Agricultural and Horticultural Co-operation Scheme 1985 (Hansard, 28 February 1985)

§ The Earl of Swinton

My Lords, I beg to move that the draft Agricultural and Horticultural Co-operation Scheme 1985 be approved. May I first explain that this order supersedes the 1971 scheme, which has been amended on four occasions and which now needs to be consolidated. The main purpose of the order is to introduce lower rates of grant for agricultural co-operatives. However, there are also several textual differences compared with the 1971 version.

Before I describe to your Lordships the various changes, perhaps it would be helpful if I explained briefly how and why this scheme operates. The scheme is designed to encourage co-operatives to invest in new buildings, plant and machinery and in so doing, to put themselves in a stronger position to respond to the demands of today's markets. The scheme also provides for non-capital grants which assist with the initial expenses of bringing a group of farmers together into a co-operative and then with the salaries or fees of key staff or marketing agents. By these means newly established co-operatives are encouraged to employ people of a sufficiently high calibre to get them off on a sound trading and financial footing. We are not altering the existing rates of non-capital grants.

The co-operative development division of Food from Britain considers all applications and makes recommendations on them to Ministers. The amount of grant paid to co-operatives has increased substan 1065 tially in recent years. The level of this demand can be seen in the recommendations made to Ministers by Food from Britain. In 1982–83 these virtually doubled compared with the two previous years; and in 1983–84 were close to £5 million, this increase being due mainly to a marked upsurge in the number of applications from the cereals sector. The estimated savings from the reductions proposed in this draft will amount to about £300,000 in a full year.

I should now like to explain the reductions in grant rates. When your Lordships' House debated the amendment to the Agriculture and Horticulture Grant Scheme on 24th January, my noble friend Lord Belstead said that reductions in the rates of grant for individual farmers would contribute towards the Government's objective of keeping down the level of public expenditure, although the savings which will result from lower co-operative grants will be comparatively modest. Nevertheless we think it equitable that the co-operative sector should bear its share of the amount to be given up.

In reaching the decision as to where any cuts in co-operative grant should fall, one must necessarily consider whether these should apply across the board or whether some sectors may be more deserving of Government financial support than others. We have taken the view that the horticulture industry has special needs at the present time and that the encouragement of horticultural co-operatives should be maintained at its present level. Such co-operatives are making a valuable contribution towards the improved marketing of our fruit and vegetables.

The reduction of 5 percentage points in the grant rate for buildings which is introduced by this order is therefore confined to co-operatives in the agricultural sector. There are no reductions in the rate of grant for plant and equipment. I am of course aware that there have been two previous reductions—both in 1983—which have affected rates of grant for cereals co-operatives, but it cannot be disputed that cereal growers have done well in recent years and that that sector has been particularly bouyant. We believe that cereals growers are thus in a better position to withstand the loss of grant. I should add that a lower level of support for the cereals sector is also fully consistent with the policy which the Minister has been pursuing in the annual price negotiations within the Community.

Perhaps I may now turn to the textual differences between this draft and the 1971 order. Your Lordships will see that paragraph 2 now contains a definition of "horticultural produce" for the purpose of distinguishing between the agricultural and horticultural rates of grant in column 2 of the schedule. This is the same definition as that laid down in the Agriculture and Horticulture Grant Scheme.

I should also draw your Lordships' attention to the new definition of "recognised group". We have for several years been making relatively small sums of grant to forage groups under the provisions of Article 11 of EEC Directive 75/268. We have now been advised that formal statutory authority for these payments should be included in the Agricultural and Horticultural Co-operation Scheme, and reference to these grants has been inserted at Items 14 and 15 of the 1066 schedule. The rates of grant will be the same as at present—that is, 15 per cent. for tractors and 25 per cent. for other machinery. Up till now the scope of these grants has been restricted to the original Less Favoured Areas, and has not extended to the marginal land approved by the Council of Ministers last year. As my honourable friend the Minister of State announced in another place recently, this extension will apply similarly to proposals from forage groups received after this order comes into operation. I am assured that this will be welcomed by livestock farmers in the hill areas.

