HL Deb 12 December 1979 vol 403 cc1166-76

3.56 p.m.


My Lords, with the leave of the House I should like to repeat a Statement which my right honourable friend the Minister of Agriculture, Fisheries and Food is making in another place about the meeting of the Council of Agriculture Ministers in Brussels which took place on 10th and 11th December. The Statement is as follows:

"At my request the Commission proposed a 5 per cent. devaluation of the green pound in order to boost the resources available to British agriculture. The devaluation will take effect on 17th December for all the main commodities except cereals and eggs and poultry, where the change will take place at the start of the next marketing year on 1st August 1980. For wine, the devlauation will not take effect until December 1980. This devaluation will be of great importance to British agriculture and it will add some £150 million to farmers' returns in a full year. The effect on consumer prices will amount to one quarter of one per cent. on the retail price index, but it will be many months before the full effect of the ¼ per cent. Increase reaches the shops.

"The Council also agreed a 5 per cent. devaluation of the Italian green lira.

"The Council agreed a mandate for the Commission to negotiate voluntary restraint arrangements by third countries exporting sheepmeat to the Community. The mandate was in accordance with our insistence that any agreement should be a totally voluntary agreement on the part of New Zealand and that there would be no unbinding of the GATT tariff arrangements. We rejected a French proposal that there should be a threat of unbinding the GATT for any country that refused to reach a voluntary agreement.

"We and the Commission also rejected a French request to the Commission that no action should be taken by the Commission in respect of the illegal French measures on sheepmeat imports. We again made it clear we would not accept any sheepmeat regime that failed to give a net benefit to Britain or included intervention.

"Proposals were before the Council for a wine package designed to restore balance to the wine market and to avoid surpluses. The package was such that Community payments of £32.5 million per annum would have resulted in equivalent Community savings of £32.5 million per annum. We succeeded in negotiating a substantial reduction in the Commission's proposed FEOGA payments so that the savings will outweigh the payments and produce an anticipated net reduction in the Community Budget of £6.5 million per annum over the period of the programme. We also resisted French pressure to bring into the package, at the very last moment, an extension of present temporary arrangements protecting producers from low market prices at the end of long term storage contracts.

"We also secured an agreement that at the end of the current seven-year programme of restructuring, with its ban on new plantings, there would be a review by the Commission. This should ensure that planting controls will be maintained if there is any further risk of surplus production. The package finally agreed will therefore reduce the contribution of the United Kingdom towards Europe's wine régime.

"Agreement was reached on a group of animal health measures, which fully meets the United Kingdom's requirements, and we obtained an extension for a further six months of the derogation enabling the United Kingdom, the Irish Republic and Denmark to maintain their national swine fever requirements for imports of pigs and fresh pigmeat ".

My Lords, that concludes the Statement.

4.1 p.m.


My Lords, I am grateful to the Minister for coming to the House and stating what has happened in Brussels. The devaluation which he mentions will certainly be of great importance to British agriculture. There is a problem here about the consumer. The noble Lord has spelled out that the effect on consumer prices will amount to ¼ of 1 per cent. on the Retail Price Index and it will be many months before the full effects of this increase reaches the shops. I hope the Minister is being realistic here. I am all for helping the farmers. I recognise, after all, that the farmers produce food for the consumer. There must be a proper balance. I hope he has it right.

May I ask about the hill farmers? Is it possible to break this figure down to show what aid is going to be given to hill farmers, who have had a rough time over a long period? I am thinking about the recent weather affecting Scotland, the North of England, the South-West and also Northern Ireland, which also are affected by this price review. I would be grateful for any information about that.

If I may turn to sheepmeat, I am glad that so far it seems that New Zealand is going to be protected. We know that France and other countries have sometimes sniped at Britain for allowing imports of New Zealand lamb. I believe that New Zealand is part of our own set-up and must be protected. I hope the Minister feels that this arrangement is satisfactory. On the other hand, the Government have not been able to persuade France to meet her legal obligations; she is still defying the European Court. Why has there been no real progress on this? Has it been suggested that, because no action has been taken on wine, quietness has been achieved in this respect?

