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Sheepmeat Regime

Volume 78: debated on Tuesday 30 April 1985

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

9.41 pm

This debate on the sheepmeat regime comes at an opportune moment. I gather that discussions in Brussels at the beginning of April and on 21 and 22 April brought no agreement on the continuation of the sheepmeat regime as it applies in Great Britain. All the sheep farmers in my constituency, and in Great Britain, wish my right hon. Friend the Minister of Agriculture, Fisheries and Food and my hon. Friend the Minister of State every success when they go to Brussels again this Thursday, and hope that they can secure an acceptable settlement. I thank my hon. Friend the Minister of State for taking the trouble to attend this debate, and I look forward to his contribution.

Since its creation in 1980, following the so-called lamb war, the sheepmeat regime has provided a durable and efficient method of supplying housewives with plentiful cheap lamb while also ensuring an adequate return to the farmer. The regime is essentially a deficiency payment rather than intervention by assistance. In the years before our accession to the EEC, the system for providing support for many of our farming industries was essentially the deficiency payment system rather than intervention. I hope that the system will be allowed to continue working effectively. In the EEC, we are only 70 per cent. self-sufficient in lamb and there is by no means a lamb surplus, so, prima facie, the sheep farming industry should be encouraged.

I shall refer to four matters—first, the ways of improving the deficiency payment system; secondly, imports of lamb from New Zealand; thirdly, improving the auction system; and fourthly, the way that we promote English lamb. There is no need to promote English lamb in the House of Commons. My wife and I, together with one of my constituents, Mr. Drury, have enjoyed this evening an excellent repast of English spring lamb. I place on record my congratulations to the General Manager of the Refreshment Department. He at least is promoting English lamb, in the House of Commons.

My first concern is the seasonal scale of guide prices, which governs the amount of deficiency payments. The scale falls in a rough U-shape during the year, reaching a trough of guide prices set by the Commission from July to about mid-October. If a farmer receives a market price lower than the guide price, a variable and open-ended premium will bring his return up to the level of the guide price.

It is important to draw a distinction between the way the variable premium system works for the sheep farmer and the situation in the beef industry where there is a limit on the amount of variable premium that is paid and makes up part of the overall return to the farmer. In the sheep industry there is an open ended premium which is payable to the farmer.

The present sharp rate of fall in the scale of the guide prices during June and July is disrupting the market. In the four weeks from mid-June to mid-July last year the seasonal scale of guide prices fell at an average of 9p per kg per week. That sharp rate of fall in midsummer has created an erratic market. Market prices rose sharply last year from mid-June to early July. That was because farmers held back supply as the drop in the guide price meant a lower return. The resulting high market price stimulated supply, which in turn brought the market price down again. That set in motion a roller-coaster effect on the market price from mid-June to the end of August, as prices fluctuated up and down. That volatility was a direct result of the sharp rate of fall of the seasonal scale of guide prices in June.

It is unfortunate that at a time when we should promote English lamb—from mid-July to the end of August—the seasonal scale should damage supply because the farmer cannot make sensible long-term plans for finishing and selling lambs, and the butcher may be reluctant to hold large stocks in volatile markets when he may be able to buy cheaper lamb in the following week.

As I said at the beginning of the debate, sheep farmers in my constituency wish my right hon. Friend the best in his further negotiations in Brussels. I wish to touch on one or two points which I am sure the Minister has in mind. They may be modest contributions to preparations for those discussions.

In a recent reply, my right hon. Friend said:
"the Commission's proposals for next year's seasonal scale offer no improvements and we shall continue to press for changes which will promote more orderly marketing."—[Official Report, 14 March 1985; Vol. 75, c. 273.]
I hope that when my right hon. Friend does so, he will bear in mind the advisability of changing the seasonal scale of guide prices so that there will be a maximum fall in guide price in any one week of between 5p and 6p.

The Commission has also suggested that the payment of the variable premium should be controlled by the operation of the limited gap. I have already referred to the parallel with the beef industry, where the variable premium is subject to some restrictions.

