§ 4.17 p.m.
Earl FERRERSMy Lords, with the permission of your Lordships, I should like to repeat a Statement which is being made by my right honourable friend the Minister of Agriculture in another place. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement about the Council of Agriculture Ministers' meeting in Brussels on 28th to 30th May, at which I represented the United Kingdom with my honourable friend the Minister of State.
"At that meeting the Agriculture Council completed its consideration of the 1980–81 agricultural prices and related proposals. We have pressed for and secured important modifications to the original proposals of the Commission. We have removed those elements of severe discrimination against our industries and we have secured a number of parts of the package from which we will derive substantial benefits.
"The Commission had originally excluded any continuation of the special butter subsidy currently worth 13p a pound on butter. We have succeeded in obtaining the continuation of this subsidy for the coming marketing year, 100 per cent financed by Community funds.
"For five years we have failed to obtain substantial refunds on cereals used in the export of whisky. We have now succeeded in obtaining the refunds. back-dated to the period since accession, and this will bring us in a net benefit of £ 40 million this year and approximately £ 16 million per annum thereafter.
"We did argue for no price increases upon those products in surplus. On sugar, however, the world price has now gone well ahead of the European price and therefore there will be no cost of disposing of Europe's sugar surplus in the present circumstances. Britain 1139 will retain the same sugar quotas as last year.
"The wine structural reform package agreed earlier this year is designed to make a major impact on the structural surplus and will impose an important discipline on producers in France and Italy. At the Council meeting in Brussels last week I insisted on a further discipline of a limit being placed for the first time on the amount of wine eligible for end-of-season distillation, and this will impose a limit of 18 per cent. on any individual producer whose production goes into store.
"The price increase on milk is offset by an increase in the co-responsibility levy so that the net increase on milk prices will be 2½ per cent.
"This increase does not affect the liquid milk sales in the United Kingdom. During the marketing years 1979–80 and 1980–81 the average increase in the price of milk in the Community net of co-responsibility levy will be 1¼ per cent. per annum and this, compared with the substantial increase in input costs of dairy producers, will mean that there will be a substantial reduction in real terms of the income of dairy producers throughout the Community.
"The total effect of the whole of the CAP package on the consumer will be an increase of 0.7 per cent. on the food price index and of 0.15 per cent. on the retail price index over a full year.
"The package includes the introduction of a new suckler cow subsidy worth about £ 12 a cow, financed 100 per cent. from Community funds. The original Commission proposals, limiting this subsidy to smaller herds only, was successfully eliminated. We also managed to retain in the package, contrary to the Commission's original proposals, the right to continue the variable beef premium. As Britain provides 26 per cent. of the specialist beef herd in Europe these measures will be of net benefit to the United Kingdom.
"I obtained agreement that at an early Council meeting the Council would consider structural proposals to benefit the agriculture of Northern Ireland.
1140 "At Luxembourg eight countries had agreed upon a sheepmeat regime based upon intervention throughout the Community. I believed that this would be bad for the British consumer, bad for the British producer and bad for New Zealand. I informed the Commission that there was no way the British Government would accept such a scheme in spite of it being backed by eight other member countries.
"I succeeded in persuading the Commission and the Council of Ministers to accept United Kingdom proposals whereby there will be no intervention in the United Kingdom and, where the arrangements will so operate that there will be no incentive for any British lamb to go into intervention in France or any other part of the Community.
"I succeeded, for the first time in the history of the Community, in persuading the Community to provide Britain with a full deficiency payment system financed 100 per cent. from Community funds. The only previous major example of the Community accepting the principle of deficiency payments was when the previous Government negotiated the beef premium scheme, but that, while hailed as a triumph at the time, is a scheme that still enables intervention of British beef to take place and is financed only 25 per cent. from the Community funds and 75 per cent. from the Treasury.
"The housewife will benefit because British lamb will tend to stay in Britain to be eaten by the British consumer at reasonable prices instead of being sucked into intervention overseas as would have happened under the Commission's Luxembourg proposals.
