Dairy Industry

Debate between Daniel Kawczynski and Huw Irranca-Davies

Wednesday 4th February 2015 Westminster Hall

[Daniel Kawczynski (Shrewsbury and Atcham) (Con)]

During the previous Parliament, in 2006, I set up the all-party group for dairy farmers. In Shropshire at that time, nearly a decade ago, we already recognised the crisis that our dairy farmers faced. Some 160 Members of Parliament joined the all-party group and we had an excellent secretariat, the Royal Association of British Dairy Farmers. The Prime Minister joined the all-party group when he was Leader of the Opposition; it was the only one that he joined during that Parliament. After a year of deliberations, taking evidence, going to Brussels and meeting various organisations, we came up with two recommendations: a limited cull of badgers to deal with the crisis of bovine TB, and a Bill introducing a groceries adjudicator to regulate the supermarkets and their conduct towards processors and dairy farmers. We took those recommendations to David Miliband, who basically laughed us out of his office—

[Huw Irranca-Davies (Ogmore) (Lab)]

Rubbish!

[Sir Roger Gale (in the Chair)]

Order.

--- Later in debate ---

[Huw Irranca-Davies (Ogmore) (Lab)]

This has already been an excellent debate. I thank the hon. Member for Ribble Valley (Mr Evans), a good Swansea boy, and all Members who have spoken for their contributions. My hon. Friend the Member for Ynys Môn (Albert Owen) and others reminded us of the importance of the dairy industry not simply to the economy, growth and exports but to the social fabric of our rural communities, their interplay with our towns, and our health and well-being.

About 14 billion litres of milk are produced in the UK each year, and about half of that is used for liquid milk. The UK is the third largest milk producer in the European Union, after Germany and France, and the 10th largest in the world. Given the industry’s value of £4.27 billion at 2013 market prices, its importance is clear.

However, despite the long-term optimism expressed by some Members, Ministers and EU Agricultural Commissioner Phil Hogan, the dairy sector has suffered from low prices and volatility for years. The November 2014 farm-gate price of 28.91p per litre was down 16% from the previous year. The 2012 milk crisis led to blockades of depots and processors, and thousands of angry farmers descended on Westminster to confront Ministers. In fact, the former Minister who was confronted by those angry dairy farmers, the right hon. Member for South East Cambridgeshire (Sir James Paice), is now the chairman of First Milk, which is owned and run by dairy farmers who have been forced to delay payments. He told the press recently that

“hundreds of UK dairy farmers are unlikely to find a home for their milk this spring.”

In addition to that delay, First Milk’s producers have seen the price they are paid plummet from 32.5p per litre last spring to 21.2p per litre for those supplying the Co-op on liquid contracts and 21.57p per litre for those in the manufacturing pool.

The average farm-gate price of about 28p per litre disguises huge variations. A third of liquid milk is sold to retailers, which base the price they pay on what it costs the farmers to produce it, plus an agreed margin. Sainsbury’s and Marks and Spencer currently pay 34p per litre, Waitrose pays 33p per litre, Tesco pays 32p per litre and the Co-op pays almost 31p per litre.

Some major retailers, though not all, argue that their massive discounting of liquid milk at four pints for less than 90p in their endless price wars is not done at the cost of farmers. They argue that the only casualty in the price wars is their own profit margins, but frankly, even supermarkets that pay decent farm-gate prices to the producers and have the most direct relationships cannot absolve themselves of responsibility. The fact that they engage in price wars in which liquid milk is a prime weapon embeds the idea that milk is a commodity to be undervalued and sold for less than the price of water or carbonated and unhealthy fizzy drinks. Ultimately, the only casualty in the price war is the dairy farmer. We need to see not only British milk but British dairy products on supermarket shelves.

Some retailers and their production chains do not contract directly with producers, so they may not have regard to the voluntary dairy code, which I will return to in a moment. They do not absorb the costs of the price wars themselves, and instead put pressure on their supply chain, which causes farmers to reduce costs further below the cost of production.

