Skip to main content

Agriculture (Prices)

Volume 886: debated on Monday 17 February 1975

The text on this page has been created from Hansard archive content, it may contain typographical errors.

I should like, Mr. Speaker, to report to the House the decisions reached last week by the Council of Ministers (Agriculture); and the Government's own determination of guaranteed prices following the Annual Review.

In my view, the most important decision of the Council was to make radical changes in the Community régime for beef. Under the new arrangements, it will be open to any member country to switch the emphasis of support away from permanent intervention and on to a variable premium, financed to a substantial extent from Community funds. The United Kingdom will take up this option. During the beef year beginning in March, the Community will pay about £47 million towards the cost of the premiums we shall pay on clean cattle sold for slaughter.

The average premium throughout the year can be up to about £5 per live cwt. but may vary above or below this figure at particular times. The total cost of the premiums will vary according to the state of the market, but at most would be about £135 million over the year. These premiums will enable the Government to assure producers of a fair return. I shall announce details of the scheme later; but my aim will be to provide an average return to producers of between £22 and £23 per live cwt.

It is an essential feature of the new arrangements that the premium cannot be paid on beef sold into intervention. This reduces the effective buying-in price to a level which will mean that support buying cannot take place on more than a limited scale.

This new system has been introduced on our initiative. I regard it as a major reform of the common agricultural policy. It gives the producer an assured return without forcing consumer prices up to unacceptable levels, and without building up mountains of frozen beef. This is the right way to give support.

The other main group of decisions concerned the level of common agricultural prices for the coming year. The increases average between 9 and 10 per cent. They relate, however, to support prices for Community producers. Their effect on food prices in this country, together with that of the transitional step we make towards common price levels, should be less than 2 per cent.

The biggest common price increase is of 15 per cent. for sugar. As a result of monetary changes, our own sugar beet growers will benefit from an effective increase of about 17 per cent. bringing the total sugar beet price to about £16 a ton. I hope this will encourage an increase in the sugar beet acreage.

The common target price of milk is increased by 6 per cent. in March and 4·7 per cent. in September. These increases, together with the transitional step, will result in higher prices for butter and cheese; but the Council also made provision to raise the contribution from Community funds to the general butter subsidy from about £26 to about £48 a ton.

The Council also agreed on minor changes in the monetary arrangements applying to the common agricultural policy. The percentage increases in common farm prices, when expressed in national currencies, will be slightly smaller in countries with appreciating currencies and larger in countries whose currencies have depreciated. For the United Kingdom this change means a new representative rate reducing monetary compensatory amounts by 2½ points, over and above a reduction of 1¼ points which is being applied on a general basis to countries with depreciated currencies.

Finally, the Council reached agreement in principle on the Directive on Less Favoured Areas, which deals mainly with aid for hill farming. We obtained an amendment so that the payments are not reduced for pensioners, a point to which this House attached importance. The contribution from Community funds will be a minimum of 25 per cent., but this is to be considered next month with a view to an increase. I expect the United Kingdom to be a net beneficiary.

I turn now to the determinations of guaranteed prices which the Government have made in the light of the Annual Review.

First, the guaranteed price of milk will be increased by some 5p per gallon, and is expected to average about 34·75p per gallon for the year from 1st April. The standard quantity will be increased by 50 million gallons so that it should continue to include all milk sold by the marketing boards. As a consequence, the maximum retail price of milk will be increased by 1p per pint on 2nd March.

The guaranteed prices for wheat, barley and oats will be increased to £51·80, £46·80 and £44·60 per ton respectively.

The guaranteed price for potatoes will be raised by £6 to £28 per ton.

The guaranteed price for fat sheep will be increased by 6p to 35·5p per 1b. The guaranteed price for wool will be increased by 5p to 31p per 1b.

The hill sheep subsidy will be raised by a further 60p per ewe over and above the increase made in December. The Exchequer cost of the increase in the level of support for the sheep sector in 1975–76 is estimated at about £34 million, including £9 million for continuing last December's hill sheep subsidy increases.

