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Westminster Hall

Wednesday 4 February 2015

[Sir Roger Gale in the Chair]

Dairy Industry

[Relevant document: Fifth Report from the Environment, Food and Rural Affairs Committee, Dairy Prices, HC 817.]

Motion made, and Question proposed, That the sitting be now adjourned.—(Gavin Barwell.)

9.30 am

Sir Roger Gale (in the Chair): Good morning, ladies and gentlemen. It will not have escaped your notice that quite a lot of people want to take part in this debate. I am therefore immediately imposing a five-minute time limit on speeches, apart from the opening speech and the wind-ups. If Members stick to that sensibly, we may be able to get everybody in.

To facilitate matters, I will—perhaps exceptionally—read out the list of Members in the order in which I intend to call them, which is the order in which they submitted their name to the Speaker’s Office. There is no question of preference or seniority; it is simply how the names went in. On the Opposition Benches, we have Mr Shannon, Ms Ritchie, Dr Whiteford and Mr Owen; on the Government Benches we have, in this order, Glyn Davies, Nick Herbert, Miss McIntosh, Mr Ollerenshaw, Mrs Newton, Mr Kawczynski, Mr Julian Smith, Mr Reid, Mrs Murray, Mr Farron and Sir William Cash. I need to add Mr Parish to that list; he was chairing a meeting earlier.

That is the batting order. I am telling Members that because it may be that some will choose to intervene rather than make a speech. Those whose names I have not read out are not on the list at all. I hope that is clear.

9.31 am

Mr Nigel Evans (Ribble Valley) (Con): I am grateful for the opportunity to lead this debate on the dairy industry under your chairmanship, Sir Roger.

This is a time of deep uncertainty for many farmers, as they have seen huge volatility in the price that they receive for milk over the past three years. The dairy industry is vital for the United Kingdom, but I hope hon. Members will excuse me if I address the challenges facing the industry through the prism of my rural constituency, Ribble Valley. The industry is simply the backbone of the constituency. Some of the farmers to whom I spoke can trace their farms back several hundred years. Generations have worked the land and shaped its appearance and character.

From a food security point of view, the industry is simply essential. Its liquid market is strong; of course, we also have some of the most recognised cheeses in the world, particularly the tasty, crumbly, creamy and mature Lancashire cheeses that are made by some of the most famous family names and sold throughout the world. Milk is also processed into other commodities, including yoghurts, butter and powdered milk.

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The by-product of the industry is amazing: rolling countryside that attracts a large number of tourists, providing income for bed and breakfasts, amazing hotels and companies that source food and beers, as well as providing a large number of local jobs. Then there are the gastro pubs. There are far too many to mention, but we have the Campaign for Real Ale pub of the year, the Swan with Two Necks in Pendleton, and, just 2 miles away from there, the food pub of the year, the Freemasons at Wiswell. Originally I had planned to mention all the pubs, delicatessens, restaurants and amazing quality shops in my constituency, but my speech became a travelogue for Ribble Valley; that is what the dairy industry has done for my area. The Ribble Valley food trail is now firmly a part of why visitors come to the area, and those visitors keep small villages such as Rimington, Clitheroe, Longridge, Lostock Hall, Chipping, Waddington and Mitton alive.

The recent investment in local businesses runs to millions of pounds. The restaurants and hotels in the James’s Places group are found throughout the valley, representing big investments in the area. The Aspinall Arms in Mitton has just seen massive investment, as have the White Bull in Gisburn, which has reopened after being closed for over a year, and the Derby Arms in Longridge. My point is that without the backbone of the dairy industry the whole fabric of the area simply would not exist.

Anyone can see the pride and worth of the industry as they travel through the area, but it is especially clear at the agricultural shows, such as the Chipping show, the Hodder Valley show and the Longridge show. I am proud to say that the Royal Lancashire show will be part of the local calendar once again this year, on 7, 8 and 9 August. [Interruption.] My hon. Friend the Member for Stone (Sir William Cash) has just pushed a note to me saying, “Don’t forget to mention the Shireburn Arms”—that is just down from Stonyhurst college, where he went to school.

My village of Pendleton is relatively small. It has three dairy farms of different sizes. John Cowperthwaite is the seventh generation of his family to operate from his farm. He has a contract with Sainsbury’s and says that the contract has been honoured and that he is happy with the way he is being treated. That means that there will be a business for his son Richard, who is 22 years of age, to take over. Richard works with his dad at the moment.

Heather Wheeler (South Derbyshire) (Con): I congratulate my hon. Friend on securing this important debate. It is a pleasure to serve under your chairmanship, Sir Roger. My hon. Friend is getting to an important question about contracts for our farmers. Sainsbury’s has been very good, as has Tesco, but the real issue is the pressure on the price per litre. Will he go on to talk about the big supermarkets’ contracts?

Mr Evans: Yes. It will not have gone unnoticed by my hon. Friend and others that Sainsbury’s took out a large advert in a number of newspapers indicating those supermarkets that are being fair and those that are not. I will refer to that later.

Edward Cowperthwaite’s farm is a bit further into the village. He milks a smaller herd than John Cowperthwaite. He came off his tractor to speak to me yesterday. He is not on a contract and has seen two

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successive cuts to his milk price, in January and February this year. He works seven days a week and cannot afford to employ anyone. He has some sheep to keep his income up, and his wife works as a teacher, so thankfully he can make a go of it, but he has five youngsters and is not sure that any of them will want to enter farming while it is in this particular predicament.

At the top of the village is William Slinger’s farm, which he can trace back to 1603. He has a larger herd of cows, plus sheep, and is the founding director of Bowland Fresh, which about 30 local farms feed into. Both Booths and Asda take his milk, and he works hard to ensure the scheme works for the participating farmers. I want to thank Booths in particular, as the founding buyer for Bowland Fresh, for the considerate way that it has treated local suppliers. Edwin Booth lives locally and knows that the value of milk is not simply the plastic bottle people take away from his stores. I also thank Asda for its support for Bowland Fresh.

Whether the cause is Russian sanctions, the reduced Chinese market or simply an over-supply in the market after a very good year last year, the fact is that the price for milk on some farms is now way below the cost of production. A local dairy farmer from Samlesbury, Graham Young, who is also a member of the National Farmers Union north-west dairy board, told me that many farmers joined the European milk co-operative, Arla, and are getting under 25p a litre; some farmers are in the First Milk co-operative and are getting around 20p a litre. Although the longer term is looking good, those prices are not sustainable in the short term, and farmers have to survive the short term first.

The current situation has energised a number of MPs who, like me, think something must be done. Those include my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), who is here today. She is Chair of the Environment, Food and Rural Affairs Committee, which produced an excellent report last month making a number of important recommendations. My hon. Friend the Member for Carmarthen West and South Pembrokeshire (Simon Hart), who is also here, had an Adjournment debate in November on this issue; sadly, the plight of the industry has worsened since then. A number of Members have put down or signed early-day motions and raised issues relating to dairying on the Floor of the House, including my hon. Friend the Member for Stone.

Sir William Cash (Stone) (Con): Non-payment caused a huge crisis. Will my hon. Friend give some thought to the idea that the Government could help by engaging more, through public procurement of services? People who are in the Army, the education sector and other sectors could get milk supplied in a way that would help our farmers, and would ensure that the Government were taking an active part on this issue.

Mr Evans: That is an excellent idea, and I hope that the Minister will be able to respond to it, given the Government’s ability to direct procurement towards British dairy farmers.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): My hon. Friend talks about all the activity taking place in this Parliament, but we also had many Westminster Hall debates in the previous Parliament about the crisis

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in the dairy industry. Does he agree that the time for talk is now over, and that we really are looking to the Government for concrete steps this time round to sort out this perennial problem?

Mr Evans: I do agree that the time for action is now. If we do not act now, it will be too late. The number of farms has dropped from 35,000 to fewer than 10,000, so this is clearly a crisis. I should congratulate my hon. Friend on being the founding member of the all-party group on dairy, which has focused on the industry’s plight.

To go back to a previous intervention, we know something is out of kilter when milk is sold at 89p for 4 pints. When I was in Ribble Valley last week, I saw 8 pints on offer for £2 in my local Co-op. Perrier sells for £1.04 a bottle—water is valued more than milk. That cannot be right.

I commend the Minister on his hard work and resolute efforts to look at fresh ways of supporting the industry. He meets industry representatives constantly; indeed, he met Thomas Binns, one of my dairy farmers in Cumbria, just yesterday. I have looked long and hard at a number of suggestions made by some of my farmers. I have also read around the issue in the Farmers Guardian, and I have read reports about the industry’s plight. I have produced a charter for the British dairy industry, which I hope the Government will get behind. It is a 12-point plan, although it may well be a 13-point plan after the intervention by my hon. Friend the Member for Stone. I have provided the Minister with a copy. The charter simply says:

“1. The Groceries Code Adjudicator to be given more powers to protect dairy farmers.

2. A strengthened Groceries Supply Code of Practice.

3. Supermarkets and wholesalers who pay less than the cost of production for milk should be named and shamed. They have Fairtrade coffee, chocolate and bananas, this should extend to Fairtrade UK milk and dairy processed products.

4. Farmers need to be given more assistance in accessing a variety of export markets.

5. Banks should provide support to dairy farmers during this challenging time for the industry.

6. HM Revenue & Customs should move to look at profits over a five year period to provide a more level rate of taxation.

7. The EU intervention price of 15 pence per litre needs to be urgently reviewed as it is no longer an accurate figure and is far too low.

8. Better and clearer origin of production labelling. British means produced and processed in the UK.

9. More stability on investment allowances for farmers.

10. Ensure that dairy farming is supported and championed by the Government. Dairy farms are the backbone of rural Britain and it must be sufficiently attractive for new generations of young farmers to enter the industry.

11. Look to encourage producer organisations within the industry to give better protection on product price.

12. Look to cushion the worst impacts of the volatility within the industry.”

Let me also add point 13, on the public procurement of UK milk.

Richard Drax (South Dorset) (Con): I congratulate my hon. Friend on his fantastic speech, which is very timely. May I add my concerns about over-production? With quota coming off this year, we hear that Ireland is

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likely dramatically to increase its production of liquid milk. That will flood across into the United Kingdom, and the consequences could be very serious. I would be interested to hear what the Minister has to say about that. Does my hon. Friend share my concerns about the future of milk production?

Mr Evans: That has certainly been heralded in a number of agricultural publications. Ireland, France, Germany and the Netherlands could all increase their production, and the price would drop even further. The threat is that we start importing more product into the UK, which will further and severely disadvantage British dairy farming. I hope the Minister will address that.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): At Prime Minister’s questions the other day, did the Prime Minister not say in answer to a question from my hon. Friend the Member for Montgomeryshire (Glyn Davies) that the Government were seriously looking at, and he was committed to, the introduction of fines and the spreading of tax payments over this year? If that is good enough for the Prime Minister, I hope it will be good enough for the Minister when he responds.

Mr Evans: I will finish now to give lots of other Members an opportunity to contribute. However, we will all listen carefully, as will the industry, to what the Minister has to say. We know he supports the British dairy industry, and we know the Prime Minister supports it, having a number of dairy farmers in his constituency. It will be interesting to hear what the Minister has to say. I would like to thank Kathleen Calvert, a stalwart defender of the industry’s interests, whom I spoke to this morning, for her suggestions on helping the industry, some of which I have incorporated into my speech.

I want to finish with the last paragraph of a letter to Emma Penny, the editor of the Farmers Guardian, which is published not far from my constituency, in Fulwood, on the outskirts of rural Lancashire:

“If nothing is done we will not recognise the industry in 10 years’ time. It will consist of 50 mega dairies on the outskirts of large cities and even more milk, cheese, butter and powder will be imported. Wake up Britain.”

Minister, it is time we all woke up and smelled the coffee, but what is the use of smelling the coffee unless it has British milk in it? We also want some toast with British butter on it and a slab of Lancashire cheese, followed by British yoghurt and the full English breakfast, including a healthy portion of black pudding—all supplied by British farmers. We must not take the industry for granted. We must not lose it. We have to act now to ensure its future.

Several hon. Members rose

Sir Roger Gale (in the Chair): Order. Sixteen Members now wish to participate in the debate. Members can do the maths: speeches are down to four minutes. I have also decided that I will not add injury time for interventions. Members who courteously give way to others may need to bear that in mind when considering whether to take interventions.

