Agriculture (Wales)

– in the House of Commons at 10:57 am on 5 November 1997.

Alert me about debates like this

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion 10:57, 5 November 1997

In seeking the debate, my colleagues and I were fulfilling an undertaking that we made during the summer recess when, of course, we were all on holiday, as the Minister knows. At meetings with farmers, we promised them that we would raise in Parliament, as soon as it reconvened, the grievous crisis that is besetting the farming community in Wales and, by extension, the grievous crisis that is affecting the entire rural community. That was our undertaking and I am glad to be able to fulfil it.

Farming in general is under pressure these days, but it is generally accepted and well understood that the crisis is worst of all in the hills, and 80 per cent. of Welsh farm land is in the hills and so officially categorised as being among the less-favoured areas.

It is legendary that farmers always complain, and there is something in that. It is fair to say, however, that they are not unique in that. It is important to understand that the situation now is different. I cannot remember a time when there was such profound gloom, such pessimism and so little laughter among farmers. Their complaints these days are not shot through with satire and teasing as they have been in the past. They are genuinely pessimistic and gloomy.

Farmers fear for their livelihoods and for their very survival. More radically, they foresee the loss of a way of life. They ask specifically whether the new Labour Government care about farming and about the countryside, by which I do not mean just the landscape, which is terribly important, or wildlife and biodiversity, which is even more important, but the countryside, its people and its communities. Do the new Government care? That is the issue.

Farmers' minds remain open, especially in Wales, where many of them are part of the non-Tory majority. It is important for the Government to understand that political point. In Ceredigion, by far the majority of farmers are among the non-Tory majority. The Labour party should bear that in mind, because at some time it may need their practical support, albeit indirectly through other parties. Farmers are rapidly coming to the conclusion that the Government do not care: that is what they believe, and will say so.

The Government are on trial, and their credibility is at stake. If they care, they must show that they care. For a range of reasons, Plaid Cymru hopes that they will show by their actions that they care.

Let us make no mistake about it: there is a real crisis. Not since the war have so many things gone so badly wrong at the same time. A combination of problems is pressing down on farmers. Beef prices are worse than they were last year due to the continuing effect of the BSE crisis and the export ban, and the effect of a strong pound.

The strong pound has depressed prices across all sectors of Welsh agriculture. The high prices of lamb last year partly compensated for the low beef prices, although not all farmers keep both sheep and beef cattle. The strong pound does not affect prices only by disadvantaging exports and facilitating imports; it also significantly reduces the value of European support payments, so it has a double effect.

Farmers feel that whatever they do, they cannot win. Higher lamb prices in early 1996 led last year to a reduced sheep annual premium, but lower lamb prices this year will not lead to an increase in that premium, because it is calculated on the European Union average price for the whole year, which this year is high. Welsh hill farmers receive a double whammy: United Kingdom prices are lower because of the strong pound, and Welsh hill prices are lower still, even though the product that farmers bring to market is first rate, because lambs do not come to market until later in the year when prices are lower. By all accounts, SAP payments will be down and not up next year.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley Leader and Party President, Plaid Cymru

Does my hon. Friend accept that in 1995–96, as many as 40 per cent. of Welsh cattle and sheep farmers in less-favoured areas—where 80 per cent. of Welsh farmland is located—had incomes of less than £10,000? That was with the higher prices to which he referred, so the prospects for this year are devastating.

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion

I am grateful to my right hon. Friend the Member for Caernarfon (Mr. Wigley) for making that point. Income levels this year are certainly significantly lower than £10,000. On top of the problems that I have already described, there has been a sharp reduction—about 20 per cent.—in the price of milk, partly due to the strong pound. Worst of all, that reduction has coincided with Milk Marque's new collection charge system. We understand why Milk Marque introduced it, although its detail is questionable.

The combination of the reduction in price and the new collection charge system is driving farmers with up to 40 or more milking cows out of milk production while they can cut their losses. They have been driven out peremptorily, because they are losing money in production. The holdings that cease milk production will remain for a while producing beef and sheepmeat, thus exacerbating the problems in those sectors, until they are absorbed into ever-larger holdings, adding a further twist to the spiral of decline in our rural communities.

There is also the possibility of quota moving out of parts of Wales. The Welsh Office should keep a careful eye on that.

Farming unions reckon that 69 per cent. of farms in less-favoured areas in Wales have a net farm income of less than £10,000 a year: 80 per cent. of agricultural land in Wales is in less-favoured areas. Interest payments and reinvestment must be funded from net farm income, which leaves precious little on which to live.

It is small wonder that the results of a recent National Farmers Union survey were depressing for the prospects of hill farmers. It found that 64 per cent. of hill farmers are over 50, and of them, 18 per cent. are over 60: so it is an aging population. Of those who responded to the survey, 82 per cent. had children, and 43 per cent. of them stated that their children would not take over the running of the farm after them. There is a strong prospect of a mass exodus.

The reasons given by young people for not taking up farming were income levels, 74 per cent.; lack of long-term stability, 48 per cent.; and long working hours, 50 per cent. It is difficult to do anything about the last factor, because farmers have always lived with long working hours. However, it would make a big difference if the first two factors were tackled. It is the combination of factors which young people find so depressing.

The evidence shows that there is a real danger that farming in the less-favoured areas could go into steep decline. The problem is as serious as that. No wonder farmers are depressed. Unlike us, they see at first hand this decline taking place each and every day.

The effects of such a decline on social and cultural life, including the Welsh language, which we must bear in mind all the time, on the natural environment in rural Wales, which requires people to maintain it—we should make no mistake about that—and on the economic vitality of rural areas, would be far reaching and deeply harmful. Farmers and their children contribute enormously to the economic vitality of rural areas. We cannot afford to lose the tradition of entrepreneurialism not just in farming, but in other sectors of the economy.

We should also consider the loss of the complex and invaluable inherited skills of farming communities that cannot easily be recreated. A series of national vocational qualifications or even a degree in agriculture does not make a farmer. That skill is inherited: it is intricate, complex and rich. In 15 or 20 years, if not sooner, we may rue the loss of those skills. I am sure that in 15 years' time we will need people in agriculture more than we do now.

In that context, farmers see a Government who are not even seeking to stabilise the situation, let alone launch a rescue operation. They see a Government who want to grind them down even further. Cuts in over-30-months scheme compensation have led to a reduction in receipts from barren cows—an important part of milk farmers' income—of 60 per cent., with average prices down from £760 last year to £311 this year.

The Government are refusing to take advantage of European Union compensation for sterling revaluation, although all other eligible EU countries have done so. Ireland has just delivered top-up support for BSE-affected farmers to the tune of £17 million—£50 per beef animal. Farmers are asking whether that is fair competition in a free and open market, and, clearly, the answer is no.

