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22 May 2007 : Column 388WH—continued

22 May 2007 : Column 389WH

As I said, I participated in the great milk debate in my constituency, at the West Midland showground in Shrewsbury. More than 400 farmers and constituents attended that event, which was one of the most popular events that certainly I have played a part in over the past few years.

The campaign is starting to pay off. I am extremely encouraged by Tesco’s action. I appreciate the point made by the hon. Member for St. Ives (Andrew George) that it is only a very small, initial, tentative step. However, the investment by Tesco adds up to approximately £25 million and will affect 850 farmers, who will potentially receive a price of 22p a litre. I am even more encouraged by the initiative whereby it will employ 150 local farmers to produce local milk.

The hon. Member for Ceredigion told us that Tesco does not yet want to sell Ceredigion milk, and I have to tell him that I have been banging on Tesco’s door, asking it to sell Shropshire milk in its Shropshire stores. I encourage every hon. Member to interact with Tesco and to continue trying to get it to sell local milk in their constituencies. I know that it is going to have a Dorset milk, so my question is, “Why can’t you have a Shropshire milk?” We in Shropshire are also major milk producers. Such proposals are an important first step, and I want other major supermarkets to follow suit. I have had numerous meetings with Mr. Justin King, the chief executive of Sainsbury, and I expect him and Sainsbury to follow Tesco’s action. Mr. King will be coming to the all-party group’s next meeting in the House of Commons, and I hope that hon. Members will attend and quiz Mr. King about his actions.

When I met Mr. King, I showed him a full-page advert in The Daily Telegraph, which clearly highlighted Sainsbury’s policies on bananas, describing how the supermarket would pay banana growers in Belize, other central American countries and the Caribbean a fair price. I said, “You show such enthusiasm and passion for telling your customers that you want to pay Belizean and Caribbean banana growers a fair price. Why can’t you show just a molecule of the same interest and passion for our British dairy farmers?” Part of the reason is that there has been a great Fairtrade debate, and constituents up and down the country have very effectively shown the supermarkets how many people care about farmers in the third world being paid a fair price for their products. Together with the WI and other bodies, we in England and Wales must show supermarkets the same determination and interest so that they will follow suit on this issue.

Let me add a couple of extra points. The all-party group’s report does not call for a regulator for the supermarkets. Having studied the issue, I desperately wanted a regulator, but, regrettably, I could not persuade the other MPs to agree. The only party that is prepared to contemplate a regulator is the Liberal Democrats—

Hywel Williams: And Plaid.

Daniel Kawczynski: And Plaid. However, I hope that the Conservative party and the Labour party will look closely at introducing some form of watchdog, even if they are not prepared to have a regulator.

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Andrew George: I welcome the hon. Gentleman’s endorsement of the concept of a regulator. What the sector requires is a food or grocery trade inspector at the Office of Fair Trading, rather than a new body. However, does the hon. Gentleman not agree that the code of practice has clearly not worked? Producers are not prepared to complain because they fear the consequences for their contracts. On that basis, we need someone to investigate proactively, rather than simply waiting for complaints that will never appear.

Daniel Kawczynski: Yes, I totally concur. Indeed, that point was raised at the all-party group’s annual general meeting yesterday. We must come up with a solution under which our group or some other body encourages farmers to collate and present complaints to the Competition Commission.

Helen Goodman: I found that the OFT was prepared to take complaints from my constituency that I had anonymised for it, but that it would not take anonymous complaints directly from farmers.

Daniel Kawczynski: Yes, that is very much the case. However, the point remains that many farmers are fearful, and the commission needs to hear their views. I have put on record that if any farmer wishes to write to the all-party group, we will collate their views, anonymise them and pass them on to the commission. We can act as a conduit between farmers and the commission.

I am conscious that others want to speak, so let me raise just a couple of extra issues. The hon. Member for Ceredigion mentioned bovine TB. A few months ago, the Minister kindly met me and a delegation of farmers from my area to discuss the soaring rates of bovine TB in my constituency. He replied to me in writing to confirm that it had gone up significantly—by more than 20 per cent.—in the past year in my constituency and kindly agreed to meet a delegation of local farmers to discuss the issue. I hope that he will be able to give us an update on what the Government will do about bovine TB. I know that the issue is controversial, but I would be grateful for an update.

