plus almost daily increases in materials, fuel and labour—indeed, in each and every item purchased by farmers—have reached a stage where no profit is made on 75 per cent. of the total commodities grown, leaving only a few crops where a worthwhile margin can be made in suitable seasons when prices are reasonable and not being floored by almost unrestricted imports.
The outcome of the situation is that all farmlands have become seriously depleted of their natural resources—fibre, soil structure and plant foods—and very seriously infected with couch grasses, grass weeds, wild oats, plus eel worm build-up affecting many crops such as 152 potatoes, sugar beet, peas, wheat and so on, crop pests and many other cereal diseases. Farmers' net incomes are minute and farmworkers' wages are pitiful. Farmers' capital is seriously depleted because of having to purchase bigger and more costly equipment to compete with labour loss, the lack of young men coming into farming and a regular staff getting far too old. Production per man on each and every farm increases every year, but only because more farmers' capital is spent each year to compete with the loss of labour.
My Lords, what is wanted from the Review is more fruitful results from the expenditure. Therefore, we must take a new look at its objects. In this respect I entirely agree with the noble Lord, Lord Walston, on the quinquennial Price Review. Agricultural wages must be increased to the average industrial standard throughout Great Britain, experiment, expertise and improvements in yields must be encouraged and two blades of grass must be made to grow where one grew before if the £160 million extra is to be achieved by 1972—and this increase is inadequate; £500 million should be aimed at by 1977 if we are going to try to get our adverse balance of payments right.
Farm workers work long hours in all extremes of weather. The skills and the expertise called for nowadays are many and varied and as productivity increases so do the skills. A tractor driver has to be not only a ploughman but also a highly-skilled mechanic. The cost of living in the country is no less than that of the towns. About half of the workers live not in tied cottages on farms but in local authority housing. They pay the same rents as men in industry who earn a higher basic wage for a shorter working week. While farm workers see their neighbours bringing home high wages for less onerous work in far better working conditions, we shall never stop the drift from the land. It is the young and skilled men whom we are losing to industry all the time, leaving on the farms the older men who find the new skills and techniques difficult to grasp. These young men we cannot afford to lose. Farmers are well aware of this inequality in wages and wish to pay far more. But until adequate provision is made in the Review this cannot happen.
153 I turn to yield improvement. This will be achieved by the experimental stations and agricultural colleges. This is a costly business and they must have much more backing from the Government. As a farmer of forty years' experience, I feel that I must press hard for the improvement in soil fertility. I should like to praise the Government for the bean subsidy; but they have not gone far enough in this direction. They should make a grant for re-seeding arable land with grass or short leys. This re-seeding is only the first step. Profitability from grass is essential, but you must have the cattle and sheep to graze the grass, and so I call for a grant for lowlard farmers for breeding cows and ewes. The highland farmer gets a grant; why should not the lowland farmer? Nationally it would be far more profitable. Of course the calf subsidy is an encouragement, but it does not give sufficient incentive to increase breeding herds. Dairy beef is not of the quality of the best Scotch shorthorns. In the Price Review there was a guaranteed minimum price for fat sheep. Owing to the high export demand this guarantee seems unlikely to be called on this year. Will the Government consider using this money to make a grant per ewe on the farm for breeding? I should like to ask the Government to prohibit the export of pure bred fat ewe tegs for killing. I estimate that at the store sales taking place at this time of the year 50 per cent. of the best ewe tegs are going abroad for this purpose. This is impoverishing our breeding flocks of the future.
I should also like to see an import duty imposed on fruit and vegetables which are now obtained from abroad but which could be grown in this country. To avoid dumping and in order to protect our home produce I should like the Minister of Agriculture, Fisheries and Food to have power to impose, when necessary, an immediate duty on cereals and farm products such as potatoes, carrots, onions, et cetera, imported from abroad. This would, however, presuppose the farmer improving the general presentation of his goods to the same high standard of presentation as has been achieved in respect of many of the imported products. I feel that in this connection the British farmer lags behind his Continental counterpart. If steps are not taken to improve the profitability of 154 farming, the industry will decline very rapidly and the situation will be even worse than in the 1920s.
Finally, my Lords, good husbandry may be obtained only by balanced farming. Make meat, milk and wool production really profitable so as to allow farmers a chance to put one-third of all the land back to grass for a three-year grass break. The alternative is general bankruptcy of the soil on a large proportion of the farms and of all allied trades. Land is our national heritage the misuse of which takes a generation to put right.
§ 7.25 p.m.
§ LORD CRAWSHAW
My Lords, first of all, may I thank and congratulate my noble friend on raising this important subject at such an opportune moment. I am afraid that this evening, as it is getting late, I am bound to repeat many of the arguments which we have already heard, but I do not really apologise for that, because to me these arguments are vital. A year ago in the Economic Debate in your Lordships' House I regretted the 1968 tax increases which were aimed primarily at reducing private spending rather than raising revenue, because they kill incentive, they are inflationary and, indirectly or directly, they increase the price of food. The increase in S.E.T. and the tax on petrol are obvious examples. Naturally, I regret the 1969 increases still further and I am sorry that the Chancellor sees high taxation as being a vital part of the export drive. I ask him to look again at a policy of import saving instead of placing so much emphasis on exporting.
As I see it, my Lords, the export/import situation is in a chronic state and present methods are not working. It is vital that we should make more tile of our natural resources and import-saving industries. A choice has to be made between the industries and I think that greater emphasis should be put on the import-saving ones rather than on the export industry. The largest of our import-saving industries is of course agriculture. I am afraid that when one starts talking about home produced food there is a tendency for the cheap food or free trade school to think of more expensive food. I am well aware of this argument. Yesterday, when I was at home thinking about what to say in this debate I saw on the walls pictures 155 of my forbears from Manchester glaring down at me, and I have drawers full of correspondence from Messrs. Cobden and Bright.
To my mind the old argument is no longer valid. In order to get this foreign food we have now to pay high domestic taxes, which is really far worse than paying more for our home produce. British agriculture has markedly improved in output and efficiency in the last ten years. As a result, farmers have produced additional food which has cost not much more than that from the alternative sources of supply abroad; and so long as we adhere to last autumn's expansion plan economies of scale are bound to operate and prices will come down still further. It is also, of course, in the interests of agriculture to keep down prices so as to achieve the maximum sales.
It is because of the raised hopes last November and because overall the Price Review does not inject capital needed for expansion, but merely recoups increased costs, that the farming industry is feeling frustrated and resentful. When they read about adverse trade figures the farmers feel that they could go a long way to putting matters right, if they were given the tools and the encouragement. When they read further of costly, irresponsible industrial action in other fields they feel also that someone is taking advantage of their more orderly and responsible conduct. I believe it a fact that a strike could easily cost this country £1 million, and that agriculture could easily save that amount in a day. When you add all this to the appalling weather conditions which the farmers have faced in the last year—certainly it was the wettest period in my lifetime—you can appreciate that there is a good deal of unhappiness and uncertainty among them.
