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The Minister for Agriculture, Fisheries and Food (Mr Robert Goodwill)
I congratulate the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) on securing this debate on the proposed tariff schedule for agricultural products in the event of the UK leaving the EU without a deal.
I reiterate the position of the UK Government: leaving the EU with a deal remains our top priority. I hear the hon. Gentleman’s justification for not voting for the deal, but the deal that I voted for three times already this year represented a compromise between people such as him, who seem to think that being in the single market and customs union is the only way to deliver Brexit—in my view, it would be Brexit in name only and would not give us the freedom to negotiate free trade deals around the world—and others, who seem to want some sort of pure Brexit. I believe the compromise deal was a good deal. Had we voted for it, we would have left on 29 March and would now be in negotiations on the trade arrangements with the rest of the European Union.
I gently remind the hon. Gentleman that 52.5% of the people of Wales voted to leave the European Union. They will be frustrated that some parties in Wales have not voted to deliver on that. He said it was a narrow margin, but the majority for the 1997 devolution referendum was 50.3%, and he seemed very happy to stick with that.
Ben Lake (Ceredigion) (PC)
That is something that has been raised on several occasions. Is the Minister aware that there was a further referendum on devolution in Wales in 2011, which saw the Welsh people over- whelmingly support granting further powers to the Welsh Government?
Mr Goodwill
I understand that a win is a win, which is why the results of the initial referendum and the referendum on Britain’s continued membership of the European Union should be respected and delivered on by all parties in Parliament.
As a responsible Government, we have spent more than two years carrying out extensive preparations for all scenarios, including no deal. Nowhere has the preparation been more assiduous and detailed than in my own Department. As we heard, the Government announced on 13 March a temporary tariff regime that will apply for up to 12 months should the UK leave the EU without a deal. In developing the policy, we have sought to balance the five principles set by the Taxation (Cross-border Trade) Act 2018. The five principles include taking into consideration the interests of consumers, producers, external trade, productivity and competition.
We analysed a range of evidence, including information on average trade volumes, tariff data and Government modelling on tariffs in a no-deal scenario, supplemented with business stakeholder engagement. Under this policy, the majority of UK imports—87%—would be tariff free. However, tariffs will be in place for the remaining 13% of overall trade, to avoid significant adjustment costs for certain agricultural products, where tariffs help to provide support for UK producers against unfair trading practices such as dumping, and to maintain our trade commitments to developing countries.
We have not had tariffs on cereals to any extent for a number of years. Indeed, I believe the protections that we are introducing through tariffs on imported poultry meat will help protect the cereal industry, because the major customers of our cereal producers will be producers of poultry and other meat products, which we are protecting.
Jim Shannon
I declare an interest in this issue as the chair of the all-party parliamentary group on eggs, pigs and poultry, which has asked me to pose the following question. Does the Minister agree that it is absolutely essential that eggs and egg products are included in the tariff scheme, given that it is the most effective way to ensure that all UK egg producers can continue to make improvements and further welfare standards without the threat of being undermined by low-quality imports from third-world countries?
Mr Goodwill
I hope I can to some extent reassure the hon. Gentleman on the issue of shell eggs, which is the major egg market. Supermarkets have made it clear that they would not seek to buy lower quality products, and that they will continue to sell only Lion mark products. I have heard representations on liquid and powdered egg, which might be a problem, and we will continue to listen to the industry.
The no-deal tariff policy has been carefully designed to mitigate price spikes should we apply the full EU most favoured nation rates to our trade with the EU, which will result in large tariffs and potentially price increases for both consumers and producers. I will give a few examples. Should we retain EU MFN tariffs, it will result in tariffs on pasta of over 20%, and 12% tariffs on basic foods such as potatoes, cabbage and lettuce.
