HL Deb 02 April 1984 vol 450 cc504-14

4.49 p.m.

Lord Belstead

My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Minister of Agriculture. Fisheries and Food. The Statement is as follows:

"With permission, Mr. Speaker, I wish to make a statement on the meeting of the Council of Agricul-ture Ministers in Brussels on 30th and 31st March. My honourable friend, the Minister of State, and I represented the United Kingdom.

"The Council was able to agree on all outstanding issues on prices and other aspects of the common agricultural policy, including the provisional agreements reached at earlier meetings on milk, monetary compensatory amounts and other products, details of which I have previously given to the House.

"This settlement represents, for the first time, a positive step in controlling the growth of unwanted food surpluses and the consequent huge increases in the cost of the CAP. We can, for instance, expect milk production, which is the greatest problem area, to drop in the current year by about 6 million tonnes below what would otherwise have been the case. The Commission estimates that this alone will save the Community over £1,000 million in a full year. Even so, the House must understand that, even at the revised level of production, about 10 million tonnes of milk will be produced over and above what the Community itself consumes.

"Moreover, the trend makes it doubtful whether, in 1984 at any rate, agricultural expenditure can be easily met within the budgetary provisions. Of course it is still early in the year and the situation could yet change, but I made it clear to the Council that in the United Kingdom's view the Community will need to take the necessary steps to limit expenditure if budgetary problems arise.

"Of course the settlement will cause problems to farmers throughout the Community. But since last July when the post-Stuttgart proposals were first published farmers have urged that the uncertainty thereby created be ended as soon as possible. That has now been done.

"The supplementary levy for milk, which has been widely discussed since last July, will take effect immediately. The agreement provides for this to continue for five years with a review before the end of the third year. I told the House on March 22nd that I was determined to ensure that Ireland was brought within the supplementary levy system and that appropriate arrangements were made for Northern Ireland. I have achieved both these objectives. Ireland has no guarantee of future expansion beyond this year, and I have obtained for Northern Ireland an additional quota of 65,000 tonnes.

"On the detailed arrangements for implementing the supplementary levy, I secured important changes which will enable redistribution of quota to take place without restrictions relating to size of herd.

"We are discussing the details with the farmers' unions and the milk marketing boards, and information on the supplementary levy will be given to individual farmers as soon as possible. Meanwhile, I would urge producers to consider carefully and take advice from local advisory officers before deciding how to adapt their milk enterprises to take account of the impact of the supplementary levy system.

"The House will remember that the Commission's original proposal implied a revaluation of the green pound which was estimated to reduce farm incomes by 10 per cent. The NFUs put the deletion of this proposal as their prime negotiating objective. I am glad to confirm that I have not accepted this proposal, nor, unlike Germany, are we committed to any future revaluation.

"Another outstanding issue for us was the beef variable premium scheme. Despite very strong opposition from the Commission and other member states, I insisted on retaining this scheme in the United Kingdom. There is a small reduction in the maximum rate from 10.7 pence per kilogram liveweight to 8.7 pence, which is higher than it was up until 1982. In order to remove possible distortion of competition in export markets, arrangements will be introduced to claw back the premium on exports which have benefited from it.

"This outcome means that consumers and producers will continue to benefit from the premium scheme. We shall, of course, ensure that the back-up support available through intervention to beef producers in Great Britain and Northern Ireland is maintained.

"The specialist beef sector has faced particular difficulties for a number of years, and this has had a damaging effect on the balance between beef and sheep in some areas of the country. I am, therefore, delighted to inform the House that I have decided to double the suckler cow subsidy from £12.37 to the maximum permitted level of £24.74. I know that this will be very welcome to the farming industry.

"Turning to sheep, I resisted pressure to defer the final transitional step, which is worth 3.9 per cent, on the support level. This will broadly compensate for the effect of changes in the calculation of ewe premium.

"Sheep has been a relatively profitable sector for the last few years. But I recognise that the hill producers have particular difficulties. I have concluded that it is time, after four years with no increase, to raise the guaranteed price for wool by 5 pence per kilo.

"There were a number of other detailed changes to what is a very complicated compromise package. I shall in the normal way arrange for full details to be put in the Library of the House. Overall, the common support prices have been reduced by about ½ per cent.; this means, taking into account green rate changes, a reduction in real terms over the Community as a whole of between 2 and 3 per cent.

"The settlement is a favourable one for United Kingdom consumers. The price cuts agreed, together with recently introduced economy measures, could well for the first time have a small reducing effect on retail food prices on average.

