§ 7.48 p.m.
§ Lord JACQUES rose to move, That the Draft Milk (Extension of Period of Control of Maximum Prices) Order 1974, laid before the House on 5th November, be approved. The noble Lord said: The present statutory powers to fix maximum prices for milk stem from the Emergency Laws (Re-enactments and Repeals) Act 1964. Section 6 of that Act extended the Government's powers to control milk prices until 31st December, 1969, with provision for renewal by Order in Council for further periods of five years. In 1969 Parliament approved an Order in Council extending the Government's powers until 31st December, 1974, and the purpose of the Draft Order now before the House is to extend these powers for a further period of five years.
§ My Lords, the price orders which are made under these powers concern retail prices. Therefore, the question before the House is whether the Government, as has been the case with previous Governments 168 over the last thirty years, shall have power to control the retail price of milk. Successive Governments have had this power for, I think, two reasons. The first is the nature of the market. In the case of milk, first-hand sales are made by the milk marketing boards, and at the other end of the scale the processing, packaging and distribution of milk to the doorstep is very largely in the hands of a number of very large distributors. But there is another reason, and that is the importance of milk in the national diet. As a nation we drink about 1,650 million gallons of milk, and the value, including the subsidy, exceeds £1,000 million. Milk is therefore one of the most important items in the food diet. Given the nature and importance of the market, it is not surprising, perhaps, that successive Administrations have taken the view that Government should be in a position to ensure that producers and distributors get a reasonable return, and that milk reaches the final consumer at a reasonable price. Powers to fix maximum retail prices are essential to this objective at the present time, and I therefore hope that the House will approve this Draft Order. I beg to move.
§ Moved, That the Draft Milk (Extension of Period of Control of Maximum Prices) Order 1974, laid before the House on 5th November, be approved.—(Lord Jacques.)
§ 7.52 p.m.
§ Lord SANDYSMy Lords, the House will be grateful to the noble Lord, Lord Jacques, for giving such a very clear and concise explanation of this Order. There are, however, a few points on which I think we should be very grateful to have his further assurance. In the first instance, my Lords, I should like to express concern in one matter, and that is in regard to the supply position. The noble Lord will be aware that at the present moment milk for manufacturing purposes—that is, for processing through various means for the manufacture of butter, cheese and also dried products—is down by 60 per cent. I think the noble Lord will be able to confirm that either little or no butter is being produced in the United Kingdom in present circumstances from home-produced milk. In view of the present position, does he believe that the Order as set out at the present moment gives a sufficient flexibility and control over our affairs?
169 In the second place, while appreciating what the noble Lord has said in regard to the reserve powers which Governments have retained over the last thirty years, does he not recognise that a five-year period appears to be rather longer than may perhaps be necessary in present circumstances? All I require, my Lords, is an assurance that in the Government's view this is entirely satisfactorily. Finally, I should like to stress once again the rather uncertain position in regard to the present situation vis-à-vis Europe. Perhaps the noble Lord can assure us that if we pass this Order it will in no way affect the present negotiations being conducted in Brussels.
§ 7.54 p.m.
§ The EARL of KIMBERLEYMy Lords, the noble Lord, Lord Jacques, has most eloquently expressed the view of Her Majesty's Government on the subject of this maximum milk price Order; and I should like also to associate myself with the noble Lord, Lord Sandys, on the questions that he has raised. Unfortunately, a great problem is looming on the horizon due to the fact that there will be an acute shortage of milk in the shops in the near future for the simple reason that the dairy farmer is rapidly being forced to leave the industry. Indeed, my Lords, I myself have been driven to your Lordships' House. We have already had a warning from the Milk Marketing Board that dairy products for Christmas could well be in jeopardy, and that if dairy supplies fall by more than the amount already forecast we shall have to import cream. This has been brought about by the lack of confidence which the dairy industry has today, coupled with the high consumer demand for milk, which has been stimulated by Government subsidies.
I should like to mention briefly what it costs the dairy farmer to keep a cow, as I feel this is pertinent to the Motion we are debating this evening. To maintain a cow costs £1.21 a day, and if the animal is happy, healthy and yielding three and a half gallons of milk a day the farmer makes a profit of about 5p. However, out of this 5p he has to pay wages (which have increased, due to the threshold payment rises, eleven times in seven months), lighting, refrigeration, rates, veterinary bills, insurance, fuel, 170 fertilisers and the maintenance of his dairy equipment, as well as innumerable other expenses. This shows that in actual fact the farmer is losing money every minute of the day, and that the entire dairy industry is heading for total disaster and bankruptcy. If the price of milk to the consumer was increased by 1p per pint, this would cost the pint-a-day consumer £3.65 extra a year, which is equivalent to less than half-a-pint of beer a week. Where is our sense of values? If we are to have this maximum price Order continued for a further five years, let it at least be at a realistic figure so that the farmer, who is currently being used as a political football, will not be kicked to bankruptcy and we may have a healthy, thriving and expanding dairy industry, to the benefit of our whole nation.
§ 7.58 p.m.
§ Lord JACQUESMy Lords, I would first thank the two noble Lords who have taken part in this mini-debate on the Milk Order. I shall try to answer the questions which have been raised. The first, I think, was the question of the shortage of milk. My Lords, there is no shortage of milk for liquid consumption. The margin of production over liquid demand fluctuates, and is at its lowest in the winter; but it is still substantial, and supplies for liquid consumption are not at risk. Sales have increased by about 2 per cent. over last year. Because earlier this year the hoped-for expansion of milk production did not materialise, supplies of milk for manufacturing have been lower than had been expected. In spite of this, home production of cheese is forecast to increase by about 35,000 tons. On the other hand, there has been a substantial drop in butter production. The recent measures that the Government have taken were designed to help stimulate milk production and thus give more milk for, particularly, the liquid market and also for manufacture.
So far as flexibility is concerned, the powers which the Government would have, as has been the case with past Governments, would be permissive. There is therefore flexibility. So far as the period of five years is concerned, this has always been the period and we see no reason why it should be altered now. Furthermore, there are special reasons 171 why there should be this power at the present time. Milk is being subsidised by this Administration as it was by the former Administration, and when you subsidise you have to take some steps to try to ensure that the subsidy reaches the consumer—and you can best do that by the control of retail prices. So far as the EEC is concerned, this Order is concerned with the control of retail prices. That is not forbidden by the rules of the EEC, and most of the countries of the EEC in fact control the retail prices of milk. So we should not expect any difficulty there.
My Lords, on profitability, the measures that the Government took in October had the effect of increasing the returns of milk producers by some 8p a gallon over the winter months, October to March. These took account of the high cost of feeding stuffs and the present low returns on culled cows and calves. The more recent measures taken for beef may give additional help here. The October award was worth about £100 million. It should give the industry new confidence to reverse the decline of milk production and put dairy farmers in a position to expand their production. The 1975 Annual Review which is just about to start will involve a detailed examination of all factors affecting the dairy industry. It is not possible to anticipate the determination; but the points that have been made in this debate will be borne in mind. As the Government have made clear, their aim is the expansion of our home agricultural industry and the milk sector is an important part of that industry. It was against this background that the recent measures were taken and that the Annual Review will take place.