Potato Market: ECC Report

HL Deb 17 May 1993 vol 545 cc1584-621

6.8 p.m.

The Earl of Selborne rose to move, That this House takes note of the report of the European Communities Committee on the Common Organisation of the Market in Potatoes [19th Report, H.L. Paper 74].

The noble Earl said: My Lords, when Subcommittee D launched an inquiry into the regulation, we were all well aware that the proposal, which is described by the Commission as "lightweight", had explosive properties so far as concerns Great Britain. Your Lordships have already fully debated the possibility that our Potato Marketing Board might be ruled incompatible with the regulation: this was done when we discussed the Agriculture Bill. Strong views were expressed then on whether it was wise to change our existing potato marketing scheme, which has been operating for over 40 years and which is held in high regard by many.

The questions that we set out to address were as follows. First, do we need in this country—or, rather, in Europe —a common regime for potatoes? If so, is the proposed scheme one that we would want? Further, is it either necessary or desirable to change our existing potato marketing scheme even if we do decide that we need a common regime for potatoes? At the outset, I should like to say how grateful we were to have the help of our specialist adviser, Mr. North. I should also like to express my gratitude to our clerk Mrs. Mary Bloor for all her assistance.

The proposed regulation is deceptively simple. It seeks, first, to provide assistance for the formation of new producer groups; secondly, it seeks to bring under Community rules state aid for the production of and trade in potatoes; and, thirdly, it gives the Commission power to require third countries to apply for import licences.

All the force of the draft regulation lies in the second provision. That is the one which seeks to prevent member states from giving support to their growers, whether on an ad hoc basis or by sophisticated statutory schemes, such as ours, in so far as that might be incompatible with the Common Market.

Our report sets out in paragraphs 6 to 13 the nature of our potato marketing scheme and how it operates. I am sure that this will be familiar to your Lordships. Essentially it controls supply by transferable, tradable quotas and allows for intervention buying. There are, of course, additional functions which I shall refer to later.

The purpose of quotas is, above all, to achieve stability in the potato market, thereby benefiting both the producer and the consumer. It is most important that we keep the consumers' interests in mind. The cost of intervention buying, of administration, research, promotion and the collection of statistics is carried by producers. Government help on the cost of intervention buying is now about to end. It is necessary for anyone growing over 0.44 hectares of potatoes to have a quota. If a producer does not have a quota, he pays a fairly heavy penalty. Some would consider this to be a very heavy penalty.

The evidence we received, both written and oral, all tended to concentrate on the issue of whether the potato marketing scheme achieved the desired stability, and furthermore whether the demise of the board would lead to loss of stability and thereby to a loss of confidence by producers, to the disadvantage of consumers and the country as a whole. There was agreement that most member states intervened in the market, usually in times of surplus. Such support as was given by member states inevitably favoured the producers of one member state against another. A recent report from Nottingham University on this proposed regime—I believe that has been circulated to many of your Lordships—confirms the evidence that we received on this point. This report states on page 106 that many countries have provided intervention, aids for storage and indeed export subsidies.

We concluded that such distortions by member states were likely to occur where the farming lobby was strongest. We felt that such assistance was undesirable in a single market. Quite frankly we felt that if member states were going to play at this game of helping their own nationals with export subsidies and other such measures, we were likely to lose out, as we were not as likely to be so belligerent as some of our producer neighbours on the Continent. Therefore, for reasons of expediency—let us be honest about this —but also for reasons of principle, we favoured bringing potatoes within the scope of Community rules. This would mean that any further aid would have to be notified to the Community and would have to be compatible with the EC treaty. That does not rule out support but the support must be compatible with the EC treaty.

Most witnesses agreed—this opinion was almost universal —that the present potato marketing scheme was incompatible with the regulation as drafted at the moment. Some therefore concluded that the regulation needed amending. Others concluded that the potato marketing scheme needed amending or abolishing. All witnesses addressed the central issue of whether the scheme was achieving the desired objectives of stability for producers and consumers, as well as helping to advance the interests of the potato industry in this country. Not unexpectedly there were widely differing perceptions on this central issue.

We took evidence from the Ministry of Agriculture who acknowledged that plantings had been more stable than in other countries but suggested that prices fluctuated as much in the UK as elsewhere, though around a higher mean; that is, around a higher average price. The Potato Marketing Board disputed this, claiming that a stability had been achieved which would not have been possible without area control. It has since quoted the Nottingham report to substantiate this claim. There is a graph on page 15 at figure 2.6 of the Nottingham report. It does not match the graph of the Ministry of Agriculture, which covers a longer time span.

However, I shall for the moment refer to the Nottingham report. That report suggests to me that UK prices have indeed been on average higher. At least the Ministry and Nottingham University probably agree on that. However, the price fluctuations in the Nottingham report appear to have been less than in the three other member states mentioned in the report. However one looks at the graph, stability is not the word which comes to mind. Perhaps it is possible to reconcile the two graphs produced by MAFF and Nottingham University respectively, although my own suspicion is that much depends on the relative weighting of components. That point was made in the Nottingham report. I am quite content to leave the question of comparing like with like to the respective economists, and may they reach a conclusion! Some will say that that seems unlikely.

We had to conclude, however, that supply control by means of quotas has not achieved price stability. Bearing in mind the chronic fluctuations in yield of the potato crop, it is probably too much to expect that it ever could achieve stability in an absolute sense. The price of quota itself has proved an unstable element in potato production. We took oral evidence from the National Farmers' Union of Scotland. The union informed us that quota had peaked at about £2,500 per hectare and had now fallen to £50 per hectare and it was continuing to fall. The production costs of those growers in the quota market have therefore not been stable. One has to ask whether the operation of a transferable quota scheme, with its inevitable disincentive to expansion for those producers without access to the necessary finance, has worked to the detriment of the British potato industry.

The Ministry of Agriculture's evidence on the steady decline in numbers of producers is corroborated by Nottingham University. If the objective of the potato marketing scheme had been to keep potato producers in business—that was not the objective of the scheme—then an 80 per cent. drop in numbers between 1955 and 1992, as mentioned in the Nottingham University Report, would suggest that the objective had certainly not been achieved. However, this would not be a fair measure of success. Instead we suggest that we should judge the success of the potato marketing scheme by the extent that it has given the potato industry the confidence and stability to position itself in our own market, and indeed in the European market, as well as keeping consumers satisfied with our product. That should be the yardstick as regards our success rate over the years the scheme has been operating.

I have already referred to prices. The consumer might have a mild grumble here, as prices seem to have been a little high. However, the position on exports, as mentioned in our report, is confused by a subsequent revision of statistics by MAFF. To be fair to MAFF, it referred in the evidence it gave us to a forecast for 1992. I understand that has been revised. That has the effect of showing increased export figures over the figures for the years 1981 to 1983. There are now forecast to be 121,000 tonnes of exports in 1992. That is about 2.2 per cent. of production and it compares with 1.4 per cent. of production between 1981 to 1983. Those are not figures we can be proud of.

Our weakness is our level of imports, not so much of ware potatoes but of processed imports, which now stands at 556,000 tonnes. That is a much larger figure than the figure I have just mentioned for our exports. When the chairman of the Potato Marketing Board gave evidence to us he described 73 per cent. self-sufficiency in processed products as a success story as it was better than the 64 per cent. we had previously achieved.

Our main competitors in our own market are the Dutch. They have been more successful in attracting investment in processing and have thereby benefited from increased employment and the added value which goes with that industry. We could not agree that there was any element of success in our present level of imports of processed potatoes. Our conclusion was that quotas had inhibited investment in this country by processors in spite of the formation of the joint consultative committee. Our home producers had conceded a significant share of our own market when we should have had all the advantages. As producers we have economy of scale in what is a capital intensive crop where larger fields provide significant unit cost savings, and of course we are close to our home market, which is sophisticated in the matter of potatoes and recognises the much wider choice of varieties which are grown in this country. We have a high consumption of potatoes compared with other countries. This is a classic situation, in which, if ever there was a commodity where we should be able to take on the opposition and win, it is this one. However, we have not done so.

Therefore, we concluded that, with hindsight, the potato marketing scheme could not be judged a success and that we should allow our natural advantages to reassert themselves. Our proximity to the market and our relatively sophisticated production systems should ensure that we compete effectively within a common market for potatoes. We felt that to be the only member state imposing area supply control would be to inflict a self-imposed handicap on ourselves. While that might well be favoured by our competitors, it was not a move that we could recommend. We recommend instead that, rather than amend the regulation to allow the scheme to continue within the potato regime, we should abolish the potato marketing scheme itself.

The evidence we received from some of the more successful producer groups suggested that some faced the demise of the quota scheme with equanimity. However, it must be emphasised that a large number of producers are extremely alarmed at the prospect. It may be that some of those producer groups are not so strong as others and that some have not invested in suitable production systems for the developing market. It will be the case that, if we enter a common market for potatoes, a number of producers will face an uncertain future.

We have already seen a steep decline in the number of producers. That is bound to continue. We felt confident that the market share which would be released by such producers would and should be taken up by the more efficient producers. That is simply to state what has happened in the past. There is no reason why it should not happen in the future, with or without transferable quotas. If we kept the scheme in existence in the hope of sheltering vulnerable producers we would be failing to act in the long-term interests of the British potato industry or the consumer.

Lastly, we recognised that many functions of the Potato Marketing Board, such as promotion, research and collation of statistics, should continue. We acknowledge that a development council, as allowed for in the Agriculture Bill, might well be a suitable vehicle. We note the provisions in the regulation for promoting new producer groups and for enabling the Commission to require third countries to apply for import licences. We feel that those two measures, although relatively trivial, may be helpful.

We were suspicious of the proposal of the Council of Ministers to introduce quality standards into the regulation, although we felt that some common definition of quality standards might be helpful. That is not so much a matter for the regulation as for a code.

Without doubt most growers see the board as having achieved a stability which would not have been possible without a compulsory potato marketing scheme. Those producers claimed that when everything else is changing in the common agricultural policy this is not the time to abandon the scheme. Reluctantly, we have been forced to disagree. We should never have allowed ourselves to be put on the defensive and to become a net importer of potatoes and potato products when we have every natural advantage. We should be exploiting more effectively our expertise as producers and the advantage we gain from having a higher consumption of potatoes per head than any other European country. We need to encourage our successful producer groups and to allow them to make contracts with buyers uninhibited by an area quota scheme. This EC regulation should be seen as an opportunity to compete more effectively with the rest of Europe and to remove the danger of unfair national aid schemes which tilt the playing field against us. I beg to move.

Moved, That this House takes note of the report of the European Communities Committee on the common organisation of the market in potatoes [19th Report, H.L. Paper 74].—(The Earl of Selborne.)

6.24 p.m.

Baroness Carnegy of Lour

My Lords, I am sure that the whole House is grateful for the clarity and the concise way in which my noble friend introduced the report. Those of us who were members of the sub-committee are no less grateful for the ability with which he chaired the inquiry.

Potatoes, and how they are grown and marketed, are extremely important to this country, more important than to any other country in the European Community. Potatoes represent 16 per cent. of the output of our arable farms. If one excludes cereals they represent 84 per cent. We are the largest consumers of potatoes and potato products in the European Community. We consume on average 4½pounds of potatoes a week per head, 102 kilograms a year, while across the Community the average is only 80 kilograms. This report, and any changes in the arrangements in the Community or the United Kingdom which lie ahead, are important matters for the United Kingdom.

In its response to the report the Potato Marketing Board commented that this was a complicated subject. It certainly is. Perhaps with hindsight it is too complicated for a short inquiry and a quickly produced report. However, the Select Committee decided to deal with the matter this way to make sure that the report was published before final decisions were taken by the Community and while the related United Kingdom Agriculture Bill was still under discussion in Parliament.

Fortunately, some of the background information which the committee might have considered with advantage but could not because of the timetable—for example, information about the potato industries in other member states—has since been set out in a most helpful and interesting report produced by the Nottingham School of Management and Finance, to which my noble friend referred.

The questions which the Select Committee had to address, and which my noble friend rehearsed, were simple enough: is the European regime necessary at all? If it is necessary, is the suggested regime the right one? What should now happen to the existing potato marketing scheme in the United Kingdom?

Those are simple questions, but in considering the answers we encountered problems. First, the committee found itself shooting at a fast-moving target. The proposed European regime, for differing reasons in different member states, was meeting huge hostility among Community potato farmers generally. It was rejected by their two big co-operatives —COPA and COGECA—and those views were subsequently reflected in the European Parliament. There was clearly a growing likelihood that the Commission would have to amend its proposals or abandon them altogether. The regime was, and still is, a moving target.

As to the future of the United Kingdom potato marketing scheme, the committee found itself hearing evidence that reflected deep divisions, with witnesses' opinions on all sides of the argument based partly, of necessity, on guesswork. The questions were simple but there was too much conjecture all round. For that reason, I found that it was not a comfortable inquiry to conduct.

In considering whether there need be a European regime at all, the committee received conflicting advice. As my noble friend said, the Commission's evidence expressed the view that the Treaty of Rome imposed a duty upon it. It told us that potatoes were one of only two major agricultural products not covered by the CAP and that that meant that there had been an "untidiness" for years.

The Potato Marketing Board disagreed. It considered that there was no legal requirement for a regime. The Country Landowners' Association commented, I thought refreshingly, that the nonexistence of a regime is no reason for having one. MAFF linked the proposed regime with the need to do away with national schemes which distorted competition, while the National Farmers Union and the Scottish National Farmers Union would only contemplate a European regime if it permitted national schemes to continue.

In the event, the committee was strongly influenced by the evidence of Mr. Pooley, the manager of a large group of many hundreds of farmers involved in the production of some 30,000 acres of potatoes in England, himself at present president of COPA and COGECA. He believed, from his European experience as well as his home experience, that it was important that there should be a European regime of some kind, if only to ensure that member states were not able to give direct government aid to their own farmers and so distort competition. The committee took that point, as my noble friend said. It has happened from time to time in the past. In the new single market it would no longer be appropriate and should not be possible.

My noble friend has commented on the committee's views of what sort of European regime it should be. I shall not reiterate them except to say that the committee looks for a very light regime indeed.

The third question relating to what should happen to the potato marketing scheme is of course by far the most important to the industry and in particular to potato farmers in this country. Living as I do in Angus, a part of Scotland where the growing of seed potatoes has for many years been the backbone of the rural economy, and indeed having had—although having no longer—involvement in the industry, I take seriously the doubts and anxieties of seed growers in particular about life beyond the statutory potato marketing scheme. Most seed potato growers take the view—and the evidence to the committee of Mr. Melrose reflected it—that without the potato marketing scheme, demand for and prices of ware potatoes, and with them the demand for and prices of seed, would fluctuate far more from year to year than they do under the scheme. Overall the price would be lower. It is because of that belief that the growers contribute large sums to the scheme. Seed growers are also of the view that fluctuation within the seed trade would be greater than the effect on the trade in ware potatoes. The Nottingham report confirms that and indeed estimates that the effect would be double.

Incidentally, at the back of most potato growers' minds is the fact that their own quota is currently without value. However, if quotas were maintained it might acquire a value again in the future although it will probably never reach the £2,500 referred to by my noble friend. It is in examining that question and the future of our UK scheme that the limitations on evidence and time imposed by a quick report show themselves most clearly. At the end of the day the balance of evidence received suggested to the committee that to limit production and to keep prices up by artificial means, as the potato marketing scheme does, in the context of the new single market, in the longer run must reduce rather than expand the scope for competent potato farmers. It must increase rather than decrease the import of potatoes and potato products from other Community countries to the United Kingdom. As my noble friend said, the Select Committee therefore takes the view that whether or not the European regime falls by the wayside, the United Kingdom potato marketing scheme, if retained, will over a period of time become disadvantageous to UK consumers who wish to buy British, to United Kingdom farmers, and to the United Kingdom economy.

Many of the committee's facts and figures are confirmed and enhanced by the Nottingham economists. The economists in fact come to a different conclusion, suggesting that the potato marketing scheme will continue to benefit the industry and even that it is a model for farm policy that might be developed in other sectors. It is perhaps a little wicked to comment that, "They would say that, wouldn't they?" After all, the report was commissioned by the Potato Marketing Board.

Lord Mackie of Benshie

My Lords, the noble Baroness is surely not suggesting that professional economists are incapable of being objective. It is surely not worth their being prejudiced if they do not produce decent reports.

Baroness Carnegy of Lour

My Lords, I would not dream of calling into question the integrity of the board, but the report was paid for by the board—which means by the producers. It must have cost a lot of money. I should have thought that the producers would be rather angry if the board then recommended that it does away with itself. I am not sure; I was making that comment in a rather light-hearted way.

Lord Carter

My Lords, I am grateful to the noble Baroness for giving way. Is she aware that one of the authors of the report is my noble friend Lord Peston? Is she calling into question his academic integrity?

Baroness Carnegy of Lour

My Lords, absolutely not. Perhaps I may explain what I seek to say. The report is fascinating and most useful. In the course of argument the report makes a good suggestion: that seed potato producers might with advantage link their businesses more closely to the producers of ware. However, as a lay person I perceive that the economists, like the Select Committee, have not been able entirely to eschew guesswork in some of the conclusions that they draw. For example, the report confesses that, it is extremely difficult to estimate the extent to which the quota holds quantity down and prices up". Perhaps I may give another example. The economists arrive by a precise and clearly defined path at estimates of large numbers of farmers who might stop growing potatoes because of the ending of the potato marketing scheme. They then add, somewhat vaguely, that, of course, the more efficient farmer may seek to expand [though…] not overnight". At the end of the day much depends on how people react. I often recall my experience as chairman of a committee which some years ago considered the likely effect of a projected relief road in Edinburgh on traffic in and out of the city. That experience leads me to suspect that, however skilled, professionals cannot always predict how human beings will respond to new opportunity in a complicated network of circumstances, whether those are changed choices of routes home in the rush hour, or a new freedom to choose to stop, reduce or expand the growing of potatoes.

The committee had a difficult task. I believe that the report should be helpful. I certainly believe that the Potato Marketing Board report is also very helpful. I commend the report of the Select Committee to the House.

6.38 p.m.

Lord Stanley of Alderley

My Lords, I have once again to declare an interest, in that I am and have been a producer of potatoes since 1954. As a result, I have to say that the report of the Select Committee is one that I cannot support. I do not look forward—indeed, I never do—to the remarks which I intend to make any more than your Lordships will care to hear them. I do not mind irritating some of your Lordships some of the time, but I am fearful of irritating all of your Lordships all of the time, including my noble friend on the Front Bench, although I detected that my noble friend Lady Carnegy also had reservations about the report. However, to be anodyne is a sin that I will not commit.

I believe that Sub-committee D failed to realise the importance of a number of factors that affect the United Kingdom potato industry. If it did so realise, it drew the wrong conclusions. I believe that it concentrated far too much on the quota as opposed to other matters. Indeed, the speech of my noble friend Lord Selborne concentrated vastly on the quota problem. The committee failed to understand the effect of the English Channel. It failed to understand how much more varied is the use of the potato in the United Kingdom compared with our continental colleagues, in particular, the stronger demand for the fresh potato. The committee failed to understand the effect of the strong co-operatives in Europe. I think that 80 per cent. of the Dutch crop is co-operatively marketed, which would put them in a powerful position should our potato marketing scheme be abolished.

The committee assumed that there is and will be a level playing field, though listening to my noble friend Lord Selborne I have to say that he put it in, if I may say so, a slightly more defeatist way. I wonder whether, when my noble friend on the Front Bench replies, he will be able to give an assurance that the United Kingdom Government will match, ecu for ecu, for United Kingdom producers any help given to continental producers.

The United Kingdom Government's record is not all that good. For example, I was staggered to be told in a Written Answer on 29th March (at col. WA. 33 of Hansard) that they were ignorant of how much continental countries had given in support last year, whereas a telephone call to Brussels would have enlightened them. I have sent my noble friend on the Front Bench details of those subsidies, which amounted in France alone to well over £19 million sterling, compared with the United Kingdom's paltry £1¼or £1½ million.

The committee came to the conclusion that our potato marketing scheme restricted the processors' ability to purchase United Kingdom produce. I do not believe that to be so. They could not or would not take up all the offers of contract last year; I know that we could not get all our extra quota acreage. In particular, frozen chips are imported because processors do not have the plant in the United Kingdom. It is a question of the chicken and the egg, I believe. If the processors put up more plant they would get more potatoes. Incidentally, the fewer chips eaten and the more fresh boiled and baked potatoes eaten, the better, I am told, for the country's health.

The committee was unfortunately fed inaccurate or incorrect information by the Ministry of Agriculture. For example, Annex A, Table 5.14—my noble friend Lord Selborne admitted this in the end—contained serious errors in the raw potato export figures. The UK raw exports increased; they did not decrease. If one bases one's evidence on a fact which is 100 per cent wrong, it makes it somewhat suspect.

Secondly, MAFF failed to understand the vital difference between a crop and a calendar year, so suggesting that there was intervention in each of the past five years, whereas it occurred only three times between 1988 and 1992.

