EUROPEAN COMMUNITY (AGRICULTURE)

HC Deb 07 November 1980 vol 991 cc1589-644

[European Community documents Nos. 9370/80, 9521/80, 10439/80 and 10440/80 and an unnumbered explanatory memorandum dated 27 October concerning a proposal for a Council decision on the conclusion of voluntary restraint agreements with non-member countries concerning sheepmeat and goatmeat are also relevant.]

9.35 am

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith)

I beg to move, That the Common Agricultural Policy (Agricultural Produce) (Protection of Community Arrangements) (Amendment) Order 1980 (S.I., 1980, No. 1562), a copy of which was laid before this House on 17th October, be approved.

In debating the order the House will wish to bear in mind that a number of EEC documents listed on the Order Paper are relevant. The House is aware that it was intended to take today another statutory instrument—the Sheep Variable Premium (Protection of Payments) Order 1980—to which I shall refer briefly, by way of explanation. The order was brought to the special attention of the House by the Joint Committee on Statutory Instruments, which questioned whether the enabling powers used were adequate for certain provisions in the order. The Committee has not accepted all the arguments put to it by my Department in respect of the provisions, and therefore my right hon. Friend the Minister and the Secretaries of State with responsibility for that matter have decided not to seek the approval of the House for the order. We shall lay an alternative order as soon as possible, taking account of the Committee's concern, to provide the necessary powers for the continued protection of payments under the sheep variable premium scheme. I hope that that clarifies the reason why the motion to approve that order will not be moved.

The order that I am moving is one of the six statutory instruments required to implement the sheepmeat regime that came into operation on 20 October. The Community regulations establishing the regime are directly applicable to the United Kingdom, but further domestic legislation is required to provide for the enforcement of the Community provisions and protection of Community expenditure.

I shall summarise briefly the provisions of the regime. The support arrangements, which are fully financed by the Community, consist of annual premiums designed to guarantee the income of farmers who maintain breeding flocks, together with the option for each member State to operate either intervention or a variable premium. Of the countries in the Community, only France has chosen to operate an intervention system. Britain intends to operate, and is operating, the variable premium. The other member States, including the Republic of Ireland—I know that the right hon. Member for Down, South (Mr. Powell) has an interest here—have chosen to operate only the annual premium system.

Mr. J. Enoch Powell (Down, South)

Did the Minister say that the arrangements are being operated? If so, under what powers are they being operated, in view of the fact that the order is only before the House today?

Mr. Buchanan-Smith

I thought that the right hon. Gentleman would know that the system has been operating from 20 October, when the system was introduced. The orders were laid in time. All that we are doing today is debating the orders within the period of time allowed from their having been laid. I wanted to make that clear, because there has been some confusion about the different systems.

The variable premium system that we have adopted is basically a deficiency payments scheme on similar lines to our previous fat sheep guarantee scheme, which it replaced on 20 October. Member States who operate the variable premium scheme have to recover or, to use the jargon term, clawback, an amount equivalent to the premium on the sheep or sheepmeat that they export. I know that the matter is causing concern, and I shall return to it in a moment.

Trade with New Zealand and other third country suppliers is covered by voluntary arrangements under which the third countries will restrict their exports to the Community to a level slightly higher than that which has prevailed recently. In return, the Community's import duty on sheepmeat has been reduced from 20 to 10 per cent.

I return to the export arrangements for sheep and lamb. I should make it clear that I am well aware of the concern of our export trade over the claw-back arrangements, which have had a particular impact on our exports to Belgium, Germany and countries outside the EEC where no charge existed previously. Not only is my Ministry monitoring the situation carefully; in the past few days I have met individuals concerned with the trade and I have firsthand knowledge of the anxieties and worries.

It is perhaps inevitable that when one introduces new arrangements there is a degree of uncertainty about the way in which they apply, and some disruption in moving from one system to another. Previously, there was no clawback of payments on our export trade. The situation has changed, and there has been uncertainty and disruption.

We hope that the situation will improve. The scheme has been in operation for a relatively short time and although' some traders have reacted more strongly than others, many of those to whom I have spoken have been aware that we could not expect the new system to operate immediately as we had hoped. Some disruption and uncertainty was expected. On the other hand, we have in mind the length of time that the situation may continue. We are watching it carefully and we shall have to consider what to do if the scheme does not settle down as we hope.

Mr. Douglas Jay (Battersea, North)

Will the hon. Gentleman clear up a question of fact? I have had a letter from his Ministry saying that as there will now be different market prices for lamb in the United Kingdom and in France, the obvious possibility of exports from the United Kingdom to France will be prevented by a system of levies paid on lamb exported from this country. Is the hon. Gentleman telling us that there is to be a clawback and a levy, or is he calling the levy a clawback?

