Select Committee on Agriculture Minutes of Evidence


Examination of witness (Questions 740 - 753)

TUESDAY 23 NOVEMBER 1999

RT HON STEPHEN BYERS

  740. Given the sensitivity of the issue, partly for historical reasons, and given that objective two covers a large part of countryside in which dairy farming is important, if someone came along with some form of government assistance under objective two what would be your reaction?
  (Mr Byers) It would depend on the nature of the application for financial support. There are now a range of different programmes that potentially may apply to a small dairy farmer who may come along for support under our general small business approach. It will vary. We have to judge every application on its particular merits. There are certain restrictions because of European Union rules about what we can give support to and what we cannot give support to. My understanding is that if the farmer came along with proposals to get into yogurt or ice cream that would qualify, for example, for regional selective assistance.

  741. Going down what one might call the boutique processing road—the "appellation controllee" type of thing—that would seem to you to be the most likely way that the processing would develop rather than there being a big bang?
  (Mr Byers) That is one example of what I think would qualify for government assistance under our normal rules of support for business.

Mr Marsden

  742. Minister, on supermarkets, why did the original reference to the MMC not empower them to look at other elements in the supply chain, in particular to address the accusations that processors were acting as a cartel, and the role of supermarkets in deciding retail prices?
  (Mr Byers) The original reference was made before my time as Secretary of State, but it was very narrowly specific to raw milk. There is a bit of a history to raw milk. When the Milk Marketing Board was changed and Milk Marque was created and Dairy Crest was floated off on its own, at the time the then Government gave a clear commitment that the Director General would keep the new structure under review specifically in relation to the supply of raw milk. It was part of that review process that led to this latest reference that we are dealing with today. However, since I have been Secretary of State, I have asked the Competition Commission, as the Monopolies and Mergers Commission is now called, to look at supermarkets. I made it very clear, and it is part of the terms of reference of the Competition Commission inquiry that they will look carefully at the relationship between supermarkets and their suppliers in relation to the concerns that Mr Marsden has raised.

  743. Do you know what the change in retail milk price has been over the last view years?
  (Mr Byers) It has varied, largely depending on the strength of sterling. My recollection is that there has been a decline, I think, in the price of about 30 per cent. I am sure that the committee knows the figures better than I do.

  744. What about the retail milk price?
  (Mr Byers) I would only be able to give you that from my experience of buying milk which probably is not the best way of answering the Select Committee's inquiry.

Chairman

  745. I shall not ask you how much a pint of milk costs.
  (Mr Byers) It depends where you buy it from. I can tell you but it does depend where you buy it.

Mr Marsden

  746. Would you be surprised that it has been suggested that it has fallen by only about three per cent in the last five years?
  (Mr Byers) Yes, three per cent. It would be interesting to see the price at the farm gate and the decline that has occurred there. It would not surprise me at all.

  747. On the one hand we have the farm price falling by 30 per cent and on the other hand the retail milk price falling by three per cent. Does that not indicate to you that there is more market power exercised by the dairy trade and supermarkets than by Milk Marque and the producers?
  (Mr Byers) There are issues that give cause for concern which is why I have referred pricing in supermarkets to the Competition Commission. In terms of pricing there are a number of areas that the Competition Commission will want to consider. I have no doubt that when the commission looks specifically at the relationship between supermarkets and their suppliers that milk will be one of those areas where they will want to give careful consideration.

  748. Do you think that it is fair to say that there is a direct relationship between the change in price by the supermarket and the price at the farm gate?
  (Mr Byers) My concern is that I do not want to pre-judge what the Competition Commission will say to me. At the moment my words are being watched very carefully by the supermarkets so I do not want to pre-judge what the Competition Commission may report round about Easter next year. I do not want to appear difficult to the committee. I would like to answer the question, but it could pre-judge my consideration of the report.

  749. Do you have any comments on the evidence from Express Dairy's chief executive who said that there was no relationship between the producer price and the consumer price for liquid milk?
  (Mr Byers) I would be surprised if there were no relationship. The best thing is to make sure that that evidence is drawn to the attention of the Competition Commission.

Mr Todd

  750. In technical economic terms there is no reason why there should be a relationship, since the price a person is prepared to pay is determined by that alone and not necessarily by how much it costs to produce it. Turning back to the Milk Marque inquiry, one could say that Milk Marque and its members faced a decline in the price that they were able to obtain over the period of their activity, whatever that was, of 25 per cent or thereabouts. That would imply that if they were exercising monopolistic power they were doing a rather poor job.
  (Mr Byers) Yes.

  Mr Todd: Fair enough.

Mr Marsden

  751. When is the Competition Commission report on supermarkets likely to be published?
  (Mr Byers) It will report to me round about Easter of next year. My Easter break will consist of looking of the reports on three successor bodies and looking at the supermarkets. I shall obviously need to consider it and I shall publish it at the time when I make my announcement and recommendations. I shall try to do that as soon as possible. I apologised to the House at the time because I took far longer over the report into the supply of raw milk than I would have liked, but I found it difficult as I was going against the recommendations of the Monopolies and Mergers Commission and I wanted to be clear in my own mind that I was doing that for the right reasons. I do not know what the supermarket report will say. It is due to be reported to me round about Easter and then I shall publish it when I make my decision on the recommendations. I shall do that as soon as possible.

  752. You were saying that last time you took too long. Would you like to hazard a guess as to when we shall get it?
  (Mr Byers) No. I received the report that the committee is considering on 26 February this year and it was not until the beginning of July that I reached a decision.

Chairman

  753. It was July. You had to put a sticker over the June date on the front page.
  (Mr Byers) Is that right? At least it did not cost to trash the whole lot and do it again. No, I cannot tell, but there is going to be so much interest, as there was with this report, that I would want to try to announce my decision as soon as possible.

  Chairman: Secretary of State, I think that concludes our questioning. Can I end with a homily from the chair? First of all, I think you can publish these reports before you announce your decision. I am sure that was the advice that previous Secretaries of State have received. If there is a long delay over the publication of the supermarket report, I would urge you to consider early publication. What this report shows is that the Monopolies and Mergers Commission was not very good at looking at vertically integrated industries. I remember with great pain the experience over the beer report some years earlier where they showed they completely failed to understand the issues raised by vertical integration. Only the minority report written by a trade unionist was worth reading or acting on, as it turned out in the event. Finally, Mr Curry asked a question of Milk Marque when they came in. He said: "So you would say, in a sense, that both you and the dairy trade industries have been lumbered with a structure because that is what the legislation required and what the Government required at the time, and you have both suffered from it." Milk Marque answered: "I think that is fair." I hope that we are not lumbering anyone with a similar problem in the future. Can I thank you very much indeed for your real cooperation? In fact, the judicial review did not seem to get in the way at all of our questioning today. We are grateful to you, even if your officials are not. Thank you very much indeed.


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 1999
Prepared 10 December 1999