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9.46 am

Jim Shannon (Strangford) (DUP): It is a pleasure to speak in this debate. I thank the hon. Member for Ribble Valley (Mr Evans) for giving us all the opportunity to participate.

I am here because the dairy industry is an important issue in my constituency. I have spoken about it before, but there are new issues to raise. In Northern Ireland, we have 3,425 dairy farms, boasting almost 280,000 dairy cows, with a market value of £627.5 million—the value of the dairy industry to the Northern Ireland agriculture sector is therefore enormous. The industry also employs 2,318 people.

As we have heard, the price of milk has continued to drop. In the past month, however, it appears that the market has bottomed. The milk price indicator hit a low of 19.24p per litre in mid-December, but it has now risen to 20.09p per litre. There is an indication that it may be 20p to 22p per litre before the early summer. Let me put that into perspective. If someone gets 21p per litre for their milk, and the cost of production is 28p, they lose 7p per litre. A base price of 20p per litre means that a 100-head dairy herd would lose £5,000 a month. Over a year, that would amount to £60,000. For those in the dairy industry, that is a serious issue. One of my constituents started dairy farming just before Christmas, and he is getting an extra 2p per litre, but even that is not enough.

Mr Gregory Campbell (East Londonderry) (DUP): Does my hon. Friend agree that the fact that many supermarkets in Northern Ireland and across the UK use milk as a loss leader to get footfall is a key issue, which the adjudicator must address?

Jim Shannon: That is clearly an issue, and the Groceries Code Adjudicator needs to address it.

Northern Ireland exports 85% of its milk products. There are a large number of dairy farmers in my constituency, and Pritchitts is one of the major milk powder producers. It is therefore immensely important for me to ensure that things change.

There is hope on the horizon with the pending abolition of the milk quota, which maintains high production levels even if demand remains static. I also welcome the resurgence of the Chinese market. I believe demand there is coming back, and we are pleased to see that. That might just be the thing that makes the difference.

A further concern, as my hon. Friend the Member for East Londonderry (Mr Campbell) said, is retailer price cuts. Asda is selling two litres of milk for 79p. That means that only 23p profit has been made—23p that has to be split between the farmer and the supermarket giant. It does not take Einstein to work out who is really making the money. I will give hon. Members a clue: it is not the dairy farmer. Farming unions are trying to encourage Dairy UK and the Dairy Council to support the promotion of local dairy products, and we agree; every hon. Member can talk about how the milk is sweeter, the cheese better-tasting and the yogurt particularly tasty in their area. My hon. Friend knows about yogurt—he is an expert.

The issue is clear for us. Farming unions have continued to fight for the EU intervention milk price to be reviewed. That has received support from the Minister at the

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Northern Ireland Department of Agriculture and Rural Development, and has been backed by the Scottish and Welsh Farming Ministers. The Minister has claimed that there is no value for money in such interventions, so it would be unlikely that the UK would fight for the review. He needs to rethink his position, given the regional support and clear need for a review. I would certainly like a consultation, at least.

9.50 am

Glyn Davies (Montgomeryshire) (Con): I apologise, Sir Roger, for arriving a minute or two late at the debate, and I am grateful to be called. It takes longer to walk to work with a broken toe.

I want to make two points, on public procurement and labelling. The dairy industry has had a huge impact on my constituency, as it has on many others. The Severn valley is a fertile part of Britain, and a huge number of dairy farms earn a living there. It has been a huge part of my life. I have said before, in the main Chamber, that I am probably the only Member of Parliament who has actually milked cows by hand. [Hon. Members: “No!”] I had not realised. I will have to start an all-party group for those who have milked cows by hand.

The issue we face is global instability through the flooding of the market across the world. It is important that DEFRA should do everything possible to help in the current situation, in the hope that it will not last too long. That means talking to banks and Her Majesty’s Revenue and Customs, to see us through. I was pleased with what the Prime Minister said in response to my question in the Chamber on 21 January, which has already been mentioned and is at column 216 of the Official Report. I asked about expanding the powers of the Groceries Code Adjudicator and whether there should be a power to fine, and the answer was a strong message that the Government take the issue seriously. Progress is being made, and that is what we all want.

The only answer to the present situation is to expand the market. We operate in a global context, and there is probably over-production across the world. When quotas are lifted, that is likely to get worse. We must aggressively expand the market for British milk and dairy produce. First, we need a full-blooded DEFRA campaign to export and market to China, which is a huge growing market, and elsewhere. I know that action is being taken on that, but it must be redoubled and must continue.

Public procurement is a sensitive matter, because we are members of the European Union and must stick to competition rules, but the Government need to be as inventive as possible. Every public body in Britain that wants Britain and its dairy farming to succeed should do all they can to make sure they use British produce. That is a key issue that the Government can influence, although obviously they must be careful.

Labelling is also incredibly important. The British people generally want to support British farming. They want to buy British produce from supermarkets or other retailers, particularly now that they can see that dairy farming is having a difficult time. However, we must be certain that produce marked as British genuinely is British. That does not mean packed in Britain—produce

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brought here and sold and advertised as British when it is not. We need accurate labelling so that the people of Britain can join together to help the continued success of the dairy industry, which has underpinned rural life in Montgomeryshire and elsewhere for generations.

9.54 am

Ms Margaret Ritchie (South Down) (SDLP): It is a pleasure to serve under your chairmanship, Sir Roger. I congratulate the hon. Member for Ribble Valley (Mr Evans) on securing this important debate on the dairy industry.

I am a member of the Select Committee on Environment, Food and Rural Affairs, under the chairmanship of the hon. Member for Thirsk and Malton (Miss McIntosh), and we have just completed a detailed report on dairy prices, volatility in the market, and the need for the European Union to review the intervention price. I urge the Agriculture and Rural Development Commissioner, Phil Hogan, and the Minister to make sure that the price is reviewed, and that there is considerable uplift. From my Northern Ireland perspective, the volatility has had a great impact on the local dairy industry. The majority—about 85%—of our milk products are exported. With the milk quota ending in April, the issue of price volatility will be more marked and definite, so it needs to be addressed.

My constituency neighbour the hon. Member for Strangford (Jim Shannon) mentioned the dairy intervention price, which the Select Committee report dealt with clearly, along with the fact that the Groceries Code Adjudicator lacks teeth. On 29 January a motion was tabled on enabling fines to be levied on the big supermarkets. I hope that penalties will be brought in, but smaller retailers also have an effect on the consumer and, more importantly, the farming and dairy industries, and that needs to be investigated.

We want an uplift for the dairy industry, and we feel that there is a need to take a long-term view of the industry and its current crisis. Countless farmers are being forced to leave it and abandon their livelihoods, because they are not receiving sufficient support in the crisis. There will come a time when the markets improve and we will need their high-quality produce. There may be a shortage of farmers remaining to produce it.

The dairy industry is vital to farmers’ livelihoods and to the economy. Intervention is not just an option; it is an immediate necessity. We need action at Government and EU level to protect farmers properly in the long term, in the face of market volatility, which will bring further challenges. I commend the Environment, Food and Rural Affairs Committee’s report to the Minister, and I look forward to his response. I hope that he, in conjunction with the EU Agriculture and Rural Development Commissioner, will be able to provide some relief for the dairy industry.

9.58 am

Nick Herbert (Arundel and South Downs) (Con): I join other hon. Members in commending my hon. Friend the Member for Ribble Valley (Mr Evans) for initiating the debate and raising an issue of great concern to those of us with rural constituencies. In the past two decades or more, the number of dairy farmers in West Sussex has reduced significantly. The national trend is

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for further reductions, with the threat that dairy production in the county will become a very rare thing. That would be a great shame.

I want to raise three ways of addressing the unsustainable situation in which producers are paid a price below the cost of production—albeit that we accept that prices are volatile. The situation was not the same last year, and there are world market problems that cannot be addressed easily. The first issue, which was discussed by my hon. Friend and has been raised by the EFRA Committee, is the Groceries Code Adjudicator. I announced the Conservative party’s policy to introduce what we then called a supermarket ombudsman at the Oxford farming conference some five years ago.

I believed then, as I do now, that in spite of having faith in free markets, when markets operate in an unfair way, damage can be caused not just to producers but ultimately to consumers. That can justify measures to correct market failure. There is a danger that that is happening here and ultimately the consumers will lose if we undermine our production base too much. There is a case, as the EFRA Committee recommended, for strengthening the powers of the Groceries Code Adjudicator across the supply chain and ensuring that the adjudicator can levy substantial fines and mount proactive investigations. I welcome the Prime Minister’s indication that the Government will look at that and I hope that the Minister will say more about that when he responds.

The other policy that I promoted in opposition that we need to continue to press hard is country of origin labelling for our produce. That would help hugely in what is needed: a national campaign to market and promote British produce as the means by which consumers can support British production. We have not yet succeeded in extending that principle, partly because of the problems with getting EU agreement and also because of problems with our authorities who claim that such measures increase the burden of regulation. We need to resist such arguments.

I agree with my hon. Friend the Member for Montgomeryshire (Glyn Davies) that we should look carefully at public procurement and the way in which the public sector can do more to promote British produce. The long-term outlook for dairy farming may be rosy, given the potential for global markets to improve and for the international consumption of dairy products to increase, but we need to do more to help producers in the short term to recognise that dairy farmers are part of the backbone of the rural economy. It is not in the national interest to continue to see their loss.

10.2 am

Dr Eilidh Whiteford (Banff and Buchan) (SNP): I congratulate the hon. Member for Ribble Valley (Mr Evans) on securing the debate and I commend the Environment, Food and Rural Affairs Committee on its report, which provides a helpful backdrop to the proceedings. There seems to be much consensus from industry, stakeholders and others that the present low prices and market volatility are largely attributable to increased global production, lower demand than anticipated in China and the impact of Russian sanctions on EU imports.

There is also fairly widespread agreement that, in the longer term, the demand for dairy products worldwide is likely to rise and our producers could access growing

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international markets. In the meantime, however, as we have already heard, the situation is a lot less rosy. Farm-gate prices are below the cost of production, which is creating a critical situation for many dairy farmers, some of whom have been struggling to stay afloat for some years.

I have a sense of déjà vu, because back in 2012 we debated the crisis in the dairy industry here in Westminster Hall. At that time, I welcomed the introduction of what was then the new voluntary code of conduct, but I pointed out that farm-gate prices were still too low to be viable, and that, until the prices paid to producers exceeded the cost of production, we would not have a sustainable dairy industry. That essential issue, which is not fully addressed by either the voluntary code or the Groceries Code Adjudicator, still underpins the problems facing the dairy sector.

Most of Scotland’s milk production—92% of it—is for domestic UK markets, and primary producers, who have high input costs, are caught in and continually squeezed by over-concentrated supply chains. Dairy farmers point out that that those who supply Asda, Morrisons, Lidl, Aldi, Iceland and Waitrose receive substantially less than the cost of production for their milk. Asda’s suppliers say that they receive 56p for four pints against a production cost of 68p. Dairy producers cannot be expected to subsidise retailers in that way. In the long term, it is not in the interests of our food security or consumers to push dairy farmers out of business.

There has been some discussion about whether the voluntary code is operating as it should, whether the EU intervention price is too low and whether the powers of the Groceries Code Adjudicator should be extended. The voluntary code has been a positive move—as far as it goes—but it is not designed to tackle underlying structural problems. The dairy industry in north-east Scotland—what is left of it—illustrates well the limitations of the voluntary code in practice in that there is only one processor. That is the case in many parts of rural Scotland. The voluntary code can help in terms of conditions of contracts if stakeholders choose to adhere to it, but, if circumstances change, it is very weak in that there is often no other show in town. That lack of competition means that, in negotiations between producers and processors, one player holds all the cards. That highlights the underlying problems of a concentrated supply chain.

When legislation for the Groceries Code Adjudicator was going through Parliament back in 2012, I argued strongly that the restrictions on who could make representations to the adjudicator would place serious limitations on its effectiveness. I would definitely like to see the adjudicator being able to investigate complaints from parties other than direct suppliers. The situation we are discussing is a good example of where that would be beneficial. However, that would still address only the symptoms.

Roger Williams (Brecon and Radnorshire) (LD): Will the hon. Lady give way?

Dr Whiteford: I will not allow an intervention. I apologise. The Government’s failure to empower the adjudicator to impose penalties on those in violation of the code is a real dereliction that I hope they will put

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right with all due haste. I do not want the adjudicator to be another useless quango. Given the time constraints, I will not say anything about the intervention price except that I hope that the Minister will raise that at EU level so that it is on the policy makers’ agenda.

