§ 5.3 p.m.
§ Lord RAGLAN rose to move, That this House takes note of the Reports of the European Communities Committee on EEC Farm Prices 1978–79 and proposed changes in Green Money, and on Milk. [Fourteenth Report (H.L. 97)(R/3200/77, R/3295/77 and R/2601/77); Fifteenth Report (H.L. 98)(R/2648/77 and R/27/78). The noble Lord said: My Lords, this is the first debate which has been held by your Lordships' House on a report from the Select Committee since the death of our noble friend Lady Tweedsmuir. I think it is right that I should say how much 1610 we loved and admired her and how so much the poorer we feel for her passing.
§ I beg to move the Motion standing in my name on the Order Paper. As acting-chairman in the absence of my noble friend Lord Walston of the Sub-Committee which produced this report for the Select Committee, I think that I can say without diffidence, because I did not draft it, that this is a good, clear report and that it is not too long. I am sorry that it has been available for only a comparatively short time partly because of difficulties with printing but also because it might have been ready earlier if we had not decided to discuss it very fully in Committee when its emphasis was altered somewhat from taking a neutral line to one of making a positive recommendation that British agriculture should be allowed to expand—something which would be both healthy for farming and in the long-term interests of consumers.
§ As a farmer, I do not mind the Committee's saying that my operations should be allowed to become more profitable, but being chairman of the Committee too, I should feel shy in making such a proposition myself; I would only say that the Committee accepted the observations of non-farming Members who felt that things had slid rather too far, that British agricultural production was being held back for short-term reasons and that consumers' interests would benefit from home expansion.
§ My Lords, let me say that I think that few farmers are in penury. The great majority in any case will always survive by pulling in or cutting back. I have done it myself. What you do is to tie your gates together with string and your tractors with wire; you do not erect that shed, you do not drain this field or dig that ditch and you keep your head down until times get better. But one consequence of that kind of operation is to depress the industries which depend upon supplying agriculture—and they are very many and they employ a lot of people, probably as many as farming itself does directly. Then there are the associated food manufacturing industries. Encouraging the importation of manufactured foods by maintaining an artificially low green pound depresses them, too; and perhaps the noble Viscount. Lord Trenchard, may have a word to say about this.1611
§ Keeping food prices low therefore decreases economic activity over a wide slice of home industry. It has a kind of domino effect. If an industry is poor, it depresses an industry which is either directly or indirectly dependent upon it. If some farmers—perhaps they have bigger farms or they are better farmers—make more money out of higher prices than it is thought they deserve, the Inland Revenue is there to cope. I remember my accountant reproving me one year when I expressed pleasure at not being eligible to pay income tax. He said that it merely meant I had not made any money: at which my face fell back into place and the Chancellor of the Exchequer was disappointed as well. At any rate, we are saying in the report that we think it wise, by a progressive lowering of the level of the green pound, to allow British agriculture to expand because it produces competitively; and we are also repeating that there is more likelihood of being able to hold down prices in the Community in the long term if production is encouraged in those areas best suited to it by climate and by soil as well as by farm structure.
§ My Lords, in saying that, we must remember that this rationalisation which has been going on slowly for a long time will cause, as it has caused, social problems in parts of the Community. Therefore, it can still be allowed to occur only slowly. When we say that the moderation of the proposed price increases is a sign of growing realism from the Commission, we realise that the Commission would not be proposing higher prices than they think they can get the farm Ministers to accept. Mr. Gundelach and his men must have been applying a lot of pressure this last year.
§ The worry is not surpluses. We should all be grateful to have more than we need. It is paying for the surpluses. But, allowing for inflation, the Commission are, in fact, proposing what I was intrigued to hear described as a negative price increase; and we say that farm support prices in real terms are likely to fall and we will have to see over the coming year whether this fall will be enough either to reduce surpluses or to cause no increase in them.
§ As your Lordships are aware, the Commission face two complications in 1612 their price setting. These are the movements in the values of the national currencies, and the setting of the green money rates. The Commission's proposal, recently endorsed by the European Parliament—where I was interested to see that the rapporteur of the Agricultural Committee argued against his own Committee's report—of a 2 per cent. increase is insignificant beside the alteration in farm prices which can be obtained by changing green money rates, as the two have become so far out of line.
§ The Commission are hoping that the agricultural rates of exchange can be brought back more or less into line with reality over a period of about seven years. Whether this happens will depend upon national policies and developments which we cannot yet foresee. If the Nine countries believe in an economic Community, they ought to keep trying as a matter of policy to get the two to come together. In the British case, a steady devaluation of the green pound will on the one hand help British agriculture while with the other hand we shall help to exert a downward pressure on Community prices. That may appear to be a chauvinistic thing to do but it is one of these cases when chauvinism, the national interest and, I suggest, the Community interest may all agree.
§ I do not think that I should speak for much longer on the Farm Prices Report. In a way, mine is the easiest task this afternoon because the report does my speaking for me—and much better too. On the other hand, I am inhibited from making comments which I should like to make about the food and farming scene, and I hope that other noble Lords, even if they are Members of the Sub-Committee, will not feel so constrained and will use this opportunity to range widely over general or specialised topics. I hope, too, that they will have no hesitation in criticising the report if they feel like it, as this can only help the Sub-Committee in their considerations next year. We have a good list of speakers and I am sure that we shall have a useful debate during which noble Lords look forward to hearing the maiden speech of the noble Earl, Lord Fortescue.
§ I shall now turn briefly to our report on the Commission's proposals as to how they might assimilate the British Milk 1613 Marketing Boards into the CAP. These Boards have come a long way since Lady Elliot of Harwood's husband (who started them) was hanged in effigy in a street in Edinburgh. The Boards underpin the whole structure of milk production and distribution in this country. The dairy industry would be in a fine state of chaos without them. I think that is agreed. It would be pretty reckless so to weaken them that they could no longer perform their function effectively. Their structure does not agree with the CAP way of thinking up to now, and they have thought up some ideas for accommodating them which the Committee do not think fully fills the bill.
§ The trouble is that in this country we have acquired a reputation for being awkward. The drawback of getting such a reputation is that people begin either not to listen to you or, if they are experienced bargainers, to affect not to listen to you. I do not know into which of those categories the Commission's response falls; but our response to theirs has to be to say: "These things work and we have had a lot of experience with them. If we adopt your suggestions, they will stop working because you are knocking away some of the essential props. Why not try to slot these Boards into the CAP? Besides, they may hold some useful lessons for us all for coping with, let us say, the wine surplus, which is such a worry to us all."
§ I do not suppose that, in order to work, the Boards have to have exactly the same structure as they have now, but I hope that there will come about a better appreciation in the Commission of how they work. In paragraph 16 of the report on the Commission's proposals, we say that three key issues remain to be resolved. We have come a long way. The Commission have swallowed a lot of prejudice on the journey and if we progress just a little mole I think we may be all right. I thank the Sub-Committee for their hard work and good temper during the preparation of both reports. I know that I speak for them when I express gratitude for the assistance that we have had from people too numerous to mention. I bee to move.
§ Moved, That this House takes note of the Reports of the European Communities Committee on EEC Farm Prices 1978–79 and proposed changes in Green Money, 1614 and on Milk. [Fourteenth Report (H.L. 97)(R/3200/77, R/3295/77 and R/2601/77); Fifteenth Report (H.L. 98)(R/2648/77 and R/27/78).]—(Lord Raglan.)
§ 5.16 p.m.
§ Lord SANDYS
My Lords, the House will be grateful to the noble Lord, Lord Raglan, for introducing this debate and especially for paying another tribute to our late noble friend Lady Tweedsmuir of Belhelvie, to whom the House and indeed the nation owe a deep debt of gratitude for pioneering the whole field of European legislation scrutiny in such a meticulous and careful way. Few people outside Parliament recognise the full nature of what has taken place. As part of the decision-making process, I should like to quote from a book by Zara Steiner, called the Foreign Office and Foreign Policy 1898–1914. In her introduction, Zara Steiner says this:How are decisions made, what complex chain of intuition and reason, of ignorance and awareness relates the initial dim intent to the final formulation.All those matters concern us so much this afternoon. We have before us the final formulation which is to be presented to the Council of Ministers early in April. We hope that the Government will actively consider this report, and its recommendations and recommend certain changes to the Council when they meet very shortly.
The noble Lord, Lord Raglan, referred to Milk Marketing Boards in one of the two papers. A major step that has taken place in the past 12 months is that the EEC now recognise the vital role which all the Milk Marketing Boards in this country play. Therefore we welcome the view adopted by the Commission that the Boards should continue, though in an amended form. It has been strongly recommended that the terms of the poll of members should be changed, and the five-year rule for repetitive polls should be struck out or amended in such a form that there is perhaps only one initial poll, and one taken at the behest of Members.
I think that there are certain structural changes which are desirable but which are not specifically referred to in the report. One which is felt within the trade, I think, is the need for an independent chairman of the Joint Committee and, in conjunction 1615 with that, there is a need for more consultation and advance notice of declaration of surplus supply. This is all part and parcel of the feeling that buyers should be on a more equal footing with producers, and some safeguards may be desirable for the buyers.
In the paper referred to, entitled Milk, which is Document R/27/78, special reference is made to the producer-retailer in paragraph 12. I should like to draw your Lordships' attention to what the Committee says about the producer-retailer. The recommendation has been, to date, that any producer-retailer with fewer than 150 cows, selling milk direct to the consumer, would be able to remain outside the system. That is not felt to be a desirable exemption by the Committee, and some revision is thought to be necessary.
So far as prices are concerned, the noble Lord, Lord Raglan, referred to them, and of course the 1977–78 prices are already well-known. The levy fixed at 1.5 per cent. from 16th September last holds good, and the target price was raised by 3.5 per cent. For 1978–79 the Commission propose that the levy should remain the same, but the target price should be increased by 2 per cent. Your Lordships will have noticed that the European Parliament decided that it would be very much better if commodities in surplus—and, of course, milk is one of the principal ones—had their target prices frozen at the existing level.
It is very clear from interests in this country—principally among the National Farmers' Union and other interests—that there is a difference of opinion here. For instance, the Dairy Trade Federation is strongly opposed to any increase in the target price. When consumption has dropped and continues to drop, the surplus will clearly continue. I think the point is very well made by them, and indeed by others, that higher price increases mean higher milk surpluses. I should like to quote from paragraph 26 on page 11 of the report on EEC farm prices 1978–79:It is most likely that as a result of the prices package and the 7.5 per cent. Green Pound devaluation, there will have to be a rise in the retail price in due course.That is not thought to be correct, and I think I can explain why. I do not 1616 believe this was an error of printing: I think it was a mistake which arose in the course of the deliberations.
I think it can be explained in this way: it is a complicated story but, as your Lordships are aware, a 1.5 per cent. devaluation of the green pound is effective from 1st April this year. That is a carry-forward from last year. Then the 7.5 per cent devaluation of the green pound recently agreed to will be effective from 1st May. There will be a 2 per cent. increase in the target price suggested by the Commission, now frozen until such time as the Council of Ministers make a determination on it. That will mean that the price of liquid milk, standing at the moment at 12½p per pint, should remain the same. I think there is a very strong reason why it should do so. The reason is that in 1977 deliveries and sales of milk in this country amounted to £648 million, and the projection for this year, 1978, is that deliveries are likely to amount to £728 million—an increase of £80 million—due to an increased supply of milk and further deliveries. In these circumstances, I cannot believe that there is a case for a price increase.
So far as the co-responsibility levy is concerned, there has been some criticism—and I think rightly, my Lords. Set out for us in documents—of course there are a number of other documents involved, though I think it would be tedious to recite their numbers—is a proposed action programme to increase consumption. This I hope the Government will strongly recommend. A promotional programme based upon market research and further investigation would seem to be most likely.
This was brought out in the debate in your Lordships' House last year, when on 27th April at column 651, my noble friend Lord Onslow said this:You cannot get delivered milk in Paris.Here is a gap which the trades in Europe have not so far filled. As my noble friend said at the time, we have much to learn from them so far as co-operatives are concerned. But, with deference to the French and our other colleagues in the Nine, one may say that they may perhaps wish to investigate further the role of the Milk Marketing Board. Should they choose to do so, I have little doubt that the 1617 Board in this country would warmly welcome requests for any advice. There is nothing more important in the EEC situation at the moment than the reduction of surpluses, and if a Milk Marketing Board proposal is made by a number of other countries involved in the present situation, it cannot but do good. So far as a reduction in liquid milk is concerned, surely among the best things that could be promoted are long-term contracts either with the manufacturing trade or with industry. I would cite especially pig farmers in this connection; but what are necessary are long-term contracts and not sudden surpluses.
I turn now to other parts of the dairy industry, and perhaps I might quote what the noble Lord, Lord Raglan, rightly said a few moments ago:Our country has acquired a reputation for being rather awkward".That was quite apparent during the negotiations which took place almost exactly a year ago in regard to the butter subsidy. Your Lordships will recollect that at that time the Minister for Agriculture was offered 7½p per pound on the butter subsidy. Eventually, after a great deal of discussion and, if I may say so, considerable ill will, he achieved 8¼p per pound. I suggest that this long negotiation over such a small sum of money was scarcely worth it and was perhaps very counter-productive in the long term.