There is only one further change of substance from the 1971 scheme. Your Lordships will note that there is now no reference to a power which existed in the superseded scheme enabling Food from Britain to act through intermediaries in its dealings with applicants. I understand that this was a reserve power which has never been used. It would have permitted FFB, with ministerial approval, to appoint the central co-operative organisations as agents and to pay them for their services in sifting grant applications. The joint committee commented on the vires of this power in relation to the enabling legislation—the Agriculture Act 1967. In the circumstances, and with Food from Britain's agreement, we have decided to delete that power from the new scheme. I am assured that its deletion will not affect the present arrangements and, if they so wish, the co-operative associations may continue to act in an advisory consultancy capacity to applicant co-operatives. My Lords, I commend this scheme to the House.

§ Lord Gallacher

My Lords, I will first say that we on this side of the House welcome this scheme, although perhaps for reasons different from those advanced by the noble Earl in moving it. When the Central Council for Agricultural and Horticultural Co-operation, as it then was, came under the wing of the newly-formed Food from Britain organisation, there was some concern that it would be dwarfed by what was essentially a marketing organisation—and a marketing organisation whose life is finite in the sense that it is to enjoy public funding for its marketing activities only for a specified number of years—after which, trade interests are supposed to step in and provide money.

The proposals before us this evening indicate clearly that although they will amend the 1971 scheme and will place agricultural co-operative schemes under the wing (as they are now) of Food from Britain, the Government envisage the continuance of support for agricultural co-operation. With that proposition, we are entirely in accord.

It is regrettable but understandable that certain grants are being reduced in line with reductions made in other schemes. We know that the total estimated savings as far as this particular sector is concerned will amount to some £300,000 per annum. Presumably that is a saving worth considering, but I cannot help observing the difference in standards of treatment, in that these are only the estimated savings so far as agricultural co-operative promotion is concerned, 1067 whereas when not so very long ago your Lordships were discussing a Bill to extend the life of the Co-operative Development Agency, the actual funding of that organisation was at the level of only £200,000.

It seems to this side of the House that there is a marked disparity between that and the Government's treatment of producer co-operation—and an agricultural society is of course a producer organisation, as is a workers' co-operative—and that this disparity ought to be examined at some time in the future. It behoves the Government, in their admirable support for the co-operative concept, to be as even-handed with that support as they possibly can.

We are particularly intrigued with the definition of a co-operative, other than one registered under the Industrial and Provident Societies Act 1965, appearing in paragraph 2(b). We like it. Some of us have spent a lifetime trying to define a co-operative society, and now we discover that the Civil Service can do that for us in a couple of lines. I congratulate them on that particular aspect of the draft.

We are particularly pleased that the horticultural industry is not to suffer any disability under the proposals in the same way that cereals will. We accept that in the present climate of production and public opinion, there is justification for some reining-in of assistance to cereals and to cereal co-operative societies—in particular, in the case of the marketing schemes they are devising.

We are pleased also that non-capital grants are not to be altered because we recognise the importance of advice in the formation of agricultural societies. The Government are being helpful here.

Finally, we note the reference in the explanatory notes to the European Community. We hope that agricultural societies, under the guidance of Food from Britain, will continue to make maximum use of the guidance section of the FEOGA fund. Although the calls upon that fund are considerable and therefore the commissioners are somewhat selective about the schemes they choose to aid, nevertheless there is every indication that the European Community is particularly favourable to co-operatives. One hopes that Food from Britain will take full advantage of this, although it may be that a purely marketing organisation as the applicant may not be looked upon as favourably as would the old Central Council for Agricultural and Horticultural Co-operation.

We are also pleased, too, that the co-operative associations may continue to serve in a consultative capacity. We hope that they will take advantage of this opportunity because their knowledge and experience at the formative stage will undoubtedly be of assistance to the Food from Britain organisation. We welcome this scheme and wish the new organisation, under the wing of Food from Britain, continued success—although, as I have said, it is in some respects poorer as a result.