Having said that, my Lords, one must also recognise that there is a fear in industry that an increase in home food production might reduce export orders for machinery and other manufactured goods. I maintain that a flourishing agriculture would require a great deal of new machinery and capital goods. In this connection I often read in the local Press in Loughborough and Leicester of Queen's Awards to industry. When these 156 Awards are being considered in future I should like to see consideration given to firms which save imports or service import-saving industries.
To carry out our expansion plan, which I think is vital for our solvency, we first need greater national investment and private investment in farming, and we have heard that private investment can come either from income or from credit. And it would be a very good investment, for between 1952 and 1964 agricultural net output increased by 30 per cent. while capital increased by only 18 per cent. We must also quicken the development of more intensive farming and continue the improvement in farm size structure. I regret that grants for this purpose have not been as widely claimed as the Government hoped. I agree that this was a very constructive move, but I think that the problem is social as well as economic and it probably means the sacrificing of independence by many farmers. I think that this problem needs to be dealt with with a great deal of understanding. I also think that there is tremendous scope for mass production in many spheres of farming. We must have a real assurance from all Parties that additional output can be marketed on a profitable basis and will not be threatened by cheap surpluses from abroad.
I want to say a word or two about individual ideas and enterprises which I have seen at first hand. Cattle and beef account for half of United Kingdom temporary agriculture imports. A signicant increase in the size of the national beef and dairy herd must be a feature of the import saving programme. This would also encourage grain and grassland production to feed them. I regret the present standstill on milk because by 1972–73 milk could go up from 2,550 million gallons to 3,230 million gallons and could save £70 million worth of imports. Although the bulk of this increase would go for manufacture, I feel that there is great scope for more British cheese. And, coming from Leicestershire, I personally feel that there is no cheese to compare with the Stilton. I would be happy to see two or three Stiltons in the restaurant of your Lordships' House. I had some people from Scandinavia staying with me over the last 157 week-end. They were amazed to find that they could buy dairy products cheaper in England than they could at home. They were Danes, and they said that it was not only in Denmark where something was rotten!
If we keep up the dairy herd, it will be much easier for us to produce the extra beef required, because much beef will have to come by cross-breeding dairy cows with beef bulls. However, I welcome the increased support for beef. We must try to create a stable market in this commodity, which has always been chancy, and therefore we must control imports. I should like to see us producing virtually all our own beef and keeping out the dreaded foot-and-mouth disease. There is great scope here for large enterprises, which should reduce the prices to the housewife. At the moment I feel that there is too much dog and stick in this sphere, as people dare not commit much capital to it.
I find cereals in the same position as beef. One welcomes the increase, but there is still at the back of the farmer's mind the fear of cheap surpluses from abroad. And the same probably applies to pigs. Certainly in the Midlands the most important crop of all is grass and this, of course, suits our climate admirably. Here there is a great margin for improving production, especially with permanent grass. We must make more use of what we are already growing and we must grow more with more fertiliser. Although I see the reason for reducing the subsidy on fertilisers, I only hope that this reduction will not be a cue for farmers to decrease the amount of fertilisers used.
In conclusion, I would say that we must treat agriculture more seriously, not just as an industry to fall back on in time of war or of emergency. We must create a stable market, principally by the extension of import regulation, added to the guaranteed structure. In return, agriculture is capable and keen to reduce our present £1,000 million a year food import bill by at least one-quarter. In so doing, we can begin to see an end to all our national recurring financial crises and a reduction in the burden of taxation in every home in the land.
§ 7.35 p.m.
§ LORD DONALDSON OF KINGS-BRIDGE
My Lords, it is a long 158 time since the opening of this debate, but I must apologise to the noble Lords, Lord Nugent of Guildford and Lord Henley, because I had to miss their opening speeches through an unavoidable engagement. I think that I have heard almost all the other speeches in the debate and must endeavour to resist the temptation of usurping the position of my noble friend Lord Hughes in replying to the various speeches, but there are one or two things that I must say as a result of the debate.
First of all, I would say how interested in and how pleased I was with the maiden speech of the noble Lord, Lord Congleton, which I think all of us enjoyed. His dry approach to this rather sentimental subject was a relief to me. We are always hearing farmers say how much this or that should happen and it was good to hear a purely economic approach, though perhaps we can have too much of that. In the course of what I am going to say, I should like to try to dispose of the suggestion made by the noble Viscount, Lord Massereene and Ferrard, and by the noble Lord, Lord Wise that there is a £6 million shortfall in this Review.
The last point I want to make from the debate is about the suggestion of the noble Lord, Lord Inglewood, that because the Labour Party have accepted the possibility of getting into the Common Market, therefore it is at least curious not to adopt the Conservative Party's present proposals. I do not want to discuss these proposals beyond saying that most farmers, certainly the National Farmers' Unions, have always taken the view that if it were for the benefit of the nation to get into the Common Market, it is not up to the farmer to stop them. But by no stretch of the imagination could it be said that going into the Common Market would help the average British farmer. I think that it will do the big farmer some good but will do nobody else anything but harm. Even so, the view of the N.F.U. is to go into the E.E.C., if we get proper terms. This is not a reason, we think, for anticipating that. I shall not follow the noble Lord; Lord Crawshaw, in his interesting discussion on free trade and home-prod aced food. Of course, in the end, this is what the whole thing is about.
159 It is very agreeable to be able to discuss a matter of this kind in this House on an almost non-political basis. Anybody who has ploughed through the debate in another place will have found that it is more interesting when it is non-political. The real issues cut straight across Party lines. One could reverse the Party roles without straining probability. The line-up is really the old one, dating back to the Corn Laws, between a prosperous agriculture and cheap food. Nearly every farmer believes, and believes with passion, that he should have the right to push production from his land to the limit of good husbandry and that it is not just mistaken, but morally wrong, to allow foreign competition to prevent him making the maximum use of the natural resources under his hand. He believes that the foreigner can only undersell him as a result of hidden subsidy, sweated labour or specially favourable weather conditions; but even if none of these advantages can be proved, he still thinks that home-produced food should be bought and consumed at home before foreign stuff is let in, even at lower prices. In contrast to this, the free trader believes that we should buy our food in the cheapest market and congratulate ourselves if we can buy it specially cheap because some foreign Government subsidises it or sweats its labour, taking the view that a subsidy of this kind is a direct bonus to the housewife and as such is to be welcomed.
