It is a privilege to serve under your chairmanship, Mr. Chope. The last time that I recall us having a full hour and a half debate on the state of the UK’s dairy industry was in November 2005, when such a debate was initiated by the hon. Member for Preseli Pembrokeshire (Mr. Crabb). Not many Members are here today; however, there is a similarity between the faces present today and those present then. I am sure that Members will agree that this debate is long overdue.

Since November 2005, there have been many developments in the dairy sector and it would be churlish not to acknowledge that a lot have been positive. The ongoing Competition Commission inquiry gives us hope that some form of regulation will be introduced into the market and that that will help to provide dairy farmers with better farm-gate prices. Farmers’ unions, the women’s institute and other rural interest groups are succeeding in building a much higher profile for the plight of Britain’s dairy farmers, notably through the great milk debate that was launched in April; many Members will have had experience of that in their constituencies. We ignore the WI at our peril, particularly as others have been less responsive to its concerns.

Supermarkets are starting to get to grips with their responsibility to ensure that farm-gate prices are set at a fair level. However, such progress cannot come a minute too soon for dairy farmers. Today, the average farm-gate price for a litre of milk is just under 18p, yet research by the National Farmers Union and the Royal Association of British Dairy Farmers estimates the price of production at 21.23p a litre.

The situation is compounded by the escalating costs faced by our farming community. Figures provided by the National Farmers Union of Wales show that the cost of diesel has more than doubled and that the cost of nitrogenous fertilisers has risen by more than 50 per cent. in the past six years. During the past four years, the average price of electricity for small industries, including farms, has risen by some 90 per cent. In that context, farmers secured a price of 24.5p a litre 10 years ago, compared with 18p a litre today.

I remind the Minister of the serious and worsening impact of tuberculosis on dairy farming. The Government’s perceived lack of action on bovine TB does little to support the industry. I know that the Minister takes a particular interest in this matter, and I urge him to implement a clear and universal strategy to deal with bovine TB at the first opportunity.

Agricultural policy is a devolved matter, but there are cross-border issues. For example, English badgers are free to enter Wales, as Welsh ones are to enter England.

The hon. Gentleman has rightly pointed out that policy on bovine TB has been devolved to the Welsh Assembly. Does he agree that we have had four wasted years under the last Assembly Administration, during which the problem was not tackled? Does he also agree that the interaction between low farm-gate milk prices and the spread of bovine TB in his constituency and in mine risks decimating the dairy sector?

I agree and I thank the hon. Gentleman for that contribution, as the situation is much as he describes. Issues associated with bovine TB ring out from cases brought to his surgery and to mine.

Sadly, there are few signs that the regulatory burden is lifting. In fact, many farmers across the UK are seriously worried about the impact of the nitrate-vulnerable zone regulations, which are likely to have significant cost implications by requiring farms to build storage units for slurry. I have heard estimates that implementation of the regulations will require capital costs of £300 million to £400 million. Does the Minister agree with those figures? How does the Department for Environment, Food and Rural Affairs plan to mitigate the effect of those measures and where will the burden fall? The great environmental challenges of our day are not lost on our farming community, but there are serious concerns about how the terms of the regulations will be met. I commend to the Minister the work on methane emissions undertaken by the Institute of Grassland and Environmental Research, which is based in my constituency.

The result of the shift in the balance of production and retail costs has been disastrous in Wales. I will resist the temptation to stray into devolved matters and will simply cite some examples. The Welsh Assembly revealed in its latest aggregate agricultural statistics that income from farming in Wales fell by about £44 million between 2005 and 2006. That dramatic reduction is mainly due to a downward slide in the value of milk and milk products that amounts to £23.9 million. The net result, which I am sure has been the experience of other Members in their constituencies, is that dairy farmers have left the industry. In Wales, the figure has fallen by about 30 per cent. to 2,400 farms.

The situation is compounded by the difficulties faced by new entrants and the average age of the work force, which is increasing every year.

I thank the hon. Gentleman for that comment. One concern that is doubtless raised in his meetings with farming unions is the ageing farming community. The problem is not that young people are not keen to enter the industry as a career, but that it is incredibly hard to do so. I will come back to that issue.

It is not just farmers who are under threat; there is also a decline in associated industries. Some 70 per cent. of Welsh milk is turned into cheese, and I hope that our discussions will not focus just on supermarket milk. The recent announcement in my constituency of the closure of the Aeron Valley creamery, which will result in the loss of 44 jobs, has given cause for concern. Its highly motivated work force had been working very hard to establish some well-known brands, and the decision to close came as a bolt from the blue. The closure came only 12 months after Dairygold closed in Felinfach, which resulted in 115 job losses. Dairygold is another dairy sector firm that has pulled its operations out of Wales. It has benefited from not insubstantial sums of public money.

I am pleased that the Dansco creamery in Newcastle Emlyn, which is just across the border from Ceredigion in Carmarthenshire, has secured its short-term future. Had it not done so, farmers in my constituency and more widely in west Wales would be in an even worse position. If milk is processed locally, transport costs are kept down, farmers’ margins are less and more of the value of the primary product is kept in the local community. That should be the benchmark.

As the hon. Member for Caernarfon (Hywel Williams) said, the average age of the dairy farmer is rising and we need to act now to ensure that more young people have an incentive to stay in the sector. Wales certainly has an impressive network of young farmers clubs. When I am on the hustings at elections, I am often asked whether I would encourage a young person to pursue a career in dairy farming. Faced with the current pricing regime, it is difficult for me to give an honest, objective opinion.

The looming spectre of the Competition Commission’s inquiry has at long last provoked supermarkets into taking some action to increase farm-gate milk prices. Out of the major retailers, Waitrose and Marks & Spencer have led the way. Waitrose has created a “select farm” milk range, which guarantees 65 farmers a price of 23p a litre. Marks & Spencer guarantee 61 milk suppliers a fair price. Tesco has recently announced that it will guarantee 850 farmers 22p a litre, which is welcome news. Sainsbury’s and Asda are both urging their processors to pass a premium back to the farmer, but we have yet to see any concerted action from Morrisons.

My hon. Friend is making a good point. On the Competition Commission inquiry, does he agree that the Tesco announcement was made largely in response to the requirement for a public relations boost for how it is seen by the dairy industry? Does he also agree that the nature of the contracts themselves—the short-term changes, the overriders, the paying for promotion and other conditions—need to be looked at? That is why the Competition Commission should come down hard on the retailers to protect primary producers.

I of course agree and it would be churlish not to welcome those moves, in so far as they go, but we have yet to see the detail. [Interruption.] The hon. Member for Caernarfon asks from a sedentary position, “How far have they gone?” and the answer, I think, is not very far at all. It is a step, when we need strides. As my hon. Friend the Member for St. Ives (Andrew George) said, we need to look more closely at such practices through, I believe, the Office of Fair Trading.

