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Mr. Stephen O'Brien (Eddisbury): I congratulate my hon. Friend on initiating this debate, which is of key interest to my constituents in Eddisbury--which, as the Minister will well know, shares with North Shropshire the honour of being Europe's largest milk field. I have not only large dairy farmers, but small dairy farmers. However, the economies of scale that one would expect to be a differentiating factor between them simply no longer exist. That is a major plight that is affecting all dairy farmers.

In addition to sharing the sentiments expressed about south Cumbria--to which I have a fond attachment--I should like to mention that, when I met my constituents at today's lobby, there was a great sense of dismay about the absence of Government support for immediate action on the Food Labelling Bill, which the Minister and I had a discussion on just over a week ago, in this very place. It is yet another matter on which Government action really must be focused.

Mr. Collins: I am grateful to my hon. Friend. As he knows, I strongly support his proposed legislation and I hope that the Government think again on that.

As the Minister will recognise, perhaps the most disturbing aspect of the agricultural situation is that even a year ago--certainly two years ago--dairy farmers and farmers in any agricultural sector would say that things were grim, but in six months' time they would be better. They said that six months after six months until six or nine months ago. As the Minister will probably acknowledge, sadly, farmers are no longer saying that--they have endured so many knocks, so many hopes have been dashed, and so many chances that there was light at the end of the tunnel have proved fruitless.

An entire generation of farmers believe that they will be the last. The average age of farmers is something like 57. Many fewer farmers' sons and daughters expect to follow their parents into farming than was the case before. As a result, many farmers who are still in business do not expect to hand over to the next generation, something that has been a great incentive to invest and produce for the future, but are simply carrying on, waiting for the opportunity to get out of the industry and retire. That is very sad.

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It is allied to the point that was made to me by Matthew Robinson, one of my constituents who came down to London for the demonstration earlier today, that they way in which the financial constraints are biting is hitting the new, younger, possibly more technologically sophisticated and more efficient farmers who are at the start of their careers, have heavy borrowings and are perhaps most vulnerable to a financial shock. Older farmers, who may have paid off their mortgages and loans, are more likely to keep going for a few more years, hoping that things will get better, because they will have built up some fat on which they can depend.

The Select Committee stated at paragraph 43 of its report:

We should not kid ourselves that only the less efficient, older producers will be forced out by the present circumstances. It may well be the next generation who are knocked out and, if we are not careful, the industry will have no future at all.

My final point relates to the nature of farming in my constituency. I represent a large chunk of the lake district. The Minister will recognise that a large number of the farmers there--both dairy and otherwise--are hill farmers. Consequently, they are on the margin of the margin. In many cases, the dairy part of their farming was the diversification strategy, alongside sheep. Now they find that the sheep market and the dairy market are down. Some of them depend on farming incomes of only £2,000 or £3,000. Many of them are on family credit and are really at the margin of viability.

Paragraph 44 of the Select Committee report specifically addressed the fact that those small family farms are important to the industry because of what they bring to the environment, the social life of the area and rural communities. It stated:

I hope that the Minister will say something about that. There is a general problem across the board for the dairy sector, particularly in my part of the world, where the only significant alternative employment is in tourism. Frankly, tourists come to the lake district to see not blasted heath and wilderness but a man-made landscape. Without the small dairy farmers, we will not have that landscape and the pit prop of the whole underpinning of the economy in large tracts of Cumbria and elsewhere will be knocked away.

Inevitably, it is not possible in such a short debate to raise all the problems facing the industry, but I hope that the Minister will say that the Government recognise the scale of the problem, that they accept that there should be a strategy to keep a significant dairy industry viable and that they will address specifically, perhaps in the context of the Prime Minister's farming summit on 30 March, the need to provide targeted assistance for the dairy industry and to help small dairy producers in particular.

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2.35 am

The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): I congratulate the hon. Member for Westmorland and Lonsdale (Mr. Collins) on securing this debate. I would have wished him better fortune in the timing, as it is an important subject and it is a pity to discuss it at such a late hour; but it is timely in that it is taking place on the day when dairy farmers have reached London in their campaign to increase public awareness of their serious plight. I am conscious that the march started in the hon. Gentleman's region, the north-west, in Carlisle, so it is suitable for him to have introduced the subject.

I am grateful for what the hon. Gentleman said about my right hon. Friend the Minister of Agriculture, Fisheries and Food and his willingness to meet members of the delegation today and to engage in discussions with them, examining the very difficult issues that face the dairy sector. The industry is important nationally. It is the largest and arguably most economically important of all the agricultural sectors.

The industry is also important regionally, as the hon. Gentleman said. He represents a constituency in which dairying is very important. I understand that Cumbria has the second largest breeding herd, exceeded only by Devon's. The hon. Member for Eddisbury (Mr. O'Brien) also referred to the importance of the industry in his area.

I share something in common with the hon. Member for Westmorland and Lonsdale, as one branch of my family comes from his constituency--and they were farming folk.

We recognise the severity of the problems. The hon. Gentleman is right to say that there is a variety of factors in the current situation. The most dramatic aspect is the fall in the price of milk, which has several causes. The hon. Gentleman referred to the fact that milk is less expensive than bottled water. One might also say that it is less expensive than some not very healthy fizzy drinks that we have been encouraged to drink in preference to milk. Indeed, we dealt with that subject in a Standing Committee last week, and at least one Conservative Front Bencher here tonight was there then.

The price has fallen especially dramatically in the United Kingdom. Prices are low in some other European countries, but there are some particularly British aspects to the crisis. Obviously, as the hon. Gentleman recognised, the strength of sterling against the euro is an important factor affecting agriculture and the dairy industry in two ways: not only the familiar problem of the high price of exports but the fact that the European Union support price is set in euros and its value falls as sterling appreciates. As the hon. Gentleman knows, that represents the market of last resort and provides a floor in the commercial market. That is an important factor, but at the same time the level of sterling is an incentive for imports into the UK and makes for problems with exports. It certainly adds very much to the competitive pressures on our producers.

I was not surprised that the hon. Gentleman also mentioned several issues concerning the marketing of milk. We know that the main deregulation took place in 1994, and at that time everyone in the industry was in a new and perhaps alarming situation. However, the second stage has involved the results of last year's Monopolies and Mergers Commission report into the marketing of

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milk. That is an issue that the Agriculture Committee considered closely in its recent report on the marketing of milk, and I welcome that. In this short debate, it is not possible to go into all the different aspects of that report.

Despite the difficulties and frustrations involved in the whole process, I welcome the fact that Milk Marque chose to act positively and decisively to meet some of the criticisms in the MMC report. The successor organisations are in the process of getting up and running. Obviously, we want them to bring a new dynamism to the market and to have a positive effect on returns, even if only in the medium term, rather than the negative effect that many people worry will result.

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