Mr. Buchanan-Smith

I am delighted to be able to clear up that point. One arrangement under the sheepmeat regime is that France gives free access to its markets, with no levy. There is now freedom of trade within the Community. The clawback is a different matter, and is not related to previous levies.

The clawback arises for the simple reason that we have chosen to operate a variable premium system. That results in a lower market price in the United Kingdom. If we are to have a system under which producers in one country operate the deficiency payments scheme—and no one can disagree with that in principle—we must take back the premium given to producers when their goods and products enter Community trade. The fundamental basis of the system is that the premium has to be recovered when products enter Community trade.

Mr. Tam Dalyell (West Lothian)

Can the hon. Gentleman quantify what sums we are talking about in the clawback? Those of us on the House's EEC legislation Committee often do not know how important a matter before us may be, because we do not know the sums involved. The Minister says that the Government are watching the situation carefully, and therefore he ought to be able to give a rough indication, which is all I ask for, of the sums of money involved.

Mr. Buchanan-Smith

I shall deal with that point in detail when I reply to the debate. I must emphasise that we are dealing with a situation that we hope is transitory. The clawback on exports will amount to the total of the premiums paid on that part of our production that goes into export. It is difficult to give a meaningful estimate when the market is suffering uncertainty and disruption.

My Ministry is watching the position carefully and we have raised the question of disruption of trade in the Community. We have received from Vice-President Gundelach a firm undertaking that he and the Commission will keep the claw-back arrangements under review, because this is a new element for us. He has also given a clear undertaking that it is not the intention of the sheepmeat regime to hinder the development of export trade. We shall certainly keep the Commission to that undertaking. There is a Council of Ministers meeting next week and I have no doubt that we shall be discussing the matter with Mr. Gundelach, at least on a personal basis, at that time, in the light of experience.

Mr. Robert Maclennan (Caithness and Sutherland)

Is it the intention of the Commission in the regulations that the clawback should operate equally as between exports to Community countries and exports to third countries? Clearly, it is the exports to the third countries that create the new situation.

Mr. Buchanan-Smith

It is the intention as of now that the scheme should operate equally on all exports, but it is the EEC exports that are the most important for our trade. There are also a certain amount of exports on a smaller scale to countries outside the EEC. That is another aspect of the arrangements that we shall have to watch carefully, once we see how the level of clawback settles down.

Mr. Jay

rose—

Mr. Buchanan-Smith

I have given way a great deal already. I know that other hon. Members want to speak, and I want to give them the maximum opportunity. I hope to have the opportunity to wind up the debate, when I shall do my best to answer any points that have been raised.

I have acknowledged that there is a difficulty over the way in which the claw-back arrangements are working. We are very concerned about the matter. Once we see how the position settles down, I hope that we shall be able to deal with it.

We should not allow the difficulty that has appeared since the new arrangements started to make us lose sight of the advantages and benefits that the arrangements give to this country. First, they give considerably increased support to our producers. There is not only the immediate advantage of the raising of the guarantee price—about 12 per cent. over the first year on the current level of guarantee—but over the next four years producers have the definite prospect of an improving level of guarantee prices- something that has not been available in the past to producers of fat livestock in this country. They have often called for continuity and some certainty, and I know that this is very much welcomed.

Those in our hill and upland areas—particularly in Scotland—who produce store stock will not benefit directly from the first year of working, but they should benefit from the store prices next year, once the system has been in operation for a while. The arrangements give increased support and the prospect of increasing support over the coining years.

Secondly, the arrangements have made certain that consumers will benefit from ample supplies of lamb at reasonable prices. One of the successful features is the continuation of our deficiency payment type of system, which produces a better price for the consumer. I have learnt from traders to whom I have spoken this week that the arrangements are undoubtedly leading to ample supplies of reasonably priced lamb in the shops. It is certainly a good deal for our consumers.

Thirdly, I come to our very important arrangement and relationship with New Zealand. This sheepmeat regime maintains our access to supplies of New Zealand lamb. I emphasise that the arrangements with New Zealand have been entered into voluntarily. The agreement has the advantage that the lamb is coming into the United Kingdom under a lower tariff than before, which is to the advantage not only of New Zealand, but of consumers. The regime involved a major share of Community expenditure in this sector coming to the United Kingdom, which is also of benefit to us.

