House of Commons Hansard Debates for 23 Mar 1993

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Member for Westmorland and Lonsdale, wool now represents only a small part of the overall income of sheep and hill farmers, but taking away the guaranteed price will halve what is already a very low price. The average price paid to farmers at the moment is 117p per kilo, which will drop to about 60p per kilo when the world market price is introduced. There are still 98,000 wool producers in Britain, many of them clinging on in a difficult situation, eking out a minimal existence. Farming in the hills and the least-favoured areas continues to be one of the most vulnerable sectors of the farming industry. To lose the security of that small part of their income at this stage would be extremely unfortunate.

As the right hon. Member for Westmorland and Lonsdale said with characteristic understatement, there was some concern and anxiety from those parts of the country about the hill livestock compensatory allowances, but it was a great deal more than that. There was real anger from those areas because they felt that their interests were not being understood and that the position they came from, which was a steady deterioration in their income, although it was increasing somewhat in the current year, was not widely recognised within the Ministry.

We know that the proposal is not new and has been widely forecast, but for the Government at this time to take powers in the Bill to destroy what is left of the guaranteed wool market when it is at its weakest, without anything to take its place, seems to give precisely the wrong signals to the most vulnerable sector in the farming community. I remind the Minister that, according to his Department's figures published last week, there have been only modest rises in the incomes of hill livestock farmers, while in Scotland they have continued to fall for the second year running. As a minimum, the sector is entitled to ask that revocation be delayed for two years to allow the market to recover.

It is rumoured that the Government are planning to circumvent the whole process of parliamentary scrutiny and to use a statutory instrument to lower wool guaranteed prices to zero prior to the passage of the Bill. It is not for us to insist that the timing of the Bill should be brought forward--that is up to the Minister--but we could legitimately ask for a delay until that specific issue has been debated properly. It seems unlikely that the Bill will be enacted before the end of April, so surely the guarantee should continue for a full clip year and avoid disruption and unfair treatment to sheep farmers.

On the main issue in the Bill--milk--it is of critical importance that a "very heavy regime", to use the words of one hon. Member, should be replaced with an equally effective regime, if all the advances in the sector are not to be put at risk. If the Bill provides an effective co- operative organisation for the dairy sector, with real muscle in the marketplace--comparable with the co-operatives which work so well for producers in most other member states of the Community--it could be the springboard for the improvement that I referred to at the outset.

We accept that the vertical integration of the English and Welsh boards into a single co-operative would create a body which had the potential to be too monopolistic. In principle, the proposals of the milk marketing boards for Milk Marque are therefore along the right lines. We do not believe that Dairy Crest can be incorporated within that organisation and agree that it should be floated, but there is a problem with timing. If the Diary Crest flotation is delayed beyond the vesting day for Milk Marque, the

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market could be distorted during the transitional period. We must have safeguards to ensure that that does not happen, and that there is no conflict of interest. Too long a transitional period could be damaging and could fatally compromise the new system.

Scotland is very different. The latest figures from the Ministry show that dairy farming incomes in Scotland continue to fall, in contrast with other areas. With the three boards, the proportional and actual scale of operations are somewhat different. Despite earlier exchanges, I believe that there is a good case for the Minister to seek the co-operation of his colleague the President of the Board of Trade, who has just set a precedent by overturning an Office of Fair Trading recommendation on Owners Abroad, to reconsider the reference to the Monopolies and Mergers Commission and the provision that the Scottish milk marketing boards should not be allowed to engage in any production. It must be obvious that the milk production set-up in Scotland must be different from that in England and Wales, not merely for historic reasons but because of the state of that sector of the industry north of the border. I hope that the Minister will also be able to reassure us that the Government will allow the constitution of a separate Scottish development council for milk.

The last thing we want is for the new milk co-operatives to be so constrained from the outset that they are not able to work for the full benefit of their members, to enable them to survive and to compete in the single market. Since January, the economic context of the industry has completely changed and it must surely be only a matter of time before some of the enterprising producer co-operatives in other member states target our market. After all, many cases of them have generous backing from investment by their Governments. It is extremely important to us that the Minister, with other Ministers in the Community, should consider the problems of quota allocations now. It is a high priority, which should be resolved before completion of the change to the new marketing system. Either more quota should be allocated to member states such as the United Kingdom, whose home market suffers from a major deficit--we are importing liquid milk now into this country--or we should allow quota to be traded across member state boundaries, which might prove preferable. If our dairy industry is as efficient and productive as it has shown itself to be in the recent past--which I believe to be the case--that could only work to our advantage, and we should consider it urgently.

Mr. Gummer : The hon. Gentleman's second suggestion is Government policy. We are in favour of trading quotas across borders. That is one way in which one can make the quota system more flexible and sensible and make it react properly to the market. The sadness is that we are unique. That is a European view, and as good Europeans we ought to do that to attempt to ensure that milk production takes place in those countries most suited to it. I hope that the hon. Gentleman will help us by ensuring that members of his fellow parties in Europe start to support that policy, as until now they have been implacably opposed to it.