"British producers will obtain a 17 per cent. improvement in their guaranteed prices this year and can look forward to a secure future as the Community guaranteed price converges to a common price. These improved producers' returns will be financed 100 per cent. by the Community with deficiency payments, and I anticipate that on the completion of the first four years of the scheme we will receive an annual benefit from the Community to the order of £ 100 million per annum.
"It was vital to defend New Zealand's interests and the whole regime will take effect only if and when New Zealand 1141 reaches a satisfactory agreement on the volume of her imports into the Community in exchange for a reduction in the tariff. I have agreed with the Commission that this agreement should and must include a New Zealand agreement as to the possible use of any export refunds. The fact that Britain, which produces half the lamb of Europe, will now have no lamb going into intervention means that, unlike the Commission's original proposals and those agreed by the Eight in Luxembourg, there will be little intervention in the Community.
"Throughout the negotiations I have kept close to the New Zealand Government and will continue to do so until their negotiations are satisfactorily completed.
"Last year I was able to announce a price settlement which for the first time gave the United Kingdom a net benefit.
"Before making the budget adjustment now negotiated, this year's agricultural price settlement gives a net benefit of £ 37 million in 1980–81. In addition, the Commission's proposals to eliminate the butter subsidy, worth £ 108 million to British consumers, have been successfully rejected.
"We have in fact obtained a settlement of benefit to Britain and the success of the negotiations on the budget will mean that in future our partners will have a much greater financial interest in improving the common agricultural policy. "
My Lords, that concludes the Statement.
§ 4.25 p.m.
§ Lord PEARTMy Lords, I am grateful to the noble Earl for repeating the Statement which has been made in another place. One or two points strike me. I am rather surprised that there was some criticism of a previous Administration on the deficiency payments system. The noble Earl spoke about the previous Government negotiating the beef premium scheme. Yes, my Lords, they did and I was very proud that it was called the Peart premium. It was a breakthrough at that time. The previous Administration had done nothing about it and it was a Labour Government which, when it first went to Brussels, did something.
1142 I remember also being chided by a noble Lord opposite¤I do not think it was the noble Earl¤because it was said that we had done nothing for some sections of the industry. I quoted the pig subsidy that we arranged at that very same meeting. But I am not going to carp about that. I am glad that Northern Ireland's agriculture is to be carefully considered by the Community and that there will be discussions. I think that that is right. I know that it is an unusual step, but I support it very strongly.
Above all, I support what has been said about New Zealand. New Zealand's terms, in relation to the Community and ourselves, were discussed a long time ago at the Summit in Dublin, and since then every subsequent Government has safeguarded New Zealand's interests. So I hope that Mr. Muldoon, who made a statement to the Press the other day, finds that he will not be let down; that he will make certain that the present Administration ensure that New Zealand's exports to this country are allowed, and that we shall continue to recognise that New Zealand has a major part to play in relation to our own economy.
I know that there are people in this country who disagree with me, and I have even stood up against farmers on this issue. But I have always said that we are defending people who, in time of peril and war, came to our aid without being asked. So I hope that noble Lords opposite, and indeed noble Lords from all parts of the House, recognise that that section of the Statement will have the warm approval of us all.
I shall not criticise this Statement. On the other hand, one should not be too euphoric. I gather that an extra £ 710 million will be for the Treasury; but £ 300 million will be put on food prices and in the end inevitably the consumer will be affected. I agree that there should always be a sensible balance between producer and consumer, and I hope that this Government will not forget the consumer. However, I believe generally that this is a document which we could debate at some time, although we have had many debates on the CAP and other matters and at the moment it may well not be timely. Nevertheless, I hope noble Lords will consider carefully what the noble Earl has said. I still believe that we have to think 1143 in terms of being in Europe, not just because of what the CAP offers, but because of what is right politically.
§ 4.29 p.m.
§ Lord TANLAWMy Lords, we, too, on these Benches welcome the noble Earl's Statement on behalf of the Government. I think noble Lords will agree that this is a much better Statement than the last one which was read out in your Lordships' House, and which said absolutely nothing. This Statement is coming to grips with the reality of trading with Europe, in the way that has been set out.
