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Livestock Industry

Volume 941: debated on Wednesday 14 December 1977

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3.43 a.m.

I, like many other hon. Members, have received a bundle of letters from worried livestock farmers in my constituency. I am impressed by the detail into which the farmers have gone to explain to me the dire situation on their farms. The letters are informative and very convincing.

A sizeable reduction in the cattle and pig herds is clearly taking place, and all logic points to the fact that this can reach catastrophic proportions if action is not taken by the Minister pretty soon.

The crisis in livestock production is the certain and inevitable outcome of our having a Minister of Agriculture who has always been hostile to Europe and clearly has little regard for British agriculture. He has no qualms about cheating in his use of the green pound, because that is what his manipulation of the system is, in order to squeeze quite unjustified, disgraceful and humiliating food subsidies out of the EEC, despite the damaging effect on the industry which he should be proud to serve and promote.

By his too-clever-by-half conduct at Brussels, the right hon. Gentleman has forfeited respect, and he has got a far less good deal for Britain than he would have done had he been reasonable and co-operative. The clever lawyer who was going to run rings around the simple Europeans has turned out to be the not-soclever bull in a china shop, and the farmers are left to pick up the pieces.

We in Humberside—or the East Riding, as I still prefer to call it—have about 600,000 pigs, which is the largest number in any county area. Last year, we had over 90,000 cattle, other than dairying, which, although a modest number compared with some other countries, is of significance in the way in which yarded cattle is a traditional and useful enterprise on many farms in the area, and it is a system which complements the established farming policy in many cases.

I doubt that the Minister realises the extent to which one part of a farm enterprise depends upon and helps the remainder. One very good farmer from the Howden area has written to me to say:
"I suppose it would be easy not to have beef production and thereby stop the losses. However, this is not realistic because the farm production cycle revolves round the beef, and we use all our straw and hay with the beef cattle and all the manure is used on the potato crop, saving quite a lot of expensive artificial fertilizer.
I am afraid that all major capital projects for 1978 will have to be cancelled. These include 100 acres of drainage, three tractors and a new potato store. This will mean that other people's livelihoods will be affected by these cutbacks."
Those last remarks are confirmed by the latest report I have from a leading machinery dealer in the area, which shows a striking drop in his turnover.

There are a large number of farmers in the East Riding who have not bought any cattle this autumn, partly because they cannot see the sums working out to give a profit and partly because of the lack of confidence in the future. They see Government policy for expansion in shreds, and beef producers' fingers have been burnt too often in recent years. Where yards are stocked with cattle, this is either because the farm runs a suckler herd or rears from calves, and such systems are slow to run down. It is the producer who buys stores who is reaching the decision not to do so.

I illustrate the general situation with those particulars from my own constituency not only because this is the area which I know but also to point out that if the situation is as threatening as that in the East Riding one can be sure that it will be a good deal worse in many other agricultural areas. The East Riding is particularly well formed. The size and structure of the farms, by good fortune, happen to be particularly suitable for modern farming methods.

On the pig front, I could cite farmers who have given up pig production, but the position is more a slow contraction and the shelving of plans for future expansion. If this is happening in a county with many of the most modern pig units in the country, I dread to think what is happening in other areas.

Now let us look at the situation which has led farmers to make these retrenchment decisions. Britain's beef industry is in a mess. Since the middle of June, the market for clean fat cattle has slumped by 10p a kilo. During the same period of the MCA madness has made it attractive for foreign producers to ship in almost £20 million worth of extra beef compared with the same period last year. In addition, that same monetary system made it good commercial sense to ship thousands of 50-kilo calves out of this country to replenish the European stockyards. So the crazy cycle is kept in motion. Meanwhile, in the markets store cattle prices fall at a time when production costs are at record levels.

The chief depressing factor in the beef sector is the excessive imports of Irish meat. The Irish farmer is enjoying what is, in fact, a subsidy of about £75 a beast. In addition, there are United Kingdom Exchequer payments on Irish carcase beef imported into the United Kingdom under Article 5 of the EEC beef premium regulations. Not surprisingly, imports of Irish meat have practically doubled in the past year. The chairman of the Irish Meat Board has recently said that in 1976 Ireland exported to this country meat to the value of £135 million. The expected figure for 1977 is £265 million. It is no good the Minister saying, as he has done in the past, that this is but a small proportion of the total market. We all know that it is this marginal quantity that decides the price.