"At the end of the meeting the Council considered again the proposal for New Zealand butter. Despite strong pressure from the Presidency and all other member states, Ireland alone refused to accept the Commission proposal for a five-year deal. Since unanimous agreement was needed, the Council concluded that there should be a further two-month roll-over. This matter will, therefore, require further discussion at a forthcoming Council.

"In conclusion, the House will realise that this has been a very difficult price fixing, against the background of the growing budgetary crisis facing the Community. Inevitably, it creates difficulties for farmers throughout the Community, but I believe the House will regard the outcome as a fair and realistic one."

That concludes my right honourable friend's Statement.

Lord John-Mackie

My Lords, we have to thank the noble Lord, Lord Belstead, for repeating that Statement. It is one of many and I do not know whether it is the final one. We hope that it is well on the way to being the final one, although, as the Minister said, there are a few outstanding points. It is a very important Statement. It naturally affects me personally, and I must declare my interest as a farmer. Milk is still the big problem.

I ask the noble Lord whether there are any plans to deal with the enormous surplus of 10 million tonnes which will still be left, which is mentioned in the Statement. The agreement is for five years, I gather, with a review at the end of three years. Does that mean that the 10 million tonnes may be taken into account or something done about it at the end of three years, or what? We are dealing with only 6 million to 7 million tonnes of a surplus of nearly 20 million tonnes. It is important to know what might happen there.

We should all be interested in the redistribution of the quota. Will the redistribution be in favour of the small farmers, particularly those in Wales, the West Country and areas of Scotland? Frankly, I think that they are in roughly the same position as a lot of small farmers in Ireland and should be dealt with in the same way in the redistribution.

I wish to ask about the advice to farmers. There have been too many scare headlines, such as: One in six dairy farms to go", and, 300,000 cows to be slaughtered". I should like to think that the advice to farmers will be good and detailed—and I mean detailed. I hope that the advisory service has not been run down so far that it cannot cope with giving this advice. That is a very important point and I hope that the Minister will look into it.

I note that the Minister is pleased that the green pound has not been touched. Naturally there is pleasure about that because it would affect us a lot. But some day MCAs, the green pound and, for that matter, the whole European monetary system will have to be looked into. There is something to be said for starting to phase out these items.

The Statement says that there will be a "small reduction" of 2p a pound in the beef variable premium scheme. That could mean £24 for a 1,200 lb steer. I may say that I am trying to farm 100 a year, and it is a fair reduction. I do not see how it can be called a "small reduction". The increase in the suckler cow subsidy will be very welcome. I am sure that the noble Baroness, Lady Elliot, will be pleased to hear about it. But does this cover all suckler cows, or only those in the less favoured areas? If it is all suckler cows, that is good.

On the question of sheep, as the Statement says sheep have had a fairly good time recently, and there is the question of the recalculation of the new premium, which is balanced in some ways by 5p in the price of wool; but that is not an awful lot if you take the average size of a fleece of somewhere between five to six pounds, or maybe a little more. It is not a lot these days. Then, I think the main thing that everybody is interested in is what effect this will all have on the consumer. So far I have not yet seen the noble Lord, Lord Mottistone, licking his lips, but we hope it will help the consumer because we all know that the price of food has had a steady rise, although I understand the figures show that it is not such a heavy rise as in some areas.

We all realise, as the Minister says in his Statement, the difficulties he has had. I am glad we have got almost to the end of the way, as I said earlier, and I do hope that there will be a decent agreement with New Zealand because, after all, in 1975 we did provide for a long-term transitional period for New Zealand. I think we owe the New Zealanders a lot, although there are many difficulties, particularly on the question of their butter, but I hope some arrangement will be made there at an early date. I am not quite sure why the Irish objected to this so strongly, but perhaps the noble Lord could explain.

Lord Walston

My Lords, we have it on the highest authority that there is joy in heaven when a sinner repents, and it would be arrogant and, indeed, churlish if I did not express some joy at a certain evidence of repentance on the part of the Minister of Agriculture. I am sorry, however, that the repentance has been so long in coming, and is so restricted in its form. I doubt if those introductory remarks come as any surprise to the noble Lord.

I have three questions I should like to put to him. The first is to ask him what steps have been taken, or will be taken, to prepare a long-term plan designed to bring production of all major commodities down to the level of Community needs. We have it in the Statement that even arrangements made for milk—the drastic arrangements—are still going to leave a ten million tonne surplus over requirements. It appears from the Statement—and here I slightly echo the question of the noble Lord, Lord John-Mackie—that these arrangements stand for five years with the possibility of a review after three years. Am I right in taking it that, unless the review alters things drastically, it is envisaged that there will still be a ten million tonne surplus of milk at the end of a five-year period? Assuming—and I hope it is not a rash assumption—that some steps have been taken to prepare such a long-term plan, what steps are being taken to notify farmers of such a plan, if indeed it exists?

