§ 3.28 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)My Lords, I beg to move that this Bill be now read a second time. The main purpose of this Bill is to provide the necessary statutory authority for payments under the milk outgoers' scheme. The supplementary levy and milk quota arrangements were introduced in April last year in an attempt to achieve an immediate cut in production in most member states of the European Community. Over-production of milk in the Community had been escalating over a number of years and disposal of the surplus was placing a growing burden on the Community budget. By March last year, with up to £10 million a day being devoted to the milk sector alone, clearly urgent action had to be taken.
When it became clear that other member States were not prepared to agree to price reductions necessary to achieve a rapid drop in output, there was no alternative but to accept the introduction of quotas, and the supplementary levy. Under the levy system, most member states, including the United Kingdom, have been allocated national quotas based on the amount of milk delivered to dairies and other undertakings or sold for direct consumption in 1981, plus 1 per cent. In the United Kingdom the introduction of quotas meant that producers were required to cut their production by about 6¼ per cent. in 1984–85 by comparison with 1983 in order to avoid liability for supplementary levy on excess production. A futher cut of some 2½ per cent. was then imposed on producers in order to create a reserve of quota to ease the difficulties of certain producers in special situations. Thus, overall, producers in the United Kingdom have had their primary wholesale quota allocations—that is, their basic quotas—set at 9 per cent. below their 1983 production levels.
Quotas have fallen particularly hard on the smaller producers—those with up to some 200,000 litres of annual milk production, representing about 40 cows in the herd. These small producers represent a very considerable proportion—some 40 per cent.—of all milk producers in the United Kingdom, and it is their difficulties which our milk outgoers' scheme is particularly designed to alleviate.
678 Under the Community levy rules, member states are allowed to compensate producers who go out of milk production by giving them grants out of national funds. The purpose of these grants is to assist any necessary restructuring of the dairy industry following the imposition of quotas. These grants are intended to provide farmers with the necessary cash payments to allow early retirement or to switch production. Those are just two examples; doubtless in practice there will be others. But, for whatever reasons, those farmers giving up production will help those who wish to carry on because the quota they surrender may be reallocated to other producers who will then be able to produce more without incurring liability for levy.
All member states, with the exception of Denmark, Greece and Luxembourg, have chosen to make use of this provision in the Community regulations to introduce nationally-funded outgoers' schemes. The various schemes all differ markedly from one another to reflect different circumstances and different aims. The response of producers in Great Britain at least shows that we have pitched the payment, which comes to about £650 per cow, assuming a yield of about 5,000 litres annually, at about the right level. The indications are that we should get the amount of quota we are seeking and that the number of producers who wish to but cannot join the scheme will be very small.
In the United Kingdom the deadline for applications for this scheme was 28th August last. So far, already over 1,000 producers have been paid and have given up their quota. The fact that the scheme is so far advanced prompts the very reasonable question: why the need for the present Bill? The answer lies in the fact that under our outgoers' scheme we have made provision to spend up to £50 million over a period of five years. Spending this amount of money over this length of time requires, for reasons of constitutional propriety, specific statutory authority. Had we been under a Community obligation to introduce the outgoers' scheme, we would have used existing powers under the European Communities Act. But the Community outgoers' provision is permissive only and we therefore need to have the specific legislative authority provided in this Bill.
The actual authority for these payments is provided by Clause 1 of the Bill. Clause 1 enables payments to be made to producers who, in return, undertake to give up milk production and surrender their quota. This is in line with existing Community rules. Following an amendment tabled at Committee stage in the other place, which was accepted by the Government, Clause 1 also now makes it possible for payments to be made to producers who reduce their production and surrender a corresponding part of their quota. The Government felt that although partial surrender of quota is not at present permitted under Community rules it might, if the rules were changed, introduce further much-needed flexibility into the quota system. There is no indication at present that the regulations are likely to be amended to allow this. However, if at some time in the future it is allowed we shall have the necessary legislative authority to put it into effect in Great Britain through any future scheme.
Clause 1 further provides that statutory schemes for paying out compensation to milk producers may be set up. It is clearly sensible to take these powers now so 679 that they will be available if a future statutory scheme is ever required. But, once again, I must warn the House that at the present time the Government have no plans to introduce a further outgoers' scheme. Clause 1 also provides that any money paid out under a scheme may be recovered if the person who receives the payment fails to comply with the conditions laid down; for example, if he were to return to milk production. Clause 2 provides powers of entry on to land and access to records. This is to enable checks to be made to ensure that producers receiving outgoers' payments are not engaged in milk production.