Sir Henry Plum has pointed out that the operation of the green pound in relation to Ireland is even more ridiculous than with the EEC. We use the same currency as the Irish when trading in motor cars and other products, but with agriculture the Irish are presented with a 30 per cent. subsidy. Farmers have called this legalised dumping, and I challenge the Minister to say that they are wrong. According to the Department of Trade, dumping is:
"Selling abroad at a price below the exporter's domestic price."
The Department adds that the EEC, which is now responsible for taking action against dumping, insists on evidence that the dumping is:
"causing or threatening material injury to the Community industry."
There is certainly no shortage of evidence that that is so.

The pig problem has much in common with beef in that it suffers from the same handicaps of the green pound and the MCAs. Since we joined the Common Market in September 1973 the United Kingdom breeding herd has dropped by 20 per cent. Of particular concern is the fact that within the herd the number of gilts continued to decline for the fifth successive quarter, and at September it was estimated that there were only 96,000 gilts in the United Kingdom. This represents a drop of about 25 per cent. over the previous year. The total percentage for the bacon market held by home-produced supplies continues to drop and for this year will be about 45½ per cent. compared with 46½ per cent. for 1976.

Although that does not appear to be a significant reduction, this share of the market has been held so far only as a result of producers selling below production costs for a period of nearly 18 months. Furthermore, imports of canned hams and bacon have increased by 10 per cent. in the first nine months of 1977. With the EEC pig-breeding herd again on the increase and the United Kingdom herd now in decline, the prospect for 1978 is for lower United Kingdom output and a massive increase in the import of processed pigmeat from other European countries, such as Denmark and the Netherlands.

Present bacon price levels, which are unlikely to be held after Christmas, are insufficient to enable bacon curers to pay pig producers the average price for pigs and make any profit. Indeed, currently curers are making substantial losses. This has put in jeopardy the future of the bacon contract, which in past years has done so much to stabilise the pig industry. It is hard to see a break-even situation, let alone a profitable one, returning to the pigmeat production and processing industry within the next few months. This means that curers may have no alternative but to close factories, making workers redundant.

In case the Minister thinks I am taking an alarmist line, may I read to him a letter that I received on 8th December from the managing director of Porkshire Limited, which runs an extremely substantial factory in my constituency? It says:
"Dear Sir Paul, It is with much regret that I enclose a Press release concerning redundancies at our Malton factory. After a very thorough investigation by a set of Management Consultants we have been forced to reduce our labour force as we can no longer sustain our throughput of bacon on the face of subsidised imports from within the EEC. I feel I do not need to labour this point with you as in the past you have kindly assisted us in trying to stave off this evil day. Yours sincerely, F. C. Lyon."
The Press release said:
"Porkshire Limited very much regrets that it has had to announce 80 redundancies at its Malton factory. Despite the support of its parent company and the Government, Porkshire Limited has found it impossible to compete in the home market with imported bacon which is subsidised by MCA at approximately £250 per ton."
We have been building up to this serious situation ever since the Minister took office. We have had to suffer the right hon. Gentleman's superior "I know best" attitude for too long. Surely he can see that unless he takes action on the green pound, agriculture in this country will suffer lasting damage.

One of my constituents from the Driffield area writes:
"As a young farmer specialising in pig production and having invested a large amount of time (15 years training and studying), energy and money establishing my herd, I would like to know if it really is being too optimistic to hope that one day my efforts will be rewarded."
This is the question being asked by hundreds of young farmers all over the country.

This is not just a short-term slump or dip in the cycle. Farmers have always been suspicious that a Labour Government, with their main support in the towns, would let down agriculture. Now they have a new fear. North Sea oil gives us a guaranteed balance of payments surplus for some years to come. Does this, in the eyes of the Government, mean that agriculture can safely be allowed to decline if, in one way or another, cheap or subsidised food can be got from abroad?

The conduct and attitude of the Minister of Agriculture leads farmers to believe that this is precisely the view of the Government. I ask the Minister in his reply to convince us that it is not so.

3.56 a.m.

The whole question of Government support for the United Kingdom livestock producers makes the Government's attitude towards the measures proposed by the EEC Commission one of importance and utmost urgency if the Minister is to maintain and restore the confidence of United Kingdom producers.

The Commission has published new proposals for a change in the operation of the beef regime based on the outcome of a study of the operation of support measures between 1974 and 1977. Although the review of the regime was initiated as long ago as March 1976, I understand that the present proposals are intended to come into force from the start of the 1978–79 marketing year—that is, next April.

Based on the experience of various member States using differing methods of market support, coupled with the varied circumstances of the EEC beef market—namely, a scarcity in 1972–73 and a surplus since 1974—the report on the review concluded that both intervention and the variable slaughter premia have been of significant benefit to producers and consumers but that neither method of market support is enough when used by itself.