Mr. Tyler : I am grateful to the Minister for his intervention--and all power to his elbow during the negotiations. It is a great pity that more advance was not

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made in that direction when he was in the driving seat in the Council of Ministers. Surely with the change in our milk marketing we can start to press for such an initiative.

Mr. Campbell-Savours : Perhaps the policy that we have adopted-- which, as I understand it, is the free movement of unrestricted quotas--has been the problem with our European partners. If the Government were to take the view that there should be some control and restriction on the amount of quota which could move across boundaries, our European partners might be more amenable to the suggestion.

Mr. Tyler : I am grateful to the hon. Gentleman. No doubt he will develop that theme later in the debate, and it may be better for me to leave it to him to do so.

Quota management is an important issue. I think that it is fair to say that the sector was orginally sceptical of the value of the introduction of quotas, but the system is now working reasonably well and therefore any major change in quota management will inevitably cause concern for the reasons that I have advanced. For that reason--in Committee, or by whatever means appropriate--I hope that the Minister will be able to guide us on the current thinking on quota management before the Bill reaches the statute book. Little guidance is given in the Bill or in any statements made by Ministers during its passage in the other place or today to guide us on how it will operate, and clearly there are different views of the extent to which Milk Marque, as the successor body but one which does not represent 100 per cent. of producers, should be involved in the exercise. We want a producer co-operative, but not as a fallback position : we want a potential ground breaker which will establish itself as a strong marketing co- operative to match those in other member states. From our experience of agriculture in other member states, we know how effective producer co- operatives are. They are prepared to use their marketing muscle in the market place and to prevent the sort of domination of buying power which results in this country from a small number of processors and supermarkets. A co-operative with the ability to compete in the world of the giants--the supermarket chains and food processors--would be a benefit to producers and consumers. By cutting back on the bargaining power of the middle men there is no reason why retail food prices should not fall.

Speaking with all the authority of a former Minister, the right hon. Member for Westmorland and Lonsdale referred to the individualistic tendencies of farming communities, and there are no more individualistic farmers than those in my area of Cornwall. This is the time for us to stimulate, encourage and cajole, by every means possible, to ensure that they work together in co-operation. In the long term, the Milk Marque pioneer should be able to expand into other commodities. Why should it not expand into potatoes, wool or eggs, where we desperately need producer co-operatives to give more muscle to producers vis-a-vis those who buy from them? By that means, we could develop a multi-product group to market the best of British produce, and it would certainly command more confidence and respect than the inadequately funded Food from Britain organisation. The Minister referred to liberating creative potential, and there are opportunities to do that. In the case of both

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potatoes and wool, however, the Bill seems to be too early, too drastic, and lacking in realistic provisions to enable a transition to a well-managed market. On milk, the Bill is still too sketchy and the sector is understandably concerned about what may happen. The Bill retains a distinctive whiff of Thatcherite philosophy, offering little prospect of real competition to the dominance of the supermarkets, and putting too much potential power into the hands of the Minister. It will need radical revision in Committee. This is not the Bill for which we hoped and expected. If we are presented with a real Bill which achieves the sort of objectives about which hon. Members have been talking today, we can all support it. I hope that the House or the Standing Committee will be able to improve the Bill, but I have no more confidence in the Government's policies at present than, I believe, agriculture has.

7.30 pm

Mrs. Elizabeth Peacock (Batley and Spen) : My interest in manufacturing and industrial issues, as well as, of course, consumer matters is well known, and leads me to contribute to today's debate in two ways--first, in relation to wool, as chairman of the all-party wool textile group and, secondly, in relation to milk, as someone who has been closely involved with the industry for many years. I declare an interest as my husband is employed by one of Britain's largest dairy companies, with which I am in regular contact on a range of issues. I am happy to leave the future of the potato board to my hon. Friend the Member for Cambridgeshire, North-East (Mr. Moss), who made an interesting speech on that subject.

At first glance, the Bill, as it relates to wool, milk and potatoes, seems straightforward with no controversial issues--but nothing could be further from the truth. The bill is a privatisation Bill to remove Government involvement from the market for those commodities. I fully support privatisation as it gives a new boost to industry, but if we privatise, we must do so properly--something which the Bill does not appear to do.

One aspect of the Bill will have a serious effect on the wool industry and wool producers, which will, in turn, affect our textile industry--the measure to terminate the guaranteed wool price from 1 May this year. As has been said, that guaranteed wool price will disappear before the Bill has completed its passage through the House. The main purpose of the guaranteed price has been to give stability to wool producers, which it has done for 40 years. The cost to the Government has been small, and the stability continued until the world collapse in wool prices in 1990.

The stability created by the guaranteed price has allowed the British wool clip to improve in quality and image, and turn itself into an internationally recognised fibre. There are licensees all over the world, and there is representation in Japan, which is now one of the biggest consumers of British wool. The existence of the guaranteed price has helped to develop an efficient structure for the collection, distribution and promotion of British wool. That structure is the envy of many European countries and it was the basis of the system now operating in South Africa.

