Dairy Farming

Philip Hollobone Excerpts

Tuesday 7th June 2011 Westminster Hall

[Mr Paice]

My hon. and learned Friend must be aware that it would be contrary to EU law for us to set a minimum price. The whole common agricultural policy has—with, I think, cross-party support—moved away from the idea of Government setting prices, whether at a member-state or EU level. That has been the big reform of the CAP over the past 15 to 20 years, and it is right that we move in that way. I do not think that the answer is to set a minimum price. The Government’s role—I will return to this in a moment—is to try to make sure that the market is working properly. There is parity of power, wherever possible.

Let me turn to an issue raised by the hon. Member for Glasgow North East. We fully support the proposition in the European dairy package that producer organisations should be allowed, although we are concerned about a point of detail regarding how big they will be allowed to get. However, the only two significant co-operatives in this country—Milk Link has about 13% of the market and First Milk has about 10%—are light years away from what we believe should be the maximum, namely 25%, or the EU proposal of 33%. To be honest, that upper limit is relatively hypothetical at the moment, because we are nowhere near it. Even if the two merged—it was once proposed that they should merge; the merger was approved by the Office of Fair Trading; but they decided not to—they would still not be up to the maximum. I need to make it clear, therefore, that nothing today prevents groups of dairy producers from getting together to become a producer organisation. Indeed, the Secretary of State, in her speech in Oxford, and I have frequently said that we strongly encourage them to do so. However, Government cannot force farmers to work together, and it is for them to do so.

The final point on the package concerns transparency, to which the hon. Gentleman referred. We strongly support a transparent marketplace. Obviously, there is a limit in terms of regulation and bureaucracy on how much information it is sensible to demand, but we support the principles of transparency in the package.

I am in the unusual position of having a bit of time to respond to the debate, so let me now address some other issues. The supermarket adjudicator takes us back to my point about parity of power. The Government have published their Bill, and I was interested to hear the Opposition’s concerns. I am not too clear on all of them, but one related to the adjudicator’s powers to impose fines and other sanctions, although I am not sure what they are. Let us be clear that the Bill provides the option for the Secretary of State to give the power to provide fines. In other words, if we find the adjudicator’s initial power, which might be described as the name-and-shame approach, to be inadequate, the Secretary of State can provide it with the power to impose fines. I do not think that we in this Chamber necessarily understand the relative import of that. The big retailers assure us that that is totally unnecessary, that they do not break the code, that there is no need for an adjudicator and that they are all doing the job properly. I am sure that they have assured everyone present of that. They all pay a huge amount of attention to their reputations. They want their good name to be known and seen. If we say, “We’re going to fine you instead,” what level of fine would make any difference to one of our big retailers? That is the question. The level would not be £10,000. I do not even want to guess what would actually influence their behaviour, but it would be many times that. We therefore have to consider whether that is really a sensible way forward, commensurate with all the other issues of fines, levels of fines and penalties throughout the country. I think that we underestimate the power of damaging somebody’s reputation in that way.

The hon. Gentleman also referred to incentives for innovation and development, particularly in relation to energy saving. He referred to the industry road map. I am not sure whether he or any other colleagues were present when I launched the industry road map a few weeks ago, but one of the most telling charts in the document—I do not take any credit for this, but it is worth making the point—shows that the dairy producers who had the highest margins also had the lowest carbon footprint. Fiscal incentive, to which the hon. Gentleman referred, is therefore built into the system. Of course, we can provide fiscal incentives from the rural development plan for England, but the real incentive is that it is profitable to conserve energy, which the report clearly shows

We are putting in place other things and taking action on them. My hon. and learned Friend the Member for Torridge and West Devon is looking at me with beady eyes—I have not forgotten his remarks. We hope that the Government buying standards will be published shortly. They will lay down particular criteria, so that the Government will lead by example. The Macdonald taskforce on regulation made a number of proposals about nitrate vulnerable zones, which are hugely important to the dairy sector. We are taking those forward as fast as we can. Indeed, at the outset, I was able to announce that we could accept one or two areas relating to NVZs immediately. I am looking across the whole of that issue and am considering how we can reduce its impact and cost.

I am trying to reinvigorate and revitalise the dairy supply chain forum, which was set up by the previous Government. I want to ensure that the only people who come to that forum are chief executives or board member equivalents and that it has an important role because, at the end of the day, the real future of our dairy industry lies not in the hands of the Government, but in the hands of the industry. I am trying to ensure that the retailers, the processors—whether they are bottlers or processors into commodities—and the producers are all around the table and that they are working together to iron out the problems and take things forward. Price is important and I wholly understand the dairy farmer who says, “I need more for my milk.” However, the Government’s job is to ensure that the whole chain is working. If we can do things to take costs out of the system, it would be equivalent to a price rise, although it may not be so readily seen as that.

