HL Deb 28 February 1985 vol 460 cc1040-4

4.44 p.m.

The Earl of Swinton

My Lords, with the leave of the House, I will 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 make a Statement on the Council of Agriculture Ministers meeting in Brussels on 25th to 27th February. My honourable friend the Minister of State and I represented the United Kingdom.

"The Council agreed to certain modifications to the milk supplementary levy regulations in order to ensure the implementation of quotas throughout the Community in 1984–85; two of these are particularly important to our industry.

"The first is a provision enabling producers who have two quotas, one wholesale and one for direct sale, to switch between the types of quota according to the marketing needs of their businesses.

"In order to avoid abuse, there will be strict administrative controls. This is a change for which I have been pressing at successive meetings. I am delighted that we have now obtained an agreement.

"The second important element for milk is a provision, for one year only, to permit unused quota to be switched between producers and between regions. Provided there is no abrupt change in levels of milk production, I would expect this to relieve all liability for levy on wholesale milk sales in the United Kingdom in 1984–85. This is of particular benefit to Northern Ireland. We would also expect liability for levy on direct sales to be substantially reduced, though it is not possible at this stage to say whether it would be eliminated.

"The package did not deal with a number of points which are of importance to some other member states, including the Irish request for an additional 58,000 tonnes of quota. This issue will be further discussed in the price fixing. It was made clear that subsequent decisions on this or other matters were in no way prejudiced by the decisions taken at this Council. I emphasised that we remain opposed to the Irish request.

"I am also pleased to announce that the Council agreed on a series of important measures to bring wine production under control. These implement the outline agreement reached by the European Council in Dublin last December.

"The new measures contain three main elements. The first element is an effective guarantee threshold so that surplus production will be removed by compulsory distillation at low prices, so as to dissuade producers from increasing output.

"The second element is a system of aids for producers who grub-up their vineyards and go out of production, thus leading to a permanent reduction of the Community's vineyard area.

"The third element is a commitment to a restrictive price policy for as long as a significant structural surplus remains. This is a crucial part of the agreement and was one of the Government's major objectives.

"During negotiations I was successful in reducing substantially the cost of the package to the Community without undermining its effectiveness. The Commission's original proposals would have cost over the next five years 740 mecu—about £460 million. But this has now been reduced to 435 mecu—about £270 million.

"Our calculations show that these decisions will lead to very significant savings for the Community budget by way of reduced distillation costs.

"The agreement of the Council will be put into legal form as soon as the European Parliament has given its opinion on a small element of the package, which has only been recently proposed by the Commission, to restructure some Greek vineyards. I made it clear that this element is still subject to scrutiny in this House.

"The Council also carried forward discussion on the more general agricultural structures regulations. The Commission formally proposed a new article authorising member states to introduce aids in environmentally sensitive areas. As the House knows, I have been pressing for such a provision. I am glad to say that it had a wide measure of support in the Council. I would expect discussion on the structures package to be resumed at the next Agriculture and Finance Councils, when I hope it will be possible to reach decisions.

"The Council adopted a regulation which allows the Commission to acknowledge applications submitted to it for aids for improvement in processing and marketing facilities. Without a prior acknowledgement from the Commission, work in hand is rendered ineligible for aid. This technical change was, therefore, needed in order to allow people to press ahead with investments. This is an important change for many British firms which wish to make improvements urgently.

"Finally, I raised the question of the preferential tariff for supplies of gas to the Dutch horticultural industry. The Commissioner told the Council that the Dutch Government have now been informed that this tariff is incompatible with the Community's state aid rules. The Dutch have one month to respond to the Commission communication. I emphasised that the Dutch growers had already benefited from reduced heating costs for most of the current season. I said that this was a thoroughly unsatisfactory situation and that the growers should be required to repay the aid. The Commissioner indicated that he would be giving further thought to this in the light of the Dutch response.

"This was a highly satisfactory Council for the United Kingdom. The wine decisions are the second major step, after milk, to bringing reality into the common agricultural policy. The modifications of the milk regime are of great importance, as is the proposal on conservation; and the Council has cleared the way to press ahead with the price fixing negotiations".

That concludes the Statement, my Lords.

Lord John-Mackie

My Lords, we welcome the Statement from the other House and wish to thank the Minister for repeating it. On the question of the two quotas, I am perfectly certain that producer retailers will welcome this. As the Statement says, it is open to abuse. I am presuming that the policing of it will be done by the MMB. I wonder whether the Minister can tell us whether or not that is right.

On the question of the balancing of unused quotas, I wonder whether the Minister means as part of a quota that somebody does not use, or if somebody goes out of milk is that an unused quota as well? It is not clear whether that is the case. Of course this will be a great relief to people who have gone over their quota. But I think those who have been good and kept within their quota will be a little hurt at that point.

On the question of the 58,000 extra tonnes that the Irish are demanding, there is in today's Financial Times a report which I need not read. However, it says that the Irish Minister, Mr. Austin Deasy, insisted that if this was not included in the negotiations then he might veto the package. That would be a dreadful thing to happen if that should be the case. I wonder whether the Minister knows if he can do that. However, in the Statement it says that that is not so.

On the wine question, it does not, to any great extent, anyway, affect our wine producers. But the saving is of course an overall help to the common agricultural policy and is to be welcomed. There is a time factor here. It will take people a long time to decide whether to grub up their vines or not. I just wonder whether there will be any effect in time to satisfy the Spaniards and the Portugese in their efforts to come into the EEC. I made a calculation that the surplus was 11 litres per head per year, and I wondered whether, if we could all drink an extra 11 litres a year, which is only a litre a month, we should be able to soak up the surplus there. However, I understand that my noble kinsman will deal with wine and he has much greater experience of dealing with it, particularly on the consumption side.

