department for Environment, Food and Rural Affairs

James Paice Excerpts

Tuesday 17th July 2012 Commons Chamber

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

I was expecting at least one further subject to be brought up during the debate. [Interruption.] That, like many other wonderful speeches, will be consigned to the filing cabinet of those never to be delivered in this Chamber.

I hope that the House will forgive me if I devote most of my response to dairying, which was the subject of most Members’ speeches. First, though, I will reply to my hon. Friend the Member for Pendle (Andrew Stephenson). I am very sorry to hear about the dog attack on his mother. I am pleased to hear that she is recovering, even if she will bear the scars for the rest of her life. He was absolutely right to refer not only to the measures that we have announced but to the importance of dealing with dog owners. As he said, often the problems with dogs are in fact a problem with the owner, either because they do not understand how to control the dog or have the desire to use it as a form of weapon for intimidation or worse. That is why the Home Office proposals on antisocial behaviour will include measures on the use of a dog as a weapon, which will rightly be seen as an antisocial activity and dealt with in that way.

My hon. Friend referred to the measures that I announced on 23 April. The consultation that stemmed from that closed on 15 June. We have begun to analyse the responses and will announce our conclusions as soon as we can. To recap, the most important element was to extend the criminal offence of allowing a dog to be dangerously out of control on private property, which addresses his point about postmen and the many other people who have a legitimate right to come on to one’s property. We are consulting on the compulsory microchipping of dogs—in particular, precisely on how early to do that and whether it should be at the puppy stage. We are increasing the fee for placing a dog on the index of exempted dogs. We are removing the need to seize and kennel all dogs where court proceedings are pending. We are also, as my hon. Friend said, making a grant to the Association of Chief Police Officers for the training of dog legislation officers. I hope that he agrees that we are endeavouring to address an issue that is long overdue.

Dairying and the crisis in the British dairy sector were referred to by at least four Members in their speeches and by others in interventions. Like my hon. Friend the Member for Montgomeryshire (Glyn Davies), I had milk cows earlier in my life. I fully recognise the huge crisis that is affecting many people in the sector. As a number of Members have said, some supermarkets that have aligned groups of producers have not cut their prices. However, the processors for many producers cut their prices in May or June and have announced further cuts for 1 August. The cut will total some 3.5p to 4p per litre over the two periods. We now seem to have an industry of haves and have-nots—those who have a supermarket deal and those who do not.

As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) said, there has been some good news today. Asda has announced that it will increase the premium that it pays its processor, Arla Foods, by 2p a litre, thereby nullifying the cut that Arla has announced. In other words, the producers affected will not face a cut on 1 August. From memory, that is about 227 producers. Dairy Crest has announced today that, in future, it will require only three months’ notice when producers leave their contracts, and it has guaranteed that it will give four weeks’ notice of any price cut.

[Bob Stewart (Beckenham) (Con)]

I have been listening to the debate and, although I do not know much about this subject, it seems to me that we should somehow ensure that price cuts are not passed on to the dairy farmer. The big supermarkets should take whatever they wish, but they should not pass it on to the milk farmers.

[Mr Paice]

My hon. Friend’s point is properly made and is an important one.

I will concentrate on the issues that need to be addressed. I fully recognise that what matters to the dairy farmer is the price that they are paid. However, as several hon. Members on both sides of the Chamber have said, it is not simply a matter of reversing the price cuts, although that is what the producers want. We need something more substantial and more permanent than that.

As I say frequently outside this place, we have an obsession in this country with the liquid market and with the desire of our processors to gain bottling contracts for supermarkets. They keep undercutting each other to keep their bottling plants at full capacity. When, as has happened on this occasion, cream prices collapse and they face major problems, the only way in which they can recoup any income is by cutting the price for their producers to below the cost of production. That is a direct consequence of the obsession with bottling for supermarkets.

As several hon. Members have said, and as is abundantly clear, there are ample other opportunities for investment. Some 20% of our total dairy consumption is imported. The hon. Member for Bishop Auckland (Helen Goodman) talked about imports. We do not import liquid milk. All the imports are dairy products, but they nevertheless make up a significant part of our total consumption.