The hon. Gentleman is being extremely generous with his interventions. My discussions with representatives of Tesco have left me under the impression that it is very alive to the concerns of the dairy sector. The new contracts that it is trying to move towards represent a genuine attempt to get close to producers. There is a lot of cynicism among farmers about Tesco and the larger retailers, and we can understand where that is coming from, but Tesco’s initiative is a genuine attempt to move the debate forward, to get beyond the finger-pointing among retailers and processors of recent years, and to do something positive for the sector. However and as the hon. Gentleman said, we need to see the detail.

The proof of the pudding will be in the eating. What will happen remains to be seen, but I would like a lot more detail from those companies, so I shall reserve judgment.

Any recognition by supermarkets that their huge power bestows on them a social responsibility is, of course, welcome. Any initiative that guarantees farmers a return over and above the production costs represents a step—although we are looking for strides—in the right direction. For a long time, my colleagues and I have been urging supermarkets to look at the model of Fairtrade products. Wisely and necessarily, the Fairtrade movement guards its label and name for use with developing countries only, which I respect, but the model shows us how consumer power can lead to a change in practice by supermarkets. However, direct-supply contracts could easily create problems, as well as solutions. For those farmers not lucky enough to secure a direct contract—if it is an acceptable contract—the future would remain vulnerable and unsustainable.

The Royal Association of British Dairy Farmers estimates that only 11 per cent. of Britain’s 15,000 diary farmers will benefit from Tesco’s recent decision. Those left out in the cold will continue to face a very uncertain future. Supermarkets will continue to get the majority of their milk from milk processors, and for most farmers the farm-gate price will remain unsustainably low.

As I ate my breakfast this morning, I noticed the flag of St. George on the milk carton and the milk pledge by Marks & Spencer:

“We were the first retailer to introduce a scheme that guarantees our dairy farmers a fixed price for milk, removing the uncertainty of the milk industry's price fluctuations so our farmers have greater security and the ability to plan.”

We need to hold companies to such statements, and I sincerely hope that Tesco’s direct-supply contracts are robust enough to ensure that those guaranteed prices actually reach farmers—the contractual point made earlier by my hon. Friend the Member for St. Ives. The milk will still come via processors, so how it will work in practice remains to be seen.

There is a separate move by Tesco to allow its customers to support local milk producers, which represents an important development, too, but we should realise the limits of the current scheme. My county of Ceredigion is a big milk producer, but Tesco confirmed to me that although it has a local-choice milk supplier in Caernarvonshire for its Welsh milk, it does not have one in Ceredigion. The definition of localism depends on who is making the case.

Moreover, only half of raw milk is consumed as liquid milk. As I said earlier, 70 per cent. of Wales’ milk goes into cheese production. It is vital that supermarkets introduce fairer pricing structures for cheese, as well; reform of the milk sector on its own is not enough. I accept that the cheese market is more complex, but supermarkets must make efforts in this area, too. Sainsbury’s has worked to increase returns to farmers through its new cheese contracts; again, the details have yet to be seen. That must be the start of real change in the sector.

The Government can help, too. The Food Standards Agency and Ofcom model—it puts cheese in the same category as sugary cereals, crisps and burgers, and involves a ban on the advertising of cheese during children’s programmes—is very damaging to the product. If Ministers can bring pressure to bear there, I sincerely hope that they will. I commend the work of my hon. Friend the Member for North Cornwall (Mr. Rogerson) and the all-party group on cheese, which I believe has led the campaign. It is doubtful whether voluntary action by supermarkets alone will be enough to halt the erosion of the dairy sector. Indeed, I would suggest that the threat of regulatory action by the Competition Commission has stirred supermarkets into life.

Farmers across the UK are hoping for a strong conclusion to the commission’s inquiry, because its recommendations can do so much to aid the sector. That is why it is regrettable and frustrating that its announcement is not now expected until February 2008, according to the commission’s website this morning. The supermarket code of conduct should be scrapped and replaced by a fair trade inspector within the Office of Fair Trading. He could proactively investigate abuses of market power at every step in the supply chain and ensure a fair deal for farmers. I hope that the parties represented here this morning can reach some unanimity on that point.

I hope that the Minister will give a commitment to abide by the results of the commission’s inquiry and that he will set in train a review of Government policy, in order to recognise the pressures on the dairy industry and to investigate actively ways in which to bring bargaining powers back to dairy farms. In Wales, the NFU Cymru has proposed bringing together the Milk Development Council, the Dairy Development Centre and the Welsh dairy strategy group to lead the way for the Welsh dairy industry, according to the example of the Ireland model. Obviously, because such matters are devolved the Minister cannot comment directly on the Welsh example, but I hope that he can say whether he has made an impact assessment of the success of the Irish model, of the grants given to Irish cheese producers and of the competitive edge given to Irish milk products as a result of that support. Would he support the formation—I hesitate to say this, as a Member representing a Welsh constituency—of an England-wide or regional marketing board along those lines?

I remind the Minister that reinvestment levels in the UK dairy industry are unacceptably low and well below the European Union average, which does not make for a healthy industry. We need to do something about that. The NFU thinks that further rationalisation of the processing industry is essential if the UK is to compete effectively at an EU and international level. I would be interested to hear the Minister’s views on the principle of rationalisation and whether he agrees with the NFU that it should be encouraged.

I am interested in the relative gullibility of the hon. Member for Preseli Pembrokeshire (Mr. Crabb) in accepting Tesco’s announcement. On my hon. Friend’s point about the Competition Commission’s inquiry, does he agree that there is still time for dairy farmers and other producers to bring forward evidence to the commission before the initial findings are announced in September? In fact, it is urging producers to bring forward further evidence. It is an important moment in ensuring that we get a decent outcome.

I agree with my hon. Friend, and I have certainly sent that message in my dealings with farmers in my constituency. There were concerns early on that the body of opinion and evidence for which we had hoped had not been presented to the commission.

Dairy farming is more than an industry. I shall resist the temptation to be poetic, but, representing a rural constituency, I can say that it is much more than that. If we do not offer support to our dairy farmers, they will simply go out of business and we will lose much more than farms. We will lose the wonderful produce that is being developed and has been developed over the years, and risk destroying livelihoods and breaking down communities. Potentially, acres of countryside will be left untended. Once dairy farmers go, there is very little chance of getting them back. The cost of re-establishing a farm is uneconomic as things stand.

I detect a change. It might consist of token gestures, or it could be more substantial. There is greater awareness in this place of the farming industry. I pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) and the all-party group on dairy farmers—it consists of Government and Opposition Members—in bringing such matters to the attention of the House. Farmers need support now, before it is too late. The next time that I address a farming union meeting in my constituency and I am challenged with the question about young entrants to the farming industry, I want to be able to give the unequivocal answer “Yes”, rather than “It depends.”

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. I concur with almost everything that he said. When I was elected to Parliament, I started to realise the extent of the crisis in the dairy sector through meeting many of the dairy farmers in my constituency. Two constituents in particular, Mr. Stuart Jones of Asterley and Mr. Andrew Bebb from Cruckton, managed to teach me a great deal about the industry and have encouraged me throughout to pursue their interests and those of the wider dairy sector. Mr. Bebb is a member of Farmers for Action, and I pay tribute to the work that he does.

