Agriculture Strategy

– in the Scottish Parliament at 2:30 pm on 29th June 2000.

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Photo of Lord David Steel Lord David Steel Presiding Officer, Scottish Parliament 2:30 pm, 29th June 2000

We now move to motion S1M-1051, in the name of Ross Finnie, on a forward strategy for Scottish agriculture, and amendments to that motion.

Photo of Ross Finnie Ross Finnie Liberal Democrat 3:32 pm, 29th June 2000

It is with pleasure that I move this motion welcoming the steps being taken by the Scottish Executive to promote a debate on the development of a long-term strategy for Scottish farming.

The Executive has already clearly demonstrated its commitment to the future of the agricultural industry in Scotland as part of the social, economic and environmental fabric of rural Scotland. I will say a little more about that in a few moments, but I will begin by putting this debate into its proper context.

It has been acknowledged by all concerned that we must move away from the past. We cannot afford to lurch from one crisis to another, casting about for short-term solutions, without making a serious attempt to address the fundamental problems facing the farming industry.

That is why we published a discussion document, entitled "A Forward Strategy for Scottish Agriculture", early in April with the intention of opening up a full, but I stress brief, debate during the summer and autumn on the issues which underlie the future of agriculture. As I said in this chamber in April, this issue is of fundamental importance to Scotland. It has perhaps been too easy in the recent past to understate the contribution of agriculture to the rural economy. Our document demonstrates its substantial and continuing significance.

Around 75 per cent of our land area is given over to agricultural production. In direct employment alone it accounts for some 8 per cent of the rural work force, and gross agricultural output in Scotland is valued at around £2 billion per year. Some percentage figures highlight its importance in parts of Scotland: agriculture accounts for 15 per cent of gross domestic product in the Orkney islands; 12 per cent in the Scottish Borders; and 11 per cent in Dumfries and Galloway. Of course, these figures increase when one applies the multiplier effect and takes into account the industries that are linked to agriculture.

As members are aware, the farming industry remains under exceptional pressure for a variety of reasons.

First, there are economic pressures. The agriculture industry has faced a tight squeeze from the exposure of European agricultural production to falling world market prices, a weak euro and rising costs. Despite the support that has been given, the level of farm incomes has continued to fall. There are long-term changes in the world trading economy and also temporary and cyclical reasons for that fall. At the same time, agriculture support regimes are changing in ways that will probably reduce production-linked subsidies. The future costs of the common agricultural policy in an enlarged Europe will also have an impact on the level of agricultural support.

Secondly, we face inescapable regulatory pressures and a regime that now—rightly—gives priority to public health issues. We have an independent UK Food Standards Agency, and it is likely that there will be a European agency. The focus is on traceability and identification. We will argue for rules that minimise red tape. We will apply them as economically and efficiently as we can, but those pressures will remain.

Thirdly, the market is putting exceptional pressures on the industry. Rationalisation in the retail industry is putting a huge pressure on costs and margins and falling world prices are adding to that pressure. Consumer habits are changing and farmers can no longer assume, if they ever could, that the simple act of producing their goods will secure buyers and profitability.

Fourthly, we face significant environmental pressures. I know how seriously farmers take their responsibilities for the preservation of Scotland's environmental heritage. Like other sectors of industry, they are under pressure to play an even fuller part in delivering clean water and avoiding pollution. That is a significant burden. I am aware that many farmers feel that they are not adequately rewarded for the work that they already do to enhance the environment, and that many of them would wish to do more if they could afford to do so.

The Executive on its own cannot devise or implement a strategy for agriculture. We need to work in partnership to ensure that agriculture continues to sustain the social, economic and environmental fabric of Scotland. In my first year as Minister for Rural Affairs, the Executive has tried to take steps to inject new thinking into policies for Scottish agriculture and the rural economy. I also pay tribute to the work and effort of the industry to improve its efficiency and innovation.

I will give some examples of the opportunities for innovation in which the Executive and the farming industry have already started to invest, but in which a great deal more needs to be done.

First, on markets and products, a substantial part of our industry is already exploiting the value of Scotland's reputation in the food and drinks industry for quality, integrity and service. The Executive has given clear support to marketing and business development, has encouraged an increased awareness and understanding of the food chain, and has heavily emphasised the commitment to quality in Scotland through our support for the food industry strategy and the development of Quality Meat Scotland.

Photo of Dr Winnie Ewing Dr Winnie Ewing Scottish National Party

Is the minister aware that when the French ambassador kindly visited us yesterday, he said that there was a proposal in the French presidency to set up a European food security agency? As we have always tried to attract a European institution, will the Executive fight to get that agency? That would help the problem that we face with the reputation of our beef.

Photo of Ross Finnie Ross Finnie Liberal Democrat

I am aware of that. Dr Ewing will be aware that, even under the Portuguese presidency, proposals for a Europe-wide food standards agency are emerging.

I think that such an agency would be hugely beneficial, provided that its objective was to create a level playing field in standards across Europe. I fear that experience tells us that adding another layer of bureaucracy creates additional burdens and costs. Although I would support whole-heartedly any attempt to secure a level playing field and to promote an agency that would achieve that, I would not support any attempt to add further layers of bureaucracy or cost on the industry.

I want us to focus every part of the food chain on the consumer, and on making the most of our innovative capacity to do more processing and manufacturing in Scotland, and to do so in an atmosphere in which the integrity and quality of our products is assured. I hope that that will increase returns to producers and processors through high-quality products.

Secondly, there is the question of organisation. Organisation is a sensitive issue, but any industry with thousands of individual businesses at one end of the chain supplying ever fewer retail buyers at the other end is at risk unless it co-operates and organises. Scottish farmers have made great strides in developing co-operatives, which reduce costs, enhance marketing opportunities and increase returns. There are, however, opportunities to do more in that field.

Thirdly, there is a major new opportunity for our agriculture industry to embrace technology. The Executive is doing what it can to drive forward the adoption of technology in farming to simplify administration. We can make the whole business of meeting regulatory requirements much easier through the use of technology such as electronic cattle identification. New technology is also being deployed to research new products and services for the farming industry. We must make that one of our priorities for the future.

Fourthly, the opportunities that arise from the environment are at least as great as the challenges. The environment is a great public good and we must expect farming to be carried out in as environmentally sensitive a way as possible. The environment also contributes hugely to tourism, recreation and sustainable sources of income from which many farmers in many areas continue to benefit. Our strategy must take full account of that.

I commend all that activity, but there is a long way to go. That is why the Executive is promoting this debate on the future of Scottish agriculture. We cannot continue to sustain an industry on the basis of subsidies that form substantially more than 100 per cent of incomes. We need to build on what we have achieved and to develop a new vision for farming in Scotland, which will influence policies and thinking not just in Government but in the industry and in the wider community.

The Executive wants a farming system that is economically sustainable, that is integrated with the rural economy as a whole, that sells what people will buy and that preserves and enhances the rural environment. That vision must be set firmly in the context of our distinctive Scottish farming structure, acknowledging the fact that 85 per cent of our agricultural land has less favoured area status and that hill farming is central to our livestock farming system. That vision must also acknowledge that there is a significant social and community dimension to farming in rural areas.

Our discussion document has set in train that process which, I intend, will lead to the production of an agricultural strategy early next year. I make it clear to the chamber that I want the process to be concluded by the end of this year. We cannot wait indefinitely for a strategy—it is vital that we have one.

Last Wednesday, before the opening of the Royal Highland Show, the debate was kick-started with a conference involving 170 people, including representatives from more than 70 organisations intimately involved in Scottish agriculture. We listened to a range of speakers with distinct perspectives on the future of agriculture, addressing a number of key questions. Today's debate is another important marker in the process, affording members the opportunity to outline how they want the strategy to develop and to highlight the areas of concern that they want addressed.