My second question is to ask why no steps appear to have been taken to alleviate the undoubted hardships that will occur to some farmers—the less advantaged farmers—by this pretty drastic reduction in their prices, particularly by payments of a social nature from some social fund of the Community. Thirdly, are the Government now working on proposals which, without causing an outcry from farmers, will eventually reduce the price of food to consumers and reduce the cost of the CAP to the taxpayer? I ask that because I understand that even this proposal here envisages a still further increase of cost to the taxpayer of the common agricultural policy.

Lord Belstead

My Lords, I am grateful to both noble Lords for their reception of this long Statement. The noble Lord, Lord John-Mackie, and the noble Lord, Lord Walston, asked me in their different ways about how the milk situation is going to work out. The noble Lord on the Front Bench opposite, in particular, asked whether there are any plans (indeed, both noble Lords did) for reducing the admitted surplus of ten million tonnes, which is with us indeed until, as both noble Lords have interpreted correctly, the scheme is looked at after three years—and that will be the first moment when the Community can make a check on it.

I would simply say this to the noble Lords: yes, we must see how we go for three years. There is, however, one practical matter which was not in the Statement and which I think your Lordships may welcome. There is a new aid for concentrated skimmed milk for pig feed, which has been agreed. I think this may be used quite considerably in this country to assist farmers to use up additional milk which they cannot bring within their quota, and of course will be a source of, I would trust, cheaper feed for the pig producers, so in effect hitting two targets with the same missile.

I should like to add one other thing, if I may, which was not in the Statement. There is a total being put upon the milk package, so far as direct sales of milk are concerned, of four million tonnes. This is a quantification of the broad control within the quota which we already have. If I may put it just for my own purposes in simple terms, so far, for instance, as France is concerned, in France, as I understand it, about six and a half million tonnes of milk are consumed every year by livestock. By limiting, as this four million tonnes total does, the direct sales under the quota of milk in France to 1.183 million tonnes of milk, we are ensuring that there can be no diversion of milk from livestock to the open market so far as direct sales are concerned. I thought it was quite important to bring that in at that point; it was not in the Statement.

If I may go on much more quickly now, I am sorry to be unhelpful but I think Northern Ireland, if I may say so. is a special case because of the Irish situation. However, if I may say so to both noble Lords, I did attempt on behalf of the Government to make clear in the debate which we had only a week ago that, of course, hard and difficult cases are going to be looked at obviously in consultation with the farmers' unions. That is the sort of process which must go on now quickly and urgently.

Certainly, in answer to the noble Lord, Lord John-Mackie, the advisory service of the ministry is very well aware of its important responsibilities now in giving advice, and is already beginning to offer advice; and. as the Statement says, it is ready to do so. The suckler cow subsidy, which is being doubled, as announced in the Statement is for all suckler cows, and not just those in the less favoured areas.

Finally, if I may, as far as New Zealand is concerned, we have endeavoured throughout these long and difficult negotiations to negotiate from this country as fairly and as strongly as we can on behalf of the New Zealand interest. I think I can simply say that some member states have seen fit to stand in the way of the effect of the Dublin Declaration of 1975, when it was agreed under Protocol 18 that New Zealand would have access to the European market, which in fact means to this country, and now it is only Ireland. When the noble Lord asks, "Why?", I think that on that the Irish must answer for themselves.

If I may quickly cover the points I have not already covered of the noble Lord, Lord Walston, the noble Lord is habitually kind and generous to me so he will forgive me if I cross swords with him on his opening remarks. It is a little hard to be told by the noble Lord that the sinner has repented. Two years ago, my right honourable friend the then Minister of Agriculture was voted down when he endeavoured to use the Luxembourg Compromise on the scandalous price settlement which increased prices in the European Community by 10 per cent. The noble Lord, who is always fair-minded, I know, would I am sure be the first to admit that Governments of all political complexions in this country have tried over the years—but so often have tried alone—to see that the Community prices were damped down and not allowed to be stoked up. I simply say that in answer to the noble Lord's opening remarks.

So far as his three questions are concerned, as to the steps taken for a long-term plan to remove surpluses, my answer to that is that I think it is going to be financial pressures—and, again, it is the United Kingdom which has brought and is continuing to bring to the attention of the member states the needs of those financial pressures. We do not have a master plan in the Community at the moment. We are responding to the financial pressures; I admit that openly. I have already answered the point about hardship for milk producers, and I must admit to the noble Lord that I have forgotten his final question, or I cannot read my writing in regard to it.

