Dairy Industry

Thursday 13th September 2012 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Evennett.)

14:30

[Mr Charles Walker (in the Chair)]

A lot of hon. Members want to take part in the debate, so I will make myself immediately unpopular by saying that, outside the two opening speeches and the ministerial and shadow ministerial speeches at the end, you will have a six-minute limitation. You can take less time, but you will have six minutes. We will give you one injury time for one intervention.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Walker. To put a time limit on speeches was a courageous decision for someone who is currently running for office.

I welcome the new Minister to his post. He may know that the last Liberal Minister to hold the farming brief was Auberon Herbert, who was President of the Board of Agriculture between 1914 and 1915. However, that does not bode well for the current Minister because Herbert only held his post for one year and did not survive the forming of a coalition Government. None the less, I wish the Minister well in the post.

I am sure that hon. Members wish to pay tribute to the outgoing Agriculture Minister, the right hon. Member for South East Cambridgeshire (Mr Paice). While he and I may not always have agreed, he did his best and will be sadly missed by the farming industry and by members of the Environment and Rural Affairs Committee.

I pay tribute to the hon. Member for Tiverton and Honiton (Neil Parish). We served together on the Select Committee, and as many Members know, he is a mine of information on agriculture. He and I have combined on more than one occasion to ensure that our farmers’ voices have been heard in Parliament. He is a real champion of Devon farmers and regularly makes the case that Devon cream is far superior to Cornish cream. With your permission, Mr Walker, he will sum up at the end of the debate.

A number of important debates are taking place in the House today, and I appreciate that Members might not be able to stay for the whole of this debate. None the less, I thank everyone for coming along.

Members will know that despite the favourable market conditions, the UK dairy sector has been a source of dispute for a number of years. During the summer, the public campaign led by dairy farmers to protest against large cuts in milk prices captured the British public’s imagination. The profile generated by that campaign combined with the lobbying and overwhelming support from all parts of the House have resulted in some significant progress. Indeed, more than 70 parliamentarians went to the National Farmers Union’s dairy summit in July. Several retailers that were identified as not doing enough to support the dairy farmers took belated steps to address some of the unsustainable prices that they paid for their milk. That has helped processors either rescind or reverse the effects of their proposed August milk price cuts. Many of the same retailers have made commitments to address their long-term pricing models for liquid milk. That is very welcome.

In recent days, Arla Foods has committed itself to a 2.5p per litre rise, and today Müller-Wiseman has announced that it will raise its price to 29p per litre. Agreement has been reached between farming unions and Dairy UK on a voluntary code of practice for dairy contracts. However, the industry still suffers from systemic problems that need to be addressed. As the NFU has warned this week, if we do not take action, recent progress will be nothing more than a sticking-plaster solution.

The milk supply industry is not made up simply of producers and processors. Supermarkets also have an important role to play in ensuring fair prices. It is simplistic to portray all retailers as the villains of the piece; the situation is much more complex. Some retailers, such as Tesco and Sainsbury’s, have taken progressive steps in the liquid milk sector, with dedicated pools of producers, and they should be congratulated.

The cheese market remains much more challenging for farmers, however. I hope that one outcome of the code will be to increase transparency in the pricing of milk going to make cheese. Last year, the Select Committee took evidence from Tesco for our report on the dairy industry. We found dishonest its arguments on why it does not provide the same support for farmers who produce milk for the cheese market. It is ludicrous to suggest that there is not enough stability in demand for a workable contract for cheese.

The Select Committee was clear that if supermarkets such as Tesco continue to rip off farmers, the Government should be prepared to step in. Tesco is by no means the worst offender, and I am disappointed to have to report that we are repeatedly told that the Co-op provides the worst deal to dairy farmers. It is vital that customers and Co-op Members apply pressure to those retailers to provide a fairer share of the retail value to their suppliers.

The recent crisis was brought about by the reckless actions of Asda, which was selling milk at a loss-leading price of eight pints for £2, which is less than the price of bottled water. That in turn sparked a price war, which inevitably led to a cut in the price being paid to farmers. While supermarkets have seen quarter on quarter rises in their profits, many farmers have been pushed to the brink. Although I welcome moves by Morrisons, Asda and the Co-op belatedly to increase their price, they have a responsibility to ensure that we have a sustainable dairy industry now and in the future.

[Dan Rogerson (North Cornwall) (LD)]

I congratulate the hon. Gentleman on securing this debate. Although he has been making a good case, he made some rather strange assertions about cream, which we will brush over. Does he agree that when looking at how the price is passed on to the various people in the chain, the trends that have emerged are that the processors’ share seems to have been relatively static, the retailers’ share has grown and the farmers’ share has shrunk? Anything that we do to look at the relationship between the processor and the farmer must also take account of the relationship between the retailer and the processor.

[Thomas Docherty]

The hon. Gentleman is correct. I will touch on the role that the groceries code may play in that process in the future. I did not say that I necessarily agreed with the assertions about Devon, but they have been forcefully made on more than one occasion.

I say well done to those retailers who have belatedly got on board, but why did it take them so long? The actions of the House and the dairy industry forced the retailers to take those steps. Members on both sides of the House will look to the Minister to hold all elements of the supply chain to account. We all want the groceries code and the voluntary code to work, but it is vital that he takes the lead on pushing through these issues.

On the specific case of the adjudicator, the previous Government gained cross-party support for a supermarket ombudsman to ensure a fair deal for farmers and food producers from the major retailers. Following a Competition Commission inquiry in 2008, Labour introduced a new groceries supply code of practice in August 2009, which came into effect in February 2010. The Competition Commission also recommended the creation of an ombudsman to enforce and monitor the code of practice.

This Government presented their Groceries Code Adjudicator Bill in the House of Lords before the summer recess. However, the Bill grants only limited power to the adjudicator to tackle the issues in the dairy industry. It will be limited to tackling the direct supply between the processor and the supermarket, or the farmer if they have a direct contract with the supermarket, and will not be able to deal with a three-party contract. I hope that the Minister will reflect on that and listen to the Select Committee’s cross-party advice.

[Mr William Cash (Stone) (Con)]

It would be highly desirable, would it not, if the milk that is used in the Houses of Parliament came from UK sources at a fair and sustainable price? Does the hon. Gentleman agree that if we gave a lead in the Houses of Parliament, it would send out a big message?

[Thomas Docherty]

The House of Commons Commission has urged the catering and retail services to ensure that we operate within the European rules—I am conscious that I am now setting off a whole new avenue for the hon. Gentleman—but perhaps the Minister will set out what steps he will take to ensure that all Departments buy their milk from British farmers.

The issue that we have faced time and again during this dispute is that retailers have argued that the cuts on farm-gate prices were being implemented by the milk processors and not by the retailers. The reality is that, as the hon. Member for North Cornwall (Dan Rogerson) mentioned earlier, the downward pressure has come from the supermarket shelves, and that pressure is passed on to the milk processors, who then pass it on to the producers.

We have urged Ministers in the Lords to keep open the option of extending the powers of the groceries code adjudicator. I hope that when the Bill comes to the House of Commons, the Minister will consider talking to his colleagues in the Department for Business, Innovation and Skills about the potential of extending the GCA’s powers if necessary.

In closing, I have a few questions to put to the Minister.

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

Before the hon. Gentleman finishes, I hope that he will give us an indication of what the Labour party’s position is with regard to bovine tuberculosis, which of course is the other great threat to many of our dairy farmers.

[Thomas Docherty]

I do not speak for the Labour party; I think that my hon. Friend the Member for Ogmore (Huw Irranca-Davies) will have an opportunity to set out whatever issues he wishes to when he speaks, if he has time to do so.

I am conscious that other Members wish to speak, so I will conclude very briefly by asking the Minister some questions. If the voluntary code does not deliver, will he step in and consider regulatory action? Will he tell us when he expects the code to be published? I understand that it is waiting for clearance from the Office of Fair Trading, but I am sure that he will try to ensure that it is published as soon as possible, so when will that be? What assurance has his Department been given about the full implementation of the voluntary code by all milk processors? As the signatory to the code is Dairy UK and not all the players, how will the Department for Environment, Food and Rural Affairs ensure that all the processors play fair? When do the Government expect to bring forward a consultation on the dairy package? I would be grateful to him if he gave us an indication of some of those timings. Finally, when will the Government publish the framework that will underpin the establishment of producer organisations?

I am very conscious that a large number of Members wish to speak today; I am sure that this will be an excellent debate; and I commend everyone who is taking part.

14:41

[Neil Parish (Tiverton and Honiton) (Con)]

Thank you, Mr Walker, for calling me to speak. It is a great pleasure to speak in this debate.

I thank the hon. Member for Dunfermline and West Fife (Thomas Docherty), because he and I have secured this debate. He has a great knowledge of the retail trade, so perhaps with that knowledge, my own knowledge of farming and some cross-party support we can get a really good price for milk. We want this debate to be about the price of milk, and the fact that we have nearly 40 Members in Westminster Hall who want to speak in this debate shows how important the issue is to everyone in this House. In fact, I suspect that at the moment there are probably more people in Westminster Hall than there are in the main Chamber. I thank all Members who are present for coming, and the number of Members who are here shows the seriousness of this matter. I also thank the Backbench Business Committee for granting this debate; it is a very important one.

Confidence in the dairy industry has been at an all-time low this year, not only because of the prices for its products but because we have had probably some of the worst weather that we have ever seen in the UK. As a result, we have had some of the worst May silage, and all those types of things, coupled with the high price of cereals, have meant that farmers are being crushed between low prices and the high cost of feeding animals.

Ten years ago, there were more than 26,000 dairy farmers; now we are down to fewer than 15,000 dairy farmers. That shows how many dairy farmers have been forced out of the industry, and how things have become more and more competitive.

It is good to see the new Minister here in Westminster Hall today and it is also good to see my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the Chairman of the Environment, Food and Rural Affairs Committee, here.

The voluntary code of best practice on contracts between milk buyers and dairy farmers is an important settlement. It will prevent producers from being trapped in unfavourable contracts and it will add much-needed transparency to milk contracts. I pay great tribute to my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), who worked absolutely tirelessly with all parties to reach that agreement. It is a great legacy and I know that Members from all parts of the House are grateful to him for his profound knowledge of farming and for his support.

I welcome the new Minister to his post, and I hope that he can pursue the voluntary code as quickly as possible. The contract between producers and purchasers should set out a clear price. It should also set out that in future producers must receive at least 30 days’ notice of a price change; that retrospective price adjustments will not be accepted; that dairy producers are allowed to supply more than one processor when their primary milk buyer seeks to cap their production; and that supermarkets setting farm prices must engage meaningfully with farmers and their representatives, rather than just driving farmers into a corner and every now and again adding a sop, when what farmers need is a long-term future. The code must be implemented and then monitored for compliance and effectiveness. If it is not working, the Government must consider what statutory powers and mandatory powers can be added to it.

The Government have also made a very welcome and long-overdue move to introduce the Groceries Code Adjudicator Bill. It was presented to the House of Lords only last week and we now look forward to its Second Reading.

This issue is about fairness. It is also about supermarkets, particularly the few large ones that dominate the retail market and that have been able to increase their profits at the expense of food producers by using—

[Mr Ian Liddell-Grainger (Bridgwater and West Somerset) (Con)]

There is one issue that my hon. Friend forgot to mention just now. He lives in Somerset and I represent a Somerset constituency. However, he forgot to mention the Wiseman dairy at Bridgwater, which is one of the processors, and the processors are equally culpable in this matter.

[Neil Parish]

I thank my hon. Friend for his intervention. I will be talking about processors shortly, but he is absolutely right to make that point. However, we should not forget that processors, especially when there is a fixed price with the supermarkets, are very often the ones that get squeezed, because there is a guaranteed price to the farmer and then the farmers enter into a trade war with their supermarket friends—or enemies—and at the end of the day it is probably the processor that actually pays the price.

We must move more swiftly to make the Groceries Adjudicator Code Bill law, so that supermarkets play by the rules, producers have confidence that their complaints will be taken up and third parties can also raise issues with the buyers. If the supermarkets and other larger retailers are not doing anything wrong, they have nothing whatever to fear from the groceries code adjudicator. However, some supermarkets and other large retailers are less than enthusiastic about the adjudicator, so I feel that there is much to answer for.

It is also very important that third parties, such as unions and trade associations, are able to submit complaints to the groceries code adjudicator on behalf of producers, so that producers are able to benefit from the legal advice and support that those third parties may be able to offer.

All supermarkets can and should do more when it comes to responsible sourcing of all dairy products. The pursuit of ever greater margins, coupled with a short-termist approach to sourcing British dairy products, is jeopardising the future of the British dairy industry. Marks & Spencer, Waitrose, Tesco and Sainsbury’s should be acknowledged for introducing more transparent pricing mechanisms into their milk groups but, as the hon. Member for Dunfermline and West Fife said earlier, they have got to do much more about the cheese market. Retailers that have promised to do more, such as the Co-op, Morrisons, Lidl, Farmfoods, Iceland and Spar, have got to be brought to the table actually to do something, rather than just promising to do something, because let us not forget that all the time they are driving the price of milk down.

The point that I want to make very strongly to everybody here in Westminster Hall today is that consumers already pay enough money for their milk. The problem is that many of the large retailers are taking 16p in profit out of that money. That is where the problem is, and therefore some percentage of that profit needs to go back to the farmer. It is not just a case of farmers breaking even; they need to be able to make a profit to reinvest.

[Mr Marcus Jones (Nuneaton) (Con)]

On that point of reinvestment and making milk production more efficient, does my hon. Friend think that there has been an absurd situation in recent years whereby the regional development agencies have been distributing Government funding to try to support farmers in that regard, but in my constituency farmers on one side of the A5 have been unable to access that funding whereas on the other side of the A5, and under a different RDA, farmers have been able to access it? Does he agree that we need to have a more transparent system, a more level playing field and a sensible amount of funding from Government to try to help our farmers to become more efficient?

[Neil Parish]

Yes. My hon. Friend raises an interesting issue. It is not only a question of RDAs and which side of the A5 they are on; it is also a question of which side of the border people are on, because there are probably different policies in Wales and Scotland too. At the end of the day, all these things distort the market and we should not distort the market with public money. We need a level playing field, so that farmers can compete very well together.

I want to ask the Minister for an update on the milk package proposals, particularly on the establishment of producer organisations that will be able jointly to negotiate contracts, collaborate over price and adapt the production of their members to market demands. I hope that the farmer-owned co-operatives will be able to work more together to drive the price up, rather than compete with each other, which sometimes drives the price down in the liquid market.