Let me indicate how I intend to take the process forward, to allay the concerns of some people, particularly on the Conservative benches, about the lack of speed or urgency. I have set up a steering group, under my chairmanship, with a wide membership from throughout the industry, which, over the next few months, will keep on top of the dialogue with those who contribute to the process.

As part of that process, sectoral issues will be considered by experts. We will meet and have discussions with a wide range of farmers throughout Scotland. We will take evidence, if necessary, from abroad. We have had early indications from Ireland and Spain that they may have experiences on which we can draw. The Andrew Dewar-Durie report will also be published imminently, and I believe it will provide some helpful pointers. Officials will have detailed discussions with groups—I hope that they will be flexible and informal gatherings—to get input from the widest possible range. We have also invited written comments on the discussion document by the end of September.

Some people have questioned the wisdom of encouraging discussion on this topic rather than jumping to instant conclusions. I looked back and was astonished to discover that it has been a very long time since there was a policy statement and a strategy document on Scottish agriculture. I find it staggering that the department that I now have the pleasure of running has been distributing vast amounts of money under the overarching common agricultural policy, without a clear view of what we are trying to achieve for the benefit of Scottish agriculture. That is why I believe that, before coming up with different policies and ideas, it is vital that we have an overarching strategy around which we can coalesce in the best interests of Scottish agriculture.

Finally, I am conscious that we do not have a huge amount of time for today's debate. I remind any members who have not had the chance to express all their views as fully as they might today that the process will allow them to make their views known to me and that those views will be fed into the full process of consultation and discussion.

I move,

That the Parliament welcomes the steps being taken by the Scottish Executive to promote a wide-ranging and constructive debate on the development of a long-term strategy and plan of action for Scottish farming following the recent publication of the discussion document A Forward Strategy for Scottish Agriculture in order to secure a sustainable future for the agricultural industry as part of the social, economic and environmental fabric of rural Scotland.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party 3:46 pm, 29th June 2000

The minister has quite rightly put agriculture into context as a very important Scottish industry. The industry is even more important to the fragile rural economy. Scottish agriculture has had a great deal of attention during the past few years, in both the Scottish Parliament and the UK Parliament. It has also been the subject of much public debate—not necessarily about its future, but about its present. The minister has alluded to the problem that so much attention has been paid to examining the day's crisis that we never really begin to consider the medium or long term. I welcome the chance to debate the subject in the context of the document.

Recently, some people have said that agriculture needs less strategy and more action. I do not know whether I completely agree. One of the problems that we have faced is that, perhaps understandably, there has been far too much short-term action. Politicians and farmers may be equally to blame for that. There has not been enough willingness to sit down and try to work out a long-term solution.

In the foreword to "A Forward Strategy for Scottish Agriculture", the minister said:

"The days of rural areas and agriculture being synonymous are long gone".

However, it is important that we try to reinforce the connection between rural areas and agriculture. While acknowledging the importance of agriculture for rural Scotland, we should also be aware that our actions and strategies should be directed not only at primary production in agriculture, but at related industries.

Our amendment alludes to the point that the future of Scottish agriculture—and through it the future of our rural economy—cannot be taken in isolation in the context of events in the UK, but must be considered in the context of events in the wider Europe and the world at large. Over the next decade, those events will significantly affect Scottish agriculture. The last renegotiations of the common agricultural policy failed to make the radical changes that many states sought. There is no doubt that, in the next set of renegotiations, close as they will be to the accession of the relatively poor states in eastern Europe—all of which have substantial agricultural sectors—there will be significant pressure for a reduction in the amount of money spent in western Europe under the common agricultural policy. That will have significant consequences for our farmers. Regardless of that situation, there will be considerable pressures from the World Trade Organisation to reduce the level of subsidy in western Europe to equate with levels in the rest of the world.

It is not just within the institutions of Europe that agriculture will begin to feel the pressure. In the document, the department refers to the currency situation and the euro exchange rate and to

"the need for the farming industry . . . to do what it can to make their fortunes less susceptible to exchange rates. This may include developing products which are less price sensitive or targeting markets where exchange rates are less of a problem".

I must say that I find that statement extraordinary. It seems to boil down to saying that, for whatever reason, the Government has landed us with a strong pound against a weak euro and that the solution for the farming industry is effectively to forget sales in Europe. There is no mention of the reluctance to pay agrimonetary compensation to make up for the fact that the level of support prices is dependent on the level of the euro, nor any mention—or hint—that the Government itself might take some responsibility for dealing with this problem. No one in the agricultural community who read that statement could have taken much comfort from it.

Photo of Robin Harper Robin Harper Green

Does the member agree that the development of strong local markets would mean a far more sustainable—and environmentally sustainable—future for Scottish agriculture?

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

Yes, indeed. In fact, I will briefly mention local markets later in my speech. However, the suggestion is somewhat unrealistic, because we trade in a global environment. As exchange rates affect both products that we export and that we import, the problem is still a significant one.

In the document, the section headed "Opportunities Ahead" highlights certain areas where Scottish agriculture could benefit from targeted investment. Such areas include the development of new markets for Scottish produce; retail trends; exploiting the demand for new products in our shops and among our consumers; the development of direct or local markets; the use of new technology; increased co-operation between farmers; and increased development of tourism and recreation.

I suspect that one of the problems is that investment in and development of those areas are not sufficiently achieved by the current structure of the funds that are going into agriculture. Although farmers and farm businesses obviously welcome the substantial payments that go into the direct subsidy regime, they do not necessarily develop the industry for the future.

That brings us to modulation, or the top-slicing of direct support payments to put cash into the rural development regulation that can target payments at items as diverse as training, early retirement, agri-environment schemes and the improvement of marketing and processing. The Government currently proposes to reach a fairly modest 4.5 per cent of top-slicing over five years, as opposed to the maximum 20 per cent allowable in the European Community. It is a matter of concern that, because Scotland is not a member state, we are tied to the same modulation percentage that is decided at UK level. The National Farmers Union of Scotland is not particularly happy with the modulation proposal. However, although we can understand why anyone in receipt of direct support payment would not want to see it diminish, we need a wide and well-informed debate about the options and possible consequences.

I have referred to the WTO, in which context the barbarians are well and truly at the gates. In Geneva yesterday, the US delegation tabled proposals for today's negotiations that would effectively end the so-called blue box system that has protected the level of EU farm subsidies up to now. Those proposals will receive the support of the Cairns group, a group of 18 agricultural exporting nations led by Australia which is campaigning for big subsidy reductions. It is not a question whether the current direct support system will be drastically changed, but a matter of when.

Photo of Ross Finnie Ross Finnie Liberal Democrat

Does the member agree that, although there are proposals for moving out of the blue box, no one is attacking the green box? Furthermore, does he agree that in so far as the rural development regulation, which includes the modulation proposals that he mentioned, is acceptable, we can make a very serious case for sustaining levels of support within the green box?

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

There are certainly levels of support that need to be sustained and I recognise that not all support is under attack from the WTO. However, in the current situation where the level of subsidy will reduce over what might be a fairly short period, we have to think now about how we use that money while we have it to the best advantage and for the best future of the Scottish agricultural industry.

We have to put Scottish agriculture in a position to compete in an increasingly global market, whether exporting or importing. If we can take action to achieve that aim, perhaps we should be talking about modulating more of those direct subsidy payments while we are able. Whatever the answer is—and I see members shaking their heads—there should be debate about it. We need some answers about where we can place Scottish agriculture to ensure that it survives and competes not only for the next five years, but for much further into the future.

I move amendment S1M-1051.2, to insert at end:

"but recognises that the re-negotiation of the Common Agricultural Policy will be a major factor affecting the future of Scottish agriculture and regrets that, under the current constitutional settlement, Scotland will not have its own voice in these negotiations."