On income other than that derived from price, let me refer to the two big groups that I have mentioned, First Milk and Milk Link. They are nothing in European terms but, in UK terms, they are pretty substantial producer-owned organisations. They got off to a rocky start, and there were big problems with paying low prices and members having to put up large sums of money. Of course, the third group—Dairy Farmers of Britain—fell by the wayside a couple of years ago. However, those two organisations are now making progress and have chief executives who understand the new world in which we are operating. For example, the chief executive of First Milk has opened up a global pool, whereby when the price of skimmed milk powder on the world market is equivalent to 33p a litre, farmers can say, “Why aren’t we getting it?” They can get that price, although perhaps it will not be quite as much as that. There will be a pool of milk targeted at global price commodities. Of course, there is a downside, because if global commodities collapse—they have done so in the past—so will the pool price. However, such an initiative allows that issue to be addressed and is an ingenious and innovative approach.

Milk Link—I hope First Milk will follow—is paying dividends to its farmer members, which is important. People who have invested in shares and through their commitment to a farmer-owned business are entitled to receive a dividend—a share of the profit. That is just as important to them as the price of their milk, and it is part of the return to their business. From what I have been saying, colleagues will not be surprised to learn that I am an enthusiast for farmer-owned businesses and think that they are the way forward. However, there is a limit to what the Government can do. We will exhort all we can, and if there are any barriers in the way we will do our very best to lift them, but we cannot force farmers to work together.

Finally, I come to the issue of tuberculosis. I am grateful for the words of my hon. and learned Friend the Member for Torridge and West Devon about my personal commitment to the matter, which is completely and utterly undiminished. However, as he has said, we must get things right. A number of his presumptions about why we have not yet been able to make any final decision were accurate. We launched our consultation in September, and it concluded before Christmas. As I have said repeatedly in public, that consultation threw up some serious issues that must be dealt with because, as he rightly presumes, we would almost inevitably be faced with judicial review if we were to decide to go ahead with the badger cull. Several of those issues have taken some tackling. We are working with our own lawyers, and we have retained QCs to advise us. As he will know from his own eminent career, they have raised all sorts of issues to which we must have answers in the courtroom if the situation arises.

I can tell hon. Members that we are getting to the position whereby a decision can be announced and, as my hon. and learned Friend has rightly said, there will be an overall package of measures. This has been a good debate and I do not want to raise the politics of the matter too much but, apart from the issue of badgers, my other big criticism of the previous Government is the piecemeal approach that they adopted to tackling TB. They should have grasped the issue by introducing a comprehensive package and used every available tool in the toolbox, as many people in the industry have said.

I can tell hon. Members—this is not what my hon. and learned Friend wants to hear at this stage—that we hope to make a full announcement before the House rises in July. That will comprise a decision on the issue of badger culling as well as a wider package of measures. He picked up the point that I have been reported as implying that we might not be going ahead with a cull. As a lawyer, I am sure that he fully understands that if one has not made a decision, there has to be a question mark in both directions over what that decision might be. I say to him and hon. Members that, as I expect is blatantly obvious, that decision is not just for me, but for my right hon. Friend the Secretary of State and, indeed, the Cabinet to make. Such a major decision is hugely important, and we must get it right. We need to ensure that the whole Government support the final decision, whatever it may be. As I have said, I assure hon. Members that the decision will be announced before the House rises in July.

As you have rightly said, Mr Hollobone, this has been a tremendously good and very important debate. I am grateful for the opportunity to take a little longer than usual to elaborate on some of the issues. I hope that I have impressed on hon. Members the Government’s determination to tackle a number of these issues and to move forward. As I have said, it is not all in the Government’s hands, but what we can do, we will do. I pay respect to my hon. Friends’ commitment—those who are here now and those who have been in and out of this Chamber during the debate—and to that of my hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski), who is sitting behind me. He was the founding member of the all-party group on dairy farmers, but now he cannot discuss the matter, because he is acting in another guise. Many hon. Members rightly feel very strongly about the importance of our dairy sector. It is the biggest sector of British agriculture and long may it remain so.

[Mr Philip Hollobone (in the Chair)]

I congratulate the hon. Member for Central Suffolk and North Ipswich on securing the debate and thank all those who have taken part. The sitting is suspended until 11 o’clock.