UK Dairy Sector

Calum Kerr Excerpts

Wednesday 20th April 2016 Westminster Hall

[Calum Kerr (Berwickshire, Roxburgh and Selkirk) (SNP)]

This has been an excellent debate, and I congratulate the hon. Member for Ceredigion (Mr Williams) on securing it.

We may have had many debates on this subject, but this one has highlighted the fact that we need time in which to discuss it. What came across to me right from the offset was the desire to resolve the situation. Our farmers get a bit of a bad name sometimes—they have a tough job, with many factors ranged against them, which means that they are sometimes seen as being somewhat negative and complaining. Actually, as one farmer said to me, “To still be in farming, you’re an optimist, because you’re still keeping at it.”

The hon. Gentleman made an excellent starting contribution, which set out the challenges and, critically, put forward proactive and constructive suggestions. As he said, the issue is a complex local and global one, with many factors in play. Fundamentally, the drop in the price received has outweighed the savings from efficiencies in production. He made an excellent point about that.

We are lucky to have my neighbouring MP from across the border, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Penrith and The Border (Rory Stewart), responding to the debate, because I am sure that he will talk about concrete steps and not platitudes. He is known for getting his wellies on and getting engaged, and I am sure that he will demonstrate that again today. We need to consider many issues—the Groceries Code Adjudicator was mentioned regularly in the debate, as was the voluntary code of practice, which I will return to—but let us keep it positive and proactive. The hon. Member for South Down (Ms Ritchie) nearly started off a different kind of milk war with her boastful contribution, but such is the nature of politics—it was understandable.

The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) made some excellent points. I congratulate his all-party group on its work, in particular on the GCA, and it presented a strong case on the badger cull. For reasons of time I cannot go through everyone’s contributions, so I apologise to the many other Members who added to the debate. It has been of great benefit to have present the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Tiverton and Honiton (Neil Parish). He summarised the key points about the market for milk, the important distinctions between fresh and processed milk, how critical labelling is and the role that Government procurement has to play.

It is fair to say that the dairy industry throughout the UK is in crisis, and that is particularly true in Scotland, as we have heard. The downturn in milk prices has led to a fall in returns of some 50% for many Scottish dairy businesses. My hon. Friend the Member for Argyll and Bute (Brendan O'Hara) wanted to be present today, but is in the main Chamber. His concerns for his constituency, and the figures involved, are worth reviewing. Only three years ago, the farmers whom he represents were receiving 32.5p per litre; now, they obtain a farm-gate price of just 15.8p per litre, even though the milk is costing them 26p per litre to produce.

We cannot leave the milk pricing issue simply to market forces. There is a pressing need for action and more imaginative solutions. Collaboration involving Government and the entire supply chain is needed, with urgent action across a range of areas. In the short term, it is critical that banks are involved in the planning process and are prepared to extend credit to dairy farmers. That makes business sense, because global experts believe that the long-term outlook for the sector is promising. We need to maintain a viable UK industry through the lean times, and to do that we need collaboration and innovation now.

Above all, we need to deal urgently with the fact that we have a broken supply chain, with fundamental imbalances exacerbated by short-term opportunism. The chain needs to be fair, workable and responsible. Unless we have that, milk producers and others will continue to get a raw deal and will not have the confidence to invest.

For a start, we need the dairy voluntary code of practice to be refreshed. NFU Scotland says that that is potentially the key to the viability of the sector, and I agree. The code is designed to set out minimum good practice, and as long as it is respected and there is a commitment to it, it could be effective. So far, however, it has not developed enough momentum. The NFUS has warned that to date, and despite Government support, vested interests have undermined the uptake of the code of practice, and that the code is not being allowed to deliver the benefits that it could provide. I know that the Farming Minister is committed to strengthening the code in relation to the milk sector, and I welcome that, but it must include the whole supply chain. If for any reason we cannot make progress with a voluntary code, we need to look again at the option of compulsory contracts.

Another way to assist the dairy industry—this ties in closely with the voluntary code—would be to strengthen the role of the Groceries Code Adjudicator. Some Members have already made specific recommendations, but I will summarise the three main possibilities: allowing her to initiate her investigations rather than waiting until a complaint has been received; taking in smaller retailers and indirect suppliers; and reporting on the balance of pricing across the whole supply chain. Another useful step forward, as we have heard, would be to encourage retailers to use labelling to identify the origin of the product, giving consumers the power to buy local and from the home nations.

We cannot allow the retail giants and others to keep on milking our dairy sector. Firm action is needed and firm action must come—we owe that to our farmers, our consumers and our national self-sufficiency. Without wasting another moment, let us give our dairy sector the help and support that it deserves.