It is also vital that farmers are given more bargaining power. Today, 87% of milk comes from just five companies, resulting in an effective monopoly in some regions.

[Neil Carmichael (Stroud) (Con)]

The producer group question is really important, because it leads us on to the contracts. It is very important that contracts are fair for farmers; they are already rather too prone to defend the position of the purchaser. Let us ensure that the farmer gets a fair chance in the contract.

[Neil Parish]

I welcome my hon. Friend’s contribution. More producer organisations being able to negotiate decent contracts, and being able to cut the contracts within three months, which is what the voluntary code is all about, will help to drive the price up. In the past, some contracts have done the reverse, and have driven the price down.

Currently, there are no formally recognised producer organisations operating in the dairy sector, nor is there a definite interpretation of what the dairy package regulation means for the establishment and recognition of producer organisations known to the industry. Members will hiss when I say that my experience is that producer organisations are much stronger in many other countries across Europe and, dare I say it, probably get a better price because of that. Let us not always shun what may be done across the channel, but endorse some of it if it improves the price to farmers.

[Sheryll Murray (South East Cornwall) (Con)]

Does my hon. Friend agree that if producer organisations are to have clout they have to represent everyone in the industry and not be dictated to by the large producers, as we have seen happen in other industries, such as fisheries?

[Neil Parish]

My hon. Friend is absolutely right. Farmers’ great strength is their independence, but sometimes they do not get together as much as they should. This is an opportunity, with producer organisations, to do precisely that. It is important that the Rural Payments Agency is in a position to formally recognise groups of farmers who wish to constitute themselves as a dairy producer organisation before spring 2013. We have to stop talking about that, and do it.

The Government must also continue their work in making farming and the dairy industry more competitive, through cutting regulation, waste and red tape. The independent taskforce, set up by Richard—Dick—Macdonald, has been successful, but it means that the Department for Environment, Food and Rural Affairs has revoked some 39 statutory instruments only to turn around and introduce a further 41. We have, therefore, to run a little faster to get rid of regulation.

Farmers have to spend a great deal of their time filling and refilling forms on everything from livestock movements to nitrates regulation. The cost of current regulation is upward of £5 billion a year, with 50% of all DEFRA regulations coming from the EU. In particular, it is important that the Government look again at the nitrate vulnerable zone, because I do not think that it is scientifically based, and it costs the industry a huge amount. Ultimately, DEFRA must go further in cutting the barriers to growth domestically, and give Parliament more scrutiny over EU regulation coming in.

Farmers are never going to get a good price while we flood the UK market with liquid milk. The majority of milk produced in this country is for the liquid milk market, with only 49% of it going into processed products such as cheese and yogurt, which is far less than in many other countries. For instance, in Eire—the Republic of Ireland—80% of the milk is exported.

[Mr Charles Walker (in the Chair)]

Order. The hon. Gentleman has had more than the allotted time. Out of deference to him, I will let him start to wind up now. I will give him one more minute.

[Neil Parish]

I am very close to the end.

We need, therefore, to get more milk into the emerging markets of China and the far east, to ensure that we take more milk out of the system and create greater competition, which can drive up the price.

Finally, please can we ensure that the groceries code adjudicator is given real teeth and comes in quickly? Please can we ensure that all the work that the previous Minister did on the voluntary code is up and running immediately? When are the Government going to spend the £5 billion earmarked for producer organisations? Can we keep up the good work that we have done on eradicating tuberculosis? Healthy livestock, healthy wildlife.

[Mr Charles Walker (in the Chair)]

Lots of colleagues want to speak. I was slightly generous to the hon. Gentleman, but I really am going to do six minutes, with a minute for an intervention.

14:49

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate.

Over the summer, much of my political work centred on the dairy industry. I was invited by the National Farmers Union to meet local farmers, a meeting hosted by Mr and Mrs Thomas of Dolau Gleision farm near Llandeilo. It was an extremely interesting experience. I was chaperoned into a nearby barn, where the local farming community sat on rows of hay. It was a bit like “Question Time”. I also had a detailed meeting with the executive of the Farmers Union of Wales in Carmarthenshire, at which we discussed policy options, and my Assembly colleague Rhodri Glyn Thomas and I arranged an open meeting on the eve of the Royal Welsh show in Llandeilo. To his credit, the Welsh Deputy Minister for Agriculture, Food, Fisheries and European Programmes, Mr Alun Davies, attended the meeting at extremely short notice.

Feelings in all those meetings were running extremely high. Most farmers had just received news that they were facing price cuts of at least 2p. A large number of farmers were threatening to spill their milk down the drains, and many did not attend the meetings because they were picketing processing units across the border. Thankfully, and to his credit, the UK Minister at the time acted, and during the Royal Welsh show announced progress on a voluntary code of best practice between processors and producers. Together with the milk price cuts being postponed, that was enough to restore calm in the countryside and avoid a summer of discontent, which meant that I could enjoy the rest of my August holidays.

The process culminated with the announcement of a finalised voluntary arrangement earlier this month, which is undoubtedly a step forward. However, the key question is whether it will result in a fair price for farmers for their product. At the end of the day, that is key, as well as creating a fair and transparent supply chain. Unless farmers are confident about the future prospects of the industry they will not commit to dairy production.

I welcome the moves to equalise the relationship between producer and processor, specifically in the contractual arrangements. Previously, producers were tied to a processor for periods of longer than a year, whereas the processors could cut the price on a whim. The voluntary agreement, as I understand it, will ensure that processors have to give producers 30 days’ notice before dropping prices, but producers will have to give three months’ notice. Although the agreement is a step forward, the balance will still be weighted towards the processors.

There has been broad support for the voluntary code. NFU Cymru has always championed a voluntary agreement. The Farmers Union of Wales, which traditionally shares my more militant tendencies, has also welcomed the announcement. I am not being pessimistic, but I believe that it is incumbent on both the UK and Welsh Governments to prepare a policy response, if the voluntary code breaks down.

During the public meeting in Llandeilo, the Welsh Deputy Minister said that he had the power to introduce a Welsh dairy package. I was completely wrong-footed by that suggestion, because I had always thought that such things had to be introduced at member state level. However, during a visit to Brussels last week, the Welsh Affairs Committee met with Hermanus Versteijlen, the European Commission’s director of agriculture and rural development. I naturally asked him about that, and he said that a dairy package could be implemented wherever the political competence lay, which seems to indicate that it would be possible for the Welsh Government to introduce one. I urge the Welsh Deputy Minister—I hope that he is listening in Cardiff—and stakeholders in my country to at least begin to prepare the framework for legislating on a Welsh dairy package. Having something concrete in draft form might even concentrate the minds of processors, in relation to ensuring that the voluntary code that was set out earlier this month works.

I have a few questions for the Minister on the voluntary code. How does he expect the code to affect the expected legislation on the grocery ombudsman? What measures will he use to judge the voluntary code’s effectiveness? How do British farming Ministers view the implementation of the European Union recommendations for producer organisations? How will they develop on these isles? What is the potential threat of quotas ending in 2015? In informal meetings in Brussels we were led to believe that the Irish are gearing up vastly to increase their production to flood the UK market. Will the Minister indicate his thinking on the potential threat of that future development?

[Mr Charles Walker (in the Chair)]

I have one last notice. The Clerk will ring a little bell when a speaker has a minute left. That is an innovation.

15:00

[Jeremy Lefroy (Stafford) (Con)]

I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing this debate.

Staffordshire is one of the UK’s leading dairy counties. Dairy farming is important to my constituency; let us not forget how important it is to so many others. Some 70 trades and suppliers, possibly more, are estimated to depend on each 400-acre dairy farm.

Another almost unique feature is that Staffordshire has kept its county farms, which were set up after the first world war. Half of Staffordshire’s county farms, some 50 of them, are in my constituency of Stafford. Those farms provide a route into dairy farming for young people, which is essential because the average age of farmers is between 55 and 65, depending on who we listen to.

Last Friday, I attended a meeting at Church farm, Coppenhall, at the invitation of the Madders family, with many dairy farmers and the National Farmers Union. We discussed the problems they face. As time is brief, I will highlight three or four areas.

Clearly, the first area is milk prices and fair treatment. The common refrain was, “Give us the highs in prices and we’ll take the lows.” It is often said that the processors and supermarkets are quick to put down the prices paid to farmers but are slow to raise them when the market goes up, and the market will surely go up because dairy production figures across Europe in August 2012 show that in Germany production was 0.3% down, in France production was 1.7% down and in the UK production was 3.7% down. Those figures reflect a combination of the weather and low milk prices. So there will surely be price rises, which must be passed on to farmers.

The second vital area is marketing. Many of my constituents are already taking up the challenge of adding value—Bertelin Farmhouse Cheese in Ellenhall, for example, which was previously in the constituency of my hon. Friend the Member for Stone (Mr Cash), who will no doubt know the farm—but there is much more potential. I have recently had to start buying lactose-free milk, for which there is a huge market in the UK, yet the milk I buy is made in Denmark by Arla.

[Mr Cash]

Does my hon. Friend agree that there are also enormous export opportunities for dairy farmers? I have just come back from India, from where people will shortly be coming to see Staffordshire dairy farmers precisely to try to develop joint ventures. Is that not a great opportunity?

[Jeremy Lefroy]

As so often, my hon. Friend is a prophet. I was just about to say that.

The previous Minister, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), who has rightly been applauded, was in China on a trade mission and saw no British dairy products, despite there being many from the Netherlands, Germany, Denmark and so on. We must do more, and the industry must do better.

Supermarkets, too, can do more. On a holiday in the Republic of Ireland a few years ago, I entered a Tesco that was festooned with Irish tricolours promoting products processed or produced in the Republic of Ireland. I welcome that great idea. I want to see far more Union flags in UK supermarkets promoting British foods.

The UK Government, too, can do more, but, first, a word of praise from the farmers. They say to me, and I do not know whether hon. Members agree, that the Rural Payments Agency has improved considerably in the past two or three years, and due credit should go to the RPA and the ministerial team.

As the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) said, the current EU negotiations are vital. I am concerned to hear that British representation is not as strong as sometimes it should be. In a debate last year, I stressed the continued importance of single farm payments, particularly to the small farmers who continue to be the backbone of the UK dairy industry. The UK and Portugal are currently the only countries applying voluntary modulation from pillar one to pillar two. The concentration on environmental measures has clear benefits, but we should not go any further in that modulation if it puts us at a competitive disadvantage to our European neighbours.

I want to allow time for others to speak, so I will conclude by saying that I welcome this debate. The time is right for fair prices. I worked for many years in the coffee industry, in which I saw the impact of fair trade and fair prices. I would like to see a similar approach in the dairy industry, based on the voluntary code of practice, with supermarkets, processors and farmers working together.

Finally, I pay great tribute to those dairy farmers who work day in, day out, week in, week out, rising before dawn and going to bed late at night, to put those products on our tables.

15:06

[Mrs Mary Glindon (North Tyneside) (Lab)]

It is an honour to serve under your chairmanship, Mr Walker.

I congratulate my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) on securing this timely debate.

I speak not only as someone who has the honour of serving on the Select Committee on Environment, Food and Rural Affairs under the able chairmanship of the hon. Member for Thirsk and Malton (Miss McIntosh) but as someone who cares about fairness and the value that we as consumers should place on the items we buy to eat and drink.

My hon. Friends and I want a fair deal for both farmers and food manufacturers through a competitive and equitable supply chain for producers, processors and retailers alike. Hopefully, the voluntary dairy code, agreed between the previous Minister, the right hon. Member for South East Cambridgeshire (Mr Paice), to whom tribute has already been paid, Dairy UK and the National Farmers Union will positively address problems between members of the supply chain. The Government have described the code as a

“robust and proactive basis for a more effective system of raw milk contracts that will provide greater certainty and clarity for all parties.”—[Official Report, 4 September 2012; Vol. 549, c. 18WS.]

The question remains: is that voluntary approach enough? Should the Government strengthen the code with additional measures, including legislation? Will the Government consider Labour’s request for a strengthened regulator across the whole supply chain, including the dairy sector, to avoid the crisis we have seen affect dairy farmers during the past year?

Although DEFRA has engaged with the farming industry and retailers to develop the code, the Department of Health, in considering the future administration of the nursery milk scheme, is possibly putting at risk prices paid to farmers. Concerns have been raised with me by the School and Nursery Milk Alliance, a group of organisations, including from the dairy sector, committed to promoting the benefits to children’s health and well-being of drinking milk in schools and nurseries.

The Department of Health is considering four options, one of which would create a national contract for the supply and delivery of milk to all early years settings. That option would involve consortia taking part in a competitive tender for the direct supply and delivery of milk at an agreed price to all child care providers registered with the scheme. The Department of Health seems to favour that option, as it is the most cost-effective measure. The alliance, however, has serious concerns that that delivery system may have a detrimental effect on the dairy sector if the Department of Health uses the supermarket price as a benchmark for the provision of milk.

The alliance urges the Government to consider the impact of a national contract on the dairy supply chain, especially the potential pressure on farmers to reduce prices further. There are further concerns that a national contract may also reduce local purchasing, affecting retailers and dairies alike.

On behalf of the alliance, I ask the Minister to make the case to his colleagues in the Department of Health regarding the implications of the proposed changes to the administration of the nursery milk review for dairy farmers. It is good that DEFRA should work with the dairy industry and farming unions to ensure an equitable system of pricing, but that work must not be undermined by any other Departments looking to make savings in their budgets.

I said at the beginning of my speech that I was concerned about the value that we as consumers place on what we eat and drink. It is time we looked at the real cost of the items we all take for granted in our shopping baskets. Support for the dairy industry and other food producers should come from the Government and other bodies, but until the consumer fully understands the effort and dedication by our food producers that go into each pint of milk or unit of food, and voices that understanding to retailers and others, will a fair price ever be achieved for commodities, including milk and dairy products? In the meantime, I hope that the voluntary code is successfully implemented, but I urge the Government to prepare to legislate for the fairest system possible.

15:10

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

I, too, pay tribute to the outgoing Minister with responsibility for farming, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice). I had the immense privilege and honour of being his Parliamentary Private Secretary for a year and a half. With his experience and expertise, he was one of the best farming Ministers this country has ever had. His departure is a great loss to the Government.