As a result of those meetings, about a year ago I started to campaign for action by supermarkets, but when I met chief executives of supermarkets, they were intransigent. At that time, they were saying, “We’re already doing a great deal. Don’t bother trying to kick up a fuss over this issue, because we’re not going to do anything about it.” That was their attitude. I was particularly disappointed with some of the comments from Asda at the time.

I therefore decided to set up the all-party parliamentary group on dairy farmers, because as we all know in the House, numbers speak and it is important for Members of Parliament from all political parties to co-operate to show the extent of feeling. It is a tribute to the extent of feeling on this issue that so many MPs are here today to take part in the debate. I introduced a debate the other week on Anglo-Russian relations and I was the only Member present.

And the Minister.

Indeed. Obviously, the dairy sector is far more important than Anglo-Russian relations.

I should like to inform the Minister that more than 170 MPs have joined the all-party dairy farmers group, which makes us one of the largest all-party groups in the House of Commons. We have a very large number of Labour MPs, Conservatives and Liberal Democrats, as well as Welsh nationalists of course and Members from Northern Ireland. The group has been very active: we have published a report, which has been widely circulated. I, together with my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb), took it to the Secretary of State for Environment, Food and Rural Affairs, and we hope that he will consider some of the recommendations that we put together in the report. However, the Secretary of State left me with the impression that the view is that it is not the Government’s role to intervene with supermarkets and that the matter will have to be sorted out by the industry.

I very much regret that, because I feel passionately about the issue, even as a Conservative. We always think that we cannot buck the market and we have to let the market look after itself, but as a Conservative I can say that I feel passionately that, for certain industries, there has to be some form of intervention and regulation. The industry that we are discussing is of such fundamental importance to our country that it deserves to have a spotlight shone on it by the Government. The Government should at least be scrutinising far more effectively what the supermarkets and processors are doing.

For the report, the all-party group interviewed many people over the past 12 months, including the Office of Fair Trading, chief executives of various supermarkets, the NFU and many other outside bodies. I pay tribute to the RABDF, which has acted as an excellent secretariat for the group and has been a tremendous help to me in sorting out a great number of interviews and other exercises.

A delegation even went to Brussels recently. I see the hon. Member for Brecon and Radnorshire (Mr. Williams) and my hon. Friend the Member for Preseli Pembrokeshire here. The three of us, with other MPs, went to Brussels to lobby the Agriculture Commissioner, Mrs. Fischer Boel. For an arch-Eurosceptic such as myself, it was quite a difficult experience to go to Brussels to interact with commissioners. Nevertheless, I had to do it, because I feel that the Government of my own country are not doing enough on the matter. I had to go to Brussels to lobby the Agriculture Commissioner to intervene in our country. It hurts me to say this, but I had to ask her to intervene in our country.

Mrs. Fischer Boel was extremely encouraging. I hope that my colleagues will concur with that. She said that she would look at the situation of the dairy sector in Britain and would have negotiations with our Secretary of State for Environment, Food and Rural Affairs to see what could be done. She also said that, in her native Denmark, Arla has 80 per cent. of the processing capacity. That was one of the most interesting things that I took away from that meeting. We are in a common market, and Denmark allows a processor to have an 80 per cent. market share, so why cannot we do something similar in the United Kingdom?

My hon. Friend makes an extremely important point. Does he agree that one potential solution to the problem in the dairy industry is to have large farmer-owned co-operatives that are vertically integrated, similar to Fonterra from New Zealand and Arla in Denmark, emerge in this country? That will restore some of the balance in the supply relationship between farmers and the larger retailers. Does my hon. Friend also agree that there are significant concerns in the farming community about the attitude of the Office of Fair Trading to such a development? We need some of those co-operatives to become much bigger and stronger.

I totally concur with that. It goes back to the point that there is a role for the Government to examine the success of processors in countries such as Denmark and to see whether they can negotiate or make it easier for some form of rationalisation to take place.

I totally agree with the hon. Gentleman. The problem is that we had such a body—it was called the milk marketing board—but successive Governments and successive farmer organisations did their best to undermine it. Perhaps with the benefit of history, he can go back and rewrite it.

I do not know how to reply to that. I certainly stick by my comments that there should be some rationalisation of processors.

(Bishop Auckland) (Lab): What the hon. Gentleman says is absolutely right. The point about the message that he has been given by DEFRA—that it wants the market to operate—and the point that he is making is that in the market that we are discussing, the power structure is totally unequal. That is the problem. The farmers do not have the same power that either the processors or the supermarkets have. If the Office of Fair Trading, in its inquiry, does not pay attention to the unequal power and does not look to the long term as well as to the short term, we will not end up with a satisfactory and sustainable dairy industry.

Absolutely correct. I am grateful to the hon. Lady for that intervention.

The hon. Member for Ceredigion referred to the help that we have received from the WI. I pay tribute to its campaign. It has been instrumental in the great milk debate, in which I recently participated, and it is much better than us politicians in getting publicity. I remember that a lovely lady, who I believe was from Gloucestershire, came here on a cold January morning in a bikini and had milk poured all over her in the garden next to the Palace of Westminster to highlight the plight of dairy farmers. I applaud her for doing that on such a cold January morning.

As I said, I participated in the great milk debate in my constituency, at the West Midland showground in Shrewsbury. More than 400 farmers and constituents attended that event, which was one of the most popular events that certainly I have played a part in over the past few years.

The campaign is starting to pay off. I am extremely encouraged by Tesco’s action. I appreciate the point made by the hon. Member for St. Ives (Andrew George) that it is only a very small, initial, tentative step. However, the investment by Tesco adds up to approximately £25 million and will affect 850 farmers, who will potentially receive a price of 22p a litre. I am even more encouraged by the initiative whereby it will employ 150 local farmers to produce local milk.

The hon. Member for Ceredigion told us that Tesco does not yet want to sell Ceredigion milk, and I have to tell him that I have been banging on Tesco’s door, asking it to sell Shropshire milk in its Shropshire stores. I encourage every hon. Member to interact with Tesco and to continue trying to get it to sell local milk in their constituencies. I know that it is going to have a Dorset milk, so my question is, “Why can’t you have a Shropshire milk?” We in Shropshire are also major milk producers. Such proposals are an important first step, and I want other major supermarkets to follow suit. I have had numerous meetings with Mr. Justin King, the chief executive of Sainsbury, and I expect him and Sainsbury to follow Tesco’s action. Mr. King will be coming to the all-party group’s next meeting in the House of Commons, and I hope that hon. Members will attend and quiz Mr. King about his actions.

When I met Mr. King, I showed him a full-page advert in The Daily Telegraph, which clearly highlighted Sainsbury’s policies on bananas, describing how the supermarket would pay banana growers in Belize, other central American countries and the Caribbean a fair price. I said, “You show such enthusiasm and passion for telling your customers that you want to pay Belizean and Caribbean banana growers a fair price. Why can’t you show just a molecule of the same interest and passion for our British dairy farmers?” Part of the reason is that there has been a great Fairtrade debate, and constituents up and down the country have very effectively shown the supermarkets how many people care about farmers in the third world being paid a fair price for their products. Together with the WI and other bodies, we in England and Wales must show supermarkets the same determination and interest so that they will follow suit on this issue.

