Agriculture Bill [H.L.]

HL Deb 08 December 1992 vol 541 cc94-167

3.5 p.m.

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Earl Howe.)

On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Clause 1 agreed to.

Clause 2 [Applications for approval]:

Lord Mottistone moved Amendment No. 1: Page 2, line 25, after ("trading") insert ("including the arrangements for pricing, continuity, delivery and means of settling disputes").

The noble Lord said: When moving Amendment No. 1, I also wish to speak to Amendments Nos. 6, 8 and 15. Amendment No. 1 was suggested to me by the Food and Drink Federation, the other three by the Dairy Trade Federation. All these amendments seek to make Clauses 2 and 3 give more details.

With regard to the first amendment, I am worried that Clause 2 fails to require adequate details of the reorganisation scheme, particularly for selling milk. In Clause 2(1) (c), the general term "practices" should specify the arrangement for pricing, continuity, delivery and means of settling disputes; hence the need for the text of Amendment No. 1.

Turning to Amendments Nos. 6, 8 and 15, Clause 3(4) (a) should be extended because while processors of milk clearly have a vital interest in the trading practices to be adopted by any successor body to the board, there will be other matters in relation to the scheme of reorganisation which will be of concern and directly affect all purchasers of milk.

For example, the proposed distribution of any assets of the milk marketing board or its subsidiary have implications for competition in the dairy sector. A new subsection (4) (b) should be added to Clause 3 to ensure that an appropriate means of dispute resolution is catered for so that any difficulties arising between a successor body and its customers can be speedily dealt with.

This provision would be of particular importance if a single dominant co-operative were to emerge as successor to the Milk Marketing Board since in those circumstances there would be few, if any, alternative sources of supply for dairy companies which found themselves in dispute with the new body. Any long-standing disputes could affect the dairy sector's viability.

The Minister stated that processors' interests will not be overlooked. We need a great deal more than that. These amendments serve to recognise the extent of those interests. Perhaps I should add that I find it quite extraordinary that Clause 2 makes provision only for a milk marketing board to prepare a scheme. It is quite extraordinary that a body which is about to be executed is invited to prepare its own rules for execution. It seems to me that other interests should be involved in preparing a scheme; for example, food processors and consumers. I hope that my noble friend will comment on that point. I beg to move.

Lord Gallacher

I took note of the fact that the noble Lord, Lord Mottistone, mentioned that the Food and Drink Federation had invited him to table Amendment No. 1 and that Amendments Nos. 6, 8 and 15 were suggested by the Dairy Trade Federation. I mention that at the outset because during the passage of the Bill, where there is an obvious conflict of interests if not a suspicion of parties, it is important that we should know at various stages not merely what we are discussing but on whose behalf we are discussing it.

Lord Mottistone

I went to some trouble to explain that before moving the amendments. I always say who advises me and I do not believe that the noble Lord needs to make that point yet again.

Lord Gallacher

I was acknowledging the advice in general and setting out a course of action which may be helpful to the Committee as we proceed through this complicated Bill. I hope that the noble Lord, Lord Mottistone, will accept that that is a genuine attempt to facilitate consideration of the Bill in Committee. On this side of the Committee we are not acting on behalf of any particular interests. We are trying to steer a course of informed neutrality throughout our discussions on the Bill.

We have no objection to the extension of the phraseology which Amendment No. 1 contains, although we shall be interested to hear from the Minister whether or not the details of that amendment are covered by the normal terms of commerce as between buyer and seller. However, we shall not object if it is felt that the Bill would be strengthened by the inclusion of those additional specifications.

As regards Amendment No. 6, we should be quite happy to see processors of milk included in the Bill to give added emphasis to their importance, which we acknowledge. Again, if the Minister is disposed to accept the amendment we should be in sympathy with it.

On Amendment No. 8, we believe that it is normal in provisions of the law of contract, which I can dimly remember from days gone by, for provision to be made for the settlement of disputes between a successor body and its customers. Indeed, the new body could choose to register in England and Wales under the Industrial and Provident Societies Act 1965 where, as I recall it, there is specific provision for an arbitration system which is designed to resolve disputes without the fuss and expense of litigation. Again, I do not believe the Bill would be harmed in any way by the inclusion of the words suggested by the noble Lord. I look forward to hearing the Minister's response on that.

Amendment No. 15 is an attempt to spell out in some detail what a successor body is. We have no objection to that either, again subject to the views expressed by the Minister. In looking at the placing of the amendment, on page 3 at line 41, our only thought is that there may be a better case for such detailed specification under Clause 21. However, subject to that thought, we are not dissatisfied with the amendment for the reasons that I have given.

3.15 p.m.

Baroness Carnegy of Lour

I am bound to say that I have a great deal of sympathy with the amendments. I agree with my noble friend Lord Mottistone that it is strange that in their attempts to meet the desires and habits of dairy farmers the Government have produced a Bill which gives the dairy trade and the consumers no direct involvement in agreeing to arrangements which will affect them greatly. Some of the possible traps into which the Bill may fall in not achieving that agreement are indicated by my noble friend's amendments.

Under the Bill Ministers will have to take the interests of the trade and consumers into account in agreeing a future scheme, but their direct involvement in that which is finally decided is nowhere to be found in the Bill. Therefore, I have a great deal of sympathy with these amendments.

Lord Mackie of Benshie

I looked at the amendments and noted the mover of them. The noble Lord is quite right in that people know that he represents the interests of the processors and does it to the best of his ability. I have more sympathy, because of my background—and I declare it—with farmers and dairy farmers. I am old enough to remember the good that milk marketing boards did when they came into being in 1933. They were introduced by the husband of the noble Baroness, Lady Elliot. Considerable harm was done by the techniques of the processors before that period, when they smashed the small farmer into the ground and progressively lowered the price of milk. Therefore, in general I am suspicious of the amendments because of their source. However, I am glad that they were analysed by the noble Lord, Lord Gallacher, and I too shall wait to hear what the Minister says.

Lord Stanley of Alderley

I find these amendments confusing. I presume that my noble friend is in favour of free bargaining between parties. I have often heard him speak of the market place. Therefore, perhaps my noble friend will explain why he believes that it is necessary, particularly in Amendment No. 1, to tie down various parties. I find that totally out of character on the part of my noble friend.

Baroness O'Cathain

I have a certain sympathy with the comments of the noble Lord, Lord Stanley. If the purpose of the Bill is to try to reduce the managed market and make it much more of a free market, I wonder why we need to go back into the same old mode that we have had which has bedevilled relationships among various parts of the dairy trade for the past few years. I do not believe that it is useful to see in this Bill an amendment which talks about arrangements for pricing, continuity, delivery and means of settling disputes.

I should declare an interest. It relates to my background. I was employed by the Milk Marketing Board where probably 50 per cent. of my time was taken up with those nitty-gritty matters when I should have been encouraged to think about the consumer, developing new products and providing milk to the consumer in the most cost-effective way. I believe that we shall be hamstrung if we include all those caveats into the Bill.

Lord Wade of Chorlton

Perhaps I may first refer to the point made by the noble Lord, Lord Gallacher. I have been involved in the industry. It is inevitable that one asks questions and discusses the issues with everyone: milk producers, buyers, manufacturers and consumers. Therefore in declaring my interest I confirm that I am involved in all sectors. What I want from the Bill is something that is right for the industry as a whole. That is how I see the matter and the issues we shall be discussing today.

There are two or three points I should like to refer to in regard to the amendment of my noble friend. First, he refers to the need for wider consultation with the milk industry and milk producers. As a milk producer and one who is close to milk producers I am aware that there has been discussion of the issue for a long time. Since 1932 there has been a controlled marketing of milk from the point of view of producers. We are now asking them to move suddenly from a system where they had complete security—no involvement in a market place—to being much closer to their buyers and more involved in the consumers' need for various milk products.

That will not be easy for many milk producers. To make the new proposals work—of which I am in favour—it is right and proper that we should introduce a scheme which retains the confidence of the vast majority of milk producers. In that regard I feel that enough discussion has taken place. It is right and proper that a new board should be formed, perhaps a sole board but not one with monopoly powers because under the Bill there will be opportunities for many other people to buy milk.

On the importance of the purchaser, I have sympathy with the comments made. It is one industry and milk producers cannot operate unless they have full confidence in the market place. I understand entirely the point that is being made. At the same time I feel that what is in the Bill creates the right balance. However, I shall be interested to hear what the Minister has to say. I should like him to be clearer as to how he sees the importance of the purchasing side of the industry.

As milk producers, we cannot effectively maximise the price we need unless we understand that the successor body will have the authority, the power and the opportunity to obtain the best possible price that the consumer will pay. I say that in the knowledge that over recent years the producer has not received the price to which he was entitled in the market available. There has not been the opportunity to maximise the milk price. In that sense I have sympathy with the comments of my noble friend. But the demands of the purchaser which would maximise that opportunity must be there. It is something that we need the Minister to understand when he responds to the proposals. I should like him be a little firmer on that point.

Earl Howe

I do not wish to delay the Committee nor, I hasten to add, to cause any embarrassment to my noble friend. However, it may be helpful to remind the Committee at this stage of the provision in the Companion to the Standing Orders covering the matter of speaking on behalf of outside interests. It says that when speaking in the House noble Lords may indicate that an outside body agrees with the substance of the views that they express but that they speak for themselves and not on behalf of outside interests. I know that my noble friend bears that in mind, but it is as well to remind ourselves of it.

The intention of the Government is to open up the dairy market to the normal commercial freedoms and constraints which apply in other sectors. Once the milk marketing schemes are ended we do not propose to take new regulatory powers to control the marketing of milk, thereby establishing a sort of milk marketing scheme Mark II. However, we intend to rely on the existing powers of the courts on the one hand and the competition authorities on the other to ensure fair trading and fair competition.

It is right and proper for the Government to ask a milk marketing board which is proposing to establish a successor trading body to demonstrate that it has considered in some depth how that body can trade fairly with its customers in a manner which does not constitute abuse of a dominant market position if it has one. That is what the requirement in Clause 2(2) (d) of the Bill, taken with Clause 3(2) (c), is intended to achieve. It must produce a statement of trading practices which takes account of the interests of purchasers of milk. The statement would have to cover the arrangements for the pricing and delivery of milk.

I do not believe that anything separates my noble friend and I on this part of the argument. However, Amendment No. 1 would go further. If I understand its purpose correctly, the amendment implies that there may be a special duty on the part of a successor body to ensure some kind of continuity with the previous supply patterns of its milk marketing board predecessor. If my noble friend reflects on that, he will realise that that will not do. The point of freeing up the market is to enable market forces to work and new patterns of milk trading to emerge. It is not to require a successor body to take over where a milk marketing board left off. In any case, a successor body may control a much smaller proportion of the milk supply than its predecessor. That is something we simply do not know at the moment. On the other hand, there is an obvious and inbuilt safeguard for the domestic consumer and the processor alike against any interruption of overall supply. That lies in the simple fact that milk is a perishable commodity which is not easily stored. Cows will not cease to lactate on vesting day; milk will continue to flow to the dairies and the consumers.

As to my noble friend's other suggestion that the statement of trading practices should contain provision for settlement of disputes I hope that he will realise that that also is unacceptable if it implies—as I believe it does—that there should be provision for some procedure not normally available to commercially trading bodies. The normal means of settlement are through the courts or by arbitration. It is difficult to see what purpose would be served by a unilateral statement by a successor body that it intended to resolve disputes in some other manner since, in such matters, it takes two to tango—to coin a phrase.

The same objections apply to Amendment No. 8, also tabled by my noble friend, which would have a similar effect. A successor body should operate within the normal framework of law governing relations between trading partners. I am therefore asking the Committee to reject both Amendments Nos. 1 and 8 on two grounds: first, that they are unnecessary in that they refer to pricing and delivery arrangements, which would necessarily have to form part of a statement of the kind required; and secondly, that they are ill-advised in their reference to continuity and dispute settlement, for the reasons I gave. In the light of what I have said, I hope that my noble friend will not wish to pursue the amendments further.

I turn briefly to Amendment No. 6. The Government consider as a matter of principle that it is in the best interests of consumers, and indeed all sectors of the dairy industry, including processors, to move away from our present system of statutory marketing arrangements. I outlined the reasons for that view on an earlier occasion and will not repeat them today. I do not believe that there is any real disagreement in the industry on that basic point. A move to more open and competitive marketing arrangements was welcomed in principle by virtually every organisation or company which commented on the board's proposals for change in the consultation exercise carried out by government in August and September.

As I said, the Government regard the ending of the schemes as being in the interests of purchasers as well as consumers and producers. But it is at least arguable that the implementation of any reorganisation scheme of a board, which established a successor body selling milk on behalf of producers, would be less in the interests of processors than a simple winding up of the board without a successor.

To put it at its bluntest, the processors' interests might be best served by putting milk producers in a weak position in the market. After all, did not the England and Wales Dairy Trade Federation propose, in its response to the Milk Marketing Board's "new world" proposals, that the board's assets would simply be sold off and producers left to their own devices. I do not believe that that is a point which my noble friend can dismiss lightly in the context of Amendment No. 6.

For their part, the Government do not wish to ignore the legitimate wish of many producers for some form of collective marketing body. At the same time, they do not wish either to ignore the legitimate interests of purchasers. It would be quite wrong to do so. It is for that reason that the Bill makes specific provision for a board to demonstrate the intention and capacity of a proposed successor body to trade fairly, taking account of the interests of the purchasers of milk. That requirement, which is contained in Clause 3(2) (c), is a point on which Ministers must be satisfied. That is a powerful safeguard for purchasers and one which I believe they should accept as satisfactory. I very much hope that my noble friend will withdraw that amendment as well in the light of that explanation and because of the difficulties to which I have drawn attention.

3.30 p.m.

Baroness Carnegy of Lour

These are very important points. Does my noble friend agree that, if the Milk Marketing Board had never existed, it is improbable that the kind of successor body which is likely to emerge following the end of the Milk Marketing Board would ever be able to set itself up? Therefore, is it not reasonable that the rest of the trade, apart from the producers, is somewhat anxious about the relationship it will have and the trading conditions which will arise with the body, about whose characteristics we are not sure? However, it will be something of a one-off situation.

Lord Carter

Before the noble Earl replies, there is a recent example of the Hop Marketing Board which turned itself into a voluntary co-operative with the support of all hop producers.

Earl Howe

I know that there is anxiety in the processing industry about the extent to which its interests will be protected under the Bill. However, I believe that that anxiety is unnecessary. Clause 3(2) (c) already makes specific provision for a board to demonstrate its capacity to trade fairly and for the interests of milk purchasers to be taken account of. I think that both my noble friends would do well to reflect on that. It is a very real protection for purchasers of all kinds.

Baroness O'Cathain

Would it not also be a good idea to include retailers in the scheme? They are forced to buy milk from the processors. They account for about 20 per cent. of the liquid milk market. They have valid interests which should also be considered. This is a matter which bothered me as regards the original Bill. Now that the measure has been extended to include the processors I feel that there is a gap in that retailers are not deemed to be important in the chain.

Earl Howe

I do not believe that anyone is suggesting that the retailers are not important. My point is that processors should not be included on the face of the Bill for the reasons which I have stated. If the noble Baroness feels that this is a point which should be aired at greater length, I shall be glad to consider it and respond perhaps at Report stage.

Lord Mackie of Benshie

Is it not a fact that without milk marketing and other boards in Denmark, the producers have formed themselves into very strong co-ops which not only market the products, both pigs and milk, but also deal with manufacture, export and promotion in other countries without regard to the independent processors?

Earl Howe

That is a very interesting point but I do not believe that it cuts across the thrust of what I was trying to say as regards this particular amendment. I shall reflect on what the noble Lord has said.

Lord Mottistone

I thank all noble Lords for having involved themselves so strongly in this matter. As regards what the noble Lord, Lord Mackie of Benshie, has just said, that is a very strong argument but it does not relate to any of my amendments which we have under discussion at the moment. I thank my noble friend the Minister for his full reply. I am not altogether happy with parts of it. I shall take great care to read what he has said. I shall almost certainly want to come back at Report stage with something which takes advantage of what he has communicated to us. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mottistone moved Amendment No. 2: Page 2, line 45, at end insert: ("( ) Applications for independent ownership of central industry assets may be made by any party other than a milk marketing board.").

The noble Lord said: In moving Amendment No. 2 I speak also to Amendments Nos. 18, 20 and 24. As regards Amendments Nos. 2 and 20 I have been advised by the Food and Drink Federation. When I say "advised" I mean just that. I have been in this House for 25 years and I have received advice from people of all shapes and sizes. But anything that I say to the Committee is very firmly my own view. Some of the things that I have to say are not said on the advice of these people. However, as regards Amendments Nos. 18 and 24 I have been advised by the Dairy Trade Federation.

Both sets of amendments relate to the transfer of Milk Marketing Board assets. As regards Amendments Nos. 2 and 20—the latter being consequential—I would welcome Ministerial assurances that the terms and conditions of the transfer of Milk Marketing Board assets will not be such that producers will be unduly pressured or else will jeopardise financial interests to join the successor body. There is a strong case for central industry assets, particularly the central testing laboratories, to be set up on an independent basis so that they continue to be a resource available to everyone on nondiscriminatory terms.

My noble friend should also consider the merits of opening up access to the Milk Marketing Board's haulage fleet, farm service business and real property. In that respect there is an argument for the assets to which I have referred to be somehow hived-off in another way rather than automatically going to the successor body whatever that might be.

I now turn to Amendments Nos. 18 and 24, the latter amendment being consequential. In a move towards a freer market it is essential that producers be permitted full participation in determining their future. If producer groups are not given the right by statute to propose the successor bodies to which assets could be transferred, there can be no guarantee that their interests will be adequately represented by the Milk Marketing Board in preparing a scheme of reorganisation, or by the Minister when he considers the Milk Marketing Board's proposals under Clause 3(4) (b).

In introducing the Bill my noble friend the Minister recognised that producers would wish to sell direct and form local groups. They should be accorded an equal right to suggest recipients of board assets to enable them to set up and market effectively from the first day of "new world" rather than to be forced to rely on private finance or grants. In a letter from MAFF dated 11th November 1992 to the president of the Dairy Trade Federation, in the course of refuting a proposal for wider distribution of Milk Marketing Board assets, it is suggested, such a step would leave the successor co-operative without the resources to sustain the business". That seems to indicate that the Government recognise that a share of the assets is crucial for any successor body. That must apply equally to any producer grouping. The request that producers other than the Milk Marketing Board should be allowed to suggest suitable transfers is a natural embodiment of my noble friend's assurance that the purpose of the Bill is to allow freedom to producers to give effect to their commercial judgment.

This is a complicated matter, but I believe that there is room for amendments on the lines that I have suggested in order to free the situation in a way that currently the Bill does not do. I beg to move.

3.45 p.m.

Lord Carter

The Committee is extremely grateful to the noble Lord, Lord Mottistone, for giving us an early opportunity to debate this central area of the proposals in the Bill regarding the future of the milk marketing boards. I must admit that when I first read the amendment I wondered what the noble Lord meant by "central industry assets". It was helpful that he defined them and seemed to include in them all those activities of the marketing boards which are not involved directly in the sale and purchase of milk. As I understand it, that means all the cattle breeding, the farmer services, the central testing, and all the rest.

As the noble Lord suggested, Amendments Nos. 2 and 18 march together, but when considering them together one cannot help wondering, without being in the least unkind, whether they were intended to ensure that a number of successor bodies would emerge which would be much weaker than the new co-operatives proposed by the marketing boards as their likely successors. As the noble Lord knows, in a later amendment I ask the Government to consider the definition of those services which should come under a milk development council, as set up under the Industrial Organisation and Development Act 1947, and those services which should remain either as stand-alone commercial services or as part of the successor bodies. That is an important point to which I am sure we shall return when we reach that later amendment,

If Amendments Nos. 2 and 18 were to be accepted by the Government they would effectively take the heart out of the Bill. It is an enabling Bill which states clearly that only the marketing boards can bring forward proposals for their successor bodies. I should like to take this opportunity early in the debate to make clear the view of these Benches that, as I said on Second Reading, if we had formed the Government we would not have sought to wind up the marketing boards. We would have tried to amend them in the light of the European situation to ensure that the way in which they traded—the sale of milk, and the rest of it—was transparent, but we would have tried to keep them. However, that is not to be. We now have this Bill and I should make it clear early on that we want strong successor bodies to the marketing boards. Milk producers face some powerful forces on the other side of the farm gate and as long as the successor bodies meet the criteria which are set out in the Bill—we shall be seeking in later amendments to extend and improve those criteria—and their activities are properly controlled under normal competition law, we want them to succeed.

