Agriculture

– in the House of Commons at 6:56 pm on 15th February 1988.

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Motion made, and Question proposed, That this House do now adjourn. [Mr. Maclean.]

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food 7:01 pm, 15th February 1988

In a general debate on agriculture such as this I would normally talk about a wide range of issues germane to agriculture and which I spoke about or which were raised during the discussion period at the annual general meeting last week of the National Farmers Union. Those issues are about the future of dairy quotas and the reviews in the coming months of the sheepmeat and sugar regimes. I would have talked also about progress on environmentally sensitive areas, and that would have helped me to underline the substantial achievement that has been made in just a few months during which there has been a most encouraging response from farmers and environmentalists. I would have talked about our pioneering approaches to giving help, much of it also helpful environmentally, to assist in the process of taking land out of agricultural production. Perhaps I would have said rather less than usual about that because we debated it recently on the Second Reading of the Farm Land and Rural Development Bill, particularly in relation to the farm woodland scheme.

I would have dwelt on topical issues such as rhizomania, the progress of ADAS in its first year of charging, the position about the pigmeat industry, private storage aids, MCAs for the pigmeat industry and the free food scheme. All those matters are of current interest to farmers and, with the exception of one of them, the free food scheme, they were all discussed with me last week. I mention those issues to show that there are issues other than the ones upon which I wish to concentrate. If my hon. Friends would like to raise any of those other matters, my right hon. Friend the Minister of State will respond to them in his winding-up speech.

Photo of Margaret Ewing Margaret Ewing , Moray

Does the Minister agree that there is a need to discuss the problems facing agriculture? Will he perhaps emphasise to the Leader of the House that we need a general debate on agriculture very soon?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

That is not a matter for me, but I shall ensure that the hon. Lady's comments are passed on. I would not say that they are all problems, because some of them are challenges and exciting opportunities. Many sectors of agriculture are doing very well.

I have listed the topics upon which I shall not go further in the debate, and I apologise for that. In the debate the House will expect me to concentrate on the agricultural aspects of the outcome of the summit. It is timely that, following the statement today by my right hon. Friend the Prime Minister, I am able to report on that and that we are able to have a debate so soon after the event. As I have said, to cover all the other issues as well would necessitate an inordinately long speech, but if hon. Members wish to deal with those topics we shall have an opportunity to reply to them in the winding-up speech.

I shall now turn to the outcome of the summit and make one or two preliminary comments. First, as the Prime Minister reminded us, the Government and my right hon. Friend have achieved 95 per cent. of all our negotiating objectives — including all the fundamental ones. I noticed in the exchanges following the Prime Minister's statement that the Opposition were picking up one or two of the details about agriculture. For example, they talked about the maximum guarantee quantity for cereals, to which I shall return. However, they were details, and it was noticeable that the Opposition concentrated on them. It is important to look at the fundamental issues in the negotiation and at the outcome in relation to those.

In any negotiation, one rarely achieves 100 per cent. of one's initial objectives. The fact that we have succeeded on all the fundamental issues is crucial. I would certainly compare this with the renegotiation in 1975 of the United Kingdom's entry terms into the Economic Community. That was intended crucially to alter the entry terms, but did absolutely no such thing. It is crucial to realise the importance of the fundamental issues and the fact that we have achieved 95 per cent. of our objectives. Secondly, primary among those fundamental objectives is the continuation of our Fontainebleau abatement. That is unchanged in its effect, despite the fact that the French and German Governments, amongst others, were strongly opposed to it for much of the negotiations. That is an important issue that will not be discussed in this debate. However, it must be in our minds as we approach the overall outcome.

Let no one underestimate what has been achieved for agriculture. One has only to look at the French and German press to see what has been achieved. Nor should we underestimate the effect of these measures in the event of over-production. Certainly the French and German Governments are under no illusions about that. My third general comment is that in looking at the results the House must compare what is in place now as a result of the summit with what was in place before it. We must not compare it with the package that was in front of the Heads of State at Copenhagen. At that meeting the French and German Heads of State refused to sign up. If we compare the outcome of the summit with what was in place before, we see that it is undoubtedly clear that the previous system will be substantially changed as a result of the summit.

Photo of Mr James Spicer Mr James Spicer , West Dorset

Perhaps my right hon. Friend will go on to illustrate what might have happened if there had been a total breakdown. That is too horrifying to contemplate, because we would have seen financial breakdown throughout the Community and our farmers would have been left with total indecision, not for three or six months, but throughout the presidency of the Greeks, and then next year the presidency of the Spaniards.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

That was certainly one of the possibilities, and in looking at the outcome one must consider the overall future of the Community and the importance of achieving the single European market. My hon. Friend the Member for Dorset, West (Sir J. Spicer) makes a fair point about agriculture, on which I hope to elaborate. It is that for our farmers one of the critical issues, and one of which they are well aware, is that in this world of surpluses they must face adjustment.

As was constantly said to me when I was going round the country, what farmers want most of all is an end to the uncertainty. They want to know what the new regime will be. That, too, was another factor that had to be taken into account. As I think the Opposition will argue, it would have been possible to hope for a different package in another summit. As I shall show, we have achieved considerable changes in agriculture. We have achieved most of our objectives, and one of the factors that had to be considered was the importance of ending uncertainty.

Having made those preliminary wide comments, I shall now turn to agriculture and to the key differences brought about by the summit. The first is that we now have a legally binding overall budgetary ceiling for agricultural spending. Let no one under-estimate the importance of that. The last major agreement was reached in 1984, when there were real attempts to achieve budgetary discipline in agriculture. In the following three years spending on agriculture rose by 40 per cent. As a result of this agreement, spending on agriculture over the next five years will rise by 7·8 per cent. This will be a legally binding agreement as soon as the full regulations and legal requirements are put into effect. That 7·8 per cent. over the next five years compares with 40 per cent. in the three years after 1984. It is 8·5 per cent. if one includes the cost of disposing of existing stocks and contributing to set-aside. I shall return to that.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

While I accept what my right hon. Friend says, that the actual budgetary discipline was binding on the Council, but not legally binding, may I ask whether he agrees that under the Dublin agreement the 1·4 per cent. VAT maximum was legally binding? Despite that, last year the Commission, by using budgetary devices, increased that to 1·6 per cent. Can my right hon. Friend say where in this new agreement there is anything that can prevent the Commission from doing exactly the same in future by having, as it had in 1987, a metric year of 10 months to make sure that it kept within the so-called legally binding 1·4 per cent.?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

My right hon. Friend the Prime Minister this afternoon commented on some of those aspects in relation to what we know as creative accounting, but which can be known as negative reserves and other things of that sort. In the context of agriculture, I shall deal later with some of the other key differences that make this a much more effective and legally binding settlement.

I shall deal further with the matter of the overall budgetary ceiling, because I should like to put one or two aspects of it to the House. I have already said that the figure for the next five years is likely to be 7·8 per cent. or 8·5 per cent. if one includes the cost of disposing of existing stocks and the contribution to set-aside. Inevitably that must be an estimate, because it is related to the projected growth in GDP across the Community as a whole in the next five years, but it seems a reasonable estimate.

In considering the 40 per cent. increase since 1984 one must take account also of the fact that there was no provision for the disposal of existing stocks. I am now including in the 8·5 per cent. increase over five years the cost of disposing of them. That was a big hidden cost—an overhang on top of the 40 per cent. increase. I have put the cost of disposing of those existing stocks — the penalty which we now face for the result of previous budgetary indiscipline—into the figures, but there is an even more significant point. Under these arrangements, any new surplus stocks will be included within the agricultural guidelines. These stocks will depreciate year by year, which means that the depreciation element will have to be included in the year in question within the overall agricultural ceiling. That is a further budgetary discipline and an important change.

I come to the point that my hon. Friend the Member for Southend, East (Mr. Taylor) must have had in mind. We had a political undertaking at Fontainebleau to agree a guideline, but it was in the minutes, not in a legally binding text. The guideline could be overridden at the will of the Council in what were known as "exceptional circumstances", and it was. I remind the House that, in the 1985 price fixing, the German Government invoked the Luxembourg compromise for the first time in the Community's history over a 1·8 per cent. price cut for cereals. Now, exceptional circumstances will apply in only one case. A change in spending can occur only if the value of the ecu against the dollar changes by more than 5 per cent. If the dollar appreciates, that will mean an automatic reduction in the amount spent on agriculture. Previously, the guideline was not reinforced by the necessary changes in the regulations for each commodity; now it will be. There is a clear definition of exceptional circumstances and there are changes for each commodity.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

Will my right hon. Friend give way?

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

This will be the last time, honestly—never again.

Photo of Mr Teddy Taylor Mr Teddy Taylor , Southend East

I promise my right hon. Friend sincerely that I shall not intervene again in this debate. My right hon. Friend, who has a reputation for being honest, sincere and straight in all the years in which he has been a Minister, should surely tell us about annex V. He has said that there is only one reason to allow a break through the limits—a fall in the value of the dollar. What about annex V, which says that if the majority of member states think that any other country has not done a proper job in restraining agricultural production they can increase spending by any amount that they like? Would it not be fairer to tell the House that we should consider not only this definition of "exceptional circumstances", but annex V on page 41 of the presidency notes, which drives a coach and horses through every word that my right hon. Friend says?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I am sure that annex V does not say that, although I do not have the text in front of me. I have had a quick word with my right hon. Friend the Minister of State, who will give a full reply on the point about annex V.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I should like to continue, because there is much that I want to say.

In a very different change from 1984, the stabilisers are now a guaranteed automatic mechanism for each commodity where there is over-production beyond a certain point, or over-expenditure. This is a major achievement. When I first became Minister and we started to talk last summer about stabilisers, it seemed to me that it would be a massive task to get the Community to sign up on stabilisers in all major commodities. That has now been achieved. That is why — [Interruption.] I shall elaborate on that later. That is why the Government's overriding concern in the many months of negotiations has been to secure effective control over CAP expenditure through the installation of stabilisers. We have stressed throughout that there need to be effective stabilisers for all major commodities— a mechanism that will automatically bring about a reduction in levels of support when production exceeds a given threshold. That automatic nature is very important in this outcome.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

Will my right hon. Friend stress to the farmers that that may well secure stability in production, but that he will be going hell-for-leather, as he pointed at the National Farmers Union annual general meeting, to ensure that it also secures fairness for our farmers by ironing out the problems of the green rate?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

As my hon. Friend knows, that is a separate issue from what was agreed at the summit. I have made clear my position on the green rate. There is one important aspect. The way has now been cleared for working towards the single European market, but if we are to achieve a single European market in agriculture it is crucial that we secure the objective of phasing out all monetary compensatory amounts by 1992.

As for stabilisers in all products except cereals, oil seed, peas and beans, my right hon. Friend the Prime Minister made the position clear this afternoon, and this point was raised by the French Government at a late stage in the summit negotiations. My right hon. Friend said: The Dutch Prime Minister and I made it clear that our agreement to all the measures before the European Council last week was conditional on the adoption of these eight stabilisers as they are. That is an important point. I had to fight hard in the Agriculture Council in the negotiations after Christmas for the inclusion of stabilisers in all the other products within the package to be considered by the summit. A number of Governments wished to weaken the stabiliser regime by, in one way or another, getting changes in their products. That would have reopened the whole package in front of us at Copenhagen and made it difficult to achieve agreement at the summit.

It is important that the decision is carried through in the Foreign Affairs Council. These other commodities are wine, tobacco, fruit and vegetables, sugar, milk, sheepmeat, olive oil and cotton. There was no further discussion on the substance of these stabilisers at the summit or in the Agriculture Council, except in the attempt to take them outside the overall package in the Agriculture Council leading up to the summit.

There are, of course, elements in those other products that we do not like. I fought strongly on one or two, and that was true of all member states. If that package were reopened, all of us would have fought for the changes that we wanted. That would have made it even more difficult to achieve a successful outcome at the end of last week. It is important to bear in mind that those other products must be part of the final arrangement.

Photo of Mr Colin Shepherd Mr Colin Shepherd , Hereford

I am following my right hon. Friend's comments as carefully as I can. As sheepmeat is not yet in surplus, nor is likely to be for a while, how does this affect the sheepmeat regime and the discussions on the regime's development if we were in the very first stages of negotiation, as my right hon. Friend said last week?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

It does not really affect the discussions on the future of the sheepmeat regime, to which we shall come in due course. There had to be a stabiliser on sheepmeat because, although we are not in surplus in sheepmeat, the supporting cost to the CAP of the regime was escalating fast and was projected to be more than 1 billion ecu in the coming year. One must have regard to the extent to which the support for any one commodity is rising very fast, and this was true in the oil seed sector as well. That is why if we argued that there had to be a stabiliser in all the major commodities—excluding only a few—a stabiliser for sheepmeat had to exist.

There were two elements which I disliked and on which I fought hard in respect of the sheepmeat stabiliser. The most crucial element — I think that all our farmers accept this — was the proposal to have a ceiling on headage payments of 1,000 in the less-favoured areas and 500 elsewhere. Despite the fact that we had little support in the rest of the Council from other member states, we were able to negotiate that out in this package. It is important that it stays out, which is a reason why I want the other products package to remain as it is.

There was another discriminatory element in relation to the variable premium which I could not negotiate out. One cannot negotiate everything out, and the headage payment was the most important.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

This is a debate on agriculture and the right hon. Gentleman is the Minister. In the light of the recent malicious and squalid attacks of the Minister of State on the clergy, will he now sack the Minister of State? He is an embarrassment to the Government and he is offending people throughout the country —[Interruption.]

Photo of Mr Paul Dean Mr Paul Dean , Woodspring

Order. This is a short debate and that has nothing to do with the subject.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I was about to say that, in view of the shortness of the debate and the fact that so many hon. Members wish to speak, I would not give way again. In view of the complete irrelevance of the hon. Gentleman's intervention, I wish that I had said that before he rose.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

No, I shall not give way again. I am afraid that the last intervention was completely irrelevant and wasted a great deal of time. I must get on with my speech.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I am sorry, but I cannot give way again. I am sure that the hon. Gentleman will make his own speech.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

This is an important point.

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

I am extremely grateful to the Minister and he will find my point relevant. From the statement and document we know that there is an arrangement for a 3 per cent. cumulative reduction in the intervention price if the cereal limit of 160 million tonnes is exceeded. On what evidence does the Minister conclude that that will be sufficient to keep the agricultural budget within the 75 per cent. of any increase in GNP year on year?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I was about to come to the cereal stabiliser and I shall deal with that point, but overriding the decisions in the annual price reviews is the need to keep the agricultural ceiling within the limits that are set down in the regulation that will come before us.

The cereals and oil seed stabilisers featured in the summit. The need for such stabilisers is particularly acute for cereals and for oil seeds as costs have been escalating in those sectors and without such a mechanism could soon be out of control. For cereals, for example, the price more than doubled in two years to about £3·5 billion in 1987.

For cereals the new stabilising mechanism is linked to a production threshold of 160 million tonnes. Earlier this afternoon there was some criticism about the fact that we have agreed to a maximum guarantee quantity threshold of 160 million tonnes, but what has not been understood is what we have achieved in return. Two critical points mean that in effect it will be as effective a stabiliser in our judgment.

First, what was on the table prior to the summit—in other words, what left the Agriculture Council — for cereals was a maximum guarantee quantity threshold of 155 million tonnes with a 1 per cent. price reduction for every 1 per cent. increase beyond that. That meant that in order to achieve a 3 per cent. price reduction the maximum guarantee quantity threshold would have had to increase to 159·6 million tonnes, which is little short of the 160 million tonnes. But the new change that has been introduced is that above 160 million tonnes it will be not a one for one, but an immediate automatic 3 per cent. price cut. Given that the projected harvest for next year is likely to be about 168 million tonnes, it is in effect as effective a stabiliser.

Secondly—

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

We all follow these matters.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

After the hon. Gentleman's comment, I would not expect him to understand.

Secondly, the new regime will apply for four years instead of for three years, which was on the table before the summit began. It is a marginal change and the stabiliser will continue to be effective.

We have regretfully had to accept that the stabiliser should operate through the co-responsibility levy as well as through price. That is certainly not a satisfactory method of market regulation. That, as much as anything else, has caused many of the long debates that the Agriculture Council has had since Copenhagen. The German presidency wanted to put much more emphasis of the stabiliser on to the co-responsibility levy and I was strongly opposed to that. There are many reasons why it is not a satisfactory method, but the Commission and every other member state felt that that must play a part in the stabiliser and, indeed, some wanted it to play a bigger part than it does now.

We have insisted that the levy should play a subordinate role to price cuts. Thus, the additional levy will increase by 1 per cent. for each 1 per cent. increase in production up to 3 per cent. in any year while price cuts will cumulate at 3 per cent. a year so long as the guarantee threshold is exceeded. Moreover—this is an important point when one considers what was proposed earlier in the negotiations — the maximum additional levy of 3 per cent. is much lower than the 7·5 per cent. originally proposed by the Commission. When one combines that with the fact that we have managed to ensure that price cuts play a bigger part than the co-responsibility levy, and with another important point—

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

Will my right hon. Friend give way?

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I said that I would not accept any other interventions, but I will accept this last one in view of my hon. Friend's position. I wish to make one other important point on the co-responsibility levy which again demonstrates how much we have succeeded in minimising its impact on the stabiliser.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

Will my right hon. Friend explain how this extra hardship which is to be imposed on our cereal growers will in any way diminish cereal output? All cereal farmers will have to try to grow more to maintain their income or to reduce their losses, bearing in mind the serious situation in which they find themselves at present.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I am well aware of the difficulties of adjustments, but one of the benefits of a stabiliser is that it has automatic price and other penalties if production continues to rise. Therefore, in terms of the CAP it helps to keep costs within a reasonable amount and, from the farmer's point of view, it will prevent the CAP from collapsing under its own weight, so it is necessary.

The other important point which I should like to emphasise is this. We have successfully opposed the proposal, which was in the negotiations for some time, for a flat-rate exemption of 20 tonnes on co-responsibility levy— this was introduced by the German presidency — which would have resulted in the levy having a disproportionate impact in the United Kingdom where 20 tonnes represents a much smaller proportion of average cereals output per enterprise than in other member states. Had that been in the package, 70 per cent. of the co-responsibility levy would have been met by Britain and France, and only 10 per cent. by Germany. I am glad to say that we have negotiated that out.

I recognise that there is concern among farmers about the potential impact which these measures may have on their incomes. I appreciate that their incomes have been under pressure and that many were hit by the bad harvest last year. However, we are faced with the imperative need to put the Community's agricultural support system on a credible and viable basis. It is the farmer who would be most adversely affected if the system were left unrestrained to collapse under its own weight. Some discipline had to be introduced to ensure a stable foundation for the industry in the long term.

Moreover, the burden of over-production of cereals is not simply a problem for the Community alone. It is one of the key issues being discussed in the Uruguay round. If the Community had not put its house in order, disagreements on cereals could sour these negotiations and exacerbate the existing difficult trading relations between the Community and the main agricultural exporting nations such as the United States. At a time when the United States has set aside 10 million hectares of wheat-growing land—equivalent to 30 per cent. of the total Community cereals area — and has cereal stocks of about 150 million tonnes, it will not accept that the Community should do nothing to reduce its cereal production; or that it should try to solve its problems by increasing its highly subsidised exports or by restricting imports of competing products, such as cereal substitutes. That is an important international context in which to view the matter.

I stress that we are not relying exclusively on stabilisers for cereals. The European Council also agreed that stabilisers should be complemented by new proposals on set-aside. I particularly welcome that. As the House will know, we have persistently argued that, to be fully effective, a restrictive price policy needs to be accompanied by a set-aside scheme. That would provide an acceptable alternative to those growers who might have difficulties in coping with a more rigorous pricing regime. The Commission's new proposals are set out in document COM(88)1, to which I draw the attention of the House.

In view of the lateness of the hour, I shall mention just a couple of things about set-aside. There has been a significant change regarding the set-aside that I proposed in the consultative document—I referred to it earlier — that followed the extensification agreement reached in the Council last year. We are now talking about a set-aside scheme for all arable crops. Now that agreement has been reached on the principles, that scheme will overtake the consultative document that I introduced. Nevertheless, the responses that I had from the farming community and others on that consultative document were extremely useful in the very long discussions and negotiations that we had on the set-aside scheme now before us. In view of the time, I shall not go into more detail on the set-aside scheme.

Photo of Mr John MacGregor Mr John MacGregor Secretary of State for Agriculture, Fisheries and Food

I am sorry, but I cannot give way. I must get on.

In the documents before us the House will see that there are some items which the Council has now signed which will provide the basic principles for operating the set-aside scheme. Member states will still have considerable choice over the details — exactly what rates to pay and what conditions to attach—and they are clearly a matter for further discussion in the Agriculture Council.

On cereals, I stress that the stabiliser mechanism, in contrast, for example, to quotas, will not prevent the most efficient farmers from competing for a greater share of total Community production. I emphasise, "in contrast with quotas." As the United Kingdom farming industry holds a leading position in the Community for efficiency, that is a challenge to which our producers should be able to respond and they will not be held back by artificial quotas.

The same considerations apply to oil seed and protein crops. The past few years have seen a dramatic increase in Community oil seed production—from 14½ million tonnes in 1979 to 10 million tonnes last year. In the past three years alone expenditure has trebled from £700 million in 1985 to more than £2,100 million in 1987. The regime is also among the most expensive per hectare. Last year it cost nearly £700 per hectare. Tough measures were needed to restrain escalating costs. There was already a threshold system for oil seeds but subject to a limit of 10 per cent. on the price reductions which could be made under it. That limit will be removed so that if oil seed production continues to increase support prices will be reduced automatically to avoid an increase in budgetary expenditure. The extent to which support prices can be cut will increase after the first year of operation of the new system. The new maximum guarantee quantities have been agreed at 25 to 30 per cent. below production.

I ask those who argue that the final outcome on oil seeds was not enough to consider the rigorous discipline of that sector as it now stands. On the basis of forecast output in 1988, there will be price cuts of up to 8 per cent. on top of the 10 per cent. price cuts already applied to the 1987 crop. The mechanism will result in automatic further price cuts thereafter if production continues to expand. A similar system will apply to peas and beans. I stress, however, that oil seeds and peas and beans are profitable crops, as is evident from the rapid rate of expansion both in the United Kingdom and in the rest of the Community. They should continue to be attractive, but while production may continue to expand it will in future have to be on a broadly cost-neutral basis.

While discussing oil seeds, I remind the House that agreement on the stabiliser package has been achieved without the introduction of an oils and fats tax, for which some member states had been pressing most vigorously up to the last minute and to which we have been, and will remain, adamantly opposed.

To understand just how successful the outcome of the negotiations has been in achieving our objectives, I should like briefly to compare the opening positions of other member states—they were held for a long time during the negotiations—and what those states have had to accept. For example, the German Government were opposed to a stabiliser for cereals that would bite and they wished to rest entirely on set-aside. They had to accept that set-aside is not an alternative to an effective stabiliser, but complementary to it. It was a bitter battle. The German, French and Irish Governments would have liked a maximum guarantee quantity for cereals that was over 160 million tonnes. On oil seeds and proteins, the French wanted a different system in which price cuts were linked to productivity and not to area expansion. That would have considerably eased the position for French producers. The French Government fought vigorously for that system, but failed to achieve it. The French in particular, supported by Ireland and Greece, were the main proponents of the oils and fats tax; it was a key negotiating objective.

On set-aside, Greece wanted higher Community funding. On wine, France and Italy were strongly opposed to the regime that is now coming in. On sugar, Germany and France wanted the new additional levy to be switched to "A" quota—that would have adversely affected our sugar beet growers — rather than to "B" quota. They failed in that objective.

Spain, Greece and Italy were opposed in many respects to the new stabilisers for fruit and vegetables. Greece, Italy and Spain were also opposed to the new limits on the maximum guarantee quantity for tobacco. I could go on, but the plain fact is that to achieve a new, effective agricultural regime every member state had to make sacrifices. That brief list demonstrates that many other member states had to go a long way from their opening negotiating positions.

I have listed the substantial number of changes made to the whole agricultural regime to achieve a better budgetary discipline. Those changes add up to a much more effective system of discipline over agricultural spending. We have achieved our major objectives and the outcome will greatly assist us in the Uruguay GATT round negotiations because it demonstrates that the Community can put its house in order, not just in relation to the latest outcome, but in the context of the milk and beef changes that were agreed under the United Kingdom presidency in December 1986.

I am well aware that the changes will mean some difficult adjustments for our farmers, and, even more, for many farmers in other member states. However, our farmers are aware that in a world of surpluses it was inevitable that there had to be changes in the CAP regime. I believe that the outcome gives our farmers a much more stable basis on which to plan. I hope, first, that we have now avoided the need for constant emergency measures that disrupt farmers' business and, secondly, above all, prevented CAP from collapsing under its own weight. That would have been to the detriment of our farmers as well as farmers elsewhere in the Community.

For all those reasons, I believe that this was an effective deal. It is the right deal for the future of the Community, and the right one for the taxpayer and the farmer. I commend it to the House.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs 7:38 pm, 15th February 1988

According to the farming press, I understand that at the NFU annual meeting the other day the Minister charmed the delegates.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

The hon. Lady agrees with that view.

The Minister presented his case in a charming and plausible manner. I believe that if anyone could defend the case that is before us tonight, it is the Minister, and he did it very well.

The Minister started by attacking the Opposition for their response to the Prime Minister, and said that we were paying too much attention to detail without being able to consider the summit as a whole. I assure the Minister that it is because we see the summit as a whole that we are especially annoyed. Tonight I hope to explain why and also to ask why some of the details that we feel are important to the whole have been omitted. We shall be seeking further explanation on a number of points.

As the Minister explained to us at the beginning of the debate, this is the annual debate on agriculture. Now that the debate has been overtaken by the result of the summit, I hope that we shall have the opportunity of another debate on agriculture, as the hon. Member for Moray (Mrs. Ewing) suggested. That was an admirable suggestion, and I think that the whole House would like a further debate.

The debate comes at a most propitious time. We have had the publication of the annual review of agriculture for 1988 in the past few weeks, the annual general meeting of the NFU last week, and over the past 72 or 96 hours there was the historic meeting in Brussels, which will take up so much of our time, and which witnessed the humiliation, I am afraid, of the British Prime Minister.

All those events have occurred against a background of despair in British agriculture or, perhaps more accurately, in the words of Simon Gourlay, the president of the NFU, on yesterday's BBC farming programme, an air of uncertainty. As I travel up and down the country meeting farmers, I constantly hear of the lack of direction and leadership from the Ministry, and a sense of confusion. British agriculture does not know where it is expected to go. Indeed, it is in a state of crisis. [HON. MEMBERS: "Come on."] Local and regional press confirm that description. I have a copy of the Western Mail of 4 February, which refers to the "Crisis in Welsh farming." The South Shropshire Journal carries a headline saying that for agriculture in south Shropshire "The future looks grim." One could go on. The picture throughout Britain is of crisis. The situation is serious.

If one wants confirmation of that, one need only look at the Government's own annual review of agriculture. Even if one reads it through rose-tinted spectacles, it makes disturbing reading. Bank borrowings have risen further, from £5,909 million in 1986 to £5,962 million in 1987. All that is against a background of falling assets, amounting to only £49 billion in 1986 compared with £56·5 billion only three years before. That is not a good background of economic viability.

It is little wonder that there are predictions that one in 10 farmers is likely to face bankruptcy in the next few years. Agricultural confidence is particularly fragile. It is not the wish of Opposition Members to see farmers go bankrupt. Far from it.

Photo of Mr Andrew Stewart Mr Andrew Stewart , Sherwood

Not at the hon. Gentleman, but at the hon. Member for East Lothian (Mr. Home Robertson).

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I think that farmers do a good job in keeping Britain's countryside attractive, which is what we want. We want to try to encourage them so to do. That is the view that we continue to put forward.

It is against that background, as well as the background of the lack of economic viability, that the Prime Minister went to Brussels last Thursday to protect British interests—of farmers and consumers alike. The Prime Minister's nerve cracked and the other leaders watched her "dramatic climb down". [HON. MEMBERS: "No."] Those are not my words; they are the words of the Financial Times, whose agriculture and diplomatic correspondents were there, which is more than can be said of any member of the Ministry of Agriculture, Fisheries and Food. I am more inclined to accept the viewpoint of the people who were there and saw the effect of the Prime Minister's "dramatic climb down", as the Financial Times said.

Photo of Mr Paul Marland Mr Paul Marland , Gloucestershire West

In view of the shortness of the debate, it would be helpful if, rather than standing at the Dispatch Box and lambasting what has happened, the hon. Gentlemen told us what he thinks should happen.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I am sorry that the hon. Gentleman cannot take it. He has obviously been listening too carefully to the Government's propaganda machine, which has been put into overdrive over the past 48 hours, in an effort to turn the truth on its head.[Interruption.] We are debating agriculture. We are debating the result of the summit, when the Prime Minister sold this country short. It is right and proper for us to debate that.

In spite of all the efforts of Conservative Members, the truth will come out. For example, The Times—not exactly a house magazine of the Labour party—reported: The post-summit consensus as the drama of the summit fades is that, on the whole, Mrs. Thatcher did give way, and not only on the farm question. That is another observation by someone who was there. I know that the hon. Member for Gloucestershire, West (Mr. Marland) does not like the truth, but he will get it, whether he likes it or not. Modern European politics will never be the same again. The iron lady cracked. For some unexplained reason, at the 59th minute of the 11th hour, her confidence went and her judgment faded.

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden

Is the hon. Gentleman saying that the Prime Minister should not have given an inch or given way at all? In what areas would he not have given way?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I shall address that point in a moment. I am not trying to evade the issue.

We in the Labour party have a right to feel betrayed by the Prime Minister because we gave her our support. We had a debate on 24 November, when we said that if the Prime Minister and the Minister fought for the interests of the British people in Brussels, to make sure that there was a reduction in the amount of money spent on the CAP, she and the Minister would have our support. They have not delivered the goods. As a result they have let down not only the British people but the people of the Third world.

I now come to the point made by the hon. Member for Wealden (Sir G. Johnson Smith). I should like to spell out in detail the critical position that the Prime Minister and the British people were in when she made that eventful journey to Brussels. There is no doubt that the EC was in difficulties. There was no budget. By about August, the money would have run out. That was the simple scenario. As the House knows, the reason for that budgetary impasse was that the CAP was simply too expensive for the European Community. Almost two thirds of the whole EC budget is eaten up by the CAP. Even worse, almost two thirds of the CAP goes towards the storage and disposal of surpluses, sometimes including destruction. Only one third gets through to the farmers. That is the key point that we should address. It is the key point that the Prime Minister did not address in the discussions in Brussels.

The CAP is sheer nonsense. The complicated bureaucratic system that was devised about 30 years ago to protect — I understand why—European consumers and farmers has grown into a monster, which now threatens to destroy the very purposes that it was set up to achieve. It has become the cuckoo in the European Community nest.

The British farmers know that. They realise that the harvesting of subsidies can be only temporary because, to use another ornithological simile, they see that the goose that once laid the golden eggs is now laying addled eggs. Our farmers know what the situation is, as do the consumers.

The consumers in Britain have paid dearly for the agricultural system of support. Indeed, they have not appreciated how dearly they have been paying. We have been trying to get the point across, admittedly without a great deal of success, so we were most encouraged last week when our case was given a fillip from a most unexpected quarter — Her Majesty's Treasury. The Treasury produced its "Economic Progress Report", which is well worth reading, headed, "The challenge of agriculture." The document sets out some principles that should guide agricultural reform in the European Community, which the Prime Minister evidently forgot last Friday. It was strange that that document should appear from the Treasury on the day that the Prime Minister went to Brussels. It is quite unclear to me why it was produced, but it contains the truth and is therefore worth examining.

One of the key findings of the document is that consumers have to pay much higher prices for food than would otherwise be necessary. The additional costs of higher food prices together with higher levels of taxation have been estimated at over £550 per year for a non-farming family of four in Europe. In other words, it costs in excess of £10·50 a week for every family of four in Europe—

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

Is the hon. Gentleman aware that that document is based, among other things, on cereals at £50 a tonne? Does he realise that no one anywhere in the world can produce cereals at £50 a tonne? Does the Labour party support that sort of figure?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I am familiar with the study. Not only have I read it in detail, but I have read in detail the computer model that went with it, and the variables. It was based on 1979, and updated to 1986 prices. The figures produced by the study are accurate. We stand by them, and the Treasury stood by them last Thursday, but it no longer seems able to do so.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I have given way a great deal, and other hon. Members want me to continue.

I have read the document; I have it here and I happen to have read the associated comments from Australia and the OECD. I shall return to one of those in a moment.

As the hon. Member for Norfolk, North (Mr. Howell) knows, the document was produced by the Department of Primary Industry in Australia. But Conservative Members need not go as far as Australia; we have many excellent agricultural economic departments in this country. If the hon. Member for Norfolk, North had gone to Newcastle university he would have found similar work. As I pointed out in our last debate, the university calculated that in 1968 an average household of four in Britain — not Europe—was paying £11·50 a week in tax and inflated food bills—in other words, approximately £8·25 on the food bill and £3·25 in tax. If we update that figure, it probably means that the average British family of four will pay £12·50 a week to support the CAP. But that is not the end of it. The Newcastle university figures match the Australian and the OECD figures. Almost all academic agriculturists agree on the figures, give or take the odd statistical point.

The key point is that it is not only the academics who accept these figures; the British Government accepted them last Thursday, although they have cold feet now. The Treasury document and the original report go a bit further. The Treasury document, referring to the costs to the housewife and the consumer, states: Even these heavy costs borne by consumers and taxpayers do not tell the whole story. Far from preserving employment and output, the effect of the CAP is to reduce employment in other sectors. The most recent study, parallel to the one that I have just quoted, which was also done in Australia by the Bureau of Agricultural Economics and the Centre for International Economics, published the figures for 1986—the latest available—and concluded that in the EEC the CAP has cost 1 million jobs in manufacturing and services. In Britain alone, 480,000 jobs have been lost in manufacturing and service industries. So hundreds of thousands of urban and rural workers in non-agricultural industries have lost their jobs on account of the common agricultural policy—in addition to the tens of thousands of agricultural workers who have suffered the same fate. The CAP is nonsensical—

Photo of Quentin Davies Quentin Davies , Stamford and Spalding

The hon. Gentleman started by presenting himself as the champion of farmers, and proceeded to argue that the regime that should have been imposed on them at the end of last week should have been even harsher than the one that was agreed. That is hypocrisy. Will he now face the facts and tell us what he proposes should have been done last Friday?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

Apparently the hon. Gentleman was not listening to what I was saying. Incidentally, I am charmed to be called the champion of farmers. I did not expect that, but I am pleased to hear it—however temporarily I may have been given the title.

Under the CAP, two thirds of the cost of agricultural support goes not to farmers; it goes to buying storage and disposing of surplus products. That is nonsense.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

I cannot continue to give way to the hon. Gentleman.

Only one third of the money gets through to the farmers.

We are discussing not only money on the direct budget. It costs about £7 billion for the British citizen to protect agriculture, taking into account levies and taxation. To put that figure in perspective, it means that we are spending four times as much on agricultural support as we are on unemployment benefit each year. That cannot be right, and that is what the Prime Minister had a chance to change in Brussels last week — [Interruption.] Conservative Members do not understand the fact, but it was an historic occasion. The Community was in crisis. Like British farmers, it was going to run out of money. The British Government had the power of veto, and if the Prime Minister had insisted on the demands that she originally said she was going to stick to before she went, she would have effected a reform in the EEC that would have changed its whole nature. By failing to do that and by not waiting for the summit in Hanover, when the political problems of the French and the Germans would have been eased, she failed to obtain a better deal. For some reason she gave in.

The Minister has proclaimed that the deal struck at Brussels—he was very convincing at a superficial level—would substantially reduce agricultural production. Many hon. Members on both sides are sceptical about that claim. It is difficult to see how it can be true. Certainly, the NFU does not take that view; nor do informed agricultural observers. Over the past two or three weeks—and, in particular, the past two or three days—there has been a messy compromise. It has arisen out of stabilisers. The mechanism by which the Minister believes he can reform the system is that of stabilisers, and various other means. Stabilisers were the core of his argument. Why did he agree to increase the limit at which stabilisers come into play from 155 million tonnes to 160 million tonnes? He has said in the past that stabilisers are ineffective at that level. I understand the relationship of the compensatory levies that are paid at the beginning of the year. This is a complicated subject, but will the Minister confirm that if the maximum guaranteed quantity of 160 million tonnes is exceeded in one season, the 3 per cent. reduction will not become operative until the following season? Am I right in thinking that?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

The Minister indicates that I am right and that I have read the documents correctly.

Will the cut be made only in the nominal price so that the Agriculture Council will not be free to increase the buying-in price in the following year? If that is so, it could negate the stabiliser effect.

The thrust of the Minister's argument was that there will be a capping of the agricultural budget. We have repeatedly seen the other 11 nations cave in when we have got to that budget. That is a specific point, but I am sure that the Minister will agree that it is important.

Did discussions take place within the Community's agrimonetary system? So far, they have not formed part of the negotiations. How will we ensure that individual nations do not manipulate their green currencies to offset price cuts for their farmers, thus negating the effective use of stabilisers? I think that was the point that the hon. Member for Lancaster (Dame E. Kellett-Bowman) was trying to make when she talked about the green pound in Britain.

Photo of Tim Boswell Tim Boswell , Daventry

Has the hon. Gentleman noted the early-day motion regarding the disparity between green currencies as they affect the British farmer? Is he disturbed about that matter, or is he ruling out any change in that arrangement in the future?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

The hon. Gentleman, who is very knowledgeable about these matters and who always participates in these debates, is making the point for me. Of course Ministers can change their green currencies by negotiation, but will those changes be used to negate the purpose of stabilisers?

Photo of Mr Nigel Spearing Mr Nigel Spearing , Newham South

The cogent points that my hon. Friend is making highlight the question that the Minister courteously allowed me to put: that there is no statistical proof or evidence to back up the assertion that the Community will get within the 75 per cent. GNP limit. Should we not sympathise with the Minister, who was not present in Brussels when British agricultural policy was made over a 48-hour period by the Prime Minister?

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

My hon. Friend talks common sense. I believe that if the Minister had been present good sense would have prevailed and the good sense of British agriculture would have succeeded. It is a pity that he was not present to give first-hand advice to the Prime Minister when she so obviously needed it.

The hon. Member for Hereford (Mr. Shepherd) mentioned sheepmeat. We have heard little detail about the proposals for sheep stabilisers. We have always given the Government our general support on cereals, but not on sheep stabilisers. As I understand it, the Copenhagen agreement discriminated solely against the United Kingdom in that stabilisers were to be exclusive to Britain and that they were related to the variable premium. That is discrimination against Britain, which we should not tolerate. There should not be discrimination against an individual nation.

Although, as the Minister explained, the limit on the payment of the annual ewe premium to 500 ewes in lowland areas and 1,000 ewes in less-favoured areas has been withdrawn, the Commission has said that it wil renew this proposal in this year's review and that it could become operative on 1 January 1989. Will the Minister give the House an assurance that there will be no discrimination against sheep farmers in the United Kingdom? Does he realise how vital this matter is for upland farmers, who are on extremely low incomes?

One of the other issues that was way down the list to be discussed in Brussels was direct income support. It is interesting that the Treasury's "Economic Progress Report," which I keep praying in aid, with regard to the best way to help farmers on low incomes, says: Low income farmers would be best helped through direct income support rather than price guarantees or output related assistance. When we have advanced that argument, the Minister has always disagreed with it. As that statement was agreed by the OECD Ministers and endorsed by the Venice economic summit in June, why does the Minister still refuse to rule out that course of action? As it has been accepted in Brussels, does that mean that it is on the table and that there is a chance of income support for our upland farmers? Any comments that the Minister could make about that matter would be helpful and would end the uncertainty, which the Minister acknowledged, in British agriculture.

We have been asked to consider a document relating to set-aside, but I do not think that it will receive the attention that it deserves. I am sure that the Minister will agree that this is an important matter, and I hope that we can have a debate on it. Does the Minister appreciate that if the system is introduced in a clumsy manner and farmers are paid for doing nothing, we will be bitterly opposed to it, as will the overwhelming majority of British people?

We are prepared to support proposals aimed at utilising land for more sustainable agricultural and environmental needs. It is sensible to encourage the planting of broadleaved woodland, as the Minister said when he presented a Bill to the House a couple of weeks ago. Are the Government committed to set-aside as a positive method of improving our environment? Are they prepared to build on the experiences of the environmentally-sensitive areas, to which the Minister referred at the beginning of his speech and which have been a tremendous success? We believe that we should build on those experiences to encourage farmers to farm in a less damaging and more ecological manner. I hope that the Minister will take that point on board.

There is specific reference in the reports from Brussels to the concept of fallow grazing. That is a sensible possible use for land taken out of cereal production. However, if the system is to be effective, how will the Government contain the progeny aspect of it?

With regard to set-aside, will the Minister consider the proposal for which we have argued—the development of low-input farming, which has the advantage not only of protecting the land and the landscape but of retaining labour and machinery on the land?

The House has a right to expect the Minister to explain what proposal has been made to stamp out the fraud that so bedevils the CAP. As the Minister knows, this is a serious problem. Some experts estimate that over £2 billion—10 per cent. of the CAP budget—has been lost in fraud every year.

Photo of Robin Cook Robin Cook , Livingston

Before my hon. Friend leaves the set-aside issue, I should like to put forward a point that I tried to put to the Minister. The effect of set-aside will be to encourage the most marginal land to come out of production first. That could have a serious regional impact, particularly in Scotland, which has not a surplus of cereal but a deficit. It could have serious knock-on effects on other consumers of cereals, such as the poultry industry, which is well represented in Scotland and which will be a less economic location as a result of set-aside.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

My hon. Friend is right. Cereals for feed, especially in an area such as Scotland, might be the commodities most taken out of production. As we understand the Commission's proposals, the amount of support from FEOGA for more marginal land — the land to which presumably the Government will be giving lower grants—will be at a higher level than the more productive land, for which the Government will be giving higher grants.

Photo of Mr Peter Hardy Mr Peter Hardy , Wentworth

My hon. Friend mentioned fraud. It seems to me that people can go on television and confess to the most astonishing frauds without any action being taken. That may be common in Britain, but it is even more frequent abroad. What does my hon. Friend have to say about member state Governments who do not implement arrangements that they are obliged to implement under the EEC regulations? For example, the Italian Government have not introduced milk quotas.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

My hon. Friend has raised a point with which both sides of the House sympathise, and which worries many of us. We are concerned that the British Government and British farmers adhere to these agreements. Certainly, there is a suspicion—I choose my words fairly carefully—that that is not always the case in other countries.

The domestic scene is very depressing. In real terms, farming is at the second lowest level since the end of the war. Twenty thousand jobs have been lost in the past couple of years, and investment in plant, machinery and vehicles is at a post-war low. That is not a very happy state of affairs, and we believe that the time is now right for the Minister to give a lead.

We are especially critical of the Government's handling of research and development. We know that they have already made considerable cuts, and we also know that the Ministry is now carrying out a thorough review of its research and development, with a view to indentifying areas of research that can be funded by the industry rather than with public money. The technical term, I believe, is "near market research". That research has been hurried through behind closed doors, with no formal consultations, and to those concerned there seems to be no clear definition of the objective. However, the Opposition are quite clear. A time when the farming industry is in a state of crisis is entirely the wrong time to start cutting down on research and development and on advice services. I hope that the Minister will think again.

The debate has largely centred—and, I am sure, will continue to do so—on the recent Brussels summit. The agreement reached there, as one eminent agricultural journalist has written, is remarkable for the number of concessions made by the British to the Franco-German position on the agricultural section of the package. The Minister attacked us earlier for being too specific, but I hope that I have raised a number of specific points. He also criticised us for not seeing the issue as a whole. What has annoyed Opposition Members so much is that the Prime Minister had the chance of a decade to obtain a fundamental and far-reaching reform of the CAP. That would have been of long-term benefit to the British people—farmers and consumers—to the people of the Third world, who will now have food dumped on them in a glut, and, of course, to the European Community. The Prime Minister went to Brussels proclaiming her intention of imposing absolute financial limits on agriculture, but, as we know, her nerve broke. Now, tragically, the CAP will trundle on and on.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk 8:12 pm, 15th February 1988

I recognise that both Front-Bench spokesmen have concentrated on the summit statement. That was inevitable. However, I prepared my speech for the debate on agriculture which was originally intended, and I mean to say only a word or two about the summit. I have not had time to study the document, and I do not know precisely what has been done, but, judging by what I have heard so far, I would sum it up as another typical EEC fudge which may damage British farmers. The only good thing that I can say is that it will probably damage them a little less than might have been the case.

Agriculture is in a very serious position, not just because the weather has made it a very bad year, and the awful autumn and winter will probably make next year very bad as well, but because of the uncertainty and loss of confidence in the industry. Somehow, that must be put right.

My first point concerns the necessity to solve the green currency problem. As far as I can see, it is a great swindle. British farmers have been swindled under both Governments, and the time has come for that to end. I also believe it to be a self-inflicted injury. We have had artificially low food prices in this country, and this is a way of keeping them low. I can substantiate what I say. Last week, in reply to a question, I was told that food prices had increased by an average of 5·8 per cent. since 1979, while all other prices had increased by 7·8 per cent. That has seriously damaged the farming industry.

As a result of that holding back, and because of the green currency fudging and swindling, the assets of British farmers have gone down to a dangerously low level—66 per cent. of the total assets of 1979. This means that British agriculture has lost £21 billion of assets, which is a huge figure.

We are now suffering the second lowest level of profits since the war—that is, for those who are making profits. A number of people are making losses. Profitability for cereal producers is down to 10 per cent. of the 1979 level. I am calling for an overall rethink, not just in this country but throughout the EEC. I cannot understand how the way ahead can possibly be achieved by restricting output and lowering prices.

Before he came to the House, my right hon. Friend the Minister was a banker. If one of his customers had gone to see him and told him that his business was in difficulties and that he proposed to reduce production and sell at cheaper prices, he would have been drummed out of the office pretty quickly, because that is the road to disaster. In farming, or any other industry, if output and prices are reduced at the same time, the result cannot add up.

We should recognise that the present troubles of our pig farmers are entirely due to the green currency system. The artificial price levels in this country mean that they are doubly damaged by the effects of the MCAs, which are already causing so many problems.

Photo of Michael Lord Michael Lord , Suffolk Central

Does my hon. Friend agree that when we talk to farmers we find that the problem falls into two separate halves? One half is the problem of sorting out surpluses, with all the complications that are involved. The other half— this comes over loud and clear—is the fact that it is all about fairness.

My hon. Friend has made the point made earlier by other hon. Members about the green pound and the MCA, which is hurting our pig farmers so much. That is all down to fairness. If we could get it right we would still have problems to tackle, but our farmers would have much more sympathy with all that we are trying to do.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

I entirely agree. There is no doubt that British farmers could compete with any other fanners in the world on a fair basis, but we cannot compete as we are.

I wonder why the cereal farmer is under such attack at present. I must declare an interest—I am a cereal farmer — but I should like to tell the House how well our cereal industry has done. In fact, it is one of the most successful industries in the country and is of great help to our balance of trade. In that respect it is the fourth most important industry in the country. Only invisibles, oil and chemicals are more successful. The chemical industry has improved our balance of payments position by £837 million since 1979. The cereals industry has improved it by £812 million—almost as much as the chemical industry. Steel, coal, motor vehicles and other visibles all reflect adversely on the balance of payments.

Why is it generally accepted that the United States should have such a great share of the export trade in cereals? Why should the United States, which exports 74 million tonnes, export more than the EEC, Canada and Australia put together? The 20 million tonnes that we export help the European balance of payments in general.

I now want to consider the myth of how much agriculture costs us. Will my right hon. Friend the Minister of State set out clearly just what we are paying for agriculture? My right hon. Friend the Minister of State has said that we are paying less now in support of agriculture than we paid in 1961. In 1961 we spent £263 million in support of agriculture. At 1961 prices we are spending £246 million this year. To bring the figures up to date, we are told that agriculture is costing us £1,443 million, yet we receive a refund of £1,480 million. We need to know how much agriculture is really costing the taxpayer. I believe that we will be amazed at the real figure.

The hon. Member for South Shields (Dr. Clark) referred to the Treasury document that was released last week. The Treasury should disown that document. There is no substance behind it. Why does the British Treasury need to get hold of an obscure Australian publication to prove its point? Many people are employed in the Treasury—probably too many. We should be able to work out the figures for ourselves. I shall table a question tonight to ask my right hon. Friend the Chancellor of the Exchequer either to substantiate the figures or to withdraw the document.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

I wonder whether my hon. Friend would return to the point that he was making to the hon. Member for South Shields (Dr. Clark). Did I understand the hon. Member for South Shields to say that he was happy for British farmers to receive £50 a tonne for wheat? If so, would my hon. Friend care to explain the input cost of wheat and state whether £50 a tonne would in any way meet the farmers' requirements?

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

I am most grateful to my right hon. Friend for his intervention, because I might have forgotten who to attack. I did not hear an answer from the hon. Member for South Shields.

The Australian document—and here I am shooting at the Opposition and the Treasury at the same time—was based on wheat at £50 a tonne. I do not believe that any farmer in the world can grow wheat at £50 a tonne. I am sure that my right hon. Friend the Minister of State will understand that the farmers in his constituency cannot compete with that price either.

Photo of Mr Paul Marland Mr Paul Marland , Gloucestershire West

To be more precise, can we say that the input costs of growing an acre of cereals in this country are probably between £90 and £100 an acre? Therefore, it is ludicrous to try to produce wheat at £50 a tonne.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

I am grateful for that information.

One or two people hanker for the past, but anyone who believes that the Labour party has anything to offer agriculture with wheat at £50 a tonne is seriously mistaken.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

My hon. Friend the Member for Workington (Mr. Campbell-Savours) commented on the Minister of State—

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

The right hon. Gentleman says that this is completely irrelevant. A few minutes ago the Minister of State said that I had said that British farmers could grow wheat at £50 a tonne. That is not true. I have never said that. The Minister of State's statement needs rebutting now. The credence of the comments made by my hon. Friend the Member for Workington have some standing if the Minister of State intervenes and makes allegations that are basically untrue.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

I should explain that the hon. Member for South Shields referred to the document and said that it proved his case. That was based on £50 a tonne—

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

Let us argue the point further. According to the document, the figure is 80 ecu for wheat. That is almost £50.

Photo of Dr David Clark Dr David Clark Shadow Secretary of State, Shadow Secretary of State for Environment, Food and Rural Affairs

Perhaps I can clarify this. The hon. Gentleman is obviously very knowledgeable on these matters. I am afraid that I was not quoting from the secondary source from which I believe the hon. Gentleman is quoting. I was not quoting from the "Economic Progress Report". I was quoting from the original document based on the 1979 figures, which have been updated to 1986. I referred to the figures in the primary document, not to those in the secondary document which the Treasury put out. I cannot be responsible for what the Treasury says all the time.

Photo of Mr Ralph Howell Mr Ralph Howell , North Norfolk

We have established the point that the figure is based on 80 ecu, which is roughly £50 a tonne.

I want to refer to world food production in general. We have reached a point where we are consuming more wheat than we are producing. It is quite possible that by the time some of the penalties are in place we will penalise ourselves and will have reached a serious position of food shortages.

I also want to refer to the damage that this general low food price is having on the Third world. It is all very well for the Geldofs of this world to try to do something about it, but so long as the advanced nations insist on holding agricultural prices down to the present absurdly low levels we will damage indigenous agricultures throughout the world, including the Third world.

I want to explode the myth that food prices are high. They are actually low. In 1979, in Britain, 21·2 per cent. of consumer expenditure was spent on food. We now spend 15·6 per cent. Some 25 per cent. less is spent on food so that we can buy more videos and other goods. I have already said that food prices generally are lagging 2 per cent. behind other prices. That has cost our agriculture industry £17·6 billion since 1979. That money should have been ploughed back into the industry.

If the Government are still not convinced that food is relatively cheap, I remind the Minister of the bottle of water that I gave him some weeks ago. I bought it in this House. It contained a fifth of a litre of English Ashbourne mineral water. I paid 55p for it. If the Minister had bought that bottle full of milk, he would have paid less than 9p for it. If he had been a farmer and had filled it with milk, he would have received 3p. That is a startling revelation of how we are prepared to pay for non-essentials, but not prepared to pay for food. It is impossible to buy a litre of mineral water for less money than one pays for a litre of milk.

The way ahead is obvious. For those commodities that are over-produced we must find a way of effectively restricting production. The sooner that we go over to some form of compulsory set-aside, the better. It is no good fiddling about with these petty little schemes that we have on the stocks at present. We must be serious about this and stop over-producing those commodities that are costing us so much in storage. We must recognise that if we restrict production we must allow prices to rise. If we were to allow prices to rise we could escape from the system of subsidising food. Why not pay for it over the shop counter and stop fiddling about with this awful mess of subsidising? It merely helps an army of bureaucrats and achieves very little.

One thing comes out of the summit. We now recognise that we are in Europe, that we must stay in Europe and that we must make Europe work sensibly. I hope we realise that the uncommon market in which we have been for the past 15 years cannot last. We must make a proper common market, and Britain should be playing her full part in taking serious steps to get us in to a proper common market. The first and most sensible thing that we can do is to join the European monetary system and prove that we are really determined to make Europe work.

Finally, I am convinced that British agriculture has a tremendous part to play in the well-being of the economy of this country and in maintaining a good and sound environment. It will do that only if agriculture is prosperous and thriving. It simply cannot pay for the enhancement of the environment if we are pushed to the borders of bankruptcy. I trust that the Minister will do his utmost to have a total rethink of our agricultural policy.

Photo of Mr Geraint Howells Mr Geraint Howells , Ceredigion and Pembroke North

It is always a pleasure to follow the hon. Member for Norfolk, North (Mr. Howell). I agree wih many of the points that he made—and, just for information, may I say that we are not related. If we were in charge of the Ministry of Agriculture, Fisheries and Food, there would be many wealthy farmers on the east coast and the hills of Wales.

I am proud to be a dedicated European, like many other hon. Members on both sides of the House. I am also proud to be a farmer and, at times, a politician. From my experience, confidence in agriculture is at its lowest ebb since the war. I am sure that the Minister and his two colleagues will agree. I know from experience that they are genuine and sincere in their deliberations to help agriculture. They realise that, at present, agriculture is being clobbered, but, unfortunately, they have to toe the line, so far as the Prime Minister is concerned, and have to pursue policies that are not acceptable to them.

Throughout the recent discussions on the EEC budget and the common agricultural policy, what has been most striking is the Government's attitude to the farming community in the United Kingdom. Anyone hearing the Prime Minister speak this weekend would not realise that British agriculture was the most efficient industry in this country, if not the world. No one would believe that, after being encouraged by the Government to increase production to enable us to be self-sufficient, the farmers of this country responded and achieved the desired results. Indeed, instead of being praised, agriculture has been reviled, dubbed the villain of the piece and accused of wantonly producing more and more food and creating mountains and lakes as far as the eye can see. Farmers are being criticised by those who used to be their friends. The Tory Government have truly turned their back on British farmers.

It is a great pity that, during their discussions in the European Community over the weekend, greater emphasis was not given to the marketing of our surpluses within the Community and to the intervention system. As we have been members of the Community for many years and the common agricultural policy has been in existence for a long time, it is time to set up an independent inquiry into the CAP. Many farmers do not realise what is happening in Italy, France and West Germany in comparison with what is happening in Britain. Something must be done in the near future to give extra clarification to British farmers on how agriculture is faring in other countries within the Community.

For some years agriculture has been coming under great economic pressure and the strain is beginning to tell. It has been estimated that, in 1987, total investment in agriculture was cut by 15 per cent. and the average net income of farmers fell by 1·5 per cent., following years of similar falls. In some sectors, such as specialised dairy farms in Wales, there was an estimated fall in income of 8·2 per cent. in 1987. That excludes interest paid on loans. It must also be pointed out that, over the past decade, food prices have risen by only 73 per cent. of the increases in the retail prices index. Farm gate prices have increased by just over one half of the rise in food prices.

Why, then, is the industry being so fiercely attacked? This is why we are not as ready to consider the problems of our farmers as sympathetically as our European partners do. We cannot expect the farmers to produce less, to do away with the surpluses and to accept a reduction in income at the same time. It is not compatible and it will never work in this country. Many small and medium farmers will be in dire financial trouble and the social consequences of many of these new regulations will be far-reaching.

For example, in Wales, where the livestock industry accounts for 85 per cent. of agriculture, there is great alarm at the probable effects of the measures being taken to curb production. They are seen as measures against the family farm and, thus, against a way of life and the rural economy.

The use of stabilisers, set-aside schemes and diversification are fine in theory and may well have limited uses in some sectors, but there are drawbacks. For example, it has been argued that land set-aside would be the least productive in any holding. The remainder of the holding could be intensively farmed to bring up production to previous levels, thus defeating the object of the exercise. When he replies to the debate, I know that the Minister of State will clarify the comment of the Minister of Agriculture, Fisheries and Food that 20 per cent. of the land will be taken out of wheat and cereal production over a period. What effect will that have on the less productive land? We need more clarification on the question of set-aside. I have always held the view that farmers should be paid if their land is set aside. Will those farmers who take 20 per cent. of their land out of production be able to grow something else, such as a crop of rape to feed lambs, for short-term benefit? They should be able to do so if they choose to go for that instead of taking the money under the set-aside scheme.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

Does the hon. Gentleman agree that, even if farmers do not do that, the land would still need to be looked after? Therefore, the idea that they would be paid for doing nothing is a calumny on the farmers of Britain and it does no good, in an attempt to change our agriculture system, to throw this calummy about, as seems to be the policy of the Labour party.

Photo of Mr Geraint Howells Mr Geraint Howells , Ceredigion and Pembroke North

I agree with the Minister on this occasion—we do agree now and again.

The British Poultry Federation has pointed out that this scheme could alter the structure of its industry, and it is dependent upon the cereals sector. Marginal land will be taken out of production and in some regions the poultry sector will suffer the consequences.

There are millions of sheep in Wales, particularly in the hills of Plynlimmon and mid-Wales, where I farm myself. On behalf of the sheep producers, I ask the Minister not to dismantle the sheepmeat regime if it is at all possible. I disagree with the Prime Minister, who said earlier today that we cannot revert to the deficiency payments scheme. The present scheme is operating under another name, but it is still a deficiency payments scheme. It has worked well for the sheep producers over the past 40 years, and may it remain doing so.

I believe that the Minister said some months ago that the year of the introduction of stabilisers would be based on the stock numbers in 1987. Is that still the case, or is the year now 1988? Will other countries within the Community accept a similar scheme for sheep?

There is an obvious example of restraint from producers causing prices for the consumer to rise. Cattle prices are already rising because of the shortage of supplies and the Sunday roast of a succulent beef joint is becoming prohibitively expensive. The Government extensification plans for cattle look as if they are already heading for trouble, and any surplus will soon be replaced by shortages, which can only harm the family budget in the long term.

What plans have the Minister and the Government to help dairy farmers in particular? I know that the majority of them are doing reasonably well because there is a good export trade to the continent in cows and calves. This is due to market forces, and if things go wrong and we revert to a poor trade in those two commodities the dairy sector would be in trouble once again.

Another grave concern is the ever-decreasing budget for agriculture research. In my constituency we have the world-renowned Welsh Plant Breeding Station, which deserves great support. I should like the Minister to reassure us that the recent report from the Institute of Professional Civil Servants that it is planned to take a further £75 million from research, with a loss of 7,300 jobs in agricultural research, is without foundation.

I will leave many of the points that I wished to raise, Madam Deputy Speaker, because I want to give other hon. Members an opportunity to raise matters concerning their constituencies.

I have had a word with one of my parliamentary colleagues in Scotland, who has pointed out how the new 50 per cent. rule for the suckler cow premium scheme will discriminate against farmers and crofters, particularly those in the islands. Their way of life must be protected, and I urge the Minister to look into the working of this scheme with particular reference to this sector.

We are committed to stabilisers, extensification and diversification. These may help in the short term to control farm spending, but my worry is that unless the Government show willing to support the genuine farmers the whole industry will degenerate. It is only reasonable that, if we are interested in the future of farming, we should look at fiscal measures to aid the family farmer through this difficult period. Many EEC farmers are able to take advantage of bank loans at a lower rate than many farmers in Britain. I wonder whether those schemes in Europe could become optional for farmers here instead of the capital grant scheme.

It would be helpful to set up a Royal Commission to review the effect of capital transfer tax and capital gains tax on the industry and the rural economy so that the future of small family farms can be safeguarded from one generation to another. I hope that the Minister will respond to this suggestion.

I am anxious to see an inquiry set up into the comparative effects of the CAP in various countries and the way in which the regulations are operated within each state. My interest is to see that British farming is given a fair deal and is enabled to compete on equal terms with other countries in Europe. It is difficult to believe that this is so and the Government are partly responsible for not ensuring that there is fair play.

Several Hon. Members:

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Photo of Miss Betty Boothroyd Miss Betty Boothroyd Deputy Speaker (Second Deputy Chairman of Ways and Means)

Order. I appeal for short speeches. There is a great deal of interest in this important debate and if speeches go on as long as they have so far, many hon. Members will be disappointed.

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden 8:47 pm, 15th February 1988

I shall do my best to oblige, Madam Deputy Speaker. It is a pleasure to follow the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) — I am more familiar with the second part of his constituency. The hon. Gentleman knows what he is talking about, and I specially welcomed his sympathy for the small farmer. I have a number in my constituency, and the small farmer has a vital part to play in maintaining the prosperity of the rural community. We will not solve this problem as easily as Ministers thought they might at one time. The existing structure of the common agricultural policy is not as helpful as it ought to be.

I appreciated the constructive tone of the speech of my right hon. Friend the Minister of Agriculture, Fisheries and Food. I liked the way in which he approached the matter. He said that there was a challenge but that there were exciting opportunities ahead. He did not minimise the severe problems, but he was right to point out that 95 per cent. of the Government's objectives were achieved. It has been forgotten in the debate that has been raging today that in these negotiations my right hon. Friend the Prime Minister clearly demonstrated her commitment to Europe.

I have a great personal regard for the hon. Member for South Shields (Dr. Clark), but he was less than fair to suggest that my right hon. Friend should have gone to the summit like some latter-day Boadicea, shaken her fist, so that all the other nations would fall down before her, and smashed any idea of agreement, thus causing considerable confusion and uncertainty among the British farming community, which she desires to protect. How arrogant to assume that someone should have the power to do that, when two powerful nations which are facing elections, and many other nations which are not quite so powerful nor facing elections, did not happen to agree with the hon. Member for South Shields, and certainly would have disagreed profoundly with such an approach by my right hon. Friend. That is an arrogant assumption, and we should not behave arrogantly.

Had the Prime Minister behaved in that way, I know what sort of speech the hon. Member for South Shields would have made. He would have talked about the "Iron Lady" and the Prime Minister thinking that she knows better than anyone else. What rubbish. We do not like that sort of speech. The hon. Member for South Shields sought to redeem himself later on in his speech.

Photo of John Greenway John Greenway , Ryedale

Is it not a fact that there is no politician in the world who could have negotiated a better deal for this country than the Prime Minister has done?

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden

My hon. Friend is right. The Prime Minister needs no lessons from any Patsies on the Opposition Benches on how to stand up for Britain. I admire her for her capacity to achieve considerable savings when the majority were against her. In fact, all the other nations were against making the sort of substantial savings that we have been able to achieve. The hon. Member for South Shields knows that that is true. I have now got that off my chest.

Although we have achieved some of our objectives, we have not achieved everything that we would like, nor will we. With the common agricultural policy as it currently exists, we will not be able to sort things out at a session such as that held in Brussels over the past few days. However, the National Farmers Union has said in its press release: It is good for Europe that the ECs internal financing problems have now been resolved. This should now allow the Community to concentrate on achieving the objectives which it has set itself and, in particular, the completion of the Single European Market. Of course, there are uncertainties, because this is an uncertain time. However, most of us who want to be fair-minded about this matter would agree that the Community has now set up a system that gives a better chance of providing the additional prosperity and stability that farmers seek. It will not benefit just the farming community. Taxpayers can feel that the Government have not neglected their interests. The British budget rebate was saved, and we received £3 billion for the last three years. The saving will continue at that rate over the next five years. To those who believe that the Government have not established the importance of reducing the proportion of the Community's budget by reducing the common agricultural policy's budget, I should say that we know that it will go down from 75 per cent. of the budget as a whole to 50 per cent. in 1992. That is a reduction of 25 per cent., and it is not bad.

We know that farmers face serious problems of adjustment. I do not know of any industry that has been called upon to face a 12 per cent. price cut such as that faced by the farming industry in respect of cereals. I am glad to note that the Minister was able to see that the exemption limits were negotiated out of the agreement.

We know that farm incomes have dropped. I shall not go into the details of that, because it has already been mentioned by hon. Members on both sides of the House. I shall not develop my indignation at the impact of the green pound, except to join my hon. Friends in saying that I believe that that is of profound concern to the farming community. I wonder to what extent the Government's reluctance to seek devaluation of the green pound arises from the fact that it will result in higher farmgate prices, which would affect the set-aside proposals. Or is it the Treasury that complains that it would be a subsidy to farmers?

Photo of Mr Allen McKay Mr Allen McKay , Barnsley West and Penistone

I have been talking to the farmers in my constituency. I have been talking to the pig farmers who, without a shadow of doubt, are going bankrupt. I have been talking to the farmer who has a farm in Yorkshire and one in Germany. Therefore, he is able to compare what is happening in Yorkshire with what is happening in Germany. Also in my constituency there is the manufacturer of industrial machinery who has had to dismiss 49 people because of the roll-on effect. A 10 per cent. devalutation of the green pound would offset that.

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden

I fully accept what the hon. Gentleman has said. He has anticipated my comments about the MCAs. The patience of farmers has been stretched to breaking point.

I understand the Government's intentions on set-aside schemes. My right hon. Friend the Minister is right to pursue them with all the vigour that he can command, but he must ensure that they are effective. From what I hear, I do not know whether the amount that is to be paid to farmers to set aside land will be sufficient. It is a mammoth problem. I hope that it will not be too expensive before it becomes effective. That is one reason why some of my hon. Friends believe that it should be compulsory. That is a matter for the future.

I am indebted to the magazine of the Country Landowners Association. It has provided me with some information which sets out the massive scale of trying to make an impact on production by a set-aside programme. It pointed out that in France the land surface area is 55 million hectares. A total of 55 per cent. is used for agricultural purposes, 29 per cent. is made up of woods and forest and 9 million hectares are used for other purposes. France faces the prospect of 6 million hectares being taken out of food production. That is quite a lot.

The editorial says: Even if 300 new golf courses are built and 10,000 tennis courts and 1,000 camping and caravan sites, they will account for no more than 30,000 hectares, leaving 5,970 hectares facing a fate, which the Franch call desertification. A few golf courses were established in my constituency years ago. It was announced recently that one of the few large farms in my constituency is to go out of farming and that at least one international standard or championship course will be built, with perhaps another for less ambitious players. That is the trend. It may be helpful in diversification and in bringing in new employment.

There is another aspect of trying to cope with such massive production. Diversification has been the policy embraced by the Ministry of Agriculture, Fisheries and Food and the Department of the Environment. The figures show that the Ministry of Agriculture gives £1·5 billion in price support in this country. It gives £150 million to special areas and hill livestock and £100 million in capital grants. Most of that money goes to the bigger farmers.

What has happened to grant-aid for diversification since 1986? I read a report saying that virtually nothing had been handed out. There is a Development Commission for Rural England, which receives £30 million. I am not prepared to say that all the money should be taken away, from the hill farmers and those living on marginal land, especially when I see the Celtic fringe facing me on the Opposition Benches. However, the size of the budget, where it goes and the emphasis that is placed on other things shows how inadequate it is to support a diversification programme.

A start has been made in encouraging woodland management. However, to us in the south-east, that seems to be unduly biased towards the planting of hardwood, for which there is less anticipated demand than for softwood. Prices for pulpwood are discouraging.

In this general debate on agriculture I should like to digress for a moment to talk about woodlands and to underline to my right hon. Friend the Minister of State the despair that is felt by those woodland owners who face horrendous and crippling financial burdens to clear up the mess that was left behind in the wake of last October's hurricane. The Government now have the facts, the Forestry Commission has looked at the matter, and there is every reason to believe that the costings have been made. What encouragement is there for woodland owners, and what untold long-term damage has been done to our forests and woodlands in the south-east? There will be long-term damage if nothing is done to help clear the fallen trees.

Photo of Michael Lord Michael Lord , Suffolk Central

Does my hon. Friend agree that the most important thing is to recognise that in the woodlands that have been so badly damaged, and where trees have been blown down, there is not only the problem of replanting and replacing those trees, but the enormous cost that will be involved in getting rid of the huge roots, which is totally out of all proportion to normal forestry work? This is not the kind of thing that farmers, or even woodland owners, normally have to cope with, and it will add massively to the bill. Does he agree that that must be taken into consideration if we are to be fair to those people and get on with the reinstatement?

Photo of Sir Geoffrey Johnson Smith Sir Geoffrey Johnson Smith , Wealden

My hon. Friend is totally correct. I am delighted that the Select Committee on Agriculture visited three woodland sites in my constituency and saw just that sort of damage. It is ludicrous to suggest that anything can be done in the way of replanting, least of all getting an agreement on replanting, by the deadline of 30 March this year unless this vexatious problem is dealt with as a matter of urgency by the Government.

9 pm

Photo of Elliot Morley Elliot Morley , Glanford and Scunthorpe

Although I do not want to go over some of the points that have been made in the debate, other issues have been raised that need emphasising in terms of my own constituency and in general.

The effects that monetary compensatory amounts have been having on pigmeat and on the pig industry in terms of the green pound have been mentioned. I know that the discussions that took place were centred mainly on grain and on oil seed crops. Nevertheless, the pig industry always seems to be pushed to the bottom of the pile when it comes to negotiations. What impresses me about the pigmeat industry is that it is asking not for subsidies but only for a chance to compete fairly. That is unlike the grain farmers who are subsidised up to the hilt in many ways. All the pigmeat industry wants is fairness in terms of imports entering this country and undercutting our producers.

I should like to deal briefly with the set-aside policy. Hon. Members of all parties have agreed—perhaps for different reasons—that the set-aside policy will not work in terms of reducing the overproduction of cereal crops. There are many reasons for that. One is that the amount of money that will be paid in set-aside grants will not compensate the very large cereal farmers, even it they go over their target figures and suffer the 3 per cent. price reduction. I do not believe that that 3 per cent. price reduction will in any way deter them or induce them to go over to the set-aside scheme.

Therefore, we need alternative ways to reduce the overproduction of grain. One way—the Government are considering this and I support them—is the alternative use of land for the planting of trees. It has been said that 29 per cent. of France is covered by forests, which is a far higher proportion than that in this country. I think that I am right in saying that we have the lowest proportion of land covered by forests of any European country. Therefore, there is a need, a demand, and a market, especially in the hardwood sector. I hope that the Minister will consider that point seriously.

I know that this matter does not come under his control but I hope that when the Government consider investment in forestry they will do something about the tax dodges, whereby people, such as Lady Porter, can receive about £500,000 in tax relief. That is more than many people in my constituency could hope to earn in a whole lifetime of work. Although we must encourage forestry, we should do so in a way that does not put large sums of taxpayers' money into the pockets of private individuals.

I do not want to waste time by going over all the points that have been raised. I agree that food overproduction in the common agricultural policy is a serious problem. The problem with the CAP is that many farmers have been caught in a trap that is not of their own making. Over recent years they have been induced to produce more and more food. They are caught in what has been termed "a treadmill effect"—not a term that I would coin myself. However, because the farmers must produce more and more to get the money, they invest more and more in fertilisers, equipment and other things. That was bound to have the effect that has made the CAP so damaging to our farming community and to our environment because of the way in which many farmers have moved over to agriculture. They have done most of the damage by ripping up hedgerows and chopping down trees simply to increase their production so that they can get more and more in terms of grants. In many cases, it is the small farmer who is suffering as a result of those policies.

There is scope for improvement. I accept that it is a difficult concept. I agree with my hon. Friend the Member for South Shields (Dr. Clark) that the Prime Minister went to Europe spouting more rhetoric, instead of trying to achieve something. No matter what has been said, because her veto would have held up the whole negotiation, and frankly because the bankruptcy of the Common Market was hingeing on that, the Prime Minister had a tremendously powerful lever and could have achieved real changes. I do not believe that the change that she did achieve will seriously dent the overproduction of grain in Britain.

Photo of Ann Winterton Ann Winterton , Congleton 9:05 pm, 15th February 1988

I shall participate in the debate only briefly, but I should like to second the plea made by other hon. Members that we have a much longer debate at some stage in future. It has been quite impossible for many hon. Members to speak and to make their points. The subject is important.

I speak tonight in the full knowledge that farming incomes are down to approximately half in real terms compared with five years ago, and that the present return on capital in the industry is negative and employment is falling. It is very difficult to be optimistic about the future of agriculture in Britain, unless that efficient hard-working industry is enabled to return to profit and reinvest for the future.

The details of the internal financing agreement of the EC are too new to be fully digested, and some are completely indigestible, but I fear that they will not benefit agriculture in Britain, although I realise that it is difficult to be 100 per cent. positive until the next price-fixing round has been completed. The set-aside proposal is a mixed blessing. In theory, set-aside would appear to be the answer to reducing production by taking marginal land out of production. In practice, it is difficult to see how it will be of benefit until the monetary level is fixed at a reasonable rate; and the minimum would need to cover fixed costs. No one is likely to be attracted to the scheme by less than that. The proposal that half set-aside land should be green fallow is ludicrous and would seriously exacerbate the problems in other commodities such as beef and sheep.

The present proposals for the sheepmeat regime are quite unacceptable, as they discriminate against British agriculture, although the worst proposal of all has been shelved, at least for the moment. Sheep represent the one area of hope in which we have been supremely successful, especially in the export markets, having escaped the MCA system. To have to control ewe numbers if we retain the variable premium is quite deplorable; and it would enable France, for example, to build up its flock whilst ours was being tightly restricted. The Minister will appreciate how devastating that stabiliser mechanism will prove, not least to the hill farmers in less-favoured areas.

The other commodity being devastated at present is the pigmeat regime, which has been mentioned by many hon. Members. I urge the Minister to fight hard for the abolition of the MCAs on this product as soon as possible. Because they are receiving lower prices now than they were five years ago, many producers in my constituency are losing money hand over fist. That cannot be sustained for any length of time. Urgent action must be taken to ensure that our pig farmers can compete in a fair market. The Dutch farmers are receiving a payment of £70 for every tonne of bacon that they export to the United Kingdom at present, and they are, of course, paying £16 per tonne less for their feed.

Finally, it is absolute nonsense for the EC to try to depress cereal production while allowing cereal substitutes to be imported. Surely it is quite obvious that one cancels out the other.

Uncertainty may well have been ended by the summit agreement, but that emotion has been replaced by dismay at the prospects for British farmers compared with others in the industry elsewhere in the Community.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

I thank the hon. Lady for a commendably brief speech, and say to the remainder of hon. Members waiting to speak that if they follow suit many of them will be called.

Photo of Eric Martlew Eric Martlew , Carlisle 9:09 pm, 15th February 1988

I shall try to be brief. I should like to make three points. First, it is agreed in the House that the common agricultural policy is nonsense. It is agreed by the Opposition that the Prime Minister failed in her objectives in Brussels because she failed to achieve what she told us she would achieve.

My hon. Friend the Member for Workington (Mr. Campbell-Savours) teased the Minister of State about his attacks on the Church of England. It was only when I read the London Standard that I realised that the Prime Minister had had a secret meeting with the seven bishops. Perhaps she and the Minister of State have been trying to get the churches to stop praying for a good harvest. The last thing that we want is a good harvest. Perhaps the Minister of State has been trying to ban harvest festivals.

The common agricultural policy is nonsense, and so is the cereal deal concluded this year in Brussels. Are we really saying that what we need is an epidemic of slugs on our cereal land? Perhaps somebody in the Ministry of Agriculture, Fisheries and Food is working on some sort of disease that will attack the crops. That is the sort of nonsense that we find in the common agricultural policy.

The wood pigeon is a much maligned bird. I have been doing some research on it and perhaps after I have outlined my findings the Minister will make it a protected species. The Ministry of Agriculture, Fisheries and Food says that each wood pigeon eats 20 kg, which I understand is over 40 lb, of grain per year. There are between 5 million and 10 million wood pigeons in the United Kingdom. Therefore, in five to 10 years it could eat Britain's grain mountain. We should breed more wood pigeons but, unfortunately, we might end up with a wood pigeon mountain, such is the nonsense of the common agricultural policy.

Some hon. Members have said that we are so efficient that only 2·5 per cent. of our work force works on the land. We criticise the French for having 10 per cent. and the Germans for having 5 per cent. However, it is we who are stupid because the French and the Germans are preserving their rural communities. They are not decimating the villages and closing the village schools because people are leaving the land. The sooner we get back to putting people on the land, such as was done by the Land Settlement Association brought in by a Tory Government in the 1930s—

Photo of Michael Lord Michael Lord , Suffolk Central

I am carefully following the hon. Gentleman's argument. I am sure he appreciates the effect on labour costs and on the price of food if we put all those people back on the land. Is he recommending a large increase in the price of food?

Photo of Eric Martlew Eric Martlew , Carlisle

I am saying that the French and the Germans are doing very well and that we are doing badly. If the hon. Gentleman asks the housewife whether we have cheap food, she will laugh. We do not have cheap food because of the common agricultural policy. If we had a free market and allowed such things as sugar to come in from Jamaica, we would have cheap food. We have the worst of both worlds.

I should like to mention a local point about milk quotas. I accept the need for the quotas. We got a bad deal in 1983 when the Government agreed that it was a bad year. A creamery in my constituency has just closed because of the quotas. We have heard much talk about looking after the farmers but not much talk about the people who work in the food industry. People in Europe tried to get rid of the Milk Marketing Board. I support the Milk Marketing Board because I worked in the milk industry for more than 20 years and I know that it does an excellent distribution job and looks after its markets.

Dairy Crest does a terrible job. One would expect the chairman of Dairy Crest to drive around in a Volkswagen Polo because that company was getting into milk production when all the smart money was getting out. It is the sort of company that married the kitten when she turned into a cat. In my constituency Dairy Crest spent £7 million building a factory at the time when a reduction in milk quotas was on the cards. That factory has been closed.

Many of my hon. Friends have signed an early-day motion about New Zealand butter, but I am afraid that I cannot sign it because the butter workers in my constituency are out of business. I have had letters about the matter. If we are talking about set-aside, can the Minister set aside a little money to compensate those dairy workers for the loss of livelihood? We are always talking about compensating farmers, but the Milk Marketing Board is offering dairy workers the most miserable redundancy money one could imagine. It is diabolical. The trouble with the Milk Marketing Board is that, as it is a farmers' co-operative, it has always treated its workers like farm labourers. It is time that the Government gave some thought to helping those people who will be made redundant by the common agricultural policy and this decision.

There is a factory which was once efficient but is now a blot on the landscape in my constituency. Is there an opportunity to get money from the CAP to convert that factory into a food-processing factory? If that is not done, it will be an insult to the people of Carlisle. I should like in a year's time as many people to work in that factory producing a food product as there were working there before the redundancies.

Photo of Mr Paul Marland Mr Paul Marland , Gloucestershire West 9:15 pm, 15th February 1988

In recent years, whenever there has been a summit on the skyline, the farmers have trembled at what may come out of it. The speech of the hon. Member for Carlisle (Mr. Martlew) will make them tremble even more. His idea of trying to supply an improved diet for wood pigeons, with no recompense to the farmers, would put all of them out of business in one season.

Photo of Frank Cook Frank Cook , Stockton North

It is a grain of sense.

Photo of Mr Paul Marland Mr Paul Marland , Gloucestershire West

That must be recognised.

When I say "farmers", I mean the farmers about whom we are all concerned — not the agri-businesses that operate on grade 1 silt in East Anglia. The traditional farmers on the poorer soil are facing the most difficulty. They are being told repeatedly that they must produce less and produce more cheaply. They wonder, rightly, where it will all end and whether there will be any safeguards for them and their families and for those who work in the ancillary industries. Euro-economics is in an unbelievable muddle with far too much money going into the wrong hands.

What is the result of this policy of levies, price reductions and green pound imbalances? It is impoverishment and sacrifice for certain for those on poorer land and for all but the most well-financed. Pressure on price to reduce output is obviously the most efficient method to cut reduction, but it is socially unacceptable.

I was pleased to hear my right hon. Friend the Prime Minister say this afternoon that she wanted reasonably prosperous farming. Short-term expedients have allowed politicians to tamper at the edges with the CAP and completely wreck it. Thank goodness, last week-end we had some direction and sanity as to the future. I congratulate my right hon. Friend on her efforts, for at last farmers can begin to plan for the future. They know that our partners in Europe will be bound by the same rules as we are. All too often the farmers in this country have thought, rightly, that member states on the other side of the Channel have been bending rules to their advantage.

Let us return to basics. As others have said, the European Community was intended to be a single tariff-free trading area — a single European market. The problem is that we do not have a single European market. Fortunately, we are working towards that in 1992. It is disgraceful that so many British farmers should have to trade in the face of such unfair competition because of green currency variations. The pig industry well reflects that point. All those who are involved in the pig business know that the industry is cyclical, but there is no doubt that the depression this time is deeper and more serious than for many years. It is true that the Dutch and the Danes are operating and exporting their production to this country with a £60 a tonne advantage—an advantage to them of £60 a tonne and a disadvantage to our farmers when they seek to export.

Photo of Mr Christopher Gill Mr Christopher Gill , Ludlow

Does my hon. Friend agree that it is difficult for pig farmers to appreciate the difficulties that they find themselves in when, on the one hand, they are batting on an unfair wicket against foreign competition, yet, on the other hand, they see grain surpluses building up in this country which an additional 4 million pigs would help to absorb?

Photo of Mr Paul Marland Mr Paul Marland , Gloucestershire West

My hon. Friend makes a good point. I was about to plead with my right hon. Friend to make available grain in intervention so that farmers and others can take it out in small lots. At present the minimum lot that anyone can remove from an intervention store is 100 tonnes. Pig producers in my constituency tell me that it would be a great help if they could have access to grain in smaller lots. As the price of intervention grain is to be depreciated, it would be a great help if pig fatteners and others could have access to the grain in smaller lots.

Quotas in the dairy industry have successfully cut the output of dairy products. It is good news that butter in store in the past 12 months has decreased by 39 per cent. When we introduced dairy quotas, why did we say that those with a quota of less than 200,000 litres would be exempt from any further reductions? I understand that in 1988, when the 2·5 per cent. quota reduction is introduced, it will also apply to small dairy farmers. Why has there been that change of mind? I should be grateful if my right hon. Friend would touch on that in his reply.

Dairy quotas have undoubtedly reduced the output of milk and dairy products, and cereals and oil seed are undoubtedly the bugbear of the CAP today. The last time I spoke on this subject I advocated national quotas in order to share out the pain equally, for there is no doubt that quotas restrict output. We see that with milk, sugarbeet and potatoes. I accept that I have lost the battle to introduce quotas on cereals. Since then we have had price cuts and co-responsibility levies, which are again to be extended, but they have never reduced output. Co-responsibility levies are simply a soft option for European bureaucrats to raise more money. They are simply a political fiddle.

Now the new arrival on the scene is stabilisers. Price cuts are to follow the year after a surplus and I dare say that they may work. It is an ingenious but complicated way out of the problem with all this interlinking of price reductions, levies and goodness knows what else. Nevertheless, it will not reduce the surpluses. Against that the farmers are ever set on growing more if prices are reduced. They are assisted in that by plant breeders who reckon that they can improve output by 2 per cent. per annum, as a result of studies in plant pathology, by increasing the output from each acre. Stabilisers will have only a small effect on reducing output and will not achieve our aim.

In the past farmers have been urged to diversify into other enterprises to reduce their dependence on cereals. They have gone into bed and breakfast, growing borage and evening primrose, and some have even planted vineyards. This week's Farmers Weekly tells of a farmer's son who has gone into chopping pasta in Guildford. All that is enterprising, but can only be described as exotic at its best.

What was CAP originally designed for? Among its basic aims was to put money into rural communities, so farmers and those living there should have been the beneficiaries. But that most certainly is not what is happening today. The beneficiaries of today's CAP are store keepers and Russian housewives. Between 50 and 60 per cent. of the CAP is spent on storing and disposing of surpluses. Russian housewives are enjoying a subsidy from European housewives of £60 a tonne for every tonne of grain exported from the Community to Russia. As Opposition Members have said, why should our families pay £10 a week to subsidise Russian housewives? The money is not going to rural communities. I believe that we should rearrange things to ensure that it goes to such communities in Europe, not in Russia.

I welcome set-aside and am pleased that we have moved in that direction, but we must make it work. In 1988 I believe that we have a golden opportunity to introduce set-aside at minimal cost to the overall budget because less money will have to be spent on storing and disposal. Our stores are now emptier than they have been for many years. The prospects for the 1988 harvest are not that great. Those of use who are involved in farming know that we have had an incredibly difficult autumn — the amount of autumn planting has been extremely low in comparison with previous years—and I do not believe that we shall have a monster harvest in 1988. Therefore, we have a golden opportunity to divert money into set-aside rather than to the store keepers and the Russian housewives.

If we have a successful set-aside it will remove the need for stabilisers because we will not reach the targets. Unlike others, I believe that the set-aside should be voluntary rather than compulsory. I also believe that set-aside should be generous so that farmers queue up to take it. I believe that it should be £150 an acre at least. Farmers would then come forward and take the land out of production. If such a rate was set, I believe that we would have a queue of farmers from here to Exeter waiting to take advantage of it.

As regards all the land in marginal areas being taken out of production, I believe that those who organise the farmers who will be eligible for set-aside can plan where production should take place. Therefore, it will not only be the farmers in the north or in the marginal areas who will take advantage of the set-aside. I accept that set-aside is a form of quota, but I believe that it gives great flexibility to our planners. The costs would be fixed once the amount to be set aside had been established. I urge my right hon. Friend to consider seriously the possibility of making set-aside a great deal more interesting for our farmers.

Photo of Margaret Ewing Margaret Ewing , Moray 9:27 pm, 15th February 1988

I followed with great interest the arguments of the hon. Member for Gloucestershire, West (Mr. Marland) about the need to protect our rural communities. It will not surprise him to discover that I wish to devote a substantial amount of my speech to the Scottish rural community, especially as I am the only hon. Member representing a Scottish constituency who has sat through this debate.

I wish to draw attention to some particular Scottish statistics that are measured separately from those for England and Wales. They will place the Scottish position within the context of this subject. In the past decade Scottish net farm incomes have fallen by one third, and that is set against the background of rising interest charges. The overall pressures on the Scottish agriculture industry have been particularly harsh. Investment has fallen substantially — by 17 per cent. in building and ancillary additions to farms, and by 6 per cent. in plant and machinery. That reduction has an overall knock-on effect for the rural community. It deprives youngsters of the opportunity of taking apprenticeships in, for example, agricultural engineering, and it drives more and more people away from the rural communities into the towns, and it is not as though there are presently many jobs in those towns.

Moray is placed within the Grampian region for local authority purposes, and about 30 per cent. of the region's output is totally dependent upon agriculture. If there were a 20 per cent. reduction in farm employment in the region, 3,500 people would be seeking alternative employment. That demonstrates the importance of agriculture to that region.

The various issues that have been touched upon in the debate have similar effects in Scotland as in England and Wales. Every farmer I speak to emphasises the need for the devaluation of the green pound. The Scottish NFU has pointed out that a 10 per cent. devaluation of the green pound would result in less than a 0·5 per cent. increase in the cost of living. I believe that that is a small price to pay to ensure that our farming communities can compete effectively, efficiently and fairly with their opposite numbers.

Much has been said about the set-aside scheme for the cereals sector, but other aspects of the farming industry that are dependent on the cereals sector are crying out for help. The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) referred to the poultrymeat and egg industry, and I agree with what he said. I should like to refer also to the pig industry. Some 50 per cent. of Scottish pig production is based in the Grampian region, and the producers are facing bankruptcy. The industry is based historically in Grampian because of Lawson's of Dyce, which was a major employer until it moved south. The farmers there wish the industry to continue. They are angry that Holland will be importing 22 million tonnes of cereal replacer over the next five years, while we are being asked to set aside. That seems strange to them. They are left at a disadvantage, particularly in competition with the Dutch producers, which is unfair. The Minister has mentioned that in previous debates. I hope he will say that he will take steps to eradicate that unfair competition, and particularly that he will bring about the early abolition of MCAs, to ensure that the pig industry has a future.

Photo of Mrs Gillian Shephard Mrs Gillian Shephard , South West Norfolk 9:31 pm, 15th February 1988

People in my constituency of Norfolk, South-West, not all of whom farm on grade 1 soil, are realistic about the necessity to reform the CAP and to tackle the problem of surpluses. Our farmers are business men who, like any business men, want a framework in which to plan their future, in which to plan for perhaps reduced outputs in some crops and diversification to others, but above all the opportunity to compete on the fairest terms possible within the European market place and beyond.

The settlement that was announced this weekend moves towards the provision of a framework in which our farmers can work. The legally enforced regulations, provided that they work effectively, will be popular with our farmers, who for some time have been under the firm impression that only British farmers have been keeping the rules, especially with co-responsibility levies.

I know that I must be extremely brief. I should like to have talked about non-agricultural use of land and biotechnology, but I shall confine myself to some remarks about the pig industry. If farming is in crisis, it is most in crisis in the production of pigs.

As other hon. Members have said, it is a cyclical problem, but since the previous crisis in 1983 the industry has done an enormous amount to put its house in order. It does not benefit from direct support, such as intervention price, but producers have studied the market, produced pigs that the market wants, have not over produced, in contrast to their Dutch competitors, for example, and above all have developed their marketing.

I think that nobody has mentioned marketing in the debate. Perhaps no one else present in the Chamber visits supermarkets and butchers as I do, but over the past couple of years I have been struck by the evidence in the retail sector of the industry's determination to market pork attractively — not just joints, but fillets, kebabs, stir-fry, spare ribs, casserole pork and lean pork steaks. That is a good example to producers in the other meat sectors. The pork producers have also cashed in on the healthy eating fashion by demonstrating the many uses of lean pork.

The industry has been assiduous in developing its export markets. A supplier in my constituency has negotiated excellent outlets in Japan and the United States. However, all those efforts have been defeated. Why? Because our producers are being forced to compete against the Dutch, Danes and French, who are able to export their pork to us with a subsidy provided by favourable MCA rates, while our producers have to battle against an export tax from unfavourable MCAs. In effect, our taxpayers are spending £5 million a year to help the Danes, Dutch and French put our pig producers out of business. That cannot be right, and it is not good enough.

I know that my right hon. Friend is fully aware of the problem. I know that he is determined to move to an early abolition of MCAs, if possible. I know, too, that the short-term private storage aids will give temporary relief, but pigmeat MCAs should be abolished as soon as possible, otherwise our producers will be forced out of business, only to have their place in the market filled by more imports.

Our farmers are efficient, well organised and ready for change. Like my right hon. Friend, they know that their best interests are to be served by an orderly and sustainable change in agricultural policy. Moves towards the abolition of MCAs and a devaluation of the green pound will enable British farmers to compete fairly with our neighbours, and we must strive to give them that chance.

Photo of Dr Alan Williams Dr Alan Williams , Carmarthen 9:36 pm, 15th February 1988

The common agricultural policy brings the European Community into disrepute. If one could hear the call of people in the street, I am sure that an overwhelming majority of them —more than 90 per cent. of the electorate — would be hostile to the CAP. It is nonsense. Food prices and the guaranteed prices of intervention for most products are up to 40 per cent. above world prices. The regulations involved in the common agricultural policy are complex and difficult even for experts to understand. As an hon. Member representing a rural constituency with an interest in agriculture, I can assure hon. Members that the regulations are difficult for ordinary people to understand.

The cost of the CAP, as we have heard, is £19 billion or £20 billion. That amounts to about 40 per cent. of the value of the products. The extent of the subsidy is horrific. The public are well aware of that. What makes it particularly ugly is the fact that most of that benefit goes to farmers who are already rich, while small farmers are still being driven to the wall. The pricing mechanism is wholly based on production: large farms with large outputs receive a large subsidy, whereas small farms with smaller outputs are under great pressure.