However, enough of the past. What we are seeking is expansion of the industry, and to this end the ban on the dairy sector investment aids is something on which we hope the Government will have some firm things to say to the Council of Ministers. We believe that this proposal was made last year and was struck out. It has been made again this year and there has been a circular from the Ministry which is felt to be most unwelcome by those involved on the production side.
I feel that to dwell at any length on other commodities would be not particularly welcome, but I should like to say this about cereals. These are the key commodities because they affect so many other parts of the industry. Surely, there is no need today for such high and fluctuating costs within the EEC, which are 40 per cent. higher than costs outside. There is a surplus in this country of about 1½ million tonnes of cattle feed, 1618 so that the proposals for increasing costs should surely be set aside for the time being.
I turn now to the representative conversion rates in agriculture. I notice that in Document R/2601 a comment is made, which is perhaps redolent of our experience of so many of the documents referred to. It states:All calculations therefore assume that the financial situation will remain unchanged throughout the period".One sympathises with those who have to compose tables. This is very difficult to do, particularly with tables covering a substantial period of time—in this case, seven years. But, surely, no economist will believe a table extended over such a long period, and in circumstances which we know all too well vary and fluctuate most alarmingly. Let us cast our minds back seven years to 1971 and think of the changes since then. Would it have been possible to write that sentence into a document? I feel that it is most necessary here to curtail the period of seven years, when the reduction of monetary compensatory amounts is being considered. It is much too long a period, and the time-scale should be related to circumstances. Probably two to three years would be much more appropriate.
I should now like to refer to the situation in Europe at the present time. We must remember that monetary compensatory amounts have been the means of channelling a flow of fresh income, in the form of payment by the Commission to the foreign exporter to this country sending goods to the United Kingdom to make up the total deficit of 30 per cent. by which the pound fell against other currencies. It is a complicated and difficult situation, but one must note what has been happening.
I note that, recently, within the Irish Republic farmers recorded that they have never had a better year. They have had an increase of no less than 34 per cent. in net income, with a 5 per cent. growth in output. This is a direct result of the workings of the monetary compensatory amounts, which have been very much against the interests of the industry in this country. The Irish are not alone, and there are other countries which have benefited. One need not cite them all, but certainly the Germans, the Dutch, 1619 the Danes and the French have benefited. We should look into this matter and should attempt to make some move in the right direction. But I feel that very careful consideration should be given to a time-scale different from seven years.
There is another commodity to which I should refer, because, although it is not directly concerned with the document referred to by the noble Lord, Lord Raglan, it is very important to discuss isoglucose. The two documents referred to last year were R/2291/77 and R/2292/77. Isoglucose is in a particularly difficult situation. Your Lordships will, of course, know that it is a syrup which is very widely used in the manufacture of soft drinks and in the confectionery industry. Last year the Commission recommended a levy of £60 per tonne which, after some considerable discussion with Her Majesty's Government, was reduced to £29 a tonne; and here we must congratulate the Minister on his negotiations. This levy is a protectionist move by the Commission on behalf of the sugar beet industry, which at the moment has a surplus of 3.3 million tonnes. But the levy is a very blunt instrument, and a new technology which employs over 3,300 people should not be clobbered. It is a nonsense and an acknowledged nonsense.
In closing perhaps I may be allowed to quote Mr. Gundelach's letter, because it is very welcome that, in his answer of 5th July 1977, he said this about the situation in which the industry finds itself, in regard to isoglucose and starch. He said:As this is a new food production technology, the development of which the Commission certainly do not intend to hinder, and as new calculations are involved, we do not maintain that the result we have arrived at is definitely correct. We shall follow the development during the coming months, and if one or other of the claims I have described should turn out to be correct we must intervene and adjust matters. The views of the isoglucose producers are probably going to prove most correct, and we shall then have to employ the means at our disposal to correct the situation. However, for the time being I have to believe that a reasonable balance largely has been achieved. But I shall not stubbornly stick to that point of view in the light of any fresh information".Here, surely, is a most welcome point of view being expressed. I hope that that view covers a much wider part of the industries that we are discussing today.
§ 5.37 p.m.
§ Lord MACKIE of BENSHIE
My Lords, I am a member of the Sub-Committee which has produced this report, and I should like to start by supporting the noble Lord, Lord Raglan, and the noble Lord, Lord Sandys, in their tribute to our former chairwoman Lady Tweedsmuir of Belhelvie. On a recent visit to Brussels, I was astonished to find the respect in which the views of your Scrutiny Committee in this House were held by the Commission, and there is no doubt at all that that was largely due to the very hard work of Lady Tweedsmuir. I am most happy to join in tribute to her on this aspect of the many-sided works which she performed.
I do not want to go into a great deal of detail, but I think that I should look at some of the basic points about the agricultural price review in Europe, and the general state of thinking in which we find ourselves. We need to go back to what the policy is all about because at the present time most of us find ourselves talking about how to control surpluses. As noble Lords have already said, surpluses are very beneficial, because they mean that there is enough food in Europe. Particularly in the United Kingdom, we should be very grateful for the Common Agricultural Policy in its general effect, because we are by no means in a world where food is plentiful and overflowing every year. At the moment we may be in one of the seven fat years, which have been known since the time of Pharaoh, but it is not very long ago that two or three dry years put the whole world into a state where the price of wheat rose by over 50 per cent. That can occur again, and I should like to remind your Lordships that we consume every year 30 million extra tonnes of cereals, and have done so for some considerable time past, while the growth in the population of the world is still accelerating.
I think first we should recognise that the CAP basically is doing us all a great service in a country that imports half its food as we do, in seeing that there is an increase in food, and that the potential of agricultural production in the Community as a whole is kept up. In a country like Germany, because they are very prosperous otherwise they are quite willing to pay the 1621 high prices. They pay their farmers much more than farmers get here because they recognise the stability brought about by the CAP. The other object of the CAP is to see that the rewards for reasonable effort in agriculture are equal to the rewards for industry. That is an objective which is held very strongly in Europe. It cannot be kept up in terms of total inefficiency, and certainly we recognised that in this country many years ago when many people thought that we should be able to support small herds of dairy cows. For example, in uplands Yorkshire there were dairy herds of between 12 and 20 cows and the farmer expected to make a living from that number. Gradually in this country we came to recognise that in return for an agricultural support policy we must inevitably have an efficient industry.
I come now to the Milk Marketing Board. I intend really to leave this subject to my noble friend Lord Swaythling, but since people are telling stories about the origin of the Milk Marketing Board I think perhaps the best one was about the doctor who always advocted breast feeding because (a) the milk was fresh, and (b) it had nothing to do with the Milk Marketing Board. One of the things about the present proposals of the Commission, in spite of certain faults, is that although ideologically they were entirely against the concept of the CAP they have come to recognise that in fact the Milk Marketing Board in this country has benefited both the consumer and the farmer and therefore they have been content to look at it as a practical consideration. With the noble Lord, Lord Raglan, I hope that we can convince them of the one or two points where they are standing out and where we think they are wrong.
Unfortunately, this overall good policy of the Common Agricultural Policy is being mucked up with a tremendous amount of distortion. Because of considerations within our various countries we are not satisfied to accept that in the Community in Europe agricultural production should take place where it is most suitable and most economic to do so. Instead, because of the particular short-term needs of the countries involved we are mucked up by different levels of value of the unit of account.
1622 The one country that has kept its currency level is Denmark. It suits her very handsomely to do so. Denmark pays the high Community prices for her requirements and then exports all her produce through very favourable monetary compensatory amounts, or export subsidies, call it what you will, to this country, so that it has the best of both worlds. It is a very happy thing for Denmark, but it is a very unhappy thing for the EEC and the CAP as a whole.
I am certain that the noble Lord, Lord Sandys—with whom I find myself very much in agreement—was absolutely right when he said that seven years is far too long before we come to a situation where we remove the distortion caused by the various countries' valuation of the green pound or the green mark or any other European currency. Also in the present situation, when we say in our report that Italy and the United Kingdom were able to raise the prices much more than the EEC intended, we must recognise that we are raising it from a very much lower base than that pertaining in Germany. As I have said several times, I should love to have 1,000 acres producing milk and wheat at their prices, even with their high wages and the higher cost of cereals. There is no question it is infinitely more profitable than it is here. It is a situation about which something has to be done.
We have to recognise that if we are going to have agricultural support it must be allied to the market. I am a farmer and I get my living from it, but I am not a fool. I realise that it cannot go on. You cannot go on having subsidies otherwise your customers get angry and say, "Why should we pay you?", and you suddenly find yourself with the whole support system removed. We must be sensible. It must follow the market. What we say in our report is absolutely true. There is a very large surplus of milk products on the Continent and it is only sensible to say that if there is a surplus the price must come down. If we go on building surpluses, at the end of the day it will kill the system. We do not want to do that because, taken on the whole, it has been extremely beneficial to consumers, both long- and short-term, in the Community as a whole.
I should like to say one or two other things about it. One is the need for your 1623 Lordships' House to scrutinise the scrutineers. I find myself fascinated by the mechanics on this Committee. I suddenly find that there is an ingenious method of doing something because there is an anomaly. I think how clever that is and I find myself trying to think up clever devices. But there are so many clever devices in this that we are going to destroy the thing. In Brussels at the present time we have a Commission with fewer civil servants than the Scottish Office in Edinburgh, but the signs are that they will breed like civil servants do—I do not mean physically, but they do multiply—and they can find work for themselves and reasons for expansion without any trouble. There are many aspects of the EEC policy which need scrutinising. For example, on quite another point we have been looking at the protection of the consumer against the doorstep seller. It could well be left to the countries involved to legislate for the protection of the consumer. Apart from French onion sellers, I cannot see many Scotsmen plodding round the doorsteps of Hamburg to anywhere else. This is the sort of thing that could well he left to the countries concerned.
We have a very good example of it in cereals, in the support price for wheat. We have now got a two-tier system in that we have a price for bread-making wheat and a price for feed wheat. In our view, and in the view of the Committee, there should be one support price and the millers should be willing to pay for good bread-making wheat. This is the simple way to do it. It is the way it is done with bailey, and it works perfectly well in that you have barley for feeding and barley for the noble purpose of making spirituous liquor, and the maltsters pay up to £10 a ton more for good malting barley. This system is an example of the kind of complication in legislation against which we have to fight all the time—legislation which pours out of Brussels and which is not always to the benefit of consumers throughout Europe.
The Commission are recommending a 2 per cent. increase in the price of food. Germany and other high cost countries believe that this is too large an increase. However, we recognise that the effect of the rise in this country is very small and that in the long term it will help the 1624 consumer. When one considers the rise in the price of motor cars, children's clothes and shoes as well as the rises in a whole range of other consumer goods which are accepted without a moan, I believe that a 2 per cent. overall rise in the price of food, which is absolutely vital to this country, is receiving too much attention.
I commend the report to your Lordships. I have no doubt that many other speakers will deal with the details. I believe that this House ought to scrutinise what we say in the report and that an endeavour must be made to keep Community legislation simple and to the point.
§ 5.52 p.m.
My Lords, I am grateful to the noble Lord, Lord Raglan, for moving this debate and for the opportinity that it gives me to speak today. I intend to confine my remarks to one aspect of farming only, and that is pigs. If this debate had taken place a month earlier, I should have had to declare an interest: that for the last 23 years I had been engaged in specialist pig farming, breeding and fattening some 2,500 pigs each year. Sadly, due to advice from my accountant and very considerable pressure from my bank, all of the pigs have now gone.
I read the Select Committee's Fourteenth Report on EEC Farm Prices, but I could find no mention of pigs or pig meat in the text. Then I cast my eye over the tables in the appendices to the report. When I reached Appendix 2 on page 14, I thought that I was getting warm, but on closer inspection I found that the commodity listed between sugar and eggs was not pig meat, as I had hoped, but pigment. I concluded that this table was intended for artists and those in the decorating trade rather than for those in the pig industry.
Then I turned to the White Paper which was published in January this year, the Annual Review of Agriculture, Cmnd. 7058. I was disappointed to find that this document did not include more than two short paragraphs on this section of the industry, a section which is in dire trouble and which has been in trouble for nearly two years. Paragraph 25 begins:The decline in profitability which began in 1956 continued into 1977".I know that I must not be controversial 1625 today, and I hope that it will not be considered controversial if I suggest that this paragraph is a little misleading. To say that there has been a decline in profitability is like listening to a forecaster announce that the weather tomorrow will be somewhat less mild and then waking up to find one's plumbing frozen and six feet of snow outside one's front door.
The truth of the matter is that very large losses have been made. The Meat and Livestock Commission produce figures each month indicating the profitability or otherwise of pig production. They refer to this as the net margin. These MLC figures indicate that all types of pig production have been losing money since July 1976, and that during 1977 each bacon pig lost about £3.50, each pork pig lost £5 and each heavy hog lost over £10. These are figures per pig. Such losses are unbearable, unless there is an immediate prospect of profits to offset these losses. I simply do not foresee such a situation arising.