Let me add a couple of extra points. The all-party group’s report does not call for a regulator for the supermarkets. Having studied the issue, I desperately wanted a regulator, but, regrettably, I could not persuade the other MPs to agree. The only party that is prepared to contemplate a regulator is the Liberal Democrats—

And Plaid.

And Plaid. However, I hope that the Conservative party and the Labour party will look closely at introducing some form of watchdog, even if they are not prepared to have a regulator.

I welcome the hon. Gentleman’s endorsement of the concept of a regulator. What the sector requires is a food or grocery trade inspector at the Office of Fair Trading, rather than a new body. However, does the hon. Gentleman not agree that the code of practice has clearly not worked? Producers are not prepared to complain because they fear the consequences for their contracts. On that basis, we need someone to investigate proactively, rather than simply waiting for complaints that will never appear.

Yes, I totally concur. Indeed, that point was raised at the all-party group’s annual general meeting yesterday. We must come up with a solution under which our group or some other body encourages farmers to collate and present complaints to the Competition Commission.

I found that the OFT was prepared to take complaints from my constituency that I had anonymised for it, but that it would not take anonymous complaints directly from farmers.

Yes, that is very much the case. However, the point remains that many farmers are fearful, and the commission needs to hear their views. I have put on record that if any farmer wishes to write to the all-party group, we will collate their views, anonymise them and pass them on to the commission. We can act as a conduit between farmers and the commission.

I am conscious that others want to speak, so let me raise just a couple of extra issues. The hon. Member for Ceredigion mentioned bovine TB. A few months ago, the Minister kindly met me and a delegation of farmers from my area to discuss the soaring rates of bovine TB in my constituency. He replied to me in writing to confirm that it had gone up significantly—by more than 20 per cent.—in the past year in my constituency and kindly agreed to meet a delegation of local farmers to discuss the issue. I hope that he will be able to give us an update on what the Government will do about bovine TB. I know that the issue is controversial, but I would be grateful for an update.

I would also like to raise the case of a constituent, Mr. Chris Balmer from Snailbeach, who has been in the dairy industry for a lifetime, as were his father and grandfather before him. I feel passionately about the case of this one man in the very south of my constituency. He is a small farmer, he lives by himself and he had a terrible case of bovine TB on his farm, but despite my repeated interventions, he has still not had his full Rural Payments Agency payment for last year. In most cases, when the MP intervenes with the RPA’s chief executive in writing or over the telephone—I have telephoned personally and written on many occasions—the issue is usually settled. Indeed, I have intervened in 45, 50 or 60 cases in recent months, and they have been resolved. However, I want to put on record for the Minister that my constituent, Mr. Chris Balmer of Snailbeach, who has had terrible problems with bovine TB, has still not had his full RPA payment for last year. He is an honourable and decent gentleman and he came to me in sheer desperation and frustration—tears were almost coming down his cheeks—because he was at his wits’ end, and I take this opportunity publicly to ask the Minister to intervene on his behalf.

The Competition Commission has been mentioned, and I feel a certain frustration and regret at the fact that its report was not published last year. I very much await the publication of its report, which has been delayed on more than one occasion. It is now the commission’s responsibility to come up with a strong critique of what is going on and with serious recommendations to the Government. I look forward to it grasping the nettle, being controversial, putting its head above the parapet and coming up with some constructive, long-term solutions for the Government to implement.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing the debate. This is an extremely important subject, and it is gratifying to see Members from Wales here. Indeed, until a moment ago, when the hon. Member for Preseli Pembrokeshire (Mr. Crabb) left, we had what one might term a rainbow coalition on this side of the Chamber.

This is an important matter because, as has been said so many times, the family farm is of huge significance in Wales. That significance goes beyond the short-term bottom line, because individual businesses are not just businesses—they are the backbone of the rural community and the way to keep young people in our rural areas.

In a sense, the hon. Gentleman is right that there is a rainbow coalition on this issue. Does he agree that we are united by our shared concern about the seeming injustice that has been meted out to dairy farmers, with the treatment of bovine TB and the economic arrangements that the Government have imposed on the trade, which have done a great deal to force it into virtual bankruptcy?

The hon. Gentleman is quite right. Indeed, we in Wales are concerned not only about aspects of farming, which are important in sustaining rural communities, as they are in England, but about the further point that the agricultural community is the mainstay of Welsh language and culture.

I hardly need to say that there has been a huge and accelerating change in the dairy business over many years, with the size of herds increasing to a perhaps unfeasible level, along with the capital costs that are difficult to sustain. I occasionally talk to a constituent who is a good friend of mine, named Iestyn Hughes, of Mynachdy Bach. He is now retired but is fond of telling me that he brought up a family, farming a herd of 25 to 30 cows. It was very hard work, but he would not be able to do that now. There is innovation, and there are efficiency gains in the industry.

Another of my constituents has adopted the New Zealand method. He now has 800 cows out in the fields all year round and does not bring them in at all. It is a huge operation, with economies of scale, and, I hope, very good profits, but that sort of option is not open to the vast majority of farmers in my constituency.

I represent the area Hufenfa De Arfon, where the South Caernarfonshire Creamery is based. The creamery is a farmers’ co-operative set up in the 1930s. It has the vertical integration that is seen as so important and produces not only liquid milk but cheese, butter, yoghurt, buttermilk and, I am sure, other things as well. It is a hugely efficient and successful operation. It has always been in the highest 10 per cent. for paying its members; its products are of superb quality and it adds value. It handles organic milk for other retailers and it exports cheese. It produces a cheese called Monterey Jack, which is an American recipe, and exports it—to America. Its premium vintage cheese is called Hen Sir, or Old Shire—and an excellent cheese it is. However, even that co-operative cannot buck the market in which retailers get such a big share and producers get essentially what they are given.

I think that the situation is verging on market failure. It is almost as though the market does not sustain a viable industry, at least as far as farmers are concerned. I shall not go into the subject of retailers.

Will the hon. Gentleman reflect on the fact that, although dairy farmers in the United Kingdom are certainly among the most efficient, and we have arguably the best climate for dairy farming—certainly among the best grazing land in Europe—giving us the best conditions for the best dairy industry, our dairy farmers are closer to being on their knees economically than any dairy sector in Europe? That shows the extent of market failure in the UK.

The hon. Gentleman makes an excellent point. When dairying in this country—particularly in my part of the world, with its high rainfall and very good grassland—is compared with dairying in the southern parts of Europe, we have ideal conditions; so why does not it work? Clearly, there is something happening beyond the efforts of individual farmers, or even farmers working as a co-op, as they do in Hufenfa De Arfon.

