HL Deb 14 March 2000 vol 610 cc1531-6

8.26 p.m.

Baroness Hayman rose to move, That the draft order laid before the House on 14th February be approved [11th Report from the Joint Committee].

The noble Baroness said: My Lords, the main purpose of the draft order is to permit the Milk Development Council, a non-departmental public body whose activities are wholly funded by a statutory levy on all milk sold by dairy farmers, to engage in the generic promotion of milk; that is, the marketing of milk to a wide audience without reference to its origin or brand.

Specifically the draft order does three things: it provides for the widening of the MDC's statutory remit to include generic promotion; it increases the maximum rate of statutory levy by 0.03p per litre to raise funds to carry this out: and it clarifies that the maximum rate of levy is exclusive of value added tax. The levy itself is subject to VAT but most levy payers are VAT registered and, therefore, able to reclaim it. It is the intention that these changes will apply to England, Scotland and Wales. The MDC does not operate in Northern Ireland, where different arrangements apply.

Approval has been sought from, and been given by, the European Commission to the proposal, for the raising of funds in this way is considered to be a state aid. The EC approval will also require the Milk Development Council to tender the campaign in accordance with the EC public procurement rules.

The amendment would allow the MDC to approach Ministers for an increase in the actual levy, currently 0.04p per litre, within the new maximum to raise funds for an advertising campaign. The dairy processing companies have voluntarily agreed to match dairy farmers' contributions pound for pound. Latest estimates are that a total of £6 million will be raised per annum for an initial 18-month campaign, after which its success will be reviewed. Research commissioned by the MDC and National Farmers' Union has already indicated that a spend of this order should have an impact in the market-place. Ministers welcomed the proposal, which was supported by all parts of the dairy industry, to extend the remit of the Milk Development Council.

We recognise—indeed we were talking about it earlier today—that the dairy sector has suffered significant falls in income resulting from a drop in the price it receives for its milk at the farm gate. That is an unfortunate consequence of the strength of currency and other factors. Therefore, the additional cost of generic promotion will impose a burden on them. It is important to repeat that we are doing this at the request of representatives of the sector. In order to be convinced about our decision, a poll of all producers was carried out last autumn to seek their views. Across Great Britain a clear majority—over 75 per cent—of those who cast a vote were in favour of the proposal.

To conclude, the draft amending order is an important piece of legislation that has the support of all sides of the industry. I beg to move.

Moved, That the draft order laid before the House on 14th February be approved [11th Report from the Joint Committed.—(Baroness Hayman.)

Baroness Byford

My Lords, I too thank the Minister for putting forward the order tonight. The statements in the order are very positive. I am sure that dairy farmers will be glad to hear of the move to promote their milk industry. Moreover, from their point of view, they know the cost to them and how they will pay it. This will be in the form of a levy of 0.03p per litre, together with the existing 0.04p that they already pay to the MDC.

While welcoming this statement, there are a couple of questions I should like to ask the Minister. I understood from what she said—and indeed was well aware of it—that the processors said that they will match the 0.03p levy on a simultaneous payment system. However, the fact remains that the farmers have to pay by statute, whereas there is no legal compulsion upon the processors.

The Regulatory Impact Assessment of 31st January in paragraph 7 states: So far as the campaign itself is concerned, should evaluation demonstrate that it is not meeting its objective, the MDC would reconsider the campaign. If it was discontinued producer's contributions would be adjusted accordingly. Similar action would he taken if the processors' contribution was withheld for any reason". The RIA came out at the end of January. Have all the processors—because there are so many now compared to the number in the past—given a complete undertaking to fulfil their part? If the Minister has any further details perhaps she could enlarge on that section because it is obviously fairly important. The matching funds have in principle been pledged from these processors and the agreement is subject to detailed arrangements being made with the dairy processing industry. I am happy with that.

We are told that this levy is for a 12-month period. Perhaps the Minister could confirm that. I understand that it will come into effect as of 1st April. In practice, the monies will not come forward until June—I may be wrong—because it has to come from the farmers, go to the processors and then to the MDC itself. Can the Minister say when she expects this advertising campaign to start; whether it will be before June, or July.

At a time when all aspects of farming are under pressure—and we had a debate here last Wednesday and questions again today—the dairy industry cannot afford the proposed scheme to fail. Currently, there is a trade deficit in milk which for this country, with its superb grazing and highly successful breeding, seems ridiculous. It has been made even worse by the way the Irish Government were allowed extra milk quotas when they are already self-sufficient, which will enable them to export even more of their milk with impunity.

We on this side welcome the national generic campaign which has the merit of encouraging the public, especially young people to adopt the milk-drinking habit at a young age through the school milk scheme.

