§ 3.2 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)My Lords, I beg to move that this Bill be now read a second time.
The essential purpose of the Agriculture Bill is to improve agricultural marketing. Its provisions are founded on the belief that those who are engaged in a specific industry are in the best position to define their needs and that they should not be constrained more than is necessary by actions of government. While government have an inescapable duty to look after certain vital matters such as the safety of food and the fairness of competition, they must always strive, within those constraints, to give the maximum possible scope to the efforts of individuals, or groups of individuals in voluntary association, to establish the conditions of their prosperity. That means a presumption in favour of giving them the freedom to back their commercial judgment and the responsibility that goes with it.
The improvements in milk marketing which the Bill would make possible by ending the statutory milk marketing schemes are to be seen in that light, together with the abolition of government financial guarantees for potatoes and wool and the provision for introducing a scheme to grant-aid group marketing initiatives.
The powers provided to end the potato marketing scheme and wind up the Potato Marketing Board are only enabling. If activated, however, they would, as in the case of milk, place responsibility on the board for proposing successor arrangements.
Turning first to milk, it is right that I should declare a personal interest as a registered milk producer. Part I of the Bill provides for the revocation of the four statutory milk marketing schemes in Great Britain and their replacement by purely voluntary marketing arrangements. The schemes came into being in 1933 and 1934. The objective in each case was to give dairy producers the collective security and market strength which had previously been singularly lacking. To that end the milk marketing boards were granted the exclusive right to purchase, and hence to sell, all the milk produced in their respective areas.
That statutory monopoly remains in place today. In recent years, however, the feeling has been growing, not only within government but within the dairy industry itself, that the rigid structure of rules and regulations which necessarily underpins the milk marketing schemes—necessarily, because we are dealing here with a statutory monopoly—is no longer in the industry's best interests. There are plenty of examples to show that things are not as they should be. Despite our favourable climate, the structural advantages of our dairy industry in terms of size, and despite a lower self-sufficiency in milk in this country 798 than in, say, Germany, France, or the Netherlands, our producers' returns have not been among the best in the Community as one would expect, but at best in the middle of the pack. Retail prices are not noticeably lower than in other member states, however, which indicates that the system is failing to obtain the best value from our limited supply of milk. High levels of import penetration in high value-added products point to the same conclusion.
There are other indications too that all is not well. There have been many instances reported in the press of cheesemakers with a top quality product to sell and a substantial order book but without supplies of milk for months at a time. Some said that they would have been willing to pay more for their milk in order to obtain supplies but the rules of the scheme did not allow for that. At the same time, some of the major processors have been able, under the EC rules governing the boards, to withhold milk from recall to the domestic market in order to export it in the form of low-value bulk products with the aid of a large subsidy from the taxpayer. There has also been a steady stream of complaints from producers and others that their attempts to exploit the few freedoms open to them under the scheme are frustrated, if not by reluctance on the part of the boards, then by the legal and technical complexities of the system. Indeed, an attempt by the England and Wales board and the Dairy Trade Federation to give market forces a bigger say in the selling of milk—an exercise known as "New Ways"—itself foundered largely for the same reason. Even though "New Ways" was commercially sensible and desirable, it would, as originally conceived, have transgressed against the principle of non-discrimination by giving an advantage to existing purchasers of milk over potential new entrants. It was therefore not acceptable.
The failure of "New Ways" demonstrates, better than anything else could, the need to move to more flexible arrangements which allow those engaged in the industry to back their own commercial judgment. The dairy market itself is changing rapidly. The days are long since gone when British milk was consumed almost exclusively as butter, cheddar cheese and silver top milk. We now consume yoghurt, fromage frais and a large range of other fresh products and soft cheeses. Approximately 42 per cent. of drinking milk in England and Wales is purchased in skimmed or semi-skimmed form, as against 2 per cent. in 1982. Doorstep delivery in England and Wales has shrunk from 86 per cent. to only 60 per cent. of total liquid milk sales over the same period. Our processors are facing intensified competition as the single market nears completion. And we shall soon be faced with the advent of standardised whole milk.
Those developments, taken together, are putting great pressure on our monolithic marketing arrange-ments, which grew up in totally different circumstances. What was a commodity market has become a brand-dominated consumer market, and one which is no longer isolated from the rest of Europe.
The system is engulfed by change. The European Court of Justice will rule next year on whether or not 799 low fat milk falls within the boards' exclusive purchasing right. If it rules otherwise the boards themselves believe that it will be impossible to sustain the operation of the schemes. But even if the case is won there are few in the industry who believe it to be possible or desirable to keep the schemes going for much longer.