Amendment No. 2 states: Applications for independent ownership … may be made by any party other than a milk marketing board". Presumably, that excludes the milk marketing boards from any attempt to bid for the assets or from any attempt to keep them. The amendment is entirely clear. It refers to any party other than a milk marketing board". When the noble Lord replies and decides what to do with his amendment, will he consider whether the assets might be of any interest to the major buyers of milk? Some of the big dairy companies might be interested in purchasing some of the assets. If that was the case, would that affect his view? Would he be concerned about the increased concentration that would result if bodies which are powerful in the market also controlled a number of those important services?

Amendment No. 18 seems to conflict with Amendment No. 2. It suggests that producer groups shall have an opportunity to bid for the assets, referring to, other than to a successor body to the board". Obviously, Amendment No. 18 implies that there will be successor bodies to the board although under Amendment No. 2 all the assets other than the trading of milk will have been removed from them. It would be unusual for the Opposition to describe an amendment as a "wrecking amendment", but it seems to me that if Amendment No. 18 were to be accepted it would be remarkably unhelpful from the Government's point of view.

When he moved his first amendment the noble Lord, Lord Mottistone, said that the position of the marketing boards is like that of the man who is facing execution and is asked to decide on the way in which the execution is to be conducted. I think that the noble Lord had the wrong analogy. The marketing boards are to be reborn and are being asked to define their future role as midwives. I think that that is the better analogy. Amendment No. 18 states that successor bodies shall exist alongside the producer groups, but Amendment No. 2 states that successor bodies shall not be allowed to own the central industry assets, however defined.

Turning to the invitation in Amendment No. 18 which states, shall have invited proposals from all registered producers", perhaps the noble Lord will tell the Committee how long the invitation period will last. Obviously, this will be required in the planning procedure if we are to plan the successor bodies properly. I assume that he means that no single producer group can submit an offer for all the property and rights of the boards because, if one did, that would be the same as the position for the new co-operative. Therefore, the noble Lord must mean that a number of producer groups would have to be involved.

It would also be helpful if the noble Lord could define what he means by "producer groups". Are they to be co-operatives or private companies? I seem to be making the Minister's arguments for him, but may I also ask the noble Lord how the Government are to decide on the appropriate allocation of the property and rights of the boards when they have to make the decision about the producer groups? There could be a long delay and increased uncertainty.

As I said, I have tried to be fair to the Committee and to make our position clear at the outset. We wanted to keep the marketing boards, but that is not to be. We shall support the Government in ensuring that a strong producers' organisation succeeds the boards provided there is transparency in its trading practices and that it is subject to normal competition law.

I find it hard to see what the amendment is intended to achieve except, perhaps, confusion. We know that, under the new proposals, when the milk marketing schemes are revoked there will be nothing to stop groups of registered producers from selling their milk to whomsoever they like. That is clear and I do not think that anybody argues about that now. The anxiety is about the assets of the marketing boards, with the exception of Dairy Crest. I am told that the balance of assets is about 20 per cent. of the total. It is proposed that that would pass only to the new co-operative—to the successor body.

The anxiety about that is based on a failure to understand the principles of co-operation. If the new body is set up as a co-operative under the Industrial and Provident Societies Act—I am speaking particularly of the marketing board in England and Wales —the members cannot by law make entrepreneurial profits on capital as a result of ownership. In other words, the assets belong to the body of producers. The technical term is "mutual trade". Therefore, the idea that the producers who join at the beginning will have some extra right to the capital value of the assets is a misunderstanding. Those assets will belong in total to the body of members, but not to individual members. If they leave, there is a limitation in law on the amount of capital which they can extract. On that point perhaps I should say in passing that there is some anxiety about what would happen on the winding up or dissolution of a successor body, and I have tabled an amendment to deal with that.

The point that I have just made has also been made in a helpful letter dated 11th November from Sir Derek Andrews, the Permanent Secretary at the Ministry of Agriculture, Fisheries and Food, to Mr. Smith, the President of the Dairy Trade Federation. The letter states: But there is also a need to take into account relevant competition considerations. One that might be relevant here is that a producer leaving a successor co-operative would not, under normal co-operative principles, expect to take a share of the body's assets with him. It is therefore open to question whether the fact that the co-operative inherited laboratories or other services of the former MMB would constitute an incentive to producers to join. If the co-operative were to undertake to make those same services available on commercial terms to all producers, as I believe is the present intention, that too could be a relevant factor". On the point about the power of the buyers on the other side of the farm gate, to which I have already referred, I have received an extremely helpful letter and a lot of background briefing from one of the major dairy companies, one of the big buyers. The chairman's first point is: There is no need for milk producers to worry about being abused by the buyers of milk. Because of quotas, milk is in short supply and will continue to be so". Three lines down he states: If we are faced by an unregulated monopoly controlling the supply of milk we will have no choice but to seek alternative supplies in other countries within the Community". Quite how that marches with the first statement that there is no need for producers to worry about being abused by the buyers of milk, I do not know. It is, to say the least, a little contradictory.

I have taken some time over this group of amendments because it is central to the whole argument. As I said at the beginning, the noble Lord is to be thanked for allowing us to debate this extremely important point. In our view the amendments run counter to the fundamental provisions of the Bill that only the marketing boards can bring forward proposals for their own reorganisation. For that reason, if the noble Lord decides to press them to a Division, we shall find it hard to support him.

Lord Mackie of Benshie

The noble Lord, Lord Carter, failed to say that these are wrecking amendments but I think that that is exactly what they are. The intention of the Bill is to help the producers to produce a scheme for marketing in lieu of the Milk Marketing Board. The Government have inserted many safeguards so that it will not be an aggressive monopoly. These amendments, particularly Amendment No. 2, are designed to wreck it.

Lord Wade of Chorlton

I thank my noble friend for bringing forward these amendment because, as the noble Lord, Lord Carter, said, they give us an opportunity to debate one or two important issues. There are a number of important factors which must be brought into play in the new revised milk industry which are not part of the Bill and, in my view, are rightly not part of the Bill. What the Bill seeks to do is to free up the market to allow the market place to decide much more the structure of the milk industry. However, some of the factors that the amendments raise need to be confronted by the industry itself. There needs to be a look at central testing. There needs to be a look at the better use perhaps of some of the assets that are now with the milk marketing board and will not go out as Dairy Crest assets. There is also a need to look at some other aspects, such as research and development, to which we shall come later in the Bill. I wish to suggest that, in putting forward their proposals for reorganisation, the existing milk marketing boards look at these issues a little more closely than possibly they have in the proposals put forward to date.

I should like to suggest to my noble friend the Minister that, in reviewing the various proposals that are put forward, the Government might look again at this aspect. We have an opportunity to bring the sectors of the industry together to achieve certain industry initiatives in a way that has not happened before because there has been a traditional division between the milk producer and the milk purchaser. A number of issues which my noble friend brings forward in the amendment need to be tackled on an industry basis. Although, for all the reasons put forward by the noble Lord, Lord Carter, I would not agree to any of the amendments becoming part of the Bill, I would suggest that the milk marketing boards themselves look at some of these aspects and how they put forward their reorganisation proposals and that the Minister, when looking at them, bears these points very much in mind.

Baroness O'Cathain

I fear that Amendment No. 2 is an attempt to emasculate the successor body before ever it gets started. The particular reference to central testing facilities is one which I do not think the Committee should support. The fact remains that central testing facilities are just that. They are central testing facilities. They have been built up over a number of years and have a great level of expertise. They have an unimpeachable record in terms of being totally even-handed. They have undertaken work for other sectors of the food industry and their work has been regarded as being of a very high quality and standard. I believe that this is an attempt by certain people who have vested interests in the milk industry —I am not going to name people—to undermine the successor body. If that happens the consumer will be disadvantaged. Of course the producers will be disadvantaged but the consumer will not get his or her fresh milk and once more we will be subjected to an enormous inflow of milk products from other parts of the European Community and elsewhere. I hope and pray that the amendment will be rejected.

Baroness Carnegy of Lour

The noble Baroness knows a great deal about this subject and she makes important points. I do not know how practical these amendments would be if they were incorporated into the Bill but the underlying point is very important even if it goes right to the heart of the Bill. One might call it a wrecking amendment but then this is a different kind of Bill. If it were changed in a fundamental way one could say that it would be wrecked. The question is whether the whole of this approach is right in the interests ultimately of the consumer. That is what we are asking.

Can my noble friend the Minister tell us what he sees the assets to be? I know that the Milk Marketing Board has said that it would be its intention that the services which it provides at the moment should be available not only to the producers who join the co-operative but to others and that all would pay for them. That is fair enough. But what about, for example, the milk tankers which collect milk and take it from the farm to the central points? Are those part of the assets? Will those go to the successor body? Will the people who do not join not have the benefit of the value of any of these tankers? Will that be so? Can the Minister tell us what the assets are just so that we can be clear? The fairness of this to people who do not want to join the co-operative is extremely important.

Baroness O'Cathain

Perhaps I may make a point about milk collection. Unless things have changed drastically in the past four years I do not think that the Milk Marketing Board of England and Wales, as the milk marketing section, actually owns tankers. It becomes involved with haulage contractors from independent hauliers as there is as well a large transport contract with Dairy Crest, which will be floated off. I do not necessarily think that tankers are the issue. I am worried about central testing. How can one divide up five large laboratories in terms of blocks of assets to sell them off?

The Earl of Selborne

I should first of all declare an interest as a dairy farmer and as president of the Royal Association of British Dairy Farmers. It will not surprise the Committee to hear that, like many other speakers, I find the amendments totally unacceptable. As my noble friend Lord Wade said, there is an issue as to how these assets, whatever they may be, are to continue for the benefit of producers, consumers and everyone else. The proposals in this series of amendments will not achieve that. I am quite clear that we should reject them.

Earl Howe

I am grateful to my noble friend Lord Mottistone for raising the subject in the first place and I am particularly grateful to the noble Lords, Lord Carter and Lord Mackie of Benshie, for what they said.

The Government's approach to the ending of the milk marketing schemes has been to encourage the boards themselves to put forward proposals for future marketing arrangements. They do so in the belief that there is a widespread desire among producers for some form of collective marketing body in the new world, if I may call it that, to afford a degree of collective security for those producers who do not wish to take full advantage of the new freedom to go it alone. The Government also believe that if soundly-based successor organisations are to be established, they should look to the boards whose members are elected by milk producers to judge what stands the best chance of success.

There are of course limits to the degree of discretion which should be allowed to the boards. That is what Clause 3 of the Bill is all about. The Government do not, however, start from the point of view that any particular treatment needs to be accorded to any particular type of assets, although it is relevant to point out that Ministers are required to judge whether a reorganisation scheme makes reasonable provision for the distribution of assets to registered producers. That is in Clause 3(4) (b). Some producers may wish to use the assets that they receive to help them finance their own marketing initiatives. They may also wish to apply for assistance under the group marketing grant, which appears in Part III of the Bill. The Government would welcome such initiatives.

The Government do not subscribe to the view that there is something special about certain types of assets which means that they, in particular, must be passed into some form of common industry ownership. The central testing laboratory is an example that has been given. It is clear that any body purchasing milk from producers needs to be able to carry out tests to determine hygienic quality, solids, fat content, and so on, as a basis for determining payments to producers. That would apply to a single successor co-operative in England and Wales, for example, if one were to be established. So it is not an unreasonable proposition, by definition, for the co-operative to take over the board's testing facilities. Here I must disagree with my noble friend Lord Mottistone. The Government would be worried if no alternative facilities were available to other potential purchasers of milk from producers; but that is not the case. The major dairy companies already have testing laboratories, as do a number of independent concerns up and down the country. Moreover, the board has said that its testing facilities will continue to be available on a commercial basis to non-members of a co-operative as well as to members.

Ministers will judge the board's proposals on their merits when they receive them. Here I take full note of the remarks of my noble friend Lord Wade. My noble friend Lady Carnegy asked where the other assets will go in any reorganisation scheme. We shall not know until we receive the proposals.

Baroness Carnegy of Lour

I hope that my noble friend will forgive me for intervening. I did not ask where they would go, I asked whether he would tell us what they consist of.

Earl Howe

I also heard my noble friend ask where they would go. That is a point to which we shall come shortly. I can tell her what they are in outline. There is a certain amount of real property at Thames Ditton, for example. The haulage fleet, as the noble Baroness, Lady O'Cathain, pointed out, is, according to my understanding and advice, largely leased. I apologise if that is wrong. The MMB's present stance is that the successor body that it has proposed will own directly only a small part of the tanker fleet. It has yet to be decided what will happen to other peripheral activities such as GENUS, the National Milk Records and so on. Although that is not a full list of the assets in the balance sheets, they are the major ones.

What Ministers will not do is act as adjudicators in a free-for-all in which any group may put in a bid for selected slices of the assets. That would be a recipe for chaos. At best, it would mean that Ministers would have to write their own reorganisation scheme rather than exercise their function of approval or rejection. That is not the basis of the Government's policy and cuts seriously across the thrust of the Bill. I ask my noble friend to think again about the amendments.

4 p.m.

Lord Mottistone

I thank my noble friend for his reply. I do not really need to think again. Whatever the noble Lord, Lord Carter, may have said, I did not suspect that I would have an opportunity to take any of these amendments successfully through the Division Lobbies, by virtue of their nature, which has inspired a certain amount of discussion. I thank my noble friends Lord Wade and Lady Carnegy for their contributions. I have by no means finished the battle. I do not take as too much of a rejection the views of those Members of the Committee who want to retain as much of the status quo as possible, because I am sure that that is not right. I understand that that is what some people would like. I shall read with great care what has been said, not just by my noble friend the Minister but by other Members of the Committee, and will probably come back at the next stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clause 3 [Determination of applications]:

Lord Carter moved Amendment No. 3: Page 3, line 7, at end insert ("and has had regard to the results of a poll of registered producers conducted in such manner as it thinks fit for the purpose of ascertaining the level of support amongst them").

The noble Lord said: The amendment relates to a poll of producers. In his reply to the previous amendment, the Minister said that he thought that all producers wanted collective security. I happen to think that he is right. But how does he know? I am sure that he has not had access to all producers so as to be able to form that view.

The amendment has been worded carefully. I compare its wording to that of Clause 36 which deals with a poll in respect of the future of the Potato Marketing Board. The clause provides: The Board may carry out a poll of registered producers". Subsection (2) states: Where the Board carries out a poll under this section, the result of the poll shall not constrain it in deciding what to do in relation to that section". In other words, it can have a poll and ignore it. I have tried to word the amendment a little more carefully than Clause 36 is worded. I have used the words, "had regard to." It may help the Committee to know that there is a good precedent for that wording in the Town and Country Planning Act 1990 which states: In dealing with such an application the authority shall have regard to the provisions of the development plan, so far as material to the application, and to any other material considerations".

The courts have held that a duty to have regard imposes no obligation to adhere slavishly to the plan: the formula means that the authority has to consider all the material considerations, of which the plan is one. The phrase does not however allow the Secretary of State to set the plan aside altogether in favour of some other consideration. That is the reason for using the words "had regard to."

I should appreciate the Minister's guidance on the following points. Under Section 4 of the Agriculture Marketing Act 1958, am I right to think that if 200 registered producers demand a poll under that Act about the future of the milk marketing scheme, the board would have to organise one? That section of the Act is not amended until Clause 18 of this Bill, which comes into force on vesting day. So a demand for a poll by producers on the future of the marketing boards would be legal, as I understand it, until vesting day. It would be helpful if the Minister could confirm that point. What will be the Government's reaction to a poll of producers which shows substantial, and perhaps overwhelming, support for retaining the MMBs? If there were such a poll under the 1958 Act it would be interesting to know what the Government's response would be.

I turn now to a poll under the existing legislation. Perhaps I may quote a helpful letter sent to Mr. Packer, the then Deputy Secretary and now Permanent Secretary to the department, by Mr. McMichael-Phillips, summarising a discussion which had been held with Mr. Packer. On the issue of a poll under the 1958 Act, he said: You agreed with us that provisions for producer polls remained in force until the current legislation was repealed". As I said, as I read the Bill that is not until vesting day, when the existing schemes are revoked.

I shall deal now with a poll relating to support for the new scheme, which is what the amendment is concerned with. As I said on Second Reading, producers have been led to believe that they would have the chance to express their views. I quoted on 23rd November at col. 807 from a press release from the milk marketing board of July 1990. The Board would only consider recommending becoming a co-operative if it received specific and satisfactory assurances. Then and only then would producers be asked to vote on it and decide.

Presumably the board has now considered it and it is in fact recommending becoming a co-operative, but I do not know how it received specific and satisfactory assurances because it will not receive those until the scheme is approved by the Minister. I am not sure how that hangs together.

I also quoted at Second Reading at col. 807 from a report in March 1991. Again the MMB at a press conference emphasised several times that there would be no change in the existing scheme until producers had voted favourably in a referendum and an Act of Parliament had been passed.

How do the Government square this? If the Minister remembers, his answer at Second Reading at col. 858 on 23rd November was: I wish to point out that the milk marketing boards have their own procedures for consulting producers and they do not wish to have a special power for a formal poll". It is clear that the Government have accepted the view of the boards that they do not want a poll, and they are presumably ignoring the requirements of the 1958 Act. It would be helpful if we had this clear.

After Second Reading I had a most helpful letter from Sir Andrew Dare, chief executive of the MMB, in which he said—and I think this is fair—that if a poll were to be held it would nevertheless inevitably consume considerable time, expense and effort". Well, that is true. That is the trouble with democracy. It involves considerable time, expense, and effort.

I know that there have been a number of meetings around the country in which the producers have hardly been consulted. It is being regarded now as a fait accompli. They have not been consulted in the full sense of the word. They are really being told that there is no alternative. Perhaps there is not, but I should like the Government to put the argument why they think the producers should not be asked for their views. If we finally accept the arguments against a poll—and of course they may be strong—it is fair to ask that the Government must ensure that they are satisfied that the producers have been properly consulted, and indeed are likely to support the proposed new schemes of the successor bodies. I beg to move.

Baroness Carnegy of Lour

I am not sure whether the noble Lord intends the amendment to relate to Scotland. From my reading of the amendment and the Bill I think that it does. My understanding from the Scottish National Farmers Union is that there have been extensive discussions over several years on this subject, and that a recent grass roots petition in favour of the Scottish Milk Marketing Board's plans was signed by over 97 per cent. of milk producers. There seems to be no question in Scotland that milk farmers want the Bill.

Lord Carter

The noble Baroness is correct. We are in a little danger in our discussions today in concentrating entirely on the marketing board for England and Wales. I am aware of that poll which, if you like, shows that there is sufficient support. Therefore, clearly there is no need for a poll in that particular area.

4.15 p.m.

Lord Monk Bretton

I should like to begin by declaring an interest as a producer before I speak about this amendment, and to say that I personally doubt the wisdom of holding a poll. I do not know of any strong demand from producers who produce for the England and Wales board for such a poll. I know that the board has taken extensive soundings, and I am sure that Her Majesty's Government know that also.

The matter which gives me the most concern is the time delay that might be caused if such a poll were instituted. I have a suspicion that it could handicap the new co-operative in its prospects for having plenty of time to sign up producers. It might have to wait until after this poll, and there may not be much time. That degree of delay could be damaging to the future of the new co-operative. The best poll will prove to be the one that shows the degree of support that producers will finally give to the new co-operative.

Lord Geraint

I have been told many times that a week in politics is a very long time indeed, but the Milk Marketing Board has survived within the political arena for the past 60 years. Successive governments have said that the board has done an excellent job for the dairy farmers and the producers of this country. Over the past 30 or 40 years we have had a unique delivery of the pint of milk to nearly every household in this country. I support this amendment. If my memory serves me right, about 10 years ago a poll was carried out within the milk marketing board organisation itself. Nearly 95 or 96 per cent. of producers were in favour of having a ballot.

