HC Deb 19 April 1973 vol 855 cc694-708

1.15 p.m.

Mr. Gavin Strang (Edinburgh, East)

Although we have had no official statement from the Government in the House, we understand from Press reports that the meeting of the Council of Ministers on agricultural matters was unable to reach agreement and that there will be a further last-ditch effort to reach agreement the weekend after next. A great deal of the publicity surrounding these meetings has related to the prices issue and the pressure on the British Government to minimise the increases in the prices of agricultural products to be agreed at that meeting. However, it remains clear that for the long-term interests of this country and its agriculture, the EEC draft directive on hill farming, which is also on the agenda for that meeting, is far and away the more important issue.

There is no doubt that if that directive comes into force it will make the most important change in agricultural policy affecting hill farmers since the Agriculture Acts of 1946 and 1947. As it stands, certain parts of the directive are causing the industry concern. My purpose in this debate is to focus attention on those parts which may be of disadvantage to the industry and to try to ensure that the British Government reach the right decisions in Brussels.

Before dealing with the detail of the matter, I say at the outset that I believe that Britain should give the directive a cautious welcome. There is no doubt in my mind—I have always believed this— that the common agricultural policy is totally misguided. It was a bad policy for the Six. It was far too costly, and it was not in the long-term interests of producers within the Common Market. But, if it was bad for them, it is a dead loss for Britain. We have artificially jacked up high prices for the consumer at a time when the nation has to bear a huge cost, with very little back in return from the agriculture fund. It is on the issue of the common agricultural policy that the Labour Party is committed to renegotiate terms when and if we return to power after the next election.

I believe that we should welcome the directive, however, because it offers a way in which we can mitigate the two particularly undesirable effects of the CAP for the British public, namely, the high prices and the disproportionately high net cost to Britain. We shall be able to contain end prices only if we can provide producers with some other form of income support. If we can provide them with direct payments which are similar to the production grants which now exist in this country, that may be the answer. I welcome the directive because it provides one way—it is not sufficient, but it is a step forward—in which we can help to provide money directly for the producer and thus take the pressure off the end price. In that way, perhaps, in the long term EEC prices will come into line with normal world prices.

We should support the directive provided certain conditions are fulfilled, because we then stand to get a decent return for the British producer. In other words, British farmers will obtain significant help from this directive which is more than can be said for some of the other forms of assistance which are available under the CAP. Not only do I think it should be welcomed by Britain as a whole; I think that it should be given a cautious welcome by the industry. I say that because we have always been worried about the EEC obsession with free competition and its possible implications for our production grants. Here, at least, is one area in which the Community accepts the principle of production grants, where it is codifying within a directive the right to make payments of the kind that we now present to our hill producers.

The industry should also welcome the directive because it recognises the need for special assistance to hill farming areas. It goes a long way towards meeting the assurances that we were given by Ministers at the conclusion of the negotiations—that is, assuming the right decisions are taken under the directive. The industry should also welcome the directive because the principle of relating compensatory payments to production has been accepted.

There was a great deal of talk about simply providing direct income payments to farmers along the lines of social security, which I would have found totally unacceptable. I think that the industry would also have found it unacceptable. It would have been difficult to justify to the electorate and it would have been highly vulnerable in the years ahead. It would also have been distasteful for hill producers to get something akin to social security. I welcome the fact that the principle of headage payments has been accepted.

There is, of course, no doubt about the importance of the directive. It will replace the bulk of the subsidies to our hill farmers—the hill cow subsidy, the hill sheep subsidy and the winter keep subsidy—which will all be incorporated within incentives which can be provided under the directive. More important, it will provide a framework for future assistance within the Community for aid to hill and marginal farming areas. We are laying down here the conditions which will govern all future incentives and subsidies to hill farmers.

I need not stress to the Minister the importance of the hill farming sector to the agricultural economy because he is a hill farmer. About one-third of the agricultural acreage of the United Kingdom is hill farming. In Scotland it represents about four-fifths. There are about 22,000 units in England and Wales, 25,000 in Scotland and 10,000 in Northern Ireland. So we are talking about a very important group of people, a very important part of our agricultural industry.

The directive is a substantial document and I shall not be able to go into detail as I would like in the time allotted. I should like to place on record my thanks to those people who have discussed the matter with me, the Scottish National Farmers' Union, the National Farmers' Union in England and Wales, and the Highlands and Islands Development Board. I am grateful for the help I have received from them on this important issue. Because I cannot cover as much of the detail as I should like to cover, I want to concentrate on three areas which I think are crucial and where it is important that the Government take the right decisions.