With the introduction of the new arrangements for beef, I propose to lay an order restoring the calf subsidy to the level obtaining before the increase of £10 made last March.

Finally, it is intended that the guaranteed price for pigs should be set at £4·03 for the period till July, when the basic price applying in this country under Community arrangements will be increased to substantially above that level.

With permission I shall circulate in the Official Report the full details of these determinations, and a note of the main economic data arising from the Annual Review. I am confident that the new beef régime, the increases in Community prices applying in this country, and the increases in our own guaranteed prices together represent a settlement that is good for our farmers and also takes due care of the interests of the British consumer.

This is a complex package which cannot be properly analysed in minutes. May I ask the Leader of the House, through the right hon. Gentleman, whether we can have a full day's debate in Government time on this arrangement, and on agriculture generally?

This package is good in parts. I welcome at once the award the Minister has announced for potatoes, sheep, wool and sugar. I share his hope that the award for sugar will lead to an increased acreage but I have some doubt whether it will be adequate.

I welcome the new beef arrangements which the right hon. Gentleman has negotiated. However, they seem to be for one year only. If that is so, is it right to regard this as a major reform? It is still short of being an absolute guarantee for beef producers, which we believe to be desirable. This is certainly a move in the right direction, but the right hon. Gentleman will be aware that his aim of achieving prices of £22 to £23 per live hundredweight is short of the break-even point. Can the right hon. Gentleman assure the House that he will continue to negotiate for a more realistic level?

The consolidation of the 7·7p together with the percentage increase for milk is to be welcomed. However, the loss of the calf subsidy, or £10 of it, and the remaining uncertainty about the future of the beef market must be subtracted from this award. It seems that the producers may or could receive less cash for their milk next winter than they received this winter. Can the right hon. Gentleman undertake that this will not be so? Is he aware that we want to be satisfied that the net effect will be to stop the decline in production and encourage a re-expansion?

Is the right hon. Gentleman aware that pig producers today are in a position that is barely viable? Since so much of the breeding herd has been slaughtered, is it not essential to restore profitability and with that confidence, to safeguard future supplies? Is he aware that I do not believe that his statement makes that clear?

Is the right lion. Gentleman further aware of the present anxiety among arable farmers and the possibility that they will become dependent on guaranteed prices in 1975? Cereals have been a saver for many farms last year. Is this not the time to jump the transitional period altogether and go straight to Community guarantees?

Why has the Minister not referred to the poultry industry? He must be aware of the crisis in the egg sector. It is no good the right hon. Gentleman shaking his head. This statement deals with "Agricultural Prices for 1975–76". Even with a level of imports as low as 1 per cent. or 2 per cent., total disruption can be caused in the domestic market. That is just what we have seen. Will the right hon. Gentleman now negotiate and ban these imports, as the French have banned our exports?

How far does the right hon. Gentleman think that this package goes to cover the vastly increased costs in agriculture? Is he aware that those costs are agreed at about £700 million? Do the awards announced today cover much more than half those increased costs? If not may I ask whether he has any hope of stemming the decline in output and achieving the aim we all share, namely that of restoring expansion?

I would, of course, welcome a debate on this subject. It is right that we should have one. This is a complex matter. My right hon. Friend the Leader of the House deals with the business of the House and no doubt the right hon. Gentleman will be pressing him on this. I shall have a word with him.

I am glad that the right hon. Gentleman has welcomed a large part of the award. He mentioned potatoes, sheep and sugar. He criticised the calf subsidy arrangement but welcomed the milk arrangements. This is a good and big award. The right hon. Gentleman must know that the calf subsidy was only a temporary measure. It had to go. We had to do this to achieve the beef régime. The right hon. Gentleman has rightly asked whether the beef régime is a temporary arrangement, whether it is just a supplementary arrangement or a fundamental change. This is an option for all member States—

It is not a derogation on the part of the United Kingdom. It is just as much a part of the régime we have agreed as the other parts. The régime is examined every year. That was so under our own annual review procedure. This is just as important to the régime as permanent intervention for those who accept it. I hope that no one will be pessimistic about this. I believe that the award represents a major breakthrough. I agree that there are problems in the poultry industry, especially with eggs. The Minister of State has been meeting representatives of the industry. I have still to get evidence about the question of the quantity of imports. It is not an easy matter because as members of the Community we have to be careful that we, too, are not breaking the law.