From my understanding of the brief that has been given to me by the Milk Marketing Board it was keen to have a poll now, or at the beginning of the year. Its brief says: So long as there was a possibility that the milk marketing scheme might be updated and retained, the milk marketing board considered that it was appropriate that there should be a poll of registered producers to ascertain their views". But I am afraid that it is not to be.

It would be wise at this stage for the Government to tell the public, the dairy producers and the housewife, who is responsible for demolishing the Milk Marketing Board. Is it the board itself? Is it this Government? Or is it the European Community? I think that the fault is with our Government that the Milk Marketing Board is to be wound up. It does not make sense to me that the Milk Marketing Board is to lose its statutory powers while other boards in this country are to retain theirs. There is bound to be a bit of misunderstanding somewhere.

Let us hope that the Government in their wisdom will accept this amendment. It is a wise move that we press this point. The majority of dairy producers would be keen to respond to the contents of the questionnaire. For 60 years they have been well served by the Milk Marketing Board. So have the consumers. If a referendum was successful 10 years ago, I believe that a referendum should be held on this occasion to ascertain that all the dairy producers are in favour of this scheme.

Will the Minister please let us know whether the responsibility lies with the European Commission? Was it not willing for the Milk Marketing Board to be retained in its present form? I am aware that it was not willing to accept an amended version of the Milk Marketing Board, but I cannot understand why it was against retaining the statutory powers within the Milk Marketing Board itself like other boards that we have in Britain. There was something wrong somewhere during the negotiations in Brussels and here.

Lord Wade of Chorlton

I could not accept this amendment and I trust that my noble friend the Minister will resist it. I have not the slightest doubt that there is the feeling among all the milk producers that I meet that there is now full support for a change in the milk marketing system. I should like to draw attention to the fact that all registered producers are members of the milk marketing boards and it is the registered producers themselves who are putting forward the reorganisation proposals. There is no doubt that in all of the milk marketing boards that have put forward proposals there have been long consultations with all their milk producers. I am fully satisfied that there is great support for a change in the industry.

I should like to say to the noble Lord, Lord Geraint, that there is no one person or group of persons responsible for the marketing changes that are now taking place in the milk industry. The reason why they are essential is that the market place in which the industry operates has changed. The noble Lord referred to the fact that in the past 60 years the board had served everybody well and that it must continue to serve everybody well. The point is that in recent years it has not served everybody well. It has been against the interests of the consumer, because there has been a tremendous lack of choice of products as indicated by the fact that many products have had to be imported to satisfy consumer demand. It has certainly been against the interests of UK milk producers who receive a much lower price for their milk than comparable producers in the rest of Europe. That will continue unless there is a dramatic change in our system of marketing milk. As pointed out by the noble Lord, Lord Carter, in replying or referring to a letter, milk is now in short supply; demand is greater than supply. We want to ensure that that is fully appreciated and accepted by the farming community. Milk producers welcome the Bill, and I hope that the amendment will be resisted.

Baroness O'Cathain

Like the noble Lord, Lord Wade, I am unable to support the amendment. I think that it will be yet another costly exercise. I believe it is right to draw the attention of the Chamber to the fact that in the Milk Marketing Board of England and Wales there is an amazingly good system of communication. Regional committees meet frequently, and I believe that every producer is spoken to. But when it comes to elections I believe that inertia takes over. For example, in the election of board members it is not unknown for them to be returned after a poll of 37 per cent. or thereabouts. If one achieved that level of poll as a result of the amendment would everybody feel comfortable that the principles of the scheme had been agreed by the whole body of producers?

The part of the Act to which the amendment refers talks about drawing the principles of the scheme to the attention of producers. I believe that there is a case for drawing the scheme to the attention of other people as well. I return to the position of consumer bodies, retailers and processors. I have that slight worry, but certainly not about going for a poll of milk producers.

Lord Borthwick

I wish to raise a question about the Wool Board. Reference has been made to the Potato Board and the Milk Marketing Board. Apparently, they have some arrangements whereby they can do something. The Wool Board is something quite different. Many years ago I took over the Wool Board which at the time was a big mess. We could not sell our stuff and the thing was not set up properly. We then began a grading system. We graded our wool very thoroughly in this country and began to get better sales and prices went up. Things improved tremendously. Our grades were accepted by Australia and New Zealand, and the whole world; they worked on the grades that we produced in Bradford during the very early days of the Wool Board. That is all going to go by the board. I am not quite sure what the position will be. Do we now move towards the control that we had over wool throughout the world, or do we not? The position is controlled by a lot of outside people.

Lord Mottistone

Surely, we have to speak relevantly to the amendment. There is nothing in the amendment about the Wool Board. The time for the noble Lord to have talked about that might have been Second Reading, or he might care to put down an amendment to add a clause about the Wool Board so that it could be debated next time. But I think one has to be strictly relevant. If other noble Lords do not agree perhaps they will say so.

Lord Borthwick

I thank my noble friend for putting me right. I will try to put down an amendment because I think that it should be in the Bill somehow or other.

Lord Mackie of Benshie

I cannot say that I see any harm in the amendment, because one thing that the board has to do is to find out what producers are going to do. Therefore, it may well be done in the form of a poll as well as anything else. They will need to ascertain the number who support it and to tell people what they are proposing. The amendment appears to me to be a perfectly reasonable addition, although I must say that subsection (2) (a) also appears to cover the point. However, it may be advantageous to add the amendment.

Lord Stanley of Alderley

I do not support the amendment. I am sorry to say that for the first time I have to disagree with my fellow countryman the noble Lord, Lord Geraint. He read the first part of a brief from the Milk Marketing Board. I must read the next paragraph which I believe that in fairness the noble Lord should have read: In the Spring of 1992, however, it became clear that the current milk marketing scheme could not survive intact in its present form; that the European Commission was not willing to see the scheme amended: that the UK Government was not willing to support such an effort and that legislation announced in the Queen's Speech would revoke the scheme. A referendum of milk producers then ceased to be a sensible and necessary exercise".

Lord Peyton of Yeovil

I was very grateful—and not at all surprised—that the noble Lord, Lord Carter, referred to the words and has had regard to the results of a poll". I am very grateful for his explanation, but I still do not understand why the words are there. It seems very odd to me to invite people to have a poll and then to tell them that regard will be had to the way they have voted but that it will not be in any way decisive; otherwise, the words do not mean anything. I hope that my noble friend will on this occasion resist the amendment. Usually amendments proposed by the noble Lord are very sensible but this one appears to be the exception.

Lord Carter

I am extremely grateful to the noble Lord. I shall certainly look for his support if I divide the Committee on a later amendment relating to the Potato Marketing Board where the Government say not only that regard should not be had to the results of a poll but that they should be completely ignored or they should not be constrained by them. That is even weaker than the words that I have used in this amendment. If when we come to that amendment I decide to divide the Committee I am sure that the noble Lord will be with me.

I use the phrase "had regard to" because it has precedents. If there were a poll the proposal would be represented to producers, and those who had to administer the scheme—because it would be com-plicated—would have to have regard to it; in other words, they could not ignore it completely, nor would they have to follow every detail of the result slavishly. It would be advising them that that was the view of producers. There are many precedents for it, and it is wording that has been carefully used. When we come to Clause 36(2) I hope that the noble Lord will be equally critical of the Government about the way in which they have worded the Bill.

Lord Peyton of Yeovil

I believe that the argument of precedent is one that should be used very sparingly. We have all heard it used on many occasions usually from government sources with deplorable results.

4.30 p.m.

Earl Howe

The possibility of a formal poll of registered producers was raised in your Lordships' House during Second Reading. At that time I pointed out that the milk marketing boards were owned and controlled by their members and that they had their own procedures for consulting their members when the need arose. Furthermore, they did request that no special powers should be included in the Bill to conduct a formal poll before submitting a reorganisation scheme for approval. They did make that request. I do not want the Committee to think that the Government somehow consider it better for producers' views to be bypassed. The principle that producers should be consulted on a matter which fundamentally affects their future is not in doubt. That is why Clause 3(2) of the Bill requires Ministers to be satisfied, that the board has taken reasonable steps to bring the principles of the scheme to the attention of registered producers". Any sufficiently important variation of an approved scheme would also have to be brought to their attention under Clause 5(2).

The noble Lord, Lord Carter, asked about the 1958 Act and asked whether, if producers demand a poll on the future of the scheme, the board would have to organise one. A poll on the question of whether the milk marketing scheme should be revoked may, as I understand it, be demanded in writing by any 2,000 registered producers. No further poll on the question of revocation may be taken without the consent of the board within three years of an earlier poll. The figure of 200 relates to a submission to the Minister by producers asking for an amendment of the scheme.

The noble Lord, Lord Geraint, asked why we could not have adapted the MMB in some fashion to fit the requirements of Brussels. My reply to that is that my noble friend Lord Wade has answered the noble Lord in terms I cannot better. The industry itself wants this reform for the reasons I outlined on Second Reading. It is the inflexibility and rigidities of the market above all which are not serving our milk industry well. Brussels is not the reason.

The boards are democratically elected bodies and when they speak they must be held to speak for their members. They have already each carried out a substantial consultation exercise among producers regarding their current proposals and in the light of that exercise I do not think it is sensible to force a formal poll on them, or possibly a series of polls, when they have themselves rejected the idea of a poll. I believe that the Bill contains sufficient safeguards for the interests of producers and I hope the noble Lord will not think it necessary to press this amendment.

Lord Carter

Before we decide what to do with the amendment, I have a question for the Minister. He said the boards had not asked for the formal procedure of a poll. If they had asked for such a poll would the Government have agreed?

Earl Howe

I must give the standard answer. That is a hypothetical question.

Lord Carter

That is a fairly revealing answer. I am extremely grateful to all Members of the Committee who have taken part in this extremely useful if fairly predictable debate. I was anxious to find out whether it was the marketing boards or the Government that were making the policy. I have to say I am still a little unsure about that. There is a point that arose in the debate which, although not strictly relevant to the poll, should be dealt with. I believe we shall hear it said on a number of occasions in our discussions that, as regards the changes that are proposed, producers and consumers will both benefit. Everybody cannot win so presumably the dairy trade will lose out. I beg leave to doubt whether that will be the outcome of all the changes we are proposing.

I am extremely grateful to the Minister for pointing out that a poll can be demanded by any 2,000 producers and, if they do so, one must be carried out on the future of the milk marketing schemes. However, the Minister omitted to tell me what the Government's reaction would be if there were such a poll and there was overwhelming support for the continuation of the milk marketing scheme. Perhaps he would like to pick up that point before I continue.

Earl Howe

There is no doubt that if a poll produced an overwhelming vote one way or the other Ministers would need to have good reasons for rejecting the majority view of the producers' poll, as would the board itself.

Lord Carter

I hope the Minister is clear. I was referring to a poll on the future of the marketing boards. If there were a poll under the 1958 Act and that poll showed overwhelming support for the continuation of the marketing boards, I should be interested to know what the Government's response would be.

Earl Howe

I am sorry, I misunderstood the noble Lord. The Government's policy is quite clear on this. The schemes will be ended, no matter what, by 31st December 1995 at the latest. In that context I am afraid a poll would not be a relevant exercise.

Lord Carter

That was the answer I was anxious to have on the record. I am extremely grateful to the noble Earl for giving it to me. I shall read Hansard with interest and I shall decide whether to return with this provision at a later stage of the Bill. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 4: Page 3, line 11, at end insert: ("( ) The authority to which the application is made shall, before granting the application, consult with those persons who, in the opinion of the authority, represent the interests of producers, purchasers and consumers of milk.").

The noble Lord said: Amendment No. 4 deals with the important part of the Bill in which the authority to whom an application is made shall not grant the application unless it satisfies certain conditions specified in subsection (2) (a), (b) and (c). The purpose of the amendment is to somewhat strengthen the position as regards satisfaction and the decision to disallow an application. The Minister has already referred to provisions in the Bill which he regards as being adequate safeguards. He has spelt out Clause 2(2) (c) and Clause 3(2) (c). Despite those assurances, however, we feel that it is worth finding out the view of the Committee on whether or not there is a case for a somewhat wider test. The amendment standing in the name of my noble friend Lord Carter and myself provides such a test in the details of the wording which the amendment includes.

We believe that before granting an application there should he consultation by the authority with those persons who in the opinion of the authority represent the interests of producers, purchasers and consumers of milk. We think, as I said, that this provision is important to ensure the safeguards of all the interests concerned. We have already heard this afternoon sufficient evidence before the Committee on the fact that there are genuine concerns which we feel would be met in large measure if this amendment were to be made and if the Minister felt able to accept it.

We do not believe that it would unduly delay the implementation of the schemes to which the Bill is dedicated and we believe that at the end of the day the fact that such consultation had taken place would provide a valuable reassurance and, in the long term, probably enable the milk marketing co-operative to begin life in the knowledge that its fundamental constitution had been discussed with the trade and with consumers and that to that extent it was, as it were, beginning life with a clean sheet and having at least in some measure the support of all the interests in the dairy trade. I beg to move.

Lord Mottistone

My Amendment No. 5 is grouped with that of the noble Lord, Lord Gallacher. I do not have much to add to what he said. The important point is that my amendment contains the words, having consulted all interested parties without specifying which parties are concerned. It is important that this little part of the Bill should be widened to make quite certain that people who will be affected by these outcomes are all consulted at the appropriate stage. I hope that my noble friend the Minister will at least agree to that in principle. Whether he prefers the amendment of the noble Lord, Lord Gallacher, or mine is not important provided something appears in the Bill on this general theme.

Baroness Carnegy of Lour

I, too, wish to support this amendment particularly because of the point made by the noble Lord, Lord Gallacher, who said that the new bodies to emerge from this process will start on a far stronger base if they know that everybody is satisfied by the schemes.

Baroness O'Cathain

I, too, wish to support this amendment because I believe the amount of consultation that is suggested in the Bill is too narrow. Once more I am going to bring in producers, processors, consumers and retailers.

Lord Mackie of Benshie

I may be anticipating the Minister's reply, but I do not see the need for this amendment. It states quite simply that the authority shall not grant an application unless it is satisfied that the practices contained in it take account of the interests of purchasers of milk, and that must include the consumers.

Earl Howe

I made clear at Second Reading that the Government intend to consult on appropriate elements in a board's proposed scheme of reorganisation. It is right and proper that the principles of a scheme, its main elements, should be in the public domain so that interested parties may make representations.

The precise form which that consultation should take will depend on a number of factors, including the extent to which a board's proposals differ from those on which formal consultation has already been undertaken. Moreover, I do not believe that it is either right or necessary that every last detail of a reorganisation scheme should be made public. Such a scheme will consist largely of schedules of property and other assets of a board. Many of the details will be commercially sensitive from the point of view of a successor body and it would not be right for them to be forcibly disclosed to competitors.

It would also be highly undesirable for a consultation procedure to be introduced which was unreasonably onerous and slowed down the already complex procedure for reaching a decision on a reorganisation scheme to the extent that it became impossible to adhere to the timetable laid down in the Bill.

Having said that, I concede that the terms of the amendment tabled by the noble Lords, Lord Carter and Lord Gallacher, are reasonable and I can accept that amendment in principle. If they will agree not to press the matter today I shall undertake to bring forward an appropriate amendment on behalf of the Government at Report stage to meet the point that I take to be central to the concern.

I turn now to the amendment of my noble friend Lord Mottistone, which has a similar purpose. Although the requirement to consult all interested parties might be held to refer to consumers or producers individually, he will agree that that would pose a formidable task. I trust that my noble friend will be content with the assurance I gave in relation to Amendment No. 4 and will not pursue his amendment.

Lord Gallacher

I am grateful to the Minister for his remarks. In the light of what he said, and in anticipation of a government amendment being tabled at the next stage of the Bill, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 5 and 6 not moved.]

Lord Carter moved Amendment No. 7: Page 3, line 20, at end insert ("and especially small producers of milk").

The noble Lord said: The amendment deals with a matter which we touched on at Second Reading and which has caused some anxiety within the industry. I believe that that is a concern which is shared by all parties who are interested in the viability of our rural areas.

We know that all five marketing boards have performed an enormously valuable function in their lifetime in what might be described as rural social policy. The promise of the monthly milk cheque from a buyer who would always pay up, and in particular the pooling of both price and haulage costs, has been extremely valuable. In effect, the marketing boards have been operating as statutory co-operatives.

The Milk Marketing Board of England and Wales sent me a useful brief. I am sure that all Members of the Committee recognise that this is a probing amendment, designed to air a problem which is causing concern. The board included some useful figures in relation to distances. There is a tendency to think that all small milk producers are remote. They are not: they can be both small and remote, or they can be just small. It surprised me to see that over 99 per cent. of all dairy producers are located within 30 miles of the nearest buyer of milk and that 43 per cent. of farms are within five miles of the nearest buyer. The statistics, which relate to the nearest large buyers of milk—"large" being defined as in excess of 10,000 litres per day—show that more than 99 per cent. of farms are located within 30 miles of a buyer and 27 per cent. are within five miles. Therefore, remoteness from a dairy is not a serious matter, so long as there are no closures of the processing operations. We must bear that in mind. It would be interesting to hear from the Minister whether, in considering the reorganisation schemes, he will be asking about the possibility of a change in the pattern of processing points.

We know that the proposals of the new co-operatives and successor bodies in Scotland and Northern Ireland are to buy all milk from all members and to pool the price. However, the very useful brief from the Milk Marketing Board of England and Wales is silent on the question of collection and haulage. We have already heard that there is a possibility of alternate day collection from small farms or even of collection every third day. That would mean that small farms may have to buy an extra milk tank. There is also the possibility of discounts for large collections of milk.

Once the commercial pressure is on in the new world and there is a completely free market in milk, the small producer—not always a remote producer —could be disadvantaged by a differential in haulage charges and pick-up arrangements despite the pooling of price, which will be to his advantage.

Can the Minister say whether the Government will examine the reorganisation schemes with that factor in mind? So far as I can see there is nothing in the Bill about equity between producers. Perhaps that is implied by Clause 3(4) (a), which refers to whether a scheme takes account of the interests of consumers of milk and producers of milk. I assume that that means that the Government will look at the scheme in terms of equity between producers. It would be helpful if the Minister would comment on that point.

There is an aspect of social concern. It is fair to point out that in the case of other enterprises associated with small farms, particularly those in remote and disadvantaged areas, such as beef and sheep enterprises, there is no question of the market being asked to solve the problem. Successive governments have recognised the problem by making headage payments directly on hill sheep and hill beef. It may be that if there is a problem in the future and small milk producers in remote areas are disadvantaged in terms of haulage costs, policy in this area may have to be developed as a function of social rather than of agricultural policy.

We would welcome reassurance that the Government will examine the proposals with the question of small producers in mind to ensure that the advantages of price pooling are not being negated by discrimination in transport and pick-up arrangements. I beg to move.

4.45 p.m.

Lord Mackie of Benshie

The noble Lord, Lord Carter, has a point. Any scheme produced should give the co-operatives which succeed the boards a contractual obligation to collect milk at standard prices instead of a statutory obligation. It is an important point. In the days before milk marketing boards, dairy farms nearest the towns were very much favoured and those in outlying districts were disadvantaged.

Lord Geraint

Can we have a definition of a small producer? Is it a question of whether he keeps 10 cows, 50 cows or 100 cows?

Lord Stanley of Alderley

I go along with what was said by the noble Lord, Lord Mackie of Benshie. I am concerned about the small farms and share the sentiments behind the amendment. What worries me, and perhaps my noble friend may be able to answer the point, is that I do not believe that one can place an obligation on the successor co-operative, which is operating in a commercial market, to support small producers who have been supported by milk marketing boards in the past. I understood the noble Lord, Lord Carter, to say that that should be achieved either through government support or some other fund. I do not see how the successor co-operative could do that, much as I should like it to do so.

Lord Wade of Chorlton

I am grateful to the noble Lord for bringing forward the issue for discussion. It opens a number of interesting developments. The noble Lord mentioned that not everybody can be a winner and may have hit on the one area where there will be change.

