Council of Agriculture Ministers

HL Deb 14 March 1984 vol 449 cc752-8

4.15 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

My Lords, with the leave of the House, I shall repeat a Statement being 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 report to the House on the meeting of the Council of Agriculture Ministers which took place in Brussels on llth, 12th and 13th March. I represented the United Kingom together with my honourable friend the Minister of State.

"The Council discussions mainly focussed on milk and monetary compensatory amounts.

"I am glad to tell the House that a substantial measure of agreement was reached on an important scheme for tackling the growing milk surplus and the horrendous increase in the budgetary costs of this sector. The principal element in this scheme is a supplementary levy. This will be charged on all milk produced above a specified quantity. This Community-wide quota for deliveries to dairies is 98.2 million tonnes for 1984–85 and 97.2 million tonnes for the succeeding four years of the proposed five-year agreement.

"97.2 million tonnes represents the total of Community milk deliveries in 1981, plus 1 per cent., and the quotas will be divided between member states on that basis. The agreement provides for the levy to apply either at the level of the dairy, in which case deliveries in excess of the quota will be charged at 100 per cent. of the target price for milk, or at the level of the individual producer, in which case excesses will be charged at 75 per cent. of the target price. Allocation of the quota in member states can be made on a more recent basis than 1981.

"It was one of my main priorities to ensure that all producers without exception should be brought within the scope of any supplementary levy scheme. I am glad to say that this objective was achieved. There is no provision for exceptions for small producers or any other special category; and milk not delivered to dairies is also liable to the supplementary levy. The special aid to small milk producers was agreed for an additional two years. This will help with the income problems of small milk producers but does not exempt them from the supplementary levy.

"I know that the industry was concerned about having to face the full rigour of the basic quota immediately. I was therefore glad to accept an intermediate step for 1984–85. In order to finance the additional 1 million tonnes involved, I agreed to a 1 per cent. increase in the co-responsibility levy for one year only.

"Under the agreement there would be no intensive levy on milk producers. This was a major objective for me because this would have discriminated seriously against the United Kingdom milk industry.

"The agreement is related to a freeze on the common price for milk in 1984–85. There is provision for the butter subsidy to be reduced. But the United Kingdom price of butter to consumers will not increase.

"The main outstanding issue relates to possible special arrangements for individual member states. There is reference to a Community reserve of 600,000 tonnes in addition to the basic Community quota. The Irish have maintained their demand for exception from the supplementary levy to enable them to continue to expand up to the average yield levels for the Community. I have maintained a reserve on the whole idea of a Community reserve and the linked question of any special arrangement for the Irish and other member states. The Irish made it clear that they would wish to pursue this issue at the European Council.

"Turning to the question of monetary compensatory amounts, the negotiations centred on the German suggestion for dismantling existing positive MCAs, and for avoiding the creation of new positive MCAs at future EMS alignments. I have made it clear throughout that the United Kingdom is concerned about the budgetary implications of the German ideas. But this is an issue of high importance to certain other member states. The text which was worked out in negotiation would provide for the dismantlement of German and Dutch positive MCAs in three steps. It recognises the special position of sterling as a floating currency. If implemented, the United Kingdom positive MCAs would be reduced in the first stage by about 3 percentage points but there would be no effect on the level of support to United Kingdom farmers in terms of sterling. I have maintained a reserve particularly in relation to the budgetary costs of this arrangement. Because of these budgetary implications, the issue will be put before the European Council.

"The texts on milk and MCAs are subject to a number of reserves, including a reserve related to the overall agreement on agricultural prices which will need to cover other commodities. The Agricultural Council will be resuming its work on Friday. But the agreement on the implementation of a supplementary levy is, I believe, a historic step forward in bringing sanity in the common agricultural policy.

"It marks a recognition by the Council that the milk sector cannot go on expanding and adding to the waste of Community resources. My concern now will be to discuss in detail with our own industry how we can most sensibly implement these arrangements in the United Kingdom".