The Lord Bishop of Norwich

My Lords, I wonder whether the noble Lord will answer just one question from these Benches. He gave us the enormous figure of a 10 million tonnes surplus over three years, and it looked so simple from these Benches and so complicated from the Government Benches. But is this not the moment to ask the recurring question: how can these enormous surpluses of milk, with all the help of modern technology, be turned into powdered and dried milk and somehow got to the millions of starving children in the African situation, where life is quite dreadful and where part of the surplus could literally mean the difference between life and death for millions of babies?

Lord Belstead

My Lords, I am glad that the right reverend Prelate put that question to me, even though it is a perennially very difficult one. If I may say so, the answer is twofold. On the one hand, there are real reasons to believe that if European food, in whatever form—and of course, as the right reverend Prelate so rightly says, skimmed milk powder is one of the obvious ways—is simply pumped into developing nations, eventually, so I have always been advised, that undermines the agricultural structure or infrastructure of those countries, and indeed the will to improve that infrastructure. That is why I think the European Community nations are hesitant about doing that.

On the other hand, having said that, I should like to say to the right reverend Prelate that I remember very well that just about a year ago, when my right honourable friend the Minister for Overseas Development was in Southern Africa at a conference and there was a particularly terrible drought in, I think, Bechuanaland, he on the spot offered £10 million worth of aid. That will almost certainly have gone to precisely the kind of objective that the right reverend Prelate has in mind.

Lord Maude of Stratford-upon-Avon

My Lords, can my noble friend tell the House how this rather unsatisfactory compromise squares with the Government's assurance that they would insist on a proper restructuring of the common agricultural policy and on a steady and continuing reduction in surpluses and costs, because quite obviously this appears to enshrine a continuance of both? Secondly, has anything at all been done at the conference to deal with the vital problem of reducing European cereal prices to the world level of costs?

Lord Belstead

My Lords, the answer to the second of my noble friend's questions is that there is a cut in cereal prices in the price fixing. I think that it is the first such cut that the Community has made. With regard to my noble friend's first question, the Statement which I repeated makes it plain that, though it is early on in the year and the situation could change, my right honourable friend the Minister made it clear to the council that in the United Kingdom's view the Community will need to take the necessary steps to limit expenditure if budgetary problems arise. That is a direct warning to the Community that we had a reserve on the package—the reserve is no longer there because the package has been voted through—and Her Majesty's Government will be looking with very great care to see whether we feel that what has been agreed in the Agriculture Council will fit into the final package, which of course has to be agreed in another Council at a future date.

Lord Gladwyn

My Lords, this may be quite wrong, but I thought I saw it stated in the press that the latest decision of the agriculture Ministers, welcome though it is on general grounds, is likely to raise the cost of the common agricultural policy during the coming year by something like £2 billion—unless I misread the figure. If that is so, seeing that, as we understand it, the Community is already at the end of its resources, or practically so, how are the additional funds to be raised? Where is the money going to come from?

Lord Belstead

My Lords, I referred to this matter during a debate that we had the other evening, and the noble Lord, Lord Gladwyn, is quite right; there is certainly apprehension that even with this package we might be heading for a £2 billion overspend. But there are factors which, if the noble Lord will forgive me, I shall not go into now, which could well reduce that figure very considerably. It is those factors that we are to look at very carefully in the coming months and it is the result of those factors to which we shall draw the attention of our Community partners when finally the Community has to agree, at another Council, on another occasion, whether it is going in the right direction financially.

Baroness Llewelyn-Davies of Hastoe

My Lords, I should like to ask a question about the proposed tax on oils and fats. Is the noble Lord aware—indeed, I am sure he is—that your Lordships' Select Committee on the Community very recently made a report which, on the basis of overwhelming evidence from trade associations, among others, as well as consumers, recommended that the tax should be dropped? In view of the fact that in another place last week the Minister said that Her Majesty's Government were also against it, can the noble Lord tell us what is now the position? Was the matter discussed, and if it was, what was the decision?

Lord Belstead

My Lords, no decision was taken to introduce the tax.

Baroness Llewelyn-Davies of Hastoe

My Lords, is there any proposal to discuss the matter, or does that complete it?

Lord Belstead

My Lords, I do not think that I can go further than that. There was no decision taken to introduce the tax. Along with the noble Baroness, I rejoice that that is the case.