Of immediate relevance is the Ministry of Agriculture's pre-empting of the outcome of this year's review of hill livestock compensatory allowances by freezing payments at 1996 levels, and its cancellation of the supplement paid last year in recognition of the BSE crisis, which amounted to some £9.6 million for Wales and £60 million for the United Kingdom as a whole.

There have been successive cuts in HLCAs since 1992. Ministers did not mention that last night. Those cuts reflect doubts in Government about the validity of HLCAs as support mechanisms. Along with others who understand the position far better than I do, I disagree strongly with that perception: if we consider the other options, we conclude that HLCAs are the best.

Maintaining production in the hills is vital. Animals of the highest quality are reared extensively in the hills, and the highest welfare standards apply. Hill farming, however, labours under disadvantages, and there are few opportunities for diversification. There may well be a need for change in the way in which HLCAs are designed, particularly to strengthen modulation, in which my party believes. We should, however, be suspicious of the view of some conservationists that HLCAs have caused both social and environmental problems. HLCAs are probably the best method of maintaining stock farming in the hills, and there is every reason to support the unions' view that they should be kept and restored to their 1992 real value. We also support, as a separate issue, the view that the BSE compensation supplement should be retained.

Photo of Elfyn Llwyd Elfyn Llwyd Opposition Whip (Commons), Shadow Spokesperson (Communities and Local Government), Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Northern Ireland)

I congratulate my hon. Friend on securing time for the debate. Is he aware of recent research carried out by Aberystwyth university, that austere body which I know was also attended by some Conservative Members? According to that research, for every 10 full-time jobs in upland agriculture there are some 25 in the supply industry. The crisis affects not just agriculture, but life in rural Wales as we know it. Does my hon. Friend agree with that?

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion

The only thing with which I might disagree is the adjective "austere". I never noticed much austerity at Aberystwyth, at least among the students.

My hon. Friend has made an important point. It is well known that one of the best ways of putting money into the rural economy is to put it into farmers' pockets, because they spend the money locally. They do not go on foreign holidays, or buy outside their areas. We should also bear in mind the complex links between agriculture and all kinds of other sectors, and the possibility of developing further links through value addition. Farmers are currently eager to consider such prospects, but it is difficult for them to do so when they are under such pressure.

I have mentioned a number of ways in which the Government could help farming at this critical time. Another way in which they could help is by applying themselves seriously to the task of lifting the beef export ban. I think that we can all agree that, whatever applied in the past, there is no longer any justification for retaining it.

I am glad that the Government are adopting the date-based export scheme, which enables animals born after 1 August 1996 to be exported. They have put that scheme on the table in Europe, alongside the certified herd scheme. The date-based scheme is far preferable to the certified herd scheme, and—given that passports are available from that date—perfectly practicable and safe.

The question is, how hard are the Government pushing the scheme? How high a priority is it in their diplomatic and negotiating activity in the European Union? In rural Wales it is a top priority, and we expect the Government to reflect that through the intensity of their lobbying. They, too, should make it a high priority. The lifting of the ban would not deliver all the results that we want overnight, but it would be a tremendously important threshold to cross, recreating abroad the confidence in beef as a product that has already been recreated in the United Kingdom.

Mr. Lembit Öpik:

Does the hon. Gentleman agree that the issue is no longer the safety of British beef—which is the safest in the world—but marketing confidence, both in the United Kingdom and in Europe? That is what we need if we are to get our beef back on to the European market.

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion

Absolutely—and lifting the export ban is crucial to that.

Before I end my speech, I want to say a little about reform of the common agricultural policy. Farmers accept that CAP reform is necessary, that it is coming and that it will probably have to be radical. They accept that some of the problems besetting them, and besetting rural areas, are a consequence of the worst aspects of the CAP. The principle of environmental management payments as the main mechanism for support is gaining widespread acceptance among farmers. What is essential is that the distinctive needs of Wales, and the distinctive views of Welsh farmers, are strongly represented in the process of considering CAP reform.

The priorities of Welsh fanning are not those of the south of England. Indeed, in certain cases there are conflicts of interest. For example, the Farmers Union of Wales—like Plaid Cymru—supports sensible and flexibly applied modulation: I use that dirty word again. The dominant voice of English farming does not support modulation. I want a clear commitment that, in this as in other matters, the United Kingdom Minister of Agriculture, who makes policy—not just the Secretary of State for Wales, who, by and large, is able only to influence—will listen to and take account of the voice of the people and the farmers of Wales. The time for him to start doing that is now, while discussions about CAP reform are proceeding.

Photo of John Smith John Smith Labour, Vale of Glamorgan

Will the hon. Gentleman bear in mind the fact that there are also lowland farmers in Wales, particularly in my constituency? When the Minister of Agriculture takes the needs of farming in Wales into consideration, he should take account of all farming, not just hill farming.

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion

Absolutely. I dare say that there are conflicts of interest about that even within Wales at times; it is never a simple issue. We need the kind of CAP reform that will deliver good, sustainable, healthy agriculture everywhere. Specific hill-farming issues need to be considered, however, and CAP reform is relevant to those issue.

I repeat that the Government's reputation is at stake. I am glad that meetings have taken place recently, and I listened carefully to what the Secretary of State for Wales said: he recognised the existence of severe problems that might have far-reaching effects. What we want now is action, and I want to hear what that action might be.

Photo of Mrs Jackie Lawrence Mrs Jackie Lawrence Labour, Preseli Pembrokeshire 11:18, 5 November 1997

I speak as a Member who has inherited part of the former constituency of the hon. Member for Ceredigion (Mr. Dafis), so I am aware of many of the difficulties that he has mentioned.

During the past six months, I have had several meetings with farmers in my constituency to listen to their concerns. I have met groups from the two Welsh farming unions. It is interesting that only one supports modulation, so it seems that Plaid Cymru is meeting the needs only of one section of Welsh farmers. I have taken time to visit several holdings of various sizes and types, with differing sectors of interest.

The one message that comes back from all those farmers is their sheer desperation at the constant and extensive battering to which every aspect of agriculture has been subjected in the past few years. At those meetings—I am sure that the hon. Member for Ceredigion will agree about this problem—farmers also spoke of the delay between action and its impact on the rural community.

For example, the beef sector, which is of great importance to west Wales, has been struggling with the consequences of the former Government's ineptitude and bungling of the bovine spongiform encephalopathy issue since the mid-1980s. Although farmers in my constituency welcome the current Government's moves to get the ban lifted, the long-term financial and economic effects still live on.

