UK Dairy Sector

Rory Stewart Excerpts

Wednesday 20th April 2016 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rory Stewart)]

Unfortunately, I have been asked for answers to 31 separate requests—I have written them down—and I have been allowed only seven minutes to respond, but I will do my very best.

Fundamentally, dairy matters deeply to the United Kingdom. The hon. Member for Ceredigion (Mr Williams), to whom I pay tribute for securing this debate, made a very powerful case for the importance of the dairy industry to communities. The hon. Member for Stirling (Steven Paterson) made a powerful case for the nutritional importance of dairy. The hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a deep and complex argument about the importance of dairy for our history and heritage. My hon. Friend the Member for Taunton Deane (Rebecca Pow) pointed to the economic importance of dairy and, of course, the chairman of the Environment, Food and Rural Affairs Committee, my hon. Friend the Member for Tiverton and Honiton (Neil Parish), made a strong argument for the importance of dairy for the farming industry in general.

The situation is genuinely terrible. Over the last decade, we have gone from having 13,500 dairy farms to having 9,500. We have seen that very directly in Cumbria, as the hon. Member for Workington (Sue Hayman) expressed so eloquently. In my constituency, from very large herds—thousand-cow herds in places such as Longtown, producing 10,000 litres per cow per year—right the way down to the herds of 50 or 60 cows in the Bailey valley, we now see them being sold in the marts and we see real pressure and psychological strain. As the hon. Member for South Down (Ms Ritchie) pointed out, the regional factors are really important in places such as Cumbria and Northern Ireland, where access to the liquid milk markets in places such as London is much more difficult. Our prices are considerably lower.

The hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr) made a powerful argument about the global context in which the dairy industry operates, and the Labour shadow spokesman, the hon. Member for Blaenau Gwent (Nick Smith), also made a very good statement about the context. Of course, global demand has dropped—Chinese demand alone has dropped by 23%. China matters: 30% of the global export market is China and Russia. At the same time, our production is going up. There is a real problem. Production was up last year globally by 6% and UK production was up by 2.7%. This is not just a UK problem. In New Zealand, the prices per litre for their milk are now down to 12p per litre. New Zealand production is falling, as we heard from the chairman of the Environment, Food and Rural Affairs Committee, my hon. Friend the Member for Tiverton and Honiton.

We believe that things can be done. Despite the serious issues raised by both the hon. Member for Upper Bann (David Simpson) about capital structures and the hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) about price, we think there is a great future. In China, the average person consumes about 30 kg of milk products a year. In Britain, the average per person is about 250 kg a year. There is huge upward potential in terms of such markets, which Britain can exploit, provided the United Kingdom can get from the short-term problems to the long term. That will be a real challenge.

My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) made points about the health of our herds. It is why we are taking the steps that we are, not just in bovine TB but in Johne’s disease, and there is all the investment we are putting into animal health. My hon. Friend the Member for Tiverton and Honiton made points about supermarkets. Indeed, I join him in paying tribute to the steps that supermarkets such as Tesco have taken, particularly in moving towards British yoghurt.

The hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) pointed to the serious problems on processing. We are looking at that seriously with European Union partners to see whether strategic investments could be made in processing in order to ensure that liquid milk, particularly from more remote parts of the United Kingdom, can be processed in the right place. The hon. Member for South Down raised some of the problems with the banking system. We are addressing that issue directly through conversations with the banks.

There are other steps—about 14 of them—that the Department is taking that were not addressed so much in this debate. It is important to bear in mind that underlying the dairy industry is considerable Government investment. On average, about £20,000 per farm comes from the Government. We have provided emergency support of £26.3 million for the current dairy crisis.

Cutting red tape is something that has not been discussed today. We estimate that by the end of this Parliament, we will have saved farmers in general £450 million by moving to single-farm inspections. We have invested £160 million in agri-science. That is absolutely essential for everybody talking about innovation. We are looking at inward investment and had the Chinese company, Yili, here.

The hon. Member for Blaenau Gwent raised the issue of exports. The Secretary of State is currently in the United States, driving British food exports, and we are also driving them into Chinese markets. We are focusing a great deal on specialist producers. I would like to pay tribute, for example, to the movement in Swaledale towards yoghurt production.

That brings me to the point made by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) on the advances that we ought to be able to make in markets, hedging and futures markets. We have a specialist working on that in DEFRA with very considerable experience in the financial industry. It is a very complex industry, but we believe that it is something we ought to be able to make progress on.

On producer organisations, which were raised by the hon. Member for Ceredigion and by my hon. Friend the Member for Richmond (Yorks), we have created the seed funding to launch producer organisations. We have created the legislative framework for those producer organisations.

On procurement, which the hon. the Member for Dwyfor Meirionnydd (Liz Saville Roberts) raised, £60,000 of British Government money is being put into our schools to provide milk for our children. That is Department of Health money, proving that that Department recognises that milk is nutritionally beneficial to our children. The Justice Secretary has committed to milk coming into our prisons.

My hon. Friend the Member for North Dorset (Simon Hoare) and the hon. Member for Workington rightly raised issues about the Rural Payments Agency. I am therefore delighted to be able to announce that we will make part-payments to every farmer by the end of April: that means at least 50% of their payments by the end of this month to address this issue.

Finally, my hon. Friends the Members for Eddisbury (Antoinette Sandbach) and for York Outer (Julian Sturdy) raised the question of the Groceries Code Adjudicator. Again, I am delighted to announce on behalf of the Department that we are doing a full review of the powers and behaviour of the Groceries Code Adjudicator. That is being done by civil servants at the moment, and we will report back on progress and looking specifically at issues such as whether the adjudicator can address the processing industry.

I pay tribute to the hon. Member for Ceredigion for securing this debate and for the extraordinary quality of the argument, interest and commitment in this Chamber. The issue is unbelievably difficult and heart-breaking for farmers. Dairy farmers are at the core of our culture, history, identity, nutrition and heritage. The 17 measures that I have set out are contributions towards that, but ultimately we must get from a short-term crisis to a long-term future in which global demand for milk is rising and Britain is ideally placed to meet it.