The Government's concern has been to safeguard the livelihoods of producers, including a great many small family farms for whom the milk cheque is crucial, and the vitality and competitiveness of the processing sector, which is important for the consumer, for jobs and for the balance of payments. If we do not organise change now, an increasingly competitive market will force change on an unready industry, not in an orderly way, but damagingly. Since it is the milk marketing boards which fall to be wound up if the schemes are ended, it is to the boards that we looked for proposals. We made clear, however, that change must lead to more, not less, competition; to more open markets, greater choice and to more flexibility in the market.
In April this year all five milk marketing boards presented government with proposals for change to non-statutory milk marketing arrangements. Each board proposed that it should be succeeded by a single successor co-operative in its area, membership of which would be entirely voluntary for producers. Each co-operative would purchase its members' milk and sell it to milk processors and other users. Each board proposed that some of its assets should be transferred to its successor body but that provision should also be made for the distribution of part of the assets to registered producers in recognition of the loss of their existing interest in their milk marketing board.
The England and Wales board proposed that its processing subsidiary, Dairy Crest, should be separated from and independent of the board's successor. The plan is that it should be partly owned by dairy producers with additional finance provided by stock market flotation. The other boards, which are much smaller than the England and Wales board, proposed to retain their processing arms and preserve more or less their present structure but without the statutory monopoly. Government invited views on those proposals from interested organisations in August and received a substantial number of responses. Virtually all of them welcomed the proposed move to more open and competitive marketing arrangements in England and Wales, and the proposed separation of Dairy Crest.
I want now to talk in more detail about how the Bill would bring about change to milk marketing arrangements in Great Britain. Northern Ireland is not dealt with directly in the Bill but Clause 54 makes provision for Part I to be extended to the Province by Order in Council.
Clause 1 of the Bill provides for the England and Wales milk marketing scheme to be revoked on 1st October 1994 and the three Scottish schemes on 1st April 1994. Before then and, to be more precise, by 31st December 1993, each board may, under Clause 2, submit for Ministers' consideration a reorganisation 800 scheme dealing with the reorganisation of the arrangements relating to the marketing of milk in its area and in particular with the transfer of its assets, rights and liabilities to one or more successor bodies, to registered producers or to both.
The deadlines which I have mentioned for revocation of the schemes are not in fact immutable. They provide a realistic timetable for change, bearing in mind the substantial amount of work needing to be done before a reorganisation scheme could be implemented by a board. In the case of England and Wales, the somewhat later deadline reflects the likely need to allow time for the flotation on the stock market of Dairy Crest. The deadlines for revocation are, however, capable of extension by order, to allow for the unexpected, up to but not beyond 31st December 1995. It would also be open to a board to propose an earlier date than that laid down.
Your Lordships will also no doubt wish to give particular scrutiny to Clause 3, which lays down the conditions that must be fulfilled before Ministers decide whether to approve a reorganisation scheme submitted by a board, and the matters to which they must have regard in reaching their decision. They must first satisfy themselves that the board has taken reasonable steps to bring the principles of its scheme to the attention of registered producers; that the scheme contains the information specified in Schedule 1; and that the proposed trading practices of any successor bodies take account of the interests of milk purchasers. This latter point is to be judged on the basis of a statement which must, under Clause 2, accompany the submission.
Subject to satisfaction on those points, Ministers must decide whether the reorganisation scheme ought to be approved, having regard to all the circumstances and, in particular, a number of specific considerations. These include, and I paraphrase: the interests of consumers and producers; the desirability of making reasonable provision for the distribution of assets to registered producers; the desirability of ensuring that the board's liabilities can be met whether they are retained or transferred; and the competition implica-tions of the proposals in so far as they are a matter for agriculture Ministers. In this latter regard I should make clear that while the agriculture Ministers would wish to avoid giving their approval to a structure which was inherently open to challenge in the courts, the law of this country as it relates to fair trading is concerned more with the actual behaviour of a body than with its structure. It would be for the competition authorities to monitor the trading practices of the boards' successor bodies once they had started trading.
Various clauses in the Bill lay down the procedures to be followed by the boards and by Ministers for obtaining and granting approval of a scheme, for refusing approval, for agreeing modifications, varia-tions and, if necessary, withdrawal of an approved scheme. There are technical provisions to facilitate the transfer of the boards' assets under an approved scheme and to deal with various points arising in respect of taxation treatment.
801 The Bill further provides for the survival of the boards in residuary form, with a suitably modified constitution, after the transfer of their assets in order to complete remaining tasks. There are procedures for Ministers to monitor the implementation of an approved reorganisation scheme and to ensure, as far as is practicable, that a residuary board is left with sufficient assets to meet its liabilities.
Noble Lords will expect me to say something of the Government's attitude towards the milk marketing boards' present proposals. I will have more to say about that when I come to wind up. For the moment I will say only that the proposals of the England and Wales board, in common with those of their Scottish counterparts, would achieve the essential objective of ending the statutory monopoly and creating more freedom in the marketplace: freedom to choose and freedom to compete. For the first time in 60 years producers would be free to sell their milk to whomever they wanted, and purchasers would be equally free to buy milk direct from producers.