To allow our dairy sector to sink and diminish without trace is short-sighted. We all recognise that there is a future for the sector in growing export markets. If we are smart, we could develop those markets for high quality, value added products. We have a strong traditional industry with a reputation for quality, excellent animal welfare and food standards and distinctive, unique regional products. Notwithstanding the current market issues, there are substantial and growing opportunities for our dairy industry and a clear role for Governments throughout the UK in supporting their development. However, while we are still selling milk below the cost of production, we will not have a sustainable industry.

10.6 am

Miss Anne McIntosh (Thirsk and Malton) (Con): I congratulate my hon. Friend the Member for Ribble Valley (Mr Evans) on securing such a timely debate. I will share some of the evidence that the Select Committee on Environment, Food and Rural Affairs heard in addition to our conclusions. One of the most striking things I have found in representing the deeply rural constituency of Thirsk, Malton and Filey and its dwindling number of milk producers is that, in the time that the Groceries Code Adjudicator has been in place, there has not been a single investigation. I welcome the laying of the statutory instrument, but that situation must be rectified by allowing her the power not just to levy fines, but to take an investigation off her own bat. If she is not allowed to do own-initiative investigations, we will not see any progress.

It is not often that, the week after the Committee reports to the House, the Prime Minister takes up two or three of our core recommendations, but that is what happened in this case, which was very welcome indeed. I hope that the Minister will leap into action to ensure that the Groceries Code Adjudicator’s remit and the code will apply to this supply chain. There is a commonly-held belief, which has been explored on many occasions in this Chamber, that the code does not apply in this case. That leaves the small farmer exposed.

I express my hesitation about seeing further concentration in the market. We also need to look at why co-operatives work so successfully in countries such as my second homeland of Denmark but not so well here. They can negotiate collectively on price, contract terms and conditions and that must be considered.

I applaud the moves towards country of origin labelling and I press, as the whole Committee does, for an urgent review of the intervention price. It is welcome that the Government have set up, for the first time, an agriculture counsellor to be based in Beijing. The drive by the Department for Environment, Food and Rural Affairs for exports is welcome, but we must also support those producers, such as Shepherds Purse, just two fields along from where I live in North Yorkshire, who are creating cheeses that compete with many of the popular brands that we currently import.

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There is a vibrant future for the dairy industry, but, should prices go up again, potential producers and farmers must look to the fact that the market is very small. We must look at the difference between the small, individual farmer and the might, weight and strength of the processor as well as that of the supermarket. I leave everyone with the thought that until that chain and that relationship is addressed, I do not see there being any change to either the dairy price or the dairy industry going forward. However, I believe that the groceries code and the adjudicator’s role are key to strengthening and restoring the balance for the dairy farmer and ensuring a sustainable future, so that the cost of a pint of milk reflects the cost of production.

10.10 am

Albert Owen (Ynys Môn) (Lab): It is a great pleasure to serve under your chairmanship, Sir Roger, and a genuine pleasure to follow the hon. Member for Thirsk and Malton (Miss McIntosh), who is doing an excellent job as Chair of the Environment, Food and Rural Affairs Committee. I appreciate the considered and thoughtful evidence-based report that her Committee has done.

I congratulate the hon. Member for Ribble Valley (Mr Evans) on securing the debate. Since I have been in the House, I have been working with him on rural issues. When he was the shadow Secretary of State for Wales, he came to the Anglesey show to see the best county in the United Kingdom in the glorious sunshine at its best, with the dairy industry central to that. He and I have been singing from the same hymn sheet for some time, and he helped me with a private Member’s Bill for a supermarket ombudsman at the latter end of the last Parliament—he was one of its sponsors. It was good that, at that time, the DEFRA teams in each of the major parties were on board, but it was difficult getting to the Business, Innovation and Skills Front-Bench teams. That has been part of the problem, and we should concentrate on that. This is specifically an agricultural issue as well, and we should try to look at it in that way to get a better deal for farmers.

The dairy industry is important and we should not see it in isolation. If we combine food, farming and tourism, we are talking about a huge sector of the British economy. At the centre of that are the dairy farmers and the farming community, so we should not look at this problem in isolation, but it is a special issue.

The hon. Member for Montgomeryshire (Glyn Davies) is just leaving the Chamber. I started my working life on a farm. When machinery broke down I milked cows by hand, so I have some grass-roots experience—and some other experiences from the end of a cow—to bring to this debate. The serious point, however, is that I understand how special dairy farming is, because dairy production cannot be turned on and off at a tap when there are volatile prices and exterior factors across the world. Unlike sheep farmers and others that can diversify into other areas, dairy farmers cannot do that so easily, and I want to highlight that point.

I agree with the 12 or 13-point plan suggested by the hon. Member for Ribble Valley. We need a specific plan. In Wales, the issue is devolved and a dairy plan is coming into being, which concentrates on many of the issues that have been mentioned today. It is not an

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isolated issue for each Assembly and Parliament to deal with. It is a UK and global problem, and we need a UK response. That is why DEFRA needs to co-ordinate a plan of that nature to get the fairness that we all want for dairy producers.

For my final minute, I want to turn to the Groceries Code Adjudicator. I am hearing good noises about it in this morning’s debate, but in this Parliament the House was given an opportunity to water down the supermarket ombudsman’s powers, and unfortunately they were watered down. When that went through the House, we warned that if there were a toothless referee, it would not be able to make an impact. A referee must be able to come down on both sides in the game—not that I am saying it is a game—so we need to strengthen it. We need to name and shame. We have been calling for that, but it has been resisted.

I have been hearing that there is internal strife between the two parties of the coalition Government, but let us put that aside. Let us ensure that we get—[Interruption.] It is not “nonsense”. The ability to fine early on is needed. We need an ombudsman that has teeth. We need the referee to be able to put forward strong recommendations and have a proper inquiry. As the EFRA Committee said, this is a UK problem. British goods and produce are the best in the world; let us make sure we provide fairness for those best producers.

Several hon. Members rose

Sir Roger Gale (in the Chair): Before I call Mr Ollerenshaw, to whom I will give the four minutes, because he has had no warning of the fact that there will be less time, I tell hon. Members that I will be taking the time limit down to two and a half minutes. I appreciate that that is tight, but I suspect that much of what needs to be said has already been said. If Members can concentrate on making just the points they really need to make, we will still get everybody in, but it will be tight.

10.14 am

Eric Ollerenshaw (Lancaster and Fleetwood) (Con): It is great to serve under your chairmanship again, Sir Roger—I accept your strictures and will try to get in under four minutes. I congratulate my hon. Friend the Member for Ribble Valley (Mr Evans) on securing the debate; obviously, Lancashire leads the way, as per usual, on this issue. In Lancashire, according to figures from the National Farmers Union, we lost 28 dairy farmers last year. That still leaves over 500 firms—mainly family firms—such as the prize-winning Whitlow dairy herd in Preesall. As my hon. Friend pointed out, many of those families’ tenancy or ownership of small-scale farms goes back hundreds of years and they often have 50 to 500 cows.

I shall try not to repeat what others have said, but the hon. Member for Ynys Môn (Albert Owen) spoke about scale, and in these debates, we need to point out that this is not some minor rural issue. It is a major British industry. We are the third biggest producer of milk in Europe, and the 10th biggest in the world, with nearly £4.5 billion of product. That is what we need to mention to break down some of the barriers that people who are perhaps not from rural areas have in understanding what we are trying to do.

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The recent price volatility is complex. There is almost another cold war, with Russia cutting back on dairy imports. Since 2010, Members have seen this extremely volatile market going up and down, as my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) pointed out in a very important Select Committee report.

On the slashing of milk prices in supermarkets, rather than focusing on the retail price, perhaps we need to focus on what the supermarkets are paying the milk producers. That is where the issue lies, not in whether supermarkets run a loss leader at the front end. We should not tar all supermarkets with the same brush. I add my praise for Booths supermarkets in the north-west, and Edwin Booth, for maintaining the highest prices paid to producers, as my hon. Friend the Member for Ribble Valley said.

However, there are no quick fixes. We have gone through the general agreement that the EU intervention price is set too low to be helpful, and that needs to be reviewed. We all agree on the Groceries Code Adjudicator. Some farmers still do not see what that means and how it will have an impact on their lives; we need to do something about that, and I am grateful for the Select Committee’s support on that issue.

The labelling pointed out by my hon. Friend the Member for Montgomeryshire (Glyn Davies) is absolutely key. We need to get the labels right, so that people are able to buy what is made and produced in Britain—which actually tastes like cheese, unlike some of the competitors one finds abroad. I want to mention Garstang blue, made near to me at the Dewlay cheese production, just below my constituency.

We need producer organisations, such as Bowland Fresh, which has been mentioned. I understand that Yew Tree Dairy in Skelmersdale has now introduced a milk drying plant, which might help prevent volatility over time. The NFU’s suggestion for a futures market in dairy—again, to smooth out the price—has not been mentioned so far today, and it seems to be a practical way forward. All these bits and pieces have been suggested, but what we want to see from the Minister is those bits and pieces starting to come together in a policy to save a vital part of British agriculture.

Several hon. Members rose

Sir Roger Gale (in the Chair): Members now have two and a half minutes, without hesitation or deviation. I call Sarah Newton.

10.18 am

Sarah Newton (Truro and Falmouth) (Con): I will try my best, Sir Roger.

Tamara Hooper is a constituent of mine who farms some land that I am very fond of. It is next to the farm that my godfather farmed, and her tale is of the situation faced by many farmers in my constituency, who have tried over generations to keep their way of life and first-class dairy farms going. Their huge skill in raising stock and looking after them and the land is passed down over generations; it is not something that people learn overnight.

Tamara Hooper is currently being paid 24.81p a litre by Arla. That is simply unsustainable. The 48 companies that rely on her farm will go out of business unless we

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do something about it. In my lifetime, I have seen the number of dairy farms in my constituency drop like a stone to the handful that remain. Some enterprising Cornish farmers have been able to develop cheeses, ice creams, milks and butters. There are many household names that people now find in supermarkets, which is great. I hope that many more of them will be supported to do that, but right now, Tamara and her family face going out of business. It takes time for people to set up new relationships and sell their milk directly. It takes time for people to train themselves as a cheesemaker, and they have simply run out of time.

I support all the work that has been done by the Select Committee and in the charter proposed by my hon. Friend the Member for Ribble Valley (Mr Evans), which points to a series of practical things that the Government can do to intervene in a broken market. We have to intervene so that when the upturn that we all expect and anticipate comes, we will still have farms and farmers able to meet that opportunity. Just as we have a strategy for national energy security, we need a proper strategy for farming and food security, because that is just as important. I urge the Minister to take on board the ideas that we have come up with this morning and take urgent action to fix the broken market.

10.20 am

Daniel Kawczynski (Shrewsbury and Atcham) (Con): During the previous Parliament, in 2006, I set up the all-party group for dairy farmers. In Shropshire at that time, nearly a decade ago, we already recognised the crisis that our dairy farmers faced. Some 160 Members of Parliament joined the all-party group and we had an excellent secretariat, the Royal Association of British Dairy Farmers. The Prime Minister joined the all-party group when he was Leader of the Opposition; it was the only one that he joined during that Parliament. After a year of deliberations, taking evidence, going to Brussels and meeting various organisations, we came up with two recommendations: a limited cull of badgers to deal with the crisis of bovine TB, and a Bill introducing a groceries adjudicator to regulate the supermarkets and their conduct towards processors and dairy farmers. We took those recommendations to David Miliband, who basically laughed us out of his office—

Huw Irranca-Davies (Ogmore) (Lab): Rubbish!

Sir Roger Gale (in the Chair): Order.

Daniel Kawczynski: We have the minutes of the meeting. Mr Miliband said that both those issues were completely unrealistic and told us that he would not do anything about them.

I look to the Minister to take action on those two vital issues before our dairy industry collapses. What does he understand to be the impact of the volatility in the dairy industry on the cattle industry? Some of my cattle farmers are starting to talk about how it is affecting them.

I would also like to ask about EU subsidies. Apparently, subsidies are available to ensure that children under five have milk, and we are not claiming all the subsidies to which we are entitled. I hope to hear what he is doing to

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travel around the world and ensure that everything possible is done to open up new export markets for our dairy industry, particularly in Russia, where the ban on British beef has been lifted, which is worth £150 million a year to our cattle industry. I hope that when sanctions are lifted, we will do everything possible to increase exports to Russia.

