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European Community (Agriculture Ministers' Meeting)

Volume 984: debated on Thursday 8 May 1980

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With permission, Mr. Speaker, I should like to make a statement about the meeting of the Council of Ministers in Brussels on 6–7 May at which I represented the United Kingdom together with my hon. Friend the Minister of State.

I confirmed to the Council the Government's opposition to the price increases that were discussed at Luxembourg and agreed to by the other eight countries, and opposed the level of price increases of the order of 5 per cent. that were being proposed on the various commodities that were discussed at this Council meeting.

I made clear our strong objections to the proposals that the Commission had produced at Luxembourg on mutton and lamb and demanded that these proposals should be examined by the Special Committee in order to expose the many problems that would arise if they were adopted. I obtained agreement that this should be done and further discussions on mutton and lamb will only take place after the Special Committee has reported.

I resisted a suggestion from the Commission that the Council should agree to adopt immediately a regulation applying a common classification system to beef. It was accepted that there should be further detailed technical discussions before a decision is taken in time for the beginning of the 1981–82 marketing year.

I also pressed for the package of measures to include a commitment that the refunds of levies on imported cereals used in the production of spirit drinks, mainly whisky, would be paid. Although provided for in the Treaty of Accession, this has still not been implemented after a lapse of eight years. I said that I could not accept any further delay. I obtained a Council commitment to adopt a regulation this year providing for the refunds to be paid. These payments will be of substantial benefit to the whisky industry.

The Council agreed to a request from the French and Italian Governments for devaluations in their green currency rates of 1·3 per cent. in the case of France and 3·5 per cent. in the case of Italy.

The Council will resume its discussions on the CAP prices package and other items upon which, as yet, there is no agreement on 28 May. At the same time, it is probably expected there will be a meeting of the Council of the Foreign Ministers at which the budget question will be discussed.

I thank the right hon. Gentleman for that statement, but I hope that he manages to succeed in rectifying the unfair levy burden placed on the Scotch whisky industry ever since we entered the Common Market. The industry has to purchase dear Common Market barley, which has blunted its competitive edge in selling abroad.

What details of the farm package have so far been agreed? Is the butter subsidy to continue? What is to happen to the beef premium? Does the right hon. Gentleman anticipate any cuts in sugar quotas during this year? Does he still stand by his promise to the House that he will not agree to any price increase on products in structural surplus and that he will not agree to a sheep-meat regime that necessitates intervention and United Kingdom costs?

While recognising that the right hon. Gentleman has so far resisted the demand by the other eight Ministers for a 5 per cent. rise in average prices, in spite of the Commission's proposal that they should not rise above 2·4 per cent., may I ask him whether he is aware that even if the Prime Minister succeeds in cutting the budget deficit by £800 million and he then gives way on a 5 per cent. increase—there are clear indications that he will—our food bill will rise by about £300 million? Is he further aware that the greater the price increase the more the consumer bears the brunt and the more he undermines what the Prime Minister might achieve?

If the right hon. Gentleman also agrees to an increased co-responsibility levy on milk, which means that the United Kingdom consumer will have to pay more, and a contribution to a sheepmeat regime, which will mean increased lamb prices in the United Kingdom, the Prime Minister's deal, in the end, will look pretty sick, as will the British consumer. What assurances can the right hon. Gentleman give that in the final round on 28 May none of these three things will happen—that he will not agree to a 5 per cent. increase in prices, or a co-responsibility increase in milk, or a sheep-meat regime with United Kingdom costs?

Those comments from a member of the previous Government, which had an average price increase of 7½ per cent. and never obtained a deal on the budget, are remarkable. Even if we agreed a 5 per cent. increase, it would be much lower than the average increase under the previous Government.

If the right hon. Gentleman reads my statement, he will see that we have obtained agreement to the whisky rebate, which is something that we failed to do during the five years of the previous Government. That will be of considerable benefit to the whisky industry. After many years of failure, a firm commitment has been made to that.

There is no agreement on any part of the package. We have a reserve over the whole of it. The package agreed by the eight other countries includes the whole of our butter subsidy—twice what the previous Government achieved—the beef premium scheme and a continuation of our sugar quotas.

Is the right hon. Gentleman aware that I admire his stand in Europe and I do not believe that he should go for a 5 per cent. increase across the board? However, I am sure that he will agree that if British agriculture is to survive, it will need the extra 5 per cent. during the coming year. Will he assure the House that he will not abolish the present guaranteed efficiency payments on sheepmeat or trade them in for a similar scheme that will benefit the French? Can he also tell us when the review on marginal land will be announced?

The review is taking place. We are studying methods of speeding up the possible classification of marginal land. We should certainly oppose any sheepmeat regime that replaced the present system and gave fewer safeguards to our sheep producers. The present system has helped and is operating well in difficult market conditions. If there are to be changes, we shall want something that is as good, if not better, for our producers.

It is true that farm incomes have dropped substantially in real terms over the past two years and input costs are increasing substantially. A range of methods of assistance is available to us and the Government have used some, including green pound devaluations and increases in the hill farm subsidies. Those are ways in which we can try to help to maintain farm incomes. Obviously, at a time of substantial increases in input costs, there is considerable pressure on farm incomes.