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The guaranteed price has served producers in the less-favoured and remote areas of this country particularly well. More than half of British wool is exported, either in greasy, scoured or top form. Much of the processing takes place in Yorkshire, and Scotland and the borders. The stability created by the guaranteed price has ensured a constant supply of wool into the wool industry which, at present, is increasing its exports, both in terms of value and quantity. The guaranteed price has helped to secure employment in those areas. That has been a particularly important factor as the textile industry has declined over the years.

The existence of the guaranteed price has been of great value in preserving the environment and countryside. The British Wool Marketing Board, the Confederation of British Wool Textiles and the National Farmers Union have repeatedly asked the Government to maintain the guaranteed price until 1995 to allow time for the industry to recover from the unprecedented difficulties resulting from the international wool crisis of 1990-91.

There is still a big discrepancy between supply and demand, and the reduction in world stockpiles could take two or three more years. If the guaranteed wool price is removed this year, as proposed, producer returns will fall by almost half, which will compound the hardship recently experienced by sheep farmers. There could not be a worse time to remove the guaranteed price as, due to the international stock piles, world prices are at their lowest level in real terms. At today's market prices, many grades or breeds of wool have no commercial value. They could disappear and be lost from the market when prices recover. Like the milk cheque, the wool cheque is important to farmers, even though it does not amount to much. It is an important source of income to producers, particularly those in hill and remote areas.

The sheep industry has been depressed and uncertain for some years. The loss of the guaranteed price will compound the problems. As many sheep farmers say, their incomes are being reduced. I understand that a farmer in Bedfordshire--an area that you, Mr. Deputy Speaker, will know well-- receives less for a whole lamb complete with fleece than I pay for one leg in the butchers. That discrepancy shows that there is something wrong in the market.

Production will be lost to third world countries, which will affect textile manufacturing output, and employment in areas that are already suffering due to competition from cheap overseas labour. Exports will be lost and there will be an increase in imported wool. Both factors will affect the balance of payments. There may even be a switch back to synthetic fibres, which could cause environmental problems. Shearing and dipping will be discouraged--we have already heard about the cost of shearing sheep--which will have an effect on the general welfare of the national flock. Environmental problems could be caused as sheep shed their wool all over the countryside. We all know the importance of maintaining the countryside, but it could suffer.

The importance of sheep farming should not be understated. The quality and image of the clip will suffer, and the present system of collection, distribution and promotion could be undermined. We all know that promotion is important--both the British Wool Marketing Board at its headquarters at Clayton, Bradford, and the Confederation of British Wool Textiles

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must both be complimented on their work in that sector. If the British Wool Marketing Board carries large stockpiles of wool into a post-guarantee period, producers will have to bear the cost of holding stocks inherited from the guaranteed price regime. I shall call on the Minister--when he returns to his seat--to reconsider the issue and, at the very least, to extend the scheme until May 1995 when we hope that the wool market will be in better shape. Wool producers need the Minister's help, and they need it now. Perhaps as the Minister is busy in discussions, he will read Hansard tomorrow to see what I am saying.

When we see how milk is treated in the Bill, its true nature comes to light. It is an enabling Bill which leaves the action to the Minister. It is a sort of Arthur Daley Bill which suggests, "Trust me, guv'nor." I am not sure that many of us would buy a used car from Arthur Daley, and I leave my colleagues to gather the inference from my words.

Surprisingly, the Bill requires only the milk marketing boards to come up with schemes to reorganise the industry--the Minister then has to agree to those schemes. The Minister has no obligation to publish the schemes or consult anyone else in the industry. That does not constitute democracy, but provides a potential abuse of power. I hear that there is already a mood within the milk marketing boards merely to change the letterhead, repaint the trucks, get rid of a few troublesome milk producers and carry on as before. That is patently unsatisfactory. The Minister should be obliged to consult the milk purchasers, retailers and consumer organisations. We are all consumers. Perhaps not all my colleagues do the weekly shopping, but their partners, wives, sons and daughters may do so-- we are all consumers and all ultimately pay the prices. Such groups should be consulted by the Minister before he gives his approval to a reorganisation scheme. I am sure that, if the Minister were advising me on the reorganisation of my now infamous mythical whelk stall, he would at least take into account--I hope--the views of my customers. I suggest that he does the same in this case.

I should like to spend a moment discussing the competition aspects of the Bill. It is here that the issue of privatisation comes into play. The milk marketing board in England and Wales has already proposed that it should be converted to a milk brokerage, Milk Marque, aiming to control 80 per cent. of milk from farms. Its equivalent in Scotland proposes to operate an integrated milk brokerage and dairy business, with more than 50 per cent. of the market in Scotland. Clearly, we have competition on our hands, and it could be an issue from the very first vesting day.

It reminds me of the problems that we have had with privatisation in the energy market. We have privatised gas and we are allowing a monopoly to continue, restricted only by an efficient and tough regulator--and even he suggests change. In the electricity industry, there is an inefficient regulator who has been unable to prevent the industry from falling into disorder. If I were to use any more such examples, I am sure that the Chair would quickly rule me out of order, but we have adequate supplies of energy in this country, and a great deal of milk, so we should not have to import either.

I am advised that Milk Marque, the potential monopoly, has already announced the non-negotiated

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price at which it will supply dairies as from 1994. I understand the proposed price is 20 per cent. higher than current prices. I cannot see the British housewife wanting to pay 20 per cent. more for milk just because the Government are allowing a monopoly to develop. I trust that the consumer organisations will pick up this point and discuss it forcefully with the Minister.