Photo of Alex Fergusson Alex Fergusson Conservative 3:55 pm, 29th June 2000

I welcome the minister's placing of agriculture at the heart of the rural economy. I declare an interest in this debate with the same feeling of guilt that I am told accompanies those who escape from a fatal accident or who cancel their booking on an aeroplane that subsequently crashes. I am not someone who is usually noted for being ahead of the game but, given the recent advice of the president of the National Farmers Union to his members that they should get out if and while they can, perhaps I have been fortunate in finding another occupation before it is too late.

The fact that the president of the NFUS feels forced to give that advice to his members is indicative of the desperate—and I use that word advisedly—state to which farmers have been reduced. The income of producers has halved year after year since the Labour party came to power and their collective borrowing is now much more than £1 billion. Producers used to borrow for innovation and investment but now borrow simply for survival. Those individuals cannot be accused of complacency in the face of their increasingly desperate situation, for well over 70 per cent of Scotland's farmers derive a significant part of their income from non-farming activities. While I applaud the innovation and the entrepreneurial spirit that enables them to do so, I have no doubt that the vast majority do not do so voluntarily.

What has the agriculture industry had in return from the Labour Government since 1997 and from the Lib-Lab Executive since last year? I link those two bodies because all the discussion documents that are issued by the Scottish Executive seem to be regurgitated versions of those issued earlier by Lord Sewel.

The Labour Government came to power with a catchphrase of "Education, education, education", but that has been reinterpreted in relation to agriculture as "Consultation, consultation, consultation". While I welcome the minister's talk of urgency, our amendment highlights the time that has been taken so far. How could it take 10 months to produce this discussion document? How could it take 10 months to come up with the profound statements that we find on page 3?

We are told that

"Scotland is a significantly rural country."

We are further informed that

"The nature of farming itself varies."

The best statement of the lot is that

"The size of farms also varies."

I assure the minister that, if those pearls of wisdom are designed to set the farmers' minds at rest, he is in for a major disappointment.

How could it take a further two and a half months to set up the steering group to take the process forward? The document and the steering group should have been in place long ago. That would have sent a message to Scotland's farmers that their plight was as high on the list of priorities as they were promised that it would be before the election for this Parliament. Instead, the minister has to deal with an industry that feels let down, unwanted and unvalued.

The minister is not being helped in that respect by his departmental officials. It gives me no pleasure to say this, but those civil servants are becoming neither of service nor civil in their zealous pursuit of the rigorous interpretation of regulations. Why else would a farmer who wrote to me recently have had his application for the beef special premium scheme refused after he had voluntarily given the information that he had mistakenly claimed for a heifer? Why else would the Scottish Executive rural affairs department be reclaiming an entire year's sheep annual premium and hill livestock compensatory allowance from another farmer because the officials did not like his method of record keeping, despite the fact—as SERAD confirmed—that he consistently had a higher number of sheep on the farm than he was claiming for? The attitude that SERAD has towards its farming clients is nothing short of disgraceful.

Photo of Ross Finnie Ross Finnie Liberal Democrat

Is Mr Fergusson seriously telling me that he is drawing a conclusion about the whole department on the basis of two claims? Is he suggesting that that is a serious way of dealing with the problem that he perceives to exist? Is he telling me, as a matter of European law, that the claims to which he refers have been wrongly dealt with?

Photo of Alex Fergusson Alex Fergusson Conservative

If only time permitted, minister.

I am seriously saying that the size of my postbag is increasing on this issue and that, if we are to address a long-term strategy for agriculture, we need individual producers as willing participants in the discussion. If the attitude problem continues—it is becoming more prevalent, at least in my mailbag and, I believe, in others—we will not achieve that willing participation, and the whole exercise will be a waste of time. I have had more than two cases.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

On the wider point that Alex Fergusson makes about the crisis in agriculture, does he accept that that crisis did not start on 6 May 1999 or, for that matter, on 1 May 1997? To the extent that his criticisms are valid, they could be levied equally well at, say, the last 10 years of the previous Conservative Administration.

Photo of Alex Fergusson Alex Fergusson Conservative

Alasdair Morgan will be surprised to learn that I do not accept that at all.

Photo of Alex Fergusson Alex Fergusson Conservative

Quite.

I contend that the crisis accelerated considerably in 1997. I would love to find a farmer who would not prefer to be in the position in which he was in 1997 rather than in the position in which he is now.

Photo of Alex Fergusson Alex Fergusson Conservative

Yes, including myself.

The minister may be pleased to hear that we whole-heartedly welcome the desire to address the long-term situation, with the aim of maintaining a viable and sustainable industry—of course we do. However, unless we address the short-term issues as well, there is a genuine danger that only the rump of an industry will be left to sustain.

I ask the minister to answer the following points when he sums up. Why are we in Scotland so far behind the rest of the UK in establishing a sheep tagging scheme that we are endangering what is left of our export market? Is money available for the establishment of the electronic cattle tagging scheme, which the minister trumpeted as a means of cutting bureaucracy, and what is the latest timetable for its establishment? Does he agree that the industry simply cannot afford the so-called modulation proposals, even at the rate at which they are set currently, never mind the rate of 20 per cent that Alasdair Morgan proposed? If the modulation proposals are implemented, does the minister agree that they must be implemented without any significant sectoral or regional disadvantage?

I could put another 100 questions to the minister, but I am sure that the chamber will be grateful that I do not have time. I conclude by repeating that, while we welcome the desire to seek a long-term solution, there is an overriding and urgent need to address the short-term situation, which cannot be resolved by more words and consultation.

I move amendment S1M-1051.1, to leave out from "the steps" to end and insert:

"steps being taken to secure a sustainable future for the agricultural industry as part of the social, economic and environmental fabric of rural Scotland; recognises agriculture as the main economic driver in rural Scotland; deplores the lack of urgency being shown by the Scottish Executive in addressing the short-term problems of Scotland's farmers, and calls for a speedy conclusion to the series of consultations on an agricultural strategy so that action can be initiated to protect the future of the farming industry."

Photo of Elaine Murray Elaine Murray Labour 4:02 pm, 29th June 2000

According to recently published figures from the Executive, 60,000 people were employed directly in agriculture in Scotland in 1998, contributing about 1.4 per cent of the Scottish gross domestic product. Unsurprisingly, given that 75 per cent of Scotland's landmass is rural, those figures are significantly higher in rural areas. Eight per cent of the work force in rural areas is employed directly in agriculture, which is the third largest source of employment after the service sector and public services. In Dumfries and Galloway, about 11 per cent of GDP relies on agriculture.

As the discussion document "A Forward Strategy for Scottish Agriculture" states, each agricultural job is reckoned to sustain another job in downstream industries, such as the production of farm machinery, animal feedstuff and so on. The food and drink sector in Scotland, which is heavily reliant on agriculture, employs another almost 60,000 people. The total number of people whose jobs are either wholly or significantly dependent on the survival of the Scottish agricultural industry is about 180,000, or nearly 8 per cent of the Scottish work force. Agriculture is clearly an important industry in Scotland, and I have no difficulty, either as a Labour politician or as an MSP for a rural constituency, in defending the need to consider the long-term interests of that important industry.

We discussed briefly the document when it was published on 6 April, but today we have an opportunity to discuss in more detail the issues that must be tackled. Like Alasdair Morgan, I was rather disappointed by the response of the NFUS at last week's conference, when there was a demand for action, not strategies. It was interesting to note that, although the press release that was put out by the NFUS contained a demand for action, there was no indication of what action should be taken.

Some of the MSPs who have joined the cross-party group on agriculture and horticulture met representatives of agriculture-related industries at the Royal Highland Show last week. I took that opportunity to ask each representative which two actions they felt would help turn round their current problems. There was only one common theme: that we should join the euro at the appropriate rate—that was quite interesting.

Each representative also suggested actions that would assist their own industries and interests, but that would not have any particular value to other sections of the industry.

Photo of Alasdair Morgan Alasdair Morgan Scottish National Party

As we are on the subject of the euro, could Dr Murray clarify whether she supports Helen Liddell's point of view or Gordon Brown's point of view on the issue?

