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22 May 2007 : Column 381WH—continued

22 May 2007 : Column 382WH

Mark Williams: I agree and I thank the hon. Gentleman for that contribution, as the situation is much as he describes. Issues associated with bovine TB ring out from cases brought to his surgery and to mine.

Sadly, there are few signs that the regulatory burden is lifting. In fact, many farmers across the UK are seriously worried about the impact of the nitrate-vulnerable zone regulations, which are likely to have significant cost implications by requiring farms to build storage units for slurry. I have heard estimates that implementation of the regulations will require capital costs of £300 million to £400 million. Does the Minister agree with those figures? How does the Department for Environment, Food and Rural Affairs plan to mitigate the effect of those measures and where will the burden fall? The great environmental challenges of our day are not lost on our farming community, but there are serious concerns about how the terms of the regulations will be met. I commend to the Minister the work on methane emissions undertaken by the Institute of Grassland and Environmental Research, which is based in my constituency.

The result of the shift in the balance of production and retail costs has been disastrous in Wales. I will resist the temptation to stray into devolved matters and will simply cite some examples. The Welsh Assembly revealed in its latest aggregate agricultural statistics that income from farming in Wales fell by about £44 million between 2005 and 2006. That dramatic reduction is mainly due to a downward slide in the value of milk and milk products that amounts to £23.9 million. The net result, which I am sure has been the experience of other Members in their constituencies, is that dairy farmers have left the industry. In Wales, the figure has fallen by about 30 per cent. to 2,400 farms.

Hywel Williams (Caernarfon) (PC): The situation is compounded by the difficulties faced by new entrants and the average age of the work force, which is increasing every year.

Mark Williams: I thank the hon. Gentleman for that comment. One concern that is doubtless raised in his meetings with farming unions is the ageing farming community. The problem is not that young people are not keen to enter the industry as a career, but that it is incredibly hard to do so. I will come back to that issue.

It is not just farmers who are under threat; there is also a decline in associated industries. Some 70 per cent. of Welsh milk is turned into cheese, and I hope that our discussions will not focus just on supermarket milk. The recent announcement in my constituency of the closure of the Aeron Valley creamery, which will result in the loss of 44 jobs, has given cause for concern. Its highly motivated work force had been working very hard to establish some well-known brands, and the decision to close came as a bolt from the blue. The closure came only 12 months after Dairygold closed in Felinfach, which resulted in 115 job losses. Dairygold is another dairy sector firm that has pulled its operations out of Wales. It has benefited from not insubstantial sums of public money.

I am pleased that the Dansco creamery in Newcastle Emlyn, which is just across the border from Ceredigion in Carmarthenshire, has secured its short-term future.
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Had it not done so, farmers in my constituency and more widely in west Wales would be in an even worse position. If milk is processed locally, transport costs are kept down, farmers’ margins are less and more of the value of the primary product is kept in the local community. That should be the benchmark.

As the hon. Member for Caernarfon (Hywel Williams) said, the average age of the dairy farmer is rising and we need to act now to ensure that more young people have an incentive to stay in the sector. Wales certainly has an impressive network of young farmers clubs. When I am on the hustings at elections, I am often asked whether I would encourage a young person to pursue a career in dairy farming. Faced with the current pricing regime, it is difficult for me to give an honest, objective opinion.

The looming spectre of the Competition Commission’s inquiry has at long last provoked supermarkets into taking some action to increase farm-gate milk prices. Out of the major retailers, Waitrose and Marks & Spencer have led the way. Waitrose has created a “select farm” milk range, which guarantees 65 farmers a price of 23p a litre. Marks & Spencer guarantee 61 milk suppliers a fair price. Tesco has recently announced that it will guarantee 850 farmers 22p a litre, which is welcome news. Sainsbury’s and Asda are both urging their processors to pass a premium back to the farmer, but we have yet to see any concerted action fromMorrisons.

Andrew George (St. Ives) (LD): My hon. Friend is making a good point. On the Competition Commission inquiry, does he agree that the Tesco announcement was made largely in response to the requirement for a public relations boost for how it is seen by the dairy industry? Does he also agree that the nature of the contracts themselves—the short-term changes, the overriders, the paying for promotion and other conditions—need to be looked at? That is why the Competition Commission should come down hard on the retailers to protect primary producers.