However, I cannot accept an amendment which refers to small producers because, as the noble Lord, Lord Geraint, asked: how does one define those small producers? In addition, a small producer may stop producing milk and end up with a much more efficient business doing something else as a result of the changes in agriculture, such as supplying the milk industry with young stock or keeping them over the winter.

I do not feel that it is appropriate to put this in the Bill. Again, I believe that the Bill needs to allow for the necessary changes in the milk industry to take place. But I think that the Minister should be aware of the potential changes that are to take place for marginal milk producers. The key lies in being a marginal milk producer, wherever you might be or however small or large you might be. If it is no longer appropriate in certain areas to produce milk, these are the very changes that will pressurise people to make a move in their farming activities.

I believe that we will see quite a number of changes. I would have thought that they would be good for the industry as a whole. We are going to move into a very competitive industry. The noble Lord, Lord Carter, referring to a letter from a major milk processor, said that there is competition already from other parts of the world to put milk into this marketplace. There is no doubt about it, if we are to end up with a more efficient industry which uses the milk processing and producing facilities at their most efficient. It does not necessarily follow that everybody must he a milk producer. It may well be that the resources and the skills that they can put into the industry as a whole as cattle producers or calf supporters, and in handling different products are needed. I would have thought that the key is not to amend the Bill in any way but for the Minister and the authority generally to understand the effect of this Bill and how it impacts upon various sectors of the industry. They should be aware that some of the social points made may have to be thought about as they come to be noticed.

Baroness Carnegy of Lour

I agree with the noble Lord, Lord Mackie, that it is the job of Parliament to think about the small producer of milk. It will most certainly be the Government's job when considering the proposed scheme to assess whether small producers are properly considered by that scheme. For the various reasons that have been given, it is probably very difficult to introduce this amendment into the Bill.

I would draw the Committee's attention to what the milk marketing board has said to me. I believe that it might be misleading for small producers. The milk marketing board says: Under the MMB's proposal for the future after revocation of the milk marketing scheme, any producer, irrespective of the location, will be able to become a member of the new co-operative". I am sure that is so. It goes on to say: The co-operative will undertake to buy all the milk of marketable quality of its members". The milk marketing board may think that that is what the co-operative will do, and it may be that it said so at the beginning of the scheme. But as has been said, it will be for the members of the scheme to determine what happens as time goes on. It may well be that as time goes on the stronger members of the co-operative will prevail and small producers will lose out. The discussion on the amendment is extremely important, but I do not believe that putting the amendment into the Bill is a valid proposition.

Lord Monk Bretton

I have sympathy with the amendment, but I do not believe that we should put it into the Bill. The single co-operative provides certain help for the smaller producer because it runs a national pool from farmers of all sizes in all areas. I see that there are some problems. For instance, the noble Lord, Lord Carter, mentioned location and transport.

When we come to a matter like that, it is what today is colloquially termed a "green box matter", which should be subsidised in some way from funds that are there for that purpose. I think it is important to emphasise that the new co-operative has to get the best price for all members. It has to be a very determined commercial enterprise indeed. It is important not to lose sight of that. I do not want to see the co-operative shackled commercially by carrying loads of this kind. I very much hope that my noble friend will be able to tell us that a little assistance in these areas might perhaps come from the green box in due course.

Earl Howe

One of the Ministry of Agriculture's formal objectives is to promote a fair and competitive economy. The Bill will help to achieve this aim by giving all participants in the dairy industry, of all sizes, the freedom to choose how to operate their businesses and allowing them to compete to produce goods which the consumer wants.

Promotion of a fair economy means establishing so far as possible a level playing field on which all can compete on an equal basis. It follows that to discriminate in favour of particular producers because of their size means discriminating against other producers. That defeats the objective. It would run counter to all the efforts which we have made—for example, in resisting unwelcome and discriminating proposals from the European Commission.

Promotion of a competitive economy not only means giving the producers and processors freedom to compete. It also means encouraging the industry to become more economically efficient. The attainment of that aim is not helped if the framework within which the industry operates favours the less efficient.

That is not to say that Ministers would not have regard to the effects which a reorganisation scheme submitted to them by a milk marketing board would have on small producers. As Clause 3(4) (a) stands at present, they would have to have regard to whether a scheme took account of the interests of producers. It is therefore incumbent on them to consider the effects of a scheme on producers in general and on producers with differing circumstances. The Committee can therefore be assured—and I give that assurance—that the interests of all sizes of producers will not be overlooked.

Worry was expressed at Second Reading and indeed this afternoon that ending the statutory marketing schemes would be detrimental to the interests of producers in remote areas. I think that anxiety is overdone. All producers will be eligible to join successor co-operatives under the boards' present proposals. None needs to be left out in the cold. The dispersal of the processing industry around the country is such that virtually no producer is more than about 30 miles from a dairy, as the noble Lord, Lord Carter, rightly pointed out. I am confident that producers have nothing to fear from the approach which the Government have adopted.

It may be the case that producers with very small amounts of milk to offer may face higher collection charges. On the other hand they may wish to explore the possibility of alternate day collection or some other solution. There is nothing to be said for trying to neutralise the economic realities of the market. The inefficiencies which have become so evident under the milk marketing schemes provide ample evidence of what happens when market signals are distorted.

In response to the noble Lord, Lord Carter, perhaps I may add that the Government would not favour discrimination against any class of producer. But equally—this is a point that I was trying to make —it is not incumbent on a commercial co-operative to cancel out the natural disadvantages of size, remoteness or whatever. The Government have a policy for assisting producers in the uplands and in the less favoured areas. However, the question of whether headage payments might in principle be extended to dairy producers is outside the scope of today's debate, as I hope he will understand.

I hope that the noble Lord, Lord Carter will recognise that the amendment could have serious consequences. I know that he regards it as a probing amendment, but if it were accepted Ministers would have to have good reason to approve a reorganisation scheme which did not positively favour small producers. That would not be in the interests of the industry as a whole. I therefore hope that the noble Lord will be content with my explanation.

Lord Carter

I am extremely grateful to Members of the Committee. As they will appreciate, there is no intention of putting these words on the face of the Bill. The purpose of this short debate was to bring out a point which has caused anxiety. That anxiety was reflected by everyone who spoke. The noble Lord, Lord Stanley, hit the point exactly. We must be careful that we do not give the successor body in England and Wales, the single co-operative, if it is to be, or whatever it is in the other areas, the commercial disadvantage that the smaller more expensive producers will be left with the higher collection costs. With the dairy trade, we may be picking off the big boys and giving them a special deal, leaving the small producer, however defined, to the successor co-operative.

If the Government, in considering the scheme, identify this problem, I hope that it will be flagged as a problem to be examined. The possibility of the green box has been referred to by the noble Lord, Lord Monk Bretton. It should be borne in mind as a factor in policy that if these schemes cause a problem for the small producers—and it need not be the remote producers—they may need some different form of help.

If the problem is identified and it is seen to be unfair on the successor body, which will have to deal with it for commercial reasons, the Government must recognise the problem and have proposals to deal with it. The noble Baroness, Lady Carnegy, put her finger on it exactly when she said that the rules of the co-operative would be crucial. Everything depends on how the voting power is defined, whether it is on numbers or production. If the big producers find hypothetically that having to "look after" the small producers is to their disadvantage, then under the rules of the co-operative they could exercise their power to remove that disadvantage to themselves. I am sure that that is an area to which the Government will have been alerted when they examine the reorganisation schemes.

I was a little puzzled about the Minister's remark that he would not have discrimination on alternate day collection. I suppose it is not discrimination. It is an ordinary commercial consideration, and I accept that.

I am extremely grateful to Members of the Committee for joining in the debate and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5 p.m.

[Amendment No. 8 not moved.]

Lord Carter moved Amendment No. 8A: Page 3, line 22, at end insert:("both on vesting day and on any subsequent dissolution or winding-up of the successor body or bodies").

The noble Lord said: We can be brief on this amendment. The aim is to clear up a point which has exercised many people. We all understand that if the Government accept the various reorganisation schemes, the successor bodies will be set up, be it under the Industrial and Provident Societies Acts or the Companies Acts in England and Wales, in Scotland and in Northern Ireland.

There is also the understanding, if it is accepted, that in England and Wales the assets of the milk board, with the exception of Dairy Crest, are likely to be directed to the new co-operative if the Government accept the proposals of the MMB of England and Wales. What is not clear is what happens if the successor bodies fail for any reason—through lack of support, a change in the marketing scenario, bad management or whatever. Where should the assets go? Should they go under the normal rules of a co-operative? If so, they would be distributed to the producers, the members of the successor bodies at the time in proportion to their recent production. If it were suggested that this would not be a problem because if they failed their liabilities would exceed their assets, I point out that if they were well managed they would try to wind up while there was still a surplus of assets over liabilities to be distributed.

I ask the Minister whether the Government have given consideration to this matter. I am prepared to take the amendment away if the Government are prepared to consider the point. They may think that it is too constricting and that they cannot foretell the future.

Anxiety has been expressed about what period should elapse before the successor bodies are left completely to their own devices in the sense that were there to be a dissolution and return of their assets had to be considered, where should the assets go? Should they be returned to all the registered producers on vesting day who helped to share in the build up of the assets over the years?

We can accept the argument at the outset that the assets should be directed to the new co-operative, but if that were to fail in three to five years we are talking about large sums of money. What should happen? Do the Government feel that such a provision should be considered in the reorganisation schemes or are they happy to leave it to the rules of the successor co-operatives? Under those rules, as I understand it, the assets would belong only to the members who joined the successor co-operative. If the numbers were falling in the successor co-operative, it might be to their advantage to wind it up and take the money. It is important that the point should be explained. I beg to move.

Earl Howe

The noble Lord, Lord Carter, has spoken of the possibility that a successor co-operative of the board or some other successor body might he wound up shortly after its creation on the application of its members. In that event, he argues, the members of the co-operative or whatever it is would be able to share out the assets among themselves and anyone who had not joined would be left out in the cold. It may be that I have greater confidence in the plans of the milk marketing boards than Members of the Committee opposite, but I do not see this as a likely eventuality.

There are two possible reasons, to my way of thinking, why a winding up might take place. The first is because the members of a co-operative or other body simply decide that it would be in their interest to liquidate the assets. I do not see that as a real danger. The Government's stance on the issue of reorganisation centres on the belief that after 60 years of living in the closed world of the milk marketing schemes, many, if not the majority of, milk producers have a strongly felt need for some form of collective security.

The Government hope naturally that many producers will take advantage of the new freedoms to explore more adventurous marketing routes, but there will be many who will feel safer in a substantial co-operative. So to suggest that those people are likely to vote to wind up a successor body because they can make a quick profit would, in my view, be an extraordinary assertion.

If a successor body is wound up within a timescale of a few years, it is more likely to be because of business failure. That is the second possibility of which I spoke and to which the noble Lord, Lord Carter, referred. In that case, there would be no occasion for rejoicing and maybe even no surplus to distribute. But here, too, I am more optimistic than the noble Lord. I have every confidence that the boards will be able to establish successor bodies which have a viable basis for their operations.

However, I do not believe that that would necessarily be so if some of the amendments tabled today, allowing this or that group to bid for this part or that part of the assets, were accepted. That is one reason why I am opposed to the amendments. I believe that we must have regard in the Bill to the desirability of enabling the boards to set up commercially viable successor bodies.

Ministers must already have regard to whether a reorganisation scheme makes reasonable provision for the distribution of assets to registered producers. Such a distribution could, by the way, take place before vesting day—a possibility which is not taken into account in the noble Lord's amendment. The provision in question, Clause 3(4) (b), is wide enough to enable Ministers to take account of any proposals for the distribution of assets of a successor body on winding up, if such proposals or the absence of them were felt to be relevant.

Two of the Scottish boards have proposed giving all their registered producers a certificate entitling them to a share in the winding up of a successor body if that occurs. The England and Wales board might be persuaded to do the same. If it is helpful to the noble Lord, I shall undertake to seek their views on the matter.

I do not believe, however, that the question of what is a reasonable distribution of assets should be constrained in the manner suggested by the noble Lord's amendment. For one thing, I see difficulty in attempting to constrain the ability of a successor body to alter its constitution so as to negate what a board might propose. But the main consideration is one of principle. What is reasonable in one case may not be reasonable in another, taking account of all the relevant circumstances. Therefore, the picture must be viewed as a whole.

I am grateful to the noble Lord for airing the issue. As I have promised, I shall consult the England and Wales board. However, for the reasons that I have given I hope that he will feel able to withdraw the amendment.

Lord Carter

I am extremely grateful to the Minister. I did not believe that I would hear M. Pangloss today; that after the new world everything would be for the best in the best of all possible worlds. I was asking on a point of fact about what will happen and what the Government feel should be left out completely from considerations for the reorganisation of the scheme.

As I understand the noble Earl's answer, he said that he will look at the matter to see whether there should be a provision of this kind. I accept that there may not be such a need. However, if there were to be a winding up in a comparatively short period of time, with a surplus, where should the assets go? That is the point of the amendment. The noble Earl understands the point that I am trying to make and he will realise that anxieties have been expressed on this matter. In the light of the answer that I have received, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Strabolgi)

I have to inform the Committee that if Amendment No. 9 is agreed to, I cannot call Amendment No. 10.

Lord Gallacher moved Amendment No. 9: Page 3, line 26, leave out from ("assets") to end of line 30.

The noble Lord said: I should say that it is in the highest degree improbable that Amendment No. 9 will be agreed to. The late and celebrated drama critic James Agate once said of a music hall performer called Eddy Gray that his juggling got worse with every performance. I can only say that conversely my admiration for the draftsman of Clause 3(4) (e) grows each time I read it. It has an almost impenetrable ambiguity factor. The purpose of proposing the deletion of the clause is not to weaken the Bill but to try to get the Minister to tell us more about what it means in the hope that we can rest peacefully tonight and on subsequent nights until we have disposed of this important Bill.

The discussion which we want with the Minister this afternoon is on the criteria which the authority proposes to satisfy itself about; namely, that the structure of any scheme which he is being asked to approve is such as to avoid challenge in the courts, on competition grounds, with any reasonable likelihood of success, as soon as they come into operation".

We are assuming that that wording, which is of considerable importance, has been discussed, however informally, with the enforcement authorities. I have in mind the Director-General of Fair Trading, the President of the Board of Trade and possibly even the competition division of the European Community. If those discussions have taken place we should like to know, without asking for details, whether any assurances have been given to the Minister about the wording of this clause. If assurances have been given, can we be told in general terms what they are about? Are they strong or has it merely been said, "Set up your single co-operative in England and Wales with a share of trade which we cannot quantify at present and we shall look at it when it is in operation, based on its conduct and the share of trade which it actually achieves"?

If there is an early and successful challenge to the scheme in the courts, will that lead to the revocation of the scheme so challenged and will other schemes based on the scheme that has been challenged also be revoked? In moving the amendment, I invite the Minister to tell us rather more about the clause than was said in his reply to the Second Reading debate, ample and comprehensive though that was in many respects. We believe that there is a vagueness and ambiguity about the clause. We should like the Minister to take advantage of this opportunity to explain its details more clearly to us. I beg to move.

5.15 p.m.

Lord Wade of Chorlton

I support the noble Lord, Lord Gallacher, on this matter. I do not necessarily agree that the amendment should be carried but it is important for the industry to understand more fully what the Government have in mind as regards this clause.

Lord Peyton of Yeovil

I should be grateful if my noble friend could enlighten us on whether this wording is well clothed in the garments of precedent. If it were otherwise, it would be exceedingly difficult, even for him with his considerable skill, to justify its presence in the Bill. For myself, I am not easily persuaded that precedent is necessarily an invincible argument but I greatly admire the delicacy with which the noble Lord, Lord Gallacher, posed his questions about this rather odd wording.

I am anxious to know whether, if it must be there at all, the point could not be covered by much simpler wording; for example, a requirement that the law of competition should be complied with. If that is so, I go on to ask whether that is necessary at all because one assumes that the law would be complied with, without saying that it should be.

I find this matter very puzzling. I hope that my noble friend will devote his talents to explaining why those extraordinary words are necessary, where we can find them used elsewhere and whether they have ever been useful.

Lord Boyd-Carpenter

Like my noble friend, I was puzzled when I read this paragraph because it seems to pose a very curious question for decision. Like my noble friend, I should like to know whether there is any precedent for it. I do not recall any, but that does not count for much because I do not pretend to have a compendious knowledge of our mass of legislation at this time. It would be interesting to know whether there is any precedent.

It is extraordinary that what must be taken into account is not whether the arrangements would be challenged but whether they would be challenged, with any reasonable likelihood of success". Surely that involves almost setting up a case of challenge and discovering whether or not that is a strong case. I am puzzled by this and I am extremely doubtful as to its necessity. I shall listen with great interest to what my noble friend says.

Baroness Carnegy of Lour

I have less experience in such matters than my noble friend Lord Boyd-Carpenter but I suggest that there is some merit in this paragraph. Should a scheme be set up which contravenes competition law, or should the scheme be free to change its ways so as to contravene such law, there could be a period of time before that position could be corrected. The law works slowly. It would be quite wrong to allow a scheme to be set up which could operate against competition law and use unfair practices to achieve for itself a strong position before the law is able to take effect. It seems to me that the successor body might use the one or two years before the law could take effect to put itself in a position in the market which would be difficult to redress afterwards. Whether or not the wording is correct, I believe that there should be such a provision in the Bill.

Lord Hylton

It is possible that the noble Baroness, Lady Carnegy, may have put her finger on the reason why the word "structure" in line 27 is necessary. If she has not, that word may appear to be otiose.

Earl Howe

In bringing forward the provisions in this part of the Bill the Government are seeking to introduce the normal commercial freedoms into the market in milk. It is important both for consumers and for those whose jobs and livelihoods depend on the continuing vitality of the dairy industry that the new arrangements should permit free and fair competition.

Ministers will therefore wish to consider carefully the competition implications of a reorganisation scheme when deciding whether it should be approved. Clause 3(4) (e) was specifically designed with that in mind. In answer to my noble friends Lord Peyton and Lord Boyd-Carpenter, I am not aware that there has been a precedent. The deletion of Clause 3(4) (e), as proposed by the amendment, would leave a serious hole in the factors to which the Bill would require Ministers to have specific regard when considering a reorganisation scheme.

I accept the point of the noble Lord, Lord Gallacher, that the wording of the subsection makes its precise impact a little obscure and I shall attempt to explain it clearly. There is a distinction to be drawn for competition purposes between the structure of any proposed new arrangements—a matter which is capable of being assessed in advance—and the actual trading behaviour of any proposed successor bodies which it is intended should trade in milk.

In so far as those behavioural aspects can be prejudged, the Bill makes provision in Clause 3(2) (c) for agriculture Ministers to take a view. The boards will have to show that they can come up with proposals for fair trading systems which take account of the interests of purchasers, a group which will cover milk processors and other food manufacturers who purchase milk. But the actual competitive behaviour of the successor bodies can only be judged after vesting day and it will be for the competition authorities, not agriculture Ministers, to monitor them and to deal with any instances of anticompetitive behaviour or unfair trading.

The wording of Clause 3(4) (e) seeks to underline the fact that once the milk marketing schemes are revoked, Ministers' current responsibilities in respect of the milk marketing boards come to an end and it is the competition authorities who step on to centre stage. On the other hand, it also recognises that Ministers can, and indeed should, take a view of the structural implications of what is proposed under a reorganisation scheme, in so far as they are able. The likelihood of a successful challenge in court under European law or British law is a matter on which Ministers can reasonably take a view, particularly as the EC Commission is itself willing to take a position in relation to specific proposals and to make its views known. As Members know, the EC Commissioner responsible for competition has written to my right honourable friend the Minister of Agriculture about the proposal of the England and Wales board.

In answer to the noble Lord, he accepted the principle of a single voluntary successor co-operative in the form proposed by the Milk Marketing Board for England and Wales, subject to a review of the competition implications after two years of its operation. Clause 3(4) (e) therefore amounts to a reasonably practicable test for Ministers to undertake.

Members of the Committee may ask whether that test should extend to the question of whether the new arrangements contemplated by a reorganisation scheme are likely to be referred to the Monopolies and Mergers Commission by the Director General of Fair Trading. Indeed, my noble friend Lord Mottistone, tabled an amendment to that effect. I made clear at Second Reading that the present restriction on the powers of the director general to refer milk marketing arrangements for consideration by the Monopolies and Mergers Commission will be removed when the milk marketing schemes are revoked. That will be done by statutory instrument under the Fair Trading Act. The possibility of a reference is therefore a real one.