Plain intervention buying has maintained producers' incomes at relatively modest cost to the EEC budget but has resulted in quantities of beef being stored rather than eaten, and, when they have been returned to the market in periods of shortage, the reduction in quality has substantially offset any benefit that the consumer would otherwise have gained from the increased level of supply. There have also been the physical problems of lack of suitable refrigerated storage space.

The use of the variable slaughter premia has maintained producers' incomes, but at the same time it has enabled consumers to maintain their beef-eating habit. I am sure that the industry will give full credit to the Minister for its introduction. The contra to this has been the cost of the premia plus the lack of frozen stocks to draw upon and restrain price increases when supplies became more scarce.

It appears highly desirable that both methods of support should continue to be used together and in conjunction, for the United Kingdom at least. The report of the review recognises the virtues of the variable premium system as at present operated in the United Kingdom and recommends that it be extended throughout the entire Community. So far, so good. But our present system of variable premia is authorised by a regulation—applying only up to the end of the current marketing year. A continuation of this regulation would bring a valuable fillip to confidence in the United Kingdom beef sector. Will the Minister be bringing forward new regulations, and will he be supporting the concept in the Council of Ministers?

The report also recognises the value of aided private storage. What are the Minister of State's views on support for the provision and extension of these facilities?

Lastly, the report indicates that the adoption of a common support scheme on a Community basis would mean that United Kingdom premia would be paid entirely from Community funds rather than 75 per cent. from the United Kingdom Government. Will the Minister be pursuing such an objective? It seems to be good for the United Kingdom.

The Minister is well aware of the price sensitivity of the beef sector with regard to consumers' purchasing willingness. The report on the review of the beef regime advocates a "cautious" price policy. The stress on a cautious price policy means that, if the United Kingdom producer is to be compensated for his ever-increasing level of costs, there will have to be substantial devaluations of the green pound to increase the United Kingdom support levels adequately without allowing the Community guide price to rise.

The Minister will no doubt be aware of Early-Day Motion No. 83, standing in the name of my right hon. Friend the Member for Yeovil (Mr. Peyton), calling for a 7½ per cent. devaluation of the green pound forthwith. Does the Minister recognise that this step really needs to be taken now, before the concept in the 1978–79 marketing year is fully developed?

The report does not adequately consider, however, the problems of green currencies in the beef sector. The Minister will be well aware of the distortions being created by the enormous disparity between the Irish and the United Kingdom green pounds, to which my hon. Friend the Member for Howden (Sir P. Bryan) referred in his excellent speech. The present low level of United Kingdom prices and high levels of subsidised beef imports, from both Eire and others of our EEC partners, emphasise the difficulties that the green pound differential continues to cause United Kingdom producers.

I draw the Minister's attention to a brief extract from an article in the issue of the British Farmer and Stockbreeder dated 10th December, in which the reporter, Donald Taylor, indicates that
"One of the ironies of the present situation is that Britain is having to make two separate payments to Irish exporters, which encourage them to ship their beef to the UK, and then having to pay UK farmers deficiency payments to counteract the effects of these shipments.
Irish beef exporters collect an MCA of 28p/kg on all shipments to the UK, part of which is funded by the UK. On top of this, under the Anglo-Irish Free Trade Agreement of 1965 and the EEC regulation on the payment of the beef premium in the UK, the Irish exporters get a further 10p/kg to remove the incentive to ship animals live to the UK to collect the variable premium payment, now about £15 a head. In effect the UK Government pays the Irish Government (who pass it on to Irish exporters) a variable premium on carcase shipments to the UK at a rate equivalent to what the animals would have earned had they been shipped here live."
In fact, it seems as though we are paying the Irish to export to us, to the detriment of our own market.

In October I wrote to the Minister of State drawing his attention to the sub-economic returns being obtained by producers in the markets of Hereford and Ross-on-Wye. He replied in confident vein, stating that
"Whatever the level of imports, our dual support system of intervention and premiums underpins the market and producers' returns."
Those are fine words, but certainly not inspiring enough for Herefordshire producers to be facing the future with confidence.

I draw the Ministers attention once again to the headline written by Donald Taylor in the British Farmer and Stockbreeder of this week
"Slaughter premiums now failing to support collapsing beef market."
That is the measure of the urgency of the problem.

In his reply, the Minister went on to say:
"We do"—
I take it that that is his Government—
"of course, recognise and understand producers' concern about the level of the green pound but we do not accept that a devaluation would be justified at the present time. We have, however, always maintained that if at any time we felt that a green pound devaluation were necessary from the point of view of the agricultural industry and would not damage the rest of the economy, we would not hesitate to recommend it. It must be remembered that a devaluation does not help all farmers; the real key to helping UK farmers is the level of returns and profitability in British agriculture and the green pound is only one of a large number of factors in this."
What is the measure of the damage that has to be sustained by the agricultural economy before the hesitation is overcome? The green pound may be only one of many factors relating to the level of returns and profitability in British agriculture, but is it not in reality the key factor, the linchpin around which all the problems and distortions revolve?