I set up the all-party group on dairy farmers in 2006, in the previous Parliament, because of the terrible crisis my Shropshire dairy farmers were going through. An important statistic to remember is that in 1997, 47 cows were slaughtered in Shropshire as a result of bovine tuberculosis; last year, that figure was more than 2,000. I repeat those figures: from 47 to more than 2,000. The misery that that disease has caused many of my constituents is appalling. When I set up the all-party group, 170 MPs joined it. Uniquely, the then Leader of the Opposition, now the Prime Minister, joined the group. I believe that that was the only all-party group he joined in the previous Parliament.

Our group produced a report in which the two recommendations were that we needed a limited cull of badgers and a supermarket regulator. At the time, we were told that it would be impossible to get either. We pleaded with the Labour Government to introduce a regulator and to take action on bovine tuberculosis. Our pleas fell on deaf ears. I am therefore slightly bemused to hear Labour MPs calling for us to support their actions on an adjudicator, because we pleaded on bended knee for years and no action was taken. One reason why the situation is so perilous at the moment is the inactivity of the previous Labour Government.

[Andrew George (St Ives) (LD)]

On the point about a supermarket or groceries code adjudicator, I have been chair of the Grocery Market Action Group for the past six years. I am sure that my hon. Friend will agree that it was only just before the 2010 general election that we had agreement from all three main parties that an adjudicator or ombudsman should be put in place.

[Daniel Kawczynski]

Indeed. I pay tribute to my hon. Friend, who is one of the leading proponents of the Groceries Code Adjudicator Bill. I look forward to working with him to get that proposed legislation through Parliament.

I want other hon. Members to be able to speak, so I will just briefly say that I have sat with dairy farmers at their kitchen tables, and seen those grown men burst into tears. The emotion involved in seeing their herds slaughtered is profound. I hope to hear from the Minister what steps the Government will take to address this appalling issue.

I will write to the Minister specifically with regard to a constituent of mine, Mr Jones of Pontsbury, who recently lost a lot of his herd. He has been given new figures on compensation that are much lower than he thought. He is worried that he will not have enough money to replace the cows he has had to send to slaughter. I would be grateful if the Minister looked at that case.

I reiterate the comments of my hon. Friend the Member for Stone (Mr Cash) regarding exports. I feel passionately about exports to north Africa and the middle east. Libya, Egypt and Tunisia are full of Dutch and Danish cheeses, yoghurts and other dairy products, yet there are none from the United Kingdom. I hope that the Minister will work closely with his colleagues in the Department for Business, Innovation and Skills to try to help the dairy sector find new markets in those countries.

Finally, I would like to put on the record that we now have a new Waitrose supermarket in Shrewsbury—the first one has just opened. My daughter and I go every Saturday to Waitrose, because it is the supermarket that pays most to dairy farmers.

15:15

[Ms Margaret Ritchie (South Down) (SDLP)]

I am pleased to serve under your chairmanship, Mr Walker. I thank my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) for securing the debate.

It has been a difficult summer for the farming industry, and for farmers in general. It has been a challenging number of months for dairy farmers, and I welcome this parliamentary time to debate the issue. The dairy industry is critical to the farming community and the broader agricultural industry in my constituency of South Down, where different conditions appertain to how prices are set for the dairy industry.

I am more than aware of the problems that exist for English producers. I attended the recent rally in Methodist central hall where that case was put strongly. In fact, we took evidence in the Environment, Food and Rural Affairs Committee, under the chairmanship of the hon. Member for Thirsk and Malton (Miss McIntosh), on the issue. From that evidence session, it was quite clear that dairy farmers here were financially challenged and looking for a better deal.

However, I would like to take this opportunity to concentrate on issues encountered by dairy farmers in Northern Ireland, who face similar problems combined with other potentially more pressing difficulties and, as the Minister will know, a different operating regime whereby prices for milk are set by the auction system. Raw milk prices are more volatile in Northern Ireland when compared with prices for the same commodity here owing to the exposure of the Northern Ireland dairy industry to world commodity markets. Approximately 80% of milk production in Northern Ireland is exported in one form or another, the majority of which is sent outside the European Union. The price volatility of global commodity markets has contributed to milk prices that are still 3p per litre behind last year’s higher figure.

Like producers in England and Wales, the industry in Northern Ireland has suffered from the drought in America and Russia, combined with an extremely wet summer, all of which has had a decisive impact on silage-concentrate prices across the market, and the resulting milk production rise has been calculated at approximately 4p per pint. The extremely wet summer has further increased the reliance on more expensive imported food concentrates as local silage and hay supplies become depleted. This is likely to continue into autumn and winter. Such conditions have largely negated the recovery in prices witnessed in the last few weeks at the most recent milk auction in Northern Ireland. The milk price at the latest milk auction in Northern Ireland was between 25p and 26p, with the price falling as low as 22p back in June. Notably, despite the slight rally, this remains markedly lower than the cost of production, which can run 4p to 5p higher, and is 3p lower than the price this time last year.

That cost of production has risen because of the wet summer and rising feed prices, and the situation is exacerbated in Northern Ireland as so much of our milk is exported, which makes our industry particularly prone to outside pressures and volatility that are quickly reflected in the auction system. In fact, I understand that price volatility is likely to remain a feature of the dairy industry in Northern Ireland. New ways will have to be found to minimise its impact on the industry.

A parallel issue is the price reductions in milk offered by some small independent retailers, which can also leave farmers vulnerable to market conditions. Milk is often used as a loss leader, with prices being dropped to a level that is not sustainable for the industry. They can be significantly lower than the price of production. It is also notable that market research has shown that customers are willing to pay up to an additional 5p per litre to ensure that farmers get a fair deal, especially when that is explained in terms of the sustainability of the dairy industry.

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Lady is making a powerful case. Is she as confused as I sometimes am by people insisting on fair trade coffee and tea, but not fair trade milk?

[Ms Ritchie]

I am with the dairy industry and with the hon. Gentleman on that issue. I live in the countryside and am well aware of how the situation affects not only dairy farmers, but those involved in beef and sheep production. They feel that they do not get a fair price at the farm gate. Farmers in Northern Ireland feel that they get a lower price than those in Britain.

In the light of all that, I note with interest the recent voluntary code of practice agreed between processors and non-aligned producers in England and Wales. In such a context, there is a need for a commitment by all sides to reach a similar agreement in Northern Ireland, where no such voluntary code of practice currently exists. I understand that the dairy industry in Northern Ireland decided to wait on the outcome of discussions in Britain before deciding whether the code would be appropriate to its circumstances, and that different industry groups will meet later this month to consider their position. However, I am in no doubt that the achievement of a resolution in Northern Ireland is particularly pressing, as farmers there are less likely to be aligned with large supermarkets.

All sides and interests in the situation must recognise that their relationship is symbiotic and we must find a path that ensures a fair settlement to guarantee the success of a staple native industry. In that respect, I hope for some collaborative governance in advance of the Groceries Code Adjudicator Bill, which I hope will have teeth. I hope it will have the regulatory power to deal with the issues in question. I urge the Minister, whom I welcome to his new post, to talk to the appropriate Minister in the devolved Administration in Northern Ireland about the need to give the Northern Ireland dairy industry a fair wind.

[Mr Charles Walker (in the Chair)]

Hon. Members may have noticed that the bell is broken. I apologise to the hon. Lady.

15:23

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

It is a pleasure to follow the hon. Member for South Down (Ms Ritchie), and to see so many colleagues from the Select Committee here. I welcome you to the Chair, Mr Walker, and I give heartfelt congratulations to the hon. Members who secured the debate, the hon. Member for Dunfermline and West Fife (Thomas Docherty), and my hon. Friend the Member for Tiverton and Honiton (Neil Parish). They have thereby given the issue an audience wider than just those of us who have the honour of serving on the Select Committee.

I draw your attention, Mr Walker, to my entry in the Register of Members’ Financial Interests. May I also mention, hesitantly, another interest: I am half Danish, although I shudder to declare it before this afternoon’s audience. Perhaps I can use my language skills to make representations beyond these four walls.

I welcome the new Minister to his place. It is a pleasure to see him there. I know that he will build on the excellent work done by the outgoing Minister, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice). It is poignant that the ink was hardly dry on the dairy industry voluntary code before my right hon. Friend was moved.

Many hon. Members have already described the problem: the volatility of the market and the imbalance in the supply chain, which the voluntary code is intended to address, between producers and purchasers of milk. I yield to no one in my admiration of those who work in the dairy sector—not least those in the hills and uplands of the UK, especially in the inclement weather that we often suffer in North Yorkshire. The hon. Member for South Down alluded to the poor weather pushing the cost of feedstuffs up dramatically, and the cost of keeping cattle indoors for longer this year has increased production costs. We are all aware of the other debate today, on fuel prices and the general cost of living. I acknowledge that production in the uplands has been reduced to the bare bones, and those now working on farms, particularly in the uplands, are strictly family members.

I draw hon. Members’ attention to the Select Committee report of July 2011, on what should be included in the EU proposals for the dairy sector contract. We noted that, despite having one of the most efficient production systems in the world, UK dairy farmers are unable to recover their costs, and dairy producers are out-competed by imported products. We recommended that

“raw milk contracts should include the four elements specified by the Commission—price, volume, timing of deliveries, and duration.”

I am delighted that under the voluntary code, contracts between producers and purchasers must set out either a clear price or a clear pricing mechanism.

It is unacceptable that every time we deal with the issue, the purchasers add another 2p, and, when our backs are turned, or we take our eyes off the ball, prices are reduced. Even at 29p per litre, the price of producing the milk is not being covered. What is the result? As recently as the Farndale show at the end of August, I met yet another dairy producer who was selling his dairy and his sheep, for that reason.

The elephant in the room, to which I hope the Minister will turn his attention early, is the push for large units. The Government should say what their view is on large dairy units. They should acknowledge the public concern. There are welfare issues about dairy cattle being kept indoors with no access to fresh air and no room for exercise; and there are large-scale environmental issues concerning how to dispose of the slurry. That is a separate debate, which must happen. However, it is unacceptable and unsustainable that purchasers of milk continue to offer dairy producers less per litre than the cost of production. That cannot continue.

A cheese producer has brought to my attention a worrying development in North Yorkshire, which is that local suppliers are threatening not to provide cheese producers and others with the milk they need. The Government must tackle that.

I congratulate the outgoing Minister on securing the dairy package. We must recognise the fact that many dairy farmers are being pressed to abandon milk production, because they cannot secure a break-even price. That must be tackled. I urge the Government to respond to our earlier report on upland farming. We welcomed the rural statement this week, but in addition to that I want the Government to present an uplands action plan, setting out the policy area and retaining farming as the primary activity in the UK’s uplands.

We need to know where the £5 million that the Government are allocating to producers will be sent. We want contracts awarded to dairy farmers that cover their production costs. I hope that the Select Committee recommendations on the groceries code adjudicator will ensure that the adjudicator has the power to investigate on his or her own initiative, and to impose fines.

Let the message go out today that we will not accept the behaviour that has been shown towards dairy producers. I welcome this debate in that spirit.

15:29

[Chris Evans (Islwyn) (Lab/Co-op)]

I congratulate my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty)on securing this debate, which is important for dairy farmers throughout the country. I join other hon. Members in paying tribute to the former Minister, the right hon. Member for South East Cambridgeshire (Mr Paice), with whom I attended a National Farmers Union rally in a room over the Methodist hall, where angry farmers were shouting and asking him why Tesco was running the country.

On speaking to farmers, it is clear that, more than anything else, they want fairness rather than favours. Dairy farmers are getting a raw deal. It might have been a bit of fun asking at that NFU meeting whether Tesco is running the country, but it is not Tesco or the supermarkets that are the problem; in my view, it is the processors. If dairy farmers were not being squeezed enough—hon. Members have said that they get up at the crack of dawn and go to bed late at night, trying to keep their business running—the three processors, Arla, Wiseman and Dairy Crest, cut the farm-gate milk price, first in April by 2p and then in July by 1.5p and 2p per litre. Hon. Members must ask themselves, how are the farmers carrying on? It is a real problem.

It is important to note that, in the drive to produce milk for the retailer, the processor will squeeze the price and, unfortunately, the producers suffer and are not heard. They are locked into contracts and cannot negotiate out; they have no real voice. I pay tribute to the former Farming Minister’s good idea of introducing the voluntary code. Unfortunately, although some might say that the code has worked, other responses say that that has been done before but has failed time and again. Having heard hon. Members say that the voluntary code will probably fail, we should ask ourselves, when will we introduce a code with real teeth and give the producers a voice? When are we going to introduce legislation? I think that we should do so.

I welcome the new Farming Minister to the Chamber. I am sure that he will enjoy having a real policy to get involved in, rather than trying to manage hon. Members and the business of the House. He is on the record saying that we need legislation. I agree. However, we need an ombudsman—the groceries code adjudicator—and we must give him or her real teeth. We can do that with two things. First, we could fine retailers for unfair practices. If we can do that in the banking world and in respect of energy, why can we not do it in the farming world as well? Secondly, there have been past instances, including the tragic case of Hillsborough, as we heard yesterday, of things being covered up on a mass scale. So there must be an element of whistleblowing, and the NFU and other organisations must be allowed to blow the whistle on practices that they see happening and action must be taken. The Groceries Code Adjudicator Bill must state that processors should be fined for unfair practices; the Select Committee on Business, Innovation and Skills asked for that, so let us push it forward.

The dairy coalition has produced a 10-point plan. The hon. Member for Stone (Mr Cash) said that we should market our milk better, including cheese as well as liquid milk. That starts with the Government: every Department, the House and every council and local authority should focus on selling British milk. If we cannot promote our own products, what hope have we of exporting them at all?

I hope that the Minister gives hope to those dairy farmers who are being squeezed. I have spoken to so many of them. They say that the problem is not just the weather, but production costs. Dairy farms have been in families for generations. It would be terrible for a great British tradition to fall away because of the greed of those in the market.

15:34

[Fiona Bruce (Congleton) (Con)]

Cheshire has a long tradition of dairy farming. Few hon. Members in this Chamber will have failed to enjoy the taste of Cheshire cheese. May I also recommend to hon. Members the delightful Cheshire ice cream and invite them to enjoy that in Cheshire, on one of our farms?

Dairy farmers are hugely respected in Cheshire. They are appreciated not only for the essential staple foods that they put on the table, but for the contribution they make to our communities and landscape and for the hard work that they undertake all year round, at all times of the day and night and in all weathers, to produce that food, often with a smile on their face. I can testify to that because I live among the Cheshire farming community.