I have no doubt that in the new world after the abolition of the boards many individual producers will want to take advantage of those freedoms by selling direct to dairy companies and other users or by undertaking joint marketing initiatives. Some of them may take advantage of any grants which may be made available under Part III of the Bill to form local groups. I believe that there is an abundance of innovative talent ready to exploit the new freedoms by developing local initiatives and marketing local products. I see no reason at all for producers to fear change.
I now turn to Part II of the Bill, which deals with the potato marketing scheme. This has, in very general terms, the same form as Part I in that it would allow the Potato Marketing Board to come forward with proposals for certain of its functions, together with its assets and liabilities, to be transferred to a successor body or bodies.
The provisions in Part II of the Bill are enabling only, and in that respect significantly different from the provisions in respect of milk. No decision has been taken on the future of the potato marketing scheme. The Bill merely provides a trigger for action should Ministers at some future date decide to act.
It may well be asked, then, why these powers are being taken now. In Our Farming Future, the Government announced their intention of continuing to keep the scheme under review in the light of developments within Europe and elsewhere. One development which might make it impossible for the board to continue in its present form would be the introduction of an EC market regime for potatoes. A proposal seems likely to be put to the Council of Ministers sooner rather than later. At present Ministers may only revoke the scheme if potato producers vote to bring it to an end, or as a result of a report by a committee of investigation set up under the 1958 Act. The present Bill would give Ministers the powers they lack and allow for board activities, such as research and development and promotion, to be 802 passed on to a successor body, should the board's regulatory powers disappear; for instance, on the introduction of an EC regime for potatoes.
Part II of the Bill operates by empowering the Ministers to decide by order that the scheme should be revoked. From the date when the order was made the board would be precluded from setting any further quotas, and would have a period of six months (which could be extended) during which it could come forward with a scheme for transferring its assets and liabilities to a successor body or bodies. If it did so, Ministers would judge the proposed scheme against various criteria—including the interests of registered producers —and then either approve the scheme, suggest modifications which the board may incor-porate, or reject it. Once a scheme was approved, a vesting day would be set for transfer of assets and liabilities to the successor body or bodies, after which the scheme would be revoked. The board would remain in existence in attenuated form after revocation to deal with its winding up, and would then be dissolved by order.
If the board did not come forward with a transfer scheme, or if its scheme were finally rejected, Ministers would petition the court to wind up the board under the existing provisions of the Agricultural Marketing Act and the scheme. In this case, any remaining assets after discharge of the board's liabilities would he distributed to registered potato producers. Many of the technical provisions of this part of the Bill follow closely those for the milk boards. The principal differences derive from the fact that the Potato Marketing Board is not a trading body.
It may be convenient if at this stage I deal also with the termination of the Government's guarantee, which is in Part IV. The intention of abolishing the guarantee was first announced in 1988, a decision already accepted by the industry and not, so far as I am aware, in any way contentious. In accordance with the Agriculture Act 1957, Ministers set a guaranteed price per tonne for potatoes grown for sale for human consumption for each coming season. When prices fall below that level the PMB may intervene in the market. Under a financial agreement with the ministry, intervention may not exceed 500,000 tonnes. The PMB would be responsible for meeting the full cost of the first 450,000 tonnes of intervention purchases, with the Government meeting the cost of the final 50,000 tonnes. Should the PMB's reserves become exhausted, however, the Government would be responsible for meeting the full cost of support buying. The board's joint consultative committee, under an independent chairman, with a membership representing the whole of the industry and consumers, recommends to the Minister the annual target area which the board must aim to have planted by registered producers in order to meet market needs.
Part IV terminates the guarantee by removing "potatoes" from the list of products to which the Agriculture Act 1957 applies. The Minister will then have no further locus in determining the target area to be planted each year. Clause 50 therefore vests setting 803 the target area with the JCC, and establishes an arbitration procedure should either side object to the target area or the quotas established under it.
The guarantee in Northern Ireland would be terminated by a consequential Order in Council. The potato marketing scheme does not extend to Northern Ireland, so Part II has no relevance to the Province.
I shall conclude my remarks on potatoes by reiterating that the powers in respect of the potato marketing scheme are enabling only, so that enactment of this Bill will make no difference to the current arrangements for the growing and marketing of potatoes in Great Britain.
I turn now to Part III. Twelve months ago the Prime Minister called together leading figures from all sections of the food industries to find out what needed to be done to help increase the market share for British goods. The conclusion was that farmers needed to work closely with one another to develop profession-ally run marketing enterprises large enough to guarantee volume, consistency and reliability of service to meet the needs of their customers. Others in the food chain such as manufacturers, retailers and caterers also needed to play their part in helping suppliers to understand and meet their specifications.
