Wheat (Hansard, 9 December 2003)

§ Baroness Byford
asked Her Majesty's Government: What are the consequences of the Department for Environment, Food and Rural Affairs's estimate of the English wheat area grown.

§ The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)
My Lords, the revised estimates indicate that the English wheat area has fallen by 8 per cent between June 2002 and June 2003, rather than by 5 per cent, as previously estimated. That will mean that the final figure for production is likely to be lower than previously expected, but the market effect is likely to be small and short term.

§ Baroness Byford
My Lords, in thanking the Minister for that reply, I remind the House of my family's farming interests.
The Minister must be concerned that, because of Defra's failure to keep correct figures, £50 million may be lost to wheat producers in the UK. Does he take that seriously and accept the remarks made by Steve Langton, who was in charge of the June census? He admitted that there was a need to review the methodology.
634 As the IACS payments are available to the Government in May, the actual amount of wheat grown is known. How are the mistakes made? Is the Minister concerned that many farmers who sold their wheat in advance have lost £5 a tonne? That is a large loss, when multiplied.

§ Lord Whitty
My Lords, I regret the error. In using the IACS basis to augment the census basis, the mistake was made of mixing up holdings and businesses. It was a simple mistake, which had this effect.
I cannot accept the figure of £50 million that has been quoted—the noble Baroness quoted it too—for the loss to farmers arising from the mistake. When the initial figures were announced, it had virtually no discernible effect on the market price, which rose steadily before and after that date until the revised figures were produced. Although there was a momentary rise after the revised figures, it has since come down again by significantly more than half, and things are more or less on trend. I do not think that the accurate figure is anything like £50 million.

§ Lord Rotherwick
My Lords, I declare an interest as an arable farmer who is incensed at Defra's bungling. Bearing in mind that wheat prices went up only £5 per tonne, does the Minister think it justifiable that milling prices are reported to have gone up from £25 to £34 per tonne? Does he think that that is being fairly passed to the consumer by the millers?

§ Lord Whitty
My Lords, wheat prices, in total, have gone up dramatically this year, largely due to the poor harvest in Europe. They have increased in both the feed and the milling markets. Largely, the benefit has gone to arable farmers. The issue that we are discussing now has had little effect on that. As regards the price benefit being passed on to consumers, clearly, the price that millers pay for the wheat means that consumers pay a higher price.

§ Baroness Miller of Chilthorne Domer
My Lords, does the Minister know how much the price of a loaf of bread has risen this year on average?

§ Lord Whitty
My Lords, I am not sure that I can give an average price increase. The price of wheat has almost doubled; the price of bread has nothing like doubled. Principally, that is because most bread is sold in supermarkets where, often, it is a loss leader. Therefore, the full price increase has not been passed on to consumers, but some of it has been passed on. If there are more accurate figures, I shall supply them to the noble Baroness.

§ Lord Grantchester
My Lords, I declare an interest as a dairy fanner. We all take seriously the use of price-sensitive information on share prices in the City. Bearing in mind how the market has reacted to the information, can my noble friend clarify what 635 procedures exist to detect and guard against the misuse of price-sensitive information from government agricultural statistics?

§ Lord Whitty
My Lords, that was an error. There is no case of which I am aware where price-sensitive statistics have been leaked from the department before their normal issue. Frequently, the final figures are different from the initial figures. In this case, the error was not discovered until after the normal date of final figures.
My point to the noble Baroness was that this had a minimal effect on the price. Effectively, we are price takers in this country. The difference in production is likely to be about half a million tonnes in a world market of 580 million tonnes. Therefore, it is unlikely to have had a dramatic sustained effect on prices, although, momentarily, there was the increase in the UK price —to which the noble Baroness referred—but that rapidly returned to trend.

§ Earl Ferrers
My Lords, the Minister said that he thought that the price had not gone up, but he was not too certain of the figures. Is he aware—I think that I am correct—that for every £1 spent on a loaf of bread, eight pence is accruable to wheat? Therefore, it is unsurprising that the increased cost of wheat has not affected the price of a loaf of bread.

§ Lord Whitty
My Lords, my figures are not quite as low as that. Nevertheless, the noble Earl is correct: only a small part of the total price of a loaf of bread goes to the farmer.

§ Earl Peel
My Lords, does the Minister agree that the real difficulty is in trying to establish why the mistakes occurred in the first place? I have been informed— as have others— that it was largely due to a lack of resources. If that is the case, can the Minister give an assurance to the House that necessary funds will be made available to ensure that that kind of mistake does not occur again?

§ Lord Whitty
My Lords, clearly, the lessons need to be learnt by the department; in particular, the manner in which we conducted the census and used material that originated for another purpose—the IACS purpose—in the census. However, the mistake cannot be put down to lack of resources. It was a clear and systematic error in using IACS information and mistaking the definition of holding for the definition of business. It was extremely unfortunate, but it cannot be put down to resources.

§ The Earl of Erroll
My Lords, would the Minister agree that much of the problem stems from the fact that all the forms are incredibly complicated? Having slaved over them for several nights with my poor wife, who is the farmer, I can attest to that fact Perhaps the whole thing could be simplified, particularly as the department has access to digital maps but the farmer does not. Perhaps there could be more help in this area.

§ Lord Whitty
My Lords, in effect, part of this problem arose through trying to use information 636 supplied just once by the farmer for other purposes and, therefore, to relieve the burden on the farmer. I am well aware of the complexity of many of the forms that farmers fill in and the frequency with which they have to do it. That is why the department is in the process of developing whole-farm plans whereby information provided for one purpose can be used for other purposes. In that particular case, there was an error in transposing from one to the other. Ideally, we should be able to use the same information a number of times for several regulatory and information purposes.

§ Lord Dixon-Smith
My Lords, does the Minister feel encouraged that the forces of nature are far more influential on the lives of farmers and, indeed, on the lives of everyone than the forces of government?

§ Lord Whitty
My Lords, I am always happy to agree with the noble Lord about the importance of the forces of nature. Henceforth, I assume that we shall not have any interventions from him blaming either the British Government or European regulations for the plight of certain farmers. Both are important. Essentially, the changes in wheat prices this year are due to the climate, not to any of us.

§ Baroness Byford
My Lords, is it not correct that earlier in the season the Government offered UK wheat at discounted prices because the price was estimated on what they thought the yield would be? Although the Minister said that it did not have much effect, I urge him to think differently. It had a huge effect.

§ Lord Whitty
No, my Lords. I do not think that it can have had a huge effect. Clearly, there is a surplus of wheat here and there is a market for that surplus. The surplus is somewhat less—by 500,000 tonnes—than it would otherwise have been. But it is not true that the price taken earlier in the season is affected by the error. The price earlier in the season was significantly lower than the price now and later in the season, immediately prior to the error being discovered and announced. I do not think that the noble Baroness is correct in that respect.