My Lords, that concludes my right honourable friend's Statement.

4.20 p.m.

Lord John-Mackie

My Lords, in thanking the Minister for repeating this Statement given in another place, I venture to think that everyone would agree that it is a very long and complicated Statement, and one which requires quite a lot of study. I am sure that the House would wish to debate this matter on a future occasion, particularly when many of the other matters which are before the Council of Ministers and the Commission in general are settled.

In the meantime, I shall just comment on a few of the points in the Statement and ask the Minister a few questions. The first concerns the 97.2 million tonnes for the first year, 1984–85. I feel that this is going to be slightly unfair to UK farmers. The year 1981 was not an average year, and I wonder why the Minister did not press for an average of four years rather than taking one year.

Can the Minister explain what is meant by, the allocation of the quota in member states can be made on a more recent basis than 1981."? That, I think, requires a little explaining. The question of special aid to small milk producers, I understand, hardly affected this country at all. It really assists the very small producers in France and Italy, and I think it does not affect us; but would the Minister care to comment as to whether or not we do get any, or much, benefit from that?

The question of what is called "an intensive levy" mystified me. I assumed it was a misprint for "intensive milk production", but I understand that this was to be a super levy. Would the Minister just confirm that, as, of course, it would have discriminated against our industry in this country? On the agreement to freeze the common price for milk in 1984–85 along with the provision for the butter subsidy to be reduced, the Statement says that the UK price of butter to consumers will not increase. Perhaps the Minister would explain to the House how that is to be carried out. I should like very much to agree with the Minister on the question of the special arrangements for other countries which he has been against.

On the question of MCAs, we are looking forward to seeing what is to happen next because the MCAs, green pound et cetera—as the noble Lords know—create great difficulties, great confusion (if nothing else) with farmers as to how exactly they work.

The statement says: The implementation of the UK positive MCAs would be reduced in the first stage by about 3 per centage points but there would be no effect on the level of support to UK farmers in terms of sterling". I should be obliged if the Minister could give us some slight guidance as to how that comes about.

On the question of the supplementary levy latterly—there is no question of budget—this is a step in the right direction and we look forward perhaps to seeing the results. I should like to ask the Minister about this. On a calculation based on the number of producers in this country (which is about 39,700), and if they are to have the reduction mentioned on the basis of 1,100 gallons per cow in this country, that means we are going to do away with about 200,000 cows (if that is the way to reduce production) which might mean 300,000 acres—an acre and a half a cow (and I believe it might be even more than that)—which has to be put to some other use. Or would the Minister advise farmers to go in for a low input/low output system which might give them adequate profits and still reduce the milk supply? I wonder, what advice should we give to dairy farmers?

The last point I should like to ask the Minister about is this: does he think this will do the trick? After all, even if we go down to 97.2 million tonnes of milk, it still leaves a surplus of 9 million tonnes, and that has to be got rid of. I just wonder whether this will get rid of the surplus of milk products, and particularly butter and skimmed milk powder. I am sorry to ask so much but, as I said at the beginning, this is a complicated and important Statement. I should be glad if the Minister could answer some of these points.

4.25 p.m.

Lord Mackie of Benshie

My Lords, I should like to thank the Minister for what I, too, think is an important Statement and a very great step forward in bringing sanity into the operation of the CAP, because the way that we have avoided taking steps—or the Council of Ministers have avoided taking the necessary steps—has brought the whole concept to the verge of breakdown, and it is a policy which has resulted in very great benefits to the balance of payments in this country and to the security of food supplies in Europe. What has been wrong up till now has been that politically the Council of Ministers have never had the courage to take the necessary steps to make the policy work. I myself would much rather have seen a straight cut in price which would have been simpler to operate and might have been fairer, but this is a really savage and, I am afraid, necessary step if we are to stop the whole thing breaking down. For that reason I welcome it.