There has been a considerable reduction in the pig herd in this country, and it might be asked why the reduction has not been greater. I suggest that this is only because many pigs are still produced on arable farms and that these pig losses have been absorbed by the rather exceptional profits made on some arable crops, particularly in the 1976 harvest. Again it is often said that pigs have always had their ups and their downs. In my 23 years' experience, pigs have certainly had their ups and their downs—the pig cycle. But during the last 23 years, the low part of the cycle has never reached such a trough before; nor has the trough lasted for so long.
The situation which I have described is bad for pig farmers and it is bad for their employees, but others are involved as well; namely, the very considerable bacon and meat products industry. They, too, are having a very rough time. I have no precise information, but I understand that there is a real danger of plant closures and consequent loss of jobs.
When one asks why the present situation has arisen, the answer is simply lack of stability and subsidised imports. I stress that in general I am very pro-Europe, but the present Common Agricultural Policy is a disaster for pigs, or at least for British pigs.
1626 Before we joined the European Economic Community, the many Government guarantee schemes had produced a very fair degree of stability. As a result, the British pig improved dramatically in quality and in its ability to convert food efficiently. They key to this stability was feed indexing, or the feed formula as it was then known. As to the subsidised imports, I shall not bore your Lordships with my theories about the green pound or about the way in which the monetary compensatory amounts are calculated. Quite frankly, I do not fully understand them, and I strongly suspect that there is only a handful of people in this country or in Europe who really do. I can, however, state categorically that these MCAs are a vast subsidy to other European countries, mainly the Dutch and the Danes in so far as pigs are concerned, with which no British producer, however efficient, can hope to compete.
Before I sit down, I should like to stress that the trouble in the pig industry is quite different from the trouble or troubles in other industries. Our productivity compares well with that of other countries and our labour relations are good. Our problems are simply lack of stability and subsidised imports, problems which successive British Governments and their guarantee schemes had largely overcome, to the benefit of both producer and consumer. These schemes were swept away by the European rules and regulations. My plea is that we should make further major efforts to teach the people in Brussels the lessons which we ourselves have learned the hard way over many, many years.
§ 6 p.m.
§ Lord SAINSBURY
My Lords it gives me very particular pleasure to congratulate the noble Earl, Lord Fortescue on his maiden speech. I have known him for many years and in a non-political sense I would address him as my noble friend. He has the most practical knowledge, extending over many years, of the pig industry, the pig sector of agriculture, and there are at least two noble Lords in this House who could vouch for his knowledge. I hope he will participate in many of our agricultural debates because I am convinced he has a most valuable contribution to make.
1627 Although I attended earlier meetings of Sub-Committee D when evidence was taken, due to my absence abroad I played no part in the drafting of the 14th Report on EEC Farm Prices for 1978–9 which is before your Lordships' House today. I should, therefore, like to take this opportunity to congratulate my noble friend Lord Raglan and my colleagues on the Committee on the balanced report which we are considering.
I would have greatly preferred no proposed price increases at all for surplus commodities, which is the policy of the consumer groups throughout the EEC. But I somewhat reluctantly accept that what is desirable in practical terms is not always possible in political terms, particularly when nine countries are involved, in some cases with conflicting interests. As all your Lordships are fully aware, EEC farm price reviews are irrevocably bound up with the question of the green currencies. What, in my opinion, is particularly worrying is that nothing in these proposals leads to any likelihood of reductions in structural surpluses, which apply to milk, sugar and wine, in addition to the surpluses of feed wheat and barley with declining consumption, increasing surplus of olive oil, and periods of over-production in beef, as set out in Table 2 of this report.
I am especially concerned about the dairy sector, where the price proposal is for an increase of 2 per cent. in units of account, and where, according to the Commission's words, the present surplus will worsen. According to the same source, there is already a 14.4 per cent. surplus in milk products. As regards the supply position in the United Kingdom, according to evidence submitted by the Dairy Trade Federation:Stocks of butter in the United Kingdom at the end of 1977 are estimated at 170,000 metric tonnes, and with commitments to import from New Zealand of 125,000 metric tonnes in 1978 we will have sufficient to keep the market supplied until the autumn of 1978 without even selling a tonne of our own production".During examination of officials of the Ministry of Agriculture, Fisheries and Food on 18th January, the reply to a question I asked was that milk must be the sector where we have greatest concern about the proposed pi ice increase and where we feel there is least justification for any change at all. It is interesting 1628 to note that milk takes 42 per cent. of Community expenditure; 87 per cent. of skim milk powder is subsidised, as well as 40 per cent. of the butter.
To a trader—and I claim to be nothing more than a retired one—it seems nonsensical to put up the price of a product when you are overburdened with stocks and when inevitably a higher level of prices will stimulate production and reduce consumption. In addition, our consumption is likely to be affected as the Commission propose not to extend the special United Kingdom butter subsidy beyond the end of 1978. And, what is more, I do not share the optimism of the National Farmers' Union that the milk action programme, including the proposal to increase and extend the aid available for the supply of milk and milk products to school children in the EEC, will have sufficient effect on the huge surplus of dairy products. Some may recall the eminent French politician who, by example, tried to convert the French wine drinker to a milk drinker, without any success.
I was much impressed by an article by Michael Shanks which appeared in The Times on 16th February, which some of your Lordships may have read, in which he adumbrated two basic and simple principles for the reform of the CAP. The first is that no increase in common prices should be permissible for a product already in structural surplus. The second is that taxation on competing products should not be used as a means of disposing of food surpluses by compelling consumers to eat the dearer product; for example, the taxation on isoglucose, a sugar substitute, to make it less competitive with sugar, and the earlier, and happily vetoed, suggestion of taxing margarine to make it less competitive with butter.
The CAP is a fundamental element of the Community, and sooner or later there must be reforms. As Michael Shanks suggests, the Community could fix an overall budgetary ceiling on farm price support. If production went above the ceiling, there would have to be a cutback in the following year. It is most important to find a way of preventing surpluses developing in the first place. The disastrous weakness is the open-endedness of the price guarantees.
1629 In commending this report to your Lordships, may I conclude with a quotation from a recent speech by an eminent authority, Dr. Keith Dexter, Director-General of the Agricultural Development and Advisory Service. He said:Whatever short-term palliatives might be devised by the ingenious bureaucrats of Brussels—and their equally ingenious counterparts in national capitals—the tendencies towards overproduction in the Community will only be finally tempered by farm product prices being so low as to force the less efficient farmers out of production".
§ 6.11 p.m.
§ Lord VERNON
My Lords, as a Member of Sub-Committee D, I, too, should like to pay my small tribute to the late Lady Tweedsmuir. I joined the Sub-Committee shortly after she became chairman of the Select Committee and I think I can say that she was an inspiration to all of us. She was certainly an inspiration to me and I never cease to marvel at the way she used to attend at least one in two of or meetings and was usually better briefed on the very complicated subjects which we had to consider than most members of the Sub-Committee. She will be very greatly missed.
I should like to follow the noble Lord, Lord Sainsbury, in congratulating my noble friend Lord Fortescue on his maiden speech. I am sure that we shall all look forward to hearing his pungent comments on not only the pig industry but all sectors of the agricultural industry in the future.
I come to the subject of this debate. I must start by declaring my interest as a farmer. It seems to me that the package offered by the Commission is very fair, given the realities of the situation. For the second year running the Commission have made a genuine effort to reduce, in real terms, the returns to farmers in strong currency countries who, because of the green money distortions, are paid so much more for their produce than farmers in weak currency countries. That, of course, applies especially to Germany. Unlike ourselves, for example, the Germans cannot supplement the relatively small price increase offered—2 per cent. this year as against 3 per cent, the previous year—by devaluing their green currency.
I say that the package is fair given the realities of the situation. Mr. Silkin does 1630 not agree. He seems to think that because of the surpluses there should be no increases in price at all and he has said so in what I think are peculiarly tactless terms. However, what Mr. Silkin and some of his colleagues, and indeed many other people in this country so often forget, is that the Commission in Brussels are not just considering the implications of their policy for the United Kingdom; they are having to consider the CAP as it affects eight other countries as well—countries all of which have completely different traditions from ours so far as agriculture is concerned. They have always attached greater importance than we have to self-sufficiency in foodstuffs. They employ a much higher proportion of their labour force on the land. They spend a higher proportion of their income on food and, generally speaking, the farmer on the Continent gets a better deal than he does in this country. For the Commission to have suggested no price increase would have been politically unacceptable, and for the United Kingdom to have made such a proposal was both naive and psychologically damaging to our interests.
The effect of the package is that there will be an overall cut in German farm incomes, because price increases will not adequately cushion them against the cost of inflation. It is not much of a cut, but it is something. When we consider that it is being put forward in conjuction with proposals to phase out the green currency distortions over a seven-year period—and that may be too long, as my noble friend Lord Sandys has said—and also to substitute the European unit of account for the present agricultural unit of account, tied to the joint float currencies, which would make a substantial difference if it could be accepted by the strong currency countries—when we consider all that it can be seen that the Commission are making a determined effort both to cut the level of support prices and to get back to a basis of fair competition between the countries of the Nine. Instant results are not possible and should not be expected. My Lords, this is a field where I believe we must work gradually, and, if I may say so, to some extent by stealth.
The co-responsibility levy in the milk sector, which is discussed in paragraph 15 of our report, is another example of trying 1631 to achieve results by indirect means. Our Committee has always been somewhat sceptical about the effect of the levy since it meant taking away from the milk producer with one hand what we had given him with the other by way of a price increase. The object of the levy is to stimulate consumption.
We, in this country, through our Milk Marketing Board, have always advertised our milk and it is difficult to see how the levy will benefit us, particularly if the existing expenditure by the Board on advertising is not taken into account in allocating the proceeds of the levy. In any case, it may be questioned whether there is much scope for increased sales of milk and milk products. Admittedly we and the Irish drink more milk, but on the Continent they eat more butter and cheese than we do. Possibly the human metabolism dictates a point beyond which a further intake of milk and milk products is undesirable. Nevertheless, when all is said and done the co-responsibility levy acts as a tax on milk producers, and without it I suspect that the price of milk would be even higher than it is.
Whether the surpluses will, in fact, be reduced by the present proposals remains to be seen. It seems doubtful. Our Committee take the view that in due course fairly severe price reductions in surplus products are inevitable, but such reductions should take place only when the more efficient agricultural countries, of which ours is one, are allowed to compete on a fair and equal basis and, if necessary, to add to the surpluses.
The reasons for this somewhat paradoxical recommendation, which we believe is in the long-term interests of consumers as well as farmers, are explained in paragraphs 24 and 25. I shall say no more about it because I understand that my noble friend Lord Trenchard will be expanding on it in his speech. I trust that our view will be endorsed by the Government and that the updated version of Food from Our Own Resources, which we are told is to be published shortly, will reiterate the need to expand production in the United Kingdom.
I should like to conclude my speech by making a more general comment on our relations with the Community. One cannot visit Brussels, as our Sub-Committee has recently dome, without being made 1632 aware of the profound distrust with which our country is regarded by its partners. Indeed, one does not have to go to Brussels to find that out; one can do so by reading the Press. It is a most disheartening situation and one that should never have arisen. It is more than disheartening; it is a tragedy when one recollects the high hopes for British memberhip of the Community when we joined.
One is bound to ask who is responsible. The answer is, of course, the Government and especially those Ministers who have never accepted the decisive verdict of the British people in the referendum. Because the verdict went against their wishes, these Ministers are doing their best, and I shall not say to wreck the Community, but at least to change its nature completely from the continuing process of union which was envisaged under the Treaty of Rome. The blatant and aggressive ways in which they pursue our national interests—or what they deem to be our national interests—are, in my view, often counter-productive. The common fisheries régime is an obvious example. I believe that we should have been offered much better terms had we been more amenable on other issues.
The matter was put very succintly the other day by the noble Lord, Lord Thomson of Monifieth, in the Second Reading debate on the Bill for direct elections on 7th March, when, at column 711, he said:What often matters in the European Community, in my experience, is not what you say but the way that you say it. Certainly I am the last person to say that Her Majesty's Government should not vigorously defend national interests within the European Community; other countries do that. But a great deal depends on the way it is done".In another significant passage at column 710, the noble Lord said:I sometimes wonder whether Her Majesty's Government have any imagination at all where the European Community is concerned".Those damning words were not said by a Conservative critic of the Government; they were said by one of their most distinguished supporters who was previously a Minister of the Crown and who has had the unrivalled experience of being one of the two British Commissioners in Brussels. One can only hope that the Prime Minister and his colleagues will pay some attention to them.
§ 6.24 p.m.
§ Lord COBBOLD
My Lords, the noble Lord, Lord Raglan, and other noble Lords have dealt very fully with the main sections of the report on farm prices which is before us, and the interests of the producers and the consumers have been put with force by various speakers and will I am sure be put by subsequent speakers. I do not wish to go over the same ground or to deal with the effect of the measures under discussion on these various interests. I wish rather to remind your Lordships more specifically of two points which have been made in earlier reports and which have considerable relevance to the report now under discussion.