When a number of those farmers came to see me earlier this summer to talk about their anger, frustration and distress at the cost of milk and the fact that they were having to produce milk and sell it for less than their basic costs, I had to take that seriously. They entered the room without their usual smiles and were angry and distressed. Wendy Radley, who works at Holly farm in Congleton with her family, said:

“this situation gets worse on a daily basis. Our industry has seen yet another shattering fall in milk price which is simply not sustainable…something must be done about the need to provide protection for the primary producer. Currently vast swathes of dairy farmers are being forced to sell at around 20% below the acknowledged cost of production of a litre of milk.”

That is unacceptable, unsustainable and unjust, especially when retailers are making as much as 16p per litre of milk. Yet farmers are losing money on a litre of milk. One farmer said, “Not only can we not cover our costs. How are we supposed to provide for a pension?”

Knowing that this debate was coming up and about the concern in the community, I invited other farmers to write to me. I received a number of letters—I cannot read them all—from farmers and non-farmers and some unsolicited letters, including two from church leaders, who were concerned about members of their congregations and communities affected by this situation, and one from the leader of Cheshire East council. Although those letters were received before the most recent developments, they highlight the concerns in our local community. One recent development is the voluntary code of best practice on contractual relationships, which has been mentioned. It is important that that is effectively implemented and monitored and that the Government ensure that this happens. I hope that the Minister will deal with that point when responding.

Before dealing with the letter from the leader of Cheshire East council, I should like to mention a communication that I received from Stuart Yarwood of Lower Medhurst Green farm, who is an NFU representative in Cheshire, a parish council chairman and a great member of the community—I have hardly ever seen him without a smile on his face—just to highlight the anger among our local community. He says:

“I have attended a milk producers meeting at Stafford today with 500 to 600 other farmers. Our message to the processors who have cut milk prices again this week is clear.

30p a litre or you do not get the milk.

We are ready to either dump the milk or shut down the distribution centres… I never thought I would be distributing this type of language, but when you see how the supermarkets have ruined our industry and…government has watched, it is time to oil the plough and grub up the Cheshire Plain to plant some wheat.”

That would be a tragedy.

The letter from the leader of East Cheshire council says that he wants me

“to raise the Council’s very serious concerns over the plight of dairy farmers across Cheshire East. By early August a significant number of our farmers have seen the price they receive for milk reduce by 15 per cent over recent months, leading to severe economic hardship and, in some cases, decisions to go out of milk production altogether, losing a heritage which goes back many generations. The impact on the wider rural economy could be devastating.

Many farmers will be receiving significantly less for their milk than it cost to produce. No business can continue to produce a product if the price they receive for it is consistently lower than the cost of production. Over the last twenty years dairy farmers across the county have striven to become ever more efficient, they have been successful…but there is a point beyond which they cannot go.”

He goes on to ask me to encourage the Government to

“Lighten the load of farm regulation to prevent unnecessary extra regulatory costs…Put pressure on all major buyers of milk and dairy products to commit to pay fair prices that cover production costs”—

not only should prices cover costs, but a fair price of more than production costs should be provided. Finally, he asks the Government to ensure that

“the Groceries Code Adjudicator Bill…currently before Parliament becomes law as quickly as possible. This is important legislation as an adjudicator could stamp out unfair practices at the retailer end of the supply chain.”

Finally, I received a letter from another local farmer, Barry Dale, who urged the Government to tackle TB, because the rules surrounding it

“have now become so restrictive and complex that even DEFRA’s own staff struggle to understand them… The supporting computer technology is also very inefficient and causes many delays and problems. Despite this I am very optimistic about the future of our dairy industry”,

and he hopes that the Government will continue to play their part.

15:40

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I, too, congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate.

A belated announcement this morning from Robert Wiseman Dairies that it will increase the farm-gate price to 29p a litre, as well as use the new voluntary code of practice as a framework, is a timely reminder that the public scrutiny that we offer in the House remains a powerful tool to make processors and retailers who value their reputations behave more responsibly towards their suppliers and customers. I welcome the new voluntary code of practice for the dairy sector and the progress on pricing that we have seen in recent weeks, but we must not lose sight of the fact that 29p per litre is still less than the production cost, and until the prices paid to producers exceed the cost of production, we will not have a sustainable dairy industry.

As others have said, the problem is not new. There have been concerns about the way that the dairy supply chains operate for years, and it is worth bearing in mind—a point perhaps a little eclipsed today—that not only dairy farmers are squeezed by processors and retailers. The inspiring action of our dairy farmers over recent months may give a lead to other farmers and food producers, many of whom run small, family businesses. They find themselves caught in supply chains in which they have little negotiating power and in which a handful of large retailers and processors reap all the profit.

Earlier this summer, I joined dairy farmers from my constituency on the streets of Peterhead to highlight the intransigence of some retailers on paying a fair price for milk. We stood outside one supermarket that had a poster in the window advertising four pints for 99p. That encapsulated for me how milk prices have become completely dislocated from production costs or any market reality. Milk simply cannot be produced that cheaply if we want to ensure the welfare of the animals or that they are fed properly and if we want to maintain a viable business.

Farmers are angry, and it is heartbreaking for people who get up at 4.30 every morning to milk their cows to be working for nothing. They are seeing their livelihood and way of life destroyed, so that supermarkets can post multi-billion pound annual profits.

The dairy farmers in Banff and Buchan have little choice about where to send their milk for processing—most of it goes to Wiseman because there is no other large processor locally. That lack of competition compounds the inherent imbalance in the relationship between suppliers, processors and retailers. The suppliers are in an invidious position: they simply do not have enough negotiating muscle.

Perhaps the most egregious symptom of the prevailing regime is discretionary pricing: the ability of buyers to vary the terms of contracts without negotiation is unacceptable. I am glad that the new voluntary code of practice will tackle the issue, although I seek assurance from the Minister, whom I am happy to welcome to his new role, that the Government will look seriously at the introduction of legally binding measures, so that we are not debating this again in a few months’ time, next year or the year after.

The large supermarkets that dominate the retail market have the biggest share of responsibility. They have the margins, as others have said, and they need to take a long, hard look at their business models and to understand that sustainable sourcing is not only about environmental impact, but about the sustainability of the livelihoods and communities that depend on food production.

Earlier this summer, Tesco advertised for a buyer to operate in the Scottish islands. That advert let the cat out of the bag on how that company views its agricultural suppliers and goes about its business. The job advert asked for candidates who would

“achieve your savings/income target through the 4 ways of buying…Buy for less…Someone Else Pays…Use Less…Re-Engineer”.

For too long, scrutiny of the way in which large retailers push the costs and risks of food production down the supply chain has been inadequate. That is a global problem, not only a UK one. Tesco posted profits this year of £2.5 billion in the UK—apparently, its worst results in two decades—and yet it thinks that it is okay to squeeze margins from some of the most peripheral and marginally profitable producers, in the islands. That makes a complete mockery of any of its statements on corporate responsibility. It is incumbent on all hon. Members to highlight such instances because they are by no means isolated.

Many farmers are unwilling to speak out publicly about how they are treated by retailers, but privately they will catalogue the costs and pressures of doing business. We need greater transparency, and we need to be able to hold the retailers accountable. Too many supermarkets are still using business models that are completely unsustainable, and they are pushing producers out of business or to the brink of viability.

Whatever steps we take to mitigate the worst excesses of irresponsible corporate behaviour, we also need to address the underlying problems. A window of opportunity has been created by the actions of dairy farmers and the high profile that they have generated this summer, allowing Ministers to grasp the nettle of supply chains. I hope that the new Minister will seize that opportunity to bring transparency and fairness to the dairy pricing regime and take action to ensure fair prices for all our food producers caught in over-concentrated and uncompetitive supply chains.

15:46

[Mr William Cash (Stone) (Con)]

I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate, which is essential.

As my hon. Friend the Member for Stafford (Jeremy Lefroy) said, Staffordshire has one of the largest dairy farming industries in the country. I used to be the Member of Parliament for Stafford—now I am the Member for Stone—but I remain a Staffordshire MP. Dairy farmers work incredibly hard, and I was pleased to meet my dairy farmers at the Central hall rally a few weeks ago. I have had several meetings with them over the past few weeks and I entirely agree with all their arguments, which extend not only to the cost of milk and the price that they get for it but to TB and how, as a result of the legal decision in the High Court this week, we will be having further progress on that shortly. I also regard the ombudsman in the Groceries Code Adjudicator Bill, which I am glad that the Government have brought in, as important.

It must be 10 or 15 years ago that I spoke to the Office of Fair Trading, calling for fair competition in milk prices, so I have some history on the issue. As long ago as 1984, the by-election that got me into Parliament for the first time was completely dominated by milk and that has lived with me ever since. I have had great pleasure working with dairy farmers, who are wonderful people and work incredibly hard.

I congratulate the Minister, whose constituency of Somerton and Frome includes the villages that my wife’s family comes from, and the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for North Shropshire (Mr Paterson), on their new posts. I welcome them to tricky problems on such things as nitrate vulnerable zones, as mentioned by my hon. Friend the Member for Tiverton and Honiton, or the potential for compulsory codes and various other European Union measures—people will be familiar with my concern over those. It is one thing to hope, as in the notes that we received today, that people might be able to amend grassland derogation, to promote the principles of better regulation and to deal with and reverse the nitrate vulnerable zones, but there is only one way of reversing them—as my hon. Friend the Minister will acknowledge—which is by negotiating, which might be almost impossible, or by applying the notwithstanding rule, the use of which I have advocated for many years to override European legislation. That is what the National Farmers Union is calling for, which I am pleased to commend, because we have reached a point at which much European legislation—the call for federation and all the rest of it—has now become utterly absurd. There is also the question of public procurement contracts. I said that it would be a good idea if we in Parliament ensured that we paid a sustainable and fair price, because that would give a lead, and would demonstrate our commitment to our dairy farmers.

I believe strongly—and I commend my hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Stafford for joining me—in encouraging the prospects for dairy farming activity in export markets, and joint ventures. In India, I met an Indian businessman who is running a company called Milky Moo. He is coming over to see Staffordshire farmers, and I am happy to invite my hon. Friend the Member for Stafford to join us if Milky Moo needs experience and knowledge. Believe it or not, its milk production includes contracts with 10,000 farmers, and it expects that to rise to 100,000 farmers in that part of India in a few years. It is a huge business, and we can offer a lot of expertise. Some of the briefings we received contain sound advice, and the naming and shaming of those who are not prepared to co-operate in the new voluntary code is an important aspect of where we need to go.

That is all I need to say. I agree with so much that has been said by hon. Members on both sides of the House. This is a very good demonstration of the fact that Parliament is working very hard for the dairy farming industry, and the fact that so many hon. Members have turned up is a great tribute to their determination to do the best for their farmers.

[Mr Charles Walker (in the Chair)]

We are making fantastic progress. If we maintain discipline, I hope that we can get all hon. Members over the line.

15:51

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

There was a time during the post office closure programme when post offices were described as places that did a little more than just sell stamps. Dairy farmers are people who do a great deal more than simply produce milk. I want to focus, as other hon. Members have done, on the social and economic contribution of dairy farming, particularly in west Wales. The context of this debate is interesting. It has been triggered by and has focused on milk prices, but it is also about fuel prices; food labelling; procurement; the final eradication of TB; diversification in the countryside; the ability of farmers to plan and planners to co-operate with farmers in so doing; and bank lending and the availability of credit. It is also about the one issue over which we have precious little influence—the weather and its impact on input costs.

We should be discussing a great deal more than just the nub of the debate, and that can be summed up in one phrase—farming and farmers’ place in society—and the value that we as politicians and as a nation attach to that. That is the context of this debate, and the price of milk has crystallised our thoughts and brought us here. It has also brought our union farming friends to this building to champion their members.

I want to speak only briefly about milk prices, because other hon. Members have covered the matter so well. An interesting observation during the summer about the dilemma facing supermarkets was whether we protect the brand against an interesting and developing public campaign, or simply protect the bottom line. That was summed up by the fact that nothing changed economically for retailers from the day when the price drop was announced to the day when it was reversed. The only thing that happened during that period was that a coalition of farmers led a very effective and at times aggressive public campaign, which resonated with the public and the press. For the first time, people realised that something sinister was going on, and good people who were trying to make a good living in difficult circumstances were being shafted by people with no real regard for the way in which those businesses were being conducted.

Let us not be too cynical, but suddenly supermarkets and retailers started to change their narrative and their argument, not on the back of any economic arguments or developments, but purely because the nation was beginning to clock on to the fact that there was a great injustice. It is a credit to all those who were involved in the public campaign, and who drove down to Somerset in the middle of the night and lawfully picketed processors’ establishments. It is a great credit to them that they did so lawfully, and attracted great public sympathy. I will not say more about that, but it shows how effective such campaigns can be if they are done properly. The brands of the supermarkets are nearly as important as their bottom line, and we must not let them forget that.

The voluntary code has been covered quite a bit. It is a first step. The processors must—not should—co-operate. It must be seen to be transparent, it must ensure good governance, it must provide bargaining power for producers in a way that is not currently available, and it must—I underline this several times—be subject to stringent and regular review by Ministers in the Department for Environment, Food and Rural Affairs. Without all that, we will come back here shortly for another Westminster Hall debate to discuss the effectiveness, or perhaps the lack of it, of the voluntary code.

We can have an effective code, and as my hon. Friend the Member for Tiverton and Honiton (Neil Parish) said, supermarkets in the top division have nothing to worry about from that, but people at the other end who are quietly and knowingly shafting the farming industry have every reason to be worried. That is why we want it, and that is why we will not take the spotlight off them until they co-operate with the spirit as well as the letter of the voluntary code.

On contracts, I hope that the Minister will confirm that if there is any failure in the voluntary code, legislation will follow promptly, and I hope that he will make the time scale clear. The contracts today are grossly one-sided, and only the Independent Parliamentary Standards Authority would be proud of presenting such contracts. We have a little experience, and sympathy with our farmers, on that score.

What can the Government do? They can monitor the code, and legislate if necessary. They can give the Groceries Code Adjudicator Bill big, sharp teeth. Let us not mince our words, but put it in place. They can make greater progress with Government procurement and food labelling, and be absolutely resolute on the eradication of TB—let us have no truck with it. Let us get on and do it, and do it efficiently. Above all, let us ensure that whenever we, and our lords and masters, get to our feet we champion the farming industry with every ounce of energy we possess.

15:57

[Heather Wheeler (South Derbyshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate. With 370 farmers operating in Derbyshire, and a major milk producer, Dairy Crest, based in my constituency, it is clear that the dairy industry is very important to us locally. During the summer recess, I met several local farmers. They are a community of hard-working individuals who believe that they have been ganged up on, and forced to accept opportunistic price cuts. They want to ensure that the dairy industry is put on a sustainable footing for them, their children and their children’s children.

