§ 3.7 p.m.
§ EARL FERRERS rose to call attention to the need for an adequate supply of food for the nation and for the requirement of a vigorous and stable home agriculture as an essential part of that supply; and to move for Papers. The noble Earl said: My Lords, I beg to move the Motion which stands in my name on the Order Paper. I think it would be in accordance with the precedents of this House if I were to declare an interest, in so far as I am a farmer, I am a modest landlord and, in all the circumstances, an extremely modest consumer. My Lords, three days' debate on the Queen's Speech leaves one aware of one factor which, I suppose, overrides all other considerations at the moment; that is, inflation. Running as it is at 17 per cent. a year, it is already affecting not only the personal disposable income of every family, but the very fabric of industry and of our society.
§ The one area in which this has hit home hardest and almost universally is in the increase in the price of food which we have recently experienced. No one can escape it. Twenty per cent. of the family budget is spent on food and, indeed, it is the largest single item of expenditure in any budget. Therefore, food is not only affected by inflation: it also generates it. Coupled with this, many people are finding that, for the first time 441 in 20 years, they cannot always get the food they want. And yet we have the curious paradox that those who produce the food find that circumstances are such that, in many cases, they face near bankruptcy. It is a topsy-turvy situation, fraught with conflicting elements. I thought it would be appropriate to look at this problem in the context of a wider canvas and, if possible, from a non-Party point of view, because I think the problem is so serious that it requires to be looked at dispassionately.
§ My Lords, if we rely, as we do, on imports of primary products for our manufacturing industries, and if we rely, as we do, on imports of 50 per cent. of our food requirements, we cannot insulate ourselves from the inflation which we import with them. It may be that while it is right to fight inflation, we may also have to adjust ourselves to living with it. When one has seen the price of hard wheat move from £44 per ton to £110 per ton, of cocoa from £300 to £900 per ton, of sugar from £75 per ton to £500 and going higher, all in a matter of two years, and the price of a bag of sugar in the shops move from 9p to 20p in 12 months, can anyone doubt that we face real problems over the supply of food to the nation? When, on top of that, those who claim to know the breeding habits of the world tell us that the world population will have nearly doubled by the end of the century, one fact emerges crystal clear—there will no longer be any cheap food.
§ This has been said before, but I do not believe that the stark reality has yet penetrated the real considerations of most of the people of this country. Maybe it is because history has bred into us a reliance—almost a feeling of right—on cheap food. Maybe it is because some social or moral ideal suggests that because food is essential to life and people, therefore it should also be cheap. Maybe the subsidising of food, for all its virtues, adds to this belief. But whether we like it or not, every family will have to spend more of its money on food. This is a reality which must be accepted, and which we should not be ashamed to admit, even though we may regret it. It is also a fact which Governments, from whatever political Party they are drawn, should not hesitate to make plain to the people.
442§ We have few natural resources, but we do have three—coal, North Sea oil and agriculture. Unlike coal and North Sea oil, agriculture is not finite, but is a renewable resource, and it is becoming clear that to-day's energy crisis will soon merge into to-morrow's food crisis Here I agree very much with that what the right reverend Prelate the Bishop of Coventry said yesterday in his speech. The world surpluses of grain are no longer there. On July 1, the United States had enough wheat left to cover only 10 days of world trading. Despite an extra 60 million acres of land brought into cultivation and the prediction of the biggest crop ever, the grain has not materialised.
§ No longer is the American Government prepared to finance the stockpiling of surpluses but is leaving it to commercial forces, and it may very well be that commercial forces will not consider it prudent to keep anything like the stockpile—even if it were available—which we have previously associated with that country. The Food and Agriculture Organisation now finds that the world could not meet any food emergency and we would be unable to help in any human catastrophe. The World Food Conference is meeting in Rome this week to consider the gravity of the world shortage of food. My Lords, a world food shortage can only mean higher prices. To the developing countries, with their increasing populations and traditional agriculture, this means non-availability. To the developed countries, this means simply higher prices at home. The difference is that the developed countries suffer economic damage; the less developed countries suffer human damage.
§ So whether looked at from a national or an international point of view, I suggest that never before has there been such a case not just for a sound British agriculture, but for the expansion of British agriculture.
§ But if this be so, how do we find our British agriculture at this time of worldwide food deficits and high prices? We find an industry which is both in decline and in despair; one in which many people, far from expanding, are literally struggling for survival; one in which, even without expanding at all, an 443 extra 30 per cent. of working capital will have to be found next year just to meet the increase in the price of imports caused by inflation; one in which bank lending to agriculture has increased by £140 million in the last six months—an annual rate of increase of 35 per cent.—and very little of that went into expansion; and if the farmers are worried about that level of borrowing, so also are the banks. There may be a few specialist growers who have been able to benefit from the recent high cereal prices and economies of scale, but very few farmers fall into that category.