On page 10 of this report there is reference to the impact of changes in green exchange rates on price negotiations and on the importance of considering these two questions together. On this occasion it was not felt necessary, beyond a brief quotation from an earlier report, to go in any depth into the very complicated subject of green money, because that was done in great detail in the report which was debated here on 21st March, 1977. However, I should like to remind your Lordships that the picture drawn in that earlier report and the conclusions reached therein are, in the Committee's opinion, still highly relevant and should not be lost sight of. As is stated in paragraph 10 of the present report, the Committee see no reason to alter their earlier conclusions. The main conclusion in that paragraph is, I think, of sufficient importance to quote. It reads as follows:'to maintain indefinitely the present level of divergence between green rates and market rates would be untenable and runs counter to the whole concept of a common market. … while some formula of adjustment on the general lines proposed by the Commission is to be commended,'"—as the House will recollect, since the original report on green money, new proposals are before the Council at the moment—'the speed and the extent of such adjustment must ultimately be subject to the control of individual Member States through the Council of Ministers'. The Committee continue to support a progressive and balanced programme for the elimination of mcas in conjunction with acceptable decisions on price levels and the CAP generally.A further argument in support of this conclusion—the recommendation for a 1634 progressive and balanced elimination of mcas—lies in the Commission's, and particularly in the President's, recent emphasis on the objective of economic and monetary union. It is evident that, while large discrepancies exist between green rates and market exchange rates and while these discrepancies affect so large a volume of dealing between Member States, this must add greatly to the difficulties of any real progress towards monetary union and, indeed, towards any scheme for stabilisation of European exchange rates.
Secondly, at the risk of overmuch harking back, I would remind your Lordships of some points made in the Committee's report on the preliminary Budget for 1978 and in reports on earlier Budget estimates. The Committee then pointed out how heavy a proportion of Community expenditure was represented by agricultural policy—around 70 per cent. of total expenditure—and also drew attention to the increasing burden of monetary compensatary amounts on the Budget. The Committee then emphasised—and I would repeat that emphasis today—that more attention ought to be given to the financial effects of the Common Agricultural Policy and that it was undesirable that price negotiations should be confined to the purely agricultural aspects and to the conflicting interests of producers and consumers. So long as the Common Agricultural Policy takes so large a proportion of Community expenditure—often for purposes, such as support of commodities in surplus which are, to say the least, of arguable value—it will obviously be difficult for the Community to find adequate money for more general and, some will think, more useful purposes, such as the Regional and Social Funds.
I join with other noble Lords in feeling that, even if the final outturn remains unclear, the Commission has made real efforts this year to limit price increases. But I maintain the view which I have expressed in earlier debates that the CAP in general, and its proportion of total budget expenditure in particular, needs very thorough review. Finally, it is perhaps worth observing that the proposed enlargement, by the entry of Greece, Portugal and Spain, will, unless the whole policy is reviewed, add materially to the difficulties to which I have drawn attention, both in the exchange rate and in the budgetary fields.
§ 6.31 p.m.
§ Lord COLLISON
My Lords, I also should like to pay my tribute to Lady Tweedsmuir. She was a very fine person, and we can ill afford to lose her. As has been mentioned already, she was a meticulous sitter-in on all occasions when the work of her Committee and its Sub-Committees was discussed. I personally feel a sense of loss because of the respect I held for her.
I should like also to compliment the noble Earl, Lord Fortescue, for his maiden speech. He is not in his place now, but perhaps he will read Hansard in the morning. There was no need for him to feel that he might be controversial because, as I am sure he knows, we all agree with him about the problems which affect the pigmeat producers, and it is grand to have another voice for agriculture in your Lordships' House. I also once again have to thank my noble friend Lord Raglan for introducing these two reports, 14 and 15, which he has done with his usual ability and consummate skill.
As we know, the Commission propose an increase of 2 per cent. in units of account, although a study based on the objective method indicated that the increase should be 4.2 per cent. Since that proposal was made and we discussed it originally, a number of Member States, including our own, have made changes in their green currency. In our case the combined effect of the Commission's 2 per cent. proposal, plus the devaluation of the green pound, will be to double the increase in farm prices over that proposed by the Commission.
The Commission feel that their approach is a responsible one, and we have paid tribute to that approach. It was described by the Ministry's representative as "tough". As the report concluded, it appeared that on average throughout the Community farm prices in real terms are likely to drop during the coming year. Consequently the reaction has been immediate and sometimes fierce. The European Parliament, as reported in the Financial Times of 16th March, is split on the issue, and its agricultural committee proposed a 5 per cent. increase. The proposal prompted Mr. Gundelach to describe it as utter folly, pointing out that a 5 per cent. increase would cost the Community 300 1636 million units of account more over 12 months to decrease, as he pointed out, the production of those commodities in the Community where there is already a worrying surplus; it would further widen the gap, in his view, between the rich and the poor farmers' income. So all is not happy in the state of the Common Market.
The dilemma and the dissatisfaction—because you cannot win here whatever you do—arise because of the conflict of view, and perhaps of need, between the producers and the consumers and the requirement, if one can do it, to reach a balance between these two interests. Unfortunately this seems to be impossible under present circumstances. It is a circle which cannot be squared; it cannot be squared, at least, to everyone's satisfaction. Producers feel, and they have already made their voices heard, that the increases are not enough to meet the increased costs which they have to face in terms of machinery, fertilisers, and the other effects of inflation. The consumer organisations, on the other hand, have made comments which our Committee has described as "too harsh", and certainly some hard words have been spoken on both sides.
Our own Minister has come under fire. I have seen him described as, "A good Minister of Food but a bad Minister of Agriculture". But I have no doubt that if the consumers were to use a similar description they would reverse the order: they would say, "He is a good Minister of Agriculture but a bad Minister of Food". So, "You pays your sixpence and you takes your choice".
But speaking completely non-politically—and certainly my right honourable friend does not need anybody to defend him, least of all me—and speaking as an objective observer of the situation, I feel that the criticisms directed at him from both sides are not justified. In the circumstances in which we find ourselves no one—and I repeat, no one—from any Party of any colour could find an answer which satisfies the consumer and the producer, and bridges this gap between the two. I say this because I think the problem is innate. It is built into the structure and the policies of the Common Agricultural Policy.
1637 Having said that I repeat that I remain firmly convinced that the Common Market is right for us. I am sure that, given time and patience, the policy will be reviewed and adjusted so that the present apparent conflict between the producer and the consumer interests will be resolved, as they must be, because in the long run the two interests are the same. It is the method of giving support to agriculture which, in my view, creates the problem and presents to our Minister the bed of nails on which he has to lie.
The noble Earl in his maiden speech referred to the system which we used to operate in this country. He spoke of it with regard and understanding. But under that system the United Kingdom consumers were able to buy their foods at something near world prices, and the producers, on their side, were protected by our support system based upon the guaranteed prices arrived at after each year's price review. So there was no direct conflict between producer and consumer, although, as I know very well, the arguments were fierce and long. Nevertheless, our people were able to get their food at something near world prices, whereas, under the Common Market system with its policy of levy at the point of entry, the MCA system, the intervention system, all these have the result that the consumer is not getting his food at anything like world prices but at a level considerably higher.
I am not considering, or suggesting—I would be very stupid if I were—a complete dismantling of the Common Agricultural Policy. That is not possible. But I believe, and I have said this before, that it is a vital necessity that the policy should be kept constantly under review and amended, and that there should be a complete understanding of the reasons why these difficulties arise and why these conflicts always happen between the producer and consumer interests.
If producers feel they are cramped, one cannot cure their ills by cutting off their limbs. Nor can consumers be put on the rack and stretched, certainly not in terms of their pockets, indefinitely. The thinking must go to the heart of the problem and appropriate policies must be evolved from a proper understanding of the problem. As I said, faced with the situation as we know it, the only proper and honest step to take is to try to find 1638 a compromise, and that is what the Commission have tried to do and what our Minister also has tried to do. Misunderstandings have arisen, but, as I said, they have been due to the innate nature of the conflict being dependent on the structure.
Turning briefly to the proposals for milk, it is clear that the Commission have been receptive and tried hard to accommodate us. The future of the Milk Marketing Board—I hope of the others, too, but certainly of the Milk Marketing Board—seems assured and one must express appreciation of the understanding that has been shown by the Commission and of the work that has been done by my right honourable friend.
I agree with the points made in the 15th Report regarding the frequency of polling. I do not think it is necessary; I feel sure that the 80 per cent. of support of producers is there and will continue to be there and that there is no need to change the present arrangements away from having polls on request If I am worried about anything in particular. I am worried about the proposals for producers-retailers with herds of less than 150; if there were too many of that type of producer-retailer as a result of the scheme, the Milk Marketing Board could have the ground cut from beneath it and lose its position and authority as well as the support of farmers who use it having not liked it when it was first introduced, as I well remember, but now understanding what an important element it is for them.
A word of appreciation is also due from this House to the Commission for their understanding of the Northern Ireland problem about milk consumption, where the percentage level cannot be reached; they have made alternative arrangements in that regard. I entirely agree with what is said in the report about the co-responsibility levy. Having welcomed the 12 per cent. allocation for school milk, it is rather worrying for us and farmers that the use of this money has not been fully explained to us—how it could be used in the interest of farmers, not only in this country but abroad.
Returning briefly to the problems which confront the Commission and the Common Agricultural Policy, in view of some comments that have been made we should 1639 remember that we are equal Members with other States. I might mention in passing that the problems we face as relatively new Members would not exist had we gone in at the beginning but that is history and, unfortunate though it is, we cannot do anything about it. We, like other Member States, have our own problems and it is only right, as other Member States do, that we should state clearly, and if necessary firmly, what those problems are, Of course we should not expect them to say, "Thank you very much. We will reform ourselves immediately to suit your situation". Nevertheless, it is right and proper that we should be able to, and should, state our problems clearly, and our Minister should not be blamed for doing just that.
It is rather unfortunate that he is known to be, or to have been, an opponent of the Common Market. A great deal too much is being made of that. After all, as a loyal member of the Government and Cabinet he understands and respects the fact that we are Members of the Common Market and he does his best there, as he does in Cabinet in this country; and it is not his fault or the fault of anyone else, as I said that the very nature of the beast presents the sometimes intractable problems to which he must try to find a reasonable, proper and fair answer.
We must also remember that we entered the Common Market with a great deal of experience behind us, and I refer again to what the noble Earl said about our support policy as it used to be following the 1945 Act. It is only right and proper, in view of that experience, that we should be entitled to give, and do give that advice. If that is interpreted as being improper, or if it is said that we are being a nuisance, that is too bad. I would certainly not wish us to be a nuisance in that sense, but to put forward proposals and ideas about which we know and which we have tried out ourselves in an effort to improve the CAP, must be perfectly right and proper.
I am a great optimist and I may be thought to be over-optimistic. However, I have always taken the view, not only for agricultural reasons but for reasons of a much broader order and perhaps even of a more vital order, that our membership of the Community is essential in today's 1640 world. I believe in the concept and I believe it will work and that, as the years go by, the necessary reforms, on our side, in the CAP will come about; and on that note I thank noble Lords for listening to me.
§ 6.48 p.m.
§ Baroness ELLIOT of HARWOOD
My Lords, I too wish to add my appreciation of the great work that was done by the late Lady Tweedsmuir of Belhelvie. We were great friends; I knew her for many years, as I knew Lord Tweedsmuir, and it came as a terrible shock to us all when we heard of her tragic death. She has left behind a tradition which it will be very hard for anybody to live up to, and I know that we are all indebted to her for the work she did.
I also wish to thank the noble Lord, Lord Raglan, for his chairmanship of our Committee. He was chairman for two years and then decided to step down in favour of the noble Lord, Lord Walston, but this report—and I think the one before it—was entirlely his doing and I wish to say how much I appreciate his chairmanship, and congratulate him on the excellent way in which he conducted our affairs.
I will not delay your Lordships for long because I have agreed with everything that noble Lords have said, and one cannot go on indefinitely repeating the remarks of others with which one agrees. However, I must comment that the Commission think so much of production that they do not think enough of selling, of the need to find ways of getting rid of surpluses—that is, beyond turning milk into milk powder and feeding it back to the cows, which is not exactly the best way of dealing with surplus milk. I should like to see some inspiring proposals coming from Brussels on the use of, and the need to give encouragement to people to consume, the surpluses which we know exist.
For that reason I am delighted that the Milk Marketing Board has won through. Lord Raglan rightly said that it was started in 1933 by my husband as the then Minister of Agriculture. It went through terribly difficult times to get going at all, but now that it is going, and has been going for 40 years or more, it would be tragic if it came to an end. 1641 indeed, I believe the Commission would do well to adopt some of the methods which the Milk Marketing Board uses. The Milk Marketing Board sells milk. It encourages people to consume milk, and this is something which is absolutely vital.
