View from City Road: Defending against milk monopoly

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The Independent Online
Over in Whitehall Place, William Waldegrave may wish to fortify himself with a glass of milk as he gets his feet under the desk at the Ministry of Agriculture today. He should buy it quickly: if the dairy trade is right, it could cost 2p a pint more by the end of the year.

His predecessor, Gillian Shepherd, hoped her approval of the Milk Marketing Board's plans to wind itself up would end the simmering row with the industry. Mr Waldegrave will quickly discover it did not. High in his in-tray will be a letter from the Dairy Trade Federation, complaining about Milk Marque, the dairy farmers' co-operative that will replace the MMB, and asking what he intends to do about it.

So far, all the dairy industry's predictions have come true. Milk Marque has already signed up more than 65 per cent of all milk production, in effect a monopoly. It tried to disguise price rises up to 22.2 per cent by quoting an average 3.7 per cent.

The pain for butter and cheese makers has been made worse by two devaluations of the green pound this month, which affect Milk Marque's price. Unless the devaluation is reversed by the time it comes into effect on 1 November - and changes are relatively rare - prices will rise by at least another 0.7p a litre.

Mr Waldegrave may remember that Mrs Shepherd saw no reason why milk prices should rise. But she also assured the industry that the competition authorities would be watching Milk Marque closely to see it did not abuse its position - even though the Office of Fair Trading is powerless to intervene until it is up and running. Mr Waldegrave should make clear he means business by bringing that date forward.