Below is the text of the speech made by Michael Jopling, the then Conservative MP for Westmorland, in the House of Commons on 4 May 1978.
I beg to move,
That an humble Address be presented to Her Majesty, praying that the Milk (Great Britain) (Amendment) Order 1978 (S.I., 1978, No. 469), dated 21st March 1978, a copy of which was laid before this House on 23rd March, be annulled.
I must begin by declaring my interest as a farmer, but not as a dairy farmer. We have prayed against the order not necessarily to oppose it or to force a Division but to seize the opportunity of inquiring into the Government’s intentions about the milk industry in the year or so ahead. We feel strongly that it is necessary to have the debate in view of the serious uncertainty now facing the milk industry.
I hope that the Minister of State has something in his brief that acknowledges that uncertainty. It is uncertainty that necessarily followed the end of guaranteed prices for milk at the end of 1977. It is uncertainty whereby the Milk Marketing Board cannot accurately forecast producers’ prices as it used to be able to do for the period ahead. There is uncertainty about the whole future of the Board.
Order. In order that everyone shall know my interpretation of how far we may go, I advise the House that, while it would be in order to discuss the reasons for the consequences of the proposed changes in the maximum prices at which raw milk may be sold for heat treatment for subsequent resale for home consumption, it would not appear to be directly in order to debate the price of milk for retail sale as that part of the 1977 order is no amended by this order.
On a point of order, Mr. Speaker. We are in some difficulty. There has been a reduction in the maximum wholesale price for milk, which is the price received by the Milk Marketing Board. That has a serious implication for the whole of the milk industry. I hope that we shall be allowed to discuss the implications of the reduction in the wholesale price of liquid milk. We shall be in serious difficulty if we are not able to discuss the effect of the reduction in price on the whole of the industry, from the milkman who delivers the milk on the doorstep to the man who gets the cows in at 6 o’clock in the morning. It is a matter that has serious implications throughout the industry and I hope that we shall be allowed to discuss them.
I should also have said that it would be in order to point to the anomalies that arise from the fact that lower prices are being paid to farmers while the retail price remains unchanged. I shall be as tolerant as possible.
Knowing your tolerance over many years, Mr. Speaker, I am sure that we shall be able to proceed in our normal way. We are most grateful to you, Mr. Speaker, for your help and your ruling.
I was trying to explain that the effect of the order adds a good deal to the uncertainty that already exists throughout the industry. I was able to explain some of the uncertainties that have arisen.
I was explaining how the effect of the order would add to the uncertainty that is caused, for instance, over the future of the Milk Marketing Board. That is a matter about which we have often spoken in the House. In fact, nothing brings the parties together more than our joint determination to keep our marketing boards with their vital powers.
I hope that the Minister of State will acknowledge that the Opposition have always supported him in his efforts to preserve the boards—particularly the Milk Marketing Board. This order will make the life of the board much more difficult.
Mr. Nigel Spearing (Newham, South)
The hon. Gentleman mentioned, I think to the surprise of some hon. Members who assumed that this was an increase in the price that would be paid to the Milk Marketing Board, a decrease. Can he tell us what the decrease is, because a decrease in any price is of consequence to the Board and to the whole of its operations?
Yes. If the hon. Gentleman will look at the order that we are debating and the parent order—Statutory Instrument No. 2054 of 1977—he will find that in the Metropolitan police district the intention is to reduce the maximum price of raw milk on sale for heat treatment and resale by ·720p per litre, to reduce the price at a dairy situated in England and Wales which is not in the Metropolitan police district by ·674p per litre and in a number of the outer islands, which I shall not read out, by ·68p per litre. Those figures rely entirely on my arithmetic, which is not all that reliable. If the Minister of State would confirm them later, we would all be grateful.
In view of the effects of the order on the future arrangements of the Milk Marketing Board, we should appreciate a progress report from the Minister on how the negotiations for the future of the board are working out in Brussels. It is very close to the meat—or the milk—of this order. We have heard stories in the past few days that many of the first proposals over the future of the board are likely to be resolved in a satisfactory way. I shall not go into detail on those matters. In particular, we understand that a reduction in the percentage of liquid milk sales and fresh product sales from 50 per cent. to 40 per cent. is likely and that a reduction from 150 to 25 cows for producer retailers who want to opt out of the scheme is also likely. These matters seem quite satisfactory. However, I should be grateful if the Minister of State would confirm whether these stories are correct.