Not only will Milk Marque attempt to set prices that bear no relation to the market ; it also reserves the right to ration supplies, presumably to impose its own prices. That strikes me as a potential abuse of a monopoly position, and we do not want references to the Office of Fair Trading or the Monopolies and Mergers Commission early in the new scheme. I sincerely hope that it will not encourage British dairies to import raw material supplies from northern France, as we do with French electricity, or British farmers will be very cross. I know that the chairman of Northern Foods has already described the massive investment that that company will make in plant in this country once he knows what the Minister's views and actions will be. I would certainly not want him to go away with the idea that it would be much better if he invested money in jobs in northern France rather than here.

We want our industry here. I want British electricity in our power system and British milk on my cornflakes. I expect the Minister to ensure that I and future generations will have it.

The Bill must deal with the competition aspect. We cannot just leave it to the Minister to sort out the industry as best he can. Limits must be placed on the size and form of any milk marketing board successor established as a result of the Bill. The Bill must also set limits on the size of any future milk brokerage. We cannot rely on a regulator with the title of Ofmilk. That would do nothing to encourage our British industry. In any case, our regulators are only partly successful, and there is no reason to suppose that they would do any better in this industry.

We have made a botch of some of our privatisations, and we must not make a botch of milk reorganisation. Most people need milk every day of their lives and like it delivered to their doorsteps, so the legislation needs to be framed to promote competition and prevent the need for intervention by the OFT or the EC Commission.

I understand that certain services are of significance to British dairy farmers and the dairy industry. They have already been mentioned, but I shall mention them again so as to leave the Minister in no doubt about the concern felt. The services are artificial insemination, milk testing and milk recording. These services are currently provided by the milk marketing boards. I understand that Milk Marque has assumed that they and their assets would be vested in the new organisation.

That would be unsatisfactory. Some milk producers will not be trading with Milk Marque. They will sell to other organisations or direct to dairies-- but they will need the benefit of those services. For reasons of commercial confidentiality, those producers will be reluctant to use the services if they remain within Milk Marque--and who could blame them?

Moreover, the same farmers have a claim on the assets used by all those services, in the form of farms, offices, laboratories and means of transport. Milk producers have contributed to their cost for many years, so they should remain freely available for use by all milk producers. The services are critical to British dairy farming and should

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therefore be moved to independent control-- to the Agricultural Development Advisory Service, to a commercial organisation or even to a non-profit-making trust.

The milk producers who do not trade with Milk Marque also have a claim on other MMB assets--the land and property at Thames Ditton, at regional offices and at depots and farms around the country. The property belongs to all milk producers ; they have all paid for it over the years they have been members of the scheme. It would be most unfair if the benefit of these properties fell into the lap of a single milk brokerage.

Mr. William Ross (Londonderry, East) : The hon. Lady will be aware that many people have stopped producing milk. How can they get their share of all this back ?

Mrs. Peacock : The hon. Gentleman, who has been in the House longer than I have, knows how to tackle the Minister on that question. It was a good point, but I cannot answer it. I hope that the Minister will. I suggest that the Bill be amended to require the sale of these properties and the distribution of the proceeds to all producers. If Milk Marque requires them for future activities, they could be leased back.

I hope that the Minister will listen carefully to what I and my colleagues have to say, because the Bill is flawed. That is why I may oppose it if it stays in its present form. I was quite surprised that it emerged from the other place without major amendment. We have only partly heard what Opposition Members think of it, but I suggest that change is needed. The producers want change, and the wool and dairy industries recognise that change is inevitable. So I am prepared to vote for the Bill on Second Reading if I have the Minister's assurance that these points will be dealt with in Committee. When the Bill returns to the House it must then stand or fall on its merits, and I trust that it will be significantly amended.

7.47 pm

Ms Jean Corston (Bristol, East) : Three themes run through the Bill- -themes to which we have become accustomed in the past 14 years. One is the accretion of ministerial power. Another is a preliminary failure to consult. The third is the consequent creation of a monopoly. Legislation on education, health and local government has exhibited a growing concentration of power in Ministers' hands. The idea seems to be that it is easier to confer power on a Minister than to mess about with democratic or statutory bodies. It is also handy because it enables Ministers to evade parliamentary scrutiny by means of delegated legislation. The upshot is that Minister, take decisions that used to be taken by people with more expertise and experience. The explanatory memorandum tells us that clause 3 and schedule 1 give Ministers powers. Clause 4 enables Ministers, clause 5 enables Ministers, clause 6 empowers Ministers, clause 7 gives Ministers power, clause 9 enables Ministers, clause 13 confers powers on Ministers, clause 16 empowers Ministers, as does clause 20. Clause 22 enables Ministers. Clauses 24 to 27 and schedule 3 set out Ministers' functions. Clause 44 empowers Ministers. The Bill is a perfect illustration of practices that we have got used to, but which have not worked.