§ It is in the livestock area—all sectors of it—where complete despair is prevalent. Over the last 12 months, poultry producers, lamb producers, pig producers and beef producers have all suffered from an unprecedented fall in market prices at the same time as a huge rise in costs. Milk producers are in the same category, with the exception that their returns did not fall but were merely inadequate to prevent a decline both in the national dairy herd and in milk output.
§ The root cause has been the world shortage of primary foodstuffs and the massive escalation in oil prices, which in turn have resulted in vast increases to the farmer right across the board—in fuel, fertilisers, wages, feeding stuffs. This already bad situation has been further aggravated by soaking wet conditions at hay and harvest, which is making fodder both scarce and expensive, and there is now a serious threat of malnutrition this winter among stock, particularly on the hill lands. Even barley straw—a modest feed which normally sells for £5 a ton—has this year been changing hands at £85 to £100 a ton in Devon, and even now in November there are many areas where the corn has yet to be harvested.
§ At the same time, we have witnessed the total collapse of the beef market. Auction prices have dropped from £21 to £12 per cwt. since early last year. Despite this—and one might think unexpectedly—there are more cattle being presented for slaughter than ever before; 75,000 a week now, compared with 55,000 a week a year ago. The abattoirs are choked full. And yet many of the cattle are unfinished, because high feed costs last winter resulted in their being inade 444 quately fed and so the butcher, when he purchases the animal, gets less edible meat per hundredweight of beast. Some of these animals which are being slaughtered are heifers which were intended for breeding, and steers, both of which were intended for sale in the spring, but Which, because of the disastrously low prices then prevailing, were kept on in the hope that prices would improve. They have got worse.
§ This dismal situation is, in turn, affecting calf slaughtering. A year ago 4,000 calves were being slaughtered every week. Two weeks ago the figure was not 4,000 but 14,000; last week it was 16,000, and this week it is expected to be nearer 20,000. There must be something radically wrong with an industry where farmers literally cannot afford to keep their calves, and yet at the same time they cannot find anyone to buy them. Eighteen months ago calves were fetching between £35 and £50. Now, in some cases, the return does not cover the cost of the insemination which beget them. One farmer, on being given the sale price of his calf, 10p, purchased a Mars bar with the proceeds. In other cases, there is no demand at all and no bid, and the animals have to be destroyed and removed by the knackers. In Shropshire they are this week setting up a centre for the mass slaughter of calves, which is to be run under the auspices of the RSPCA, and other counties will-follow.
§ My Lords, this is a quite intolerable situation which must be resolved. It deserves, and demands, action by the Minister—and immediately. For apart from the destitution which faces livestock farmers, we are now, by destroying these calves, killing off the next generation of fat cattle and, as sure as night follows day, there will be a great shortage of beef at the beginning of 1976 and prices to the consumer will soar. The Minister is obviously acutely aware of this situation, and I have given notice to the noble Lord, Lord Beswick, that I hope he will say what action he intends to take.
§ I would offer three suggestions. First, the Minister should institute immediately a minimum price for fat cattle, so that the farmer receives out of Exchequer funds the difference between the market price and the guaranteed minimum. Whatever the arguments about intervention may be, and whatever Governments 445 have or have not done in the past, or should not have done, the fact is that when the United Kingdom opted out of intervention we removed for the first time in 25 years the floor in a market which, by its very nature and circumstances, demands a floor. That floor must be put back—and now. Whether it is by intervention or by minimum price or both is relatively immaterial. Intervention was intended to level off market fluctuations; it was never expected to deal with slumps.
§ If there are those who say that I am advocating a return to the system which my Party abolished, I would say: "So be it." The situation is desperate, and I believe that the Minister could get the agreement of the Commission on the basis that this is emergency action and would be of limited duration, for in a few months' time there will be such a shortage of beef that the market price will go above any minimum price. The Minister could then, I suggest, negotiate a more permanent arrangement for the inclusion of both the minimum price and intervention in the Common Agricultural Policy, so that, once again, farmers could have a long-term assurance.
§ One of the anomalies thrown up by the European Community is the devaluation between the English and the Irish green pound. The fact is that, as a result of this, cattle which come from Ireland straight to abattoirs in the United Kingdom receive a slaughter premium which is, in effect, £5 per head more than that received by British cattle going into the same abattoirs. This is clearly unfair, and at present an understandable irritation. I would ask the Minister whether he can either negotiate the removal of this anomaly, or revert to the old system whereby such monetary payments would be made only on Irish cattle which had been in the country for 60 days.