The dairy sector has had to cope with the former Government's decision to negotiate quotas within the European Union for only 80 per cent. of United Kingdom domestic demand, while the Irish Government negotiated quotas for 120 per cent. of their domestic demand. The natural consequence has been Welsh and UK farmers sitting by, unable to produce more, while imports flood in from elsewhere to satisfy domestic need. With the additional burden to dairy farmers of Milk Marque collection charges, is it surprising that independent organisations predict that, by 2000, 50 per cent. of the UK's milk will be produced by only 7,000 major dairy farmers? In addition, arable farmers in Wales were incensed at their unequal treatment by the previous Government compared with their farming colleagues in England.

Coupled with all that is the feeling among fanners that they are being squeezed from both sides—as a result of the misfortunes suffered by the industry in recent years and, at the other end of the spectrum, by the large retail outlets that are dominating markets and reducing even further farmers' diminishing capacity to make a living. There is no doubt that that is exemplified in the National Farmers Union's national survey of hill farming published this week, to which the hon. Member for Ceredigion referred. Sixty-four per cent. of farmers who replied to the survey were over 50 years of age and 18 per cent. were over 60 years of age. Eighty-two per cent. had children, but 43 per cent. of those said that their children would not be taking over the running of the farm when they retired.

That is worrying enough in general terms, but in Wales those facts have even wider cultural and social implications than in other parts of the UK. The rural economy throughout the UK is underpinned by agriculture. In addition in Wales, culturally and linguistically, unique communities rely on the economic success of agriculture. Therefore, when our farmers suffer, it threatens the very fabric of Wales's individuality.

Of particular concern to me and my constituents is the fate of hill farmers. Only two weeks ago, I visited a 200-acre hill farm in my constituency and heard the plight of the 40 per cent. of hill farmers in Wales's less-favoured areas whose net incomes are less than £10,000 a year. None of the children of the group of farmers whom I spoke to were entering farming; they were seeking employment in other sectors with better earning potential.

In my maiden speech, I said that there was an exodus of 11.54 per cent. of young males aged 16 to 24 out of the county, but, at the same time, an influx of 27.6 per cent. of males aged over 65. That has already had an impact. If it is unchecked, areas such as west Wales will eventually exist simply as areas of recreation and retirement for people who have spent their economically active lives elsewhere.

The new Government have already made bold and positive moves that will secure the future of a living countryside, thereby showing their commitment to halt the decline. As has been mentioned, action by the Minister to end the beef ban is welcome. Before the election earlier this year, Labour was the only UK political party to send a delegate to the conference on rural development to seek positive ways to revitalise our rural community. The new Welsh Assembly at last offers real opportunities for Welsh farmers and rural communities to have their voices and specific demands addressed regionally.

All those policies show a firm commitment to preserving and enhancing rural communities and the agricultural basis on which they depend, but they will all take time to implement. In the meantime, many of our farmers are suffering unwarranted hardship and financial crises. I ask the Minister to examine ways, as has been done in health and education, of providing more short-term financial assistance to our farmers, if that is at all possible, within the Government's sensible and stabilising long-term policies, both to address the neglect of 18 years of Conservative Government and to ensure that with safe land in sight—the ship does not sink before it gains the shore".

Photo of Mr Richard Livsey Mr Richard Livsey Liberal Democrat, Brecon and Radnorshire 11:25, 5 November 1997

It is good to follow the hon. Member for Preseli Pembrokeshire (Ms Lawrence). She has been doing her homework in visiting farms in her constituency, which is the best way to find out precisely what is going on. I thank the hon. Member for Ceredigion (Mr. Dafis) for raising this topic, which is vital in my constituency, a mainly farming area, with up to 25 per cent. of the population dependent on farming in one way or another.

Hill farms, upland farms, small dairy farms and smallholdings have all been badly hit, particularly in the past two years or so. Upland farms, which come between hill farms and lowland farms, have a less robust support system than some of the hill farms, and they have been particularly badly hit, and—I say this as an agriculturist—the push factors out of farming are acute.

Between 1992 and 1997, hill livestock compensatory allowances were cut twice by the Conservative Government. Those HLCAs are in the less-favoured areas and are a social support mechanism. They are vital for maintaining people in the hills and uplands. Clearly, that is crucial in areas of Wales such as my constituency, where practically nowhere is less than 400 ft above sea level.

The previous Government muddled the bovine spongiform encephalopathy crisis with HLCA payments. They used the HLCA mechanism to add on a special one-off £60 million payment. Fair enough, the money was needed, but it was for only one year. The present Government are religiously cloning the previous Government's budget and now we have a crisis. I sincerely hope that that budget will be consolidated and changed into HLCA payments.

The rise of the pound against the European currency unit of 20 per cent. has created huge problems, particularly in terms of the reduction in ewe premiums of up to 40 per cent. We do not have to be magical mathematicians to realise that if a farmer has a 600-ewe flock and the ewe premiums have gone down from approximately £20 to £12, that is a big loss for that farmer.

For small upland dairy farms, there are lower cull cow prices as a result of the over-30-months-scheme weight limits and lower milk prices. Smallholdings are in crisis as well. Farmers have occasionally cried wolf when the situation has not been as serious, but it is really serious now, and all the farms to which I refer are family units.

In the current financial year, one county council smallholding in my constituency will be £19,500 down on the previous financial year. It is not difficult to see where that is coming from—the reduction in milk prices of £13,500; the reduction in barren cow prices of £3,000; and the reduction in calf sales of £3,000, all in the past 12 months. It is not this Government's fault; it is the result of all sorts of things that happened under the previous Government. We have a major crisis on our hands. The farm comprises only 50 acres, but three children have been reared there. Now, the farmer rightly says that this is the worst crisis in agriculture since the 1930s, and I do not think that that is an overstatement.

One particular plea to the Minister is to chivvy up his Department and get the ewe premium payments expedited. Many farmers in Wales have not received them; they would make a big difference to them on the threshold of winter. The previous Government cut staffing, so it has taken a long time to expedite the payments.

I recently visited three farms in the famous area of Beulah. The Beulah ewe is known worldwide as a first-rate breeding ewe. It is the dam of the Welsh mule. The farmers whom I visited enjoy a fantastic vista across to the Cambrian mountains. We could see nine family farms spread out in front of us, but only two of them had sons who could carry on the business. That is a major crisis.

One farmer I visited had two daughters, one of whom had worked on the farm—but even she, as a professional shepherd, had left because she could earn more money working as a shepherd in Wiltshire than she could earn on the family farm. As the hon. Member for Ceredigion said, net farm incomes are too low to support two people. Indeed, the Welsh farm management survey has forecast a reduction of 40 per cent. in farm incomes in the current financial year. That is a huge crisis for farmers. Young farmers are not prepared to stay at home and live on a poverty wage. Who can blame them? But that means that the countryside will rapidly depopulate. We have already heard this morning statistics on the average age of farmers in upland Wales. The all-Wales agri-environmental scheme is about to be introduced, and the Liberal Democrats welcome that. However, it appears that it will not be as well financed as the pilot Tir Cymen scheme. It is vital that the overall income used for production purposes on our upland farms is compensated for in the agri-environmental scheme. There must be no less money coming in to support our family units.