The Minister of State's right hon. Friend the Minister of Agriculture, Fisheries and Food has now acknowledged that a green pound devaluation is necessary, but only in principle. The right hon. Gentleman has declined to say by how much it should be devalued. That is understandable in the light of his price review negotiations in Brussels.

Why does not the Minister suggest that he gets on with a 7½ per cent. devaluation now and haggle about the rest during the course of his negotiations? I am worried because I suspect that he is not interested in a 7½ per cent. devaluation and that he will settle for 3 per cent. or 4 per cent. However, he must remember that the disparity with Ireland is of the order of 19 per cent. He will need to go some way towards eliminating that if he is to reduce the distorting effect of the differential to which I have drawn the Minister of State's attention in the article from which I have quoted.

Admittedly there will be an effect on food prices at consumer level if there is a 7½ per cent. devaluation of the green pound but that will have to be faced at one time or another. Such a devaluation would have a 2 per cent. effect on the cost of food and about a 1 per cent. effect on the cost of living. That would be spread over a period. It would take time to come through. It would not happen all at once.

I said in my letter to the Minister that the freeing of some disposable income brought about by the Chancellor's reduction of income tax thresholds enabled the impact of devaluation to be absorbed. There will never be another opportunity like this, and the Minister should take advantage of it now. Will he not recognise that in all probability it will be in the consumer's longer-term interest to face the problem now rather than later? Putting it off could lead to a traumatic situation in 12 months or more for both the consumer and the producer.

I terminate by drawing the Minister's attention to some remarks made by a constituent of mine, a farm manager who is a veritable technocrat of farming know-how who took a decision in 1967 to move his beef herd from cereal feed to grass forage. He made the necessary investment. He says:
"This entailed a complete reorganisation. A new fattening building was erected in 1967. A calf rearing unit was added to it in 1970. This complex won a CLA farm building award in 1971. In 1974 a slatted floor house was erected for cattle at an intermediate stage.
This large investment in cattle buildings completed the main development stage; the housing now relates fairly closely to the grassland acreage for cattle grazing and silage.
A great deal of effort has been put into increasing animal performance from silage since the late sixties.
In the period for 1968 to 1971 we reduced the cereals fed per pound of grain by 63 per cent. with no loss on animal performance. Over the last few years we have had groups showing a saving of 75 per cent. over the 1968 figures, but"—
here is the crunch—
"we are still no better off financially."
He asks,
"Where do we go from here?"
He acknowledges that there is still room for
"tidying up the performance, even at the expense, if needed, of a further cut in stocking rate."
He was purchasing 360 calves a year until the spring of 1976. Since then, purchasing has been cut by 20 per cent. He says:
"We are seriously considering a further cut of 20 per cent. unless there are definite signs of return to a more stable and profitable future for beef."
That is the case for the devaluation of the green pound—to restore that confidence.

4.10 a.m.

I am glad that my hon. Friend the Member for Howden (Sir P. Bryan) was fortunate in being able to initiate this debate, even at this hour of the morning. He has been extremely loyal to the industry. He spoke in the agriculture debate in November last year, the first occasion on which the right hon. Member for Deptford (Mr Silkin) appeared in his new role as Minister of Agriculture. Perhaps we were naive, but some of us hoped that his advent would signal better days for agriculture.

I would not wish the Minister of State to imagine that problems in the livestock sector are confined to the Yorkshire Wolds or the West Midlands. The story in Wiltshire is the same. Within the past fortnight I attended a meeting of pig producers who had come together from a large area. They expressed their deep concern. There were big and small farmers, farmers to whom pigs are a sideline and farmers for whom pigs are their entire livelihood. It is those farmers, whether big or small, who specialise and whose capital is solely locked up in pig breeding and fattening who command my sympathy today.

If the Minister can come with me this weekend, I shall take him to a farm to the south-west of Salisbury which I have known for more than 10 years. There is a young and efficient farmer there. He works all the hours of daylight and more. He has about 1,000 pigs on the breeding side of the business and about the same number on the fattening side. He is not given to exaggerating his difficulties. Last year he lost £17,000. If the Minister should think that I am taking an extreme example, I shall take him to other pig farms where the story is the same, where the losses are comparable.

Where will this end? How much further will the decline in the breeding herd be allowed to continue? Does the Minister wish to see these men go out of business? How much longer will he be content to accept responsibility for the well-being of agriculture? How much longer will he be talking about a fair balance between producer and consumer while the producer is hard up against his final overdraft limit at the bank?