I think the rest of the clauses are self-explanatory, except perhaps for two. Clause 5 defines the Ministers who may exercise functions under the Bill. It means, in effect, that any future schemes could be made by my right honourable friend the Minister of Agriculture, Fisheries and Food, and also my right honourable friends the Secretaries of State for Wales and for Scotland, acting either individually, or together in any combination. The other clause I have just referred to—Clause 6—is the one which applies to Northern Ireland. Our existing outgoers' scheme applies throughout the United Kingdom, but for constitutional reasons this Bill does not apply (with the exception of course of this clause) to Northern Ireland. Clause 6 simply provides that an Order in Council for Northern Ireland which is made for the same purpose as in Clauses 1 to 3 of the Bill shall be subject to the negative resolution procedure. I understand that my right honourable friend the Secretary of State for Northern Ireland intends to lay an order before Parliament immediately after the enactment of this Bill.
As to the way in which the outgoers' scheme is working, I am sure many of your Lordships will know that tenants in England and Wales have to have their landlords' written consent before they can join the outgoers' scheme. In the early days of quotas we tried to bring the landowning and farming interests together to see whether they could agree on procedures allowing tenants to become outgoers without their landlords' consent. However, the two sides were unable to reach agreement. As a result, we felt we had no choice but to require landlords' consent in all cases. Had we not done so, apart from the obvious problems of equity where the landlord had made considerable investment in dairying there would, so I am advised, have been a risk of certain legal difficulties. If a tenant joined the outgoers' scheme and surrendered his quota without the landlord's consent it might have been possible, depending on the terms of his lease, for his landlord to sue him for breach of contract.
Moreover, the landlord might have been able to claim that the Minister had incited the tenant to break his contract. This is a scheme which is based on a contract between the Minister and the producer, and is therefore based on contract law and not on statute. Despite the lack of a formal agreement between the landowning and farming interests, a substantial number of tenants in England and Wales have been able to become outgoers. Part of the credit for this must go to the president of the Country Landowners' Association, who has urged his members to listen carefully to every tenant who wishes to become an 680 outgoer and to be as accommodating as possible. In Scotland, the various interests were able to agree on more favourable arrangements for tenants, and these also appear to have worked reasonably well.
The aim of the scheme is to buy up 289 million litres of quota in England and Wales. The producers who initially expressed interest in the scheme had between them about four times as much quota as was wanted. We knew from the start that a considerable proportion of these would drop out, but because the scheme was evidently over-subscribed, we had to decide which producers should be given priority. We started by inviting the smaller applicants to join, and when some of these dropped out we invited some bigger ones to come in. By last week we had sent firm invitations to all those with up to 500.000 litres of quota to offer. Now, in order to speed up the final stages of the scheme, we are writing to all the remaining applicants asking them to state whether they will wish to join the scheme. Our intention is that by the end of March all those who say they are still interested will be told definitely whether or not it is possible for them to join the scheme.
Although the drop-out rate at each stage has been fairly high, the scheme is operating satisfactorily in England and Wales and we believe we shall achieve our target of 289 million litres. The same is true of Scotland, where the target is 30 million litres. In Northern Ireland the position is less satisfactory, and my right honourable friends are looking to see if there are any ways of dealing with the problem there.
The precise arrangements for re-allocation of outgoers' quota will vary somewhat between England and Wales, Scotland and Northern Ireland in the light of local circumstances and priorities. In England and Wales our intention is to help small producers—those with less than 40 cows—and exceptional hardship cases.
So far as small producers are concerned, our intention for next year is to increase the quotas of all producers whose main occupation is farming and who have less than 200,000 litres of quota. The increase will be sufficient to bring these farmers back to their 1983 production levels, provided those levels are not above 200,000 litres.
So far as exceptional hardship cases are concerned, our intention in 1985–86 is to give producers the full amounts awarded by the tribunal. I should emphasise that what I have said, both about small producers and about exceptional hardship cases, is subject to a final check of the figures once we know exactly how much quota is required. The remaining quota available next year, after meeting the needs of exceptional hardship cases and increasing the quotas of small producers up to their 1983 production levels in the way in which I have described, may be used to help producers who are awarded development quota by the tribunal; that is, producers engaged in expansion programmes whose awards will have been pruned back in 1984–85 to keep within the total amount of quota available. I have to say that at the moment it looks as if the cut in those awards in England and Wales may be at least 35 per cent., or, indeed, more. Next year, we hope to be able to reduce that cut by using any of the spare outgoers' quota.
681 Finally, because producers who became outgoers will have used a significant part of their quotas before joining the outgoers' scheme, the total amount of quota available for re-allocation in what remains of this year will be substantially less than that which will be available for a full year when we come to the next marketing year, 1985–86. Therefore, in 1984–85 we envisage using all the outgoers' quota which is becoming available to help the exceptional hardship cases.
Although, as my right honourable friend said in another place, this is a short Bill and comparatively narrow in scope, it is nevertheless of great importance to many dairy producers in Great Britain. My Lords, I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Belstead.)