It is always a pleasure to speak following the hon. and learned Member for Montgomery (Mr. Carlile), and I enjoyed his summary of some of the traditions and history of the land of my ancestors.
I begin by declaring an interest—I am not sure that it is relevant to my remarks today, but for the sake of order I will declare it—in that I own a few acres in Lincolnshire and have a small flock of sheep there. I have declared that in the Register of Members' Interests.
I congratulate my hon. Friend the Member for the Isle of Wight (Mr. Field) on being successful in the ballot and on ably presenting his motion. I began increasingly to regret, as he presented his constituency in such an attractive way, that I had spent only a few brief hours on his island. I resolved, as I listened to him, to return there with my family and to stay rather longer.
Today's debate has already been distinguished by a particularly able maiden speech by my hon. Friend the Member for Surrey, East (Mr. Ainsworth). He set out succinctly and ably the differing interests of his constituency. I am sure that Members in all parts of the House greatly appreciated his obviously sincere tribute to his great predecessor, Lord Howe.
The motion presents us with a good opportunity to congratulate the Government on achievements for which they have not received sufficient credit. Without doubt, this has been the most environmentally conscious and sensitive Government we have ever had in our history. That applies to previous Conservative, and to Labour and Liberal Administrations.
I endorse the motion and everything that my hon. Friend the Member for the Isle of Wight said, and I congratulate the Government on a series of environmental initiatives. Many of them have been, or are in the process of being, copied by other countries, and that must be the greatest form of flattery. One thinks of the environmentally sensitive areas scheme and the farm woodland scheme, in which I participated in a small way.
We must recognise that, if we care for the conservation of the countryside, we must have a viable and prosperous agriculture. Without that, there is no chance of our having the attractive, neat, well cared for countryside that those who are concerned for the environment wish to maintain. The resource costs for the rest of the community of keeping the countryside pretty and environmentally healthy, so that people may appreciate it, without there being a farming community with the resources to work it would be horrific and out of the question. So we must ask whether we are willing to ensure that we have the conditions to maintain a viable and prosperous agriculture.
Agriculture is the most significant industry i n my constituency. I know whereof I speak when I say that agriculture is going through a crisis of confidence in the future, and that crisis is shared by every other major developed country. Essentially, it is a crisis of over-production brought about not by the malfunctioning of markets but by the subversion of markets through governmental action over the last 50 years.
I am not targeting in particular the European Community or British Governments who, before we entered the Community and since the beginning of the last war, decided to subsidise agriculture. The level of agricultural support in the United States has always been comparable with that in the EC. The level in other OECD countries has been greater than in the EC or in the United States, and probably the greatest offenders have been Sweden, Switzerland and, worst of all, Japan. That has brought about a crisis of over-production analogous to over-production crises in other sectors of economic activity, such as in steel and shipbuilding in the 1960s and 1970s, brought about by Government subsidies and similar action in many parts of the world.
The crisis of over-production in agriculture is the cloud overhanging every investment decision taken by every farmer in Britain today, particularly as he ponders the future, wondering whether he will be able to continue farming to retirement and have a worthwhile business to hand on to his children.
The action that farmers must take to overcome that crisis is twofold. One way to ensure survival against that background is to be a lowest-cost producer, producing goods more efficiently than any competitor, so that, so long as there is a demand for one's commodities, one will have a market share. The alternative is to decide that one does not have the necessary competitive economic advantages to become a lowest-cost producer. In that situation, one must specialise, looking for new niches and products with which to attract the consumer. In other words, one must find a new way of using one's capital resources—for a farmer, land is the most important—and change one's business mix to develop a new market.
The same applies to shipbuilding, steel production or the manufacture of shoe buttons, should there be a crisis of over-production in the shoe button market. Many farmers believe that they can become lowest-cost producers and that, so long as there is a market for their production—for example, for cereals—they will survive, provided that they are not inhibited by governmental or other external action from bringing those advantages fully to bear. Many farmers, perhaps not consciously, are adopting the other route and are becoming niche players, going in for new products and using their skills and land to develop them.
However, I am often depressed when I visit the workshops and storerooms in my constituency of Geest, the largest fresh food distributor in Britain, and see piles of new vegetables. I call them new not because they have recently been invented but because they have only recently appeared regularly in the shopping baskets of British housewives—food such as aubergines, asparagus and artichokes.
Such vegetables are produced in temperate time zones. They look attractive as they wait to be distributed throughout the country. When I ask where they come from, the answer is usually Holland, France or Germany. Generally, they come from some other country in Europe, probably in the same climate zone as ours. It is sad that our farmers have not always been enterprising enough to go in for such new products, which do not have a Community support regime for producing and selling them.
There are various reasons for that state of affairs, which I will not go into at this stage. Suffice it to say that marketing co-operatives on the continent seem to be better organised. We in Britain have many lessons to learn from their activities.
