Dairy Industry

Charles Walker Excerpts

Thursday 13th September 2012 Westminster Hall

[Mr Charles Walker (in the Chair)]

A lot of hon. Members want to take part in the debate, so I will make myself immediately unpopular by saying that, outside the two opening speeches and the ministerial and shadow ministerial speeches at the end, you will have a six-minute limitation. You can take less time, but you will have six minutes. We will give you one injury time for one intervention.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Walker. To put a time limit on speeches was a courageous decision for someone who is currently running for office.

I welcome the new Minister to his post. He may know that the last Liberal Minister to hold the farming brief was Auberon Herbert, who was President of the Board of Agriculture between 1914 and 1915. However, that does not bode well for the current Minister because Herbert only held his post for one year and did not survive the forming of a coalition Government. None the less, I wish the Minister well in the post.

I am sure that hon. Members wish to pay tribute to the outgoing Agriculture Minister, the right hon. Member for South East Cambridgeshire (Mr Paice). While he and I may not always have agreed, he did his best and will be sadly missed by the farming industry and by members of the Environment and Rural Affairs Committee.

I pay tribute to the hon. Member for Tiverton and Honiton (Neil Parish). We served together on the Select Committee, and as many Members know, he is a mine of information on agriculture. He and I have combined on more than one occasion to ensure that our farmers’ voices have been heard in Parliament. He is a real champion of Devon farmers and regularly makes the case that Devon cream is far superior to Cornish cream. With your permission, Mr Walker, he will sum up at the end of the debate.

A number of important debates are taking place in the House today, and I appreciate that Members might not be able to stay for the whole of this debate. None the less, I thank everyone for coming along.

Members will know that despite the favourable market conditions, the UK dairy sector has been a source of dispute for a number of years. During the summer, the public campaign led by dairy farmers to protest against large cuts in milk prices captured the British public’s imagination. The profile generated by that campaign combined with the lobbying and overwhelming support from all parts of the House have resulted in some significant progress. Indeed, more than 70 parliamentarians went to the National Farmers Union’s dairy summit in July. Several retailers that were identified as not doing enough to support the dairy farmers took belated steps to address some of the unsustainable prices that they paid for their milk. That has helped processors either rescind or reverse the effects of their proposed August milk price cuts. Many of the same retailers have made commitments to address their long-term pricing models for liquid milk. That is very welcome.

In recent days, Arla Foods has committed itself to a 2.5p per litre rise, and today Müller-Wiseman has announced that it will raise its price to 29p per litre. Agreement has been reached between farming unions and Dairy UK on a voluntary code of practice for dairy contracts. However, the industry still suffers from systemic problems that need to be addressed. As the NFU has warned this week, if we do not take action, recent progress will be nothing more than a sticking-plaster solution.

The milk supply industry is not made up simply of producers and processors. Supermarkets also have an important role to play in ensuring fair prices. It is simplistic to portray all retailers as the villains of the piece; the situation is much more complex. Some retailers, such as Tesco and Sainsbury’s, have taken progressive steps in the liquid milk sector, with dedicated pools of producers, and they should be congratulated.

The cheese market remains much more challenging for farmers, however. I hope that one outcome of the code will be to increase transparency in the pricing of milk going to make cheese. Last year, the Select Committee took evidence from Tesco for our report on the dairy industry. We found dishonest its arguments on why it does not provide the same support for farmers who produce milk for the cheese market. It is ludicrous to suggest that there is not enough stability in demand for a workable contract for cheese.

The Select Committee was clear that if supermarkets such as Tesco continue to rip off farmers, the Government should be prepared to step in. Tesco is by no means the worst offender, and I am disappointed to have to report that we are repeatedly told that the Co-op provides the worst deal to dairy farmers. It is vital that customers and Co-op Members apply pressure to those retailers to provide a fairer share of the retail value to their suppliers.

The recent crisis was brought about by the reckless actions of Asda, which was selling milk at a loss-leading price of eight pints for £2, which is less than the price of bottled water. That in turn sparked a price war, which inevitably led to a cut in the price being paid to farmers. While supermarkets have seen quarter on quarter rises in their profits, many farmers have been pushed to the brink. Although I welcome moves by Morrisons, Asda and the Co-op belatedly to increase their price, they have a responsibility to ensure that we have a sustainable dairy industry now and in the future.

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[Neil Parish]

My hon. Friend is absolutely right. Farmers’ great strength is their independence, but sometimes they do not get together as much as they should. This is an opportunity, with producer organisations, to do precisely that. It is important that the Rural Payments Agency is in a position to formally recognise groups of farmers who wish to constitute themselves as a dairy producer organisation before spring 2013. We have to stop talking about that, and do it.

The Government must also continue their work in making farming and the dairy industry more competitive, through cutting regulation, waste and red tape. The independent taskforce, set up by Richard—Dick—Macdonald, has been successful, but it means that the Department for Environment, Food and Rural Affairs has revoked some 39 statutory instruments only to turn around and introduce a further 41. We have, therefore, to run a little faster to get rid of regulation.