Our present policy makes concessions to both points of view. As the largest importer of cereals in the world, we do what we can to keep prices down in the International Wheat Agreement, and we quote and deal at world prices in this country, making things up to the farmer by paying him deficiency payments. At the same time, we make agreements with our main suppliers not to sell below a certain price. In other words, with one hand we bargain to get the price down, and with the other we insist on its being kept up. This, I gather, was a great puzzle to the Russians when Mr. Soames tried to explain a deal he had with them. But that is another story. Of course, there is an explanation of this contradiction. As the largest importer of cereals, it must pay us to pay less and not more 160 for our imports. But we also produce two-thirds of our own requirements of cereals here, and we assist our farmers to do this by means of deficiency payments. As the world price falls, so the deficiency cost to the Treasury rises, and thus by lowering the cost of the one-third you import you may raise to uneconomic heights the cost of the two-thirds that you produce at home. It is a very complicated position, and it seems to me that the Minister of Agriculture, Fisheries and Food is by the very definition of his name a schizophrenic.
Seeing what a curious muddle we are in, my Lords, I think we must approach this Motion with some scepticism, because agricultural truths are seldom obvious. Your Lordships have exercised your privilege—which is what makes our debates interesting—of roving very wide this afternoon, but I am coming back to the proposition of the noble Lord, Lord Nugent of Guildford. The very thorough examination by the "Little Neddy" in Agriculture's Import Saving Role suggested the feasibility of a net substitution of home-grown for imported products of £218 million, but the Report was careful to make clear that this was something distinct from a net contribution to the balance of payments. In fact, two Oxford economists have suggested that the net contribution to the balance of payments of an import substitution of £100 million lies between minus £1 million and plus £24 million. These figures are disputed, and there is no consensus of economic opinion. But this need not bother us, because what we are concerned with is the figure which the Minister accepted on November 12, which is a modest figure, some 26 per cent. less than suggested by "Neddy"; and it is for not having provided enough money to carry this out that the Motion of censure is being moved.
To produce a net substitution of £218 million the "Little Neddy" calculated that new resources in the form of fixed and working capital would be needed to the extent of £344 million—and I quote from Table 3 of the Report. This new capital would be required over five years. In November, the Minister reduced the "Neddy" target figure from £218 million to £160 million, a reduction of 26 per cent., for reasons which seemed good to him at the time, and which we need not 161 go into here. So we should reduce the capital needed proportionately, which make from £344 million to £255 million. This over five years is an input requirement of £50 million a year. I think these figures are all right, and I do not think I am playing games with them. I think that this is what this debate is about. I do not think anybody would suggest that the Government should supply the whole of the capital necessary for any expansion programme. Provided the end price is profitable—and whatever your Lordships may think about beef, wheat at £29 a ton is very profitable—the high level farmers, from whom the bulk of the expansion must come, could finance their own expansion using the normal channels. But for the purposes of this argument let us agree that the Government should inject half the required sum; that is to say, £25 million. I think if we can show that the Government are injecting something in the neighbourhood of £25 million a year, the case falls to the ground. Whether the size of the expansion is large enough is, I think, a different point that we are not discussing to-day.
Increased costs, which be it noted include higher interest charges, were agreed at £40 million; and as the noble Lord, Lord Congleton, said, this is not a matter of dispute. The agreeing of the basic costs is a question of fact, and there is no argument required once those costs are agreed. The agreed deficiency factor stood at £30 million, so there was a shortfall of £10 million to be made up. In fact, the final figure was an increase of £34 million, which is £24 million over and above the £10 million increased costs. I am sorry, my Lords, but this is true; there is no way round it that I can see. It is, in fact, a capital injection only £1 million short of the figure that we have just arrived at. It may be thought of as not over-generous in view of the appalling weather the farmers have had. But one must not forget the fearful storms besetting the Chancellor, too, and I think all things considered it was not a bad settlement for a period of maximum stringency.
The indignation of the farmers comes, as I understand it, from a failure to understand what the deficiency factor is. Here I think it is worth putting on record that my right honourable friend the Minister did not invent the deficiency 162 factor. It has been in every Review for the last, I think, 15 years, starting, I think, under Mr. Dugdale: and it has been increased by agreement between the National Farmers' Union and the Government on more than one occasion under each Government. So I cannot saddle the present Government with this particular piece of calculating machinery.
Agriculture receives a great deal of support from the N.A.A.S., which costs £4 million a year, from the A.R.C., which distributes about £14 million a year through its many institutes, from the universities, from the agricultural colleges and institutes, from the provincial agricultural economics service, and so on. It must be expected that some of this will be shared with the public. This is the case of the deficiency factor, which I will not labour. It has been agreed by the farmers' representatives. If you accept this, then you have had £24 million paid over and above the shortfall, which are agreed figures. So I fail to see what all the fuss is about.
When one looks at the breakdown of the Review by commodities, it is hard to see how much more could have been given without doing some actual harm. Here I think that noble Lords must pause for a moment and consider the whole trend of economics in this industry, and its effect on the structure of farming. We know that the economic trend is pressing inexorably towards larger farms, or at least larger farm businesses, and fewer farmers, larger technical investment and fewer workers. This involves the progressive squeezing out of the small man—something which, however much we may regret it, successive Governments have found themselves unable to prevent. And I have not yet heard of any scheme which will succeed in preventing this. However, the worst hardship can be avoided if the pace is prevented from becoming too hot, because land values are steadily rising and the owner occupier can sell profitably and retire; and even the tenant—and there are many fewer tenants to-day than there were—may be able to get out with some financial encouragement from the landlord who wants the land in hand for himself. This is in fact the way in which the worst hardship is being avoided in this country in a way that they have not yet done it on the Continent
163 The difficulty that every Minister of Agriculture is up against is that any help he may give always seems to tilt the balance still more against the small producer and in favour of the large. Subsidies on acreage or on tonnage sold both help the man with many acres more than the man with few. But the worst and most harmful of all subsidies is the one to a commodity already in over-supply. This leads to glut, to a collapse in prices and a reduction in margins, so that once again the small man with no economies of scale to fall back on suffers most. It is also, incidentally, a wicked waste of public money. For years we have been subsidising the price of eggs, which made it possible to import maize from across the Atlantic, and feed it to hens which laid eggs that were then broken out and converted into an ever-increasing pile of egg products in the Egg Board's vaults. The over-subsidisation of milk products in the E.E.C. has led to an even more hopeless position, with over 150,000 tons of butter in store, much more on the way, and no immediate prospect of finding a commercial outlet for it.
We really must support, and indeed praise, the Minister for resisting the pressures to raise the incentives to milk production and for lowering those for egg production. It is hard to see where else he could have increased incentives beyond the generous help given to pigs, beef and cereals, and the modest encouragement to sheep. My own criticism is of the reduction in the fertiliser subsidy, which I think was a pity. It has a direct effect on good husbandry and, unlike most subsidies, helps the small man as much as the large.