10.23 am

Julian Smith (Skipton and Ripon) (Con): The issue that we are discussing is a major one for Britain, but it is particularly acute for North Yorkshire. Since 2002, the region has lost 489 farmers, which is the second worst performance and loss in the country. Even farmers who are doing their best to invest in and build their businesses—such as Paul and Janet Bolland near Skipton, who recently invested £700,000 in their parlours and their farm—are struggling to pay interest on those investments. I do not find compelling the argument that we should look to Europe for reductionist intervention. My fear is that other countries that have higher production costs may soak up some of the subsidy.

I agree with many of the recommendations made by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), and I pay tribute to her for all her work as Chair of the Environment, Food and Rural Affairs Committee over the past few years. I add my support for the idea of greater teeth for the Groceries Code Adjudicator and for looking again at the voluntary contract. UK Trade & Investment needs to be a bit more robust and communicative about all the good work it is doing. I have not heard directly from it about whom I should introduce my farmers to, and how to communicate to them. It needs to get out there more and tell us what it is doing.

There are some short-term measures that I would like to see from the Treasury. HMRC could really help farmers with their monthly payments, perhaps by allowing some pooling of profits over several years rather than working on an annual basis. Above all, I think that the Minister, who has responsibility for farming, has done excellent work on the matter. I fear and suspect that were we talking about another industry such as the car industry, there would be a cross-Government task force, a committee and a cheerleader. We want that sort of focus for the dairy industry. We want somebody to take responsibility so that we know to whom we can go, across the whole gamut of Government intervention and help, to help this industry, which is in such need at the moment.

10.25 am

Mr Alan Reid (Argyll and Bute) (LD): I congratulate my hon. Friend the Member for Ribble Valley (Mr Evans) on initiating this important debate. The fall in the milk price is causing serious problems for British dairy farmers. In my constituency, dairy farmers are mainly concentrated in Kintyre and the Isle of Bute. There are many dairy farms in Kintyre and the industry is a vital part of the local economy, which would struggle without it. As well as direct employment in the farms themselves, the dairy industry supports many other local businesses, including the Campbeltown creamery, which makes the famous Mull of Kintyre cheddar. I urge First Milk to invest in the creamery to secure its

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future and that of the local dairy industry. Grants from the Scottish Government have been offered, provided that First Milk makes its own investment.

Although there is widespread agreement that dairy demand will outstrip supply in the long term, which will create real opportunities for the UK dairy supply chain in the future, farmers have to survive the current crisis. EU intervention should be considered until the situation with the Russian import ban and other market forces has been resolved. Price intervention is set too low to have any effect before the situation becomes even more serious.

Like most hon. Members who have spoken, I welcome the Government’s decision to grant the Groceries Code Adjudicator the power to fine supermarkets that have breached the groceries code, and I hope that that will act as a deterrent to supermarkets. However, many dairy farmers do not fall within the scope of the groceries code because they do not sell directly to supermarkets, so the code must be extended to include complaints from indirect suppliers such as dairy farmers. The code is not due to be reviewed until next year, I believe, but I urge the Government to bring the review date forward.

The adjudicator should be able to be proactive, and should be seen as a genuine threat to those who breach good practice. In times of price falls, it is the primary producer—the dairy farmer—whose business is impacted by the low prices. Those further up the supply chain pass price cuts down the chain, but the long-suffering dairy farmer has nobody else to pass a price cut to, and they have to take the hit.

HMRC must also be more helpful by allowing dairy farmers to spread profits over several years. I urge the Government to take the steps that I have outlined to help the dairy industry survive the current crisis and secure a good long-term future.

10.27 am

Sheryll Murray (South East Cornwall) (Con): Well done to my hon. Friend the Member for Ribble Valley (Mr Evans). My constituency has a large number of dairy farmers, some of whom have positive stories to tell. Others, however, have to contend with the ongoing problem of bovine TB, and the volatility of milk prices may be the final nail in the coffin for them.

I want to take the opportunity to congratulate some dairy farmers who have diversified and become processors. The gold award-winning champion Philip Stansfield formed the Cornish Cheese Company, which the Environment, Food and Rural Affairs Committee visited last year. The story of the young guy who produces Cornish gouda using his father’s cows is an example of a fantastic way of utilising the family milk to help with running costs. Bill Clarke and his wife, from Greymare farm near Lostwithiel, sold their cows in 2001 to concentrate on their processing business. They work only with Cornish farmers, of whom they have 23, all from within a 25-mile radius of their farm. They started from small beginnings, bottling milk from their own herd once the children were in bed. Their sons have now joined the business, which employs more than 100 people.

The story is not the same for all dairy farmers in south-east Cornwall, but it could be. I have recently been visited by a dairy farmer who is really concerned about his future. Having invested in new equipment, he fears that he will be unable to sustain his farm with such very low prices. He is fearful for his future.

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I support the conclusions and recommendations of the Environment, Food and Rural Affairs Committee and the recommendations that have been made so well by my hon. Friend the Member for Ribble Valley. I want to see a vibrant and thriving dairy industry in south-east Cornwall, with both processors and producers.

Roger Williams rose

Sir Roger Gale (in the Chair): As a word of early warning, Mr Farron is next. Mr Williams, you rose earlier and, because Sir William Cash has left, I can possibly squeeze you in at the end. I put you on notice.

10.30 am

Tim Farron (Westmorland and Lonsdale) (LD): I pay tribute to my hon. Friend the Member for Ribble Valley (Mr Evans). Dairy farming is integral and vital to the economy, culture and landscape of Cumbria. Across the UK, over the past four Parliaments, we have seen a more than 50% drop in the number of dairy farm holdings and a more than 10% reduction in milk-producing capacity because of the lopsided, counter-productive, unfair and unfree market.

It is an outrage and a great shame that it has taken this crisis to prove right those of us who wanted the Groceries Code Adjudicator to have more powers and more teeth. We should have got it right at the beginning, but the power to fine is right. As my hon. Friend the Member for Argyll and Bute (Mr Reid) rightly said, we should ensure that the adjudicator can look beyond the direct relationship with supermarkets to the indirect relationships, because that is where farmers are being done over most regularly and most heinously. We must look at the processor monopoly within the market, too, and consider putting the code of practice on a statutory footing.

I challenge the notion abroad that, somehow, the supermarkets are using milk as a loss-leader, which is not the case. Nearly 50% of the average price of a litre of milk in the supermarket goes into the supermarket’s pocket. There is room within the supermarkets’ profit margins to deal with this situation, and we must not let them hide behind the idea that this is all about world commodity markets when it is not. Poverty and hardship is now rife among dairy farmers. The inability of dairy farmers to reinvest in their future and their stock is now commonplace, and we see the loss of family farms on at least a daily basis.

John Maynard Keynes once said:

“Markets can remain irrational longer than you can remain solvent.”

That is absolutely the case within the farming and dairy sectors, and we must recognise that we have to save the supermarkets from themselves before they completely lose the producers on whom they rely. It is an outrage and an irony that we can go down a supermarket aisle to buy Fairtrade coffee and tea from Nicaragua and Colombia, but down the next aisle, getting the milk to put in that tea and coffee, we find milk ripped from the hands of a Cumbrian dairy farmer for less than it cost them to produce. We are passionate about fair trade for farmers from Colombia, but equally passionate about fair trade for farmers from Cumbria.

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10.32 am

Neil Parish (Tiverton and Honiton) (Con): I congratulate my hon. Friend the Member for Ribble Valley (Mr Evans) on securing this excellent debate. I want to make the case that, across the west of the country, on the grasslands throughout the country and on my own grasslands in the Blackdown hills and Exmoor, dairy farming is important not only to dairy farmers but to the whole farming industry; some 60% or 70% of our beef cattle come from the dairy sector. From the time that a cow goes to the bull, or is inseminated, it is three years before that heifer comes into milk production. We cannot turn milk production on and off overnight, which is why it is a special case. We have too much supply and not enough demand, but we have to do something about it. The Prime Minister and other Ministers are taking this seriously, and one of the keys is public procurement and ensuring that, by not always having to buy the cheapest milk, we can get our own production into our schools and prisons, or wherever it might be; let us ensure that our own milk and cheese is in there.

On retailers and the Groceries Code Adjudicator, I am delighted that a statutory instrument is being used to introduce substantial fines for supermarkets. Not all supermarkets are bad, and many have done a good job, but many are driving down milk prices, not for liquid milk but in the processed cheese market for their own-label cheese, which needs to be investigated thoroughly. The European Commission has a role to play in intervention. The Commission must up the intervention price, buy milk powder and cheese and put them into storage, thereby taking them out of the market. Once the market recovers, and it will, the Commission can let that cheese and milk powder back out into the market, which will not cost a great deal of public money. We have to take action. Standing around and wringing our hands is no good. I understand from the Secretary of State for Environment, Food and Rural Affairs that there will be a milk summit, which is absolutely right. We must sit down with everyone and thrash this out, because we cannot destroy our dairy herds and then expect to pick them up overnight—that just will not happen. I am delighted that this debate has taken place, but let us see some real action.

10.35 am

Roger Williams (Brecon and Radnorshire) (LD): I apologise to the House for arriving late. Other duties held me back. I am impressed with the understanding of the dairy industry that I have heard in this debate, which is partly due to the Environment, Food and Rural Affairs Committee report. I am pleased that a number of those recommendations have been enacted so soon.

I will concentrate my few remarks on the Groceries Code Adjudicator. I am pleased that she will shortly have the power to impose fines, because only fines really count to commercial organisations. Yes, naming and shaming is important, but fines are important, too. Reference has been made to extending the adjudicator’s powers to ensure that she can examine the whole length of the food chain. Very few farmers in my constituency trade directly with supermarkets, and most people who produce milk do not sell directly to a supermarket.

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I am also concerned that the Groceries Code Adjudicator should be able proactively to examine situations where she, or possibly he in the future, believes there to be a failure of the marketplace. At the moment, she can act only on a complaint. As we have heard from my hon. Friend the Member for Argyll and Bute (Mr Reid), producers sometimes have only one customer. Such producers are therefore very cautious about making a complaint that may result in him or her being put on a blacklist and being unable to sell their product.

Thank you for this opportunity, Sir Roger. I look forward to hearing the closing remarks.

10.37 am

Sir William Cash (Stone) (Con): This is an important and interesting debate. The dairy farming industry is integral to Staffordshire and my constituents, as it has been for generations, and it is incredibly important for the local economy. I congratulate my hon. Friend the Member for Ribble Valley (Mr Evans) on his charter for the dairy industry, and I am extremely glad that he has listed public procurement, as so many others have today, as part and parcel of giving a fair deal to the dairy farming industry. I also congratulate the Chairman of the Environment, Food and Rural Affairs Committee on the Committee’s fifth report, which it published the other day. We are seriously getting into it and, additionally, the Prime Minister has given his backing.

We will hear from the Minister in a moment, but when we consider the questions of intervention price, labelling and public procurement, there is a European dimension. Not unnaturally, as Chairman of the European Scrutiny Committee, I am concerned that we should not be held back simply because the rules and regulations that have been devised and that generate an enormous number of problems for our dairy farming industry, and indeed for other businesses, are allowed to prevail against our national interest. I will leave that thought with the House.

I tabled early-day motion 675 on the non-payment of dairy farmers, and there are a number of signatories. I would be extremely grateful if people signed that early-day motion, which points out, as others have said today, that

“the number of dairy farmers had dipped below 10,000 for the first time, a 50 per cent fall since 2001”.

That is a serious figure that demonstrates everything that has been said in this room by these extremely eloquent speakers on behalf of dairy farmers. The case has been made, and we now look forward to hearing what the Minister has to say.

10.39 am

Huw Irranca-Davies (Ogmore) (Lab): This has already been an excellent debate. I thank the hon. Member for Ribble Valley (Mr Evans), a good Swansea boy, and all Members who have spoken for their contributions. My hon. Friend the Member for Ynys Môn (Albert Owen) and others reminded us of the importance of the dairy industry not simply to the economy, growth and exports but to the social fabric of our rural communities, their interplay with our towns, and our health and well-being.

About 14 billion litres of milk are produced in the UK each year, and about half of that is used for liquid milk. The UK is the third largest milk producer in the

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European Union, after Germany and France, and the 10th largest in the world. Given the industry’s value of £4.27 billion at 2013 market prices, its importance is clear.