Two thirds of liquid milk produced is sold to processors, which is where the cuts are being made. Arla, which supplies Asda, pays farmers 25p per litre. Müller-Wiseman pays the same. Dairy Crest is set to cut its price to less than 25p per litre, and we await a decision on the sale of Dairy Crest’s liquid milk division to Müller in the latest act of business consolidation to drive out costs. First Milk, as I said, pays less than 22p per litre. Iceland supermarket is supplied by Arla and Müller-Wiseman, but it has asked them to base their future prices on the cost of production—that is at least a step forward. Morrisons has announced that it intends to establish its own producer group, but in the meantime it gets its milk from Arla and Dairy Crest.

There is also huge variation in production costs. The figure most commonly cited is the National Farmers Union average of 28p per litre. However, the most recent figures from the industry body, DairyCo, show that there is a 14p per litre difference in the cost of production between the top quarter and the bottom quarter of farms.

We need a prompt review of how the whole dairy industry is overseen through the dairy code and the Groceries Code Adjudicator. The genesis of the dairy code, which was established on a voluntary basis in November 2012, was a dairy crisis that culminated in blockades, protests and a Minister leaving his post benighted but not delighted at his treatment. However, the independent review by Alex Fergusson MSP in 2014 proposed an extension to retailers and measures to increase the uptake into the 15% that are not currently signed up to the code.

When the public and the political awareness of the pressure on dairy farmers is so great and when the public relations disaster for processors and retailers is so potent, why is the take-up not higher? Why is it not universal? Will the Minister commit to name and shame everybody who has not signed up to the dairy code in public, on the Department for Environment, Food and Rural Affairs website and in Parliament? Will he also commit to name and shame and publish a regularly updated list on the DEFRA website and in Parliament of all the processors and retailers that participate in supply chains that pay farmers less than the average cost of production?

The Government, in evidence to the Select Committee on Welsh Affairs in 2013, repeated their previously stated position. They said that they would seriously consider legislating for compulsory contracts if the code fails to deliver the desired outcomes. Does the Minister now feel that that is needed, or has he considered it and ruled it out?

I and some Members here today know that the Government had to be dragged into agreeing to financial penalty powers for the Groceries Code Adjudicator.

[Daniel Kawczynski]

indicated dissent.

[Huw Irranca-Davies]

I sat on the Groceries Code Adjudicator Bill Committee, so I can tell the hon. Gentleman that they did. They conceded only under pressure from Members on both sides of the Committee. They argued against giving it those powers, which perhaps explains why it has taken so long to introduce the regulations. I and others have repeatedly raised that delay in Parliament.

I ask the Minister to clarify what the Prime Minister meant when he was pressed on extending the role and remit of the GCA to the dairy industry at Prime Minister’s questions on 21 January. He said:

“I also think it is time to look at whether there are ways in which its remit can be extended to make sure it looks at more of this vital industry.”—[Official Report, 21 January 2015; Vol. 591, c. 217.]

We all welcome the sinner who repents, but that issue was discussed ad nauseam in the Groceries Code Adjudicator Bill Committee two years ago, and the Government rejected it. We had the opportunity to extend the powers along the whole supply chain, including processors and intermediaries, but that was dismissed as disproportionate. We also had the opportunity to enable the GCA to investigate abuses, but that was dismissed as allowing “fishing expeditions”.

I seek clarity, so let me ask the Minister directly. When the Prime Minister referred to extending the remit of the GCA to look at more of the industry, did he mean that it should include intermediaries? Did he mean that the GCA should have the power to instigate proactive investigations into abuses, which the Environment, Food and Rural Affairs Committee asked for?

The current pressures on the dairy industry go beyond the UK. They reflect reduced demand in China due to the economic slow-down and the closure of the Russian market. The recent increase in production in the EU due to confidence in higher milk prices in 2013, good grazing and good weather, and increased yields in the UK conspired to lead to an over-supply. Arla suggests that global production is increasing by 5% per year, while demand is growing by only 2%. There is no single answer, but there are several areas in which we need to take action in the face of continuing long-term global price volatility and predicted continuing falls in farm-gate prices in the near future.