At the seminar the Government announced two important initiatives to help get things working on the right lines; but good marketing opportunities are still being missed simply because there is a general lack of understanding about the benefits that can be available to all sectors through greater collaboration. It would be wrong of me to paint too pessimistic a picture because we have fine examples of close working partnerships from the farmer to the retailer, but we need more.
In April this year we introduced the group marketing grant to encourage the development of sizeable, professionally managed groups with a real commercial edge. The scheme falls into two phases, the first of which is a feasibility study. The object of this is to get a prospective enterprise to examine its existing business, think carefully about where its future market opportunities lie, and work out a plan on how it can gear itself up to meet that demand. The second phase of the scheme enables grant to be paid towards the legal costs of setting up or modifying business structures, the salary of key staff such as a manager, the costs of training directors or key staff, and the expenses of outside directors to help inject commercial expertise.
Separate powers are currently being relied upon for the operation of the scheme in England and Wales, and in Scotland. These powers are less than ideal because only the Minister of Agriculture, Fisheries and Food has the power to act in Wales. They are also limited and restrictive in a number of other important respects. They enable us only to pay grant to groups engaged mainly in the marketing of primary agricultural and horticultural produce. This not only affects our ability to help those engaged in processing as well as our ability to promote greater collaboration between the primary production and processing sectors. The powers are also deficient in a number of 804 other respects, including the lack of provision for the creation of offences, penalties, or formal grant recovery procedures.
The new powers will remedy the situation and enable us to provide a firmer legal framework for any future scheme. The provisions have been drawn widely to enable the Government to help tackle perceived weaknesses or encourage particular strengths in relation to any type of marketing activity in the food supply chain.
Clause 44 enables Ministers to establish a scheme covering Great Britain for the making of grants for the marketing of the produce of agriculture, fish farming and anything derived from such produce. Ministers may by order extend the range of produce eligible for aid under a scheme.
The clause specifies the various matters a scheme may include, such as the approval of proposals, the conditions subject to which grants may be made, the manner and timing of payments and different provision for different cases or areas. It makes provision for a Minister to delegate functions and also empowers Ministers to amend by regulation the constitution or powers of a statutory body upon which a scheme confers any functions.
Finally, the clause provides for the recovery of grants where any scheme condition is not met or the applicant has given false or misleading information. But Ministers must give at least 30 days' written notice of the reasons before taking action.
Clauses 45 and 46 make it an offence for any person knowingly or recklessly to make a false or misleading statement for the purpose of obtaining grant for himself or another and deal with penalties and related matters. The provisions are an important part of the Government's proposals to encourage a more market-orientated agriculture and food industry and I urge your Lordships to give them your full support.
I can be brief in dealing with the final part of the Bill, the more so as I have already described the provisions concerning the potato guarantee and quota areas. Clause 48 terminates the arrangements under which the guaranteed price for wool is fixed annually by Ministers. The wool guarantee has served the industry well since 1950 by stabilising producer returns from wool but has now outlived its usefulness. The elaborate structure of agricultural guarantees built up in the 1940s and 1950s has largely become redundant in the face of Community support measures under the common agricultural policy. Sheep and wool producers now receive very substantial support through the ewe premium and hill livestock compensatory allowances. The wool indu-stry is ready to accept financial responsibility for its own affairs and to face even more directly the challenge of the market.
Termination of the guarantee will not otherwise affect the marketing arrangements for clip wool under the British wool marketing scheme. The scheme has been administered successfully by the British Wool Marketing Board. It continues to operate in the interests of both producers and consumers of wool. The board will have the opportunity to build further on its achievements once the guarantee is ended.
805 Clause 48 also provides the board with a sensible and workable timetable of two years for the sale of wool which remains from the 1992 and previous clips. This will assure a clear and precise end-date for Exchequer liability without disruption to traditional marketing patterns.
The requirement to hold an annual review of agriculture is ended by virtue of Clause 55 and Schedule 5. This requirement was laid down in the Agriculture Act 1947. Its purpose was to enable the Government, through consultation with the industry, to formulate national price support policies. With United Kingdom accession to the European Community, decisions on levels of price support and other policy issues are now taken primarily in the context of the annual EC price fixing settlement. This removes the need for a statutory annual review and the Bill accordingly repeals the relevant part of the 1947 Act.
Finally, Clause 51 would amend certain provisions of the Industrial Organisation and Development Act 1947. The Government are aware that there is a strong desire in many parts of the industry that a means should be found of securing the continued funding and operation of those functions of the milk marketing boards, such as research and development, which might not be continued by commercially orientated successor bodies. The National Farmers' Union has advocated the establishment of a development council with this end in view. The Bill envisages also that a development council might be set up to take over the non-regulatory functions of the Potato Marketing Board. Ministers would need to receive a formal approach from representative organisations at the appropriate time before reaching a decision. The Agriculture Bill would prepare the ground by making it easier for any agricultural development council to operate a statutory levy. It would enable a levy to be collected via intermediaries such as a first-hand purchaser. I should make clear from the outset, however, that this measure is conceived in line with the Government's aim of enabling the industry to do what is best for its own future. Any development council which is set up will have to be funded by the industry itself and not from public funds.