§ In this connection, I can only refer to the demonstrations which we have seen in Holyhead and Birkenhead, and indeed, one regrets, even on the railways. I do not believe that these demonstrations are a reflection of our need for Irish cattle. This is a long established trade which has benefited both countries and should continue to do so. These demonstrations are, however, a reflection of the utter despair of men who face ruin from a collapsed market, to which these imports appear to add. I do not condone for one minute 446 the use of violence, and I do not believe any Member of your Lordships' House would, but no one can ignore the reason.
§ Thirdly, the recommendations of the Committee which sat under the chairmanship of the noble Lord, Lord O'Brien—and we are all delighted that he is going to make his maiden speech this afternoon, and look forward to hearing what he has to say—should be accepted and put into action. The Committee concluded that a permanent ban on the export of live animals "was not justified on either welfare grounds or economic grounds". This would permit the modest trade to start again which provided an outlet for certain types of cattle more suited to Continental buyers. I hope that the noble Lord, Lord Beswick, will tell us what the Government intend to do about this Report. If these actions are taken I believe that a new stability would be put into the beef market. Other noble Lords may wish to refer to the poultry, lamb and pig markets, but I would confine myself to saying that the Government could well do worse than accept the general axiom, "Put the beef market right, and the other markets will follow suit."
§ One of the effects of the collapse of the beef market is that it has pulled the lamb market down with it, and frequently the only crops which hill farmers have to sell are cattle and sheep. The nature of their farming means that they have to sell their animals when the time is right, and take the market price. Many of these people are now literally on the verge of ruin, and though I know and appreciate the steps which the Minister has already taken to help the hill farmers, I venture to suggest that they are inadequate and if more help is not given to these farmers, specifically this winter, many will go out of business. They are not—as is so often the case—asking for increases in order that their "incomes should keep pace with inflation", but they are requiring help in order to save them from insolvency.
§ There is no doubt that the recent increase of 8p a gallon on milk has prevented what otherwise would have been a further contraction in the dairy industry. During the last year the number of dairy cows has dropped by 54,000 and the annual production of milk has declined. But, at the same time as there 447 is a reduction in the total milk produced, we find that we are stimulating the consumption of liquid milk by a subsidy which does not just prevent the price to the public from going up but actually lowers it, with the result that, although the annual output of milk has gone down by 89 million gallons, the sales of liquid milk for drinking have actually gone up by 25 million gallons. This increased demand for liquid milk means less milk for manufacture; less milk for manufacture means less home produced butter and cheese. But then we subsidise these products, and so stimulate the demand for them. This demand for butter and cheese has to be filled by imports, which worsens our balance of payments. But then we subsidise these imports, too. Because of the subsidy, an extra 40,000 tons of butter a year are now being consumed—and all of it is imported and subsidised by us. This is directly at the expense of our home manufactured margarine market, whose sales have dropped by precisely the same amount as the butter sales have increased—and now butter is cheaper than margarine. So the effect of manipulating one market, however good the reason, is to affect the others.
§ I know that there are those who feel strongly—and understandably so—that food subsidies are desirable on social grounds. In my view, it is better to subsidise personally those who cannot afford the market price, for not only do subsidies accord a false sense of values to the product, they distort supply, they distort demand and they distort other markets. For the same price now you can have delivered to your door either a letter or a pint of milk, but the pint of milk has required someone to pay £200 for a cow and keep it for two years before it has produced. To use an old phrase, the relativities seem to have got a little out of balance.
§ Sugar is a particularly emotive subject at the moment—primarily because there is not any. It is also an extremely complicated subject, and it is one which requires a debate on its own. I would confine myself to this: the Minister walks a very difficult tightrope, with boiling oil ready to receive him if he falls off either one way or the other. On the one hand he must see that the cane 448 sugar refiners are kept in production—and they are far from convinced that they will be. On the other hand, he has his obligations to the Community to work within its bounds—and he very nearly did not. Overall, he has to ensure that there is an adequate supply to the consumer—which obviously there is not. The situation is not an easy one, but these things are not necessarily incompatible.
§ The Minister will have to use all the options open to him to get sugar—from our own beet growers, from cane sugar growers, and from the European Community. A real shortage will affect not just the housewives but all the food manufacturing industries, and the prospects certainly do not look good, with production from our own beet industry being 30 per cent. less than it should be, due to disease and bad growing conditions, and the world price of sugar moving up daily.
§ I would ask the Minister only these questions because this is a vital subject: first, can he give an assurance that there will be an adequate supply of sugar to the shops, especially over the Christmas period? Secondly, can he say what arrangements have been made for the supply of cane sugar to the refineries after the Commonwealth Sugar Agreement ends on December 31? Thirdly, what will happen to the supply of 300,000 tons of Australian sugar after the Commonwealth Sugar Agreement ends? Will it be terminated or will it be phased out? I think that there is an option which is exercisable by the Community. Can the noble Lord say whether the EEC have guaranteed to supply this country with 200,000 tons of subsidised sugar, or whether they have merely guaranteed to subsidise 200,000 tons of sugar, for which any member country can bid and which, therefore, may not all come to us?