However, despite the long-term optimism expressed by some Members, Ministers and EU Agricultural Commissioner Phil Hogan, the dairy sector has suffered from low prices and volatility for years. The November 2014 farm-gate price of 28.91p per litre was down 16% from the previous year. The 2012 milk crisis led to blockades of depots and processors, and thousands of angry farmers descended on Westminster to confront Ministers. In fact, the former Minister who was confronted by those angry dairy farmers, the right hon. Member for South East Cambridgeshire (Sir James Paice), is now the chairman of First Milk, which is owned and run by dairy farmers who have been forced to delay payments. He told the press recently that

“hundreds of UK dairy farmers are unlikely to find a home for their milk this spring.”

In addition to that delay, First Milk’s producers have seen the price they are paid plummet from 32.5p per litre last spring to 21.2p per litre for those supplying the Co-op on liquid contracts and 21.57p per litre for those in the manufacturing pool.

The average farm-gate price of about 28p per litre disguises huge variations. A third of liquid milk is sold to retailers, which base the price they pay on what it costs the farmers to produce it, plus an agreed margin. Sainsbury’s and Marks and Spencer currently pay 34p per litre, Waitrose pays 33p per litre, Tesco pays 32p per litre and the Co-op pays almost 31p per litre.

Some major retailers, though not all, argue that their massive discounting of liquid milk at four pints for less than 90p in their endless price wars is not done at the cost of farmers. They argue that the only casualty in the price wars is their own profit margins, but frankly, even supermarkets that pay decent farm-gate prices to the producers and have the most direct relationships cannot absolve themselves of responsibility. The fact that they engage in price wars in which liquid milk is a prime weapon embeds the idea that milk is a commodity to be undervalued and sold for less than the price of water or carbonated and unhealthy fizzy drinks. Ultimately, the only casualty in the price war is the dairy farmer. We need to see not only British milk but British dairy products on supermarket shelves.

Some retailers and their production chains do not contract directly with producers, so they may not have regard to the voluntary dairy code, which I will return to in a moment. They do not absorb the costs of the price wars themselves, and instead put pressure on their supply chain, which causes farmers to reduce costs further below the cost of production.

Two thirds of liquid milk produced is sold to processors, which is where the cuts are being made. Arla, which supplies Asda, pays farmers 25p per litre. Müller-Wiseman pays the same. Dairy Crest is set to cut its price to less than 25p per litre, and we await a decision on the sale of Dairy Crest’s liquid milk division to Müller in the latest act of business consolidation to drive out costs. First Milk, as I said, pays less than 22p per litre. Iceland supermarket is supplied by Arla and Müller-Wiseman, but it has asked them to base their future prices on the cost of production—that is at least a step forward.

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Morrisons has announced that it intends to establish its own producer group, but in the meantime it gets its milk from Arla and Dairy Crest.

There is also huge variation in production costs. The figure most commonly cited is the National Farmers Union average of 28p per litre. However, the most recent figures from the industry body, DairyCo, show that there is a 14p per litre difference in the cost of production between the top quarter and the bottom quarter of farms.

We need a prompt review of how the whole dairy industry is overseen through the dairy code and the Groceries Code Adjudicator. The genesis of the dairy code, which was established on a voluntary basis in November 2012, was a dairy crisis that culminated in blockades, protests and a Minister leaving his post benighted but not delighted at his treatment. However, the independent review by Alex Fergusson MSP in 2014 proposed an extension to retailers and measures to increase the uptake into the 15% that are not currently signed up to the code.

When the public and the political awareness of the pressure on dairy farmers is so great and when the public relations disaster for processors and retailers is so potent, why is the take-up not higher? Why is it not universal? Will the Minister commit to name and shame everybody who has not signed up to the dairy code in public, on the Department for Environment, Food and Rural Affairs website and in Parliament? Will he also commit to name and shame and publish a regularly updated list on the DEFRA website and in Parliament of all the processors and retailers that participate in supply chains that pay farmers less than the average cost of production?

The Government, in evidence to the Select Committee on Welsh Affairs in 2013, repeated their previously stated position. They said that they would seriously consider legislating for compulsory contracts if the code fails to deliver the desired outcomes. Does the Minister now feel that that is needed, or has he considered it and ruled it out?

I and some Members here today know that the Government had to be dragged into agreeing to financial penalty powers for the Groceries Code Adjudicator.

Daniel Kawczynski: indicated dissent.

Huw Irranca-Davies: I sat on the Groceries Code Adjudicator Bill Committee, so I can tell the hon. Gentleman that they did. They conceded only under pressure from Members on both sides of the Committee. They argued against giving it those powers, which perhaps explains why it has taken so long to introduce the regulations. I and others have repeatedly raised that delay in Parliament.

I ask the Minister to clarify what the Prime Minister meant when he was pressed on extending the role and remit of the GCA to the dairy industry at Prime Minister’s questions on 21 January. He said:

“I also think it is time to look at whether there are ways in which its remit can be extended to make sure it looks at more of this vital industry.”—[Official Report, 21 January 2015; Vol. 591, c. 217.]

We all welcome the sinner who repents, but that issue was discussed ad nauseam in the Groceries Code Adjudicator Bill Committee two years ago, and the Government rejected it. We had the opportunity to

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extend the powers along the whole supply chain, including processors and intermediaries, but that was dismissed as disproportionate. We also had the opportunity to enable the GCA to investigate abuses, but that was dismissed as allowing “fishing expeditions”.

I seek clarity, so let me ask the Minister directly. When the Prime Minister referred to extending the remit of the GCA to look at more of the industry, did he mean that it should include intermediaries? Did he mean that the GCA should have the power to instigate proactive investigations into abuses, which the Environment, Food and Rural Affairs Committee asked for?

The current pressures on the dairy industry go beyond the UK. They reflect reduced demand in China due to the economic slow-down and the closure of the Russian market. The recent increase in production in the EU due to confidence in higher milk prices in 2013, good grazing and good weather, and increased yields in the UK conspired to lead to an over-supply. Arla suggests that global production is increasing by 5% per year, while demand is growing by only 2%. There is no single answer, but there are several areas in which we need to take action in the face of continuing long-term global price volatility and predicted continuing falls in farm-gate prices in the near future.

Will the Minister update us on the progress on country-of-origin labelling, on the establishment of producer organisations in the dairy sector, on the futures market for dairy and on what the uptake and interest in it has been? How much of the countryside productivity scheme money—the £141 million—has gone directly to dairy farmers, and what measures has it funded? What progress has been made with banks and lenders to deal with the immediate cash-flow problems? What discussions has the Minister had about the resilience of the dairy sector in the face of increased volatility that could follow the ending of milk quotas on 1 April this year? Most of all, we would like to know what the Prime Minister meant on 21 January. Was he serious, was he committed or was he deluded? Was he misinformed? Did he misspeak? Was he off piste and off message? Was it a soundbite in the run-up to the election to make the farming community think he is listening? The Minister has the chance to clarify whether the Prime Minister knew what he was talking about, or whether he was just spinning out of control.

It is over to the Minister to sort out the confusion from No. 10. Here we are again, three months to the day after the previous dairy debate, and three years after the previous dairy crisis. Our dairy farmers need and deserve some straight answers.

10.49 am

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (George Eustice): I begin by congratulating my hon. Friend the Member for Ribble Valley (Mr Evans) on securing this important debate. Given the sheer number of Members who have wanted to speak today, it is clear that he has touched a nerve and alighted on a serious problem, which is the current state of affairs in the dairy industry. I am well aware that many dairy farmers are suffering at the moment. Yesterday, I was in Cumbria and I met a group

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of dairy farmers there. Earlier this year, the issue dominated discussions at our regular farm resilience group, as it did at our meeting of the dairy supply chain forum last November, and we have another meeting next week with the Secretary of State to look further at the issues facing dairy farmers and to consider how we can help them.

It is fair to say that the dairy industry has had a rollercoaster ride in the last couple of years. In 2012, we were exactly where we are now, with prices on the floor; in fact, in many ways the situation then was worse, because feed prices were very high and dairy farmers were losing a lot of money. Then, last year—2013-14—we saw a very good year for dairy farmers. Prices were much higher, at around 30p to 35p per litre. feed costs came down, and the farm business survey showed that they had a good year last year. Since then, there has been a big increase in production in New Zealand, with production there up around 18% over the last year. Demand in China dropped off quite suddenly, as the Chinese had built up stockpiles of skimmed milk powder and came back out of the market. Production in Europe is up by 8% to 10%, and the Russian trade ban has aggravated things. As a result of all that, on the international auctions we have seen a very sharp decline in prices, which brings us to our current low level.

As a number of hon. Members have already alluded to, it is worth noting that there are differences between different farm businesses; different farmers face a wide range of costs. Yesterday, I visited a farmer who has Jersey cattle on an extensive grass-based system, and his costs of production were only around 22p per litre. It is not always about “inefficient” and “efficient” producers. Sometimes, efficient producers choose to run quite intensive systems, which means they have higher labour, feed and capital costs, and have to make more investment. Quite often, those producers find that they have higher production costs—for some of them, it costs 28p to 30p per litre—and if they are receiving low prices they are losing money.

The other element to bear in mind is that there is a big spread in the prices that farmers receive. At the top end, there are those farmers who are responsible for around 30% of UK liquid milk production and they are on cost-of-production contracts to the major supermarkets. Many of them are still receiving around 30p per litre for their milk. At the other end, there are those farmers who supply processors and consequently they are much more exposed to the international commodity markets, such as those supplying First Milk, which takes most of the milk production in Scotland, the north, the borders and Wales. At the moment, First Milk is able to pay farmers only around 20p per litre, so there is a big spread, both in terms of production costs and the prices farmers are paid.

I will point out, first of all, the things that we are doing in the short term. Immediately, we have to address farmers’ cash-flow challenges. Regarding those farmers who have not yet received their single farm payment—most farmers have received it, but some have not—we have told the Rural Payments Agency to absolutely prioritise dairy farmers, and particularly those supplying First Milk.

I had a meeting with the banks two weeks ago to encourage them to show forbearance to their business customers who are dairy farmers suffering difficulty at the moment, and I will continue to monitor the process as far as the banks are concerned.

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We have urged Her Majesty’s Revenue and Customs to be sympathetic in its dealings with dairy farmers. Those dairy farmers who had a good year last year potentially face quite a large tax bill, which is due to be paid in June this year, and we need to show some forbearance to those farmers who will have just weathered a very difficult winter.

Finally DairyCo, which is part of the Agriculture and Horticulture Development Board, has set up a special unit to give financial advice to farmers to help them through these difficult times. Also, we will shortly open a new round of rural development programme schemes, which will have dedicated measures to try to help farmers to improve their productivity and reduce their costs.

In the medium term, there are other issues that we are looking to explore. First, there is exports, which was mentioned by a number of hon. Members. I completely agree that if we want to have a resilient industry for the long term, we have got to open new export markets. We have seen good progress in this area. In the past year, there has been 47% growth in exports to non-EU markets of our dairy products. In fact, our total dairy exports are now at their highest level ever, at £1.3 billion. A few weeks ago, the Secretary of State was in China where she had discussions with the Chinese about how we can open up these opportunities, and we will shortly receive a delegation from Brazil to consider the opportunities for dairy exports to that country.

Another key area that I have been working on with the National Farmers Union in particular is around market measures to deal with volatility. In the US, when quotas were removed, quite a sophisticated futures market was developed to help to manage volatility. Typically, US dairy farmers fix around 40% of their production at a fixed price, hedged in the futures market, and leave only 60% of their production to the vagaries of the market. That takes some of the extreme peaks and troughs in the market out of their income profile. We can learn lessons from that system and we are working on this issue with the NFU. There are embryonic markets in skimmed milk powder and butter, for instance, which are run by the London international financial futures and options exchange, and Eurex, and we would like to see whether we can develop that futures model further.

We are keen to promote country-of-origin labelling. The UK was at the forefront of arguing for improved country-of-origin labelling on beef, lamb, pigs and poultry, and we should do the same on dairy products, so that we do not have Irish milk being imported to the UK and processed into cheese, before it is fobbed off as a product of the UK.

Procurement was mentioned by a number of hon. Members. Last year, we launched the Bonfield report, which was a new approach to procurement. It sets out a balanced scorecard. The uptake from schools and hospitals has been good in that respect, and we are keen to encourage further uptake.