I know that that is the hon. Gentleman's contention.

Under the new arrangements there will be increased prices for pigs.

May I press the Minister a little further on this subject of milk? Can he first of all give an assurance to the House that producers will receive more cash next winter than they have received this winter? While it is true that I welcomed the consolidation of the percentage increase we have to take away the calf subsidy and the uncertainty in the beef sector. What I asked the right hon. Gentleman is whether he is satisfied that the net effect will be to expand production and stem the decline.

We had a major award which was welcomed by the industry. This is an addition. I have the detailed figures here. The United Kingdom guaranteed price for milk for 1975–76 was raised by 5p a gallon over and above an increase in the guaranteed price last October. This consolidates into the guaranteed price the 7·7p per gallon made from last October, and gives some more. This is a fine award.

May I congratulate my right hon. Friend on what appears to be a satisfactory agreement and especially on his success in obtaining acceptance of the principle of deficiency payments which will, hopefully, be permanent? Can my right hon. Friend say exactly what element of intervention buying he thinks will be involved at any time? Can he, further, say more precisely what effect he thinks this agreement will have on the retail price of butter? Can he explain, dealing with the less favoured areas, how the amendments will help the pensioners?

That has been accepted in principle. I put this to the Council. The whole matter is to be examined again in a month's time with a view to giving increased support above the 25 per cent. I think this was generally welcomed by participating countries. As for this question of the premium, the main effect will be on what we call the variable premium. There is a fixed element which we still have. It is this premium which is so important. I have had discussions with the unions today. They welcome this in principle and we are working out a mechanism to determine how this should apply. We have an option to take a contribution of £10 million from the Community for the butter subsidy. This is a matter for my right hon. Friend.

As a critic of the Minister may I first say that he deserves congratulations on what is a cautious and satisfactory review without being inspiring or a signal for expansion. Will the right hon. Gentleman reconsider the question of increases in sheep prices? On the face of it they appear to be considerable—6p a lb. on lamb and 5p a lb. on wool—but this has long been the Cinderella of the farming industry. Is he aware that figures disclosed this week show that at present prices, the transport costs for carcases of New Zealand lamb will be double the price received by the farmer in New Zealand next year? Does the right hon. Gentleman think that he has done enough to bring about expansion in the sheep sector? Personally, I do not think he has done enough.

Secondly, in regard to fertilisers, expansion depends on getting greater production from the hills. The Conservative Government removed the subsidy on basic slag. Why has not the Secretary of State put back to the subsidy during this review?

Thirdly, in the light of the fact that the review is said to recoup only half the increase in costs, will the Secretary of State undertake to keep the matter under review throughout the year? If there is a greater escalation in costs, the review may not look so good. Although it may turn out that nothing will need to be done, will he give an undertaking that he will be prepared to review the matter again in the autumn?

I am grateful for what the hon. and learned Gentleman said at the outset of his supplementary question in regard to the review. On the question of sheep and wool, the United Kingdom guarantee price for sheep has been increased by 6p a pound to 35·5p per pound. That is an increase of over 20 per cent. for sheep, and for wool the figure goes up by 5p per pound to 31p, which, again, is nearly a 20 per cent. increase. These are considerable increases, and I am certain that the hill farmers in the North-West will welcome this increase. We must also recognise that the hill sheep subsidies are being increased by 60p per ewe on top of the large increase last September. I think that that will inspire the necessary confidence. Obviously, I am prepared to take a continuing look at these matters after seeing how things work out in relation to guarantees and prices. I note what the hon. and learned Gentleman said.