May I ask also about the animal health measures which, to use the words of the Minister, fully meet the United Kingdom requirements, and we obtained an extension for a further six months of the derogation enabling the United Kingdom, the Irish Republic and Denmark to maintain their national swine fever requirements ". Can the Minister go into further detail about this? Our animal health is far superior to that in any other parts of Europe. I feel strongly about this because I was once in the position of a Minister who had to face the biggest outbreak of foot and mouth disease we have ever had. I have always felt that we should be very sensitive about what is happening in Europe, because there is still a lot of foot and mouth disease about in Europe, where they do not have the rigid controls we have. I should be grateful if the noble Lord would answer those general broad questions.


My Lords, I, too, should like to welcome the Statement which the Minister has repeated. It is one which will be extremely welcome throughout the agricultural industry and something which is very necessary indeed. For example—I take it as only an example—in Scotland last year real incomes in the farming community fell by 11 per cent. Even more significant and more worrying in the long term is the fact that bank overdrafts of the farming community in Scotland have nearly doubled in the last year. At a figure of 20 per cent. or over, this is a burden which it is extraordinarily difficult for any industry to bear, particularly one working on the narrow margins—and I say that without fear of contradiction—that the farming industry is working on at the present time. The 5 per cent. will certainly be most welcome. But I would ask the Minister what gap remains before we have parity in the Community? This is quite an important point. I would also ask if they intend to do anything to introduce some form of parity as regards the terms for borrowing money. Some recent programmes have shown some extraordinarily wonderful schemes for the farming community on the Continent, where farmers have been able to borrow money for as little as 2 to 3 per cent. This is a gap which is highly significant in times like these.

I would also ask about the voluntary restraint by third countries. Does this mean that we are going to ask New Zealand to reduce the amount of lamb she sends to this country, or not to increase it? If it is to ask them to reduce it, I would think this is certainly contrary to our agreements with New Zealand at the time of our joining the Community. Can the Minister explain also the part of the Statement which reads: We again made it clear we would not accept any sheepmeat régime that failed to give a net benefit to Britain or included intervention ". I do not quite understand what that means.

I should also like to know if we are simply living from six months to six months on our regulations for import of meat into this country to avoid the desperate disease of swine fever which is still about. In conclusion, I would ask the Minister if his right honourable friend is engaged in a permanent war with the French. There does not appear to be a communautaire spirit, because time after time he seems to rejoice in the fact that he has put it over on the French. Perhaps we could disguise it a little and say that we are more communautaire than the French instead of more successful.

4.7 p.m.


My Lords, I am grateful to the two noble Lords for the welcome they have given to the Statement. The noble Lord, Lord Peart, asked if we had got the balance right with the 5 per cent. devaluation. He will know more about this than I do because he was a Minister of Agriculture. The balance is always a difficult thing to achieve. We think we have got it right. The noble Lord, Lord Mackie, referred to bank overdrafts and how these are going to be a terrible imposition on farmers, and I entirely agree with him. The 5 per cent. devaluation does at least compensate in part. Of course it does mean that in the long run some food prices are likely to go up a little, but not very much. As an example, butter may go up by about 3½p per lb over a longish period of time. This is precisely the kind of situation that he himself was in, or his successor was, last April, when it was decided to devalue the green pound by the same amount.

The noble Lord, Lord Peart, asked about hill farmers. He will recall that my right honourable friend has recently announced a substantial increase for hill farmers, both for sheep and for cattle, which amounts. if I remember correctly, to something like £20–6 million. That was announced about two weeks ago. The noble Lord also referred to sheepmeat, as did the noble Lord, Lord Mackie, and both noble Lords referred to the position of New Zealand. I entirely agree that it is essential that New Zealand's interests are protected in this matter. All we have agreed to is that the Commission should have a negotiating mandate for voluntary restraint; in other words, they are permitted to negotiate with New Zealand and other countries for some form of voluntary restraint. There is not an imposition that there should be restraint, and it is not an indication that the thumbscrews are going to be turned on New Zealand. All it is is a permission to negotiate.

The noble Lord, Lord Peart, also referred to France and the illegal position as regards the French not allowing imports of British lamb. He asked why nothing was done about it. The French tried to establish that further legal proceedings should be held up pending the negotiation of a Community r½gime on sheepmeat. It was my right honourable friend who did not accept that. We have always accepted—indeed, the Commission has accepted—that the French are acting illegally. The Commission is taking the matter back to the European Court. The French wished that that action should be suspended until such time as a sheep-meat regime had been agreed. My right honourable friend and the Commission did not accede to that request.

