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Council Of Agriculture Ministers

Volume 35: debated on Wednesday 19 January 1983

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3.31 pm

With permission, Mr. Speaker, I should like to make a statement on the meeting of the Council of Agriculture Ministers on 17 and 18 January in Brussels. I represented the United Kingdom, together with my right hon. Friend the Minister of State.

The Council had its first discussion upon the Commission's price proposals for 1983ߝ84; proposals that recommend an average of 4·4 per cent. increases in farm gate prices, which for British agriculture would work out at 4·1 per cent.

A diversity of views was expressed by member States, the majority of whom sought higher increases than those proposed by the Commission in view of the projected 9 per cent. rate of inflation for the Community as a whole.

The British Government expressed the view that this was a time for price restraint, particularly for those commodities in structural surplus.

The proposals will now be referred to the special committee on agriculture and the Council of Ministers will resume its discussions at future meetings.

The Council agreed to an extension for a further month of the regulation that enables New Zealand to export butter to Britain in accordance with the 1983 quotas, agreed by the Council at its meeting last October.

The French and Irish Governments retained their reserve on the ratification of this agreement, stating that they were linking their ratification with an examination of the manner in which the Soviet Union was being treated in the tendering for butter stocks. The United Kingdom Government, supported by other Governments, the Commission and the Presidency, made it quite clear that the New Zealand quotas of butter, as agreed last October, will be maintained.

I recognise that this is a very interim statement.

This may be a useful opportunity for the Minister to make it clear that there will be no restriction in relation to any other trade-off for the full import of New Zealand butter. That has been agreed and is supported by the whole House, and we shall not tolerate any other trade-off for reneging on that agreement.

What does the phrase mean about the French and Irish Governments
"linking their ratification with an examination of the manner in which the Soviet Union was being treated in the tendering for butter stocks"?
Who will be examining it? Does it mean merely the Irish and the French, or will the Council or the Commission become involved? What will they be examining? Is there any explanation of what they are looking for, and if so, are they looking for some other type of trade-off? When are they likely to report on it?

I am pleased to see that at long last the right hon. Gentleman is recognising that this is a time for price restraints. However, does the phrase in the statement about price restraint mean that the Government are reverting to the policy that they pledged in their manifesto for the last general election, that there would be no increase in price for those commodities in surplus production? If the right hon. Gentleman is sticking to that, the Labour Party will back him on it.

Is the right hon. Gentleman clear that there must be no overruling this time of the British position in relation to the majority votes? The Labour Party would back the right hon. Gentleman on that. If this is pushed to the uttermost and these demands for something equivalent to 9 per cent. inflation are argued in terms of prices by our European partners, I trust that the right hon. Gentleman will oppose that as much as possible, to the extent, if necessary, of using his veto at the end of the day.

I welcome the remarks of the hon. Member for Renfrewshire, West (Mr. Buchan) about butter. I can categorically state that this has been agreed by all member countries. There is no way in which we would accept any restraint upon the quotas agreed for New Zealand butter, and there is no question of trading anything else off for it. We have the support of the Presidency, of the Commission and of the other member states, with the exception of France and Ireland.

As for the tendering arrangements affecting the Soviet Union, the Soviet Union has been as free as other countries to tender under these arrangements and has failed to do so. This might be disappointing to the French, who, we gather, would have been happy to export substantial amounts of butter to the Soviet Union, and whose agriculture Minister was in Moscow some time ago. It is a fair tendering system, and the Commission made that perfectly clear yesterday. However, the Soviet Union failed to tender.

It is a question not of anybody else examining the system, but purely of the Irish and the French saying that they feel that there is a bias against the Soviet Union in the system. It was made clear by the Commission that that was not so. The French Minister changed her tone on the second day of the Council from what it had been on the first day.

