§ 3.20 p.m.
§ The MINISTER of STATE, FOREIGN and COMMONWEALTH OFFICE (Lord Shepherd)
My Lords, in the absence of my noble friend Lord Beswick, I think that the best thing is not to move this Order for approval, and to proceed to the next business.
§ Lord HUGHES
My Lords, it might be for the convenience of the House if I were to move the approval of the Milk Order. This Order implements the Minister's decision that the powers to control milk prices under the Emergency Laws (Re-enactments and Repeals) Act 1964 should be renewed for a further five years from the end of 1969. The Order will be made by Her Majesty in Council, but a draft must first be approved by Affirmative Resolution of each House. This is merely continuing for a further five years the position which has existed for some time. I would doubt very much whether any noble Lord would wish at this stage to object to a continuation of the procedure which has proved so satisfactory over a number of years. I beg to move.
§ Lord BELSTEAD
My Lords, the House thanks the noble Lord, Lord Hughes, for getting on with the milking at such short notice. There is a point which my noble friend Lord Nugent, who unfortunately is unwell, has given notice to the noble Lord, Lord Beswick, that he would very much like to put. With the noble Lord's permission, perhaps I might be allowed briefly to explain the point which is troubling the noble Lord, Lord Nugent. On this side of the House, we accept the necessity for a continuation in the price control of milk. Apart from meat, if we lump meat together, milk is the largest individual component in the whole of the food price index, and I would suggest that control is also needed because the efficiency of the market has been achieved by wholesaling only through the Milk Marketing Board, and by retailing through a small group of large concerns.
The point which is troubling my noble friend is this. The main output of milk relies on the direct sale of liquid milk, 278 and the output for by-products (butter and cheese, for instance) claims less than half of the market. In September rising costs are going to force up milk prices by ½ d. a pint. During 1968-1969 there has been in fact a reduction in liquid milk consumption, partly because of the removal of free secondary school milk, and partly, possibly, because of the increase in the price of welfare milk. It is fair, I think, for us on this side of the House to be apprehensive of the effect of the September price increase on personal consumption, which is something which in fact has remained pretty steady. There is also every reason to believe that the trend of rising costs will continue, and this may well cause consumption to continue to fall. The problem is that the Government's expansion programme aims for an increase in beef production. This must mean more dairy cows for more beef calves, and a consequent increase in the national supply of milk.
May I therefore ask Her Majesty's Government whether the time has not come for the Minister to reconsider the milk price structure so as to give a bigger proportion of the market to the manufacturing and processing of milk? Presumably such a reconsideration would mean a review to include a thorough replanning of our imports of manufactured milk products. Unless this is done, it is to be feared, we think, that the Government's expansion programme may lead to the production of large, undisposable surpluses of milk. Costs and prices can only rise in this particular industry, where the small farmer is finding profit margins getting smaller and smaller. During the past 15 ye?rs the rise in the wholesale price of milk has been only 7 per cent., whereas the papers this morning, I think, show us that the rise in the cost of living in the past four years is over 21 per cent. May I ask the noble Lord whether the Government will reconsider the price structure for milk before possible further falls in consumption, and increases in production, result in unusable surpluses, which I am sure every one would regret?
§ 3.25 p.m.
§ Lord BESWICK
My Lords, I am very sorry to hear of the indisposition of the noble Lord, Lord Nugent, and I hope he is soon able to be with us again. I am sorry, too. that I was otherwise engaged when this Order came before the 279 House. I am grateful to my noble friend Lord Hughes for stepping into the breach, although he has an interest in this too, of course, from the Scottish point of view.
The problem that the noble Lord, Lord Belstead, put to us and which, as he rightly said, the noble Lord, Lord Nugent, had also mentioned to me, is a real one. I do not underestimate it at all. There is a difficulty in finding a solution. I think to some extent he over-exaggerates the inadequacy of the demand for liquid milk. It has not been falling; there is not a falling trend. There was a temporary reduction last year due to the fact that the free milk for secondary schools was discontinued. That meant a temporary drop in demand. So far as the per capita consumption is concerned, there has been a very slight rise.
The noble Lord speaks of the fact that the cost of milk has gone up so little over the past few years; and this is so. Dairy farming is undoubtedly one of the most efficient sectors of the whole of our economy. The housewife is really getting a bargain when she pays what she does for her milk. If there were to be a further increase yielding a bigger return to the dairy farmer, the impact on the demand would, it is thought, be serious. We are therefore faced with this very real problem of how to stimulate demand and, at the same time, how to give a proper return to the dairy farmer, without reducing demand.