The actual likelihood of a reference by the competition authorities, on the other hand, is fairly unpredictable. Reference is a matter for the discretion of the Director General of Fair Trading. The Office of Fair Trading does not, as a matter of principle, give judgments on whether such a reference is likely in relation to a specific proposal. Still less does it issue letters of comfort. Similarly, the decision of the MMC as to whether specific structures or practices are against the public interest is something on which Ministers cannot reasonably be expected to form a view. If they were required to, and a reference to the MMC occurred for one of the successor bodies, there could be unfortunate consequences under judicial review procedure with wide-ranging implications.

However, I should point out that Ministers are none the less required to have regard to all the circumstances in Clause 3(4).

It is the Government's clear intention that, following revocation of the milk marketing schemes, the same rules should apply to milk as any other sector and any successor body of a milk marketing board should be subject to effective regulation under EC and UK competition law. In that respect, I would draw the attention of the Committee to the recently published Green Paper discussing options for strengthening the law to curb anti-competitive practices in the market place. The Government's resolve on that matter should not be doubted.

I hope that I have said enough to convince the Committee that Clause 3(4) (e) is an important provision of the Bill. I therefore hope that the amendment will be withdrawn.

Lord Peyton of Yeovil

My noble friend has done his best. I am grateful to him for pointing out the words at the beginning of Clause 3(4), shall have regard to all the circumstances". I should like to know why the words, "all the circumstances" do not comprehend the structure of the new arrangements. Though I admire the delicacy with which my noble friend approached the problem, I find it difficult to distinguish between the structure of arrangements and the arrangements themselves. They all seem to me to be part of the whole.

Before I sit down, perhaps I may mention the question of precedent. Like my noble friend Lord Boyd-Carpenter, I was interested to hear that there was no precedent for this form of words. In that case, I feel I would be doing some slight service to posterity were I to appeal to my noble friend to get rid of this silly wording. Otherwise, someone less respectable and virtuous than himself may sit on the Front Bench in the future and say, "There is a precedent for this and noble Lords must accept it". I hope that we shall not be put in that position.

Baroness Seear

I may be the perfect fool in these matters, as I believe St. Paul said. Reading the provisions, do they say anything except that the authorities should be careful that they are not breaking the law? If so, it is an odd thing to put into legislation.

Earl Howe

My noble friend Lord Peyton asked a number of questions. First, why the phrase, "all the circumstances" could not be taken to embrace the words contained in Clause 3(4) (e). The simple answer is that while we may say that those words may embrace that message, it is important to put on the face of the Bill the specific considerations to which a Minister should have regard. I do not believe that any noble Lord would wish to see omitted from the face of the Bill any of the provisions contained in Clause 3. I must concede that "all the circumstances" is a stock phrase; but it is there for a reason and has some force.

My noble friend also questioned the difference between the structure of arrangements, which the Bill specifically addresses, and the arrangements themselves. There is a real difference between the two. The Bill deliberately steers clear of the arrangements themselves. We have said that those arrangements are a matter for the boards to propose to Ministers. We shall not prejudge those proposals in any way.

With regard to eradicating the words altogether on the grounds that there is no precedent for them, I do not believe that my noble friend is fully serious. I would add that a judgment was passed by your Lordships' House a few days ago which enables a court of law to take account of what a Minister says at the Dispatch Box, in support of any specific piece of legislation. I believe that the phrase which is part of the Bill will not stand in isolation. A judge will refer to my pearls of comment if he needs to.

Lord Peyton of Yeovil

I am a man of infinite compassion and mercy. I want to spare Her Majesty's judges the pain of even considering such rubbish.

5.30 p.m.

Earl Howe

I am very sorry that my noble friend takes that view. I have no quarrel at all with the wording. I shall be interested to know whether any other Members of the Committee take the same view as my noble friend. I believe that the words serve a very positive purpose. I have tried to explain the force of those words and what they apply to. It is the structure of the new arrangements which we are addressing rather than the behaviour of any successor body in the market. That structure is something which Ministers can reasonably consider when taking into account current UK and EC competition law.

Lord Boyd-Carpenter

My noble friend had so many questions to answer understandably he did not answer the one that I put to him. Will he deal with the point that I was seeking to make earlier? The Minister is being asked under this subsection to decide what a court would decide. The passage in the subsection, their being challenged in court … with any reasonable likelihood of success is asking the Minister to perform the judicial function of deciding as to whether such a challenge is legally valid. I do not think that the recent very sensible decision of your Lordships' House in Judicature to which he referred, has any bearing on the matter. It is an extraordinary provision in a statute. Perhaps my noble friend will recall the words taken from The Merchant of Venice: 'Twill be recorded for a precedent, And many an error by the same example Will creep into the state".

Earl Howe

Oh dear! My noble friend has very real doubts. As I mentioned earlier, we have a very real letter of comfort from the EC Commission. It enables the Minister to take the view that were a single successor co-operative to be established it would not infringe Articles 85 or 86 of the treaty. I believe that is something which this clause is meant to take into account. I can go no further than that. I hope that my noble friend sees the point that I am making.

Lord Bonham-Carter

Will the Minister answer the question put by my noble friend? He said that all this clause amounted to was an admonition not to break the law.

Earl Howe

If we glossed over those aspects in new legislation that we felt were important simply by referring to the existing legislation or competition law or practice, we would have a great deal of very woolly legislation. There is real point in trying to insert into the Bill those matters to which Ministers should have particular regard. I hope that the noble Baroness was not completely serious in the point that she made. As I said before, I do not believe that any noble Lord would wish to see Clause 3 omitted from the Bill.

Lord Carter

Before my noble friend Lord Gallacher decides what to do about the amendment, perhaps I may refer to the "letter of comfort" mentioned by the Minister from Sir Leon Brittan. I wonder whether he is aware of the final paragraph of that letter which states: It goes without saying that my view with respect to the proposed arrangements is without prejudice to the procedural rights of the Boards, the successor co-operatives and/or the future members in case of notification of the arrangements, and of any third parties which might complain against the new regime". That is rather an odd kind of letter of comfort.

Lord Wade of Chorlton

Is not the point that the Milk Marketing Board, as it exists at present, does not have to comply with competition law? Obviously therefore, the Minister believes it appropriate to put into the Bill that any successor body will have to comply with all competition law. That is reasonable. Clearly, the Minister realises that, from the views expressed in Committee, we are not satisfied that the way the clause is worded makes that sufficiently clear. Perhaps there is a way forward. The Minister may like to consider the matter again and bring forward an amendment which is more acceptable to the Committee.

Earl Howe

I do take note of the views expressed in Committee. They are views expressed by noble Lords with far more experience in these matters than I have. I shall be more than happy to take away this part of the Bill and look at it to see whether it fulfils the purpose that we want and whether we can come forward with something better. I make no commitment to that effect. I shall certainly put this matter at the top of my list to see whether there is a better form of words that we can use.

Lord Gallacher

I am grateful to the noble Earl for undertaking to look at this clause without commitment. When I tabled the amendment I did not expect to get that far. Perhaps I may say in passing that I believe that he handled a very difficult subject with considerable skill.

Noble Lords

Hear! Hear!

Lord Gallacher

I can say in truth that this is one occasion when I shall read Hansard carefully to see what the Minister had to say, not with a view to coming back at Report stage, but simply in the hope that light will dawn. If it fails to do so, I may come back to this matter on Report. Before doing so I shall seek the guidance of the noble Lord, Lord Peyton, and, failing him, I shall try the Almighty. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mottistone moved Amendment No. 10: Page 3, line 29, after ("challenged") insert ("by any competition authority").

The noble Lord said: In moving Amendment No. 10 I shall also be speaking to Amendment No. 23. As regards Amendment No. 10, I have been advised by the Food and Drink Federation. For Amendment No. 23 I have to declare an interest in that I have been advised by the Biscuit, Cake, Chocolate & Confectionery Alliance which I have been advising for about 15 years.

Both these amendments return to the subject of competition. We have gone over a great deal of the ground when discussing the previous amendment. I shall seek not to duplicate what has been said. I said earlier that I thought it strange that the Milk Marketing Board was being asked to devise its own execution. The noble Lord, Lord Carter, said that he did not see it as execution, but as re-birth. Perhaps a phoenix rising from the ashes might be another way of looking at it.

The even stronger difficulty about this matter is that, however it is done, it is one monopoly replacing another. It is the monopoly situation which I find particularly difficult. When we were debating Amendment No. 2 in relation to Amendment No. 18, the noble Lord, Lord Carter, asked what I meant by producer groups. I mean producer co-operatives, but in the plural. The scheme should say how many. Two would be too little and 200 would he too many. That is the kind of pattern we need so that we get competition.

Turning to Amendment No. 10, I have to confess that it has one small and important error. It should read: Page 3, line 29, after ("challenged") insert ("by any competition authority or")".

That "or" was dropped out somewhere along the line and I failed to see it. Therefore, that part of the subsection should read, by any competition authority or in court on competition grounds which makes a slight difference. I hope that that is not too difficult for my noble friend the Minister.

I turn to what I believe is the reason for adding the words, by any competition authority or". At the moment it is not adequate for re-organisaton schemes to be judged in anti-competitive terms only against court action. The likelihood of complaints being investigated by the Office of Fair Trading or the European Commission should also be considered as criteria for assessing competitiveness.

I noted that my noble friend quoted from what Sir Leon Brittan had written to him which he said had given him great comfort. Although I shall not bother to read them out, in effect Sir Leon's opening remarks were, "If it were left to me, I would complain about it being a monopoly". He then went on to say why he had been convinced by everybody that it was "just okay". I gained the impression of "only just okay" throughout the letter and I am sure that anybody who reads it would come to the same conclusion.

Moreover, the intention to monitor the new scheme once in operation and the mechanisms for doing so are unclear. My advisers in the Food and Drink Federation particularly asked me to see whether my noble friend would give assurances that the new scheme would be subject to the same application of competition rules as other economic operators. Periodic reports on the scheme's operation from the Office of Fair Trading or at least a report at the end of the first two years would also be welcome.

I turn now to Amendment No. 23. Although there was no collusion between the BCCCA and the FDF, the BCCCA has come up with the answer to what my remarks on the previous amendment established as being the first question. Amendment No. 23 seeks to insert into the Bill a small new clause stating: The Director General of Fair Trading shall, within a period of two years after the establishment of any scheme, conduct an investigation … to establish whether it shall be referred to the Monopolies and Mergers Commission". That is an example of what people are really worried about. We come back to the fact that we are going from one monopoly situation to another. I cannot but suggest to the Committee that all our experience of privatisations in the past 10 years or so has shown that where there is no competition afterwards, notwith-standing the establishment of all kinds of regulatory authorities to try to put in a fair test (such as Oftel looking after British Telecom) privatisations have not really created the image of there being properly competitive companies among those big monopoly organisations. Until we get that, we shall not get fair treatment for the customer. Even this very last week, I had a silly little argument with British Telecom which I am very doubtful that I should have had if BT had been a private company with competitors because it would have known that I could have gone to its competitors.

Therefore, whatever my noble friend may feel officially at the moment, I believe that an extra clause along the lines of my Amendment No. 23 would be a very useful underpinning of the Bill. It is a modest amendment. It does not state that action must be taken, but that there must be an investigation to see whether action should be taken. Perhaps my noble friend will be able to say that he will take the provisions away and return with something like that, but perhaps with different and better wording.

In the meantime, Amendment No. 10 works on the same lines. I suggest, however, in the context of what my noble friend said that he would do when dealing with the noble Lord, Lord Gallacher's Amendment No. 9, that this amendment might also be looked at again. When my noble friend looks again at subsection (4) (e), perhaps I may suggest that he looks again at Amendment No. 10 at the same time. I beg to move.

5.45 p.m.

Lord Boyd-Carpenter

Perhaps I may raise just one point on Amendment No. 23. It seems possible that it might impose a time limit on the Director General of Fair Trading in respect of his possible action by way of reference to the Monopolies and Mergers Commission. By instructing that the investigation should be carried out within a period of two years, it gives rise to the argument that after two years had elapsed it would not be possible to take that action. If my noble friend the Minister suggests that that is a restriction upon the Director General of Fair Trading, I would very much regret it.

Lord Hylton

I tend to look on these two amendments with some suspicion because I do not think that when the noble Lord, Lord Mottistone, compared the Milk Marketing Board with national monopolies pre-privatisation he was comparing like with like. We know that the milk marketing board at present has some statutory powers, but its successor co-operative will not have them and will therefore be a totally different animal again, so we have three entities which are not comparable.

Baroness O'Cathain

I should like to support Amendment No. 10, but not necessarily Amendment No. 23. There is a genuine feeling that substituting one monopoly with another is not good news. I am led to believe that the largest milk processor has some 28 per cent. of the market and there is a feeling among certain sectors of the consumer movement that the largest co-operative involved in milk supply should not have more than 28 per cent. of the market.

Having said that, however, I think that having a single large co-operative as a successor to the milk marketing board would cause total chaos. I am not sure that the processing industry—and certainly not the consumer—would be best served by that development. To try to alleviate the genuine concern which is felt—and this is not just an antagonistic view taken by other sectors of the milk industry as is—it would be a good idea to insert the words which are suggested in Amendment No. 10.

I agree also with the noble Lord, Lord Boyd-Carpenter, that imposing a time-limit would probably stop the natural development of the successor body to the milk marketing board—I am talking about in England and Wales—by constantly making it feel that it faced a time limit of just two years. It might feel that it would probably be better to do nothing instead of getting on with taking the bull by the horns (that is probably the wrong metaphor to use) and taking action to begin to look for ways of producing the goods that the customer actually wants.

Lord Wade of Chorlton

I, too, have sympathy with Amendment No. 10, but as it amends provisions which we have already discussed and which the Minister has already agreed to take a fresh look at, it seems appropriate not to push the amendment at this stage but, as has been said, to let the Minister have another look at it.

I certainly support the noble Baroness, Lady O'Cathain, and the noble Lords, who have spoken on Amendment No. 23. It seems to me that we want to include as little regulatory input in the Bill as possible. We must allow natural forces to do what they can. It is important to note that, under the Bill, the organised milk marketing board will have to act extremely efficiently if it is to have customers. It is not true that people are waiting to see what happens. Many organisations are already out there, trying to convince the milk producers to sell or to agree to sell their milk to them. Clearly, there is already a very competitive spirit among milk purchasers. There is no need to put anything else in the Bill, such as regulations that would make things more difficult. I do not think that that is appropriate. The fewer provisions that we have to that effect in the Bill, the better for business as a whole.

Lord Gallacher

I go along with the Members of the Committee who have said that Amendment No. 10 is probably acceptable even in its amended version. I liked it better before the word "or" was added to the amendment. Nevertheless, I think we can take it that it is now in a sense subsumed by the fresh look at the clause which the Minister has agreed to take, without commitment.

I am distinctly unhappy about Amendment No. 23. First, I am not sure whether Parliament has the power to pass an amendment of this kind. The Director General of Fair Trading has his authority under the Fair Trading Act. Quite apart from the disadvantages which have rightly been stressed of specifying a time limit, it would be a dangerous precedent for Parliament to be seeking in this Bill to direct the Director of Fair Trading specifically to look at any organisation. His responsibilities in that regard are, as I see it, ongoing. Therefore, I would not be at all in favour of the incorporation of Amendment No. 23 into the Bill.

Earl Howe

As I explained, the Government clearly recognise their duty to establish fair terms of competition. The Bill provides for initial scrutiny of that question by the agriculture Ministers. Once the foundations are laid, however—I say this in answer to my noble friend's question—responsibility for regulating the market will fall to the competition authorities in accordance with the same arrangements that apply to all other sectors under normal EC and UK competition law.

In providing for new milk marketing arrangements, the Government must seek to avoid any solution which inherently inhibited competition and stifled the industry's new freedoms. If not, what would be the point of these reforms? Clause 3(4) (e), controversial as the wording may be, attempts to address the point. It requires Ministers to consider the structure of the new arrangements at the time they come into operation and in particular the question of whether they are likely to be challenged successfully in a court of law. Such a challenge would be most likely to focus on Article 85 of the EC Treaty. As I made clear earlier, that is something on which Ministers can reasonably be expected to, and indeed would want to, take an informed view.

Amendment No. 10 addresses the issue of whether the Bill should extend to the question of whether the new arrangements contemplated by a reorganisation scheme are likely to be referred to the Monopolies and Mergers Commission by the Director General of Fair Trading. As I said in answer to the previous amendment, the present restriction on the powers of the director general to refer milk marketing arrangements for consideration by the Monopolies and Mergers Commission will be removed by statutory instrument when the milk marketing schemes are revoked. The possibility of a reference is therefore a real one. Conversely, the actual likelihood of a reference by the competition authorities cannot be predicted with any degree of certainty. Reference is a matter for the Director General of Fair Trading. It is completely within his discretion.

The Office of Fair Trading does not, as a matter of principle, make pronouncements on whether such a reference is likely in relation to a particular proposal. Nor, as I made clear earlier, does it issue letters of comfort. Similarly, any decision by the MMC as to whether specific structures or practices are against the public interest is not a matter on which Ministers can reasonably be expected to form a view. If they were required to form a view, as the amendment proposes, and a reference to the MMC did occur for one of the successor bodies, the likelihood of an unfavourable judicial review would be a real one, with all the damaging implications that that carries with it.

My legal advice is, therefore, that it would be unwise to make this one of the matters to which Ministers must explicitly have particular regard in deciding whether to approve a scheme of reorganisation. Nonetheless, I remind my noble friend—this is intended to be something of a reassurance even though I repeat myself—that Ministers are required to have regard to all the circumstances under Clause 3(4), with everything that that implies.

I hope that my noble friend will have looked upon this as a probing amendment—I am sure that he does —and that my response will have satisfied him as to why we do not think it appropriate to have a reference to the competition authorities. I have no doubt that those authorities will be vigilant in the immediate period after vesting day and beyond and I think that we can rely on them to operate under the normal regulatory framework which they apply to all industries in the market place.

I turn briefly to my noble friend's second amendment, Amendment No. 23, which proposes an investigation of the successor scheme during the first two years. I hope he will agree that there is no need for it. There is absolutely no danger of the Director General of Fair Trading overlooking the fact that the new milk marketing arrangements have been introduced. The amendment is therefore unnecessary. I would say to my noble friend that the Office of Fair Trading finds it an objectionable amendment in that it might be held to fetter the director general's discretion under the Fair Trading Act. Therefore, in the light of what I have said, I hope that my noble friend will wish to reconsider the amendment.

Lord Mottistone

I am most grateful to my noble friend and to other noble Lords who have spoken. What they have said clarifies these approaches. It will be most reassuring to those who have spoken to me that, so far from there being a need for Amendment No. 23 it will in effect be in place from the word go in the normal nature of things. That is most reassuring. I take the other points that my noble friend made. I am happy therefore to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Wade of Chorlton moved Amendment No. 11: Page 3, line 30, at end insert ("; and ( ) whether the scheme contains reasonable provisions in respect of milk trading by any successor body.").

The noble Lord said: In moving this amendment I have made note of the fact that Clause 3(4) lists a number of issues to which the authority shall have regard. The list refers to various sectors of the industry. I am aware that the Minister has agreed to add processors into paragraph (a). Even so, I feel that there needs to be a better balance in the clause. That is why I suggest that there should be an extra paragraph (f) to insert the words: whether the scheme contains reasonable provisions in respect of milk trading by any successor body".

We have referred to many aspects of milk purchasers and milk trading activities during the course of the Committee stage but that has mostly been in the light of what we know the industry now does and what it has done in the past. We must also accept that these changes will bring about new opportunities for different uses of milk and for different kinds of purchasers. It is important that within this clause we ask the Minister and the authority to refer to this aspect when agreeing a reorganisation scheme.

