HOME-GROWN CEREALS AUTHORITY LEVY SCHEME (APPROVAL) ORDER 1974

HL Deb 10 December 1974 vol 355 cc596-9

5.30 p.m.

Lord STRABOLGI rose to move, That the Home-Grown Cereals Authority Levy Scheme (Approval) Order 1974, laid before the House on 19th November, be approved. The noble Lord said: This Order provides for the industry's share of the Home-Grown Cereals Authority's finance to be raised in future by means of the levy on wheat, barley and oats purchased by dealers and processors from the growers. The Authority was set up in June 1965 for the purpose of improving the marketing of home-grown cereals. It has 23 members appointed by the Agricultural Ministers. Five Members, including the chairman and the deputy chairman, are independent, nine represent farming interests and nine represent dealers and processors.

Until the end of the 1972–73 cereal year, the Authority's main function was the operation of a forward contract bonus scheme under which bonuses totalling £1 million to £1.5 million annually were paid to wheat and barley growers who registered forward contracts. The Authority then decided to end this scheme since it had achieved its purpose persuading the growers that forward contracting was worth while. The Authority's main current activities are the provision of a market intelligence service for the cereals industry, and research and development. It has recently launched a wheat classification scheme designed to improve the marketing of home-grown wheat of good milling quality.

Apart from the forward contract bonus scheme, now discontinued, but which was financed entirely from the levy, and the cost of agency functions which are fully recouped, the Authority's activities have been financed half by the Exchequer and half by a levy on wheat and barley growers. This levy was collected by deduction from cereal deficiency payments, and it was recognised that with the phasing out of guarantees under the transition arrangements an alternative method of collection would have to be found. The need has been accelerated by the fact that, owing to high market prices, there are currently no deficiency payments from which levy could be collected.

The scheme that is now before the House was prepared and submitted to the Government by the Authority after consultation with the interests concerned. It provides for a levy to be paid to the Authority by dealers in, and processors of, home-grown cereals who purchase home-grown wheat, barley or oats from the grower. Dealers and processors in turn are empowered to recover 50 per cent. of the levy from the grower from whom they purchase and 25 per cent. from the dealer or processor to whom they sell. By spreading the levy liability in this way there is, I submit, only a very small burden on any one sector of the industry.

As required by Section 16(4) of the Cereals Marketing Act (as amended), the organisations representing the interests concerned have been consulted about the scheme. I am glad to report that all the interests agree about the scheme, which is considered to be the most convenient and equitable mehod of raising the levy under the provisions of the Act. The Scheme requires dealers and processors to register with the Authority, to keep records of purchases and sales of homegrown wheat, barley and oats and to submit returns. It also requires growers to keep records of sales of these cereals. The rate of levy to be charged per ton for the 1974–75 cereal year will be determined in a further Order under Section 13(3) of the Cereals Marketing Act 1965, which provided the present Order receives the approval of the House, will be laid before Parliament in the near future. It is expected that the Authority will need to raise about £50,000 by levy in the period from January to July 1975. The balance of expenditure in the 1974–75 cereal year—to be met from levy income—is being paid for out of levy money carried forward from a previous year.

The Government believe that the Home-Grown Cereals Authority is performing a very worthwhile service, and in accepting the new levy Scheme the cereals industry has indicated its willingness to make a contribution to enable it to continue its work. I submit that the scheme laid before your Lordships is as fair and reasonable an arrangement as could be devised within the provisions of the Cereals Marketing Act. I have no hesi- tation in recommending it to the House. My Lords, I beg to move.

Moved, That the Home-Grown Cereals Authority Levy Scheme (Approval) Order 1974, laid before the House on 19th November, be approved.—(Lord Strabolgi.)

5.35 p.m.

Earl FERRERS

My Lords, we are very grateful to the noble Lord, Lord Strabolgi, for having explained the purpose of this Order, which is to make arrangements for the Home-Grown Cereals Authority different from those in the past. As I understand this, and I should be grateful if the noble Lord would correct me if I am wrong, 100 per cent. is to be found by the processor, of which he may collect 50 per cent. from the growers and 25 per cent. from anyone else to whom he may sell the corn.

The Home-Grown Cereals Authority has always been connected, certainly by most of us, with those forward contract schemes which it used to operate and to which the noble Lord has referred. One might think that as that scheme has now come to an end, the work of the Home-Grown Cereals Authority would be lessened considerably. If that be so, one might expect the expenditure of the Authority to be less in the future than it has been in the past. I wonder whether the noble Lord could let us know what has been the expenditure of the Home-Grown Cereals Authority over the last two years, and whether he could explain how it financed itself during this past year? As I understand it, it used to be financed from the deficiency payments scheme, but no deficiency payments have been made, certainly not over the last 12 months. It may be that it still has a reserve, but I should be grateful if the noble Lord would be good enough to explain whether or not its expenditure has decreased.

If he is able to give an indication of what the rate per ton is, although this may come in a later Order, it would be helpful. Although it is bound to be extremely small, would he give the assurance that the Authority will take every precaution—simply because it is such a small figure—to ensure that every possible economy is exercised, because it is very easy when the levy is small for the total to become rather large and for expenditure to become greater than it should be.

5.39 p.m.

Lord STRABOLGI

I am grateful to the noble Earl for the general welcome that he has given to this Order. He asked me various questions. With regard to the first question about the amount to be found and the proportions, it will be 50 per cent. from the growers, 25 per cent. from the dealers or processors who buy first-hand, and then another 25 per cent., as he surmised, from the dealers or processors to whom they sell. With regard to the Authority's expenditure, I can give the noble Earl some figures. The out-turn for 1973–74 was £351,377, which was made up of administration £304,018, and research and development £47,359. This will increase, of course, as does everything else, for 1974–75 up to £389,000 in roughly the same proportions, and again, for the revised estimate for 1974–75, up to £385,000.

The noble Lord asked me how the Authority was financed during the past couple of years in the absence of deficiency payments from which levies could be deducted. Since the wheat levy could not be collected in 1972–73, the Authority had to borrow from the banks in order to meet payments, mainly bonuses, to wheat growers under the forward contract bonus scheme, which would normally have been financed from the wheat levy. As the wheat levy could not be recovered in 1973–74, arrangements were announced in April to advance up to £700,000 to the Authority to the extent to which it was needed. Income from the barley levy in 1972–73 exceeded expenditure apportioned to barley, and although this money could not be used towards writing off the wheat deficit because the apportionment of the expenditure had been made between wheat and barley, there was no legal objection to using it towards expenditure in subsequent years and it is currently being used to meet 50 per cent. of the Authority's costs. The noble Lord also asked me about the rent of the levy; I think that this is 1p per ton.

On Question, Motion agreed to.