The policy has been designed with the objective of minimising disruption in the agricultural sectors, and it aims to strike the right balance between exposing sectors to an unreasonable level of disruption and liberalising tariffs to maintain current supply chains and avoid an increase in consumer prices. A mixture of tariffs and duty-free quotas will therefore be used for beef, sheep meat, poultry, pig meat, butter and some cheeses. The aim is for their impact on production and consumption patterns to be broadly neutral. A point was made on lamb imports from New Zealand, which will be maintained at roughly the same levels. Lamb production is of course seasonal, and New Zealand production has always filled a gap in the UK market.
Tim Farron
The export tariffs for UK farmers, including Cumbrian hill farmers, into the single market worry me the most. Would the Minister consider the potential for increasing the powers of the Groceries Code Adjudicator, so that it can prevent supermarkets from taking advantage of the loss of export markets by paying our farmers a pittance after 31 October, should we have no deal?
Mr Goodwill
Well, I will now turn to the sheep meat market, which is my single biggest concern about a no-deal Brexit. Supermarkets will operate only within the market. There is an idea that supermarkets will drive prices down. Should we have an oversupply of lamb—we could well have, as lambs come on to the market in the autumn, around the time that we could leave the EU without a deal—it will put tremendous pressure on the market. We have already seen that lamb consumption is pretty inelastic in the UK, with a 4% year-on-year reduction. We will also have the big store markets, particularly in hill areas in places such as Wales and Scotland. Hill farms that cannot keep their sheep over the winter will bring lambs to market, which could be affected by the impact of a no-deal Brexit.
As I said, the largest economic risk to the sheep sector is limiting or halting the export of lamb to the EU. The sector is unique among UK agriculture in relying heavily on exports to balance supply—indeed, we are net importers of most products. UK lamb exports will face both tariff and non-tariff barriers in the event of a no-deal Brexit from the EU. UK exports were worth £365 million in 2018, with 97% destined for the EU. To export to the EU, the UK must be recognised as a third country. Even then, the imposition of EU MFN tariffs—around 50% in ad valorem terms—would reduce the competitiveness of UK lamb on EU markets and consequentially reduce our exports. Should the UK be listed as an approved third country, it will need to meet the EU’s additional requirements for third-country products of animal origin, including movement through a border inspection post, pre-notification of delivery, checks on marketing standards and export health certificates.
My boss, the Secretary of State, has said that he will support vulnerable sectors, should the price of sheep meat fall considerably. In the event that an aid scheme is deemed necessary, it is likely that we would use retained EU powers; hence the scheme would be exempt from state aid rules. As I said, UK lamb exports were worth £365 million in 2018, with most going to the EU.
Jonathan Edwards
In March, the British Government said it would have to undertake a mass culling programme of lambs and sheep in the event of no deal. Is that still the policy of the British Government, should they pursue no deal in November?
Mr Goodwill
That is not the policy of the British Government. As I say, we are looking at emergency measures, and various figures have been bandied about. The president of the National Farmers Union suggested that the cost of supporting the sheep industry—probably a system involving a headage payment based on the ewes that farmers had already declared—would cost around £150 million. We understand its scale, and I am sure the Treasury will be able to consider that. As I say, we do not want a no-deal situation; we need to get a deal over the line. Whoever the Prime Minister is next week, the best way to minimise the impact on farmers—particularly sheep farmers—is to get us a better deal that is acceptable to Parliament. Every single hon. and right hon. Member of the House will need to examine their conscience and consider how they have voted this year in a way that did not deliver on Brexit.
It is important that we deliver on Brexit. Confidence is waning in our democratic systems, and the Brexit party did very well in the European elections. We have only ourselves in the House to blame for not delivering on Brexit, and sheep farmers will pay the greatest price. We will still get our salaries as MPs, but they will pay the price of our failing to secure an agreement.
In conclusion, I re-emphasise that leaving the EU with a deal remains the Government’s top priority, but the tariff policy has sought a balance between the impacts on consumers and producers in the event of no deal. We expect the impact on UK consumers as a whole to be broadly price neutral should these changes be transmitted to retail prices, and we will provide support for our most sensitive sectors.
Motion lapsed (Standing Order No. 10(6)).