On the question of slag, I find it difficult to restore subsidies once they have been removed. I restored the lime subsidy, but I have not brought back the fertiliser subsidy. I made a decision and at this stage I thought that we should concentrate on other matters. I shall look at the matter carefully.

May I crave indulgence to congratulate my right hon. Friend—[HON. MEMBERS: "Oh."] Wait for it. I was about to congratulate him, within the straitjacket of the Common Market, on having carried out an exceedingly good job. How will the variable beef premium work out throughout the year? In view of the strong feelings on the Labour benches on the question of intervention will he explain how much intervention he had to agree to in securing these agreements? On the subject of poultry, is my right hon. Friend aware that what the Tories are asking for—namely, a ban on imported poultry—is quite outside his control because the Tory Party took us into the Common Market and thereby precluded us from having, the power to stop the import of eggs?

In regard to the working of the variable premium, I have already stated that the premium will not be paid on intervention beef. There will not be a United Kingdom beet mountain. I have always accepted a modest form of intervention as support. Member States then have an option, which some will not use but we have it. We believe that it could apply to other member States. For that reason we do not rely on permanent intervention. I have already answered a question about eggs.

The Secretary of State spent a good deal of time in Brussels on the price review. Would it not have been better if we had had a purely national price review?

We have had a part national review. The simple fact is that this is the situation we have had to face. I know that the hon. Member for Banbury (Mr. Marten) holds certain views, but I believe that it is right that while we are in the Community I should go and negotiate what I think is in the best interests of our farmers.

Will my right hon. Friend say what cost will have to be borne by the agricultural industry? Is it about £700 million, as suggested? Secondly, although I join my hon. Friend the Member for Bradford, South (Mr. Torney) in congratulating my right hon. Friend in what he has achieved in the course of ongoing negotiations, particularly in the beef sector, is it not the case that this is a rather unnecessary exercise imposed upon him at present by our membership of the CAP and can hardly be said to bring us one iota forward in restructuring the CAP as laid down in our manifesto?

I can give the exact figure. It is, so far as we can estimate, £692·1 million. If my hon. Friend examines the matter carefully he will see that what we have achieved is a deficiency payment. How he can say that we have not made any advance on a system which relies purely on permanent intervention is beyond my comprehension. This represents a big advance. I hope that my hon. Friend, who believes in our party's manifesto, as I do, will accept the situation.

Did not the right hon. Gentleman's experience in these negotiations reveal to him that the CAP, far from being a straitjacket, lent itself to flexibility in negotiation? Was it not that factor which enabled him to obtain the advantages about which he told the House this afternoon? Therefore, in the light of his experience, would it not be crazy from the point of view of the British farmer to come out of the CAP?

I shall not comment on the future. All I can say is that I have achieved something which is quite different from the system which has been operating in the Community. I hope that my Labour colleagues will accept this. Added to that situation, I have tried during day-to-day business and in terms of renegotiation to take the view that we must introduce a measure of flexibility into the CAP. I have attempted to do this, and it is no good burking that fact. This is one example of where I have achieved something. Therefore, I hope that the House will accept it.

Is the change in the beef régime intended to be permanent? Will the Government ensure that it is embodied in some more permanent instrument than will emerge from an annual negotiation? Secondly, if it is a satisfactory régime for that commodity, is it intended to extend the régime to other commodities?

Beef is quite different from other commodities. One must judge each commodity separately. Anybody who knows the farming industry knows that one cannot apply a rigid rule to all commodities. One system may work well, whereas another may not work well. Therefore, I hope that I should not be expected to enter negotiations in the Community on that basis. Apart from that, I have made the statement. It may well be that this matter will be referred to in the final renegotiations. I cannot say at this stage. This is as secure an arrangement as I can possibly achieve.

Although I am sure my right hon. Friend has done his personal best in the circumstances, will he not agree that, apart from the welcome arrangement on beef, which is of rather doubtful permanence, so far there has been no major reform of the CAP and no material change in the Treaty of Accession?

I hope that my right hon. Friend has read my party's manifesto. If he has, he will see that we argue that we want a deficiency payments system. We have never acepted permanent intervention. We have made an achievement and I do not know why my right hon. Friend should cavil.