I have been told that the minimum cost of producing a pint of milk is about 30p. However, many farmers up and down the country are not getting a fair price for a pint of British milk. I understand that Arla Foods has announced a new standard price of 29.5p from 1 October, and we have heard about Wiseman coming through with 29p. It is clear that more needs to be done to put milk and the dairy industry as a whole on a more sustainable footing for the long term.

I have here a picture showing how the price of a pint of milk is split, and it is clear that there is a real problem. The farmer receives 14p a pint, the processors have a 3p mark up, making 17p per pint, and when it gets to the shop floor it retails at between 30p and 50p. The price of a pint in a Westminster corner shop is over 50p. None of that mark-up goes to my farmers. Although my good friends in the National Farmers Union have informed me that those figures will have changed a bit since August for different companies, they provide a sense of the state of play for farmers during the past few months.

Over the summer, two things became clear. The first, on the rowback in prices by the big names from 24.5p to 27p—we are now hearing 29.5p—is that those prices are guaranteed only for farmers with aligned contracts, which is about half of them. It does not sort out the problem at all, and could be seen as window dressing. The second is that the price reverted to is only for liquid milk consumption; a lesser price may still be paid for milk that goes to cheese or other types of production. Again, that will not really sort out the problem.

My farmers would like us to push a campaign for a fair price for a pint of British milk. They are keen for me to see how they can get fair trade status for British milk. They are convinced that the British public would not be happy if they knew about the standards of farm production in many parts of Europe from which milk is imported. We need to build a fair supply chain that gives the farmer, the processor, the retailer and the customer a fair price for a pint of British milk.

I applaud the good work done by Ministers from the Department for Environment, Food and Rural Affairs, who worked tirelessly throughout the summer recess. The huge improvements secured are due to the clarity of their campaign, and I thank them for what they did. I also congratulate the Women’s Institute on the campaign that it is running.

[Mr Clive Betts in the Chair]

There is scope for the future. The new dairy code could do much to resolve the issue of cost among farmers, processors and retailers. The code will be voluntary, and I hope that the £5 million in additional funding announced by the Prime Minister for a rural economic grant, for which farmers can apply in the autumn to increase their competitiveness, will be another element of solving this long-term problem for our farmers.

I will cut down enormously what I wanted to say, as it is important that colleagues from around the country should be allowed to have their say. I look forward to hearing the Minister’s comments on the industry as a whole and his recommendations on what steps my farmers in South Derbyshire can take to ensure that they get a fair price for a pint of British milk.

16:02

[Guy Opperman (Hexham) (Con)]

I will be brief. If we are not a nation of farmers, what are we? The way of life that we enjoy derives its origin from the countryside, and this Government, if they are about anything, must be about supporting the rural economy.

Northumberland used to have one of the biggest collections of dairy farms in the United Kingdom; we now have very few. On 17 July, I met National Farmers Union representative Dennis Gibb and other dairy farmers. It was probably the saddest and most depressing meeting I have conducted in two and a half years as a constituency MP. One said that he could weep for the state of dairy farmers. One farmer, William Huddlestone from Allendale, explained to me how there used to be 30 dairy farmers in his dale, but now it is just him.

I underline everything said by colleagues in support of farmers. I welcome the Government’s efforts to promote fair competition and support dairy farmers. I also suggest that there is scope for a call to action, which must come from the other end of the spectrum. Many have talked about what Government and individual local organisations can do, but the harsh reality is that the large supermarkets are controlled by shareholders and pension funds, which can be shamed into what is now termed corporate social responsibility: in other words, acting fairly. Pressure must be applied not just at the bottom end of the scale by farmers, the NFU, Members of Parliament and county councils but at the top end, so that supermarkets know that if they continue to price British dairy farmers out of existence, their business will not be welcome and they will suffer the consequences of the campaigns waged over the summer, which I suggest will get a great deal worse for them.

I support entirely the actions taken by the NFU and individual farmers, and I welcome boycotts of individual supermarkets that fail to play ball and support the farmers whom they assiduously say they support but to whom they do not provide the prices deserved. I will happily lead a boycott of my local supermarkets in Northumberland that fail to do so for any particular farm.

This debate is also about how we treat the rural way of life. As my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) made clear, it touches on everything from bank lending to rural broadband to how we treat the uplands and what the local community’s role is in supporting organisations. I note, for example, that Tesco makes hundreds of millions of pounds a year from dairy products. Although we would all love a return to the Milk Marketing Board—my farmers would certainly welcome it back with open arms—I urge the Minister to consider the Government’s ability to sanction and support the coming together of large regional collectives of producers, so that they can have some collective clout when negotiating.

I am conscious of the time. I apologise, Mr Betts, that I was unable to be here for the start of the debate. In those circumstances, I will draw my remarks to a close.

16:05

[Andrew Griffiths (Burton) (Con)]

It is a pleasure to serve under your chairmanship, Mr Betts. I am absolutely delighted that so many Members have chosen to take part in this debate. I am a new Member—I was elected just two and a half years ago—and during the time that I have been here, I have never seen such a well-attended Westminster Hall debate. It speaks volumes about how important the plight of the dairy industry is to Parliament. The supermarkets and processors must be left in no doubt how seriously we intend to take the issue. The phrase was used at one point that journalists were drinking in the last chance saloon. I suggest that the supermarkets and processors are drinking in the last chance milk bar, because I think that we all recognise how serious the issue is. I pay tribute to the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for securing the debate.

I speak today to represent my farmers in Burton and Uttoxeter, who played a little part in getting us where we are today. Many Members will know that the SOS dairy campaign kicked off with a meeting in Staffordshire. The brainwave for that meeting came around a farmer’s kitchen table in my constituency with Mr David Brookes, Mr Philip Smith and Mr Trevor Beech from the NFU. They came up with the idea of being more vocal and taking the campaign forward. When they rang me with their original idea, I had to tell them that I did not think that it would work. They said that they wanted to milk a cow in Downing street to make their case. I had to dissuade them from doing so, but I think that we all recognise how important the SOS dairy campaign has been in uniting farmers.

[Daniel Kawczynski]

One of the best campaigns over the past few years has been from the Women’s Institute, whose work I acknowledge. WI members came from all over the country, and one of them sat in a bathtub in a bikini and had milk poured all over her. That got a lot of publicity for the campaign.

[Andrew Griffiths]

I thank my hon. Friend. I am left with a marvellous image of him up to the navel in milk. I know that he has done his best to support dairy farmers in his constituency.

We got to this point because dairy farmers felt that they had no choice. They were faced with a further 2p cut in their prices, and that was a cut too far. They would not have been able to survive. Dairy farming would not have been sustainable at that level. It is almost unique that having had the 2.5p reinstated in many cases, many dairy farmers are still only meeting the cost of production. In what other industry do we expect producers to sell their product at the cost of production? We do not say to Toyota that we want to buy a Prius at the cost of production or to Apple that we want to buy the iPhone 5 at the cost of production, yet we expect our dairy farmers to survive by selling their product at the cost of production. That is absolutely unsustainable, which is why it is so important that we, as Parliament and as a society, get behind our dairy farmers. If we do not, we will lose the industry for ever.

We need to be aware of why we got ourselves in this situation: it was a case of supermarkets using milk to tempt people in, just as they have with my other beloved product, beer. They have driven down the price, and milk processors, to chase supermarket contracts, have put pressure downwards on our farmers to the point at which the pips are beginning to squeak.

I shall make a few quick points to close. First, we all recognise that more than 90% of the milk for the liquid market is produced here in the UK, but just a third of the butter and half the cheese products on our supermarket shelves are produced from British milk. We must do more to get into that very lucrative market, which could save our dairy industry. Secondly, we have heard a lot about the groceries code adjudicator and the idea that it must have teeth. The industry is setting so much store by what the groceries code adjudicator can deliver in future, and we must make sure that we arm it with the tools that it needs to do its job. Thirdly, some £5 million has been made available to dairy farmers under the rural economy grant. There are rumours and concerns among farmers in my constituency that, although that money would help them to survive, not all of it will reach dairy farmers, so I would be grateful for clarification on how the scheme will operate.

We recognise that the land that we live in is green and pleasant because it is farmed and because our farmers make such a massive contribution. [Interruption.] The phrase “for whom the bell tolls” comes to mind. It tolls now not only for me, but for our dairy industry, and it is imperative that we, as Parliament and as a society, offer a lifeline and support to the great British dairy industry.

[Mr Clive Betts (in the Chair)]

To make sure that everyone can contribute, I will now limit speeches to six minutes absolutely, with no injury time.

16:11

[Sheryll Murray (South East Cornwall) (Con)]

Thank you, Mr Betts. It is a pleasure to serve under your chairmanship today, and I will try to beat the bell, like any true Cornish girl.

I would like to say a big thank you to the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for securing the debate, as well as to the Backbench Business Committee. I would also like to make colleagues aware that because of the actions of my hon. Friend before the summer recess, there was a tremendously well-attended meeting of the Select Committee on Environment, Food and Rural Affairs. I do not think I have been to such a well-attended meeting, and it shows how committed my hon. Friend is to the well-being of our dairy farmers.

In South East Cornwall, a number of small dairy farms are vital to the local economy and to the livelihoods of their owners and the people who are employed there. I know that we, as a Government, have a will to support those farms. In the past, there has been a trend of supermarkets driving milk prices down to a level that is unviable for our farmers. The dairy industry has proposed positive action to resolve the problem, and I hope that the Government will support that.

Last Saturday, when I visited my local agricultural show in Liskeard, I learnt first hand how our dairy farmers are suffering economically. How on earth can anyone expect dairy farmers to be paid a price for their end product that falls below the production cost? It is just not common sense. I also know exactly how it feels to get up at stupid o’clock in the morning and work such long hours for a product on which there is no viable return, because dairy farming can be likened to the fishing industry, which I have extreme knowledge of. In recent days, it was encouraging to hear that Arla Foods and other processors are increasing the price to 29.5p a litre, but that is not really enough. As my hon. Friend the Member for South Derbyshire (Heather Wheeler) said, that is not sufficient to provide a genuinely sustainable dairy farming industry.

I want to mention the Clarke family and Trewithen dairy in my constituency. The Clarke family were dairy farmers who diversified into processing. They source their product from the local dairy farms around them and work together to ensure that everybody secures a fair share economically of the end result. It would be encouraging if other co-operatives could be formulated to secure similar deals.

It is encouraging that the dairy coalition has produced a voluntary code of practice, but will the Minister say when he will endorse it? If the code does not work, what action will he propose to ensure that we do not see any more dairy farmers going out of business? Will the Minister also say more about the timetable for the Groceries Code Adjudicator Bill, as it does not currently seem to be published?

I would like to endorse all the points that my colleagues have made today. I shall not repeat those arguments, as they have been made on many occasions, but I would like to tell the Minister that last week, I heard even his local farmers on Radio Cornwall, my local radio station, saying that they know he is a man of the land and that he has promised to support the farming industry. I hope that now he holds the position of Minister of State, he will continue the good work that his predecessor was renowned for. We want to see strong decisions and firm help from him for our farming industry.

16:17

[Julian Sturdy (York Outer) (Con)]

As ever, it is a privilege to serve under your chairmanship, Mr Betts. Like many hon. Members here, I represent a constituency with strong rural links and I have had regular meetings with local dairy farmers. I want to voice their concerns and discuss the wider conflicts in the industry today, but I must also put on record my declaration of interest, Mr Betts, as I am a farmer, albeit not a dairy farmer.

As has been outlined powerfully this afternoon, for some time, our dairy farmers have found their backs to the wall. To be honest, that is putting it quite politely. It is fair to say that farmers have been unfairly penalised through contracts that, frankly, have sought to take advantage of the product’s perishable nature. As such, I was delighted to learn last week that UK dairy farmers and processing firms had agreed a new voluntary code of practice for future milk supply contracts. I pay tribute to my right hon. Friend the Member for South East Cambridgeshire (Mr Paice) for all his work in getting the code of practice set up. That agreement was the result of significant negotiation, and the new voluntary code will require plenty of scrutiny from both the industry and Government.

Before discussing the path forward, it is important to understand the context of farmers’ concerns. The dispute has centred on frequent reductions in the price paid by processors to milk producers. Combined with the rising cost of feed and distribution, the pressure on dairy farmers is taking a sad toll. To give a local example, Arla, based in Leeds, reversed its planned 1p price cut for August. It actually went further, raising its price to 29.5p a litre, as has been mentioned. However, in the same month, production costs for dairy farmers jumped by 1.5p, so the costs of production were still not being covered, which is the crux of the problem facing those farmers.

The dangers of failing to act now and in favour of milk farmers are stark. Quite simply, if dairy farming does not pay, we will witness an increasing decline in the number of UK-based dairy farmers and an increasing dependence on dairy imports. The farmers with dairy in their blood may continue to champion the industry out of love—I know many who would do that—but, more worryingly, what are the incentives for the next generation to do likewise? The danger, therefore, is not just the immediate threat of dairy farmers going bust, but the threat to the viability of UK-based dairy farmers in the long term.

At this stage, I praise the work, research and general lobbying provided to farmers by the NFU. I agree with the NFU’s dairy board chairman, Mr Raymond, who said only last week that dairy farmers require

“equitable and trusting relationships with their milk buyers and this can only be achieved by putting in place fair and transparent milk supply contracts.”

The recently agreed code certainly seems to address the problem of trust, with the document set to include a range of positive measures. However, I believe that dairy farmers are entitled to be cautious as well as optimistic. As with all such codes and agreements, words on paper must be translated into practical action. I put it to the Minister that the Government must ensure that the situation is kept under constant review, with an understanding that further work and perhaps even legislation might be required—and that is not something that I would often say.

Finally, I want to focus on the Groceries Code Adjudicator Bill. Like many other hon. Members, I have been calling for some form of supermarket ombudsman since my election to the House. I know that supermarkets play an important role in local economies and communities throughout the country. However, in such a competitive market, squeezing prices in the back office to the detriment of standards and of producers, such as dairy farmers, is a constant risk, requiring some manner of independent monitoring. Like many, I look forward to the Bill’s Second Reading. I believe that a strong groceries code adjudicator—I emphasise the word “strong” because it must have teeth—will build on the new code to offer dairy farmers a bit of light at the end of what has been a very long and pretty dark tunnel.