Photo of Elaine Murray Elaine Murray Labour

I do not think that there is a difference between Helen Liddell's point of view and Gordon Brown's. The Labour party's view is that we should consider joining the euro when the conditions are right, but that the final decision will be put to the people of the United Kingdom.

One of the problems in the past has been that actions have been taken without accompanying strategy. Actions may assist with a particular problem or may help the industry to get over a crisis period, but they do not do anything to solve the underlying problems. When the discussion document was published on 6 April, the minister referred to such actions as a sticking-plaster approach, which was a rather good analogy.

That is not to say that there are not times when short-term actions and injections of cash to deal with specific problems have been required. The Downing Street summit in April, at which a £39 million support package was announced for Scottish farming, was an example.

Everybody agrees that support packages do not make the problems go away for ever. Whether or not the National Farmers Union likes the term "strategy", the actions that we take, in order to be successful, have to be set in the context of a long-term strategy that aims to consolidate the Scottish agricultural industry.

Like any other industrial sector that aims to survive, agriculture has to have a vision about its future—its strengths and weaknesses, which market it will aim for, how it supports and is supported by other indigenous industries, what new products might be developed and how it can best utilise new technologies. We may soon come across the term e-farming. We have e-everything else—why not have e-agriculture?

Like any other business, farming needs to be supported by good advice services. That means business development, financial services and, I believe, assistance with product and process development, especially if we are to raise value by developing food products rather than just selling raw materials. That is highlighted in the discussion document. I believe that SERAD and the enterprise and lifelong learning department will both have an important supportive role. We cannot expect people to develop new products or new markets in a vacuum.

I shall cut out the rest of my speech and conclude by saying that, even in my constituency, Dumfries, which is largely rural and dependent on agriculture, people sometimes ask me, "Why are you so bothered about farming anyway?" Some people still see farmers as over-subsidised and always complaining about things. It is a great pity that we have that perception of agriculture, because it is such an important industry to Scotland. I look forward to a time when everybody sees agriculture as one of our crucial industries and a successful contributor to both the local and national economies.

Photo of George Reid George Reid Scottish National Party

Speeches should now be of a maximum of four minutes.

Photo of Duncan Hamilton Duncan Hamilton Scottish National Party 4:08 pm, 29th June 2000

I welcome the debate and give credit to the Executive, at least for having the discussion in a constructive manner. In the short time of four minutes that I have been allotted, I wish to consider two issues: first, strategic direction, and secondly, currency, on which we have not had a great deal of satisfaction in this debate or previous debates.

The Executive has identified, correctly, that agriculture is about a great many more people than those who are directly involved in it; it is about rural communities. If that is recognised, I find it strange that we have reached this point in the debate with no mention of the additional costs that are imposed in rural communities through the fuel tax or other charges on rural living. Those costs have an impact on people involved in agriculture, as on everybody else who lives in rural Scotland.

Although it is good to have a conversation about this, and a consultation, I am slightly disappointed with the Executive's timidity in not being particularly bold in putting forward its strategy. It is fine to have the debate, but I want to know what the Executive thinks, and what its strategic vision for the industry might be. "A Forward Strategy for Scottish Agriculture" is full of questions and contains very few suggestions, let alone answers. The debate is meant to be about the forward strategy; I would like to know the Executive's forward strategy on consulting widely in Scotland.

Page 18 of the document says it all:

"The shape of the agriculture industry in Scotland is changing constantly as farmers respond to technological and market trends. The size of farms changes, as does the type of farming".

So far, no one could disagree. It continues:

"That will no doubt continue, but some thought may need to be given to whether certain trends should be encouraged or discouraged. By and large, the Executive is unwilling to take a view on the merits of such changes, driven as they are by decisions of individual businesses, but through its various support policies it will often have an effect on structures."

It is fair to ask the Executive to do more than that—to come off the fence and give us an idea of where it wants the debate to go. Otherwise, there is no strategy, simply an absence of leadership. I am a member of the Health and Community Care Committee, and when we ask the Minister for Health and Community Care for her opinion we can barely get her to stop talking. However, there is an uncharacteristic silence from the Executive on this matter.

Photo of Ross Finnie Ross Finnie Liberal Democrat

Is Duncan Hamilton suggesting that his preference would be for the Executive simply to state its policy—its view of the way in which Scottish agriculture should proceed—in a top-down way and not engage with the industry? That is a very old-fashioned way of dealing with things and is not the way to embrace a community in a strategy.

Photo of Duncan Hamilton Duncan Hamilton Scottish National Party

In my short parliamentary career I have been called many things, but old-fashioned has not been one of them.

The minister has missed the point entirely. I am asking for a middle ground to be reached—an idea that should appeal to him, as a Liberal. I would like the Government to produce Government proposals, Government thoughts and Government leadership—not to impose them, but to discuss them. The fact that someone could read the entire document without having the faintest clue where the minister stands on many of the important issues that he has highlighted is regrettable.

I turn briefly to the issue of currency. I thoroughly enjoyed the dexterity with which the minister picked his way through his own speech, concerning the problems of the "weak euro" and its relative position to the pound. There was no mention of the strong pound, only of the "weak euro". It is important that we have an honest debate. Even the Scottish Parliament information centre document that we have been given talks about the problems of the strong pound and finishes by saying:

"The strength of the pound has compounded agriculture's problems . . . UK adoption of the Euro would remove some of this uncertainty."

I suggest to the minister that, if we are to have an honest consultative process, we should be honest about the problems that he has identified on previous occasions, and about the unbelievable impact on exports of the strong pound, which he identified in his speech in Brussels.

Alasdair Morgan highlighted the fact that, rather than addressing that issue head on, the minister said that the responsibility lay with farmers to ensure that they moved into areas in which their farms and fortunes were less susceptible to exchange rates. It is not enough to pass the responsibility. Perhaps the idea is old-fashioned, but I thought that responsibility lay with the elected Government. I would like to hear a lot more about the Executive's strategic direction.

Photo of John Scott John Scott Conservative 4:13 pm, 29th June 2000

I begin by declaring an interest in this subject.

In writing my speech, I set out to try to be positive, but the list that I compiled of the Government's achievements and successes was much shorter than my list of the problems that are still facing agriculture. I welcome Ross Finnie's acknowledgement that Lord Sewel's review, which was carried out less than three years ago, was meaningless and valueless. That is a worthwhile admission on the minister's part.

Once again, I draw to the Executive's attention the plight of dairy farmers, especially in Ayrshire, where small farm sizes dictate that the benefits of economies of scale cannot be achieved. Despite the new generic milk advertising campaign, milk prices are at a 60-year low. Consequently, many dairy farmers are going out of business in Ayrshire—a picture that is being mirrored throughout Scotland.

The problem that is affecting all farmers at the moment is the cutting back in production.

Photo of Jamie Stone Jamie Stone Liberal Democrat

Would John Scott not agree that it was—alas for him—the previous Conservative Government that deregulated the milk industry, and that that is what produced the problems that we have today?

Photo of John Scott John Scott Conservative

I would also point out that, at that time, milk prices were at a record high and rose subsequently to a high after deregulation.

The result of the cuts in food production is that we are losing the strategic ability to produce food for ourselves, which was built up over two generations. In the mid-1980s, this country was 75 per cent self-sufficient in food. Last year, that figure fell to 68.4 per cent. That is because we have a de facto Government policy of importing food as cheaply as possible from abroad. Farmers are continually exhorted to co-operate, collaborate, diversify and become more efficient, but they must compete with their hands tied behind their backs.

In Europe, there is no hormone-treated beef. I am not saying that that is what we want, but virtually all beef in America is hormone treated. That is reckoned to put our farmers at a 10 per cent cost disadvantage in world beef production terms. In Europe, we have no milk that is produced by cattle that have been fed the milk production enhancing drug bovine somatotrophin—BST; that also puts producers at a market disadvantage in world terms. We do not use genetically modified grain and maize seeds, and my guess is that it will be a long time before Britain and Europe are prepared to use GM grain and oils in our animals' and, indeed, our own diets. That puts us at a competitive disadvantage in world terms.

