Dairy Industry

Lord Gardiner of Kimble Excerpts

Thursday 17th September 2015 Lords Chamber

[Lord Gardiner of Kimble (Con)]

My Lords, I declare my farming interests as set out in the register. I am a member of the National Farmers’ Union. I, too, am most grateful to my noble friend Lord Shrewsbury for raising this important issue for debate. Coming as I do from a family much involved in the dairy industry over many generations, I know that it is a vital part of our £100 billion food and farming industry. Indeed, my first summer job was with the Royal Association of British Dairy Farmers, and I am proud to wear its tie today.

I know of the pressures that farmers are under because of global volatility and a current surplus of milk on the world market. The Government have highlighted the need for EU-wide action to help farmers overcome the severe cash-flow pressures that they are undoubtedly under, and I was able to do so directly at the emergency Agriculture Council in Brussels last week. The Commission has listened to our calls and announced a support package for dairy farmers. The package will focus on three key areas: addressing the cash-flow difficulties; developing a dairy futures market, to which the noble Duke, the Duke of Somerset, referred, similar to those that already exist for grain and sugar, which would help the industry through periods of unpredictable price shifts and give farmers more certainty over prices; and increasing openness and fairness in the dairy supply chain. Commissioner Hogan announced further details of this package at the informal Agriculture Council on Tuesday of this week. Indeed, the noble Baroness, Lady Bakewell of Hardington Mandeville, asked about this, and the precise figure is that the UK has been allocated €36.07 million in direct aid for dairy farmers, the third- largest of all the member states, in recognition of our calls for the Commission to provide support for UK farmers suffering from cash-flow problems. Rightly, the question has been asked on this, and as a matter of urgency we are working on the right way to allocate these funds, speaking to the devolved Administrations in Scotland, Wales and Northern Ireland about distribution across the United Kingdom

Other elements of this package are aimed to safeguard farming for the future, and the sustainability of the dairy supply chain. To this end, we welcome the announcement of a high-level group to look at the futures market and other ways in which to spread risk more evenly. I have to say to the right reverend Prelate the Bishop of St Albans that the Government believe that that, rather than going down the route of intervention on prices, is the best and most contemporary way forward; I think he understands that because I have said it before. In addition to distributing immediate direct aid, the Government recognise the importance of timely payment of the basic payment, as my noble friend Lord Shrewsbury and the right reverend Prelate have said. That is important to ease the cash-flow problems that farmers are facing. Ministerial colleagues and the RPA are working together to ensure that these are paid as soon as practically possible when the statutory payment window opens on 1 December.

As my noble friend Lord Shrewsbury said, it is vital to ensure that dairy farmers are not subject to undue regulatory burdens. In addition to our aim of seeking simplification of the CAP, our processes will be streamlined to make better use of the technology and data to reduce radically the number of inspections. By summer 2016, farmers will have to deal with only one single farm inspection task force, which will combine farm visits with mandatory checks. As well as taking action to support UK farmers now, I assure my noble friends Lord Marlesford and Lord Plumb that the Government want and intend to support the industry to become more resilient and ready to take advantage of the growing demand for British dairy products both at home and overseas.

The noble Baroness, Lady Parminter, referred to Defra and its work and what the Secretary of State and ministerial colleagues are doing. Last week, the Secretary of State set out a series of initiatives. There are quite a number, which I will go through in slightly staccato form because it is important for noble Lords to know about each one. They include an urgent industry-led review of best practice in the dairy supply chain facilitated by the Agriculture and Horticulture Development Board. We also need more investment in processing capacity, which needs to be looked at. We have made a new commitment to publish details of central government catering contracts, including their renewal dates, to bring transparency to the market and allow dairy farmers the opportunity to prepare and compete for contracts. The right reverend Prelate the Bishop of St Albans referred to this. There will be a review of procurement across the wider public sector, including hospitals, schools and prisons. Our aim is that all fresh milk and more than 90% of butter and cheese bought by central government is British. We also want to improve the promotion of British dairy produce within the public sector by working with major catering providers. We also intend to use the Food is GREAT brand to showcase high-quality produce at home and overseas. We intend to work with the food industry, including supermarkets, retailers, manufacturers and caterers, on more consistent labelling and branding of British dairy products. I hope that the noble Baroness, Lady Hayter, will derive some satisfaction from this being something that we are very strong on. We will press the Commission on this because we want it to make it easier for consumers and food businesses to know when they are buying British dairy products.

It is clearly in everyone’s interest—perhaps this is a message to the supermarkets—that supermarkets, caterers and the food industry have security of supply of milk and dairy products. Some supermarkets share with farmers the risk of price fluctuations. I hope and believe that supermarkets should be sensitive to what many noble Lords have said about farmers and consumers.

The Secretary of State will lead a trade delegation to China in November, which will include eight British dairy businesses, to promote quality British products to that growing market. This is part of our commitment to continue to expand export market opportunities, which grew to a record £1.4 billion for the dairy sector last year.

A number of noble Lords asked about the Groceries Code Adjudicator. We have recently given that adjudicator more teeth, providing the ability to fine 1% of turnover. I will take back all the points that have been made by the noble Baronesses, Lady Hayter and Lady Parminter, my noble friends Lord Plumb and Lord Shrewsbury, and the noble Duke, the Duke of Somerset. This is clearly somewhere where we need to think through how best we can assist.

The noble Baroness, Lady Hayter, and the noble Lord, Lord Trees, referred to milk for children. The Government continue to provide free milk for all children of nursery school age at a cost of £63 million. This clearly recognises that milk has many benefits to children’s health and is important for their development. Around 1.5 million UK children under five in 55,000 childcare locations currently receive a free drink of milk—a third of a pint—each day they attend. I am short of time, but there are interesting details on the EU and domestic school projects that I would like to share with noble Lords who have spoken in the debate.

We should not lose sight of the fact that there is great potential for significant long-term growth in the sector, with milk production at a 10-year high and exports at record levels. The latest analysis from Rabobank is that commodity prices,

“are expected to enter a recovery phase”,

late this year or early in 2016, once Chinese buyers start to re-enter the market.

Food and drink is the largest manufacturing sector in the UK, and last year exports of food and drink reached an impressive £18.8 billion. Dairy is our fastest-growing export sector, and we should all be incredibly proud of the British produce that is world-renowned. More than 700 named British cheeses are produced in the UK. With these celebrated products, as well as the Government’s push to open new export markets for the dairy sector, it is perhaps unsurprising that dairy exports to non-EU countries increased by 25.5% between 2013 and 2014. There are real opportunities for development in the industry. The global market is expected to grow at a rate of more than 2% —around 13 million tonnes—a year for the next 10 years.

While the UK is self-sufficient in liquid milk, we are importing significant quantities of other dairy products—ice cream, yoghurt and cheese—which could be produced in this country. Let us all buy more British produce.

To me, dairy farming is at the very heart of the best of British agriculture. It is animal husbandry and the breeding of a top-quality herd of cattle, which is a lifetime’s work by men and women devoted to their animals. The noble Baroness, Lady Parminter, spoke about the landscape that dairy farming provides for us. This is all part of a rural way of life with which many of your Lordships will identify.

The Government believe that through a combination of short-term and longer-term measures we can, should and must safeguard the viability of the UK’s dairy industry through a time of global volatility. This industry is important to us all in the United Kingdom.