There are just two points of clarification on which I would ask Her Majesty's Government to assist, and they relate to the question of sheepmeat. What is not clear to me, at least, from what is said in the Statement is whether there is to be freedom of movement for British lamb into Europe or whether there are still to be restrictions upon movement. Many farmers are concerned that these restrictions may still exist. Secondly, it is not clear when the items relating to British Iamb will come into effect. There is no need to remind the noble Earl that 5th August is a key date for the Scottish National Farmers' Union, as indeed it is for all Scottish hill producers. Unless the situation is clear by then, it will mean a very serious drop this year in the incomes of Scottish hill farmers.
It may be worth reminding the Government that the 17 per cent. improvement in prices will be very much welcomed by the producers of lamb. However, there is a further 17 per cent. difference in the debt servicing cost to the British farmer as compared with his European equivalent. There have also been very serious setbacks this year, due to the weather, in the production of British lamb, certainly in the hill and upland areas, which will affect farmers' costs. Therefore the date of the implementation of these factors is very important. Consequently, I hope that it will not be too long before Her Majesty's Government are able to negotiate a just and fair agreement with the New Zealand interests and with those of the Community.
§ 4.32 p.m.
Earl FERRERSMy Lords, I am very grateful to the two noble Lords for the welcome which they have given to this Statement. I would be the first to recognise the duty which the noble Lord, Lord Peart, did when he succeeded in obtaining the original beef premium. At the time I criticised him for it. Indeed, I may be the person he was thinking of, but I will not refresh his memory too much about that! The noble Lord succeeded in getting the beef premium scheme and, as he rightly said, this was the first time that the Community accepted such a scheme. We have built on that, if I may so put it. The only point that I would stress to your Lordships is that this premium scheme is 100 per cent. financed by the Community.
Although the noble Lord, Lord Peart, said that we should not be too euphoric about the Statement, I should like to be slightly euphoric because the problem of sheep was not affecting just agriculture; it was affecting the whole of the Community. A few months ago there seemed to be almost a total impasse. This Statement has at least shown that we have got out of that difficulty. We have got out of it in a way which does not put meat into intervention either in Europe or in this country. It keeps the price to the consumer in this country low, and it also puts the price to the producer in this country up. In that respect it is a major asset for which we can be grateful. It was difficult to achieve but it has been achieved.
I endorse wholeheartedly what the noble Lord, Lord Peart, said about New Zealand. May I remind him that the whole of this scheme will come into operation if and when New Zealand has come to a voluntary agreement on restraint? If she comes to such an agreement on restraint, then there will be the compensation for her of a lower tariff. The only point I wish to make about it is that this is not intended to be a restriction upon New Zealand imports. It is intended merely to prevent an excess of imports from New Zealand resulting from the new arrangements which have been made.
If I may turn to what was said by the noble Lord, Lord Tanlaw, he asked when this will come into effect. It will come into effect when the negotiations with 1145 New Zealand and the Community have taken place and are completed. I cannot tell him when that will be. I can only say that I hope it will be as soon as possible.
The noble Lord also asked¤I was grateful to him for this question because it is important¤whether United Kingdom sheepmeat will be allowed into Europe. When this new system comes into operation there will be free trade within the Community. I do not want to go into too much detail as to exactly how the premiums will work. However, there will be a price for the United Kingdom. If the market price falls below that price, there will be a premium available which will be paid by the Commission to the producer. If that lamb is exported on to the Community, that premium will be refundable, but if, as a result of the export to the Community, the price level of lamb to the consumer in France were to be lowered, then the French producer would get a higher premium relating to France. There is a further twist to that, which is that over the course of four years it is hoped to get a common reference price by which the United Kingdom producers will receive a greater benefit. But that is a detail which I think it would be more appropriate to leave until later.
§ Lord BALOGHMy Lords, can the noble Earl tell us what is the effect of the two agreements, agricultural and nonagricultural, under the present scheme and also under the Luxembourg scheme, on the British balance of payments? If the noble Earl cannot answer the question now, and I anticipate that he will say that he cannot, perhaps he will let mc know later.