Earl Ferrers

My Lords, I should like to ask my noble friend a simple and a practical question about milk—and I declare an interest as being a producer of milk. I should also like to commiserate with him and his colleagues over the position in which they find themselves because, as the Americans would say, it seems to be a "no win" situation. As I understand it, the milk quota is to be based on 1981 figures. If, for example, a person produced 100,000 gallons in 1981 and he now produces 120,000 gallons, and if the quota is operative as from now. is he paid only on the basis of the 100,000 gallons and not for the last 20,000 gallons?

Lord Belstead

No, my Lords; I think we have already made it clear, though I admit to my noble friend that the details are still to be worked out, that although the national quotas have been arranged on a basis of 1981, the quotas to the individual producers can be arranged on the basis of a year later than 1981; in other words, 1982, or 1983, which would suit many producers very much better, and which was a time when production in this country was increasing very considerably. I hope that that makes the situation clear to my noble friend.

Lord Oram

My Lords, I apologise if I missed this point through absence on other duties, but can the Minister say what effect, if any, the new arrangements about milk prices will have on the retail price of milk in this country?

Lord Belstead

My Lords, as the noble Lord will know, the wholesale price is going up by a very small amount. I think that that is happening literally now, and the retail price is due to go up, again by a very small amount, in two months' time, and so far as I know those retail prices will stick. Incidentally, they are the first price rises since 1982.

The Earl of Onslow

My Lords, I think that it would be very reasonable to congratulate the Government on coming to an agreement which is beginning to make some kind of dent in a difficult situation. First, I should like to ask whether it is not reasonable to suggest that there should be a very generous scheme for getting out of milk production? After all, we pay people large redundancy sums to cease being steelworkers and we try to pay people large redundancy sums to cease being coal miners. Therefore perhaps we should try to buy out people in the dairy industry on a Community-wide basis.

Secondly, will it not have the effect of the ploughing up of yet more grass and consequently of increasing the cereal mountain? Thirdly, what does the Minister reckon will be the effect, if we reduce the number of dairy cattle, on the production of beef? Will this not have a knock-on effect and reduce somewhat the beef mountain?

Lord Belstead

My Lords, so far as the beef mountain is concerned, the great effect of the variable premium negotiated by the noble Lord, Lord Peart, which has never been forgotten within the Ministry where I work, is that this country does not accumulate vast quantities of beef in store. That is thanks to the noble Lord. It is sold and we consume it in this country. One of the matters in this difficult package about which I am delighted is that my right honourable friend the Minister was able to carry on that good work and preserve the variable premium scheme.

As to my noble friend's question about whether we shall see more fields ploughed up, I would simply say this. We have a reduction in cereal prices as a result of this price fixing, and therefore we have a situation where imported grain, so far as we import grain now, will come in rather more cheaply than it has done before. In addition, the target prices will, for the first time, be triggered by the level of the price that has been set. I am not explaining this very well, but the effect is that the threshold over which Canadian wheat, for instance, can come into the country will be affected by the reduction in the cereal price. This means that livestock producers will certainly be able to buy some of their cereals that bit more cheaply. We have, as I have already said, got a subsidy for the first time on concentrated skimmed milk for pig feed and we have preserved the variable premium scheme for beef and sheep. I think, therefore, if I may say so, that things are better, not much better, but better, than they were before for livestock producers. At any rate, I hope so, because I agree with my noble friend that we want to see more pasture and less arable.

Lord John-Mackie

My Lords, I do not know whether the noble Earl, Lord Ferrers, is satisfied about what is to happen to his 20,000 extra gallons. I cannot follow the argument at all. We get a national quota based on 1981 but it is distributed in this country on the basis of 1983. If, therefore, the noble Earl, Lord Ferrers, is to be paid for the whole of his 120,000 gallons, someone else will suffer. Is that right?

Lord Belstead

My Lords, I think that this should be the last question. The House has, I believe, waited long enough for the next debate, As I understand it, the answer to the noble Lord, Lord John-Mackie, is this. The national quota that we have got is based on what we were producing as a country in 1981. That means that it is knocking on for 16 per cent. of the total Community quota. But, may I suppose for the moment that my noble friend was producing 0.1 per cent. of that total quota in 1981 on his own farm. If his allocation was going to be based in 1981, that is what my noble friend would be allocated in his quota. But let us suppose that in 1983 my noble friend enormously increased his production, as many farmers in this country did, and was producing instead 0.5 of 1 per cent. That is the percentage of the total national quota that my noble friend Lord Ferrers will get if his quota is based on a 1983 distribution. I assure the noble Lord that this is possible under the arrangements.