My noble kinsman has asked most of the pertinent questions, but there are a number of comments which I should like to make. I think that the whole Statement leaves unanswered a very large amount of detail. I am very glad to see that the allocation of the quota in member states can be made on a more recent basis; in other words, member states can work out the best way to apply the quota for their own farmers. I think that this is a completely necessary step because it is a little hard on the people who have increased their efficiency of production that they should be savaged, whereas people who have held this status since 1971 should not. I hope that the Minister and the industry can work out the proper way of carrying out this task.

On the intermediate step, do I gather that the other levy—noble Lords will understand that there is already a levy of 2 per cent.—is going up to 3 per cent., and that levy which is unfairly applied across the Community will be able to pay for the extra production? Can the Minister tell us until when? Is it for this year, or for how long before what is known as the "super-levy" comes into operation? Can he enlighten me as to why, if the dairies or the Milk Marketing Boards are applying it, then the payable levy will be 100 per cent., but if it is applied to producers individually it will be only 75 per cent.? I think—and my noble kinsman asked about this—it is quite extraordinary that the Commission or the Council should be asking for, or thinking of, an extra 600,000 tonnes quota when already we are 10 million tonnes over the consumption on the basis of 97 million. I should like the Minister to comment on that point.

Would the Minister also say whether the Irish—who may or may not have a case—have agreed to this? It is only a detail which has been negotiated. Will be also say whether or not unanimity will be needed for the whole question to be resolved as agreed?

Lastly, I do not understand the question of an MCA reduction for 3 percentage points in this country without any effect on the farmers' prices. This appears to me to be difficult because when we were talking about the Commission's demand for a 4.2 per cent. alteration, we were talking about a drop in farmers' income here of something like 5 per cent. I think that we ought to have that explained.

There are many other questions. There is one important question which arises right at the end of the Statement, when the Minister said that reserves are being maintained for discussion at the next Council on other prices. I hope that he will press for realistic prices for cereals, on which so much depends in the other sectors and in, other livestock sectors and which are very important. We must also realise that too savage a cut at this point might do enormous harm to an industry which has saved this country about £2½billion a year in imports over the past 10 years. Therefore, while the cuts are necessary to make the CAP work, we must watch to see that we do not destroy too much of the industry in the process.

4.31 p.m.

Lord Belstead

My Lords, I am grateful to the noble Lords, Lord John-Mackie and Lord Mackie of Benshie. The noble Lord, Lord John-Mackie, asked whether 1981 plus 1 per cent. as the basis for deciding how the quota was to be shared out between member states was not unfair. May I say in reply that there are obviously other ways of dividing up the quantity, but I think I ought to say that it has been worked out by us that all would have given the United Kingdom a proportion which would have come to approximately 16 per cent.; which is in fact what we are going to get from the formula of 1981 plus 1 per cent. The noble Lord, Lord Mackie of Benshie, answered the question put by the noble Lord, Lord John-Mackie, which is: what is the meaning of the words.

Allocation of the quota in member states can be made on a more recent basis than 1981."? It simply means that whereas the national allocations are on the basis of 1981 plus 1 per cent., in allocating to individual farmers—if, of the two options which have been agreed in the agricultural Council. that is the way we are going to do it—we could use another year as a base year; for example, 1982 or 1983.

The noble Lord opposite asked about aids to small milk producers which are to continue. Indeed, we have not benefited a great deal, so I understand, from this particular aid and there is nothing specific that I should add. The noble Lord, Lord John-Mackie, asked specifically about the reference in the Statement to the fact that under the agreement there will be no intensive levy on milk producers. I know that we are pressed for time, but may I just say that there are four things which are most important and which come from this very complicated Statement. The first is that, at last, the surpluses are reined in and the costs of the milk sector will be reduced. In answer to the last question of the noble Lord, Lord John-Mackie, we hope that it will do the trick.