Why is it, how is it, that we in this country consume more milk per head of the population than any country in Europe? Obviously this is due to such things as the daily delivery of milk, which is not done in Europe at all. Why do they not try to organise a daily delivery of milk? The consumption of milk products is also a factor here. They are better advertised in this country, and are consumed in greater quantities. We must also remember that the provision of milk in schools scheme was responsible for so much milk being consumed in the old days, and I fervently hope that this scheme will be reintroduced through the Commission in all the countries of Europe, including our own. I am quite sure that that would add tremendously to the consumption of milk. We may have to make reductions, but it is important, I believe, that we should encourage more people, especially children, to drink more milk.
Although I absolutely agree that one does not want to encourage more milk production in areas where it is expensive to produce and therefore is not economical, our own milk production here is extremely efficient, as is the marketing of it. I should not mind seeing a small increase in the dairy industry because it would only meet the increasing costs. We all know that each year we have very little control over these, and they hit all the different sections of agriculture quite severely.
The noble Earl, Lord Fortescue, made a most interesting maiden speech. I remember when we had a pig board and pigs were one of the main items of production in our agricultural world. I find it very sad indeed that, due to different methods, the pig industry has now been so severely reduced that someone of the skill and experience of the noble Earl should have to go out of pig production altogether.
There is one other aspect of the present policy which worries me a little; namely, 1642 the reduction in the beef breeding herds. I understand from literature I have received from the National Farmers' Union and elsewhere, that in the last two years there has been quite a big reduction in the breeding of beef cattle, and I very much hope that the increase in the hill cow subsidy, which enables us to breed our beef in the less favoured areas, such as the hill areas of Wales and Scotland, will be allowed to reach its maximum, which I believe is £31.38.
There is another activity involving beef which I am not very keen about. I refer to Irish beef coming here heavily subsidised by the monetary compensatory allowances. This is a serious deterrent to our beef producers here. Personally, I do not see why there should be this advantage given to Irish beef to undercut our own beef producers here, due to the fact that there are heavy subsidies paid through the meas. This matter should be looked into because there is certainly a deterrent here to our own industry.
I should like to say a few words about sheep and wool. These are still outside the EEC régime at the moment, but undoubtedly they will come into the régime in the near future. Exports of sheep are subject to the vagaries of the Paris market. This sometimes opens and sometimes closes and does so in an almost completely arbitrary manner. It throws out the sale of lambs and sheep very badly indeed. I should like to see something done in the Commission to regulate to some extent the way in which the French market is operating. The French also allow Irish sheepmeat to enter free into their market, while they tax our mutton very heavily. I should have thought that that was probably a principle which breaks the main object of the Common Market, which is that we should all be dealt with in the same way. If the French allow Irish sheepmeat to go free into France, why will they not allow our sheepmeat to go free into France? This is a matter that we might well look at again.
I want to raise another point about sheep and wool. In the present Commission's price lists, wool prices are left exactly at the same price as they were last year. That is really a reduction, because, as we all know, the increase in the costs of production have been quite 1643 considerable in the last year, and, over the last two years, have been more considerable still. Unless there is an increase in the price of the commodity one is selling, that commodity has in fact been subject to a reduction in price. It may not appear so on the surface, but to the producer it is a reduction because his costs have gone up while the price of the commodity he is selling remains the same. This, too, I believe is a matter which could be looked at by our representatives at the Commission.
I agree with the noble Lord, Lord Collison; we have a long way to go yet. There are problems to which it is very difficult to find a solution, but I do not think we should be put off by that. We must stick together in the Commission with all the other countries, and I am sure that at the end of the day we shall arrive at a policy which will be advantageous to everyone.
I agree also with those who have said that there should not be this great division between the producer and the consumer. We are all of us consumers, and some of us are producers. If we are producers, it is very important that we should have enough people to consume what we produce. Therefore, in the end, our interests are very much the same. This is a point which we must consider further. I do not think that the Minister should be perhaps quite so enthusiastic about the consumer as he is, though I may be misjudging him. After all, there would be nothing to consume if farmers do not produce. Therefore, fundamentally it is vital that our production should continue, should meet any increases required, and should be as efficient as possible. I believe we can claim that our agriculture is efficient, I hope that we shall continue to increase our production to meet a consumer demand, and I am as interested in this as I am in being a farmer.
§ 6.59 p.m.
§ Lord SWAYTHLING
My Lords, I wish to support what my noble friend Lord Mackie of Benshie has said, but I propose to confine my remarks to the question of the Commission's recognition of the Milk Marketing Boards in the United Kingdom. Others have spoken about this, but I feel so strongly that I 1644 hope your Lordships will excuse my doing so. As is well known, the Boards were first established in the early 1930s on the initiative, and by the overwhelming vote, of producers. Acting under the authority of the agricultural marketing Acts, the Boards purchase all milk offered by registered producers, and sell their milk on behalf of the producers. The Boards also organise the collection of milk from farms for delivery to the distributors; and the key of the Boards' success is their mandatory powers under the marketing schemes and the balance that these schemes have created between the consumer trade and the producer interests.
The efficiency of the Boards has drawn the admiration of milk producers and distributors throughout the EEC; and, in fact, it is understood that many of the countries of the EEC are envious of our Boards and would like to imitate them. The Milk Marketing Boards ensure that the consumers in the United Kingdom have regular supplies of milk, and have enabled the milk distribution trade to operate and maintain the daily delivery service. The high demand for liquid milk in this country is unique, and in England and Wales accounts for more than half its total production. The Milk Marketing Boards play a major role in making sure that this demand is satisfied. The level of liquid consumption is maintained especially by the rationalisation of collection necessary to ensure adequate distribution to centres of dense population from remote areas of production.
It must be remembered that the Boards do not fix the maximum first-hand selling price or retail price of liquid milk—this is done by the Government—but the Boards do negotiate the price of milk to be used for different manufactured products. The high reputation of the work of the Milk Marketing Boards is well deserved. They have been able to develop order, confidence and justice in the marketing of farmers' products through highly efficient management and through their relationship to the processing and distributive trades. Thus they have assured that the health and welfare of consumers have also benefited.
However, there are two particular aspects of the proposals of the Commission which jeopardise the future of the 1645 Boards. The continuation of the Boards, it is suggested by the Commission, as has been mentioned already, should depend upon the assent of 80 per cent. of voting producers taking part in quinquennial agricultural polls. How can anyone continue to run an efficient business if the employees realise that there is a risk that every five years their jobs may come to an end? The retaining of efficient staff or the recruiting of new staff would become impossible. It is already provided under the present schemes that if a given number of producers are dissatisfied they can demand a poll. It is readily accepted that there should be an initial poll of producers before the EEC allow the continuation of the Boards and their powers.
The other main point which the Commission wish to insist on, as was mentioned by the noble Lord, Lord Sandys, and the noble Lord, Lord Collison, is that producer-retailers with herds of up to 150 cows should be allowed to opt out of the scheme. This would no doubt upset the big producers, and they might be induced to refer the matter to the European Court, which would throw the whole question of the Milk Marketing Boards in the melting pot again, with all its dire consequences. The maintenance of the Boards with their powers is a policy which has been supported by all the political Parties. It is to the benefit of producers and consumers, and essential for the survival of doorstep milk delivery services. It is therefore hoped that Parliament will support the Commission's proposals in principle while emphasising the need for the amendments which I have mentioned.
§ 7.4 p.m.
§ Viscount MOUNTGARRET
My Lords, in 1930 the late F. E. Smith, the first Lord Birkenhead, wrote a book called AD 2030 in which he prophesied what this country and the world might be like 100 years from then. In it—in Chapter 3, I think I am right in saying—he prophesied that there would be no agriculture (which would mean that there would be no need for a debate such as we are having today, which I think would be regrettable); that everything would be produced by scientists; that we would have synthetic food and, therefore, there would be no problem such as that which we are discussing today. Be that as it may, we 1646 have a few years to go before we get to that date, so the more we can do to improve the agriculture in this country until that date arrives, the better.
As a working, practical farmer I have some knowledge of what goes on in the farming world, and I am bound to say that there are many farmers who are very discontented with the disparity of the green pound, which in my view is dreadful and seems highly likely to remain with us for a very long time indeed. It is of course true that the recent devaluation of even only 7½ per cent. has helped. Anything that is a step in the right direction must be appreciated; but 7½ per cent. at today's currency values is in fact a mere drop in the ocean. The ideal world (which, I admit, is seldom if ever achieved, but which none the less should always be attempted) would be one in which the green pound's disparity, thereby causing low product prices, was balanced by equal subsidies on production costs, so that at the same level of efficiency British farmers enjoyed the same level of profitability as their counterparts on the mainland of Europe. Really, in my view this is the only consistent answer to full European membership in the absence of a devaluation of the green pound by some 30 per cent., which it is presumably not possible to implement. I get the feeling that we are not in fact worried about input costs or output values, but merely the difference between the two.
As I said, this irreconcilable problem is here to stay unless there is a dramatic change of policy. That change of policy I cannot see forthcoming, unfortunately, as the problem is inextricably tied up with that of Party politics. Any Party naturally wishes to obtain the maximum support, and, in particular, in any Election year the maximum votes possible. As the farming vote is less than 2 per cent. of the total electorate, then adverse effects due to the green pound disparity are hardly likely to be of political significance. No political Party would be foolhardy enough to risk the wrath of, and therefore rejection by, the consumer.
What, then, might be done to try to strike a better balance between input costs and output values, and to try to remedy a situation which is highly unsatisfactory and damaging to what is almost our most important industry? 1647 The noble Lord, Lord Collison, mentioned the difficulties between the Minister of Food and the Minister of Agriculture. He happens to be one and the same person at the moment. I agree with the noble Lord, and I should like to elaborate a little further. I should like to see a Minister of Cabinet rank appointed as Minister of Food, who would be responsible for doing his best in the interests of consumers. The Minister of Agriculture and Fisheries would then be left to deal with all aspects relating to production costs and to do his best to protect and look after the interests of the agricultural community, and consequently other large firms and industry connected with agriculture which to a great extent depend upon a thriving agricultural industry in order to survive themselves.
As most of your Lordships know, there was a Minister of Food during the war—and highly effective he was, too. It might be no bad thing if we had another one now. I can only imagine that our present Minister would be very glad indeed to take off his "food" hat. The position he is in must be quite intolerable. He is rather like Pooh-Bah in "The Mikado". He must spend many sleepless nights arguing with himself over a multitude of problems, and it is only a matter of which hat he has pushed furthest on to his head at any stage of his personal dialogue which determines what answer is effectively reached. His troubles are then far from over, because one half of himself is contented with having won a major battle with the other half; but the other half is acutely perturbed at having lost; so the sleepless night continues while the first half tries to console the second. One shudders to think what would happen or what would be his state of mind if the second half is overruled by the first half's decision.
Seriously, I should be grateful to know what the noble Lord, Lord Strabolgi, might think and what his initial reaction might be to the possibility of implementing such a suggestion of dividing the Ministry of Agriculture, Fisheries and Food into two Ministries; or, at any rate, to know whether he thinks that it might be practicable for this to be seriously implemented. If this were to be done, I think that many of the diametrically opposed interests of food producers and food consumers 1648 would be better understood and thereby better tackled.
§ 7.10 p.m.
§ Lord GISBOROUGH
My Lords, I would first declare my interest as a farmer, as I farm from blackfaced sheep on the moors down to potatoes and corn on the vale. I think that one must bear in mind the fact that the 2 per cent. increase in prices proposed by the Commission is less than half of the Commission's own estimate of what will keep pace with the rise in general incomes. The Agricultural Committee of the European Parliament, supported by the farmers' unions, put the required amount at about 5 per cent. There are problems in the market equilibrium in some sectors; but existing stock surpluses do not necessarily imply that these commodities are in structural surplus. Long-term assessments are necessary for the Community food requirements, bearing in mind the possibility of greater world trade, of world stock-holding agreements and of aid to the third countries. But there are a few cases of structural surpluses, such as milk, and probably it is not socially or politically possible to reduce the surpluses by lowering prices.
The Commission propose a 2 per cent. increase in the target price for milk, and this would have a different effect on the United Kingdom farmers than on Continental farmers. The rise to United Kingdom farmers will be affected by the level of Community target prices which govern the intervention prices on dairy products: the green pound, the selling price of milk determined by the British Government and the market situation on dairy products. With regard to skimmed milk, the Commission proposed fundamental changes in support arrangements. The farm support will be replaced by measures encouraging the disposal of skimmed milk. No new schemes, how ever, are currently available, so that there will be a likely increase in market pressures, which will disturb further the product market and make it difficult for the Milk Marketing Board to assess potential producer returns and to set price schedules. The likely result of this increase will be a producer price increase of 5p per litre and this will be substantially below what is needed to improve net margins to the standards of the early 1970s.
1649 It is important that manufacturing returns should be increased to achieve a better balance between the liquid and the manufacturing markets by adjusting the green pound and the Board's selling price. There are great increases of costs which have overtaken everybody including the farmers; in machinery and in repairs. But it is unjustified that, as at present, the agricultural producers of this country should be the lowest paid of any in the Common Market.