16:22

[Mr Andrew Turner (Isle of Wight) (Con)]

I welcome the new Minister to his post and wish him well in his efforts to save the UK’s dairy industry. His predecessor, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), fought hard for farmers and has our thanks and respect.

People pick up milk from the supermarket or village shop without really thinking about it. If they consider it at all, many assume that it comes from cows in local fields cared for by local farmers, but that is usually wrong. Let us take the Isle of Wight as an example: 80% of island milk is ferried across the Solent to the mainland; meanwhile, milk from the mainland is being ferried across the Solent to the island. That is the economics of the madhouse.

It is well known by all islanders that separation from the mainland costs. Andy Turney, who owns farms on both sides of the Solent, calculates that milk produced on the island costs an extra 1.5p a litre, and he is a larger producer; for smaller farms it is more like tuppence a litre. Island farmers are not on a level playing field. Processing giants, such as Robert Wiseman, part of the German multinational Müller group, bring milk to the island, but it is believed that they bring more than their contracts allow in order to sell some milk below cost. I am writing to large processors, asking whether that is true. If it is, it may be a form of market distortion, which should be referred to the Office of Fair Trading, but even if it is not, the island’s dairy farmers are in crisis.

In the 1950s, there were more than 600 dairy farms on the island. Today, there are fewer than 20, and we cannot afford to lose any more. The whole of the island’s economy depends heavily on tourism. After the national dairy summit on 12 July, we called a meeting of the island’s dairy farmers. We know that we cannot solve all the country’s problems, but we resolved to do what we can to help ourselves. If more island milk was sold locally, that would cut out those unnecessary food miles, carbon emissions and costs and help our farmers, so a campaign was born called “I love Isle of Wight Milk”. The island has independently owned press and radio, and we have their full support. The Isle of Wight County Press, Isle of Wight Radio, the Isle of Wight Beacon, Island Life, The Island Advertiser and the popular blog On the Wight have all played an important part.

In August, we launched a public awareness campaign. Justin Birch, chairman of the dairy farmers group, took it on with Louise Hart and Jeremy Fisk—all youngsters. Many local shops on the island already sell local milk, but Tesco is the only supermarket that currently sells island milk. I thank it for that. I have written to the other island supermarkets, asking them to do the same and give their customers the choice to support local farmers. So far we have had interest from Waitrose, Southern Co-operative, Morrisons and Bookers. I am still waiting to hear from others. I am glad to say that last weekend Waitrose told me of its intention to sell Isle of Wight milk very soon. There is a way through this.

We have had generous support from processors David and Jenny Harvey of Rew Valley Dairies—so much so that we plan to introduce within a matter of weeks a new line of milk produced and processed on the island. It will be marketed and sold by the Isle of Wight dairy farmers. The aim will be to pay local farmers a fair and sustainable price for the milk that they produce.

We have had great support, so I would like to say a few thanks. Caroline Knox and John Heather of the island’s branch of the NFU, Liam Thom of Island Webservices and Judi Griffin of Briddlesford Lodge farm—the island’s milk queen—have given advice and support. I also thank Rachel Dangerfield, Brian Marriott and David Holmes. Genus, C & O Tractors and David Coombes, a local vet, have provided some sponsorship. Rapanui produced stylish T-shirts, which are bound to be a collector’s item. Very importantly, the island’s NHS has asked us to tender when its milk contract is to be renewed.

I ask the Minister to give us his support, because, in the words of David Harvey,

“If this doesn’t succeed, I don’t see any realistic future for dairy farming on the island.”

Once we have achieved our aim of getting more milk into island shops, hotels and restaurants, I would like the Minister to visit, enjoy the holiday atmosphere, taste our delicious Isle of Wight milk and, importantly, see whether there are any lessons that can be taken and used elsewhere in his work to support our nation’s dairy farmers.

16:28

[Roger Williams (Brecon and Radnorshire) (LD)]

It is a great pleasure to take part in the debate. I should perhaps declare an interest, in that I am still involved in farming—though not in dairy farming for the last 50 years, and even then not on a scale that would have caused any over-production.

I thank the hon. Member for Dunfermline and West Fife (Thomas Docherty) and all the other members of the EFRA Committee for their contributions today and their work on this matter. I look back fondly at the time that I spent on that Committee, but if I remember correctly, we were also doing then the work that is being done at the moment.

I welcome the Minister to his place; as an MP, he has always had an interest in agricultural matters, and he comes from Somerset, which is right at the heart of the west country milk-producing region.

I pay tribute to the previous Minister, the right hon. Member for South East Cambridgeshire (Mr Paice), who has now moved away from his post. He had a long apprenticeship in Opposition and perhaps too short a time in power. He delivered for British agriculture and I know that farmers think the world of him. I was at the Methodist central hall meeting, which was probably one of angriest farmers meetings I have ever attended. I am a veteran of farmers’ demonstrations, but that one was exceptional. On that occasion, the right hon. Gentleman handled it very well. Only so much can be done at a political level, but politicians can work with the industry to change public perception and public opinion on such matters, which has certainly happened.

It was a year of unrest for those in the dairy sector. They are feeling the effects of the increase in the cost of inputs—fuel, fertiliser and other oil-based products—but unlike other agricultural sectors, such as red meat and cereals, they have seen the price of their commodity decreasing, whereas other sectors have seen some compensation in the form of increasing prices.

In terms of price, the supermarket industry looks on milk as one of those staple foods that consumers judge supermarkets on, and as such, it has always been the focus of price wars. Even this morning in Tesco, eight pints were still selling for £2. In some ways, I do not criticise the supermarkets selling the milk—they can sell it for what they want—but they should not penalise farmers in their competition with other supermarkets. We have very high animal welfare standards. The public demand it. If that is to continue, farmers have to get a decent price.

Naming and shaming has made a difference—some of the processors have certainly increased their prices. The former Minister told us in July that the voluntary code of practice was coming and was only “days away,” and I am pleased to say that it was announced at the Royal Welsh show. It was a great fillip to not only Welsh but UK dairy producers. I have looked at the voluntary code:

“It offers a number of benefits and protection to farmers, including: 30 days’ notice of cut to a farmer’s price or other significant change to contractual terms”.

When we compare that with the investment that farmers have made in their farms and milk producing businesses, what are we talking about? Thirty days. Farmers have invested for years and years, and the profitability of their business can be changed just like that. I welcome the voluntary code—it is a good start—but both the milk-processing sector and the supermarkets need to be committed to the total food chain. If people are going to invest in and produce milk and other products of the quality that they have produced in the past, they need confidence that the milk chain will be there and will give them a fair return.

Certain milk processers have told me that a reason for the reduction in milk prices was that the wholesale price of cream dropped from £1,800 a tonne to £1,200 a tonne. The last time I went to buy skimmed milk, they charged the same for the skimmed as they did for the full-cream. Some of the arguments that the milk processing companies have presented should be looked at again.

The milk industry has been the basis of British farming. We need to ensure that the supply chain is made firm and secure, so that people can continue to invest in it and consumers can benefit from it.

16:35

[Eric Ollerenshaw (Lancaster and Fleetwood) (Con)]

I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty). He made some important points, which I would like to come back to, without repeating what other more experienced hon. Members have said. My hon. Friend the Member for Tiverton and Honiton (Neil Parish) is rapidly becoming my farming guru—alongside the Minister, I hope.

Probably two-thirds of my constituency, Lancaster and Fleetwood, is rural—upland and lowland. I will not repeat the points that my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) made extremely well about the particular issues for upland farmers. The dairy farms in my area are not very big, probably mixed, with about 40 head of cattle maximum—that kind of scale. To be honest, in the middle of all the erudition today, I am extremely new to the topic—a new MP and new to farming, particularly dairying.

I would like to promote Lancashire cheese—my hon. Friend the Member for Congleton (Fiona Bruce) mentioned Cheshire cheese. I thank the individual farmers in Lancashire who educated me. They have small-scale, family-run farms that have gone on for generations. The Hewitts from Poplar Grove farm in Cockerham, the Joneses from Sand Villa farm in Cockerham, and the Whitakers from Park Lane farm in Winmarleigh, all educated me in this process.

My father ran a small business that was so small it was sometimes a one-man business, or a two-man business if my grandfather was working. My father was an asphalter by trade. When the farmers showed me some of the contracts that milk producers sign, I could not believe it. My father would never have been in a position to run a business based on deals with such exclusivity, with the inability to transfer what is produced, and the person being supplied able to vary the price on a whim. On that point, I want to return to what the hon. Member for Dunfermline and West Fife said. He made an important point that others have made before and farmers have made to me: it is about not only the retail end, but the milk buyer in the middle, who is becoming the issue. The farmers are grateful, as others have said, for all that the previous Minister, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice) has done—the adjudicator and so on—but they now want that middle bit policed and to see how it is going to be policed. They have raised specific issues.

The previous Minister, in a written statement earlier this month, stated that the Department for Environment, Food and Rural Affairs would consult on the arrangements needed to implement dairy producer organisations. Is the Minister able to tell us now when the consultation is likely to be under way? In reference to my hon. Friend the Member for South East Cornwall (Sheryll Murray), whom I call my fishing guru for South East Cornwall, will we learn from the history of the fishing industry and the producers, both the good and the bad?

There was a DEFRA written statement from Lord Taylor in July about marketing, which other hon. Members have mentioned. Lord Taylor said that there would be discussions between the Department and the industry about greater sourcing and promotion of British dairy products, which we have all been on about. Has there been any progress? Has the Minister considered, or is he willing to consider, what others have said about common sense? We all campaign for fair trade, which many others have mentioned, and it is common sense to have fair trade milk, as I think my hon. Friend the Member for Burton (Andrew Griffiths) said.

I am new to the subject, but I recognise that generations are involved. I remember a particular farmer who, when I wandered over and asked how long she had been there, said, thinking me a townie, “Oh, only 300 years.” As other hon. Members have said, some farmers are now considering whether it is worth passing the farm on any more. That tragedy seems to be happening. Next Tuesday, I will speak to the Wyreside young farmers’ dinner, which can apparently be quite an event. I want to be able to say to them—and, as a result of what hon. Friends and hon. Members have said, I hope to say—that there is concern and there is support for getting the industry moving, so that they will have a future, because they are considering whether it is worth while.

My hon. Friend the Member for Stone (Mr Cash) mentioned 1984, and I, too, am a little older than some here. To me, it seems that dairying continually goes through these spasms, to the extent that it is has got to the point where farmers are considering whether dairying is worth while.

As others have mentioned, if we get to such a point, the greenery that is Lancashire will be no more and the nature of this country will be no more. I hope that the Minister will reassure both me and other Members, and particularly my Wyreside young farmers, so that I can tell them next Tuesday that there is a future in dairying that this Government will protect.

16:40

[Dr Sarah Wollaston (Totnes) (Con)]

I will not repeat the powerful arguments that have been made by the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish). I just want to ask the question: who cares for the people who actually feed the nation and care for our countryside?

In this House, we know that farming families are suffering. I used to be a GP in a very rural area, and I know that farmers work the longest hours and never seem to take a day off or take holidays. All of us are prone to depression—one in four of us will have it at some time in our lives—but it is particularly difficult and risky in farmers. Members may know that farmers are two and a half times more likely than the general population to die as a result of suicide. In the week that the Government have launched their suicide strategy, I am very pleased that that has highlighted the especially high risk to farmers. We all have a responsibility to call on everyone to make it as easy as possible for farmers to come forward and talk about being in distress. Many people will be aware that farmers are particularly stoical—they have a fine tradition of just getting on with it—and we must make it clear that when they seek help, there will be people who are ready to take them seriously.

I draw the House’s attention to the fact that help is out there. I ask the House to join me in paying tribute to the Royal Agricultural Benevolent Institution, the Farm Crisis Network and the Addington Fund for the work that they do to support our farmers. I particularly draw attention to the report published in 2009 by the Farm Crisis Network entitled “Stress and Loss”. It highlighted the number of farmers who presented to the Farm Crisis Network with financial difficulties, depression and even family breakdown, for whom bovine TB was at the heart of those problems.

Other Members have mentioned the impact of TB on farming families, but over the next few months, we will see many people—particularly celebrities—queuing up to protect the badger. I would like them to be very careful about how they talk about farmers and farming families. We know that farmers and their families are at great risk from vandalism and direct action, and what people say can inflame such situations. I hope that all Members will join me in calling for them to act responsibly and to consider that there is another aspect to this debate.

We do not have enough time to go into a detailed critique of the problems of the randomised badger culling trial, but I want to make a few points relating to that debate. We cannot cure an infected badger through vaccination. We can no more cure an infected badger with vaccination than we can cure an infected person with vaccination. Treatment takes months of complex antibiotic regimes, and everyone would agree that that is just not feasible in wildlife. Another point is that, in regard to protecting badgers themselves, TB is spreading remorselessly across the countryside to previously TB-free areas. In 1998, 599 cattle were slaughtered in Devon as a result of TB; by 2010, that had risen to 5,761. Perhaps an even more valid marker for spread is the number of new herd breakdowns, which rose from 191 in 1998 to 797 in 2010. That remorseless spread will continue across the countryside, so it is wholly appropriate for the Government at least to look at some of the issues raised by the randomised badger culling trial in relation to geographical areas, edge effects and the length of time of the cull.

I actually support the move to have further field trials of vaccination, but we must be realistic. An oral live bait vaccine will not be available for some time, and it is not reasonable to extrapolate from the results of an injectable vaccine trial to an oral bait trial; they are not equivalent. In my view, it is perfectly reasonable to have a further trial that will consider such issues. Farmers themselves, and certainly I, will be the first to say, “Let’s not carry on with it, if it isn’t shown to be effective.” Nobody is suggesting that vaccination should have a wide roll-out until we know whether it is starting to work.

I call on members of the wider community at least to consider the other side of this debate and the effect on farming families, and to join me in paying tribute to the people who, as I said at the start, actually feed the nation and care for our countryside.

16:45

[David Rutley (Macclesfield) (Con)]

It is an honour to serve under your chairmanship, Mr Betts, although I must confess that, with the new technology here, this debate has sometimes felt as though we were participating in “Just a Minute”.

I thank the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for securing this debate. The enthusiasm of so many Members shows how important the issue is to so many of us and, most importantly, to the farmers in our communities. I welcome the new Minister, who has probably had to spend a lot of time absorbing all this new information. Hearing us today will, I hope, reinforce how important the issue is to our farmers. I want to put on the record my tribute to my hon. Friend—now my right hon. Friend—the Member for South East Cambridgeshire (Mr Paice) for his tireless work in opposition before he became a Minister, and also as a Minister. He helped many of us and he helped many farmers.