Farmers have to spend a great deal of their time filling and refilling forms on everything from livestock movements to nitrates regulation. The cost of current regulation is upward of £5 billion a year, with 50% of all DEFRA regulations coming from the EU. In particular, it is important that the Government look again at the nitrate vulnerable zone, because I do not think that it is scientifically based, and it costs the industry a huge amount. Ultimately, DEFRA must go further in cutting the barriers to growth domestically, and give Parliament more scrutiny over EU regulation coming in.

Farmers are never going to get a good price while we flood the UK market with liquid milk. The majority of milk produced in this country is for the liquid milk market, with only 49% of it going into processed products such as cheese and yogurt, which is far less than in many other countries. For instance, in Eire—the Republic of Ireland—80% of the milk is exported.

[Mr Charles Walker (in the Chair)]

Order. The hon. Gentleman has had more than the allotted time. Out of deference to him, I will let him start to wind up now. I will give him one more minute.

[Neil Parish]

I am very close to the end.

We need, therefore, to get more milk into the emerging markets of China and the far east, to ensure that we take more milk out of the system and create greater competition, which can drive up the price.

Finally, please can we ensure that the groceries code adjudicator is given real teeth and comes in quickly? Please can we ensure that all the work that the previous Minister did on the voluntary code is up and running immediately? When are the Government going to spend the £5 billion earmarked for producer organisations? Can we keep up the good work that we have done on eradicating tuberculosis? Healthy livestock, healthy wildlife.

[Mr Charles Walker (in the Chair)]

Lots of colleagues want to speak. I was slightly generous to the hon. Gentleman, but I really am going to do six minutes, with a minute for an intervention.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate.

Over the summer, much of my political work centred on the dairy industry. I was invited by the National Farmers Union to meet local farmers, a meeting hosted by Mr and Mrs Thomas of Dolau Gleision farm near Llandeilo. It was an extremely interesting experience. I was chaperoned into a nearby barn, where the local farming community sat on rows of hay. It was a bit like “Question Time”. I also had a detailed meeting with the executive of the Farmers Union of Wales in Carmarthenshire, at which we discussed policy options, and my Assembly colleague Rhodri Glyn Thomas and I arranged an open meeting on the eve of the Royal Welsh show in Llandeilo. To his credit, the Welsh Deputy Minister for Agriculture, Food, Fisheries and European Programmes, Mr Alun Davies, attended the meeting at extremely short notice.

Feelings in all those meetings were running extremely high. Most farmers had just received news that they were facing price cuts of at least 2p. A large number of farmers were threatening to spill their milk down the drains, and many did not attend the meetings because they were picketing processing units across the border. Thankfully, and to his credit, the UK Minister at the time acted, and during the Royal Welsh show announced progress on a voluntary code of best practice between processors and producers. Together with the milk price cuts being postponed, that was enough to restore calm in the countryside and avoid a summer of discontent, which meant that I could enjoy the rest of my August holidays.

The process culminated with the announcement of a finalised voluntary arrangement earlier this month, which is undoubtedly a step forward. However, the key question is whether it will result in a fair price for farmers for their product. At the end of the day, that is key, as well as creating a fair and transparent supply chain. Unless farmers are confident about the future prospects of the industry they will not commit to dairy production.

I welcome the moves to equalise the relationship between producer and processor, specifically in the contractual arrangements. Previously, producers were tied to a processor for periods of longer than a year, whereas the processors could cut the price on a whim. The voluntary agreement, as I understand it, will ensure that processors have to give producers 30 days’ notice before dropping prices, but producers will have to give three months’ notice. Although the agreement is a step forward, the balance will still be weighted towards the processors.

There has been broad support for the voluntary code. NFU Cymru has always championed a voluntary agreement. The Farmers Union of Wales, which traditionally shares my more militant tendencies, has also welcomed the announcement. I am not being pessimistic, but I believe that it is incumbent on both the UK and Welsh Governments to prepare a policy response, if the voluntary code breaks down.

During the public meeting in Llandeilo, the Welsh Deputy Minister said that he had the power to introduce a Welsh dairy package. I was completely wrong-footed by that suggestion, because I had always thought that such things had to be introduced at member state level. However, during a visit to Brussels last week, the Welsh Affairs Committee met with Hermanus Versteijlen, the European Commission’s director of agriculture and rural development. I naturally asked him about that, and he said that a dairy package could be implemented wherever the political competence lay, which seems to indicate that it would be possible for the Welsh Government to introduce one. I urge the Welsh Deputy Minister—I hope that he is listening in Cardiff—and stakeholders in my country to at least begin to prepare the framework for legislating on a Welsh dairy package. Having something concrete in draft form might even concentrate the minds of processors, in relation to ensuring that the voluntary code that was set out earlier this month works.

I have a few questions for the Minister on the voluntary code. How does he expect the code to affect the expected legislation on the grocery ombudsman? What measures will he use to judge the voluntary code’s effectiveness? How do British farming Ministers view the implementation of the European Union recommendations for producer organisations? How will they develop on these isles? What is the potential threat of quotas ending in 2015? In informal meetings in Brussels we were led to believe that the Irish are gearing up vastly to increase their production to flood the UK market. Will the Minister indicate his thinking on the potential threat of that future development?

