The case for reform

Douglas Jay MP

One of the most frequent and emphatic promises made by the Government and EEC enthusiasts generally during the referendum campaign was that EEC membership would enable Britain to achieve fundamental reforms of the common agricultural policy. The 1974 Labour election manifesto, to which Ministers claim to be so faithfully adhering, said that our objectives would be "major changes in the CAP so that low cost producers outside Europe can continue to have access to the British food market". This, therefore, should now be the agreed aim of all schools of thought in this country.

Early reform of the CAP has become a prime necessity for Britain if we are to achieve economic recovery and get onto the growth path once again. For not merely have the economic absurdities of the CAP been growing more grotesque every month; but this country is becoming more and more deeply embedded in the whole evil system. The issue here is not whether we support home agriculture. Every sane person since 1939 has agreed that we must.

The real issUe is whether we do it by the system of guaranteed prices and deficiency payments successfully operated from 1947 to 1972, or by artificially high prices imposed on the consumer. With deficiency payments, the consumer can buy at the lowest world price, and the farmer can both buy feeding-stuffs at the world price and obtain a known price for his product which is reasonably related to the cost of an efficient farm. With the CAP, consumer prices are forced up to levels arbitrarily determined and unrelated to world prices, and held there by artificial scarcity — the taxation or exclusion of imports and the hoarding of food in 'intervention stocks'.

The deficiency payments system is outstandingly beneficial to Britain since it lowers our import prices and living costs, raises our living standards, and thus greatly assists an effective incomes policy, which is at present our other greatest need. (It is indeed a striking comment on current British press standards that those who lecture us so persistently on the need for pay restraint so seldom criticise the CAP.) It is accordingly Britain which suffers most grievously from the CAP system, while the French — with their balance of payments guaranteed in effect by ourselves and Germany — can pursue an economic growth policy with much less risk. But of course in the world as it is the CAP is also lowering the living standards of consumers in the whole EEC group and damaging the outside world.

For physical and climatic reasons, the cost of producing grain is normally lower in North America and the new continents generally, and of meat and dairy products in Australia, New Zealand and South America. Meat and dairy product prices are far lower outside the EEC today, and even in the exceptional years 1973-4 wheat and maize prices have seldom been higher. The rational food policy for Western Europe would be to buy wheat and feeding stuffs reasonably freely from the new continents, thus lowering our farmers' costs, and concentrate mainly on producing the secon

dary foods at home.

By contrast the CAP high-price system has the following inevitable consequences: consumers are deterred from buying (e.g. beef and bacon consumption have fallen markedly in Britain in the last two years); producers are encouraged to produce too much; and the surplus mounts and mounts, until it can only be got rid of by either destruction, feeding to animals, or sale at the lower world price to anyone outside the EEC (often the Russians at prices subsidised by us). It is this economic folly which the German Chancellor Herr Schmidt has just described thus: "The mammoth misguidance of resources is just as irrational in the long term as the continual use of public funds to get rid of the surpluses."

This "mammoth misguidance" is at the moment showing itself most flagrantly in the market for dairy products, meat and wine. And those who try to pretend that normal economic forces have suddenly ceased to apply to the world food trade should note the current facts. Artificially high consumer prices for dairy products — butter and cheese in particular — having previously built up the notorious butter 'mountain', have now forced the conversion of huge quantities of liquid milk into skimmed milk powder.

The skimmed milk powder mountain has now reached the mammoth (to use Herr Schmidt's word) total of 1,038,000 tonnes very aptly described thus by the Economist of September 27: "a stock of truly galactic magnitude, equal to three-fifths of last year's milk powder production, skimmed off froin an incredible total of 19.2 billion pints of unsaleable liquid" — unsaleable because too expensive. "Much of the powder mountain is being fed back to the calves of cows that produced the liquid milk in the first place, at an estimated. cost to the European taxpayer in 1975 of £339 million", says the Economist.

Altogether in 1976 the EEC Commission expects to spend £1 billion (note billion) on thus keeping dairy products away from the consumer. For the British public this means that we are threatened with milk shortage, and that whereas in a free market we could buy New Zealand butter for barely £500 a ton, we are now having to pay £800 for continental butter and by 1978 must pay £1260. Please note the figures, all those who repeat parrot-wise that there is "no cheap food in the world".

Compared with the mountainous folly of the EEC's milk and butter policies the damage done by manipulation of beef and wine supplies, and the destruction of apples in France, is now almost modest. But they are bad enough. Some 250,000 tonnes of beef are still hoarded in 'intervention stocks' (not counting private storage) — or fifteen days' consumption for every man, woman and child in the EEC. Some 2,000 tonnes of Irish beef alone are being added to stocks every week; Australian and Argentine supplies are virtually banned; the price to the consumer is extortionate: and consumption in this country has fallen heavily. In the case of wine, 19.8 million hl are now hoarded in stock, enough to fill two billion litre bottles — or ten weeks' consumption for every individual in the EEC!

Worse than all this, our own Government — even though deficiency payments have been partially restored for beef — has started furtively spending public money in this country to divert both milk powder and beef into stock. To avoid the odium of a public food hoard, this is being disguised as 'aid for private storage'. According to a UK Intervention Board press statement of October 14, "aid for private storage" was paid on 10,697 tonnes of beef in July, August and September, 1975, and an even larger quantity of butter in the course of this year. Over 5,000 tonnes of skimmed milk have been denatured in the UK for feeding to animals this year, according to the Intervention Board. The Board's statement quoted above tells for instance that "denaturing of skimmed milk powder for subsidy purposes can be carried out by admixture with lucerne or grass meal or by incorporation into compound animal feed."

If, as CAP apologists now suddenly tell us, these stocks are to feed hungry men and women during future scarcities, why are milk, wine, apples and other products denatured, destroyed, turned into alcohol, and fed to animals? And why does the well-meaning Bishop of Southwark attribute the destruction of apples to capitalism, when it is really due to the CAP?

Despite constant exposure of these disastrous policies, all that the EEC has accomplished throughout the renegotiation period and months of cogitation thereafter is a "stock-taking" document, which timidly mentions the possibility of deficiency payments, but finally takes refuge in a collection of minor tinkering proposals. Ministers met at last in Brussels on October 30 to grapple with the problem — but yet once again without reaching any decision. If British Ministers fail to insist on the promised fundamental reforms without much further delay, there will be little hope of long-term economic recovery by this country. The burden is too great. All those, therefore, who so loudly assured us that British membership would enable reform to be achieved from within, now have the chance to show that they meant it.

Surely, with the German Chancellor so passionately on our side, this is the moment to fight resolutely for a major British interest.