In all the pressure that the other eight member countries are bringing for increased prices, do they ever take account of the increasing imbalance which will result and the near bankruptcy that the Community already faces, which is bound to get worse if we continue along that path?

If the present package is agreed, we shall come close to the 1 per cent. VAT limit, which would mean that an even greater proportion of the European budget was devoted to agriculture. As I have said before, in terms of European policies that would be a fundamental mistake when there are so many other things to be done in Europe.

Is the right hon. Gentleman aware that his resolute and abrasive stance at the Council will be highly to the satisfaction of the great majority of his fellow countrymen? Will he confirm that the reference at the conclusion of his statement to the simultaneous meetings on 28 May in no way derogates from the statement of the Prime Minister that a settlement of the budget question to her entire satisfaction is the condition precedent to agreement on other matters?

Is my right hon. Friend aware that the scotch whisky industry is appreciative of his persistent efforts to obtain the restitution payments due to the industry? May I congratulate him on the success of his endeavours? Can he confirm that the commitment that he has obtained covers not only payments that are currently due but those that have accumulated over the past eight years?

Yes. Our interpretation of the treaty is that the arrangement was applicable to us from 1 January 1973. With the changes that have taken place in grain prices over that period, it is a substantial benefit, currently about £20 million a year.

Can the hon. Gentleman confirm or deny reports that the Commission proposes to resume full-scale exports of subsidised butter to the Soviet Union? Why cannot the British Government veto that indefensible subsidy?

The reason why the power of veto does not exist is that under previous Governments the policy was agreed and, as a matter of policy, is in the hands of the management committee. It could be taken away if the majority of countries agreed. But they do not. The British Government think that to continue that form of trade, with British and European taxpayers subsidising unwanted surpluses to benefit the economy of the Soviet Union, is a tragic blunder.

Does my right hon. Friend agree that if farm costs increase by 15 per cent. and we wish to maintain production, British agriculture must have an increase in its end prices? Will he try to explain why the Opposition accept that other industries can recover their costs but are opposed to British agriculture doing so?

In fairness to the record of the Labour Party in government, I should say that it successively obtained substantial price increases in every CAP review. It is only in opposition that Labour Members go in for their present policy. It is true that there are substantial increases in input costs. The rise in oil prices has massively affected the price of fertilisers and farm workers had their biggest ever pay increase last year. Those are substantial input costs and it is the duty of the Government to find ways of ensuring that agriculture continues to expand and invest despite those input costs.

Is the right hon. Gentleman telling us that there are to be rebates on imported grain for whisky but not for bread? Will he confirm that the levy is about £50 to £60 a ton on feed grains for cattle and for making bread? Those corn laws have been with us since 1973 and is it not reasonable that the right hon. Gentleman's party should, as it did 100 years ago, get rid of those corn laws by getting rid of the Treaty of Accession?

The refunds on whisky relate to re-exports. If we start re-exporting bread, I shall certainly claim the refunds.

Does my right hon. Friend agree that no other industry in this country has had a price increase of only 6 to 8 per cent. in the past two years? Will he confirm that the continued reluctance of the French to permit the import of lamb from England is not forming part of the negotiations at this stage?

I regret that the Commission put forward, not with the support but with the silence of a number of other member States, a programme for sheep which is unworkable, will probably result in 100,000 tons of sheepmeat going into intervention, will violate third country markets and do a great deal of damage here and overseas. It is a crazy scheme. At the last Council meeting, I pointed out in detail the absurd weaknesses of the scheme, which resulted in its being referred back to the Special Committee. I hope that as the Commission is forced to look at it in greater depth it will realise the folly of its ways.

In Europe as a whole, the price increase last year was 1½ per cent. The increase proposed by the other eight member countries this year is 5 per cent., which would give a total of 6½ per cent. over two years—much lower than the rate of price increase of almost any other product in Europe. However, there are other factors, particularly in the United Kingdom, that have enabled us to obtain increases—due to the green pound devaluations and improvement of hill sheep subsidies—that have partly compensated for that situation.

Will my right hon. Friend say what the additional cost to the EEC agricultural budget would be as a result of the tentative agreement reached by the other eight countries? Within the context of that provisional figure will the United Kingdom be a net contributor or beneficiary?

As to the overall cost, obviously I do not know the final calculations of those aspects of the package that were discussed yesterday, some of which must still be costed. As to the Luxembourg package—the main items—it was suggested that the overall increase would be about 1,000 million units of account, of which the United Kingdom would obtain a share of the benefits. However, I hope that whatever agreement is reached—in the same way as last year, when the United Kingdom was a net beneficiary for the first time—this year we shall again end up as a net beneficiary.

Why was not the ethyl alcohol question discussed if the Minister discussed the whisky industry? Surely he realises that the ethyl alcohol problem is related to the whisky industry. Is the Minister merely hoping that the problem will go away?