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My second theme is the failure to consult and I address my comments specifically to the milk industry. While Bristol, East is not well-known as an agricultural constituency, my constituents eat food and drink milk and there is a large dairy, which is a major employer. In particular, there has been a failure to consult interested parties, other than the successor body, about the milk regime. That is a major flaw.

There should have been a specific provision for consultation with all the parties affected. For example, there should have been consultation over reorganisation schemes for the board and before the winding up of the residuary body, and over the conditions under which the development council will operate. Those are all major failures to consult people who have expertise in the industry.

The Government say that they believe in competition, but, so far, their privatisation policies have created only monopolies. What has that to do with a free market, even if it was a good idea? We have seen it with gas, electricity, water and British Telecom. The new body, Milk Marque, is, as I understand the Bill, to be a private co-operative. There is concern in my constituency over how that will operate, because the Government have said that competition legislation will protect milk producers from any abuse by Milk Marque of its dominant position in the market. However, as co- operatives enjoy exemption, particularly on price restrictions, under the Restrictive Trade Practices Acts, it is important to make further legislative provision to prevent abuse. I hope that that matter is addressed in Committee.

Mr. Curry : The milk marketing boards are exempt from the operation of the monopolies and mergers regulations, so the Director General of Fair Trading cannot be referred to. When Milk Marque comes into existence, that immunity will be removed and it will be subject to the full rigour of the Office of Fair Trading and possible reference.

Ms Corston : There is all the difference in the world between a statutory body, for which there is a possibility of parliamentary scrutiny and of input from the general public, and a private, horizontally integrated co-operative, which is what we are talking about.

The Dairy Trade Federation, no less, has expressed concern that Milk Marque proposes to increase the price of milk by 20 per cent., a fact to which the hon. Member for Batley and Spen (Mrs. Peacock) referred. On 9 March, the Dairy Trade Federation asked for "independent supervision of this dominant monopoly".

As I read it, there is nothing in the Bill to provide proper transitional arrangements on price, sales, a disputes procedure and continuity of supply, all of which are important. Hon. Members on both sides of the House have spoken already of the dispersal of the milk marketing boards' assets. That should not confer an unfair advantage on, or improperly influence, farmers to join the successor body rather than supply milk direct to a company.

Other hon. Members have already spoken about the important national assets held by the boards and I make no apology for referring to them again. They include, among other things, the national milk record centre, the Genus farm service--that is vital for ensuring a healthy stock and for research into genetics, artificial insemination and other matters--the central testing laboratories, and the milk collection vehicles. The statutory arrangements

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are the best, but if there is to be a change, it is vital to ensure that there is no discrimination against bodies or companies other than Milk Marque in the use of these national assets. It would be more appropriate if there were a transfer of those functions and services to an independent national body.

It is vital that the flotation of Dairy Crest takes place as soon as possible, because it should be treated by Milk Marque in the same way as any other customer for its milk. That would only be fair to other competitors, if competition is, as it is supposed to be, at the heart of the Bill. There should be either safeguards to ensure effective scrutiny of the milk marketing board-Dairy Crest relationship or a separation of Dairy Crest and Milk Marque.

Mr. Curry : Let me make it clear that Dairy Crest cannot be owned by Milk Marque in the interim period after the end of the scheme, or by the residuary body of the milk marketing boards. Therefore, if Dairy Crest could not be floated in advance, it would be necessary to propose a means to deal with the short-term problem of

ownership--perhaps through a trust arrangement. It would not be acceptable for Milk Marque, by accident or design, effectively to control Dairy Crest, even for the transitional period, and alternative arrangements would have to be made.

Ms Corston : Although I am grateful for the Minister's explanation, it would have been helpful if that had been made clear at an earlier stage, rather than only now.

At the heart of the Bill, and anything that the House considers, there should be basic tenet. To quote a former Foreign Secretary, Lord Healey, "If it ain't broke, don't fix it." The milk marketing board has worked well and the Government should have fought for it in the way that Governments have supported it and fought for it in the past. European Community legislation did not oblige us to wind it up.

The Labour Members are not the only people opposed to the new regime. I understand that there is concern in Ambridge. Phil Archer has said how worried he is about the winding up of the milk marketing board, which he described as a trusted friend. He spoke about the uncertainty of a new regime and how opposed he was to it.

Mr. Paul Marland (Gloucestershire, West) : What about Eddie Grundy?

Ms Corston : Watch this space.

All producers can sell their milk to, and have confidence in, the milk marketing board. Anything put in its place should provide the same opportunities and give the same confidence. The proposals threaten the livelihood of farmers and those in the dairy industry. There is already a great deal of concentration of power in that industry. Some 79 per cent. of the United Kingdom dairy products market is in the hands of multiple retailers, and four of the largest monopolies have no less than 75 per cent. of that market. It is vital that we protect the milk industry in the interests of those who work in it, and of the consumers of milk and milk products. Members of Parliament have the primary duty of protecting the interests of our constituents, who are consumers. Other organisations have professional bodies to represent them, but we are here to make sure that whatever we do through legislation

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on food is in the interests of consumers. Judged by that criterion, the Bill signally fails. That is why the Labour party would be right to vote against it and try to get it amended in Committee. Several hon. Members rose--

Mr. Deputy Speaker (Mr. Michael Morris) : Order. As the wind-up speeches will commence at 9.15 pm, I appeal to hon. Members to make relatively brief speeches so that more can be called.