The noble Lords, Lord Sandys, Lord Swaythling, and others have talked about the Milk Marketing Board, so there is no point in going through that again. But I think that it is true that farmers are worried about the proposals that the Commission are going to make and that these proposals do need some amending so that there is no uncertainty about the future of the Board.
There is also the question of the larger producer-retailers being allowed out of the Board. I think that this would undermine the fine balance within the industry at the moment and distort competition in the liquid market. I should have thought that they could be, and should be, made to stay within the Board as they are now, but with the possible exception of those who sell to the consumers direct at their farm gates.
The Commission have proposed an increased guide and intervention price by 1¼ per cent. on beef and veal; but for the farmers a much larger increase is needed, something like 5 per cent.—but in two stages, one soon and one perhaps in October, to encourage an even pattern of marketing. Not only an adequate level of target price is necessary but it must be spread seasonally to reflect quickly the costs of over-wintering.
Beef, as the noble Baroness, Lady Elliot, mentioned, is causing concern in the United Kingdom. There is 6 per cent. less breeding herd now than there was last year, and 15 per cent. less than in 1974. This is due partly to contraction of livestock numbers in the hills. This could be remedied by increasing the hill cow subsidy to the maximum of £1.38 and I think that this would help to enlarge the contribution of United Kingdom meat suppliers from the hills. The prices here have been undermined by the high mcas which have encouraged subsidised imports, resulting in a lack of 1650 confidence. The census of December 1977 showed that cattle under six months old were 8 per cent. less than in the previous year. The green pound devaluation will help; but further mca reductions are necessary.
Turning to sheep, the 10 per cent. rise is welcome and should maintain the present production levels; but, regrettably, wool has been left out at 110p per kilogram. The wool cheque is important for the hillmen and an increase in the hill sheep subsidy is now even more necessary than it was before. The noble Earl, Lord Fortescue, dealt with pigmeat. United Kingdom producers have experienced great financial difficulty over the last two or three years. Pig breeding has declined ever since the United Kingdom went into the Common Market. The Commission have proposed a 3 per cent. increase in basic price, but this, by itself, will do no more than aggravate the difficulties of the United Kingdom producers. It would simply raise mcas on pigmeat imports. No rise in basic price should be agreed without recalculation of the pigmeat mcas. There is one proposal that they should be calculated at 70 per cent. instead of 85 per cent. of the basic price. This is in the right direction but it is totally inadequate. The base calculations should be calculated on the differences between the cereal foodstuff support prices, as with eggs and poultry meat.
So far as wheat is concerned, to ensure orderly marketing, provisions for mandatory intervention for breadmaking wheat at the beginning and end of each season should be instituted. Provision was made for this in 1977–78, but it needs to continue for 1978–79 to give adequate assurances to the producers. Regrettably the Commission have not proposed any increase in the size of monthly increments applied to institutional prices. Despite the reduction of interest rates and the revised green pound which will take effect from 1st August 1978, there will be some increase necessary to compensate for costs of storage. Our most important need is the reduction and dismantling of monetary compensation amounts. They distort the flow of trade and of foodstuffs in the Community, and the larger the mcas the greater will be the distortion.
There are three reasons for this. First, the amounts relate to intervention prices 1651 and not the prices of traded products. Secondly, the method of assessment results in gross exaggeration of the amounts needed to compensate for currency changes. Thirdly, the beneficiaries are not in fact always the consumers and producers, as they should be, but all too often there are other interests manipulating the system to their own advantage. The MCAs at this review should be reduced to 20 per cent. and thereafter phased out over three years. It would only add l½p per pound on the food prices each year and ½p on the retail price index each year for the next three years. It seems the most important factor and these should be firmly tackled and dismantled as soon as possible.
§ 7.20 p.m.
§ Viscount TRENCHARD
My Lords, I shall try not to repeat too many of the things that have been said already by the long list of speakers. May I start by congratulating my noble friend Lord Fortescue on a first-class maiden speech in which he showed his great and detailed knowledge of one aspect of farming, and his ability to state it so clearly. I hope we will hear from him often again.
I accept, as the last-but-one Member of Sub-Committee D to speak, that we are guilty of gross failure in failing to mention pigs in our report and making a typographical error in describing it as "pigment". I think that the reason why this happened was that we were discussing primarily the price proposals and concentrating on the commodities where surpluses existed. We inevitably touched on the green pound because it overlaps the subject to such a degree. But let me assure my noble friend that every Member of Sub-Committee D is fully seized—as are all the Ministry officials and our permanent officials in Brussels—of the fact that the distortions of the green pound affect pigmeat more than any other commodity. This is partly because there are no offsetting factors in this case where there are in others, and partly due to a long list of technical factors, including the type of régime that it is. There is hope that things might be put on a basis whereby the cocas would apply only to the grain element in their cost. This applies to poultry today. 1652 This would have the effect of halving the pigmeat mca at the present time.
It was in a sense sad to listen to my noble friend recount his experiences of pigs; but it is not surprising that, if one pays 25 per cent., 30 per cent., and at one stage up to 35 per cent., subsidy to the products of one's competitors on import, the home farming industries, where 5 per cent. is a good profit margin, will be in a position where they cannot compete. It is not of course the CAP itself that brings about this situation, but rather the British operation of the CAP, following the fall of sterling and the very high rates of inflation in this country which caused it. This of course left my noble friend and many others of the farming community with the need to pay for the costs which were rising at a high rate of inflation without being able to recover those costs in the market because we held the green pound above the level of the real pound. So it is to a degree a self-inflicted wound so far as our farming is concerned.
As I have said before, I have spent a great deal of my life on the other side of the farm gate enjoying the practice of "farmer-bashing". I have tried at times to suggest that farmers should be more consumer-orientated or more marketing-orientated. Therefore, it would be quite natural and easy for me on this occasion to be advocating yet lower prices—EEC prices particularly—and I do so; and also to be advocating that we should hold the green pound. But I do not do that. I shall come later to the reasons why I agree with other speakers on the green pound.
There is muddled thinking at work here among those who advocate very gradual movement of the green pound. They do so for two reasons: one is in order to restrain the effect on the consumer price. I understand that and shall return to it later. But the other is to avoid the buildup of surpluses within the EEC. It is this second reason that I think is muddled thinking. I think so because the whole of the EEC is supposed to be about producing the right things in the right places, and this is just not happening. It is for this reason that I prefer the proposals of the Commission for an automatic phasing out of the green pound. I go further and support my noble friend Lord Sandys 1653 and the noble Lord, Lord Mackie of Benshie, in pressing for it to be done faster than even the Commission proposes. It cannot be done, so to speak, at a stroke without causing chaos.
However, we need a nearly automatic and progressive movement out of the MCA situation. Why do I say that? Farmers will not invest in expansion unless they know where they are going to be. They will in my experience invest before things are really as profitable as they hope eventually they will be. They will not invest if the subsidies paid to their competitors' products are not under any commitment to be phased out on a progressive basis so that they can see where they stand and where they will stand.
We could produce in this country—and there have been many surveys on it—over £2,000 million more of temperate foodstuffs than we are producing; food-stuffs that our climate and agriculture are well suited to produce. In virtually all of these, our efficiency, as international surveys show, is higher than the average for the EEC—in many cases it is a great deal higher. This does not mean that there are not efficient farmers in Holland, Denmark and some parts of Germany and France, but the overall position is that our productivity and efficiency are higher than theirs. Therefore, economically, we could make this further contribution to the balance of payments. It would take some five to 10 years to achieve. The sum of £2,000 million is of course less than the figure we talk about that we shall gain from oil and gas in the North Sea. But the oil will run out and our farming efficiency—if we do not impair it with oher things like CTT and wealth tax, and do not break our units up—can go on. I have always believed, as a businessman, in reinforcing success. We find it in Britain, with our history of agriculture being in a depressed state before the war, and it is rather hard to take in that our agriculture is relatively efficient compared with that of our competitors in the EEC. There is an article in The Times today which suggests that we are more efficient in beef and milk. From all the statistics that I have seen, superior efficiency covers a wide range of products.
The noble Lord, Lord Raglan, mentioned that farmers can get through a poor 1654 patch with string for the farm gate and wire for repairing the tractor; but we heard from my noble friend Lord Fortescue that some—perhaps not so widespread in their activities as others—cannot. However, we are talking about expansion and we cannot expand on string and wire. Farmers have to buy new tractors and to make new investments.
The noble Lord, Lord Raglan, also mentioned that rationalisation of production within the EEC has been going on for a long time and that it must go slowly. I question whether it has been going on. Across the broad front, it is really not happening. The high-cost countries are still producing as much or more as they were. We, on the other hand, even allowing for the drought and other factors which have nothing to do with price, have gone back in a large number of areas—and we are an efficient area for agricultural production where, within the Common Market concept, we should be expanding.
None of this deals with the objection of those who would urge moderation or gradualness in devaluing the green pound: because of its effects on short-term prices. It is true that consumer prices in the United Kingdom will go up. Paragraph 26 of our report suggests, on Ministry estimates—and I do not doubt them, though all estimates are likely to err on one side or the other by varying amounts—2 per cent. plus one-third of a percentage point, if we are right about milk, which my noble friend Lord Sandys says that we are not, and with 2 per cent. to 2⅓ per cent. on the price of food; this is under 1 per cent. on the retail price index. These will be the results of the 7½ per cent. devaluation.
Therefore let us keep that in perspective in terms of the other benefits that I have mentioned. In the long term, I suggest that those other benefits outweigh this short-term disadvantage. It must be in the consumer's interest as well as in the taxpayer's interest to produce in the right places in the lowest-cost countries. We are not moving towards that situation. It must be in the interests of taxpayers and of the strength of sterling, which in turn can affect consumer prices, to improve our balance of payments.
1655 It is for those reasons that I believe the very well-intentioned suggestions of the Consumer Association and some elements of the food processing and distribution trade in regard to a very gradual phasing-out of the green pound, are wrong. Even in the short term, the consumer is likely to be favoured by the build-up of surpluses if increasing United Kingdom production does so augment those surpluses. This of course, is not a good thing from the taxpayer's point of view, although probably the German taxpayer will be more affected than the British.
That brings me to the question of how we actually get EEC prices down in the higher-cost agricultural countries—the strong currency countries—and in Germany in particular. We have mentioned in paragraph 12 the contradiction in the German pressure, on the one hand, to remove some of the costs of the CAP by getting the surpluses down—and, of course, they pay a very large proportion—and, on the other hand, their absolute refusal to agree either to a prices standstill or to what is really needed, a price reduction in D-marks. All the evidence we heard here and in Brussels suggests that at the moment that is a political impossibility and that the overriding factor of the German contradiction is that, politically, they cannot afford to lower their prices and must indeed increase them in D-marks.
That contradiction is a reflection of a wider contradiction within the CAP itself. The main purpose of the CAP—and I hope very much that it will triumph progressively—is that there should be free and fair trade in agricultural products and, with that, a movement of production to the most efficient areas for those products, But the contradiction is provided by the statement also included in the CAP that one of the objects is to raise farmers' incomes to the level of other national incomes of their individual countries. These two, as your Lordships can readily see, are not compatible. If farmers' incomes in Germany are to be lifted to the level of those of factory workers, their prices would have to go up very much further even than they do.
I believe that we shall get EEC prices down only if the more efficient agricultural countries and the weaker currency countries, 1656 who should produce more at home, will let their farmers go ahead. That will contribute to the surpluses and it will be a cost to the Community of which we shall have to pay our share; but only in this way will the EEC face up to giving overriding priority to the essential part of the CAP, which is to secure free and fair trading in agricultural products and to get production taking place in the most efficient parts of the Community. That must be in the long-term interests of consumers and taxpayers. Other means have to be found to supplement the incomes of the small peasant-farming areas such as Bavaria, much of France and elsewhere.
§ 7.37 p.m.
§ Lord MONK BRETTON
My Lords, may I express my gratitude to the noble Lord, Lord Raglan, for giving us this opportunity to debate these matters today. May I also congratulate most heartily my noble friend Lord Fortescue on an excellent speech and one that I believe is somewhat apt to what I have to say, which will primarily concern the Milk Marketing Boards. I at least still have an interest to declare. I only hope that this continues to be true of myself and of other dairy farmers.
I think I should emphasise the point of the Milk Marketing Boards. My noble friend Lord Trenchard has talked about the vital fundamentals of our agricultural policy and I feel he has done that so well that there is no need for me to deal further with that subject. I should just like to underline one point concerning the prices and the Boards that we have been talking about today: that is, that the Boards are of the most vital importance because dairying was always regarded—indeed, I believe, it still is—as the sheet anchor of British farming. So the view of the European Commission is certainly unreservedly welcome to me. So far, so good. I trust from here on, with the modifications which have been mentioned—I shall not mention them again: they are all modifications with which I would agree—that this matter may proceed successfully in the right direction. The ability of our Minister for Agriculture for gladiatorial effort is notable. One hopes there have not been too many gladiatorial conflicts already, because this one is the one that has to be won.
