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Glasshouse Industry

Volume 12: debated on Monday 9 November 1981

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Motion made, and Question proposed, That this House do now adjourn.— [Mr. David Atkinson.]

10 pm

My pleasure at having this brief debate answered by my hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food is equalled only by my pleasure at your presence in the Chair, Mr. Speaker.

I wish to set out the problems facing the glasshouse industry, especially the unfair competition from Dutch producers, the majority of whom have natural gas supplies to heat their glasshouses. The British glasshouse sector is an efficient industry that should continue to make a significant contribution to our economy through import savings. The annual value of output is £160 million, with tomatoes being the largest single crop at £60 million. The work force comprises 20,000 full-time and part-time workers.

The problem is that 90 per cent. of Dutch glasshouse growers use natural gas as a source of energy. They have the advantage of a special tariff rate with Gusunie, the Dutch gas concern, which is 50 per cent. State-owned. That tariff is 30 per cent. lower than the rate charged to other industries in Holland using the same quantity of gas. By comparison, 90 per cent. of the fuel used for glasshouse heating in Britain is oil. The remaining 10 per cent. is made up of coal, natural gas or waste heat. Government policy on fuel pricing means that British growers pay higher prices for energy than their main competitors, the Dutch.

The cost of heating accounts for up to 40 per cent. of the glasshouse growers' cost of production. When rapidly rising British oil prices are set against artificially low Dutch gas prices, our growers face intense and increasing competition. The National Farmers Union estimates that the Dutch fuel cost advantage averages £10,000 per acre, the equivalent of 5p per pound of tomatoes or 30p on each tray of 12 cucumbers. The volume of horticultural exports from Holland, comprising tomatoes, cucumbers, glasshouse lettuce, cut flowers and pot plants, has risen substantially in recent years. For example, the volume of Dutch tomatoes sent to Britain has more than doubled from 32,000 tonnes in 1978 to just under 70,000 tonnes in 1981.

In 1977, when the disparity between Dutch gas prices and equivalent energy prices within the EEC became significant, the Dutch Government gave an undertaking that they would ensure that Dutch gas prices were brought into line by the end of 1979. In fact, the gap has widened since 1979. In April 1981, as a result of pressure by the Commission, the Dutch announced scheduled gas price increases so that parity with the industrial tariff would be achieved by 1984. That means that the Dutch growers' heating cost advantage will continue for a further three full seasons.

The German, French and Belgian Governments have all announced various forms of aid for their domestic producers. In April the British Government announced a £5½million aid scheme for the period ending 31 December 1981. This comprised 5p a gallon on heavy oil and 8p on light oil. We trust that it will be continued.

My right hon. Friend the Minister of Agriculture, Fisheries and Food has pressed his fellow agriculture Ministers and the Commission to find, as a matter of urgency, ways to eliminate the distortions in our trade arising from Dutch policy on energy pricing. We are not condemning our Dutch friends. We are part of the same Community. We like and appreciate them, as we trust they like and appreciate us. None the less, the advantage that they have for a further three seasons will have the most dreadful results for our own glasshouse industry unless that which is now being done can be continued and perhaps expanded.

The year 1981 has been critical, and our growers are once again in a dilemma as to their programme for the coming year, 1982. Most growers have to borrow substantial sums for working capital, and the high level of interest adds to their financial problems. The effects of the unfair competition are no secret. Many firms within the industry are in serious trouble. Large nurseries have closed down and staff have been made redundant. Further closures are inevitable if action is not taken to support the industry over the coming winter.

I have two firms in Devon with enterprises on the market. One is a large tomato, cucumber and lettuce holding. The other is a fairly small but highly efficient small family tomato nursery. They are seeking to sell. There are, of course, no takers. A labour-intensive industry means that any large-scale closure would lead to increased unemployment. Even though it is difficult to establish an exact figure, the benefit that we have to pay to those made redundant and unemployed must far outweigh any temporary subsidy that we need to carry us through until the time when the Dutch and ourselves have equal problems and equal prices. I stress the word "problems", because we do not seek for one moment to have unfair competition on our side. We merely ask for fair play on all sides.