7.59 pm

Mr. William Hague (Richmond, Yorks) : I am grateful, Mr. Deputy Speaker, for the opportunity to take part in the debate, and I shall heed your request for speeches to be relatively brief.

This is a debate of great interest to my constituents. I have enjoyed listening to the speeches made so far, most notably that of my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling), with which I concur in many respects, not only because of its content but because of the measured way in which my right hon. Friend criticised some aspects of the Bill, striking a more appropriate note than that struck by one or two Opposition Members who attributed the Government policies on the Potato Marketing Board to potato processors' donations to Conservative party funds. To make such an accusation in the very month that the Duke of Westminster has resigned from the Conservative party because his views were apparently ignored on the Housing and Urban Development Bill, and against a Government who proceeded with their reforms of competition in the brewing industry against the most vociferous complaints of many of the party's principal contributors is extraordinary. If the Conservative party evolves its policies in order to please its contributors, it does so in a way that can only be described as bizarre.

I welcome many of the provisions in the Bill, particularly those relating to group marketing grants. Marketing is important for British agriculture. Improved marketing of our products is essential. We have one of the most efficient agriculture industries in the world, but, compared with the marketing of products from other countries at international food exhibitions, our industry often falls down at the crucial marketing stage. I hope that the group marketing grants will be the spark for many new ideas and projects. They will not revolutionise the industry, but they will begin to show the way and address one of the great weaknesses of our industry.

I hope that my hon. Friend the Minister of State will be able to say a little more about which organisations have expressed interest in those grants so far, what level of interest there has been, what he can do to encourage co-operatives, as well as other ad hoc groups of producers, and how the measures will proceed. The measures are obviously welcome, permitting recovery procedures in the event of the breach of the scheme conditions, enabling grants to relate to the whole of Britain, and so on.

I also give a broad welcome to the provisions relating to the milk marketing boards and the revocation of the milk marketing scheme. Like my right hon. Friend the Member for Westmorland and Lonsdale, I think that the milk marketing boards did a good and useful job for a long time, but it is right to revoke the scheme now. If we did not do so, it would probably collapse under its own weight. It

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is under challenge in the courts, there are all kinds of constraints on Dairy Crest, which do not apply to its competitors, and the pricing and allocation system for milk has clearly failed in Britain during the past 10 years or so, causing consumers to pay a high price for their milk while producers receive a low price when they supply it.

The margins of manufacturers are artificially protected and that has led to an insufficient incentive to go for high value-added products. Often there is not the availability of milk in the United Kingdom to make high value- added products because of the protection of milk for export for lower value -added products.

That particularly came home to me in my constituency where there has been great controversy recently over the future of a dairy in Hawes which Dairy Crest attempted to close. After the valiant and, I am pleased to say, successful efforts of many of my constituents, it has been brought from Diary Crest and is once again churning out true Wensleydale cheese which I hope hon. Members will join me in consuming in the Dining Room at every possible opportunity. But what really brought home to me the problems in the milk marketing scheme was studying the economics of that dairy and seeing that it was gravely affected by the fact that milk simply was not available on many days of the year for it to produce at all. We have the extraordinary situation where milk is not directed to those customers who value it most. It is not available even to businesses who want to buy it and are prepared to pay for it. That cannot be the right way to run an industry. The result is inefficiency and import penetration of high value- added products. Clearly, this scheme must go.

Mr. Nick Ainger (Pembroke) : Does the hon. Gentleman accept that the problem of supply to processors, to producers of cheese and so on, is not just inefficiency within the milk marketing boards, but the fact that we are allowed to produce only 80 per cent. of the total market. It was the disastrous deal that his right hon. and hon. Friends brought back from Europe in the early 1980s that caused that problem.

Mr. Hague : Milk quotas are a restraint on our national production, but my right hon. and hon. Friends who negotiated that deal had to start from where they were. They could not suddenly demand huge shares of the European market for milk at the expense of other countries already producing it. In fact, what was done in the 1980s now turns out to have provided an important safeguard for small producers. Like my right hon. Friend the Member for Westmorland and Lonsdale, I am inevitably concerned that small producers should not be driven out of business but should be given the chance to compete. They are to some extent safeguarded by the existence of milk quotas, even though they were savagely denounced when they were introduced. My right hon. Friend has been vindicated by events.

Like my right hon. Friend, I welcome the creation of Milk Marque. I hope that it is a success and that a high percentage of producers join it. Without being a monopoly, it will have great bargaining power if it succeeds. It will help to ensure that there are fair negotiations, particularly with large supermarket chains. I hope that many farmers will join it. However, I agree with

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my hon. Friend the Member for Batley and Spen (Mrs. Peacock) because I cannot see why such things as artificial insemination, other breeding services and milk recording services must be part of Milk Marque. That does not necessarily follow.

