Dairy Industry

David Heath Excerpts

Thursday 13th September 2012 Westminster Hall

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)]

I am grateful to the hon. Member for Ogmore (Huw Irranca-Davies) for his welcome, and for the welcome from other Members here today. I am grateful also to the Backbench Business Committee and to the hon. Member for Dunfermline and West Fife (Thomas Docherty) and my hon. Friend the Member for Tiverton and Honiton (Neil Parish) for making this extremely timely debate happen.

Before I go any further, I want to pay tribute to my predecessor, my right hon. Friend the Member for South East Cambridgeshire (Mr Paice), and, I hope, my personal friend. I have enormous respect for him. He did an excellent job for the agriculture industry during his tenure of this post, and I regret that I am able to take on the responsibilities only by his leaving them. Nevertheless, I thank him for everything he has achieved over the past two and a half years.

This is a very important debate, as evidenced by the number of Members, from every corner of Great Britain and Northern Ireland, who have wished to contribute and are here representing the interests of dairy farmers in their constituencies. I want to say straight away that the dairy sector is hugely important to the United Kingdom, and to me. It is important to me because there are, arguably, more dairy cattle in my constituency than in any other constituency in the country. We make some of the greatest and best cheeses in not just the United Kingdom but the world, and I am not afraid to say so.

[Roger Williams]

Will the Minister give way?

[Mr Heath]

If my hon. Friend is going to argue about that statement, no, I will not.

[Roger Williams]

I am sure that now the Minister is in post he will be travelling right the way around the world. Will he commit to keeping a bit of Caerphilly in his briefcase, so that he can bring it out as an example of wonderful Welsh cheese?

[Mr Heath]

That will get me into some very interesting discussions with border officials in a lot of countries. I will take the concept of Caerphilly, Cheddar, Lancashire and Cheshire around the world with me, wherever I go.

The dairy sector is enormously important to the United Kingdom. It is the largest agricultural sector, and we should remember that it is worth £3.7 billion annually. It is iconic in our countryside, and is identifiably British. There are good things to say about the industry. We have some very advanced and efficient processing plants, particularly for fresh drinking milk, and in the past year there has been a lot of wider investment in processing, which shows real promise and confidence in the future. Yet, let us not get away from the fact that in the past two months we have seen rallies and protests. There was the meeting in Methodist Central hall, which I, too, was at, and there is genuine worry about the inequity between farm-gate prices and production costs. A significant proportion of farmers may struggle to make ends meet this year, particularly in the context of the price changes, but also because of the rising input costs and the monsoon conditions that many of us have had to survive this summer.

There is nothing new in much of that. I seem to have been dealing with the issue throughout my political career, and I have always been consistent regarding the matter. I am actually grateful to the hon. Member for Ogmore for mentioning some of the things that I have said in the past, because I have consistently said that we must have arrangements in the dairy sector that are fair to the farmers, to processors, to retailers and to consumers. Those are not incompatible objectives; they are all on a par. To be fair to at least one processor and retailer, the Co-operative has been mentioned several times. No, it did not do terribly well over the summer, but it has today announced that it is increasing milk prices to 30p a litre from 1 October. That is good news indeed.

Members have raised matters that are slightly away from the economic conditions of the dairy sector. They have talked about the improvements in the Rural Payments Agency, for which I am grateful, because it is absolutely right to say that the agency’s performance has improved. We have discussed TB eradication. Unfortunately, we are still none the wiser as to the position of the hon. Member for Ogmore and his party on that, but I am clear. I thought that my hon. Friend the Member for Totnes (Dr Wollaston) spoke more sense about TB eradication in her contribution than I have heard for a long time, and I am grateful to her for that. We also talked about the groceries code adjudicator, for which I certainly have argued for many years, and I am proud that we are now putting through the House the legislation that will make that a reality.

Let us return to the economic position. We import a quarter of our total dairy needs. We have a £1.2 billion trade deficit. There is a growing demand for food at the global level, and an opportunity to fulfil some of it. Milk quotas will be gone from 2015, but we are not restricted by them now. We have room to expand already, while other member states are held back until 2015 and they desperately want quotas removed now. We have a chance to get in first—otherwise we might lose out. That is why some of the things that my hon. Friends have talked about are so crucial to the future of the dairy industry—promoting the industry around the world, promoting exports and import substitution, and increasing the efficiency and competitiveness of our industry. They are all opportunities for the British dairy industry.

It is not my business to tell people how to run their farms, but we need to look at the vast range of production costs on dairy farms and see if we can learn from best practice, helping farmers to recognise the difference that efficiency and profitability can make, and the improvements that can be achieved on the farm. There are things that dairy farmers can do on their own. For instance, I encourage them to sign up for Dairy Pro. Dairy Pro is the industry’s first integrated continual professional development scheme, which provides training and development to improve both standards of business performance and recruitment and retention within the industry.