On the general question of price restraint, one of the major items in surplus during the period of this Government was milk, for which price-fixings have meant in real terms a 17 per cent. reduction on the price inherited from our predecessors. I am afraid, as the hon. Gentleman I hope recognises, that even with a 17 per cent. reduction over the four price reviews for which this Government have been responsible, there has not been a reduction in production. There is a tendency, if the price is restrained, for people to have more cows, and production is, if anything slightly increased.

The 9 per cent. that I mentioned in the statement refers to the rate of inflation in Europe. In fairness, other than comments by perhaps the Greeks and Italians on one or two Mediterranean commodities, no such high figure has been suggested. The figure suggested by one or two other countries was in line with what certain agriculture organisations have suggested, which is about 1 or 2 per cent. above what the Commission expected.

With regard to the Luxembourg compromise, we adhere to the view that it remains, and has an important role which we have a right to exercise in any matter of national interest. I noted that after it was breached on the previous occasion, two of the member Governments who breached it immediately issued a declaration saying that from now on they would adhere to it. I trust that they will.

Does the Minister believe that the pitifully low increases proposed today will satisfy the financial needs of agriculture in Britain? Will it stem depopulation of the land? How much have the costs of production gone up in the past 12 months?

I am pleased to say that in 1982, partly because of good weather conditions, there has been a recovery from the drop in real farm incomes that took place between 1978 and 1981. That has been good for the economy as a whole because it has meant an increase in investment in the construction and machinery industries, which I welcome.

We have the benefit of high standards of productivity in British agriculture, and our application of technology and plant and animal breeding is such that each year there is an improvement in productivity that assists in tackling problems. I expect that to continue. I hope, too, that improvements in marketing of British produce will help. It is reasonable, therefore, to have tolerably restrained price increases this year.

Does my right hon. Friend agree that it is not in the long-term interests of farmers, let alone British consumers, to have an excessive price settlement agreed at the end of March, and that, conversely, as my right hon. Friend has recognised, too low a price settlement or a freezing may result in overproduction as farmers try to catch up on their income? Therefore, does my right hon. Friend accept that many of us feel that he has it absolutely right and hope that he will stick to his guns?

I am very grateful to my hon. Friend. It is worth pointing out that during the past three or four years we have, in comparison with most of our competitors, done very well in agriculture. It is also a period when the record on low food price increases has been remarkable. I am glad to say that, for example, food price increases during the lifetime of this Government have been well below half the rate of those under the previous Government.

Order. This is an Opposition day. We have a ten-minute Bill before we come to the privilege motion. I shall call hon. Members who have been rising in their places and then move on to the ten-minute Bill.

The Minister said in his statement that milk production had not fallen. If, during the negotiations or subsequent ones, it is decided to follow the admirable example of the Christmas butter subsidy, and give an extra subsidy to citizens of the Community, will my right hon. Friend do his best to make sure that sufficient time is given for distribution arrangements, so that no hold-ups occur, as on the last occasion?

The arrangements for the Christmas butter subsidy were a bad way of encouraging consumption. That was a matter for the Commission. The British Government expressed the view that it would be better to increase generally the butter subsidy over a longer period than to have a once-for-all injection. I am sure that that is right. That is why I am glad that in the lifetime of the Government we have succeeded in doubling the general butter subsidy.

I am pleased that the Minister has dug his heels in over New Zealand butter and farm prices, but does he agree that there is no long-term solution for the common agricultural policy problems while we remain members of the Common Market? Does he agree that the real solution to the problem is to get out of the Common Market?

I suppose that, more than any other hon. Member, I am acquainted with the detail, difficulties and problems of the CAP. Most other parts of the world would like to have had the stability of prices and guarantee of supply that Western Europe has enjoyed.

Does the Minister accept that the National Farmers Union will regard his attitude to prices with dismay and that it will find it hard to understand how he was prepared to accept institutional price increases last year of 10·4 per cent. while this year he is apparently boggling at the Commission's proposal of 4·1 per cent.? As farm incomes have not recovered to the mid-1970s level, will the Minister think carefully before bringing the modest farming recovery that took place last year to a juddering halt?