[Mr Charles Walker (in the Chair)]

I have one last notice. The Clerk will ring a little bell when a speaker has a minute left. That is an innovation.

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[Ms Ritchie]

I am with the dairy industry and with the hon. Gentleman on that issue. I live in the countryside and am well aware of how the situation affects not only dairy farmers, but those involved in beef and sheep production. They feel that they do not get a fair price at the farm gate. Farmers in Northern Ireland feel that they get a lower price than those in Britain.

In the light of all that, I note with interest the recent voluntary code of practice agreed between processors and non-aligned producers in England and Wales. In such a context, there is a need for a commitment by all sides to reach a similar agreement in Northern Ireland, where no such voluntary code of practice currently exists. I understand that the dairy industry in Northern Ireland decided to wait on the outcome of discussions in Britain before deciding whether the code would be appropriate to its circumstances, and that different industry groups will meet later this month to consider their position. However, I am in no doubt that the achievement of a resolution in Northern Ireland is particularly pressing, as farmers there are less likely to be aligned with large supermarkets.

All sides and interests in the situation must recognise that their relationship is symbiotic and we must find a path that ensures a fair settlement to guarantee the success of a staple native industry. In that respect, I hope for some collaborative governance in advance of the Groceries Code Adjudicator Bill, which I hope will have teeth. I hope it will have the regulatory power to deal with the issues in question. I urge the Minister, whom I welcome to his new post, to talk to the appropriate Minister in the devolved Administration in Northern Ireland about the need to give the Northern Ireland dairy industry a fair wind.

[Mr Charles Walker (in the Chair)]

Hon. Members may have noticed that the bell is broken. I apologise to the hon. Lady.

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[Mr William Cash (Stone) (Con)]

I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and the hon. Member for Dunfermline and West Fife (Thomas Docherty) on securing the debate, which is essential.

As my hon. Friend the Member for Stafford (Jeremy Lefroy) said, Staffordshire has one of the largest dairy farming industries in the country. I used to be the Member of Parliament for Stafford—now I am the Member for Stone—but I remain a Staffordshire MP. Dairy farmers work incredibly hard, and I was pleased to meet my dairy farmers at the Central hall rally a few weeks ago. I have had several meetings with them over the past few weeks and I entirely agree with all their arguments, which extend not only to the cost of milk and the price that they get for it but to TB and how, as a result of the legal decision in the High Court this week, we will be having further progress on that shortly. I also regard the ombudsman in the Groceries Code Adjudicator Bill, which I am glad that the Government have brought in, as important.

It must be 10 or 15 years ago that I spoke to the Office of Fair Trading, calling for fair competition in milk prices, so I have some history on the issue. As long ago as 1984, the by-election that got me into Parliament for the first time was completely dominated by milk and that has lived with me ever since. I have had great pleasure working with dairy farmers, who are wonderful people and work incredibly hard.

I congratulate the Minister, whose constituency of Somerton and Frome includes the villages that my wife’s family comes from, and the Secretary of State for Environment, Food and Rural Affairs, my right hon. Friend the Member for North Shropshire (Mr Paterson), on their new posts. I welcome them to tricky problems on such things as nitrate vulnerable zones, as mentioned by my hon. Friend the Member for Tiverton and Honiton, or the potential for compulsory codes and various other European Union measures—people will be familiar with my concern over those. It is one thing to hope, as in the notes that we received today, that people might be able to amend grassland derogation, to promote the principles of better regulation and to deal with and reverse the nitrate vulnerable zones, but there is only one way of reversing them—as my hon. Friend the Minister will acknowledge—which is by negotiating, which might be almost impossible, or by applying the notwithstanding rule, the use of which I have advocated for many years to override European legislation. That is what the National Farmers Union is calling for, which I am pleased to commend, because we have reached a point at which much European legislation—the call for federation and all the rest of it—has now become utterly absurd. There is also the question of public procurement contracts. I said that it would be a good idea if we in Parliament ensured that we paid a sustainable and fair price, because that would give a lead, and would demonstrate our commitment to our dairy farmers.

I believe strongly—and I commend my hon. Friends the Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Stafford for joining me—in encouraging the prospects for dairy farming activity in export markets, and joint ventures. In India, I met an Indian businessman who is running a company called Milky Moo. He is coming over to see Staffordshire farmers, and I am happy to invite my hon. Friend the Member for Stafford to join us if Milky Moo needs experience and knowledge. Believe it or not, its milk production includes contracts with 10,000 farmers, and it expects that to rise to 100,000 farmers in that part of India in a few years. It is a huge business, and we can offer a lot of expertise. Some of the briefings we received contain sound advice, and the naming and shaming of those who are not prepared to co-operate in the new voluntary code is an important aspect of where we need to go.

That is all I need to say. I agree with so much that has been said by hon. Members on both sides of the House. This is a very good demonstration of the fact that Parliament is working very hard for the dairy farming industry, and the fact that so many hon. Members have turned up is a great tribute to their determination to do the best for their farmers.

[Mr Charles Walker (in the Chair)]

We are making fantastic progress. If we maintain discipline, I hope that we can get all hon. Members over the line.