I would also like to raise the case of a constituent, Mr. Chris Balmer from Snailbeach, who has been in the dairy industry for a lifetime, as were his father and grandfather before him. I feel passionately about the case of this one man in the very south of my constituency. He is a small farmer, he lives by himself and he had a terrible case of bovine TB on his farm, but despite my repeated interventions, he has still not had his full Rural Payments Agency payment for last year. In most cases, when the MP intervenes with the RPA’s chief executive in writing or over the telephone—I have telephoned personally and written on many occasions—the issue is usually settled. Indeed, I have intervened in 45, 50 or 60 cases in recent months, and they have been resolved. However, I want to put on record for the Minister that my constituent, Mr. Chris Balmer of Snailbeach, who has had terrible problems with bovine TB, has still not had his full RPA payment for last year. He is an honourable and decent gentleman and he came to me in sheer desperation and frustration—tears were almost coming down his
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cheeks—because he was at his wits’ end, and I take this opportunity publicly to ask the Minister to intervene on his behalf.

The Competition Commission has been mentioned, and I feel a certain frustration and regret at the fact that its report was not published last year. I very much await the publication of its report, which has been delayed on more than one occasion. It is now the commission’s responsibility to come up with a strong critique of what is going on and with serious recommendations to the Government. I look forward to it grasping the nettle, being controversial, putting its head above the parapet and coming up with some constructive, long-term solutions for the Government to implement.

11.38 am

Hywel Williams (Caernarfon) (PC): I congratulate the hon. Member for Ceredigion (Mark Williams) on securing the debate. This is an extremely important subject, and it is gratifying to see Members from Wales here. Indeed, until a moment ago, when the hon. Member for Preseli Pembrokeshire (Mr. Crabb) left, we had what one might term a rainbow coalition on this side of the Chamber.

This is an important matter because, as has been said so many times, the family farm is of huge significance in Wales. That significance goes beyond the short-term bottom line, because individual businesses are not just businesses—they are the backbone of the rural community and the way to keep young people in our rural areas.

Lembit Öpik (Montgomeryshire) (LD): In a sense, the hon. Gentleman is right that there is a rainbow coalition on this issue. Does he agree that we are united by our shared concern about the seeming injustice that has been meted out to dairy farmers, with the treatment of bovine TB and the economic arrangements that the Government have imposed on the trade, which have done a great deal to force it into virtual bankruptcy?

Hywel Williams: The hon. Gentleman is quite right. Indeed, we in Wales are concerned not only about aspects of farming, which are important in sustaining rural communities, as they are in England, but about the further point that the agricultural community is the mainstay of Welsh language and culture.

I hardly need to say that there has been a huge and accelerating change in the dairy business over many years, with the size of herds increasing to a perhaps unfeasible level, along with the capital costs that are difficult to sustain. I occasionally talk to a constituent who is a good friend of mine, named Iestyn Hughes, of Mynachdy Bach. He is now retired but is fond of telling me that he brought up a family, farming a herd of 25 to 30 cows. It was very hard work, but he would not be able to do that now. There is innovation, and there are efficiency gains in the industry.

Another of my constituents has adopted the New Zealand method. He now has 800 cows out in the fields all year round and does not bring them in at all. It is a huge operation, with economies of scale, and, I hope, very good profits, but that sort of option is not open to the vast majority of farmers in my constituency.

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I represent the area Hufenfa De Arfon, where the South Caernarfonshire Creamery is based. The creamery is a farmers’ co-operative set up in the 1930s. It has the vertical integration that is seen as so important and produces not only liquid milk but cheese, butter, yoghurt, buttermilk and, I am sure, other things as well. It is a hugely efficient and successful operation. It has always been in the highest 10 per cent. for paying its members; its products are of superb quality and it adds value. It handles organic milk for other retailers and it exports cheese. It produces a cheese called Monterey Jack, which is an American recipe, and exports it—to America. Its premium vintage cheese is called Hen Sir, or Old Shire—and an excellent cheese it is. However, even that co-operative cannot buck the market in which retailers get such a big share and producers get essentially what they are given.

I think that the situation is verging on market failure. It is almost as though the market does not sustain a viable industry, at least as far as farmers are concerned. I shall not go into the subject of retailers.