§ I am glad that the Minister obtained a bigger quota for the United Kingdom sugar beet growers. His main difficulty here will be to get the quota taken up, and I impress upon him the urgency of announcing the price of next year's crop before the contracts have to be signed. I am sure that the Minister is right to try to solve these problems within the Community. After all, that is what it is there for. I would say only this about 449 the EEC: no system of managed agriculture is perfect, it will always throw up anomalies and inconsistencies whatever the system is; but I believe that our role should be to stay inside the Community and try to improve the system, which everyone—in all countries—knows to be necessary.
§ A consideration of the problems of agriculture would be inadequate without referring to the Government's proposals for capital taxation, which are having a severe effect both on confidence and on investment. I shall not refer to the wealth tax proposals as they are, as yet, only the subject of a Green Paper. However, the Government's intentions have been made very clear over the capital transfer tax by the publication of a White Paper, and one can assume that the Chancellor's proposals next week will follow broadly the lines of the White Paper. I shall take only one example. A 200 acre farmer is not normally considered either a large farmer or a wealthy man but, based on the figures in the White Paper and the fact that the Government are committed to the abolition of the 45 per cent. rebate on agricultural land, if this man wished to hand over to another his 200 acre farm valued at £800 an acre, he would have to pay capital transfer tax of over £131,000 from sources other than his farm—and that is without capital gains tax.
§ I find it hard to believe that this is intended, and I find it equally hard to believe that it can be justified socially, economically, or nationally. The small farm, the family farm, the owner-occupier are—just like the larger farm because of its economies of scale—as esesential to the economic structure of the industry as they are to the social structure of the nation. If anything like these proposals is put into effect it will mean the end of the passing to younger men the tools of the trade. This can only leave an ageing population of farmers and, as the Agricultural Economic Development Council's publication Farm Productivity shows, this results in lower output. When I was at school I remember being taught about Boyle's Law, Ohm's Law, Faraday's Law, and I coined a law which modesty compels me to call Ferrers' Law and it states quite simply, "Everything has the reverse effect of that intended ".
450§ Your Lordships may remember that when the Goya painting of the Duke of Wellington hung in the National Gallery and was subsequently stolen more people went to see where the picture used to hang than ever went to see the picture when it hung there. The right honourable gentleman, the Foreign Secretary, in a previous incarnation when he was Chancellor of the Exchequer, when we were going through one of our usual economic crises in order to save the pound, said that nobody must take abroad more than £50. And what was the result? More people went abroad than ever went before. Even the travel agents said, "Hooray for the Chancellor of the Exchequer. Now everyone knows how cheap it is to go abroad. "That was never supposed to be the effect. When the right honourable gentleman, the Minister of Agriculture, introduced the slaughter premium for cattle to put some stability into the market, what happened? Every time the level of the slaughter premium increases the auction price in the market decreases by precisely the same amount. It was never supposed to have that effect.
§ So, my Lords, I commend this little law to any Government, indeed to anyone taking a decision, because things often do have the reverse effect of that intended. I believe that the effect of the capital taxation on agriculture which the Chancellor is likely to introduce may be infinitely more far-reaching and be totally different from what he expects—and indeed from what he intends. It may well result not in a strengthened society but in a weakened one; not in an expanding agriculture but in a contracting one. Of course agriculture must pay its fair share of taxation to the nation but I suggest that the Chancellor should submit his proposals on capital transfer tax, as he is prepared in a similar way to do on the wealth tax, to a Select Committee so that they may impartially evaluate the effect which these will have both on the structure of the agricultural industry and on the long-term interests of the nation.
§ In the end, my Lords, wealth is not in land nor in pound notes nor in stocks and shares. The only true wealth of a country is in the character, personality and quality of the people who make it up—their ability to take risks, their determination to succeed, and their acceptance 451 of the need and the desire to work. To circumscribe these forces of progress, which are latent and inherent in most people, is to circumscribe the opportunities for the creation of wealth. This applies in all industries and in all walks of life, but this is particularly so in agriculture which consists of people, whether farmers or farm workers, who are primarily individualists and who are prepared to be entrepeneurs, to take risks, and to work for hours and in conditions which would be as unacceptable in many other industries as would be their monetary reward.