We must ask to what extent governmental action, at the national or Community level, will ensure for the future a viable basis for agriculture in Britain. We have debated the recent agreement at the Agriculture Council on the modified MacSharry proposals. To what extent will that lay the basis for a viable and prosperous agriculture in the United Kingdom and enable farmers to take one of the decisions to which I referred—to become a lowest-cost producer or to go for new products?
There is no question but that the achievements of my right hon. Friend the Minister for Agriculture, Fisheries and Food at the Agriculture Council were memorable. Practically all the farmers in my constituency and many others said that it was impossible for the Minister to go to Brussels and successfully resist and remove from the MacSharry proposals all the elements that appeared to have the support of the other 11 member states and would discriminate against large farmers—which in practice means British farmers as opposed to those in the rest of the Community. Yet my right hon. Friend returned having completely got rid of the pernicious discriminatory proposals. It was an exceedingly fine negotiating achievement and there was a great sigh of relief. More generously than that—farmers are capable of being generous—a great well of congratulation met my right hon. Friend on his return when he announced what he had achieved.
Nevertheless, one must consider the medium and long term, and ask whether the new agreement establishes a new basis for the CAP that will give us some stability for the foreseeable future. The jury is out. If the new agreement is to provide a stable, and at least relatively permanent, basis for agriculture in the Community, it must meet three criteria. First, it must give some assurance that the continually increasing burden of the CAP on the Community budget will be to some extent limited. The judgment on that must be slightly ambiguous, because in the near future the CAP budget will increase as a result of the proposals. The Commission calculates that after three or four years agricultural expenditure will fall. That calculation must depend on several assumptions about international agricultural prices, so is hypothetical. Therefore, the jury is out on that one.
The second criterion is whether the new regime will allow us to reach accord in the general agreement on tariffs and trade negotiations. Clearly, that is necessary. If it does not, we shall have to reconsider the matter. Again, the jury is out. We have some complicated, difficult negotiations afoot. We have unquestionably thrown the Americans on the defensive with the agreement, but let us see what happens. It is too early to predict the result.
Thirdly, and precisely for all the reasons that I mentioned at the beginning of my speech, if the proposals become the basis of a new stable regime in the Community, what will be their impact on the viability and profitability of agriculture? I must admit to a number of fundamental reservations here. The agreement is unquestionably far and away the best that we could conceivably have achieved in present circumstances. We must all be very happy with that. However, that does not necessarily mean that we should all pretend that that will be the basis of the CAP for the next five to 25 years. The agreement includes some fundamental shortcomings and contracdictions which were not inserted at British instigation but remain a fundamental part of the proposals.
One of those is compulsory set-aside. If a farmer is to qualify for compensation under the scheme, 15 per cent. of all cereal land or of all land down to combinable crops, to use the jargon in the proposals, will have to be set aside. Let us think about that for a second or two. If you came from Mars, and I know that you do not, Mr. Deputy Speaker, without any particular prejudices, preconceived notions or habits of mind, to look at how the human race organises its agricultural affairs in this country or the European Community, and you discovered that there was a crisis of over-production, particularly in the cereal and livestock sectors, and that it was proposed to take 15 per cent. of that land out of production, irrespective of whether it was the most or least productive land, of whether it yielded 5 or even 6 tonnes of grain an acre in a good year or only 2 or 3 tonnes and of the profitability and technical and economic efficiency of cultivating it, you would say that something had gone peculiarly wrong with the financial sense and economic logic of the human race.
It cannot make any economic sense over the long haul to take out of production 15 per cent. of grade 1 land in Lincolnshire and, at the same time, to grow cereals on grade 3 or 4 land in the Cotswolds or Scotland. For the medium term, it would be impossible to make the fundamental readjustments that economic logic might suggest, but we should not deceive ourselves: what we have is an anomaly, not to say an economically contradictory state of affairs, which will increase and not reduce the average cost of production.
Another shortcoming is the "quota system" for the livestock sector. If we are to have a viable, competitive agriculture and if we are to encourage our farmers to respond to new market stimuli, to develop new products, to switch their mix of production as the market changes and to do what every business must do if we are to have a prosperous economy, the last thing we want is to freeze the existing mix of production by a system of quotas establishing crippling financial penalties if people do switch their mix of production in that way. That cannot be a rational or viable basis for agriculture in the long term.
Perhaps the most anomalous and curious aspect of the proposals and the one we should reflect on longest is the concept of compensation on the basis of average yields. The new proposals provide that, for the 85 per cent. of combinable land that remains in production, the 15 per cent. having been set aside, the support prices available will fall, but that farmers will be compensated for the shortfall on the basis of average yields.
What does that mean? It means that, if previously the yield was below average, the farmer will be better off—he will receive a windfall—but if previously the farmer was more efficient than average and his yield was higher, he will suffer. In other words, we are back to the bad old business that the Labour Government used to specialise in, of penalising success and rewarding failure. That cannot be the basis of a sound, efficient, profitable agriculture any more than it can possibly be the basis of a sound and profitable sector of economic activity in any other area.