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Agricultural Prices

Volume 77: debated on Thursday 18 April 1985

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2.

asked the Minister of Agriculture, Fisheries and Food what representations he has received about the 1985 agricultural price levels.

3.

asked the Minister of Agriculture, Fisheries and Food what further consideration has been given by the European Economic Community Council to the Commission's agricultural price proposals.

My Department has received representations about the Commission's price proposals from the farmers unions in the United Kingdom, representatives of the food manufacturing industry, food retailers and consumers. The Agriculture Council discussed the proposals at its meetings on 25 and 27 March and on 1 and 2 April and discussions are expected to resume at the next meeting of the Council starting on 22 April.

Is the Minister aware that there is a desperate need to start to tackle the problem of high sale prices and the surpluses that they create, which is why both sides of the House supported the stand that he took in our debate on this issue? Will he give the House a cast-iron assurance that in no circumstances will he agree to a price-cut of anything less than the 3·6 per cent. put forward by the Commission?

I agree that it is very important that the right signals are given about cereals right across the Community. We must bear in mind that when we arrive at this year's harvest we could find 15 million or 16 million tonnes of grain still hanging over from the previous harvest.

What attitude will the Minister adopt in the Council if, as is likely, his colleagues from the other Common Market countries alter the Commission's price proposals to increase the total cost outside the scope of the financial guideline laid down by the Heads of Government and the Finance Council?

The hon. Gentleman will remember the discussions that we held on the general principles on 18 March when we expressed our opinions. He will know that if it seems likely at any stage of the negotiations that the costs of the proposals will go above the agreed ceilings, there is provision for a Joint Council with Finance Ministers at a future date to thrash out the financial problems.

Following the representations that my right hon. Friend has received, will he assure the House that he is strongly urging the European Commission on the abolition of the co-responsibility levy and also fighting to the utmost for the retention of the beef variable premium?

My hon. Friend will recall that in the debate, in which he took part, I made it clear, in regard to the beef variable premium, that it was my intention to fight for the continuation of that measure, and there was broad agreement among hon. Members on that. He will also recall the proposal of the Commission to reduce the co-responsibility levy from 3 to 2 per cent. I have been greatly heartened by the discussions; in particular, by hearing the French representative say for the first time that he believed that we should be thinking in terms of phasing out the co-responsibility levy for milk—a sentiment which I strongly support.

In view of the protracted negotiations that are taking place in Brussels on the co-responsibility levy, will the right hon. Gentleman consider introducing an interim measure, to take effect from 1 April, to reduce the levy by 1·5 per cent.? That would at least provide some aid for the hard-pressed dairy farmers, who have suffered much in the last 12 months, and such a step would riot in any way affect the price of milk to the consumer.

The hon. Gentleman will be aware that because we were not able to reach agreement in the discussions the 1984–85 marketing year was extended to 28 April. Within that arrangement we already have a further 1 per cent. reduction in the milk quota. The Commission made it clear that there would be nothing to stop the backdating of the reduction of 1 per cent. in the co-responsibility levy to 1 April.

In considering the representations. will my right hon. Friend bear in mind that agricultural price levels have been declining and that farmers' real incomes have been maintained only by increasing output? Is he aware that if restraints on output are imposed many thousands of farmers will face a great dilemma, unless there is a reversal of policy at home?

I am naturally concerned about the impact of these measures on farm incomes. My hon. Friend will agree, however, bearing in mind the massive over-production and huge surpluses which overlay the Community market, that it is important to put our house in order now. Otherwise, it will be infintely more difficult to do so at a later stage.

What proposals does the Minister have with respect to livestock producers' incomes in the light of the representations that he has received?

The hon. Gentleman was present when we debated that issue on 18 March. He will remember that I said—and I repeated it today—that it was important to maintain the beef variable premium scheme. He will also recall that part of the Commission's proposals was for a move to the second stage of the introduction of the carcase classification grid for beef. I made some remarks in the debate about sheepmeat and the importance of making sure that any alterations to the sheepmeat variable premium were compensated through the annual ewe premium, or the system would be discriminatory against the United Kingdom.

Does my right hon. Friend agree that the cereals sector has not experienced the same income reductions as have been suffered by the livestock sector? Does he further agree that a cut in the price of cereals would help the livestock sector, as well as benefiting the consumer and helping to curb surpluses? What minimum cut in grain prices is he insisting on during the current negotiations?

My hon. Friend will recall that in the debate on 18 March I made it clear that I did not believe that the proposed 3·6 per cent. cut in cereal prices made by the Commission was adequate and that the full cut of 5 per cent., stemming from the guarantee threshold, should be applied. I have therefore been telling the Council of Ministers that, for the reasons to which my hon. Friend rightly draws attention, a 5 per cent. cut would be the correct move to make.

When the Minister has stripped all the jargonese from his remarks, will he explain whether the Government, in accordance with their philosophy, believe that market forces will apply to farms and that uneconomic farms will close? Alternatively, does he believe in continually subsidising farms, as is happening this year to the tune of about £20,000 per farm?

I do not believe that the hon. Gentleman was present in the Chamber when we debated these matters on 18 March.

I am glad to hear that the hon. Gentleman was in his place. We do not usually forget his presence.

In France, for example, there is expected to be a major reduction in the number of uneconomic dairy farms. That demonstrates that market forces are operating much more effectively within the CAP and that the level of support is being reduced. The hon. Gentleman will remember that at the Stuttgart summit there was general agreement in the Community that we could not continue to subsidise enormous surpluses of food.

Will the right hon. Gentleman take into account the fact that, even if we achieve a full 5 per cent. cut in cereal prices, there is still a danger that the rake's progress of increased cereal production will continue?

No one can tell, but the hon. Gentleman must remember that last year there was what amounted to a reduction in cereal prices. If we were to have another reduction, many of those who are growing what amount to surplus cereals on land which traditionally has not been used for that purpose will have to consider whether it is wise to continue to produce cereals.