FARM PRICE REVIEW FURTHER MOVEMENT TOWARDS FULLY-MANAGED U.K. MARKET

Press, Volume CIII, Issue 30406, 3 April 1964, Page 10

FARM PRICE REVIEW FURTHER MOVEMENT TOWARDS FULLY-MANAGED U.K. MARKET

fßp MICHAEL BUTTERWICK) _ (Reprinted from the "Daily Telegraph" by arrangement.;

The annual Farm Price Review is one of the most intricate balancing acts in the political calendar. Many important, and often conflicting, interests are involved, including Britain’s farmers, Commonwealth and other suppliers of food from abroad, British taxpayers and of course the whole population as food eaters. The Minister of Agriculture s task of reconciling these interests is never easy.

This year's, balancing act deserves particular attention. The Review published last month is the first under the new agricultural policy outlined by Mr Soaines in the Commons last May. Broadly speaking, this new policy consists of a much wider measure of import control of the main foodstuffs, and so-called standard quantities of domestic production to limit amounts eligible for the full guaranteed price. The import . controls through minimum import prices and levies will very soon be provided by the Agriculture and Horticulture Bill. Standard quantities, which require no new legislation, already' exist for eggs and milk and through acreage control for potatoes and sugar beet. This Review extends them to cereals. Meat, for which the Exchequer liability remains theoretically unlimited, will presumably be included in the scheme in next year’s Review after agreements have been reached in the G.A.T.T. meetings. POLICY CHANGES

These amount to substantial changes in policy; the end of the open market for food here, a further movement towards a fully managed market. In addition the cost of agricultural support could in future be borne to a greater extent by consumers instead of taxpayers. The Review has a fair shot at explaining the reasons for the changes. The opening part of the White Paper dealing with trends in Government policy has been very much expanded. Another welcome improvement is provided by the tables and graphs illustrating various agricultural matters which should be very useful. It is less successful in explaining how the new standard quantities will be worked. Few farmers will be able to pick their way easily through the illustrations of Target Indicator Prices and so on.

The most important results of the Review are its effects on net farm income and on food prices and the cost to the Exchequer of subsidies. This year farming costs have risen by about the same amount as the nominal calculation of the gain through increased farming efficiency. Net farm income should therefore increase by about the same amount as the changes in the value of the guarantees, £3l million, equivalent to a rise of about 8 per cent. Is there an economic case for such a large increase? Agriculture is an import-saver of unquestionable importance.

The rise in agricultural production, now nearly double the pre-war level, has made a crucial difference to our balance of payments. But production is still rising and it is doubtful whether any fresh stimulus is necessary. Capital resources are being attracted into agriculture on a sufficient scale. Gross capital formation has roughly doubled over the last decade. Structural reform is proceeding slowly but on the whole satisfactorily. The price of farm land, which must give some indication of farming prosperity, has about doubled in six years. SAFEGUARDING FARMERS On the other hand the 1947 Agriculture Act charges the Government to ensure “proper remuneration and living conditions for farmers.” As Mr Soames has pointed out, in comparison with other selfemployed people farmers have not done too badly since the war. But after last year’s standstill award and the bad winter of 1962-63 a reasonable increase is certainly justified. A figure of £2O million,

or about 5 per cent, might have been appropriate, with the understanding that more would follow. The Government has been accused of producing an election year Review. Examination of the manner in which the increase was given suggests that this view cannot be substantiated. Most of it (£24 million but of £3l million) was given on milk, where the result is a rise in the consumer price rather than in subsidies. Nobody could seriously make out that a decision to increase a price which affects more than 50 million consumers for the benefit of fewer than 150,000 producers, scattered all over the country, is electioneering. The large increase in the price of milk is justified by the Government on three grounds: that the tendency for production to rise faster than liquid consumption has been halted and this price increase will not lead to a resumption of over-produc-tion; that milk producers are in particular need of additional income; and that the rise in the retail price will not check consumption, which is at last looking more promising. All these are very arguable. It is true that production is expected to be very slightly lower this year than last. But nearly one-third of all milk produced has to be used outside the liquid market and at a very much lower price. The consumer of liquid milk is subsidising this over-produc-tion at a cost of about 8 per cent of the retail price, or about Jd a pint.

PROFIT INCREASE The increase in the producer price of milk, equivalent to about 2|d a gallon, will add over 30 per cent to the profit margin of the average producer, and a great deal more than this is to the margin of the relatively ineffi-

cient producer. It is hard to see how this will not cause serious overproduction and make troubles for the milk industry for the future. A rise of l]d a gallon would have been quite sufficient and would have left more scope for the future. The pattern of milk production here has been changing rapidly. Average size of herd and average yield per cow have both increased, profit per gallon has fallen, mostly as a result of higher costs. But Mr A. H. Maunder, of the Agricultural Economics Research Institute at Oxford, has estimated that the average annual profit per producer rose by about 20 per cent between 1952 and 1962. The Review reveals that incomes from dairying fell in Scotland and Northern Ireland between 1961-62 and 1962-63 but were over 5 per cent higher in England and Wales where 85 per cent of the United Kingdom milk is produced. It appears that the unprofitability of milk production in suitable areas has been much exaggerated. Finally, milk is an important part of many families’ expenditure. The household average is 9s Id a week. A family of four that follows the exhortation to drink a daily “pinta” spends about £1 a week on milk. We already have the most expensive milk in Europe (but better quality and better service) and this further increase may well affect consumption. The most extraordinary side of the milk decision is that last November’s report of the Consumers’ Committee of England and Wales, exclusively devoted to milk, has been completely ignored. The report drew attention to the situation of the “consumer bearing any subsidy which is inherent in the guarantee price to producers” and concluded by questioning “whether the long-term consumer interest is receiving adequate attention in the operation of the scheme.” CONSUMER’S INTERESTS Prices of a good many other foods, apart from milk, have been rising recently. It is possible that further rises may follow from the use of the new import controls. In these circumstances there is a good case for bringing representation of consumer interests directly into the Price Review.

At present the Minister is statutorily obliged to consult only with those who “represent the interests of producers.” This should be widened so that a strong Consumers’ Committee is consulted and also other interested bodies such as the Country Landowners’ Association. This might involve some rearrangement of Price Review procedures. In spite of its rather, grand name and able membership the present Consumers’ Committee of England and Wales lacks practical influence. It needs to be built up in status and given a permanent secretariat and adequate resources. Its field of reference, at present limited to those foods which come under the Agricultural Marketing Act, 1958 (milk, eggs and potatoes being the most important), should be extended to include ail agricultural produce. The farmers’ unions are understandably jealous of their special position in the Price Review. They should think twice before registering opposition to the possibility of this change. Clarification of the Minister's role as an umpire acting in the overall national interest might well turn out to be to their longterm advantage. It should help to ensure that consumers’ Interests are given full consideration, thus removing the main criticism that must be made of Mr Soames’s fourth and (whatever the results of the election) probably final Price Review.