There are things that dairy farmers can do together. Several hon. Members have mentioned the EU dairy package, which increases the already significant potential for collaboration through producer organisations. The timetable has not yet been agreed by the European Council and European Parliament, but we do not expect any problems. We expect to be able to start consulting in October, and we hope the legislation will bring the package into effect in spring 2013. I hope dairy farmers recognise the wider benefits that producer organisations may offer. Such organisations are not only about negotiating prices. A well organised producer organisation can make a significant difference to the success of its members by sharing best practice, increasing efficiency and competitiveness and opening up new markets.

[Sheryll Murray]

Does my hon. Friend agree that, Europe-wide, only a certain percentage—30%, I think—of producers can become members of a producer organisation? Does he really think that the shortfall we will see between Europe and the UK will solve the problem?

[Mr Heath]

I think it can make a contribution. All of these things are cumulative, but we should encourage collaboration within our dairy industry because it would make a significant difference.

The biggest single factor, and many Members have talked about this, is the voluntary code of conduct. This is the dairy industry’s first code of practice on contracts and it is a significant step from the beginning of the chain. I congratulate the industry, and I congratulate my predecessor on bringing the industry together. The agreement on the code’s detail is potentially momentous and provides all parties with greater clarity on contractual terms and conditions, particularly on farm-gate prices. I hope the code will start to open trusting relationships between the parties, because they need each other. We cannot have war within a mutually dependent industry.

I have been asked many times what happens if the code does not work. That is the wrong question; I want to ask what happens when the code does work, because I am strongly optimistic that this is the best way forward for securing a sustainable arrangement. Under the EU dairy package, we have the option of legislating on contracts. I make it clear that I will seriously consider making contracts compulsory if the code fails to deliver the necessary changes. I have already announced that we will be consulting so that, if such changes are necessary, we can make swift progress. Having said that, it is vital that the industry gives the code its full support and the time needed to take effect.

I confirm that additional funds are being made available to dairy farmers. We are opening the skills and knowledge transfer framework specifically to provide workshop events for dairy farmers from late autumn this year. That should help dairy farmers identify and access emerging market opportunities such as exports; strengthen their position in the supply chain through more effective co-operation and collaboration; develop new products and add value; and establish benchmarking.

The £5 million rural economy grant scheme for high-quality projects in the dairy industry should continue that focus and add, in the new year, the development of a capital investment programme to target infrastructure projects. That is a significant advance in Government support to the industry, which should reap dividends.

[Thomas Docherty]

Will the Minister give way?

[Mr Heath]

I will, but this is possibly the last time.

[Thomas Docherty]

I am most grateful to the Minister. Will he clarify whether the two funds will be open only to English farmers or will all four nations be able to benefit?

[Mr Heath]

I am responsible only for farming in England. However, I have already contacted the analogous post holders in the devolved Administrations. I am keen to work with them to establish, as far as possible, common practice across the nations of the United Kingdom to ensure we do the best for our farmers.

I will continue the work of my right hon. Friend the Member for South East Cambridgeshire in the dairy supply chain forum, which is a crucial element in keeping a secure domestic market as a strong base from which to innovate, explore and expand the horizons. There are opportunities for replacing imported goods with British dairy products. I am glad that the hon. Member for Isle of Wight (Mr Turner) has done such work in his constituency.

There are clear openings for sending out British dairy products for the world to enjoy. I have already started that process. My right hon. Friend the Secretary of State and I are committed to opening those markets, which I hope will expand the interests and reach of the British dairy industry to all parts of the world, including emerging markets.

[Dan Rogerson]

Will the Minister give way?

[Mr Heath]

Unfortunately, I do not think I can give way, although I would love to do so.

I will continue supporting the Dairy 2020 project and the dairy roadmap, which we want to continue producing positive change. I wish we had another hour so we could carry on talking about what the dairy industry means to the country and how we can support it, but I will summarise my support for the industry. I am committed to a dairy industry that delivers for the future. I want to work strategically with the industry, with a clear focus, particularly in the dairy supply chain forum, on delivering the vision of an

“ambitious strategy for the UK dairy industry’s future without EU milk quotas, which takes full advantage of growing domestic and global demand for dairy products.”

I want to promote British dairy products overseas and remove barriers to trade through the joint Government-industry export action plan, under which DEFRA is researching markets and products that have the biggest potential for export.

I want to talk directly to businesses and to understand what they really think about their prospects, what barriers they struggle with and what they need to grow and take advantage of export opportunities. I want to encourage collaboration and new approaches and to make the best use of the £5 million boost to dairy businesses through the rural efficiency grant scheme. I want to push marketing, joint ventures and new facilities, which are central to enabling the industry to diversify and increase exports. I want better information and advice, and I want to work with experts to provide the information and advice that dairy businesses need, particularly on exports.

We need a sustainable dairy industry. I cannot do everything, but I am determined to do all I can to support that ambition. I simply do not believe that the consumer buys milk from the supermarket on price, a point that has been raised several times. There is an artificial market for milk and milk products in this country. If we can break free, and if we can unleash the British public’s enthusiasm for buying British products in British supermarkets, which this summer has shown, we will have done well by the industry.

I am grateful for the support of so many hon. Members.