I noticed from a parliamentary question on 14 February that my hon. Friend the Minister firmly rejected the Commission's proposal that any loss of return suffered by English farmers through the operation of a limited gap in the sheep variable premium would not be made up by a corresponding increase in the new premium. I welcome his determination on this point. In other member states, the ewe premium is the sole mechanism operated, but Great Britain has the variable premiums as well, partly because we have an efficient marketing system. Since Britain is the only country to use the variable premium system, it would be the only country affected by the Commission's limited gap proposals. For the Commission to decide that any revenue lost by farmers through this limited gap would not be corrected through the ewe premium discriminates against British farmers and must be resisted.

I must congratulate my right hon. and hon. Friends on their stand on this point so far. Indeed, attack is often the best form of defence. Perhaps when my right hon. Friend and my hon. Friend continue their discussions, they will in passing try to sell the advantage of the variable premium system to some of the other member states. Although Britain is the only country to use it, there is no reason, in theory, why France could not operate the system. One understands that there would be practical problems—Britain has a much more efficient marketing system—but there is no reason why the sheepmeat regime should not become a genuinely European system.

Also of considerable importance is the recent growing pressure from other EC countries for changes to the British system of clawback on ewe exports through the special export certification system. In simple terms, the system pays the variable premium on certified ewes to the farmer, which is then paid back by the exporter through clawback. It enables us to benefit the producer but still to sell an effectively unsubsidised product to other European nations. I praise the volume of exports of lamb and mutton from Great Britain this year, which I understand is running at the rate of 50,000 tonnes to France alone. That is a creditable achievement and a reflection of the fact that Britain produces high quality lamb and mutton. The fact that the French are importing that quantity of our lamb reflects extremely well on our farmers.

Some member states wish the United Kingdom's variable premium payment on ewes to be abolished, while retaining the clawback. That is unfair. Why should we discriminate against our efficient farmers? I realise that the Government oppose this pressure, and once more I thank my right hon. and hon. Friends for it. I hope that they can assure the industry that their stance will remain firm.

The second subject that I wish to raise is imports of New Zealand lamb. Such lamb is unquestionably popular with British consumers and has been for some time, but New Zealand has a voluntary export restraint agreement with the EC of 245,000 tonnes. In 1984, New Zealand exported 185,000 tonnes to the European Community; 144,000 tonnes came to Britain alone, representing 30 per cent. of our home market. However, Iran has increasingly become an important market for New Zealand lamb; it is the largest importer of lamb in the world and nearly all of it comes from New Zealand. What would happen if, as in 1982, New Zealand lost that market overnight, if only for a temporary period? Iran is an extremely volatile lamb market—indeed, it has an extremely volatile economy—and if that happened, New Zealand would have a shortfall of about 60,000 tonnes on its voluntary restraint agreement with Europe. I can imagine the implications for the British industry if New Zealand diverted its exports from Iran to the EC. I am sure that most of the EC imports would come to Britain.

Therefore, there is a case for discussing a new voluntary restraint agreement with New Zealand, perhaps proposing a figure of 185,000 tonnes, which is the present level of trade. That suggestion has an advantage over increasing tariffs from the present level of 10 per cent., although that rate was reduced from 20 per cent. during the latest negotiations with New Zealand.

New Zealand is an old friend and close ally of Britain and our ties are strong. It would be unfortunate to handicap New Zealand by increasing tariffs—I am not proposing that—but a new voluntary restraint agreement of 185,000 tonnes, which is the present level of trade, would be equitable and fair, and I hope that the Minister will consider that suggestion.

I come to the fat class grading of lamb. The 1984 report from the Committee on the Medical Aspects of Food Policy recommended encouraging the production of leaner lamb carcases. The Government responded by proposing the exclusion next year of fatter animals from the variable premium scheme, and I welcome that decision.

There has been talk lately in parts of the industry that live weight grading should be abandoned in favour of purely dead weight grading; that is, the abandonment of the system of grading in the auction market and relying entirely on grading in the slaughterhouse. Live weight, though it cannot measure the exact amount of fat on an animal, is a skilful and dependable process. What is more, in the live weight market, such as that in my constituency of Kettering, price competition occurs, and the farmer always has the option of withdrawing his sheep from sale.

Few will question the value of competition from the point of view of the consumer's pocket. If we removed live weight grading, the meat companies would become the major buyers and much competition would be lost from our auction markets. I hope that my hon. Friend will ensure that the choice between dead weight and live weight grading will remain within the industry.

I have concentrated on protecting our interests in Europe and on safeguarding our home market. Ultimately, in the shop, with the consumer, English lamb must be successful, so we must consider the question of sales promotion.