Tessa Munt (Wells) (LD): Will the Minister give way?

George Eustice: I cannot give way, as I want to cover as many points as possible. I agree with the point made about procurement, and we are making progress in that area.

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A number of hon. Members mentioned the Groceries Code Adjudicator. I can confirm that a week ago the order that establishes the ability to levy fines was laid. It is subject to an affirmative resolution process, so it will now go through Committees in both Houses, but that will happen during this Parliament.

A number of hon. Members talked about the extension of the groceries code. We are considering that. Last year, I considered whether we should place the dairy supply chain code on a statutory basis, but because there is existing EU legislation in this area—a Common Market organisation regulation that establishes the grounds of such codes—we would end up with a weaker code if we put it on a statutory footing, because we would not be able to stipulate that farmers could walk away at three months’ notice. Therefore, while we had a contingency plan to put the dairy supply chain code on a statutory footing if it collapsed, we would have ended up, as I say, with a code that was weaker, so there are limitations to doing that.

When it comes to the powers of the GCA, we have to realise that they are not reliant on complaints. They already have full powers to investigate

“if there are reasonable grounds to suspect”

that the code has been broken. So, those measures are already in place. In fact, when I met Christine Tacon recently to discuss this matter, she said that one of the biggest things she is trying to encourage is better training of processors and those dealing with supermarkets to ensure that they use the code effectively and say to supermarkets, “You’ll understand that I can’t accept what you are asking me to accept, because it would be in breach of the code,” and to do so in a way that ensures everybody abides by the code. That is how we can help those further down the supply chain, because one of the issues is that it might sometimes be easier for processors to take the hit from the supermarket and pass it on to farmers. We need to ensure that they hold their retail customers to the code.

A number of hon. Members mentioned intervention prices. I have to say that Commissioner Hogan thought that that would be the wrong way to go when it was discussed at the Agriculture and Fisheries Council last week. One of the difficulties we would have is that other farmers in the UK would have to pick up the cost of such action through crisis measures, and we would tend to find that other European countries would benefit most, because although we have low prices here, other European countries have even lower prices. Also, the history of such schemes tends to be that the UK pays while others benefit, so we have to be concerned about that. However, we have the milk market observatory at EU level, and other crisis measures, particularly to mitigate the effects of the Russian ban, have been considered.

Hon. Members mentioned the EU school milk scheme. I will say, briefly, that we access that scheme, although it is not a very generous scheme; we have to top it up a lot, but we do use it. When it comes to the number of dairy farmers, there has been consolidation over many years, but production in the UK is now at a 10-year high. So, although we have fewer dairy farmers, total dairy production in the UK is still higher than it has been for a decade.

I will finish on a brighter note, by saying that the long-term prospects for this industry are good. We are seeing a 2.5% rise in demand per year, and the UK is well placed to take new opportunities in markets. We

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should also note that most analysts are now predicting a recovery of milk prices—farm-gate milk prices—later this year. The last three Fonterra global dairy trade auctions have shown a recovery in skimmed milk powder prices on the global market; in fact, they are up 15% since the beginning of the year. As I said, it will take time for that to feed through to farm-gate prices, but most analysts now expect that we will see a recovery in farm-gate milk prices from the summer onwards and that could be quite a strong recovery, if the early indications on the international auction in recent days are anything to go by.

Sir Roger Gale (in the Chair): I thank all Members for their forbearance this morning. It has been difficult, but the House has conducted itself impeccably.

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National Grid (Montgomeryshire)

11 am

Glyn Davies (Montgomeryshire) (Con): It is always a great pleasure to serve under your fair chairmanship, Sir Roger. I am sure today will be exactly the same. I normally try to be a fairly relaxed and laid-back speaker in the House of Commons, and I like to be consensual in my general approach and debating style. I think that that is probably the most effective way for someone to get what they want, but since 2005 there has been one issue on which I have had great difficulty remaining calm whenever I have addressed it. It involves the industrialisation and destruction of the wondrous part of Wales where I have always lived and which is the subject of today’s debate. I want to speak about the mid-Wales connection project and the behaviour of National Grid in forcing it on the people I represent.

I have divided my speech into four sections. First, I will outline the general background to provide context. It will be necessary to make passing reference to a conjoined public inquiry into five wind farms that will have an impact on my constituency. A planning inspector’s report is being considered by the Department of Energy and Climate Change. To reassure the Minister, I respect her position and totally accept that she will not be able to make any comment on planning issues that could eventually land on her desk for decision. Today’s debate is about the mid-Wales connection project. It is a linked proposal being taken forward by National Grid, and I need to refer to the wind farms public inquiry only to create context.

Secondly, I will describe how National Grid has behaved in Montgomeryshire and north Shropshire, which has shocked me. I believe fellow MPs, the Minister and the public will also be shocked to learn about the tactics that this massive leviathan of an industrial complex and its agents have used to force their will on the local population. Thirdly, I will refer to what I consider to be the outrageous way in which National Grid has sought to influence the planning system using its power and money, which all seems to be entirely within the law. One issue I will raise, and to which I hope the Minister will respond, is whether that unparalleled power to influence planning applications, before and as they are being decided, should be reconsidered.

Fourthly, I will comment on the impact that the behaviour of National Grid, widely perceived by the public to be close to Government and thought by many to be a part of Government, has on the public’s faith and confidence in the democratic process. To finish, I will press the Minister to call on National Grid to suspend the mid-Wales connection project, at least until there are approved wind farms to be connected by it.

Daniel Kawczynski (Shrewsbury and Atcham) (Con): I pay tribute to my hon. Friend and neighbour for the persistent and dogged way in which he has championed this issue to protect his beautiful constituency and his constituents’ views. National Grid could not find, if it tried, a location to generate electricity that was further from its existing network. As a result of the construction, huge swathes of Shropshire will be carpeted over with pylons to connect the electricity to the grid, and that is completely unacceptable.

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Glyn Davies: I thank my hon. Friend and neighbour for his support.

First, to give the context, the rumpus began in 2005 when the Welsh Government announced in their infamous technical advice note 8 that Montgomeryshire—it spilled over into Radnorshire and Ceredigion—was to be transformed into a wind farm landscape. Although I had always been sceptical about the balance of benefit associated with onshore wind, I had not been a vociferous opponent until then. I had not thought the odd wind farm development would lead to the complete desecration of the mid-Wales landscape. It was the astonishing scale of development that flowed from the Welsh Government announcement that shocked me, and the subtle dishonesty with which it was presented. In 2005, Montgomeryshire was already blessed with more turbines than anywhere else in Wales, and the capacity to transfer new generated power to the grid was almost exhausted. To fulfil the Welsh Government’s new policy, a new dedicated 400 kV cable would have to be built, connecting the onshore wind farms to the national grid around 40 miles away.

In 2005, I was an Opposition spokesman on this policy area in the National Assembly for Wales, and I soon understood the scale of what was being proposed. Inevitably, whatever the announced target was, the capacity of the dedicated line would be filled. The cost of it—it was probably approaching £1 billion—was such that it could not possibly be allowed to become a stranded asset. Already there are about 20 applications at varying stages of readiness for new wind farms in and around my constituency. In summary, that means 500 new turbines on top of what we have now, a 19 acre substation and a 50 km, 400 kV power line on steel towers connecting to the existing grid in north Shropshire via the beautiful Vyrnwy valley. It is desecration of landscape on a mind-blowing scale. Not surprisingly, that has outraged much of the local population.

I used the word “dishonesty” to describe the position of the Welsh Government in 2005, and I did not use it casually. When I led a group of concerned Montgomeryshire residents to Cardiff Bay to express our views on the steps of the Senedd, the First Minister, Carwyn Jones, and the Minister for Environment and Sustainable Development, John Griffiths, stated publicly in response that the national grid line would not be needed to fulfil their policies. That was untrue, and the First Minister has subsequently changed his position, very quietly. Mind you, there were getting on for 2,000 of us who travelled on a seven-hour round trip on 38 buses to make our point. I have lived in Montgomeryshire all my life, and I have never known the people of mid-Wales to be so angry.

My second point is on the behaviour of National Grid. The position is that it has been contracted by wind farm development companies to build a 400 kV line. Over the past three or four years, National Grid has sought to force the line on a reluctant population and has totally failed to engage with the people of Montgomeryshire. Yes, it has produced glossy leaflets and yes, it has arranged hundreds of local meetings, but it has never listened to anyone. It never had any intention of listening. National Grid is programmed not to listen but to cajole, to persuade and then to enforce its proposals by whatever means possible.

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Albert Owen (Ynys Môn) (Lab): The hon. Gentleman is making an important point about National Grid and its status. I am a member of the Select Committee on Energy and Climate Change, and we have raised that very issue. National Grid has a monopoly, and legislation has given it extra powers to be the systems operator. It decides which generation goes ahead, as well as having the grid connections. Does he agree—I hope that the Minister will take this on board, and I hope to make an intervention during her response—that we need to have proper consultation? The regulator, Ofgem, needs the responsibility and the remit to be the champion for communities, to ensure that this—

Sir Roger Gale (in the Chair): Order. That was far too long for an intervention.

Glyn Davies: I thank the hon. Member for Ynys Môn (Albert Owen) for raising that point, which I intend to raise, because it is hugely important.

Over the past year or so, I have had countless frightened constituents ring me, terrified by the bailiffs employed to enforce the National Grid’s will by the agents, Bruton Knowles, who are based in Birmingham. One constituent rang me recently to say that bailiffs had entered his property without permission, using profane language and frightening his wife and children, who fled to a back room. The police were involved. Another constituent, who lives in an isolated property, rang me to say that eight men from National Grid suddenly appeared on her drive. She sent her children upstairs, locked all the doors and rang her husband, who was at work, and my office. She was terrified. An 85-year-old constituent was advised by her friends to co-operate, because of concerns about her personal welfare.

At one meeting I attended, National Grid had brought along a Gene Hunt lookalike as an enforcer to stand in the background. Police officers were also there, as they have been throughout the supposed consultation exercise. I received an e-mail two days ago from the son of an 83-year-old constituent. He had had to come home to protect his frightened father, who had encountered two strange men emerging from behind his garage, uninvited and unknown. I could go on, but I have made the point.

I am also told that National Grid has failed to share information with the local highways department. There has been non-stop lack of openness and transparency. It is all laughably described as consultation, but it is nothing more than outright bullying, using size and money to crush a local population.

Simon Hart (Carmarthen West and South Pembrokeshire) (Con): I have listened to many passionate speeches by my hon. Friend. From what he is saying, is it any wonder that members of the public have lost confidence in institutions such as National Grid? They have even lost confidence in MPs and Assembly Members because of this kind of story.

Glyn Davies: I thank my hon. Friend for his intervention. That is the fourth point that I will be making in my speech, but for now I come to my third point.

The whole basis of National Grid’s approach has been to create an assumption that its proposals and all the consequent wind farms are inevitable. The spin has been, “You can’t stop us, so you might as well help us

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and make the best of it. There is no point in protesting, it’s inevitable.” Up to November more than £15 million had been spent on the project. It is a blatant attempt to influence the planning process.

I was chairman of a planning authority for seven years. I knew that I could never be influenced or seen to be influenced before a decision was taken. I was also part of the planning appeals process in the National Assembly for Wales when I was an AM. Again, I knew the importance of avoiding any perception of influence when dealing with planning applications. That is why I fully respect the Minister’s position today. Yet here we have National Grid spending £15 million to portray another 500 turbines in mid-Wales—probably 20 or so per wind farm application—as an inevitability, before any applications are decided. That is blatant pressure on the planning system.

Recently, the chief executive of Ofgem, Dermot Nolan, giving evidence to the Energy and Climate Change Committee, questioned the position of National Grid and spoke of the need for a more independent body to develop the network. At present, National Grid has a huge financial interest in expanding the network—it expands its influence—and all the costs involved are transferred to the consumer by one means or another.

The whole mid-Wales connection project is financial madness. I have never known anything so financially crazy. There has been no value for money assessment whatever, although from the perspective of National Grid, that does not matter, because the consumer will pay. Perhaps the Minister will comment on that unusually dominant position of National Grid. It seems to me, as it does to Dermot Nolan, that there is a conflict of interest and a strong case for separating the roles of transmission operator and network expansion. I must add that I am shocked that Sir Peter Gershon, the chairman of National Grid and a man of great standing, would put his reputation on the line defending what must be becoming a huge financial and totally illogical embarrassment.