I am one of those who have always supported our membership of the EEC. My views on the matter are on the record in Hansard as far back as 1961. I have always been entirely confident that Wiltshire farmers are more than a match for their counterparts on the mainland of Europe. Farms in my area average between 400 and 500 acres. There is nothing amateurish about those who manage them.

But the Minister knows as well as I do that our farmers are not competing on level terms. He knows that the falling value of sterling and the disparity of the green pound mean that our farmers are competing with one hand tied behind their backs. He also knows that in Denmark and Germany the small pig producers are prospering. There are colour television sets by the firesides of the small pig farms there, and there are new extensions to the farmhouse for the grandparents. There is an air of prosperity. The right hon. Gentleman also knows that in contrast the British farmer has been sacrificed and allowed to fall behind.

I beg the Minister to alter the balance and to inject new life into the livestock industry before it is too late.

4.15 a.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food
(Mr. E. S. Bishop)

If I say that I am grateful for this opportunity of being here this morning I hope that hon. Members will not accuse me of being insincere, because the matters that have been raised are of concern not only to the industry but to the Government and my right hon. Friend.

I have listened carefully to the points that have been made. Hon. Members have expressed concern about the support mechanism for livestock. Fears have been expressed about the good faith of the Government in dealing with agricultural problems. I remind the House that it was a former Labour Minister—Tom Williams—who was responsible for laying the foundations of British agriculture—this is accepted by many people in the European industry—guaranteed markets and guaranteed prices, and support mechanisms generally. With the contributions of succeeding Governments, this has helped to make our industry one of the most efficient in the world. It is our aim to keep it that way.

Comments have been made about the uncertainty facing the industry. I remind hon. Members of the fact that we are going through the final stages of transition. We are in the process of renegotiating or reviewing the common agricultural policy. Surely no one will disagree with the need to do that. We are in the final stages of transition, on terms that were laid down by the Conservative Party when in office. My right hon. Friend's task is a very difficult one, but I believe that, provided the industry and hon. Members do not engage in unjustified criticism, he will succeed in restoring to the industry some of the certainty that was there in former times. This task must be carried out by any Minister of Agriculture. My right hon. Friend is doing a good job, not only in looking after the national interest but in the greater perspective of the European scene. This is the job of any Minister.

I am pleased to have this opportunity, at this early hour of the morning, to comment on some of the points that have been made. I also represent an agricultural constituency, with over 80 villages and more than 450 square miles of territory, with poultry, mixed farming, sugar beet and the rest. I am aware of some of the problems to which reference has been made.

I want to set the scene by describing some of the main features of our support mechanism for the livestock industry. For beef, United Kingdom producers' returns are protected by our dual support system of variable premiums and intervention. This point was made by the hon. Member for Hereford (Mr. Shepherd), and I shall return to it in a moment. We set great store by this and we are determined to keep the dual approach. This is one of the successes of this Government. We said that we wanted to underpin intervention and we voted to keep the variable premium system. We are aiming to ensure its continuance. It has recently been strengthened by the reintroduction of steers "M" as a category eligible for intervention. The level of the target price—which is more or less the guaranteed return—is now rising on the seasonal scale and will continue to do so until next March, giving returns substantially above the level of a year earlier. The level of the intervention price, which provides the back-up, goes up with the ending of the transition period on 1st January.

Sheep have not been mentioned but I should like to say briefly that for sheep we have the guaranteed scheme, which has served us well. The guaranteed price for sheep was raised by 24 per cent. at the last annual review and the wool guarantee for the 1977 clip was increased by over 30 per cent. We now await the Commission's proposal for the Community régime, but here again I think that there was a fair return.

For pigs, excluding the temporary subsidy in the first half of the year which transferred £17 million to the industry, we do not have national support arrangements, but our pig industry benefits from the Community support arrangements, which include aids for private storage of pigmeat, protection against third country imports and subsidies to encourage exports.

Our overriding concern in this sector has been, and still is, the competitive framework for our producers within the Community. That is why we have put unparalleled efforts into improving the basis of the calculation of the monetary compensatory amounts which apply to imports of pigmeat. This has been a difficult sector. We recognise the problems of the industry. However, my right hon. Friend has used every possible opportunity to see what can be done legally within the framework of the Community. It is not our fault that the £17 million subsidy was not continued.

We are changing the support system in the dairy sector. The guarantee ends on 31st December. Ministers will then no longer fix the precise level of producer returns but will determine the statutory maximum wholesale prices of milk for liquid consumption. Taken together with the boards' returns for manufacturing milk, the level of maximum prices that the Government have just announced should enable the boards to give producers a price significantly above that resulting from the present guarantee.