In assuring the Government of our support in principle for this initiative, I was reminded, on looking back at some papers—although he is no longer in his place—of the noble Lord, Lord Donoughue, who at last year's Royal Show, when speaking in support of the European Protected Food Names Scheme, said: Collaborative groups can afford to devote resources to finding and developing markets". I feel his words could well apply to the proposed designs to improve the sales of British milk and British products. Anything that helps the industry is indeed welcome.

Baroness Miller of Chilthorne Domer

My Lords, we on these Benches welcome the order and are aware that since 1994, when the Milk Marketing Broad ceased, the lack of any generic promotion has led to a considerable drop, year on year, in the consumption of milk in this country. The noble Baroness, Lady Byford, mentioned children drinking milk. I think this order will apply to all ages. I hope the promotion will enable young children, both pre-school and at school, to be re-weaned—if you like—off fizzy drinks and back on to milk, and indeed for people of our Lordships' ages and older, to be encouraged to be drinking Ovaltine and cocoa instead of a whisky at night. In saying that, I mean no disrespect to my Scottish colleagues. Luckily my noble friend Lady Linklater has left, otherwise I am sure she would be defending the whisky industry.

Perhaps I may ask a couple of questions of the Minister. I should like to know what proposals there are to evaluate the effectiveness of the scheme, perhaps after 12 months of its life. Also what measures will be used to evaluate its effectiveness. Although I appreciate it is a generic scheme, which does not apply especially to British milk, the last section says: for better acquainting the public in the United Kingdom with the goods and services supplied by the industry". We often hear about the contribution of farmers to the maintenance of the countryside; does the phrase "services supplied" cover the way in which the countryside is looked after by dairy farmers. It is a connection that we have often made in your Lordships' House about the contribution of farmers not only in producing the food that we consume, but also in wider countryside management issues. I wondered whether that phrase included those.

I should like to conclude by warmly welcoming this order. We feel it is a step in the right direction. I hope that the processors will support it because we have understood that one of the problems for the dairy industry has been processors and supermarkets exploiting their position in relation to driving down the price of milk. Their support for this scheme would be seen as a step in the other direction in terms of giving the farmers the support they deserve.

Baroness Hayman

My Lords, I am grateful to both noble Baronesses for welcoming the order. If I could start with the last point. This is a welcomed collaborative effort. As the noble Baroness, Lady Byford, pointed out, there is not a statutory duty on the processors. That means that we are more grateful that they are committed and believe that all the major processors are going to contribute. Their contribution, as I understand it, will be around the level of £3 million for the initial 18-month period. The noble Baroness, Lady Byford, asked when the campaign was likely to start. Assuming that the legislation goes through on the timetable that we are implementing, the levy will be due from April, but it may be collected later. I understand that the MDC hopes to start the campaign by the end of May/ beginning of June. That is a matter for them in terms of the exact timing. That is the plan.

The campaign will be directed at young children, and in ways which appeal to them, as well as to older consumers. Whether it will specifically target those who are currently drinking Scotch whisky I cannot guarantee. Nor am I sure that it would be the most effective form of marketing. Perhaps a drop of whisky in the milk would be the answer.

It is right that we should evaluate progress with all the funding partners on such projects. A formal review will be undertaken at the 18-month stage against preset objectives. It will be carried out by an expert committee appointed by the MDC. If the campaign is not having the desired effect—and we hope that it will be successful—we shall then have the option of refocusing it or, if it is seen as being ineffective, of discontinuing it.

As has been pointed out, the dairy industry is under extreme pressure in this area. It has chosen to spend this money in this way because while companies are able to promote branded goods, some dairy products—primarily liquid drinking milk—do not lend themselves easily to brand promotion. That is why a generic campaign equally supported by producers and manufacturers can be of benefit.

In Great Britain, the consumption of liquid milk is falling by 1 per cent year on year. There is competition from soft drinks and changes in lifestyle have contributed to a fall in the amount of milk being consumed in the home. That has implications for our children's health and for physical development. We are currently discussing within the EU the future of the school milk subsidy scheme.

As the levy is viewed as a state aid, we cannot permit it to be spent on promoting the Britishness of our milk. However, it is a fact that the majority of liquid milk produced in this country is consumed here. The perishability and volume of the fresh product does not lend itself well to export or import. We believe that it will be effective and useful for dairy farmers here. More importantly, they believe that, too.

As regards the services supplied, the answer is "not directly". However, the MDC undertakes R&D work in this area and it is using the existing 0.04p of the levy in that and in other areas.

I hope that I have answered the questions which were raised and that the House will support what we believe to be an important measure for the dairy industry.

On Question, Motion agreed to.

House adjourned at seventeen minutes before nine o'clock.