Liquid milk is bought and sold as a commodity and is subject to short-term variations, while small farmers are trying to run long-term businesses. Cows cannot be turned off as though they were machines, and investments cannot be planned if farm incomes are so unpredictable. I am glad that the supermarkets have begun to recognise their responsibility and are paying a premium in a few cases, but those higher prices are for a minority of producers. Perhaps I am a sceptic, or even a cynic, but I must ask whether that is more than a gesture. We shall see, but I should like those favourable arrangements to be extended to more and more farmers.

I want to end with a point about the Competition Commission. I have meetings with farmers and recently met some from the Farmers Union of Wales, and members of the South Caernarfonshire Co-op at their building in Y Ffôr. We discussed the possibility of submitting evidence to the commission, and there was an element of real fear: people thought that, if they put their heads above the parapet, they would pay in the longer term. We discussed the possibility of anonymising evidence, and that should certainly be pursued. There is still an opportunity to provide evidence. Lastly, to reinforce the intervention on the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) that I made from a sedentary position, Plaid Cymru has pressed for a milk ombudsman for a long time, and I would commend that idea to the House.

It is a pleasure, Mr. Chope, to serve under your guidance twice in the same morning and to congratulate my hon. Friend the Member for Ceredigion (Mark Williams) on securing a debate that is crucial not just with respect to dairy farming, but, from my observations of the debate so far, for the fact that it brings out some good old-fashioned politics. We can talk about the role of the market, where we stand and what we understand by the term “the free market”.

To get to the point, the issue is simply one of market failure. Five years ago, the retailers’ margin throughout the country was in the region of 11 per cent. It is now 30 per cent. There is no market justification for that. In Germany the margin is still 11 per cent. Supermarkets have increased their margins for no appreciable reason, apart from the fact that they just can. Farmers have often been challenged with the claim that their calls for fairness will lead to higher milk prices in the supermarket and on shop shelves. Far from it, the figures show that supermarkets could keep prices on the shelves as they are, ensure that farmers get a fair deal and still have a mark up twice what it was in 2002. Why do not they do that? It can only be that the supermarkets, apparently entirely legally, are abusing their market power.

It is not good enough for the Government to shrug and say that it is all down to the market; that it is a sad fact of modern life. It is market failure. Adam Smith, the author of “The Wealth of Nations” and many other works, was in many ways a great man and a decent human being, but he was fundamentally wrong in my view in his assessment of how markets operate. There is no invisible hand making sure that everything reaches a nice satisfactory equilibrium. The only natural force that I can see in the marketplace is something akin to gravity, by which those who already have plenty of wealth and power accrue a lot more of it to themselves. It is therefore important—and it is something that I request of the Government, as I expect many hon. Members of all parties who are present for the debate would do—that the Government use their visible hand to ensure that regulation takes place. Perhaps I may offer some counselling to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who is clearly bruised by his trip to Brussels: if we are to tackle the problems of the abuse of market power by multinational companies, we shall need multinational solutions to face down such companies.

Does the hon. Gentleman believe that everything from Europe that affects the dairy industry is positive? Does he not agree that the nitrate vulnerable zone regulations are likely to cause huge and wholly disproportionate costs to small dairy farmers, about which they are justifiably in a state of extreme trepidation?

I do not believe that everything that comes from the European Union is positive. One of our problems is our tendency to gold-plate regulations in this country, whereas others are a little more flexible in their interpretation.

It is important to note the welcome changes to the price that supermarkets—notably Tesco—pay farmers. There is not a single Tesco in Westmorland and Lonsdale, and I am not about to start a campaign to get one, but although the supermarkets that we do have, Asda and Morrisons, would do well to follow that example, we should not put too much emphasis on the Tesco move, because many of the 1,000 British dairy farmers whose milk is sold via Tesco will not benefit from the system. I asked a very well-connected dairy farmer who lives down the road from me—he will know that I am referring to him when he reads Hansard—and he had heard of barely anyone who counted among Tesco’s chosen few. The answer is not voluntary action by one or two supermarkets, motivated, no doubt—perhaps I am cynical—by a desire to avoid bad publicity. The answer must be careful intervention.

On the subject of public relations, supermarkets are happy, as has already been mentioned, to display fair trade produce on their shelves, and there is a very welcome recognition, among consumers and retailers alike, that fair trade and free trade are not the same thing. Is it not ironic, however, that shoppers will go down one aisle in the supermarket, purchasing the fair trade coffee and tea products, and getting a warm ethical glow as they do so, and then turn their trolley down the next aisle to buy milk that has been produced by ruthlessly exploited British farmers? The fair trade movement is very important in helping to tackle international poverty and exploitation, and I hope that the fair trade brand will be extended or replicated to give consumers ethical choices about home-grown produce.

Dairy farmers in south Cumbria have expressed deep concerns about Ministers’ exhortations for them to be more efficient. They are committed to achieving greater efficiency, but they suspect that the Government have missed the point. Dairy farmers say that the abysmal price that they receive for their produce—up to 4p a litre less than it costs them to produce—makes it almost impossible to reinvest in their businesses and to work on improving efficiency. If the Minister wants dairy farmers to be efficient, he must ensure that the market is corrected, so that they can reinvest in achieving greater efficiency.

The lakes and dales of Cumbria have a jaw-dropping beauty, but that landscape does not occur naturally. It is the result of centuries of careful management. At the heart of that management is the maintenance of grazing livestock. Our tourism product is paid for largely by farmers, so taking a laissez-faire approach to the crisis in the dairy farming industry is likely to have far-reaching effects. It will significantly damage tourism and will deprive environmental bodies, such as Natural England, of the partners that they need to deliver important environmental programmes. If the Government were bold enough to intervene to give our dairy farmers a fair deal, it would be a far-sighted investment of the highest order.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this important debate. Only 10 days ago, I visited a successful dairy farmer in my constituency, Mr. Kirkup, who has a herd of 400 cows. I was concerned to hear about the income levels of farms in my constituency. Despite making significant investments, dairy farmers in County Durham earn about £15,000 a year. Given the hours that they work, some of those farmers would be earning below the minimum wage if it were applied to the industry.

We need to consider the balance of power between the supermarkets and farmers. The essential problem relates to the time scale. Supermarkets work in a short-term time frame, and although the time frame in which farmers work does not quite span generations, the decisions that they take cannot have a significant impact in less than five years. That point is not well understood.

One practice that supermarkets and processors engage in, which some of my constituents have discussed with me, is the backdating of price cuts. That is absolutely intolerable because farmers cannot get out of it. Why are such contracts legal? I have raised this issue with the Office of Fair Trading, but I have not received a satisfactory answer.

I echo the remarks of the hon. Member for Westmorland and Lonsdale (Tim Farron) about the environmental benefits of dairy farming and how the shape of our countryside depends on it. We cannot ignore that, just as we do not ignore it when considering the financial regime for hill farming.

Another issue that has been raised is the burden of regulation on farmers. About 18 months ago, the Select Committee on Public Accounts took evidence from Department for Environment, Food and Rural Affairs officials. I pushed them on that issue, but their answers were most unsatisfactory. Surely, there is a lack of logic in imposing high levels of regulation on UK farmers, thus raising their costs, given that the dairy market is international and that we import milk from countries with lower regulatory standards. The market is not a fair one in any of the classical senses of what constitutes a fair and efficient market. We must look into this issue. However, Opposition Members have not made their case on bovine TB. Although I agree with their general analysis of dairy farming, I shall not go with them all the way on that point.