§ My Lords, if, as I have tried to show, we as a nation are going to be more dependent upon agriculture and if, as I believe, we should be more dependent on it, all the potential for progress is there—the knowledge, the expertise, the effort and the will—if only Governments can release it. By its very nature agriculture is a long-term industry. Whatever the technological innovations, the gestation period of a cow will always remain nine months. It therefore needs, above all, one thing—simple in essence but so difficult to achieve—and that is confidence; the confidence to invest in the knowledge that with all the risks attendant in the industry which anyone involved in it willingly accepts, when the investment materialises possibly some years later there will be a market for the product.
§ As an industry it cannot sustain radical changes as political Parties change if it is to fulfil the need required of it by the nation. I would ask the Minister (and I put this forward with humility and with seriousness) whether he would be prepared to consult not just, as the Queen's Speech says, with the leaders of the farming industry, but with all political Parties, as well, to try to introduce a common shaft of agreement. Of course in the end responsibility for action remains with the Government, but no one Party or group of people has a monopoly of right or good ideas. The situation in agriculture—and I suggest in the nation as a whole—is now far too serious to make Party points or to apportion blame. The prime concern of all—politicians, agriculturalists or consumers—must be to ensure that this industry once again gets on to its feet and is in the position to make 452 the contribution to the nation which the future will inevitably and undoubtedly demand of it. My Lords, I beg to move for Papers.
§ 3.36 p.m.
§ THE MINISTER OF STATE, DEPARTMENT OF INDUSTRY (LORD BESWICK)My Lords, I thought in one respect the "Ferrers Law" was operating again. The noble Earl gave up his Ministerial responsibility earlier in the year and his air of authority and confidence appears to grow. But seriously, no one I think will quarrel with the tone and temper of what the noble Earl had to say. I believe his emphasis is wrong in certain cases and perhaps some of his figures are slightly exaggerated but the increasing importance of home agriculture is self-evident.
My Lords, we accepted last March that there was a powerful case for expanding agricultural production in the United Kingdom and the noble Earl is absolutely right that events since then have made that strong case even stronger. The noble Earl was right to refer to the grim prospect painted at the Rome Conference, although I would quote the words of Dr. Hannah the Deputy Secretary-General of the Conference who said:
It is not going to be easy to feed the world's peoples but it can be done".I referred to that conference in last Wednesday's debate and I said that our delegation in Rome, which includes my right honourable friend the Minister of Agriculture, was taking it seriously and I indicated the kind of line we were going to take there and I will not pursue that further to-day.My Lords, in the past 18 months there have been, as the noble Earl said, massive rises in commodity prices on world markets. We have had inflation of our own costs of production in agriculture and in these circumstances undoubtedly life for many farmers has been difficult indeed, and I do not want to belittle their problems. It is fair to say that for some—especially the livestock producers—it has been a struggle to survive, and the high cost of feedingstuffs which is of benefit to some farmers is a particular cause of concern to livestock producers. There may be some fallback in the prices of some commodities, such as cereals and sugar, over the next year or two, but I 453 agree with the noble Earl that we are unlikely ever again to be able to buy food at the prices current in 1972. Over the last two years the rise in our trade deficit on food and drink has been similar to that of our deficit on oil. Consequently every tonne of food imports which we can save over the coming years will be worth even more to our economy than in the past.
Our overall objective therefore is clear—we must aim for efficient and economic expansion. The problem is how do we move towards that objective? One after another, various sectors of the livestock industry have come under pressure and it has required a long succession of provisions to give producers in each sector the necesary measure of assistance. Each provision has had to be tailored to the obligations which we have undertaken to the European Economic Community. We have had to develop new methods of support. But despite these difficulties, as I shall try to show, the Government have managed to help sectors of the industry over the worst of their problems. It is now the beef sector that is up against it, though a few months ago it was the dairy farmer and the pig producer. I think it will be agreed that we ought to discuss the full range of the industry's activities. I want therefore to mention cereals as well as pigs, and milk as well as beef. Perhaps I can start with the arable side.
Like other farmers, cereal producers have had to face increased costs. They have also received high returns from the market in the last two seasons. The world cereal situation, I agree, continues to be one of relative shortage. At home over 3 million acres of wheat were sown. Because of the weather, as the noble Earl said, not all of this was harvested. There was difficulty in various areas, particularly in Wales and the South-West. Overall, however, the new wheat varieties have yielded exceptionally well and growers have reported yields of over 3 tons an acre. We shall not have final figures until mid-November because of the lateness of the harvest, but the latest estimates suggest that the total cereal harvest will be somewhat above last year's figure of 15.1 million tons. This is a substantial harvest. It should help our livestock producers through the winter, although we recognise that there is a world shortage of maize this year.
454 Market prices for cereals have been well above the level of the guaranteed prices. But we should not neglect these guarantees. The Government announced in July some substantial increases in the guaranteed prices for cereals and further increases in respect of the 1974–75 harvest are at present under consideration.