I trust that I have given sufficient explanation of the content of the Bill and of the policies which underlie it. The changes which it would bring about are intended to strengthen the industries to which they relate, with a common theme of enabling them to respond more directly to the needs of the market and hence the consumer. In the case of milk the changes proposed are of a far-reaching and historic nature. I am glad to say that they have the support of the milk marketing boards and the National Farmers' Union, and I commend them and the other elements of the Bill to the House.
§ Moved, That the Bill be now read a second time. —(Earl Howe.)
806§ 3.31 p.m.
§ Lord CarterMy Lords, the House will be grateful to the Minister for explaining the Bill so clearly. Like him, I should also declare an interest as a director and shareholder in a farming company which itself is a registered milk producer.
As the noble Earl said, this is the most important Agriculture Bill for a very long time. It brings to an end the marketing schemes which have served the producer, the consumer and the trade well for nearly 60 years. My view and that of my party is that these schemes are being ended for reasons of ideology rather than perceived need or Community compulsion. We know that the present legal status of the milk marketing boards has been accepted by the European Commission since 1978. I can well remember that in the early 1970s there was much assertion that the marketing boards were not allowed under EC rules and were anathema to EC doctrine. That argument was put to rest in the late 1970s. The legal status of the marketing boards was accepted and could not be challenged however much it clashed with the normal competition rules in the Community. The Commission saw the advantage to producers when they were facing an increasing concentration of buying power on the other side of the farm gate, a point to which I shall return later in my speech.
It is the Government's decision to wind up the milk marketing boards which has forced them to produce their proposals for successor bodies and to open up those proposals to EC competition scrutiny. I should make it clear at the outset that if my party had won the general election we would not have sought to wind up the marketing boards. We would have adapted them to suit the changing nature of the market for milk, which was well described by the Minister, but we recognise the valuable role that the marketing boards have played in securing a profitable enterprise for the dairy farmer while ensuring that we have the highest quality of milk in Europe. We feel that the proposals add further unnecessary uncertainty to a farming industry which is already in a desperately uncertain situation.
In fact, we would argue that preserving the marketing boards would be a good example of subsidiarity in practice. If we can satisfy the Commission regarding the legal status of the boards and ensure transparency in the way in which they sell their milk to the dairy companies, it should be a matter for the national governments to decide the marketing system which best suits British conditions. The Government have taken the view that the marketing boards are not the right way to do this. Curiously, the Commission does not propose to look at the reform plans of the Scottish boards and the Northern Ireland board, on the basis of subsidiarity. It is concerned about the England and Wales board because it controls more than 10 per cent. of the Community's milk covered by the scheme but believes that the others are small enough to be dealt with on a national basis. So the principle of subsidiarity has already been accepted—in this case by the Commission.
807 However, we now have to deal with the Government's proposals as set out in the Bill, which is, as the Minister said, an enabling measure. The Bill does not attempt to specify the exact type of successor bodies which have to follow the milk marketing boards or the Potato Marketing Board. It places the obligation on the marketing boards—and only the marketing boards—to bring forward proposals for reorganisation schemes and those schemes have to meet the criteria laid down in the Bill. When these schemes are in draft, is it the Government's intention to seek wider consultation throughout the industry—with the NFU and all the other interested bodies —or is it to be left just for the Government to decide without further consultation?
As I read the Bill, it appears that there is no intention to bring the reorganisation schemes, when agreed by government, back to Parliament for approval. Furthermore, there is no intention to seek the views of producers by means of a poll, although this is required in the case of the Potato Marketing Board. Since the eventual reorganisation schemes will have a profound effect on dairy farmers, consumers and the trade, can the Minister say why they are not being presented to Parliament for approval? Why have the Government not required the reorganisation schemes for the milk marketing boards to include provisions for a producer poll, as is set out for the Potato Marketing Board in Clause 36 of the Bill, to ascertain the level of support for the proposed successor bodies to the milk marketing boards and to ascertain producer views of the reorganisation schemes?
Dairy farmers have been led to believe that their views would be sought. As the Minister said when introducing the Bill, it is up to the industry to define its needs. In a press statement on 31st July 1990, the Milk Marketing Board said:
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".At a press conference in March 1991 the Milk Marketing Board 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. Why has there been a change of view? Why, as dairy farmers, are we not to be asked our views through a producer poll, which is a central feature of the Agricultural Marketing Act 1958 and the earlier Act of 1933?We may well wish to seek to amend the Bill both to allow for parliamentary approval for the proposed reorganisation schemes and to allow for a poll of producers. If the Government resist such proposals, the whole of the dairy industry will be asked, to coin a phrase, to buy "a cow in a poke". I am not at all sure that dairy farmers, the trade, consumers and Members of this House and another place would be happy to leave the whole thing to a cosy stitch-up between the Government and the marketing boards.
Although the exact nature of the successor bodies to the marketing boards is not specified in the Bill, we all know, as the Minister said, that the marketing 808 boards have produced their outline proposals—and they differ considerably. The Minister said that when he replies to the debate he will express some of the Government's views on the various proposals. I appreciate that he has to be careful and that he should not attempt to prejudge the proposals but he should be prepared to give the House some general indication of the Government's thinking. Are the Government concerned, for example, by the proposal of the MMB of England and Wales for a single co-operative as a successor body? The dairy trade has expressed considerable concern about the proposal, with much talk of "a voluntary monopoly". As a matter of semantics, I find the phrase "a voluntary monopoly" a little hard to understand. We know that "voluntary" means acting by choice or freely given assent and that "monopoly" means the sole power or privilege in dealing with anything; the exclusive command of possession. Since as milk producers we will be able to sell our milk where and to whom we like once the marketing schemes have ended and as it is extremely unlikely that a single co-operative will have exclusive control of milk supply as the milk boards have now, I quite fail to see how a voluntary monopoly could be said to operate.
Will the Minister confirm that a single co-operative or indeed a number of co-operatives set up under the Industrial and Provident Societies Acts and the Companies Act will be exempt from the restrictive trade practices legislation? Clause 33 of the Restrictive Trade Practices Act 1976 specifically exempts industrial and provident societies and companies with characteristics of a co-operative so long as 90 per cent. of the shares are held by persons who are occupying land for agriculture.
Clause 3(4) (e) attempts to deal with the competition point. How do the Government propose to satisfy themselves about that requirement? For example, will confidential guidance be sought from the Office of Fair Trading or do we have to wait to see what happens? The Minister was unclear. He explained the department's responsibility in the matter, but the producers are interested to know whether the department will just wash its hands and wait to see what happens about competition or, as I said, will receive some confidential guidance.
There has been some criticism of the proposal that the successor body to the MMB should receive all the board's assets, with the important exception of the Dairy Crest assets. I cannot see why there should be that objection unless those who object to the transfer of assets want to ensure that the successor body is powerless. In that respect, I cannot help noticing that 79 per cent. of the UK market for dairy products is in the hands of the multiple retailers, and that four of the largest multiples command no less than 75 per cent. of that market.
There are a number of important points with which we shall have to deal in later stages of the Bill and which I shall not take time over at the moment, but merely mention. There is the question to which I do not believe the Minister referred of the administration and management of the milk quota scheme. At the moment, every litre of milk produced in the UK is on 809 the marketing board computer. As a result, the scheme is extremely easy to administer. With the ending of the marketing boards' exclusive right to purchase milk, presumably every first-hand buyer, producer/retailer and producer/processor will have to be registered and report every producer's milk production to some central agency, either the intervention board or a department of the Ministry. Perhaps the Minister will confirm that point and say whether that will have any effect on the statement contained in the Bill's Explanatory and Financial Memorandum that that will have no effect on government finances or public service manpower.
We welcome the idea of a development council for milk to fund such industry-wide matters as research and development, generic promotion, the proposed animal data centre and related matters. Will the Government welcome proposals by the industry for a milk development council so that such a council could be in operation from the new scheme's vesting day? From my experience over some 30 years of attempting to set up a number of agricultural development councils, I know that that takes a long time. A letter from the Minister, Mr. Gummer, to Mr. Naish the president of the NFU states:
We have discussed whether a development council for the dairy industry established under the Industrial Organisation and Development Act 1947 might provide a suitable vehicle. This is a matter on which it is primarily for the industry to take the initiative by making its case at the appropriate time".Can the Minister define what is the appropriate time?I have referred to the important work of the animal data centre. I hope that the recent announcement by the MMB about the stand-alone financing of the national milk records will not affect the very good relationship that exists between the animal data centre and the national milk records, which must of course work closely together if the ADC is to be a success. There is also the work done by the National Dairy Council in consumer promotion, education and representing the whole industry. I imagine that those are the types of thing that the Government will expect the new —if there is one—milk council to take on board. As someone who has been involved for years in a number of attempts to get development councils off the ground, I have to say how the Government's thinking on that matter has changed. We were told only a few years ago that they were completely out of the question; that they were anathema; and that they did not suit the Government's free market ideology. We now see that there has been a change of heart. We only wish that their conversion had extended also to their views on marketing boards.
There is another important point about dairy farming which should be addressed and upon which the Minister touched; that is, the considerable effect there may be on the rural economy, especially in isolated areas, if the present milk marketing system is abolished. Over the years, by its system of pooling price and haulage costs, the marketing boards have performed an enormously valuable service by ensuring that small dairy farmers in isolated areas away from the big conurbations had a viable business with a monthly milk check. Is it significant that in its criteria the Bill makes no mention of the social effect 810 of reorganisation schemes? I understand that in the draft proposals there is already talk of a collection every other day or even every third day from small farms, and a discount on haulage costs for big farms. Milk collection on alternate days or every third day will mean expenditure by small farmers on extra milk tanks. Has that factor been taken into account? There are many other important matters regarding the future of milk marketing. They will certainly be fully explored at later stages of the Bill.
I turn to the important provisions regarding the Potato Marketing Board. The first point I wish to make relates to parliamentary procedure. Clause 22 refers to the application of Clauses 23 to 43 to potato marketing. Clause 42 relates to consequential amendments. If we then turn to Clause 53 we find that it is all about orders and regulations. It provides that all orders and regulations will be subject to the negative resolution procedure. That is the usual attempt made by all departments in most Bills to give themselves a quiet life. We do not intend to let them get away with it. We shall seek to make the revocation of the potato marketing scheme subject to the affirmative not the negative resolution in both Houses
The ostensible original reason for seeking the enabling power to wind up the PMB was the possibility of the European Commission proposing a potato regime for the Community which would not allow the PMB to operate. Once again, the principle of subsidiarity should apply. If the majority of producers on a poll, as is required in Clause 36, wants a potato marketing scheme, if the scheme can satisfy the normal competition rules, and there is transparency in its activities, why on earth do the British Government not argue the case for subsidiarity in that that is a matter best dealt with at national level?
Since, as I have said, the original reason given for seeking the enabling powers to revoke the potato marketing scheme and to wind up the PMB was the possibility of EC action, I fail to understand why that is not mentioned in the Bill. The Minister said that it was one consideration that might be taken into account. We may have to try to stiffen the Government's resolution on this matter by relating the revocation of the potato marketing scheme specifically to action by the EC. We shall need a great deal of clarification of the circumstances under which Ministers propose to exercise their enabling powers. I understand from the PMB that in formal discussions with Commission officials and with its counterparts in the main potato producing countries, it understands that there will be no strong objection to the continuation of essential elements of our scheme within our own country. I also understand that France may argue for retention of its national structures within an EC regime.
I turn now to other matters. We welcome the proposals contained in Part III relating to marketing grants. Although the Minister has already given some indication, it would be helpful when he replies if he would give the House some idea of the Government's thinking on that matter: what plans they have for future marketing grants and how they would like to 811 see the grant scheme developed. Perhaps he will also tell us the order of magnitude of the expenditure foreseen for those grants.
The ending of the wool guarantee is a matter of some regret. We shall want to explore the rationale for that decision at later stages of the Bill. As the Minister said, when we look at Clause 55 and Schedule 1 we see that they seek to repeal what remains of Section 1 of the Agriculture Act 1947. That marks the end of an era in our post-war farming history. This is not the place to conduct a post mortem, but it is significant when a government repeal a requirement to promote a stable and efficient agricultural industry, to secure the proper remuneration for farmers and farm workers, and an adequate return on capital.
We all understand that the days of the annual price review are long past. Perhaps I may digress for a moment with an anecdote about the days of the price review which sums up, for me at any rate, what used to happen. Noble Lords may remember that the price review was something of a ritual: the Minister announced the determination to Parliament and then there was a series of meetings. On one particular day when there had been a price review, I happened to be in the farmers' club when a member of the NFU negotiating team came in. I said that I thought that it was a pretty good result. He said, "Yes, but there was nothing on pigs until we got to Downing Street". That sums up the whole story of the price review; the power that was exercised in those days has long gone.
Under this heading, we shall seek assurances from the Government regarding the collection of statistics to the same standard as at present and that the Government will continue to consult the various bodies in the industry regarding the forecasts that are made. Since the Government, I understand, have already given an assurance that they intend to publish the information currently contained in the annual Agriculture in the UK reports, we could ask why there is a need to remove the statutory obligation to publish it.
To conclude, we shall, of course, give the Bill a Second Reading; but that does not mean that on this side of the House we support the ending of marketing schemes which have served the farmer and the consumer well. We do not agree with introducing further uncertainty into an already desperately uncertain farming situation. We are convinced that the Bill has much more to do with ideology than a rational consideration of policy.
We must hope that in future years farmers and others do not look back on the Bill as yet another factor in the inexorable decline in the fortunes of farming that has taken place in the past 13 years. We shall do our best to amend and improve the Bill, as it proceeds, so that it leaves this House in better shape than when it entered it.
§ 3.51 p.m.
§ Baroness Robson of KiddingtonMy Lords, I thank the Minister for introducing the Bill so fully to us and explaining the Government's attitude of mind. Many of the arguments used by the noble Lord, Lord Carter, 812 are similar to what we feel on these Benches, but all of us must agree that one can broadly support the stated objectives of the Bill. The trouble is that there are too many areas where we have points of anxiety and which, no doubt, during the passage of the Bill through this House, we shall have the opportunity to amend.