We must make the economics more sustainable. I am not sure whether we should aim to squeeze the supermarkets’ margins, or to have consumers pay more. The industry’s figures show that that would be unlikely to cost the average UK household more than 10p a week. That is a price well worth paying for a sustainable dairy industry.

It is a great pleasure to see you in the Chair, Mr. Chope. I pay tribute to my hon. Friend the Member for Ceredigion (Mark Williams) for obtaining this debate; he has been persistent, even relentless, in his work on the dairy industry. Dairy farming is an important facet of his local economy; indeed, it is the cornerstone of British agriculture in both Wales and the UK.

While there has been a limited increase in UK farmers’ incomes, it has not been on the back of improved returns for the dairy industry. The increased profitability in UK farming has come from the arable sector, where the competition for crops for food and for energy purposes has led to some movement. Dairy farms used to be a step on the ladder for young farmers entering the industry. As the hon. Member for Caernarfon (Hywel Williams) said, they could take on a small farm that did not have a huge number of cows, farm it intensively, put a lot of work in, make a living and bring up a family. However, those days are far gone.

Efficiency and effectiveness have increased enormously through improved nutrition, grazing techniques and breeding. Consequently, there have been increases in output per cow, per acre and per person working in the industry. However, the huge pressure on prices has put more and more dairy farmers out of business; now, there is barely half the number that there used to be. That did not result in a fall in milk production until quite recently because fewer farmers were producing the same amount, but such has been the pressure on price recently that milk production has fallen from 14 billion litres a year to 13.5 billion.

The fall in milk production has focused the minds of supermarkets a little. They know that they cannot import liquid milk into the UK in any real quantities, and that they will really feel the pressure if there is a shortage of British milk. They are also considering the Competition Commission’s inquiry. So there are two pressures on supermarkets: whether there will be sufficient British milk for them to stock their shelves, and the question of the outcome of the commission’s inquiry. That is why they have made certain moves recently. Those moves have given some people confidence, while others think them cynical. I pay tribute to my hon. Friend the Member for St. Ives (Andrew George) for his work in developing our party’s policy of having a fair trade inspector.

One of the real problems in the dairy industry is that although about 7 billion litres of the milk produced is sold as liquid milk and 3 billion litres goes into high-value differentiated products, about 4 billion litres still goes into producing a standard quality product—a basic cheddar. British-made cheddar cheese is of a high standard, but it must compete on a world market and it is not differentiated. Because such a large quantity of our milk goes into that market, there is a downward effect on milk prices. The task ahead is to work out how we can change more of our standard—very high quality—cheddar into a much higher-priced, differentiated product. We have some wonderful products, such as the organic yoghurt and other products produced by Rachel’s dairy in the constituency of my hon. Friend the Member for Ceredigion.

I would also like to pay tribute to the hon. Member for Shrewsbury and Atcham (Daniel Kawczynski), who has done sterling work as chair of the all party-group on dairy farmers. I accompanied him to Brussels, where we met the Agriculture Commissioner. She gave an indication of work that could be done in future, and encouraged us to refer to her anything that we felt was undue pressure on the part of the Competition Commission against the interests of the industry.

I should tell the Minister that a number of farmers’ organisations have been threatened with Competition Commission inquiries when contemplating amalgamation and working with other organisations to build up their market share. The mere threat of an investigation is often enough to put people off taking a step that would strengthen their place in the market, make them efficient and lower their costs. I know that the Minister will tell me that the Competition Commission acts at arm’s length from him, but he must have some influence on how it does its work, and on the levels and particular points at which it intervenes.

I believe that the hon. Member for Stroud (Mr. Drew), who is not in his place, told us that we had an efficient and effective system for marketing milk: the milk marketing boards. We saw their demise and the break-up of their successors.

Was the hon. Gentleman present when the all-party group held an interesting session with senior representatives of the Office of Fair Trading? They gave evidence saying that until about 15 or 20 years ago, competition legislation in this country enabled the Secretary of State to take into account the national interest in the survival of a crucial industry but that, as a result of competition legislation coming from Europe, we were obliged to amend our legislation so as to be compatible with that legislation. Does he think that there is room to lobby in Europe for the restoration of a provision that would allow the Secretary of State to have some influence over these crucial national interests?

Unfortunately, I was not present when those comments were made. I believe that there is room to make such representations to Europe. The market for food is different from the one for manufactured products. For instance, it would be immoral to keep the market short in order to drive up prices, because people need to have enough food to live. It is the purpose of agriculture to provide sufficient food both in the UK and globally for the world’s population. Keeping the market short to drive up food prices is intolerable, so for that reason and for those given by my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron), it is proper to have a regulator within the food market. A number of arguments can be made in that regard.

On international competition, I have never argued that supermarket executives are products of the loins of the devil; indeed, does my hon. Friend agree that their behaviour is entirely rational? Swallowing up their competition and squeezing their suppliers is something that they rationally do, but the question is whether they acceptably use or unacceptably abuse their power. By abusing their power, they are creating a dysfunctional market that is incapable of competing internationally, which is where the UK dairy industry should be competing. We need to get our market right first to give us the strength then to compete internationally. That is what we are trying to achieve.

My hon. Friend makes a good point; indeed, he has been at the fore in putting those views forward. Most of the Members present come from the western part of Britain. Its higher rainfall and ability to grow grass means that it could compete internationally as well as any nation.

Mention has been made of the fair trade movement, which has been spectacularly successful in addressing poverty in third-world countries. I draw Members’ attention to the fair trade for British farmers campaign, which has been launched by Country Living magazine, Waitrose and Farmers Guardian. Members can still sign up to it on the website—they could even sign my early-day motion on the matter. On Friday, I am debating the issue at the Hay-on-Wye festival of literature with representatives of the fair trade movement. Please come to Hay-on-Wye to support the tourism industry and the wonderful food that is produced in my constituency.

The case has been made that supermarkets are abusing their power and position of strength in this marketplace and in the food industry in general. The Minister has a role to play, in the sense that where abuse is identified, we need to have systems in place to ensure that proper competition exists. In a perfect market there should be many sellers and many buyers, and everybody should know how much product is being produced and what it is being sold for. We are reaching the stage where we have the knowledge, but abuse remains very much present in the system, and the Government have a role to play in addressing that.

I, too, congratulate the hon. Member for Ceredigion (Mark Williams) on securing this debate, which, as he rightly said, is long overdue. It is great pity that we do not have regular debates on agricultural issues in the main Chamber any more—we always used to have them. We seem to have all sorts of Adjournment debates on weird subjects—

It is your choice.

The hon. Lady says that it is the Opposition’s choice, but if she were to look at some Order Papers, she would see how many Adjournment debates are chosen by the Government—on some pretty weird and wonderful subjects.