The noble Lord, Lord Peart, and indeed the noble Lord, Lord Mackie of Benshie, referred to swine fever and asked what was being done about it. I should like to make it clear that we have animal health regulations in this country which prevent the import, and quite correctly so, of animals from other countries which do not have certain clean bills of health. What we have achieved as regards this negotiation is that that derogation should continue for at least a further six months.

The noble Lord, Lord Mackie, asked whether we were continuing a perpetual war with the French. I should hope that there would not be such descriptions as "war ". There is a little disagreement here and there over fairly fundamental issues. We wish to see them acting legally over the imports of our British meat, and we do not intend to act illegally in the same way as they do. In the end the success of the Community and the success of the Common Agricultural Policy will depend only upon all the members of the Community acting in harmony together. It is our desire to see that the way in which that harmony comes about is not unfavourable to Great Britain.


My Lords, can the Minister answer the question about the gap as regards the green pound?


My Lords, I knew that there was something more substantial that the noble Lord, Lord Mackie, said. Indeed, he has raised a number of substantial matters. He is quite right in saying that the gap was 9 per cent. It is now 3.5 per cent.


My Lords, what the noble Earl has just said might be very welcome news for the farmers, who are a minority of the people in Great Britain. However, one would accept that the consumers in Great Britain—and they in the main are the housewives—comprise the majority. As regards mention of ¼ of 1 per cent., the noble Earl gave us some idea of the increase in the price of butter that was foreseen in the near future. The price of butter is a bone of contention, as the noble Earl clearly understands, in view of the amount of butter which is held in intervention by the EEC. So, while the British housewife might feel that the farmers are doing very well out of it, she will be quite concerned that once again, in spite of all the butter that is held in intervention, she will have to pay I think the noble Earl said another 3.5p on a pound, which in view of all the other increases in gas, electricity and so on might become the last straw. The noble Earl gave the figure for butter. Can he this afternoon give figures for any other increases that he expects the consumer—the housewife—will have to bear in this kind of devaluation of the green pound which will no doubt be of help to the farmer but will be of detriment to the consumer? Can he give us the increases in any other prices besides that of butter?


My Lords, I would respectfully reject one inference which the noble Baroness, Lady Fisher of Rednal, has suggested—namely, that because the farmers are in a minority, the effect on the majority should be taken more into account. In the long term the interests of the producer and the consumer are the same. If the farmers do not and cannot make sufficient money they will simply not be able to provide the food which the nation requires. The noble Lord, Lord Mackie, referred to one particular matter this afternoon as regards the bank rate. Indeed, if the noble Baroness were to look at figures for agricultural output in terms of income, she would see that they have, in fact, gone down. With respect, they went down I think, during the period of the Government which she supports. We want to see that situation reversed. Inevitably, if we allow prices to increase a little, somebody must pay. This relatively modest sum is available in order to enable farmers to increase their income modestly.

The noble Baroness asked what other figures were available for prices which were likely to increase. Cheese may go up by 3p per pound; beef by 4½p per pound; and bread by one-third of 1p a loaf. If she thinks that that is a great deal, which of course she is entitled to think, she should realise that our predecessor, under her Government, did precisely the same thing in April because he thought then that it was necessary that farmers should have an increase in theft income and that it was necessary—and this is what our Government wish to do—to bring the green pound more into alignment with reality and that it should be less over-valued than it has been.


My Lords, I should like to raise one further point. How does the noble Earl interpret one-third of 1p on the price of a loaf in terms of retail figures?


My Lords, of course, prices do not go up by one-third of 1p. Somebody has to absorb them. Either it goes up, presumably by a halfpenny or one penny, or it does not go up at all.


My Lords, I wonder whether the noble Earl can enlighten me about how many devaluations have taken place during the last 12 months, because I think that that would put the matter in much greater perspective? Apparently we are only considering today's devaluation and its effect on prices, but there have been three or four devaluations, think—without looking up the record—during the last 12 months.


