Dairy Industry

Lord Plumb Excerpts

Thursday 17th September 2015 Lords Chamber

[Lord Plumb (Con)]

My Lords, I thank my noble friend for leading us in this debate on the state of the dairy industry, which, I submit, is overdue. I declare an interest as a farmer, although sadly not a dairy farmer any longer. My son persuaded me quite a long time ago now that there were more pleasant ways of losing money than milking cows, so we decided to diversify, which we still do.

We joined a sector of farming that had 25,000 farmers milking cows in 2000. Now, as has already been said, the number is well below 10,000 and falling. At the same time, during that period, we have lost 314,000 cattle slaughtered with bovine TB, costing the taxpayer over £500 million, a figure that is still rising. The important figure to remember here is that the deficit in the balance of trade in dairy products increased in 2013 by £91 million to a total of £1.36 billion—that is a trade deficit in products that we can produce ourselves.

The European Union presented a €500 million package the other day for the whole of the European dairy industry, of which we will of course get a small share. However, what is needed is not palliative measures or short-term handouts but a fair market price and a more stable market in long-term business. The frustration of farmers—dairy farmers in particular—is therefore understandable. In theory, we have a comparative advantage in dairy production over the rest of Europe and even of the world, given the ability to grow grass and to ride the impact of climate change, with the potential to supply an increasing population.

There are many problems. The first is the international market, compounded by the Russian trade ban, the effect of which is estimated by some as equivalent to about 2p a litre on milk. Then there is the increased production still taking place in New Zealand, where they have very large dairy herds; the downturn in Asian demand; and oversupply in the rest of the European Union. We have to strengthen and bolster our domestic sector so that it is more resilient against such external issues. We have experienced supermarket price wars, which I need not dwell on, and food price deflation, especially over the last 18 months.

I am mostly encouraged by many aspects of the Government’s decisions in recent times and by their ethos of supporting business and hard work rather than market intervention and the imposition of nanny state rules. We need to get rid of many of those rules that are already there and see that no more are produced. I am pleased that the Government have a commitment to a 25-year food strategy, and the dairy sector has to be a major part of that. I welcome the support for the Groceries Code Adjudicator, who has the ability now to fine in cases where it is obvious that there is unfair trade. It is important to consider further powers in that direction. I welcome tax averaging for farms. Farming is a long-term business and tax averaging over a period of years is essential. I welcome the recognition of food production and processing as the largest manufacturing sector in the United Kingdom, with a commitment to follow science and ring-fence research and development funding.

We also lost the marketing organisation years ago, which we should not have done. In these circumstances, can the Minister bring together people in the dairy industry to try to agree solutions acceptable to all and renew the confidence in all parts of it? We have been—we are still—living through times of austerity. Therefore, surely, it is crazy economics to see a balance of trade deficit in the dairy sector of £1.3 billion. That is a national disaster, not just a farming crisis.