The chairman of the horticultural section of the Devon NFU is a constituent of mine, John Oliver. I have seen his glasshouses and met his staff who, in the sometimes quite bracing climate of North Devon, grow beautiful tomatoes and cucumbers for those who live in less advantageous parts of our country. Distance and transport costs from Barnstaple are similar to those from Holland. Labour costs and land costs are similar. The difference in the cost of heating is the killer. That is what can kill off our smaller and fiercely independent horticulturists. An increase of over 100 per cent. in fuel costs over three years is bad enough, but when a subsidy is added to the advantage of our major competitor the ever-increasing cost of our overdrafts anticipates disaster and the collapse of yet another British industry.

I hope that my right hon. Friend will help and will reassure those who seek no special advantage. In agriculture and horticulture we can compete with and succeed against anyone in the world. We must have fair play, and that is all we seek.

10.8 pm

I congratulate my hon. Friend the Member for Devon, North (Mr. Speller) on raising a matter which has been of great concern to the entire horticulture industry for several years.

All hon. Members will be grateful to my right hon. Friend the Minister of Agriculture, Fisheries and Food for the short term that he gave the industry earlier in the year, over the last winter. We all expected that the European arrangements with the Dutch would have been sorted out long before now. The continual dragging on of the difficulty with Holland is intolerable. We know that my right hon. Friend wishes the industry well—he has given many assurances to that effect—but we are very worried that the Continental Europeans seem to be dragging their feet for ever. We want a clear-cut assurance tonight that if the Europeans cannot be sorted out within the next three weeks something will be done by Her Majesty's Government.

I should declare an interest, in that in a minuscule way I am a horticultural grower. It would be improper if I did not declare that interest. I am sorry to have to tell you, Mr. Deputy Speaker, that my own beastly boiler is burning away at this moment, and I wish that it was not.

10.9 pm

Nothing concentrates the mind of the Commission like a power of individual countries under the treaty, not in breach of the treaty, to take unilateral action to protect their own interests against a flagrant breach of the treaty. We are in that position. I do not favour unilateral action except in extremis. I believe, however, that the phrase "in extremis" describes the situation of our horticultural industry.

10.10 pm

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food
(Mrs. Peggy Fenner)

I echo what my hon. Friend the Member for Maidstone (Mr. Wells) said in pointing out that the House is grateful to my hon. Friend the Member for Devon, North (Mr. Speller) for raising the problems of the United Kingdom glasshouse industry. I know that many hon. Members who have glasshouse holdings in their constituencies are deeply concerned about the industry's ability to remain competitive and, indeed, for individual glasshouse enterprises to survive.

As my hon. Friend has said—with understandable force—the root of this whole matter is the gross distortion of competition brought about by the Dutch growers being able to continue to heat their glasshouses at absurdly and unfairly low costs. I fully accept that, solely on account of the highly preferential tariff that the Dutch growers are paying for natural gas, many fine businesses in this country, which have been built up by hard work and enterprise, are now being placed in jeopardy.

I make no bones about it. The present situation is intolerable to the industry and intolerable to the House. One has only to look back at the way the matter has been handled by the Commission to see revealed month after month of evasion and delay. If the problem had arisen only recently, perhaps it might be understandable that it has not yet been resolved. On the contrary, however, it is now more than two years since the Commission began a detailed study of competition in glasshouse horticulture on the suspicion that all was not well. So the unfair and distorting practices in Holland must have been perpetrated since an even earlier date.

What do we find? After lengthy deliberation and consultation with the Dutch authorities, the Commission reported to the Council of Agriculture Ministers its conclusion that the preferential tariff for gas being supplied to growers in the Netherlands amounted to a State aid that was distorting competition and was in breach of the Treaty of Rome. Quite rightly, the Commission decided to initiate legal action under article 93(2) of the treaty.