Mark Williams: I of course agree and it would be churlish not to welcome those moves, in so far as they go, but we have yet to see the detail. [Interruption.] The hon. Member for Caernarfon asks from a sedentary position, “How far have they gone?” and the answer, I think, is not very far at all. It is a step, when we need strides. As my hon. Friend the Member for St. Ives (Andrew George) said, we need to look more closely at such practices through, I believe, the Office of Fair Trading.

Mr. Crabb: The hon. Gentleman is being extremely generous with his interventions. My discussions with representatives of Tesco have left me under the impression that it is very alive to the concerns of the dairy sector. The new contracts that it is trying to move towards represent a genuine attempt to get close to producers. There is a lot of cynicism among farmers about Tesco and the larger retailers, and we can understand where that is coming from, but Tesco’s initiative is a genuine attempt to move the debate forward, to get beyond the finger-pointing among retailers and processors of recent years, and to do something positive for the sector. However and as the hon. Gentleman said, we need to see the detail.

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Mark Williams: The proof of the pudding will be in the eating. What will happen remains to be seen, but I would like a lot more detail from those companies, so I shall reserve judgment.

Any recognition by supermarkets that their huge power bestows on them a social responsibility is, of course, welcome. Any initiative that guarantees farmers a return over and above the production costs represents a step—although we are looking for strides—in the right direction. For a long time, my colleagues and I have been urging supermarkets to look at the model of Fairtrade products. Wisely and necessarily, the Fairtrade movement guards its label and name for use with developing countries only, which I respect, but the model shows us how consumer power can lead to a change in practice by supermarkets. However, direct-supply contracts could easily create problems, as well as solutions. For those farmers not lucky enough to secure a direct contract—if it is an acceptable contract—the future would remain vulnerable and unsustainable.

The Royal Association of British Dairy Farmers estimates that only 11 per cent. of Britain’s 15,000 diary farmers will benefit from Tesco’s recent decision. Those left out in the cold will continue to face a very uncertain future. Supermarkets will continue to get the majority of their milk from milk processors, and for most farmers the farm-gate price will remain unsustainably low.

As I ate my breakfast this morning, I noticed the flag of St. George on the milk carton and the milk pledge by Marks & Spencer:

We need to hold companies to such statements, and I sincerely hope that Tesco’s direct-supply contracts are robust enough to ensure that those guaranteed prices actually reach farmers—the contractual point made earlier by my hon. Friend the Member for St. Ives. The milk will still come via processors, so how it will work in practice remains to be seen.

There is a separate move by Tesco to allow its customers to support local milk producers, which represents an important development, too, but we should realise the limits of the current scheme. My county of Ceredigion is a big milk producer, but Tesco confirmed to me that although it has a local-choice milk supplier in Caernarvonshire for its Welsh milk, it does not have one in Ceredigion. The definition of localism depends on who is making the case.

Moreover, only half of raw milk is consumed as liquid milk. As I said earlier, 70 per cent. of Wales’ milk goes into cheese production. It is vital that supermarkets introduce fairer pricing structures for cheese, as well; reform of the milk sector on its own is not enough. I accept that the cheese market is more complex, but supermarkets must make efforts in this area, too. Sainsbury’s has worked to increase returns to farmers through its new cheese contracts; again, the details have yet to be seen. That must be the start of real change in the sector.

The Government can help, too. The Food Standards Agency and Ofcom model—it puts cheese in the same category as sugary cereals, crisps and burgers, and
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involves a ban on the advertising of cheese during children’s programmes—is very damaging to the product. If Ministers can bring pressure to bear there, I sincerely hope that they will. I commend the work of my hon. Friend the Member for North Cornwall (Mr. Rogerson) and the all-party group on cheese, which I believe has led the campaign. It is doubtful whether voluntary action by supermarkets alone will be enough to halt the erosion of the dairy sector. Indeed, I would suggest that the threat of regulatory action by the Competition Commission has stirred supermarkets into life.

Farmers across the UK are hoping for a strong conclusion to the commission’s inquiry, because its recommendations can do so much to aid the sector. That is why it is regrettable and frustrating that its announcement is not now expected until February 2008, according to the commission’s website this morning. The supermarket code of conduct should be scrapped and replaced by a fair trade inspector within the Office of Fair Trading. He could proactively investigate abuses of market power at every step in the supply chain and ensure a fair deal for farmers. I hope that the parties represented here this morning can reach some unanimity on that point.