The Minister of State said that his right hon. Friend has made every effort to get the MCA changed. Does he agree that one reason why the EEC negotiators are less than co-operative is that he will not give way at all on the green pound?

That is not exactly true. I am not suggesting that the hon. Gentleman is misleading the House, but I remind him that devaluation of the green pound has amounted to about 21 per cent. already. My right hon. Friend has shown flexibility. The hon. Gentleman will know of the last change of 2·9 per cent. not so long ago.

The hon. Member for Hereford referred to lack of flexibility. I remind hon. Members that on 1st December, in reply to the right hon. Member for Yeovil (Mr. Peyton) who suggested a devaluation of 7½ per cent., my right hon. Friend said that, even if he did agree, although he certainly would not say so at that time, he could not imagine anything that would have a greater effect on speculation, but he was prepared to listen. That is certainly what we are doing. Therefore, there is flexibility, not a rigid doctrinaire approach.

As I said earlier, transition means a period of uncertainty, and I can well appreciate the concern of the industry. We are in close touch with the industry. My right hon. Friend and I and the Parliamentary Secretary spend a lot of time going round farms in the regions. I have been to the East Midlands recently, my right hon. Friend and I have been to the Northern Region, and only a few weeks ago I was in Northern Ireland. We get about and we recognise the concern of the industry.

With regard to the end of transition and price parity by 1978—a point which is often raised by the industry—the final transitional step will strengthen support from 1st January by a 4 per cent. increase in the intervention price and will at the same time encourage carcase exports by reducing the export MCA levy. On 1st January our intervention price for beef will be the same as for the rest of the Community when expressed in units of account. What no one could foresee in 1972 was the monetary turmoils of recent years.

We could not now accept that parity means coming into line with the "snake" currencies. That would mean devaluing the green pound by 30 per cent. We bear the need for a flexible approach very much in mind. I am sure that no one here would recommend a devaluation of that extent, but I agree that there is justification for keeping the matter in mind.

I turn now to the support system for the industry. Whatever the market price, our support system effectively maintains producer returns and aids the stability of the market. Currently, a sizeable premium is being paid in England and Wales. The target price is now rising and will continue to do so until next March. We have just strengthened our intervention arrangements by reintroducing the category of steers "M" and the EEC has recently introduced a new scheme for private storage of beef carcases.

I come next to the EEC report on premiums and intervention. I remind the hon. Member for Howden (Sir P. Bryan) that a great deal of work has been done by officials on the Commission's report on the reform of the internal beef regime. Hon. Members may have seen that in the first round of proposals for prices in 1978 the Commission has said that it did not think that the time was yet ripe to make changes on the internal beef regime. Naturally this is disappointing, but at this week's Council meeting my right hon. Friend made it clear that, whatever the Commission might propose for the Community as a whole, there could be no going back for the United Kingdom on the current mixed support system of premiums worked in conjunction with intervention. This was of great value to us during the difficult beef market from 1974 onwards when a serious position had to be corrected, particularly during the autumn and winter. The Commission has specifically commended the advantages of such a dual system for the Community as a whole.

I turn to the state of the market. Home marketings affect the market as much as imports. In the early part of this year, home production was down by 14 per cent. In the last quarter of 1977, the United Kingdom cattle sales are likely to be the heaviest of the year and about 4 per cent. up on the same period last year. The market is bound to be weakened by these extra supplies.

A useful development is that our exports of carcase beef are rising, and there are signs that the Christmas trade is beginning to firm the market. Although the imports of live cattle have been increasing recently, they are still low in relation to the traditional levels. To the end of October we imported 245,000 Irish animals compared with the 638,000 animals which the Irish were expected to send to the United Kingdom annually under the agreement. The trade in Irish cattle and beef is a traditional feature of our market. We actually imported less Irish cattle in October than in October 1976.

Comments have been made about the financial effects of this trade. Following the precedents set in the Anglo-Irish Free Trade Area Agreement, EEC legislation, which produces the authority for the variable premium scheme, states that beef originating in the Irish Republic and intended for consumption in the United Kingdom should receive the same advantages as home-produced beef. The variable premium is calculated on the quantities of carcase beef imported from the Irish Republic which meet the quality standards required for beef premium certification in the United Kingdom. Payments are not made on individual consignments or to individual exporters but are aggregated and paid about three months in arrears on a Government-to-Government basis. Any market effect is therefore remote.

Reference has been made to the decline in our breeding herds. After the high levels of breeding herds and production in 1974, we are still on the downward part of the beef cycle. The future direction of our support policy for beef is a matter for the annual review, which is now under way, and for the CAP price-fixing.

