department for Environment, Food and Rural Affairs

Andrew Griffiths Excerpts

Tuesday 17th July 2012 Commons Chamber

[Glyn Davies]

I thank my hon. Friend for that intervention. It is undoubtedly true that it is the average-sized businesses that are likely to survive and that can carry a period of loss, while the traditional farmers are likely to go out of business unless there is change.

A few weeks ago, the processors reduced the price by 2p a litre—just like that: a 6% to 7% reduction. Now they have told farmers that on 1 August there will be another 6% or 7% cut, which reduces the price they are paying to the farmers to way below the cost of production. Last week, unsurprisingly, there was a huge reaction: 2,500 dairy farmers came to a dairy summit here in Westminster and many of my hon. Friends attended. The purpose was to highlight this unacceptable position, and to demand that these cuts do not go ahead in August and that those that took place in July and July be reversed.

[Andrew Griffiths (Burton) (Con)]

I thank my hon. Friend for raising this important issue, which is dear to both our hearts. Does he agree that this crisis enveloping the dairy industry, whereby on 1 August dairy farmers will face going bust, means that if we cannot find a voluntary code between the producers and the supermarkets, we should look to impose some sort of mandatory regulatory regime to save our dairy industry?

[Glyn Davies]

I thank my hon. Friend for his intervention, as he makes a point that I was intending to deal with. I was going to raise it with the Minister to seek his opinion and perhaps his assurance on that very matter.

Processors in this deregulated, unbalanced market are behaving as though they are a cartel; they are imposing across-the-board cuts and there seems to be some agreement between them. That is outrageous behaviour. We know that across the world dairying is a volatile market—prices fluctuate. We all understand that; it is why there must be some order, which is why we have contracts. However, the current order is for the processors and the retailers, with catastrophic chaos for the producers. I shall now deal with the point that my hon. Friend raised. We need a code, preferably a voluntary one, and more balanced contracts. We had hoped that there would have been an announcement of a voluntary code already, and I know that the Minister had, too. Unless we can have an agreement on a voluntary code, the Government and the Minister have to consider going forward with a statutory code. Only with that hanging over people’s heads are we likely to achieve the voluntary code we want.

In the longer term, the Government need to encourage progress on lots of other issues. We need to encourage farmers to come together to form producer organisations. The big problem we have with individual farm businesses and micro-businesses is that they are incredibly small and do not carry any power. We know that there is now an agreement from the European Union in the dairy package that we can encourage up to 30% of farm producers to deliver producer organisations. I am hoping that the Minister will reassure us that he wants to do that.

We also need to move forward on the grocery adjudicator, although that might well have a limited impact on this particular problem, as for markets to operate we have to have a degree of fairness. When there is bullying and unfairness, the Government have to deal with it. That is why we have a Competition Commission, the Office of Fair Trading and other such organisations. The Government have to step in when the market is not working, and all of us know that this market is currently simply not working. It is working in favour of big bullying retailers and processors, and it is causing huge damage and driving into bankruptcy the dairy farmers that have sustained our countryside for so long.

[Mr David Hanson (Delyn) (Lab)]

I support the hon. Member for Montgomeryshire (Glyn Davies) in his request to the Minister today. The hon. Gentleman represents mid Wales and I represent north Wales, and a number of my constituents from the National Farmers Union and from the Farmers Union of Wales have echoed very much the concerns that he has raised. They simply cannot plan their businesses on the basis of a 2p cut in the price of milk already, with the potential for further cuts before 1 August. As he has mentioned, dairies such as Robert Wiseman Dairies are squeezing the dairy farmers of north Wales hard on the price of milk. A number of farmers in my constituency have raised the concern that they have potentially lost, because of the cut to their businesses, between £40,000 and £60,000 per business. No business could take a mid-year hit of that proportion with so little notice without it potentially having an impact on their viability. Farmers in my constituency came to London last week to raise the issue and are seeking the solution proposed by the hon. Member for Montgomeryshire.

[Andrew Griffiths]

I thank the right hon. Gentleman for giving way and agree with much of his speech. Does he share my concern that the contracts that dairy farmers have to put up with mean that they have to live with cuts of 2p, then another 2p, then further erosion, but if they want to get out of them they have to give six months’ notice? Does he not agree that that is unacceptable?

[Mr Hanson]

I am grateful to the hon. Gentleman for raising that issue and the key is to have a code of conduct for the contracts. I know that the Minister had discussions last week about a potential voluntary code and look forward to his updating the House today on his progress. If a definitive decision has not yet been made, I would welcome hearing from the Minister what plans he has to ensure that during the period between now and when the House returns in September he will be able to update Members who have an interest in the dairy industry, as well as Members in general, on this matter. I share the wish of the hon. Member for Montgomeryshire to see a voluntary code at first, but I know that my colleagues on the Labour Front Bench would certainly support regulation through a statutory version of that code if the voluntary form was not successful.