Milk Marketing Reorganisation (Hansard, 18 October 1994)

The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe)
My Lords, consumers will benefit in the longer term from the increased competition brought about by deregulation of the milk market. The opportunity now exists for processors to supply what the consumer wants and to secure supplies of raw milk to meet the demand for their products.

§ Lord Carter
My Lords, I thank the Minister for that Answer. However, if the price of milk per farmer is to increase—and it is—if the dairy companies and the major retailers protect their margins, as they surely will, and if the supply of milk is artificially restricted by quota so that the market cannot in fact work, how is the consumer supposed to benefit from the shambles which has resulted from the Government's so-called deregulation of the milk market?

Earl Howe
My Lords, the consumer can expect a number of benefits. In a more competitive environment the dairy companies will have more incentive to provide what the consumer wants, and a processor with a product which is in demand should be able to obtain a guaranteed supply of raw milk without having to worry, as he does at present, that supplies will be cut off on the so-called "equality of misery" principle. It is up to processors to respond to the market, and in time we may 118 see a wider range of high value dairy products of British rather than imported origin on the supermarket shelves. There may also be more regional or other niche products.

§ Lord Mellish
My Lords, the Minister referred to the long-term effects of the increase, but what about the short term? Are newspaper reports correct in saying that milk will increase by anything from 3p. to 6p. a pint as a result of the amalgamation?

Earl Howe
My Lords, I see no justification for the claims made by some dairies that Milk Marque prices will lead to a rise in the price of a doorstep pinta of between 2p. and 3p. I must say that I have not seen figures quite as high as those quoted by the noble Lord. I suspect that the companies may be preparing for price rises under the current arrangements and that they are seeking to blame them on the changes arising from deregulation. In itself the new system should cause little change in the price of a pinta—a price which, incidentally, is considerably lower in real terms than it was 10 or even 15 years ago.

§ Lord Mason of Barnsley
My Lords, can the Minister tell to the House what is the future for the existing small co-operatives of dairy farmers under the reorganisation?

Earl Howe
My Lords, the opportunities open to small co-operatives will, I believe, be even brighter than they are at present. They will be free to source their supply from anywhere they like. They will be free to sell in a way that they themselves agree with their customers. Moreover, there will be no imposition of a levy as there is at present on direct sales of milk and that will be a considerable benefit to the small producer.

§ Lord Desai
My Lords, can the Minister explain why there is no completely deregulated milk market in any region in the United States? Can he cite any other country in which milk deregulation has been practised?

Earl Howe
My Lords, I am not an expert on what happens around the world. I only know what is best for Britain. The deregulation of the milk market is very much in the national interest. A major part of the justification for it is our desire not to see the market for high value dairy products handed on a plate to our continental competitors at the expense of dairy processors at home.

§ Lord Willoughby de Broke
My Lords, does my noble friend agree that the problem is that British dairy farmers are well able to supply our market but they do not have the quota that allows them to do so? Can he perhaps tell the House what are the prospects for inter-country trading of quota, that is making quota tradable between member states of the European Union?

Earl Howe
My Lords, my noble friend has put his finger on an important point. The UK does not have enough quota to meet its needs and that is why we have successfully resisted recent proposals by the European Commission to cut quotas. We secured a small quota increase last year and we continue to argue for freedom to trade quotas across member state borders. I cannot, 119 unfortunately, hold out any immediate prospect of success in that area principally because, as my noble friend will be aware, quotas are currently tied to the land and therefore cannot be treated as a freely tradable commodity.

§ Lord Richard
My Lords, the Minister says that he does not see any justification for an increase in the price of milk. Does he expect an increase in the price of milk?

Earl Howe
My Lords, that is up to the dairy companies to decide after 1st November. However, I do not expect an increase of the order that is quoted in some newspapers.

Lord Bruce of Donington
My Lords, can the Minister give the House any really good reason why the Government for once should not leave well alone?

Earl Howe
My Lords, I have already explained the benefits to consumers. There will be benefits throughout the industry. All the industry will enjoy the same commercial freedoms enjoyed by those in other sectors. They will be able to take their own business decisions in a normal commercial environment; producers will be free to sell their milk to whomsoever they wish and processors will have the freedom to decide from whom they buy their milk. This can only be to the advantage of the industry generally.

§ Lord Carter
My Lords, the Minister used the phrases "the long term" and "in time". How long is the long term?

Earl Howe
My Lords, it is longer than the short term.

§ Lord Geraint
My Lords, I am sure the Minister will agree with me that the Milk Marketing Board has given excellent service to consumers and producers alike for the past 50 years. Will he give an assurance to the dairy producers of this country that their interests will be safeguarded under the present regime?

Earl Howe
My Lords, I am on record as saying that the Milk Marketing Board has served this country well over the 60 years of its existence, but times have moved on and the market is now very different, as the noble Lord will know. One of the requirements under the Agriculture Act 1993 was that Ministers should be satisfied, before approving the Milk Marketing Board's reorganisation scheme, that Milk Marque's trading practices take account of the interests of purchasers of milk. They were so satisfied, and I am confident that all in the industry will seize the opportunities that now lie ahead.

§ Lord Whaddon
My Lords, perhaps I may assist the noble Earl in his definition of the long term. Does he recall that John Maynard Keynes defined the long term as "when we are all dead"?

Earl Howe
My Lords, it will be sooner than that as far as milk is concerned.