The first and by far the most important question concerns which farming areas in this country will be covered by the directive. It concerns which areas will be defined as the poorer hill farming areas. The criteria for these areas are laid down in Articles 3 and 4 of the directive. There are basically two types of area. There is the poor farming area in mountainous country and the poor farming area threatened with depopulation. I would assume, and I hope that the Minister can give me an assurance on this, that the rate of grant will be the same for both.

It is absolutely imperative that there is a liberal interpretation of Article 4. Article 3, which refers to mountainous areas, is, of course, no use to us and I find it somewhat disturbing that the French should be pressing to confine assistance to mountainous areas. That would be disastrous and, as the Minister knows, it is just not on.

I was interested to note that John Cherrington, writing in the Financial Times this mornng, said that if that were to happen the directive would be "completely valueless" for Britain. Article 4 refers to the depopulation criterion. The infrastructure criterion will present no problems overall for British farming and nor will the income requirement as long as it is defined sensibly. However, there is one point to be raised here. The depopulation refers to the overall population in the area and not to the farming population. This must be watched because there are some poor farming areas where non-farming folk are moving in possibly because the areas are desirable to live in. People have been moving into houses there and commuting into town. Possibly there are developments associated with North Sea oil or possibly there are holiday homes. There are other examples, so we have to be absolutely sure that we do not lose out because of this.

I should like to think that there is no need to go into great detail on the criteria in Article 4 because the Minister will get an agreement which makes sure that the directive covers all our hill farming areas and a reasonable part, perhaps not all, of what we describe as our marginal farming areas. There can be no compromise on the areas which at present receive the hill cow and hill sheep subsidies. It would be totally unacceptable if some of the areas which at present receive these subsidies failed to qualify under this directive. I know that the Minister does not like to talk about using vetoes but he must realise that there can be no sell-out here.

I would assume that there is to be no problem and that national governments will retain a fair degree of flexibility. They are putting up a lot of money and I hope therefore that we shall get a sensible solution. This is the one crunch issue above all others where the Minister must not let us down.

The second issue relates to the various forms of assistance available to hill and poorer farms under the directive. The assistance comes under three headings. First, there are the compensation grants, which are really the headage payments, the replacement of our hill cow and sheep subsidies. Next there are the incentives for farms suitable for development. This category refers largely to another directive relating to poorer farms that qualify for development plan grants. The third category is simply a fairly miscellaneous list of other measures aimed at assisting farms in the hill areas.

The compensation grants are far and away the most important. The bulk of the money will be spent on them, and it is from them that the producers will receive the bulk of their assistance. The minimum and maximum rates laid down in the directive are not unreasonable. For two-year cattle the minimum will be £9.24 and the maximum £23.10. For one-year to two-year cattle the respective figures are £6.47 and £16.17; for three-month to 12-month cattle, £3.70 and £9.25; and for sheep and goats, £1.39 and £3.47.

Compared with our present grants for the winter keep, those rates are proportionately more generous to the sheep than the cattle. I am not too disturbed about that, because we are expecting a beef incentive scheme, and it is the really poor farming areas that have the sheep. They cannot keep cattle on some of our poorest farms.

Dairy cows are excluded. That exclusion is potentially a little controversial, but I would admit that there is a strong case for excluding them, although I know that not all farmers, particularly in Wales, will agree.

The issue I particularly want to deal with is the limits on the grants to farmers. The maximum proposed per livestock unit is £23.10, which is not too bad. What bothers me is the maximum in Article 8, which says that: Compensation may not exceed 50 units of account per livestock unit and the total amount thereof may not exceed 50 units of account per hectare of fodder crop area per farm. That means that a farmer will not be able to receive more than £9.35 per acre of fodder crop area. It depends on the definition of "fodder crop area". The Scottish National Farmers Union has been told that the phrase means—here I quote from its Stop Press statement issued with the March issue of the Farming Leader— the whole area of land used for grazing the stock, including the open hill", and the union commented that this makes the acreage limit more tolerable". I do not say that it is necessarily fair, but first we must ensure that it is that acreage that we are talking about. To me, the phrase "fodder crop area" means what the Minister and I would call in-bye land, but I understand that for the purposes of the directive we are talking about the whole grazing area. I presume that that is right, and that the Scottish NFU has understood the position correctly.