Andrew George: Will the hon. Gentleman reflect on the fact that, although dairy farmers in the United Kingdom are certainly among the most efficient, and we have arguably the best climate for dairy farming—certainly among the best grazing land in Europe—giving us the best conditions for the best dairy industry, our dairy farmers are closer to being on their knees economically than any dairy sector in Europe? That shows the extent of market failure in the UK.

Hywel Williams: The hon. Gentleman makes an excellent point. When dairying in this country—particularly in my part of the world, with its high rainfall and very good grassland—is compared with dairying in the southern parts of Europe, we have ideal conditions; so why does not it work? Clearly, there is something happening beyond the efforts of individual farmers, or even farmers working as a co-op, as they do in Hufenfa De Arfon.

Liquid milk is bought and sold as a commodity and is subject to short-term variations, while small farmers are trying to run long-term businesses. Cows cannot be turned off as though they were machines, and investments cannot be planned if farm incomes are so unpredictable. I am glad that the supermarkets have begun to recognise their responsibility and are paying a premium in a few cases, but those higher prices are for a minority of producers. Perhaps I am a sceptic, or even a cynic, but I must ask whether that is more than a gesture. We shall see, but I should like those favourable arrangements to be extended to more and more farmers.

I want to end with a point about the Competition Commission. I have meetings with farmers and recently met some from the Farmers Union of Wales, and members of the South Caernarfonshire Co-op at their building in Y Ffôr. We discussed the possibility of submitting evidence to the commission, and there was an element of real fear: people thought that, if they put their heads above the parapet, they would pay in the longer term. We discussed the possibility of anonymising evidence, and that should certainly be pursued. There is still an opportunity to provide
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evidence. Lastly, to reinforce the intervention on the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) that I made from a sedentary position, Plaid Cymru has pressed for a milk ombudsman for a long time, and I would commend that idea to the House.

11.44 am

Tim Farron (Westmorland and Lonsdale) (LD): It is a pleasure, Mr. Chope, to serve under your guidance twice in the same morning and to congratulate my hon. Friend the Member for Ceredigion (Mark Williams) on securing a debate that is crucial not just with respect to dairy farming, but, from my observations of the debate so far, for the fact that it brings out some good old-fashioned politics. We can talk about the role of the market, where we stand and what we understand by the term “the free market”.

To get to the point, the issue is simply one of market failure. Five years ago, the retailers’ margin throughout the country was in the region of 11 per cent. It is now 30 per cent. There is no market justification for that. In Germany the margin is still 11 per cent. Supermarkets have increased their margins for no appreciable reason, apart from the fact that they just can. Farmers have often been challenged with the claim that their calls for fairness will lead to higher milk prices in the supermarket and on shop shelves. Far from it, the figures show that supermarkets could keep prices on the shelves as they are, ensure that farmers get a fair deal and still have a mark up twice what it was in 2002. Why do not they do that? It can only be that the supermarkets, apparently entirely legally, are abusing their market power.

It is not good enough for the Government to shrug and say that it is all down to the market; that it is a sad fact of modern life. It is market failure. Adam Smith, the author of “The Wealth of Nations” and many other works, was in many ways a great man and a decent human being, but he was fundamentally wrong in my view in his assessment of how markets operate. There is no invisible hand making sure that everything reaches a nice satisfactory equilibrium. The only natural force that I can see in the marketplace is something akin to gravity, by which those who already have plenty of wealth and power accrue a lot more of it to themselves. It is therefore important—and it is something that I request of the Government, as I expect many hon. Members of all parties who are present for the debate would do—that the Government use their visible hand to ensure that regulation takes place. Perhaps I may offer some counselling to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who is clearly bruised by his trip to Brussels: if we are to tackle the problems of the abuse of market power by multinational companies, we shall need multinational solutions to face down such companies.

Mr. Geoffrey Cox (Torridge and West Devon) (Con): Does the hon. Gentleman believe that everything from Europe that affects the dairy industry is positive? Does he not agree that the nitrate vulnerable zone regulations are likely to cause huge and wholly
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disproportionate costs to small dairy farmers, about which they are justifiably in a state of extreme trepidation?

Tim Farron: I do not believe that everything that comes from the European Union is positive. One of our problems is our tendency to gold-plate regulations in this country, whereas others are a little more flexible in their interpretation.