Earl FERRERSMy Lords, the noble Lord is absolutely right. I am unable to give him the information which he has requested, which is a matter of very considerable detail. But I shall see whether I can obtain it for him and I will write to him about it.
§ Lord HARMAR-NICHOLLSMy Lords, is my noble friend aware that, while he is likely to get and while he is entitled to get unanimity on the success of taking the sting out of the sheepmeat controversy, certainly on all the help that we have got to give to New Zealand, 1146 some of us who held different views about things to do with the European Community over the years will feel a little disturbed about the nature of this Statement? Over the years we have found that things which matter have been submerged by the giving out of lots of detail and by intricate quotations which very often have not been understood and which have tended to cover up the real problems which have had to be faced.
The problem which now is likely to undermine the whole structure of Europe is the problem of surpluses. Unless something is done about the surpluses, for they are the things which eat into the budget¤and that will have to be done by getting outside all the intricate explanations of points of detail such as my noble friend has very ably given¤we shall not get to the point where the European Community can operate in the wholehearted and broad based way which has been suggested. Therefore I hope that my noble friend will use all the power and influence he has got with his colleagues in the Government to get to grips with this problem of the surpluses, even if it means having to allocate subsidies from national providers in order to ensure that they do not over-produce.
While I congratulate my noble friend on the way in which he has handled the intricate part of the Statement, I hope that we shall not have again what we have had over the years. Both the noble Lord, Lord Peart, and I were in those days very critical of Europe and felt that the basis of the Treaty of Rome was not the basis upon which we ought to join Europe. Nevertheless, now that we are in the Community, supported by a referendum, we want to make it work. But it will not work if we blind ourselves with the science of the details and intricacies which cover up the real problems; and the problem in the field of agriculture is the problem of surpluses.
Earl FERRERSMy Lords, I am sorry if my noble friend Lord Harmar-Nicholls felt that I had in any way obscured the facts by giving too much detail. All I would tell him is that if I gave him too much detail it was merely a tiny fraction of that which was given to me. I totally agree with him that we should not permit the details to obscure the facts, and also 1147 that one of the greatest problems is the surplus of production. That fact has been pre-eminently in the mind of my right honourable friend throughout the whole of the negotiations, and I think that every member state is aware that this is a real problem.
It so happens that this is only one of the problems. The other problem is to get the community of nations to work as a community. The challenge of the whole European concept is to see whether, within a generation, it will be possible to have a united Europe where these problems are less than they are now. That is the challenge which faces our negotiators. I can assure my noble friend that we take that very seriously into account, and that is one of the reasons why my right honourable friend took the stance that he did.
§ Lord CLEDWYN of PENRHOSMy Lords, I should like to add my congratulations to those of my noble friend upon the Statement which the noble Earl has just read. My congratulations are extended to certain aspects of the report but not to the report in its totality, because I think it is a report of such detail that noble Lords will wish for a great deal more time to study it before they come to a final judgment.
Will the noble Earl say, first, to what extent he feels that the common agricultural policy has been substantially amended by this package? It is, as the noble Lord, Lord Harmar-Nicholls, has just said, the common agricultural policy which is at fault. That is where reform is needed. It is important that the noble Earl and his right honourable friend should explain to Parliament how this report really helps in changing the common agricultural policy and in dealing, in part at least, with one of the main problems, which is the problem of surpluses.
Secondly, I wonder whether the noble Earl will be good enough to deal with one point of detail—namely, the effect of the Statement on dairy producers in this country, who have been much maligned and criticised from time to time but who in fact are efficient, whereas the problem of the common agricultural policy is that it tends to subsidise inefficient or nonviable agricultural producers in Europe. If this Statement in fact is to affect the 1148 income of dairy producers throughout the Community it is important that the House should know precisely how this package is to affect the dairy producers in the United Kingdom, bearing in mind that a considerable sacrifice has been made by British agriculture in the sense of creating viable farms. Many milk producers in this country have gone out of production over the last few years, as the noble Earl knows. How is this package to affect dairy producers? I think both the House and the industry would wish to know that in more detail.