The monetary arrangements negotiated by the Minister of Agriculture at the recent meetings of the Council of Ministers are of special importance. As a consequence of these arrangements, subsidies will be paid on imports of cereals and this should help to keep down the cost of feed over a wide sector of the livestock industry. For example, the subsidy on wheat varies but is currently around £3 a ton. To some extent this will help producers of pigmeat, eggs, poultry, milk and beef, as well as having a beneficial effect on prices in the shops of a whole range of important products.
The latest estimates of the United Slates indicate that soya production will be some 34 million tons this year compared with last year's record 41 million tons. But there are higher carry-over stocks this year than last, and Brazilian production is expected to be some 2 million tons higher this year. Prices have fluctuated since the peak of over £250 a ton in the summer of 1973. This summer they fell to £80 to £85 and are currently about £100 a ton. One of the main alternative sources of protein, which we discussed in our last debate, is derived from Peruvian anchovies. Harvesting this year is expected to reach 1½ million tons, which is a substantial improvement over the 400,000 tons produced in 1973.
Considerable concern has been expressed—and echoed by the noble Earl—about this year's poor hay harvest. There are fears that supplies of fodder—particularly hay and straw—may not be sufficient to last the winter. This is worse in some areas than in others and we must find out as clearly as possible what stocks are available. A detailed survey is already in progress and discussions about the fodder situation have been held with the farmers' unions and other producer bodies. The results of that survey should be available within the next fortnight. We should then be in a position to consider what can and should be done. Preliminary indications are that the shortage of hay is particularly acute in the 455 hill areas and in the South-West. Supplies are lower than usual in the eastern part of the country, which is normally an exporting area.
In the case of straw, indications are that the eastern counties have produced more than normal, but there is a serious deficit in the rest of the country. Silage production appears better than usual in quantity and quality. I should emphasise that these are preliminary indications and that the results of the more detailed survey are awaited. In the meantime, this is a matter on which the Government are keeping in the closest possible touch with the farmers' unions and other interests concerned. Various ideas have been offered and the Government's advisory services are making a special effort to help producers to make the best use of available feedingstuffs of all kinds.
If I may say so to the noble Earl, he is in danger of exaggerating here. He speaks of a figure of £100 a ton. I happen to know of one transaction which took place with a noble Lord in this House at around £45 a ton. I cannot think that talking of high figures will necessarily be in the best interests of the farmers concerned. Certainly the average figure given to me is considerably less than the £100 of which he was talking.
Turning now to the livestock side, may I deal first with the dairy sector. Milk production—the heart of our agricultural production—is the largest livestock sector, and, of course, it provides many of the calves used for beef production. In the course of the summer concern was expressed about the enormous difficulties that milk producers would face during this winter. In September, the Minister of Agriculture was successful in securing the agreement of the E.E.C. Council to an increase in producers' returns during the winter months of about 8p per gallon. This is a quite substantial increase. It has been widely welcomed and I was glad to have the confirmation of that welcome from the noble Earl.
It is too soon to forecast the probable production of milk this year. The increase in returns on milk was confirmed by the Council of Ministers only in October and it is too early as yet to assess how the industry will respond. The Chairman of the Milk Marketing Board has expressed 456 his view that it offers a basis for expansion. I think we should all do well to support the Chairman's advice. The noble Earl was pessimistic about milk products, but cheese production is expected to be substantially higher in 1974 than it was in 1973, though I agree with him that butter production is likely to be lower. No one here will underestimate the importance of our milk supply. I hope your Lordships will recognise that this Government action, which will be worth over £100 million to producers, gives a very practical indication that the Government share that opinion.
But, of course, it is the beef sector where the greatest difficulties are being met. Last July the average price of fat-stock was around £18 per live hundredweight; the average is now £13. But in some markets on some days it has been, I believe, somewhat less than that. The prime cause has been this upsurge of marketings, many of only poorly finished animals. In fact marketings are now running at a level one-third higher than in July. That means an extra 20,000 fat cattle a week. The price of calves and stores has fallen heavily, too, which bears harshly on breeders and rearers. I accept that the prices for calves of the pure dairy breeds and for Friesian bull calves have been worst hit and the reductions in prices for calves of the beef breeds and beef crosses have been less drastic.
I cannot agree entirely with what the noble Earl said about calf slaughterings. It is true that these are running at an annual rate of double last year's very low figure of just over 200,000, but that is not altogether a fair comparison. It does not of itself prove that beef production will be down in 1976. We are still a long way from the level of slaughterings of 600,000 or more in the late 1960s. Last year saw very high prices. The noble Earl will recognise that the number of slaughterings was abnormally low. I gave the figure for the 1960s when the breeding herd was much smaller than it is today.
