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Dairy Farmers of Britain

Volume 495: debated on Thursday 2 July 2009

6. What discussions he has had with representatives of Dairy Farmers of Britain since it was taken into receivership. (283381)

May I take this opportunity to welcome my hon. Friends the Members for Poplar and Canning Town (Jim Fitzpatrick) and for Wansdyke (Dan Norris) to the DEFRA ministerial team? As we have heard already this morning, they are making a great impact.

I and my ministerial colleagues have been working with the Dairy Farmers of Britain members council, the receiver, Dairy UK, farm unions, banks, and charity and benevolent organisations to continue to help all those affected.

Many Dairy Farmers of Britain producers in Lancashire and Cumbria are suffering because of the collapse of their dairy business and associated cash-flow problems. Will the Secretary of State consider extending meeting the requirements of the nitrates directive by perhaps one year? Will he also consider bringing forward some of the single farm payment due in the autumn for affected farmers to alleviate some of their cash-flow problems?

I am only too well aware of the difficulties that farmers have faced, but let me take the opportunity to give the House the very latest information. Of the 1,813 farmers with Dairy Farmers of Britain on 3 June, 1,759 have found other buyers for their milk, 45 have retired or are in the process of retiring and nine have not yet decided. Given where we were on 3 June, that is considerable progress.

To respond to the two points that the hon. Gentleman raised, in theory it would be possible to try and advance single farm payments, but that might have a knock-on effect on other farmers. On the RPA, I have said throughout that the one thing that I am not prepared to do is jeopardise the recovery that my hon. Friend the Minister of State referred to. Secondly, we cannot delay the requirements on nitrate vulnerable zones further, but I remind the House that the new requirements on slurry storage do not have to come in until 2012.

What a pleasure it is to see you in the Chair, Mr. Speaker.

May I ask my right hon. Friend the Secretary of State to pass on my welcome to my two colleagues who have joined him on the Front Bench? Food and food production are far too important to be left entirely to the advocacy of Members with rural constituencies. They are of importance to everyone.

I noted my right hon. Friend’s response to the hon. Member for Lancaster and Wyre (Mr. Wallace). Will he consider approaching the Office of Fair Trading and pressing it for its view on what is competitive in the dairy market? That would allow it to take a more pragmatic approach when mergers and changes happen in the co-operative sector.

First, may I say that it is very good to see my right hon. Friend in her new place? [Interruption.] At the last Question Time, I expressed my sorrow at her departure. To make it clear, I refer to the fact that she continues to take an interest in DEFRA matters. I thoroughly welcome that, and I thank her for her efforts in relation to Dairy Farmers of Britain.

On the role of the Office of Fair Trading, as my right hon. Friend will be well aware, a merger was proposed last year between two of the co-operatives, but it did not come off, not because of problems with the OFT, but because the two partners were not able to reach agreement. However, I will reflect on the point that she rightly makes.

When Parmalat went into administration in 2004, the Italian Government provided emergency compensation to the thousands of Italian dairy farmers who were affected and the European Union agreed to waive state aid rules. Why do the British Government not provide similar support now to the thousands of British dairy farmers affected by the collapse of DFOB?

The most important thing that we have done, as I have just informed the House, is work with all the partners to try to ensure that farmers can find other buyers for their milk. Considerable progress has been made, although one should acknowledge the position of workers in the creameries and dairies that have not been able to be bought by others. The dairy industry is facing longer-term problems because of the difficulties in the world market. Through the dairy supply chain forum, which we established in 2003, we are working with the sector to look ahead. There is over-supply at the moment, but the longer-term prospects are slightly brighter.

The most important issue for most farmers is, of course, the lack of the milk cheque. Will my right hon. Friend at least talk to PricewaterhouseCoopers about the fact that, although some people obviously knew how desperate the state of the company was, milk was supplied and has been purchased by various outlets? Is it not right that those outlets pay the farmers for the milk that they have received and that PWC ensures that that is done as a matter of urgency?

If others have contractual obligations, it is clearly very important that they are met, but we have made further progress in the past week or so because of Milk Link’s offer to purchase the rest of the milk—milk that had not been bought by other buyers—at a price of 18.45p a litre, as opposed to the 10p a litre that the receiver was offering.

The Milk Marketing Board was scrapped under the Conservative Government and its successor, Milk Marque, was broken up under this Government, all in the name of free and fair trade, yet dairy farmers are now receiving as little as 10p a litre for their milk in the aftermath of the break-up of Dairy Farmers of Britain. I wonder to what extent that constitutes a free and fair market. Will the Secretary of State undertake to do two things now? First, to prevent a disastrous loss of capacity in the dairy sector, will he underwrite the unpaid May milk cheque for Dairy Farmers of Britain? Secondly, will he intervene to prevent unfair trade by introducing a powerful food market regulator, to prevent buyers from exploiting farmers from all sectors in this unfair, unfree and unbalanced food market?

First, I cannot give the hon. Gentleman the answer that he wants on the payment of the milk cheque. Secondly, as he will be well aware, the Competition Commission has been consulting on the idea of an ombudsman and seeking agreement with the supermarkets and others. At some point in the not-too-distant future, the commission may come back to ask the Government to form a view on that, and we will consider it very carefully at the time.

On the dairy industry more widely, I simply say that there has been a huge increase in productivity. Although if we look back over 20 years, we see that milk production has declined a bit from about 14 billion litres to 13 billion litres, the dairy industry in Britain is much more productive than it was.

The situation is very serious. I represent hundreds of farmers, who were receiving 10p a litre, which is totally unacceptable and not sustainable, when the company went into receivership. First, we need the Secretary of State to call for a full inquiry into what has happened in Dairy Farmers of Britain. Secondly, we need him to help to fund the shortfall. Why did the banks foreclose when the farmers were owed the most money and the banks could therefore receive the most from the receivership? We need a full inquiry, we need support to ensure that those farmers are compensated, and we need him to see what help he can give.

Order. Before the Secretary of State replies, may I mention what will be apparent: questions are fast becoming threesomes and some trimming is required?

To be honest, I am not sure that an inquiry is required. Dairy Farmers of Britain had problems and in the end, despite the efforts of the members, it was not capable of being saved. I agree with my hon. Friend that receiving 10p a litre is impossible for farmers, and that is why Milk Link’s offer to all the remaining farmers to buy at an average of 18.45p a litre is to be welcomed.