The reality is that we in Scotland, the UK and Europe are handing our world food markets to America and to the Cairns group of countries, which are prepared to adopt change and lower their food production costs.

That is one side of the equation—the other is that our costs in Scotland are higher than most places in the world and agrimonetary compensation has not been paid. We have huge meat hygiene costs—the BSE taxes—which cost about £60 for every bovine animal that is sold. The cost for pigs is about £5 and for sheep it is £2. Scottish farmers also bear welfare costs and bureaucracy costs. The cost of fuel—mentioned by Duncan Hamilton—is the highest in Europe. Distances from markets in Scotland, especially in the Highlands and Islands, and all the other factors that I have mentioned combine to result in producers in Scotland having greater production costs than producers anywhere else in the world.

The effect of that—the bottom line—is that Scottish farm borrowing exceeds £1 billion, but Scottish net farm income is only £73 million. Profitability is a thing of the past for most Scottish farming businesses, the income from which does not even service their borrowing. Farmers are caught in a pincer movement of rising costs with shrinking support and an inability to compete in world markets with the prospect of enlargement of the EC.

The minister's hands are tied by the Ministry of Agriculture, Fisheries and Food and by Nick Brown's inability to lead effectively in Europe on behalf of the UK and Scotland.

I urge members to support the amendment in the name of Alex Johnstone.

Photo of John Farquhar Munro John Farquhar Munro Liberal Democrat 4:18 pm, 29th June 2000

I declare an interest as a working Wester Ross crofter. Other members will put their feet up on Saturday after surgeries in their constituencies, but—poor me—I will be outside mending the fences and trying to keep the goats out.

The minister said correctly that the Executive cannot on its own devise or implement a strategy for agriculture. He talked about the need for partnerships, the UK policy framework, European matters and world prices. All that he said was true and appropriate. He offered many warm words and good intentions, but as Rudyard Kipling said:

"Words are, of course, the most powerful drug used by mankind."

I want to look beyond the words and focus instead on some of the issues that will soon be faced by all our farming communities. There is great concern among crofters and hill farmers who rely heavily on the hill livestock compensatory allowance payments. The majority of highland farms qualify for those payments, but new European regulations demand a change in the rules on that allowance from January 2000. From that date, payments will no longer be based on livestock headage, but on the amount of land that is farmed.

A straightforward transition from head counts to land counts will result in a huge redistribution of payments from small marginal crofts to the larger estates. I understand that, under current proposals, farmers will be paid 80 per cent of their headage payments next year, 60 per cent the following year, and 40 per cent the year after that. I would be interested to know exactly what our strategy will be to protect the incomes of small crofters and farmers. If a solution is not found, I anticipate a huge exodus from our farming communities. It is not over-dramatic to say that HLCA funds are literally putting food in children's mouths.

Modulation—or top-slicing, if you will—has been mentioned, and that is another vital issue. Farmers can ill afford to have their grants cut by as much as 4 per cent, and regard modulation as daylight robbery. It is their money, so why should they lose another 4 per cent? I understand that moneys will be channelled into schemes to encourage farm diversity. That may be a noble cause, but why should the farmers suffer to pay for the scheme?

We need long-term strategies, such as the French have. In France, young people are encouraged, and financially supported, to take up farming. We also need a funded retirement scheme to make way for new blood.

I hope that the minister will address the problems of the clerical and computer systems in his department. Every week, I receive angry calls from constituents who face delays and unnecessary bureaucracy, causing needless added financial and personal strains. I am sure that other members also receive such calls. No one doubts the minister's sincerity about improving the lot of our agricultural and rural communities, but let me offer him some sound advice from the book of Ecclesiastes:

"The preacher sought to find out acceptable words: and that which was written was upright, even words of truth.

The words of the wise are as goads, and as nails fastened by the masters of assemblies".

Words are all very well, and we know that the minister's heart is in the right place, but words alone will not save our farmers from financial ruin. I look forward to seeing our farmers benefit from the substance that will emerge from the rhetoric of today's debate.

Photo of Cathy Jamieson Cathy Jamieson Labour 4:22 pm, 29th June 2000

I am not sure how to follow John Munro's speech. I should start by declaring an interest—which might surprise some members—partly because of my long involvement with the Co-operative Wholesale Society, which is one of the largest farming operations in the UK. I am also a member of T&G Scotland, which represents low-paid agricultural and horticultural workers.

I am a vegan, so I do not eat dead animals in any shape or form, but I have a son who is a committed carnivore. Indeed, he was distraught at John Scott's election to this august institution, as he feared that that would mean the demise of the Ayr farmers' market and that I would no longer be able to bring home any Ayrshire bacon for him.

On a more serious note, I generally welcome the thrust of the report, which tries to put a strategy in place and recognises that things have been difficult. Contrary to suggestions from the Conservatives, all was not well in the world before 1997. There is a long history of things that were wrong, so let us be honest about that. As for my colleagues on the SNP benches, I think that for Duncan Hamilton to suggest that Labour is coming up with lots of questions and few answers is a case of the kettle calling the pot something.

Photo of Cathy Jamieson Cathy Jamieson Labour

I will not accept an intervention at the moment, as there are a number of points that I want to make.

I want to focus on consumer concerns that have arisen about agriculture and the food industry. Some of it will make fairly interesting and thought-provoking listening for those involved. I do not profess to be an expert on the technical side of farming, but I can certainly make some points from the point of view of the consumer.

The Co-op recently surveyed 30,000 consumers, and 87 per cent of those surveyed said that they disapproved of the use of growth-promoting antibiotics and pesticides in agriculture and the food industry. Surely we can say that in this country we are proud to be producing food without the use of such products. Ninety-one per cent disapproved of GM foods and were concerned about the contamination that could arise. Eighty-two per cent were concerned about animal welfare issues and felt that animals would suffer as a result of intensive farming methods. They were especially concerned about poultry—for example, the force-feeding of geese for products such as foie gras, not that I have ever tried it. They were also concerned about the use of human sewage as fertiliser and about the possibility of animals being fed their own species, animal blood, or other animal by-products.

People I know who work in the farming industry have raised a number of other concerns. In reply, either today or at a later date, perhaps the minister could give me some indication on the current proposals for the use of organophosphates. That has been a long-term issue for members of my trade union, who were concerned when such products were used in sheep-dips and are currently concerned about plans to reintroduce them. For the information of members, the Co-op has decided that it will ban the use of lindane in any of its own-brand products. People have been concerned for many years about the possible effects of that product.

I would like the minister to make some reference to the future of the Agricultural Wages Board, which is of relevance not only to those who work directly in the farming industry, but to people in the wider horticultural sector. The board is under review. If we are working towards a strategy for the rural economy, it is vital that the working conditions of people in the industry are secured. I suggest—as do many of my trade union colleagues—that the future of the Agricultural Wages Board is one way of ensuring those conditions. I would be grateful for an indication of when a decision might be made on that.

I welcome today's report. Obviously, a lot of consultation is still required. I ask members to note the gender interest from the Labour members. There are many women here—and two men on the front bench. John Munro was perhaps suggesting that he was the only member who would be doing any work during the recess; I can assure him that most of us here may take the opportunity, as consumers, to visit a few shops and to cook some dinners.

Photo of Robin Harper Robin Harper Green 4:27 pm, 29th June 2000

I give my whole-hearted endorsement to everything that Cathy Jamieson said—it was brilliant.