Will the Minister update us on the progress on country-of-origin labelling, on the establishment of producer organisations in the dairy sector, on the futures market for dairy and on what the uptake and interest in it has been? How much of the countryside productivity scheme money—the £141 million—has gone directly to dairy farmers, and what measures has it funded? What progress has been made with banks and lenders to deal with the immediate cash-flow problems? What discussions has the Minister had about the resilience of the dairy sector in the face of increased volatility that could follow the ending of milk quotas on 1 April this year? Most of all, we would like to know what the Prime Minister meant on 21 January. Was he serious, was he committed or was he deluded? Was he misinformed? Did he misspeak? Was he off piste and off message? Was it a soundbite in the run-up to the election to make the farming community think he is listening? The Minister has the chance to clarify whether the Prime Minister knew what he was talking about, or whether he was just spinning out of control.

It is over to the Minister to sort out the confusion from No. 10. Here we are again, three months to the day after the previous dairy debate, and three years after the previous dairy crisis. Our dairy farmers need and deserve some straight answers.

Dairy Industry

Debate between Daniel Kawczynski and Huw Irranca-Davies

Thursday 13th September 2012 Westminster Hall

[Huw Irranca-Davies]

Indeed. I will return to that important point shortly; the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) raised it earlier, too. It is absolutely right that the Welsh Government are already considering what will happen if the code does not work. I will raise the point with the Minister, too, because we need to ensure that a discussion takes place across the UK about having an approach that, if it is not universal, respects both devolution and the fact that we need to work on behalf of all our farmers—not only farmers in the Principality, but right across the nation.

I say to farmers who may be tempted to pause for breath because they think that the summer storm is now passing that they should not do so. I say to them, “Organise yourselves; invest in producer organisations and in the value of the raw product, and do it now. And keep the pressure on us as parliamentarians and on the Government to deliver, as the groceries code adjudicator comes to the House.”

One of the last acts of the former Minister was to sign off on a voluntary code for best practice between milk processors and suppliers. That was good, and the code has been broadly welcomed. However, as night follows day, or in this case—please excuse my pun—as knighthood followed that day, the announcement was welcomed but with some caution. The chairman of the National Farmers Union, Peter Kendall, said that although the announcement

“gave some hope for the long term, it did not solve the dairy farming issues of today”.

So we must keep up the pressure to ensure that those processors that are not paying a fair price announce—as we have heard today—that they are rescinding their former announcements. Peter Kendall went on to say:

“This agreement will give us the architecture we need to make sure that we don’t end up with the same dysfunctional markets that are responsible for the dairy crisis we have today”.

We now have the architecture there in front of us, as long as we can make it work.

Let me make it absolutely clear that Labour supports the voluntary agreement if it can be made to work and once the legal niceties have been ironed out, but we also seek assurances from the Minister that the Government do not rule out additional measures, including legislation, should they prove necessary.

We are not alone in seeking that assurance, as the Minister has already heard today. Conservative parliamentarians—including the hon. Members for Bridgwater and West Somerset (Mr Liddell-Grainger), for Burton (Andrew Griffiths) and for Tiverton and Honiton, who have spoken in this debate, and many others who have spoken elsewhere—have queued up to express caution. As I was saying to my hon. Friend the Member for Dunfermline and West Fife a moment ago, that does not sound like the party of regulatory bonfires. This must be one of those good bits of regulation that some people talk about, while others jeer at the very idea.

I will express one word of caution to the Minister, to urge him not to rush headlong down the Stalinist end of the spectrum of views on this issue. Such views have been expressed by the hon. Member for Bridgwater and West Somerset, who has stated:

“There is no way it”—

the voluntary code—

“is going to work—it is just another rather sad red herring—it has been tried I don’t know how many times and it is always a disaster”.

He says that the code, which the Government support, is “nowhere near sufficient” and that Parliament needs to set a minimum price for

“a strategic resource like milk.”

I urge the new Minister to avoid capitulating to the old, central, statist control-and-command tendency in the Conservative party—next thing he will be arguing for a price set at a European level. Give the voluntary agreement some time to work, but as those in the less red-in-tooth-and-claw tendency of the rural Conservative party argue, keep the legislation ready to hand in case it is needed. Alternatively, as the Minister’s own Liberal Democrat party president, the hon. Member for Westmorland and Lonsdale (Tim Farron), has said, although the voluntary code is fine for now, the Government must

“commit to back that up with legislation if needed.”