I hope that the Minister will give a commitment to abide by the results of the commission’s inquiry and that he will set in train a review of Government policy, in order to recognise the pressures on the dairy industry and to investigate actively ways in which to bring bargaining powers back to dairy farms. In Wales, the NFU Cymru has proposed bringing together the Milk Development Council, the Dairy Development Centre and the Welsh dairy strategy group to lead the way for the Welsh dairy industry, according to the example of the Ireland model. Obviously, because such matters are devolved the Minister cannot comment directly on the Welsh example, but I hope that he can say whether he has made an impact assessment of the success of the Irish model, of the grants given to Irish cheese producers and of the competitive edge given to Irish milk products as a result of that support. Would he support the formation—I hesitate to say this, as a Member representing a Welsh constituency—of an England-wide or regional marketing board along those lines?

I remind the Minister that reinvestment levels in the UK dairy industry are unacceptably low and well below the European Union average, which does not make for a healthy industry. We need to do something about that. The NFU thinks that further rationalisation of the processing industry is essential if the UK is to compete effectively at an EU and international level. I would be interested to hear the Minister’s views on the principle of rationalisation and whether he agrees with the NFU that it should be encouraged.

Andrew George: I am interested in the relative gullibility of the hon. Member for Preseli Pembrokeshire (Mr. Crabb) in accepting Tesco’s announcement. On my hon. Friend’s point about the Competition Commission’s inquiry, does he agree that there is still time for dairy farmers and other producers to bring forward evidence to the commission before the initial findings are announced in
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September? In fact, it is urging producers to bring forward further evidence. It is an important moment in ensuring that we get a decent outcome.

Mark Williams: I agree with my hon. Friend, and I have certainly sent that message in my dealings with farmers in my constituency. There were concerns early on that the body of opinion and evidence for which we had hoped had not been presented to the commission.

Dairy farming is more than an industry. I shall resist the temptation to be poetic, but, representing a rural constituency, I can say that it is much more than that. If we do not offer support to our dairy farmers, they will simply go out of business and we will lose much more than farms. We will lose the wonderful produce that is being developed and has been developed over the years, and risk destroying livelihoods and breaking down communities. Potentially, acres of countryside will be left untended. Once dairy farmers go, there is very little chance of getting them back. The cost of re-establishing a farm is uneconomic as things stand.

I detect a change. It might consist of token gestures, or it could be more substantial. There is greater awareness in this place of the farming industry. I pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) and the all-party group on dairy farmers—it consists of Government and Opposition Members—in bringing such matters to the attention of the House. Farmers need support now, before it is too late. The next time that I address a farming union meeting in my constituency and I am challenged with the question about young entrants to the farming industry, I want to be able to give the unequivocal answer “Yes”, rather than “It depends.”

11.20 am

Daniel Kawczynski (Shrewsbury and Atcham) (Con): I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. I concur with almost everything that he said. When I was elected to Parliament, I started to realise the extent of the crisis in the dairy sector through meeting many of the dairy farmers in my constituency. Two constituents in particular, Mr. Stuart Jones of Asterley and Mr. Andrew Bebb from Cruckton, managed to teach me a great deal about the industry and have encouraged me throughout to pursue their interests and those of the wider dairy sector. Mr. Bebb is a member of Farmers for Action, and I pay tribute to the work that he does.

As a result of those meetings, about a year ago I started to campaign for action by supermarkets, but when I met chief executives of supermarkets, they were intransigent. At that time, they were saying, “We’re already doing a great deal. Don’t bother trying to kick up a fuss over this issue, because we’re not going to do anything about it.” That was their attitude. I was particularly disappointed with some of the comments from Asda at the time.

I therefore decided to set up the all-party parliamentary group on dairy farmers, because as we all know in the House, numbers speak and it is important for Members of Parliament from all political parties to co-operate to show the extent of feeling. It is a tribute to the extent of feeling on this
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issue that so many MPs are here today to take part in the debate. I introduced a debate the other week on Anglo-Russian relations and I was the only Member present.

Hywel Williams: And the Minister.

Daniel Kawczynski: Indeed. Obviously, the dairy sector is far more important than Anglo-Russian relations.