I hope that Milk Marque will stick to the promise that it made in correspondence sent to me and other hon. Members that it will have milk pricing that is market driven and responsive to supply and demand, and will allow easy access for new businesses, encourage the development of new high value-added products, allow rapid and flexible response to the demands of consumers, meet the challenge of foreign imports and provide export opportunities. If it can do those things, it will be a great success and it will do a great service to British agriculture and the British balance of payments. If it succeeds and makes a voluntary co-operative work, it will set a valuable example to the rest of the industry. I endorse and enthusiastically applaud that part of the Bill.

But that brings me to the other major part of the Bill, concerned with potatoes. Again, like my right hon. Friend the Member for Westmorland and Lonsdale and my hon. Friend the Member for Cambridgeshire, North-East (Mr. Moss), I must sound a cautionary note and say that I am worried about what is proposed. I have yet to be convinced that it is the right course of action.

The milk industry has suffered because of rigid price arrangements, the absence of competition and the existence of a monopoly purchaser, but the same is not true of the potato industry. The Potato Marketing Board is different. There is no monopoly purchaser, there is free competition beyond the farm gate, producers compete with each other making contracts with whomever they want and there are no restrictions on imports so British producers have to be competitive. Therefore, we should be cautious before we sweep away the system. There is a danger in trying to be neat and deal with all the marketing boards at the same time and in tinkering and interfering too much with arrangements that have worked reasonably well. I share with my hon. Friends a natural bias against marketing boards, quotas and restrictions of any kind, but we must look carefully at how the arrangements work.

What is the case against the Potato Marketing Board? First, we are told that it leads to higher prices : indeed, I have heard many people say that it must do that or producers would not want to be part of it. It is true that prices have tended to be lower in some countries, particularly France and Germany ; yet, in many recent years, Dutch prices have been higher than spot prices in the United Kingdom--and, after all, we should compare our prices most rigorously with those of Holland, which seems to be the source of most of the imports.

One of the problems generated by today's debate is the existence of tables of statistics that can prove almost any point that hon. Members wish to illustrate. The potato market is very complicated ; there are many different grades of potato, and various places and seasons are involved. The price moves all the time. It is possible to construct a table to demonstrate and validate almost any point--but, for what it is worth, I have a table that shows the spot potato price in the Netherlands to have been higher than the United Kingdom price in 1988-89, 1989-90 and 1990-91, and marginally higher, by a few pence per tonne, in 1991-92.

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The basic premise that price is at the heart of the matter and that people will pay to be part of the Potato Marketing Board only if they receive a higher price as a result, is not necessarily valid. People pay not just for a higher price, but for a reduction in the risk, regardless of price. The only conclusion that I can draw from the contradictory data that are available is that although the potato market scheme sometimes leads to a higher price in this country, at other times it leads to a lower price. Sometimes the product is scarcer than it would be if the market were completely deregulated, but sometimes supply is made more secure.

After all, producers are liable for a penalty if they do not take up all their quota in any given year : they will lose on their quota allocation in the following year. The potato marketing scheme can act to maintain supply, rather than depressing it in a way that would be characteristic of a damaging monopolistic arrangement. I do not consider the price arguments sufficient justification for sweeping the scheme away.

Another argument used against the scheme is that processing capacity will move abroad. A slight handicap of that argument is the fact that new processing capacity has recently been built in this country. A bigger problem for the industry seems to be the availability of excess processing capacity in Holland, which has led the companies that own that capacity to discount heavily in order to make maximum use of it. Such a development should not be mistaken for a relentless move abroad.

If the scheme's failings have led to more processed imports, why are there more such imports from the Netherlands into many other European countries-- countries that have no potato marketing schemes ? Perhaps the problem is not so much that processors are moving out of Britain ; perhaps it has more to do with inadequate competition among processors in Britain. I feel that my right hon. and hon. Friends in the Ministry of Agriculture, Fisheries and Food must conduct and present a much clearer analysis of the industry and its workings--after all, it is a very complex matter--before they can persuade us that the potato marketing scheme needs to be abolished for the reasons they have given.

It is said that the removal of the scheme would result in generally freer and fairer competition, but can we speak of freer competition when Dutch producers seem to be combined into a few large co-operatives with the ability to control plantings and negotiate prices far more effectively than individual, fragmented producers in other countries ? Are Ministers sure that this would be the only country in which producers joined to agree on how much should be planted ? Are they certain that it would be against our interests to be the only country with such a scheme ?

I am very much in favour of free and fair trade, but I am not sure that the outright and rapid abolition of the Potato Marketing Board is the way to achieve it. I think that the other place was sensible to insert one or two provisions in the Bill, and I welcome the Government's announcement that they will not try to reverse those decisions. I also welcome the provisions to ensure the creation of a successor body. I think, however, that there is a strong case for giving the Potato Marketing Board longer to show that it can make things work--that it can work with processors to reduce the percentage of the processed potato market taken by imports, and do more to meet the right specifications with better grading and the like.

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I believe that my right hon. and hon. Friends in the Ministry should pause to reflect before overturning the current arrangements, and I hope that the debate will give them some cause to do so. 8.15 pm

Mr. Nick Ainger (Pembroke) : My constituency has interests in all three areas covered by the Bill : wool, potatoes--particularly the early potatoes for which it is famous--and, of course, milk and the proposed abolition of the milk marketing boards.