The whole rural economy is in crisis. The powerhouse agency must have a sound and thrusting strategy for small businesses. It must ensure that rural families have sufficient income from off-farm activities as well as from on-farm activities. There is the whole question of changes from 5b funding to objective 2. I understand that a great deal of 5b money has not been claimed in Wales, and we must get access to that.

What are the solutions to the problems that I have outlined? We must have the £60 million BSE payment—which was one-off—incorporated into HLCAs. The HLCAs must be restored to their 1992 levels, before the Tories cut them, plus inflation. We have to secure green pound compensation, which will greatly assist the impact on the ewe premium and on milk prices. We must raise the weight limits on the over-30-months scheme. We must take up the European Union retirement scheme, which the previous Government would not do. I well remember the right hon. Member for Suffolk, Coastal (Mr. Gummer), in a previous decade, saying that he would not touch it. He was wrong to take that view.

We must adopt the European Union's scheme for young farmers, which gives them access to funding, so that they can obtain working capital to help them make a start on their farms. We must ensure that the Agenda 2000 proposals take into account an element of modulation on a UK basis and, indeed, on a Welsh basis, to support family units.

Clearly, we must ensure that the beef export ban is lifted, and we must prevent sub-standard beef imports. That would be an important move. In the beef industry, many livestock farmers would like additional support for beef heifers coming off upland farms. The price for heifers is rock bottom. A real crisis confronts family farms in upland Wales. When I talked to farmers, as I did over the summer, I was told that they were having to sell their beef herds because they could not make them pay. That leaves only one enterprise in our hills—sheep. That is a real crisis.

Photo of Mr Ieuan Wyn Jones Mr Ieuan Wyn Jones Plaid Cymru, Ynys Môn 11:35, 5 November 1997

I congratulate my hon. Friend the Member for Ceredigion (Mr. Dafis) on securing time for this important debate. I welcome the contributions of the hon. Members for Preseli Pembrokeshire (Ms Lawrence) and for Brecon and Radnorshire (Mr. Livsey). Many of the points of real concern to the agriculture industry have already been aired. The hon. Member for Brecon and Radnorshire referred to the crisis surrounding entrants into the industry.

One major concern is that the average age of people in the agriculture industry is steadily rising. Young people no longer want to come into the industry. Therefore, packages to support young farmers are important. I think in particular of pensions and of the European Union schemes. When I visited France with the Select Committee on Agriculture, I found young farmers from Wales taking up the offers available in that country. They could not stay in Wales because there was nothing on offer.

The immediate crisis facing the industry in Wales must be set against the background of continuing concern about the viability of the industry in general. Indeed, we need to look at the viability of the whole rural economy. It is important to put the debate into the context of the employment crisis, but that must be set against the background facing the rural economy year on year. We cannot look at agriculture in isolation—it must be part of an integrated rural strategy, bringing the strands together. If the economic powerhouse is to make a real impact in rural Wales, it must ensure that the integrated approach is uppermost in its policy.

Although agriculture faces major problems, it is still the major player in the economy of rural Wales. We have heard eloquent speeches, from both sides of the House, about the immediate crisis facing the industry. For example, we heard about the problems surrounding the strength of the pound; the green pound and its effect on commodity support; the BSE crisis and the previous Government's refusal—and, so far, the refusal of this Government—to ask the European Union for additional support; the reduction of support through the over-30-months scheme; and the continuing ban on exports.

I am pleased that certain moves have been made to resolve the crisis. If the Government secure a raising of the ban on beef exports, that will boost confidence and aid the marketing strategy of the beef sector. That should be an immediate aim.

We have also heard much about hill livestock compensatory allowance payments. There is no immediate prospect of an increase in those payments. Farmers are aware that although prices have been frozen this year, the prospect is that they will be frozen again next year. A freeze is likely, because the Government have adopted for at least two years the previous Administration's spending plans.

Unless Ministers are prepared to consider switching money from other budgets in the Welsh Office, farmers face the prospect that HLCA payments will again be frozen next year. The effect of such a freeze on farmers in difficult areas will be devastating. This year, therefore, farmers are making the case that the review should be a real one and should not be conducted against a background of frozen payments.

Current pressures on the industry are adding to the underlying problems that it faces. There are two major concerns on the horizon—common agricultural policy reforms and Agenda 2000, and the World Trade Organisation talks. We must consider how the industry will be supported, because it must be supported.

People from every part of the political spectrum realise that agriculture cannot survive without support in some areas in Wales and other parts of the United Kingdom. The nature of support for the industry will change over time, but it must have support.

For all types of reasons, Plaid Cymru Members support the shift from headage payments to agri-environmental payments, although we place some caveats on that support. First, as my hon. Friend the Member for Ceredigion made clear, agri-environmental payments must be regarded as part of a package rather than as the entire answer. Commodity support—added to the agri-environmental part of the equation—must be retained in one form or another.

Secondly, the Government must show clearly that they are committed to keeping their side of the bargain. Let us acknowledge the fact that, currently, the European Union finances 100 per cent. of commodity support. The problem with agri-environmental payments is that they must be co-financed. Based on the record of recent Governments, however, we cannot rely on European payments being co-financed. Whenever European Union support required matching income, the Conservatives Government refused to do it properly. The result has been that farmers in other parts of the European Union receive co-financed support, annually giving them greater income buoyancy.

A question that Ministers will have to answer is whether they will ensure that a shift to an all-Wales agri-environmental scheme is properly financed. We should remember that the Tir Cymen pilot scheme has been largely successful, building on the previous environmentally sensitive area schemes—some of which were successful, although others were not. Although the results of ESA schemes have been patchy, the Tir Cymen scheme has built on their successes and examined the possibilities of co-farm management.

The Tir Cymen scheme has been generally successful because it was targeted; the available pot of money was not spread too thinly and it dealt with only one geographical area. The problem with an all-Wales scheme is that, unless the Government realise that more money must go into the system, only one of two options will be available. The first option is that the butter will have to be spread more thinly, which—because there will be no incentive—will deter many farmers from entering the system. The second option is to prevent some farmers from entering the scheme.

An all-Wales scheme can work in only one of those two ways. The real fear among Welsh farmers is that the second option will prevail, and that the rules will be rigged to prevent some farmers from joining the scheme. Many farmers believe that such an outcome is likely, although I hope that Ministers will convince hon. Members that it is not.

