HL Deb 21 March 1973 vol 340 cc749-58


1. The cereal year will be brought into line with that used under the common agricultural policy, i.e. a year beginning on August 1 instead of July 1 as at present. To effect this change, the 1973–74 cereal year will run from July 1, 1973, to July 31, 1974—a "13-month" year.

2. Guaranteed prices will in future be determined in£per ton instead of £ per cwt.

3. Target indicator price arrangements for wheat and barley will be abolished with effect from July 1, 1973.

4. As announced on March 7, 1973, the rye guarantee is to be terminated with effect from July 1, 1973.


5. For the 1973 crop, if production from the guaranteed acreage (443,000 acres) exceeds the

of the schedule will also be available in the Library of the House of Commons and in the Printed Paper Office in the House of Lords."

My Lords, that concludes the Statement.

Following are the schedule of the determinations and note of changes referred to above:

quantity fo beet needed to produce 900,000 metric tons of white sugar for which the British Sugar Corporation is obliged to pay the minimum beet price under Community arrangements, the Government will make up to the guaranteed level the average return for any additional beet from that acreage.

6. Producers have hitherto received a guaranteed price for beet delivered to the factory and have had no rights to the resulting pulp. Under Community arrangements they will receive a minimum price for beet delivered to "collecting centres" (normally at or near the farm gate); the ownership of the pulp remains with the grower, but it may be offered to the processor for puchase separately. The National Farmers' Union and the British Sugar Corporation have agreed on values for delivery to the factory and for the pulp rights. The 1972–73 guaranteed price of £8.00 per ton on the old basis is taken to be equivalent to £6.71 on the new basis. The guaranteed price for 1973.74 is expressed accordingly on the new basis.

7. The guarantee for sugar beet will be terminated with effect from July 1, 1974.


8. As announced on March 7, 1973, the guarantee for fat cattle is to be terminated with effect from March 26, 1973.


9. The estimated price for the year as a whole will be 27.0p per lb estimated dressed carcase weight. With effect from March 26, 1973, new scales of weekly standard prices and weekly estimated prices will be introdued and these scales will be adjusted to take account of the expected market situation for the year. The estimated price arrangements will be adjusted so that if the average market price realised should fall short of the estimated price in any week by more than 2½p per lb estimated dressed carcase weight, the guarantee payment would then be subject to a corresponding reduction, up to a maximum reduction of 1½p per lb estimated dressed carcase weight.


10. As announced on January 24, 1973, the flexible guarantee is to be discontinued with effect from March 26, 1973.

11. The use of a feed formula in establishing the standard price will in future be discretionary, so that the arrangement may be terminated at a suitable time. The new guaranteed price is related to a feed price of £2.53 per cwt., which is deemed to be equivalent to 1,000 points on an index representing the price of a feed ration. For every movement of 5.3 points from 1,000 points (equivalent to about 1.33p per cwt), the guaranteed price will be adjusted by 1 p per score.


12. The standard quantity for Northern Ireland will be increased by 22 million gallons to 142 million gallons.


13. The estimated producer prices for 1973–74 will be 15.0p per dozen for hen eggs and 15.5p per dozen for duck eggs.

14. Guarantee payments will in future be made on eggs graded to the Class A standard under Community arrangements instead of the first quality standard under previous arrangements.


15. The rates for Calf Subsidy Stage A will be reduced to £8.50 a head for steers and £6.50 a head for heifers for calves born on or after April 16, 1973. Payments at these reduced rates will not start being made until the autumn when calves born after April 15 will first become eligible for subsidy.

16. The rates of subsidy at Stage B will not be affected by these changes during the life of the present scheme.


17. The standard rate of grant will be reduced from 30 per cent. of approved capital expenditure to 20 per cent. This new rate of grant will apply to all applications for approval received after March 21, 1973.

18. There is no change in the special higher rates of grant for drainage, for certain works and facilities of benefit to hill land or hill farms, for re-modelling work consequent upon a farm amalgamation or boundary adjustment, or for certain orchard grubbing work.


19. Many of the above changes are subject to Parliamentary approval.

3.49 p.m.


My Lords, may I express our thanks to the noble Earl for repeating the Statement that is being made in another place. I think he will agree that it is very difficult to make any real comparison of this with any other Price Review, because, as the noble Earl himself said, this Statement does not include the schedule of the determinations, and until one has that schedule in front of one quite obviously it is a little difficult to make comparisons between this and other Reviews.

May I clear up just one point? I think there is going to be some concern about the cut in the subsidy for capital grants, and indeed, so as to prevent any misunderstanding, when the Statement says that the higher rates of grant for certain purposes will remain, "higher" in fact means the present rate, does it not?


My Lords, may I interrupt the noble Lord, Lord Hoy, for clarification? There are some rates which are higher than the 30 per cent. rates. Those higher rates will continue at their high rate.