The hon. Member for Howden raised the question of the problems in the curing industry. We are conscious of the problems facing not only the pig industry but the curing industry, which is facing particular difficulties. The curing industry is in the front line in facing the competition from imports which benefit from the unfair MCAs operating in this sector. The Government are fighting for better condition of competition for the industry and we have sought a meeting with Mr. Gundelach, the Commissioner, to impress upon him the seriousness of the situation.

Both the Government and the industry have submitted evidence to the Commission in its study of the MCA system to demonstrate the distorting effects of the present arrangements on the pigmeat sector. Government policy here is well known with the initial change of 8 per cent. and the persistent pressure we have exercised since.

Devaluation of the green pound is put forward as the panacea for many of our ills. Such a change is not necessarily the best way of helping this sector, although that could play its part. The green pound is not selective like the MCAs. The industry would like an immediate devaluation since that would also reduce the pigmeat MCAs, but that is no substitute for getting the calculations on to a proper basis. Our case is that the present system of calculation provides a large degree of over-compensation to our competitiors. This persists whatever the level of the green pound.

We must continue our efforts to change the system. Our policy on the green pound is clear. We will devalue when we regard it as in the national interest to do so. We will give full weight to the interests of the pig sector in reaching our view on the timing and the extent of any change.

I should like, in conclusion, to summarise our approach. First, on beef we recognise the force of farming opinion that in order to strengthen the market we should devalue the green pound so as to reduce monetary compensatory amounts on beef imports. We fully understand this point of view and the anxiety which is felt by producers. I would not dispute for one moment that the MCA position has influenced the pattern of prices on our beef market this year. But other factors have been at work, particularly the increase in marketing of Irish export slaughter-houses, compared with 1976 and a return to a more normal seasonal pattern of marketings here. It is the latter which dominated the market in the last few weeks. Indeed, imports from all sources were lower in September and October than a year earlier. The market has now become firmer and we must hope that stable consumer demand and the support mechanisms will help towards a more buoyant outlook. As for the green pound, we have no objection in principle to changing the United Kingdom representative rate—we have made a 21 per cent. change in the last year or two—but we have always stressed that the timing is very important.

We have to look after the wider interests on this, however. On the one hand, if prices rise too high there is consumer resistance, and that does not help the farmer. If prices are too low, the producer gets no encouragement to produce. The Minister of the day has the difficult job of keeping a balance of the interests.

On pigs, we recognise that the producers have faced a long period of difficulty on the present pig price while production costs have risen. There has been an improvement in recent months with feed costs falling and pig prices up about 10p per kilogram deadweight above the lowest point earlier this year. We welcome this improvement in the position of producers. We recognise the problems, and the Minister is pressing hard for an early decision on the review of pigmeat MCAs. This is not easy because there are those in the Community who benefit from the present system and are opposed to our ideas for change. We believe, however, that our case is fully justified and we are encouraged by French and Italian support. We are therefore taking every opportunity to maintain pressure for a change.

The industry would like an immediate devaluation of the green pound because that would help to reduce pigmeat MCAs, but there is no substitute for getting the calculations right, and that is worth fighting for if we can get it on to the right footing. It would enable our industry to compete on fair terms at whatever value of the green pound may be in operation. At the present time, as hon. Members know, one of the problems is the encouragement for imports from other parts of the Community.

We recognise that there has been anxiety in the dairy sector. But producers now have the details of the new arrangements, and it is the Government's intention that the new arrangements should permit producers to get the returns necessary to secure the production we need. We are satisfied that the sort of return that the boards will be able to give producers in the coming quarter will be adequate to achieve this. We predicted in the spring that producers would have a good year, the best for a long time. This was widely disputed at the time but there is no reason to dispute it now.

In the light of the assurances which I have given and which my right hon. Friend has given over the last few months, hon. Members will recognise the extent to which the Government have given support to the livestock industry. But we are not able to act unilaterally in these matters. We have to work with the Community. It is no good talking about the Minister's attitude in Brussels as being like that of a bull in a china shop and so on and then accusing him of not being firm enough with the Community in bringing back a better deal.

We fully understand the point of view of the industry. Equally, we know the point of view of the consumers as well. The interests of the two groups are very much tied up. We have to keep the balance of the argument. The duty of the Government is to look at the national interest as a whole and not pursue the interests of only one sector. That would not be a service to the sector concerned. We shall therefore continue to weigh all the considerations in an objective and fair manner and do our best to look after the agriculture and food industry as a whole.

With the price review now under way and with the EEC negotiations which are taking place, all the factors raised in the debate and by the industry generally will be taken into account, so that in the period of transition we can give the assurance that we are not only sensitive to the problems of the industry but have the determination to see that we get the right result.