That was 12 months ago. Having started down the road of legal action, it was reasonable for us to expect that the action would have been brought to a rapid conclusion. We accept, of course, that procedures are laid down in the treaty to ensure fair play for member States when the Commission identifies a transgression of the rules. But it is deplorable when these are allowed by the Commission to become so long drawn out that the very future of the glasshouse industry is placed at stake.

I assure the House that our glasshouse industry's interests have not been neglected. At meeting after meeting of the Council of Agriculture Ministers, my right hon. Friends have been in the lead in impressing on the Commission the dire position to which our industry has been brought by a continued and increasing stream of imports to which my hon. Friend referred, of tomatoes, cucumbers and flowers from Dutch glasshouses, fuelled by energy purchased at prices demonstrated to be contrary to the competition rules of the treaty.

It is not only the Commission, of course, which is culpable. The Commission is given responsibilities under the Treaty of Rome. But it is upon the Governments of member States, who put their hands to the treaty, that the final responsibility rests to act in accordance with the rules and to make the Common Market work. I am sorry that the Netherlands Government have persisted in action which clearly distorts conditions of competition.

I share the anger and concern expressed by hon. Members tonight. We did not join the Community to see our horticulture industry squeezed nearly to death by unfair competition from other member States.

I must, however, make it plain that the Government have not contented themselves simply with pursuing the matter as a legal exercise in the Council of Agriculture Ministers. We recognised in April of this year that, most regrettably, the matter was unlikely to be brought to a satisfactory early settlement. We therefore obtained the agreement of the Commission to extending practical help to our growers in meeting the costs of oil for heating their glasshouses during the present year.

This is the so-called "adaptation aid" now being paid from national funds. It is applied retrospective from the beginning of 1981, since when growers have been paid 5p towards each gallon of heavy oil and 8p towards each gallon of light oil used in glasshouses. Also, as announced last April, they will be continuing to receive the same level of assistance towards the cost of oil used in glasshouse heating right up to the end of this year. This aid, on normal consumption levels, is worth about £5½ million to the industry for the year. It represents a substantial additional form of help, unplanned when we were deciding on the competing priorities for available funds for supporting our agriculture and horticulture industries.

This aid, more generous than that given to their growers by some other member States, was the maximum allowed by the Commission, and in the present difficult financial situation it represents a very generous commitment by the Government to our glasshouse industry.

I am sure that the House will agree that in the absence of effective action by the Commission and the persistence of the Dutch Government in pursuing their present course of action—which has been the subject of unanimous and vehement expressions of disapproval in the Council of Ministers—the Government have demonstrably done all that has so far been possible to protect our growers against the unfair competition from Dutch imports.

In spite of the help that they are receiving, I fully recognise—as my hon. Friends have made quite clear—that our growers have had a very difficult time and a very difficult market this summer. At a time when demand for salad crops was already being adversely affected by the unseasonable weather, market prices were further depressed by the weight of increased Dutch sendings. Consequently many businesses have not received an adequate return for their produce. So what, as my hon. Friend has quite properly asked, are the industry's prospects in the next few months?

It did not need this evening's debate to remind us all that growers are now entering the time of year when glasshouse heating costs are at their highest as winter develops. Because of the need for further help for the beleaguered industry, my right hon. Friend has, since the summer, been in frequent and close personal contact with Mr. Dalsager, the agriculture commissioner, about the plight of growers in the coming months as the heating season gets under way. He has demanded that action should be taken immediately to relieve the situation.

The Commissioner has confirmed that the Commission remains convinced of the need to align the prices of gas to horticulture and to industry and of the ability of the Dutch authorities to bring pressure to bear on the parties concerned to achieve this end.

My learned Friend referred to a possible extension of the present "adaptation aid" into 1982. We have recently been informed by the Commission that it would be in favour of payment of the aid for another year under an extension of its earlier guidelines.