I should like to inform the Minister that more than 170 MPs have joined the all-party dairy farmers group, which makes us one of the largest all-party groups in the House of Commons. We have a very large number of Labour MPs, Conservatives and Liberal Democrats, as well as Welsh nationalists of course and Members from Northern Ireland. The group has been very active: we have published a report, which has been widely circulated. I, together with my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb), took it to the Secretary of State for Environment, Food and Rural Affairs, and we hope that he will consider some of the recommendations that we put together in the report. However, the Secretary of State left me with the impression that the view is that it is not the Government’s role to intervene with supermarkets and that the matter will have to be sorted out by the industry.

I very much regret that, because I feel passionately about the issue, even as a Conservative. We always think that we cannot buck the market and we have to let the market look after itself, but as a Conservative I can say that I feel passionately that, for certain industries, there has to be some form of intervention and regulation. The industry that we are discussing is of such fundamental importance to our country that it deserves to have a spotlight shone on it by the Government. The Government should at least be scrutinising far more effectively what the supermarkets and processors are doing.

For the report, the all-party group interviewed many people over the past 12 months, including the Office of Fair Trading, chief executives of various supermarkets, the NFU and many other outside bodies. I pay tribute to the RABDF, which has acted as an excellent secretariat for the group and has been a tremendous help to me in sorting out a great number of interviews and other exercises.

A delegation even went to Brussels recently. I see the hon. Member for Brecon and Radnorshire (Mr. Williams) and my hon. Friend the Member for Preseli Pembrokeshire here. The three of us, with other MPs, went to Brussels to lobby the Agriculture Commissioner, Mrs. Fischer Boel. For an arch-Eurosceptic such as myself, it was quite a difficult experience to go to Brussels to interact with commissioners. Nevertheless, I had to do it, because I feel that the Government of my own country are not doing enough on the matter. I had to go to Brussels to lobby the Agriculture Commissioner to intervene in our country. It hurts me to say this, but I had to ask her to intervene in our country.

Mrs. Fischer Boel was extremely encouraging. I hope that my colleagues will concur with that. She said that she would look at the situation of the dairy sector in Britain and would have negotiations with our Secretary of State for Environment, Food and Rural Affairs to
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see what could be done. She also said that, in her native Denmark, Arla has 80 per cent. of the processing capacity. That was one of the most interesting things that I took away from that meeting. We are in a common market, and Denmark allows a processor to have an 80 per cent. market share, so why cannot we do something similar in the United Kingdom?

Mr. Crabb: My hon. Friend makes an extremely important point. Does he agree that one potential solution to the problem in the dairy industry is to have large farmer-owned co-operatives that are vertically integrated, similar to Fonterra from New Zealand and Arla in Denmark, emerge in this country? That will restore some of the balance in the supply relationship between farmers and the larger retailers. Does my hon. Friend also agree that there are significant concerns in the farming community about the attitude of the Office of Fair Trading to such a development? We need some of those co-operatives to become much bigger and stronger.

Daniel Kawczynski: I totally concur with that. It goes back to the point that there is a role for the Government to examine the success of processors in countries such as Denmark and to see whether they can negotiate or make it easier for some form of rationalisation to take place.

Mr. Drew: I totally agree with the hon. Gentleman. The problem is that we had such a body—it was called the milk marketing board—but successive Governments and successive farmer organisations did their best to undermine it. Perhaps with the benefit of history, he can go back and rewrite it.

Daniel Kawczynski: I do not know how to reply to that. I certainly stick by my comments that there should be some rationalisation of processors.

Helen Goodman (Bishop Auckland) (Lab): What the hon. Gentleman says is absolutely right. The point about the message that he has been given by DEFRA—that it wants the market to operate—and the point that he is making is that in the market that we are discussing, the power structure is totally unequal. That is the problem. The farmers do not have the same power that either the processors or the supermarkets have. If the Office of Fair Trading, in its inquiry, does not pay attention to the unequal power and does not look to the long term as well as to the short term, we will not end up with a satisfactory and sustainable dairy industry.

Daniel Kawczynski: Absolutely correct. I am grateful to the hon. Lady for that intervention.

The hon. Member for Ceredigion referred to the help that we have received from the WI. I pay tribute to its campaign. It has been instrumental in the great milk debate, in which I recently participated, and it is much better than us politicians in getting publicity. I remember that a lovely lady, who I believe was from Gloucestershire, came here on a cold January morning in a bikini and had milk poured all over her in the garden next to the Palace of Westminster to highlight the plight of dairy farmers. I applaud her for doing that on such a cold January morning.

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