Thirdly, I would ask the noble Earl how many of the recommendations of the report of Sub-Committee D of this House on agriculture and food have been implemented by this package? The Sub-Committee went to an enormous amount of trouble to look at the proposals which were then made by the Community and it would be interesting if the House could be informed how the recommendations of the Sub-Committee were treated in the negotiations in Brussels.
Earl FERRERSMy Lords, I am gratefull—I think—to the noble Lord, Lord Cledwyn of Penrhos, for his observations. He asked some penetrating questions and I am grateful to him for his appreciation of the Statement. He asked how the Statement had resolved the problem of surpluses within the Community. He will know better than I know, as he was a Minister himself, that one cannot resolve problems like that overnight; one can only make a gradual contribution towards doing so. I would point out one significant fact to him and that is that, under the sheep réegime, there was a near total confrontation. That has been avoided, and one of the ways in which it has been avoided has been the principle of what we used to regard as deficiency payments, which has enabled meat not to go into intervention and then to be sold to third countries, probably with an EEC subsidy, but has retained the meat within the countries of the Community, to be consumed as fresh meat. I believe that that is a major contribution.
The noble Lord then asked how the Statement had affected dairy farmers. He will be aware that there is a co-responsibility levy, that the common price increase is 4 per cent. and that the co-responsibility levy is of the nature of 1.5 per cent. and 1149 therefore the increase in support prices is only of the nature of 2.5 per cent. As that affects this country, of course, it refers to milk which goes into manufacture, because milk which goes on the liquid milk market is adjusted by my right honourable friend's movement of the price for milk on the liquid milk market. I would only remind the noble Lord, Lord Cledwyn, that in the past 12 months we have had three devaluations of the green pound and two price increases, all of which have helped the dairy farmer, although I accept that he faces a number of difficulties of which the noble Lord, Lord Cledwyn, is all too well aware. We shall be able to continue to carry out investment in the Community's schemes under the farm and horticultural development scheme, but only on those herds of up to 60 cows¤and that applies throughout the Community¤or where there is an increase in herd size of up to 15 per cent. but not more.
The noble Lord asked how many recommendations of the House of Lords Committee which dealt with this have been taken into account, and in connection with that I shall ask for the noble Lord's indulgence. I should have to do a certain amount of homework on that because I do not have the figures readily available¤and I rather fancy that he thought I would not have them.
Lord BRUCE of DONINGTONMy Lords, is the noble Earl aware that the views expressed by his noble friend Lord Harmar-Nicholls will find very wide support on this side of the House? Is he aware that over two-thirds of the cost of the common agricultural policy is in respect of the storage of these vast surpluses and in losses on their disposal? As I believe the Prime Minister herself has said, they represent a complete absurdity. Is he further aware that the time has long since passed when a radical change has to be made in the whole structure of the common agricultural policy? It is already the laughing stock of the world; it is already costing vast sums of money, and we on this side of the House shall not be satisfied until there has been some radical reform¤and when I say "radical" I do not mean tinkering about on the fringes; I mean a radical structural change in the whole of the present absurdity.
Earl FERRERSMy Lords, those are fairly harsh words and I would not go all the way with the noble Lord, Lord Bruce of Donington, on that, but of course I accept that, where large sums of money are being spent on putting good food into intervention, that seems to be wrong. We want to see that stopped; we want to see a change, but one does not just make a change overnight. The noble Lord, Lord Bruce, knows that full well. Where there are nine other countries to take into account, these things cannot be done either successfully or effectively if over night one set of traditions is swept away and replaced with another set. But I take his point entirely and of course we are just as worried as he is that so much money is spent on putting good food into store.
§ Lord SANDYSMy Lords, as your Lordships have been dealing with two very important Statements which together have taken over an hour of your Lordships' time, I suggest we should now return to the Social Security (No. 2) Bill.