Secondly, we have ended the idea of having special exemptions, which the French wished, for small producers. The small producers will benefit in other ways from the continuation of the special aid for them, but not by saying that because a producer is so small he can fall outside this whole basic levy system altogether. Thirdly, my right honourable friend the Minister insisted that off-farm sales should not he exempted from this system. As most of our milk in this country goes through dairies, this was absolutely essential for Britain's interest, and we secured that. The fourth point, which answers the noble Lord's question, is that there was indeed an idea for a second levy—an extra super levy—which the French pressed for and which would have affected at least 6 per cent. of our production. That has not been agreed in the agricultural Council.

To be much more quick, if I may, both noble Lords asked about the situation regarding butter. The Commission proposes to cut the butter intervention price. The reduction in the butter subsidy takes account of the change in the intervention price and, as a result, the total effect should be to leave butter prices in the shops unchanged. Both noble Lords asked me to try to interpret the passage in the Statement on MCAs. The meaning simply is that my right honourable friend the Minister has stood out stalwartly against a revaluation of the green pound. This will mean that the returns to our producers, farmers and horticulturists will not be affected by the plans of other member states to alter MCAs.

So far as our exports are concerned, I am advised that the reduction of our MCA—not the green pound—will be balanced out by the re-calculation of the central rate and, therefore, there will be no effect on our exports or, indeed, on our imports. I think that concludes my replies to the questions put by the noble Lord, Lord John-Mackie.

The noble Lord, Lord Mackie of Benshie, asked me to confirm that the co-responsibility increase of 1 per cent. is for one year only. It was agreed by the agricultural Council for one year only. The noble Lord asked me about the significance of the difference in the two options which member states can choose: either going on the 100 per cent. levy if the milk goes through the dairies, or the 75 per cent. levy if it goes through producers. My understanding is that these ought to be very similar when worked out in practice.

This brings me to my final point. There is no question but that there is still a very great deal of work to be done on this enormously complicated document. For instance, we have to discuss very seriously with the farmers' unions and the Milk Marketing Board exactly how it is to work. I assure the noble Lord that we shall do the best we can for our national interest. In that context, may I say that my right honourable friend will again be back in Europe on Friday. For instance, as the noble Lord, Lord Mackie of Benshie, said, cereals are still to be dealt with and there is still much to be discussed.

Lord Shinwell

My Lords, may I ask a question about procedure? On those occasions when we have short debates, as for example today—

Noble Lords

Not short!

Lord Shinwell

—a very important issue is raised. A large number of noble Lords wish to take part in the debate. Why should we have these long, wordy Statements thrust upon us? I am not seeking to criticise, but merely stating a fact. In two cases Ministers have taken a quarter of an hour or 20 minutes to repeat a Statement made in another place and then from our side we have two Front Bench speakers—not ordinary people like ourselves—

Lord Stoddart of Swindon

Since when has the noble Lord been ordinary?

Lord Shinwell

—who made long speeches, for example, on agriculture, and on other subjects. Surely some arrangements can be made so that our short debates are not interrupted as they have been today. Moreover, when long Statements of this character are made, instead of only a couple of Front Bench speakers taking nearly an hour between them to express their views, could not the whole subject be thrown open to general debate, so that some of us on this side of the House, who are not so well educated or well-informed as the Front Benchers, can offer an opinion? I should like an answer to that question of procedure.

Lord Belstead

My Lords, I think my answer to that must be that I think it is irritating. But it is important in this particular case for very large numbers of our farming community, and it is necessary for the procedure of your Lordships' House. With apologies for having taken up rather a lot of time, may I suggest that perhaps we move on to the next business and some very important speeches.

Lord Jacques

My Lords, may I suggest that, in future, when there are Statements they should be postponed until after the maiden speeches have been made in a debate?

Lord Belstead

My Lords, I will draw the suggestion of the noble Lord, Lord Jacques, to the attention of my right honourable friend the Chief Whip.