The noble Earl has suggested that imports of cattle from the Irish Republic have been depressing market prices and that a domiciliary period of two to three months should be introduced before payment of our marketing premium. This would not be easy and we should in any 457 case keep this trade in perspective. It is a traditional trade, and it could not legally be stopped. But the numbers of fat cattle sent for slaughter here represent only 5 per cent. of total cattle slaughterings. I have, however, noted the point which the noble Earl has made. I have no doubt that reference will be made to it later in the debate; and I give an assurance that in their consideration of this matter full weight will be given by my colleagues to what is said.
My Lords, there are some grounds for believing that we may now be at the bottom of the prices trough, and that market prices will firm as marketings ease off, helped by the Government measures of support. In this way, we are hopeful that producers' returns will be restored to a reasonable level. That is the background of the past six months in the beef sector. During this time the Government have been working towards the establishment of a new EEC régime for beef as Community beef markets deteriorate. Your Lordships will appreciate that this has been no easy task. At least, I hope your Lordships will appreciate it, because when I said it was going to be difficult not a syllable of support did I get in the debates we had on the Treaty of Accession, except from the noble Lord, Lord Woolley. But it is conceivable that the truth of what we said in those debates is now becoming appreciated. The old deficiency payments scheme, which was well liked and was suited to our needs, was not ended by us and we did not negotiate the Treaty of Accession. It is that Treaty of Accession which effectively blocks any reintroduction of that practical national support measure.
In its place, we have this system of permanent intervention. It requires member States to buy beef at predetermined prices, and to freeze and store it until it can be disposed of either inside or outside the Community. We, the Labour Government, objected then as a Party, and we object now as a Government, to this freezing down and storage of fresh beef, and to the creation of a beef mountain. We object in principle, and we object because it does not work out in practice. The Community's market price is now below 80 per cent. of the guide price, as compared with the level of 93 per cent. which permanent intervention 458 was intended to sustain. In the Irish Republic, where market prices are the lowest in the Community, the price is 50 per cent. of the guide price despite intervention buying. My Lords, why are so many Irish animals coming here? It is simply because intervention has broken down there. It is impossible for the Irish Government to buy and to store the animals that are offered, because of the lack of cold storage facilities. This is why the Labour Government negotiated the option not to operate the permanent intervention system, and have exercised that option.
The extent to which we have been able to revise and to renegotiate the CAP has, I think it will now be accepted, been beneficial. As a first step, the Government took action aimed at safeguarding the future supply of beef. The calf subsidy was increased by £10 a head from last July, at a full-year cost of £34 million. Payment of the beef cow and hill cow subsidies for 1975 have been brought forward, so that producers can get the money early in the new year when they most need it. This will put another £35 million into the hands of producers at a very crucial time. These measures, with the award to the milk producers, should help to safeguard a continuing supply from the dairy herd of calves suitable for beef production.
So far as the market for fat animals is concerned, the Government have persuaded the Community to introduce a marketing premium, on a rising scale, financed increasingly from Community funds. The object of the scheme is to supplement the return from the market through the winter. By February the premia will be £36.65 a head, or over £3.50 a live hundredweight. I know that some say the scheme has not worked, and indeed the noble Earl said it was useless. Of course, it could not have prevented the drastic fall in auction prices this summer. I have already explained that it was the excessive marketings which did that damage. But it has supplemented producers' returns. It raises current prices to around £15 a hundredweight, and should have even greater impact as it rises to over £36 a head in February. It is also important to realise that these premia represent a radical new departure from the EEC's beef policy, 459 and their introduction should help to pave the way for other changes in the Community's beef régime.
To help stimulate demand, the Government are introducing on December 2 a Community arrangement for payments to old-age pensioners of 20p a week in respect of their beef purchases. Secondly, agreement has also been reached on a Community scheme for subsidies of over £260 a tonne to be paid to the trade to encourage the private storage of beef. These schemes should be particularly beneficial to the United Kingdom. They should help to firm up prices; and the storage scheme should help a better phasing of supplies on to the market. These measures, I suggest, add up to a substantial transfer of resources to the beef sector. Actual payments of subsidies to the beef industry for the year to March, 1975, will rise from under £65 million to over £150 million, and this, I suggest, illustrates the Government's intention to encourage production whenever they can within the constraints of our obligations under the Treaty of Rome.
Twice in recent months my right honourable friend has pressed in the EEC Council of Ministers for the introduction of some measure to assure a reasonable level of returns for producers. So far he has obtained no positive response. However, he is still trying, and he has outlined the type of system which we will be seeking. It is a system which I believe would be acceptable to most of us. Its aim would be to provide beef producers with the genuine and long-term security of an adequate return. He intends to press for a system of variable marketing premiums which would provide such an assurance. He will seek the introduction in the Community of production grants, possibly on the lines of our calf and beef cow subsidies. These could safeguard the supply of good quality calves and store cattle. He would want an improved and simpler import régime. These are the arrangements that the Government have been advocating in the run-up to the settlement of a new Community régime, and they would clearly represent a substantial improvement on the present permanent intervention system.