My Lords, I am bound to say that I speak from memory as regards this matter, but I think that the noble Lord's Government devalued the green pound by 5 per cent. in March. We devalued it by 5 per cent. in June; then 1.1 per cent. in September and now another 5 per cent. The reason, of course. is that when the value of the pound slips this becomes necessary. I would remind the noble Baroness, Lady Fisher, that, if she is concerned about the rise in the price of food to the housewife—about which we are indeed all concerned—the Retail Price Index went up by no less than 122 per cent. during the last five years.


My Lords, is the Minister of State aware that, subject to what my noble friends have said about increased prices, there are considerable remaining problems? Can he be rather more precise about the increase in real farm income which will result from this 5 per cent. devaluation? Secondly, rather more broadly and fundamentally, can he say to what extent the Government are still hoping that there could be a more radical reform of the Common Agricultural Policy? Is there not a danger that we go from package to package—and I am not expressing this as a view of any one political party—mollifying this sector or that sector, but failing to impress upon our partners in the Community that we shall not come to a satisfactory conclusion until we have a real reform of the Common Agricultural Policy? Can the noble Earl say what hope the Government have of achieving that?


My Lords, the noble Lord, Lord Cledwyn of Penrhos, has of course put his finger exactly on the difficulty. We accept that there should be some fairly substantial reforms of the Common Agricultural Policy in order to prevent the kind of thing which we are at present witnessing and in order to make sure that there is a better agricultural policy. But, like all things which are described as "common" agricultural policies, there has to be common agreement, and the difficulty is to get eight other people to agree with one's own point of view. That is bound to be a slow process. It is bound to be a process where, from time to time, one feels that not a great deal of success is being achieved. However, we intend to continue with it in order to try to reach a more successful outcome than we have at the moment.

The noble Lord asked whether I could give any indication of how farmers' incomes would be affected. That is always a difficulty, because it depends upon the price at which commodities are sold, which are not necessarily the prices that are indicated by intervention prices or target prices. On the whole, it is expected that the devaluation will make a gross improvement to farmers' incomes of £235 million; but of course there will be additional costs, such as feeding stuffs, which are likely to be in the nature of £85 million. This will leave a net improvement of about £150 million. I would explain to the noble Lord, Lord Cledwyn, that that figure does not represent the increase in intervention prices, but it is the figure by which it is anticipated farmers' incomes will increase.


My Lords, in any radical reform of the Common Agricultural Policy will the noble Lord agree that farmers should receive guaranteed prices by some means other than by making the food consumer pay, as is the case in this country?


My Lords, the great difficulty is to get the supply and demand in equilibrium and in balance. What we would wish to achieve—and this is perfection—is that that which is required is produced and that there should not be any surpluses. But the nature of life is that if we are not to have shortages in some years, we are bound to have surpluses in other years. The dramas created by shortages are, with respect, infinitely greater than the dramas created by surpluses. Perhaps I could give the noble Lord one example. About four years ago potatoes were in short supply not only in England but throughout the Common Market countries. Prices simply rocketed from £40 a tonne to £230 a tonne. The complaint then was that consumers were having to pay too much and farmers were making a fist out of it. Of course, the following year prices came down and things were different. Therefore, when there is a shortage the effect is infinitely greater than when there is a surplus.


My Lords, will my noble friend accept my congratulations on what he is doing to defend the farming community from sometimes rather unfair attacks by the other side—that everything is being done for the farming community and not enough is being done for the consumer? Will he bear in mind that this winter has only just started?


My Lords, I hope the noble Lord will appreciate that I never said that; indeed, some of the critics did not. I recognise the importance of the farming community and of having a healthy agricultural system.


My Lords, if I may refer to the noble Lord, Lord Peart, as my friend, I was obviously not referring to him when I said that certain comments had been made. His comments were very much more balanced, as one would expect from a former Minister of Agriculture.

But I return to the problem that this winter has only just started, and as far as weather and other things go it has started extremely badly. The noble Lord, Lord Mackie of Benshie, reminded my noble friend that farm incomes last year fell by more than 11 per cent. and that at present the expectation from the same source is that they will fall by a larger amount this year. The farming community is grateful for the help that it receives through this devaluation, but I merely want to put on record that in no way will this reverse the fall in farm incomes in Scotland, and most certainly not in the hill country.


My Lords, I take my noble friend's point, but unless we draw this discussion to a close, we shall be embarking on an agricultural debate. Perhaps, with your Lordships' approval, we might return to the debate on which we originally embarked.