1657 We do not contribute to the milk surplus, in my view. We have approximately one dairy cow to every 10 people in this country. Unfortunately, my figures are not very up to date, so I am using an approximate guide like that. The French have double that number, and the Dutch have 60 per cent. more per head of population. The overall figure, with which one ends, is that with a population of about 250 million, the 10 nations in the EEC now have 30 million or 31 million cows; and, according to my ruling, if their proportions were the same as ours they would have only 25 million.
Most of the milk is produced on the northern maritime plain, so that we produce it under fairly similar climatic conditions. There is no reason why we here should not be perfectly competitive in that situation. It is primarily a situation that should produce liquid milk for Europe, with a suitable buffer of manufactured milk, and it is likely that there will be other areas outside Europe which can do better in producing milk for milk products.
My view is that my noble friend Lady Elliot never said a truer word than when she said that the Europeans should also look at the Milk Marketing Board system as a possible solution, and I should like to underline that. She mentioned a number of reasons why, and there is just one more which I should like to add. I believe that that system would satisfactorily provide the liquid milk and the sales effort that is most necessary, and would also enable the means of keeping the production of manufacturing milk within bounds in Europe. That is a highly sensible proposal, and I hope that it has something to do with the reception given to this problem by the European Commission.
So far as our milk boards here are concerned, there is no doubt that, if they are now weakened, with the green pound and the MCA situation which we are in, there will be a major disaster in the dairy industry in this country, which I very much hope will not happen. It is a vital matter for the Minister and, even if no other reasons—economic or agricultural reasons—apply, it must be remembered 1658 that in time of war milk is the cheapest protective food. We resorted to it heavily in the last war. But it is not something that can suddenly be produced from nowhere. For that long-term reason alone, it is very necessary that we do not allow the liquid milk market in this country to be lost to the British farmer. If anything like that happened, even temporarily, it would mean that a bridgehead was built in the market over here, which we should have great difficulty in getting rid of. That is all that I need say, and I trust that we shall see success in these negotiations.
§ 7.45 p.m.
§ Lord MOTTISTONE
My Lords, I should like to join with those noble Lords who have paid tribute to my late noble friend Lady Tweedsmuir. Not only did she recruit me on to Sub-Committee D, but I found, as did other noble Lords, including the noble Lord, Lord Collison, that her leadership was an inspiration. The extent to which she contributed to the development of these Sub-Committees, and indeed of the Select Committee itself, cannot be overestimated.
I should also like to pay tribute to my noble friend Lord Fortescue. I must confess that I found his story, if I may so describe it, an extraordinarily tragic one. It seems quite disgraceful that somebody who had 2,500 head of pigs should be advised by an accountant to sell the lot, just because of the Common Market and its rules. If that is the case, then my attendance on Sub-Committee D must be seriously at fault, because I had not realised that matters were quite as bad as that. However, his delightful way of putting his point across, and his very skilful speech, make me hope that we shall hear him very much more in this Chamber in future.
I must declare an interest as a director of the Cake and Biscuit Alliance. This will lead me not entirely to agree with my noble friend Lord Trenchard on some of the points he made. I find one or two distressing points in this paper, which have not been fully referred to. In Table 1 on page 5, your Lordships will find that, invariably since 1974, the Council's average price decisions have been in 1659 excess of those recommended by the Commission. This I find distressing and, presumably, it means, once again, that in trying to strike a balance and an agreement the Council of Ministers will exceed the Commission's recommended price increases. I should like to join with other noble Lords who have said that they think the Commission should be congratulated on being so cautious, and on taking as low a politically acceptable increase as they can.
However, if your Lordships will then look at Table 2 at the bottom of page 5 you will find that all the commodities which are in surplus are recommended to have an increased price, which will obviously have some effect in encouraging a yet larger surplus, in many cases. At the bottom of page 9, we learn about sugar, for example—and I am taking sugar, because it is a commodity in which I have an interest and it has not been fully covered—though the Community consumption will stand at a mere 9.3 million tonnes, we are expected to produce a total Community supply of 12.6 million tonnes. That is one-third as much again. When my noble friend Lord Trenchard said that he thinks that surpluses are a good thing and should be encouraged, I hope that one-third as much again as we need, when we know we cannot export the product, is not what he has in mind.
§ Viscount TRENCHARD
My Lords, if the noble Lord will forgive me, I certainly did not intend to say that surpluses were a wonderful thing. I said that it is possible that the only way that we will be able to bring adequate pressure on EECprice levels to bring them down and get out of structural surpluses would be by allowing British agriculture, through the mechanism of the green pound, to go ahead to a greater degree, even though that would contribute to the surpluses, which might have the beneficial effect I described.
§ Lord MOTTISTONE
My Lords, I take the point, and perhaps one can take some surpluses as being within the remit of my noble friend while others are not. But to come back to sugar, when we visited Brussels we learned that since 1968 the average prices have been some 25 per cent. higher than they would have been if the 1660 normal laws of supply and demand had applied to that product. We also learned that when the Ministers took fright in 1974–75, when there was an apparent temporary shortage of sugar, they introduced regulations which gave them the sole power to decide on the future of sugar. Since then they have consistently over-ensured so that the over-stocking of this product has gone up still more and the price is still a great deal higher than it need be.
Ironically, the other day, when attending a sugar fair in Paris, I learned that the French claim that the harvesting of sugar from beet—which is behind what I am advancing to your Lordships—was introduced by Napoleon at the turn of the 18th-19th century, due no doubt to the efficiency of the blockade instituted by the Royal Navy at the time; so perhaps it is all our own fault that we are landed with too much sugar. But I rather suspect that it is due to had management by the Council of Ministers and it is about time that they tackled their problem in a more efficient fashion. I see that the noble Lord the Leader of the House is here and he has been a Council of Ministers man in his day. I rather get the impression that the Commission are fully aware of what should be done, but perhaps they have fooled us into thinking that they are the "goodies" and the Council of Ministers are the "baddies". Whether or not this is so, it is not a thing which one can take with equanimity.
I got the slight feeling that because of all the difficulties there was a general tendency in the debate for noble Lords to say "Well, this situation is a lot better than it has been before and we have to congratulate everybody concerned". I am not sure that I like that. As my noble friend pointed out, and as is pointed out in paragraph 12, on page 8, the people who are principally to blame for the continuance of the present state of affairs are the Germans. One car, see their problem. The Germans, having got themselves into the position where their farmers are very much better treated than they should be, cannot now unhook themselves so that their farmers are treated reasonably, so that there is an even balance of agricultural production throughout the Community—which is where I come into line with what my noble friend is perhaps seeking to achieve. 1661 Until we can somehow persuade the Germans that it is not in their own best interest for their farmers to be given abnormal preference to the extent that they export farm produce to Denmark—something that apparently has never happened before in history—it seems to me unlikely that we shall solve the problems that are facing us.
I suppose there is another way; that is, that production in this country outside the agricultural field could improve so very much that our pound would gain in value and the gap between the real pound and the green pound would be dealt with in that fashion. Perhaps that is the solution. Whatever it may be, I do not think there is any ground for complacency. I do not believe that we can say too strongly—though I know as a Member of Sub-Committee D I support this argument—that the Commission have done jolly well in view of the circumstances, or words to that effect. I think we must continue to encourage our representatives on the Council of Ministers to press for a movement of the total agrimonetary and price control picture in such a way as to work toward greater harmony and less massive differences, many of which are caused by artificial means which in the passage of years have got worse rather than better. I hope therefore that the Government will be able to give us some answer to show that they are tackling the problem in that way rather than with an air of complacency.
§ 7.58 p.m.
§ Lord STRABOLGI
My Lords, we have had a most interesting debate and I have had the good fortune to listen to every one of your Lordships' speeches. First, I should like to congratulate my noble friend Lord Raglan for having initiated the debate and for his admirable speech which was short but succinct and an admirable introduction to this debate. It is also my pleasant duty to add my congratulations to those of other noble Lords to the noble Earl, Lord Fortescue, for his maiden speech. The noble Earl, if I may say so, comes from a distinguished family that has given great service to this House, and, if I may echo the words of my noble friend Lord Collison, we are very glad to welcome him to our debates 1662 and to have a new voice speaking on agriculture, particularly as he has spoken with such expert knowledge of the pig sector.
We have examined in some detail the important questions which arise on the EEC Commission's proposals for farm prices and their thinking on green currencies and of course the separate issues which affect our Milk Marketing Boards. The clarity and thoroughness of the Select Committee's reports have given us considerable help in examining these complex subjects, and I should like to pay a tribute to the hard work which has gone into them, and to all members of the Committee. I should also like to join in the tributes to the late Lady Tweedsmuir of Belhelvie, who has given such great service to the House and who is so sorely missed.
My Lords, one of the problems in looking at the EEC price-fixing is that the picture is always changing. I agreed very much with the noble Lord, Lord Mackie of Benshie, when he asked who should scrutinise the scrutineers—a sort of modern version of who shall guard the guards. The Commission presented their proposals on prices and related matters to the Agriculture Council in mid-December. In February, France, the United Kingdom and Italy all devalued their green currencies. In March, the Commission presented their second tranche of price proposals, France devalued the green franc further and changes were made on an experimental basis in the green currency arrangements. Against this background of intricate developments, I shall try to be as clear as possible in my presentation of the many issues which have been referred to by your Lordships.
Our debate on the price-fixing is most timely. As I have explained, it follows publication of the second stage of the proposals but it precedes the meetings at which negotiations will take place in earnest. I have in mind that, while discussions have continued steadily in the January, February and March Councils, little overall progress has been made, but we do expect to see some developments in the next Council on 4th and 5th April, and I am sure that my right 1663 honourable friend will take full account in these important negotiations of the careful and considered advice which has been offered today by your Lordships.
Regarding the Milk Marketing Board discussions, these likewise continue and my right honourable friend will again bear in mind all that has been said today in this House. I shall have a little more to say about the problems of the Milk Marketing Board. I want now to deal with the specific points which have been raised, but before I do so I must answer the proposal of the noble Viscount, Lord Mountgarret, that the Government should consider splitting the Ministry of Agriculture, Fisheries and Food into separate departments dealing with food and agriculture. The Government note what the noble Viscount has said, but it is, of course, a matter for the Prime Minister. My right honourable friend the Minister of Agriculture has made it clear that he would see no advantage on either the agriculture or the food side in dividing this responsibility, but the Government will certainly take note of what the noble Viscount has said. My noble friend the Lord Privy Seal is sitting beside me here, and I am sure that what has been said will be noted carefully in the right quarters. I must say, however, that there is a possibility of conflict and the Government's present thinking is that it is better for the responsibility to be combined in one Ministry. We shall also take note of the interesting remarks that have been made by the noble Viscount, Lord Trenchard, on the general aspects of our agricultural policy in a European context.
Turning first to the Commission's price proposals, it may be helpful if I summarise and comment on those proposals as a whole which are set out in the documents that are being considered this evening. The Commission's objective method calculation implied that a 4.2 per cent. price increase was necessary this year, but they sensibly regarded this calculation as only a starting point and proposed a smaller price increase of approximately 2 per cent. on average, including increases of 4 per cent. for most oil seeds, 3 per cent. on the pigmeat price, 2 per cent. on the milk target price, 1.25 per cent. for beef, 1.16 per cent. For 1664 sugar, and proposals for the cereals sector which vary but give an average rise of nearly 2 per cent.
The Commission wisely pointed out that Community agriculture is sheltered from the worst effects of the economic recession and that structural surpluses exist for milk, wine and sugar, with a dangerous situation developing in some other sectors. As my noble friend Lord Raglan said, the problem is not surpluses but paying for them. Against this background, the Commission adopted quite a tough approach, taking account of the economic dffiiculties of the Community generally and the problems of imbalance in agriculture between supply and demand.
At the same time, the Commission had it in mind that the Member States should make certain green currency changes in accordance with proposals they had made earlier for phasing out monetary compensatory amounts over a seven-year period. The Commission's second stage proposals presented at the March Council do not affect the basic price recommendations, but include proposals for the continuation of the variable beef premium system, for adjustments to the arrangements for intervention for beef and skimmed milk powder and for certain other measures. The Commission's price proposals, if adopted, would add a further 2 per cent. to support prices overall in the United Kingdom. In cash terms, that is an addition of something of the order of £30 million to £40 million to producers' returns, net of feed costs when the effects have worked through. The effect on food prices in a full year of the Commission's price proposals is about ½ per cent.
It may be appropriate here if I comment generally on the Government's approach to the price-fixing which has been mentioned by so many noble Lords. The immediate need of the agricultural industry in this country, which was for help in the livestock sector, has been met by means of the 7½ per cent. phased green pound devaluation. The devaluation adds just over 8 per cent. to support prices in the United Kingdom when the effects have worked through. Overall, producers' returns, net of feed costs, will rise by something of the order of £150 million to £200 million in a full year.
1665 These developments enable the Government to concentrate in the price-fixing negotiations on the main issue, which is to seek improvements in the Common Agricultural Policy, with particular emphasis on the need for price restraint. Indeed, our central objective in price fixing is to restrain price increases to the minimum, because it is setting price support at too high a level which results in unduly high levies on imports, provokes structural surpluses and leads to excessive refunds and disruption of third country markets.