We do not think it right that Governments should be put in a position of having to finance national aids because of a failure by the Commission to secure equality of competition. We are, nevertheless, urgently considering the Commission's recent communication. I cannot tonight anticipate the outcome, but I would point to the Government's record of supporting our industry over this difficult period, which I have already spoken about, and assure the House that we have no intention of seeing our industry ruined.

My hon. Friend has not yet given the Government's view on the alternative—which would not cost the taxpayer a penny—of exercising our right to restrict imports from the country that is acting, and which has been found by the Commission to be acting, in gross breach of the Treaty of Rome.

My hon. Friend raises another point on the possibility of imposing restrictions on the import of Dutch glasshouse produce, either by way of quotas or by applying countervailing duties. The Government are ready to examine any proposal that may provide a legal basis for alleviating the problems now facing our growers, but the United Kingdom has no authority to act unilaterally to restrict infra-Community trade.

We have pressed the Commission on the possibility of countervailing action against the Dutch, and it has confirmed that it is not open to it to authorise such action in present circumstances.

The Commissioner has given an unequivocal undertaking to bring forward proposals for action to safeguard the interests of glasshouse growers in member States affected by the unfair Dutch competition who are now making plans for the new glasshouse heating season. We are determined to ensure that that is done. In the absence of positive action by the Dutch in the rapid removal of the present distortion of competition, our expectation is that the Commission would seek to resolve the matter through the European Court of Justice.

My hon. Friend the Member for Devon, North referred to the great contribution made by the glasshouse industry. I cannot speak too highly of our glasshouse industry. It is extremely well equipped and highly efficient, and, in the case of some forms of production, includes world leaders. It is all that we mean when we talk about individual enterprise and endeavour. I have no doubt whatsoever that, given equality of terms of competition, it would be more than a match for the glasshouse industries in any other member State. The Government are fully committed to ensuring that the industry is able to continue to exercise its very considerable skills in marketing produce of the highest quality that will stand comparison with any with which it has to compete for a place in our market.

The United Kingdom has been in the van in pressing the Commission and the Dutch to take effective action to remove the threat to our glasshouse growers from the illegal assistance being given to Dutch growers. We have succeeded in getting a great measure of support from the other agriculture Ministers. The industry can be assured that, together with those allied with us, we shall not relax the pressure on both the Commission and the Dutch Government to bring the matter to a satisfactory conclusion.

I appreciate the motives and intention of the Government, and we are fortunate to have such a strong team pressing our case, but it is now November. Next month our growers must decide whether to keep going in hope or to cut and run.

My hon. Friend knows that the present adaptation aid continues until the end of the year, although that does not minimise the need for advance planning. I remind my hon. Friend of the Government's strong action previously and their clear intention to support the industry in every way possible.

My hon. Friend has not answered two fundamental questions. First, if the Government are to provide the money, how much will it be? It was £5·5 million before. She has uttered sternish words about what is happening in Brussels. She says that progress is being made. But when will we have a firm decision?

We are mindful of the need for an early decision. The work done by ray right hon. Friends shows their intention not to leave the glasshouse industry in doubt. The present aid goes on to the end of the year. The answer to my hon. Friend's second question is "As soon as possible". To deal with his first question, we were more generous than some other States in adaptation aid. I trust that my hon. Friend will take heart from that example.

I hope that my hon. Friend will not assume from the total lack of interest from the Opposition Front Bench, the Liberal Party, the SDP, the Welsh Nationalists and the Scots Nationalists that there is a lack of concern in the House. We on these Benches believe that horticulture is part of agriculture, which is one of our most efficient industries.

We thank my hon. Friend for her soft words, but we urge on her hard deeds and soon.

I never make assumptions about lack of attendance at this time. I have seen too many questions on the Order Paper and early-day motions not to understand that the matter is of extreme importance to the horticulture industry.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes past Ten o'clock.