The United Kingdom producers' share of our domestic market has increased, and it stood last year at about 60 per cent., the balance being made up by New Zealand imports and others. Nevertheless, lamb and mutton consumption has been falling in the United Kingdom since 1974. Since 1980 it has fallen from 4·5 ounces per capita per week to 3·3 ounces in 1984. It is fair to say that, unfortunately, English lamb has a rather conservative image. However, I am glad to say that many people who obviously enjoy home cooking and preparing the evening meal do not share that view.

About £2·5 million a year is allocated by the industry to promoting English lamb. The money is raised through a levy on producers and slaughterers. New Zealand, by comparison, spends £5 million a year on advertising and presents lamb as versatile, fashionable, tasty and, of course, cheap. In the United States, too, great culinary things are being done with lamb.

In this country, Matthews' Turkey Farms has begun to produce rolled, boneless New Zealand lamb products. It is regrettable that Matthews had to resort to an agreement with New Zealand producers and was unable to conclude negotiations with English slaughterhouses. It is a pity about that, but I wish Matthews well, as I wish well all innovations in this market.

I understand that the industry may wish to raise more money, and I urge the Minister to support any necessary changes to the 1967 Act to enable producers to contribute more, if they wish to do so. In addition to money, we should review the way in which the campaign is mounted. We need to emphasise to schoolchildren and young families the increasingly lean nature of English lamb, which should be more acceptable in terms of both health and taste and fashion. Once we have dealt with the technicalities of the sheepmeat regime and imports and exports, it is here in the home market that our lamb needs help and promotion. I pay tribute to the Meat Promotion Executive whose vice-president is a constituent of mine in Kettering. It has done——

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

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

As I was saying, I pay tribute to the Meat Promotion Executive. I am glad that its vice-president is a constituent of mine. He has been very helpful in the preparation of my remarks. In the 1960s, the Northamptonshire farmers were among the earliest in encouraging self-help in the industry and promoting the products of the industry. I am very proud that many of them are my constituents. English lamb is a great product with great potential. I hope that this will be remembered, as I know it will, in the coming months by my right hon. and hon. Friends in the Department. My constituents and all those who are involved in the sheep farming industry wish them well in their negotiations in Brussels.

10.1 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food
(Mr. John MacGregor)

I am grateful to my hon. Friend the Member for Kettering (Mr. Freeman) for raising this important issue and I congratulate him on the skilful and perceptive way in which he has put his case. Sheep farming is an essential part of our agriculture industry. We are the Community's largest producer, consumer and trader of sheepmeat, accounting for 39 per cent. of production and 43 per cent. of consumption in the Community. Not only is the subject important but the debate is timely. As my hon. Friend has already mentioned, this year's price-fixing discussions will be continuing later this week, on this occasion in Luxembourg, not in Brussels. They may well go through the weekend to the bank holiday Monday and the sheep sector will be an important element. The fact that my right hon. Friend the Minister of Agriculture, Fisheries and Food is attending the Adjournment debate demonstrates the importance that we both attach to this subject.

To set the background, let me first mention the central features of the regime. The aim of the regime is to guarantee to producers average incomes to the level of a basic price set each year by the Council of Ministers. If average annual market prices in any community region fall below the basic price, support is paid through an annual premium which is a headage payment on breeding ewes. In addition, member states may opt to provide weekly support when market prices fall below a seasonalised guide level, averaging 85 per cent. of the basic price. In Great Britain, variable premium payments provide the weekly market support. It is the seasonalised scale of guide prices to which I have just referred and to which my hon. Friend referred, that has caused the problems so clearly spelt out by him.

Ironically, when the Commission first proposed changing the scale of guide prices at the 1984 price-fixing, it was with the aim of smoothing the flow of marketings and reducing Community expenditure. We agreed with those aims but said quite forcefully at the time that the changes were too great and forecast that there would be market disruption. Unfortunately, events have proved us right. As early as July 1984 we were pointing out the problems to the Commission, and we have done so persistently since. In the autumn we thought that it had recognised the force of our arguments. We were therefore disappointed when we received the Commission's price-fixing proposals earlier this year, which do not include any improvement in the seasonal scale. Throughout the negotiations we have been stressing the need for a scale permitting more orderly marketings, as my hon. Friend has done tonight in his remarks.