As has been said, the industry is in a parlous state, and I do not intend to rehearse all the points that have been made. As the hon. Member for Brecon and Radnorshire (Mr. Williams) said, the reduction in the number of farmers was initially compensated for by increased production by others, but overall production is now falling. Some people argue that that in itself will solve the problem, but I do not take that view. I do not believe that this is simply an issue of the oversupply of the marketplace.

I want to concentrate on three specific issues in the hope that the Minister will respond to them, but before I do so, I want strongly to endorse the point made about the advertising of cheese. A ludicrous decision was made, and it does so much to damage the image of cheese as a wholesome food.

There has been a lot of debate about the issue of regulation and intervention. The hon. Member for Westmorland and Lonsdale (Tim Farron) suggested that Adam Smith was wrong, but if he were to study Adam Smith, he would find that Adam Smith was right, because he said that a proper market operates only when there is a large number of both buyers and suppliers. That is what we do not have, so Adam Smith was right, but we do not have a proper market.

We can all spend a lot of time looking back into history, but this Government’s decision, early in their days, to break up Milk Marque when it had only 37 or 38 per cent. of the market was absurd, particularly when one compares that with the share of the market held by a number of the retailers. There are now a number of major farmer-owned groups or co-operatives, call them what you will, which is good, but they are very small in comparison with the major retailers and particularly with the major processors, such as Arla and Dairy Crest.

I share the concern about the Office of Fair Trading’s attitude. My proposition is that the dairy industry should be a European market. There has been a lot of comment about Europe, but the OFT judges competition in the domestic market, so whenever a milk group wants to acquire another cheese plant and so on, it is threatened with reference to the OFT, because it will have too big a market share. The OFT should understand that the dairy sector, particularly the processing sector, is a European-wide market, and it should look at market share throughout Europe. Reference has been made to Arla’s share of the Danish milk industry and to Frontera in New Zealand. Europe is supposed to be a single market, and competition rules should be based on that.

My second point is the milk price. Making co-operatives more sustainable, and allowing them to integrate more and merge if necessary would go some way towards redressing the balance in the marketplace. Obviously, I welcome the Competition Commission’s investigation, and I strongly welcome its interim findings, which were published in January. It is a pity that its final report will be delayed, but I hope that it will be as robust as those findings.

Supermarkets have clearly been making excessive margins, but I urge a word of caution to hon. Friends and colleagues who think that the solution is intervention and some sort of regulator. I am less enthused by that because we may end up with a belief that supermarkets make too much profit, so consumers should pay less, which would not help the dairy producer. Simply looking at the share of the retail price that the supermarkets take works both ways. It does not necessarily guarantee that it is passed on to the producer. It is more important to ensure that the market is working properly. As several hon. Members have said, fresh milk comprises only 50 per cent. of the market; the rest is made up of processed products, the major part of which is imported. That is where we should seek to make a real difference.

The latest figures show that, in 2006, we imported 352,000 tonnes of cheese, 154,000 tonnes of yoghurt, and so on. Those are huge amounts, and are partly an inheritance from the Milk Marketing Board which, for all the good points that some people claim for it, prevented innovation and investment in processing during the years of its existence, when the big co-operatives in Europe were so investing. That is why they now have the volume of scale and have penetrated our domestic retail market with processed products, yoghurts, ice creams and so on, yet they are paying their milk producers the same, if not more, for their raw milk as our milk producers receive.

If the supermarkets really care, as they profess to, about the future of our dairy industry and the need to retain a British dairy industry, they should work with the major processors to develop our own domestic lines of processed products—the high-value desserts, yoghurts, ice creams and cheeses that we import instead of, as the hon. Member for Brecon and Radnorshire said, the low-value, mild, bog-standard Cheddar.

The final issue that I want to raise will not be a surprise to the Minister. We have been trying for some time to have a debate in this Chamber on tuberculosis, but to no avail. He knows that I and other hon. Members have a real complaint about the Government’s lack of concerted effort. If he is honest, I suspect that he would accept in private that the issue is serious and that more can be done. Over the past 10 years, we have seen a piecemeal approach to dealing with TB. Recently, there has been a small but welcome increase in the use of gamma interferon and the introduction of pre-movement testing at considerable cost to the farming industry, but without the commensurate actions that the industry believed were part of the deal in accepting pre-movement testing. We have had the Krebs report and the triplets trials, and we are now awaiting Professor Bourne’s final conclusions.

We need a comprehensive, all-enveloping strategy, and to roll out the gamma interferon test across the board to ensure that the skin test, which is pretty crude, is as accurate as possible. We must increase the frequency of testing, particularly in the frontier areas where the disease is spreading. I am sorry that the hon. Member for Bishop Auckland (Helen Goodman) has left. It is all very well for her to say that, from Durham’s perspective, we are all wrong about TB, but she has no significant problem with it in the Durham area.

We must, of course, continue with research into badger and cattle vaccines, and I hope that the Minister will tell us where we are with that. We are told that they are getting closer. I also think we need much more research into mineral deficiencies as a precursor to TB infection. It has been argued that selenium deficiency in particular makes cattle more prone to TB.

Biosecurity is obviously important, and the Minister will not be surprised to hear me say that we must do a lot more on the polymerase chain reaction test. I am concerned that the Government are not addressing the matter as urgently as they should. I know that they have commenced a three-year study programme with Warwick university, which has done much of the work, but last year DEFRA was presented with a proposal, which included the central veterinary laboratory, the Veterinary Laboratories Agency, University college London and a private company, to develop a specific real-time PCR test for the detection and quantification of mycobacterium bovis in the environment—that is exactly what the Opposition have been calling for—to detect whether badgers and badger families in their sets are carrying the infection.

I do not believe that culling badgers is a silver bullet to solving the problems of TB, and I reject the argument that that is the sole solution, but as Professor Bourne has told me publicly, unless we get rid of the reservoir in wildlife, we will never get rid of bovine TB. It is part, but only part, of the overall package of necessary measures. It is more than a year since the Government’s consultation closed, and we need a decision. Even a negative decision would be of some reassurance that the Government were addressing the issue rather than, as it seems, trying to keep it in the long grass.

Those are three specific areas in which the Government could take a leading role to address what all hon. Members who have spoken agree is a very serious crisis in the industry.

I start by apologising for the absence of my hon. Friend the Under-Secretary of State for Environment, Food and Rural Affairs, who is engaged on duties connected with his biodiversity responsibilities. He usually speaks on these matters in the House.

I congratulate the hon. Member for Ceredigion (Mark Williams) on securing this debate on an important topic. I agree with him that while it is important to accept that the industry faces serious challenges, it is also important not to talk the sector down. He acknowledged that many of the recent developments have been positive. We must encourage new blood into the industry, as well as innovation and ideas. I believe, as one or two hon. Members here have acknowledged, that our natural advantages in dairy production should mean that our dairy industry has a good future. I hope that we can all agree on that, although we may differ in our opinion of how to arrive at that good future.