My final point this morning is specific to mid-Wales and north Shropshire, but more generally relates to the confidence that the population of Britain have in the democratic process. We have seen reduced engagement with the democratic process, in particular by young people, but National Grid has been granted the power to act beyond any democratic control, spitting in the face of public opinion. Any localism agenda has been thrown out of the window and, in my view, National Grid is acting contrary to any sort of human decency.

I hope that the Minister will consider asking National Grid to scrap such a crazy project or, at the very least, to suspend it until planning permission is in place for wind farms that might need a connection.

11.14 am

The Parliamentary Under-Secretary of State for Energy and Climate Change (Amber Rudd): I congratulate my hon. Friend the Member for Montgomeryshire (Glyn Davies) on securing the debate. The need for and impact of electricity network infrastructure is an important and sensitive issue. I will, if I may, deal with that issue in principle, then come on to his specific questions, to which I will seek answers from my Department, if I cannot give them in the Chamber.

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I welcome the opportunity to explain the need to upgrade the electricity network, and to clarify the approach to deciding where and how new infrastructure is delivered, and how that relates to my hon. Friend’s concerns about the impacts that onshore wind developments and associated networks can have on local communities. The Government are clear that onshore wind farms and the associated network connections must be appropriately sited, and that local communities should be properly engaged. The coalition Government are committed to meeting the UK’s climate change targets, maintaining energy security—with the appropriate siting, as I said—and delivering economic growth. Achieving those objectives represents a significant challenge.

The UK is increasingly dependent on fossil fuel imports, leaving us more exposed to risks from rising global demand, limitations on production, supply constraints and price volatility. At the same time, we expect to lose around a quarter of our electricity generation capacity by 2020, as old or more polluting generation plant closes. That is why we need a mix of energy for the future, comprising nuclear, fossil fuels with carbon capture, and a major roll-out of renewables. As well as onshore wind, we want to see expansions in offshore wind, solar power and sustainable bioenergy. The Government have set the framework for delivering the appropriate energy mix through, for example, electricity market reform.

Turning to onshore wind, which is the driver for National Grid activities in Montgomeryshire, we set out in the renewables roadmap and in the electricity market reform delivery plan our ambition for 11 to 13 GW of onshore wind by 2020. That must be appropriately sited. We are clear that local communities must be properly engaged and see real benefits from hosting wind farms. A declaration on community benefits from onshore wind has been signed by developers in Wales to ensure a consistent and transparent approach to the way in which they engage with communities. Wales is already seeing community benefit funds of £5,000 per megawatt per year. The Welsh Government have developed a community benefit register to ensure greater transparency and probity. It means that everyone will be able to see and track the impact of benefits to communities and to the wider economy.

In order to accommodate the new generation, we require such sources as onshore wind, but also others such as nuclear and offshore wind, and the existing electricity network will need to be expanded.

Sir Tony Cunningham (Workington) (Lab): In Cumbria, on a number of occasions I have dealt with National Grid staff on new nuclear build. I have always found them to be extremely professional. When I have wanted them to do special consultations with farmers, for example, they have always done so.

Amber Rudd: It is reassuring to hear of the hon. Gentleman’s experience in Cumbria, although that has clearly not been the experience of my hon. Friend the Member for Montgomeryshire. I will suggest some possible remedies as I make progress.

Tessa Munt (Wells) (LD): I have every sympathy with the hon. Member for Montgomeryshire (Glyn Davies), because of my constituents. Eight thousand people replied to a consultation, decrying what National Grid

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proposed, but it has been utterly high-handed in dismissing such concerns, and completely ignored the possibility of the power connections and the line being put underground or undersea. Technology develops, but National Grid has ignored it completely, much to the distress of my constituents. There are probably many similarities with the situation described by the hon. Gentleman.

Amber Rudd: I am not familiar with the particular example given by the hon. Lady, but I hope that the Planning Inspectorate would review the consultation process as part of its consideration. That is part of the inspectorate’s legal obligation.

I was discussing the need to upgrade infrastructure to accommodate renewables, which in part explains why National Grid is going ahead in Montgomeryshire and why the hon. Lady had her experience. Developers of new generation, however, need the reassurance that the network will be delivered in line with their project time scales, so that they are able to generate electricity once those projects are completed. We should recognise that such generation projects are substantial long-term investments, and timely network delivery is crucial to their viability.

Before I address National Grid’s activity in Montgomeryshire, it might be helpful to explain the wider approach to deciding on new network infrastructure. Under the current regulatory framework, it is for network companies, such as National Grid, to submit proposals for new network infrastructure to the industry regulator, Ofgem, and the relevant planning authorities. My hon. Friend the Member for Montgomeryshire made some interesting points about Ofgem’s potential concerns, and referred specifically to conversations with its chief executive. I assure him that I will follow up on this debate by writing to Mr Nolan to establish whether the formal position has moved, and will come back to my hon. Friend on that. Under the current set-up, proposals are based on a well-justified need case—say, the connection of new generation, or the maintenance of a safe and secure network—but it is important to us that Ofgem feels confident of the proposals.

The network companies also propose routes and types of infrastructure. In doing so they are required to make a balanced assessment of the benefits of reducing any adverse environmental and other impacts of new infrastructure against the costs and technical challenges of doing so, following extensive consultation with stakeholders. The requirements are set out in their licence obligations under the Electricity Act 1989: they must develop economic and efficient networks, and have regard to the preservation of amenity and the mitigation of the effects that their activities could have on the natural beauty of the countryside. The 1989 Act also stipulates that network companies must provide connection offers when requested to do so by developers.

Albert Owen: I agree with the wider strategy that the Minister has outlined, but on the specific issue of defined and suggested routes in the consultation, communities are frustrated by the fact that the suggested route always goes ahead with only fine amendments. Will she encourage National Grid and Ofgem to have some sort of community involvement or appeals mechanism? When the preferred route goes ahead, communities fear that their words and deeds are not taken on board.

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Amber Rudd: I appreciate the sentiment expressed by the hon. Gentleman. His point is valid, and if the experience of hon. Members present is that the current consultation process is not sufficient, I will follow up on it. Some progress has been made: Ofgem has recently published information for stakeholders on how their views should be taken into account. That information clarifies that network companies are required to consider wider impacts and alternative solutions to overhead lines, as mentioned by the hon. Member for Wells (Tessa Munt).

Daniel Kawczynski: On the point that I made earlier about how far the site in Montgomeryshire is from the national grid, are the Government doing any work to look at the grid and evaluate how projects can be initiated closer to it, rather than so far away? Some sort of strategic work must be under way on that.

Amber Rudd: As I said earlier, National Grid is looking at the process as part of the preparation for potential new generation through wind farms. It has reviewed where the grid will be required, and then has to take its proposals to the Planning Inspectorate. The whole process is overseen by Ofgem. Obviously, my hon. Friend will be aware that although my Government have a policy role in encouraging the development of renewable energy and ensuring that it can be accessed, we do not interfere with planning, which is a very sensitive issue.

Roger Williams (Brecon and Radnorshire) (LD): The important point made by the hon. Member for Montgomeryshire (Glyn Davies) was about the attitude of National Grid, which I experienced when a pipeline was being laid to take liquefied natural gas from Milford Haven to Gloucestershire. National Grid took no notice whatever of representations about the integrity of rivers and spawning areas—it was incredible. I think it is that attitude that gets people’s anger up.

Amber Rudd: Where there are particular examples, I urge hon. Members to write to me, and I will write to Ofgem. It sounds to me like there might be particular examples; that does not necessarily mean that the whole system is flawed, but it might mean that particular examples of insensitivity require some sort of redress. I will happily look into that for the hon. Gentleman.

Tessa Munt: I am grateful to the Minister for her generosity in giving way. Will she write to me on two specific points? First, there is the business of a “willingness to pay” study, which I believe has been carried out in Essex or Suffolk but not in other areas. That study has proven that, given the chance, people want new pylons and other infrastructure to be put underground. That should be done for existing pylons as well.

Secondly, the Government’s legislation says that there should be a social and environmental impact assessment. At no point have I or other Members been given any clarity on exactly what that entails. If the Minister could write to me to explain how that is implemented, that would be most kind.

Amber Rudd: I would be delighted to write to the hon. Lady and will take up the two points that she has raised. She is of course correct that it is possible to bury the cables; the cost is approximately 10 times as much, but that is obviously part of the consideration.

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The regulatory approach to which I was referring and that is overseen by Ofgem is reinforced by the Government’s national energy policy statements. They set out the framework for factors to be considered when consenting to an infrastructure project of national significance. They make clear that for electricity networks, cost should not be the only factor in determining the type of network technology used, and that there should be proper consideration given to other feasible means of connection, including undersea cables.

Within the framework, National Grid, the transmission network owner in England and Wales, published a new approach to building new transmission infrastructure. Using that approach, National Grid puts greater emphasis on mitigating the environmental and visual impact of its new electricity lines, while balancing other considerations, such as the need to manage the effect on costs, which are of course ultimately funded through consumer energy bills. I hope that that balanced approach provides reassurance to hon. Members who are concerned about network infrastructure that alternatives are being considered.

Since the costs and technical difficulties vary so much from project to project, it is important that each one is assessed case by case. The Government consider the costs and benefits of undergrounding electricity lines to be important issues, which is why the Department of Energy and Climate Change supported an independent study—I think that it is the one to which the hon. Member for Wells referred—to give clarity on the practicality, whole-life costs and impacts of undergrounding and subsea cabling as alternatives to overhead lines. The report was published in January 2012, and its findings are generally consistent with the comparative costs that National Grid has quoted.

The potential need for and development of transmission network infrastructure in Montgomeryshire is the reason behind National Grid’s activities in the area. The application for the proposed new electricity network infrastructure to connect the proposed wind farms in mid-Wales has yet to be submitted to the Planning Inspectorate. After examination, any application would be decided by the appropriate planning authorities and Ministers, so it is not appropriate for me to give a view on the particulars

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of the project—as my hon. Friend the Member for Montgomeryshire has observed—or indeed on the proposed wind farms in mid-Wales, which have been subject to a public inquiry. However, I recognise that many people feel very strongly about overhead lines and other network infrastructure, and the possible effect on the landscape. In introducing the debate, my hon. Friend spoke passionately about the beauty of the landscape and the wonders of mid-Wales. He has been a champion of maintaining the landscape as it is, and we will take that on board.

Effective consultation with local communities and other interested parties is a vital part of the planning and regulatory approval process. When making proposals for new infrastructure, National Grid must demonstrate that alternatives were considered and why the preferred option is justified. It must also demonstrate that stakeholders have been engaged. At the root of the issues raised by my hon. Friend the Member for Montgomeryshire is his concern that, although safeguards exist and there are many levels of requirements for consultations, those consultations are either not taking place or not taking place satisfactorily. By law, the redress for that is through the Planning Inspectorate, which will look at the consultation process as part of the planning application. If it is not good enough, the planning application could be refused, because the request for planning permission requires a good consultation. My hon. Friend has made his points very clearly today, but I urge him to make them to the Planning Inspectorate as well at the appropriate time.

My hon. Friend spoke passionately about his constituency and mid-Wales in general. We have heard specific concerns about National Grid, but we believe that, overall, it is regulated carefully and diligently. Nevertheless, if hon. Members have specific concerns about incidents, they should write to me and I will certainly look into them. I urge all Members to continue to protect their constituencies as they have done, and congratulate my hon. Friend the Member for Montgomeryshire on leading this debate and being so assiduous in protecting his constituency.

11.29 am

Sitting suspended.

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UK Poverty

[Mr David Crausby in the Chair]

2.30 pm

Lisa Nandy (Wigan) (Lab): It has been almost five years since the coalition Government took office, so we are far beyond the time when it was even remotely credible to claim that everything that has happened in this country is the fault of the previous Government. The truth is that the choices that we make as a country have an effect. With a few months to go until the general election, this is a good time to assess the Government’s impact on the most vulnerable people in this country and to look again at the Prime Minister’s claim, five years ago, that he would not balance the books on the backs of the poorest. What a joke that statement now seems.