The point made earlier in the debate about CAP reform was well taken, because such reform must be made. I am sure that all hon. Members believe that allowing 80 per cent. of the aid to go to 20 per cent. of farmers is a grotesque situation. I should tell the hon. Member for Preseli Pembrokeshire that Plaid Cymru Members support modulation, because we believe that help must be targeted. We support modulation not to ensure that those with large farms continue to fill their pockets with European money, but to ensure that the Welsh traditional family farm receives targeted support and that cuts under CAP reform do not disproportionately hit small family farms. Most farmers in Wales share those objectives. In targeting aid, we shall not only reduce the CAP budget but ensure that farmers who really need help receive it in the most beneficial form.

HLCA payments have always been regarded as socio-economic payments, assisting farmers who farm in difficult areas. There is even a system within HLCAs that distinguishes specially disadvantaged areas from disadvantaged areas. HLCA payments have always been made on the basis that more assistance should be given in the areas where it is more difficult to farm. Over the years, many people have examined different systems of providing such support, but no one has yet devised a better one. Everyone has been forced back to the conclusion that the current system is the fairest way in which to provide money. Although I realise that we might have to re-examine the current system to ensure that it is properly targeting payments, it is broadly accepted by the industry.

The Government's decision to freeze HLCA payments this year is no different from the decision made by the previous Government. I remember so well hearing an agriculture Minister say at a sitting of the Select Committee on Agriculture, "Of course, we shall have to consider reducing HLCA payments to farmers in years in which their incomes go up. That must be seen not as support in the traditional sense, but as support when incomes are low. Payments are increased when farmers' incomes are low and go down when incomes rise." Over the past 10 years, however, the problem has been that payments have been cut when incomes are high, but have never been increased when incomes are low. Over the past 15 years, in real terms, HLCA payments have been eroded considerably.

By observing the lines on graphs, we know that, ultimately, HLCA payments will simply disappear. That is the obvious outcome. For many years, there has been a type of shadow-boxing in progress, in which farmers argue and lobby for greater HLCA payments. Although Ministers listen, they do not listen properly, because the payments are never increased. The payments are withering on the vine. We can predict that, in about 10 years, the value of the payments will be virtually nothing.

What is the Government's policy on HLCA payments? Do Ministers want them eventually to disappear? If so, what do they think should replace them? Everyone involved in the debate realises that if support is withdrawn, agriculture will simply cease to exist as a living industry in some areas of Wales. My hon.Friend the Member for Ceredigion touched on an important point when he said that we are talking not only about the economy of rural Wales but about the fabric of rural society. Hon. Members who have visited farms in rural Wales realise the difficulties facing those farms.

There is a consensus among all politicians that support is necessary. The difficulty has always been to ensure that that support comes at the right time. As it does not come at the right time, there is a continual drift from the land, and agriculture becomes an aging industry. Agricultural colleges are failing to attract students because young people no longer see agriculture as an attractive industry.

This year's crisis is immediate, and the Government need to deal with it, but I should like the Minister to give us an idea of how he sees the future of agriculture. Do the Government have any plans to attract young people into the industry in future? Do they see agriculture forming an important part of an integrated rural strategy? Do they have any real policies to breathe life back into the countryside?

Photo of Mr Gareth Thomas Mr Gareth Thomas Labour, Clwyd West 11:49, 5 November 1997

I welcome the initiative of the hon. Member for Ceredigion (Mr. Dafis) in securing this debate on an issue of great importance to all the people of Wales. However, I found his remarks to the effect that the Government do not care about agriculture not only inaccurate but rather offensive, especially to Members of Parliament such as me who represent rural constituencies and who have a good relationship with the farming unions and, I am pleased to say, with the farmers themselves.

The Government have inherited an extremely difficult situation. As was outlined by the Minister of Agriculture, Fisheries and Food in yesterday's debate, which I know the hon. Member for Ceredigion attended, mitigation of the hardship suffered by hill farmers unfortunately has a price tag. The most realistic assessment of that price tag is that it would cost no less than £440 million this year to introduce the measures that the hon. Gentleman suggested in respect of the over-30-months scheme, revaluation of the green pound, agri-monetary compensation and so on. The remarks made by the hon. Member for Ceredigion bear the hallmark of irresponsibility, because his party will never have the opportunity to introduce legislation and will never have responsibility for the economy of the United Kingdom. It is all very well for him to press for those measures, but, realistically, given the extremely difficult situation that the Government have inherited, they are not possible.

Having said that, I urge my Government colleagues to look again at the hardship being caused, especially to hill farmers in Wales. I am prepared to accept and trust that the Government are heading in the right direction—they have a constructive dialogue with the European institutions and with the farming unions.

It is fair to say that agricultural policy is nowadays inextricably linked with European policy. If European policy is wrong, as I suggest the Opposition's policy is wrong, agricultural policy will inevitably suffer. It is of grave concern to many farmers in my constituency that the Conservative party seems so aggressive towards Europe. It has an ideological fixation or phobia about Europe, which I am afraid will harm agriculture in the long term. A great many agriculturists feel that there is benefit in a single currency or that, at the very least, it is harmful to shut out for 10 years, as the Opposition are, any possibility of joining a single currency. Fluctuating prices and instability are added features of the difficulties confronting many farmers. The Government's more pragmatic approach to European policy is to be welcomed—it means that the general approach to agriculture is far more realistic.

I welcome the Government's initiative in introducing an all-Wales agri-environmental scheme, learning from the lessons that came from the development of Tir Cymen and the environmentally sensitive area schemes. I also welcome the fact that reform of the common agricultural policy is a priority for the Government. It is essential that resources be diverted from price support in the long term. Although there is scope for price support, and I wish it to continue, in the long term there has to be movement towards environmental support and conservation. Farmers in my constituency in particular know that. I recently visited an upland farm, Plas Matw, owned by Mr. Tecwyn Evans. I must congratulate him on the conservation work, especially the protection of hedgerows, that he has undertaken with the support of the Countryside Council for Wales and the Agricultural Training Board. I welcome the Government's initiative in that respect. The Government have inherited a difficult situation, but they have a constructive dialogue with the farming unions and the European institutions. In the long term, I expect that the hardship confronting farmers, particularly in Wales, will be mitigated. The Government have every sympathy with them, but, unfortunately, it is a very difficult time for everyone, and I am afraid that the Government have to prioritise.

Mr. Lembit Öpik:

I, too, thank the hon. Member for Ceredigion (Mr. Dafis) for securing this debate and enabling me to make a few brief comments about family farms and smallholdings. I shall not rehearse all the arguments again, but I wish to emphasise the great importance of protecting family farms and smallholdings, not just for the present but for the foreseeable future.

My constituency, where the largest town has only 12,000 people and where there are no others with even 10,000, depends on farming and rural life not only for its culture and for a sustained economy, but for its very existence. If farming is threatened, Montgomeryshire, and places like it across Wales, will fall into serious economic decline.

The hon. Member for Preseli Pembrokeshire (Ms Lawrence) made an important point about depopulation, which is being experienced all over rural Wales. Young people are tempted to leave the world of agriculture and rural life for the simple reason that it is easier to make a living and have a sustained and stable income by going to the city. According to one projection, the number of retired people will increase by 31 per cent. in some parts of mid-Wales over the next 13 or 14 years, so we have another social crisis in the offing.

Hill livestock compensatory allowances and the other payments that we have discussed need to be regarded as a form of social payment, not just as support for the agriculture industry. I counsel the hon. Member for Clwyd, West (Mr. Thomas) to be a little more cautious. He accused some Opposition Members of irresponsibility because we are calling for more money. Does the hon. Gentleman not realise that many of these payments are a substitute for unemployment benefit and other direct benefits that would have to be paid if farms collapsed? Let us make no mistake about the fact that many farms and smallholdings are on the verge of collapse, for the reasons that have been outlined. I would go further and suggest that it is probably cheaper to make these payments to the agriculture industry than to pay the money through the benefits system. Farmers work hard for a living; by and large, the smallholders have to work the hardest of all.

It is clear that the continuity in terms of culture and economic survival provided by the family farm is vital to the countryside. That continuity is threatened when the sons and daughters of farmers find it easier to leave the countryside. Again, I suggest that the payments and the security that they represent are a guarantee that reassures the offspring of farmers that there is a future for them in farming.

I must mention the plight of new or young farmers coming into the business, because the enormous "in-going cost" of becoming a farmer these days has not been mentioned. We would welcome the Government giving serious consideration to ways of making it easier for new entrants to come into the agricultural market. The voice of the countryside is sometimes drowned by the shout of the city in the Chamber. Today, we have heard from hon. Members who evidently care about agriculture in Wales. I counsel the Government to take on board the points that have been made and to recognise that the issue is not saving money from the countryside, but saving the countryside. That is why we desperately require funds.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley 11:59, 5 November 1997

I am grateful for the opportunity to contribute to the debate. I congratulate the hon. Member for Ceredigion (Mr. Dafis) on securing it. I am delighted to be able to contribute because, as a Conservative Member for a rural English constituency, I have spoken to farmers in my constituency and in Wales many times. The Conservative party is still the second party in Wales, with 100,000 more votes than the Liberal Democrats and almost twice as many votes as Plaid Cymru at the general election.

We know how difficult times have been for hill farmers recently. More than 55 per cent. of farmers now feel that hill farming is not an attractive career option. That is very worrying. We have heard how the population, particularly in the less-favoured areas, is aging. There is a great fear that there will be nobody to take on the farms after those people. The Government have an enormous task to prove their rural credentials. They should act on four main issues to benefit rural farmers in Wales and save the industry from decline: the hill livestock compensatory allowance review; the over-30-months scheme; the revaluation of the green pound; and the lifting of the beef export ban. Those issues have all been mentioned today. Other problems include the falling price of milk, the pressure of quota and charges for carrying milk.

Labour's planned minimum wage could prove disastrous, leading to the closure of small businesses and job losses in rural Wales. We all know that farms in the less-favoured areas operate close to the margins of profitability or even below them. To afford wage costs and operate within the law, some small firms will have to shed labour. That could be a real problem. The alternative is a big increase in black market labour, without the protection of health and safety legislation. That will lead inevitably to the rundown of rural villages, as people move away to look for work. Our countryside will then decline. We have already heard that, for every job on the farm, there are at least two and a half outside.

The HLCA areas are important for the management of the countryside, for tourism in Wales and for the economic vitality of various parts of Wales. The previous Government maintained their commitment to hill farmers, paying out £107 million in HLCAs in 1995. Despite a tough Government spending round, the rates for 1996–97 were not cut. We provided an extra £60 million on HLCAs because of the effect on hill farming incomes of the BSE crisis, which is still affecting many farmers.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

I shall give way in a moment, but I want to build up a little head of steam first. I have only 10 minutes, because I know that the Minister will want to answer many of the points that have been raised. The £60 million increase in payments for the 60,000 United Kingdom farmers who claimed upland livestock subsidies was announced by the then Minister of Agriculture, Fisheries and Food in November 1996.

Photo of Mrs Jackie Lawrence Mrs Jackie Lawrence Labour, Preseli Pembrokeshire

Will the hon. Gentleman confirm whether that £60 million was put in the spending plans that this Government took over?

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

The £60 million would not have been in the Government's spending plans, because nobody could have predicted the huge scale of the BSE crisis. Some £1.4 billion was spent to support the agriculture industry after the rise of BSE. We are asking the Government to consider the needs of farmers in HLCA areas carefully, to ensure that they get the support that they desperately need. The Government seem to have pre-empted the review, even though, as we know, they love reviews.

In 1995–96, HLCA payments to Welsh hill farmers reached £27.2 million. A similar figure is expected for 1996–97. Planned expenditure for the next year is £36.4 million. Labour does not share our commitment to hill farming. The Government plan to announce a cut in the HLCA back to 1996 levels, wiping out the £60 million supplement. Such a move will fail to take into account the current trends in hill farming incomes. Government figures for 1994–95 show that 69 per cent. of farmers in the less-favoured areas of Wales had a net farm income of less than £10,000—and the Government have the nerve to talk about a minimum wage.

Cuts in compensation for Welsh farmers without reference to economic conditions and incomes in the hills and the less-favoured areas will mean savings for the Government, but cuts in income for all hill farmers, putting some of them out of business. The cuts will mean deprivation and depression for many rural villages. The Government are not listening to Welsh farmers, not consulting them and giving many of them no chance.

A recent National Farmers Union survey showed that farming incomes were back to below 1988–89 levels.

Photo of Chris Ruane Chris Ruane Labour, Vale of Clwyd

Does the hon. Gentleman recognise the damage that the previous Conservative Government did to the rural economy? They presided over it for 18 years, during which there was Alar in the apple industry, anthrax in the pig industry, botulism in the food processing industry, listeria in the dairy industry, salmonella in the poultry industry, E. coli in the meat industry and BSE in the beef industry. Does he believe that that strengthened or weakened the rural economy in Wales?

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

If the Government had sat back and done nothing to support the farming industry, with those problems, it would have been a complete disaster. I have already mentioned the enormous £1.4 billion support on BSE. The Government's reactions in the next three or four years will be interesting. There have been incidences of E. coli in Scotland since this Government came to power. We shall not scaremonger in the appalling way that certain Labour spokesmen did when we were in government. Some of the comments made when the BSE crisis began did not help hill farmers in Wales. I am sure that the hon. Gentleman will recall the right hon. Member for Camberwell and Peckham (Ms Harman) asking: Does the Secretary of State acknowledge that public confidence on this issue is hanging by a thread?"—[Official Report, 20 March 1996; Vol. 274, c. 376.] Matthew Parris succinctly remarked the following day in his column that she then proceeded to cut it. I know that the hon. Gentleman was not in Parliament then, but some of the statements made by other Labour Members at that time were not helpful to hill farmers in Wales or any other farmers throughout the country.