There are, as always, other points of view in the Community. We are convinced, however, that our arguments are right and we shall continue to seek t persuade the Commission and the other member states o the sound technical reasoning behind our arguments.

My hon. Friend also mentioned the commission's proposal relating to the variable premium. It has suggested a limitation on the variable premium and related clawback payments so that if there would otherwise be above a level equal to 25 per cent. of the guide level they would be abated by up to 5 per cent. Linked with this is a proposal that any reduction in producers' returns caused by the limit on variable premium payments.

The second part of this proposal is known as the recovery bar, which I think my hon. Friend had in mind when he referred to the limited gap. In principle, we are willing to consider a ceiling on variable premium, since such an arrangement could help our exporters. However, as my hon. Friend explained in his speech, the recovery bar would mean that the returns of producers in Great Britain were no longer guaranteed to the basic price, as they would continue to be elsewhere in the Community, but to a lower level. That implies discrimination against us, which we are strongly resisting. Therefore, I can confirm that we continue to oppose the proposal vigorously, though the House should be in no doubt that we are under great pressure in the negotiations in this area.

The same point about heavy pressure on the current negotiations applies to the special export certification scheme, to which my hon. Friend referred. I am grateful for what he said. The scheme was set up in 1980, shortly after the introduction of the regime. The need for it arose because the Commission ruled that clawback—the charge on our exports into the Community—had to be paid on all presentations of sheepmeat, whether or not they had received the benefit of premium. We did not accept that interpretation of Community legislation. It is patently illogical to have clawback which is meant to compensate for a premium that has been paid applied to the export of animals which have never had the premium paid on them in the first place. So we insisted on finding a way to deal with that, which would permit continued exports. It was agreed that we would pay a notional—I emphasise the word "notional"—variable premium on presentations that would normally be ineligible for certification in order to offset the clawback charge. I want my hon. Friend and the House to be under no illusion that that arrangement is currently under heavy attack, but we are firmly opposing the pressures to end the scheme.

I should like to refer to imports from New Zealand. As the House knows, New Zealand has long supplied the United Kingdom market with lamb. Nearly all of it is marketed frozen, and to date it has met a separate market demand from our own lamb, which is a fresh product. Indeed, I think that it is fair to say that New Zealand supplies have complimented our own. Of course New Zealand could, if she so wished, send unlimited qualities of lamb to the Community under the general agreement on tariffs and trade, a point to which I shall return. Instead New Zealand has reached what is aptly described as a "voluntary restraint agreement" with the Community under which, in exchange for a reduction of the tariff to 10 per cent. ad valorem, New Zealand has agreed to limit her sendings to 245,500 tonnes.

My hon. Friend has suggested that the permitted import tonnage from New Zealand might be reduced. The Community has, of course, reached voluntary restraint agreements with all its major suppliers, and during 1984, at the request of certain member states, the Commission approached all those suppliers with a view to negotiating a reduction of quantities permitted under the agreements, which is what my hon. Friend suggested should be done now. My hon. Friend may like to know that it was not only for New Zealand but for all the suppliers under the VRA system that the Commission subsequently reported that such a change was not negotiable.

My hon. Friend said that New Zealand sent 144,000 tonnes to the United Kingdom during 1984. In fact, that quantity represents the lowest level of imports from New Zealand since the war. He also mentioned that 217,600 tonnes arrived in 1982. However, a considerable proportion of that tonnage was not released direct on to the market but was put into store. Indeed, it is worth stressing that New Zealand supplies generally are being phased on to the market in a way that demonstrates sensitivity to our market requirements.

I should make it clear to my hon. Friend that for those countries, including New Zealand, there is a GATT binding for access for unlimited quantities at a tariff of 20 per cent. ad valorem. The voluntary restraint agreement is what it says—voluntary—so the Commission cannot unilaterally force a lower figure in the import quantity because if there was no mutually acceptable arrangement on a VRA, New Zealand would have the right to send unlimited quantities at that 20 per cent. tariff ad valorem.

My hon. Friend talked about the COMA report and liveweight certification. I am grateful for what he said. The COMA report suggested that less fat should be consumed. Certainly, there is a good deal of evidence that consumers are tending to prefer leaner meat. We took the decision to respond positively to the report by announcing changes in the certification standards for variable premium designed to encourage producers to adapt to that demand. It is also important in the context of marketing, which my hon. Friend stressed, to have a support system which takes account of modern marketing needs and modern consumer perceptions.