On the environmental aids question, and the areas that might be affected by this grant, this would help the image that we in agriculture are trying to improve. I look forward to seeing how this will be operated. The technical change mentioned in the Statement—that you have not got to get the prior approval or the prior acknowledgment from the Commission—should help us in this country and it should help in all countries.

As we all know, our growers—such as those in the Lea Valley where I live—have always been very much against the Dutch receiving help with their gas fuel. If the Minister can do anything there or the Commission can do anything there—although in the Statement it says they will—it will do much to satisfy growers in this country.

I do not want to say any more about this Statement. However I should just like to say this. As the noble Lord the Minister knows, the quota system which was brought in about a year ago created a state almost of chaos in the milk industry. I hope that, if there are any future changes, particularly, for example, in the cereals situation, next time we shall be given plenty of time so we avoid the chaos that was created in the milk industry. For instance, I see that the French have been so upset by the quota system that they have not yet done anything. Because of this agreement they are looking forward to doing something within the next year, whereas we have done it all in this last year.

I think we should thank the Agriculture Minister for what he has done. He has a difficult job. However, he will make it very much easier if he will pay attention to what I have just said about any future alterations to the CAP.

Lord Mackie of Benshie

My Lords, I, too, should like to thank the Minister for repeating the Statement, which is a long and very important one. It covers two very important areas. Milk is certainly extremely important to us. Wine is certainly important to the Community and is one of the products which is very much in surplus and very expensive to support.

I should like to support my noble kinsman in a plea that, because there is no levy to be paid this year on producing over quota, that should not benefit those people who have gone on producing and sending the milk to the Milk Marketing Board while others have endeavoured to keep down to quota by, for example, restricting the feeding of cake and by feeding milk to cows. I hope that in any future fixing of individual levies, people who have tried to keep to quota will not be penalised. I think that this is an important point when you look at the amount of resentment caused by the way in which quotas have been introduced.

I assume that, when you say that this is expected to relieve all liability for levy on wholesale milk sales, this will also apply to producer retailers. I wholly agree with the statement from the Minister that we remain opposed to the Irish request for 60,000 extra tonnes of quota. I must say that to be allowed to keep the increase they had appeared to me to be most reasonable, in view of their economic position. But to ask for 60,000 tonnes extra does not appear reasonable with the surplus of enormous proportions that we already have.

The question of wine is important. I was very pleased with the compliment that my noble kinsman paid me. Anyone who drinks more of the wine variety than he is indeed doing noble work. However, when it comes to compulsory distillation, I hope the Minister will be able to reasure us that this does not apply to Chambertin, Lafite, Mouton Rothschild and Chateau Yquem and a number of other noble liquids which it would be an absolute scandal compulsorily to distil. However, I think the important element in this is the guarantee that compulsory distillation is applied at a low price which does not make it profitable. Of course, this has been the trouble today: the threshold was set at a figure which made it quite profitable to produce low-grade wines and to continue to expand production.

I hope the Minister will be able to give us an indication of what figure will be set for the price paid for this compulsory distillation. I hope also that he will be able to reassure us that the grubbing-up subsidy will be effective. There has been for a number of years a subsidy for grubbing-up vineyards. It has been totally ineffective and production has continued to rise. I think it is absolutely vital that a restrictive price policy is one which is genuinely restrictive. I say this as a farmer. I think it should apply to things that I grow as well as to wine. For years now the Commission have said that we must apply a prudent price policy, a restrictive price policy. A restrictive price policy which merely encourages producers to keep up their income by producing more is less than useless, with the enormously effective juggernaut we have in the encouragement to produce in all sorts of fields including cereals, milk and wine. I think it is necessary to be unkind in order at the end of the day to save the agricultural policy of the Community from destroying itself.

I do not think there is anything else that I particularly want to say. I could say a great deal more and, if further provoked, I might. In the meantime, I shall await the Minister's reply.

The Earl of Swinton

My Lords, I am grateful to both noble brothers, if I may say so, for the way that they have received this Statement. I shall certainly make a point of conveying to my right honourable friend the congratulations that they have offered. They have asked me a number of questions. Both asked about quotas and said that we must not punish the "goodies". All of us, I am sure, would agree that they should certainly not be punished. The Commission reasonably took the view that, as this measure changes the impact of the levy system on individual producers in a significant way, it should be adopted only as a temporary amendment. Milk production has been cut back significantly in the Community. In this context, some easing of the financial impact of the quota system was acceptable.

The noble Lord, Lord John-Mackie, asked about policing. The details will have to be worked out. But it is envisaged that the Milk Marketing Board will have a major part to play in the arrangements. Both noble Lords made a point of asking about the Irish demand for an extra 58,000 tonnes of milk. The Irish demand was resisted. The decision on this milk package does not include any increases in quota. The Irish Minister can, of course, reiterate his demand in the price-fixing, but my right honourable friend has made it abundantly clear that we would oppose it. This package has, in fact, been agreed. So there is no question of a veto being used at a later date. It is agreed and has gone through.

On the question of wine, I was delighted with the response of both noble Lords. The wine that is included is only the very lowest of the low quality. I can probably describe it as the plonkiest type of plonk. Were the noble Lord, Lord John-Mackie, to try drinking 11 litres of it, the Opposition might have to appoint a new Front Bench spokesman on agriculture. There is absolutely no question of the great growths of claret being turned into commercial alcohol, I am glad to say, in any distillation plants. Nor will there be any effect upon this country's wine producers, whose wine is of a better quality. I hope that I have answered all questions, but if I have missed any, I shall write to noble Lords.

Lord Mackie of Benshie

My Lords, can the Minister indicate what threshold price is envisaged for compulsory distillation?

The Earl of Swinton

My Lords, I shall have to write to the noble Lord with that information.