A recent National Farmers Union survey showed that farming incomes were back to below 1988–89 levels. It also showed that 74 per cent. thought that the main reason for young people not taking up hill farming was the low incomes. The president of the Country Landowners Association has predicted that hill farmers face tough times unless the Government boost special payments to keep their incomes above the breadline. He said: HLCAs were originally brought in to compensate farmers for the natural handicaps to farming in LFAs. Now more than ever, this policy is justified and higher rates are needed for LFA farmers to survive. By cutting the HLCA, the Government are acting ahead of the outcome of the annual review of the state of hill farming. It is like a judge passing a life sentence for murder before he has heard any of the defence's evidence. It is an irresponsible act worthy only of a Government who have shown themselves untrustworthy and unable to keep their word. They say whatever they feel like at the time. If it turns out to be inconvenient later, they simply drop it. It is a betrayal of our farmers' trust.

The over-30-months scheme provides farmers with compensation for the culling of cattle over 30 months as they come to the end of their working lives. The culling of cattle over 30 months was one of the conditions for the lifting of the beef ban agreed at the European Council of Ministers meeting in Florence in 1996. By the time of the general election, more than 1.2 million cattle had been culled under the scheme.

We have already heard how wonderful the Government are, with their pro-communautaire policies and their relations with our European neighbours. At the time of the BSE crisis, they said that the Conservative Government were not doing enough to lift the ban, but the ban has not been lifted since 1 May. We want the Government to do more. They said that they had good relations with Europe. They almost gave the impression that if they were elected on 1 May, the ban would be lifted on 2 May. That has not happened. It is damaging to the industry in Wales.

In March 1996, before the BSE crisis, the average price reported by the Meat and Livestock Commission for a grade 1 cull cow was 95.3p per kilo liveweight. That made an 800 kg cull cow worth about £760. With the new weight limits and prices, the same animal would be worth only £311, an enormous drop in farmers' incomes. The accusation against Welsh farmers, and against farmers generally, was that the system was being abused. That is an ill-founded, ill-considered accusation against hardworking, decent farmers. I ask that the Government take measures to review the decisions that they have taken, which are hitting farmers in Wales so hard.

On green pound revaluation, the value of sterling has risen strongly since the general election, caused at least in part by the four interest rate rises since 1 May. That has led to a further revaluation of the green pound and means that the value of common agricultural policy support prices in sterling has fallen. The agreement at the June 1995 Agriculture Council allowed member states to freeze the green rate applying to CAP direct payments. We exercised that right to protect British farmers against revaluation. The freeze protects the value in sterling of more than 60 per cent. of CAP expenditure and is worth a massive £440 million over two years. To compensate for the effects of the strong pound, the Government can apply to the Commission for further compensation to help farmers whose CAP payments have effectively been reduced by the strong pound. The Government should take that course of action at the earliest possible time, which would go some way to helping Welsh farmers.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

No, I said that I would finish at 12.10 and I aim to do that.

I ask the Minister to reverse the weight limits, seek greater compensation and give real assistance to farmers through the hill livestock compensatory allowance, to help farmers in their time of need. They do not need an insensitive Government who look the other way. Welsh farmers deserve better; if they do not get it, the loss of the livelihoods of thousands of Welsh farmers will lie with this Government.

Photo of Mr Win Griffiths Mr Win Griffiths Parliamentary Under-Secretary, Welsh Office 12:11, 5 November 1997

I congratulate the hon. Member for Ceredigion (Mr. Dafis) on his success in the ballot and on taking the opportunity to raise matters of great importance to the rural communities of Wales. I also thank my hon. Friends the Members for Preseli Pembrokeshire (Ms Lawrence) and for Clwyd, West (Mr. Thomas) and the hon. Members for Brecon and Radnorshire (Mr. Livsey), for Ynys Môn (Mr. Jones) and for Montgomeryshire (Mr. Öpik), all of whom made thoughtful contributions.

The hon. Member for Dribble—I mean Ribble Valley (Mr. Evans), I was getting him confused with Tom Finney—can say all that he likes now but the huge crisis that we face is the doing of his Government. He knows that all his demands for expenditure were left unprovided for in their Red Book estimates in the last public expenditure round. That is part of the problem with which we have to deal.

As to lifting the ban, when one considers that we were left in a trench as deep as the Marianas in the Pacific, it has to be recognised that we have already made huge progress in increasing the European Union's confidence in the measures that we are taking to ensure that it can be lifted. I assure all the hon. Members who raised the matter that we give it the highest priority. It is the opening of export markets to British produce that will make the fundamental difference.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

We all agree that lifting the ban would boost Welsh farmers. Can the Minister give us any idea of when he believes that it will be lifted?

Photo of Mr Win Griffiths Mr Win Griffiths Parliamentary Under-Secretary, Welsh Office

I would love to be able to, but 1 can say only that we are giving the matter top priority. The sooner it happens, the better, but I cannot set a deadline because that would look as if I were holding our European colleagues to ransom. I assure the House that it is a top Government priority. While agriculture accounts for only a small part of total employment in the Principality as a whole, in the rural areas of Wales it is the dominant occupation and one on which scores of other jobs depend. The rural economy depends on healthy agriculture. The Government's commitment to agriculture remains very firm. We believe that an efficient and competitive farming industry in Wales is an essential part of our rural economy and vital to the cultural and social life of rural areas.

The number of people engaged in the industry is declining, as it has for decades but, thankfully, in Wales it is a modest decline. It is inevitable that, as farming methods improve and productivity rises, the number of farmers will decrease, but we recognise that those who continue to work in agriculture are entitled to a reasonable measure of support from the community as a whole, not least because of their role in preserving the landscape that is so valued by millions of townspeople. While the number of farmers continues to decline, their impact in rural communities remains as strong as ever.

The Government have a large number of market support measures, such as the sheep annual premium scheme, the beef special premium scheme, arable crops area payments, hill livestock compensatory allowances, the agri-environment programme, the environmentally sensitive area scheme, and Tir Cymen. An integrated countryside and agricultural information service provides free advice to farmers in Wales. We have two grant schemes designed to help companies improve their food processing and marketing facilities. The European Commission has given structural support amounting to £28 million over five years under the European agricultural guidance and guarantee fund. Government support has helped to maintain the incomes of those employed in agriculture in Wales over the years. In talking about the Government in this case, I refer to the previous Government, because all those schemes are on-going and part of the European Community process.

Planned expenditure on agriculture in Wales this year is around £250 million. That is a demonstration of our support for the rural economy and a significant contribution from the taxpayer. I recognise that farming is at the heart of community life in the hills of Wales. Farming in the hills of Wales is predominantly the production of sheep and suckler cows. We fully endorse the importance of HLCAs to Wales, where 80 per cent. of the land is in less-favoured areas.