I believe that there is a further need for the Minister to look at this aspect. At the end of the day we have to make sure that milk is traded and marketed in the most efficient way in terms of those who buy it and those who produce it. I appreciate that the question of the importance of the purchaser is referred to in other parts of the Bill but I believe that the amendment would strengthen the case even more and give confidence to those who are looking now for new ways of creating activities in milk at all levels of the industry. I am well aware of people who are looking in an innovative way at how milk can be utilised and have margin added to it.

I urge the Minister to look at this carefully. Although I shall not take the matter any further, I should be most grateful if he would give it serious consideration. If he cannot accept the amendment now, perhaps we can have a discussion about it before the next stage of the Bill. I beg to move.

Lord Carter

I can understand the noble Lord's argument but I am not sure why he is not satisfied with Clause 2(2) (c), which states: a statement, in relation to each successor body proposed to be engaged in milk trading, of the practices proposed to be adopted by it with respect to such trading". That is carried over into Clause 3(2) (c) which provides that the practices have to take account of the interests of purchasers of milk. I shall be interested to hear the Minister's reply, but I should have thought that those two paragraphs would cover the important point made by the noble Lord.

6 p.m.

Earl Howe

The amendment would require Ministers to have regard to the provisions in a reorganisation scheme in respect of milk trading when deciding whether to approve that scheme. However, I should point out that a reorganisation scheme would not include any provisions concerning trading. Schedule 1 requires a scheme to provide for the disposition of the property, rights and liabilities of a milk marketing board. That is deliberate. We intend there to be a clear break between the boards and their successors. Trade will not be transferred by a reorganisation scheme except perhaps the trade of commercial bodies such as Dairy Crest. It is planned that contracts between the boards and producers on the one hand and purchasers on the other will end on vesting day.

However, as I have already made clear, Ministers will wish to pay great attention to the impact of the reorganisation on processors and other purchasers. It is precisely for those reasons that Clause 2(2) (d), to which the noble Lord, Lord Carter, rightly, drew our attention, requires an application for approval of a reorganisation scheme to include a statement of the proposed selling arrangements of each proposed successor body which would trade in milk and, also, of why the board believes that those practices take account of the interests of milk purchasers. That will enable Ministers to consider the implications of the scheme for the market in milk. The statement will not formally be a part of the reorganisation scheme; but if Ministers cannot be satisfied that the practices contained in that statement take account of the interests of purchasers of milk, they must refuse to grant the application for approval.

I am grateful to my noble friend for bringing forward the amendment because it draws attention to an important point. However, in the light of my explanation, I hope that he will feel that he can withdraw it.

Lord Wade of Chorlton

I am grateful to my noble friend for that reply. In view of his remarks and those of the noble Lord, Lord Carter, I am pleased to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 12: Page 3, line 30, at end insert ("; and ( ) whether the scheme makes provision for the appointment of three members of the board of directors of the scheme to represent the interests of consumers of milk from a list of names supplied by the appropriate authority after consultation with organisations representing consumers.").

The noble Lord said: In support of the amendment, I should like to pray in aid the Cadbury Committee on company law which is of increasing importance as a document, not least because of the continuing European Community interest in two-tier boards which, as I understand it, the United Kingdom Government dislike. The text of the Cadbury Committee Report on the best code of practice for companies recommends three non-executive directors as appropriate. Thus, the amendment accepts and anticipates legislation in that area affecting companies as a whole.

If a single producer co-operative is established to handle milk in England and Wales, it is essential that it should be —and be seen to be—above suspicion in both a commercial and administrative sense. Being a co-operative does not, of itself, render it immune from the provisions of the Fair Trading Act or the Competition Act—a point already well made during our deliberations this afternoon—neither is there any solace for a single co-operative to be found in the recent Green Paper on the abuse of market power.

The co-operative will reassure itself and the supervising authorities if, being an association of producers, it deliberately appoints three persons as directors who have specific consumer commitment and credibility. Having seen the Milk Marketing Board's comments on the amendment, it is time that the board in England and Wales discarded its blinkers and current tendency towards authoritarianism. Good will, in my experience and opinion, is precious to a co-operative society. The amendment is one way of achieving that. I beg to move.

Baroness O'Cathain

I support the amendment. Consumers' views can be taken only if there is some proper consumer interest on the boards. For too long the farmers' co-operative movement in this country has fallen apart because it has not considered the consumers. I hope that the MMBs' successor bodies would have the consumer at the forefront of their minds all the time. The only problem that I have with the amendment is: who will appoint the three non-executive directors to represent consumer interests? I hope that they will not be taken from the list of the great and the good upon which the same old names keep cropping up for the same old jobs. Then, lethargy steps in. It is a valuable amendment. I hope that the Minister will take it on board.

Earl Howe

As I explained on Second Reading, one of the philosophies behind the Bill is that on the ending of the milk marketing schemes the milk industry should operate within the same commercial regulatory framework as other industries. Successor bodies to the milk marketing boards would be subject to scrutiny by the normal regulatory authorities both in the United Kingdom and in the European Commission. To that end the Government will remove the present restriction on the Director-General of Fair Trading referring the wholesale sale of milk to the Monopolies and Mergers Commission on the ending of the milk marketing schemes. The amendment, on the other hand, seems to assume that there will be no protection for consumers of milk and milk products against any activities of any successor bodies to the milk marketing boards after the ending of the milk marketing schemes. Clearly, that will not be the case. Consumers would be afforded the full protection of the normal rules on competition and consumer protection.

The amendment is also inconsistent with the structure of the Bill. Agriculture Ministers would have responsibility under the Bill for deciding whether to grant an application from a milk marketing board for approval of a reorganisation scheme. One of the intentions of the Bill is that they would no longer have a special role in overseeing the milk industry. It therefore follows that they should not be involved in the activities of any successor body to a milk marketing board.

But there is another, very practical, reason why the amendment will not do. As I have said before, I cannot prejudge what decisions Ministers might take on any reorganisation scheme submitted to them. However, on their present proposals a number of the milk marketing boards are likely to propose the establishment of co-operatives registered under the Industrial and Provident Societies Act 1965. The Registry of Friendly Societies operates well-established principles that have been in existence since 1939 in deciding whether a co-operative is registrable under the 1965 Act. One of the principles used by the registry to determine whether a bona fide co-operative is registrable is that control is vested in its members. One method of ensuring that is to require that all members of the committee of a co-operative are elected from the membership. The registry therefore does not register a society of which one or more members of the committee are not members of the co-operative itself.

The result of the amendment would be to require those milk marketing boards which are currently proposing the establishment of a co-operative registered under the Industrial and Provident Societies Act 1965 to rethink their proposals radically. That would deal a severe blow to the aims and aspirations of many dairy farmers in this country, and I am sure that that is not the objective of the noble Lord who proposed it. I hope my explanation of the implications of the amendment will persuade him to withdraw it.

Lord Gallacher

I am grateful for the fact that the Minister's objections are technical rather than objections in principle. That enables me to say that I am doubly grateful to the noble Baroness, Lady O'Cathain, for her support of the principle underlying the amendment. As to who would choose from the list of the great and the good, I can only say that the amendment would give the milk marketing co-operative a choice of a number of names. There is no intention that the Minister should have any say in the matter. He would consult the organisations that I am sure are well known to him. Indeed, thanks to the endeavours of this side of the Chamber, we have at long last managed to get a consumer committee from the Ministry of Agriculture, Fisheries and Food. I follow its activities with considerable interest. However, I take the point made by the noble Baroness, Lady O'Cathain, that there is a danger with the great and the good, even in the field of consumerism. Nevertheless, that is a risk that I am prepared to run in the interest of having consumers on the boards of the co-operatives.

There is a technical argument. First, if what the Minister is saying is that the organisation is likely to register under the Industrial and Provident Societies Act 1965 rather than the Companies Act, which is another option available under the Bill, I can only say that I am pleased and surprised, because I think that my noble friend Lord Carter, who has taken on himself the burden of trying to guide the listed co-operative movements in Britain into a revision of the 1965 Act, will find that that is a problem of monumental difficulty, not least because of the failure of the co-operatives currently registered under the Act to agree what changes they would like to see.

Nevertheless, the Act as it stands is not as prohibitive as the noble Earl made out. There is no good reason why, if the co-operative producers organisation wishes to have three co-operative consumers as directors, they could not become directors for the duration of their term of service on the board. There is no good reason why they could not be co-opted if the rules made provision to that effect. If this were not a fairly public occasion I could give the noble Earl a classic example of where such a provision exists, but I do not wish to say more about that because I would incur the severe displeasure of an organisation which is currently a beneficiary from the indulgence of the registry in accepting such a society.

I think it is perfectly proper. The noble Baroness, Lady O'Cathain, was right in saying that the producer movement will need to recognise the existence of consumers in its structures. For that matter the consumer movement in turn will one day come to terms with the fact that the producer organisations have something to contribute to its deliberations. I shall bear in mind what the noble Earl said. It has been a useful discussion. I cannot promise to come back to the matter at Report, but at least I have said my piece and I hope that the Milk Marketing Board will take note. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 13: Page 3, line 30, at end insert ("; and ("( ) whether the scheme makes a proper definition of those ancillary services which are to be carried out by a development council set up under the Industrial Organisation and Development Act 1947 and of those ancillary services which are to be carried out by successor bodies.").

The noble Lord said: This amendment is intended to deal with the definition of those ancillary services which are to be carried out by the milk development council, which has been mentioned as a possibility under the Industrial Organisation and Development Act 1947 and has been touched on a number of times in the debate today, and those ancillary services that are to be carried out by successor bodies, or perhaps hived off in commercial arrangements.

I welcome the change of heart of the Government towards the idea of development councils. They have long been a favourite of mine for development in agriculture. Over the years I can think of a number of examples where I have been engaged professionally. I can think of the British Agricultural Marketing Development Organisation in the early 1970s which we tried to set up under the 1947 Act, and the Oilseeds Development Council, which we also tried to set up. There was no way that the government of the time intended to accept development councils, so I am pleased to see that there has now been a change of heart.

I think the Minister indicated at Second Reading that the Government would welcome proposals for a milk development council to be set up and run from vesting day. It would be helpful if the Minister could confirm that that is correct. If that is to be the case, then the industry should start work immediately on the design of such a council. The amendment asks for a proper definition. It is important that we hear what the successor bodies propose for such things as their considerable involvement in research and development. There is the animal data centre, and the debate over national milk records, which has now lost its subvention from the MMB, and whether that should be left to the successor body or should be a part of the animal data centre.

There are such things as generic promotion. I shared the reservations of a number of noble Lords at Second Reading about the value of generic promotion. If there were to be such an activity, presumably it would not be a natural for the milk development council. I am a little sceptical of the value of promoting a product in a market which is under supplied, because you tend also to promote the value of the imported product as well.

There is also the valuable work carried out by the National Dairy Council in education, information, in relation to consumers, issues management, market research, nutrition, statistics and the rest of it. All of these should be looked at when the Government are considering the nature of the reorganisation schemes and the services that they should provide. It is a job for the Government to ensure that proper consideration is given to these matters.

Obviously the Minister is not able to prejudge, but in broad terms can he indicate those services that he thinks might be appropriate for the development council, those that should be hived off and handle their own commercial activities, and those that should remain with successor bodies? If there were some new activities in the future, then it would be up to the milk council, if it was formed, to come forward with its own proposals in that area.

I am a strong supporter of development councils. They are appropriate in agriculture, which is an industry of small units that often has to undertake things on behalf of the whole industry. The principle of a statutory levy collection procedure to ensure that all producers pay for that which is defined as benefiting all producers is an excellent idea. We welcome also the proposals in Clause 51, and the sensible change about the collection of levies.

With all that to consider, I hope that the Minister will be able to give some indication of the way he sees the debate developing over those services that should be looked after by a milk development council, if there is one, and those that should remain with successor bodies, or indeed be hived off completely. I beg to move the amendment.

6.15 p.m.

Lord Monk Bretton

The work of the animal data centre is of great importance to the industry and to the dairy industry. That is also the case with the work of national milk records. National milk records has recently lost its subvention. I believe that we record officially about half our dairy cattle. The Dutch record 75 per cent. of theirs; the Irish manage to record only about 8 per cent. Most countries, including the Dutch, give assistance by means of subventions to national milk records. It is not paid for merely by the owners of the cattle having them recorded.

I do not want our country, because of the changes happening now, to become also rans like Ireland. I want us to continue to have a broad base of recorded cattle. It is important from the point of view of the proving of progeny of bulls, and so forth. We want to be in the van in that and not bringing up the rear. I am not sure that a development council might not become too discursive an organisation over the issue. We have to be careful about the extent of levying on milk prices that will occur. It is something we have to bear down on pretty hard.

The Milk Marketing Board was careful. I fear that a development council could widen the window and that that might be rather dangerous. I hope that a satisfactory solution can be found and that our milk recording and animal data centre will continue from strength to strength. We have to make sure that we have the ground work right.

Baroness O'Cathain

I should also like to support this amendment but only on the basis of asking the Minister to try to include in the final document a list of those activities which would be supported. I take it that this is not the time to debate whether or not one should have a development council or maintain NMR. I believe that NMR and the Animal Data Centre have a very good case, but I am already on record at Second Reading as saying that I am very dubious indeed about National Dairy Council's generic advertising. Anything like that tends to get the lowest common denominator rather than the highest common factor. But for the future of the agricultural industry in this country as opposed to the milk industry it is imperative that the Animal Data Centre and NMR should be maintained by subvention.

Earl Howe

The effect of this amendment is to require a reorganisation scheme to deal with the disposition of ancillary services—a term which I am sure has been deliberately left undefined —as between a development council and a successor body. However, the matters to be addressed in a scheme of reorganisation, and together with a scheme of reorganisation, are laid down in Clause 2 and Schedule 1 of the Bill. They do not include the functions to be assigned to a development council for the very good reason that it is not within the power of the boards themselves to set up a development council or to assign functions to it. These are matters to be dealt with in an order under the Industrial Organisation and Development Act 1947. Ministers would first need to be satisfied that the establishment of a development council was desired by a substantial number of persons engaged in the industry.

Lord Carter

Perhaps I may ask the Minister how he would intend to find out that such support existed. Would he consider that a producer poll would help?

Earl Howe

I reserve judgment on that matter for the moment. I said at Second Reading that the Government was favourably disposed to the creation of a development council for the dairy industry provided that the conditions laid down in the 1947 Act were met. It would be for the industry itself to take the initiative and to provide the necessary finance. The timing would be up to them; but I believe it would be sensible for the industry to wait until the Agriculture Bill had received Royal Assent.

As to the functions that a development council might take on, it would be reasonable to envisage that it might continue the research and development work of the Milk Marketing Board. It might continue to publish booklets such as Dairy Facts and Figures and might undertake or contribute to promotional activity in whatever form. I believe it would also be possible for it to operate in co-operation with the Animal Data Centre. But those would be matters for the development council itself to decide under the terms of the 1947 Act.

Under the current plans of the England and Wales Board, it is proposed that GENUS Central Testing and National Milk Records should be transferred to its proposed successor co-operative. A number of organisations have suggested that they should be placed under independent ownership. Ministers will need to examine any reorganisation schemes submitted, including any provisions made in respects of those activities in line with the provisions of the Bill. The board has also indicated that the co-operative would make services such as GENUS and National Milk Records available on a commercial basis to non-members so that the whole industry would continue to be able to benefit from it.

I hope that in the light of my remarks the noble Lord will be content to withdraw the amendment.

Lord Carter

I am extremely grateful to the Minister. The purpose of the amendment was to get on record the general drift of the argument as to the kind of things that might be dealt with by a development council. If I hear the Minister correctly, he is saying that if after Royal Assent the industry were to get together to work on proposals for a milk development council the Government would not be minded to oppose it.

An interesting point is raised about the proposed successor co-operative providing commercial services to non-members on the same basis as those provided to its own members. It would be interesting to know whether services provided to its own members would be treated as part of its mutual trading and therefore any profit on those activities would not be subject to tax. I suspect that those provided to non-members would be regarded as non-member trade and therefore subject to tax. That is a point that the successor body will have to consider. Those of us who have been involved in co-operatives that have dealt with both members and non-members are very well aware of the distinction between member and non-member trade.

I shall read Hansard with care. I think the points that I wished to have covered have been covered, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Carter moved Amendment No. 14: Page 3, line 41, at end insert: ("( ) Any scheme approved by the authority in accordance with this section shall be subject to approval by the affirmative resolution of each House of Parliament.").

The noble Lord said: In moving Amendment No. 14, I shall speak also to Amendments Nos. 21 and 38. By an oversight on my part, we should also have included in our consideration Amendment No. 37. If your Lordships do not object, I shall refer also to that amendment because it deals with the same subject. I remind your Lordships that that is the catch-all amendment which provides, "No regulations under this Act shall be made unless a draft of them has been laid before and approved by a resolution of each House of Parliament". This group of amendments deals with a point that is very well aware to the Committee: the regulation-making powers under the Bill. Your Lordships have long experience of examining such matters as Henry VIII clauses, and the need for affirmative and negative resolutions. The amendments deal with whether when a reorganisation scheme has been finally approved by government—I emphasise "finally"—it should be submitted to Parliament by way of affirmative resolution.

The point has been made that a number of detailed matters in the reorganisation scheme will be matters of commercial confidence. I entirely understand that. In the wording of an amendment if the principle were accepted, one could deal with that by saying that only the principles of a scheme—those matters that do not involve commercial confidentiality —should be included in an order that is brought back to Parliament. From an earlier debate on an amendment that I moved, it is probable that there will not be a producer poll. We have an enabling Bill which leaves it to the Government to work out with the marketing boards how they should determine their future. We welcome acceptance by the Minister about the nature of the consultation process, which we hope will be wide. But it seems that the Government see no further role for Parliament in consideration of these schemes once the Bill has passed into law. At Second Reading I referred to what I described as a cosy stitch-up between the Government and the marketing boards. I know that the Minister thought I was coming on a bit strong, but I think he got the general drift of the argument.

At Second Reading, when I expressed the view that Parliament should decide on eventual schemes, the Minister said: The problem with that approach is that it is not simply a matter of a 'yes' or 'no' vote. As the procedures in the Bill show, the process of decision-taking is ongoing. Therefore, we need a provision to deal with change and a developing situation. There may well be modifications to the details of the scheme after it is first submitted".—[Official Report. 23/11/92; col. 859.]

I hope that if the consultation is as wide as we want it to be there will be modifications of the details of schemes after they are first submitted; but the whole emphasis here is on when the schemes have been finally agreed by government and are to come into force. That is the point at which Parliament should have the right to express a view. The Bill must be finally approved at some stage, presumably well before the vesting date, so that business can proceed.

I would ask why Parliament should not be allowed to examine schemes that fundamentally change 60 years of successful milk marketing. The changes have substantial implications for farmers, the dairy trade and consumers. In view of the way the Bill is drafted it seems there is no way that Parliament can be allowed to have another look at it and to say whether it approves of the schemes. I believe it is up to the Government to say why not. I do not believe that we have to put up an argument. The argument is a strong one, and it is for the Government to show why when schemes have been finally approved by the authority they should not come back to Parliament and, by way of affirmative resolution, Parliament should not have a chance to express its view.

As to why I propose an affirmative resolution, I refer to the First Report from the Joint Committee on Delegated Legislation (Session 1972–73): this particularly rigorous scrutiny should be confined to affirmative instruments because they are the most important class of instrument and are in any case subject to more careful examination than other types". That is why we should have the affirmative resolution procedure.

I think that there is a hint of a new approach to Henry VIII clauses throughout this Bill in the nature of an enabling Bill where everything has to come back by way of a negative resolution. As I said, Parliament lays down the criteria for the new scheme in the Bill—and we are trying to extend the criteria as we move through the Bill—but it seems that Parliament is then to be denied any examination of the Government's success in fulfilling those criteria. We have heard a lot about the new world of milk marketing. Perhaps Parliament should be allowed to express a view regarding the shape and the nature of the vessels which will be setting out on this new world of milk marketing.

On the wider argument about the resolutions in general, it seems to me that there cannot be just a blanket acceptance of negative resolutions. I believe that the provision we are discussing comes off all the word processors of parliamentary draftsmen in all departments. It is a standard procedure that arises with every new Bill. I dare to say that departments try it on by saying everything should be done by negative resolution.