I must say to the hon. Gentleman, however, that the pressure on farm gate prices will remain; it is simply a fact of life. Dairy production exists in a competitive market, and there will always be pressure on costs. However, the acknowledgement of the increased cost pressures borne by dairy farmers, and the resultant action by a number of retailers to increase prices paid for liquid milk, is welcome. It follows discussions that Lord Rooker and I have held regularly with the chief executives of the major retailing companies.

The Government believe that it is in the supermarkets’ long-term interest to ensure sustainable arrangements for dealing with their suppliers. Several Members have acknowledged that those retailers have recently put in place initiatives to encourage closer working relationships with identified suppliers, some of which attract a price premium. There have also been positive developments in the contractual arrangements between processors and producers, which should help to develop greater transparency and trust. They are to be encouraged.

It is also important to recognise that a considerable proportion of milk and milk products are sold through middle-ground retailers, catering establishments or as food ingredients. The four largest grocery retailers account for less than one quarter of volume sales of raw milk processed in the UK. I know, because I heard it from the farmers in my own region at the Devon show last week, that the south-west has a particular grievance. One of our main recipients of milk is the farmers’ own co-operative, Milk Link, which, according to the table that I was given before the debate, pays the lowest price of any taker of milk. It is important to put the debate about retailers in that context.

Will the Minister give way?

I shall give way, but I must warn Members that my policy is to be courteous to the hon. Member for Ceredigion, who secured the debate. I want to answer the points that he raised, so I shall limit the amount of times that I give way.

I totally appreciate that point, and I am grateful to the Minister. He quotes Milk Link’s price, so I just want to put on record that the co-operatives also plan to pay a dividend on top of the milk price. Milk Link has just paid a 7 per cent. dividend, which needs to be added to the price.

I join the hon. Gentleman in welcoming that situation.

It is also important that we politicians and the industry focus not only on price, but on profitability. Several Members have acknowledged that there remains a worrying disparity in the cost of production of the most and least efficient dairy farmers. In 2003, there was on average a 12p per litre differential between the most and least efficient dairy farmers. We encourage all producers to examine carefully their production costs and to seek ways in which to minimise them. The rest of the supply chain also has its part to play in cutting costs, maximising efficiency, innovating and adding value.

There has been considerable investment in processing capacity, and as a result, we have some of the world’s best processing plants. However, there are some less efficient plants, too, just as there are efficient and inefficient producers. That is why the Department has funded a study through the dairy supply chain forum to benchmark processor efficiency internationally. The Milk Development Council is also conducting a benchmarking study on producer efficiency. We have invested more than £1.3 million through the agricultural development scheme to help the dairy sector address efficiency issues.

Profit margins are a concern, however, in particular the apparent increasing margins on liquid milk sold through the retail sector. Although that is a Europe-wide phenomenon, the Competition Commission, in the emerging findings from its inquiry into the groceries market, has noted that supermarkets are retaining an increasing share of the retail price for milk. The commission will look further into that issue, both in the milk sector and in other primary produce sectors. The Government welcome that development, and we will of course respond to any recommendations.

Several Members cited the Irish and Danish models. Let me say something about the support given to the Irish cheese market. The advice that we have received is that there is not unanimous support for the model that has been adopted in Ireland. There is concern about the system propping up inefficiencies in the Irish dairy sector, which is fragmented. Its processing industry is not as efficient as it could be, and we believe that the future of the UK cheese sector is best served by adding value, creating branded products and innovating, something that I am pleased to say is happening. It is also pleasing to note that Britain produces more varieties of cheese than France does.

I share Members’ concerns about the advertising decision last year by Ofcom, which was made on the advice of the Food Standards Agency. It is important to acknowledge the reasons for the decision. Although I understand that only 20 per cent. of advertising for cheese products takes place during children’s programming, 90 per cent. of that advertising was for highly processed varieties such as Cheestrings and Dippers products.

I welcome the FSA’s commitment to look again at the nutritional profile model and to review it now that it has been in place for a year. I understand the dairy industry’s concerns and I agree that cheese is a valuable part of a nutritious and balanced diet.

My hon. Friend the Member for Bishop Auckland (Helen Goodman) raised concerns about regulation. I have been responsible for many regulations in statutory instrument debates, and we have a debate on cattle identification this afternoon on a measure that will reduce the number of regulations from five to one. The Animal Welfare Act 2006 reduced from 21 to one the number of regulations. When one tots up the number of new regulations, it is also important that one takes into account the number of regulations that the Government have got rid of.

A number of hon. Members, including the hon. Member for South-East Cambridgeshire (Mr. Paice), raised the issue of bovine TB. Aside from badger culling, he raised several issues, and I can assure him that the Government are doing everything in our power to further the vaccine test, and field trials are under way. I met the academics who are attempting to develop the polymerase chain reaction test and I shall write to him about the matter. The hon. Member for Leominster (Bill Wiggin) was at that meeting, but I shall happily send the hon. Member for South-East Cambridgeshire the details of it. My understanding is that while there is potential, the test is not yet at a stage at which our scientists will advise that it can be put into field trials.

It was interesting that the issue of badger culling was raised, but I am not sure what the Liberal Democrat policy on the matter is. I am also not sure what the Conservative policy is. As the hon. Gentleman acknowledged, we have only one more month—hopefully—to go before Professor John Bourne’s independent science group produces its final report on the badger culling trials.

It would be odd for the Government to make a major policy announcement in advance a report for which we have only three or four weeks to wait. I assure the hon. Gentleman that we intend to make a decision on the issue soon after the report is published. I say to him what I also said to the dairy farmers that I met at the Devon show last week: it is important that the industry intensively engages in some of the practical and organisational challenges that would result in any decision to include wildlife controls as part of our bovine TB policy.

A number of Members talked about regulation. I do not intend to repeat what the hon. Gentleman said—he gave a good riposte to those who argue for the introduction of regulation. The hon. and learned Member for Torridge and West Devon (Mr. Cox) recalled that the Conservative Government under Prime Minister Thatcher agreed to the single market, which she trumpeted as one of her greatest achievements. I do not know whether the hon. and learned Gentleman suggested that we should go back and undo it, but as the hon. Gentleman pointed out to him—perhaps privately—the single market is of huge benefit to our industry and even to our farmers.

The difficulty with the Danish model is that Denmark has land borders with Germany and easy border arrangements with Scandinavian countries, so it operates in a completely different market. We have a GB market for liquid milk—we are a net exporter of liquid milk. The competition authorities in this country take a different view from those in Denmark. Arla was set up before the current competition rules applied. The Government encourage and help farmers to set up co-operatives, but we cannot condone or encourage the setting up of cartels. I hope that all hon. Members will accept that no Government should do that.

We have had a good, positive debate. I am sorry if I have not responded to all Members’ concerns, but I shall write to them if that is the case.

I also wished to raise the nitrates problem. Tomorrow, as part of the energy White Paper, there will be a positive announcement on anaerobic digestion, for which Members may wish to prepare themselves. There is huge potential for a win-win situation for the environment and for renewable energy.

Order. We now move to the next debate. Will hon. Members who are leaving the Chamber please do so quietly?