When the common agricultural policy was introduced, it had two main aims: to guarantee food security for Europe and to keep small farmers on the land. Since then, we have gone into overproduction, and food security for Europe is no longer a problem. The problem for Britain—for many farmers as well as everybody else—has been in the application of the CAP, which seems to have left small farmers far worse off than they have ever been. One of the Sunday newspapers gave an example of that: in the south of England, small farmers are selling up and going to France—a country that has already been mentioned—because in France they receive far more support. As far as I know, there is no essential difference between Britain and France, except that the French take every opportunity they can to support their small farmers, whereas we do not.

Duncan Hamilton made a plea for the Executive to come off the fence. Will the Executive come off at least one fence and say whether it agrees with the original intention of the CAP? We need a clear statement of the Executive's position.

In the rest of my remarks, I will restrict myself to talking about the targets that I would like to be incorporated in any strategy. A target should be set for developing import substitution, for developing innovative marketing arrangements, and for developing local markets as much as possible.

A target should be set for reduction in herbicide, pesticide and chemical fertiliser usage. In particular, we need a target for reduction in marine pollution. The minister is aware of the concerns that are being expressed by a large number of environmental organisations about pollution resulting from salmon farming on the west coast; I am aware that at least 6,000 jobs are at stake, but we must address that issue if it is a real problem. I want to hear about it from the minister.

Farmers need encouragement and education. The Scottish Agricultural College has only a small number of staff to send out to farms, either to give normal advice or to give specialist advice—on organic conversion, for instance. There should be a target for increasing the number of people whom the SAC can spare for that important work.

The minister is aware that we are working on an organic targets bill. I would be happy to work with him to bring it together with the strategy that the Executive is producing.

I am alarmed by the criticisms of modulation that have been expressed. The arguments for addressing that issue sensibly, sensitively and positively are very strong. Modulation has been used to the advantage of farmers in other parts of Europe, so why do we see it as a threat rather than as something extremely positive? I, along with everyone else, recognise that farmers are responsible for the beauty of the Scottish landscape. Modulation would allow them to take on that responsibility in a way that would benefit them as well as our landscape.

We also need targets for agri-environment schemes of all kinds. I would like those to be incorporated in any document that is produced. As Duncan Hamilton said, the Executive must come off the fence; we must have a document that contains realistic targets that people can understand.

Photo of Fergus Ewing Fergus Ewing Scottish National Party 4:32 pm, 29th June 2000

Ten days ago, with two other members who are here today, I attended an NFU panel debate in Inverness at which many hill farmers were present. As members appreciate and as the minister understands, the average income of hill farmers is around £1,750 a year, which is impossible to cope with. In this debate, perhaps for the first time, there is a growing sense among all members of the crisis that faces the farming community.

I would like to mention two matters of considerable importance. The first concerns the future of Claymore Dairies in Nairn. I imagine that the minister is aware of the background to the referral to the Office of Fair Trading last year, which led to a further referral to the Competition Commission. I hope that the minister is aware of the statement of potential remedies that was made just yesterday by Denise Kingswell of the Competition Commission. It indicated that Robert Wiseman and Sons dairies may be forced to sell off its milk-processing plants in Scotland and may be stopped from hiking its milk prices for three years. I take care to point out that that was merely a statement of potential remedies, rather than a finding in the case, and that no decision or report will be made until November.

I raise this issue because concern in the Highlands about the future of the creamery is extreme. I hope that the minister will be aware of the very serious allegations that are circulating in the farming community in the Highlands concerning practices pursued by Robert Wiseman. I hope that he will agree that this is a matter in which the Executive must intervene now. I say that having chosen my words carefully.

The second issue that I would like to raise was touched on by Alex Fergusson. It concerns the treatment of farmers who make mistakes when completing their forms under the integrated administration and control system. As I have said before, I believe that the approach the Scottish Executive has taken for a number of years is unnecessarily harsh. There occasionally appears to be undue zeal in the enforcement of penalties when they need not be imposed.

The effect of imposing a penalty is, in many cases, the confiscation of the whole year's income. It is possible under particular schemes—whether the beef suckler cow premium scheme, or whichever particular scheme the farmer applies for—to lose the whole year's income from making a simple mistake. In one case, the penalty was over £10,000. As a solicitor, I occasionally appeared in court representing clients accused of crimes. Somebody would have had to have committed a particularly heinous crime to be fined £10,000. I raise this question—not for the first time in this Parliament—in the hope that there will be a rethink.

Having studied the relevant Commission regulation at great length, it is my view that the rules do not require the imposition of penalties. There is a series of guidelines, of which the minister is aware, headed "Obvious errors in aid applications submitted under the integrated system". The minister will be aware that when the member state is convinced that the farmer acted in good faith—that there was no risk of fraud—and that the mistake was made innocently, there is no need to impose penalties.

I think that the rules are being interpreted in an unduly harsh way. In some of the individual cases that I have dealt with, it seems that the Scottish Executive's approach is to cast the blame on Europe and to imply—quite wrongly—that there is no discretion to the rural affairs department, to the Scottish Executive or to the Scottish agricultural officers at the top of the civil service. Quite plainly there is a discretion, and it should be exercised in many more cases. I urge the minister to rethink this extremely important issue.

Photo of Euan Robson Euan Robson Liberal Democrat 4:37 pm, 29th June 2000

I welcome both the statement and the discussion document, which is clear and succinct and addresses the problems. We must move quickly, because the collapse in farm incomes is having a detrimental effect throughout local economies such as that in the Scottish Borders. There, agriculture's direct contribution—as the minister said—is 12 per cent of gross domestic product, but many other businesses are suffering because of the lack of purchasing power in the farming community.

Three issues are frequently raised by my constituents. The first is, of course, the differential between the pound and the euro and the lack of competitiveness resulting from that. Furthermore, time after time I get complaints about the differences in implementation of animal welfare and hygiene standards across the EU. It is time we insisted that other countries applied the same standards as we apply.

I also hear complaints about modulation and how farmers are to take advantage of it. We need to embark on an education process to assist every farmer to have a plan ready to take advantage of modulation. The minister can assist with that by advising the parameters and the types of criteria that farmers could adopt. There is work to be done there.

I welcome all the initiatives in annexe C of the discussion document. They are correct and move in the right direction. I agree with what Alex Fergusson and Fergus Ewing said about IACS forms—although not quite with Alex Fergusson's strength of feeling. Ministry officials should assist the farmer, not put roadblocks in front of the farmer. It is high time we got rid of some of the disproportionate penalties that Fergus Ewing mentioned. We must ensure greater flexibility.

My final point is that the way forward for the industry is for farmers to move en masse into distribution and retail businesses. I heard of a good example in my constituency in Berwickshire the other day. Eyemouth Freezers Ltd is freezing the vegetables produced by Borders Produce Ltd, a ring of 40 farmers. That is great, because the farmers control the economic process apart from one stage; they have not yet moved into retailing the peas and other vegetables they are producing and freezing. That is the way forward.

For too long, farmers have decided that they can leave their produce at the farm gate for somebody else to deal with. It is now time for farmers to go further down the distribution chain so that they get economically active in distribution and retail and therefore get the rewards from each part of the chain that goes from production to consumer purchase. That is the way forward for many organisations. I know that it is being developed in several parts of the country. If we can facilitate that we can assist farmers in obtaining a better income, because that is what is really required.

Photo of Patricia Ferguson Patricia Ferguson Labour

We now move to the closing speeches. I call Rhoda Grant to speak for the Labour party. You have four minutes.

Photo of Rhoda Grant Rhoda Grant Labour 4:41 pm, 29th June 2000

It has been good to debate the way forward for agriculture, but I am a little disappointed that some members have wasted the opportunity. We are all aware of the problems that the sector has faced for the past few years. The Rural Affairs Committee spent the first few months in this Parliament dealing with various crises. We appeared to spend all our time fire fighting. That was also true for the chamber. That is why the Labour party welcomes this consultation.

I agree with Alasdair Morgan and Elaine Murray, who said that for too long we have been involved in crisis management and have never looked forward for a future strategy. A strategy should have been looked for a long time ago. We need to put priorities in place now—priorities that will protect the farming industry, not just the status quo. We need to have an industry that will provide us with competitive produce for this century. To do that, we have to learn from experience. We have to look at other countries and their farming industries and to learn from our own success stories.