It is important to note the welcome changes to the price that supermarkets—notably Tesco—pay farmers. There is not a single Tesco in Westmorland and Lonsdale, and I am not about to start a campaign to get one, but although the supermarkets that we do have, Asda and Morrisons, would do well to follow that example, we should not put too much emphasis on the Tesco move, because many of the 1,000 British dairy farmers whose milk is sold via Tesco will not benefit from the system. I asked a very well-connected dairy farmer who lives down the road from me—he will know that I am referring to him when he reads Hansardand he had heard of barely anyone who counted among Tesco’s chosen few. The answer is not voluntary action by one or two supermarkets, motivated, no doubt—perhaps I am cynical—by a desire to avoid bad publicity. The answer must be careful intervention.

On the subject of public relations, supermarkets are happy, as has already been mentioned, to display fair trade produce on their shelves, and there is a very welcome recognition, among consumers and retailers alike, that fair trade and free trade are not the same thing. Is it not ironic, however, that shoppers will go down one aisle in the supermarket, purchasing the fair trade coffee and tea products, and getting a warm ethical glow as they do so, and then turn their trolley down the next aisle to buy milk that has been produced by ruthlessly exploited British farmers? The fair trade movement is very important in helping to tackle international poverty and exploitation, and I hope that the fair trade brand will be extended or replicated to give consumers ethical choices about home-grown produce.

Dairy farmers in south Cumbria have expressed deep concerns about Ministers’ exhortations for them to be more efficient. They are committed to achieving greater efficiency, but they suspect that the Government have missed the point. Dairy farmers say that the abysmal price that they receive for their produce—up to 4p a litre less than it costs them to produce—makes it almost impossible to reinvest in their businesses and to work on improving efficiency. If the Minister wants dairy farmers to be efficient, he must ensure that the market is corrected, so that they can reinvest in achieving greater efficiency.

The lakes and dales of Cumbria have a jaw-dropping beauty, but that landscape does not occur naturally. It is the result of centuries of careful management. At the heart of that management is the maintenance of grazing livestock. Our tourism product is paid for largely by farmers, so taking a laissez-faire approach to the crisis in the dairy farming industry is likely to have far-reaching effects. It will significantly damage tourism and will deprive environmental bodies, such as Natural England, of the partners that they need to deliver important environmental programmes. If the
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Government were bold enough to intervene to give our dairy farmers a fair deal, it would be a far-sighted investment of the highest order.

11.51 am

Helen Goodman (Bishop Auckland) (Lab): I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. Only 10 days ago, I visited a successful dairy farmer in my constituency, Mr. Kirkup, who has a herd of 400 cows. I was concerned to hear about the income levels of farms in my constituency. Despite making significant investments, dairy farmers in County Durham earn about £15,000 a year. Given the hours that they work, some of those farmers would be earning below the minimum wage if it were applied to the industry.

We need to consider the balance of power between the supermarkets and farmers. The essential problem relates to the time scale. Supermarkets work in a short-term time frame, and although the time frame in which farmers work does not quite span generations, the decisions that they take cannot have a significant impact in less than five years. That point is not well understood.

One practice that supermarkets and processors engage in, which some of my constituents have discussed with me, is the backdating of price cuts. That is absolutely intolerable because farmers cannot get out of it. Why are such contracts legal? I have raised this issue with the Office of Fair Trading, but I have not received a satisfactory answer.

I echo the remarks of the hon. Member for Westmorland and Lonsdale (Tim Farron) about the environmental benefits of dairy farming and how the shape of our countryside depends on it. We cannot ignore that, just as we do not ignore it when considering the financial regime for hill farming.

Another issue that has been raised is the burden of regulation on farmers. About 18 months ago, the Select Committee on Public Accounts took evidence from Department for Environment, Food and Rural Affairs officials. I pushed them on that issue, but their answers were most unsatisfactory. Surely, there is a lack of logic in imposing high levels of regulation on UK farmers, thus raising their costs, given that the dairy market is international and that we import milk from countries with lower regulatory standards. The market is not a fair one in any of the classical senses of what constitutes a fair and efficient market. We must look into this issue. However, Opposition Members have not made their case on bovine TB. Although I agree with their general analysis of dairy farming, I shall not go with them all the way on that point.

We must make the economics more sustainable. I am not sure whether we should aim to squeeze the supermarkets’ margins, or to have consumers pay more. The industry’s figures show that that would be unlikely to cost the average UK household more than 10p a week. That is a price well worth paying for a sustainable dairy industry.

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