There is above that a vital issue which is causing just as much uncertainty in the milk-producing industry at all levels on both the distribution and the production sides. I wrote to the Minister of State about this matter this afternoon. I hope that he got my note. I see from the way that he is nodding that he did. It concerns the present negotiations over the future of the Milk Marketing Board.
I know that a number of people are concerned that a settlement might be reached in Brussels which, while appearing satisfactory in the short term, would leave a serious danger that, after a number of years, the board’s powers might be removed. It is felt to be essential that whatever arrangement is reached should be permanent and that it should not leave the board uncertain as to its position within the constitution of the Community in future, a position that could be challenged in the courts in years to come. I am sure that the Minister is aware that this matter is causing a good deal of concern throughout the industry. There- fore, we should be grateful if he would assure us that the Government will in no circumstances agree to a solution with these shortcomings in it.
I turn to the heart of the order. Its effect is to stabilise the retail price of milk to housewives. At the same time, it reduces the wholesale price of liquid milk. This dual act seems to sum up most of the dilemmas facing the Government in the intricate maze of action and reaction surrounding the milk market.
I acknowledge the fiendish difficulty with which the Government are faced in trying to stabilise the milk market using the various price structures which exist. I shall give examples of the action and reaction involved. Following the poor year for milk sales in 1977, which was caused partly by the escalation of tea and coffee prices, unfortunately there has been a further fall in liquid milk sales in 1978, following the rise to 12½p per pint on 1st January. The Milk Marketing Board told me today that it expects the March-April sales figures to be down about 2 per cent. on 1977. It would be interesting if the Minister of State commented on that figure.
We do not argue with stabilising the price on the doorstep at this time. Milk sales are highly volatile, depending on price, and it is probably right not to raise the retail price for the time being. But the Milk Marketing Board has said that it thinks that there should be a further rise of ½p per pint at the beginning of June. This is a matter upon which we find it difficult to comment. But it would be helpful if the Minister of State told the House the Government’s reaction to that proposal.
The second interaction following the order is caused by the reduction in the level of the maximum wholesale price for liquid milk. The implication of the order is to reduce on average the wholesale price of milk by about 0·7p per litre from 1st April. It is intended to allow the distribution trade its extra costs. The House will agree that in a period of inflation, with distribution costs increasing as they are, when there is a commitment to recoup the distribution trade for these increased costs, the Government have no option but, first, to increase the retail price or, secondly, to reduce the wholesale price. They can perhaps do a little of both. They have chosen to reduce the wholesale price.
At this time of increased distribution costs, with sales of liquid milk slightly down, we do not quarrel with the Government’s decision to stabilise retail prices and to reduce wholesale prices. But this step gives rise to a whole set of new actions and interactions in addition to those I have already mentioned.
A reduction in the wholesale price of liquid milk cuts the crucial gap between the wholesale price of milk for doorstep sales and the wholesale price for manufacturing into cheese, butter and other products. I refer to this as a crucial gap because if that gap were to become too large, it could give rise to temptations to import milk from the rest of the Community. We believe that that would be disastrous for our liquid milk market.
If liquid milk were imported, it would go for sale primarily in the supermarkets. Those sales would erode doorstep sales. That would push up the unit price of distribution. We should then be in a vicious circle of cause and effect. What is the Government’s view about the dangers of imports? What is the crucial level of the gap between the wholesale price for liquid milk and the wholesale price for manufacture which will prevent imports?
To what extent can our health and hygiene regulations be used to prevent liquid milk imports? Although the reduction in wholesale prices that is implicit in the order makes imports less likely, we are still deeply worried and would be grateful for any information from the Minister.
The order will have serious repercussions for the milk producers. If the wholesale price of liquid milk is reduced, the producer is paid less. That is a matter of serious concern to him. As with the distribution trade, where margins are protected by this order, the dairy farmer’s prices are rising, too. The Milk Marketing Board told me today that whereas between April 1977 and April 1978 distributors’ margins went up by about 12 per cent., during that same period producers’ margins increased by only 2 per cent. We see here the same uncertainty to which I referred earlier.