My Lords, I do not think the noble Earl is quite correct in saying that the present rates will remain the same but the other rates will be cut by 10 per cent. I am sure that your Lordships would like to know what in fact this 10 per cent. represents in cash. The noble Earl also said that these changes will of course have no immediate effect on consumer prices, and I should like him to define exactly what he means by "immediate". Does he mean that a little later on prices will go up, because this obviously does not cover the Statement made to-day that the price of flour, rolls, corn, et cetera will all go up 10 per cent.

May I ask one further question which affects the consumer? The noble Earl anounced an increase in the guaranteed price of milk by 1½p, and this, as I understand it, represents a guarantee of some £28 to £30 million. Perhaps he will confirm whether or not that is correct. Secondly, if it is not the intention of the Government to permit the price of liquid milk to go up and so recover this sum, I would ask the noble Earl how it is to be met. As I understand it, there is at present a £20 million deficit on the milk fund and that the Government propose to get rid of it by producing some statement or some Order to recoup the milk fund by a direct grant of £20 million. If the price of liquid milk is not to go up, does it mean that the £30 million will be recovered by increases in butter and cheese prices, so that the liquid milk, while remaining the same price, will in fact have to be subsidised by increases in the prices of butter and cheese? I am certain that noble Lords would be grateful if the Minister could reply to these points.


My Lords, I am grateful to the noble Lord, Lord Hoy, for what he has said with regard to this Review. I agree with him that it is particularly difficult to make comparisons with previous years, because now that we are members of the Community we have the transitional period to take into account and also the effect of Community levels as well as our own deficiency payment system. It is therefore difficult to make direct comparisons. The noble Lord asked what the situation was with regard to the farm capital grant scheme. I am sorry if I misunderstood him at the time. He is quite right in saying that the higher rate of grant will continue. It will be the 30 per cent. grant which will be dropped to 20 per cent., and the cost of this is likely to be in the region of £15 million a year.

The noble Lord also referred to the part of the Statement which said that there would be no immediate increase in food prices. My Lords, this is perfectly true. The whole object of this guarantee is to increase and keep the increase in production of the farms going, because if there is one way to keep down the price of food it is by increasing its supply. It is not anticipated that this will have any immediate effect on the price of food in the shops. The noble Lord referred to the increase of 1.5p per gallon in price of milk and he also referred to the situation with regard to the milk fund. The Government's policy in general is that taking one year with another the guarantee is financed from the retail price of milk, and the general policy allows a good deal of flexibility. My right honourable friend has announced to-day, in reply to a Question in another place, that this year, in order to help the consumer and to assist the counter-inflation policy, it has been decided not to recover from the consumer the deficit in the milk fund at the end of March, 1973, and no increase in the retail price is contemplated during the next few months. I am grateful for the remarks which the noble Lord, Lord Hoy, made and I hope that when he comes to study the Review he will find it agreeable.


My Lords, is the noble Earl aware that this settlement is regarded as a very generous one? I should like to ask only one question and that is about the reduction in the calf subsidy. Could he make a further statement on that and give the reasons for it?


My Lords, my noble friend will remember that the price of meat has risen a very great deal, and at the time the Gulliver Report came out it was considered that farmers have had benefits from the increase in the retail price of beef as it was affected by world markets. It has been considered prudent that the beef guarantee should be removed, as we discussed yesterday, and that the calf subsidy should be reduced to the present amount in order to take into account these increases which have taken place in the meat sector.


My Lords, may I follow my noble friend's question concerning calf subsidies and ask the Minister two brief questions? First, I understand that, as applicable to Scotland, the drainage grant will remain unchanged. Will there be any changes in other general grants such as grants to improve fencing? My second question is whether there will be any alterations in the existing hill-cow subsidy applicable to Scotland.


My Lords, in regard to the last question the answer is that the subsidies will remain the same. With regard to my noble friend's first question about drainage grants, the rate of drainage grant will remain the same, and the fencing grants will also remain the same provided they were at the higher rate, If they were at the rate of 30 per cent. they will be reduced.


My Lords, I am grateful to the noble Earl for replying to the first part of my question on milk: that is, that the £20 million deficit will be paid by the Government. But he did not reply to the part regarding the new increase, which I estimate will cost some £28 to £30 million. Are the Government in fact going to accept responsibility for this £28 to £30 million or are they going to permit the milk industry to increase the price of butter and cheese to recoup the £30 million award which has been given under this Review?


My Lords, as I am sure the noble Lord knows, the milk fund is operated by ensuring that the price for liquid milk is recouped either from the Government or from the retail sources. It has been decided that there will be no increase over the next few months in the price of milk. Of course, I cannot tell the noble Lord what will happen in the months and years ahead, but I can say that for the immediate future there will be no increase, nor is it anticipated that this cost will come from manufacturers.