Will the Minister consider again the subject of milk? Does he not realise that he has done nothing like enough to restore confidence in the industry? If he looks at the facts in regard to the drop in the number of inseminations, he will realise that what the Department has done will do nothing to restore the position in the dairy industry. What is needed is a sum of 3p to 4p a gallon on top of the winter price—for, unless he awards this figure, I believe that we shall not get the milk which the consumer requires.

The hon. Gentleman is being too pessimistic. He knows that the dairy producer has got the highest award he has ever had and that it is a reasonable award. What I have announced today is additional to that. Therefore. I hope that the hon. Gentleman will not spread gloom around but will appreciate that this is a good award.

My right hon. Friend has mentioned that the variable premium scheme for beef may cost up to £135 million. Will he clarify for the House how he will decide whether that will be not available for intervention? He said that this money will not be available for intervention buying. Will he decide, or who will decide, and on what basis, whether beef will be given the premium or whether it will be put into intervention?

The mechanics will be decided by Her Majesty's Government. I stated earlier that I have had meetings with farming unions today and we have agreed to work out details which we see as essential in order to give long-term security in relation to beef production. In relation to the application of the variable premium, relating it to seasonal needs, we think that this is the right way to go about it. It will be decided by Her Majesty's Government.

Will the right hon. Gentleman say whether the figure he mentioned for sugar beet of £16 a ton includes the allowance for haulage and the allowance for pulp, because, if so, I can tell him that he will not get the full acreage which he requires and which he stated the other day should be 500,000 acres?

I have looked at the haulage question, I but I think that it does not include that. All that I can say is that the full Community price in effect is here, and we get the old common price plus 15 per cent.

Will my right hon. Friend say something about the impact of his statement today on the industry in Northern Ireland? Will he further build on the efforts he has made to encourage the industry to sit down now and plan for the growth that we very much need in order to guarantee that we can feed the people of this country and cut down on our imports?

On Northern Ireland, I had a Northern Ireland official with me. I have discussed matters today with the Northern Ireland farming leaders as well, and I recognise that there are problems affecting Northern Ireland, regarding the relationship with Eire in relation to the representative rate. I accept that, and we are having discussions with them to make sure that their industry in Northern Ireland is not harmed.

I was asked about the long term—and I would agree about the need for a long-term policy. I hope that all hon. Members, of all parties, would want a long-term policy. I hope to produce very soon a White Paper on this matter. I believe that this price review and what we have achieved in relation to the beef régime will help considerably to provide confidence.

The right hon. Gentleman said that the costs had increased by £692 million this year. He did not give the value of the determinations he has just announced. What estimate has he made, also, for increased costs in the forthcoming year? Is he aware that unless returns are, at worst, in line with increased costs, there is no hope of any increase in production?

I gave that cost figure. I could not go beyond that. It is too far ahead. I understand the concern, however, and we shall keep a continual watch. It will affect different sections in different ways.

I welcome the moves that the Minister has made towards a more satisfactory return for producers of beef, milk and other commodities. However, will he say whether he and, equally important, the farming unions regard this price review as the basis for a genuine expansion in home production of food, which is so important not only from a balance of payments point of view but also in releasing our imports of food for the Third World—or will it simply have the effect at the same time of increasing Community imports into this country, such as French eggs?

The question raised by the hon. Gentleman is perfectly valid. I have met farming leaders, here and in Brussels. On the Brussels negotiations—the part which affected the United Kingdom—I think there was broad agreement. I met today farming leaders from Scotland, Northern Ireland and England and Wales. I get the impression that they think it is a step forward. On the other hand, they are holding their council meeting this afternoon, and no one could predict how they will react. I hope that they will recognise that this is something reasonable.

Do I understand my right hon. Friend to say that the Community's minimum contribution was 25 per cent. but that he was aiming for a good deal more? How much is he hoping to secure, bearing in the mind that the greater the contribution, the more we shall be dependent upon them in respect of their influence upon our policy if for any reason we stay in the Common Market and then incur the disfavour of the Common Market community?