I ask the Minister to accept the principle of these amendments. Obviously I do not intend to divide the Committee at this stage. My intention is to promote debate. Will the Minister be prepared to attempt to specify properly in the Bill those matters which should be the subject of negative resolution—obviously there are some—and those which should be the subject of affirmative resolution? The matter which I believe should be the subject of affirmative resolution is the measure which gives this Chamber and another place the chance to see the final shape of the principles of the reorganisation schemes after the Government have approved them. I beg to move.

6.30 p.m.

Baroness Carnegy of Lour

I wish, with the permission of the Committee, to speak to Amendments Nos. 2I and 38, which are grouped with Amendment No. 14, and to Amendment No. 37 to which the noble Lord, Lord Carter, has just spoken. The amendments which stand in my name and which I have discussed in particular with the Dairy Trade Federation would have a similar effect to the amendment of the noble Lord, Lord Carter, except that I am proposing that not only initial schemes should be subject to parliamentary order but also subsequent variations to schemes. That last point is inserted as a way of exploring the Government's view—I believe this has not so far been discussed—on the significance for the public of the variations to schemes in the future.

I shall certainly not press my amendments this evening. Nevertheless I suggest to the Government that this group of amendments is important. The noble Lord, Lord Carter, has made many of the points that I would wish to make, but I think that some of my reasons for tabling these amendments are somewhat different from those put forward by the noble Lord, Lord Carter. It seems to me that the Bill is tipped fairly heavily in favour of milk producers. In a way that is understandable. Hard working dairy farmers have for many years been so accustomed to the advantages for them of the operations of the Milk Marketing Board that they would be horrified if the ease of the system was suddenly removed in the name of ultimate market benefit. So voluntary schemes, foreshadowed as having many of the characteristics of the milk marketing boards are provided for in the Bill and the National Farmers' Union, on behalf of the farmers, welcomes that.

It was clear on Second Reading, and it has been clear this afternoon, that there are other points of view. For those who purchase and sell milk; those who manufacture and sell dairy products, and above all for the consumer, it is essential that any new scheme is not only convenient for farmers but is also fair to all concerned in the marketplace. If that is not so, at the end of the day people will not have the best possible choice of products and the most convenient availability of milk at the best possible price.

The Bill seeks only to establish the criteria to be met by a proposed successor scheme. It requires Ministers, as has been said this afternoon, to take a wide variety of interests into account before accepting a proposal and it requires them to fix the day when the present scheme ceases. In addition, my noble friend has given a very welcome undertaking today for extra consultation. I am sure that the Committee will be grateful for that. But, so far as I can see, there is no requirement at all that a new scheme should be published or come in any way at all into the public domain. The Scottish National Farmers' Union tells me it considers that the amendments of the noble Lord, Lord Carter, and my own would simply cause unnecessary delay. The union would regret that.

The Milk Marketing Board suggests that it is out of the question that proposals should be discussed by Parliament because they would be commercially sensitive. With so many interests at stake and with the direct effect on the shopping public and on local businesses so great, surely when Parliament is arranging for the scheme, Parliament should have the final say. Should that not also apply to variations to schemes as much as to their initial determination? I shall listen with particular interest to what my noble friend has to say on this group of amendments. I hope that his reply will include my proposal that variations to schemes should be included within the Bill.

Lord Mackie of Benshie

In the case of every Bill that comes to this Chamber it appears that at some point Members ask for the affirmative resolution procedure. This Bill is no exception. The only exception as regards this Bill is that it is a wholly enabling Bill. On any page of the Bill one can read that the authority to which an application is made will not grant the application unless it is satisfied about certain matters. That appears on every page.

What we are doing here is giving the Government the authority to discuss a scheme with the Milk Marketing Board and, as the noble Lord, Lord Carter, said, to sew it up between them. However, we are not taking any authority to consider the scheme that is finally produced. That is a matter of extreme importance. I have never seen a Bill that is more enabling. Without any further ado, I believe that as regards a Bill of this kind it is absolutely essential that a scheme which has enormous importance to the whole country should be examined by Parliament. In this case I am certain that the affirmative resolution procedure should be adopted. I am delighted to be able to agree with my noble neighbour. For once she is talking great good sense. However, I do not quite agree with her as regards the bodies she considers will need to examine the measure. I think that there is a need for the farming population to examine it too. I support the amendment.

Lord Boyd-Carpenter

There is, of course, a very clear distinction between Amendment No. 14 which the Committee is at the moment formally discussing and Amendment No. 21 to which my noble friend Lady Carnegy of Lour referred. Amendment No. 14 provides that all orders shall be made under the affirmative procedure whereas Amendment No. 21 refers to their being made by order by the Minister without any provision that the affirmative procedure shall apply.

Baroness Carnegy of Lour

I thank the noble Lord for his intervention. If he looks at Amendment No. 38, to which I was also speaking, he will see that it includes the affirmative resolution.

Lord Boyd-Carpenter

I am much obliged. I was about to point out that there is a clash between Amendment No. 21 and Amendment No. 38 which as a matter of drafting is unfortunate, as I am sure my noble friend will appreciate. But coming back as one must to the main Amendment No. 14, it is of course almost the conventional move of the Opposition nowadays whenever there is an order to try to provide that it should be subject to the affirmative procedure. There are two very substantial objections to that.

Lord Carter

I am obliged to the noble Lord for giving way. The fact is that there is no provision in the Bill for the schemes to come back to Parliament. There is a two-level argument: first, whether the schemes should come back to Parliament for approval and, secondly, if they do, whether that should be under the affirmative or negative resolution procedure.

Lord Boyd-Carpenter

Amendment No. 14 does not so provide, but one can provide for a ministerial order and for the negative procedure. We are not discussing that because it is not in the Bill; nor is it covered by the amendment. I am dealing with the amendment in the name of the noble Lord, which would apply the affirmative procedure.

As I was saying when the noble Lord intervened helpfully, if one insists on a large number of affirmative Motions one will congest parliamentary business. One may well find that because of the sheer number they are not considered as closely as they might be. There is the further serious objection that if the necessity to make the order arises at the beginning of the long Recess there is a matter of some months before the order can be effected. That must be a considerable weakness in the proposal.

I agree that there may be some important and exceptional orders which are nonetheless worthwhile including under the affirmative procedure. However, a general proposal such as Amendment No. 14 prescribes would congest business. It would also hold up orders which arise during a Recess.

I hope, therefore, that if my noble friend the Minister is prepared to make some adjustment—there is certainly an argument for that—he will not go as far as is proposed in Amendment No. 14.

Lord Carter

Before the noble Lord sits down perhaps he could deal with one point. Is he aware that Clause 53(5) states that every statutory instrument under the Bill shall be negative? Is he happy with the situation that in a Bill of this nature the Government should have a catch-all provision that all regulations shall be subject to the negative resolution procedure rather than to the affirmative resolution procedure?

Lord Boyd-Carpenter

I have a higher regard than the noble Lord for the negative resolution procedure. It is always possible for any noble Lord or Member of another place to put down a Prayer and secure that any particular order is debated. That is a convenient procedure because it means that one only debates those particular orders which seem, to at least one noble Lord or one honourable Member, to be of real importance. On the other hand the proposal set out in Amendment No. 14 that the affirmative procedure should be automatic in all cases means that we would have to take those orders even if no noble Lord or honourable Member considered them worth debating.

I am very much obliged to the noble Lord for helping me to clarify the position. I think that he understands it.

Lord Wade of Chorlton

Although this is an enabling Bill it is clear what it enables. It seeks to replace the statutory Milk Marketing Board scheme with a free market scheme. How that reorganisation takes place is a matter for consideration and for proposals put forward by the industry. Therefore, I do not believe that it would be appropriate for us to be involved in discussions as to how that scheme will work.

Further, there are five milk marketing boards and no doubt five schemes will be proposed to the Government. I do not believe that Members of this House would want to discuss in detail the reorganisation of five milk marketing boards. I believe that the amendment is not appropriate.

Lord Monk Bretton

I am opposed to the amendment for a practical reason. The same situation arose in connection with Amendment No. 4. The delay which would result from the affirmative resolution procedure, which has already been mentioned, has a serious practical disadvantage. Until that procedure had been completed the co-operatives would be unable to secure market share.

Lord Mackie of Benshie

I thank the noble Lord for giving way. The only delay which has been mentioned so far is the delay that would occur if that happened during the long Recess and the matter could not be dealt with. Surely the Government could organise their business better than that?

Lord Monk Bretton

I was not trying to defend my noble friend on the Front Bench, although I have sympathy with him. I was thinking of milk producers. They want to see the co-operative have a good chance of securing market share pari passu with the big dairies which will probably also be canvassing for market share. It is that aspect which concerns me. I believe that the co-operatives would be held back until the affirmative procedure had been gone through whereas the other organisations would be galloping ahead.

6.45 p.m.

Earl Howe

The amendment, and the amendments which are grouped with it in the name of my noble friend Lady Carnegy of Lour, would require a scheme or reorganisation submitted by a board, once approved by Ministers, to be approved also by an affirmative resolution of both Houses.

I fully appreciate the wish of the Committee that Parliament should exercise vigilance over the details of successor marketing arrangements. The Government for their part have no wish to act in secrecy. I have already undertaken that the main elements of a reorganisation scheme should be fully in the public domain and subject to appropriate consultation before approval is given.

The Bill is deliberately drafted so as to expose to the maximum practicable extent the matters to which Ministers should have regard in deciding whether to approve a reorganisation scheme. It is right and proper that your Lordships should debate the principles at issue, as we are now doing, and that they should also be debated in another place.

The noble Lord, Lord Mackie, said that this was an enabling Bill, as though it were writing Ministers a blank cheque. That hardly stands the test of scrutiny, not least if one refers to the provisions contained in Clause 3.

When I looked at this amendment I wondered whether it was something that the Government could consider accepting. However, when I thought about it more deeply, I realised that there would be some real difficulties with it. My initial difficulty is with the proposition that once the extensive procedure provided for in the Bill, leading up to ministerial approval, has run its full course there should be a further hurdle for a scheme to jump. First, let us ask ourselves whether a board would not be in an impossible position if, having submitted its proposals in accordance with the Bill as enacted, and having received confirmation that its proposals were acceptable in accordance with that enactment, it was nevertheless faced with their rejection. Would the board be expected, if I may use the expression, to return to the drawing board? Regardless of the question whether there would still be time to formulate new proposals from scratch, consult producers and so on, and that is open to doubt, the fundamental question arises—on what basis of hope or expectation could a board found its plans? Parliament, having passed a Bill laying down the terms of reference in some detail, would effectively have negated its own provisions. We would be in a blind alley. It would be more honest to reject the Bill in its entirety than to go down that path. At the very least the Bill would need to be withdrawn and substantially rewritten.

There is also the significant point for which I tried to find words at Second Reading; namely, that the process of decision-making, as prescribed in the Bill, is more a process of iteration than something which occurs at a single moment of time. The provisions for variation, withdrawal and resubmission are there not because of a remote possibility of them being needed but because there is a very real chance. The need arises partly because of the time which will elapse between submission of a scheme and its implementation. The world does not stand still. If a scheme has to be withdrawn and resubmitted in a different form to reflect a material change of circumstances, are we prepared to reconvene in the middle of a possibly lengthy Recess to remove an unexpected obstacle to progress?

If we are to take upon ourselves the responsibilities of an executive, we must be prepared to act accordingly. Therefore I do not believe this is practicable. I believe that the additional delays which would inevitably result from acceptance of the amendment, and the amendments of my noble friend, would be fatal to the whole process.

The noble Lord, Lord Carter, said in answer to my noble friend Lord Boyd-Carpenter, that Clause 53(5) specifies that all regulations shall be under the negative procedure. I should like to clarify that point. He is not quite correct. Clause 53(5) refers to statutory instruments "containing regulations". Any statutory instrument containing regulations made under the Bill is to be subject to the negative resolution procedure. Power to make regulations is included in Clauses 13, 34 and 44.

My noble friend Lady Carnegy asked why there is a provision to vary a scheme after approval. A scheme will contain a mass of technical detail relating to a board's assets, liabilities, and so on. Circumstances, as I have said, may change. Items may need to be added or deleted from a list.

A more substantial variation may be necessary, for example, if it were not possible to undertake a flotation on the given date. So there could be multiple variations. But a major change would probably necessitate withdrawal and submission of a new scheme.

So what may seem a straightforward matter of principle is in fact a very substantial thrust at the heart of this part of the Bill. There would be very severe practical objections, even if I felt, which I do not happen to feel, that the affirmative resolution was appropriate. It would, I believe, put paid to realistic hopes of achieving satisfactory successor arrangements to the present milk marketing schemes on terms that were favourable to the majority of producers and acceptable to government. I hope that the noble Lord, Lord Carter, agrees and that he will withdraw the amendment.

Lord Mackie of Benshie

Is the Minister prepared to consider that the Milk Marketing Board and others might prefer, when dealing with a Minister, to know that the scheme was going back before Parliament and that that might ease the path? Ministers normally, and governments always, think that they are right and that Parliament is some sort of nuisance. I do not believe, however, that it is a generally held view in the country.

Earl Howe

I doubt very much whether they would feel that, in the light of the remarks I made earlier. The possibility that Parliament might reject what they and Ministers had considered acceptable within the terms of the framework of the Bill would present them with very severe difficulties. I doubt that they would wish to go along that path.

Baroness Carnegy of Lour

My noble friend did not refer to the proposal in my amendment that variations should also be included. I take it that what he said would apply to subsequent variations to the scheme as well.

Earl Howe

I believe that the need for affirmative resolutions would build substantial delays into the approval system, which, as I said, would probably be fatal. By extension, it would be even worse if all variations had to be similarly approved by Parliament, as my noble friend proposes.

Lord Carter

This is a very familiar debate to your Lordships. Most Ministers who come to the Dispatch Box take much the same view. One begins to wonder what Parliament is for when one hears the replies from Ministers as to why they need to get ahead, why there must not be delay, why in fact they cannot be consulted. As I say, we have to lay down the criteria but we are not allowed, either in this place or another place, to see whether the Government and the boards have fulfilled the criteria that we laid down. The Minister protested too much. Most Ministers do when responding to this kind of amendment.

I tried to deal with the point about commercial confidence. After all, the principles will have to be announced to producers if they are to sign up. So why on earth, if producers have to know about the principles of the scheme, should Parliament not be allowed to pronounce upon them? As the noble Lord, Lord Mackie, said, it is an enabling Bill all the way through. It enables the Government to get together with the marketing boards, and that is the end of it so far as Parliament is concerned.

I find the business of delay hard to follow. When we conclude the debate we shall consider the Child Support Fees Regulations. They were drafted and laid before Parliament on 29th October. They turned out to be wrong and had to be redrafted and relaid. No doubt they will receive the approval of this House this evening, having already received the approval of the other House. A whole five weeks have therefore elapsed in dealing with the Child Support Fees Regulations.

If the problem of affirmative resolution is as great as the noble Earl says, I could perhaps he persuaded that there is a case for the negative resolution procedure. Perhaps the scheme should be laid, and if anyone wants to pray against it and draw the attention of either House to any weakness, that should be possible. I am concerned about the principle. It happens all the time with regulations and statutory instruments. They come into force very quickly. They are drafted, laid, and often debated in the other place on one day and here the next day. So the argument of delay does not stand up for one moment. I am not convinced about what the Minister said. Obviously I shall read Hansard. I intend to withdraw the amendment but we shall probably have to come back to the matter in rather more detail. Perhaps we shall even have the noble and learned Lord, Lord Simon of Glaisdale, to help us. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

On Question, Whether Clause 3 shall stand part of the Bill?

Lord Monk Bretton

There is one point I should like to raise at this stage. At Second Reading I mentioned the possibility that the new co-operative might be permitted a holding in Dairy Crest. The disposal of Dairy Crest is in effect the break-up of what I have come to regard as a major producer's co-operative asset in the United Kingdom. It is a decision of very considerable moment. Because of that I wondered whether I might ask my noble friend to comment on government intentions with regard to permitting the Milk Marketing Board to hold a minority interest of some kind in Dairy Crest, and not a majority interest.

There are fears all round at the moment. The producers fear that the co-operative will be too weak—I am one of those. The dairy trade fears that it might be too strong and probably does not want it any stronger. But there is one overall concern that governs my thinking. That is that once the assets that were built up by the England and Wales board have gone, I believe they would be very difficult to reassemble again in case of need. It is for that reason that I raise the subject. I wonder just how strong in the matter of assets the new co-operative will be permitted to be.

Lord Wade of Chorlton

I understood that the Milk Marketing Board, in agreeing to the sale of Dairy Crest, was saying that it would be floated off in such a way that the milk producers would become—or at least would have the opportunity to become—shareholders of the proposed company. So the proposal of my noble friend that the Milk Marketing Board should remain itself a shareholder in my view would not seem appropriate. We should be looking at a revised board that would be solely a milk trader, buying milk from producers and selling it to the trade. In my view, it would not be appropriate for it also to be a shareholder. However, there is certainly every opportunity for milk producers to be shareholders of a floated Dairy Crest.

Earl Howe

I must be careful in what I say at the Dispatch Box not to anticipate the proposals which eventually come forward from the boards on the disposition of their assets. We are talking hypothetically here about what may or may not happen to Dairy Crest. I wish to ask my noble friend to be patient until we discuss Amendment No. 17 tabled by my noble friend Lord Wade which addresses the issue. If he is content to do that, I shall have a number of points to make when we debate that amendment, and no doubt he can elaborate on his views at that time.

Lord Monk Bretton

I thank my noble friend.

Clause 3 agreed to.

7 p.m.

Schedule 1 [Qualifying scheme of reorganization]:

[Amendment No. 16 had been withdrawn from the Marshalled List.]

Lord Wade of Chorlton moved Amendment No. 17: Page 28, line 16, at end insert: ("( ) Where the scheme of reorganisation provides for the commercial activities of a milk marketing board to be separated then this must be completed before the vesting day.").

The noble Lord said: The purpose of putting down this amendment is to have an opportunity to discuss the timing of vesting day, the implementation of the Bill and the revised reorganisation of the board. It would be bad if there were doubt in people's minds as to when the scheme would come into operation. In the Bill we have already allowed an extra period of six months for the milk marketing boards in England and Wales as against the other milk marketing boards. No doubt that will enable the marketing arrangements of some of their existing assets to be dealt with appropriately.

Even so, we all know that the timing of floating companies, trying to raise money at the right moment, dealing with the market and with the potential opportunity of 30,000 farmers becoming shareholders in the assets, could be difficult. It may well be that it would not be appropriate to wait until that was completed, if we went through all the circumstances.

I should therefore like an assurance from the Minister that the Government intend to do everything in their power to ensure that the reorganisations are completed by October 1994. If it is not possible to do what we wish, then other arrangements might have to be made to make sure that the date is complied with. Otherwise, we may find ourselves at the end of 1994 in a situation where it is an extra six months and then another six months after that. I know that it could go to 1996 but that would be the worst thing that could happen to the industry. That is particularly so if the other milk marketing boards go ahead with their reorganisation schemes and are operating in a free market. Once they do that, they do not have to keep to their own geographical area and, in my view, it opens up what could be tricky situations. That is the purpose of my amendment. I seek assurances from the Government on how they intend to ensure that the reorganisation takes place by October 1994. I beg to move.

Baroness Carnegy of Lour

I had intended to table amendments relating to Dairy Crest in order to elicit the argument on which my noble friend Lord Monk Bretton touched and some of the points which my noble friend Lord Wade made. However, I came to the conclusion after discussing the amendment with one or two of my noble friends that perhaps the amendments were flawed so I withdrew them from the Marshalled List.

However, it is important that the Committee should be quite clear exactly what will happen about Dairy Crest and at what point. It is a major change for everyone concerned, particularly consumers. If my noble friend is able to clarify the point in his reply on this amendment, it might mean that I need not put down an amendment on Report which I should otherwise do.

Lord Carter

The amendment of the noble Lord, Lord Wade, is helpful because it enables us to explore a problem which he highlighted. There is anxiety and confusion over what might happen because of the variation of dates in the Bill.