The noble Earl, Lord Ferrers, also raised the question of the ban on the 460 export of cattle for slaughter and the implementation of the recommendations of the Committee chaired by the noble Lord, Lord O'Brien. All interested parties have been given an opportunity to comment on the Committee's recommendations, and the Government have undertaken that the present policy will not be altered until the report has been the subject of a debate in the other place. What has been said to-day and what is said later in the debate will be taken into account. I can add that the Government are in touch with the Community on aspects of the report, and regard the matter as one of urgency.
Before I leave beef, I should like to refer to a point put to me the other day by the noble Lord, Lord Walston, who suggested that the distributive margin between the farm gate and the retail shop is larger here than in France, and that this should be looked into. I have made inquiries to see whether this could be done. I understand that such comparisons arc difficult to make since our systems of cutting meat and marketing it are very different. However, I can say that on this matter the Price Commission has been asked to conduct a study in depth of meat prices, including butchers' margins.
I have spoken at some length about beef because I agree with the noble Earl that it is currently facing considerable problems. Pig producers have had similar difficulties, but their position is now improving. The Government introduced a special subsidy of 50p per score on fat pigs and subsequently extended the subsidy when the market failed to improve. Market prices have now firmed to about £4.90 per score. The Government are considering the position of the pigs guarantee following the increases in common prices agreed in the Council of Ministers. It is perhaps worth noting, too, that the monetary arrangements agreed by the Council represent a reduction in feed costs to the pig industry of something of the order of £9 million. I know that sheep—for some time the most buoyant of the commodities in the meat market, but now less happy—have caused concern. To meet this, my right honourable friend has announced his intention of increasing the basic rate of hill sheep subsidy from £1.20 to £2.20 a head, and the supplementary rate from £1.75 to £3.
461 These increases amount to over £9 million-worth of extra aid to producers in a full year.
As the noble Earl said, there is much interest here in the poultry industry. Fedingstuffs, again are of course, important to both poultry and egg production and the fact that they have gone up when the market has been weak has created special problems. There has, however, been some recovery in egg prices recently, but the sort of fluctuation which has been experienced is really of no benefit to anyone. These are in general highly efficient and organised sectors of the agricultural industry and I hope that I am not being over-optimistic in saying that, in the long run, it should be possible for them to achieve a more even supply of products.
I have gone through the main commodities at some length because I think it is important to see the full range of the industry's activities and, in particular sectors, to get problems in perspective. The substantial catalogue of aid measures provided by the Government represents a major effort—undertaken in only eight months—to sustain the industry in the context of some eighteen months of domestic and international problems of a kind rarely experienced before.
My Lords, I have said something about what we have done and hope to do in Brussels. Our general aim is to keep down the cost of the Common Agricultural Policy, while ensuring that the necessary conditions are provided for the agricultural industry to assure a reliable food supply at stable prices for consumers. The Government will be discussing the necessary measures in the Community over the next few months during the renegotiation of 1975 prices and the stocktaking which will follow. We believe that the sort of changes we are advocating will benefit the European Community as a whole.
The noble Earl said that sugar merited a separate debate. There will in fact be one to-morrow—and in the interests of time, I will speak on that to-morrow. I should add a word about the points raised on the capital transfer tax. I can say that the views of the agricultural organisations directly concerned have been made known in detail to my right 462 honourable friends the Chancellor of the Exchequer and the Minister of Agriculture and there have been extensive discussions with officials. I am not in a position this afternoon to say what action will be taken. That is a matter for my right honourable friend the Chancellor of the Exchequer. But I again give an assurance that what has been said to-day will be called to his attention.
My Lords, I liked the ending of the noble Earl's speech. I will see that the points which he made about the possibility of inter-Party discussions are considered. I hope that I have matched his reasonable approach. I have tried to avoid controversy and to deal with facts, as they are known to me. The next few months will be important. Another Annual Review is approaching. A new round of talks on E.E.C. farm prices will start next month. Renegotiation and the stocktaking of the Common Agricultural Policy are in train. The new E.E.C. beef régime is under consideration. Talks are being held with the interests concerned on the long-term future of the home agricultural industry. This is a crowded timetable, but the Government's record in the past eight months suggests that they are capable of dealing with such a timetable. Of course, complacency would be folly, but defeatism would be absolutely fatal. I hope that in this debate from now on we can ensure that we can emphasise together the words of the Motion calling for "an adequate supply of food for the nation and … a vigorous and stable home agriculture".