To sum up, my Lords, in a time of great stringency the Minister has been able to keep his word to agriculture by returning to the industry £24 million of its agreed efficiency factor, which amounts to an injection of capital equal to 50 per cent., or nearly so, of the annual sum necessary to make possible the selected expansion programme outlined in November. Goodness knows! I have some understanding of the farmer's grumbles. I made my living from the land for thirty years, and for the most expensive first fifteen years, when I was educating my family, I had no outside resources at all.
164 I know the bitter frustrations due to weather, to price, to disease, to competition, to Government interference and to one's own over-spending. It often seems as though every hand is against you. But this is no excuse for boorish behaviour of the kind that greeted the first Review of my right honourable friend Mr. Fred Peart. I think that farmers felt properly ashamed of themselves after those unedifying demonstrations. I hope that they will not again put themselves in the wrong by biting the hand that feeds them while it is actually handing over the £24 million. My Lords, I think this is a reasonable and well-balanced settlement. The Minister has avoided the temptation of currying favour with the farmers by giving additional incentives which would do more harm than good, and he has given generous support wherever expansion is desirable. I commend his courage for refusing to be stampeded into expensive folly.
§ 7.52 p.m.
§ THE EARL OF DUNDEE
My Lords, may I first congratulate, on behalf of my noble friends on this Bench, the noble Lord, Lord Congleton, on his excellent maiden speech and very valuable contribution to our debate—one that we very much hope he will repeat on future occasions. May I also say how glad we are to see taking part in this debate my noble friend Lord Crawshaw, whose contribution a few minutes ago was, I think, of particular value and interest. We are always very glad when he can come here and give us the benefit of his advice on these subjects.
I have listened to practically the whole of this debate, and I do not want to prolong it. Until a few minutes ago my feelings of chivalry had strongly tempted me to make a speech in favour of the Government, because I had not heard a single word said from any quarter of the House in their favour. But that has been perhaps partly corrected by the speech we have just heard from the noble Lord, Lord Donaldson of Kingsbridge. But I am particularly unwilling to add anything to the burden of the noble Lord, Lord Hughes, who so often has to perform the gallant task of Horatius, without any companions, defending the bridge against a host of enemies.
The only thing I want to say about Scottish agriculture is something with 165 which I think the noble Lord will probably agree: that the Scottish farmers, who share with the farmers in other parts of Great Britain the results of each Annual Price Review, have to do so, very often, in harder conditions, both rougher weather and tougher soil, particularly in the North and West of Scotland. I think that many of them are living a very admirable but not a very easy life.
The noble Lord is no doubt aware that not long ago the Chairman of the Governors of the North of Scotland Agricultural College said that for the year 1966–67, of all those farmers who had done their costing with the College, 40 per cent. were receiving, or earning, an income which was less than the income of the lowest paid agricultural worker under the Agricultural Wages Board's scales; and that allows nothing for overtime and nothing for a return on the farmers' capital. In addition to that, the Scottish farmers have to pay a slightly higher rate on overdraft interest than do people in other parts of Britain. The banks charge a little above bank rate, and we in Scotland have to pay 10 per cent. on our present overdraft interest. As these high bank rates become more and more permanent, and less and less brief in their application, it is a very serious subject. The experience of the noble Viscount, Lord Monckton of Brenchley, is by no means exceptional, and I shall perhaps return to this point again in a minute or two.
However, taking agriculture in Britain as a whole, I think no one would deny that it is the only major industry in Britain which since the end of the war, for more than twenty years, has successfully submitted to a prices and incomes policy which has actually worked. It has worked very well. Our farms have produced more wealth for the country, having increased their wealth to a greater extent than the extra money which they have taken out in wages and costs, which cannot be said of all industries. And, my Lords, they have never had any strikes. I read a week or two ago of some wage agreement—I forget whether it was in the motor industry, but I think it was—in which it was provided that the workers were to get a large bonus every few months if they had not been on strike. I wonder what would happen 166 if that were done in agriculture. If it were, I should think that all agricultural workers now would quite easily be able to sell the whole of their future earnings for the rest of their lives to Constellation Investments Limited, and perhaps the Chancellor of the Exchequer might feel that they were rather too numerous to be robbed with impunity of the benefits of their enterprise and their bargain.
In this debate, although it is about the Price Review, many of your Lordships, including my noble friend Lord Nugent who moved the Motion, have referred to certain proposals which have been put forward in outline by the Conservative Party about a changed basis in agricultural policy. The noble Lord, Lord Henley (I was very interested to hear his speech), said that he approved of the principle of this proposal of having an import levy rather than deficiency payments; that he thought that cheap food ought not to be our major objective and that it might be better for our national economy if we had agricultural protection by means of levy, although the effects of that might be to raise food prices to some extent. I was particularly delighted to hear that from a Liberal, because I am old enough (perhaps Lord Henley may not be) to remember the time when any Liberal who was rash enough to express views of that kind would have been in danger of instant excommunication from the Liberal Party.
The noble Lord, Lord Woolley, took a rather less favourable view of these proposals and pointed out that the farmers had some reasons for being apprehensive of their possible effects, which is perfectly true. But my memory here also is inconveniently long. I have been a member of the National Farmers' Union since 1927, and I cannot recall any new proposal for price protection in agriculture that has not in one way or another encountered opposition, sometimes very strenuous opposition, from the farmers when it was first proposed. I remember that in the 1931 Parliament they were all agreed on the wheat deficiency plan which was then introduced, but when Walter Elliot tried piecemeal to protect prices in various other commodities, such as by the Milk Marketing Board, he was almost howled down, I remember, by indignant hecklers 167 at a meeting of farmers in the Borders; and when he tried to reason with them and pointed out that when you put a bull into a field with cows you do not expect to get results the next morning, one farmer replied in a loud voice, "No, but you do expect to see a look of contentment on the faces of the cows".
Then, after the war, we had what I thought at the time was a most admirable plan, by which the Government—the Ministry of Food—bought all our produce at very good prices. In a way they were not as good as we thought, although they were far better than anything we had been accustomed to before, but in fact they were often less than the world prices; and while the Government represented that this was an enormous food subsidy which they were giving, I think the truth often was that the farmer was paying a subsidy to the consumer of food, because the price which we got for barley, although it was quite satisfactory to us, was often less than the price of barley imported from the Middle East.
The price of fat cattle was often less than the domestic price of fat cattle in the United States of America, because at that time world food prices were very high, and when the Conservative Government proposed to change from that system of bulk buying by the Ministry of Food to the present system (as the noble Lord, Lord Beswick, pointed out, it was not entirely deficiency payments, but the main feature was deficiency payments), Harold Macmillan may have liked it very much, but it was not liked by the farmers when it was first brought in, and it was not particularly liked by me. Many of us thought that in the bulk buying by the Ministry of Food we had security and that in the new plan, which has prevailed since then, we were risking the loss of this price security.