4.38 a.m.

My hon. Friend the Member for Howden (Sir P. Bryan) has done us a great service in initiating this debate, even at such a late hour. He has very clearly drawn attention, supported ably by my hon. Friend the Member for Hereford (Mr. Shepherd) and my hon. Friend the Member for Salisbury (Mr. Hamilton), to the crisis within the livestock industry. He has brought out the great uncertainty which faces it, and the realisation that people engaged in livestock farming in this country have not had the opportunity, which they were promised when we joined the Community, to be able to compete with the rest of the agriculture industries of the Community on level terms. This has not been fulfilled. The frustrations which face livestock farmers today were made very clear to the Minister of State before he began his speech.

I must at this stage declare my own interest as a farmer. But even if I were not a farmer the speech which the Minister of State read out to us could not fail to infuriate me. We have become accustomed to his coming down to the House over a number of years and reading out bland, platitudinous Civil Service briefs. I have never heard a more absurd speech than the one he has made to the House tonight. On a number of occasions he told us that the points were being taken note of and that he would look into them and bear them in mind. He nearly ran round in a complete circle with his platitudinous remarks.

I am getting increasingly fed up with speeches of this sort which the Minister reads out interminably on these occasions. It was an impertinence for him to talk to us of Tom Williams. I would have thought that Tom Williams would be turning in his grave if he knew what this Government were doing to the country's livestock industry.

My hon. Friends have drawn attention to the fact that in so many sectors of the livestock industry breeding herds are declining and the industry is suffering seriously.

The right hon. Gentleman went on to say that the present Minister of Agriculture is doing a good job for European agriculture. I suppose that that is probably true. Farmers in Germany, Holland and Denmark are rubbing their hands with glee at the opportunities that have been opened to them for sending their produce here because of the actions of the Minister of Agriculture.

The hon. Gentleman should have thought about these problems before he stampeded us into Europe.

I shall come to the point made by the hon. Member for White-haven (Dr. Cunningham). I must confess that I have never before heard of his interest in agricultural matters. If he took such an interest, I dare say that we should get some rather more sensible speeches than the one to which we have just listened.

The Minister said that of course there had been uncertainties caused by the end of the transition and that this was based particularly on the terms on which a Conservative Government took us into the Community. I would point out that when a previous Conservative Government took us into the Community it was no part of that Government's plan to take the agriculture industry into the CAP and put it at such a disadvantage with regard to the green pound. [HON. GENTLEMEN: "Rubbish".] Hon. Gentlemen may say "Rubbish," but that was no part whatever of the Conservative Government's plans. It was a disadvantage that was not foreseen, and such a suggestion is unreasonable and unfair.

I do not intend to talk at length. The Minister ended his speech by using the phrase "in view of the assurances that I have given". I did not hear any assurances. There was no comfort at all for the agriculture industry, and particularly the livestock industry.

The Minister went on to say that in view of the assurances he had given hon. Members would recognise the Government's support for the livestock industry. That is really the most platitudinous rubbish, and he should not come here and read it out to us. I do not know who wrote it. How dare the Minister tell us that his Government have done more than we have ever done? He confounded his own argument when he told us that beef production had dropped drastically since 1974 when under our Government we built up beef production in this country to—

The hon. Gentleman's Government got rid of the fatstock guarantee scheme. It was my Government who in 1974 had to bring in the variable premium scheme to underpin the intervention. I do not know why the hon. Gentleman is being personal. I would not have thought that this was the time to expect me to come to the House and make major pronouncements about an industry when the whole matter is under review.

I should have thought that when the House of Commons seeks to discuss these matters, whatever the time of night, the Minister should give us the facts. I have said nothing personal to the Minister. How dare he accuse our Government, compared with the actions of his Government, with regard to support for the beef industry?

The right hon Gentleman's memory fails him, but I can tell him that there was only one occasion in the fortunes of the beef industry since the days of Tom Williams—and that was in the summer of 1974—when the industry had no support of any kind from the Government. That was when the present Government refused to use the intervention system, which was the recognised system in the Community. When the beef premium system was introduced, it was after there had been pleas from the Opposition for the introduction of such a system.

This is a highly unsatisfactory situation. The Opposition have made it clear that there should be an immediate 7½ per cent. devaluation of the green pound to restore the fortunes of the livestock industry and the size of the breeding herds.

It is the intention of the Opposition to raise this matter as soon as possible in time provided for the Opposition. We shall ask the House to make up its mind about whether there should be an immediate 7½ per cent. devaluation of the green pound to attempt to make good to the livestock industry the ravages that the present Government have caused.