HL Deb 15 July 1999 vol 604 cc546-8

3.37 p.m.

Lord Monk Bretton asked Her Majesty's Government:

Whether they have any plans to amend the changes to milk marketing announced by the Secretary of State for Trade and Industry on 6th July; and, if so, how soon.

Lord McIntosh of Haringey

My Lords, the Secretary of State has no plans to amend the remedies concerning Milk Marque which he announced on 6th July. They provide Milk Marque and the milk processing industry with the opportunity they both sought; that is, to devise a reform of Milk Marque's selling system which enjoys the confidence of all.

Lord Monk Bretton

My Lords, I thank the Minister for that reply. However, is it not the case that Milk Marque has only been able to deliver the lowest producer price in the whole of Europe? It has been losing membership in droves. If it is denied milk processing capacity and its selling methods are again to be altered, is not its collapse a serious possibility? If that collapse takes place, is not the industry back in its pre-1933 position, before the establishment of the Milk Marketing Board? I do not know whether that is the Government's intention. But would not there be greater virtue in looking at the need for substantial processing to be in producers' hands, which has led to stability for dairy farming both in Europe and the United States? Also, should we not look at the serious gap between UK producers and retail prices?

Lord McIntosh of Haringey

My Lords, it is certainly the case that Milk Marque has been losing custom at the rate of around 4 per cent a year. The Government recognise that that is a serious situation. However, I must remind the noble Lord that the Monopolies and Mergers Commission found that Milk Marque had been operating its monopoly against the public interest at the expense of consumers and the milk processing industry. The Government want a viable diary industry, but it cannot depend on a continuation of bad monopoly practices.

The Earl of Onslow

My Lords, is it not true that the quota system allows this country to produce only 83 per cent of the milk that we consume? That adds a terrible distortion to all milk production and the milk industry. With that imposition from Europe, of course the industry is in a muddle.

Lord McIntosh of Haringey

My Lords, we produce virtually all the milk that we consume as liquid milk and approximately 80 per cent of the milk that we use in butter and cheese. I am not familiar with the statistics to which the noble Earl referred. Despite a lot of scare talk some years ago, there has not been a significant increase in imports of raw milk.

Baroness O'Cathain

My Lords, the dairy sector will be interested in the Minister's statement. It will hope that the changes will enjoy the confidence of all. The dairy sector is lacking in total confidence at the moment. Does the Minister agree that Milk Marque is the only organisation in that sector with a long-term, total and unswerving commitment to the future of milk production in this country? Any further problems in the industry would have reverberations throughout the agriculture sector in England and Wales.

Lord McIntosh of Haringey

My Lords, the noble Baroness knows better than most of us the history of the dairy industry and milk marketing in this country. She will be aware that the Monopolies and Mergers Commission report advocated the break-up of Milk Marque. Although the Secretary of State accepted many of the MMC's findings, he rejected the idea of breaking up Milk Marque immediately, because he saw that as a very difficult and long-term solution. That is why he gave Milk Marque and the industry another six months to try to come up with the reforms to its selling methods that the report shows are clearly necessary.

Lord Monkswell

My Lords, further to the question of the noble Earl, Lord Onslow, about the fact that this country does not produce 100 per cent of its milk and milk products, and bearing in mind the efficiency of dairy farms and the milk processing industry, am I right in thinking that that deficiency in production is made up by imports from Commonwealth countries such as New Zealand?

Lord McIntosh of Haringey

My Lords, not as far as I know. The noble Earl was referring to imports from the European Community.

Lord Mackay of Ardbrecknish

My Lords, does not the Director-General of Fair Trading have six months before making a final decision on processing? Is not that causing uncertainty in the industry, because the final outcome is still not known and there are still six months before the decision is taken? Is not a further problem in the milk market the fact that Milk Marque is obliged to be the collector of last resort? Given that it has to collect milk from some of the remotest parts of Wales and elsewhere, its costs are inevitably higher than those of many of its competitors.

Lord McIntosh of Haringey

My Lords, the noble Lord does not seem to like the long-term commitment that is such an attraction to his noble friend. The six months that the Director-General of Fair Trading, Milk Marque and the dairy industry have to come up with solutions to the defects in Milk Marque's selling methods is not a minimum. If they can come up with solutions earlier, the uncertainty can be dealt with. I thought that the Secretary of State's decision had been generally welcomed in the dairy industry. Mr Ben Gill, the president of the National Farmers Union, said: However, we do accept the need for a new selling system and will be actively pressing the Government, the OFT and all the parties to find a new system straight away". We are generally in accord with the views in the industry.