Dairy Industry

Baroness McIntosh of Pickering Excerpts

Wednesday 5th November 2014 Westminster Hall

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

I welcome you to the Chair, Mrs Riordan, and the Minister to his place, and I congratulate my hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart) on securing this timely debate. Many dairy farmers in my area are tenant farmers, and they have been acutely affected by the downturn in price. They form the social fabric of the hills and are an integral part of the uplands.

My hon. Friend referred to the groceries code and the adjudicator; it is a commonly held belief that the groceries code applies to the dairy industry, but I point out to him that it does not. The Select Committee on Environment, Food and Rural Affairs is launching an inquiry at the end of the month, and we are asking for evidence, because there are those who would like to see the remit extended and a review of the remit. It is generally accepted that the groceries code has been working well, and that the adjudicator, created under the last Government but brought in by the present Government, is a great asset, and I absolutely accept that it must apply to the dairy chain. The Government, in their defence, will probably say that a change would open the sluice gates to other products, but I believe that there is a common interest in the Chamber today in such a change.

[Tessa Munt]

Might that be something one could refer to the Competition and Markets Authority, instead of trying to use powers that are not within the remit of the groceries code adjudicator?

[Miss McIntosh]

I beg to disagree with my hon. Friend; I believe that the groceries code adjudicator should extend to dairy farmers, but I would go further: I believe that there is a role for the Office of Fair Trading in reviewing increased collaboration on pricing and marketing, and on the whole agreement between farmers.

On a Select Committee visit to Denmark—I will declare an interest: I am half-Danish and very proud of that—we were hugely impressed by the amount of exports and marketing opportunities that there have been through its co-operative movement. Arla was one of the first and most successful dairy co-operatives, and we understand that there are now 1,000 producers in this country under Arla. I yield to no one in my admiration of British and north Yorkshire farmers, particularly those who work on the land in my area. They are fiercely independent and fiercely proud of their tradition, but we must do more to help them co-operate and understand that, if state-aid rules are not deemed to be broken in Denmark, we could apply the same collaboration and co-operative movement in this country.

On exports, my hon. Friend the Member for Carmarthen West and South Pembrokeshire set the scene well. We saw a 3p increase in price about two or three years ago, which was very welcome. We have now seen at least a 1p—and potentially up to a 2p or 3p—decrease. I understand that that is partly because of the global situation, partly because of Russian sanctions and partly because of the milk powder scenario in China, but every time the price goes up, people flock to milk production. We then get a glut of milk and two or three years later, the price goes down. There is a circular situation, and if we are not careful, we will have, at some stage in the long term, a potential food security issue.

Another hon. Friend set the scene for me to say that 40% of leftover liquid milk is used for butter and cheese. We produce Shepherds Purse and Wensleydale cheese in north Yorkshire, and Cheddar cheese is world-renowned. Liquid milk and milk products generally are some of the most nutritious products available. We should be doing more not only to generate growth in this country for this market, which is very popular, but to ensure that we are exporting as much as we possibly can.

There is a role for Government. I believe that what the Committee set out in our report in 2011 still pertains today: dairy farmers should be offered written contracts by processors that specify either the raw milk price or the principles underpinning the price, the volume and timing of deliveries, and the duration of the agreement. Unless such contracts are made compulsory, we will continue to be in this circular situation. That is a very good argument for looking at the voluntary code, as mentioned by the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), whom I am delighted to follow. If we have a situation where the voluntary code is not deemed to be working, let us review it and see whether it should be made compulsory. Let us look at why the groceries code and the adjudicator’s remit does not extend to the role of the dairy industry. Let us look at having greater oversight by the Office of Fair Trading. Let us work with the European Commission and our partners, crucially, to underpin the labelling. If we can get the labelling right at an EU level, that would be a great way forward. Let us encourage all consumers to buy the red tractor products.

[Gavin Williamson (South Staffordshire) (Con)]

One of the key drivers in the creation of the groceries code adjudicator was to try to deal with some of the inequalities that dairy farmers had to deal with all the time. Does my hon. Friend feel it is incumbent on us to do everything we can to address that long-term issue?

[Miss McIntosh]

I am delighted that my hon. Friend made that intervention. I hope that the Minister, having heard that, will listen to the arguments made by both my hon. Friend and me. I hope that as many people as possible will heed the message and hear the voices that have spoken this afternoon. I believe that we need a greater balance in the relationship between the dairy producer, the processor, and the retailer. Having a four-pint milk bottle sold for 89p is unsustainable. That certainly would not happen in China.

I shall end my arguments by congratulating my hon. Friend the Member for Carmarthen West and South Pembrokeshire, and by saying that I hope the Minister will review the recommendations in our 2011 report, which we stand by, and will review the groceries code adjudicator and the voluntary code, and encourage co-operatives. There must be a role either for the Competition and Markets Authority or, as I would argue, the Office of Fair Trading.