Cathy Jamieson again gave her support to the Agricultural Wages Board. The Labour party—the party that introduced the national minimum wage—also supports the retention of the Agricultural Wages Board. Over the years, it has protected the terms and conditions of agricultural workers. We need to sustain agriculture for owners and employees.

I was particularly pleased to read in yesterday's The Herald that the demand for crofts is outstripping availability. There is much to be learned from crofting. Outside the crofting counties, agriculture policy has done nothing to keep people on the land. Much of the best farming land in Scotland has been used to form large farms, which has pushed people off the land in much of rural Scotland. As Robin Harper said, the distribution of CAP funding does nothing to discourage that. In my view, it encourages it, because there is no capping on the amount that one person can claim, therefore the bigger the farm, the more is gained. That encourages landowners not to rent small farms, but to form large concerns.

We should look at the example of France. It has succeeded in keeping people in rural areas and has a buoyant farming sector. Agriculture and the availability of land keeps people in rural areas. If there are no opportunities, they must move away, which means that the rural economy suffers. Crofting has stopped that happening in most of the fragile areas of Scotland. We must see whether we can use good practice in other areas.

Agriculture must also change to meet the needs of the consumer. There is no point in producing something that nobody wants to buy. Cathy Jamieson mentioned some of the concerns of consumers; they must be taken on board. By processing produce locally, we can meet those needs, selling it in a form that appeals to consumers, which will lead to an increase in our market.

Photo of Jamie McGrigor Jamie McGrigor Conservative

On local markets, does Rhoda Grant agree that a lot of hill farms produce store lambs and store cattle, which are not finished products? That is an argument against organic production, because unless one can find certified organic farms to buy them, they might as well not be organic in the first place. What would she do about stock sold as stores? How would she get it into the food chain?

Photo of Rhoda Grant Rhoda Grant Labour

I agree that there are huge problems, but I do not agree that in the 21 st century it is beyond our wit to find solutions. That is why we need the consultation process to look at how we can finish products locally and sell them locally. That would add value, provide jobs in rural areas and maximise the sale of produce from farms.

We must consider all those objectives, to create an industry for the 21st century. The Labour party supports the strategy to address the long-term needs of the industry.

Photo of Alex Johnstone Alex Johnstone Conservative 4:45 pm, 29th June 2000

In declaring an interest, I would also like to make a small apology to the minister. If I sound negative during my speech, it is largely because, as a farmer, I like to have a good moan sometimes.

However, I begin by being positive and declaring my support for the document. I took the opportunity to welcome it during the discussion after Mr Finnie introduced it to Parliament and I continue to welcome it today. However, I wish to explain my concerns about the broad strategy it introduces. First, I am slightly concerned about its title. It is not so much a forward strategy for Scottish agriculture as a search for a forward strategy. At the same time, it is not so much a discussion document as a questionnaire. If we look through it, that is what it is full of: questions.

I am concerned that the document led to criticism from the National Farmers Union this week. A press release from the NFU says:

"We continue to seek fair competition but so far neither 3 years of a new Westminster administration or 1 year of a Scottish Parliament have actually tackled these tough issues head on."

I made a public statement about how that criticism was addressed. My concern is that the NFU chose to criticise the Scottish Parliament. I would far rather it had criticised the Scottish Executive. The concerns of the NFU appear to have brought disrepute on the whole Parliament rather than on those whom I may choose, for political reasons, to blame for the problems farmers face. There has been consultation after consultation. I can understand the disappointment that the NFU chose to express.

I wish to highlight the problem we face with the hill livestock compensatory allowance—John Munro and one or two others have mentioned it. I am sure that the suggestion that we change from a headage-based system to an area-based one has sound reasons in the structures of Europe, but the damage that it may have on the structure of the farming industry in Scotland is quite extraordinary.

I live in the margin between the Lowlands and the Highlands. While I, as a dairy farmer, am not affected by the HLCA, many of my neighbours are. They tend to be smaller farmers who, although they farm marginal land, farm it intensively. They have come to depend on support, not least the HLCA.

There are, I believe, a large number of farmers who are in a critical position. If the change is carried out in such a way that a headage payment becomes an area payment, a huge number of marginal farmers in Scotland will find themselves in an impossible economic position almost overnight. That is why I urge the minister to take the opportunity to reinforce further the view that I know he has expressed, in conjunction with others in the Parliament, that that change cannot be carried out overnight.

In supporting the principle that lies behind the document, I can assure the minister that not only will the Conservative group support the Conservative amendment today, but we will support the minister's motion, when that opportunity comes along.

I am mildly concerned about the nature of the Scottish National Party's amendment. The principles that lie behind the problems of Scottish agriculture require a degree of unity. I am particularly disappointed to find that the SNP's amendment contains, once again, the independence clause. It would have been a great pleasure for the Conservative group—and for me—to be able to vote for the SNP's amendment, but it is disappointing to discover that by supporting it we would be supporting independence.

In the interests of the farming industry, I invite the SNP to take the opportunity to decide not to put in such a clause next time and to show the farmers of Scotland a united Scottish Parliament whose members are willing to work together to fulfil farmers' desires—and their interests in the longer term—without allowing simple party politics to get in the way.

Photo of Irene McGugan Irene McGugan Scottish National Party 4:50 pm, 29th June 2000

As the Minister for Rural Affairs is aware, the Rural Affairs Committee is concluding an inquiry into changing employment patterns in rural areas. Our findings are fairly similar to those of other studies of the current economic structure of rural areas: not only is there an overall decline in the amount of labour employed in agriculture, but there is a shift from full-time often hired workers to part-time often family workers.

The low level of hired workers and the structural changes suggest that agriculture will never again represent the economic mainstay of rural areas. Indeed, it is no longer the economic mainstay of farming households, because in more than a third of families farming income is less than a half of the total household income.

In a recent survey, Scottish Enterprise Grampian concluded that reorienting the rural work force to be forward facing will require substantial reskilling. I want to draw the Executive's attention to an area where intervention could have a very positive impact. Objective 4 funding provides for subsidised training and applies to almost all of Scotland. The present scheme ends tomorrow and the new scheme, objective 3, should have taken over immediately but will not now be commissioned until December at the earliest, leaving a funding gap.

For the next six months, no trainees will benefit and there will be no subsidised training for farmers who are trying to improve their business performance. With the financial difficulties they face, they need the 45 per cent subsidy that the European funding provides. A further difficulty is that although there is bridging funding, only the voluntary sector is eligible for it, so the Scottish Agricultural College, the most significant training provider to agriculture, in common with all other colleges, is not eligible. The minister will know that when they are in crisis, farmers cut out what is seen as non-essential—such as training. This is the wrong time to do that.

I strongly urge the Executive to make appropriate representation so that the funding can be extended until the new arrangements are in place. That would have no cost implications for the Executive but it would keep options open for farmers who want to reskill, diversify or just operate more efficiently.

Farmers are food producers, but we all know who makes the profit on food sales. In the food supply chain, the agriculture sector receives only a fraction of the return received by supermarkets. The Executive's discussion document accepts that there will be

"a continuation of the squeeze on producers' margins".

Some farmers are beginning to see advantages in shortening the supply chain, for example through farmers markets, which have been mentioned as an opportunity to sell direct. In Perth and Forfar, they attract a loyal following. The markets show that there is a need for greater product variety and some farmers are now trying to expand their range. That ties to remarks made by the communications director of Safeway Stores last week at the launch of the strategy document. He said that while, in addition to meat, they sell £35 million-worth of Scottish products, that is from a very narrow base. He said that the main potential for growth was in convenience foods, which allows producers to capitalise on the added value.