In preparing for this debate, I took a look at that well-known agricultural journal—“Lonely Planet”. Its guide to Cheshire states, obviously authoritatively, that the

“largely agricultural Cheshire is a very black-and-white kind of place—if you focus on the genuine half-timbered Tudor farmhouses and the Friesian cows that graze in the fields around them.”

Cheshire is great dairy country. We have heard about other counties, but Cheshire is supreme as far as I am concerned. [Interruption.] Did my hon. Friend say Cheshire?

[Daniel Kawczynski]

Shropshire.

[David Rutley]

Okay, fine.

From speaking to my local farmers’ forum, our local NFU branch, it is clear that farmers are facing extremely challenging times. It is worth while pausing on the degree of consolidation that they have gone through. According to DairyCo figures, there are 609 farmers in dairying in Cheshire, but just 10 years ago there were nearly double that number—1,007. That amazing change is because of the extreme challenges that they are going through. Of course, that is due to the power of the supermarkets, as we have heard, and to the fact that the cost of production is going up, while others have mentioned broadband—many of us are campaigning for improved broadband services in rural areas—and my hon. Friend the Member for Totnes (Dr Wollaston) has made an important point about TB. Those are all huge challenges for our farmers and for our rural communities that depend on farmers’ well-being, so we of course want to support them.

It is also important to say that farmers have responded to such conditions. They have not sat back; they have faced into these headwinds. Yields are up; farmers have adopted innovative farming methods; they have added value to their milk; and they have diversified. Just look at Blaze farm in Wildboarclough, with its world famous Hilly Billy ice cream—it has an extraordinary taste. Blaze farm now also has ceramic pottery painting and even hosts wedding receptions. That is diversification: farmers are facing into these headwinds and responding to market pressures. They do not want to defy the laws of gravity or the laws of the market. When I speak to farmers in Gawsworth and Siddington, and such great places, they want to be able to compete on a level playing field, in a fair market with fair prices.

Many of us attended the protest at Westminster and, with 2,000 farmers there, it was clear that they need action. I shall summarise my words quickly, because I want the Minister to be able to reply. It is good that processors and retailers have responded—keep the pressure on. The voluntary code is incredibly important, and the fact that farmers can now give 30 days’ notice and terminate contracts with three months’ notice is vital. It is amazing that that has not been the case before. Let us ensure that, like the groceries adjudicator, the code has teeth. I pay tribute to colleagues and to the NFU for their hard-fought campaigns. I have said enough. We need to hear from the Minister. Again, I thank the hon. Member for Dunfermline and West Fife for securing this debate.

16:50

[Bill Wiggin (North Herefordshire) (Con)]

I have waited two and a half years for this moment. It is really sad that, as a nation of tea drinkers, we cannot organise a fair price for the milk that goes into it. Even more sad is the fact that in 2003 and 2004, we compiled a Select Committee report on milk pricing, and very little has changed. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) rightly said, it is wrong that the middle men take the lion’s share of the profit from the milk market.

I am not sure whether it is on the record, but I own and breed Hereford cattle, and one big problem for dairy farmers is knowing that the product that they work so hard to produce is grossly undervalued by their customers. There is also another problem. Imagine how Robert Wiseman would feel if one of his beautiful black and white lorries was crushed every time it failed its MOT, or Sainsbury’s or Tesco had their building bulldozed if it failed a health and safety inspection. That is what happens when a farmer fails a TB test.

Probably no hon. Member has taken a TB test, so I will explain what it is like. It is quite easy on day one when a farmer puts his cattle through the crush because the cattle do not know what is going to happen. The vet comes along and very carefully and professionally gives the cattle two injections, one for avian TB and the other for bovine TB. The cows do not think much of that. Three days later, the vet comes back to feel whether the bovine bump is larger than the avian one and whether the cows have been exposed to tuberculosis. The cows do not know that they are not going to get jabbed, so they do not want to go through the crush and will fight to dodge it, and that, I am afraid, makes the whole process extremely dangerous.

My little boy, Jack, who is only seven, got kicked. My cows weigh 900 kilos, which is quite a lot more than me, and when they want to go somewhere, they will go. It is tough for farmers, and they get hurt. At least two of them have been killed in the time that I have been a Member of Parliament. It is extremely difficult for people who do not see this sort of activity to understand why the milk price has to reflect the risk that these people take, why it is so important that the Government continue with their agenda to fight this disease and to beat it, and why the Minister should go further than we are at the moment and allow the badger culls to go ahead and be trialled. I support the culls, because I have heard the misery of the farmers. They used to ring me up and cry down the phone when they started shooting their bull calves and I completely sympathised with them.

I have worked with the Royal Society for the Prevention of Cruelty to Animals, Compassion in World Farming and all sorts of other people in the efforts to stop the export of live calves. Blade farming has now done a great deal of good in providing a market for those dairy bull calves. When I was elected in 2001, we had the smell of burning flesh from the foot and mouth outbreak. Farmers have been through absolute hell. I urge the Minister to use all his charm, skill and wit to persuade the European Commission to allow vaccination for cattle as soon as possible. Even if badger culling succeeds, we can do more both for the people and for the cattle.

At the moment, farmers who live in a four-year testing area do not have to test for pre-movement. That is good, because the process is dangerous and unpleasant for both the farmer and his cattle. We need to recognise, too, the economic disadvantages of the process. It costs about £100 to do a pre-movement test for a cow. If the cow leaves a farmer’s property, it must be done and it lasts only for up to 60 days. A farmer may also wish to bring in a bull to see his cows. There is a lot more to this than just producing milk.

I have some fantastic dairy farmers, although they are smaller in number now. They are buying their cows from France because they are scared stiff of having TB on their farms. If they are shut down, their cattle will continue to produce calves and their sheds will become full. Calves need proper ventilation otherwise they get pneumonia. They have to be looked after properly. If a farmer is shut down they cannot do that, so their sheds fill up and they have more and more cattle on their property. The chance of a respiratory infection being passed through is increased and they are in a real mess. Again, that is more risk for the dairy farmer that is not reflected in the price.

Worse, farmers will be given the DEFRA compensation table, which has two sides—pedigree and non-pedigree. Hon. Members must urge their constituents to buy pedigree cattle because the compensation and the way in which it is calculated are significantly better. Moreover, it is taken over a six-month period instead of a one-month period. A pedigree heifer is worth £1,798 and a non-pedigree only £895, so a farmer will lose a great deal of money if they do not have pedigree stock. If they do not buy their pedigree stock from the UK, there is no market for those heifer calves that are being reared. Again, the vicious circle goes on. It is even worse than that because if the Government are paying more compensation, the price to the taxpayer goes up—we are heading now towards £100 million.

The dairy industry is racked not only by the price that we receive for milk but by the disproportionate risk that these people are taking, which is why the speech of my hon. Friend the Member for Totnes (Dr Wollaston) on the risk to the families was so important. I urge the Government to do everything they can to support this vulnerable group of people.

[Mr Clive Betts (in the Chair)]

I thank hon. Members for their co-operation and for ensuring that everyone got to speak. There are now 15 minutes for those on the Front Bench, then I will ask Mr Neil Parish to wind up.

16:56

[Huw Irranca-Davies (Ogmore) (Lab)]

This has been a tremendous debate. If my arithmetic is correct and I include the Front-Bench speakers, we will have had 26 contributions, plus interventions. That is quite something. We have heard from all parts of the Chamber, and there has been a large degree of consensus on the way forward, on how to learn the lessons not only from this summer but from where we have been before, especially at the producer end, and on how to reach a long-term solution. I thank all Members for that, especially my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) and the hon. Member for Tiverton and Honiton (Neil Parish) who introduced this debate.

I want to say something that no one has said so far—milk is a fantastic and delicious product. I know that from having three boys who are all mad keen on rugby and football. It is their after-training drink, so it is not only delicious but nutritious. Perhaps we should resurrect that old saying, “Drink a pint of milk a day.” We should also find an equivalent saying for yoghurt, cheese and all the manufactured products that we should be producing in the UK as well.

[Mr Cash]

I raise my glass because it did have milk in it until I was told by the policeman outside that I could not bring it in. Downstairs in the cafeteria, a small glass of milk costs 70p.

[Huw Irranca-Davies]

Perhaps the Administration Committee will look at the rules and allow us to bring in good UK products. I thank, too, the Select Committee for its recent and long-standing work. The detail and forensic analysis that it has applied to the subject will be of help to us and to the Minister. I welcome the new Minister to his position and tell him that we want to work with the Government to strengthen future policies. I hope that he will be open to some of our suggestions.

This is a welcome opportunity to debate the industry, especially after our dairy farming sector—I apologise to hon. Members for saying this in the Chamber—took on a slightly French flavour. We had protests, blockades and threats of direct action that were not carried through. The hon. Member for Brecon and Radnorshire (Roger Williams) said that the former Agriculture Minister fronted up a very heated session in the Methodist hall, which he did. He did what a Farming Minister should do, which is to front up the debate and earn his salary. It was an immensely difficult and confrontational meeting, but he earned his stripes. Although not everything he said was welcome, he really earned his salary that day and, as a Minister, he did the right thing—he did not hide.

We now have a very good chance to examine not only what has been going wrong, but more importantly what can be done to resolve the situation. In fact, I returned this morning from a meeting with farmers just outside Corby. That is no coincidence; people will probably know that we have a tremendous Labour candidate there, Andy Sawford, who was with me today. We were out meeting people, but we discussed in detail some of the issues that arose from the dairy crisis and the long-term solutions that are needed for the future.

I have already welcomed the new Minister to his portfolio, but I also pay tribute to his predecessor, the right hon. Member for South East Cambridgeshire (Mr Paice). He and I did not agree on everything. If we had, not only would he be a Conservative but I would be a Conservative, or perhaps a Liberal Democrat—I am not sure. I regard him as a very decent man who wanted to do the right thing for agriculture. Reshuffles are a brutal affair, and his successor, the new Minister, will want to strive to avoid any dairy crisis in the future, as we all do, and we will try to work with him to prevent another crisis.

Let me put on the record some of Labour’s bottom lines. We want a fair deal for farmers, food manufacturers and retailers, but we should not forget consumers. We want a fair deal for them, too—a point made by the hon. Member for Thirsk and Malton (Miss McIntosh), the Chairman of the Environment, Food and Rural Affairs Committee, in her contribution to the debate. We want a competitive and equitable supply chain that delivers not only profitability all along that supply chain, but affordability for the shopper. That is not a lot to ask, although sometimes this summer it seemed like a huge task to achieve. To that end, we welcome wholeheartedly the dairy coalition’s 10-point plan. We want the consultation on the EU dairy package to be carried out this autumn without fail, so that producer organisations can gain formal recognition.

It is perhaps not surprising for a party that was born from one parent within the co-operative movement that Labour wants to see more producer-based organisation within the dairy sector. However, that is not simply about strengthening bargaining power—bargaining power has been referred to repeatedly today—or seeing some new imbalance that might be to the detriment of the consumer. It is vital not only that farmers can balance power in the supply chain, which is not in equilibrium, but that dairy producers come together, transfer right up the value chain by investing in food production, as well as food processing, and develop higher-value products for both the domestic and export markets. We should not forget the export market, although it has not had much attention today.

[Andrew Griffiths]

The hon. Gentleman speaks about the proud tradition of his party and its relationship with the co-operative movement. Will he today speak out and condemn the Co-op supermarket’s inability to pay a fair price to their farmers?

[Huw Irranca-Davies]

I do not know whether the hon. Gentleman is trying to make this debate party political; I am trying not to do so. Let me again put on record something that I have already said publicly and to the media repeatedly: I condemn all those retailers and milk processors that are squeezing the price down. I condemned them, and I have named them to shame them.

The retail sector and the milk processors have taken a heck of a kicking this summer, and they have taken a heck of a kicking today. The hon. Gentleman will have noted that I have already made the point—I am sure that the Minister will make the same one—that we do not want to turn this situation around completely, whereby the consumer loses out because we have strengthened another part of the supply chain and its bargaining power so much that the poor old shopper walks into shops and is fleeced for a different reason entirely. What we want is a fair and equitable supply chain. So, yes—in answer to the hon. Gentleman—I will speak out against anybody that is abusing the supply chain, because what we want is a healthy, thriving and open supply chain that is competitive but that has some form of co-operation, because it is in the interests of UK plc that we have a strong supply chain and not an imbalanced one, whereby somebody is badly hurt. At present, the farmers and producers are being hurt very badly.

[Susan Elan Jones (Clwyd South) (Lab)]

My hon. Friend has spoken a great deal about fairness and equity in this industry. Although I think that we would all welcome the voluntary code, I am reliably informed by certain farmers in the Ceiriog valley that there is a chance that it might not work and that if it does not work Her Majesty’s Government here in Westminster should carefully bear in mind the words of the relevant Minister in the Welsh Government, who said that we might have to take statutory action.

[Huw Irranca-Davies]

Indeed. I will return to that important point shortly; the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) raised it earlier, too. It is absolutely right that the Welsh Government are already considering what will happen if the code does not work. I will raise the point with the Minister, too, because we need to ensure that a discussion takes place across the UK about having an approach that, if it is not universal, respects both devolution and the fact that we need to work on behalf of all our farmers—not only farmers in the Principality, but right across the nation.

I say to farmers who may be tempted to pause for breath because they think that the summer storm is now passing that they should not do so. I say to them, “Organise yourselves; invest in producer organisations and in the value of the raw product, and do it now. And keep the pressure on us as parliamentarians and on the Government to deliver, as the groceries code adjudicator comes to the House.”

One of the last acts of the former Minister was to sign off on a voluntary code for best practice between milk processors and suppliers. That was good, and the code has been broadly welcomed. However, as night follows day, or in this case—please excuse my pun—as knighthood followed that day, the announcement was welcomed but with some caution. The chairman of the National Farmers Union, Peter Kendall, said that although the announcement

“gave some hope for the long term, it did not solve the dairy farming issues of today”.

So we must keep up the pressure to ensure that those processors that are not paying a fair price announce—as we have heard today—that they are rescinding their former announcements. Peter Kendall went on to say:

“This agreement will give us the architecture we need to make sure that we don’t end up with the same dysfunctional markets that are responsible for the dairy crisis we have today”.

We now have the architecture there in front of us, as long as we can make it work.

Let me make it absolutely clear that Labour supports the voluntary agreement if it can be made to work and once the legal niceties have been ironed out, but we also seek assurances from the Minister that the Government do not rule out additional measures, including legislation, should they prove necessary.

