I hope that the House will agree that, albeit short, this debate is a timely opportunity to allow the House to make some representations and to seek clarification from the Government on a subject which is causing concern on both sides of the House. I hope that, if they catch your eye, Mr. Deputy Speaker, the hon. Members for Tayside, North (Mr. Walker) and for East Lothian (Mr. Home Robertson), a well-known constituent of mine, will add their voices and make my submission an all-party one.
There is great concern because cereal producers in non-less-favoured areas of Scotland face potential swingeing penalties this year and possibly even greater losses in subsequent years. Those losses are harder to contemplate because they were completely unexpected and came after a very difficult harvest.
I hope that the Under-Secretary of State for Scotland will agree that there has been much comment in the recent past about the issue, some of which has generated more heat than light, and some of which has been unfortunate from our point of view. Unfortunately, such comments have come from both sides of the argument. I should like to try to draw a line under that rather emotional approach, put it firmly behind us and look forward rationally to what can be done to deal with the difficulty. None of us wants to be in the present situation. We must try to find a way out of it.
As the House will know, area aid payments were put in place to compensate for the drop in farm income expected as a result of the 30 per cent. drop in price support. The general set-aside scheme offers assistance to cereal producers who are willing to leave untouched 15 per cent. of their productive land in order to be eligible for area aid payments in compensation.
It was always accepted by policy makers that the overall costs of that package would increase in the short term in order that supply and demand could be better balanced in the longer term. Indeed, the Minister himself was reported this year expressing satisfaction that the support funding paid by his Department would be increased this year.
The deal that was struck in Brussels—the MacSharry proposals for the three-year period until 1996—was welcomed by the industry because it was regarded as a reasonable package of measures that would provide some stability for the foreseeable future. It was hardly surprising then that such great concern was expressed when the full implications and extent of the 5·4 per cent. penalty for the majority of Scotland's arable land became known.
Of course, that concern is not restricted to the farming industry. A detrimental effect will be felt by all sectors of the cereals sector, whether it be growers, merchants or processors. There will also be further knock-on effects in downstream industries such as road haulage. There have been estimates of up to £20 million as the full cost of the present penalties to the industry if the measures are implemented in full. Of course, that pays no regard to the longer-term effect of loss of markets to places and producers outside Scotland.
The irony is that Scotland has been very successful in taking cereal areas out of production—successful compared with other European countries. The figures show that clearly. The crux of the problem is the way in which the base area was originally calculated. Census figures for the years 1989, 1990 and 1991 have been invested with a significance that they were never designed to bear. To suggest that farmers have overshot by 5·4 per cent. assumes that 20 per cent. of Scottish farmers have an average 27 per cent. additional arable land.
Various permutations of the figures can be arrived at, but it stretches credibility to suggest that this is what has happened. I must therefore tell the House that the industry has no confidence in the calculation of the base reference area. Census forms may well be statistical tools that can identify and confirm trends, but they have suddenly been used for a crucial financial calculation, and that calculation is seen by the industry as deeply prejudicial to Scotland.
No one should doubt that this penalty discriminates against Scottish cereal producers in the Community. We must find some mechanism to mitigate the financial consequences of these penalties. If we do not, we may risk driving producers out of the system altogether. The Minister knows that it is voluntary. They will then resort to large-acreage, high-yield, high-input crops, thus destroying the whole objective that set-aside was put in place to achieve.
We must therefore get Ministers to accept that there is a problem and to agree to use their best endeavours, within the rules, to find ways of mitigating the proposals and penalties, especially next year.
I understand that the president and officers of the National Farmers Union for Scotland, who lobbied this place effectively earlier today, met the Secretary of State for Scotland this afternoon. Interpreting the statement issued by the Secretary of State after the meeting, it looks as though the industry will get nothing more than tea and sympathy.