It is very difficult to promote innovation and investment in the current economic situation. Does the Executive plan to help Scottish farmers participate fully in that sector? The document says that there is not much of a tradition of Scottish consumers buying local produce. The problem is that it is difficult to find or identify local produce. In some supermarkets it is difficult to find any Scottish produce. Supermarkets must be encouraged to be less rigid about buying policy and to negotiate with local producers.

Likewise, there are niche markets that command a premium. The best current example is the organic market. Sales of organic foods rose by 140 per cent in 1999 but 80 per cent of the produce was imported—a missed opportunity for farmers. Since the sales of organic produce are set to increase, the Executive must continue to support farmers who want to convert to organic farming.

Concern has been expressed that the standards for certification applied in some overseas countries fall short of those applied here. Unless we want to perpetuate the unlevel playing field in yet another sector, I suggest that that issue be addressed soon.

A survey earlier this year by Lloyds TSB established that 67 per cent of respondents considered that substantial reform of the CAP was necessary for the long-term future of Scottish agriculture. It is vital that there is a strong voice negotiating on Scotland's behalf. I urge the minister: please do not let Scottish farmers down.

Photo of Ross Finnie Ross Finnie Liberal Democrat 4:55 pm, 29th June 2000

I thank Alasdair Morgan for his typically thoughtful and constructive speech. It is a hallmark of this Parliament and helps enormously on matters on which we seek to find a long-term solution and promote a serious debate on a serious subject that although he indicated several areas of disagreement he set a helpful tone for this debate. I hope that that will continue to mark the way in which we discuss the important matter of Scottish agriculture.

Alasdair Morgan pointed out—I obviously do not agree with everything he said and will reject the SNP's amendment—that the European dimension is important. I do not believe that we are necessarily suffering from the fact that the United Kingdom operates with a single voice. Whether we have a reformation of the sheep regime has been discussed recently and we have made it clear that this is the wrong time to be moving in that direction. I am satisfied that my colleagues elsewhere share that view.

Alasdair Morgan mentioned the World Trade Organisation and the pressures that it will create. In our exchange, I think we agreed that it is important for us in Scotland to argue in Europe so that we are able to ensure a continuing high level of support, especially within green box measures—specifically the rural development regulation which, if it is to be developed into the second pillar of CAP reform, could be important to us here in Scotland.

To articulate which matters we want to pursue and which longer-term policies we wish to engage with other regions and nations in Europe to develop, it is important that I, the Executive and the Parliament are much clearer about what we want for our Scottish agriculture policy. That is why I wanted to open up this process.

I must tell Duncan Hamilton that this is a complex area. I was unhappy about indulging in an exercise as a result of which I might be misconstrued as suggesting that there might have to be some adjustment in social, economic and environmental terms to sheep farmers in hill areas without hearing their views on how they saw their future. I was unhappy to pursue a policy in some rural areas of Scotland where they can clearly no longer compete on proper terms with world commodity prices, but where they can continue to have specialities in their own areas. Yes, I will have to come off the fence, but the correct way of starting seemed to be to assess the situation in conjunction with the industry and to consult experts. I will have to come off the fence and people will either agree or disagree. I will have to promote the strategy. The correct process is to engage with the industry first.

Photo of Patricia Ferguson Patricia Ferguson Labour

Before the minister continues, I ask members to keep the noise level down so that they can hear his speech.

Photo of Ross Finnie Ross Finnie Liberal Democrat

As for Alex Fergusson's comments, it is not enough to say that there are a few short-term problems and that, generally, the Conservatives welcome this. He mentioned red tape, as did Fergus Ewing and others. I do not want to get into legalistic debate with Fergus Ewing, but I do not share his interpretation that we are misreading and misapplying European regulations.

I am deeply concerned—I have made this clear publicly before—that our staff in the Scottish Executive rural affairs department have, with the increasing burden of regulation, progressively become more policemen than genuine assisters to the industry. I have made it clear—and they have accepted—that this is not the position that they wish to be in. In discussions in the European Commission, there are clear efforts to change the regulations so that the disproportionality of current penalties will be changed. That would be the biggest single change that could help.

Members should read the conclusions of the red tape review that was conducted by the industry. The industry group that took evidence to find out whether regulations were being disproportionately applied in many areas found that that was not the case. Sheep-tagging proposals will be announced shortly. They will comply with all the requirements of European regulations. We are going ahead with measures to promote the use of electronic data and absorb technology into the industry.

The one area of contention that surprised me was modulation. It is a question not of taking subsidy from the farming industry as a whole but of using an instrument within European regulations to direct subsidy toward areas that might assist the industry in restructuring. Given the fact that the Treasury is going to match pound for pound the amount that is modulated, John Farquhar Munro should be aware that it is not a question of taking money away. Not even Ecclesiastes would allow me to do that; I have to stick by Zechariah, because I am the shepherd looking after the flock. I can tell members that that took a bit of research—in the inner and deeper recesses of my mind.

These are serious issues. I tell members who asked about the Agricultural Wages Board and others who are concerned about it that we have completed our consultation, but an independent social impact study is also being carried out. It seems appropriate to wait for the outcomes of the consultation and the study. I expect the study to end in July, so my announcement is reasonably imminent.

I will briefly address the matter of the euro. I do not want to get into an argument about strong and weak currencies—I think that we use those words a bit glibly. I am fairly clear that it is the case that the euro is weak, but if Duncan Hamilton tracked movement between the pound and the dollar and considered dollar-denominated business, he would realise that the pound is not exhibiting particular strength. I am interested that he would wish to perpetuate a situation that is deeply damaging to our industry. I make no attempt to hide the fact that the present euro situation is causing deep damage, although I think that he would accept that there is not a chance that we would enter the euro at the current exchange rate.

It is important for the future of agriculture that there is a serious recognition of how we would enter the euro.

I was puzzled by John Scott's speech. I was not entirely sure why accepting hormone beef, introducing bovine somatotrophin and having a general relaxation on GM produce would be greatly helpful to Scottish agriculture, but no doubt some in the chamber understood. We are certainly not driven by the Ministry of Agriculture, Fisheries and Food.

I continue to recognise that less favoured areas are a key issue, but it is not just a question of less favoured areas.

Photo of Ross Finnie Ross Finnie Liberal Democrat

No, I want to make my point about LFAs.

We must also understand the economic structure of LFAs. Members representing remote Highland constituencies will be aware of the enormous difficulties that prevent farming there from making a full economic return. The strategy must address how we get the balance right between economic activity, environmental activity and the social cohesion that agriculture brings to remote Highland communities.

I will deal with some of the points that Robin Harper made. Of course it is important to have regard to environmental considerations. In my opening speech, when I talked about the four pillars that had to be considered, I made it clear that environmental considerations are at the heart of things. I welcome his support for the proper use of modulation.

This is the beginning of short sharp process. The issues are complex and enormous and go right across the food chain. We have to consider those in LFAs and those who may find it difficult to make any economic return. We have to examine the areas of Scottish agriculture that can and should make a return and ensure that our strategy best fits them. We also have to understand better the impact on the other end of the food chain.

Also, while I warmly support the introduction and creation of farmers markets, we must recognise that in a country that produces four times the sheepmeat it requires, such markets will not be the answer to all our needs. We must also examine mechanisms to deal on a much wider scale, which we desperately need.

As I have said, I do not want the consultation process to be a talking shop that goes on and on ad infinitum and ad nauseam; I want to bring the process to a swift conclusion. I want all members to put their points for the medium and longer term. I take many of the points about immediate issues, but they, frankly, are being addressed. What we need is a longer-term strategy to allow us to fashion our policies more adequately to represent the needs of the farming community in Scotland.

I am absolutely determined that the general drift out of agriculture, which demeans the importance of agriculture to Scotland, should come to an end, but I will be able to ensure that only by fashioning policies that fit within a strategy and framework that more properly represents the needs and aspirations of Scottish agriculture, whose importance to Scotland's rural community must be recognised and sustained.