Even if the Scottish NFU has got it right, the matter is still a cause for concern, because in places such as Orkney there are a number of fairly intensive, fairly small farms, particularly cattle farms, which will be penalised by this upper limit. Therefore, the Minister should try to ensure that a change is made. We want a more flexible acreage limit on the compensatory grants.

I want to say something briefly about the limit to aid to farms that are not poorer farms. Article 12 talks simply about the total maximum per farm being about £3,500. That is potentially a little worrying, because we are referring to the better farms, and there is a limit to any capital grant of 50 per cent. of the relevant investment, which I think we might do without. However, I should not go to the stake on that.

The third important issue is the special position of crofters. The crofting communities in Scotland have a special scheme of assistance which is more generous than the general hill farming scheme. As the directive stands, it is a matter of concern to the crofters. First, there is the statement that the percentage income from non-agricultural activities must not exceed 50 per cent. In the general development plan directive the limit is 20 per cent., but here it is increased to 50 per cent. By definition, crofters are part-time, and very often their other incomes exceed 50 per cent.

Secondly, there is the limit of 50 per cent, in capital grants. The bulk of capital grants that crofters now reecive represents more than 50 per cent. of the total investment. There is a limit on total assistance which I believe includes non-agricultural developments of about £4,500, and when we consider tourist developments that could also be a matter of concern.

There are two real problems for the crofters. The first is that they obtain higher agricultural grants now, which are more than 50 per cent., and that seems to be incompatible with the directive. Secondly, because crofters receive and rightly receive—and should receive more —non-agricultural grants, grants to help tourism and craft industries, these grants should not be restricted by the directive. I see no alternative but to make crofters a special case, as they are now. I trust that that is the line the Minister is adopting in Brussels. It is reasonable that we should obtain that.

Decisions on the directive are to come in about 10 days' time. Therefore, this has been an opportune moment for the debate. The right decisions must be made in Brussels. I hope that the debate will help to stiffen the Government's resolve in the matter. I realise that from the Government's point of view this is rather a delicate time to say much about the bargaining taking place in the Council of Ministers. I know that the Minister will feel that he cannot comment on the attitudes adopted by others, such as the French.

I have referred to three specific issues, of which I have given the Minister advance notice, issues of great importance to the industry. It is reasonable to expect the Minister to give us fairly definitive statements of the Government's position on them.

1.40 p.m.

Mr. James Molyneanx (Antrim, South)

On behalf of the farming community in Northern Ireland, I support and endorse what the hon. Member for Edinburgh, East (Mr. Strang) said. I take the liberty of congratulating him on the timely emphasis which he has placed on the matter, coming, as it does, before a decision on the directive.

Like the Lowlands of Scotland, Northern Ireland has a great deal of marginal land, particularly in the western counties of the Province—for example, Londonderry, Tyrone and Fermanagh. That land amounts, as the hon. Gentleman said, to about 10,000 acres.

A great deal of the livestock-rearing land in Northern Ireland has not qualified for hill subsidies because it is not in the hills. The disability of these areas was recognised during and after the last war in the form of special grants for marginal land. Those grants were discontinued during the 1950s. The various schemes which replaced them were designed to provide an incentive to livestock rearers in those areas.

The production of store cattle and sheep in the hills and in marginal land must be maintained to supply those who finish the stock in the better land. Because of the increased demand for meat and the reduction in the supply, for example from the South of Ireland, those most concerned with the problem in Northern Ireland are very anxious to see that the directive should be left wherever possible in its present form, but with a widening of the definition of marginal land for grant aid purposes.

1.42 p.m.

Mr. John E. B. Hill (Norfolk, South)

I did not wish to take up any time in this debate. However, having heard the hon. Member for Edinburgh, East (Mr. Strang) and having been present while the draft directive was discussed by the European Agricultural Committee, I must tell the hon. Gentleman that nearly all the points which he made were argued by the British representatives on the European Agricultural Committee.

The directive may be widened a bit if the suggested amendments which were put forward by the European Parliament are accepted by the Council of Ministers. That might meet some of the points which the hon. Gentleman raised.

Does the hon. Gentleman realise—we did not originally—that this directive needs to be read in conjunction with the earlier directive last year providing for development plans for those farms that can be viable as farms? In that case a great deal more aid is available.

1.44 p.m.

