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Food Prices

Volume 19: debated on Tuesday 2 March 1982

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asked the Minister of Agriculture, Fisheries and Food what would be the effect on the price of foodstuffs purchased retail, such as bread, butter, beef and sugar, if the current proposals of the European Economic Community Commission were accepted in their entirety, with no change in the green pound level.

As I have explained on a number of occasions, retail food prices are affected by many factors, of which common agricultural policy support prices is only one. It is possible therefore to provide only a general indication of the effect and it should be noted that any price increases which would result would, of course, take place over a period of time.For bread, cereal raw material costs account for only one quarter of the retail price, which inevitably will be much more affected by the costs relating to the remaining three quarters than by the price fixing for wheat. The effect of proposed rise in the support prices of between 5·3 per cent. and 7·05 per cent., if fully reflected in market prices, would be less than ¾p on a standard loaf.For butter, there is a proposal to increase the intervention price by 8·58 per cent. But in practice the market price depends upon market circumstances, including changes in commercial stocks, opportunities for export, the price levels of competing products such as margarine, and, of course, the figure that is agreed upon for the future level of the consumer butter subsidy. Therefore, whilst a straight increase of 8·58 per cent. could represent 7½p per pound on butter, there are many other factors that will determine the price in the shops. We currently enjoy a consumer subsidy of 13p per pound paid for by the Community.There are no direct support prices for cheese, and it is likely that any increase in the manufacturing price paid for milk would result in a somewhat smaller increase than the equivalent price effect for butter.For sugar, the Commission has proposed an increase of 9 per cent. in the minimum price of beet. If reflected in the first hand selling price of refined sugar, this would be about 3p per kilogram. But it must be recalled that such are the violent fluctuations of world sugar prices that, as we saw in 1980, the Community price can protect Community consumers from the effect of world price fluctuations.

On present marketing conditions it is unlikely that the Commission's proposals for beef and lamb will have any impact upon the market price. There is therefore no immediate retail price effect that can be identified.

There is no price fixing as such for pork, bacon, poultry and eggs and prices fluctuate according to supply and demand circumstances, although it can be argued that any increases in cereal feed costs would have an impact on the input costs of these producers.

As far as the overall impact of the Common Agricultural Policy on food prices is concerned, I would point out that of the 37 per cent. rise in food prices between December 1978 and December 1981, some 24 per cent. was attributable to the rise in labour and other costs and the margins of processors, distributors and retailers. Only 13 per cent. was due to the rise in the cost of the basic products, and only the smaller proportion of this 13 per cent. can be directly attributable to changes in the Common Agricutural Policy prices. The reason is that much of the 13 per cent. was due to increases in the price of foodstuffs not affected by Common Agricultural Policy price fixing; in fact not much more than one quarter of the retail cost of food is directly affected by Common Agricultural Policy support mechanism, and the quarter that is controlled by Common Agricultural Policy price mechanisms have tended to rise less rapidly than other main elements in the retail cost of food.

asked the Minister of Agriculture, Fisheries and Food what has been the average percentage rise in the retail price of bread, butter, beef, lamb and sugar from a date 12 months before the United Kingdom introduced the levy system until the present time.

I refer my hon. Friend to the detailed information on retail prices of food items published in monthly issues of Employment Gazette, previously The Department of Employment Gazette.