The argument is made that on the flotation of Dairy Crest (which we all welcome) the share capital will be allocated to producers on a formula. But the whole object and the whole reason for floating it is because it needs further equity capital. It is difficult for the Minister because we are referring to the possible flotation of a public company. But in seeking further equity capital, will the successor body and cooperatives which can invest in public limited companies—I believe there is no restriction on them doing so—be restricted? Does the Minister foresee that there will be any restriction on the successor bodies? When the son of Dairy Crest seeks further equity capital in the market, could the successor bodies subscribe? Is that feasible?

On the other hand, suppose the companies cannot be floated. Suppose the market conditions are such that this tends to crowd out investment in the stock market. This occurs, particularly when the Government have a public sector borrowing requirement of over £40 billion, in real terms I believe £52 billion. Suppose we reach a point where, for technical reasons, the Dairy Crest company cannot be floated. What happens then? I believe that the noble Lord, Lord Wade, has raised a helpful point.

Earl Howe

One of the principles behind the Bill is that it should be for each milk marketing board to decide whether to submit formal proposals for Ministers' approval. The circumstances of each board are different. It would therefore be inconsistent with this principle to prejudge in the Bill what any board might or might not propose.

However, the amendment appears to address two possibilities. The first is that a board which intended to separate its commercial activities might propose in its reorganisation scheme that the residuary board should retain ownership after vesting with a view to a subsequent disposal. Our clear intention is that a board should continue after the vesting day only to carry out residual activities relating to the winding up of activities arising from its former milk marketing scheme. It would not be a trading body. Indeed, paragraph 15(3) of Schedule 1 specifically provides that a residuary board could not buy or sell milk.

There is also the possibility that a board might provide in a reorganisation scheme for the transfer of its commercial activities to a successor body with the express purpose of subsequent separation. Only one board has so far proposed separating its commercial activities. This is the England and Wales board in respect of Dairy Crest. Separation (by vesting day at the latest) is not in doubt under the proposal. Let me make that clear. The timing of a flotation is a different matter and cannot be tied down to a specific day 18 months in advance. The company concerned will naturally wish to time matters to make the flotation as successful as possible. I can therefore understand if some noble Lords might wonder whether the proposed flotation of Dairy Crest might be delayed beyond vesting day by factors outside a board's control.

Our position on this point is also clear. An approved reorganisation scheme must be completed on the vesting day. The Milk Marketing Board for England and Wales is not intending that its successor co-operative should assume ownership of Dairy Crest even if flotation was delayed beyond vesting day. I understand that the board is making contingency plans for this eventuality which would still involve separation from any proposed successor body. It does not envisage its proposed successor co-operative assuming ownership of Dairy Crest for even a limited period.

Although I am sure my noble friend tabled this amendment with a probing intention, I have to say that the amendment is also unduly restrictive. It would require any separation proposed in an approved reorganisation scheme to take place before the vesting day specified in it rather than on or before. The vesting day would be the day on which transfers of property, rights and liabilities of a board would be given automatic effect under the provisions of Clause 10. I hope that my noble friend will accept that there is no reason why a board should not propose that the separation of any of its activities should take place on the vesting day.

I hope that I have assured the Committee that the amendment is both unnecessary and too restrictive and, therefore, that my noble friend will withdraw it.

Lord Carter

I understand that the boards do not propose that the successor bodies should attempt to control Dairy Crest but if Dairy Crest goes to the market in order to raise further capital equity—and that is the reason given for needing to float the company on the stock market—do the Government envisage that a year or two after the company has been floated, when it is looking for further investment, that the successor co-operatives will be able to invest their members' money, if the members so desire it, in Dairy Crest?

Earl Howe

That is a matter to which I must give some thought but if a successor co-operative were so minded to subscribe in Dairy Crest, the competition implications would be uppermost in mind and the Director General of Fair Trading might well take a view on that.

Baroness Carnegy of Lour

Is my noble friend saying that if the scheme put forward for England and Wales includes the separation of Dairy Crest on or before vesting day that can be accepted, but it is not necessary that the scheme should provide for its flotation subsequently?

Earl Howe

No, I was not saying that it was not necessary to provide for its flotation subsequently. We see that as a very desirable aim. I am saying that if separation of Dairy Crest were part of the scheme proposed by the England and Wales board, we should insist that separation take place on or before vesting day.

Baroness Carnegy of Lour

Is my noble friend saying that if that separation is not included, the scheme will not be accepted?

Earl Howe

We know that the European Commission would not accept a scheme along those lines. Ministers will have to take very serious account of that position.

Lord Wade of Chorlton

I should like further clarification. Provided that Dairy Crest is separated from the Milk Marketing Board, in the event that it is not possible to carry out a flotation on vesting day—for example, October 19, 1994, which is the date for which we should aim—because it has not been possible to raise the finance, for whatever reason, and more time is needed, can the re-organised board start from October 1994?

Earl Howe

Yes, my noble friend Lord Wade of Chorlton has summarised the position well. Provided that the separation takes place before October 1994 then, so to speak, we are in business.

Lord Carter

In that situation where it has not been possible to float Dairy Crest but it has been separated off, who will own Dairy Crest?

Earl Howe

The producers would own Dairy Crest. It would simply be a non-publicly quoted company.

Lord Wade of Chorlton

I am grateful to my noble friend for making that situation much clearer to the Committee. I shall read what he said with interest. It may be necessary to clarify the issue further on Report but, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 18 not moved.]

[Amendment No. 19 had been withdrawn from the Marshalled List.]

[Amendment No. 20 not moved.]

Schedule 1 agreed to.

Clauses 4 to 7 agreed to.

[Amendment No. 21 not moved.]

Clauses 8 to 10 agreed to.

Lord Carter moved Amendment No. 22: After Clause 10, insert the following new clause:

("Conditional contracts

. Between the day that this Act comes into force and the vesting day under an approved scheme, purchasers of milk may enter into conditional contracts with producers of milk, such contracts to be effective on vesting day.").

The noble Lord said: The amendment seeks clarification as to what can happen between Royal Assent and vesting day as regards contracts for the purchase and sale of milk. As I understand the position at present, as a milk purchaser I can enter into a conditional contract with a dairy company — not the MMB—which says that if certain events take place and the milk marketing scheme is revoked so that I can sell my milk anywhere, I can enter into a contract with that company. That dairy company actually exists at present and I can enter into a conditional contract with it. I cannot do that with the MMB itself because its power to buy my milk will end with the milk marketing scheme and the residuary boards will not be able to trade. Therefore, I cannot enter into a contract with any body.

When the successor co-operatives are formed and have received final approval from the Minister—and we may or may not have a chance to comment upon that in Parliament—and once the re-organisation scheme is approved, that co-operative can then enter into conditional contracts. I imagine that all the successor bodies will need some form of forecasting of contracts to allow them to trade from day one. They will need to know how much milk they have to sell, how they are to buy it, and so on. What are the rights of the producers, successor bodies and private dairy companies as regards entering into additional contracts which allow the trading to start on vesting day so that everybody knows that supplies of milk are secured?

On a different but related point, I believe that the Minister has said already on an earlier amendment, that existing contracts between producers and the boards will fall automatically on vesting day and that no contracts will be allowed to roll over to the successor bodies. If so, it is even more important that we should know what will happen to conditional contracts and whether they will be able to set up their trading arrangements in advance of trading which would start on vesting day.

My third point is also related, and I touched on this matter on an earlier amendment. Anxiety has been expressed, particularly in Scotland, as regards the looseness of dates in the Bill: for example, it is April 1994 or earlier for the Scottish boards; and it is October 1994 or earlier for England and Wales; or it can be delayed until January 1996. I understand the reasons for that, but the view has been expressed that the Scottish scheme could be dissolved a year or more before the English scheme, and that could lead to problems with cross-Border trade.

This amendment is intended to be helpful and to clarify that area where anxiety has been expressed about the power to trade on conditional terms between Royal Assent and vesting day. I beg to move.

Baroness O'Cathain

I support the amendment because the Milk Marketing Board, or its successor body, is likely to be put at a commercial disadvantage during the period running up to vesting day. The other dairy processors will be able to sign up as many farmers as they can. Suddenly at midnight, or one minute past midnight, the Milk Marketing Board has no idea, at least technically, as to what is the position, although I trust that it would be possible to arrive at some sort of arrangement.

We were discussing competition. I believe that the provision places the milk marketing boards or the successors thereof at a disadvantage. I should like to hear the Minister's views on that point.

Lord Mackay of Ardbrecknish

When I spoke at Second Reading, I mentioned that Wiseman Dairies in Scotland were already circulating draft documents to certain farmers to entice them to sign up with Wiseman Dairies. I believe that that illustrates the problem which could occur for the successor body to the Scottish Milk Marketing Board, and indeed all the milk marketing boards, if they were not freed before vesting day to send to producers offers and contracts on their behalf. I am sure that the Government do not intend—it would be ludicrous —that the successor bodies should wait until after vesting day before they are able to negotiate contracts. As both previous speakers mentioned, that would place successor bodies at a huge disadvantage in respect of their competitors. I hope that my noble friend can say something which will help us in that regard.

Earl Howe

Although I realise that the amendment is exploratory, it is one which reflects the failure to stop thinking in terms of a regulated market. A milk marketing scheme governs the sale of milk while the scheme exists. It does not prevent producers from making arrangements to sell their milk after it ends. Producers are free to enter into contracts today to supply milk to whomever they wish after their milk marketing scheme ends, provided that they abide by the rules of the scheme until then.

Lord Carter

Perhaps I can interrupt the Minister. Should I wish to contract with the successor body today, how can I do it? It does not exist.

Earl Howe

The contract is conditional upon the successor body coming into existence and upon events moving as people anticipate. It is not necessary explicitly to empower producers to enter into contracts to supply milk after revocation of their milk marketing scheme. In that sense the amendment is superfluous. Furthermore, establishing a period during which producers could enter into new contracts may even restrict producers' freedom to prepare for the introduction of the new arrangements.

The noble Lord, Lord Carter, asked whether contracts with the boards would cease on vesting day. I believe that I addressed that problem earlier and answered that there will be a clear break. He mentioned also the question of dates and whether there may be complications if the Scottish scheme came first. I do not foresee any specific problems arising from different dates of revocation of the schemes. But should Scotland be liberated first, English producers will not be able to sell to the Scottish co-operatives until they too are liberated.

I hope that I have covered the points sufficiently and that the noble Lord will feel content to withdraw the amendment.

Lord Mackie of Benshie

Perhaps I may raise one point with the Minister. Obviously the milk marketing boards in Scotland and elsewhere will be attempting to tie producers to the new scheme. Will that contract or letter of intent be legally binding?

Earl Howe

The force of a conditional contract is not something that I am best placed to comment upon. Perhaps I may write to the noble Lord on that point.

Lord Wade of Chorlton

Before the noble Lord continues, I may be wrong and the noble Lord opposite may be able to help me, but I understood that under the scheme, if any member of the Milk Marketing Board—while the board and the scheme are operational—did something which placed a cost on the board but which it was not legitimate for it to bear in the interests of its then members, anybody could claim that a default had taken place and that the money had been used incorrectly.

In my noble friend's reply to the noble Lord, Lord Carter, he said that there would be nothing to stop a successor body entering into contracts. But who is it that can do that? The only person who can do that is somebody already employed by the existing Milk Marketing Board. Nobody else would be there. It occurs to me that it may well be that if such a person were incurring costs which were not legitimate for the Milk Marketing Board to carry out, he could be liable.

I should be grateful for that point to be considered more closely. It may be that the Government are expecting the present Milk Marketing Board to do something which under its scheme it cannot do, because there is nothing that covers it, and which the Bill changes the law to enable it to do.

Earl Howe

My noble friend's question is based on a misunderstanding of the legal position. The milk marketing schemes prevent producers from selling milk other than in accordance with their terms while the schemes exist. They do not prevent producers from entering into contracts to sell milk to other buyers—processors or whoever—which are conditional upon the milk marketing schemes being revoked. As I said, producers may enter into such contracts now. There is nothing in the present law to prevent the achievement of the purpose of that part of the amendment.

Lord Wade of Chorlton

I apologise to my noble friend. I obviously did not make clear my point. I am concerned with the question of how the successor body to the Milk Marketing Board can make contracts with potential suppliers from 1st October 1994. The noble Lord, Lord Carter, raised the point of who the suppliers negotiate with.

I understand the point made by my noble friend that as a producer I can enter into a contract with Northern Foods. That is understood. Northern Foods exists and is there to make a contract with me. But who do I enter into a contract with if I wish to enter into a contract with the successor body? It is my belief that the present scheme prevents anybody employed by the existing milk marketing boards from acting in that capacity. That is the problem.

Earl Howe

I did not address my noble friend's question properly. I apologise to him. Clearly, one cannot have a contract between parties who do not exist. A successor body can be set up in advance of the approval of a reorganisation scheme. At that point it would be possible for conditional contracts to be entered into.

Lord Carter

This was a probing amendment. I did not think it would cause so much trouble. I believe that the Minister answered the point. I shall need to read Hansard and if necessary come back, or perhaps it is something we can discuss between Committee Stage and Report to make sure that it is clear.

Before withdrawing the amendment perhaps I can say that with all this talk of the new world, liberation, North of the Border and South of the Border, perhaps we should change vesting day to independence day. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 23 not moved.]

Clause 11 agreed to.

Schedule 2 [Provisions relating to carrying out of approved scheme of reorganization]:

[Amendment No 24 not moved.]

Schedule 2 agreed to.

Clauses 12 to 15 agreed to.

Clause 16 [Levies]:

Lord Carter moved Amendment No. 25: Page 10, line 28, leave out from ("who") to end of line 29 and insert ("are registered producers on vesting day.").

The noble Lord said: Amendment No. 25 seeks clarification and I hope that we can deal with it quicker than the last amendment. I am not clear what subsection (4) means. Perhaps I am misreading the Bill, but when one looks under Clause 16, which deals with levies, in subsection (4) it states, the reference to eligible producers is to the persons who, under the approved scheme, are entitled to participate in the distribution of assets of the board to registered producers". That concerns the residual boards going out to raise levies because the liabilities exceed the assets. Under the approved scheme, if all the remaining assets of the milk boards except those of Dairy Crest have gone to the members of the new co-operative, does it mean that should there be a need to raise a levy it will only be raised from the members of the new co-operative and not from all registered producers? After all, they should be responsible for the liabilities which arose before vesting day.

I hope that the Minister appreciates the point. I am not clear what subsection (4) means. I have been asked who the producers are who will have to pay the levies should they be raised. Will it be only the members of the successor bodies or will it be all producers who were in milk production? To be helpful I have added, are registered producers on vesting day". In other words, all milk producers on vesting day have a share of the liabilities. Are they all to be levied or is it only the members of the successor bodies? I beg to move.

7.30 p.m.

Earl Howe

Without unduly detaining the Committee, perhaps I may start by explaining the purpose of Clause 16. It is intended as a fallback; a longstop which I hope will never be used. To begin with, it only applies to the extent that a board's reorganisation scheme has provided that liabilities, and the assets to meet them, should be vested in the residuary board. For that purpose the board should, so far as possible, ensure that a residuary board has sufficient assets to meet retained liabilities. As noble Lords will recall, Clause 3(4)(d) requires Ministers, in determining whether a reorganisation scheme ought to be approved, to have regard to the chances of the board concerned being unlikely to be able to meet the liabilities which it proposes to retain out of retained assets.

It is possible that between approval of the scheme and vesting day there could be a significant change in prospects or circumstances. Clause 9 therefore contains a further provision requiring Ministers to be satisfied that it does not become expedient for the provision made in the scheme for meeting the retained liabilities of the board concerned to be increased.

These two provisions seek to ensure that the residuary board will be able to meet its retained liabilities. However, despite all these precautions, it is just possible that a residuary board will be unable to meet its liabilities. Clause 16 provides for that eventuality. It would empower, but not oblige, Ministers to make an order enabling the board to require eligible producers to contribute towards the meeting of its liabilities. Before making such an order, Ministers would have to be satisfied that the strict criteria in the clause were met.

The noble Lord, Lord Carter, asked: who specifically would pay the levy? All registered producers who benefited from the distribution of assets, including for example, Dairy Crest if that is part of the scheme, would be liable. There is no question of limiting the levy to the members of a successor co-operative or other successor body.

This amendment addresses the question of who should be required to contribute if a levy has to be raised. It is the Government's view that, in the unlikely event that a levy has to be raised from producers, it is only fair that it should be collected from those who benefited from the distribution of assets in the reorganisation scheme. We have not, however, imposed on the boards a formula for the distribution of their assets. That is for the board concerned to decide.

The reference in Clause 16(4) to persons who, are entitled to participate in the distribution of assets of the board to registered producers clearly identifies those who were entitled to receive assets as being required to contribute to any levy. That may well not be identical to the group of people who are registered producers on vesting day. Adoption of this amendment—I do not believe that the noble Lord intends to press it—could therefore lead to some people who were not entitled to receive assets being required to contribute to a levy, while some who benefited would escape. That would be manifestly unfair. I hope that the noble Lord is satisfied with that explanation.

Lord Mackie of Benshie

If there are eligible producers on vesting day in Scotland who have contracted to sell their milk afterwards to Mr. Wiseman, would they be liable to pay the levy if more money were needed?

Earl Howe

As I said earlier, it would apply to all registered producers who benefited from the distribution of assets. That would define the group.

Lord Carter

I am grateful to the Minister. I thought that that was the intention, but it was worth having it on the record and making it clear. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 agreed to.

Lord Carter moved Amendment No. 25A: After Clause 16, insert the following new clause:

("Distribution of excess assets

.—(1) This section applies where assets retained by a board exceed its liabilities.

(2) The excess of assets over liabilities shall be distributed to registered producers in proportion to their production of milk in the year preceding vesting day.").

The noble Lord said: The amendment is to deal with the situation which is the reverse of that dealt with in the previous amendment. It is where we find that the assets retained by the board exceed its liabilities and there is a surplus. It is simply to find out what should happen to that surplus. I have suggested that it should, be distributed to registered producers in proportion to their production of milk in the year preceding vesting day. The Committee will appreciate that this is a probing amendment. The Bill is clear as to what happens if the liabilities exceed the assets. The amendment is intended to discover what will happen if the assets exceed the liabilities. I beg to move.

Earl Howe

As the Bill now stands, Paragraph 10(l) of Schedule 1 would require a milk marketing board which wished to retain any property or rights after its intended vesting day to specify in its reorganisation scheme who was entitled to share in any surplus assets of the residuary board remaining on the winding up of its affairs. Paragraph 10(2) of the same schedule limits recipients of any such surplus assets to present and former milk producers.

The Bill therefore leaves it to a board to propose how any surplus assets remaining on the winding up of its affairs should be distributed. It does not lay down any specific requirements in relation to this point other than to limit eligible recipients to present and former producers and to require Ministers to have particular regard, when deciding whether to approve a reorganisation scheme, to whether the scheme makes reasonable provision for the distribution of assets to producers.

I can see that there may be a case for including some form of specific provision further defining those who would be entitled to a share in any surplus assets of a residuary hoard. However, it would be inconsistent with the rest of the Bill to specify this in the terms of the amendment.

One approach might be to make the class of those entitled to a share in such assets the same as the class which would be liable to contribute to any levy that might be raised under Clause 16. In that way there would be as little disparity as possible between those entitled to share in any surplus assets and those liable to meet any shortfall in assets of a board after vesting.

I should like to consider this point further. If the noble Lord agrees to withdraw the amendment, I shall undertake to see whether the question of specifying further who would be entitled to a share in any surplus assets of a board on its winding up could helpfully be dealt with in the Bill. If a suitable way can be found I shall table an amendment at Report stage.

Lord Mackie of Benshie

Will the Minister consider a further complication? He spoke about former milk producers. Any such milk producer who has gone out of business has sold his quota at a price equal to the value of the cows in many cases. That kind of thing needs to be looked at if any form of equity is the result.

Earl Howe

The noble Lord makes an interesting point. Paragraph 10(2) of Schedule 1 is intended to allow for the possibility of former as well as present milk producers to be included in the scheme for the distribution of assets. In the end it is up to the boards to decide.

Lord Carter

I am extremely grateful to the Minister. He has taken the point that this matter needs clarification. I understand that he will at least consider the tabling of an amendment at the next stage of the Bill. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 17 to 21 agreed to.

Viscount Goschen

This may be a convenient moment to break off these proceedings. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.