That point has been made consistently today by many MPs from all parties.

[Daniel Kawczynski]

I am grateful to the hon. Gentleman for giving way, as he is running out of time, but I hope that he will not finish speaking without giving an up-to-date explanation of the Labour party’s views on a limited cull of badgers, following the decision of the courts.

[Huw Irranca-Davies]

I will try, but I might well run out of time. We need another debate, and following that decision, I suspect that we will have one on that matter in the near future. I will try to get to the issue. I want to draw on some of the points that have already been raised.

I seek assurance from the Minister that he will keep the voluntary agreement under extremely close scrutiny, that he will report back to Parliament on its operation with genuine urgency and that legislation is being kept as an option. I assume that he will be open—more open, in fact, than his predecessor—to the suggestion that the groceries code adjudicator should be given a few more teeth than the Government seemed willing to countenance formerly. In fact, I am confident that he will want to do an about-turn, because he is rightly an openly professed friend to good sense, to farmers, to a healthy and prosperous supply chain and, by default, to the position that is being expanded upon today. There is cross-party consensus; let me explain.

The new Minister, not without some background or expertise in the farming and food sector, including in dairy production, is on record as saying that he favours

“an ombudsman with teeth, who can deal with the iniquities of the food supply chain”—[Official Report, 20 January 2009; Vol. 486, c. 165WH.]

He said that the sooner that was established the better. We note the phrase “with teeth”, to which I will return in future debates.

Today, we particularly note the reference to the food supply chain. In 2009, the Minister said, with wisdom and foresight, that we need

“a sustainable price that allows our producers to get a return on their investment in milk”.—[Official Report, 18 June 2009; Vol. 494, c. 501.]

He also talked about

“a regulator who will be able to regulate the whole supply chain effectively, and ensure that the relationships are fair and transparent”.—[Official Report, 20 January 2009; Vol. 486, c. 165WH.]

That refers not to a limited part of the supply chain, such as a direct link between retailers and suppliers, but to the whole of it, which would include intermediaries such as milk processors. However, that is not what the Government propose in the Groceries Code Adjudicator Bill. Now that he is Minister in charge—the man with the levers of power who will stamp his own authority on the Department—I know that he will want to amend the Bill in line with the proposals.

I have run out of time. We will have to debate the matter again. I welcome the new Minister, and I hope that he can confirm that his imprint will now be on the proposals for the groceries code adjudicator.

Wind Farms (Mid-Wales)

Debate between Daniel Kawczynski and Huw Irranca-Davies

Tuesday 10th May 2011 Westminster Hall

[Huw Irranca-Davies (Ogmore) (Lab)]

It is a delight to serve under your stewardship this morning, Mrs Riordan.

I congratulate the hon. Member for Montgomeryshire (Glyn Davies) on introducing this debate, and on speaking eloquently and passionately on behalf of his constituents. I know that the issue of wind farms has engaged him for quite some time and continues to do so. He has made that clear today, and I am sure that the Minister will respond in great depth to the debate.

I also congratulate the other Members who have spoken—my hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne) and the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski), for Brecon and Radnorshire (Roger Williams) and for Wells (Tessa Munt). Who would have thought that a debate on wind farms in mid-Wales would have stimulated contributions from Scotland to Somerset and all points in between? That shows the pulling power of the hon. Member for Montgomeryshire, even when he is on crutches; I also wish him well in his recovery. As we strolled, chatting, to Westminster Hall today, he told me that things were going well and that he would be up and running very soon. I say “well done” to him for that.

I turn to the nub of the debate. This is a difficult situation, both for individual MPs representing their constituents and for the Minister. We wrestled with the same issues when we were in government. We are committed to local interests and local democracy, and at the same time to national interests and national democracy, whereby parties stand on manifestos and accept commitments to renewables and climate change targets. How do we square that triangle? How do we ensure that the voice of people at a local level—including my own voice and that of my constituents—is heard, while ensuring that we deliver a national imperative in terms of energy security, energy affordability and carbon targets? Indeed, we must also deliver on our global ambitions to be a world leader in renewables.