In the same way many farmers now are naturally apprehensive about the possible results of the levy. I think there are good reasons for proposing a change of this kind, because this country is at present the only country in which foreign food can be brought in at any price and dumped free. And this is at a time when, owing to agricultural stimulation by price fixing in many advanced and highly 168 productive agricultural countries, many of them have a large surplus of agricultural produce which they are able to send here with complete freedom.
I think there are several reasons for considering a change of this kind. First, there is the reason which was given by the noble Lord, Lord Henley: that it is much the most effective way—it is an automatic way—of preventing dumping, and dumping is extremely difficult to prove. Whether or not the Board of Trade want to be difficult, it really is often difficult to prove that a certain case has fulfilled the conditions laid down under the anti-dumping Act. If we had the protection by means of a levy there could be no dumping. Another reason is that under present conditions I think the consumer would not pay the whole of the levy, in the shape of an increased price in food, because in present conditions the food importer would have to pay part of it by reducing his profit margin. Indeed, that is one reason why some farmers may feel apprehensive: because they may feel that, even with a substantial levy, food prices will not be forced up to the extent that will be necessary to recoup them.
I did not agree with the noble Lord, Lord Beswick, that we should be trying to have it both ways if we had a system of protection by levy with a three years' period of introduction during which some price deficiency payments would still remain, because I think that a change of that kind would probably have to take some time in any case.
In my submission, the final reason for considering such a system favourably is that if we are successful in our application, to which the Government still adhere, to join the Common Market we shall in any case have to negotiate a new agricultural arrangement with the other countries of the E.E.C., and it will be much easier to do that if our own existing system of price support is similar to theirs. I think that there would in any event have to be a re-negotiation; for not only are the other countries in E.E.C. continually re-negotiating among themselves now but their prices are so high that our farmers would do too well. As the noble Lord, Lord Beswick, pointed out, they are more efficient in productivity than the farmers in France and Germany, and I think that if we were to 169 join the Common Market on the present basis of price support other countries in E.E.C. might feel that they would be paying the British farmers altogether too much. That is all hypothetical, but I think it is a good reason for examining favourably proposals for a change to a system of protection by levy that it will make it easier for us, without too prolonged negotiation, to join the Common Market.
Finally, as to this Price Review policy, I do not want to attack the Government about it. I do not think it would have been a bad Price Review if its objective had been simply to carry on as we were. But I do think it is an unsatisfactory Price Review, having regard to the fact that the Government accepted the recommendations of the E.D.C., which contemplated a large expansion in our agricultural production to help our balance of payments which would require a large infusion of capital. I think we must take account of the fact that, in spite of all the increases which have been given in nominal prices over the last four years, the farmers' income now, according to the agreed figures on which this Price Review was based, is substantially the same as in 1965; that is, a net income of £472½ million in 1965, and £477 million now. That is allowing nothing for the fact that prices have gone up in the meantime by 20 per cent. and the value of money has consequently gone down, partly owing to devaluation, by 20 per cent.
The noble Lord, Lord Donaldson (and I am sure he has studied this question much more carefully than I have done), spoke a great deal about the efficiency factor, but I find it difficult to see how, if the farmers' income is so much less now, in terms of real purchasing power, than it was four years ago, and if you want the increase which is recommended by the E.E.C., this present figure of £34 million can be anything like adequate. Let me remind your Lordships of the figures proposed by the E.D.C. They said it was perfectly feasible that agricultural production could be increased by £345 million in the next five years in order to achieve that. They gave a figure of £230 million of new fixed capital, combined with a further figure of £110 million of working capital each year, carried on from one year to another. The Govern- 170 ment, in accepting these figures, reduced the target of import saving, which the E.D.C. had put at £220 million, to £160 million, but that was after only four years, whereas the E.D.C. had put it at £220 million after five years.
I think one must consider not only the fact that the net incomes of farmers are now lower but also the fact that overdraft interest is so much higher. The noble Viscount, Lord Monckton, gave us a very good example, and there are many others who could quote examples with great feeling. Our overdrafts have gone up, and the interest has gone up in Scotland to 10 per cent. I asked the noble Lord, Lord Beswick, in a Parliamentary Question a few weeks ago if this overdraft increase had been taken account of in the new Price Review determination. He said it had been taken account of, and he said to-day in the debate that all the implications of the Government's acceptance of the E.D.C. Report had been taken account of. I must say I should like to see what the Review would have been like if these things had not been taken account of, if there had been no proposal for increasing agricultural output and, as the Select Committee recommended, not only keeping pace with foreign imports but cutting into them and saving all this foreign currency.
I do not see how that could have been done, and I think that is why Lord Donaldson said the farmers were bitter. But I do not think the statement of the President of the Scottish National Farmers' Union, although it was forthright, contained any bitterness. What he said was this:The effects of this decision will be resented in the industry. The public must realise that on this basis the farming industry cannot develop its full potential. We cannot go all out for production with these prices. They do not ensure the level of earnings necessary to command the additional capital we must have. We cannot make the drastic contribution to import saving of which the industry is capable.And there, he said, is the real tragedy of this Review. I do not think you could have a better summary—and it is quite a sober summary—than this, of the reasons why we regret this Review.
It is not a question of generosity. The noble Lord, Lord Beswick, said that the Award was reasonably generous, but I 171 do not think it is a question of whether it is generous or ungenerous. It is a question of whether it is adequate to fulfil the policy aims of the Government, because we do not give farmers guaranteed prices from public money out of motives of compassion; we give it to them in order to achieve value for the country—a definite object of public policy. It is that which I think we have not succeeded in doing. We have not succeeded in fulfilling the expectations of expansion and import saving which were raised last autumn; and that is the reason why my noble friend has put down this Motion to-day.
§ 8.15 p.m.
§ LORD HUGHES
My Lords, I have listened with more than usually keen interest to this debate; in fact, I have found it a delight, and my only regret was that in order to attempt to prepare a reasonable reply which could be brought into something less than 30 minutes I should have to retire from the Chamber for a short while and miss some of the speeches. However, my noble friend Lord Beswick was taking copious notes, so I am aware of the substance of what was said while I was away. As the noble Earl, Lord Dundee, has just demonstrated, not all that was said during the debate was directly related to the Price Review, and indeed some very cogent points have been made about some of the peripheral difficulties which beset farmers to-day.
The noble Lord, Lord Congleton, whose maiden speech was enjoyed so much by all of us and who must now be feeling rather embarrassed at the number of complimentary references he has received, spoke of the fear that the lure of cereal deficiency payments would seduce farmers from the rules of good husbandry. That is indeed a point, though nature of course is quick to protest if she is mishandled. My noble friend Lord Raglan took us into his confidence and told us of the difficulties of resisting the attractions of new machinery, although it was interesting to hear that the noble Lord, Lord Allerton, after complaining about how high the prices were, then went on to say how he succumbed to the attractions of buying new machinery and, notwithstanding its apparently high price, how profitable he found it to do so. It 172 would indeed be surprising in a debate of this kind in your Lordships' House on the subject of agriculture if we did not have some valuable insights into the everyday problems, because it cannot possibly be gainsaid, no matter what impressions there may be in another place about the value of your Lordships' House, that in this House we have a considerable body of experience in agriculture.