My Lords, it is difficult to understand the Statement, and I think we are entitled to understand it. If in fact the consumer is not going to pay either in the price of liquid milk or in increases in the prices for cheese and butter, then quite obviously somebody at the end of the day has to find the £30 million. All I want to know from the noble Earl is simply whether the Milk Board is going to be allowed to increase the prices of butter and cheese to recoup this £30 million, or will the Government do so? Is the noble Earl saying that if the Milk Board is not going to he allowed to do so the Government will recoup this £30 million in the same way as it has recouped the £20 million for the past year?


My Lords, with respect, I think that the noble Lord. Lord Hoy, should await the outcome. I have explained to him that the Government have decided not to recoup the deficit in the milk fund for the past year. I have also told him that it is not anticipated that the price of milk will be increased during the next few months. I cannot go further than that.


My Lords, is the noble Earl aware that the reception of this Review will not perhaps be quite so glowing as the noble Lord, Lord Butler of Saffron Walden, has indicated, and that it will probably have a mixed reception? Of course it is recognised that the Government have many difficulties, and that this is a very different set of circumstances from what has obtained hitherto. But is the noble Earl aware that, in particular, there will be concern about the reduction in the calf subsidy; that that would appear to be somewhat illogical at a time when farmers are being encouraged to increase beef production to meet the shortage; and that the effect of this reduction will fall particularly upon dairy farmers who are producing the majority of the calves which will be affected? Is the noble Earl also aware that the increase of 1.5p in the milk price is about half of the increased costs per gallon of milk production, and that that can be calculated to mean a reduction to the dairy farmer of about £10 per cow per year, which is quite a heavy reduction in his income? I think that this Review will be viewed with considerable concern, and not in the glowing terms which the noble Lord, Lord Butler, adopted.

May I also ask whether the noble Earl is aware that the reduction in the capital grants would seem to be somewhat illogical at a time when we are being advised and exhorted to equip ourselves to increase our efficiency, in order to be more competitive? But, in the same context, may I also say that I am sure there will be very great pleasure about some of the grants. In particular, I should like to mention the land drainage grant which has not been reduced, because this is generally regarded in the industry as being the most valuable of all the capital grants by which the Government assist agriculture, and there is a strong desire that that grant, at any rate, should not be tampered with. We are glad that it has not been tampered with now, and that it will not be tampered with in the future. But, overall, I think that this Review will be received with some bafflement. It will be appreciated that the Government have tried to act fairly in the matter, but it will have a mixed reception—and, I think, a pretty chilly reception from most milk producers.


My Lords, I am sorry that the noble Lord, Lord Woolley, did not give quite the reception that I hoped he might give to this Review. He said that he was sorry that the calf subsidy has been cut, and that the price of milk has not gone up more than it has. I can understand his being sorry when any subsidy is cut, and of course it is disagreeable, but there has been a level of direct support through production grants which has helped the beef industry, and there have also been fairly high prices. So the Government felt that those factors, and the level of support which has been received from the Community system, made it reasonable to reduce the calf subsidy at this juncture. The noble Lord also said that he was sorry that the capital grants have been reduced from 30 per cent. to 20 per cent. There is always a very difficult balance in making any of these determinations, but it has been considered that if the return from farming operations is sufficient then, on the whole, farmers ought to be able to decide in what manner they should make their investments. The building investment, to which the noble Lord referred, was estimated in 1972 to be £167 million, which was an increase in buildings of somewhere in the region of 19 per cent. That is a fairly substantial increase which shows that the farming industry has taken advantage of the grants which have been obtainable, and is continuing to make the capital investment which is necessary for the future.


My Lords, can the noble Earl confirm that the productivity performance of the industry continues to be a very good one, and a great deal better than the national average?


My Lords, I think that I should have to have notice of that question, particularly in relation to the national average.


My Lords, would my noble friend like to comment on calf prices, say, three years ago and now? If my recollection is right, they have gone up very substantially. I am sure that this must justify the abolition of the calf subsidy.


My Lords, I would agree with my noble friend's first observation, that prices have gone up substantially. But I do not think I would agree with the second part of his question, that that would justify the abolition of the calf subsidy. If the Government thought that, the calf subsidy would have been abolished as opposed to being reduced.


My Lords, is my noble friend aware that every Annual Price Review produces a mixed reception and that, possibly, the sooner these Annual Reviews are out of the way the better for the industry?


My Lords, I quite agree with my noble friend that all Reviews produce a mixed reaction, and this one appears to be no different from the norm. But I would not agree with him that Annual Reviews ought to be a thing of the past. I am bound to repeat what I said to my noble friend Lord Onslow, that had we thought that Reviews ought to be a thing of the past, the Government would not have deliberately carried on with them. We think it is a good thing that the agricultural industry should have an Annual Review.


My Lords, would the noble Earl agree that the proposals which Signor Spinelli has now put forward to the Brussels Commission suggests that we should do better to return to the support price system, rather than have the intervention price system, thereby ensuring that we keep these Reviews?


My Lords, certainly the support price system has a certain amount to be said for it, and that is why we are endeavouring to make our views on the value of the support price system known in the Common Market countries.