The Minister of State for Agriculture, Fisheries and Food (Mr. Anthony Stodart)

The hon. Member for Edinburgh, East (Mr. Strang) has chosen to raise a highly important and an extremely topical subject. I am genuinely grateful to him for having done so, even if it has meant that he and I will not get home quite as early as otherwise we might. During his thoroughly helpful speech I was not sure whether the area from which the hon. Gentleman stems is a livestock rearing area. One fact which he did not get wrong was to describe me as a hill farmer. Let me tell him the sad tale that my farm is the last farm before the livestock rearing areas begin. However, it is a subject which, I assure him, has always been close to my heart.

The United Kingdom has a large area of hill land, and farming in those areas has an essential part to play not only as the source of cattle, sheep and wool but as the mainstay of social life of these areas. According to my figures, one-third of the whole of the United Kingdom is hill, and three-quarters of that area is in Scotland. The hon. Gentleman said that the proportion was four-fifths.

One of the factors which contribute to the natural beauty of hill areas is hill farming. I have heard people say that it might be more economic not to breed cattle in the hills but to breed them down on the low ground. That, to my mind, would be the wrong use of land. A stream of stock flows from the reservoir of breeding land up in the high ground.

This is a topical subject, because the Council of Ministers now has the proposed directive under consideration. It will be returning to the subject in about 10 days' time. I should prefer not to comment on some of the attitudes that have been struck by other countries interested in the matter. It is a matter on which we have expressed strong views. In the course of the next quarter of an hour I hope to convince the hon. Gentleman that we shall maintain that position. As the draft directive is still under consideration my remarks must be more in the nature of a running commentary than a final statement.

The Commission put forward the draft directive earlier this year. Discussions in the Council of Ministers have shown that there are many points on which the various member countries have different views. But there is general agreement on the desirability of some Community framework for special aids to areas of special difficulty. At the next meeting of the Council of Ministers we hope to reach agreement on certain basic proposals which will facilitate subsequent agreement on the text of the directive itself, although the text might well include various modifications of the original draft.

As regards the effect of the draft directive on British agriculture if it were adopted in its present form, I start by saying that in many ways the draft endorses our present policies. Its provisions would, we believe, be broadly adequate to enable all our hill areas to qualify for these special aids. It proposes that special aids could include headage payments on cattle and sheep, which we already give in the hill cow and hill sheep subsidies. It also proposes that there should be special assistance for capital investment in mountain and what I call "difficult" areas. So the Commission's proposals would not involve any major change in our agricultural policies for the hills and uplands.

The draft directive proposes two main types of area for assistance. The hon. Gentleman is right; the rate of grant would be the same. Both would be characterised by relatively low agricultural incomes. There would be mountain areas, defined by steep slopes and a short growing season That takes me back about 10 years to the days in which similar criteria were used for the grading of farms in Scotland. There would be other farming areas, not necessarily mountainous but threatened with depopulation. These areas would be defined by poor land, a low or declining population, and a dependence on agriculture.

Finally, there would be provision for special aids to be given to some small areas with low incomes, which might not have poor land and sparse populations but where farming should be continued to protect the countryside, preserve the tourist potential or protect the coastline. These small areas could not exceed 2½ per cent. of the total area of the member State concerned. In our case that would mean about 400,000 acres.

It would be for member States in the first instance to put forward to the Commission their proposed list of areas to be assisted. The Commission would then submit proposals to the Council of Ministers and it would be for the Council to take the final decision. This procedure leaves room for some flexibility and we see no reason why it should not prove adequate to cover the areas needing special assistance in the United Kingdom.

The hon. Gentleman is right in his supposition about the crop area. The aid covers all the area used for feeding cattle, including grazing.

With regard to types, there are first to be annual payments to farmers based on the number of stock or the acres of crop. The level of payment is to be fixed by each member State up to a maximum of 50 units of account per cow unit, subject to an overall limit of 50 units of account per hectare—which I believe is still about two and a half acres. One ewe would be regarded as equivalent to 0.15 cow units. There is in England at the moment a restriction on the subsidy which can be given, and thus, on 20 acres, one can get a subsidy on five cows and 50 ewes. Under the new system, it would be a subsidy on eight cows and about 20 ewes.

What we are anxious to achieve, and what we have suggested, is that the overall limit of 50 units of account per hectare might be raised to 60. This point is still open. Fifty units of account comes to rather more than £23, which I admit is a bit below the present level of our hill cow subsidy.