The rise in food banks has been the most visible sign of the devastation caused to towns such as mine, Wigan. In the past three months, my local charity, the Brick, has handed out more than 1,000 food parcels to families who cannot afford to eat. The first thing I want to say is this: be in no doubt that the situation has become much worse under this Government. Ministers have constantly said that food banks are the fault of the previous Government, but let me give them the facts. There were 3,000 food bank users in 2005, and 40,000 by 2010. By 2012, that had exploded to 128,000 people queuing for food parcels in one of the wealthiest countries in the world. Under the Labour Government, food banks fed tens of thousands of people a year; they now feed a quarter of a million people in this country, and the numbers are rising.

Debbie Abrahams (Oldham East and Saddleworth) (Lab): I congratulate my hon. Friend on securing this debate. She may not be aware that we had never had a food bank in Oldham until 2012. In that year, 849 food parcels were delivered; last year, 5,000 people ended up receiving support, including 1,500 children. The numbers are going up inexorably. Would my hon. Friend like to comment on the suffering that those people are experiencing?

Lisa Nandy: That experience is mirrored in my constituency. The Brick gave out 6,097 food parcels in Wigan last year. I spent a day helping its volunteers to do that. Many of the food parcels were cold boxes—I had never heard of a cold box before I spent the afternoon at my local food bank—for people who cannot afford the gas or electricity required to heat up some soup or a tin of beans. Our credit union, Unify, the charity Compassion in Action and Citizens Advice have given out loans, furniture and fuel payment vouchers in increasing numbers in the past four years. Yet people were told by the Conservative hon. Member for Blackpool North and Cleveleys (Paul Maynard) that unfortunately their food bank use has become a habit. How utterly offensive.

The real causes are obvious. In my constituency, one can track almost exactly when the cracks in the community started to show. In October 2012, the Government introduced a new sanctions regime that affected nearly

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6,000 families in my borough alone. It had an immediate impact. In early 2013, the manager of the Brick, Trish Green, said:

“We have been operating since 2008 but recently we have seen more families, more young people and people who have lost their jobs using the service…It also affects every part of the borough and we distribute food parcels throughout different communities, not simply the more deprived areas.”

That is mirrored across the region: as pointed out by my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams), between 2012 and 2014, the number of people accessing food banks in the north-west exploded, growing by 238%. That was not, as the Conservative Minister for Business and Enterprise, the right hon. Member for West Suffolk (Matthew Hancock), said, because

“more people know about them”.

The vast majority of food bank referrals were because of benefit sanctions, although delays, debt, low-paid work, loss of job and family crisis were all common reasons.

Most of my constituents who have used a food bank were referred to it after being refused help by the jobcentre. A quarter of them had been told that they had not participated in an employment programme, and a fifth had been told that they had failed to attend an adviser interview. Let me give the Minister an example. Just yesterday, a man got in touch with me who had taken on temporary work over Christmas. He had notified the jobcentre of the start and finish dates of that temporary work, but was told that he had missed an appointment with the jobcentre to give the information that he had already provided. He was sanctioned. The jobcentre was closed on the day when he was supposed to have attended an appointment, so he was paid just 1p for the whole of January. He found out yesterday that he has been given £26 for the whole of February. Will the Minister tell me how someone in this country is meant to live on a penny a month?

Quite separately, two other people got in touch with my office, one a woman, the other a young man. Both had been sanctioned in the past few months for attending the funeral of a family member. In both cases, the individuals had notified the jobcentre of the reason why they could not turn up to sign on. I was thinking about what on earth people are supposed to do in that situation. It reminded me of a line from Kafka, which states that,

“it is not necessary to accept everything as true, one must only accept it as necessary.”

When death is not a good enough reason to change the rules, what sort of society have we become?

We find increasingly that people are sanctioned for being just a few minutes late for appointments to sign on. My local councillor, Jeanette Prescott, said that,

“several times this year I have had to refer a gentleman with learning difficulties to Denise (the local Reverend) for food due to him having sanctions on him for turning up late (once by 4 minutes). The gentleman can’t tell the time and is a recluse. He has been found sitting in his flat in the dark with no electric or gas. He won’t ask for help. Only for the old neighbours watch out for him and contact myself heaven knows what would of happened to him. I was informed he has to get a letter off the doctor for an electric card…The lad turned up at my door the other night. He hadn’t eaten for 5 days. He looked like he was dying.”

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Mr Mark Spencer (Sherwood) (Con): I hope that the hon. Lady appreciates that people who work very hard, and who might be earning very small amounts from working 50 hours a week, have to turn up to work on time. If they are late for their employment, they might be sanctioned by their employer. It is important that those who are seeking employment learn the discipline of timekeeping, which is an important part of securing and keeping a job.

Lisa Nandy: I must say to the hon. Gentleman that taking that sort of patronising tone towards people is exactly why people throughout the country are so angry with the Government. While he was speaking, my hon. Friend the Member for Bishop Auckland (Helen Goodman) made the point that two Conservative Members turned up minutes late for this debate, but they will still be allowed to participate if they wish to do so. I will come on to the example of a working couple who got in touch with me recently and who have had real problems with the system. Nevertheless, I am happy to give way again if the hon. Member for Sherwood (Mr Spencer) wants to come back on this point: what would he expect someone with learning difficulties, who cannot tell the time, to do in that situation? He has no one to turn to for help and was sanctioned for being four minutes late.

Mr Spencer: I think that that emphasises the importance of the education system in solving the challenges that we face as we move forward. We must try to ensure that the employees of the future are in the best place to be able to take on a career and move forward with a job.

Lisa Nandy: The man I am talking about is the fourth case of someone with learning disabilities being sanctioned that I have come across in my constituency office this month. The Minister’s Department holds the responsibility for people with disabilities. I hope that she has listened to the comments made by her colleague and will take the opportunity to condemn them. I also hope that she will ensure that in future no one will be sanctioned for having learning difficulties that prevent them from being able to tell the time.

Debbie Abrahams: I am sure that my hon. Friend will want to take the opportunity to mention the fact that the universal credit regulations include the potential for introducing in-work conditionality for people who are in work but on low pay. The hon. Member for Sherwood (Mr Spencer) should be careful in what he says. Also, people are sanctioned who have done nothing wrong. We repeatedly hear examples of people who did not know that they had appointments because they were made without their knowledge. Of course, they did not turn up to those appointments, so they were sanctioned.

Lisa Nandy: Absolutely. I could not agree with my hon. Friend more.

I want the Minister to understand the complete nonsense of the system. Another of my local councillors, Lol Hunt, got in touch with me last week to help a 53-year-old woman. That woman was awarded maximum points for ESA last year; she got no points at all this year. Absolutely nothing in her health or circumstances has changed. Councillor Hunt said that,

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“she has very little food in her cupboards and is cancelling her direct debits this week for rent, gas, electric, phone etc. as she simply cannot pay.”

That is just the tip of the iceberg as to the stupidity of the sanctions regime.

The single biggest reason that my constituents were given for being sanctioned last year was that they were supposedly not seeking work. For example, in one family, a couple with two-year-old twins, one of the partners worked as a home care worker on a zero-hours contract—I am sure all Members are familiar with the situation of the many people who work in the home care industry on low pay and with insecure conditions. The hours that she was given were so few that the pay did not even cover the bus fare to work.

The wider family tried to help out, but the stepfather is out of work and the grandmother on a small pension. They were even refused a doorstep loan. The twins were living on a tin of beans and a few potatoes a day, while the adults went for days on only tea and the occasional biscuit. Relatives of mine remember such conditions in our family a few generations back, but that was before the war. One of my constituents—one of the parents—told me that,

“asking for food was so humiliating but the alternative was to go hungry. We were so grateful for the help of the Brick and they made us feel like it is not something to be ashamed of.”

Contrast the actions of that local Christian charity with the words of Lord Freud, Minister for Welfare Reform, who said that,

“food from a food bank…is a free good, and by definition there is an almost infinite demand for a free good.”—[Official Report, House of Lords, 2 July 2013; Vol. 746, c. 1072.]

How utterly insulting to a family such as the one I am describing. They had built up £1,000 in rent arrears, because they were not earning enough even to cover the bus fare to work. At a loss as to how to help them, the only advice that a local charity could give them was that the partner should leave her job, because it was pushing them further into debt. Reluctantly, they went to claim jobseeker’s allowance, but were told that she had left the job voluntarily and were sanctioned for three months. The mother said:

“We were receiving 15 minutes of work a day that is around £1.10 a day. If this…wasn’t a good reason for leaving a job, I truly do not understand what is.”

That is not an accident of the system; that is the system.

The level of confusion in the Government is astonishing. The Department for Work and Pensions website states:

“We expect claimants to do all they reasonably can to look for and move into paid work. If a claimant turns down a particular vacancy (including zero-hours contract jobs) a sanction may be applied, but we will look into the circumstances of the case and consider whether they had a good reason.”

Only a couple of weeks ago, however, I had a letter from the Minister stating:

“It may be helpful to explain that Jobseeker’s Allowance claimants are not required to apply for a zero hours contract job and cannot be sanctioned for refusing to accept employment under a zero hours contract or for leaving such employment voluntarily.”

She even went to the trouble of underlining some of the words in that sentence. When she responds to the debate, will she tell me how that fits with what happened to my constituents only recently? Will she tell us what the policy is? Perhaps she would like to explain it to people who are trying to navigate the system and work within it, but who find that there is no safety net.

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Mr Spencer: Surely the hon. Lady has to accept that in a complicated welfare system, with officers working in jobcentres, on occasion a mistake will be made. That may happen at times. The question is, how do you put that problem right? If the rules are being set by the Government, but sadly on occasion being misinterpreted or misunderstood, we have to find a system that puts that right. Accidents will happen, but it is a question of how we put them right quickly.

Lisa Nandy: The hon. Gentleman does not seem to be listening: the rules are the problem and make no sense. I have just quoted two examples, one from the Minister and one from the Minister’s departmental website, that contradict one another. Neither makes any sense in the context of what happened to my constituents. I have written back to the Minister to ask what on earth is going on, though I have not had a reply yet. I hope that I will get a reply, and that all the people stuck in the same situation as the one my constituents just went through will get any reply at all.

In “The Trial” by Kafka, the hero of the novel, K, said:

“But I’m not guilty…there’s been a mistake. How is it even possible for someone to be guilty?”

The priest replied:

“That is true…but that is how the guilty speak.”

That is exactly what is happening to people in the system. There is nowhere to turn; there is no way to fight their way out of the system. That is not an accident of the system; that is the system, and it is time that the Government did something about it.

The saga for the family in my constituency continued—that was not the end of it. After the sanctions were lifted, they were told that they had to sign on every day at an unpredictable time, and that for a family with two-year-old twins. One of the parents said that once her partner

“had to take our two sick, contagious children who were suffering (from hand, foot and mouth disease) with her to a job centre appointment as the adviser said you must come in, bring them on the bus with you. Even when we replied but they have a temperature of over 40 degrees his response was if you don’t come in we will have to issue a further suspension. We live in fear that our money will be stopped and this hell will never end.”

That is indeed a hell.

Margot James (Stourbridge) (Con): I have great sympathy for some of the individual cases that the hon. Lady has talked about, but I want to introduce a note of perspective based on my own constituency experience. The last time I checked with my jobcentre, just before Christmas, fewer than 5% of all the people seen there had been sanctioned over the previous 12 months. We are talking about a minority, and she is talking about a very tiny minority of an already small minority. I also want to put in a word for the sanctions regime, because from the experience of what I have seen, the threat of sanctions has been of assistance in galvanising people to maintain their appointments and genuinely to seek work.

Lisa Nandy: I am grateful to the hon. Lady for trying to bring statistics to the debate, but they do not reflect the reality. Glasgow university has found that across the country, one in five have been sanctioned, and 6,000 families in my borough alone. In the past few

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weeks, research from Oxford university shows that the majority of people who have been kicked off benefits due to sanctions have not gone into work. So it is simply not true to say that we are talking only about a minority.

Furthermore, although I know that the hon. Lady fights for people and against injustice—I have seen her do so on behalf of her constituents—if such things happen to families, they must be stopped. We should not tolerate what happens to families who are trying to find work and do their best. They might have to drag ill two-year-old twins across town because of the inflexibility and inhumanity that we have somehow managed to build into the system. It is a hell of low-paid jobs, zero-hours contracts and rising living costs. Frankly, the system lacks any compassion or understanding.

Can the Minister comprehend the social isolation being caused? A 39-year-old mum got in touch with me. She is struggling to walk because of spina bifida, which has deteriorated in recent years, and she has three kids. She applied for a personal independence payment, but was told—this is common—that it could take a year. She said: