If we have five-minute speeches from hon. Members—I have no way to impose such a request—most of those who wish to speak will be called. If we cannot have five minutes, may I ask for speeches of no more than 10 minutes today?
The Order Paper lists a number of documents which have been recommended by the Scrutiny Committee for consideration by the House. These relate to the stabilisers, set-aside of agricultural land, cessation of farming and the price fixing. I shall endeavour to cover all these in my remarks. Most of the measures flowed from the European Council agreement in February, which was the subject of considerable discussion in the House during the agriculture debate on 15 February, immediately following the summit's decisions. The regulations were then the subject of considerable negotiation in the Agriculture Council, and were eventually adopted on 25 April. As they were not substantially changed from those that we debated in February, I hope that the House will forgive me if I refer to them fairly briefly.
Document 5004/88 concerns the implementation of the stabiliser for wine, which was also part of the February agreement. We had an intense negotiation on the details of that provision at the March Council, and the regulation has not yet been adopted, as the opinion of the European Parliament is not yet available. Therefore, I will bring the House up to date on that in more detail.
Of course, the price-fixing proposals are highly topical. The Agriculture Council has had two discussions on these so far, but at this stage they have been only very general —the opening skirmishes, so to speak—with broad positions being outlined. The detailed negotiations will begin in earnest after the French presidential elections, so this is a highly appropriate time for the House to debate the subject.
That is a large enough menu, but as Mr. Speaker has just implied, this is one of the major agriculture debates of the year and I hope that the House will agree that it would be appropriate for me to refer to other matters which are of great importance to our farmers and hence, in one sense, inextricably bound up with the documents before us.
First, some general but fundamental comments bear repeating. I am well aware of the pressure on farm incomes. That aspect has been drawn attention to in recent debates by my hon. Friends—though I am not sure that those outside agriculture who freely comment on the protected, so-called comfortable position of farmers, as they put it, are equally aware of it. The fact is that since 1977, farm incomes in general have declined by some 50 per cent. in real terms.
The latest farm income publication just published by my Ministry is a mine of information. It gives not just the aggregate position, as did the White Paper published in January, but data for farms of different types around the country. Therefore, we have a very thorough and detailed picture. Also given are figures from a survey of Inland Revenue returns which cover the total income, as assessed for tax, of those who farm. As they deal with actual incomes, it is useful and important to consider them.
Those figures show that in 1983–84, about 68 per cent. of farmers had incomes of less than £10,000; about 24 per cent., between £10,000 and £20,000; and about 8 per cent., above £20,000. Only about 50 per cent. of total income to farming households was derived from farming alone. The rest of their income came from other businesses, other jobs, investment income, and so on.
By no means all farmers can supplement their income from the farm to a significant extent by having other jobs, so many of them have low incomes. Indeed, the figure for actual income purely from agriculture and horticulture revealed in the survey is much lower than that which I have just quoted—and the position has not improved since 1984. For some—such as those in the dairy sector—the figure has improved, but for others it is worse.
We can see that farm incomes really are under pressure, at a time when incomes in most other walks of life are rising in real terms. Many farmers earn what would be regarded as a very modest wage, given the hours of work that they and their spouses put in, often in very bad weather in many parts of the country—as my hon. Friends testified earlier. The paradox is that that pressure is occurring at a time when support for agriculture has been rising significantly.
In terms of CAP support—in other words, mainly taxpayers' subsidies going to commodities—expenditure in this country has risen by 28 per cent. in real terms since the Government took office. That statistic alone belies the accusation that one sometimes hears from hard-pressed farmers that Government support for them is diminishing.
May I just finish the sentence?
That may he a gut reaction by farmers, when they see their income declining. I can understand such accusations, but they are misdirected. The truth of the matter is that those critics are wrong and that it is the other way round.
Will my right hon. Friend make the point that the reason for the apparent disparity is that much of the money paid in support goes to the storers of produce rather than to the producers of food and that only quotas can directly support producers rather than storers?
Quotas have a different effect. They are not a form of support but are an intervention in the market system. I want to describe the situation as I see it, which is not wholly as my hon. Friend has described it. While some element of the subsidy is going to the storers, it is also the case that if one was producing the same volume as is being currently produced, and if that support was withdrawn, then farm incomes would considerably diminish. It works through, in the support that it gives to the farming community as a whole.
As so many wish to speak in this debate, I wish to set the scene and I therefore do not wish to give way too often. I wish to explain how—
No—I must be allowed to get on with my argument.
The paradox of declining farm incomes and increasing subsidies can be explained principally by the fact that farmers are producing more than real markets can sustain. In other words, for part of their production at least, they are unable to meet effective demand at the going price without a significant subsidy to cover their current costs of production. That is another way of drawing attention to the surpluses, which are worldwide, and to the excessive costs to the taxpayer of sustaining them.
Nobody can argue—and no farmer, in his heart of hearts, does argue—that we are getting value for money from excessive subsidies and that they make sensible use of the nation's and taxpayers' resources. That is why I have constantly argued that we cannot bring stability to our agriculture and to farmers until we have dealt with that problem and have contained the sharply escalating rise that has taken place in subsidy support over the past few years. Hence the importance of the stabiliser negotiations and the Brussels summit outcome.
I am often asked what I see as our main policy objectives for British agriculture. I shall briefly restate what I have been saying in the many meetings that I have been holding with farmers around the country. First and foremost, and for the reasons I have just given, we must get supply and demand into better balance and get on top of the budgetary indiscipline in spending on agriculture in the Community that we have seen hitherto, as well as surpluses worldwide. Hence the importance not only of a stabiliser regime but of a successful outcome to the Uruguay talks. Hence, too, the priority and attention that the Government, and Agriculture Ministers, have been devoted to them.
Secondly, we must keep British agriculture thoroughly efficient and competitive, taking advantage of technological change and not halting it simply because of surpluses. To take a Luddite approach and fail to embrace the fruits of scientific progress is not the way in which other industries have become, and remain, competitive in world markets. I want to ensure that our agriculture remains competitive and thoroughly up to date.
Thirdly, it means focusing on the market place in meeting changing and ever more demanding consumer requirements. That means quality and a heavy emphasis on marketing throughout the whole food chain. That is primarily a matter for the industry itself.
Fourthly, it means that we must face up to the fact that more land will have to come out of agricultural production —and, yes, more farmers as well. Hence the importance of our many initiatives to help ease that process, including set-aside. I suspect that that process will be much more painful in some other member states, where there are still vastly greater numbers of very small farmers than we have, and where agricultural structures are well behind ours. It is also worth underlining that the vast majority of land will, after that process, still be used for basic food production, which will remain the primary industry of the countryside.
Fifthly, from the point of view of the rural economy, it is essential to recognise that land is a resource to be managed and that alternative products outside agriculture —alternative businesses and leisure activities—will all have an increasing part to play in providing rural employment and rural prosperity. Many farmers are, and have always been, highly entrepreneurial. Many have already recognised the signs and have been blazing a trail in alternative businesses and diversification for some time. To assist that process, we have introduced the farm diversification scheme, which has had a good response in its first few months.
Sixthly—here I know that I will carry the hon. Member for South Shields (Dr. Clark) with me—the changing agricultural scene provides exciting opportunities to achieve a new balance between farm production and environmental objectives. Hence the ESAs, which have also got off to a very promising start.
All six objectives form a coherent pattern and one which I believe is right for the future of British farming, the rural economy and the attractiveness of our countryside. The various new initiatives we are now pursuing, often taking the lead in the European Community, all flow from them.
I will not dwell on the details of the stabilisers, as we have already debated them twice in the House. I shall confine myself to three points on the stabilisers. First, while we have not gone as far as some people—especially those outside agriculture and in other industries—would like, I hope that no one will be in any doubt about the potentially severe impact of stabilisers and hence the pressure on farmers if production continues to rise.
The severe restraining effect of the oilseed stabilizer—which is necessary in view of the escalating costs and hence incentives to further production of the previous regime —is now well recognised. But in cereals, if Community production exceeds the maximum guaranteed quantity of 160 million tonnes by whatever amount regularly over the next four years, intervention and buying-in prices will automatically be cut by as much as 12 per cent., coming on top of reductions in recent years. Cumulatively, that could mean that by 1993 the common level of support for cereal producers could be as much as one third lower than it was in its peak in 1983–84.
That is a not insignificant reform to undertake. It does of course have its good side for some sectors in our industry, in the livestock and especially intensive livestock sectors, but it is none too soon, in the light of the likely continuing technological developments and the potential worldwide surpluses. I shall have more to say about that later. The point for our farmers is that had we not acted now to get gradual restraint into the market and to curb production, our cereal growers could have faced much more drastic emergency action at short notice later on. They ask for greater certainty and stability. This helps to provide a measure of it.
I find it difficult to understand how it will help our hard-pressed producers if their returns are cut even further when they are below production costs already. And why are we constantly talking down the world price of wheat and saying that it is lower than the price British farmers are receiving, when that cannot be proved? When our millers are paying up to £250 a tonne for American wheat to be delivered to East Anglia, and home producers are getting only about £100 a tonne, how is it in the interests of British farmers for the price to be cut still further? They are in an appalling position already.
The support price will fall if production goes on rising. I beg my hon. Friend—who I know is very interested in these matters—to note that the subsidy costs of the cereals regime have been rising very sharply since 1984. It is unsustainable for the increase to continue at such a pace, especially if it provokes a further international trade war. I should like to say more about that later. One part of the answer must be to take more land out of cereal production. That will be crucial if we are to solve our problems.
The second point on stabilisers is that the wine stabiliser does not affect us as producers, but is of great concern to us as taxpayers, as net contributors to the Community budget and, in some instances, as consumers. A tough wine stabiliser is also important in keeping within the FEOGA budget ceilings. It is therefore very important to the United Kingdom that a tough stabiliser should be achieved in our negotiations, and that outcome has been achieved.
The key point is that the price for obligatory distillation has been set at 50 per cent. of the guide price for the first 10 per cent. of normal production, representing about 10 million hectolitres, and at 7·5 per cent. thereafter. I put that on the record although I know that not many people study wine stabilisers in detail. It represents a cut of over 50 per cent. in the average price paid at present. I believe that it was entirely right to arrange such a tough wine stabiliser, because we were producing surplus wine that no one wanted, and I believe that the package meets our major objective in providing truly deterrent measures against over-production.
I have already mentioned that the wine stabiliser has not been agreed in the Council, because it has yet to be considered by the European Parliament. I know that the House supports the Government in attaching great importance to the need for all the stabilisers to be agreed together. Let me give some reassurance on that point. The Agriculture Council has agreed that any change resulting from comments from the European Parliament would be adopted by the Council only on a unanimous vote.
Thirdly, the new arrangements for budgetary discipline are crucial, and are already making themselves felt. Greater realism has been entering into the discussion of the Agriculture Council for some time, but this is now strongly reinforced by the awareness—in any decisions that we make, but, I suspect, especially at price-fixing time—that the financial guideline has to be respected. All the old loopholes have been closed, and, apart from an allowance for large movements in the dollar, there are no circumstances that can justify exceeding the guideline; nor can the Commission defer expenditure by allowing the build-up of stocks.
A very important provision in the new arrangements—which the Government worked hard to achieve, and which I believe has not been given as much attention as it deserves—is that stocks must be written down to their market value when they are taken into intervention. That means that if stocks were to build up there would be an immediate pressure on the guideline. The Commission and Council have made great efforts recently to run down the mountains of food in intervention, and the new accounting arrangement will be a powerful deterrent to their re-creation.
It is worth mentioning that while the levels of intervention stocks are still higher than we would like, considerable progress has been made. In August 1986, the Community had some 1·4 million tonnes of butter in intervention: over 10 months' supply. By contrast, in February this year the level of stocks was not much more than half that. For skimmed milk powder the improvement has been even more dramatic, with stocks falling from over 1 million tonnes in 1986 to a quarter of that level in February this year.
Cereals stocks have also been reduced, albeit with assistance from two successive poor harvests. Stocks' of wheat totalled over 10 million tonnes in 1986 and are now under 3 million tonnes, and there have also been reductions in stocks of barley and rye. We see similar progress in the United Kingdom on its own, with butter stocks down by 36 per cent. from February 1987 to February 1988, skimmed milk powder stocks down to practically nothing and cereals down by 51 per cent.
Emphasis on the financial guideline takes me straight on to the price fixing. The proposals here follow up the agreements on stabilisers, which of course affect the support levels for many commodities in 1988–89, and the Commission has generally proposed no further changes to price levels. The proposals include a number of related measures, some of which would involve effective reductions in support levels. For two sectors—fruit and vegetables, and tobacco—the proposals put more flesh on the bones of the stabilisers which were agreed at the summit.
We have two major concerns in the negotiations. First, it is essential that we respect the new agricultural guideline of 27·5 becu—£19 billion—for 1988. The Commission's proposals are made within it. We must ensure that the final decisions taken by the Council also respect it. That means that we must carry forward the essential message of the summit: supply needs to be brought closer to real market demand.
There is also a major deficiency in the package on green rates. The Commission has proposed only one green rate change—a 10-point devaluation for Greece. I have made it quite clear that in our view, some devaluation of the green pound at this price fixing is fully justified, and I would like to tell the House why.
In agriculture, as across the whole range of economic activity, we are looking towards 1992 and the completion of a single European market. The Commission last year set the Community the aim of abolishing all MCAs by then. That is essential if we are to have a proper single market without frontier controls, and I strongly support it. It would therefore be sensible—and wholly consistent with the Commission's aim—to take a measured step in the direction of MCA abolition at the current price-fixing.
I have told the Agriculture Council that I find it surprising, and discriminatory, that the Commission proposes a devaluation for only one country—Greece—and makes no provision for a devaluation in the United Kingdom.
Although sterling has appreciated recently, our MCAs remain higher than in any member state except Greece, and are still in double figures for the main crop products. That means that support prices in other countries are higher than ours.
Producers here have recognised the essential need for CAP reform if the system is not to collapse under its own weight. That shows their realism, and I welcome it and am grateful for it. But it would be wrong to ask them to shoulder a disproportionate share of the burden of budgetary restraint. To avoid this we need to start reducing our MCAs now, and I shall continue to press for a devaluation of all products. I well understand the desire for reasonably fair competition—I say "reasonably fair" because, as the Commission document on price fixing points out, there are a whole host of different factors in each member state which in different ways made up the competitive mix, and one cannot isolate any one. I hope that this has made the position clear on the general green pound.
It is worth pointing out that a 1 per cent. green pound devaluation adds only one fiftieth of 1 per cent. to retail prices. The House is aware of the excellent record on food prices under this Government. The average annual increase in food prices since May 1979 has been just under 6 per cent. and the trend in recent years has been steadily downwards. The most recent figures indicate a rate of just over 3 per cent. This compares with an average increase of nearly 16·5 per cent. per annum during the period of the last Labour Government.
What my right hon. Friend has said about the need for devaluation of the green pound will be welcomed by everyone who supports British agriculture, which demands level playing fields, not favourable treatment. What I find hard to understand, and perhaps my right hon. Friend can explain, is why the Commission is so negative and does not seem to wish to produce proposals for making these playing fields level so that our agriculture can compete fairly.
The Commission has produced in its document—it is worth reading, because it is an interesting passage—some explanations of why it is very difficult to establish across the Community for every member state what a level playing field is. I go along with that, because when one looks at any commodity one sees that a whole range of factors have to be considered when trying to establish what is—to use my hon. Friend's words—a level playing field. Obviously it is for the Commission to justify its own price proposals. The Commission is arguing that the proposals that it puts forward come pretty well up to the budgetary ceiling and it feels that it cannot go any further. So this is going to be a difficult negotiation. but I hope that I have made it clear where I stand.
Pig farmers are additionally suffering from a variety of problems specific to the sector which are nothing to do with the CAP but very much to do with straightforward supply and demand in a comparatively free market. On one of the two areas that affect the CAP—private storage aids being the other—I should like to go further. MCAs apply to pigmeat to compensate for differences in the price of cereals between member states. But the calculations take no account of the use of cereal substitutes in the pig ration. The result is that these costs are lower in the Netherlands than in the United Kingdom, yet Dutch pigmeat still receives an MCA subsidy when it comes to the United Kingdom. It is an internal trade distortion; it is nothing to do with support prices, because there is no support price regime, apart from a very small aspect. This means that for pigmeat MCAs produce distortions rather than prevent them.
While our MCAs in pigmeat have already substantially reduced in recent months—I made that point frequently at Question Time this afternoon—and therefore have considerably reduced the trade distortion so that it is now quite small, I am nevertheless still pressing, as a point of principle, for the complete elimination of our MCAs in this sector, although, again, because the Commission has not proposed it and a number of member states would not wish to change the system, this is going to be a very difficult part of the negotiations.
Time does not permit me to deal with each of the commodities, so I will touch only on the main ones. On cereals, the Commission is proposing a general freeze on prices. It has also proposed that monthly increments to intervention prices should be halved, which would reduce support levels by around 2 per cent. this year. As this flows from discussion at the European summit, I am ready to accept the proposal, although I recognise some of its disadvantages, such as that it may encourage putting cereals into intervention earlier in the year. So I would be equally ready to accept any other solution which had an equal effect—for example, a direct cut in intervention prices. We must maintain the momentum of the changes agreed at the summit if we are to bring cereals production in the Community under control.
Some, of course, point to the improving world market for cereals and question whether the problem of surpluses still exists. It is possible that cereals consumption will exceed production in 1988, and the stocks that overhang the world market are falling. But in the past year, with our extremely difficult harvest in the United Kingdom due to weather conditions—as we in East Anglia need no reminding—we still had a surplus, as did the Community as a whole, so that there was a continuing need to export to third countries, with the big cost involved in the export refunds.
We must also have it in mind that in the United States, which I visited recently, under current support programmes some 69 million acres of land is set aside; that is 80 per cent. of the total cereals area in the entire Community. Some 23 million acres of that land is set aside under the conservation reserve programme, which means that such land has to be set aside for 10 years. But the remaining 46 million acres is set aside on a yearly basis, and our set-aside schemes will, of course, go beyond a yearly basis.
That illustrates the massive potential in the world for increased production. It is significant that the United States, in any case, under the provisions of the Food Security Act, plans to reduce the area set aside next year because of the fall in United States stocks of grain. Other major grain-producing countries will not continue to hold back their production if the Community does not maintain its efforts to control its own surpluses.
There is one other major cereals issue this year—the proposal for a cereals incorporation aid, designed to increase the quantities of cereals used in animal feed. It was agreed at the summit that the Commission should be requested to come forward with ideas for increasing cereals usage, and I agree that the more cereals that we could use in this way the better. But any scheme to encourage this must be cost-effective and must not create distortions. I believe that the scheme put forward by the Commission does not meet those criteria, and I have therefore been expressing very serious reservations about it.
I have several reservations, which I cannot cover because of the time factor, but perhaps the most fundamental one is that it seems a peculiar oddity, to say the least, that we are imposing, on the one hand, the cereals co-responsibility levy—which, as the House well knows, I strongly dislike and to which I have frequently expressed objections—which adds to the costs of cereal users, and on the other hand we may introduce a complicated cereals incorporation subsidy to reduce its effect. It would be better not to have the cereals co-responsibility levy in the first place. But that is an argument that I seem to be alone in pushing in the Council. This ill-thought-out proposal reinforces my belief that a reduction in price is the best way of making cereals more attractive to animal feed compounders.
For all these reasons, and others that I have not been able to go into, I am expressing concern about this proposal and will continue to argue—I hope that I will have the House with me—that if our aim is to increase consumption of cereals it is better to cut prices than to increase the co-responsibility levy, because lower prices benefit consumers more directly.
I really must not give way at this stage because I have other points that I must cover to explain the Commission's view and the Government's position on it, and I know that many hon. Members wish to speak.
Dairy products are unlikely to feature very much in this year's price review. I am taking the opportunity to press very strongly for the Commission to come forward with proposals later this year to improve the transferability of milk quotas, including ideas for removing the link between quotas and the land, giving member states more flexibility in the operation of quotas, within, of course, the need to have overall effective production controls in each member state. I should like to see these discussed and agreed in the Council this year so that they are ready for operation in 1989, at the end of the first five-year period of quotas.
I feel that I ought not to give way, because so many hon. Members wish to express their points of view. My right hon. Friend will be winding up at the end and can respond then.
I will continue to pursue my suggestion as I believe that it is highly desirable. Again, it is an initiative in which the United Kingdom is in the lead.
There is one other point on milk that I ought to mention, because it is frequently raised by some of my hon. Friends, who point out that there are occasions when users of milk, particularly manufacturers of cheese, are short of supplies. The point is that it is not that we are short over the year in general if we produce to or near our quota; it is that at certain points of the year, effectively the seasonal trough in the summer, supply falls sharply compared with other times in the year.
So, as we bring milk production into line with demand, the balancing of demands in the seasonal production trough becomes increasingly important. I have therefore urged the Milk Marketing Board to make every effort this year to avoid the problems encountered with the supplies of milk for cheese manufacture last autumn.
The board has advised me that contingency planning has progressed well on three fronts in particular. First, the programme for rationalising butter and powder manufacturing capacity has enabled a substantial reallocation of milk to higher value manufacturing usage. Secondly, manufacturers have been encouraged to make more Cheddar during the peak of milk production; manufacture of hard pressed cheese is currently estimated to be 25 per cent. up on the first quarter of 1987. Thirdly, the board is seeking to reach agreement with manufacturers on arrangements to give a higher priority allocation of milk for territorial cheese manufacture in the July-October period.
The House will appreciate that the extent to which the plans succeed will depend upon the co-operation of both sides of the industry. But I am hopeful that the industry as a whole will fully recognise the importance of avoiding seasonal shortages of high-quality home-produced cheese for which there is a regular and growing demand.
I have explained to the House on previous occasions why I regard a set-aside scheme as an important complement to action on price. It also deals with the general objective of getting more land out of production, particularly arable land. It provides an alternative source of income for those farmers most affected by reductions in Community support. It provides payment for management of the land—this is a crucial point to underline—that will conserve the countryside and preserve the environment for the benefit of the public as a whole.
The timetable is very tight. Member states are now obliged to introduce set-aside for the 1988–89 cereals marketing year. Effectively, that sets a target of 1 July which we must make every effort to meet, although I have made it clear in the Council that for those of us who have to take the scheme through our Parliaments it is an ambitious timetable. The Commission last week completed the drawing up of the detailed regulations and I am now considering with my agricultural colleagues in this country the form of the United Kingdom scheme in the light of these rules.
The views we have received since I issued our consultation document in December have been most helpful and will be taken into account. Once we have completed that consideration, we must have the clearance of the Commission, like all other member states, and then put our proposals before the House. I hope to make an announcement fairly soon. I will, however, make two points now.
First, the Community rules give member states the option to permit set-aside land to be grazed at a lower level of payments. That is now being described as grazed fallow. I was one of those who insisted that this should be optional and not compulsory. I have received divergent views on whether the United Kingdom should take up the option. Factors that will need special attention are the potential environmental benefits from permitting grazing, though there will he environmental conditions for set-aside as a whole; the possible adverse effects of an encouragement to extra production, and problems with administration and control, which are quite severe.
One of the points of which I am particularly aware, and which will be very important in our consideration of all factors in reaching a decision, is the concern expressed by farmers, particularly in the hills and especially by the sheep industry, about the knock-on effects in lowland areas of the pressure on cereal prices and, hence, the implications for hill areas, which often have no alternative to sheep production, if there were a grazed fallow scheme on arable land which might have the effect of expanding sheep production. [HON. MEMBERS: "Hear, hear."] I heard what was said on that point during Question Time and I have heard the response to what I am saying now. I shall certainly be listening carefully to further views expressed during the debate.
Secondly, I want to make one point clear to avoid doubt in the minds of farmers about what land will qualify for set-aside payments. The Commisson rules allow set-aside of land in production in the 1987–88 crop year, provided that the land has not been brought into arable production since the beginning of 1988. The implications of this are obvious for any farmer intending to plough up grassland this year in the hope of benefiting from set-aside payments; that will not be possible.
I should also mention one other element of the stabilisers package, to which one document before the House refers; the scheme for cessation of farming which in fact means early retirement. Member states may take up the scheme if they wish and may offer payments to older farmers taking all their land out of production or amalgamating it with neighbouring farms. I have constantly emphasised in the Council the need to ensure that such schemes do not add to production, and preferably reduce it. We succeeded in getting it confined substantially in that direction, though not entirely so. The scheme will be taken up elsewhere in the Community where there is a large proportion of such elderly farmers, often farming on a small scale. But my initial view is that the scheme is not attractive for the United Kingdom.
I have had to outline many of the points in some detail and I apologise to the House for taking time on that. However, it is important, as this is the first opportunity we have had to show the United Kingdom's general position. I should like to finish on a few quick points of general importance to agriculture, particularly bearing in mind the fact that, as Mr. Speaker said, we do not often have main debates on agriculture.
In horticulture, which has to look to the market for its return, the mood is buoyant. Growers have been able to benefit for the past five years from the very favourable grants for modernising their glasshouses and orchards and these are now beginning to show an effect in keeping our industry capable of producing good quality products economically and performing well in today's competitive conditions.
The new policy initiatives that we have taken on environment and farm diversification, both of which I listed as key objectives at the beginning of my speech, are already producing good results. In the first year of operation of the five original English environmentally sensitive areas we made 1,480 agreements for farmers, covering 35,600 hectares—about three quarters of the area considered suitable for entry to the scheme.
I am delighted to say that in the 1988 application period, which has just closed, there has been a similarly excellent response. Nearly 1,000 farmers have applied to join the scheme this year with land covering some 65,500 hectares. In all, this brings the total to just over 100,000 hectares or 85 per cent. of the area considered suitable for the scheme. That is a success story by any standards and a resounding reply to those sceptics who said that farmers would not be attracted by the ESA initiative.
The farm diversification grants scheme has also got off to a good start in attracting lots of interest. While talking about environmental matters, I emphasise the considerable switch in capital grants that we have undertaken in recent years, cutting down substantially on those grants that assist in the production of agricultural products, thus, of course, adding to the surpluses, and concentrating on grants with environmentally favourable effects.
I simply do not think that the scale of our change has yet been appreciated. The simplest way of demonstrating the impact of our approach is to give the figures. Grants for conservation and effluent prevention work took up 4 per cent. of our total expenditure in 1983 but represent 48 per cent. of expenditure under the current scheme. Grants for production facilities under schemes presently available for take-up have declined from 96 per cent. to 52 per cent. of total expenditure.
This year's Budget has great importance and highly favourable effects for farmers. The most marked is the removal from the tax system of so-called capital gains incurred prior to April 1982, which will exclude the inflation element of land value increases which occurred during the 1970s. That will allow farmers and landowners to unlock the value of their assets, thereby giving many of them the opportunity to reduce their borrowings or reappraise their utilisation of their resources—very important at this time of substantial agricultural change. That is not the only good point for farmers.
Retirement relief for farmers will be extended and the further changes to the inheritance tax system, combined with earlier changes to capital transfer tax under this Government, will make it much easier for farms to be passed on without expensive or complicated schemes to finance the tax payments, the effective tax rate being cut to 20 per cent. Farmers' incomes—along, of course, with those of others—will benefit from the reduction in the basic rate of tax to 25 per cent., the reduction in the higher tax rates and the alignment of the small companies rate of corporation tax to the basic rate.
An important point in this connection is the effect of the reductions in direct tax rates on a point that has frequently been raised by farmers—I want to stress it now—in the context of the changes to the capital allowance system in 1984. Many farmers have pointed out that 90 per cent. of farm businesses are unincorporated, so that, as they saw it, they did not fully share in the offsetting effect, when the capital allowance changes were introduced, of the reduction in the corporation tax rate. The changes in this year's Budget mean that that point, which has often led some farmers to ask for a reintroduction of modest capital allowances for unincorporated businesses, has lost its impact. The average rate of tax for unincorporated farm businesses will now be around or well below corporation tax rates.
I know that the Opposition have supported our environmental initiatives, and I am grateful for that, but a marked feature of the current agricultural scene is how little the Opposition have to say of any value or benefit to farming.
The hon. Member for South Shields and his hon. Friends sometimes try to make something of a point about the pressure on farm incomes. We all understand that—none more so than me, and I have already commented on it at length. But it is somewhat of a pointless comment, because the hon. Gentleman has made it clear that he fully supports the CAP reforms for which we have been successfully striving, and I am grateful for that. As I have constantly stressed, these are necessary for the long-term stability of British agriculture; but it is certainly these that are putting the pressures on farm incomes so the hon. Gentleman and his party have nothing to offer in that respect.
In cases where they have something different to say, the impact of the Opposition's policies will be extremely unfavourable for and unhelpful to farming. They have already opposed the basic and higher rate tax changes that we are making, and presumably will oppose the capital tax changes, too. We have just incorporated in the Local Government Finance Bill—in the primary legislation—the exemption of agricultural land and buildings from our replacements for rates. The Labour party voted against the amendment and so would be imposing a very heavy additional financial burden on farmers if it got the chance. The hon. Member for South Shields certainly made it clear earlier that he opposes any changes in the green pound and MCAs, which farmers consider to be so important to their competitive position at present—and he nods now.
The Labour party clearly has nothing to say of any value to farmers at the present time. It is our policies that deal directly with the current problems facing agriculture. Those policies are working for a more sensible system within the Community and a more stable long-term basis for agriculture, and will ensure the continued success of British agriculture in the changing market place, the right balance between agricultural and environmental needs in the countryside and a prosperous rural economy. I commend them to the House.
This is an appropriate time for the House to be debating agriculture. As the Minister rightly pointed out, we do so as the Council of Ministers and the Commission are beginning their haggling over this year's price level. We do so as an important conference takes place here in London on world agricultural trade, and at a time when British agriculture is in considerable disarray.
I welcome the debate, although I feel that the juxtaposition of a discussion of the detailed Commission proposals and a debate on the state of agriculture in this country is not a happy one, because it means that many points with which I am sure the Minister would have liked to deal have gone without mention. I fully understand that. The Minister introduced the debate in his normal urbane and civilised manner, not surprisingly praying in aid on occasion the fact that he was involved in negotiations and therefore could not elaborate as he might have wished. We understand that difficulty but, equally, we feel that there are many points that we have the right to raise with him, and I hope that we can persuade him and his right hon. Friend to be a little more forthcoming later this evening.
I took the Minister's comments at the end of his speech in the spirit in which they were made. They were fair political points. There are differences of opinion between us, and we must acknowledge that. However, it is also important to stress that Opposition Members believe in British agriculture. We are prepared to support British agriculture, and we believe that in the long term our approach is more for the benefit of British agriculture than might appear from the Minister's comments.
I deal, first, with the point about the long-term benefits to British agriculture. I emphasise that we are beginning to witness the real costs of the Prime Minister's capitulation at the summit in Brussels. [HON. MEMBERS: "Oh, no!"] I know that Conservative Members object to that. There is a fundamental difference between us. Opposition Members believe that the Prime Minister lost her bottle; that she got frit, to use her word, and as a result threw away our bargaining chip. We shall not get another one probably for another five years. In the intervening period we must muddle along, trying to reform the CAP as best we can. The Prime Minister had always been regarded in Europe as a tough negotiator. Now that her bluff has been called, the task of wringing changes out of our European partners will be much more difficult. Her tough image is irreparably damaged.
As we contemplate the immediate future for British agriculture, we begin to notice the costs of the Prime Minister's concessions—costs which the Minister himself acknowledged. He repeatedly said, in effect, that arrangements had been agreed at Brussels and that we had to accept them as agreed at the summit meeting. He is quite right. All the stabilisers were agreed in principle as they lay on the table at Copenhagen at the previous summit. There had been no real debate about them previously. They were not discussed because people did not feel that they would be taken on board. We have had to take the shortcomings of the stabilisers on board without any real discussion.
I believe that if the Minister of Agriculture, Fisheries and Food had been at Brussels at the side of the right hon. Lady we should not have got into the mess that we are in at the moment. The Minister has the unenviable task of trying to pick up the pieces and make sense of the reform of the CAP. He has to do that from a very weak bargaining position. He has admitted time and time again that when he has wanted changes in the agricultural scene he has been on his own. He has lost his bargaining power. We had a bargaining chip at Brussels, but we threw it away needlessly.
I have made a number of allegation and perhaps it is incumbent on me to justify my criticisms of the CAP.
Perhaps the hon. Gentleman will make a sensible speech and get back to his proper form. No doubt this is a bad patch. What is this marvellous bargaining chip, and who supports him, apart from one or two of his hon. Friends?
If the hon. Gentleman had not been so quick to jump to his feet he might have heard a sensible speech, and I hope that he will stay and listen. If he has not realised that the CAP—and the European Community—was bankrupt at Brussels, there is nothing that I or anyone else can do to get it across to him. It is as simple as that.
If the hon. Gentleman is unhappy and believes that the common agricultural policy was bankrupt in Brussels, why does he not accept that stabilisers were the answer? For example, without the single sheepmeat stabiliser we would have lost our variable premium, which would have been absolutely catastrophic. What is wrong with the stabilisers as an answer if the CAP was going bankrupt?
On a point of order, Mr. Deputy Speake. Do you now permit an hon. Member to whom the hon. Member who has the Floor has not given way to speak while that Member is still on his feet? Is that another of the double standards that are creeping into the House?
If the hon. Lady was present at previous debates—I accept that she must have been: I am sorry that I missed her—she cannot have been listening. The Minister will acknowledge that we have accepted the concept of meaningful stabilisers. We are critical of the operation of some of the stabilisers, and I want to explain why. We believe that they will harm this country's agriculture and the incomes of many of our less well-off farmers.
I was criticising the CAP because as the cost escalates the position becomes even more farcical.
The situation has deteriorated so far that total public resources spent on agriculture through the Community and national budgets have reached a level which even not counting social security transfers, is now practically equivalent to the, net income of the sector.
That is a damning comment, but I am afraid that I cannot claim credit for it. That view comes directly from the Commission itself, in volume 1 of its proposals on pricing for agricultural products in the coming year.
To rid it of Euro-jargon, it means that agriculture is highly subsidised, to an extent that could not even be contemplated in any other sector of industrial activity, in this country or elsewhere in Europe. It is a damning comment that the amount of public support for agriculture, through the Community and national budgets, is practically equivalent to the net income of the agricultural sector. That is a serious indictment, which we must address. We put forward our points of view today against that background.
The hon. Member for Dumfries (Sir H. Monro) says, cynically, that that information is revealing. I accept that. The key point is that people in this country do not realise it. We do well to remember how much of our money and the money of our constituents goes to support the agriculture industry.
How can the Minister justify this situation? How does he advise us to explain to our constituents, who may have been miners, shipyard workers or steel workers, that it is wrong to subsidise their industry, but right to subsidise agriculture to this extent?
Conservative Members ought to listen to this. I accept that it is right to give some subsidy to agriculture, because the industry is vital to this country in more ways than one. Equally, I submit to hon. Gentlemen that the same argument can be made for the coal and shipyard industries.
No. I have given way twice already. I shall follow the lead of the Minister, as I have a lot to say. It is better that I make my speech and hon. Members then seek to catch your eye, Mr. Deputy Speaker, and make their own speeches.
Can the Minister tell us how we can justify the present system to farmers who receive only a third of agricultural support? The key factor is that a grossly expensive agricultural support system does not reach the farmers, who are at the sharp end. Only a third of the money goes to farmers, and the rest goes to storage and the likes of export restitution. How can the Minister defend that system and not seek a radical reform? The question is unanswerable.
I wonder where the Government stand on this issue. I listened very carefully to the Minister and though that I heard some indications. Did I detect a shift in Government policy for agricultural support? I listened carefully to what the right hon. Gentleman said today about the markets. I even listened to the philosophical guru of the agricultural Benches, the hon. Member for Calder Valley (Mr. Thompson). All his references at Question Time today to market forces got through to me. They burnt through to my soul. I thought, "Aha, perhaps there is a shift in Government policy. Perhaps they are moving away from almost unfettered support for agriculture." Are the Government really thinking of removing or reducing financial support for industry?
I read with great interest a speech made last week by the Minister of State, Ministry of Agriculture, Fisheries and Food at the annual dinner of the Grain and Feedstocks Association. He made some revealing comments to that august group. He is reported as saying that price cuts were his preferred option to reduce surpluses. How does that square with the Government's policy on the devaluation of the green pound, which is a price increase for farmers, rather than a price cut? The fundamental message in his speech came when he provided some insight into the Government's thinking on the reduction of intervention in the farming industry. He made the point that government was best when least obtrusive and involved. His general conclusion was that farm support ought to be reduced.
Further confirmation of that change in Government policy came yesterday from the Economic Secretary to the Treasury. I believe that the Treasury has some influence in these matters. The Minister was arguing that the experience of the deregulation of transport, financial services and mining in Britain had stimulated growth. He argued that deregulation could have a similar effect for agriculture.
It is fair to ask the Government at this early stage whether they are really contemplating a U-turn on agriculture. Because so many jobs are involved, and the lives of so many of our citizens will be affected, is it not time for the Government to come clean and start an open debate on the matter?
We on the Labour Benches would approach any rethinking on agricultural policy in an open and positive manner. I make that offer to the Minister. There is much at stake. It makes a lot of sense to strive for a policy based on common and agreed principles. If we could get consensus on some basic issues of principle, we might take the debate a stage further. Therefore, I ask the Minister to give us a little more information about his thinking on these matters. As he pointed out at the beginning of his speech, public subsidy to agriculture is increasing all the time. He gave a telling figure of 28 per cent. in the past few years. He used it for a different reason, but I use it in this context, too.
Continuing the theme of finance, I shall consider the cost of the CAP to the consumer. It is worth repeating it to the House, with all the legitimacy of a Treasury document to back me. It was issued and distributed at the time of the NFU conference, and it said that it cost the average household of four in Europe more than £10 a week to support the farming community.
The figure for the United Kingdom is even higher, because of our different trading patterns. As long ago as 1986, the university of Newcastle calculated the figure at £11·50 a week. I know that the figure is not very welcome to farmers in this country, but it is a fact promulgated by the Treasury. When the Minister accepted our amendment to the Government's motion on CAP reform in November 1987, we thought that, while he did not agree with the figure, he reserved his position. I fully concede that point, because I want to be fair. We believed that the Government genuinely shared our concern. I hope that that is still the case. However, I detected rather a different attitude by the Minister today, compared with his determined approach before he went to Brussels.
I shall say a few words about the green pound, because the Minister asserted our position correctly. The NFU argues, especially through its publication British Farmer, that the green pound is still the most critical issue facing British agriculture. I regard the NFU as probably the most effective trade union in the country. It has been remarkably successful over the years in persuading successive British Governments to back its proposals. It is more than a strange coincidence that sometimes the Ministry of Agriculture and the NFU speak in almost the same voice.
I can understand the determination of the National Farmers Union to maximise the income of its members, and I appreciate its arguments for devaluation of the green pound. There is no doubt that the system of green currencies has got somewhat out of hand, but I have some intellectual difficulty in accepting the duplicity of the NFU's approach. I shall explain what I mean.
On one hand the NFU is on record as supporting the concept of stabilisers, which is a means of cutting surpluses by price reductions. Obviously, for such a system to work effectively, the price cuts must hurt. Yet the NFU is on record as justifying its devaluation stance by claiming that at least 4 per cent. is needed to offset the effects of stabilisers on British farm prices. The two objectives are contradictory, and that casts doubt on the NFU's determination to tackle seriously the costly farm surpluses.
While I accept the NFU's claims that the farming industry is not so prosperous as it was, equally I use the Minister's arguments that the farming industry has had benefits in the past 12 months and will have benefits in the immediate future. The industry has the benefit of lower input costs—of fuel oil and so on—because of the strength of sterling. It has the benefit of a reduction in income tax—for some farmers, a reduction in income tax at the higher level. The industry has those benefits, as the Minister has pointed out.
The hon. Gentleman makes the point that some farmers do not pay tax. He represents a particularly difficult area for farmers, and his statement is correct. Many of his constituents are on low incomes and work hard in difficult terrain. I think I am right in saying that the average income for the Welsh upland disadvantaged area farmer is £4,617 a year.
I thought that I was doing rather well in helping the hon. Gentleman, until he started adding his additional incomes. I think that I have made my point without the help of the hon. Gentleman, who is such an honest man.
Apparently, the Government agree with the NFU's approach. The Minister has said that he is in favour of a devaluation of the green pound. We are entitled to ask by how much. As the right hon. Gentleman pointed out, a devaluation in the green pound affects the cost of living of the rest of the community.
I shall return to that trivial point. Is that really the Government's position? How can they justify their support for the NFU's campaign to offset the cost of stabilisers by price increases to farmers through a green pound devaluation? I thought that the Government were serious about stabilisers, and here I return to the point that was made by the hon. Member for Torridge and Devon, West (Miss Nicholson), which I may have misrepresented.
I listened carefully to the Minister. Will he confirm that the Governments of France, Ireland, Italy, Portugal and Greece have requested green rate devaluations? If they have, that negates any advantages that we in Britain may gain by our devaluation. One is then talking about rates of devaluation, and that is another reason why we want to know the rate on which the Minister has his eye.
I must continue. I am sure that the hon. Gentleman will try to catch your eye later, Mr. Deputy Speaker.
Will the Minister confirm that the French, the Italians and the Irish have argued that a devaluation of their green currencies is a condition of any price package agreement? Is it true that the British Government have not taken that line? Am I right in believing that the Minister is not making a green pound devaluation a condition? Is his declared support for devaluation real, or a sham? The House needs to know where he stands.
The recent strengthening of the pound in foreign currency exchanges has made the case for the Minister's devaluation stance even weaker. On 22 April, in Farming News, the hon. Member for Skipton and Ripon (Mr. Curry) spelt that out clearly in words of one syllable for us all to understand. This strengthening led, ipso facto, to a corresponding devaluation of the green pound. Given that, surely there can be no justification for further devaluation, unless of course the Minister is not confident that the pound will remain strong over the next 12 months. For the House to make a decision, or even to offer an opinion, on the level of the green pound, we need to know where the Minister stands on this issue. Is the current strength of the pound temporary, or will it be permanent? The answer is crucial. Does the right hon. Gentleman side with the Chancellor or with the Prime Minister on this issue'?
I happily offer the Minister my support on one small issue. There are sound technical reasons for the abolition of MCAs in the pig sector. In effect, it would mean a green pound devaluation in that sector. I hope that the Minister will press as hard as he can for that. He has our support. For the technical reasons which he explained so well, we believe that the pig regime is different.
I should like to conclude on the green pound issue—[HON. MEMBERS: "Hear, hear."]—by mentioning the forgotten consumer. Obviously, Conservative Members will cheer at that, because they would like to forget the consumer. When I mentioned price increases, the hon. Member for Tiverton (Mr. Maxwell-Hyslop) said that they were trivial. They may be trivial, but, on the NFU's figures alone, it means 1p on the standard loaf of bread, 3p on a 250g pack of butter and an extra 4p per pound on beef. What does the Minister say to those of our constituents who are already on low incomes, who have been heavily penalised by the Government's policy and who have lost in the past 12 months through the Government's reform of social security and the housing benefit system—
I would rather not give way, for the simple reason that I think it important that I make my speech and then allow others to make theirs.
When the poll tax is introduced, these people will be even worse affected. They will not have the benefits of any tax cuts, because many are on such poor incomes that they do not pay any income tax. If I may say so, they are like the farmers of mid-Wales. How can we argue for any further financial penalty in the form of higher food prices for the many pensioners, the long-term unemployed and the widows and widowers in constituencies such as mine who have lost under the Government's rigid reform of the social security system? Is it fair to suggest to widows with no capital, who were recently faced with a £15 cut in their already meagre income following the changes in the Government's rules, that there should be price increases to help the hard-up farmers?
It is ironic that some of the unemployed once worked in the shipyards and the coal mines before the Government withdrew the subsidies. That is a fair point which is often raised with me. A further irony, while I am on the subject of ironies, is that some of the people most severely affected by food price increases are the farm workers, who are among the lowest paid in Britain. In a sense, they have been the real forgotten farmers.
I freely acknowledge that all is not well in farming. The Government must accept some responsibility for farmers' difficulties. Farmers are completely bemused by the Government's lack of direction. The Government's policies have had the same effect on farming as on society as a whole. The past three Administrations under the Prime Minister have shown that the rich farmers are getting richer and the poor farmers are getting poorer. The small farmers in particular have suffered greatly under the Government.
The position of some farmers in the upland areas of Wales, Scotland and England—for example, Durham and Cumbria—is diabolical. Many farmers are on income support, or near to it. Many are deeply distressed at the Prime Minister's sell-out in Brussels on the sheepmeat regime. I use the word "sell-out" rightly, because even the Minister accepts that the sheepmeat regime discriminates against the British sheep farmer. No objective person could avoid that conclusion.
I shall now turn my attention to the set-aside issue. It is disappointing that we are having this debate without all the information being available to us. This is very serious. As I understand it, the EC conditions for set-aside have been agreed. I understand that they were agreed at the end of last week. I find it rather deplorable that although the issue was agreed at the end of last week, this debate is taking place without the documents and the details being available to hon. Members.
I shall ask the Minister one or two questions on the issue. Am I right in thinking that bare fallow will not be allowed? I should like an answer from the Minister. Does the Minister consider that the £16 million allocated to the scheme will be adequate? I wonder whether the Minister could develop a little further his attitude and his thinking about fallow grazing. If bare fallow is to be disallowed, only green fallow and grazing fallow are left. Therefore, the options are restricted. I understand that it is entirely up to the Minister whether there is grazing fallow. As has been shown by hon. Members during Question Time and in interruptions in the debate, there is deep concern about the effect of grazing fallow, especially on the farmers in the upland areas to which I have referred.
The concept of grazing fallow is admirable if we can contain the progeny issue. As the Minister knows, there are deep and serious anxieties about the operation of the scheme. We know that the hill farmers operate a monocrop system. We also know that they have no alternative. Even if grazing fallow is allowed at a 50 per cent. grant, it turns upside down the economics of sheep farming.
Perhaps I can use an example. Perhaps I can compare an average hill farm in Cumbria with 600 ewes with an average cereal farm in East Anglia of about 1,000 acres. The East Anglian farmer may put 200 acres into green fallow as grazing fallow set-aside. As I understand there is to be a limit on stocking on grazing fallow, he will be permitted to place approximately 400 mule ewes on that land. Given the nature of lowland farming, he would expect a lambing percentage of about 180. He would therefore stand to gain £8,000 under the set-aside scheme at 50 per cent. In addition, he would get a ewe premium of about £2,000, at £5 a ewe, and expect a variable premium on 720 lambs at £4 a lamb, amounting to £2,880. That means that there would be a total gain to the East Anglian farmer of £12,880. I accept that he would have some costs, but he would also be able to sell the lambs.
The Cumbrian situation assumes a small drop in lamb prices, due to the increase in lamb numbers, of perhaps £5 a head. In the upland areas it would be realistic to expect a lambing percentage of about 70, which means about 420 lambs, perhaps less 120 kept back for further breeding. The system would mean a loss to the Cumbrian farmer of £1,500. Assuming that there is a drop in the ewe premium of £1·80, which is likely, there will be another loss of more than £1,000.
I have spelt that out in some detail because only when it is stated in such stark detail do we realise why so many hill farmers are worried. On a simple comparison—I have used the rounded figures for simplicity—the Cumbrian farmer is more than £2,500 worse off, while the East Anglian farmer gains more than £12,500. Surely that cannot be right. It highlights the danger that can follow from grazing fallow.
Obviously the final details have to be worked out, but I hope the Minister will ensure that the House has a full debate on the set-aside issue before a final decision is taken, and before the final details are sorted out. I have not dealt with the environmental aspects and the other economic aspects that are affected by the set-aside issue.
I shall conclude with two thoughts. All hon. Members will agree that we are facing a period of great uncertainty. I should have thought that it was time for diversification and alternative methods of farming. I understand that that is the view of the Government. However, I do not understand why they appear to be intent on further slashing the research and development budget in agriculture, fisheries and food. As I understand it, the report on the review has been submitted to the Cabinet Office. I understand that it has been discussed by the Cabinet. If that is correct, and if the future of research and development is to be altered radically, with industry being encouraged to fund more research, more jobs will be lost.
The issue raises many questions. For example, does the industry have the ability to pay for research? I understand that the farming industry is under stress and under financial pressure, yet the Government want it to pay for more research. What influence will industry have in deciding the research topics? How will it be decided which research is to be classed as near market research? So far the review has been conducted in the utmost secrecy. The industry itself has not been consulted, nor have any interest groups affected, such as the trade unions and other pressure groups. I hope that before making any recommendations the Minister will come to the House, make a statement, and let us question him on the proposals.
I began my speech by referring to the fundamental challenges facing agriculture and by accepting that there is a difference of approach between the two sides of the House on many issues. I began by proclaiming the Labour party's concern and desire to keep British agriculture healthy. I applaud the Government's meagre efforts to reform the CAP. Our criticism is that they were not drastic enough.
I urge the Minister to persuade his colleagues in Europe that we must be much more serious about working in the international ambit. We must devote much more effort to making sure that agricultural issues are discussed within the context of world trade. I make the point that I hinted at in the course of my speech. We feel that there is common ground. We believe that the Government have sometimes been obsessed by secrecy. That is not good for the farming industry or for the House. We should like a much more open discussion, and I urge the Minister to ensure that during the period of readjustment and reform he takes the House and other interested parties into his discussions and listens to their opinions before reaching conclusions.
I think the Minister acknowledges that there have been issues that we have supported. I freely admit that we have given our full support to the environmentally sensitive areas scheme, which has been a successs. We welcome its success, we want it to be more successful, and we are willing to help the Government in positive efforts to help British agriculture, but we always reserve the right to take a different approach on some of the issues.
I was disappointed in the speech of the hon. Member for South Shields (Dr. Clark). I thought that he would get to the root of what is wrong. His speech was founded on the same fallacy as all the pages that we have had from the Community—I do not know how many, but the documents stand about four inches high. Like the speech of the hon. Member for South Shields, none of them explains the paradox that my right hon. Friend gave us at the outset. In the past eight years the Government have increased support to agriculture by no less than 28 per cent. in real terms. That is a huge increase. Every farmer in the land should be grinning all over his face with delight, but we all know that the opposite is the case. In the same period, farming net incomes have plummeted.
There is nothing new in that paradox. It began, sadly enough, soon after we launched a policy of price support some 40 years ago. That was done entirely in good faith. We believed that if we artificially raised the price of what the farmer produced, the extra money would go into his pocket and become an addition to his net income. Instead, in the past 40 years farming net incomes have gone down, in real terms, to one third of what they were before that policy.
Some of us are old enough to remember—the hon. Member Ceredigion and Pembroke, North (Mr. Howells) is very nearly old enough to remember—the days when, just after the war, young men could start serious farming with just a few hundred pounds and make a good livelihood. Today, they would need a hundred times more money in real terms to enable them to do so. In those intervening years—this is why I emphasise that the paradox is not new—300,000 farmers have gone out of business, and the annual review shows that they are still leaving at the rate of 2,000, 3,000 or 4,000 a year. I regret that, and I hope that all other hon. Members do so too.
The fact is that price support has not had the effect of supporting farms. It is high time that farmers and taxpayers were given some explanation of where all the money has gone. If one looks through the annual estimates for agriculture, one can easily tot up all the money that has gone to agriculture in the past 40 years. One can also estimate how much land values have gone up in the same period. The two figures come to exactly the same. We have lost the money that has gone in price support in inflated land values. That has been fine for somebody such as myself who has the good fortune to own a couple of farms, but it is harsh indeed for the small farmer, and particularly harsh for the tenant farmer, because the more land values rise, the more rents rise. With the aid of the annual review, one can see how that has happened. Even in the past eight years they have nearly doubled.
We must think seriously about whether the policy to which we have been pledged for so long is fundamentally right. I was more than delighted when my right hon. Friend the Minister for Agriculture, Fisheries and Food touched upon the root causes of the paradox. He is edging towards a much more sensible policy, and I hope that it will work. I am all in favour of set-aside, provided that it is constructive. Nothing would damage the reputation of farmers more than to be paid large sums of money for their land to lie idle. The money must be used for constructive purposes, and I am sure that that is my right hon. Friend's wish.
I also hope that the Ministry of Agriculture, Fisheries and Food will be much more active in extending ESAs. I appreciate that they are all an experiment, but some of us suspect that the Ministry—not my right hon. Friend, but those further down the line—are not going ahead with sufficient enthusiasm with that practical alternative by which we can lower the temperature of farming and give farmers real security by compensating them for any loss of profit that they suffer by farming differently and more constructively.
We all know—I think that the hon. Member for South Shields quoted a figure—that the average family is paying much of the price. The figure, accepted by the Treasury and everyone else, is about £11 for the average family. That is a serious amount. If we phased out price support, the average family would be that much better off a week. They would have £11 a week more spending money.
Does my hon. Friend accept that the figure that he has just quoted is based on wheat at £50 a tonne and that no such wheat is available? The cheapest wheat imported into Britain is £105 a tonne and wheat from other parts of the EC is as much as £177 a tonne. His figure is wholly fallacious.
I dispute those figures. Only a few weeks ago I had the offer of some land at £7 an acre, and that was in Australia where land that can grow wheat at £50 an acre has gone out of cultivation. There has been compulsory set-aside and farmers have walked away from it. But there is land there that is now growing wheat at £45 an acre and they would gladly send it to this country at that price. I am not suggesting that it would all come in, but I am saying that we are deluding ourselves if we think that we are helping the farming community by pursuing a policy of price support, which manifestly has not supported more than half our farmers since it was introduced.
I am not arguing that no money should go to farming. On the contrary, I am saying, and have said often, that we have got agriculture into such a mess that a vast sum of public money is now needed to put it right. One of the things that has gone wrong is that we have brought into arable cultivation about 7 million acres—an area the size of Northumberland, Durham and Yorkshire—of poor, grade 3, 4 or 5 land, which cannot possibly grow cereals economically. That is the root cause of the grain surplus that we have had for the past few years, which nobody in Britain wants to buy, certainly not the poor pig producers and dairy farmers who cannot afford it.
I have consistently argued that to put right the pattern of agriculture a large sum of money is needed—perhaps £2,000 million a year. I think that public opinion will accept that. I draw the attention of my right hon. Friend the Minister to a significant recent opinion poll which said that 78 per cent. of the British people would be willing for 1 per cent. of the national income—which is more than £2,000 million—to go to agriculture for purposes of protecting the countryside, conservation and so forth. That is a heartening prospect for farmers. It means that the British people are willing for an appreciable part of their income to go to agriculture and support it in a genuine way. If we extend the principle of ESAs and the constructive policy of set-aside—as my right hon. Friend is anxious that we do—we would be able to use such money for that purpose.
However, I fear that if we pursue that course we must also recognise that consumers have rights too, and it would be too harsh to expect consumers to be heavily taxed at £11 a week per family for more expensive food at the same time as contributing another £2,000 million a year.
I hope that my right hon. Friend will pursue the course of getting to the root of the paradox that has hurt agriculture for a long time. It may not have affected some of the constituents of my hon. Friend the Member for Norfolk, North (Mr. Howell), who may have been beneficiaries, but many other small farmers in Devon, Wales and elsewhere, particularly in the livestock sector, have gone out of business at the rate of several thousands a year. Our aim should be a more balanced agriculture, but one that is secure and stable. That will not come while we pursue a policy of supporting the products instead of the farmer and his farm.
It is always an honour to follow the hon. Member for Holland with Boston (Sir R. Body). We have both been in the House for many years and have disagreed on agricultural policy on nearly every occasion. I am old enough to remember the days when I lived on my father's 250-acre farm. My father's gross takings on that farm were £60 a year, out of which he paid a farm worker. We can turn the clock back 40 years if we want, but I would prefer to start on the farming ladder in the 1980s.
Little did I think, when I began my farming career back in the 1950s, that Welsh farmers would one day be told that they were producing too much. After all, for years the farming community had been encouraged by successive Governments to improve the land, invest in modern buildings and machinery and build up viable units to reduce our food import bill and ensure that Britain provided as much food as possible from its own resources. Farmers responded magnificently to those appeals. Over the past decade or two, the family farms in Britain—the basis of agriculture—have improved out of all recognition. They have turned themselves into efficient small businesses that make a vital contribution to the economy of rural Britain.
Welsh farmers find it difficult to accept with equanimity the fact that they have been penalised for their efficiency and for putting all their energies and capital into their life's work. There was a sad lack of foresight by the Government when they accepted and introduced schemes that could easily lead to the destruction of the family farm structure in Wales and the rest of Britain, and to many farmers' financial problems being made impossible.
It should be possible in 1988 to improve the marketing organisation of the European Community, dispose of unwanted surpluses and find alternative markets, without having to use the intervention system and put everything into cold storage. I was delighted when the Minister said that he has plans to remove many of the surpluses in the intervention system.
The intervention system has always struck me as a wasteful and shameful exercise, especially when millions of people are starving and young children are dying in their thousands every day through lack of food. Those of us who confess that we are Christians—some of us do—believe that, if there is a will, there is a way to help many of the starving people of the world.
One of the saddest aspects of the affair is the way in which such mismanagement of the common agriculture policy is turning people in Britain against the EEC and causing them to forget the advantages that membership has brought us. As a dedicated European, I feel sorry that many people are not taking advantage of what is happening in Britain. The Community has expanded the market for British goods, and it has ensured that there will never be any food shortages in the Community.
The common agricultural policy must be reformed. I agree with the efforts made by the Government, but they have not yet done enough. I am sure that it is not an impossible task, given the will to do it. There is far more to the European concept than its agricultural policy.
British agriculture is facing its worst crisis in recent memory. I do not think that hon. Members on either side of the House will disagree with that argument. For many of our farmers, the consequences of the crisis are dire. Many have seen their incomes fall to unacceptable levels. If I understood the Minister's opening remarks, he agrees with that view.
In 1987, United Kingdom farming income fell to its second lowest point since the war, and over the past five years the average decline has been 9 per cent. a year. The effect of that decline has been that during the past two years about 20,000 full-time jobs for farmers and farm workers have disappeared from the industry and investment has fallen by 30 per cent. to the lowest level since the mid-1950s. Last year, the number of full-time workers dropped below 100,000—to 96,000—for the first time.
I do not know whether it was a slip of the tongue—it is for the Minister to defend himself—but he said something that will agonise hon. Members on both sides of the House, and especially the agricultural industry. The Minister said that many more farmers will have to leave the land in Britain and in the Community. I am sure that he is aware that in France and Germany people working on the land represent 20 per cent. of the electorate. In Britain the number has reduced to just over 2 per cent.
In reply, will the Minister state whether he wants the 2 per cent. who are engaged in agriculture in Britain to decline to 1 per cent. or even 0·5 per cent.? It is a sad reflection on the industry when the Minister responsible for agriculture says that more farmers will have to leave this land of ours and go elsewhere to look for work. If the position is so serious, the Government should introduce schemes so that many of our farmers could become part-time farmers, and save our countryside and stop depopulation.
I draw the Minister's attention to this week's Farming News, which reports on the deepening crisis in mixed arable and pig units in north Humberside. Farm workers are being laid off in that region at an alarming rate. The report exaggerates little when it says that farmers, who are forced to take on the extra work themselves, are
hanging on for grim death".
The people who remain in the industry have seen their incomes cut drastically in recent years. What I say next will be important to everyone in the House, as I believe that agriculture is more important than political parties. The leaders of the Farmers Union of Wales are today meeting the Secretary of State for Wales in Cardiff. The union has discovered that 37 per cent. of full-time farmers in the United Kingdom earned less than £5,000 last year, and more than half of them made a loss. Those are the figures given by the Inland Revenue, which also says that about 31,000 farmers earned less than £40 a week.
Something must be done to stop the decline. Whatever views the Minister holds, and whatever the Opposition spokesman thinks—I disagreed with many things he said —the industry is in dire financial trouble. The hon. Member for Holland with Boston said that more money must be given to the industry if it is to survive. That must be done soon.
I particularly want to draw the Minister's attention to the farmers on low incomes to whom my hon. Friend has referred and who he says constitute 37 per cent. of all farmers. Many of them have been receiving family income supplement and are now being transferred to family credit. Their assets of livestock and land are being taken into account, and many of them are therefore not receiving the benefit. So the social security reforms are another aspect that affects agriculture. These farmers will have to leave the land. It is a serious state of affairs.
I said earlier that British farming is one of the most efficient industries in the world, yet the Government continue to deride farmers for overproducing. Their record of efficiency speaks for itself. Farm product prices have risen by only 51 per cent. in the past 10 years. Food prices in the shops have risen by 88 per cent. and prices generally by 120 per cent. Britain's farmers responded to the call from the Government to produce more and make Britain self-sufficient, but when they respond to the reverse call to cut back production they can only go so far. The industry is already demoralised, without criticism from those who should be defending it in Europe.
One step that would help to restore confidence in the industry would be an independent inquiry into the running of the common agricultural policy. British farmers have the right to know how their position compares with other farmers throughout Europe. That point was raised in Question Time this afternoon, and I am sure that when the Minister reads what I said he will take the lead in setting up a public inquiry in Europe to establish whether British farmers have the opportunity to compete on equal terms in Europe. That would be a step in the right direction and would allay many of the fears of Welsh farmers.
The way in which the Government allow the green pound to operate is crippling agriculture, and that must be changed before it causes further damage. Its current operation creates ludicrous problems—producers in this country are put at a tremendous competitive disadvantage by the heavy subsidising of food imports and the taxing of exports. It is little wonder that British farmers cannot understand what is happening. They see their livelihoods threatened and all they hear is talk from the Government —without action. I hope that the Minister will do something in the near future about the green pound. I assure him that my hon. Friends and I are behind his efforts to devalue the green pound soon.
There must be a concerted effort to achieve parity as soon as possible in all areas so that our industry can compete fairly in the markets of Europe. Our producers cannot be expected to compete in a single European market with one arm tied behind their backs.
The National Farmers Union of England and Wales has already been mentioned, as has the Farmers Union of Wales, but I have received a letter from the National Farmers Union of Scotland, which wrote to my hon. Friend the Member for Inverness, Nairn and Lochaber (Sir R. Johnston) saying:
I know that you are fully aware of the grossly unfair imposition imposed by the green pound on Scottish (British) farmers at this time, and the gap remains large despite the strength of sterling over recent weeks. The Government is using the green pound to keep food prices artificially low, and in doing so is hitting the producer rather than the retailer who has muchlarger marginsif economies have to be made.
So the problems in Scotland are the same as those in England and Wales, and I am sure that the Minister will take heed of that request.
I said earlier and I say again that 12 months ago many hon. Members said that it would be most likely that we should have to introduce a quota on beef production. Here we are 12 months later and we have been told by the Meat and Livestock Commission that there will be a shortage of beef before the end of the year within the Community. The Minister gave figures for butter and dried milk today, and it is more than likely that there will be shortages of other products in the Community within the next year or so.
We can all say that the livestock market is buoyant now. Store cattle are selling exceptionally well; calves, in particular, are selling well because many are going to the continent, but there will be a shortage of beef in the near future, in my view. Whatever views we may hold on the introduction of stabilisers and set-aside policy, much more consultation should take place before the Government and our friends in Europe decide on a policy. A great deal of consultation is needed. If agriculture is to survive and we are to keep the small farmers alive in our countries and in the Celtic fringes, we need a 10-year plan for agriculture and parity within Europe.
It is well known that I am a farmer. Perhaps I can sum up my contribution by saying that I have been in the House for 14 years and a farmer all my life. Ten years ago, my income from the House of Commons was not enough to keep the family, but the money I received from the farm subsidised that income. Today, the money that I receive from the House of Commons subsidises the farm. The position is serious. I honestly believe that the Minister is doing his best; he is an honourable and sincere man, but what is needed is action, not words.
It is not for me to comment on the details of the income of the hon. Member for Ceredigion and Pembroke, North (Mr. Howells), but it is always a pleasure to follow him because he speaks much good common sense based on his own experience. I endorse his remarks about our membership of the European Community and the importance of the smaller family farmer in the structure of agriculture.
One of the most significant features of the debate on agriculture is the growing recognition that we are no longer discussing only the level of farm incomes or even the cost of the common agricultural policy within the European budget. We are also considering the future structure of our rural areas in an economic and social context. It is about the fabric of the countryside that I want to speak.
The background is not particularly encouraging, but that, in itself, is not surprising. Most of us accept the need for greater financial discipline. Surpluses must be reduced to more manageable sizes. Although that adjustment is difficult and painful for many producers, within the overall requirements of the country and of the national farm, the various proposals outlined by my right hon. Friend—the introduction of stabilisers, a voluntary scheme for set-aside and no increases in prices for 1988–89—are necessary. I also recognise that Ministers have a difficult task in this respect.
As mentioned in the debate, the Government's White Paper shows that the United Kingdom's farming income in 1987 fell to its second lowest point in real terms since 1945. Over the past five years there has been an average decline in real incomes of 9 per cent. per annum. In the last two years alone, about 20,000 full-time jobs in agriculture have disappeared. In addition, many jobs have been lost in ancillary activities because of events such as the closure of milk processing plants.
Those are all examples of reductions in the level of job opportunities in the rural economy. An added dimension to the trend is that rural areas often already have high levels of unemployment. In my constituency unemployment is currently 14 per cent. Farming and associated enterprises and activities have long been one of the principal anchor points of our county's economy. As the House knows, it is essentially a livestock area and I should like to mention the effect of the proposed changes and recent trends in milk, beef and pig production.
As we know, pig farming traditionally operates in cycles of peaks and troughs. This trough seems to be longer and more pronounced than any of its pig trough predecessors. I hope that you can follow that, Mr. Deputy Speaker. If we look at the figures for my county showing the effect of this downward trend, we see that in 1978 there were 1,364 farmholdings with pigs forming part of the enterprise. The number has dropped by 36 per cent. in the last 10 years, so that today there are 867 such farmholdings. The total number of pigs on those farms has fallen from 105,000 to 85,000, a drop of 19 per cent. That reflects a reduction in the size of the breeding herds, the sows and gilts. This is a worrying trend. The pig production unit traditionally formed part of the mixed farming enterprise in counties such as Devon and Cornwall.
I did not object to the principle of milk quotas. Following their introduction, the profitability of milk production rose. That was essentially because hitherto farmers had not necessarily realised that the maximum output of milk did not equate to maximum profitability.
The adjustment was essentially a one-off exercise and has now been achieved. We are now in a new situation in which there is a virtual standstill on milk prices, and that comes on top of a 19 per cent. quota cut since quotas were introduced. That has imposed considerable financial pressures on milk producers and had it not been for calf prices I doubt whether the financial position of the milk producers could have been sustained. Here again we run into the problem of the multiplier effect because beef producers in my part of the world are facing serious financial problems.
In part, those problems stem from the high price of calves and store cattle. The beef producer faces the prospect of a reduction in beef intervention prices and the abolition of the variable premium from January 1989. In that context I welcome the Minister's remarks about his attitude to the green pound intervention and about the posture that he will take in meetings of the Council of Ministers. Irrespective of that, one of the key questions is simply about the alternatives that can be used to sustain the rural economy and farming incomes, given the background of the proposed changes and the consequences that will result from them.
The Minister recently gave evidence to the Select Committee on European Legislation. He was pressed about the growth that there would be in rural employment if set-aside were to be fully implemented. He said:
Yes, I have been asking myself this question. It is, I think, difficult to judge. I would guess that at the end of the day the effect of set-aside will be marginal either way on rural employment.
My right hon. Friend was pressed further and asked to be more specific. I asked about the actual alternatives for land use that would stimulate employment in rural areas. My right hon. Friend replied:
I have seen in the West Country quite a number of tourist activities. This is not necessarily land that is set-aside, but I have a considerable number of developments of tourist activities, old houses converted into hotels and … horse related activities.
My right hon. Friend was correct about that, but he owes it to the House and to all those in agriculture who will be adversely affected in some way or another by these proposed changes to show a greater awareness of the difficulties that producers will undoubtedly face.
Not everyone will be able to grow trees as an alternative activity or to set aside land. Not everyone will be able to find a suitable tourism project to develop or a leisure and recreational pursuit on which to rely. There is a limit to the number of golf courses, horse-related business activities, farm museums and theme parks that a rural economy can sustain—highly desirable as those developments may be. There are also problems in connection with local planning authorities. The Minister has a responsibility to ensure that dilatory planning authorities become more responsive to the changing needs of rural economies.
I conclude by again emphasising to the Minister that there is considerable uncertainty among producers about their future. That is understandable, given the changes that have been made and are being made to adjust to changing circumstances that we all acknowledge. I welcome my right hon. Friend's positive attempts to lead along the path of diversification. He must demonstrate a clear perception of his objectives to the producers. They are the people that he is anxious to convince that they do have a real role to play in maintaining the structure of the countryside as we know it and wish to see it developed in the future.
When we examine the 5 in of solid paper that we are supposed to be debating today, the need for diversification into wood production becomes apparent just to supply the paper needs of the bureaucracy of the European Community.
However, on a serious note, hidden within that kilo or so of paper are some documents with grave potential for agriculture in the United Kingdom, particularly for the farmers on marginal hill farms, who are livestock farmers with little or no real chance of diversification, and very many of whom I represent. Farm incomes have dropped drastically in the past few years. That drop is, of course, more damaging to those already on low incomes and once again affects most seriously the livestock farmer in upland areas.
Community price proposals will reduce beef production by abolishing the beef variable premium from next January. This will hit United Kingdom farmers, particularly in areas such as Clwyd, South-West. We are the only country that has variable premiums. Others buy into intervention, and therefore the United Kingdom will as usual come off worst. Monetary compensatory amounts exacerbate the situation, taxing producers and denying fair competition for our producers in Europe.
Sheepmeat production is probably the most important provider of jobs and plays an important role in the preservation of the countryside in large areas of my constituency. We have heard that the vast amounts of Eurocash being spent on the common agricultural policy are not cost-effective. Both the farmer and the housewife obtain value from the variable premium scheme for sheep, and it will be detrimental to both if it is removed.
Control of production is required, but the present measures are likely to have a twofold effect on farmers dependent on sheep.
First, measures to reduce production in other areas that desperately need control, such as cereals, are likely to drive lowland farmers into sheep and grazed fallow, and such moves will turn into a stampede.
Secondly, that will push the United Kingdom flock over the stabiliser limit and the twofold effect will be disastrous for marginal hill farms and for the conservation of our upland areas. Surely one sector of an industry that is in surplus should not have its problems solved at the expense of another.
The Minister claims that some devaluation of the green pound will take place. This will help the farmer, although once again it will help the better off more than the less well off. I am sure that the long-term interests of most farmers in my constituency would be better served by some form of income support based on the continuation of their responsible care of the rural environment. Environmentally sensitive areas are welcome, but set-aside properly administered could be a godsend to hill farmers squeezed by low incomes and arable replacement by lowland farmers.
Set-aside with safeguards to protect wildlife, landscape and archaeological features of farms, with maintenance plans taking in the whole of the farm and avoiding intensification on other parts of the farm, but with adequate payment for the farmer, must be the only answer in the long term that will not destroy the fabric of large areas of the rural parts of my constituency.
I was encouraged this afternoon, as was the House, by the speech of my right hon. Friend the Minister of Agriculture, Fisheries and Food, particularly by his acknowledgment of the serious situation facing agriculture and by his tough and realistic approach to the negotiations in Brussels in the weeks ahead. I intend to refer to some of the problems facing agriculture, particularly in the light of my right hon. Friend's comments and open acknowledgment of the difficulties, although I shall not detain the House for long.
I shall not repeat my right hon. Friend's comments about incomes. We face similar problems in Scotland, as I am sure he will acknowledge. The real value of net farm incomes is now only about 33 per cent. of the 1977 figure. This again shows the difficulties that we, like farmers in Wales, now face. However, as my right hon. Friend acknowledged, that pattern is not the same in different parts of the country. He mentioned East Anglia, where he comes from, and I wish to mention the Grampian area of Scotland, where I come from. Last year, the harvest there was probably more disastrous than in any other part of the United Kingdom, and the problem of indebtedness is serious. I have made those points before and simply wish to emphasise them again.
There has been a massive deterioration in recent years in the agriculture asset base. It is critical to consider that in terms of the long-term future of the industry. We have seen, on the one hand, increased borrowing and, on the other, lower land values. For example, over recent years that asset base—it is on that base that any industry judges its prospects for the future—has diminished by about 50 per cent.
This is not simply a question of moaning or crying wolf. In these debates we set out the facts to enable proper judgments to be made. What is to be done? I know from practical experience that in the negotiations my right hon. Friend must be guided by the agreement in Brussels in February.
The remarks of the hon. Member for South Shields (Dr. Clark) left me with niggling doubts and complete uncertainty about what alternative he would offer to tackle that problem. He appeared to be grudging about progress so far. I am sure that my right hon. Friend will stand up for United Kingdom interests in the broad framework agreed in Brussels in February. He must ensure that there is no deterioration in those matters of prime interest to British agriculture, in view of claims made by other European Ministers.
My right hon. Friend covered a number of matters, including set-aside. I want to concentrate on the green pound because, given the background of the Brussels agreement in February, this is crucial to British agriculture in the forthcoming negotiations. The green pound is overvalued, as my right hon. Friend acknowledged. The British farmer is receiving less than his competitors and, most important, the terms of trade in agricultural products are to the disadvantage of United Kingdom producers. My right hon. Friend will know that that is not a new phenomenon. It has been going on for several years and has been a major contributor to the current weakness and malaise of British agriculture.
It is acknowledged that the worst affected sector is pigs. Earlier this year the subsidy on bacon imported from Denmark and Holland was as high as £70 a tonne. The situation has improved because the pound has strengthened, but that does not remove the need for action.
Will the pound remain strong? I shall not enter into that debate here, because it would not necessarily take us very far. What matters is that in future the strength of the pound could deteriorate, and I ask my right hon. Friend to ensure that in the negotiations in Brussels he takes the green pound to such a level that if there is a deterioration we do not go back to those huge export subsidies which our competitors in Europe enjoy. Therefore, I urge my right hon. Friend to achieve, as far as possible, at least a neutral position, and as soon as possible.
There is a cost in this, but there is also a benefit. Every 1 per cent. of devaluation means an extra £50 million increase in the incomes of British farmers, who are so pressed. There is a cost to the Exchequer of between £8 million and £9 million for every 1 per cent. change, but that is a small price to pay to help this major industry in its difficulty. One can always come up with objections—for example, the cost of living and food prices, a point made by the hon. Member for South Shields. However, as my right hon. Friend did, let us get this into perspective. A 1 per cent. devaluation is about 0·2 per cent., or one fifth of a penny in the pound, on food prices. It is about 0·02 per cent., or one fiftieth of a penny in a pound, on the retail prices index. In those circumstances, we need a devaluation of between 9 and 10 per cent. That is about one third of a penny in the pound on the RPI and it is necessary to sustain this great industry.
Some Labour Members may say that this is inflationary, but let us remember that over the past 10 years the retail prices index has gone up by 120 per cent., while the farmgate price has gone up by only 50 per cent. This means that agriculture has made a massive contribution to the Government's achievement of their objective of bringing down prices and inflation. Agriculture has served this country. Let us now, in our turn, see that the Government and the country serve agriculture.
In this important debate, I shall concentrate on the effect of agricultural policies not only on agriculture but on the agricultural and rural communities of the countries of Britain. Agriculture is an important employer in Wales. In rural Wales, it is a vital industry in terms not only of the number of people employed directly on farms, but of those employed in ancillary industries such as creameries. We have seen the effect of certain policies on those creameries in recent years, and on the small businesses and families who depend on agriculture.
The policies of the past 30 years have had a dramatic effect on rural Wales. In those years, thousands of people have left rural Wales, leading to massive rural depopulation, to the break-up of many rural communities and the consequent pressure that that puts on the traditions of rural life, the way of life of those communities, and, in parts of Wales, on the Welsh language. Therefore, it is important for us to consider not only the economic impact of agricultural policies but the social, linguistic and cultural consequences.
We have heard a great deal about different sectors of agriculture, but it must be remembered that Wales and Scotland, and parts of England and Northern Ireland, are primarily livestock producing areas and that the consequent effect of pressure on those sectors makes it difficult for those farmers to retain their livelihoods, because they have little room for manoeuvre if they wish to move into other sectors. That is why I shall concentrate on what is happening in the beef, sheep and milk sectors and how that affects our farmers.
The beef sector has already been highlighted in the debate. It is interesting to note that, although for years we have been talking about a potential beef surplus, the industry believes that there is a shortage of quality beef coming on the market. In view of the potential crisis, I ask the Government to give a significant boost to the suckler cow premium. As has been said, about 12 per cent. of our calves are being exported, and they are sometimes the best quality calves. Therefore, in years to come, the quality of our beef stock will suffer immensely. I urge the Government to consider a substantial improvement in the premium.
The crisis which faced the milk sector in 1983, 1984 and 1985 through the initial imposition of milk quotas has in some ways subsided. However, there remains the significant problem, which the House should consider, of the transfer of milk quotas between farmers. The main reason why milk quotas are being transferred from farmer to farmer is the total failure of the outgoers scheme. The original intention of the scheme was to reduce overall milk production in the United Kingdom. That is not happening. Rather than being reduced, milk production is being moved around the country, with the significant effect that small producers in places like Wales, Scotland and Northern Ireland are feeling the pinch because they are in financial trouble. The large milk producers are buying up milk quotas and, increasingly, milk production in the rural areas is lost. I urge the Government to look at ways in which that can be prevented.
The sheep sector is of major importance for Wales. I warn the Government that the problems in this sector, unless we get it right, could make those of the milk sector pale into insignificance. Some 80 per cent. of farmers in my constituency keep sheep. Therefore, the importance of sheep to Wales is obvious, and the Government understand that and should act upon it.
We could face real trouble as a result of the agreement in the cereal sector and the introduction of green fallow and grazing fallow. In fairness, the Minister of Agriculture, Fisheries and Food said that there would be significant problems over the introduction of the grazing fallow. Let us make one thing clear: the introduction of the grazing fallow shows that the muscle of the cereal growers, in having this on the agenda in the first place, is significantly greater than that of sheep producers. The cereal growers are an important lobby and the importance of that lobby has put that issue on the agenda.
We have the awful prospect of cereal growers being subsidised for not growing cereals, and being entitled to move into other sectors such as the sheep sector. If that happens, sheep will quickly be in surplus. Something should be done now to protect our sheep producers, and the Government should reject any proposals to bring grazing fallow into operation in the United Kingdom.
There is already a massive increase in the number of sheep being kept. For example, in the first eight weeks of this year's lambing season alone, £48·5 million was paid out in the variable premium, whereas the total sum for last year was only £105 million. Last year there were 2,000 new wool producers, and if one allows cereal growers to keep sheep that will have a significant impact. If there is an increasing squeeze on sheep producers, family farms in rural Wales and in other rural areas of Britain will be under threat. The Government should act now.
The overall position of the varible premium and of the ewe premium in the Brussels negotiations should tax the Minister's mind greatly. We know that there will be problems in introducing sheep quotas and realise that they will create severe policing difficulties. However, the Government have a duty—in my view, a primary duty —to protect the traditional sheep farmer who has nowhere else to turn if there is a surplus and a knock-on effect. The traditional sheep farmer in rural Wales will suffer significantly if no agreement is reached in the Brussels negotiations.
My penultimate point concerns the green pound. I shall not detain the House unduly because other hon. Members have already spoken eloquently about that subject. However, I would ask the Minister, when he replies, to give the House some idea of the level of devaluation that he considers necessary, bearing in mind that the NFU recently called for a 9 per cent. devaluation.
Finally, at a crucial time for agriculture, research and development becomes of increasing importance. If farmers are not to be allowed to follow the traditional path and are compelled to consider other methods and sectors of production, it is vital that they receive the best possible advice. That means good research and development. Will the Government give an assurance that research establishments in England, Scotland and Wales will be maintained and expanded? Also, will the Minister tell the House when he expects to receive the results of the Barnes review of research and development in Scotland? We implore the Government, with all the passion at our command, to consider the problems of rural areas, particularly in respect of their agriculture industries, and to take up many of the issues that have been raised in this debate.
I am glad that I have this opportunity of following the hon. Member for Ynys Môn (Mr. Jones) because, judging from his remarks, the northern area of my constituency is like his constituency. Last Saturday I met members of the Whitby NFU, who knew of this debate. They made a number of points, and I am glad to say that my right hon. Friend the Minister has dealt fairly and squarely with most of them. I shall certainly make sure that his remarks are put before them in due course.
I was sorry to hear the hon. Member for South Shields (Dr. Clark)—I regret that he is not in his place—say that the Government had thrown away a unique opportunity at Brussels. He cannot understand the processes of Brussels, because if one enters into negotiations there expecting 100 per cent. success, the only certain thing is that one will achieve nothing. The successful future of the Common Market and of the CAP, whatever changed form it finally takes, will largely be due to the determination of our Government, particularly during their presidency.
We went as far as we could, and the successes I believe we shall achieve—and we all give our good wishes to my right hon. Friend the Minister in his further negotiations —will stem from the fact that we knew how far to go at the appropriate time. We are now taking up the fight again on those points which we believe to be so important. In other words, we did not throw away a unique opportunity at Brussels. We played it right, and it is an ongoing game in which we shall continue to have an important role to play.
The farmers in my constituency are worried by a number of the factors which right hon. and hon. Members have touched on in this debate. The devaluation of the green pound ranks high among their problems. My right hon. Friend the Minister spoke about the MCAs and the problems of securing agreement because of the varying circumstances in each member country. We, too, have varying circumstances, which no Minister can himself manipulate. None the less, those circumstances exist.
I hope that in any discussions my right hon. Friend has, it will never be forgotten that the rates of interest all our farmers have to pay at the bank are very different from those paid by our competitors in Europe. That is an important factor in pricing policy.
Farmers in my constituency are also very worried about set-aside. Beef and sheep producers feel that that is the only stock they can rear on their farms and the only type of farming they can do. They have always done it, and are doing it now, and it represents their only hope for the future. Others who might be persuaded to enter beef and sheep production might do so only temporarily, and it would be fatal if their temporary incursion were to cause lasting damage to those farmers who will always have to depend on beef and sheep farming for their livelihoods. I shall say nothing about the subject of pig farming, because enough has been said already about how seriously those concerned, who include pig farmers in my own constituency, view that aspect of production.
There has been no reference so far to diversification. One of the problems affecting it will be the attitude of planners. If one is diversifying, there will be a change of use, and old buildings might have to be altered for new uses. There may even be questions about whether roads are suitable for tourists in certain parts of the country. It would be tragic if farmers seeking to diversify, as they are encouraged to do, found themselves bumping up against objections from planning authorities. I hope that those concerned with planning in country areas will make sure that they have the machinery set up to help, as sympathetically as they possibly can, those farmers seeking to diversify. In that way, they will be of great benefit to their own countryside.
I wish to say a few words about reforming the common agricultural policy and about the set-aside proposals, particularly in respect of grazing fallow, which is a serious matter for my constituents. I start by quoting from a recent Consumers Association report concerning the common agricultural policy, which described it as
one of the most anti-consumer policies of all time.
In considering agriculture, we tend always to think of the farmer—the producer—and hardly ever of the consumer. As has been said several times already, the CAP costs the average European family £710 a year. That figure
was given in the Which? report. How can such a policy be justified when £10 or £11 a week is being paid by each family in this country?
The report also comments that the arrangement hurts low-paid families much more than those with average incomes, because such families—pensioners' families, for instance—spend proportionately more on food. The Consumers Association concluded that, in the longer term, the only way to reform the CAP was to bring down support prices to a point at which surpluses were no longer created. That applies in all other industries: agriculture is singularly cushioned in this respect. In the long term, it must be the sensible course.
As I said earlier, seen from the consumer angle, there can be no justification for the CAP. It would have been much more appropriate to hold a debate tonight not on agriculture, but on food and food prices and the effect on rural communities. Those factors affect most of the population. As the hon. Member for Ynys Môn (Mr. Jones) said so eloquently, during the past few decades the effects of farming policy in Wales have meant massive rural depopulation.
Earlier the Minister admitted that the drift from agriculture would continue. He said that with equanimity and complacency, as if it were a fact of life about which he could do nothing. In comparison with the rest of Europe, however, that drift has gone far too far already in Britain. The thrust of any agricultural policy must surely be to try to preserve rural communities and small farmers.
The CAP was devised originally to protect small farmers: that is the incredible irony and dishonesty of what has happened in the past 20 or 30 years. Initially, in 1960, there were 17 million farmers in the nine EEC countries. Now the figure is down to 7 million. In Britain, 430,000 people derive their livelihoods from agriculture, and that number is falling by 9,000 every year. That is the pace of decay in agriculture.
Unfortunately, the Government allow the relentless drift from agriculture to continue. We know that that is happening, despite the enormous subsidy—the £11 per week per family, the £20 billion cost of the CAP and the £4 billion that comes from the British taxpayer and consumer. Agriculture derives a larger subsidy from the taxpayer than the whole of manufacturing industry. The subsidies to British Rail, British Steel and the coal industry, and regional aid, are dwarfed by it.
The money that goes to agriculture, however, is spread out very unevenly. It is based almost entirely on production, which means that the big producer receives an enormous benefit, while the small farmer derives very little. It is tied to land ownership. Six per cent. of farmers own 45 per cent. of the land, so half of any money that we put into agriculture will go to fewer than 10 per cent. of farmers.
In any reform of the CAP, we need targeting, if I may use the Government's word. I do not believe in it when it comes to social security, when money is taken from the poor to pay for the richest. In agriculture, however, we have the reverse of targeting. The taxpayers' money is going to the very rich farmers. There is the awful distortion of the big farmers deriving hundreds of thousands of pounds a year in subsidies. Co-existing with those millionaire farmers are farmers in the poorer rural areas of Wales who are driven to the wall and out of business. We drastically need a redistribution of resources away from the rich farmers to the poor ones.
We were not told the numbers involved, but one of the announcements that we heard this evening concerned the devaluation of the green pound. I cannot agree with such a devaluation simply because it is a blanket benefit to all farmers. A farm that is 10 times as big as another will derive 10 times the benefit. That cannot be justified. Every 1 per cent. devaluation means £50 million. A 9 per cent. devaluation means £450 million being taken from some part of the British economy.
In the past month or so, social security changes have been announced. Apparently we have not the money to give the pensioners and the low-paid, and we have learned of the cruelties of the social fund. How can that and the deterioration in our health services be squared with giving money to these farmers? I would agree with it entirely if the money went to small farmers, but unfortunately half of it will go to only 10 per cent. of farmers.
Two months ago, the Prime Minister returned from Brussels championing the success of her negotiations, and trumpeting her success in limiting the budget. But, as was conceded earlier, devaluing the green pound is simply a way of countering or neutering the effects of that—a way of getting back the money that was conceded in Brussels. The Consumers Association has concluded that the only sensible long-term reform of the CAP must involve guaranteed prices in Europe coming into line with market realities—if I may use a phrase used by Ian MacGregor during the coal miners' dispute. The market realities in Europe are that we are producing 15 per cent. more food than we need, and prices are well above world prices. Stabilisers will help, and I am delighted with that major step forward. The amounts agreed—160 million tonnes for cereals, for instance—were too high; too much ground was given in Brussels. Nevertheless, the principle holds considerable hope for the future.
As 15 per cent. of land needs to be declared redundant, farmers are asking what else they can do with the land. The Government are being very weak about giving a direction to those farmers, who do not know which way to turn. They know that there is a crisis and that they cannot carry on as they are, but the Government are providing very little leadership. They seem to have no policy to offer the farmers, bumbling from one little step to the next.
Woodlands obviously have a major role to play. I have been involved in Committee with the Farm Land and Rural Development Bill, which is a very timid affair. We talk about 12,000 hectares a year when we know that 4 million hectares are redundant and it would take 300 years to diversify at that pace. We need at least 10 times the commitment to that.
The hon. Gentleman devoted the first part of his speech to saying that his constituents needed more help and the second part to decrying the level of Government expenditure. Is there not something slightly ironic there? Do those two parts fit together?
As was said by the hon. Member for Holland with Boston (Sir R. Body)—I am sorry that he is not in his place, but this was very much the thrust of his excellent speech—the money that now goes to agriculture needs to he redeployed and used to solve the problems of agriculture, especially as it is going to rich farmers.
Woodlands certainly have a major role to play, but we are far too timid and the action that the Government are taking is on far too trivial a scale. The consumer would very much like to see de-intensification of agriculture and cutting down on the use of pesticides and fertilisers, especially in areas where there are serious problems of nitrate pollution and where nitrogenous fertiliser should not be used, for the sake of human health and safety and the preservation of our water supplies.
As has already been said, the Ministry is very much in the pocket of the NFU, which is a very effective pressure group. Where do their policies differ? The consumer is in favour of de-intensification and a tax on the use of pesticides. The Government should look at what is happening in Europe. In Sweden there is a tax on the use of pesticides and a very heavy tax on fertiliser usage. It needs to be a heavy tax to cut down its use, and there are strong environmental arguments to justify such a tax. There is now a trend towards organic farming and, among consumers, towards organic, healthily grown food. Food can be grown perfectly economically with far less use of pesticides and fertilisers. Again, Government thinking is at a very elementary stage. They are pussyfooting around without any real commitment or direction.
I feel very unhappy about set-aside in a moral or ethical sense. It is fundamentally immoral to declare land redundant. It is like declaring people redundant—and this Government, of course, have no compunction about that. I feel that set-aside is a wrong policy anyway, whatever type of set-aside it may be.
I am particularly concerned about the idea of grazing fallow. Perhaps there is an argument for green fallow, the rotation of crops and the 15th or 17th century idea that in one year in five one should not grow anything. But the implications of what we have heard so far of Government thinking on grazing fallow would spell disaster in my constituency and many other less-favoured areas.
The idea, as I understand it, is that in the fertile cereal-growing areas farmers could be given about £50 to £200 per hectare to turn to grazing and produce sheep meat or beef. Sheepmeat is not in surplus; it is just about in equilibrium at the moment. Therefore, any extra sheepmeat produced in cereal-growing areas would threaten to lead to a surplus. We do not really need it, and it would simply exacerbate the problems of the CAP.
Far worse would be the effect on areas such as those in Wales, because it would mean that we were subsidising lowland farmers to drive upland farmers out of business. That, in summary, is what grazing fallow means.
I hope that the Government will take seriously the comments made in the debate and any representations made by farmers in our areas.
As the largest single industry in Northern Ireland, employing 13 per cent. of the total work force, directly or indirectly, agriculture plays a vital role in the economy of Ulster. The crucial importance to Northern Ireland of the future well-being of agriculture must be recognised by the Government in their dealings with the European Commission and the Council of Ministers. At the moment the outlook for Ulster farmers is very bleak indeed. Ulster farms are largely small family farms, and they are the backbone of the industry in Northern Ireland. They are now being seriously threatened by factors that are beyond the farmers' control. With little or no alternative means of earning a living open to many farmers in Northern Ireland, it is imperative that action is taken to preserve the rural infrastructure.
Suggestions from some quarters that farmers should diversify—for example, go into tourism—re in many cases simply not practical in Northern Ireland. Our indigenous population is much too small for diversification into tourism and, because of the continuation of the troubles, there is unlikely to be a vast influx of tourists to the Province, although we welcome the increase in tourism there. Therefore, Northern Ireland is not in a position to benefit in the same way as other European countries or the mainland here from schemes to diversify into tourism.
Similarly, the suggestion that farmers in Northern Ireland should get involved in forestry as a means of diversification is not likely to attract any small farmer. He would have to wait a very long time to see any return on his initial outlay and investment if he tried to diversify into forestry.
Options which are open to agriculture elsewhere in Europe are simply not available to the farming community in Northern Ireland. Given that fact, it is essential to address the very real problems being experienced in the industry in Northern Ireland. It seems to me to be a terrible step for the Ministry of Agriculture, Fisheries and Food to announce that from 1 October farmers in Northern Ireland will no longer have the advice services of the Department of Agriculture, unless they pay for them. Up to now, such services have been free of charge, but from 1 October farmers must pay for them. This will undoubtedly lead to advice not being sought, because the farmers' financial position is very serious indeed. I had a meeting with some farmers recently, and they brought their bank manager along. They put their accounts on the table and I was appalled at the plight of the farming community.
The European Commission's farm price proposals contain some measures that are detrimental to Northern Ireland farming interests. In particular, the proposal for no change in the valuation of the United Kingdom green pound will have serious repercussions in Northern Ireland. I welcome what the Minister said today, and I urge him to seek a substantial devaluation in the United Kingdom green pound during his discussions and negotiations in the Council of Ministers. I should like to know what percentage he has in mind for devaluation.
Farmers in Northern Ireland and in the United Kingdom generally have no objection to competition, but they must be allowed to compete in the market on a fair and equitable basis and not be placed at a disadvantage compared with farmers in other member states.
We have heard prices of cereals quoted in the House today. Many hon. Members are unaware that, because of transport costs, all farmers in Northern Ireland have to pay £13 or £14 per tonne more than farmers in the United Kingdom. How then can farmers compete in the Common Market? I must confess that I am opposed to the Common Market. I always have been, and always will be. We had a large intensive industry of pigs and poultry in Northern Ireland but it has been slashed by 50 per cent. because we cannot buy grain on the world market. However, I do not want to go into that controversy today.
For dairy farmers, the present milk quota regime has led to many difficulties. I agree with the hon. Member for Carmarthen (Mr. Williams) that the larger producer has done well, but the small family farm is now in jeopardy. If something is not done for the small family farm in Northern Ireland, many thousands of farmers will go to the wall. Many of us fought hard for the extra allocation of 65,000 tonnes of milk from the EEC. If that had not been spread over the entire United Kingdom, but had come fully to Northern Ireland, we would not be in our current state. The super-farms on the continent are nothing more than milk factories. They get away with it, while the small farmer in the United Kingdom goes to the wall.
With the milk quota regime in place, the further proposal from the Commission to extend the milk co-responsibility levy for a further two years is unacceptable and should be resisted by the Minister in his discussions in Europe. It is an extra tax on milk producers which they should not be asked to pay when one realises the considerable constraints under which they already have to operate.
In the beef industry, once again there is a proposal to end the United Kingdom variable premium. I am on record in the House and in the European Parliament as condemning the proposal, which the Commission has been forced to take back on previous occasions. The premium compensates producers when the market price falls below the target scale. It also ensures that the price is kept down for the consumer. We have heard much tonight about the interests of consumers, and rightly so. However, the intervention system increases the price to the consumer, by taking beef off the market. The variable premium provides benefits for producers and consumers. It should be retained rather than be phased out simply to bring us into line with the rest of the EEC.
I want to stress the tragedy that has occurred within our pig industry. It has been cut to 50 per cent. and Northern Ireland has become the dumping ground for pigmeat from Holland. The Dutch have trebled their pig industry, while ours, as I have said, has been cut by 50 per cent. Before joining the Community, Northern Ireland was able to buy cheap cereals on the world market. Now, it is forced to import dearer feedstuffs and, as a result, cereals are very expensive.
What is the Minister's commitment to the abolition of MCAs on pigmeat? He told a deputation from Northern Ireland that he was interested in this issue. Is it true that in France the MCAs on pigmeat have been phased out?
The time has come to look at the pigmeat that is imported into Northern Ireland from Holland. Why is it —perhaps the Minister can tell me—that meat from Holland is not inspected? The Ulster Farmers Union, a deputation of which I met this morning before coming to the House, told me that it had been in touch with the Department of Agriculture in Northern Ireland, which said that such matters were not its responsibility. The Department said that it was the responsibility of the Department of Health and Social Services. The deputation went to the DHSS and was told that such matters were not its responsibility either. Therefore, we have uninspected pigmeat coming to Northern Ireland. The pigmeat that is exported from Northern Ireland is carefully checked and examined, while pigmeat coming in is not inspected, and the two Departments wash their hands of any responsibility.
Northern Ireland has been fortunate. It has been free from swine fever for a long time. The time has come for the Department to do something about this matter. I understand that swine fever could come to Northern Ireland through contaminated pigmeat.
The farmers in Northern Ireland will wait with interest to hear the Minister's reply. Some of the things that he said today were encouraging, and I was glad to hear him make such remarks.
It is probably opportune that I should follow the hon. Member for Antrim, North (Rev. Ian Paisley) who so eloquently described the agriculture industry in Northern Ireland. I should like to re-emphasise what he said: agriculture is the base industry upon which most of our people are sustained. It sustains the farmers, their families, their communities and their entire environment.
I am what is called "book-learned- on agriculture. That is a Northern Ireland expression meaning that I have no practical knowledge of the industry. However, in my former occupation as a professional adviser I was aware of the greatly deteriorating real income being suffered by the farming community. Since becoming a Member of the House, representing an entirely rural constituency, I have been inundated day by day by matters concerning the plight of the small farmer. I have been concerned with the plight of the farmer with 40 or 60 acres, the hill farmer and the family farmer who are all suffering greatly.
The sector that is most at risk and is teetering on the verge of collapse is the pig industry. Producers in Northern Ireland are producing animals at a loss of £4 to £6 per head. Obviously, they cannot sustain a continuing loss of that nature for any time.
The plight suffered by the industry can be shown by the fact that about 10 years ago there were 24,000 producers and now there are only 4,000. The pig population has been decimated by 50 per cent. Most of that is due to what is seen as the unfair competition from the northern European countries, arising from the MCA differential. As has been said, until last month that was giving continental producers a hidden subsidy of almost £60 to £70 per tonne and now, fortuitously in a sense, it has been reduced to £45 per tonne as a result of the exchange rate fluctuation. That is still an enormous disadvantage. When added to feed costs, import costs and additional transport costs when produce is sent out again, it gives rise to very heavy overheads indeed.
I was pleased to hear the Minister say at Question Time that he was resolved that the MCAs should be reduced to nil as soon as possible. I asked him then whether he could extend the export restitution so that not just Northern Ireland and the United Kingdom as a whole, but the whole European Community could expand into new markets—particularly in the Third world.
Perhaps one of the most unjust systems applying to farming in Northern Ireland is the milk quotas system. We seem to be locked into a decision made some years ago which seems to be immutable. The dairy farming community in Northern Ireland is small and, because of its size, farms have tended to pass from family to family and from farmer to farmer. However, that community is now locked into a fixed position. None of the cases concerning milk quotas that I have referred to a tribunal seeking the alleviation of hardship has been successful. I have not been successful in getting quotas reallocated in one single case. No real revision of adverse circumstances arising from the quotas is possible for the producer.
Quotas are also stifling new blood and new ideas in the industry. The young farmer can no longer get into the dairy business. He lacks the capital and purchasing power to buy quotas. The new generation of dairy farmers will not succeed unless something is done to alleviate matters and allow more fluidity in the allocation of milk quotas. The hon. Member for Antrim, North referred to the hijacking of additional quota for Northern Ireland to the United Kingdom as a whole.
Milk quotas are having a further adverse effect, as many hon. Members have said. They are forcing many would-be mixed farmers and dairy farmers into sheep farming. That has a particularly adverse effect in my constituency, which is a less-favoured area and contains two mountain ranges. Hill sheep farming is most important to many of our people. Unless relief is given, we shall be heading for a new mutton mountain. We shall then have to take corrective action, probably when it is too late.
I do not wish to repeat what has already been said, but I have one or two new points pertaining to Northern Ireland in particular.
The hon. Gentleman refers to the problem of ossification due to milk quotas and to the looming problem of a mutton mountain. I agree that milk production has ossified as a result of quotas, but may I now take it that the SDLP is against quotas and will be against quotas for mutton as well?
I am arguing for flexibility and fluidity to enhance dairy farmers' ability to continue to earn an income so that they will not be forced to consider sheep rearing, with the possible creation of a future mutton mountain.
A problem has recently arisen regarding the plight of potato producers in Northern Ireland. My recent information is that they are suffering financial hardship. I do not know to what extent the Ministry can intervene. The producers are not being paid for their produce. Exporters are not being paid by their foreign importers. That will have a most serious effect on that important sector of farming in Northern Ireland.
Let me deal with the less-favoured areas. There are applications before the Ministry to extend them. It seems to me that the Ministry is sitting on them; there appears to have been no movement in the decision-making process over the past few months.
The hon. Member for Scarborough (Sir M. Shaw) made some interesting remarks about the panacea of diversification in farming to supplement farm income from other sources. I completely agree with him that the possibility of diversification will be negated by the planning regulations that will apply in Northern Ireland. My constituency is almost exclusively an area of outstanding natural beauty. Parts of it are areas of special scientific interest, and parts of it are areas of special control with green zones, blue zones and yellow zones. Within that colour scheme, it is virtually impossible to build a house to accommodate one's family, let alone diversify into other forms of industry and income-producing activity.
I recommend hon. Members who are interested in rural development and the protection of rural communities to read in detail the Maher report, an EEC report designed to help rural communities in Northern Ireland. It is a most interesting document whose recommendations about planning and revitalisation would go a long way towards assisting the continuation of our rural communities. which are the backbone of most nations, and certainly of our nation.
I wish briefly to make two points which are nevertheless important to the people who are suffering the disadvantages to which I shall refer. Perhaps the problem of rural electrification is unique to Northern Ireland, as I do not think that it has been mentioned today. I draw the Minister's attention to the fact that the most exorbitant prices are being charged for rural electricity extensions by the sole producer—the Northern Ireland Electricity Service, which is a monopoly. The charges being quoted for small extensions to main lines, even for a relatively short distance, are prohibitive to our small farmers. In addition—the House may hardly believe this—if a farmer goes for credit with NIES, which, as I said, is the sole producer of electricity, it charges an annual percentage rate of 34 per cent. That has been admitted in a parliamentary answer. No small farmer can afford that sort of money for the simple modern facility of electrical energy.
My last point is allied to that and concerns bank interest rates. Bank interest in Northern Ireland is automatically 2 per cent. above the minimum lending rate. No reason is given. It is completely to the profit of the banking fraternity. Whatever the rate in the United Kingdom, it is 2 per cent. extra in Northern Ireland from the start. One negotiates from there upwards. Several years ago, farmers were being encouraged to bring wheelbarrows to the high street banks to get the surplus money lying on the counters. They took out massive loans. Since then, they have been crippled by enormous overheads in the form of bank interest.
Will the Minister consider what justification there is for this additional interest factor in Northern Ireland, which affects not only the farming community but the manufacturing and service industries and personal loans.
I commend the Minister of Agriculture, Fisheries and Food for his interest in abolishing the obvious subsidy created by MCAs. I look forward to that alleviating some of the disadvantages suffered by farmers in Northern Ireland and the United Kingdom.
One of the disadvantages of sitting through a debate and being called to speak at the centre point, if not beyond it, is that many of the more important points have been made.
Many farmers will be watching with interest the results of this debate, and the negotiations in the next few weeks. They will be gratified by the Minister's speech. He showed clearly that he will go to Brussels to defend the interests of the British farmers. That will not be a moment too soon for the British farmer. One of my sorrows during the few months I have been a Member of the House is that many hon. Members have been critical of British farmers and agriculture. Even today there have been accusations from the Opposition Benches about the levels of subsidy in agriculture. The blame has been laid entirely at the door of the farmer: we are told that it is his fault.
It is worth reminding ourselves, however, that farmers have responded to the pressures of successive Governments. It is only 13 years since the previous Labour Government produced the White Paper "Food from Our Own Resources" which was widely welcomed. It gave the green light to farmers to produce continuously. That is exactly what has happened. But 13 years is but a blink of an eyelid in the time scale involved in agriculture production.
Farmers have had the security of some market price support, which has enabled them to continue producing and to live up to the expectations of the House. Every country in the western world has various forms of support for agriculture. It is not unique to us. Farmers have sat back and rested in the sure knowledge that the Government and the state will support them all the way. They have invested in and been very welcoming to new techniques, machinery and technology.
We have heard it suggested that many people want to turn back the clock and ban the use of chemicals, and even fertilisers, and that it would solve the problem. It is ludicrous to suggest that as a universal panacea. It would be like telling the National Coal Board that it should produce coal only from its poorest and oldest pits. That would also mean turning one's back on modern techniques of production. It is a good idea in environmentally sensitive areas to have a system such as the Government have brought in during the past few years. I welcome that, but abhor the suggestion that it should be applied across the country without further thought. It would reduce production but increase production costs per tonne, litre or kilo. Then consumers, or the House, would have to find more money in support of agriculture.
We heard much about the consumer from the hon. Member for South Shields (Dr. Clark). The interests of farmers are in fact very much akin to those of consumers. They are two sides of the same equation, because if the consumer is not buying, the farmer is not producing and surviving. They are both vital. In the 14 years that the CAP has applied to this country, food prices have increased by less than the retail price index year after year. The consumer in Britain as well as in Europe, has been protected from the massive price fluctuations that occur among commodities that are not subject to a marketing regime.
The public perceive that our stores are bulging. I understand why it is highly emotive to have surplus food when we see on our television screens people starving in other parts of the world. It is a vital issue, but we have to examine the reality. On 1 January this year there were just over 1·25 million tonnes of cereals in store in the United Kingdom, or half the figure of a year before and a fifth of what it was two years before. That is a measure of the way in which our intervention stocks have been reduced, contrary to claims that are often made in the House.
Just to put it into context, the 1·25 million tonnes of intervention stocks on 1 January represented only half the reduction in the previous year's harvest, which was 3 million tonnes down. That was more than twice what we had in store only four months after that harvest. Those figures put in context some of the more absurd ideas that have been put forward.
The Minister said that 50 per cent. of CAP money is spent on storage and disposal of surpluses, and on export refunds; that position is ludicrous. It has occurred because the Community's politicians—I absolve most politicians in this country from the charge—have failed to grasp the nettle time and again. Because of that inaction, farmers are being asked to pay the price. The massive amount of money spent on storage and export refunds is all considered to be agricultural support. Farmers are personae non grata. They wonder where they are going. They are vilified by the press, by Opposition Members and, I am sorry to say, by a few Conservative Members. That is unacceptable, and it worries me.
I cut my teeth on agricultural politics. I joined the Conservative party and came into the House because I know that my party and my Government support agriculture, as they have done for many years. It worries me that farmers are beginning to doubt the Government's commitment to their future. I know that that is not true, and I want to make it absolutely clear as far as I can. I am sure that the Minister of State will do the same in winding up. The Government and the party are committed to a strong and vibrant agriculture that faces the future, as well as recognising the faults of the past.
We have to create more opportunities for farmers to diversify. There is no single panacea or prop, or livestock commodity, that every farmer can say is the new golden world. It is only 10 to 12 years since oilseed rape appeared on the horizon of East Anglia and then spread throughout the British isles. Now it is planted as far away as Orkney and Shetland. That crop was a great boon. The bubble has burst and there is no similar crop that farmers can plant.
There must be a range of alternatives for farmers, but we have to accept that, as has been said by hon. Members on both sides, for topographical or geographical reasons, not all farmers can take them. Not all farmers are able to go into tourism, horses or other activities. That must be recognised.
I have no brief to protect farmers from bad investments. There have been many of those in the past few years. I do not hold a brief for the inefficient, who must recognise that the time has come for change. But I believe that the country and the House have a responsibility to recognise that farmers need time to adapt to change and to face the future. We have asked them to do a great deal ever since the war, and they have done it beyond all our wildest dreams. Our response to what they have given us must be to give them the chance to change and to be treated fairly. I welcome the commitment by my right hon. Friend the Minister on the green pound. It is important that we have a devaluation to enable farmers to compete just that little bit more fairly.
I recognise the dilemma faced by Ministers. It is strange to be trying to contain the costs of the CAP while maintaining farmers' incomes and viability. We must do something. Although stabilisers are a good means of putting a cap on the Community's expenditure, I am worried about the effects on individual farmers. In a few years we may wish that we had adopted a more flexible approach.
The Farm Land and Rural Development Bill, which we shall discuss later, is a valuable step forward. It brings in measures that are long overdue. It is many years since I urged my Member of Parliament, my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer), now the Minister of State, Ministry of Agriculture, Fisheries and Food, to introduce a scheme to encourage farmers to move into woodland production. This is happening now and, although it is long overdue, it is welcome.
I shall come to that point.
Two or three Opposition Members have compared the amount of money spent on supporting agriculture with the amount spent on supporting British Steel, British Coal, British Shipbuilders and other industries. But there is an even more significant statistic—the amount of money that we are providing to enable those who are finding farming impossible or difficult to continue to diversify or to move into other businesses or interests. The Farm Land and Rural Development Bill will provide £1 million a year for grants towards diversification projects, in addition to the £3 million for related capital grants. Sums of £10 million or £12 million a year have been allocated as replacement for income forgone for woodlands.
That can be compared with the amount spent on British Steel to help steelworkers when there was no further work in steel—£419 million over the past 10 years in readaptation benefits. I do not include redundancy payments. I am talking about special payments to enable those workers to find other businesses and jobs. As for British Coal, more than £2 billion was provided to redundant mineworkers to help them find alternative employment and businesses. That puts into perspective the £4 million a year which we are giving to farmers for diversification and the £10 million or £12 million a year which we are putting into woodlands.
I agree with my hon. Friend the Member for Taunton (Mr. Nicholson) that the woodlands scheme is too small. I hope that it is the beginning of something much greater. Over the next few years, we shall press Ministers to double, treble and quadruple the assistance.
Hon. Members are rightly concerned about the rural environment, conservation, public access and leisure. The points have been made many times. Great steps have been taken and the Government's measures will assist. We must understand that these measures can be taken only with profitable agriculture. One cannot achieve effective conservation by pauperising agriculture—contrary to the beliefs of some. The countryside is changing. Agriculture is changing, and it knows that it must. Farmers recognise the challenge facing them. We owe them the opportunity to change. I support the Government's efforts to reduce the costs of the CAP. I know that Ministers will work hard over the green pound and other issues, in the interests of farmers.
The House has a major responsibility to tell farmers clearly that it knows that they must adapt and face the future. That is their reponsibility, but Parliament must recognise that it owes them the chance to change. We shall give them that opportunity.
I should like to follow the remarks of the hon. Member for Cambridgeshire, South-East (Mr. Paice) in two particulars. First, I have abstained from agriculture debates for a few months since the corruption of the Opposition Front Bench gave way to the incorruption of the Back Benches—[Interruption.] I was sure that the Minister of State would look up that ecclesiastical reference. Little has changed in agriculture debates in those few months. We come every year to talk about the crisis facing farmers. The crisis has been continuing for nearly a decade and the main problems have changed little or not at all.
The hon. Member for Cambridgeshire, South-East said that we blamed the farmers. For my part, that is not true. I have never blamed the farmers for our present position with the CAP. We are producing too much of the wrong quality for consumption. There is a mismatch between what is produced and what is consumed. That is partly the structural fault of the CAP, and partly the fault of Ministers. I hope that the hon. Gentleman will not be unduly defensive or prickly when I say that the House must decide the balance between consumption and production for the future and how we shall best achieve it.
Secondly, I hope that hon. Members will not look upon the green pound devaluation as a panacea. They appear to do so, but it will be at best—this is the Government's argument and not necessarily mine—only a temporary alleviation of the problems. I say "temporary" for a reason. These matters are not decided by economics. One of the weaknesses of the NFU's brief is the belief that if we move everyone else will stand still and that, either passively or actively, they will accept that we should devalue, whereas others should not accept a devaluation. The truth is that every country will look for a matching devaluation of the green pound once we start. The hon. Member for Cambridgeshire, South-East talked of a devaluation of the green pound to enable us to compete, but there will he little or no competitive edge. We must return to the point: how, in the long term, do we match agricultural production with the CAP system?
I agree with the Minister of Agriculture, Fisheries and Food. There is something structurally wrong with a system that pays so much subsidy, yet so little trickles through to the producer. Whatever else it is doing, it is not doing the job for which it was intended, so we must change the system fundamentally.
The hon. Member for Ceredigion and Pembroke. North (Mr. Howells) and a number of hon. Members ask why we cannot feed the Third world out of our surpluses. There are two answers. First, the surpluses provided depend upon other measures being taken. For example, skimmed milk products are of no use unless there is a pure water supply in the country to which they are sent, and that depends on other forms of overseas aid.
The second answer is that if we systematically exported our surplus products to the Third World to feed them we would destroy their economies, their agriculture and their societies. Let there be no mistake about this. I think that there is general agreement in the House that we should seek a balance between consumption and production within the EEC, with only reasonable economic exports being added.
I now turn to the present situation. I rely heavily on documents 4079/88 and 4588/88 in dealing with the surplus of cereals. The cereal surplus was 18·1 million tonnes in 1986–87. That has dropped to 14·2 million tonnes because of the very bad harvest last year, but it is interesting to note that it is 0·4 million tonnes higher than it was two years ago, so let us not be sanguine about the way in which all the mountains are disappearing. They are not disappearing. Consumption still does not match production. If a stabiliser is set at 160 million tonnes, that will still provide a continuing surplus in Europe over and above what we can consume, so the mountains will not disappear.
The documents say that, despite all the efforts, there is still a beef surplus which amounted to 700,000 tonnes in September. We all recognise the problem of red meat and livestock production. Sugar production is acknowledged to be in chaos. We have over-produced for many years. Who knows what the benefit is? There are A quotas, B quotas and C quotas. In our C quota we are effectively undermining the economies of the cane sugar producing countries and causing poverty in many other countries. I do not think that we should be proud of that record.
The production of fresh fruit and vegetables has increased in the past year, despite the fact that buying off the market—that is, buying in and not putting the produce on the market—in many continental countries has become a valuable and significant source of income for farmers. In other words, the products are already too numerous and too great in volume for the market, yet we still consider them to be worth subsidising.
We have to consider where to go from here, because there is a time limit. Document 5448/88 says that in time all those things will be brought into equilibrium, but when will that be? How long, oh Lord, how long? Set-aside can provide only a partial answer. In my view it cannot provide an answer on other than environmental grounds, because the Minister acknowledged in his evidence to the Select Committee that marginal land will be put into set-aside first. He said that we are so efficient that we will not be able to produce more. We are told that crop yields in cereals will rise by 25 per cent. in 10 years. If that is so, from the remaining land we can produce much more than we are producing at the moment in cereals.
Everyone is trying to avoid talking about quotas. The Minister of State knows my view. I believe that quotas should be introduced to govern all products. I believe that that should be done by the EEC for an overall total, but the decision on how each country works up to its national total should repatriated to the individual countries. We must take steps to bring in those quotas. That is the only way in which we can help the small farmers. What we mean by a small farm is not what Europe means by a small farm. In European terms, a British small farmer is a large farmer. We will be unable to help small farmers unless we have a measure of repatriation in the common agricultural policy.
Sheep farming is vital in my part of the country. For such monocultures it is a matter of life and death, not only for individual farmers, but for communities. The NFU is fighting very hard on sheep quotas, despite the fact that union members are asking for them.
When speaking to a farm conference, Mr. John Davies, the Under-Secretary at the Welsh Office responsible for agriculture, was reported in theWestern Mail on 28 April as saying:
I for one will fight tooth and nail against the imposition of sheep quotas.
Does the Minister really consider that that is the proper way for a civil servant, who is traditionally politically neutral, to address the problem? Ministers should come out from behind their civil servants and say that to the farmers, instead of using civil servants to express politically contentious views.
Ultimately, wriggle as Ministers may, the only answer will be quotas which combine strategic decisions being taken by the EEC with national repatriation of the means of working up to the quota. Only in that way can we begin to safeguard the small farmer, the monoculturalist and the future of the agriculture system. Even if we continue with a budget of £19 million in subsidy by the EEC, this will be greater than the present budget and will be a continual source of reproach. In all future debates, as if the matter were fresh and new, hon. Members will be saying that we face an era of crisis. We have faced it for a decade. For heaven's sake, in our negotiations this year, let us seize the means of overcoming it once and for all.
I was interested in what the hon. Member for Pontypridd (Mr. John) said about quotas. As a result of the introduction of stabilisers, we have what amounts to a Communitywide quota. It will be interesting to see to what extent that Communitywide quota or, to use the old term, standard quantity over a period of time, has to be broken down into quotas for individual farms.
I was very encouraged by the appreciation and understanding shown by my right hon. Friend the Minister of the situation facing agriculture. Nonetheless, it is a continuing irony that agriculture, the industry which, more than any other, has done what was asked of it—increasing production, productivity and the self-sufficiency of national food requirements and helping the Government in their endeavours. The industry is now facing the greatest difficulty. Not surprisingly, as a result, many farmers feel somewhat soured and let down, let alone worried, financially squeezed and desperately anxious about the future of their businesses and the future of the countryside.
The underlying cause of that disarray remains the slow growth in the size of the market in comparison with the huge growth in output stemming from scientific advances put into practice.
I think that the hon. Member for Pontypridd is right. We now have to bring consumption and supply into better balance. However, that is small consolation to the individual farmer who learns from the White Paper that United Kingdom farming income in 1987 was the second lowest in real terms since the war, and that over the past five years the average decline has been 9 per cent. a year. Whereas industry generally is achieving an annual return of about 8 per cent. on working capital, farming achieves the negative return of minus 0·5 per cent. and investment is at its lowest level since the 1950s. Nor is it a consolation that all that is a consequence of successful farming. None the less, that is the situation with which my right hon. Friend the Minister must grapple.
In practice, my right hon. Friend must grapple with the contradictory objectives of preventing further growth in surpluses and in the cost of the common agricultural policy, and the commitment in the treaty of Rome to increase the earnings of those engaged in agriculture.
Furthermore, my right hon. Friend carries a great responsibility, as has been emphasised several times already, for the economic and social interests of rural areas and for the conservation of the countryside, the latter being an admirable, but added, self-imposed burden stemming from the Agriculture Act 1986. I do not envy the Minister, but he and his ministerial colleagues are extremely well qualified to cope with the gargantuan task that they face.
We all know that in 1992 the Common Market becomes a reality. From that time on there should be fair and equal competition between all food producers in the Community. That does not mean, as was said earlier, that British farmers will automatically enjoy a bonanza. It must not be forgotten that many European farmers, probably a majority, are already efficient and are daily becoming more so. On the other hand, British farmers will at least not be at a disadvantage, as at present they are in many respects. Not only are they squeezed financially in the short term, but farmers outside Britain enjoying a slightly better level of prices may be able to improve their competitiveness now, which would be to our disadvantage from 1992.
The National Farmers Union has calculated that the loss of farm income in the United Kingdom brought about by stabilisers for all commodities in a full marketing year will amount to about £125 million. I accept that the Government do not wish to have a green pound devaluation to offset the effect of stabilisers, as the objective of stabilisers is to contain output and the cost of the common agricultural policy. But I also agree with the hon. Member for Pontypridd that a devaluation on the green pound is not a panacea.
On the other hand, when United Kingdom agriculture prices are between 6 and 8 per cent. lower than those in France and Ireland, and up to 17 per cent. lower than those in the Netherlands and West Germany, it must follow that there is a strong case for the devaluation of the green pound, because such price levels are bound to militate against the competitiveness of United Kingdom producers. Therefore, I was pleased to hear what my right hon. Friend had to say on that topic.
There is heavy discrimination against cereal farmers in Britain. Although some livestock market prices are satisfactory at present, livestock farmers are being asked to compete on unfair terms. The position of pig farmers continues to be very serious indeed.
The vice-chairman of a pig farmers' co-operative in my constituency has just sent me some illustrative figures. I believe that they were produced by a Cambridge agriculture economist and refer to eastern counties pig producers, but I am assured that the situation in Wiltshire is similar.
In the four weeks up to 23 February this year, pig producers in the study were making a loss of £13·20 per £100 of output, or about £6·50 per pig. In the subsequent four weeks a loss of £11 per £100 of output, or about £5·50 per pig, was registered.
My correspondent described his position as an example. He turns out 5,000 finished pigs a year. Therefore, even if the loss was £5 per pig, less than either of the figures that I have quoted, he would show a year-end deficit of £25,000. Clearly, such a situation cannot continue for long without disaster, and action is called for.
I have no doubt that pig farmers are efficient enough to make a living if competition is fair, but for that to be so my right hon. Friend the Minister must achieve a devaluation of the green pound and wipe out MCAs whatever opposition he faces from his European counterparts.
While pig producers' returns have not exactly been helped by extra sheepmeat coming onto the market and while I am pleased to see more sheep in a traditional sheep area such as Wiltshire, I share the concern of my right hon. Friend the Minister and others about possible adverse consequences in the upland areas where sheep are often the only source of income.
I revert for a moment to cereals and other crops on which there is major economic pressure. For example, rape has been an excellent corn break and cash crop for the past decade or more, but now its economics is decidedly marginal. Therefore, there is bound to be a tendency for farmers growing rape to return to more grain production.
Already the United Kingdom is the sixth largest exporter of grain in the world. Even as little as 10 years ago nobody would have thought that that was conceivably possible. It is an extraordinary reflection on British agriculture's ability to increase output. It is amazing. But equally clearly, against a background in Europe and the United States of what almost amounts to a glut in cereal production, there is little scope for still more exports. In any case, as we know, stabilisers will insist on a limit on production, and with storage and disposal of all surpluses costing about £250 million a week, the stabilisers must be right.
But I am not sure whether the production limit insisted on by the stabilisers is fully understood. We know that the stabiliser for cereals has been set at 160 million tonnes. We know that the EC can normally dispose of about 155 million tonnes. We know that the estimated output for Europe in 1992 is about 184 million tonnes. No doubt stabiliser price cuts would cut off some of that production, or at least reduce it in some areas. No doubt set-aside, too, will encourage a reduction in cereal acreages, but the size of the area to be set aside, or de-intensified, or extensified, is literally enormous.
Does my hon. Friend agree that to set aside the equivalent of 5 per cent. of our productive area we need to set aside the equivalent of the counties of Shropshire, Herefordshire, Worcestershire and Staffordshire put together?
I am sure that my hon. Friend's calculation is more or less correct. I was about to make the same point in a different way.
On the basis of an annual growth in grain production of about 2·6 per cent. on average—I say on average because obviously there will be an occasional bad harvest, as there was last year—in the United Kingdom alone, it has been estimated that the area of land surplus to the requirements of cereal production is likely to increase annually at about 100,000 hectares—247,000 acres. That means about 1 million acres in four years. It is a staggering acreage that must come out of grain production in one way or another.
It is no use pretending that there is a simple panacea for this problem. My right hon. Friend will have to make use of a full range of policies to cope with the new position of agriculture and the rural areas. I am glad that that is exactly what he is doing. However, I hope that he will give more consideration to the financial encouragement of the growing of spring cereals and the undersowing of grain. Those two systems together could have a considerable effect on reducing the total grain production and would be enormously beneficial to environmental conservation.
While my right hon. Friend considers those matters, will he also redouble his efforts to convince his colleagues on the Council of Ministers that the co-responsibility levy achieves nothing but great administrative cost? Does the Minister know what that administrative cost happens to be? That levy is also a considerable cost to feed manufacturers, and improves the relative economics of imported manioc to the detriment of further use of United Kingdom or European Community-produced grain.
I encourage the Minister to take more of his measured steps more quickly, and perhaps even a few unmeasured ones, if they can speed the process of readjustment of British agriculture. British farmers and all those employed in the ancillary industries depend on the success of that process. Collectively, they account for the health of the rural economy. That is the burden for which my right hon. Friend is responsible. It is a heavy burden, but for the good of all our rural areas, it is one in which my right hon. Friend must achieve success.
We heard earlier that a number of Conservative Members wish to speak in the debate. I have the impression that it would be helpful if speeches were kept as brief as possible to let as many hon. Members as possible speak. That is a courtesy that is not normally extended to Scottish Opposition Members during Scottish Question Time or Scottish debates, when often our time is eaten up by Conservative Members. I shall try to be as brief as possible, because I would not wish to follow that pattern.
The thread running through the debate is not just the vast amounts of money being expended on agricultural subsidies in general. There is also a worry, expressed especially by Opposition Members, that the small farmer is not getting a fair and adequate deal.
I remember a comment made by the former Minister with responsibility for the Highlands and Islands, who was then the hon. Member for Argyll and Bute, Mr. John MacKay. He referred to crofters as state pensioners. He said that they should not be receiving handouts from the state and behaving like pensioners. The electorate has now pensioned off that Member of Parliament. That sort of attitude from the Government is not appreciated by smaller farmers or crofters.
For crofters to be referred to as state pensioners is to imply that they receive an excessive amount of Government subsidy. That was not only a graceless remark by the previous Minister, but it was wrong. It has been mentioned already that only about 30 to 40 per cent. of EEC agricultural subsidies go to farmers. Only 10 per cent. go to the smaller and poorer farmers—those on less than average incomes. That is despite the fact that, according to The Economist, the smaller farmer is more efficient in his output per acre, output per head of stock, unit labour cost and pound invested.
However, as the hon. Member for Holland with Boston (Sir R. Body) said, the overall effect of Government subsidies is to support not smaller and proper farmers, but always the larger farmers. That is the sort of discrepancy that I draw to hon. Members' attention. It is wrong not only on the grounds of equity, but on the grounds of efficiency. It is wrong not just in the narrow economic sense, but in the larger sense of using Government and Community money properly to sustain, support and promote rural communities.
I confine my remarks to crofters as a sub-group of the smaller and poorer farmers. The image of crofting sometimes conveyed—possibly the image that Mr. MacKay was thinking of when he referred to them as state pensioners—is that it is an outmoded, inefficient and inadequate system of agriculture or a traditional form of farming that has lost its place in the modern world. That is not true. Modern-day crofting is more relevant than it has ever been.
Crofting is a model of the sort of farming that Conservative Members say that they want to see. Crofting exemplifies the virtues of diversification of farming activities. Crofters commonly combine their farming activities with other economic supplements—for example, weaving, working in light industry, tourism or even professional work. That not only increases their individual income but stabilises the rural population.
Although people can lose their jobs and go through temporary periods of crisis, if they have a crofting background on which to fall back, they can retain their roots in the community until they find further employment. That helps to avoid the demoralisation that could easily lead to rural depopulation.
Crofting is also relevant to today's needs. It will probably amaze many hon. Members to learn that the most densely populated area of countryside in Britain is in the northern end of my constituency. Although it is very marginal land, because crofting can combine with other forms of income, people are encouraged to stay on the land, which maintains a flourishing rural community
Perhaps the hon. Gentleman will allow me to continue. He may be able to catch your eye later, Mr. Deputy Speaker.
I turn now to some of the problems that crofters face. Enough has been said about the threat that grazing fallow poses to them. If sheep production is moved from the upland areas down to the lowlands that will be a body blow to the crofting communities, because sheep production is the staple of crofting. I hope that the Government will seriously take account of that.
This problem is reminiscent of the problems of the milk quotas and unequal effects on farmers, particularly in Scotland, where farmers have not produced to excess but have been hit by the broad-brush approach because of the way in which the quota scheme operates. I hope that the same will not happen with stabilisers for sheep production.
A couple of points that have not yet been discussed arise from the Minister's opening remarks. He got feisty and condemned the Opposition for having nothing to say for the farming community. He tried to give the impression that the Government's record with farmers was blameless, but the tax on research and development is affecting smaller farmers who cannot afford to pay the new fees they are being asked to pay for services from the Ministry, which they formerly received free.
What will be the effect of the poll tax on crofting communities? The Minister made great play of the fact that farmers, too, would benefit from the income tax changes of the Budget. However, he scrupulously avoided referring to the poll tax's impact on rural communities. It will be devastating, particularly in the Highlands and Islands, for two reasons. As a flat-rate tax it will discriminate against low-rated rural areas in the Highlands and Islands. The university of Strathclyde has estimated that between 65 and 75 per cent. of people there will end up as losers under the poll tax.
The present rating system makes allowance for the fact that marginal, peripheral and outlying areas receive fewer council services—less rubbish collection and street cleaning, fewer street lamps, and less access to libraries and facilities such as swimming pools. By taking account of those factors, the rating system balances out the inequity. The poll tax will not take account of them and will be a great disincentive to people to live out in the rural areas, because they will have to pay the same for fewer services.
The poll tax will also disadvantage crofters because they will lose the 50 per cent. rating concession that they now have and which was introduced by a Conservative Government in the 1950s. It is an unfortunate sign of the times and of the change in the Conservative party that it should take that concession away. It is hypocritical of the Government to go on about the supposed threat of the rating of agricultural businesses and to do away with the 50 per cent. rating concession simultaneously. If there is an argument for the one it also applies to the other.
The rating concession for crofters was introduced specifically to take account of the disadvantages they suffer, living and working in the areas that they do. The costs of living are higher there; electrification is an example which has been mentioned. Crofters in my constituency can pay £2,000 to £3,000 to be connected to electricity. That is why it is sad that the Government are thinking of taking the concession away. It has been estimated that the introduction of the poll tax will remove £1·5 million from the crofting areas.
The Government cannot pretend to be blameless on fish farming, either. It is not an industry in surplus. It is an example of crofters diversifying and it makes great use of new technological developments. It has exciting prospects and is particularly useful in the disadvantaged areas on which we need to target our money. The Government happily sit by while fish farmers are burdened with a tax with which no other enterprise or business in the country is saddled. It was imposed by the Crown Estate Commission and the fish farmers receive next to nothing in return for it. They would at least receive services in return for their rates. Until the Government wake up to that and do something positive about it, they can hardly pretend to he blameless.
The thrust of Opposition Members' remarks has turned the Government's attention to the position of smaller and poorer farmers in disadvantaged areas. The agricultural crisis consists not only of the difficulties in keeping subsidies for the farming sector under control. The underlying crisis is the increasing trend towards fewer and bigger farms. That is an unhealthy trend for rural communities and the Government should try to do something about it.
I agree strongly with what has been said about the beef variable premium. It always seemed a perfect system to me. It helps the farmer and encourages the housewife to buy the beef by keeping the price down instead of selling it into intervention. To get rid of it seems an act of madness.
I thank my right hon. Friend the Minister for the tough stand he takes on most issues for British farmers—if not yet on the one I have mentioned. He manages to hold out against all the other farm Ministers in the European Community, he preserves our interests, and he prevents discrimination against us. That is his primary job. We shall never reach a stage at which everything in the garden is satisfactory, so I draw his attention to some matters that particularly concern my constituents.
First, we demand a measured devaluation of the green pound so that we are paid the same for our produce as other European farmers. However, it is important that should not lead to the French obtaining an even better devaluation, which would cause CAP spending to hit the budget ceiling and so jeopardise other policies. There is no justice in our farmers getting less than the others on the continent for identical produce.
My sheep farmers are worried about the future course of stabilisers. We did not want and do not like a separate stabiliser system for sheepmeat and we know the Minister fought hard to avoid that. But we can all—albeit a trifle reluctantly—accept the logic that as we have a separate sheepmeat regime to which we are deeply attached we cannot grumble too much if we have a separate sheepmeat stabiliser relating to 1987 flock numbers, as long as it does not lead to too big a reduction in the support price.
We are, of course, anxious to get on with the wider review of the sheepmeat regime so that we know where we stand in the longer term. Until the French presidential elections are over, I fear that this, along with many other things, will have to wait. The French insist that we do not discuss the long-term review until negotiations with the 12 outside countries, and especially with New Zealand, are completed. Those discussions have not yet begun.
I make absolutely no apology for saying that we should take a very tough line with New Zealand on sheepmeat and on butter now that she no longer fully supports NATO. It is most important that in any set-aside policy, land set aside should not be used for grazing sheep because that would put many of my sheep farmers out of business. I am grateful to the Minister for getting this matter on the optional list in Europe, and I trust that he will not permit it to take place here. I hope that I did not detect a slight wobble when he was speaking about this and trust that it was merely a courteous nod to his own part of the world.
The matter of most concern to dairy farmers is the quota system. They have now settled down and adjusted to it as it is. Although we know that quotas should exist up to 1992, there is no guarantee that they will exist up to then or that even before 1992 there will not be changes in the rules and regulations about transfer and leasing after 1989, never mind 1992. It terrifies me to see how much some farmers are paid for quota. That is an absolutely artificial market that can be changed by Government regulation, reducing an expensive quota to a worthless piece of paper virtually overnight. It is vital to clarify these points as soon as possible or bankruptcy could result.
I thank the Minister for his efforts on our behalf and wish him well in his negotiations in Brussels.
In many ways the debate is a rerun of debates that have taken place in the last decade or more. Anyone who reads the Commission's document, "The Situation on the Agricultural Markets", or its proposals for agricultural prices in 1988–89, which sketch what has been happening in agricultural markets, cannot help having a great sense of feeling that he has read it all before throughout the 1980s.
The Commission admits that the money being spent on the common agricultural policy is doing very little for farmers. Referring to the agricultural markets, the document says:
it has become increasingly evident that the income support function the CAP provides to farmers is often poor value for money.
The document on the proposals for agricultural prices for 1988–89 says that, despite the changes so far undertaken,
the underlying trends in consumption and of production are not yet significantly different from those recorded in the more distant past.
In other words, even the tinkering that has so far been carried out on the common agricultural policy has not produced a significant change in the way in which money is spent on that policy.
It is difficult to realise in the context of a debate on CAP spending that this year's budget for the CAP shows the largest increase for a long time—perhaps even in the history of the common agricultural policy. It is up by almost 30 per cent. In the previous five years, the average increase was slightly over 16 per cent. and yet the budget is presented to us as a triumph for the new realism. The new realism for the cereal quota is 160 million tonnes, but Community consumption over the past few years has been less than 140 million tonnes. Unless there is some way of exporting about 20 million tonnes at no cost to the taxpayer, we are building into the system a significant subsidy at a time when we are supposed to be trying to get rid of subsidies.
A great deal has been said about the GATT round of talks in Uruguay. Even if they are successful, they will take at least four years to carry through. The differences that exist between the negotiating positions of the European Community, the United States and the so-called Cairns group headed by the Australians are so great that it is difficult to see how a compromise can be achieved within four years.
The common agricultural policy has outlived its usefulness. It was formulated at a time when traditional farming methods were the norm, when the dairy industry grazed cows on ordinary untreated grass in the summer and gave them a bit of hay in the winter. Now we are factory farming and the common agricultural policy cannot cope with that. We must stop tinkering with the complexity of the existing systems and come down to seeking a few fairly simple but radical solutions.
The first thing we must say is that the existing system must be phased out over, perhaps, five years. In its place we need a battery of measures, such as the introduction of quotas across the board allied to a reduction of inputs. That can be achieved partly by reducing prices and thereby discouraging farmers from the excessive use of fertilisers, cattle feed and pesticides, most of which are doing irreparable damage to parts of the countryside.
The Minister was rather complacent in speaking about some of the people who oppose new methods and changes as Luddites. Much of the opposition is simply to do with making sure that we do not pollute the earth and poison ourselves. We need to extend the principle of environmentally sensitive areas. Perhaps we should push a similar scheme on the 7 million acres of land mentioned by the hon. Member for Holland with Boston (Sir R. Body). That land has been brought into production since the last war and has brought about much unnecessary production.
We should get rid of the green currencies, phase them out. However, we must accept that in doing that we will come up against one of the major problems of the common agricultural policy, which is that conditions between member states are very different. I shall give one example of that in relation to energy prices. In 1987, energy prices declined in real terms by more than 20 per cent. in the Netherlands, by 12 per cent. in Italy but by only 4 per cent. in France. I could give other examples to show that the input costs for farmers vary tremendously across the Community. We need to forget about the existing common agricultural policy and get a completely new one based on the factors that I have mentioned.
I begin by paying tribute to my right hon. Friend the Minister of Agriculture, Fisheries and Food for what he has achieved in Europe on behalf of agriculture in this country. Many farmers in my constituency admire his robustness and they will be delighted to hear that he has forced a tough stabiliser on wine production. Too often the farmers of this country think that farmers in other countries get away with blue murder while we put up with the curtailment of output.
The situation in the countryside is genuinely worrying, not only for farmers, but for the ancillary trades and for the rural economy in general. There is no doubt that the dairy industry is experiencing a certain stability over the introduction of quotas and I cannot help but smile when I recall the resistance to those quotas when they were introduced. The future for cereal farmers and livestock producers is most uncertain.
I welcome my right hon. Friend's commitment to the transferability of quotas between farmers. That will be widely welcomed and we should appreciate what my right hon. Friend has achieved. Nevertheless, the farmers are still a little discontent about the £90 dairy inspection charge. A commitment was given some time ago that that would be re-examined, and it would be interesting to hear tonight whether any progress has been made on that.
Like myself, the dairy farmers in my constituency are against the co-responsibility levy and it would be marvellous if that could be abolished. It is a ludicrous tax and is now down to low levels, particularly in the dairy business.
Furthermore, there is a levy to be paid by milk producers this year on over-production. My right hon. Friend will probably remember a commitment given by his predecessor that farmers in this country would not have to pay that levy unless it was paid by producers in every other country in the Community. I should be grateful if he would reiterate that commitment.
Overall, dairymen crave fairness and fair competition. They are prepared to take on anyone, but they want fairness. As we face up to the next stage of curtailing agricultural output, farmers accept the need for financial discipline. Quotas have undoubtedly made farmers look carefully and afresh at their businesses to maximise profits rather than simply maximise output. A price squeeze has the same effect, but the farmers retreat into trying to produce more rather than trying to produce it more cheaply, thereby defeating the object.
Farmers are looking at the whole of their businesses, rather than concentrating on producing more and obtaining a greater output. Whether they are involved in milk, cereals or meat, they are concentrating on selling the product rather than just producing it. Food from Britain has undoubtedly been a help in that, but much still remains to be done and we must look to the farmers and producers to do much of that themselves. If they wish to diversify and go into a leisure business—caravans, fishing or shooting —they expend a great deal of time researching the market before they do so.
The message that I wish to give to my right hon. Friend is that agriculture as a whole is looking for fairness of competition. We shall achieve parity in a genuine common market in 1992. I am delighted that we are to begin to take steps towards achieving parity of the green pound and sweeping away some of the livestock MCAs that need to be removed.
Many hon. Members were impressed by yesterday's lobby by pig farmers from the NFU headquarters. They crave equal opportunity. In 1984, 83 per cent. of the food consumed in this country was home-produced. In 1987, that figure had fallen to only 73 per cent. Much of that must he attributed to the fact that our farmers are facing unequal competition while others are able to send cheap food to this country. There is no accounting for those who want to eat Danish butter or drink French water, but we are losing out in our market to cheap imports.
I was pleased to receive a brochure entitled "Pork Talk", published by the NFU, as it shows the unfairness of competition in the pig in the pig industry abroad. In France, there is a system called "Stabiporc". That is not a new way of putting the wretched animal to death, but a stabilisation scheme initiated by the Credit Agricole and backed by the French Government. Last year, this scheme paid out £12·5 million via marketing groups, either as a subsidy or as cheap loans at a 5 per cent. rate of interest. In Italy, grants totalling more than £30 million have been paid to producers on a per pig basis as an emergency measure. In Germany, small farmers are able to reclaim VAT of 13 per cent. on output, while paying only 7 per cent. VAT on inputs.
As I said at Question Time today, the imports of manioc carry a levy of 28 per cent. for pelleted or processed product and 6 per cent. for raw product. It appears that, although the imported product is processed, the lower levy of only 6 per cent. is being paid. This is in clear breach of the rules. I hope that my right hon. Friend the Minister of State will have time to reflect on these obvious breaches of the regulations and will be able to give us his thoughts about "Pork Talk"'s revelations.
What of cereals and stabilisers in general? As I have said, when prices are forced down, farmers produce more. Secondly, the plant pathologists have guaranteed that they can increase output by 1·5 per cent. per annum, so that forcing down the price will not do much good. Thirdly, stabilisers penalise the non-expanders. Fourthly, bearing in mind that mainstream farming will always occupy most of the land in the United Kingdom, it would be marvellous if we could look again at the quotas for producing cereals. Quotas have been successful in milk, potatoes, sugar and hops.
As has been said already today, morale in agriculture is bad—it goes from poor to terrible. We can see where we are going, but I urge my right hon. Friend to keep talking and to keep pushing as he has been doing in Europe. He must go steadily, and be gentle with the farmers. He must keep on telling them where he is taking them because he is getting a lot of credit for doing that.
It is unfortunate that the Minister cannot tell the farmers where he is taking them. I do not criticise the right hon. Gentleman personally, because he does not decide policy any more, and neither does the House. The Minister was not even present—if I am mistaken he will correct me—when the Prime Minister, along with others, decided what the stabiliser figures and arrangements would be. That is the extent to which uncertainty about agriculture has been increased.
The House is not even debating a motion on the important documents before us, which bring about a complete change in agricultural policy and the prices for the coming year. We are paying those prices in the way of taxes.
I deplore the fact that the Government have decided, though a procedural device, not to allow the House to debate an amendable motion. There is now no view of the House on this change of agricultural policy or on the prices that are being paid. That procedural and constitutional slippage should not go without strong remarks. We should point that out to Conservative Members. They have different views from mine about the main merits of the market, and they voted away those powers, so they have no real claim to talk, because we are now but a consultative assembly, if not less than that.
Enough of procedural matters—let us talk about agriculture. Can and do stabilisers work? If the liabilities exceed the income, capped by the so-called discipline tied to the gross national product of the Community, what will happen? Those who know doubt very much whether stabilisers will do the trick. The Select Committee on European Legislation has reported on these matters, in documents HC 43-xix and HC 43-xxx. We note that, although 1 million hectares have been designated for the set-aside proposals, the Government reckon that even if it is reduced on the basis of cereals, it will save only £260 million.
It looks to me as though we shall be in shtuck in a few years' time, if not sooner, with those so-called measures. The bizarre results about which we have heard, if my hon. Friend the Member for South Shields (Dr. Clark) was right, shows that there has not been much field work. His figures comparing likely income from the schemes for a farmer in Cumberland compared with one in East Anglia were bizarre indeed.
With the quotas introduced this year, together with those introduced two years ago, we have reached a turning point in British agriculture of equal significance to that resulting from the Williams Act and our entry into the Common Market itself. The Minister must agree that the tragedy of it all is that, despite the money being spent, and unlike those two other eras of the War Agriculture Executive Committee and the Williams Act, we are not encouraging good husbandry.
The combination of interest rates, bank loans, the need for inputs and the need for productivity screws farmers into practices and financial difficulties that they could well do without. Indeed, as has been publicised in the newspapers, the Minister may have difficulty in deciding who is to pay for better practices. There are reports questioning who is to pay, for instance, for nitrates—with which we shall have to deal in respect of our water supplies in any case.
I draw the attention of the House to evidence that can be found in the Library, and which has been received by the Select Committee on European Legislation, from the Council for the Preservation of Rural England. In referring to direct income aids, the council states:
CPRE considers that if a rich and varied landscape, wildlife and historical heritage is to be maintained, price reduction must be accompanied by the introduction of direct income aids tied to environmentally beneficial uses of land. This is not recognised in the Commission proposals.
The Minister suggested that there would be some environmental benefit from the additional expenditure, I doubt it. Mention was made of environmentally sensitive areas, and it was stated that 100,000 hectares will be put into the sort of regime that I will describe in inverted commas as "the Halvergate scheme". That is surely no answer at all. Paying farmers additional money not to grow things which they might otherwise grow, under a regime that is already expensive, is throwing additional sums of money after and additional sum of money. That illustrates the back-to-front nature of the whole scheme.
Article 39 of the treaty of Rome is worth studying because it encourages production, scientific innovation and greater output per farm worker. Those may have been valuable at the time when the treaty was drafted—my hon. Friend the Member for Bridgend (Mr. Griffiths), adverted to them in his speech—but they have now become the opposite. Instead of encouraging certainty for farmers, who have the weather to deal with anyway, they encourage uncertainty, and that is what agriculture can well do without.
When the quotas were introduced in April 1984—may I have the attention of my right hon. Friend the Minister?—the then Minister of Agriculture explained to the House that he had agreed to southern Ireland having an increased milk quota while ours was slashed, on condition that the United Kingdom was allowed to keep the variable premium. Therefore, if the variable premium is taken from us, I charge my right hon. Friend to ensure that the southern Irish quota increase, which was agreed only on the basis of the variable premium remaining, is taken away to what it would have been had it been on the same historical basis as that for the United Kingdom. We cannot have this penny spent over and over again—it was a quid pro quo and so it must remain.
In the brief time available to me I exhort my right hon. Friend the Minister, who is such a redoubtable fighter for the United Kingdom's industry in negotiations, to ensure that the policy is coherent. It is not coherent to put a standard quantity—now called a stabiliser, although it is exactly the same as a standard quantity—on lamb production, and then to allow the grazing of fallow land so that others can go into sheepmeat production who are not there at present.
Nor, of course, does it make sense to put a standard quantity on British sheepmeat production and not drastically curtail imports of New Zealand lamb. Otherwise the percentage of the market occupied by New Zealand will continue to rise rather than fall, just as the percentage of our packaged butter market going to New Zealand has increased rather than diminished. By 1989, New Zealand butter imports ought to be down to 40,000 tonnes. New Zealand will then have only the same percentage of the market as it did in 1983. That is essential. New Zealand has sacrificed our sympathy in following a policy of withdrawing from its defence obligations; we therefore have no further obligation to crucify our own agriculture to admit New Zealand's produce.
Quotas have been mentioned, but when a quota is applied it should, if possible, be before and not after there is a surplus. Otherwise many producers will have the unanswerable problem of spreading an overhead commitment based on one level of output over a smaller level. It follows as night follows day that the standard-quantity policy will fail for the same reason as it failed under Christopher Soames. It does not bite on the individual producer; it still pays him to produce more and to beggar his neighbour instead of himself.
We shall have to proceed to a quota policy, because it is the only way to resolve the dilemma to which my right hon. Friend himself drew attention. With vastly increasing expenditure on the so-called agricultural programme in the Community, we nevertheless have catastrophically falling farm incomes. The only way to square the circle is to have quotas which provide budgetary limitation, with the payment going to the food producer rather than to the food storer.
I have said this before, and I shall continue to say it. The truth will not go away with failure to grasp the nettle, and that is why quotas are bound to come. They are, moreover, the only way to secure the pattern of livelihood in rural areas, instead of causing rural depopulation with all the social costs that go with it. The realities will not change.
I have a last question for my right hon. Friend. Much reference has been made to 1992, when EEC competition policies are to achieve final harmonisation. The date for other policies is 31 December 1992, but many people assume that the end of the green pound and the MCAs will be on 1 January 1992. Will that be the case, or will it happen a year later, on 31 December? It is crucially important that we get rid of such distortions—which will otherwise drive so many of our producers out of business —before that date arrives. That is why we should do as much as possible this year rather than leave it until 1 January or 31 December 1992. We must get rid of those distortions with which our industry is at such a disadvantage as compared with other producers in Europe.
I am very conscious of the fact that a number of hon. Gentlemen who have been present in the Chamber throughout the debate have not been fortunate enough to be called. That is a matter of regret, because the debate has been interesting and very well informed. I express my personal regret that those hon. Members on the Government Benches have not had an opportunity to make their contributions. I know, however, that the Minister of State is anxious to reply fully to the debate. That is right and proper because, as the Minister said in opening the debate, this is essentially a consultative debate. I am sure that the House wants to hear some response from the Minister of State on the matters that have been raised.
I am the sixth hon. Member from the Principality to speak this evening. There have been contributions from two of my hon. Friends representing Scottish constituencies, and from two hon. Members from Northern Ireland. I am aware that the responsibility for agriculture is not held exclusively by the Minister of Agriculture, Fisheries and Food, because the territorial Ministers have responsibilities as well. None of them has been present during the debate. I do not say that as any kind of criticism, because they have other responsibilities, and the debate is being led by the Minister. Because serious concerns that have been expressed by those hon. Members representing Wales, Scotland and Ireland, I hope that the Minister of State will give an undertaking that he will draw to the attention of the territorial Ministers the concerns that have been expressed this evening. That is not a point of contention. It is a request to the Minister and I should be grateful if he would respond to it.
The majority of the contributions have had three things in common. First, and most obviously, most of them have been critical of the Government. That is true not only of the contributions from the Opposition Benches, but of most of those from behind the Government Front Bench. Secondly, most of the contributions have concentrated on constituency matters. That, too, is right and proper, because there has been an intensive system of lobbying during the last couple of days, and farming interests are very important to the economy and the fabric of our rural life. It is therefore important that those interests are properly represented in debates in the House.
Thirdly, most of the contributions have come from hon. Members who represent essentially the dairying or livestock areas of this country. Those are the areas that are in greatest jeopardy because of the potential movement out of cereals as a result of the stabiliser proposals. The great fear in the dairying and livestock areas is that as the stabiliser package starts to bite and put pressure on cereal producers to go into livestock rearing, this will undermine those areas that have been referred to by several of my hon. Friends as monoculture areas, where the combination of geographical and economic circumstances means that there is little opportunity for diversification. I believe that those are very significant developments.
When the Minister opened the debate he referred to the paradox of the common agricultural policy. He said that as financial support for the CAP has grown, so the income of farmers has fallen. Tonight's debate is essentially about how that internal contradiction can be resolved.
There has been much criticism of the CAP, particularly from my hon. Friend the Member for Pontypridd (M r. John), whose contribution I welcomed, because for several years he spoke for the Labour party on agricultural matters. I am sure that all of us recognise the value of his contributions, and I was particularly pleased to hear him in the debate this evening.
It is worth reminding the House that since 1975 the CAP has been responsible for increasing agricultural production by 23 per cent. That has been at the cost of a 125 per cent. increase in expenditure by the guarantee fund. At the same time as that increase in production, farm net income has seen a 25 per cent. reduction. As my hon. Friend the Member for Bridgend (Mr. Griffiths) said, the average cost to the average Family in the Community is now running at over £10 per week.
Throughout that time, in the words of the former Minister responsible for the environment, the hon. Member for Bristol, West (Mr. Waldegrave), the CAP has been operating as the engine of destruction of our environment. As my hon. Friend the Member for Pontypridd pointed out, we have been responsible for dumping surpluses on the Third world and wrecking their economies. That is not a record of which the CAP can be proud.
Both sides of the House have expressed the concern and alarm for the future that is felt, in all sectors of the industry. Everybody is concerned, apart from the Minister of Agriculture. He seemed to suggest that everything is OK. He said, "I will make adjustments to the green pound if I can get agreement. I will get the stabilisers to operate if I can get agreement." He made many suggestions about his policy, but he signally failed to give us any guarantee about his negotiating position. I was reminded of the speech that he made in February, when he said:
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 … We have achieved most of our objectives, and one of the factors that had to be considered was the importance of ending uncertainty."—[Official Report, 15 February 1988; Vol. 127, c. 756–57.]
The Minister set that as a standard by which we should judge him, and by that standard he has failed in his performance this evening. When we have asked for an end to the uncertainty and for guarantees about the position, we have had precious little from him. Our cereal farmers do not know what is to be expected of them. They have no guidelines. They do not know how to adjust their production if they are to avoid the imposition of stabilisers.
The future of the beef support scheme is in jeopardy. We know that the variable premium will end on 1 January, and we are told that there will be something to replace it, but we do not know what that will be. Our sheep producers face the prospect of an end to the variable premium. The sheep rearing areas do not know what will replace that. We do not know the Government's real intention on the green pound. We had a vague statement from the Minister this evening. He said that he was generally in favour of a devaluation, but he failed to take the same steps as his colleagues in the Council of Ministers, who have set devaluation of the green pound as a condition to their sitting down to negotiate. Our Minister has said that we would like to see a devaluation of the green pound, but has not set it as a condition.
That is supposed to be a package that brings an end to uncertainty. I am afraid that we have had as much certainty in those matters as we have on the Government's real intention on extensification and set-aside. We have not had an end to any of the uncertainty.
We know that the Government have announced that by midsummer the proposals will be implemented. If anybody could think of a date for the implementation of the proposals that would be least suited to agricultural interests in this country, it would be midsummer. The cereal harvest will be growing and harvest time will be approaching. How are farmers supposed to adjust then? How, halfway through the season, are our stock farmers supposed to adjust their annual programmes? How are they to cope? How are they to avoid the impact of stabilisers? By midsummer none of the uncertainties will have been resolved.
We know that the Minister has succeeded in one thing. He has succeeded in making most people opposed to his proposals. I do not mean just those in the House, but most people outside as well. The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) referred to the representations from the National Farmers Union. He mentioned the good briefing that the NFU had circulated to Members of Parliament.
The NFU said:
Over the last two years some 20,000 full-time jobs for farmers and farm workers have disappeared and investment has fallen by 30 per cent. to the lowest level since the mid 1950s. Farmers' return on working capital was negative.
The NFU also said:
The Government's White Paper also showed that UK farming income in 1987 was the second lowest in real terms since the war—over the last five years, the average decline has been 9 per cent. a year.
That is not a particularly praiseworthy record. The NFU goes on to say, however, that the package will serve to tighten the screw even further. That is the view of the NFU.
The Farmers Union of Wales was even less charitable. On 3 May it responded—[Interruption.] The Minister of State may want to challenge some of these points and I look forward to hearing him challenge the statement by the National Farmers Union, interpreting the Government's statistics. The president of the Farmers Union of Wales said:
The Ministry of Agriculture's recent report on farm incomes in the UK shows that the real value of farm land and building has fallen by 40 per cent. since 1979. Based on Inland Revenue data, 48 per cent. of all farmers were assessed to have a total income of less than £6,000 in 1985 and 31,000 had an income of less than £2,000 a year … These statistics bear out the fears we have been expressing in recent months. Unless farmers generally can improve their incomes, the effect of this continuous erosion of earnings will have far-reaching consequences on the industry.
The package will have far-reaching consequences in precisely the areas that can least afford to bear the brunt —Scotland, Wales, Northern Ireland and the upland parts of England. That is the unfairness and folly of the Government's proposals. They have not sought to ensure that the cuts fall where they can be borne most easily. Not through malfeasance on the Government's part, but
through indolence, or perhaps lack of concern about the upland areas, their policies will fall most heavily on those areas.
I see that the hon. Member for Torridge and Devon, West (Miss Nicholson) has come back into the Chamber. It is true that she joins us frequently during our agriculture debates. She comes in, goes out and comes back in. I am sure that, like all other hon. Members, she will have had representations yesterday from the farmers. The farmers who lobbied me and my colleagues from Wales were particularly concerned about the erosion of the farming base. They argued as follows "We have had lean times, certainly since 1979, and they have eroded our earning capacity. As a result of that erosion, capital investment in the industry has fallen. It has now fallen to its lowest level. It is now a third of what it was a few years ago. As a result of the Government's packages and the lack of investment that we have had in recent years, the industry is being critically weakened."
The farmers are looking forward a few years—it is a pity that the Government are not—to 1992. In 1992, the Single European Act will be in operation, whatever the hon. Member for Tiverton (Mr. Maxwell-Hyslop) and my hon. Friend the Member for Newham, South (Mr. Spearing) may think or hope. What will happen then? If our agriculture has been faced with five years of erosion, if farm incomes and farm investment have suffered from five lean years, it will not be in a position to respond to the challenge available to it. I fear, and the farmers of Wales who came to visit me yesterday fear, that instead of an exciting challenge and the opening up of new opportunities, they will face a nightmare. They obviously do not welcome that prospect.
Those views from the industry have been expressed in the debate this evening, and they are shared by the House of Lords Select Committee on the European Communities. As most hon. Members know, the Committee has been examining these proposals. The Minister of State will be pleased to know that it is not the national executive committee of the Labour party, but a Committee of the House of Lords. The report says in paragraph 50:
It is the Committee's view that Agricultural Stabilisers should not be regarded as the major instrument for controlling production levels. Primarily, Agricultural Stabilisers are instruments for budgetary control … Effects for production of most CAP commodities are likely to be limited and to be lost within the overall variability in agricultural production from year to year.
It goes on to say:
For sheepmeat, the Committee cannot accept the discrimination against the United Kingdom incorporated in the Commission's original proposals. Following the perverse logic of setting a separate stabiliser for sheep numbers in Great Britain, the principal Community sheepmeat producer, the Commission should equally have proposed the setting of separate stabilisers for the principal Member State producer of other commodities (for example, a separate stabiliser for cereals in France).
The sheep farmers of England and Wales want to know the reason for this treatment. They will lose £3 million in variable premium next year because the Community is in surplus and we have special arrangements for Britain, which is the largest producer. That will have considerable consequences, as my hon. Friend the Member for Ynys Môn (Mr. Jones) said. Why have sheep farmers been singled out for equal treatment, while the cereal farmers of Germany and France, who are responsible for surpluses in that commodity, are not to be treated similarly? Why does
the European burden not fall on them? It is most unfair. There is little wonder that farmers in the uplands, faced with the prospects of a squeeze, and competition from lowland diversification, view the future with trepidation.
The environmental impact of stabilisers has been mentioned, as has the way in which the Government have been using the Agriculture Act 1986. We all listened to the hon. Member for Holland with Boston (Sir R. Body) with great interest and respect. I am sure that some of us read his books in the same spirit. The hon. Gentleman mentioned environmentally sensitive areas. The Opposition have gone on record as saying that we endorse the Government's proposals and welcome ESAs. They have been successful. I am sorry that my hon. Friend the Member for Newham, South, does not agree with us, but, that is our view. We debated this in Committee and told the Government of our support, but it is not unqualified and unlimited support. The reservations that we are starting to have about the impact of these measures are shared by many people outside the House.
Let me quote from evidence given by the Council for the Protection of Rural England, with eight other organisations, to the House of Commons Select Committee on European Legislation:
the Commission's proposals pay scant regard to the environment, maintaining many damaging aspects of the guaranteed section, despite firm evidence of the acceleration of loss of landscaped features.
The CPRE was joined in that by eight other groups, including the Ramblers Association, the Royal Society for the Protection of Birds, the Council for the Protection of Rural Wales and the World Wildlife Fund, in an unprecedented coalition to put pressure on the Government to recognise the folly of their ways. They are particularly anxious to ensure that when the new set-aside proposals eventually come into effect, they will achieve a diminution in agricultural production in a way that minimises environmental damage and uses the opportunities that created for environmental enhancement. It is a great pity that we have had little evidence from the Government that they intend to do that.
We are not confident that the set-aside proposals will achieve the objective of reducing production. This week the European Commission has made provision for a 50 per cent. leakage of saved production. If the Commission wants 1 million hectares of land removed over a five-year period it will have to make provision for double that, because of the inherent inconsistencies of the set-aside proposals. It is budgeting for a 50 per cent. failure of the proposals.
The proposals present a threat to the upland farmer. They will not achieve their objective and will be environmentally damaging. In the last debate, in February, we offered constructive support to the Government. They have failed in the endeavour that they set out to achieve in Europe. Their proposals are inadequate and we shall urge them to reconsider their position.
It must have been surprising for many hon. Members who have sat through the debate to hear the speech of the hon. Member for Caerphilly (Mr. Davies) and compare it with the speech of the hon. Member for South Shields (Dr. Clark). The hon. Member for Caerphilly attacked the Government for not listening to the lobby of the National Farmers Union, yet his hon. Friend told the NFU that the real problem with the Government was that we were not tough enough on the price stabilisers, that we had not banged the farmer strongly enough and that my right hon. Friend the Prime Minister did not have enough bottle. That is what the hon. Member for South Shields said, although it is not something that would be recognised by any other European country. If the hon. Gentleman had been around Europe and listened to what the rest of Europe thinks about how successful the Prime Minister had been and how unsuccessful their own Prime Ministers had been, he would have heard a different story.
The hon. Member for Caerphilly had the cheek to say that we had been too hard on the NFU and went on to say that the NFU wanted a devaluation of the green pound. The hon. Member for South Shields said that he did not want any devaluation of the green pound. The hon. Gentleman cannot have it both ways, even though lie has been divided from his hon. Friend by every other hon. Member who spoke. No doubt the hon. Member for South Shields will start telling his hon. Friend that it is a good idea to have the same policy at the beginning of the debate as at the end. The only problem is that that would mean that we would have to assume that there was a policy at the beginning of the debate. That is difficult to understand.
I felt sorry for the hon. Member for Pontypridd (Mr. John) because at least when he led the Opposition we knew where we were. We may not have agreed with him, but he put forward a policy that had to be answered. He had a view. He said that we should have quotas on everything. That was nonsense, but it was a perfectly legitimate view. The hon. Member for South Shields has given us no view at all. On the one hand, he has said that the farmers were poorly off and, on the other, his policy would make them more poorly off.
I must apologise to the hon. Member for South Shields. In a recent debate, I accused him—I think, in retrospect, unfairly—of being committed to a policy of £50 a tonne, for wheat. If I was unfair, the hon. Gentleman must stop using the figures which are based on £50 a tonne; otherwise he is trying to have it both ways. I apologise to the hon. Gentleman, but I hope that he will cease using figures that suggest that farmers in Britain could produce wheat at £50 a tonne.
The hon. Member for South Shields went on to accuse my right hon. Friend the Minister of a sell-out on the sheepmeat regime.
My right hon. Friend has made it absolutely clear that the United Kingdom needs a regime which satisfactorily meets the needs of our sheep industry, but at the same time we are not starting discussions by saying that we are not willing to discuss. That is no way to get out of our problem. The Opposition admit that a series of different regimes within Europe create certain problems. If we could find a solution which was satisfactory to everyone, it would be worth discussing. However, as history has shown, we have stood up toughly for the British farmer, as my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) made clear.
The hon. Member for South Shields cannot have it both ways. Either he should accept that it is his policy to clobber the farmer, or he should propose something which will give the farmer even more in the way of subsidy. He cannot expect to have the farmer's vote while he is making one half of his speech and the consumers and the taxpayers vote for the other half. He really must be consistent, and until he is he will not be taken seriously by the farming community or indeed by the electorate.
My hon. Friend the Member for Holland with Boston (Sir R. Body) is taken seriously. I have not quite finished his book, "Red or Green for Farmers", in which he made some important points which we should not avoid. His major concern is that farmers should be seen, at least in part, as conservers of the countryside. I think he used the word "husbandman" in his book. We might be accused of sexism if we use that word, but we may find a word which would cover what he wishes us to do.
I hope that my hon. Friend agrees that the Government have shown themselves increasingly concerned to say that part of the reason why the agriculture community is supported in a way that is different from other industries is that they look after 80 per cent. of the land area of the country. If it were not looked after by farmers, it would turn into a wilderness that would not be loved by ramblers, bird watchers, townies or anybody else. Therefore, the farmers need support to enable them to avoid that.
The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) always delights us with the charm with which he puts the whole of his own personal experience, and indeed his personal financial circumstances, at the mercy of the House so that we can understand how matters proceed. I agree very much with his concern that we should not so cut production in the rich part of the world that we are unable to meet the needs of the poor. However, all the advice of the independent groups such as Oxfam is that, except in emergencies, there is little place for food aid, because continuing food aid undermines the ability of countries to produce.
Not long ago I went to Mauretania, which is one of the poorest nations. The effect of continuous food aid on that country and the destruction of nomadic agriculture as a result is one of the most serious things I have ever seen. We must not be too facile in our discussion of the matter—that description does not apply to the hon. Member for Ceredigion and Pembroke, North—and suggest that one can pick up a lot of the surplus food produced in the west and deliver it on a permanent basis to developing countries.
I take very seriously the points raised by my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) about the problems with the pig cycle. I worry lest pig producers should believe that, even if in the course of our negotiations we reach our desired aim which is the elimination of MCAs on pigmeat, as has been stated very clearly by my right hon. Friend and myself, that will not remove the fundamental problems of the pig industry, which is a much wider international issue. It is necessary to eliminate MCAs as it is unfair that the situation should remain as it is, but it ought not to be seen as the only answer. The NFU briefing gives the impression—I am sure it is not meant—that the removal of MCAs will have a bigger effect on the livelihood of farmers than I believe will be the case.
No. I want to apply myself to answering the questions.
My hon. Friend the Member for Cornwall, South-East also mentioned the planning authorities' attitude. We are anxious that all planning authorities should realise that the changes in the countryside demand a more sympathetic understanding of the re-use of old farm buildings, of new enterprises and so on. The countryside must be a work-place, not a museum. It is crucial that planning authorities should realise that.
The hon. Member for Clwyd, South-West (Mr. Jones) made a curious comment. He said that, as usual, the United Kingdom comes off worst. Time and again the rest of Europe believes that we have won battles, even though we have started with a major disadvantage. The trouble with the hon. Gentleman is that he constantly carries on with an untruthful statement about the effect of British negotiations and discussions.
My right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith) spoke of the contribution of lower food prices to the fight against inflation. We should congratulate the farming industry on the way in which over the past 10 years it has made a major contribution to the reduction of inflation. It is noticable that it has been able so to do within the environment created by this Government whereas it was not able so to do within the anti-agriculture and anti-food production environment created by the previous Labour Government.
The hon. Member for Ynys Môn (Mr. Jones) talked about the suckler cow premium. It was this Government who raised the level in Europe much higher than it had been before and paid at the top of the permitted level. I know that he will understand that the suckler cow premium is always one of the most difficult parts of my negotiation because other EC countries do not attach the same importance to it as we do. However, I shall certainly take on board what he has said.
I must try to answer the points that have been raised. I shall talk to my hon. Friend after the debate, if he will allow me.
My hon. Friend the Member for Scarborough (Sir M. Shaw) talked about planning, and that is a matter that we have very much in mind. I have now addressed five meetings of planning officers and those concerned with planning committees and I am now discussing means whereby we may make farmers more aware of their responsibilities. This is a two-way matter. It is not just a matter for the planning committee; the farmer must be prepared to proceed in the right way in order to have the best chance of obtaining planning permission.
The hon. Member for Antrim, North (Rev. Ian Paisley) talked about whether the rest of the United Kingdom had stolen his milk. I know of his feelings, but I must tell him with great care that much of the English part of the United Kingdom feels rather the opposite. There is always that difficulty. The hon. Gentleman may disagree with them, but I merely say that as a matter of fact, whether they are right or wrong. However, the hon. Gentleman made an important contribution enabling us to understand even further the particular problems in the north of Ireland.
The hon. Member for South Down (Mr. McGrady) made some points that I shall draw to the attention of my right hon. Friend the Secretary of State for Northern Ireland. The hon. Member for Caerphilly (Mr. Davies) asked me to draw to the attention of the various territorial Ministers the points made in the debate, and I shall certainly do so.
My hon. Friend and constituent, the Member for Cambridgeshire, South-East (Mr. Paice) spoke about diversification opportunities. He said that so far we have done the right things, but not enough of them. I would expect him to press me to do more, but it is most important that what we do we get right. We must not have a modern equivalent of the groundnuts scheme. We must not go forth with some gigantic scheme for, for example, the afforestation of Britain which turns out to be founded upon false premises. We cannot have an ESA system which turns out to be an invitation for fraud or scandal. We must move step by step towards a position in which alternatives are available for farmers throughout Britain.
The hon. Member for Pontypridd reminded us clearly of his view on quotas. However, I disagree with him and with my right hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) on that. Quotas have a disastrous effect upon an industry. They give to those who can the power to continue. There is no opportunity for others to come in. They solidify and restrict an industry. There is little opportunity for enterprise. There is no advantage in dong something well. They have all the worst aspects of Luddism and I continue to be wholly opposed to them. If we have a system with a mixture of price restraint and alternative provision, and we can keep the farming community closer to the market, I believe that we shall have an answer that will work.
My hon. Friend the Member for Devizes (Sir C. Morrison) spoke about the green pound, and in so doing he did a most important service to this debate. He reminded us of the underlying increase in yields and production. The hon. Member for Ceredigion and Pembroke, North passed over the fundamental underlying facts about the increase in production in favour of temporary positions in the beef and cereal markets. My hon. Friend the Member for Devizes put the record straight.
The hon. Member for Western Isles (Mr. Macdonald) spoke about the problems of crofting. I shall consider with my right hon. Friend the points that he made. He knows that I have tried to see what can be done for crofters. I was sorry to hear his comment about my former hon. Friend, Mr. John Mackay. I do not believe that the hon. Gentleman quoted him properly. That was a pity given the tremendous amount of work that John Mackay did on behalf of those people least well off in the farming industry.
My hon. Friend the Member for Lancaster congratulated my right hon. Friend, and I thank her for that. She made some points about New Zealand that were echoed elsewhere. We must be careful about blaming the New Zealand people for the state of their not always attractive Government. We shall take into account what my right hon. Friend said.
The hon. Member for Bridgend (Mr. Griffiths) suggested that our policy was to get rid of subsidies. That is not our policy. We accept that agriculture will continue to need support. Our policy is to ensure that that support goes to the farmer and is not wasted on the system. We want to make savings for the taxpayer and make sure that our money is efficiently and effectively spent. If the hon. Gentleman wants to get rid of subsidy entirely, he must tell the farming community that that is the policy of the Labour party. That is what its policy appears to be.
My hon. Friend the Member for Gloucestershire, West (Mr. Marland) mentioned the £90 dairy charge. It difficult to accept the objection to people paying £90—usually once every two and a half years to ensure that the product that they sell to the public is of the proper quality. Everyone else has to do that, and I do not see why it is so terrible to ask the farmer to do it, too. If we can reduce the price, we certainly will. I hope to make an announcement on that matter once the discussions have been completed.
The hon. Member for Newham, South (Mr. Spearing) made some procedural points. Those were agreed through the usual channels and cannot be aimed at the Government or at my right hon. Friend.
My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) knows that I do not share his views on quotas. The sort of quotas that he wants would not be a sensible solution to the problem. However, I agree with him about coherency of policy. It is important that all parts of the policy fit together. He will agree with me En rejecting the attacks of the hon. Member for Caerphilly. In the part of his speech which was on the same side as the hon. Member for South Shields the hon. Gentleman repeated the argument that the Government should now tell the House what decisions will be made after the negotiations for the price fixing. We could do that if we knew. We do not know, because we have not had the negotiations.
The Opposition have not been involved in negotiations for so long that they do not understand how they work. They cannot ask us to tell the House our detailed position when we are trying to win in negotiations. If they go into negotiations by telling their opponents exactly what they will settle for, they will lose the negotiations.
That point was made by the hon. Gentleman who was presuming to tell my right hon. Friend the Prime Minister how she should negotiate. A fat lot of good she would have got out of the negotiations if she had gone in like him. She would have said, "This is what I will settle for; I might go down the road as far as that. I have agreed to do this in advance." What a nonsensical way of dealing with anything. Thank God our negotiations are not carried out by the hon. Member for South Shields and his cohorts our opposite numbers in Europe would not know who was speaking on bahalf of the Government and they would be beaten in any discussion of any subject in any part of the farming industry.
This debate has been another example of the fact that the Labour party has no agriculture policy. In so far as it discusses agriculture, it hits the farmers, attacks what they are doing and does everything possible to undermine—