§ 6.14 p.m.
§ LORD HILTON OF UPTON
My Lords, I beg to move that the Draft Bacon Curing Industry Stabilisation Scheme 1970, laid before the House on February 12, be approved. The scheme embodied in this Order will continue the present stabilisation arrangements in respect of bacon produced during a period of approximately three years from April 1 next. This is the maximum period that the Act allows. Bacon stabilisation arrangements began in December, 1966, and the present system of payments and levies was introduced in April, 1967. These were made under the authority of the Appropriation Acts; but a year ago a Scheme was approved by your Lordships which put the arrangements on a statutory basis by virtue of the provisions of Part V of the Agriculture (Miscellaneous Provisions) Act 1968. This Scheme applied only to bacon produced in the six months up to September 30, 1969. The Scheme was made for this short period in the first instance because the Government had asked the Industrial Reorganisation Corporation to carry out an investigation into the effectiveness of the stabilisation arrangements and of other possible forms of support.
541 We were perhaps a little optimistic in thinking it would be possible for the I.R.C. to complete its investigation— particularly since it was also asked to consider the structure of the industry— and for its recommendations to be considered by the Government in consultation with the industry, and for amendments to be made to the formula and to the Scheme itself, all within the space of six months. The noble Lord, Lord Nugent of Guildford, urged us at the time not to rush the I.R.C, and the Government were happy to take this advice. Last July, therefore, your Lord-ships approved a variation scheme extending the Scheme to apply to bacon produced up to March 31, 1970. How-ever, the I.R.C. have now presented their recommendations to the Minister of Agriculture, Fisheries and Food, and in the light of those recommendations he has, in concert with the Secretary of State for Scotland, put forward the Scheme that is now before your Lordships.
The report to the Minister was confidential, as is usual with I.R.C. reports, but your Lordships will wish to know that the Corporation came to two general conclusions as far as the Scheme was concerned: first, that the formula that had been used since the Scheme was first introduced should be continued un-changed, since it was as reasonably satisfactory a method as could be devised; and, secondly, that the figures used in the formula should be amended to take into account increased costs and some return on capital, and also that allowance should be made for a better conversion rate from pigmeat to bacon and a higher return to curers from the sale of offal. These various increases to some extent cancel each other out, but the net effect is that curers, on average, would receive something of the order of 6s. more per hundredweight. Since the Scheme does not include the actual figures of the various costs, which are, of course, not static, but only states the various elements from which the formula is built up, it was possible for the Government to introduce the changes proposed immediately, and this was done at the beginning of January. Of course, provision for these payments will be continued under the Scheme that is now before your Lordships, together with the corresponding provision for levies which will be payable by the industry when 542 the bacon price reaches a sufficiently high level.
We have made this Scheme for the longest period possible under the Act, and we think that this will provide a very considerable stimulus to the industry, together with the new determinations which have been made under the Bacon Market Sharing Understanding and the system of moderate control we have introduced in respect of the export of its raw material—pigs and pigmeat. Under the Government's expansion programme for agriculture, the objective for pigmeat is twofold. For pork, the broad objective is continued self-sufficiency, with home production meeting all the growth in demand. At the same time, it is the Government's policy to encourage an expansion in the supply of British bacon based on increased productivity and improved marketing. To a large extent, this must depend on the industry itself, but the Government will continue to pay full regard, in any future consideration of policy affecting the bacon industry, to the industry's needs to plan ahead in the fields of investment, development and research.
My Lords, this Scheme is a most important step in carrying out that policy. In essentials, the Scheme at present before your Lordships is on the lines of that approved by your Lordships last year. A few minor drafting amendments have been made, but the only significant change is that in paragraphs 8, 9 and 10 the wordsand any other considerations which appear to Ministers to be relevanthave been omitted, since they seemed to the Government to have been too general and at least to appear to leave too much discretion in the hands of Ministers. We have tried, therefore, in the new version of these paragraphs and in the definition of "bacon" to specify all the considerations that Ministers will take into account. Of course, no changes are being made in the basis of the calculation of payments. The Scheme will continue to be based on the present formula which applies each week a standard operating margin to the current cost of pigmeat and the sale price of bacon. I think that there can be no doubt that the stabilisation payments continue to be necessary and that it is right to put them now on 543 a more permanent basis. I have no hesitation therefore in commending this Scheme to your Lordships' approval. I beg to move.
§ Moved, That the Draft Bacon Curing Industry Stabilisation Scheme 1970, laid before the House on February 12, be approved.—(Lord Hilton of Upton.)
§ 6.21 p.m.
§ LORD BELSTEAD
My Lords, I am sure that your Lordships would like to thank the noble Lord, Lord Hilton of Upton, for his wide and thorough explanation of this Order. There is one small point that I should like to put to the noble Lord for elucidation and to which the Special Orders Committee directed attention. Article 2, in the second from the last line of the first page, lays down that the "carcase of a pig" does not include, among other things, any pig which is "emaciated". The noble Lord did not mention that this is new wording and it presumably turns entirely on the meaning of" emaciated". I wonder whether the noble Lord can tell the House who is to be the judge of this rather unattractive condition
Rather more broadly, in 1968 the Worth Committee Report on the bacon curing industry held that the support policy of the Government was the major influence on the profitability and viability of the industry. That part of the policy which is to be found in this Order, the balancing system of payments and levies, is outlined, as the noble Lord has told us, in paragraphs 8 and 9 of this Scheme. These payments are not simply subsidies; for in lean times they make savings in the guarantee payments, and when prices are high levies are required from the industry which in fact occurred last summer.