What are our processors doing to combat that? One or two are trying to do something. Dairy Crest has gained back some of the cheese market with one of its products and it should be congratulated on that, but there is still much to do. Where do the supermarkets with aligned dairy groups, which pay a premium for their liquid milk, get their own-label brands? Where are their other dairy products, such as their yoghurt, produced? Do they use British milk? In many cases, they do not. There is therefore a great opportunity for import substitution.

There is an even greater opportunity for exports. The world is crying out for increased dairy products. Yes, global prices have fallen back and that is part of the immediate problem that we face. However, I say to my hon. Friend the Member for Ceredigion (Mr Williams) that if I was asked whether I would encourage a young person to go into dairy farming, my unequivocal answer would be yes, because I am convinced that there is a long-term future beyond today’s crisis.

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

Will my right hon. Friend give way?

[Mr Paice]

No, I am sorry, I need to press on.

Hon. Members also raised the issue of supermarket power. As has been said, we are introducing the groceries code adjudicator. I have always tried to be honest with farmers and say that on its own it will not increase the price of milk, but that it should increase fairness and transparency.

The big problem that we face, which has been mentioned this afternoon, is what I view as the absurd level of price cutting by some retailers, particularly those in what is known as the middle ground. One retailer is openly selling milk at 99p for four pints.

[Helen Goodman]

Name them.

[Mr Donohoe]

Iceland.

[Mr Paice]

It is on the record, and I did not move my lips.

The reality is that such a price is completely unsustainable. Such retailers need to understand that if they go on like that, there will be no milk. There is a limit to cost cutting. Maybe some producers can cut their costs, but not to that level. It is completely impossible. There is no country in the world that can sell bottled milk at the equivalent of 25p a pint by the time it has been through the whole processing chain. That is absurd, and such retailers are biting off their nose to spite their face.

The final issue that several hon. Members raised was the lack of producer power and the need to promote producer organisations. That brings me to the dairy package and the voluntary code. I am grateful to Members of all parties for the support that they have expressed this afternoon for my work in trying to get a voluntary code. I genuinely believe that that offers a far better prospect than legislation, and I shall explain why.

A voluntary code can, if agreed by both sides—the processors and the producers—cover such issues as price, notice periods, contract lengths, volume and exclusivity. A raft of other points could be included if both sides wanted them to be. Conversely, the dairy package and the legislation that would be permissible under it are about a contract, not a code. We could legislate to make contracts compulsory, but the permitted legislation would limit greatly what could be put into those contracts.

For example, as we understand it, no notice period would be permitted. A length of contract would be specified, and it would probably be a year or more. The idea of a short notice period to get out of a contract would not exist. That is just one of many examples showing that the regulatory route, which I fully accept appeals to some people, is not as good as a code, which could accommodate a range of measures.

I agree with farmers and others who said last week that we cannot go on like this, because the discussions on a code have now taken 14 months and we cannot continue simply hoping it will happen. I had a meeting with both sides last week before the public meeting to which reference has been made. We got very close to an agreement, but both sides still had what I considered to be very minor issues to resolve. Those issues were obviously important to them, and they were not resolved. There have been further, private discussions with my officials and others over the past few days, and I intend to precipitate a final decision. I do not want to give the House more information than I have given the industry, because that would not be right, but I intend to say that enough is enough, that the negotiations have been going on long enough and that it is time for both sides of the industry to show some maturity and demonstrate that they can agree a voluntary code of practice.

I would be foolish to pretend that it is a certainty that we will get a code. There are still some stumbling blocks on both sides, coming both from those representing producers and from at least one major processor. However, I have every intention of driving the process forward and getting a result. We have got to the point at which knowing it was not going to happen would be better than living in the never-never land that we have been in for some time. However, I emphasise that I do not believe that the regulatory approach recommended by some hon. Members would give either side of the industry anything like the beneficial future that is there for the taking.

I hope I have answered the points raised by hon. Members in the debate. I entirely share their concerns. I can assure the right hon. Member for Delyn (Mr Hanson) that we are in discussions with colleagues in the devolved Administrations. We are getting together prior to the Royal Welsh show this weekend. We were going to discuss the common agricultural policy, but we will also discuss the situation in the dairy sector. I can only hope that, before the cuts take place on 1 August, we can get a voluntary code at least. I hope others agree that that is the best way forward.