The CAP is drastically in need of reform, and we had hoped that the Prime Minister would have achieved something worthwhile for the people of this country last weekend. Instead, she caved in to the French, the Germans and the other members. I shall give only one figure to show that — for expenditure on the EEC next year. The proposal was for an increase from 1·4 per cent. of the VAT base to 1·4 per cent. of GDP. In the circumstances, the Prime Minister settled for 1·2 per cent. of GDP. In today's statement she acknowledged that that was a 25 per cent. increase in our contribution to the Community next year. We challenge that figure. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said earlier today that the real figure was an increase of at least one third. My own calculations put it nearer 40 per cent. Even if we accept the Prime Minister's figure, there will be a 25 per cent. increase in our contribution to the European Community next year.

What other sector is receiving a 25 per cent. increase? Will our Health Service or our education service receive that much? Our pensioners will receive only an inflation-linked pension with no real increase, yet the Prime Minister bends the knee to the European Community and allows this phenomenal increase.

Let us compare the amounts allocated to the Health Service and the EEC. The cost of the CAP—we have heard it several times this evening—is about £10 a week for every family in Britain. The cost of the National Health Service, as we have heard the Prime Minister say dozens of times over the past few months, is about £20 per family per week. I am sure that if there were a referendum on scrapping the CAP and giving the money to the NHS it would carry a 90 per cent. — or higher — majority. [Interruption.] That is what the majority of the British electorate feel. With the CAP, we are pouring money into a virtually bottomless pit. The Health Service is desperate for resources.

There is agreement throughout Europe that we must dramatically reform the CAP. I give a cautious welcome to stabilisers, even though the Prime Minister again made a major concession by raising the amount from 155 million tonnes to 160 million tonnes. I represent an area with a strong dairy farming interest. When milk quotas were introduced there was a 7 per cent. cut right across the board. The agreement that has been reached is much softer on cereal farmers than the agreement on milk producers a few years ago.

As to set-aside, I cannot but feel that there is something fundamentally immoral about not using land. The problem is that the CAP tries to treat the symptoms, but that results only in problems and absurdities such as growing tomatoes and then subsidising farmers to plough them back into the land. Set-aside is an illogical, immoral absurdity. In effect, it means that we are paying rich farmers for doing nothing. I do not believe that we should pay anybody anything for doing such things.

Farming, through the subsidies, has experienced that sort of feather-bedding for many years. As the Government acknowledge, difficult times lie ahead for farmers. When the recession hits agriculture, the broadest backs that have been doing so well should carry the burden. Small farmers should be protected. We must protect our rural communities and the social structures within them.

We must reform pricing mechanisms and productivity restraints which discriminate against small farmers. When milk quotas were introduced in Germany there was a threshold below which there were no quotas. That helped to protect small farmers. The same should apply to all other pricing mechanisms and quotas. We must protect small farmers to protect our rural communities.

I represent a Welsh-speaking area where the Welsh language is under severe threat. The Government's policies, with milk quotas being applied across the board, are driving small farmers out of business. That poses a strong threat to the Welsh language, to rural schools and to community life. The small farmers who look after the countryside best are being driven out of business. It is large farmers who are bulldozing hedgerows, spraying pesticides and pouring masses of fertiliser on their fields. Small farmers enjoy a much more harmonious relationship with the environment.

It is ironic that the CAP was introduced to protect small farmers. However, it has been perverted. It is guaranteeing fortunes for the very rich and is driving small farmers to the wall—the trend is relentless.

We need a redistribution of income right across the board in Thatcher's Britain in the 1980s. Rich farmers have had it too good for many years. We should take income from them and, through pricing mechanisms and production restraints, use that money to support small farmers and rural communities. That is what I would describe as a Socialist agriculture policy.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food) 9:45 pm, 15th February 1988

I carefully checked the constituency of the hon. Member for Carmarthen (Mr. Williams) because it seemed almost unbelievable that he should represent a farming constituency when we heard his mixture of comments about the common agricultural policy. If we followed his proposals, very few of his farming constituents would be able to pay the bills at the end of the week.

I was sad that the hon. Member for South Shields (Dr. Clark), who opened the debate for the Opposition, used the sort of quotations that can be seen outside London theatres — a few odd words from the middle of a newspaper statement, intended to encourage people to go to see the play. What the hon. Gentleman might have done was to look at the foreign press. If he had done that, he would have seen what our competitors thought about the results of the summit. I quote but one, Le Figaro which is after all a French newspaper. [Interruption.] It is evidently a very pro-British newspaper. Let us hear what it says about the decision: To assert that the victor of the Falklands has given way is a sign both of a slight unfamiliarity with Community affairs and of a failure to appreciate the mettle of the Head of Government of Her Britannic Majesty. That is what that "anti-British" newspaper said.

I feel that it is rather an overestimate of the hon. Gentleman's speech to refer to a "slight unfamiliarity" with Community affairs. The problem is that the Opposition are determined to say two entirely opposite things. On the one hand, they demand that we obtain a price structure that is close to world prices; on the other hand, they complain about the lack of direction, the worries and the low incomes of farmers. They cannot have both at the same time.

The truth is that Opposition Members cannot get by by quoting out-of-date Australian figures about world prices and believing that the farmers will then take their views seriously. The hon. Member for South Shields made it clear that he wanted our agriculture policy to be based on an attitude to world prices involving about £50 a tonne for grain.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

The hon. Gentleman may have misstated his case. He must read what he said. I was very careful. He has not given me enough time to say any more.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

The hon. Gentleman has interrupted on this point on several occasions. If he listens to what I say, I think that he will realise that I am not doing him a disservice. He drew our attention to the £50 a tonne world price for grain, and suggested that the Government would have done a great deal more good if they had come nearer to that price. But that would not do our farmers any good whatever.

My hon. Friend the Member for Norfolk, North (Mr. Howell), in his fine defence of the farmer, made it perfectly clear—

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

The hon. Gentleman knows perfectly well that he has already answered my point. I am now answering his point. He also knows perfectly well that I have 13 minutes before the end of the debate, and I intend to answer the comments that have been made.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

The hon. Gentleman does not like what I am saying; that is why he says what he does.

The hon. Gentleman went on to say that in the proposals for set-aside farmers would be paid for doing nothing. He knows that that is not true. Farmers will be paid for looking after the land, and there are various forms of set-aside that we are seeking to implement. My hon. Friend the Member for Congleton (Mrs. Winterton) suggested—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. If the Minister will not give way, I am afraid that the hon. Gentleman cannot intervene.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. It is not a point of order. I think that the hon. Gentleman is distressed about something—

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. Every right hon. and hon. Member makes his speech in his own way, and I have heard nothing unparliamentary so far.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

Order. The hon. Gentleman must give the Minister a chance to answer the debate.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

My hon. Friend the Member for Congleton referred to green fallow. As she rightly said, this is a very new proposal and all the details are before us. She may have misunderstood the proposal. The proposal is not that 50 per cent. should be green fallow, rather if a country agrees to have a green fallow system it can pay only 50 per cent. of the rate for bare fallow. That is where the 50 per cent. comes in and my hon. Friend will agree that it is a less worrying proposal than the proposal that she was rightly concerned about.

I must tell Opposition Members, including the hon. Member for Ceredigion and Pembroke, North (Mr. Howells), that it will not help the farmers to suggest that there is no cost in caring for the land. The truth is that costs will be involved in any system. The purpose of set-aside is to ensure that the costs to the taxpayer are not inflated by the production of food that we do not want. The common agricultural policy alone has not resulted in surpluses. There are surpluses throughout the world. Even India and China can export food, something that we would not have thought possible 10 years ago.

We are concerned for the developing countries. I know that the hon. Member for Moray (Mrs. Ewing) will want to consider this carefully. I have heard her speak with gratifying support for the developing countries. However, it is difficult to say that we should exclude from this country agricultural products from all other countries, especially as we are part of a group of nations based on a trading community. This Government could not possibly support such a policy. It would be wholly against any reasonable international trading policy to tell the Thais that they cannot export manioc, one of their major products, to Europe. It would also be against the morality of international policy. It would also be wholly against our national interests because we would not be able to sell to those countries if we were not prepared to buy at least some of their products.

I can assure my hon. Friend the Member for Southend, East (Mr. Taylor) that there is nothing in annex V that adds to any powers that the Commission or the Council possesses at present. Many countries in the European Community want to underline the fact that if the European Community cuts back on its production they will expect other surplus producers which subsidise their farmers to do likewise. We would not wish our farmers to bear the brunt of surplus production and leave other countries to produce surpluses to fill the markets.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

My hon. Friend will forgive me if I do not give way. I have already said that I will not give way in the time left to me.

My hon. Friend the Member for Wealden (Sir G. Johnson Smith) rightly referred to the fact that 95 per cent. of the Government's objectives have been achieved. Perhaps we should consider the horrific situation that might have occurred. If we consider the position of other countries in their negotiations, we realise that this is an enormous achievement. Those who wanted to quote selectively from the newspapers did not continue with the quotation from the Financial Times which said that any attempt to leave this to the next discussion would have been worse for Britain and for British farmers. The hon. Member for South Shields should have paid the House the honour of continuing the quotation.

The hon. Member for Glanford and Scunthorpe (Mr. Morley) referred to pigmeat. I agree that pigmeat is seldom the centre of debate largely because it does not have the same kind of regime as other products. He was right to say that pigmeat producers believe that because they receive so little support—only indirect support in the form of private storage aids—they are often not at the centre of the discussion. However, the hon. Gentleman would agree that the discussions were not concerned about the green pound or MCAs. Therefore, we must consider the decisions that will be made in the price fixing where Britain has always insisted that the decisions should be finalised. The Community is committed to the eradication of these by 1992 and the Government are wholeheartedly in support. We need that if we are to have the Common Market and the kind of competition that we all want so that Britain can succeed.

I agree with the point made by the hon. Member for Glanford and Scunthorpe about forests. We are trying hard, through our recent proposals, to get matters under way. I hope that he will support us in the difficult task of encouraging farmers to see that forestry can be one of the jobs and that woodlands can be a crop. It is not an easy change to make and I hope that the hon. Gentleman will help us.

I wish to make one point to my hon. Friend the Member for Congleton. We made it clear that we intend to fight for the interests of British sheep farmers, and those battles will continue to ensure that the sheepmeat regime will meet their needs.

We should forget the argument about the wood pigeon put forward by the hon. Member for Carlisle (Mr. Martlew) because it will not go down well with his farming constituents.

Photo of John Gummer John Gummer Minister of State (Ministry of Agriculture, Fisheries and Food)

No, I shall not give way. There are many farmers in the hon. Gentleman's constituency who shop in Carlisle, but they will not have much with which to shop if he pursues his wood pigeon policy.

The hon. Gentleman also suggested that, if we allowed sugar to come in from Jamaica, we would have cheap food. It is one of the great triumphs of the CAP that we pay to those who produce sugar in Jamaica a similar sum to that which we pay to those producing sugar in this country. That is one of the ways in which we support the poor economies of many West Indian countries. If the hon. Gentleman is suggesting that we should cut the price that we pay for sugar to some of the poorest people in the world, that is not the way in which I want to reduce the cost of food in this country.

My hon. Friend the Member for Gloucestershire, West (Mr. Marland) rightly said that co-responsibility levies are not the answer to the problem. They are, in the inimitable language used by successive Ministers of Agriculture, a load of old rubbish. We should much prefer not to have them as part of the stabiliser mechanism, but we have ensured that they are a much less important part than the price reduction section of that mechanism and that they are a considerably less important part than other European countries, particularly West Germany, wanted them to be.

We have also ensured that co-responsibility levies do not contain the particular trick sought by some other countries, which would have meant that the major part of the cost of the co-responsibility would fall on the backs of British and French farmers and very little upon the backs of German farmers. I agree with my hon. Friend the Member for Gloucesterhire, West that, as in any negotiations, although we have not done all that we should have liked, we have done a great deal more in respect of co-responsibility than anyone would have thought possible before those negotiations.

I have taken the points made by the hon. Member for Moray (Mrs. Ewing) about the problems of smaller farmers and those on difficult terrain. I hope that she will help us to convince Labour Members that the proposition in respect of set-aside will help smaller farmers as well as larger farmers. I hope that she will also help us with our propositions for diversification. She has already raised with me the problems of crofters. I am not ignoring those and, as she knows, I have put those matters to my colleagues at the Scottish Office. Our ideas for diversification are designed to make it possible, not just for those with larger amounts of land, but for those with smaller incomes, to find alternatives. We need to find those answers together. The answers do not lie in further production. Over-production is the result of technical advance, not of any particular system of farming support. Every country must consider and deal with that.

My hon. Friend the Member for Norfolk, South-West (Mrs. Shephard) rightly emphasised that fairness is a crucial part of acceptability. That was why we fought so hard against the unfair policies proposed in the sheepmeat stabiliser regime. That is why we are pleased to have got out of it that headage limit which would have distorted it. I hope that she will agree that we must be fair in that regime, as in others. It would have been odd if we had asked for stabilisers for all the other regimes but not insisted on one in the sheepmeat regime. My hon. Friend is right to press the fact that the pig industry, of all industries, depends greatly on the rate of the green pound. That is why we are committed to the phasing out by 1992 of the differences that make for that unfairness.

Altogether, the proposals from Brussels mean that, for the first time, we have a clear budgetary ceiling on spending on the CAP.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.