On a smaller point, MAFF implied in Table 1, Annex B, that the United Kingdom potato prices were £6,000 per tonne due to an error: it interpreted 100 for one. It is an understandable error like those that I make every day, but it does not exactly inspire confidence in MAFF's report.

When Sub-committee D questioned Mrs. Attridge of the Ministry, she clearly failed to understand the role of the Potato Marketing Board's consultative committee. She stated: It does not build in an element for exports or at least [has] not done so up until now". I should not like to say what I put by that. Suffice it to say that that just is not so.

I realise only too well that my noble friend Lord Howe believes that I have got my knife into the Ministry of Agriculture. I made it quite clear to my noble friend in a letter that I have no objection to much of MAFF's overall strategy, including incidentally the hated IAC and BSP schemes. It is the small print that lets MAFF down. I suggest that it has done so again in this matter. I strongly commend the article in The Times of 6th May by Sir Peter Kemp, a former prominent civil servant. It was headed: Mandarins are not the only fruit". Ministers should shuffle advisers too.

So much for the errors in the evidence. Perhaps what worried me most was Sub-committee D's misinterpretation of Article 39 of the Treaty of Rome. It appears to have neglected the words: ensure stability of the market and a fair income for producers". The report does not address that vital matter. Indeed, the report from Nottingham, to which noble Lords have already referred, on page 112 states a categoric no. That view, as my noble friend Lady Carnegy said, is supported by COPA, COGECA, ECOSOC and of course the European Parliament. In common with those organisations, I cannot accept paragraph 50 of the Select Committee's report which states that our potato marketing scheme would be incompatible with a European Commission scheme. It is just that the United Kingdom does not want to negotiate such a scheme.

So I have to conclude that this was a poorly thought out report, based on poor and incorrect evidence, reflecting the gospel coming from the Minister, which could result in throwing out the baby with the bath water. It seems to be saying, "We have a less than satisfactory situation, so let more chaos reign".

I have to end on a constructive note. I suggest that your Lordships accept the Government's view in 1989 which was expressed as follows: to retain the basic elements of the existing scheme in view of the need to maintain stability in the potato industry at a time of major adjustment in the arable crop sector generally". I entirely agree. I hope that the Commons will take such a view and, more importantly, I hope that my noble friend Lord Howe will confirm that those sentiments expressed by the Government in 1989 are still held by the Government.

6.47 p.m.

Lord Middleton

My Lords, as one who had formerly grown potatoes for a good many years under the aegis of the Potato Marketing Board, my first reaction on hearing that the Commission was to introduce an EC potato regime was to have misgivings similar to those voiced by my noble friend Lord Stanley. However, having had the privilege of rejoining Sub-committee D under the chairmanship of my noble friend Lord Selborne just in time for our inquiry, and after hearing the evidence, I took a different view. It is one that is wholly in accord with our conclusions on pages 12 and 13.

The Commission clearly regards this as a single market measure in that it is aimed at dismantling national support measures which act as restrictions on trade. There is a strong case for preventing member states from operating national schemes which distort the Community market in potatoes.

As my noble friend Lord Selborne reminded us, in Great Britain, the PMB, with its potato marketing scheme, controls the area of potatoes grown by means of a quota system. It supports the market by contract buying and by operating an intervention system.

My noble friend Lord Stanley thought that we had overstated the quota issue. Sub-committee D has been consistent during the years I served on it and before in opposing quotas in principle. In previous reports we have argued against the use of output controls both on economic and on practical grounds. We have said that the quota system is not in the interests of consumers, manufacturers or the agricultural industry as a whole.

When we wrote our report on the reform of the CAP, we said: Quotas distort markets, create artificial shortages of commodities and impede restructuring in agriculture … we believe that in the long term quotas should be progressively phased out". In a debate in this House on 10th March this year, my noble friend Lord Selborne spoke very effectively on this question of supply controls and their malign and potentially damaging influence on food production.

It was not unexpected that most producers and producers' organisations wanted to keep the potato marketing scheme. The overwhelming weight of producer opinion wanted to retain a national quota system whose purpose was to act as a cushion against violent price fluctuations. One witness summed the matter up when he said that the PMB and its ability to control quotas equalled stability. That perception of the benign effect of the potato marketing scheme was not supported by any figures. To the contrary, the figures supplied by MAFF, which were referred to by my noble friend Lord Selborne and which appear in graph form on page 25 of the report and on page 14 of the evidence section, show that British prices of main crop food potatoes fluctuated in very much the same way as prices in other member states but that British prices were consistently higher. The Potato Marketing Board, in the brief which it sent to Peers—

Lord Mackie of Benshie

My Lords, is the noble Lord saying that to have higher prices for potatoes in this country is a bad thing?

Lord Middleton

My Lords, I will deal later with the, again, malign effect of higher prices on the penetration of our market. To that extent, I believe that they have had a bad effect.

The Potato Marketing Board, in the brief which it sent to Peers in anticipation of this debate, disputes MAFF's figures. It claims that producer prices are fully competitive with continental prices. But again it does not supply any figures of its own—or if it has supplied them, I have not seen any. It backs its claim by referring to the negligible quantity of ware imports. Great Britain has an in-built protection against imported ware. Because of their weight and hulk, raw ware potatoes cost about £30 a tonne to transport into this country. So one would not expect much competition from that source. Therefore I find that explanation unconvincing. There is the graph on page 15 of the Nottingham University report. to which my noble friend Lord Selborne referred. He has dealt with that point, so I shall not repeat what he said. We find other examples of the disadvantages of supply and price management when we consider the potato market in Great Britain. I should like to expand a little on what my noble friend said about penetration of our home market.

The processing of potatoes by manufacturers is a very important outlet for growers in this country. In 10 years the take-up from the United Kingdom crop has risen from 20 per cent. to 30 per cent. of the total output. It is a growth industry. Yet under our quota system the potato industry appears to be unable to satisfy increasing consumer demand for processed potatoes. Imports of processed potatoes have risen by a factor of four in the past 10 years in terms of tonnage. While 10 years ago 10 per cent. of the processed chips, crisps and so on consumed in the United Kingdom were imported, the figure is now nearly 27 per cent.

Surely we ought to be perfectly capable of satisfying the whole of our domestic demand for raw and processed potatoes, except perhaps for the out-of-season earlies, from our own fields. It does not say much for a system that exerts close control over both output and quality if this growing penetration of our market can be allowed to happen.

In its brief to Peers, the Potato Marketing Board says that the reason for the admitted import deficit in processed products in Great Britain is insufficient or inadequate processing capacity. My noble friend Lord Stanley repeated that tonight. The Nottingham University report recently commissioned by the PMB, to which my noble friend Lady Carnegy referred, is equivocal on the subject. The section on the processing industry says: Whether the import deficit is due to a production or a processing bottleneck is an important question.

"In other words the import deficit may be due to constraints imposed on processors by the P.M.B. through the P.M.S., or to lack of processing capacity and marketing ability in the British processing industry". So that does not get us very much further.

However, MAFF told us in its evidence that in Great Britain processors found that the quota system made it more difficult for processors to be assured of their supplies and that quotas. by restricting production, gave a higher average price of their raw material. That was borne out by the representative of the Potato Processors Association, who said: the potato marketing scheme has been disadvantageous to us —particularly in the way it operates in this country … This has resulted in potato prices being generally higher in this country than in most other E.C. countries and in our finding it is more difficult to obtain potatoes of the right quality, variety and value for our processing plants". He went on to say that there was at present in Great Britain sufficient processing capacity to take over a proportion of the imported tonnage but that new plant built to satisfy the home market would be more likely to be placed on the other side of the Channel. He blamed the potato marketing scheme. He said: If the present scheme stays … I believe that it will adversely affect investment here in the United Kingdom". Finally, he quoted a Dutch person as saying to the secretary of his association: I hope to goodness your potato marketing scheme stays. It is the greatest advantage that Dutch processors have in helping them to exploit the UK market". The Dutch look like following the example of the Danes, who captured more than 40 per cent. of our bacon market, which our home pig industry had ample capability but not the wit to satisfy in full.

Those are some of the reasons which lead me to agree with the conclusion in our report; namely, that a free market in potatoes would lead to a more competitive industry, where efficient British producers would not only increase their share of the home market but should also aim to penetrate markets abroad. I shall be very unpopular with my farming friends for saying so, but I fear that our producers cannot do that within the restrictions of the potato marketing scheme.

6.59 p.m.

Lord Monk Bretton

My Lords, I do not grow potatoes now. Like my noble friend I am an ex-grower. I hasten to add also that I do not have any quota. However, unlike him, during debate on the Agriculture Bill I said quite a bit in support of the Potato Marketing Board. Though I am now better informed (I hope), I do not recant what I said then. Indeed, I find the subject an extremely complicated one. I can understand the anxieties there must have been among members of the Select Committee over the matter.

One at once picks up that prices are higher in the UK. The question is whether we are comparing like with like in the kinds of potatoes which we are considering. I do not believe that we really know. Something else on which we must keep an eye is the great asset of the Dutch—their land. It is their greatest asset in the potato industry. We need not give up heart because of that, but to some extent we must remember that factor.

If the potato marketing scheme quotas are abolished, the insurance provided by support buying must go also; the one supports the other. I therefore find it difficult to accept that abolition of quotas will not result in greater fluctuations in price and in the acreage planted. The scheme at least kept acreage planting more constant.

It follows that if we are not careful and make a wrong decision, investment in potato growing, which is extremely important, will be discouraged. There will be a danger that instead of quota abolition stimulating production and reducing import penetration, the reverse could arise. That is pointed out in the Nottingham report. It is said that the potato marketing scheme is against the consumer interest. To a small degree that may be so. However, to date it has encouraged investment by growers which, in the long run, has been to the advantage of consumers.

There is evidence that we endure greater yield variation per acre than some other parts of Europe. Some of that could perhaps be cured by relocation or irrigation. It would be a good thing if and when that comes about. If we go on as we are it will probably happen anyway. But as regards potatoes for processing, we have greater difficulties over ensuring quality. We have difficulties in obtaining the right sugar content and that is climatic. It may be alleviated by better varieties, but that is in the long term. The importance of our seed industry is again illustrated.

Many processing varieties of potato are useless for other purposes if rejected. One is then back to the need for a support scheme over the problem of quality risk in producing processing potatoes. Of course, the potato marketing scheme provided that when a processing crop was unsatisfactory. Without that insurance through the levy, producers will carry the whole burden in such cases.

I should like to mention our market. In processing there is a tendency for it to be in the hands of internationals. Unlike Holland, we have one processor with 60 per cent. of the capacity. For the rest of the market we have to keep an eye on the increasing power of the supermarkets—very much a UK phenomenon. I have said a good deal about that in this House on several occasions. Therefore the position of the United Kingdom growers is more bleak than anywhere else unless they have strong marketing. The road ahead does not spell that it is safe to rely on laissez-faire. There are too many oligarchies around for that. Most growers feel that some form of direction is needed for the industry.

It must be said that we were able to solve some of our marketing problems in the absence of strong co-operatives as in Holland by means of the potato marketing scheme. European growers all want something similar—greater stability if they can obtain it. They could not achieve that before the advent of the European market, as we could, because of their cross-border trade and their market being less isolated than ours. Hence the controversy over the new EC proposal in COPA and in the European Parliament. That controversy is something that should not be lost on us.

I suggest, if possible, that we do not abolish or disrupt the potato marketing scheme. Unless there is something strong enough to take its place I fear that abolition of quotas would be a serious blow to the industry in this country. It is not the same situation as is the case with milk, where at least for the moment quotas are a protection for British producers. The potato situation is considerably less safe. It is essential to pay more heed to growers' views. As far as I am aware the majority of them are in support of the PMS and I believe that also applies to the majority of the acreage. One should definitely take all those points into consideration before being ready to accept the recommendations made by the Select Committee.

I fear that we could lose more ground to the Dutch and others by scrapping our marketing system without establishing a co-operative like theirs. Our quota system —certainly as claimed by the Potato Marketing Board—is capable of adjustment to accommodate more processing. That would come about when processor over-capacity in Holland, which is the position at the moment, is more fully used. The quota scheme is now much more like co-ordinated production planning and there seems to be a need for that.

I am sure that in Holland one will find that loyalty to one's co-op is strong. Dutch producers plant with an eye to the market. They have discipline and show it. Their approach is not unco-ordinated laissez-faire; it is a thoroughly co-ordinated affair. I do not believe that a laissez-faire approach in this country would work. I believe that our system, with modification from time to time, is best retained and built upon. It would then be capable of producing a sound basis for producer and processor investment to get the right production in the right places. It may not produce stability of supply because of weather, yield and quality. But it will produce stability in acreage planted. That in itself is extremely useful.

I believe that there is another moving target in addition to the EC scheme; that is, the Potato Marketing Board. It has evolved considerably. It is probably well capable of evolving further and we should abandon it only after a great deal of thought. We may do so at our peril.

7.9 p.m.

Lord Lyell

My Lords, first, I thank my noble friend Lord Selborne and the members of his committee for all their hard work in producing the report we are discussing today. Your Lordships will know of the Angus mafia, as explained by my noble friend and neighbour Lady Carnegy. My noble neighbour who has yet to speak—the noble Lord, Lord Mackie of Benshie—grew, and for all I know is still growing, potatoes in his new area. My noble friend Lady Carnegy is still growing on the lovely lands of Lour, but perhaps not in her own capacity.

I have to declare an interest, in that I have quota but allow some of the giant processors to grow on Kinnordy land. I, and I believe all potato producers in Angus in Scotland and elsewhere, will pay tribute to the very hard work of the Potato Marketing Board over nearly 60 years. I believe it is agreed that that operation has provided the stability which is, to put it politely, demanded by my fellow Scots, be they producers of ware or, above all, seed potatoes.

I thought fit to speak in this debate in a fairly humble capacity only at the weekend. For that reason I did not receive all the fascinating reports from Nottingham University. I saw some reference to them and received something by fax this morning. What struck me was paragraph 47 of the report of the Select Committee. I should like to quote from the report of my noble friend Lord Selborne. The report suggests that significant fluctuations in production since 1985 are noted. However, that is also the case in Europe. Paragraph 47 goes on to mention that demand is inelastic and that has produced considerable variations in producer prices. Evidence was given by Mr. Black, who I believe was the representative of the National Farmers' Union of Scotland. He said at page 49, Q108, that, although demand might have been inelastic, he was continuing to sell potatoes. I do not know whether those potatoes were ware potatoes for the pot, fresh potatoes or potatoes for processing. He said that he had sold pre-packed supermarket potatoes last year for £150 per tonne. At the same time of year this year he is selling presumably the same type of potatoes to the same supermarkets for £55 per tonne. Yet he says that prices in the supermarkets have remained the same. I find that most interesting. We find that demand is inelastic and that prices will go up or down, yet prices at the farm gate can be one third of what they were last year but not change in supermarkets.

What amuses me considerably is another comment in paragraph 47 of the report. Mention is made of the same fluctuations in prices in other member states. This arises very much in the context of the Potato Marketing Board's quota. I refer to the end of the paragraph: the main effect of the potato marketing scheme is that potato prices in Britain fluctuate around a higher mean". I have heard that once most distinguishedly from my noble friend Lord Selborne. I do not know whether when he and I took O-level or elementary mathematics at Eton 37 or 38 years ago we covered things like higher mean figures. We were concerned with simple figures.

Perhaps I may take my noble friend and your Lordships to Appendix 6 on pages 38 to 40. The appendix deals with the prices of potatoes for processing in Britain. The figures purport to be in support of the case made by the potato processors. We have heard a great deal from all who have spoken that it is the Netherlands potato industry that is our greatest competitor. It is the greatest supplier to the market. Whatever "higher mean" may mean, I invite your Lordships to look at what appear to a simple Angus man to be simple figures. Referring to page 38, in 1987/88 the annual average within the band above —that is to say, column (A) under "Great Britain" (for the purposes of these calculations Northern Ireland is excluded)—was £64.56 per tonne as against £42.97 per tonne in the Netherlands. At the bottom of page 38 in 1988/89 your Lordships find that the figure is £60.61 per tonne as against £54.79 for the Netherlands. If we look at page 39, we find that for the past three years, according to figures produced by the processing industry in support of their case, average prices per tonne in 1989/90 have been £112 in the Netherlands versus £90 for Great Britain; in 1990/91, £83 against £75 and in 1991/92, £79 against £78. The processors tell us that the quota scheme of the Potato Marketing Board is not acceptable and produces higher prices. These figures come from the processors who want the scheme done away with because they say that that will assist the housewife and the industry.

My noble friend Lady Carnegy raised a point relating to the seed potato industry in Scotland. I await the thunderstorm from my noble friend and neighbour Lord Mackie. Perhaps he will allow me to allude to one or two points made in evidence. I refer particularly to the evidence of Mr. Melrose, who was speaking for the seed potato industry in Scotland. Your Lordships will see that on page 70, at 187, Mr. Melrose points out that the seed potato industry needed a lead time of perhaps seven, eight or even 10 years before the material found its way eventually to an English or perhaps Scottish farm and into the ware and production cycle. I seem to remember using a similar argument for the protection of long lead products a fortnight ago when arguing for the pharmaceutical industry.

Nevertheless, I believe that what Mr. Melrose presented to the committee had some force. He stressed the export opportunities for the Scottish seed potato industry overseas. Over the weekend my mind wandered to places like Russia, Poland and other large potential markets for the Scottish seed industry. Coupling the seeking of those overseas markets with the long lead time, it was his belief, and, I understand, that of the farmers' union in Scotland, that the current scheme with quota, warts and all, provided stability, and that that was what the seed industry was seeking.

I should like to turn briefly to paragraph 48 of the report and couple that with the wise evidence of Mr. Pooley. The committee accepted the point made by the Scottish seed potato growers; it went a good way to accepting the points made by the industry. Mr. Pooley in evidence stressed on page 81, at Q240, that the scheme should not cover breeders. He felt that breeders were major entrepreneurs and that any scheme proposed as a result of the recommendations of the committee, or from elsewhere, should not necessarily cover breeders of Scottish seed potatoes.

I am very interested in paragraph 47 of the report. I hope that noble Lords and my noble friend on the Front Bench will consider the three examples given on pages 38 to 40. Perhaps my noble friend on the Front Bench or my noble friend Lord Selborne can tell me why it is thought that the potato marketing scheme as it exists in Great Britain at the moment produces a higher mean. I accept that I have taken average prices in the three most recent years, comparing the Netherlands with Great Britain. However, those figures are presented by the processors. I wonder whether I or the processors have got them wrong. It seems that some of the evidence does not necessarily demonstrate the inefficiency of the quota.

That said, I should like to thank my noble friend Lord Selborne and his committee and all the experts who have produced a very readable and lucid report. I believe that it is of immense importance to the potato industry and also to the seed potato producers and experimenters in the great county of Angus.

7.19 p.m.

The Earl of Perth

My Lords, I apologise for not having put down my name earlier but I did take the necessary safeguarding steps in order that I might speak in the gap on the speakers' list.

First, I must declare an interest. It is not a very large interest but all the same I grow potatoes. This year I wish that I did not and I think that most growers of potatoes are of the same opinion. Indeed, it occurs to me that it may be rather a bad time to introduce change—a radical change—because we do not know what will come about if we do away with the Potato Marketing Board, go into the deep end of no restrictions of any kind and take our chance with the rest of Europe.

Perhaps I would not mind taking our chance with the rest of Europe if I felt that the Government could guarantee that we would all be treated in the same way. However, I have heard again and again today that in one way or the other there have been subsidies to almost all the other countries in Europe. The noble Earl, Lord Selborne, said that even if there is a general scheme of things there is no guarantee that other countries will not continue to support their industries. All they have to do is to report it. Knowing the position of the British Government, I am afraid that they certainly would not support their industry. We would be in the position of having got rid of our Potato Marketing Board, whose cost, incidentally, is almost entirely borne by the potato growers and not by the Government—they have helped a very little this time.

So the first thing that occurs to me is that, if there is to be a change, we must be sure that from then on we have a level playing field. Otherwise, we shall find the same kind of thing as happens at the present time in other areas of farming whereby other European countries somehow seem to get around the rules. One of the arguments in favour of the change was that the system as it stands is very untidy and that only two commodities are not covered as a whole. That is about the worst argument I have ever heard. What does being untidy matter if the system works?

I find this a very difficult subject. As has already been pointed out, we ought to enjoy an advantage in the ware potato market because it costs £20 or, as some other noble Lords have said, £30 a tonne to bring potatoes from Europe to this country. But I am worried by the fact that prices do not seem to affect consumption. I say that very forcefully in relation to this year. Many potato growers have seen the price drop by 80 per cent. but that does not increase consumption.

Lord Mackie of Benshie

My Lords, has the noble Earl noted that the 80 per cent. drop has not been reflected in the supermarket?

The Earl of Perth

My Lords, I entirely agree. That is another way of saying what I was trying to say. The fall in the price does not mean that consumption will increase. I am not entirely clear about the reason for that. It may well be, as the noble Lord, Lord Mackie of Benshie, said, something to do with the system of great supermarkets in this country which we do not find in Europe.

Another thought occurs to me. The report tells us how the countries of Europe, particularly Holland, have very successful co-operatives. What guarantee do we have that getting rid of the Potato Marketing Board, which in a sense is a co-operative, will result in more successful co-operatives in this country straight away? There is a risk in getting rid of our Potato Marketing Board entirely and being at the mercy of co-operatives, which take a long time to develop.

What are my conclusions? It is a very difficult subject and we have heard the views of those who have studied the subject carefully. Two points arise. First, we should be certain that the other governments will not be able to help out their own producers unless we can too. I am clear that we will not if the Potato Marketing Board disappears, because the Government will not be prepared to help out in the same way as others. I do not blame them, but that is what one has seen again and again.

Secondly, if we are to do this, is there no way in which the Government can do it gradually? To take a plunge into icy water at a time of uncertainty is a mistake. If the Government wish for change, I beg them to do so in a way that can be gradual. Once one stops the activities of the Potato Marketing Board altogether it will be difficult, if not impossible, to bring it back again. If the Government are determined to go forward I hope that they will do so gradually. I do not know what I mean by that but I do know that it is very necessary.

7.27 p.m.

Lord Marlesford

My Lords, I crave the indulgence of your Lordships to say a few words in the gap in support of my noble friend Lord Selborne, on whose sub-committee I had the honour to serve. I declare an interest as a potato grower and an identity of interest with the noble Lord, Lord Perth, in that I too expect to make a loss on my potatoes this year despite the Potato Marketing Board and the quota system.

I should declare straight away that I am a free trader by instinct. Perhaps that has something to do with 17 years at the Economist. But that does not mean that I do not see the advantages of fixed and rigged markets from time to time. The ERM is a lovely idea if it produced a stable currency network, and a single currency might also be very nice. In certain areas market intervention works well. We have milk quotas which have been successful. That is because they apply throughout Europe. What in my opinion would be wholly unacceptable to the British farmer and to the British potato producer is constraints on the acreage of potatoes that may be grown by British farmers with no such constraints on farmers in other countries of the European Community and completely free trade in potatoes. The cost of transporting potatoes is a relatively unimportant factor—compared to milk.

I understand why the Potato Marketing Board should be mounting a bit of a campaign against our report. I studied Karl Marx for long enough to understand how people react on such matters. Equally, I can understand why some farmers will be apprehensive at the loss of the potato marketing scheme on the old adage of "holding firm to nurse for fear of finding something worse". In my area of England, Suffolk, I do not believe that I shall be unpopular with my potato growing neighbours for saying that I believe that the potato marketing scheme should go. The committee attempted to get evidence of this alleged widespread support for the scheme and we did not find it.

I believe that the crucial factor is that the Potato Marketing Board and its potato quotas have not in fact increased the stability of the potato price. The reason has already been referred to. It is in our report and also in Section 6.3 of the Nottingham University report—the inelasticity of the demand for potatoes. This also explains the point raised by the noble Earl, Lord Perth. There is a limit to the number of potatoes which the supermarkets can sell. On the whole, for the people in this country money does not limit the quantity of potatoes which they buy. They buy the number they want to eat.

If, due mainly to the weather or sometimes imports, there is a big fluctuation in the supply of potatoes, the supplier will be paid less by the supermarket. The supermarket goes on selling at the same price because it can get the same price. If the supermarket cuts its price it would not sell more. It probably has an idea of the price which people are prepared to pay. So when the price to the producer falls the supermarket does not have to cut its prices. That is the explanation of the apparent paradox of the noble Earl, Lord Perth.

We in Britain, as they do in Holland, have very good producers' co-operatives. I am a member of one, Anglian Produce, which I believe is the biggest in Britain. Co-operatives try to regulate the market to help farmers by telling the potato growers when to lift and when not to. Thus they reduce the perennial rip-off of the potato growers by the supermarkets and processors.

Potatoes have always been, and I believe will continue to be, one of the most speculative crops that farmers can grow. I do not believe that our prospects will be adversely affected by the scrapping of the potato marketing scheme. I support the report. I also support my right honourable friend the Minister for Agriculture. I believe he has a healthy scepticism of assumptions about attempts to regulate which do not really work.

7.33 p.m.

Lord Mackie of Benshie

My Lords, I too must thank the noble Earl, Lord Selborne, for putting his case with great clarity. But I regret to tell him that it has failed to convince me. I was quite shocked at some of the things in the report. When I came to paragraph 47 I could hardly believe what I read: The Committee note that these price fluctuations are not more pronounced in other Member States and therefore agree with MAFF and the Potato Processors' Association". That is a combination including both the devil and the deep blue sea. The report goes on to say that the main effect of the potato marketing scheme is that potato prices in Britain fluctuate "around a higher mean".

What we have seen already is that a higher mean must be good for the potato growers of Great Britain. As the noble Lord, Lord Stanley of Alderley, said, one of the objectives of the CAP is to give the farmers of this country and Europe a reasonable standard of living. I cannot see why the committee should believe this combination of MAFF and the potato processors—one driven wholly by self-interest and the other by doctrinaire assumptions which are becoming more and more unpalatable to the voters of this country.

I then read paragraph 49: The Committee take the view that a free market, in potatoes would lead to a more competitive industry, where efficient British seed and ware producers would increase their share of the home and export market. The Committee therefore support the abolition of the Potato Marketing Scheme". Paragraph 51 is even worse. It states that the committee supports the abolition immediately, whether there is a scheme produced by the CAP or not.

These are arguments which I would like to contradict. I shall start with the core of the argument both from the ministry and the committee. It is that in a free market we would supply all the extra consumption of processed potatoes, whether crisps, par-fried chips or anything else which the British public have taken to. That is the core of the argument from both the Government and the committee.

When one looks at the admirable report from Nottingham University it puts the processors on the spot. The processors have a very good method of getting their supplies. They contract for 50 per cent. which gives them the core. Then they realise on fluctuations in the market, which is downwards mostly, so that they fill up the rest of the requirement and do not have to contract for the lot. That is the first thing they do. It may be good commercial practice but it is not particularly good practice for the industry in Britain.

Then the report continues by giving some more interesting features. One of them is that in the great processing industry 10 of the members have 95 per cent. of the business in Great Britain. The largest single business has 60 per cent. That may or may not be a good thing, but it is a significant factor when it comes to any surplus potatoes in this Country and the price which farmers may get for them.

I am delighted that the report shows exactly what kind of return is being obtained on the money. It is far greater than that achieved by any other section of the food industry. In 1991 McCain Foods was knocking off 26.5 per cent. on the return, Walkers Crisps 54.6 per cent. and Bensons Crisps 40.5 per cent. Good luck to them. That is absolutely ideal because they are making money. No business or industry can prosper without making cash.

Then we come to the great restrictions on a competent industry; namely, that the potatoes required cannot be grown in this country. That is simply not true. A number of things can be done. The first is that an extra quota can be available and applied for by the processors if they want to contract it out to farmers. Surely that is the efficient way to produce good crisps; namely, to contract out to farmers all their needs and insist on the quality that they require. The farmers are perfectly willing to do it. The record growers grow to good records. The Burbank potato was grown for the people who wanted it for their particular job. Surely to make one's suppliers happy and give them a price that gives them a return—not necessarily of 50 per cent. on their capital but a decent return—is the way to build up an industry that will have the confidence of the consumers who will buy its products.

One of the other things that the report shows clearly is that when it comes to the end price to the consumer the price of the potato hardly matters. Although we all knew that, it is nevertheless an extraordinary revelation which the report quantifies. Those facts show that what the Minister should be doing is looking at the energy, application and enterprise of the processors. They are the people who must contract and get the farmers to grow what they want, but instead of doing that here they prefer to invest in Holland. I do not know whether they think that they can get a bob or two more there, but I know that, if they want to get a good hold on the potato market in this country, the way to do it is to make a proper bargain with the suppliers on both price and quality. If that is its argument, the processing industry has completely failed this country, and it would be well to look at the Potato Marketing Board's suggestions in this area.

There is no question but that the problem of the primary producer still deserves our attention. It has not been solved. He is always at the mercy of market forces, especially when it comes to potatoes. Potatoes can grow well one year but badly the next. I must admit that I remember with great joy that in 1974, 1975 and 1976 potatoes went to a ridiculous price. Although that knocked consumption back in this country, it was not an inelastic effect. Those years were followed by some of the worst years for potatoes in the history of the industry. Obviously, this year is appalling and a great many people will lose a great deal of money. However, the producers are willing to have another go and, under the umbrella of the potato marketing scheme, fewer will go under than would have been the case with another scheme. That will guarantee supply to the consumer.

There is no question about it—one cannot stabilise the price of a volatile crop such as potatoes but one can help it. One can give the producers confidence, and that is what the potato marketing scheme has done. I implore the Government not to spoil the whole thing. I implore them not to rush for a free market position but to take a look at who is really to blame for the lack of production for consumption of the newer varieties of potatoes in this country. I do not think that it is the grower; I think that it is the industry and perhaps the Government. Anyhow, I like the way the report is set out; I like the colour of the label; but I reject its contents.

7.43 p.m.

Lord Carter

My Lords, like other noble Lords who have spoken in this debate, I should like to thank the noble Earl, Lord Selborne, for introducing it. I thank him and his committee also for choosing to examine this subject which, as we know, is timely and of great interest. The Agriculture Bill is now at Report stage in another place. From reading the report of the Committee stage there, it is clear that the Government are determined to revoke the potato marketing scheme and to wind up the Potato Marketing Board whether there is a European Community requirement to do so or not. That determination will certainly be strengthened and supported by the conclusions of the Select Committee.

I have to say immediately that in my opinion the committee reached the wrong conclusions. It received some wrong evidence from the Ministry of Agriculture, Fisheries and Food. It received a wholly predictable, parti pris stance from the Potato Processors' Association. In my view, it conducted a less than thorough economic analysis of the actual market situation.

I should like to deal at the outset with two extremely important matters which are germane to this debate. The first relates to MAFF's evidence to the committee. I do not apologise for repeating remarks made by the noble Lord, Lord Stanley of Alderley. As your Lordships will know, I served on Sub-committee D for over five years and I regret now that my Front-Bench commitment as the Opposition spokesman on agriculture and rural affairs means that I can no longer serve on it. Never in my time on that committee can I remember a government department producing evidence so riddled with error as that given by MAFF to your Lordships' committee. First, MAFF got the statistics hopelessly wrong. How on earth can a government department produce statistics for a parliamentary committee showing that UK exports of potatoes have declined when in fact they have increased? The ministry's figures for the five crop years 1988 to 1992 were wrong by 21 per cent. That led directly to the committee reaching the wholly erroneous conclusion (in paragraph 49 on page 12) that the British potato industry is less competitive than that of France, Holland or West Germany.

Secondly, MAFF mixed up calendar years and crop years—a misunderstanding which is so blatant in farming terms that it beggars belief. Thirdly, it got its figures wrong on production in Holland. Fourthly, it could not tell the difference between one kilogram and 100 kilograms, producing prices in Annex B on page 14 which completely baffled me and others when we tried to work out what on earth the figures meant. I spent many hours on that last week and feel extremely sore about it. Fifthly, MAFF used a common measure of Eurostat prices, which were multiplied by ecus, and thereby produced a price series which bears no relationship to reality and is a mere statistical figment. It is statistically meaningless. Sixthly, it misunderstood the market intervention system which is operated by the PMB. Seventhly, it incorrectly described the method by which the joint consultative committee calculates the target area.

The kindest thing that one can say about the evidence given by MAFF to the committee is that it has all the hallmarks of the clock which struck 13—one not only doubts but completely disbelieves that which has gone before and that which comes afterwards. When the noble Earl, Lord Selborne, responds to the debate, could he tell us whether it is intended to produce an erratum sheet or something that will indicate to those who read the report (because it is now in the public domain) the serious errors in MAFF's evidence?

The second important point concerns the report prepared by Nottingham University, An (Un)Common Potato Regime for Europe, which has been quoted. In my view, it is a great pity that the report was not available to the committee. If it had been, I suspect that the committee might well have reached a rather different conclusion. I was extremely disappointed to see that Mr. John Gummer attempted to rubbish the report in another place by pointing out that it was commissioned by the Potato Marketing Board—the same point was made by the noble Baroness, Lady Carnegy of Lour —thereby tending to call into question the academic integrity of its authors. I hope that the noble Earl, Lord Howe, will not repeat Mr. Gummer's statement, particularly as my noble friend Lord Peston was one of the authors of the report and anyone who calls into question his academic integrity does so at their peril.

I should point out that over half the research and development that was commissioned by MAFF in 1991–92–a total of £123 million—was commissioned from external organisations. Are we to understand that all the external reports prepared for MAFF are no longer to be regarded as independent simply because MAFF pays for them? Any such suggestion would raise questions from the National Audit Office. Equally, that would cast doubt on the reputations of the researchers and the academics involved. I understand that the academics involved in this report were never approached by PMB staff at any stage before publication. The only PMB comments that were made on the initial draft related to factual inaccuracies in the text. I understand also that the Potato Processors' Association never responded to calls that were made to it and thus lost its chance of direct involvement in the study.

As we know, the committee decided to report on potatoes because the European Commission is proposing to introduce a potato regime and the Government are taking powers in the Agriculture Bill to wind up the potato marketing scheme. Taking the European Commission first, I do not think that I have seen a more blatant example of European Commission ideology in practice than that which was stated by Mr. Roberts, the deputy director general, in his evidence on page 54—this has already been alluded to—when he said: One of the reasons why we want to have a potato regime is simply that it is one of only two major products that are not covered by the common agricultural policy, the other one being alcohol, and in that sense it has been an untidiness for many years". It is not a question of whether the potato market is failing the producer or the consumer; not whether there is some great distortion in the market requiring Community intervention; not whether the European taxpayer and consumer is being held to ransom as in the rest of the CAP. No, it is untidy, and so we must do something, but we are not entirely sure what and so we will do very little.

If the agricultural directorate spent less time tidying up that which offends very few people and more time attempting to deal with the £6 billion of fraud within the EC, which is mostly in the CAP, its time would be must better spent. Mr. Spitz, also from the Commission (page 57) said: I should stress the fact that market forces prevail at least on the continent. Even if some governments such as the French or the Italian occasionally take some measures, we should not over-estimate their effect". Denmark, Italy, France, Spain, Portugal, Luxembourg and Holland all have schemes of one type or another for helping the potato producers. I do not believe that that point was brought out fully by the committee. It is crucial. If there is a lightweight regime will those national aids all be swept away? The Government and the committee tell us that the PMS and the PMB will have to go, but does anyone believe for a moment that all the other member states will fall meekly into line and stop helping their potato producers? The committee apparently does not mind, because in paragraph 51 it recommended: If, for any reason, there is a failure to agree on the Commission's proposal, Britain should not continue to impose unilateral market controls". If there is no regime, all those other countries will presumably be able to keep their national aids, but ours have to go: we have to wind up anyway.

The Government's enthusiasm to wind up the PMS, which is backed up now by the report, has a simple objective: to ensure that potato processors can buy their UK potatoes more cheaply. It was clearly stated by Mr. David Curry, in Committee in another place when, after referring to the consumption of fresh potatoes, which was about 34 ounces, and the consumption of crisps and frozen chips, which was about 4 ounces, he said: Processed potatoes, in whatever shape or form, probably account for more than a third of the market. The heart of the argument is whether, when we consider the overall interest, the scheme still accommodates those changes".—[Official Report, Commons, Standing Committee F, 4/5/93; col. 187.] Although it was in the evidence, nowhere does the committee report draw attention to the fact that the frozen chip sector is dominated by one multinational with 60 per cent. of the domestic processing capacity and five firms which control nearly 90 per cent. of the capacity. I was not in the least surprised to see that the PPA in its written evidence said (page 65) on its fourth point: It therefore strongly opposes:—any form of production quota system—any form of price support or intervention. It believes free market forces are likely to produce the desired effects most speedily". With one processor controlling 60 per cent. of the market and five firms controlling 90 per cent., I bet it believed that free market forces were likely to produce the likely effects most speedily. Curiously, the committee did not attempt to question Mr. Richard Harris of the PPA about the degree of concentration in the potato processing industry and, not surprisingly, he did not attempt to volunteer the information.

The committee says in paragraph 47 that it accepts the evidence of MAFF and the PPA that the PMS has not brought about the stability that most growers perceive. I have already pointed out that the MAFF evidence on prices is statistically worthless and that the PPA has a particular point to make. It is a great pity that the committee did not have the benefit of the rigorous statistical analysis contained in the Nottingham report which shows that the range of British potato prices is much narrower than it is for continental potato prices and British potato prices are not more expensive than those in Europe. Also, although GB potato yields are more variable than those in other European countries, price variability is in fact lower. So there is more stability in the market, and that can only be the result of the operation of the PMS. That is an important point. Indeed, it is crucial to the committee's conclusions. It seems to me that the committee was over-persuaded by the incorrect evidence of MAFF and the predictable evidence of the PPA and that of Mr. Robin Pooley of Anglian Produce and did not seek a full econometric analysis of the available statistics.

Lord Marlesford

My Lords, does not the noble Lord think that the Anglian Produce charts which are produced on pages 82 and 83 of the report demonstrate big fluctuations?

Lord Carter

My Lords, they demonstrate fluctuations, but if one looks at the mean, they also show how stable the market is if one takes the weighted average. If one takes any period, with all the differences in the quality of potatoes, there will be a wider range of potato prices. The market is notoriously cyclical. One should look at the weighted average. If one refers to Mr. Pooley's evidence, I believe that he said that if one wants to look for evidence of stability in the market, then one should look at the weighted average.

As I say, Mr. Pooley's evidence obviously impressed the committee greatly. I am not in the least surprised by that because I know Mr. Pooley. However, what struck me when I read his evidence was his description of a vibrant and thrusting industry which is investing heavily, is co-operating with its European counterparts and is generally performing well. All that has been done while the PMS has been in existence. I suspect that that has helped Mr. Pooley and others considerably to plan their marketing because they knew that the market was underpinned by the PMS.

The other important point upon which the committee touched in its questioning of Mr. Harris of the PPA, was the role of the joint consultative committee. What seems extraordinary is that, despite the constant protestations of the processors that they cannot obtain the quantity or quality of the potatoes that they need at a competitive price; they never seem to have used the JCC to correct that position. That was a point brought out by Mr. Tipping in Committee in another place. He put it well. He asked: Am I right to remind the Committee that, at the joint consultative council, there has never been disagreement about the amounts and types of potatoes grown? Is not it the case that there has been no substantive disagreement during the past three years and that the Potato Processors Association is well represented on the joint consultative committee? I believe that it holds three of the 18 places on that committee. It is strange when consensus is not achieved".—[Official Report, Commons, Standing Committee F, 4/5/93; col. 188.] When the point was put to Mr. David Curry he had no answer, but the Nottingham report comes somewhere near the answer when it points out that the dominant position of some processors has encouraged them to believe that sophisticated contracts are unnecessary when their market power can be brought to bear.

At the moment the PMS and PMB exercise a degree of countervailing power and the JCC fulfils an important role in producing market stability. Without them, the producer of processing potatoes would be in a much weaker position. The Nottingham report suggests that there is already a considerable exercise of market power in the processing sector. That cannot be ignored, as the committee appears to have done.

We have heard a great deal about the success of the Dutch in that respect. It seems to me that as they over-invested considerably in processing capacity in recent years there has been a great deal of cheap processing Dutch capacity as a result and they have been able to export at marginal cost. That is now changing. It is noteworthy that the processors are now starting to invest in this country.

An independent survey of registered GB growers conducted by Public Attitude Surveys Limited in March of this year shows that 71 per cent. of growers support the GB scheme representing 76 per cent. of the planted area. The majority of British potato growers both by number and acreage want to use their own money (at no cost to the taxpayer) to produce stability in a notoriously cyclical market where potato processors are an oligopoly but where there is a mechanism (the JCC) which could produce the quality and quantity they want if they cared to use it. But of course they will not use it so long as they have a complaisant government who have swallowed their arguments hook, line and sinker and are prepared to hand over British potato producers, completely unprotected, to a market where five firms control some 90 per cent. of capacity; where the European Commission can produce no better argument for a potato regime than that Europe looks untidy without it; where ECOSOC and the European Parliament have found the proposed EC regime wanting and have proposed amendments to it; and where we have a situation which lives and breathes subsidiarity. I do not apologise for repeating the statement made by the noble Lord, Lord Stanley of Alderley. He told us that only three years ago in 1989 the Government decided to retain the basic elements of the existing scheme in view of the need to maintain stability in the potato industry at a time of major adjustment in the arable sector generally. What has changed in three years?

Another conclusion is that of the report of the University of Nottingham. It states: Most importantly, the analysis of the Potato Marketing Scheme concludes that removal of the Scheme would reduce prices and production in Britain. As many as 40% of growers might lead the industry in the medium term in response to squeezed margins on variable and fixed costs. As much as 500,000 tonnes of output could be lost and 7,000 producers might leave the sector. Certainly, removing area control would allow other growers to expand but the analysis suggests that the likely increase in plantings would be relatively small. The effect of this on agricultural and rural employment and on import demand for potatoes and processed potato products would run directly counter to the stated objectives of the UK Government. The adjustment to a 'free market' in potatoes would not be painless". I have the greatest respect and regard for the noble Earl, Lord Selborne, and for his committee. However, in this case I believe that the Select Committee and the Government have got it wrong.

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

My Lords, for a subterranean vegetable the potato has recently adopted a fairly high profile. It seems like only the other day that we were engaged in a stimulating debate on potatoes in the context of the Agriculture Bill. Now here they are again cropping up, if I may say so, under the aegis of the European Communities Committee report on the proposed common organisation of the market in potatoes.

Before dealing with the detail of the report I wish to congratulate my noble friend Lord Selborne and the committee on what I consider to be a most thorough and excellent piece of work. They took evidence from the widest spectrum of interests in the industry; for instance, from those who favour the retention of our potato marketing scheme whether or not there is a Community regime to those who wish to see its central provisions done away with. The evidence given is fully and clearly recorded. It is to the credit of the committee that, faced with a plethora of information, it has emerged with a set of recommendations in the clearest of terms. I do not say that merely because I happen to agree with the thrust of the recommendations. Surely it is in everyone's interests, whether or not they agree with the report, to have the issues so thoroughly analysed and such clear conclusions reached.

During the Agriculture Bill we discussed at length the implications of the Commission's proposals for our potato marketing scheme. It was clear then, as the committee's report accepts, that our scheme would be incompatible with the regime as drafted. At that time I presented various arguments to demonstrate why, if the regime were introduced, the loss of our scheme would not be the tragedy that many predicted. Having taken evidence from a wide range of experts in the field, your Lordships' committee has come to the same conclusion. Indeed, it has gone further in saying that, whether or not there is an EC regime for potatoes Britain will be better able to compete in Europe without the constraints of the potato marketing scheme.

Before I deal with the detail of the report, which the Government welcome, perhaps I may bring your Lordships up to date with events since we previously debated the subject. The House will recall that in December Ministers asked for work to be done on incorporating marketing standards into the proposals and agreed to take decisions once the opinion of the European Parliament had been received. Work has been proceeding and proposals incorporating marketing standards are now before the Council. The European Parliament has also delivered its opinion, which is basically favourable, although it contains several suggested amendments. The most notable allows a member state to retain its national arrangements, including quotas and intervention, should it so request. To attempt to allow such special pleading must surely be nonsense in the context of a single market.

In another place the Government have made it clear that we shall not be pressing for the retention of the quota and intervention elements of the potato marketing scheme in the context of a Community regime. That position is supported by the report of your Lordships' committee. We are prepared to accept a regime which sweeps away the various support measures that exist throughout Europe and allows our producers, whom we regard as the best, to compete on equal terms with their counterparts on the Continent. The regime is likely to come before the May Council for a decision. Of course, I cannot prejudge the outcome. Some member states still believe that a regime is not needed while others wish to see a heavier regime in the classic mould, with market support and intervention buying. Clearly, we wish to avoid such a heavy regime. In that we have the support of the Commission and the majority of other member states.

We agree with the committee that the primary objective of the regime should be the prevention of national schemes which distort the Community market. That answers one of the points raised by the noble Lord, Lord Carter. It is important to realise in this connection that various support measures, some more informal than others, operate elsewhere in the Community. However, nowhere else are there quota restrictions such as operate in Great Britain. All these arrangements would fall with the introduction of the common organisation of the market, thus achieving our long stated objective of—I shall not say a level playing field—a level seed bed for our producers.

Lord Carter

My Lords, I am grateful to the noble Earl for giving way. It is an extremely important point and the House will be grateful that he has brought it up to date. Is the Minister saying that if the Council of Ministers decides to adopt a regime such as that proposed by the European Parliament in which intervention is allowed we shall have to do away with ours and allow other countries to keep theirs if they wish?

Earl Howe

My Lords, I think it highly unlikely that the Council will agree to the proposals of the European Parliament in that respect. As I said, in the context of a single market it makes no sense to have national schemes; it is simply a contradiction in terms.

Another theme which ran through our debates on the Agriculture Bill was the dire effects which several noble Lords believed would follow the ending of our scheme, in particular the destabilisation of the market. That issue was raised by several noble Lords today. I tried to reassure your Lordships—I am not sure to what effect—that the prophets of doom were not necessarily right. Therefore, I am glad to see that the committee, having examined the matter in considerable detail and taken evidence from all sides of the industry, has reached the conclusion that the prophets of doom are wrong. The committee certainly appreciates the need for stability in the market but it is of the view that the potato marketing scheme has not achieved any greater degree of stability than occurs in other member states. Rather, it has meant that prices in Great Britain have fluctuated around a higher level than in other comparable member states. The Government agree with that analysis. most important indicator of the effects of the scheme in our view is the fact that the UK industry's share of the high added-value growth market in processed products far from being stable is in steady decline.

Your Lordships' committee is of the opinion that the abolition of the potato marketing scheme would lead to the UK industry becoming more competitive and reversing the trends of growing imports and declining exports. The Government share the committee's concern for the long-term future of the industry. The Government hope that more liberal arrangements will enable our growers, with all their advantages of expertise and technological advancement, to produce what the increasingly sophisticated market wants. We regard the freeing up of the market as a much-needed opportunity for us to repatriate the hectarage of potatoes which has been lost to the processing industry on the Continent, particularly in Holland.

The committee also concludes that a successor body to the Potato Marketing Board will be needed to carry out functions such as research and development, market promotion and the collection and supply of statistics. As your Lordships will be aware from our previous debates, the Government are also keen that those activities should continue. The Agriculture Bill now in another place provides specifically for the establishment of a successor body to carry out those activities if that is what growers want.

Those are the principal conclusions of the committee. Perhaps I should comment also on some of the other points which it made. As regards quality standards, the committee believes that those would be difficult to agree on and impossible to enforce. It suggests that a free market will dictate its own standards. The Government are not quite as pessimistic as the committee since they believe that, so long as such standards are restricted to the minimum necessary to ensure that growers' and consumers' interests are protected and applied only to fresh potatoes for direct consumption, they could be applied throughout the Community with advantage. I am happy to tell your Lordships that the majority of member states agree with that approach and it seems likely that provisions along those lines will be included in the eventual regulation.

The committee would prefer the Commission to evolve a common language of potato quality, although it recognises that that has been attempted unsuccessfully in the past. While the Government agree with the principle behind that idea, we consider that to be more a commercial matter between the producer and the customer, although under a common regime it is highly likely that such a language will evolve in any case.

I note that the committee believes that the proposals for grant-aid for the setting up of new producer groups may bring more coherence to planting and marketing strategies in some parts of the Community. The Government's view, which we expressed to the committee, is that those proposals will not directly affect the UK. The kind of group envisaged is not typical here and would not fit well with our marketing structure.

The committee supports the proposed system of import licensing which is intended to afford some measure of protection from disruption by third country imports. In general the Government do not welcome the principle of import licensing and agree with the committee that the practical problems of transporting fresh potatoes, together with the restrictions of the common customs tariff, already afford some considerable protection. It is likely that disruption would occur only as regards premium products such as early potatoes. There are well-established patterns of trade in such potatoes under tariff concessions and the Government hope that any measures would not be used to influence that traditional trade. We shall also seek further clarification on the financial implications of setting up a licensing system.

I now turn to some of the points raised in the debate. Your Lordships will forgive me if I do not cover all the points raised. I shall endeavour to write to noble Lords on the substantive points which I fail to cover now. I turn first to the noble Lord, Lord Carter. He became rather exercised about the MAFF evidence to the committee and thereupon proceeded to cast aspersions on its conclusions based on that evidence. He said that one part of the MAFF evidence was statistically meaningless. I disagree with him about that particular example.

Lord Carter

My Lords, why?

Earl Howe

My Lords, I am coming to that. The noble Lord drew to our attention table I on page 14 which contains a list of comparative prices which refers to ecu per kilogram. It should have referred to ecu per 100 kilograms. That mistake—and it is a mistake—makes no difference to the central tenet of the argument.

Lord Carter

My Lords, that is not what I was saying was statistically meaningless. The use of Eurostat prices takes no account of the various differences in grades and qualities and the way in which the potatoes are measured. Moreover, the value of ecus changes all the time for reasons completely unconnected with potatoes. That makes the statistics meaningless. I was not referring to the mistake to which the noble Earl referred, although I agree that it caused confusion. What is statistically meaningless is the use of the Eurostat prices and their multiplication by ecus.

Earl Howe

My Lords, we must agree to differ on that because I believe that that table presents a very revealing picture of the differences in prices between member states.

My noble friend Lord Stanley made various allegations against the evidence given to the committee by MAFF and, indeed, against the committee report itself. I find it difficult to respond in a way in which he would like me to because I agree with hardly a word of what he said. He spoke of serious errors in the export figures. There is only one figure involved which is an error in so far as it is a provisional figure which has now been updated. More fresh potatoes were exported last year, but that does not alter the inexorable rise in processed potato imports.

My noble friend went on to comment on the factual accuracy of MAFF officials' evidence. I agree that there are some mistakes in it, partly because of printers' errors which are difficult to legislate for and partly for other reasons.

Lord Stanley of Alderley

My Lords, what printers' errors?

Earl Howe

My Lords, for example, the printers' error that I mentioned in reply to the noble Lord, Lord Carter.

Lord Stanley of Alderley

My Lords, when I mentioned the question of ecus, I took exactly the same view as the noble Lord, Lord Carter. It was an incidental error. I merely said that it cast a reflection on the accuracy and carefulness of the MAFF evidence. I fully understand that mistake and am not worried about it.

Earl Howe

My Lords, I believe that my noble friend does himself and his case a disservice by concentrating on minutiae. The committee took a more statesmanlike view and clearly considered that the evidence given by MAFF carried some weight.

I agree with my noble friend that there are now special, if limited, arrangements for exports, but the House may like to note that those arrangements were introduced last year when the joint consultative committee decided to allow just short of 300 hectares, out of a total of 156,000 hectares, for export. It is not difficult to imagine what our Dutch competitors thought of that.

Lord Mackie of Benshie

My Lords, has the noble Earl seen a figure reaching a total of nearly 4,700 hectares allowed for various purposes, including manufacture?

Earl Howe

No, my Lords, I have not seen that figure but I am grateful to the noble Lord for bringing it to my attention.

My noble friend Lord Stanley and the noble Earl, Lord Perth, referred to subsidies given by other member states and asked whether the UK would undertake to match them. The whole point is that there should be no such aids or subsidies once there is an EC regime of the kind which is currently envisaged. It is by means of such a regime that fair competition is ensured. The way to achieve a level playing field is to stop other countries supporting their producers. If there is no EC regime, there cannot be a level playing field.

The Earl of Perth

My Lords, this is a vital point. Is the noble Earl saying that the Government would not accept any European regime if there was not total satisfaction that there should be no intervention by any nations in whatever form that may take?

Earl Howe

My Lords, the Government have said repeatedly that they are committed to seeing a level playing field for potato producers within Europe. That means achieving fair competition for our own producers. We are backing our own producers. We shall not see them disadvantaged in whatever regime is agreed to. We shall fight for our own producers in Brussels.

Lord Stanley of Alderley

My Lords, I am sorry to interrupt my noble friend again, but I have a helpful point to make. If what he just said is in fact the case, obviously the Government do not support paragraph 51, which was mentioned by the noble Lord, Lord Mackie, and the noble Lord, Lord Carter. That is a very vital point.

Earl Howe

My Lords, I shall need to look at paragraph 51 again to remind myself of its contents. I think that I had better write to the noble Lord on that point.

Conversely, if we have a single market, as we now do, it is absolutely crazy to run a protectionist regime when one has no protection oneself. As I said, we must allow our industry to compete on level terms. If I may say so, what my noble friend Lord Stanley failed to do was to address himself to the two central conclusions of the committee: first, that the potato marketing scheme is disadvantageous to Great Britain as opposed to potato producers; and, secondly, that an EC lightweight regime without the potato marketing scheme in Great Britain would be in our best interests. In particular, my noble friend did not explain why he felt that it would be a good thing if all the producers in other member states were allowed to produce as many potatoes as they liked, while only producers in Great Britain were prevented from so doing. My noble friend Lord Marlesford made that point very tellingly.

The noble Earl, Lord Perth, advocated a gradual period of transition if we have to make a change. The EC proposal provides for transitional measures. We have written to the chairman of the PMB and others asking for their views on what sort of transition would be appropriate. We shall take account of views once they are received.

My noble friend Lord Lyell spoke about the evidence given by MAFF that potato prices had fluctuated around a higher mean than in other member states. There is no doubt that prices, as a whole, fluctuate around a higher mean. However, where potatoes for specific purposes are in short supply, they will command a premium. Dutch high-quality potatoes for processing attract high prices. This year, for example, UK processors are hoping to buy in Holland even when thousands of tonnes of UK potatoes are being bought into intervention.

The noble Lord, Lord Mackie, asked why anyone should doubt that prices fluctuating around a higher mean benefited producers. I do not doubt that fact in a narrow sense. No doubt producers are delighted to have a higher price for their crop. But is that advantageous for the country? I do not think that that question has been answered. The noble Lord, Lord Carter, mentioned the PMB poll, in which 71 per cent. of those polled favoured the continuation of the scheme. The amazing thing about that poll is that 29 per cent. of producers who, by his argument, have an interest in the status quo do not favour a continuation of the scheme.

My noble friend Lord Monk Bretton said that fluctuations in production lead to a reduction in investment. We already have fluctuations in production. There is no reason why gearing production more closely to market demand should lead to greater fluctuations or less investment. Various speakers mentioned the report prepared by Nottingham University. When I saw the name of the noble Lord, Lord Peston, on the study, I must confess that my ears pricked up. I know him to be someone who thinks matters through in a sane and sensible manner. However, even Homer nods. I am afraid that what we have here is a report which pulls together several different pieces of work, without realising or acknowledging their inconsistency with one another. The analysis of the British potato marketing system and the economics of the processing industry in the paper is, I believe, flawed. In particular, its conclusion that a lower UK price would lead to increased imports confounds normal economic wisdom.

Conventional economic analysis indicates that the removal of the quota system would increase domestic production and the lower price brought about by the increased domestic production would reduce imports, so that more of GB demand would be met by domestic production. The argument that removing a quota which restricts production in Great Britain would lead to a worsening trade gap, is not well founded. There is already free access to the UK market and prices are determined by supply and demand. A fall in price would be brought about by an increase in UK supply, but that in turn would lead to foreign exporters sending less rather than more to the UK market. I cannot, therefore, accept that removing constraints from UK industry would lead to a worsening of the trade gap.

As I said, the Government welcome the committee's report, which recognises—

Lord Mackie of Benshie

My Lords, before the noble Lord proceeds to his peroration, I wonder whether he would be good enough to comment on the central point of my argument—namely, that the gap created by the increase in consumption of processed potatoes in this country was not the fault of the growers. It could not have been foreseen by them; it should have been foreseen by the industry.

Earl Howe

My Lords, the gap in processed consumption is as much down to the growers as to anyone else. They are simply not growing what the market demands and they are not growing the quality demanded by the market. That is why the processors are buying in Holland. It is not that there is no quantity in Great Britain; indeed, we all know that there is. The quality and standard of potatoes is not good enough. Once producers are not cushioned by a scheme of the kind that we have at present, I suggest that it will concentrate their minds wonderfully to produce what the market actually needs and wants. I give way to the noble Lord, Lord Peston.

Lord Peston

My Lords, I shall write to the noble Earl in due course and explain the economics of my paper. However, he cannot simultaneously argue that British producers are not producing what the market wants and then say that, by subjecting them to a more ruthless and competitive regime, they will actually do even better. That is about as absurd an argument as I have ever heard.

Earl Howe

My Lords, I do not know about a more ruthless and competitive regime—

Lord Peston

I am sorry my Lords; I should not have joined in at this point. I shall write to the noble Earl on the matter.

Earl Howe

My Lords, I am advocating that the shackles that the industry now has to contend with should be removed, thus enabling it to compete and to grow as many potatoes as it feels that the market will take.

Lord Mackie of Benshie

My Lords, the noble Earl has not answered my point. Why do they not offer contracts for the whole of the production that they need from this country? They are already getting the quality for half, so why do they not offer it for the lot?

Earl Howe

My Lords, I agree that that question should be directed at the processors. Perhaps that is a productive avenue to follow. However, I note that the report prepared by Nottingham University contained no contribution whatever from the processors.

Lord Carter

My Lords, they were invited.

Earl Howe

My Lords, as I said, the Government welcome the committee's report, which recognises the significance of the challenges and opportunities which an EC regime will offer both to our growers and to the rest of the industry which they supply. I hope that the prophets of doom whom I mentioned earlier will be convinced by it. The committee has shown a clear concern for increased competitiveness and market awareness, which the Government applaud. I believe that the direction being determined by the Council of Ministers, together with the provision in the Agriculture Bill, will deliver the opportunity for our growers to compete more effectively than ever before. As I said before, I am absolutely sure that those growers, whose expertise is second to none in the world, will make the most of that opportunity when it arrives.

Lord Carter

My Lords, before the noble Earl sits down, there is one extremely important point that I should like to make. I must apologise for not speaking earlier when the noble Earl reached the point in his speech. It is the matter that was raised by him and by other speakers and which is also mentioned in the report. If we keep a quota and other countries do not have a quota scheme—and the noble Earl said that there is no other country in Europe with such a scheme—then the imports will flood in. That is the argument. Why then have they halved the tonnage during the past five years from 230,000 tonnes to 116,000 tonnes while we have had the quota scheme and no other country in the Community has?

Earl Howe

My Lords, the imports have flooded in in terms of processed product as some speakers have said. That is the growth area of the market. It is the area where there is high added value and where our own processors are potentially losing out.

Lord Carter

My Lords, it is clear that, if we had a quota scheme and no one else did, the imports would flood in. During the past five years of the scheme's operation, imports of main crop potatoes have halved.

Earl Howe

My Lords, we could probably carry on arguing about this point all night. However, I shall take note of the noble Lord's comments and of his entire speech. I shall write to him on those points that I have failed to cover properly.

8.30 p.m.

The Earl of Selborne

My Lords, this has been a highly controversial debate and we were never in any doubt that it would be anything other than that. As many noble Lords have been at pains to point out, our report is highly controversial. I believe I am the only person who has detected one or two common themes emanating from all corners of the House. I believe we have agreed that it is not satisfactory to be in a position where one member state can distort the market to the disadvantage of another member state. I therefore entirely agree with the comments of the noble Earl, Lord Perth. We must ensure that we reach a situation where, if we cannot achieve a level playing field—that is clearly always impossible—we can at least stop the present abuse. That abuse was mentioned in the excellent report of the noble Lord, Lord Peston, and Nottingham University. The report referred to export rebates and other measures that are being provided in some member states who are exporting within the Community. That position is totally unsatisfactory.

The Select Committee addressed the issue of whether we need a common regulation for potatoes. We decided that we did need such a regulation. Noble Lords clearly hold widely divergent views on whether the present potato marketing scheme is good or bad. I believe something will have to give. As has been suggested in the European Parliament, one can write in a provision to the new order to suggest that some present scheme should be allowed to continue, or one can decide to move into a freer market for better or for worse.

It is not surprising that views have been so widely divergent in your Lordships' House this evening when one realises that producers themselves appear to hold widely divergent views. I believe we were told that about 70 per cent. of producers were in favour of the board and about 30 per cent. were against it. I find that statistic rather surprising. We have also heard about the processors. I believe the noble Lord, Lord Mackie of Benshie, referred to them in terms of the deep blue sea. I fear consumers did not receive quite as good a hearing as I would have liked. The written evidence we received suggested consumers did not favour the retention of the potato marketing scheme. However, we received much conflicting evidence. I drew up a chart as we were taking evidence to see which side was winning. However, the sides were fairly even.

Noble Lords have a great deal of expertise in the matter of potatoes and they have displayed it fully today. At the end of the day neither I nor anyone else can persuade noble Lords to change their views on the potato marketing scheme. Noble Lords will have to decide that for themselves. However, Britain has many natural advantages as regards growing potatoes. We have economies of scale. My noble friend Lord Stanley reminded us quite correctly that we have a distinct market sheltered by the Channel and that we consume a great quantity of potatoes. We prefer to have a wide range of potatoes. All those factors are a strong base from which to produce potatoes. If, bearing all those factors in mind, we lose market share then something is wrong. Unlike the noble Lord, Lord Carter, I prefer to look at a longer timescale than five years. I become impatient with fiddling around with the minutiae of figures. Ultimately, we should be considering the import tendencies of processed potatoes. Some noble Lords will feel that the Potato Marketing Board has alleviated what is clearly an unsatisfactory situation. However, some Members of the Committee felt it did not have an impressive record and that perhaps we should try something else.

On Question, Motion agreed to.