Recently, I have engaged in extensive discussions both with my local branch of the National Farmers Union and with the Farmers Union of Wales. Both organisations--as well as individual farmers--have expressed grave concern. As my hon. Friend the Member for Bristol, East (Ms Corston) pointed out, we have here an organisation which appears not to be broke, so why on earth try to fix it? This is especially relevant to constituencies such as mine, which is 60 miles from the nearest city and has serious transport problems. We have one or two buyers in the milk industry--processors--and the local farmers fear that, if Milk Marque is not a success, they will be under pressure from those processors. They are afraid that prices will be forced down in the local market because Milk Marque has failed nationally.

Having expressed those reservations, I must say that in the main both unions welcome the idea of Milk Marque. They see certain advantages in it. They recognise that Dairy Crest should perhaps have been separated from the milk marketing boards many years ago, and that if that had been done we might not be faced with this Bill now. The subject of wool was touched on briefly in our debate some weeks ago on hill livestock compensatory allowances. My farmers on the hills of Preseli quoted figures showing that the price that they now receive for their wool is less than half the price that they received 10 years ago. Wool is no longer a reasonable product for them to sell ; it is hardly worth shearing the sheep. In the light of that, it is a great shame that the Government have decided to remove the guarantee price : there is now no bottom to the market, and prices are set to plummet.

Many hon. Members have referred to both milk and sheep, but as Pembrokeshire has a special interest in new potatoes, and a special sector of the market I shall speak mostly about the possible abolition of the Potato Marketing Board. Last year, 35,000 tonnes of early potatoes were produced in Pembrokeshire, and that produce alone put a significant amount into our local economy. In 1989, nearly £6 million was pumped into the local economy by sales of early potatoes. In 1990, the figure fell to £4.3 million ; in 1991, it went up to £6 million ; in 1992, it fell to £3.1 million. It would have fallen much further if the Potato Marketing Board had not intervened and placed a bottom on the market.

The season last year was unusual because the Cypriot, Moroccan and Egyptian early potatoes came in much later and the early English potatoes, because of a mild winter, came in much earlier. The traditional time for the Pembrokeshire potato was extremely limited. Fortunately, the Potato Marketing Board intervened with about £450, 000 for Pembrokeshire growers last year. That is a good example of why we need the board to continue to prevent such enormous fluctuations. To illustrate the price ranges, the House might like to know that the average

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price paid for Pembrokeshire early potatoes in 1989 was £171 per tonne while the average price last year was £95 per tonne. The Minister told us that he wanted to break the shackles imposed on producers by the Potato Marketing Board. However, in my discussions with growers and with the NFU, no one has said that they want to see the end of the board or that they want to break free of its shackles. To illustrate that point, I want to quote from a letter--not from a sado-masochist, but from John Davies of Herbrandston Hall, a member of the NFU potato committee and one of the largest early potato producers in Pembrokeshire. He writes : "If quotas were removed the bulk of growers in Wales would stop growing. This would be because without stability we would have years of shortage and high prices followed by large surpluses. In those years because of the carryover of the main crop from the previous year potatoes in Pembrokeshire would not be sold at all. Rather than cope with this they would leave potato growing and reduce their overheads and fixed costs.

There was no early potato industry in Pembrokeshire before the formation of the Potato Marketing Board. Pembrokeshire is the largest supplier of early potatoes in the UK market during May and the first half of June. If the area was substantially reduced it would not be so easy to influence the market and marketing would be very much less effective. The effect of this happening would be an increase in imports of first early potatoes. The home growers have reduced imports from 385,000 tonnes in 1978 to 264,000 tonnes in 1992. This is one of our great successes in import substitution."

That is a good illustration of how, as a result of the Potato Marketing Board and a regime, we have been able to stop imports or to reduce them significantly.

Mr. Davies also referred to the importance of the potato industry to the local economy in respect of the provision of casual and permanent labour. He wrote :

"Potato growers in Wales spend approximately £1.2 million on seasonal labour which is very important to rural economies. About 350 potato growers employ regular farm workers. If they stopped growing potatoes and returned to cereal production they would no longer need this labour."

It is clear that the Government have completely failed to make the case for the abolition of the Potato Marketing Board. I have yet to hear a speech from the Opposition Benches or from the Conservative Benches in favour of its abolition. I certainly did not hear such a speech from the Minister. He seemed confused as to whether it was a good British idea to get rid of the Potato Marketing Board or a bad European one. We have already heard that the Spanish and French operate intervention policies. Hon. Members on both sides of the Chamber accept that with the removal of the 50,000 tonnes Government limit, leaving the Potato Marketing Board to intervene to the tune of 450,000 tonnes maximum a year, we would have a totally self- financing scheme which would cost the taxpayer nothing.

Why are the Government proposing to legislate away the Potato Marketing Board? The only answer I can think of is that, unfortunately, they seem determined to get rid of any whiff of an organised market which has worked so very well. They are now virtually in the pockets of the only people who will benefit from the board's abolition--the major potato processors.

It is a great shame that the Government have ignored the success of the Potato Marketing Board. I hope that

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