I am not sure what my hon. Friend means by the 25 per cent., and whether he means that it is in relation to beef.

The Directive concerning less-favoured areas? I believe they have decided to do that; they have accepted it in principle. We shall meet again next month with a view to upping that amount.

Will the right hon. Gentleman answer the question of my hon. Friend the Member for Devizes (Mr. Morrison)? Will the farmers be better off as a result of this price review? The right hon. Gentleman has calculated their costs, but he refuses to tell the House what this award is worth.

Yes, I believe they will be better off. Much of this depends on how the market works out. I shall not stick my neck out on something theoretical. I do not indulge in hypothetics. One gets one's fingers burned like that. I do not know how the market will go; no one does. But I believe that this points the way.

In telling us what the anticipated effect on food prices would be the Minister did not include, I think, the element for monetary compensation amount differential. What will be the effect on this country of than change in monetary compensation amount?

I mentioned that. I did not give a specific figure. I believe that it will be about 1 per cent.

Is it not imprudent for the Minister to give the impression that the new beef régime is a permanent feature of the CAP when, I think, it is not?

I have tried to show that it is as permanent as anything can be permanent—[HON. MEMBERS: "Oh."] "Of course it is: in the same way as intervention is permanent intervention, accepted by other sections. It is as permanent as it can be.

I am sorry that I have not been able to call every hon. Member who rose, but I shall remember those whom I have not called when we come to the debate.

Following is the information:



Determination at 1974 review

Revised determination

Determination at 1975 review

Increase over 1974 review determination

Increase over revised 1974–75 determination

Wheat (per ton)£39·62£42·97*£51·80£12·18£8·83
Barley (per ton)£35·73£38·78*£46·80£11·07£8·02
Oats (per ton)£34·20£37·12*£44·60£10·40£7·48
Potatoes (per ton)£22·00No change£28·00£6·00
Pigs (per score dwt.)£3·49£4·03†—‡
Sheep (per lb. edcw.)29·50pNo change35·50p6·00p
Wool (per lb.)26·00pNo change31·00p5·00p
Milk (per gallon)26·27p29·74p§34·75p≑8·48p5·01p

* It was announced on 17th July 1974 that the 1974–75 guaranteed prices for wheat, barley and oats were raised to £41·27, £37·26 and £35·67 respectively in the light of increases in CAP prices agreed in March. These guaranteed prices have been further raised in the light of the decisions of the EEC Council of Ministers in September-October 1974.

† The revised determination is effective from 28th October 1974.
‡ The pigs guarantee is to be terminated after 27th July 1975 in accordance with the Act of Accession.
§ This is the estimated average effective level of the guarantee, taking account of the increase in the guaranteed price to 29·79p per gallon at the beginning of October 1974, following the 5 per cent. increase in CAP prices then agreed, and the introduction of a special additional payment of 4·18p per gallon at the same time.
≑ Average. The guaranteed price will be related to a standard quantity of 2,950 million gallons. It is intended to assure the Boards an average price of 34·0 pence per gallon for production during the period 1st April-15th September 1975 and 35·5 pence per gallon on the remainder of the standard quantity or on the residue of production whichever

is the less.

1. Income, output and productivity
The figures in the following table update the series shown in Table 18 of the 1974 Annual Review White Paper and incorporate revisions to the figures in the earlier years:


June-May years

Net Income at current prices

Net Product at constant prices

Labour Productivity



3-year moving average







1974–75 (forecast)1,133 117131

* Adjusted to normal weather conditions.

2. Gross capital formation


In plant machinery and vehicles

In buildings and works

Work-in-progress and stock valuation changes


1974 (forecast)3092664301,005
3. Aggregate cost changes
Net cost change relating to all products: +£692·1 million.
4. Public expenditure
Public expenditure under the common agricultural policy and on national grants and subsidies in 1975–76 is estimated at £306 million. This figure is subject to Parliamentary approval of the Estimates and does not take account of the Review determinations.