However, to come back to the Price Review, my noble friend Lord Walston would have had the whole Price Review system brought to an end. As we are accustomed to have from him, we had a well-thought-out speech. But, tempted as I am to go along with him and have a quinquennial Review, with the joy of having the farmers complimenting us once in five years on an exceptionally good Review or berating us only once in five years for an exceptionally poor Review, it is a temptation which must be resisted, and must have been resisted only with the greatest difficulty by many Minister: of Agriculture. I should have liked to rush in to welcome it and commend it to my right honourable friend, but I am afraid I was brought back to the realms of reality by the noble Lord, Lord Woolley, who said he also would like it but would have to reject it as impracticable. It may be that twenty years from now we shall discover that what was impossible in 1969 becomes inevitable in 1989, provided we have not had import levies thrust on us in the interval. I suggest that the present system, as Lord Woolley said, serves us well. Perhaps the discussions are protracted; perhaps it is inevitable that they should be; but I do not think they are unduly so in relation to their importance to the economy of the country and the wellbeing of the industry.
However, let us look at this year's Review and the Government's determination. I must say I was rather surprised to hear the noble Earl, Lord Dundee, say that he had heard most of the speeches. Perhaps he said he had been present during most of the speeches—I must look at the Record. If he said he was present I can understand the comment he made, but if he said he had heard most of the speeches and that until the noble Lord, Lord Donaldson, had spoken no one had come to the aid of the Government, I really am astounded. If the Government's 173 position on the Price Review had to rest on a completely objective consideration made in the content of one speech, I should be quite happy to let it rest on what the noble Lord, Lord Woolley, said. I have never claimed, and I hope that my colleagues have never claimed, that everything that was done in every field during the "13 wasted years" was a total waste. After all, to accomplish that would require a degree of genius which not even noble Lords opposite have claimed for their Governments.
On the same basis, I have never suggested that everything which has been done by the present Government was 100 per cent. correct. I do not suggest that if we looked at this Review three or four years from now, we should then say, "With the knowledge that we now have we would have done exactly the same thing in 1969". But when one has a speech such as that which came from the noble Lord, Lord Woolley—not praising the Government all along the line, not condemning the Government all along the line, but taking a sort of middle view—I must say that I personally, as a member of the Government, am reasonably content with Lord Woolley's verdict on this year's Review.
What did we do? The noble Lord, Lord Nugent's Motion is:To call attention to the limitation which the 1969 Agricultural Price Review places on the Government's expansion programme for home food producton.In the debate which we have had, we have had little criticism of what the Government are doing in the fields where they are seeking to expand production. The criticism has been that we are not seeking the expansion in other fields; that we are not seeking to expand, for instance, in milk. No one, however, has dared to suggest that it is wrong that we are not seeking to expand in eggs.
I think that if we look at the Government's objectives as stated by the Minister of Agriculture last November, the Government have not held back on their programme. More meat and more cereals—these are the objectives, and I do not think anyone has denied that the determinations in this Review will help farmers to attain them. The disappointment among farmers centres largely on the neutral award on milk. But I suggest that it does not make sense to boost 174 milk production when the inevitable result must be the lowering of returns to farmers.
A good deal has been said about the alleged falling away in confidence. Of course, whatever the facts of the situation, it is always possible to talk down confidence. Let us look at the facts. Do they not give substantial grounds for confidence in expanding production in the commodities highlighted by the selective expansion programme? Several noble Lords, including the noble Lord, Lord Crawshaw, said, "Let us treat agriculture more seriously, and not as something to fall back on in times such as war". In the past five years, after allowing for cost changes and the agreed calculation of increased efficiency, a total of £105 million has been added to farming income. In the previous five years, 1960–1964, the sum added was £62 million. That is the measure of this Government's belief in agriculture and their determination that it should play its full part. Presumably during the years 1960 to 1964 the previous Government thought that they were expressing their confidence in agriculture and the part which it could play in the economy of the country; and if they did so by injecting £62 million into the industry over that period, they can hardly complain that, even with the decline in the value of money, this Government are falling behind in contributing some 40 per cent. more during a similar period.
The noble Lord, Lord Rennell, had a number of interesting things to say on the subject of sheep and wool. He is not in the Chamber, but he may look at the OFFICIAL REPORT to-morrow to see whether he is in fact going to get a special, extra Review on the subject of wool and find that he can sell his wool at 7s. 6d. per lb. I am afraid that I must disappoint him. The Wool Marketing Board are the judges of these matters, and the Government are content to leave them to be so. But I must point out that the quantity of British wool is a small part of world production, and if the Government were to ignore international prices we should be involved in a subsidy, in a mounting deficit, which no Government could possibly face.
If I may take the subject of sheep—I must make it clear to noble Lords 175 that I have never posed as an agricultural expert; in fact, I have never posed as an agricultural anything—I must say that I was rather astounded at the idea that a sheep which had previously discarded 10 lb. of fine quality wool turned up as a 60 lb. carcase. I wondered just exactly what Lord Rennell was crossing his ewes with; it sounded as if there were a hairy mammoth about the place at some time or another. Anyway, he did not think that the 1½d. per lb. was good enough. He compared it to the headed payments for hill sheep.
I cannot accept the argument that it would be reasonable to put the whole thing on the end product because, after all, the value, particularly to Scottish hill farmers, is in having the sheep on the hills and in getting the head payment. Then the farmer knows where he is. But if it all went on to the end product he would be at the mercy of the other farmer to whom he sold his sheep when they came off the hill, the hill farmer getting just exactly what he could extract. I think the hill farmer probably feels that he does much better under the present system, and I greatly doubt whether he would wish to make a change. I have no doubt that he would wish to get a lot more per head, but that is a different question. Incidentally, on the subject of whether or not it is reasonable, on any precedent the 1½d. per lb. estimated dressed carcase weight is by no means negligible. Indeed, on precedent, if I do not offend the noble Earl, Lord Dundee, I would say that it is a generous award. It brings the amount to a total of 5¾d. per lb. awarded between 1965 and 1969; and while I do not want to make too many comparisons, it is worth making the political point that between 1960 and 1964 the guarantee was reduced by 1½d. per lb. So whereas it is plus 5¾d., previously it was minus 1½d., and I think the sheep farmer can decide where his interests best lie.