At the outset, I must point out that recently we had a very good Westminster Hall debate on wind farms; it focused on the Localism Bill and so on. I will turn to that Bill in a moment. There were 20-odd contributors to that earlier debate, and I think that a couple of the Members who are here today also attended it. I will not waste everyone’s time by re-rehearsing the arguments that we went through, but it would be fair to say that a fair degree of scepticism towards onshore wind farms was demonstrated in that debate. I do not share that scepticism, and I will explain why in a moment. I recognise the need to have local input into these decisions, but I do not share the scepticism, in various degrees, that some people have about wind farms. Let me explain why.

[Daniel Kawczynski]

Regardless of whether one believes in these wind farms, does the hon. Gentleman not agree that it is preferable to have them offshore rather than onshore?

[Huw Irranca-Davies]

There is an interesting and live debate about not only the appropriate way to deliver energy security in the UK, to which renewables definitely contribute—people often say that they are not part of our energy security—but the most affordable way to do so. That debate has continued in the past few days, and it addresses that very question: should it be onshore or offshore, or should other types of technology be involved? That is the sort of debate that we should have in Parliament. If the hon. Gentleman will bear with me, I will come to that later.

Before I do, I want, on behalf of the hon. Member for Montgomeryshire and other Members who have spoken today, to ask some questions about mid-Wales and the routing of the transmission. Can the Minister provide an update on the consultations, and on any outcomes from them, including any amendments being considered to plans or to the routing and the strategic optioneering report? Will he comment on any consideration that has been given, or is likely to be given, to the community benefits? Such benefits were remarked on by the hon. Member for Montgomeryshire, and I wonder whether the Minister will update us on the individual developments or on the grid transmission development.

The Minister has spoken not only about renewables and the offshore development off the north-east east coast of England, but about a number of technologies. How will he ensure, if this development progresses to the scale that has been outlined, that the absolute maximum benefit in the form of local and regional economic impact accrues, and that the benefits are not leaked out of the area? How will he deliver on what he has previously said—that he wants these developments to create jobs and to input into the local and regional economies? If the development is to go ahead, that needs to happen.

Can the Minister also update us on the progress of the transport routing, an issue that has caused great concern to people in the hon. Member for Montgomeryshire’s constituency and those of other Members? Will there definitely be another round of consultation in autumn this year so that people, including Members, will have a further opportunity to comment on the route alignment and other aspects of the project?

The issue should not be rushed through. Can the Minister update us on the delay in the progress of the national policy statements, both generally and in terms of transmission and the UK energy infrastructure? We all know that our 75-year-old infrastructure is exactly that. It was a landmark when it was rolled out 75 years ago, but it is not now fit for either what we are trying to do with renewables or what we need to do in developing a smart grid. The Minister and I agree on that, so can he give us an update on what is happening with the national policy statements? They have been slightly delayed, and it would be good to hear when we will see them and what input parliamentarians will have.

The crux of the matter appears in a phrase that, curiously, has been hurled at the Labour party by Conservative Members, despite our very best efforts over more than a decade in government. They have said that we had a “wasted decade” of renewables, largely because of what they saw as the failure to roll out, at speed and at scale, onshore wind. That phrase has been used if not by the Minister, certainly by his colleagues, and in recent months.

I acknowledge that the Labour Government did not succeed in rolling out onshore wind at the scale and speed that we had anticipated. Curiously, that was very much because there was strong local input into the decisions, which either slowed things down or deterred investors from staying the course and developing onshore wind to any great scale. That is why, before we left government, we put in place a huge expansion of offshore wind energy, which is much more expensive.

That cost falls, of course, on us. There is a cost implication, but the plan will now deliver if the Government hold true, as they are doing. They have delivered on the £60 million for the investment in ports infrastructure, which has led to four major companies, including Siemens and Marconi, coming in and saying that they will put the jobs into those ports, and manufacture and develop offshore. That is fantastic, and it is because we were not able, because of local input, to go as fast as we wanted with onshore. One of the critical decisions here, not only for mid-Wales but generally, is whether the Government will now see onshore as an area for expansion over the next five to 10 years.