The order, in seeking to make good the effects of inflation on distributors’ margins, reduces the boards’ income from liquid milk and puts them at a serious disadvantage. Perhaps one of the most important implications of the order, is that it puts producers at the same disadvantage.
It will become extremely difficult for the boards to influence the seasonal aspects of milk production, which is one of their vital functions in a market so heavily weighted towards liquid milk sales. The boards will be unable to announce future prices, which means that farmers will be unable to plan properly. Previously the boards have been responsible for considering how increased costs should be handled in order to ensure a continuity of supply, especially in the winter months. Now the Government seem to have taken over that role under the order. We believe that Whitehall, with the present policy of political interference by Ministers, will not do the job as well.
Mr. Jerry Wiggin (Weston-super-Mare)
This is a most important point. As I understand it, the problem is guaranteeing producers’ prices not for the term of this order but for next winter. That is the producers’ main fear.
I am grateful for my hon. Friend’s intervention. I shall come to that point.
Will the Minister explain the Government’s intentions on this new level of interference with the milk price, the structure of the industry and the seasonal aspect of production, which was hitherto the responsibility of the board? He should use this debate as an opportunity to explain how far the Ministry intends to do the jobs which have been done so successfully—there is unanimous agreement on that—by the boards in the past.
I turn to the price of the milk that goes into the manufacture of butter, cheese and other products. In that respect it is possible that the boards could do something to maintain producers’ returns in view of increased costs which have caused difficulty for the board. Because of the Government’s action the Milk Marketing Board has had the ground pulled from under it.
What were the implications of the Government’s reaction to the debate at the beginning of the year? The Government then refused to acknowledge the wording of the motion agreed by the House—namely, that the green pound was to be devalued by 7½ per cent. forthwith. We still have not had a 7½ per cent. devaluation on milk. We were told in January that the 7½ per cent. devaluation on milk was likely to come into effect when the new Community prices came into effect. We hoped that that would happen on 1st May but, because the talks are dragging on, we are now told that the date will possibly be 20th May—and it will not surprise me if the eventual date is 1st June.
The consequence of the Government’s refusal to accept the will of the House in implementing a green pound devaluation forthwith has meant that masses of dairy produce, particularly butter, have flooded into this country to beat the time when a lower level of MCAs would be paid in respect of imports of dairy produce.
That flood of dairy produce has totally depressed the market and the board tells me that it sees little chance during the year of increasing the price of milk that goes to manufacture in order to stabilise producers’ returns through that method. That is a serious indictment of the way in which Government action has brought added uncertainty and prevented producers from getting a better price to recoup their high level of increased costs this year.
Where is the producer left at the end of all this when the implications of the order come into effect? He is faced with rising costs and little chance of having them fully recouped, with no idea what price he will receive for the rest of the year. I am now dealing with the point mentioned by my hon. Friend the Member for Weston-super-Mare (Mr. Wiggin). The producer sees the possibility or likelihood of grain and therefore feed prices being set to a considerably higher level than they were last season.
Furthermore, the producer finds a great deal of uncertainty over whether the Government will be pressured into banning exports of live animals. I do not want to go too deeply into that subject, but in passing I wish to say that the producer sees before him a good deal of uncertainty, because he does not know whether the Government will allow themselves to be pressured into banning live exports. Such a ban would have a serious effect on the returns of dairy farmers in terms of sales of calves and culled cows.
I do not remember a time when there was greater uncertainty facing the dairy farmer than there is today. The National Farmers Union has already said that the dairy farmer is left as a residual legatee, as it were, since he is last in line when milk prices are considered. The Government have a good deal of explaining to do, and I hope that the Minister will acknowledge this uncertainty. It will not do for the Government to say that there will be a thorough review in the late summer when maximum prices for the future will be set. The Opposition believe that the milk industry could be in a serious mess before that review is complete, and in a worse mess during autumn and winter periods.
I do not in the least belittle the fiendishly difficult problems that the future of the milk industry sets for Government, but it is vital that the Government use this opportunity of explaining to the House, and thus to the whole milk industry from the milkman who delivers on the doorstep back to the man who gets the cows in at 6 o’clock in the morning, just what the future will be. There has never been more uncertainty, and there has never been a better opportunity for Government to explain what the future is and how they intend to reduce those uncertainties.