§ Lord Glenarthur
asked Her Majesty's Government:
When the announcement of the guarantee price for wool for the 1990 clip is likely to be made.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington)
My right honourable friend the Minister of Agriculture, Fisheries and Food, together with my right honourable friends the Secretaries of State for Scotland, Wales and Northern Ireland, have reviewed the state of the wool market and prospects for the 1990 clip.
The 1989-90 period has been a difficult year for the wool industry. There is now a world surplus of wool, and the domestic market has been affected by a decline in consumer spending. This, and other factors, including the withdrawal of China as a major buyer, have had an adverse effect on average market prices which have fallen back sharply from a high point of 145 p/kg to as low as 90 p/kg, well below the 1989 clip year guaranteed price of 129 p/kg. For 1990 the prospects remain uncertain.
Ministers have also had to take account of the Government's already announced intention of legislation to end the wool guarantee as soon as parliamentary time is available. They know and understand the wish of the British Wool Marketing Board that this should be done as soon as possible.
It has also been necessary to draw up a new financial agreement to cover the period from 1990. Following discussions with the industry, the new financial agreement with the British Wool Marketing Board will last for two years. It will provide a new flexibility to enable the returns to producers to reflect more quickly any substantial recovery in the wool market above the guarantee price.
In the light of the review and taking acount of these factors, it has been decided to set the guarantee at 125 p/kg for the 1990 clip year—a reduction of 4 p/kg on the 1989 guarantee price. At the same time, the deficit in the stabilisation fund is being written 1599WA off as provided for in the existing financial agreement. This relieves producers of a significant burden equivalent to about 18 p/kg over two years.
They believe that these various elements constitute a significant step towards actual market prices and provide a sound basis for preparing for the ending of the guarantee. At the same time the new financial agreement enables producers to benefit at an early stage if market prices should recover markedly.