The hon. Gentleman has made an interesting statement on behalf of the alliance. The NFU will be interested in statements from his partners in the alliance about the re-rating of agricultural land. Any dismay that the NFU has about me is as nothing compared with its dismay about the ignorance of the Social Democratic Party about agricultural matters.

Will my right hon. Friend state what agricultural commodities do not have direct price support under the proposals, such as turkey meat, which could be bought last year at the same price in cash terms as 30 years ago?

There have been considerable changes in the poultry industry over the past 30 years. The consumer has benefited. A large range of foodstuffs are unaffected by CAP price fixings although most British foodstuffs are—for example, cereal prices affect the poultry industry.

Does the Minister accept that British farming is not the main culprit for structural surpluses of agricultural commodities? Will he therefore take steps to ensure that British farming does not suffer unduly, if at all, from penalties for excess production?

Yes, Sir. That is why I am pleased to say that in the lifetime of the Government we have improved the share of the home market produced by British farmers so that this year our balance of payments will be £1 billion better than it would have been otherwise.

Although I welcome, unlike the Social Democratic Party, the Minister's attempts to curb excessive food price rises, does he agree that even that restraint will not solve the problem of the growing structural surpluses in the Common Market, particularly now that the Americans are matching the dumping of food in the Middle East and elsewhere? Did any new thoughts emerge from the meeting about what to do with those large and growing surpluses? What would the Government do if the Council of Ministers overruled him and forced through a large price rise, as it did last year?

As I have said, I believe that the Luxembourg compromise will prevail in the countries that used it last year, so they will adhere to it this year. With his views on Europe, my hon. Friend will have noted the big reduction in the major surpluses in the European Community. All I can say is that a pricing policy which would diminish returns to a level where European farmers came out of production would result in a swift rise in world prices. The comparison with world prices that some people use is artificial and wrong.

Is the right hon. Gentleman aware that I have a considerable interest in New Zealand butter as we pack a good proportion of Anchor butter in Swindon and that for that reason I support the tough and forthright attitude that he has taken with the French? However, as so often in the past, tough and forthright attitudes come to naught, as happened in the price review last year. Therefore, will the Minister give the absolute assurance that under all circumstances we shall import 89,000 tonnes of New Zealand butter this year? How long will that agreement run?

The figure is 87,000 tonnes. It is this year. I give the assurance that the hon. Gentleman requires.

Does my right hon. Friend accept that this is probably one of the best farm price reviews that has come from the Commission in the past few years? What does he think will be the likely food price increase once the final negotiations have been concluded?

The relationship between the food price increases and the farm price increases is not substantial. Food prices this year have continued to increase less than the retail price index. The increase has been less than 5 per cent. whereas last year there was an increase of over 10 per cent. in farmgate prices. We have a whole range of disagreements on individual items. It will be possible to calculate the impact when we have looked at the increases for each item.

Does the Minister regard the Commission's price proposals as constituting price restraint? Does he regard it as an important national interest that we should get price restraint on products in structural surplus? If those price proposals are adopted, what will be the effect on Britain's contribution to the Community budget?

The last point depends totally on the method of calculation of our budget contribution for the coming year. That has yet to be negotiated. I can only say—I know that it will bring great joy to the hon. Gentleman—that the proportion of the CAP budget that benefits British agriculture has doubled during the lifetime of the Government. Therefore, we are obtaining much more benefit than our predecessors managed to obtain from the system. Part of that is directed towards the consumer in the doubling of the butter subsidy that the Government have achieved. Price restraint varies from one commodity to another. It depends upon productivity. In some areas a policy of price restraint is illustrated. For example, if one takes the price proposals combined with the suggestions on green currency proposals for a number of countries, the proposed price increases are way below the rates of inflation and increased input costs in those countries. It varies from one commodity to another. I repeat that I am happy to compare the Government's record in the past few years on food prices with that of any of our Socialist predecessors.