No. The ethyl alcohol position is discussed under the alcohol regime. I discussed the whisky aspect under the cereal regime. I was unable to discuss this point under that item. The agenda at the moment is totally connected with price fixing. It is fixed by the Council, not by any member State, and therefore it was not discussed on this occasion.

Will my right hon. Friend say what he means by " sheep-meat "? Does he mean lamb and mutton? If he does, will he ensure that he defends the interests of our lamb and mutton farmers?

Yes. I mean lamb and mutton, although I discover that in this country basically all mutton is now called lamb. Obviously I give the assurance for which my hon. Friend asked.

Did the right hon. Gentleman make it clear that he was determined that our apple and pear industry would survive? Can we expect during 1980 an end to the present absurd coefficiency method of calculation? Does the right hon. Gentleman believe that 1980 will see action taken in the autumn of this year to restrict the flow of Golden Delicious applies from France?

I do not think that the correct policy is one of restricting the flow if the flow is coming on perfectly reasonable and equal terms. If it is not, one should deal with any unfairness in that regime—which we shall deal with. There is a great deal of scope for improving the marketing, grading and production of British apples and pears. I shall make some announcements in the coming week concerning that industry which I hope will be of help. I hope that we shall start the French worrying about exports of Cox's and Bramleys to France rather than the other way round.

Does my right hon. Friend agree with me and the majority of people in this country that the common agricultural policy is damaging to the economy of Britain, to British agriculture and, in particular, to the housewife? Will he ensure that the housewife continues to have access to traditional supplies of butter and sheepmeat, including lamb, produced at a fraction of the cost of that produced in the Common Market, which comes from New Zealand? If the CAP is not reformed by the EEC, which is unlikely, given the vested interests of many EEC countries, will he ensure that he seeks either to foist the cost of the common agricultural policy on to those countries that benefit from it or to disengage from it?

As the CAP consists of over 70 per cent. of the budget, in obtaining a proper and fairer adjustment of the budget we would be putting the cost of the agricultural budget much more upon those who benefit from it instead of those of us who do not obtain the same kind of benefit. The argument about the budget is very much concerned with the fair distribution of costs of the CAP.

As to the effect of future supplies on the position of New Zealand, the community, including France, agreed within the GATT that sheepmeat should come from New Zealand with a 20 per cent. tariff and should thereafter have free access. There is no way that the British Government and, I am glad to say, virtually all the other member States would agree to any change in that position.

Will the Minister give an assurance that at future meetings of the Council of Ministers he will oppose any proposals by the EEC to introduce a tax on vegetable oils and fats? Would not such a proposal lead to further unemployment in the United Kingdom, especially on Merseyside and the North-West?

I totally agree with the hon. Gentleman. There is a group of Ministers who would like to see this industry put at a handicap because of the surpluses of butter. That would be a totally disastrous and wrong policy and certainly I should oppose it.

Does my right hon. Friend accept that these annual EEC price negotiations seem to become more difficult each year? Is he further aware that the delay in announcing the price agreements is very damaging to British farming? Is he aware that there remains doubt and concern in the minds of the dairy industry that he may be forced to accept an increase in the co-responsibility levy? Despite his assurance that he will not accept it, will he repeat the assurances given on previous occasions?

What I said about the co-responsibility levy was that I was against any form of exemption that resulted in creating a position that was adversely affecting the position of the United Kingdom dairy farmer. The current proposals contain a proposal for a price increase of 4·1 per cent., with a flat rate co-responsibility levy, but with very minor exceptions, of 2 per cent. I should much prefer no price increase and no levy, but that is the current proposal put forward by the Eight.

As to the duration of price fixing, no one is more opposed to the duration of the discussions than I am.

Will the Minister give an assurance that he will continue to resist resolutely any increase in commodities that are in surplus? I understand his approach and the need to be flexible in this round, but does he agree that the continued featherbedding of commodities in surplus must be the economics of the madhouse?

Yes. However, I must point this out. Last year we were the first Government to succeed in getting a price freeze on milk. The previous year there was only a small increase in the price of milk. The result is a substantial increase in milk production in Europe. One of the impacts and effects, if we are not careful—which is the immediate effect that has occurred—is that small farmers take on an extra cow to retain the same income. Therefore, we do not necessarily solve the problem of the surplus. However, in principle we stated our policy, which is that we think it is foolish to increase the prices of the goods in surplus.

As support for milk alone cost almost £3,000 million last year—almost 40 per cent. of the total CAP budget—does the right hon. Gentleman agree that it is crucial for him to stand by his commitment to this House to a freeze on the common price of milk? Will he undertake to maintain the same resolute opposition as did the Labour Government, and as he did last year, to any levy that would discriminate unfairly against our own milk producers?

I must repeat this to the hon. Gentleman because he asked for it. Every price review for which he was responsible increased the price of milk. On occasions he agreed to increase it beyond what the Commission proposed. He did that because he was in a negotiating position.

On the question of prices, I agree totally with the words of the Leader of the Opposition last week when he said, after my right hon. Friend had reported about Luxembourg:

" I repeat very strongly that we shall support her in not giving way on the agricultural price freeze until the budgetary issue is settled."—[Official Report, 29 April 1980; Vol. 983, c. 1154.]