We are not alone in seeking that assurance, as the Minister has already heard today. Conservative parliamentarians—including the hon. Members for Bridgwater and West Somerset (Mr Liddell-Grainger), for Burton (Andrew Griffiths) and for Tiverton and Honiton, who have spoken in this debate, and many others who have spoken elsewhere—have queued up to express caution. As I was saying to my hon. Friend the Member for Dunfermline and West Fife a moment ago, that does not sound like the party of regulatory bonfires. This must be one of those good bits of regulation that some people talk about, while others jeer at the very idea.

I will express one word of caution to the Minister, to urge him not to rush headlong down the Stalinist end of the spectrum of views on this issue. Such views have been expressed by the hon. Member for Bridgwater and West Somerset, who has stated:

“There is no way it”—

the voluntary code—

“is going to work—it is just another rather sad red herring—it has been tried I don’t know how many times and it is always a disaster”.

He says that the code, which the Government support, is “nowhere near sufficient” and that Parliament needs to set a minimum price for

“a strategic resource like milk.”

I urge the new Minister to avoid capitulating to the old, central, statist control-and-command tendency in the Conservative party—next thing he will be arguing for a price set at a European level. Give the voluntary agreement some time to work, but as those in the less red-in-tooth-and-claw tendency of the rural Conservative party argue, keep the legislation ready to hand in case it is needed. Alternatively, as the Minister’s own Liberal Democrat party president, the hon. Member for Westmorland and Lonsdale (Tim Farron), has said, although the voluntary code is fine for now, the Government must

“commit to back that up with legislation if needed.”

That point has been made consistently today by many MPs from all parties.

[Daniel Kawczynski]

I am grateful to the hon. Gentleman for giving way, as he is running out of time, but I hope that he will not finish speaking without giving an up-to-date explanation of the Labour party’s views on a limited cull of badgers, following the decision of the courts.

[Huw Irranca-Davies]

I will try, but I might well run out of time. We need another debate, and following that decision, I suspect that we will have one on that matter in the near future. I will try to get to the issue. I want to draw on some of the points that have already been raised.

I seek assurance from the Minister that he will keep the voluntary agreement under extremely close scrutiny, that he will report back to Parliament on its operation with genuine urgency and that legislation is being kept as an option. I assume that he will be open—more open, in fact, than his predecessor—to the suggestion that the groceries code adjudicator should be given a few more teeth than the Government seemed willing to countenance formerly. In fact, I am confident that he will want to do an about-turn, because he is rightly an openly professed friend to good sense, to farmers, to a healthy and prosperous supply chain and, by default, to the position that is being expanded upon today. There is cross-party consensus; let me explain.

The new Minister, not without some background or expertise in the farming and food sector, including in dairy production, is on record as saying that he favours

“an ombudsman with teeth, who can deal with the iniquities of the food supply chain”—[Official Report, 20 January 2009; Vol. 486, c. 165WH.]

He said that the sooner that was established the better. We note the phrase “with teeth”, to which I will return in future debates.

Today, we particularly note the reference to the food supply chain. In 2009, the Minister said, with wisdom and foresight, that we need

“a sustainable price that allows our producers to get a return on their investment in milk”.—[Official Report, 18 June 2009; Vol. 494, c. 501.]

He also talked about

“a regulator who will be able to regulate the whole supply chain effectively, and ensure that the relationships are fair and transparent”.—[Official Report, 20 January 2009; Vol. 486, c. 165WH.]

That refers not to a limited part of the supply chain, such as a direct link between retailers and suppliers, but to the whole of it, which would include intermediaries such as milk processors. However, that is not what the Government propose in the Groceries Code Adjudicator Bill. Now that he is Minister in charge—the man with the levers of power who will stamp his own authority on the Department—I know that he will want to amend the Bill in line with the proposals.

I have run out of time. We will have to debate the matter again. I welcome the new Minister, and I hope that he can confirm that his imprint will now be on the proposals for the groceries code adjudicator.

17:09

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)]

I am grateful to the hon. Member for Ogmore (Huw Irranca-Davies) for his welcome, and for the welcome from other Members here today. I am grateful also to the Backbench Business Committee and to the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for making this extremely timely debate happen.

Before I go any further, I want to pay tribute to my predecessor, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), and, I hope, my personal friend. I have enormous respect for him. He did an excellent job for the agriculture industry during his tenure of this post, and I regret that I am able to take on the responsibilities only by his leaving them. Nevertheless, I thank him for everything he has achieved over the past two and a half years.

This is a very important debate, as evidenced by the number of Members, from every corner of Great Britain and Northern Ireland, who have wished to contribute and are here representing the interests of dairy farmers in their constituencies. I want to say straight away that the dairy sector is hugely important to the United Kingdom, and to me. It is important to me because there are, arguably, more dairy cattle in my constituency than in any other constituency in the country. We make some of the greatest and best cheeses in not just the United Kingdom but the world, and I am not afraid to say so.

[Roger Williams]

Will the Minister give way?

[Mr Heath]

If my hon. Friend is going to argue about that statement, no, I will not.

[Roger Williams]

I am sure that now the Minister is in post he will be travelling right the way around the world. Will he commit to keeping a bit of Caerphilly in his briefcase, so that he can bring it out as an example of wonderful Welsh cheese?

[Mr Heath]

That will get me into some very interesting discussions with border officials in a lot of countries. I will take the concept of Caerphilly, Cheddar, Lancashire and Cheshire around the world with me, wherever I go.

The dairy sector is enormously important to the United Kingdom. It is the largest agricultural sector, and we should remember that it is worth £3.7 billion annually. It is iconic in our countryside, and is identifiably British. There are good things to say about the industry. We have some very advanced and efficient processing plants, particularly for fresh drinking milk, and in the past year there has been a lot of wider investment in processing, which shows real promise and confidence in the future. Yet, let us not get away from the fact that in the past two months we have seen rallies and protests. There was the meeting in Methodist Central hall, which I, too, was at, and there is genuine worry about the inequity between farm-gate prices and production costs. A significant proportion of farmers may struggle to make ends meet this year, particularly in the context of the price changes, but also because of the rising input costs and the monsoon conditions that many of us have had to survive this summer.

There is nothing new in much of that. I seem to have been dealing with the issue throughout my political career, and I have always been consistent regarding the matter. I am actually grateful to the hon. Member for Ogmore for mentioning some of the things that I have said in the past, because I have consistently said that we must have arrangements in the dairy sector that are fair to the farmers, to processors, to retailers and to consumers. Those are not incompatible objectives; they are all on a par. To be fair to at least one processor and retailer, the Co-operative has been mentioned several times. No, it did not do terribly well over the summer, but it has today announced that it is increasing milk prices to 30p a litre from 1 October. That is good news indeed.

Members have raised matters that are slightly away from the economic conditions of the dairy sector. They have talked about the improvements in the Rural Payments Agency, for which I am grateful, because it is absolutely right to say that the agency’s performance has improved. We have discussed TB eradication. Unfortunately, we are still none the wiser as to the position of the hon. Member for Ogmore and his party on that, but I am clear. I thought that my hon. Friend the Member for Totnes (Dr Wollaston) spoke more sense about TB eradication in her contribution than I have heard for a long time, and I am grateful to her for that. We also talked about the groceries code adjudicator, for which I certainly have argued for many years, and I am proud that we are now putting through the House the legislation that will make that a reality.

Let us return to the economic position. We import a quarter of our total dairy needs. We have a £1.2 billion trade deficit. There is a growing demand for food at the global level, and an opportunity to fulfil some of it. Milk quotas will be gone from 2015, but we are not restricted by them now. We have room to expand already, while other member states are held back until 2015 and they desperately want quotas removed now. We have a chance to get in first—otherwise we might lose out. That is why some of the things that my hon. Friends have talked about are so crucial to the future of the dairy industry—promoting the industry around the world, promoting exports and import substitution, and increasing the efficiency and competitiveness of our industry. They are all opportunities for the British dairy industry.

It is not my business to tell people how to run their farms, but we need to look at the vast range of production costs on dairy farms and see if we can learn from best practice, helping farmers to recognise the difference that efficiency and profitability can make, and the improvements that can be achieved on the farm. There are things that dairy farmers can do on their own. For instance, I encourage them to sign up for Dairy Pro. Dairy Pro is the industry’s first integrated continual professional development scheme, which provides training and development to improve both standards of business performance and recruitment and retention within the industry.

There are things that dairy farmers can do together. Several hon. Members have mentioned the EU dairy package, which increases the already significant potential for collaboration through producer organisations. The timetable has not yet been agreed by the European Council and European Parliament, but we do not expect any problems. We expect to be able to start consulting in October, and we hope the legislation will bring the package into effect in spring 2013. I hope dairy farmers recognise the wider benefits that producer organisations may offer. Such organisations are not only about negotiating prices. A well organised producer organisation can make a significant difference to the success of its members by sharing best practice, increasing efficiency and competitiveness and opening up new markets.

[Sheryll Murray]

Does my hon. Friend agree that, Europe-wide, only a certain percentage—30%, I think—of producers can become members of a producer organisation? Does he really think that the shortfall we will see between Europe and the UK will solve the problem?

[Mr Heath]

I think it can make a contribution. All of these things are cumulative, but we should encourage collaboration within our dairy industry because it would make a significant difference.

The biggest single factor, and many Members have talked about this, is the voluntary code of conduct. This is the dairy industry’s first code of practice on contracts and it is a significant step from the beginning of the chain. I congratulate the industry, and I congratulate my predecessor on bringing the industry together. The agreement on the code’s detail is potentially momentous and provides all parties with greater clarity on contractual terms and conditions, particularly on farm-gate prices. I hope the code will start to open trusting relationships between the parties, because they need each other. We cannot have war within a mutually dependent industry.

I have been asked many times what happens if the code does not work. That is the wrong question; I want to ask what happens when the code does work, because I am strongly optimistic that this is the best way forward for securing a sustainable arrangement. Under the EU dairy package, we have the option of legislating on contracts. I make it clear that I will seriously consider making contracts compulsory if the code fails to deliver the necessary changes. I have already announced that we will be consulting so that, if such changes are necessary, we can make swift progress. Having said that, it is vital that the industry gives the code its full support and the time needed to take effect.

I confirm that additional funds are being made available to dairy farmers. We are opening the skills and knowledge transfer framework specifically to provide workshop events for dairy farmers from late autumn this year. That should help dairy farmers identify and access emerging market opportunities such as exports; strengthen their position in the supply chain through more effective co-operation and collaboration; develop new products and add value; and establish benchmarking.

The £5 million rural economy grant scheme for high-quality projects in the dairy industry should continue that focus and add, in the new year, the development of a capital investment programme to target infrastructure projects. That is a significant advance in Government support to the industry, which should reap dividends.

[Thomas Docherty]

Will the Minister give way?

[Mr Heath]

I will, but this is possibly the last time.

[Thomas Docherty]

I am most grateful to the Minister. Will he clarify whether the two funds will be open only to English farmers or will all four nations be able to benefit?

[Mr Heath]

I am responsible only for farming in England. However, I have already contacted the analogous post holders in the devolved Administrations. I am keen to work with them to establish, as far as possible, common practice across the nations of the United Kingdom to ensure we do the best for our farmers.

I will continue the work of my right hon. Friend the Member for South East Cambridgeshire in the dairy supply chain forum, which is a crucial element in keeping a secure domestic market as a strong base from which to innovate, explore and expand the horizons. There are opportunities for replacing imported goods with British dairy products. I am glad that the hon. Member for Isle of Wight (Mr Turner) has done such work in his constituency.

There are clear openings for sending out British dairy products for the world to enjoy. I have already started that process. My right hon. Friend the Secretary of State and I are committed to opening those markets, which I hope will expand the interests and reach of the British dairy industry to all parts of the world, including emerging markets.

[Dan Rogerson]

Will the Minister give way?

[Mr Heath]

Unfortunately, I do not think I can give way, although I would love to do so.

I will continue supporting the Dairy 2020 project and the dairy roadmap, which we want to continue producing positive change. I wish we had another hour so we could carry on talking about what the dairy industry means to the country and how we can support it, but I will summarise my support for the industry. I am committed to a dairy industry that delivers for the future. I want to work strategically with the industry, with a clear focus, particularly in the dairy supply chain forum, on delivering the vision of an

“ambitious strategy for the UK dairy industry’s future without EU milk quotas, which takes full advantage of growing domestic and global demand for dairy products.”

I want to promote British dairy products overseas and remove barriers to trade through the joint Government-industry export action plan, under which DEFRA is researching markets and products that have the biggest potential for export.

I want to talk directly to businesses and to understand what they really think about their prospects, what barriers they struggle with and what they need to grow and take advantage of export opportunities. I want to encourage collaboration and new approaches and to make the best use of the £5 million boost to dairy businesses through the rural efficiency grant scheme. I want to push marketing, joint ventures and new facilities, which are central to enabling the industry to diversify and increase exports. I want better information and advice, and I want to work with experts to provide the information and advice that dairy businesses need, particularly on exports.

We need a sustainable dairy industry. I cannot do everything, but I am determined to do all I can to support that ambition. I simply do not believe that the consumer buys milk from the supermarket on price, a point that has been raised several times. There is an artificial market for milk and milk products in this country. If we can break free, and if we can unleash the British public’s enthusiasm for buying British products in British supermarkets, which this summer has shown, we will have done well by the industry.

I am grateful for the support of so many hon. Members.

17:28

[Neil Parish]

In the short time I have left, I thank everyone for their contributions this afternoon. There have been more than 30 contributions, which shows the strength of feeling across the country. I will not enter into whose milk is the best, whose cream is the best or anything else, but this debate has shown that dairy farming is important to this country, and not only for dairy—the industry produces 70% of beef animals, too.

I am an optimist. I believe there is a future for agriculture, and I believe young farmers will go into agriculture. I was a young farmer many moons ago, and I have milked cows for 25 years. I have seen prices go up and down. We have marched up and down this hill before, so we have to ensure that this time we get the code in place and make it bite.

I welcome the Minister’s comment that he will legislate if the code does not bite. If there is such a threat to legislate, the code will work. There is enough money out there from what consumers are paying for milk, but the money is not getting back to the farmer.

I thank everyone for their contribution. This debate has shown the House at its best. Finally, I am looking forward to hearing the Labour party’s view on tuberculosis and the badger cull, because we have to be united to get rid of that disease.

Question put and agreed to.

17:29

Sitting adjourned.