I have spoken on the milk point. I was greatly interested in what the noble Lord, Lord Balerno, had to say about pigs. With his long connection with P.I.D.A. I thought he was going to blind me completely with science, and he jolly nearly did. Unfortunately for the noble Lord, Lord Balerno, somebody had 176 handed me a copy of today's Financial Times, and I think I would rest content on a flank attack on him from that point of view, by reading this. I think the heading is fairly readable from the other side of the House. It says:After the Price Review. Pig Farmers all planning one thing—to double up.Perhaps I may read a little from the beginning of the report. This is talking about the Minister of Agriculture and about getting an expansion in the pigs' side.He has no need to worry, at least as far as the Eastern side of the country is concerned. I have spoken to many dozens of the East Anglian pig keepers in the past few months, most of them already with sizeable herds, and almost without exception they are all planning the same thing—to double up.The article finishes up with the prediction:Eventually we shall be faced with over production and governmental embarrassment of a similar nature and magnitude to that in the egg industry and the parallels between poultry and pigs will be complete.There is an awful lot between these two points. Before the noble Lord, Lord Balerno jumps up—and I will give way—I would point out that probably the truth lies somewhere in between. The picture will not be nearly as black as the noble Lord, Lord Balerno has painted. I suggest that it will not turn out to be a mirage, and I am pretty certain that we have not done so much that we shall necessarily reach the position which the last paragraph of this article suggests.
§ LORD BALERNO
My Lords, if I may intervene, I suggest that the noble Lord, Lord Hughes, should pay a little more attention to the Press of his own country and less to the London-based articles in the London papers. If he had studied the agricultural Press, or the Glasgow Herald, or the Scotsman, he would have been well aware of the grave discontent amongst the pig breeders in Scotland at the Price Review.
§ LORD HUGHES
My Lords, the noble Lord will forgive me if I remind him that I am replying to a debate on a Price Review for the United Kingdom. I am not going to be tempted to make this a reply to a Scottish debate, because inevitably if I did so I should be obliged to point out that in this particular Review Scottish farmers are doing relatively better than farmers South of the Border, because of the nature of the items on 177 which the selective expansion programme is based. But I do not want to do so because I do not want Lord Woolley's friends next year to be seeking to redress the balance by getting more out of it than their natural merits entitle them to. Just let us leave it that Scotland is perhaps doing as well out of this Review as the English are; and that on the subject of pigs in the Award we must work on a United Kingdom basis, and I would rather not single out Scotland as being typical of the whole of the United Kingdom any more than I would accept—as my remarks have made clear—that a particular part of the East of England is necessarily typical of the United Kingdom.
§ LORD BALERNO
My Lords, will the noble Lord excuse me again? What I was criticising him for was being selective on a London-based newspaper. I think that the North of England newspapers and the Welsh papers would also reveal that there is considerable discontent among pig producers at this Price Review.
§ LORD HUGHES
My Lords, I do not want to spend too much time on this aspect. I did not accept the argument other than, as I say, a flanking attack on the noble Lord, Lord Balerno, and I finished by saying I thought the truth would lie somewhere between his pessimism and the other way round pessimism of this article.
The noble Lord, Lord Raglan, introduced a rather unusual note on the subject of the over-permanency of farm buildings. I must say that I had two years' direct connection with the Department of Agriculture for Scotland, and I did experience from time to time that Department's querying the over-elaborate suggestions which sometimes came from farmers—although sometimes it was the other way round, when they suggested that what was being put up was not of a sufficiently stable nature. I have no doubt that the same position applies on this side of the Border, but I feel that it is a point which is worth looking at. It may well be that the Ministry and the Department tend to set too high a standard, and that this results in an over-investment of public money in grants for these buildings. It is a point which I 178 should like to ask my right honourable friends to study.
The noble Lord, Lord Henley, and a number of other noble Lords, drew attention to the Chancellor's statement yesterday on the subject of overdraft interest and its removal from tax concession. The answer, so far as farming overdrafts is concerned, is that they will continue as they are. They will be the subject of tax concession, in so far as overdrafts are required for the business of running the farm. So there is no cause for any concern among farmers on that point. But he went on to talk about the subject of capital formation. It may be that his figure of 70 per cent. is right—it may be wrong: I do not know. But I am prepared to accept that the 70 per cent. which he suggests is locked up in land and buildings is correct. What I do not accept is what he goes on to say: that in these circumstances there was not enough available for fixed capital formation. The figures which are available to me show that in 1962 the figure was £152 million. It went up year by year until in 1965 it was £171 million. In 1966, it was down slightly, at £170 million. In 1967 it was £183 million, and the provisional figure for 1968 is £210 million. These are all at current prices, so that the trend is in fact strongly upwards; and even if we allow for the fact that we have to make deductions because current prices are higher than they were before, there is still a rising formation of fixed capital going into the industry.
My noble friend Lord Walstor congratulated the Government on the farm structure scheme, and went on to make some interesting suggestions about marrying up the interest of the city dweller with the need to conserve marginal farms perhaps to an extent beyond their real economic value. I would remind my noble friend that the Government have this purpose in mind. This is one of the tasks which would fall to Rural Development Boards, and although they are having some difficulty in getting off the ground I have no doubt that when these Boards are in fact working this is something to which they can well devote their attention in a worthwhile way.
My noble friend Lord Raglan said something which I particularly noted. He said, "If all farmers were as good as the 179 best we should not know what to do with the surplus produce". My Lords, the criticism of the Review—not only of this Review but of almost any Review—has been based on the fact that of course not all farmers work at maximum efficiency. But if we went to the other extreme and made the Awards on the basis of what would give a fair return to the farmer at the lowest end of efficiency, then I venture to suggest that the parallel to my noble friend's remarks would be that the efficient farmer would not know what to do with the surplus income he had because he had been grossly overpaid. Obviously, therefore, any system which must in fairness ignore the most efficient and the least efficient and be based on a fairly broad band in the middle ranges of efficiency will be less than generous to those who, because of their size or their ability, are not able to get the same results as the very big or the very efficient.
I said I should be almost content to rest the Government's case on what the noble Lord, Lord Woolley, said. He said that the Government would be entitled to view the 1969 determination as better than many in the last twenty years. I was surprised at what the noble Earl, Lord Dundee, said about it and I noted it down at the time. When he came to the remarks of the noble Lord, Lord Woolley, about a levy system we had a masterpiece of understatement from the noble Earl, because he summed up the remarks of Lord Woolley as, "Lord Woolley took a rather less favourable view". One could possibly put it that way, but it certainly was not overstressing the situation. But this was the only matter on which the noble Lord, Lord Woolley, "went to town" in expressing his disagreement with a levy system in place of the present system.
He said that the prices and incomes policy was something which the farmers have lived with for many years; it was not just something that started in 1966. On the whole, he thought it was a good thing that they should have had to live with it, but on balance he thought that perhaps the reins were being held too tightly. I do not think I could have a better summary of the Price Review than what Lord Woolley then said. He said he thought the Government had made an error of judgment. It was not a big one, 180 but he thought they had erred on the side of doing just too little. Then he said, "I do not think there was much in it."