Secondly, may I ask the noble Lord whether he could tell us the cost of the scheme during the past year? The Government have a formula, to which the noble Lord referred, for computing these stabilisation payments from week to week. In 1968, the Worth Committee recommended an annual readjustment of this formula. The Government then asked the I.R.C. to examine the structure of the industry further. As a result of this, in January of this year the formula was modified to raise payments to some extent in the way which the noble Lord 544 described. But, presumably, the I.R.C.'s research was based on 1968 figures. So already it is to some extent out of date. Could the noble Lord give some evidence of profits in the industry and, if this is too wide a question, may I ask whether there is any proof that profits afford opportunities to curers to expand and to modernise?
May I refer for a moment to the noble Lord's fairly exhaustive description of the I.R.C. Report. For the first time this Scheme is to last for three years. A Press notice of December 29 last promised a full statement of Government policy in this field and covering the other aspects of the I.R.C. Report. The noble Lord, Lord Hilton, reminded us that it was for this reason that the previous Scheme was introduced twice last year for short periods of time pending the I.R.C. recommendations; and it was for this that a year ago my noble friend Lord Nugent, referring to this very matter, after paying tribute to some of the many admirable qualities of the industry, said:We must try to get this industry reconstituted on a really sound basis.The Government Press notice of December 29 went out of its way to promise a full statement on the I.R.C. Report when introducing this Scheme this afternoon; a statement which is expected in this House, will be expected in the House of Commons and is certainly expected by the industry itself which, so far as I know, has so far heard nothing despite what the noble Lord has told us about consultations with the industry.
I attempted to listen very carefully to what the noble Lord told us. So far as I can make out, this I.R.C. Report consists entirely of a recommendation to raise the formula, which has been done, and certain recommendations about how the industry can get better returns from other things apart from bacon curing. I may be wrong, in which case I apologise, but this has nothing to do with restructuring. To this extent the I.R.C. Report will be considered most unsatisfactory. Also, are we to understand that this Scheme will not be considered again for three years? When the basic Scheme was first introduced on April 12, 1967, the Minister undertook a review each year. Naturally, the industry welcomes any attempt to plan ahead; but the effect of this three-year duration on 545 a formula which can so quickly become outdated, on profit fluctuations, not to mention possible E.E.C. negotiations, needs further explanation.
The last point I would put to the noble Lord is this. Since last autumn, a strong home pork market and a sudden increase in export demand, mainly for Europe, drained our pig resources and put the curing industry at a considerable disadvantage. It is surprising that the Government did nothing to rectify this situation for five whole months until powers were assumed in February to license ex-ports of pig meat and pigs for slaughter —a step only just becoming effective. May 1 ask the noble Lord whether the Government will give an assurance that this situation will be watched with the greatest care and that if necessary similar action will be taken far more promptly in the future? These are some of the questions which I hope may be considered relevant to an Order which affects a most important industry.
§ 6.27 p.m.
§ LORD HILTON OF UPTON
My Lords, I am grateful to the noble Lord, Lord Belstead, for the general welcome he gave to this Scheme. I am especially grateful for his discussing the Scheme with me some time before it was called on here to-night, because it gave me the opportunity to take note of some of the points he has since raised and enabled me to try to get an answer to some of his questions from the Minister. I will do my best to give him the answers that I have and I hope he will regard them as satisfactory. I must say that I was a little surprised at his very first question, that on emaciated pigs, but I managed to get an answer for him. The various types of pigs listed in the definition of "carcase of a pig" are those which are ineligible for the purpose of the Fatstock Guarantee Scheme. Although it is true that emaciation must be to some extent a matter of opinion, certifying officers under that Scheme have been deciding this issue for a number of years, apparently with complete success. The point is that if a pig is so emaciated that it is not eligible for certification under the Fatstock Guarantee Scheme, then the bacon made from it is not eligible for payments under the Bacon Curing Industry Stabilisation Scheme.
546 The noble Lord was also interested in the cost of the Scheme during the past year. The cost of the Scheme in 1969–70 is estimated at about £6 million. The estimate for 1970–71 is £9.3 million. Then the noble Lord asked about profits within the industry. Profits within the industry vary very much with the efficiency of individual firms. There is no doubt that expansion and modernisation is going on, but it is invidious to pick out individual firms. I.R.C. found a good general level of efficiency, but the Scheme is primarily intended to assist in meeting costs rather than directly creating profits.
The noble Lord had a lot to say about the I.R.C. Reports. I think the best thing that I can do is to repeat part of the statement I made in my original speech. Referring to the I.R.C, I said that they have now presented their recommendations to the Minister of Agriculture, Fisheries and Food and in the light of these recommendations he has, in con-cert with the Secretary of State for Scotland, put forward the Scheme that is now before your Lordships. The Report to the Minister was confidential, but, as your Lordships will no doubt wish to know, the Corporation came to two general conclusions so far as the Scheme was concerned. First, that the formula used since the Scheme was first introduced should be continued unchanged, since it was as reasonably satisfactory a method as could be devised. Secondly, that the figures used in the formula should be amended to take into account increased costs and some return on capital and also that allowance should be made for a better conversion rate from pig meat to bacon and a higher return to curers from the sale of offal.
The noble Lord was interested in a review of the Scheme. As mentioned in the second part of my speech, the figures in the present formula are not included in the statutory Scheme and therefore can be changed at any time. The Government think that they are all right now, but it is proposed that the formula should be reviewed at regular intervals. No further Scheme will be laid before Parliament until the expiry of this one.
My Lords, I think that those are the main points put by the noble Lord, Lord Belstead. If I have not answered all the points he raised, I will get him 547 further information, but I think I have answered the questions he posed. I hope that your Lordships will give this Order the same welcome as has already been given to it by the noble Lord, Lord Belstead.
§ On Question, Motion agreed to.