I underline what was said last night and raised again by my hon. Friend the Member for Preseli Pembrokeshire. The £60 million to which the previous Government so often referred was a special one-off payment. As the hon. Member for Ceredigion pointed out, it should never have got embroiled with HLCAs. No provision was made for it in this year's budget. That is part of the problem that we are dealing with.

I and my right hon. Friend the Secretary of State for Wales have had good discussions with the Farmers Union of Wales and the National Farmers Union in Wales about the difficulties that their members face. Over the next few weeks, we shall consider what they and others have said to us, but, as hon. Members know, the Government are pledged to live within overall public expenditure targets set by the previous Administration. That was part of the basis on which we were elected, but it makes life difficult for us. Having said that, we are considering the situation in the hill farms and of farming in Wales and we are setting up a dialogue, which I shall mention again, for the future.

We want to ensure that hill farmers and those in less-favoured and severely disadvantaged areas continue to receive a high level of support. It is interesting to note that the rate of decline in farming in severely disadvantaged areas is much slower than that recorded in other parts of Wales. The rate of decline in non-less-favoured areas, for example, is just under 20 per cent., whereas it is 2 per cent. elsewhere.

Last year, most of the £226 million of subsidies for the production of livestock in Wales went to farmers in less-favoured areas. Those significant sums of money demonstrate that we are committed to HLCAs.

Hon. Members will be aware that the Welsh Institute of Rural Studies at Aberystwyth has won the contract for the evaluation of HLCAs in Wales. It will be presenting its report to the Welsh Office before the end of the year. As soon as I have read it, I shall send a copy to hon. Member for Ceredigion and the farming unions and I shall also place a copy in the Library so that all hon. Members can look at it. It will be an important contribution to establishing a dialogue between the farming unions and others about the future of agriculture in Wales and how best to support it.

We also face the challenge posed by the reform of the common agriculture policy. In addition to the internal need for that to happen for the good of the development of the European Union, one must consider external factors such as the need for our goods to be competitive on world markets. The World Trade Organisation wants agricultural markets to be opened up. We also want CAP to become more market oriented, with payments decoupled from production, and supply controls removed.

All those issues will be subject to radical thinking and the Government want to play their full part in helping to construct a modern, sustainable and environmentally friendly agriculture policy. The debate has shown that that desire is shared by plenty of other hon. Members. We know that there will be challenges to farmers in adjusting to any new regime. We shall continue to consult the industry and farming unions in Wales about the proposed EC reforms, and we understand farmers' concerns.

We believe that the reform of the CAP is necessary and inevitable and that Welsh agriculture must respond and adapt to the challenge of reform. Unlike the previous Government, this Government will look at constructive ways in which to provide practical help to farmers to make that possible. We need to examine the needs of key sectors in the Welsh agricultural industry, such as the beef, lamb and dairy industries, which will be affected most directly by CAP reform, while looking at the development potential of our other important farming sector, horticulture.

In that context, it is particularly important to develop the range of premium and added-value food products that our industries produce. We shall continue to support the development of food promotion schemes such as farm assurance schemes, which prove the quality of our products and have done much to help them appeal to the retailer and the consumer alike. That is why the work of the Welsh food strategy is so important to the long-term competitive position of agriculture in Wales. I am keen to see that work developed more effectively. I want to see Wales develop a good reputation for first-class food products, which will give us a strong market position in organic and farm-assured foods.

Photo of Mr Cynog Dafis Mr Cynog Dafis Plaid Cymru, Ceredigion

I like what the Minister is saying. I, too, would like to emphasise that adding value to Welsh food and the production of high-quality products are important issues of economic development. That must be borne in mind when deciding the spending priorities of the new development agency. Together with inward investment, such issues will be key, important considerations in the creation of a vibrant economy in rural areas and in Wales generally.

Photo of Mr Win Griffiths Mr Win Griffiths Parliamentary Under-Secretary, Welsh Office

The Secretary of State for Wales, my fellow Under-Secretary, my hon. Friend the Member for Neath (Mr. Hain) and I will use our respective briefs to consider that issue. We want to ensure that our economic powerhouse, to which reference has already been made, adds value to the work of the Rural Development Agency, to strengthen the rural economy in Wales.

The BSE crisis has certainly added to the difficulties that hill farmers are facing. As I have already said, one of our high priorities is to get rid of the export ban. We are also aware that some of the changes that we have announced, together with the OTMS and the difficulties in responding quickly on the revaluation of the green pound, have caused further problems for farmers. As my right hon. Friend the Minister of Agriculture, Fisheries and Food made clear last night, we are still considering the green pound revaluation and have got until January to make a decision about most of the products affected. We want to get to grips with those problems.

In the short-term, it is important to appreciate that we inherited a dire situation. It is therefore difficult to fulfil the Opposition's expectation that we will undo the severe damage inflicted in the past eight years in just a couple of months.

We want to beef up the agri-environment scheme. The hon. Members for Ynys Môn and for Brecon and Radnorshire asked about providing money for whole-farm management to make such a proposal worth while. We have not made any decision about the rates of payment, but we realise that we must make them attractive so that farmers will opt into the scheme. The resources required from 1999 will be considered as part of the comprehensive spending review. We want that scheme to be successful.

It is inevitable that the schemes that provide most added value environmentally will get the money first, but we shall not make Tir Cymen or something like it an all-Wales scheme, in receipt of a fixed amount. That would not be in keeping with the spirit of our proposals. The exact amount of additional resources available will, however, depend on the outcome of the comprehensive spending review. The working group is considering the scheme now. We want to ensure that everything that we do is designed to meet our targets on biodiversity and other commitments.

It is important to us that farming continues in rural Wales because of the associated social, cultural, economic and conservation considerations. I can reassure the House that the Government are committed to re-establishing a prosperous agricultural industry in Wales. When we discussed HLCAs with the farming unions they accepted the existence of a short-term difficulty. We had a positive dialogue about moving the debate beyond the first two years in question to ensure that there is a common approach to the development of long-term strategies.

Photo of Nigel Evans Nigel Evans Conservative, Ribble Valley

How many farms in less-favoured areas does the Minister think will be able to survive two years? In the last minute, what good news can he give to farmers farming in less-favoured areas?

Photo of Mr Win Griffiths Mr Win Griffiths Parliamentary Under-Secretary, Welsh Office

The hon. Gentleman will know that we face the problem of working within the budget that the Conservative Government considered to be sufficient to deal with those issues. All I can say is that we are looking for ways to provide some short-term help, but there is no question of my being able to trumpet any major figures now, because difficult discussions are still going on. We accept that there is a need to do something in the short term, but it is difficult. I would not wish to raise anyone's hopes, but the point—