I do not wish to put any additional words into the mouth of the noble Lord, Lord Woolley, but I suggest that if, instead of an award of £34 million net this year, the figure had been £64 million net, spokesmen for the farmers would then have got up and said, "I think the Government have made an error of judgment. They have put in a little too little." Whatever happens the farmers will always say, and believe, that it is either a lot too little or a little too little. It will never be exactly right and it will certainly never be too much. Therefore, in these circumstances, I think that to have the verdict that perhaps the reins are a little too tight, but there is not very much in it, is a fairly good verdict on our Price Review.
§ LORD WOOLLEY
My Lords, may I interrupt the noble Lord? I think he would also concede that there have been occasions when the farmers have agreed. Even though they have thought it was perhaps a little too little, they have nevertheless been able to agree. On this occasion they were not, and I am bound to say, as I tried to make clear in my speech, that I think they were entitled to take that view and it was a genuine reaction.
§ LORD HUGHES
My Lords, I should not wish to dissent from that. I think this Government have had their fair share of agreed Reviews, by comparison with their predecessors. What I am saying is that given the fact that the farmers did not agree with this Review, I would accept as a satisfactory verdict—at least it is equal to the Scottish verdict of "not proven"—that perhaps there is not a great deal in it.
On the selective expansion programme, the noble Lord, Lord Inglewood, quoted what had been said about our future needs, given the expansion of population which was likely by the end of the century. He said that if we were to take care of the whole of the increase we would need to expand our production by two-thirds from the present figures, and at that point he was quoting. There are 31 years left in this century, and if we have to expand by two-thirds by then, it 181 means—and I have checked my arithmetic—an average growth at simple rates of 2.15 per cent. per annum. The noble Lord was generous enough to discount last year as being a freak, because of the exceptionally bad conditions, but he then went on to compare it with the previous three years. But the previous three years produced a growth of 7 per cent.—an average of 2.4 per cent. I suggest that even if we allow for the falling out of agricultural use of land at the present high level, the 2.4 per cent. of the previous three years will accomplish the 2.15 per cent. which is needed until the end of the century. So the noble Lord can rest content that his grandchildren are most unlikely to starve at the end of the century, if the policies of the present Government continue.
My final point is again one raised by the noble Lord, Lord Woolley. When he spoke of the import levies he implored noble Lords on the opposite Benches to have another look at their policies for agriculture, before such time as they might be in danger of putting them into operation. I like those words, "in danger of putting them into operation." I hope that the fears of the noble Lord are never realised. Contrary to what the noble Earl, Lord Dundee, said, I think the Government have had a good day in this debate. We have not been condemned over the whole field. We have been criticised in particular directions, but generally, if we are not being found "not guilty" of the charge in the Motion of the noble Lord, Lord Nugent of Guildford, I think we are at least entitled to claim that we have the verdict of "not proven".
My Lords, before the noble Lord sits down, may I ask about reseeding to improve soil fertility? I mentioned it in my speech, but the noble Lord has not referred to it.
§ LORD HUGHES
My Lords, I had intended to refer to that point, because not only was I made aware of it to-day, but the noble Lord, Lord Nunburnholme, made me aware yesterday that he intended to raise this point. Undoubtedly he is correct about the advantages of having this reseeding done. He spoke about the value of the bean crop as a break crop, and suggested that this was another 182 method. But the Government submit that what is being done on the animal side gives the necessary incentive, because it provides the wherewithal for a programme of this kind. I hope the farmers will accept that in their own interests this is a desirable thing to do, and is a reasonable use of the assistance which is being given in relation to the selective expansion programme for beef.
§ LORD WOOLLEY
My Lords, may I ask the noble Lord whether he can say a word on the capital gains tax, which I think the noble Lord, Lord Allerton, raised. I certainly raised it.
§ LORD HUGHES
Yes, my Lords. The noble Lord, Lord Allerton, and the noble Lord, Lord Woolley, both raised this point. I am sorry, but I cannot give the answer to it. When I was out I attempted to find what the answer would be; but, as your Lordships will appreciate, this is not an agricultural matter, and we did not have any Treasury people available to advise us. It is, however, a point of importance. My normal reaction would be to suggest that I should write to the noble Lord to let him know what the answer is; but as there will be more than the two noble Lords who asked the question who will be interested in the answer, I would suggest that perhaps some time next week, or the week after, either the noble Lord, Lord Allerton, or the noble Lord, Lord Woolley, might put down a Starred Question for Answer, and then we can have the Answer on the Record of the House. Or, alternatively, they can put down a Question for Written Answer. But I think it is important that, the question having been asked, the answer should be on the Record in your Lordships' House.
§ 8.52 p.m.
§ LORD NUGENT OF GUILDFORD
My Lords, I must thank those noble Lords in all parts of the House who have contributed to-day to what I believe has been a most interesting and valuable debate—indeed, a debate of exceptional interest. I should like to add my congratulations to those expressed from all quarters to the noble Lord, Lord Congleton, on his maiden speech, which I thought was a speech of great authority. In concluding the debate, I should like to thank the noble Lord, Lord Beswick, 183 and the noble Lord, Lord Hughes, who have of course defended the Government's position with their customary skill and courtesy. I would especially congratulate Lord Hughes on the sparkling form with which he wound up the debate, with the minimum of material but nevertheless the maximum of conviction.
On the merits of the Review as a basis for expansion, clearly we must beg to differ. To us on this side it seems that the Government's emphasis is more on selection than on expansion. I can only hope that the noble Lord, Lord Hughes, will not have embarrassed Lord Woolley too much with his friends at Agriculture House, but he certainly made the most of it.
§ LORD NUGENT OF GUILDFORD
I think we are aware of that. The noble Lord, Lord Beswick, reminded us of the import controls already existing and others already promised, and thus it may be that he is moving by stealth along the road to a system of comprehensive import control, which I advocate. I hope that this may be so. I believe that this is the only policy which will provide the basis for the major expansion of home production which so many of us believe to be in the national interest.
On a small point of statistics, the noble Lord, Lord Beswick, gave us a figure of 3 per cent. as agriculture's percentage of the total G.N.P. I have always believed the figure to be 5 per cent. I have consulted the Annual Abstract of Statistics, and I still believe that this is so. Of course, it is a very much more striking achievement on 3 per cent. of the total labour force, and therefore, for what it is worth, I should like to put it on the Record now.
This debate has at least, I believe, made the point that a major expansion of home production has a unique benefit to offer towards rectifying our chronic balance-of-payments deficit, and the traditional Board of Trade policy is, at any rate in the judgment of this side of the House, no longer valid—and I think that noble Lords on the Benches opposite, too, agree. With this achieved, my 184 Lords, I must be content, and hope that in due course the logic of my argument will sink in. I beg leave to withdraw my Motion for Papers.
§ Motion for Papers, by leave, withdrawn.