HL Deb 22 June 1971 vol 320 cc807-32

3.56 p.m.

LORD DENHAM

My Lords, I beg to move, That the Price Stability of Imported Products (Specified Commodities) (Beef and Veal) Order 1971, a copy of which was laid before this House on May 19, be approved. It may be convenient to noble Lords if, with this scheme, we discussed also the related Orders; namely, the Price Stability of Imported Products (Specified Commodities) (Milk and Milk Products) Order 1971, and the Fatstock (Guarantee Payments) (Amendment) Order 1971. The Orders are related to changes in the basis of the system of agricultural support, and form part of the interim levy schemes which are due to come into operation at the beginning of July. I suggest that your Lordships will find it easier to take the Orders together rather than discuss them one after the other.

It is the Government's declared policy to reduce public expenditure generally. The annual cost to public funds with price support for agriculture has, in recent years, been running at about £130 million, though for 1971–72 the cost is estimated to rise to over £160 million. As part of the general objective, the Government consider it is essential to reduce and to limit this commitment of public funds. The Government also consider that it would be for the benefit of the agricultural industry if farmers obtained a greater proportion of their return from the market. This can be done only if farmers pay greater attention to the needs of the market, and also if reasonable protection is given to our market from low-priced imports. The interim levy schemes at present before your Lordships are a major step towards the Government's new policy for agricultural support, though it is, of course, the Government's intention to ensure that the changeover from the present system of deficiency payments to the new system based on levies will be a gradual one, whether or not we join the European Economic Community.

The schemes that we are at present introducing, including those for cereals and for mutton and lamb which we are not debating this afternoon, relate to nearly half the farm sales in this country and so are bound to be of considerable significance. The intention to make this change in the agricultural support system was announced in the gracious Speech at the beginning of this Session. In March, the Government were able to announce that they had secured agreement with our major overseas suppliers. after intensive negotiations, to introduce the interim import levy schemes for cereals, beef and veal, mutton and lamb and for milk products other than butter and cheese.

The Orders before the House provide the foundations for the interim levy schemes on beef and veal and milk products other than butter and cheese. The Orders for beef and veal and milk and milk products are made under Section 1 of the Agriculture and Horticulture Act 1964. The first step in the procedure is that Ministers must specify by Order the commodity to which minimum import price and levy arrangements are to be applied. Once such an Order is in operation Ministers can proceed to the making of two further Orders setting out, respectively, the levels of the minimum import prices for the specific commodities and the arrangements for the charging of levies for the purpose of maintaining those price levels. These two Orders specifying beef and veal and milk products now before the House were made on May 13 and came into force on May 20. The Order amending the Fatstock Guarantee Scheme is made under Sections 1 and 35(3) of the Agriculture Act 1957 and comes into effect on July 5. I will discuss this in more detail later.

I must first say something about the arrangements relating to imports of beef and veal. The necessary three Orders dealing with the levy arrangements for these products are made under Section 1 of the Agriculture and Horticulture Act 1964 and have been laid before the House. I have already mentioned what may be described as the "specifying" Order; the second Order prescribes weekly scales of minimum import prices for fat cattle and for various categories of beef and veal during the period July, 1971, to March, 1972. The third Order prescribes the method of determining and charging levies on fat cattle, beef and veal.

The Scheme will operate in the following way. There is no world market price for beef, but there is a reasonably constant relationship between the price of fat cattle in the United Kingdom and prices of imported beef in particular categories. It has, therefore, been decided to link the minimum import prices and levies for beef and veal to the average price of fat cattle in our own markets. It was announced on March 17 in your Lordships' House that for fat cattle in 1971–72 there would be an annual target indicator price of £10.35 per live cwt. From this figure, a scale of weekly minimum import prices for fat cattle has been worked out for the period July, 1971, to March, 1972, following the pattern of the seasonal scale under the Fatstock Guarantee Scheme. The minimum import price scales for the various categories of beef and veal have been derived from this scale for fat cattle by means of standard co-efficients which express existing price relationships.

The estimated average market price for fat cattle in the United Kingdom is calculated each week. If this price falls below the minimum import price of fat cattle for that week, levies will be chargeable on imports in the following week at a rate—for fat cattle—equal to the difference. The rates of levy for the various categories of imported beef and veal will be arrived at by applying the standard co-efficients to the average market prices of fat cattle and deducting the result from the appropriate minimum import price level. The levies will be variable from week to week so as to reflect quickly changes in market circumstances. The levies have been fixed at a comparatively low level compared with current market prices. The target indicator price figure of £10.35 per live cwt. compares with an average market price at the end of last month of £13. Thus the levy is unlikely to be operative in the immediate future but it will still have important effects. It will serve to put a floor in the market and by giving an assurance of price stability will increase farmers' confidence and encourage them to produce the beef we need.

The levies will not apply to imports from the Irish Republic, partly because the cattle industries of the United Kingdom and the Irish Republic are closely integrated and partly because of the arrangements made under the Anglo-Irish Free Trade Area Agreement; but the Government of the Irish Republic have agreed to take special measures of their own when our levies are in force on imports from third countries.

I should now turn to the Order amending the Fatstock Guarantee Scheme. Its purpose is to introduce the changes under the guarantee arrangements for cattle and sheep which were announced in the Annual Review White Paper published on March 17 this year. The Fatstock Guarantee Scheme is not easy to explain clearly and I do not wish to plunge your Lordships into a sea of technicalities. Basically, the change we are making is to introduce for fat cattle and fat sheep a system of target indicator prices to give farmers a positive financial incentive to better marketing which will operate in parallel with the levy arrangements. For fat cattle there will be the target indicator price that I have already mentioned, and for sheep a similar scale of weekly estimated prices. Normally the size of the deficiency payment for fat cattle will, as now, be the difference between the standard price under the guarantee system and the average market price, but if the average market price in any week falls below the target indicator price then the deficiency payment will be limited to the difference between the standard price and the target indicator price.

The system will be much the same for fat sheep, but with one added refinement. The reduction in the deficiency payment will not start until the average market price has fallen to 1½p a lb. below the estimated market price and it will be limited to a maximum of 1½p a lb. This slight difference between the provisions for fat cattle and fat sheep is basically required because of the different statutory powers which have been used to impose import controls on beef and veal and mutton and lamb respectively. The Order abolishes the scales of abatements and supplements for fat cattle and fat sheep as we are now looking to the market to provide the incentive to better marketing. It also provides for end-of-year residual payments to continue. These will differ from the present arrangement whereby any underpayment of the guarantee over the year is paid in full to producers. The new provision will reduce arty end-of-year payment by the amount by which the average market price is below the target indicator price for fat cattle or the estimated market price for fat sheep for the year as a whole.

Finally, the Order provides that for 1971–72 there may exceptionally be two residual payments. This is because the new arrangements are being introduced after the 1971–72 fatstock year has begun. The first payment would be for the period up to and including July 4. For this period, the present arrangements will continue to be applied. For the remainder of the fatstock year the new arrangements I have just referred to will be adopted for calculating any end-of-year payment. I hope that this explanation has made the position clear to your Lordships.

I now come to the arrangements for milk and milk products. The specifying Order is on similar lines to that for beef and veal. It sets out the milk products which may become the subject of levy arrangements and these arrangements will be introduced for some of them, notably cream, milk powders and condensed milk, on July 1. Steps will be taken to ensure that the price levels are not undermined by imports of certain related products—such as animal feedingstuffs containing a high proportion of milk products, and that is why these products are also specified in the Order. Butter and cheese are not included in this scheme as they are already subject to import regulation or voluntary restrictions on imports. We are in large measure self-sufficient in the supply of the specified products, but imports are still important. In all, about 40 per cent. of our milk—about 1,000 million gallons—goes into the manufacture of milk products, such as butter, cheese and condensed milk, and the rest goes for liquid milk consumption. The price which the Milk Marketing Boards received for each gallon of milk sold for manufacture into milk products has been, until recently, static or declining, and there is a very wide differential between the price of a gallon of milk sold for liquid consumption and the price of a gallon sold for manufacture. In fact, the differential has been widening over the years because a large volume of our imports of milk products in recent years has been sold below the cost of production. The system of minimum import prices, backed by levies, will help to strengthen our market and reduce the differential between the prices of milk for liquid consumption and for manufacture. The Scheme will bring about a better balance between the return for milk sold for liquid consumption and that sold for manufacturing purposes.

The likely effect of the Scheme on consumer prices is clearly a matter of importance. In this respect it is important to take account of changes in world markets for milk products which have taken place over the past year. The great butter surplus in Western Europe has gone and world market prices have risen sharply. Our current market prices reflect broadly the availability of specified products in world markets. For example, the domestic price of skimmed milk powder, one of the more important commodities covered by this scheme, is now freely established at about £160 a ton. This scheme will underpin that price by setting a minimum import price of £157 a ton. World prices have now moved more closely into line with the minimum import prices under the Scheme and world prices for milk products seem to be still rising. Thus the consumer of these products as a raw material is not going to be faced with any appreciable extra cost as a result of the Scheme. But the situation could change, and the Scheme will serve to insure the milk producer against a fall in market prices.

The Government have tried to keep the Scheme simple and to cover only the main areas of need. They are not going to set at present minimum import prices for such products as milk puddings or ice cream. But it seemed prudent to take powers to allow such products to he brought into the Scheme should the need arise. The levies under the Scheme will be determined on the basis of differences between the appropriate minimum import price and the lowest representative offering price of the product in the preceding period. The same rate of levy will normally be applied to all imports of the particular commodity. There will be certain exemptions from the levy for some specified commodities coming from certain countries, principally the Irish Republic. Under these special arrangements, however, the prices or quantities will be so regulated as to be consistent with the objectives of the Scheme.

My Lords, I have set out to explain the background and purport of the Orders before the House, and also to indicate how the Schemes will operate. I must apologise to your Lordships for taking a very long time in doing so, but as you will have gathered it is rather difficult to explain these Orders in a few words. For the reasons I have given, I believe that all these Schemes represent an important step in the development of a new support policy for agriculture. Taken together with the Cereals Scheme they will help to create firmer markets and thereby reduce the cost of agricultural support and give additional confidence to the agriculture industry. The effect on consumer prices will be small, and the changes we are making will clearly be to the advantage of the economy as a whole. I therefore invite your Lordships to approve these Orders. I beg to move the first Order.

Moved, That the Price Stability of Imported Products (Specified Commodities) (Beef and Veal) Order 1971, be approved.—(Lord Denham.)

4.10 p.m.

LORD HOY

My Lords, we are grateful to the noble Lord, Lord Denham, for explaining these Orders. He need not apologise for the time he has taken, for he was moving at such a speed at one time that I can only think that if he had been entered for the Derby he would have been the winner. I want to say to the noble Lord that, despite his explanation, we are no more better informed than we were. I do not say that critically; I have had to move Orders on occasions too numerous to mention, and I know that it is very difficult. But I am bound to say that I am certain no noble Lord will understand them as a result of what he has told us, and I hope to indicate to the noble Lord, Lord Denham, where our difficulties arise.

He said the first thing that had to be done was to reduce public expenditure. Then he said that that was really not the reason for introducing the Orders: the reason was that we have to stabilise prices. If we have to do these two things, the consumer has to pay more. That is exactly what it means. You cannot reduce public expenditure without the cost having to be carried by some other section of the community. So, if we reduce central Government expenditure, obviously the burden has to be carried by someone: and I say that it can be carried only by the consuming section of the community. So what it means is that increased prices have to come from the community and not from the market.

The noble Lord said that the levy will not be operated very quickly because the targets have been fixed so low. What he was saying was that the targets will be so much lower than the present market price that they will have no effect—certainly not on the producer. If this is the case, the exporter to this country can put up his price and keep it below the target price; and the consumer will pay extra for food without its having any effect on the producer in this country. That is the logic of the noble Lord's argument. What I could not understand was why, if target prices have been fixed so low they should be fixed at all. If they are to have no effect, why should we have them? I am certain that noble Lords will find difficulty in understanding-what it is all about. Your Lordships may look for a further explanation, and I say sincerely that I should be grateful if I could be told what it all means.

My Lords, if we take Statutory Instrument No. 801, which refers to guaranteed prices and assured markets and the Fat-stock (Guarantee Payments) (Amendment) Order 1971 we find that it is all laid down very legally. Then we have an Explanatory Note which says: The principal changes provide for— (a) weekly payments to be based on, for fat cattle, the difference between the standard price and the average market price or the target indicator price whichever is the higher, and, for fat sheep, the difference between the standard price and the average market price, such difference having been adjusted by reference to any amount by which the average price is lower than the estimated price.…. The noble Lord says that it is quite simple; I am sorry that he did not take a simple way of explaining what it meant. I do not think that any noble Lord could tell me what it means because none of them knows. If a Minister presents an Order of this kind—I appreciate that there are difficulties he ought to be able, before he asks us to approve it, to tell us what it means. If this were not bad enough, my Lords, the Explanatory Note goes on: (b) any residual payment to producers after the end of the fatstock year to be calculated with reference to any amount by which the average market price is for fat cattle, below the average target indicator price or, for fat sheep, below the average estimated price over the year as a whole; except that for the current fatstock year instead of a single end of year residual payment two residual payments may be made,"— I think that this was what the noble Lord was trying to get at when he spoke about two annual payments— one after the end of that part of the year ending with 4th July, 1971 and the other after the end of the year. Provision is made for these payments to be made for the former part of the year on the basis of the amount, if any, by which weekly payments fall short of the average standard price for that part of the year and for the remaining part of the year on the basis of that amount reduced by the amount, if any, by which the average target indicator price in the case of fat cattle or the average estimated price in the case of fat sheep exceeds the average market price. I cannot imagine any farmer in the country—I have had a very long association with them—being able to understand a word of this, and I think that it is incumbent upon the Minister to explain it.

I have already referred to what the Minister has said, that the prices indicated are all very much lower than those operating at the moment. The Minister explained that the powers in the Order are exercisable in the interests of maintaining a stable market for agricultural and horticultural produce of any description produced here. If the prices are to be fixed so low as to be below the present market prices, what does the Minister mean by "stability"? Does he mean —once more I ask him—that the exporter is to be allowed to send goods to this country at prices up to the present floor level, so that we shall be paying much more for our imports without getting anything in addition because of the price the Ministry has fixed? Even if we do that, what we are saying by these Orders is that we are not giving any more stability to our own producers than we do at this moment; in fact, we are giving less. Exactly the same argument applies in respect of milk products. We are seeking to protect the milk producers. At every Annual Price Review—if I may use the old currency terms—I remember it was always drilled into me that every time we gave a penny on a gallon of milk, we were providing an extra £9 million a year to the dairy section of the agricultural industry. But it seems to me that the figures in the Order are not going to give much protection, as they are concentrated on certain forms of milk, small things which will not have a considerable effect.

The Minister said this afternoon that these powers are exercisable in the interests of maintaining a stable market in the United Kingdom for agricultural and horticultural produce of any description produced here. But if that is the case, may I put this point to him. At this moment we are negotiating with our friends in Europe on a Common Market policy. If we reach agreement, what effect are these Orders going to have? Are they going to have any effect at all? When we enter into a European agreement, if we do, then we shall be bound by those agreements and so these Orders simply cannot apply—at least I would think that is so, but it would be interesting to have the Minister's thinking on the matter. if we do agree, it is foolish to say to our agricultural and horticultural industries that these Orders are giving them a stability that is denied to them at present.

I do not think that these Orders do anything at all to help price levels. The Minister may think differently. I shall be delighted if he can produce an argument to convince me that I am wrong; even then, he has to convince your Lordships that these figures will stand up if we are going to join the E.E.C. I do not think they can. What I am troubled about is that instead of giving stability to prices by passing these Orders, we may be doing nothing of the kind.

May I also say that it might not be a bad thing if the Minister took some time to explain these Orders. When I was at the Ministry, I found these things very difficult to understand because of the jargon—target prices, floor prices, level prices, minimum import prices and so on. I am not criticising the noble Lord but I am saying that the wording is extremely difficult to understand. All this jargon was not envisaged at the time of the 1964 Act, under which the Minister is producing these orders.

I believe that, without giving any more stability either to agriculture or horticulture, the result of these Orders will be an increase of prices to the consumer. The Minister has said that there will he a little increase. I do not want to misinterpret his words. He said that there will be a little increase in prices. He admits that; there is no dispute about that. I think that your Lordships' House and another place are getting a little tired of Government saying—and this is true of all Governments—whenever they want to put up prices, that it is only a "little" increase. I remember that when we wanted to put up the price of cigarettes, the Chancellor of the Exchequer of the day said that, "It is only a penny on the twenty." But what we paid a shilling for in 1945 we pay 5s. 6d. for to-day. These pennies continue to add up.

I would say to the Minister that if there is any Government which ought not to be introducing increases of price, it is the present Government. Whatever justification they may have for other things, this Government made it perfectly clear—as did the Prime Minister—that one thing they were going to do was to stabilise prices. I will not dwell on the" at a stroke "remark, because anybody who has been in politics for any length of time knows that that is not the way in which prices work. I was surprised that the Prime Minister should have used that phrase. But having given an assurance that they are going to restrain prices and then to bring before your Lordships' House legislation which the Minister says will increase prices, is (and I put it no higher) a contradiction of what was offered to the electorate.

That is not the strongest point in my argument. It is that these Orders will do nothing for agriculture. The noble Lord excused himself for taking a long time in introducing these Orders. If he takes only half as long to reply, speaks a little more slowly and explains what they mean, I am sure that every Member of your Lordships' House will be delighted.

4.35 p.m.

LORD ROYLE

My Lords, I should like to support my noble friend Lord Hoy in the speech that he has just made in protest against these Orders. Let me say to the noble Lord, Lord Denham, and to my noble friend that if I repeat some of the things my noble friend has said, it is because I want to emphasise, rather than repeat, what so much needs to be emphasised in this matter. The noble Lord, Lord Denham, said he hoped that he had made the Orders perfectly clear to us. Some of his speech was clear and some of it was not. One thing he never made clear at all was that the levies under these Orders must result in increased prices to the consumer. That is one thing that needs to be stressed all the time.

This first Order is only one of a series on similar lines for various commodities. I was glad when the noble Lord, in introducing the Orders, suggested that we should take these three together, because in my study of them I felt that the third of these Orders should have been the first, for the simple reason that all the other Orders are hinged on that Order, No. 801. It was because of the change of system that it was necessary for the Government to introduce the Orders and for that reason the third Order on the Order Paper is the paving Order for further legislation to come.

The noble Lord dashed along at tremendous speed. I tried very hard to get from him and from the Explanatory Note on the back of one of the Orders an understanding of the matter. In this I had an advantage over my noble friend Lord Hoy. I happen to be a member of the Special Orders Committee, and in the course of our deliberations on these Orders another explanation was made to us, which made them more clear—clearer than the noble Lord made them in his speech and clearer than the Explanatory Note on the back of the Order. Perhaps your Lordships will allow me to quote what the Special Orders Committee got in the way of an explanation, and in view of the fact that I speak much more slowly than the noble Lord does when reading, perhaps it will make clear to your Lordships precisely what the third of these Orders actually does. This amending Order, which is also procedural, provides for changes in the arrangements for making guarantee payments to producers. It provides for the determination for fat cattle of…weekly target indicator prices. and for the determination for sheep of estimated prices on a similar basis. The Order further provides that the rate of weekly payments to producers, in the case of fat cattle. shall be the difference between the standard price and either the average market price or the target indicator price whichever is the higher and, in the case of fat sheep, such weekly payments shall be adjusted by reference to any amount, if any, by which the average market price is lower than the estimated price. Finally. provision is made for the calculation of residual payments by the deduction from the guarantee price of the amount, if any, by which over the fatstock year as a whole, the average market price has, in the case of fat cattle, fallen below the average target indicator price and, in the case of fat sheep, fallen below the average estimated price. Your Lordships, having had the noble Lord's explanation, the Explanatory Memorandum on the back of the Orders, and my reading of this simple explanation from the Ministry of Agriculture. Fisheries and Food to the Special Orders Committee, can now go ahead and express yourselves at the end of our short debate by approving these Orders, in full satisfaction and knowing exactly what they are all about.

But the increases are not accidental: they are part and parcel of Government policy to make a different level of prices to the consumer. What they are doing is to shift the burden from the shoulders of the taxpayer to the shoulders of the consumer—and we all know that they are not the same people. It is the poorer consumer who will be suffering, and this is Government policy at the present time. I wonder whether the Government have another idea in mind. With the nearness, as it seems to me, of our entry into the E.E.C., I wonder whether the Government want to put themselves into the position of being able to say to the people of this country:" Ah, well, the difference between their prices on the Continent and our prices is not so great." In order to be able to say that, they are gradually pushing up our prices, particularly in relation to matters of food, to put them on a level with Continental prices.

The increases, as I say, are not accidental and, in contradiction of what the Prime Minister is constantly saying. they are not due to wage claims. Between June 16 of last year and June 16 of this year (I use these two short illustrations because they are the subject of one of these Orders) rump steak went up by 30 per cent., and boned, rolled sirloin of beef went up by 19 per cent. Can the noble Lord tell us which wage claims were responsible for those increases? I know something about the meat trade, but I have no recollection of any 30 per cent. increase in that year to people employed in the meat trade; and I am sure that there was no 30 per cent. increase in the profits which retail butchers made over that same year. I cannot for the life of me see how the wage claim argument comes into it. But the present Minister of Agriculture let the cat out of the bag about the promises, did he not? He said that he did not think housewives had taken the Prime Minister's promises seriously, and, in effect, that he knew we could not do it. In passing, let me say that I often look at the title of that Ministry—the Ministry of Agriculture, Fisheries and Food—and I feel that successive Ministers (I say this in regard to our side, as well as the other side) seem to have their concentration on agriculture and very little on food as it affects the consumer. There are other things. The levy is intended to handicap competition in order to force up the price of the home product—that is what the Government are after—and to avoid payment of subsidies without demanding that there should be efficiency in production. They are dodging the column in that way all the time.

My other point is this. This method that is now being adopted by the Government as an alternative to past methods cannot possibly close the vast gap that exists at this moment between current production and current consumption. I agree that to-day compared to the figures which we knew in the days before the Second World War, there is a much greater production of beef and lamb in this country. But the gap is still a big one. In the case of beef, the gap between consumption and production, home production is 30 per cent., and in the case of lamb 55 per cent. This shows how much we rely on New Zealand, particularly with regard to supplies of lamb. And we are going to put up that barrier by one of these Orders—not the Orders that we are discussing this afternoon, but one that will reach us later. In spite of increasing wholesale prices, home production has been decreasing, particularly over the last year. Surely, my Lords, this gives the lie to the Government's theory of expansion and of production by way of higher prices.

I would recommend your Lordships to look at an article in this morning's Financial Times on the whole question of meat production and distribution. Among other things, the writer of the article says that the levies which we are now discussing will prevent the housewife from taking advantage of what should be reduced prices from July to Christmas. I should like to enlarge on that point, from my knowledge of the trade—and this is known to noble Lords who are in agriculture. At this time of the year, from, say, February-March to the middle of July, prices are pretty high: the market is good for the agriculturist; there is a short supply. In the case of beef, the cattle have not had the full advantages of being turned out on to the pastures. By the time we get to September, October and November, when they have been fattened in that way, on grass rather than indoors, there is a better supply and, as a result, prices fall. This is the time when the butcher is able to pass on to the consumer something in the way of reduction of prices. The Financial Times argues—and I agree—that if these Orders are put into operation, and particularly the one in relation to beef and veal, it will mean that there will be no reduction in the price when that period comes. I regard this as a serious matter. It has always been a question of ups and downs in the supply of cattle and sheep in this country; and prices have varied according to the prices obtained by the farmer at a particular time and in accordance with the number of animals available. This time the price will just stay up. because these levies will create a level, and therefore protect the farmer and the agriculturist, but push it into the consumer very hard indeed. Therefore I have no choice but to support my noble friend in his arguments. If I have repeated some of the things he said, I am sorry; but, as I have said, I regard this as a very serious matter in the interests of the consumer.

4.40 p.m.

LORD BALERNO

My Lords, with his extensive knowledge of the meat trade. I have great hesitation in crossing swords in any way with the noble Lord who has just spoken, although I have done so occasionally in the east on the Agriculture Act. The noble Lord spoke of the price of luxury cuts of beef rising by 30 per cent. in one year. The correct way to look at this question is not to take the rise in the price of luxury cuts in one year but their percentage rise in a number of years —that is to say, you must compare the price rise of beef with the rise in wages, which is fundamentally the basis of the rise in the price of meat. If you take the rise in wages over a reasonable period and the rise in meat prices over the same period, you will find a definite correlation.

In dealing with this subject of the price to the consumer, whether it be the price of milk or meat, one must remember that our prices are still substantially below the world prices, and particularly below the Common Market prices. Therefore, we must not be altogether upset in this country. How can we expect, with the galloping inflation that now besets this country, food prices to remain steady? Is the farmer not to get the same compensation as other people because of the general inflation in the country? Is he to be denied that right? The argument from the other side of the House would indicate that perhaps he is to be denied the right, consequent upon the inflation which is taking place.

The noble Lord, Lord Hoy, questioned the value of the policy of the Government in relation to entry into the E.E.C. Of course, there is to be an interim period of about five years if we go into the E.E.C., and there is to be some measure of arrangement and adjustment before that takes place. I would congratulate the Government on their perspicacity in this matter. They are looking forward to this as a possibility and making arrangements which will make the transition very much easier, both for the farmer and for the housewife, than would otherwise be the case.

The noble Lord, Lord Hoy, also questioned the timing. I can think of nothing better than the present timing, when world prices are coming fairly close to the minimum prices put forward under these Orders. Some play was made of the complicated nature of these Orders. I would submit that there is nothing easier in life than to take any Government Order made between 1900 and 1971, to examine it closely, to quote sentences from it and to ridicule it. Any Government Order produced during this period, and not least Government Orders during the last 10 or 15 years by any Government, could equally well be pulled to pieces. The noble Lord, Lord Hoy, in another place, as junior Minister for Agriculture, has perpetrated many such Orders which those of us who were then in Opposition could equally well have pulled to pieces. I have always known that the noble Lord was a most ingenious man, and he has proved it once again to-day.

LORD HOY

My Lords, may I ask the noble Lord to give me one example of the Orders to which he refers?

LORD BALERNO: The livestock Orders, the fatstock Orders.

LORD HOY

My Lords, I should like to ask the noble Lord whether he is going to produce them.

VISCOUNT STONEHAVEN

My Lords, there are one or two things which I find completely unable to understand in the Order as read out, but this is quite normal. There is nothing unusual in that, but I should like to take up one or two things which fell from the lips of my noble friend I may not call him that, but I still will do so—Lord Royle, which I think are not perhaps absolutely accurate. The first thing is that there is a very heavy tax on petrol, cigarettes, beer and so on—indirect taxation. So to say that the consumer is not the taxpayer is not quite correct. It is very easy to lose sight of that and say that the taxpayer is a person who, like ourselves, pays income tax, surtax and so on. But tax is paid by people who smoke and those who must have a motorbike or who indulge in the normal things in which we all indulge. I also disagree about the price of food in the shops, because it is not easy to know how the price is made up. The point is that money has been paid by way of taxation to enable the subsidies to be paid. If we really knew the price we pay for food it might be possible to make comparisons; but we do not know.

The noble Lord also mentioned th.2, rise in meat prices. I would point out that agricultural workers, very justly, have recently had three substantial rises in wages. In addition, there have been rises in the wages paid to transport drivers, railway workers, mechanics and so on, which all affect the farmer's costs. It is cumulative and does not consist of only the 15 per cent. or so which has recently been paid to farmworkers. The fact is that the farmer has to recoup himself somehow. As I understood the noble Lord—I may be quite wrong and I can see no relationship in what was read out, as I frankly admit—I thought that levies on imported food were to be paid by the countries who were dumping their food here and that the money was to be used to reduce, if you like, the duty on cigarettes. It depends on what the Government do, but the money will be available for that purpose. Therefore. I think that the argument that this is an effort to raise prices sky high goes by the board. There is an argument on the other side. When we talk about target prices, thresholds, and so on, I have not the foggiest idea what is meant.

LORD ROYLE

My Lords, before the noble Viscount sits down, as he has referred to certain comments of mine, would he allow me to emphasise this point? I agree that the farmer, if faced with increased costs, must be recouped, but the Government are saying that he must be recouped at the expense of the housewife. That is the objection.

VISCOUNT STONEHAVEN

My Lords, I am not quite sure that that is true, because the Government are saying that the farmer should be recouped. Where is he to be recouped from? I believe that the farmer at this moment is being recouped by the housewife, because many of them smoke and many of them enjoy a pint of beer—my wife does not smoke but she likes a pint of beer. The cost of public transport and petrol has gone up because wages have gone up. The thing is cumulative, and therefore I do not agree with my noble friend.

LORD NUNBURNHOLME

My Lords, I will not detain your Lordships for very long, but I should like to point out two things. The first is that last year I believe we paid £130 million subsidy to the farmers. In future, that subsidy is going; and not only is the subsidy going, but the Government are £130 million better off. They also have a levy on imported foods which will come to about the same amount. Therefore the Government are getting on the band-wagon for about £250 million. I do not think the farmer is going to be any better off at all. To me, speaking as a beef and sheep fattener, there seems to be no guarantee that in future prices will be maintained. I should like to know what the answer is. I feel that the distributive trades get about half the money on agricultural produce, and I should like to see the distributive trades taxed a little more and the benefit passed on to the agricultural producer or fatstock fattener.

LORD BALERNO

My Lords, before the noble Lord sits down, may I ask him whether he is advocating the value added tax?

LORD NUNBURNHOLME

My Lords, I am not in favour of the value added tax. I am dead against the housewife having to pay any more than she did in the past for her food.

LORD BURTON

My Lords, I agree with my noble friend Lord Stonehaven about how complicated these Orders arc, and I have sympathy with noble Lords opposite. But I have even more sympathy with my noble friend on the Front Bench who has to interpret these incomprehensible Orders. However, I hope that the Orders will stop the ridiculous situation in which at the moment we are importing cheap Australian beef which is going into game soup and markedly reducing the price of venison. This reduction in the price of venison is having a serious effect on the economy of the Highlands.

LORD WISE

My Lords, I should like to speak in support of my noble friend Lord Nunburnholme. I do not profess to understand the meat retail trade as much as my noble friend Lord Royle, although it is a fact that to-day the producers' prices in the market are falling. I think they are averaging something a little under 20p per lb. less carcase weight, whereas the retail prices paid by the consumers are something in the region of 40p per lb., taking the good cuts and the bad. It is obvious that consumer prices will rise; the Government have agreed that they will do so. if that is the case, I wonder whether steps can he taken to ensure that the producers' prices will be increased and will be in a fair and accurate relation to the consumer prices. As stock comes on to the market, producers' prices must inevitably fall. Will that fall be carried on to the housewife?

4.54 p.m.

LORD DENHAM

My Lords, I am extremely sorry that my previous speech, which I regarded as rather overlong, was not quite long enough to explain to your Lordships the difficulties and intricacies of the Fatstock Amendment. One of the chief difficulties which the farmer will not have to face, and which your Lordships have had to face, is that I have not been able to show you a diagram which, could I do so, would make the situation absolutely clear. It is very difficult to explain the subject in words. The noble Lord, Lord Hoy—or it may have been the noble Lord, Lord Royle—asked me to explain the jargon. There is nothing very difficult about the jargon. Your Lordships all know what is known by the "guaranteed price". Your Lordships probably know what is meant by the "average market price". The only new term that comes in—and it is one that has been used, even in the days of noble Lords opposite—is "target indicator price".

I will try, without the benefit of the diagram that I have mentioned, to make things a little easier, and will explain briefly how this new arrangement will operate. First of all, I will deal with fatstock and beef. At £2 a ton below the scale of weekly standard prices—that is, the guaranteed price—there is to be set a scale of target indicator prices. Market prices should not fall below these target indicator prices unless home and imported supplies are badly marketed. If the market price drops below the level of the target indicator price, this will, very broadly, have two effects. First, it will trigger off levies on imports, whether of fat cattle or beef, or veal, and these will continue until United Kingdom fat cattle prices rise above the level of the target indicator prices. Secondly, the size of the deficiency payment will be limited to the difference between the standard price—that is the guaranteed price—and the target indicator price. Producers will have to carry any further drop in market prices in the form of a lower overall return. In other words, both importers and home suppliers will have an incentive to market in such a way that market prices are not significantly weakened.

LORD NUNBURNHOLME

My Lords, may I interrupt? The noble Lord said "per ton" below the market price. In talking about cattle does he not mean per cwt.?

LORD DENHAM

My Lords, I should need a little notice of that question.

LORD HOY: My Lords, it is per cwt.

LORD DENHAM

My Lords, I can now confirm that it is per cwt. For fat sheep there is no upper limit to the rate of deficiency payments, only an adjustment operating when market prices are weakening. The level of the estimated market price is set to 3.3p a lb. below the scale of standard prices. This represents the return the producer should get, provided that our market is not oversupplied. If market prices weaken, and fall more than l½p, a lb. below the level of the estimated market price, the rate of deficiency payment is held until the point is reached where the market price has fallen to more than 3p a lb. below the estimated price. After that point is reached, any further fall in the market price will be reflected directly in the deficiency payments. In other words, on beef and veal, when market prices drop below a certain point, the supplier has to bear the full loss himself. With sheep, there is a band where the supplier has to bear the full loss himself, and once market price goes below the bottom line of that band the deficiency payment is increased again.

I am sorry that this matter is very complicated, hut I think that if your Lordships read what I have said in the OFFICIAL REPORT to-morrow it will be a little clearer to you. Noble Lords may wonder why there is this difference in the arrangements for fat cattle and beef and for fat sheep. This difference stems from the fact that the arrangements have to be framed to suit the particular circumstances of the market for the commodities. For fat cattle the import levies will operate so long as United Kingdom market prices are below the minimum import prices set. The arrangements affecting domestic supplies need to he comparable in their incidence. For fat sheep, however, there is to be an import duty which will serve to strengthen the market up to a certain point so far as imported supplies are concerned. Imports make up a much larger proportion of our total supplies with sheep, and the special arrangements in the guarantee scheme for fat sheep take account of this fact. There is, however, a disincentive to producers from marketing their produce badly, but the incidence is limited and the risk of prices falling below a certain point will be borne by the Exchequer and not by producers.

When looking at these amendments to the Fat Stock Guarantee it is a matter to bear in mind that there must be a responsibility on producers to market so as to get the best advantage. The Government are setting out to create the conditions in which production can be expanded and in which producers are encouraged to take greater care over marketing their produce. This I am sure is a feature which will commend itself to your Lordships. Noble Lords—particularly the noble Lord, Lord Hoy—have argued that the interim levy schemes are going in some vague way to disrupt supplies from overseas and the efficient marketing and distribution of home produced commodities. We are not restricting access to our market. The Government's arrangements are designed to bring greater stability to our meat market, and this should be in the interests of all suppliers.

LORD HOY

My Lords, I never argued for one moment that it would disrupt. My argument was about the price level.

LORD DENHAM

My Lords, I shall come on to the price level in a moment. But if this was not one of the noble Lords' worries, then I will not waste your Lordships' time in trying to set it right.

In contrast to the criticism of the alleged harsh effects of the Schemes—I think the noble Lord, Lord Hoy, said this—the noble Lord expressed doubts whether the Scheme would have any real effect at all. I accept readily that market prices for fat cattle are expected to remain high, and levies on imported beef and veal are unlikely for much of the coming year. Much the same applies for import prices of the specified milk products where market prices have now risen so that generally they are close to minimum import price levels, or even above them. But it is wrong to conclude that the Schemes are valueless as a result. They will in fact underpin market prices and prevent them from sweeping downwards again as they have done in the past. That is their stabilising effect. They are, after all, based on the operation of minimum import prices and, by their very nature, cannot be framed to deal with situations when markets are strong. It will also be possible to make adjustments if these prove to be necessary.

Next I will come to prices. The main attack on these Orders from noble Lords opposite related to the allegation that they will be very costly to the consumer. Noble Lords opposite cannot really believe that. The levy schemes have not yet begun to operate. In fact, the present level of prices and the rise in the cost of food is due in large measure to shortages in world markets. These reflect through on to our own market. The other important factor is of course wage inflation of this country, which affects, both directly and indirectly, costs in manufacture and distribution. And before the noble Lord, Lord Royle, rises to reiterate his question about the wage increases there have been in the meat market, let me say that it is wages and prices generally that have done this.

The Government's estimate of a rise of one-half of 1 per cent. in the Food Price Index up to July next year as a result of the introduction of the levy schemes is, we think, fairly accurate. We have again reviewed the overall situation and seen no need to change that estimate. Of course, it may be a little less or a little larger; I could not say. The outcome will depend on the course of market prices and other factors, but I can assure your Lordships that that order of magnitude is right. If I may put it into the kind of terms which I think there will be no possibility of noble Lords not understanding, I am advised that the effect over the year, relating them to a weekly budget of a family of four, would be something in the order of 4p per week.

LORD ROYLE

My Lords, is that what is called an inspired guess "?

LORD DENHAM

It is a calculation, my Lords.

There is one general point which your Lordships will wish to bear in mind when considering the scheme. The Opposition when in office were actively considering a minimum import price scheme for beef, if the evidence of that time is to be believed. Thus, in the 1970 Annual Review White Paper there is a long passage about the import measures then in operation which were regarded as a firm base for the stable market which the Government recognised the industry needed. Among those measures there was the minimum import price scheme for cereals. Towards the end of the passage is a reference to discussion being in process to provide more orderly marketing and price stability in beef. No details were given, though there was a report in the trade Press about that time of discussions concerning certain proposals for regulation of imported and home-produced beef supplies. From this report the earlier scheme seems to have a marked resemblance to certain features of our own scheme. So if only noble Lords opposite would recognise the fact, there may in reality be not so much difference between us.

I make no apology whatsoever for introducing these Orders. These Schemes were certainly foreshadowed in the Conservative Manifesto. May I quote, not from the Manifesto but from a Conservative document issued in January, 1970? It says: The next Conservative Government will thus be under a great responsibility to repair toe damage of years of Labour inertia and to restart the process of agricultural expansion. Our main proposal for doing this is the gradual introduction of levies on food imports. These will reach a level high enough to ensure that ex-farm and market prices in this country will provide the home farmer with a full and sufficient return so that he will no longer require deficiency payments. There can be no allegation of bad faith. While we are on allegations of bad faith, may I say this to the noble Lord, Lord Hoy, who brought up the old bogey of the alleged words of the Prime Minister about cutting prices—

LORD HOY: I said I would not, my Lords.

LORD DENHAM

My Lords, it is a well-known political trick which I think was employed by the noble Lord. By saying he did not do it, he immediately did it. But it cannot be repeated too often, until it is realised by noble Lords opposite, that my right honourable friend never undertook to cut prices. He undertook to pursue—

LORD HOY

My Lords, the Minister of Agriculture has got into enough difficulties.

LORD DENHAM

My Lords, my right honourable friend is perfectly able to look after himself. My right honourable friend the Prime Minister undertook to pursue a line of action which would, at a stroke—and this is where "at a stroke" comes in reduce —the rise in prices increase production and reduce unemployment.

LORD DAVIES OF LEEK: And has he done that, my Lords?

LORD DENHAM

The action has not yet taken place, my Lords. The first of these things is reduction of selective employment tax, which takes place on July 5. When that has happened, when the various provisions that my right honourable friend has in mind have taken place, then your Lordships will see the reduction in the rise in prices.

LORD HOY: My Lords, we look forward to that.

LORD ROYLE

My Lords, before the noble Lord sits down may we say from this side of the House that we look forward to his introduction of the mutton and lamb Order!

LORD DENHAM

My Lords. I beg to move.

Moved. That the Price Stability of imported Products (Specified Commodities) (Beef and Veal) Order 1971, be approved.—(Lord Denham.)