The one solution to which I find so many people coming rather readily is curtailment of importation of milk products. I wish it were possible to give the noble Lord an undertaking that there will be a further curtailment of the importation of milk products, but I cannot give him that assurance. As he knows, we have gone part of the way to meeting this proposal by getting a voluntary agreement. That has been very useful. I hope it will go some way to help in this matter. There is, however, a difficulty with all the international trade agreements, and with our need to export manufactured goods, which we cannot expect to do if we are going to reduce the importation of products of other countries. With these difficulties, I think the effort to get the voluntary agreements has gone about as far as it is possible to go. The problem, as I have 280 said, is a real one. It is understood by the Department concerned, and I can assure the noble Lord, Lord Belstead, and, through him, his noble friend, that if it is possible to do more, either to step up liquid milk consumption—and the Milk Marketing Board are doing a lot by their various publicity campaigns—or to secure by voluntary agreement a restriction on the importation of milk products, then that will be done.
§ Lord WALSTON
My Lords, may I ask my noble friend just one question? He mentioned the efforts that the Government have made to restrict the importation of certain processed milk products. Could he not ask his right honourable friend to look very urgently at the question of reducing the costs of the distribution of retail milk? We still use very much the same methods to-day as we used thirty years ago in distributing the milk. Naturally, it has been impossible, even with the most efficient operators of that industry, to cut down costs beyond a certain point. With the great extension of multiple stores, self-service shops, vending machines, et cetera, would it not be possible to press ahead with making retail milk available through self-service or vending machines at a price very much lower than it must of necessity cost when it has to be delivered on the doorstep every morning? I suggest that as a way of reducing the cost to the housewife without in any way interfering with profit margins, and thereby stimulating demands for liquid milk.
§ Lord BELSTEAD
My Lords, before the noble Lord replies again, may I thank him for his very full answer. We accept that the total output for consumption is rising slightly, but the worry on this side of the House is that the liquid consumption, which is the basis of the market, is estimated to be a falling quantity. As the noble Lord told the House, the voluntary agreement on processed imports is something which does not work too well. Therefore, although supporting the Order, we shall continue to worry.
§ Lord BESWICK
My Lords, if I may have permission to speak again, I accept the noble Lord's promise to keep on worrying, and I am sure that what is said from that side of the House, on this subject at any rate, will be constructive. On 281 the question of the distribution cost, I do not think there is the room for economy which my noble friend Lord Walston speaks about. As we know this matter was referred to the Prices and Incomes Board, who went into it with some care. It is not right to say that the retail distribution of milk is uneconomic or inefficient. On the contrary, it is highly efficient.
The proposal that, instead of delivering from door to door, the milk should be available, as it is on the Continent, in the shops, so that one has to go and fetch it, sounds attractive if one is thinking simply of distributive costs. But the unanimous view of all the people with whom I have discussed it is that, if the housewife had to go and collect it from the shop, the consumption of liquid milk would fall to a serious extent. The fact that it is placed on the doorstep is one of the best guarantees we have that the demand will be a stable one. As for sales through vending machines, this is something which has been encouraged. The trend is slightly upwards, but again it is not all that attractive to the housewife.
I disagree with the noble Lord when he suggests that nothing has been done to change the method of distribution in the streets. I should have thought that rationalisation in the retail milk distributive trade is one of the most efficient pieces of rationalisation that we have seen since the war. Instead of four or five milkmen coming up the street, there are now only two—one commercial firm and the local co-operative society. This seems to me to be as far as one can expect to take rationalisation. Nevertheless we must not be complacent about this. I take note of what my noble friend has said, and again assure the noble Lord, Lord Belstead, that although butter and cheese are already controlled, they form, after all, two-thirds of the milk products market. If more can be done by voluntary agreement with the other third, it will be done.
§ Lord RITCHIE-CALDER
My Lords, may I ask my noble friend whether he accepts the statement made by the noble Lord, Lord Belstead, that there is such a thing as unusable milk? It seems to me that the world is desperately short of protein and we are talking here 282 about whether we can sell through a mechanical cow, when in point of fact we should be thinking how we cat dispose of the surplus milk that we have.
§ Lord BESWICK
My Lords, if I may speak again, with permission, I do not disagree with what my noble friend says, but I think it would be extending the limits of this Order rather considerably if I were to go into the whole of that issue.
§ On Question, Motion agreed to.