My right honourable friend has accordingly welcomed the Commission's recognition in their proposals of the need to hold down prices but has consistently and powerfully stressed the need for an even tougher policy. In particular, my right honourable friend has urged a prices standstill for cereals, milk, sugar, wine and fruit and vegetables. In this connection, we shall take careful note of all that has been said by my noble friend Lord Sainsbury.
We have to recognise, however, that all Member States do not take the same view as the United Kingdom, as the noble Lord, Lord Vernon, implied. The Benelux countries in particular, and Ireland, would all like to see bigger price increases than the Commission propose. Germany wants a price increase which is at least adequate to accommodate a small green D-mark revaluation, while the other Member States are most unlikely to stand out against proposals for bigger price increases. We therefore stand alone in our pressure for stronger price restraint and we have to recognise that at the end of the day we shall not achieve all that we seek.
The noble Lord, Lord Vernon, said, I thought, some rather hard things about my right honourable friend the Minister. I should like to say in reply that the European Assembly has endorsed the view of the United Kingdom that there should be no increase for surplus commodities. Obviously this tough line is not popular but it is surely right. I may say in passing that the Conservative Party has welcomed the view of the Assembly, which shows that the noble Lord, Lord Vernon, is out of step. Here I agree very 1666 much with and welcome the remarks of my noble friend Lord Collison on the speech made by the noble Lord, Lord Vernon. I think that my noble friend's remarks put the matter into perspective.
§ Lord MACKIE of BENSHIE
My Lords, will the noble Lord not agree that it is possible to be both tough and amiable at the same time?
§ Lord STRABOLGI
Certainly, my Lords, and that is what my right honourable friend is being. I shall now discuss a little more fully the proposals on milk. Against the background of the continuing structural surplus, the Commission have taken a fairly tough approach. The increase in the target price would be limited to 2 per cent. and there would be corresponding increases of 1.9 per cent. and 1.6 per cent. in the intervention prices of butter and skimmed milk powder. The Government do not believe, however, that this goes far enough for what is, after all, the major surplus commodity in the Community. The Commission themselves estimate the surplus at over 14 per cent. of all milk delivered to dairies even before account is taken of imports, as was mentioned by my noble friend Lord Sainsbury. Intervention stocks of butter in the Community are now at some 146,000 tonnes and of skimmed milk powder at some 832,000 tonnes, but an increase of 2 per cent in the common price could generate production of, say, a further 80,000 tonnes of butter and 160,000 tonnes of skimmed milk powder beyond what would be produced with no increase in the common prices.
It is not surprising that expenditure in the milk sector is about 40 per cent. of all guarantee expenditure in the Community agricultural budget. An increase of 2 per cent. in common prices, quite apart from the other proposals put forward, would cost the Community agricultural budget about another 100 million units of account. In these circumstances, my right honourable friend has told the Council repeatedly that there should be no increase at all in the common price, and here I very much welcome what the noble Lord, Lord Monk Bretton, said.
The other proposals in the milk sector are complex, although not as complex 1667 as they were last year. The Commission's thinking is that the co-responsibility levy should continue at its present level at 1.5 per cent. of the target price, that there should be a 50 per cent. increase in the EEC contribution to school milk, where the arrangement would also be extended to other products, and that there should be a gradual elimination of our butter subsidy. However, the Commission have also proposed the injection of Community funds of the order of 50 million units of account to help disposals of butter. The Commission have resurrected their proposal for a ban on investment aids on the farm, which we firmly oppose. They propose changes in the scheme of premium payments designed to encourage milk producers to quit. And they want to see suspension of intervention on skimmed milk powder from 1st October. All these proposals will be studied further and discussed in more detail in Brussels.
The Commission's price proposals on milk together with the agreed green pound changes do not of themselves necessitate changing the United Kingdom maximum retail price of milk for liquid consumption, as was implied in some quarters in the Press last week. They are just two of a number of factors which need to be taken into account by Ministers in determining the maximum price for milk sold for the liquid market.
Mention has already been made of the co-responsibility funds. I cannot comment in detail on all the proposals put forward for the milk sector, but I should like to say a special word about these. Under the terms of the agreement setting out the co-responsibility levy the Commission was charged with drawing up a programme of measures which would use the yield of the levy to expand the markets for milk products inside and outside the Community, to search for new outlets and to improve products. Here, I am very glad that the noble Lord, Lord Sandys, speaking for the Opposition, welcomed the proposed programme. The Commission undertook to consult interested parties through its own Advisory Committee in drawing up the programme and to notify the Council of the outcome. It was this last communication which the Select Committee recommended for debate.
1668 There has been some concern that our industry might not get a fair share of the benefits from the use of the funds, but I can assure noble Lords that the Government have pressed very hard for our own very substantial publicity programme to benefit fully from Community assistance. The Commission have come some way towards meeting us on this, but we have to recognise that at the end of the day it will be for them to decide the matter. In the meantime, we shall continue to urge an equitable and sensible use of the levy money. And I am sure that our industry will do likewise through the various channels open to them.
The noble Lord, Lord Sandys, spoke about the ban on aids to dairy farm investment. My Lords, we do not accept that removing the incentive to improved efficiency and working conditions will have any direct impact on surpluses, and we therefore consider that the proposal is irrelevant. The noble Lord, Lord Vernon, also spoke about the effect of the EEC price proposals on the United Kingdom producers' returns and the retail prices of milk. The proposals would lead to increased returns to producers and eventually to higher retail prices for milk products, though the size and timing of the increases would depend also on the level of supply and demand on the milk products market. There would be no direct effect on the retail price of milk, for which the Government will continue to set a maximum. I was interested in what the noble Baroness, Lady Elliot of Harwood, said about school milk. I agree that it makes good sense to attract schoolchildren to drinking milk, and we therefore agree with the broad aim of the proposal. We have already taken action to claim subsidy on our existing programme.
Turning to beef, I should like to make a few points here. The Commission's proposal for an increase in institutional prices of 1.25 per cent. is in line with our own ideas of a cautious price policy. Beef is not a commodity which is in structural surplus. The intervention stock of some 350,000 tonnes is only equivalent to about 6 per cent. of total Community consumption. Moreover, beef is a commodity where a surplus could quickly disappear if consumption increased. On 1669 the other hand, excessive price support increases obviously act against consumption, as does too great a reliance on intervention. We note what the noble Lord, Lord Gisborough, has said.
The Commission's second stage proposals provide for the continuation of the United Kingdom variable premium arrangement on an unchanged basis in 1978–79 and this development is of prime importance. We also welcome the Commission's proposal to allow suspension of intervention in certain circumstances. This change would make the intervention machinery more responsive to the needs of the market.
The noble Baroness, Lady Elliot, spoke about premium payments to the Irish Republic. It is a long-standing arrangement, dating from the Anglo-Irish Free Trade Area Agreement, to pay United Kingdom premium on beef imported from the Republic that meets our own qualifying standards. The obligation to make these payments was carried into Community law when variable premiums were introduced. It recognises the close integration of the beef market in the two countries.
The noble Baroness also mentioned Irish lamb exports to France and the Franco-Irish arrangements for allowing levy-free access for those exports. We are totally opposed to such bi-lateral arrangements which heighten the discrimination against the United Kingdom. The United Kingdom Government have asked the EEC Commission to act. The Commission have initiated proceedings under the Rome Treaty. With regard to the French import levies and their recent increases, these increases have further increased the discrimination against our exports. A telegram has been sent to the EEC Commission drawing attention to the potential trade distortion and disruptive effects which we regard as totally unacceptable.
The noble Baroness, Lady Elliot of Harwood, mentioned wool. Producers receive the guaranteed price less marketing expenses. Wool prices weakened during 1977 and are, at present, below the current guaranteed level. It was decided to leave the guaranteed price for the 1978 clip at 110p per kilogram, as although prices have 1670 been weak they have recently shown signs of firming. This also reflects the present credit balance in the Stabilisation Fund.
I should like to turn briefly to the pig sector which was referred to by the noble Earl, Lord Fortescue, and the noble Viscount, Lord Trenchard. Here the Commission has proposed a 3 per cent. increase in the basic price. This would not directly affect our producers' returns, because intervention buying is not normally employed in this sector. In practice it means two things. First, that aids to private storage could be introduced when market prices are a little higher than the level which applies under present arrangements. Secondly—and this is much more important—it means that so long as monetary compensatory amounts on imports are calculated from the basic price, a higher price would increase mcas on imports which are already much too high. Noble Lords will know that the Government have been trying very hard to get a change in the method used for calculating the pigmeat meas. In these circumstances, my right honourable friend is opposed to any increase in the basic price for pigmeat except in the context of an agreement in the Council to change the mca calculation.
The noble Earl, Lord Fortescue, mentioned the position of pig producers as, of course, he is one. As he said, the recent devaluation of the green pound will help to the extent that it is reflected in higher prices for bacon and pigs, and given that it does not apply to cereals until August. However, the need for action on the calculation of the pigmeat mcas remains, and as I indicated we shall be continuing our efforts to secure this. We have been encouraged by the strength of French and Italian support for our point of view.
As regards sugar, the Commission's proposals provide for an increase of a little over 1 per cent. in the common intervention price for sugar and a corresponding increase in the minimum price for beet. In view of the structual surplus in Community sugar production, the Government are opposed to even that increase. Of greater significance, however, is the proposal to cut the maximum quota from its present level of 135 per cent. to 120 per cent. of the basic quota. If accepted in full, this would reduce Community sugar 1671 production by some 600,000 tonnes or 6 per cent. according to the Commission's estimate. This is an important step towards bringing production into line with market needs and the Government accordingly fully support this proposal.
The noble Lord, Lord Sandys, mentioned isoglucose and asked why there is a levy. The Commission's argument is that there is surplus sugar in the EEC, and the excess has to be exported with the aid of refunds. Because isoglucose replaces sugar, it causes more sugar to be exported, and so it ought to bear the same proportion of the cost of sugar export refunds as "B" quota sugar already bears. The only company in the United Kingdom producing isoglucose has participated fully in the Commission's study. Isoglucose manufacturers, including the United Kingdom company, are challenging the legality of the isoglucose production levy in the European Court. The result of these actions is not yet known.
I turn now to the question of the Milk Marketing Boards which have been mentioned by all noble Lords. The Boards have a most important function to play in enabling daily doorstep deliveries of milk to take place in the United Kingdom. Without the Boards it would not be possible to maintain the delivery system, since a very high degree of organisation is required to carry out the massive movements of milk from production areas in the West of the country to the major consumption areas in the East. The high level of consumption of liquid milk in the United Kingdom depends on this and absolute regularity of supply is essential to it. Successive Governments have recognised the value of the Boards and the present Government are committed to safeguarding their future.
The noble Lord, Lord Sandys, mentioned the question of an independent chairmanship. That does not arise directly from the Commission's proposals, but it is currently being discussed with interested parties in the general context of how the Joint Committee should operate under the proposed new arrangements.
In conclusion, I should like to say how much the Government welcome this debate. We have taken careful note of 1672 everything that has been said by noble Lords who have participated in it.
§ 8.27 p.m.
§ Lord RAGLAN
My Lords, first, I should like to thank my noble friend Lord Strabolgi for his comprehensive summing-up of this debate. Indeed, he summed up in the same debate last year. In particular, I am glad to hear a little more information from him about what will happen to the money received from the co-responsibility levy, as regards the fate of which several noble Lords expressed curiosity. I am also grateful to him for reminding me of the Commission's reasons for making stabbing attacks on isoglucose. I did know those reasons once, but I had forgotten them and my noble friend has reminded me. The Commissioner whom we met in Brussels and who spoke about this particular subject felt very strongly about it—just as strongly as the refinery in this country feels about it. So I do not know how it will come out of it at the end of the day.
I should like to congratulate the noble Earl, Lord Fortescue. We are glad that "pigment" which is mentioned on Page 14 covered his remarks. He lamented the lack of stability in the pig market and the subsidised imports. He also lamented that we had not paid sufficient attention to pigmeat in the report as regards which the noble Viscount, Lord Trenchard, I assure him, spoke for the Sub-Committee later.
My noble friend Lord Sainsbury gave us some praise, and praise from him is praise indeed. He, like the noble Lord, Lord Mottistone, wanted no increase in price for any product in surplus. It is difficult to see whether the Commission has actually proposed a price increase or has accepted the fact that because of inflation there will be a price decrease. I find it very difficult to know where I am when, on the one hand, one has a putative price increase and, on the other, at least a 5 per cent. rate of inflation. My noble friend Lord Sainsbury also raised a matter to which we could return at a later date. He referred to a certain extent to wanting surpluses but not open-ended surpluses. I think that perhaps that spells quotas for the Common Agricultural Policy in the long run.
1673 I have many jottings before me, but I think that I have spoken for quite long enough for a proposer at the end of a Motion in a customary summing-up speech. Therefore, I thank all noble Lords who have spoken.