I turn now to the question of investment aids. The draft directive would allow rather more favourable terms to be given to farmers in these special areas who have put forward farm development plans under the Directive 72/159. Details of the scheme, which we shall be introducing later this year under that directive to provide investment aids for potentially viable farms on the basis of farm development plans, are still under consideration. This is a complicated subject and I do not think I would wish to go into it today. In any case, it is not a subject which can be covered in a comparatively short Adjournment debate.

The hon. Member for Edinburgh, East referred to crofting. The crofters, like other hill farmers, come within the scope of the draft directive. In relation to the main forms of crofter assistance—which are basic and supplementary headage payments and winter keep grants—the directive should not present any major difficulties since, for sheep, the level of aid permitted is well above that of our hill sheep subsidy and for cattle it is only very slightly less than the present head-age payment for hill cattle.

However, it seems clear that the main obstacle to the continuation of our present crofting assistance lies in Article 12 of the draft directive dealing with investment aid to farms not qualifying for a development plan. In its present form, Article 12 would result in certain limits on investment assistance to most crofters as it would to hill fanners who do not qualify for a development plan. However, this would be offset appreciably, I think, by investment aids for communal schemes under Article 11.

This is an aspect which the hon. Member might wish to consider. I can assure him that the interests of the crofters will be taken fully into account in the negotiations. Perhaps one cheering piece of news is that there is no restriction in the draft directive itself on non-agricultural grants. For example, these could include grants given to crofters by the Highlands and Islands Development Board.

The draft directive also proposes some other measures of assistance, such as a new type of grant to co-operatives and a special grant for young farmers getting themselves established. We and other countries have some doubts about whether these proposals are necessarily desirable. I have often felt that perhaps one could build too high a cliff between the hill areas and those outside. I feel sympathetic towards and have always supported the concept of the hill areas being given additional percentages for drainage and other works, but I think that there could be a danger of overdoing aid, if only—and here again I speak perhaps with feeling—for those just outside.

It would be, to say the least, slightly invidious to give a grant to a man of 37 but to refuse one to a man of 38, or to give a grant to a son who takes over a farm from his father but to refuse one to a son who goes into partnership with his father. This is a matter which one wants to reflect upon rather more. The proposals on co-operatives also involve certain practical difficulties.

Under the Commission's proposals, FEOGA would contribute 50 per cent. to the annual payment to farmers in these special areas and 25 per cent. to the other measures I have mentioned. The proposals are not agreed but, of course, our present expenditure on hill livestock subsidies, including winter keep payments, is just over £33 million.

Finally, the draft directive includes certain limits on national aid for investment—that is to say, help given to farmers who do not qualify for or prefer not to apply under the Community schemes based on farm development plans under the directive I have referred to. It may well be that many full-time hill farmers would enter the scheme based on farm development plans and would not therefore be affected by the limit. But, as I have said, this is a slightly complicated subject which is still under consideration. In any case, it seems to us that the proposed limits on national aids are too rigid, and a number of other countries share our view.

The question of special aids for the hills, uplands and other difficult areas is still under consideration by the Council of Ministers. It is possible that the Commission's proposals will require some modification, but we think that their main lines are right and that they will broadly meet the needs of our hill areas. I do not think that I should give any impression that there is much likelihood—or even that I think it very desirable—that the hill areas as we understand them today will be extended. Again I speak with feeling.

There is a line, but it is one which is drawn outside what are known as the areas of mountain, hill and heath. Bring it down a little, and there would still be a line with someone else just outside it. I think that we have probably got the definition of where assistance should be given pretty well right, and we have had a good deal of experience in this.

It is important that the common agricultural policy should move away from the attempt to deal with problems of difficult areas by ever-increasing prices which go mainly to the better areas and can lead to burdensome surpluses—and we know all about them. Therefore, I very much agree that in providing selective grants to meet special needs, the draft directive represents a valuable advance in the development or modification of the CAP, and I think it a great and helpful sign that the Commission seems to be cashing in on the long experience of this country with these extremely useful methods of support.

We hope that at its next meeting the Council of Ministers will be able to reach agreement on the general principles involved so that a satisfactory directive can be approved before long. I am grateful to both the hon. Gentleman and to my hon. Friends for raising this matter. The hon. Member for Edinburgh, East knows the importance which my right hon. Friend and the Government attach to this subject.