We should like the Bill to be seen as an opportunity to expand marketing opportunities for agriculture and to give farmers a better chance to compete with the large processors and the supermarkets. If the proposals are to benefit farmers and consumers at the same time, it is vital that the Bill does not simply become a mechanism for allowing supermarkets to use their buying power to cut farm-gate prices even further.
There has been a growing differential over the years between farm-gate and shop prices. Since 1982, the producer price of milk has increased by 45.5 per cent. During that time shop prices have increased by 70 per cent. Over the same period, 1982–92, beef producers received 46 per cent. of the selling price of beef in 1982. That has now fallen to 36 per cent.; so there is obviously something wrong in the marketing system between producer, middleman and the consumer.
Milk, the product of farming activity, is a special kind of commodity. It is the most perishable product produced by agriculture. It requires enormous storage capacity and enormous investment in transport so that it can be delivered to the consumer in a fit state. Therefore, in 1933 when the Milk Marketing Board was first introduced, it was essential that some system be introduced in order to ensure that the product could be delivered fresh to the consumer. The board was a statutory co-operative. The Bill now proposes to create a private co-operative.
We broadly welcome the proposals to form a single producer co-operative. We argue that if the co-operative is to succeed, it is essential that as many farmers as possible join it. One would hope that as many as 90 per cent. of milk producers will join. Membership of the proposed co-operative will, of course, be open to all farmers and it will promise to buy all the milk that members produce. But no farmer will have to join. Each will have his own choice and decision and will be able to leave the co-operative at short notice. Buyers will not be obliged to buy from the co-operative.
In view of those regulations, it is essential that farmers learn the lessons of the 1930s. If they allow themselves to be picked off one by one by initially attractive independent deals, then their incomes will collapse.
If a near market monopoly is created by a single co-op in England and Wales, what are the Government's plans for the regulation of that body, apart from the obvious rules with which the co-operative will have to comply? In other words, it must comply with the same UK and EC laws on compensation as other dairy companies. I wish to know what further regulations the Government propose.
I also wish to know much more clearly than I have heard so far this afternoon what criteria the 813 Government will use to decide whether a scheme is acceptable and to what extent real consultation—a point raised by the noble Lord, Lord Carter—will be entered into with producers and consumers.
The noble Lord, Lord Carter, mentioned the need for a milk development council. I agree with him that it is essential to establish a milk development council to take care of all those functions previously looked after by the milk marketing boards which are not to be transferred into the new co-operative; for example, research and development and generic promotion. We believe that the milk development council should be funded by a statutory levy on all milk collected at the point of first purchase. It is essential that when the milk marketing boards no longer exist we have the milk development council established. We want that assurance.
On the question of potato marketing, the Bill starts from the basis that the scheme shall be brought to an end if the relevant Minister so certifies. The excuse for the enabling power that has been given is the imminent, or possibly imminent, introduction of an EC regime into potato marketing. However, it is unclear to me why the Government seek powers potentially to end the scheme at a future date. Are the Ministers or the Government already intent on abolishing the Potato Marketing Board, irrespective of what happens in the EC?
What worries us, perhaps more than anything else, is that it appears to be yet a further example of government by regulation. We would seek to restore the powers of Parliament in regard to the scheme, or at the very least to ask the Government to state the circumstances under which they are prepared to exercise their enabling powers. Under present law the potato marketing scheme can be revoked at the instance of Ministers only if each House of Parliament approves the draft order to that effect. I must declare an interest as I am also a farmer. We do not wish to lose that provision. It is essential that we retain the right to have the question referred to both Houses of Parliament and not to have it governed by regulation.
The noble Lord, Lord Carter, said that we want to retain the annual review of agriculture. It seems to me that even if that is not needed for price fixing, agriculture is still the biggest industry in this country and it is right that Parliament should debate the future of the industry at least once a year in the House so that we can be kept up to date with what is happening. I sincerely hope that the Government will not insist on withdrawing the annual review of agriculture. The review is of importance to producers and to the whole country.
The one proposition in the Bill that finds favour with both the noble Lord, Lord Carter, and noble Lords on these Benches, is the proposition concerning the grants for marketing. We see this as the basis of a system that would allow for the development of proper marketing co-operatives in this country so that British agriculture can compete with the co-operatives already in existence in France and Denmark. We shall be looking for assurances that these schemes will be 814 properly funded and that the regulations will be constructed in such a way as to be practicable to implement.
MAFF has produced some group marketing grants which have been less than efficient. We sincerely hope that the new grants will be properly planned and regulated. If within the context of the CAP reform it can be demonstrated that the provision of realistic funding for effective co-operative marketing enables us to compete on even terms with our EC neighbours, we can build on that to the benefit of both producers and consumers. However, the Government must put their money in the same place as they put their promises.