We were also anxious to give producers time to adjust their husbandry and breeding practices. Accordingly, we decided that the changes in certification standards should be effective from the beginning of the 1986 marketing year and that meanwhile there should be a suitable programme of advisory events designed to help producers make the necessary adaptations.

I noted my hon. Friend's comments about liveweight certification. I am aware of the critics of the system. However, liveweight auctions are part of our traditional system of marketing and, as my hon. Friend said, advantages are attached to them.

My hon. Friend made some interesting remarks about the promotion of lamb. In particular, he suggested that more money should be spent on promoting a more dynamic image for lamb and on boosting consumption of home-produced meat. I agree that we should make the best of this excellent product, but to do so our lamb must be of the highest quality and the way in which it is presented and processed must be in accordance with what today's consumer wants. I was, therefore, glad when Food from Britain recently launched its foodmark—an umbrella for new and existing quality assurance schemes in different commodity sectors.

Scottish and Welsh lamb producers have already had their schemes accepted by FFB and before long their lamb will carry the foodmark. That is a good step forward and in line with what my hon. Friend seeks. FFB regards the foodmark as the means by which producers can guarantee the quality and reliability of its products. It is open to English lamb producers to come forward with their own quality assurance scheme if they wish to do so.

I must also mention meat promotion itself. I was pleased when the Meat and Livestock Commission launched a new initiative last year by setting up an independent review of its meats promotion work, to which my hon. Friend referred. The report of that review was published last autumn and the MLC announced its response only yesterday. Much of what the MLC now proposes concerns its own internal procedures and it is not appropriate for me to comment in detail.

My hon. Friend will be interested to know that the proposed new arrangements include the establishment of a promotion council specifically for lamb, and separate councils for Welsh lamb and Scottish beef and lamb. The councils will be responsible for deciding how much money should be raised for producers to finance lamb promotion and how and when it should be spent. The MLC has only just announced its proposals, and discussions will take place. If the proposals are implemented, the arrangements might lead to the increase in total expenditure for which my hon. Friend has called.

Although, naturally, I am keen for the initiative and momentum to be maintained, it is important to reach a broad agreement among all concerned about exactly what needs to be done. The industry will be giving the proposals careful and constructive consideration in the coming days and weeks. The same applies to Ministers in so far as the proposals might call for Government action.

I have mentioned the particular initiatives taken by Food from Britain and the MLC, but I have seen for myself the excellent efforts that individual companies and producers are making on the marketing of lamb. Their progress is encouraging.

My hon. Friend is interested in the wool sector, although he did not mention that tonight. No discussion about the British sheep industry would be complete without something being said about that sector. The years prior to 1984 were not especially easy for the wool industry, because market prices were relatively depressed. The guaranteed price set by the Government played a valuable part in stabilising producers' incomes from wool. The guarantee was maintained at a constant level for four years until 1984 when there was evidence of a recovery in market prices. On the basis of the more optimistic situation, the Government announced an increase of 5p per kg in the guaranteed price for the 1984 clip.

The sales results for the last year have fully supported that decision and prices have reached record levels. As a result, Exchequer advances have been reduced substantially. By the time that the 1984 clip of wool has been sold the sum outstanding to the Exchequer is expected to be about £8·3 million. This is some £7·8 million lower than a year ago. I am pleased to add that, as my right hon. Friend announced yesterday, this situation has enabled us to make a further 9p increase in the wool guarantee, which now stands at 129p per kg. This means that the guarantee has been increased by 12 per cent. over the last two years. This increase should enable producers to continue to improve the quality of their wool clip and so encourage the British Wool Marketing Board in its already notable achievements in promoting British wool. One has only to walk round one high street shop to see how many quality goods now carry the British woolmark. Abroad, our exports of wool textiles to Japan have increased four fold over the last four or five years so that as much as 16 per cent. of British wool is now exported there in one form or another. I am sure that my hon. Friend will welcome these developments as much as I do.

I am grateful to my hon. Friend for raising such a timely issue. I hope that I have demonstrated to him and to the House that, although considerable difficulties remain in the price-fixing negotiations this year, my right hon. Friend and I are very clear about what ought to be achieved in the sheepmeat regime, and we are grateful for his support on those points tonight.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Ten o'clock.