The effect of the order is to add various items, now subject to Community arrangements under the sheepmeat regime, to the list of specified commodities in the Common Agricultural Policy (Agricultural Produce) (Protection of Community Arrangements) (No. 2) Order 1973. The 1973 order provides general powers for the protection of the support system for products subject to a common organisation of the market. It provides that persons dealing with the specified commodities may be required to keep appropriate records and to produce them on demand to authorised officers, who may enter land on which these commodities are kept for the purpose of inspection and taking samples. It may on occasion be necessary to use these powers to ensure proper administration of the support arrangements for sheepmeat.

The five Community documents to which I have referred were regulations necessary to the implementation of the regime and were—as we warned the Scrutiny Committee—adopted by the Council of Ministers on 14 October. The House was in recess, and in our view it would have been wrong to hold up the introduction of a regime that will bring major benefits to the United Kingdom. I do not propose now to deal in detail with the five documents, but I shall try to answer any questions on them that hon. Members may have.

I believe that the new regime for sheep-meat that I have described is of advantage to the United Kingdom in terms of Community finance, returns to our producers and price and availability of lamb to consumers in this country. It also continues the access to the United Kingdom market of lamb from New Zealand.

Certain difficulties have arisen, particlarly in relation to the matter of exports, but I hope that the House will not overlook the wide range of advantages that the arrangements bring to the United Kingdom. I hope that once the market settles down we shall see an improvement in the area where there are difficulties now. It is our intention to do all we can about that.

9.57 am

Mr. Gavin Strang (Edinburgh, East)

The motion gives the House its first opportunity to discuss the arrangements that were agreed last month and came into operation on 20 October—the new EEC sheepmeat regime.

The starting point for any consideration of a common regime on lamb and mutton is a recognition that the United Kingdom occupies a dominant position in the Community in this sector. It consumes half the total lamb consumed throughout the EEC, accounts for about three-quarters of the total imports of lamb into the Community, and is far and away the largest producer of lamb in the Community. The Labour Party has always argued that it follows that any regime agreed in this area—I leave aside the argument whether there is any need for a regime—must take full account of the United Kingdom's interests.

I acknowledge that what has been agreed goes a significant way towards meeting the United Kingdom's various interests: the interests of our consumers, our relationship with our traditional importer, New Zealand, and, of course, the interests of our producers. That progress has been bought at an enormous future price to the Community taxpayer.

Let me go over those aspects of the regime as it affects the United Kingdom. There is no doubt that what has been agreed provides a substantial protection for British consumers. By that I mean that the open-ended variable premium that will be financed entirely out of Community funds will enable British consumers to continue to benefit from lamb prices that are significantly lower than those prevailing on the Continent. When there is a glut of lamb, it means that the consumer will benefit from these lower prices. But there is nothing new about that. There has been no advance. It is the retention of a system which, traditionally, we have operated in the United Kingdom. The only difference is that the subsidy will now be paid for by the European Community.

It must be said that we are talking about a very large subsidy. I was informed in a written answer that the Minister of State gave me yesterday that, in the week beginning 20 October, the subsidy was almost 62p per kilogram deadweight. That is a measure of the level of direct subsidy on lamb in Britain.

The most important way in which the interests of the consumer are protected has been the raising of a barrier against the movement of lamb from this country to the Continent. Given what has been agreed for France—and right hon. and hon. Members should make no mistake: this regime represents a victory for France—I acknowledge that it was essential to put up a barrier between our trade and the Continent to prevent our lamb prices from being dragged upwards. However, the variable premium makes no difference to that. What will really determine the price of lamb here in the future will be the demand for our lamb in relation to supply. Given that we have a French regime with intervention at high prices, the only way to prevent that open-ended French intervention from pulling up our lamb prices in the future is to have some restraint on free trade between the United Kingdom and France.

That is the position of the United Kingdom consumer. There has been a substantial success, and I have no desire to detract from the Minister's achievements. We have a variable premium financed wholly by the Community.

As for the position of New Zealand, what has been achieved is reasonable. The 10 per cent. reduction in the tariff is virtually all new money to New Zealand exporters. The voluntary restraint arrangements are reasonably fair, and the Minister of State will doubtless confirm that the New Zealand Government have accepted them. The impositions which we have put on our export trade to third countries to which New Zealand exports are also a source of satisfaction to New Zealand.

I do not think that the long-term position of New Zealand is necessarily ideal—I shall touch on that later in terms of possible future intervention supplies of French lamb—but in the short term it is a satisfactory arrangement, and again the Minister deserves credit for what he has achieved.

Let us now consider the position of the producers. In the short term, largely because of the very large amount of money that is now being spent in the United Kingdom in the form of a variable premium and the increased prices that have just come into operation, the producers have derived significant initial benefit from this regime. But the long-term position of our producers in this sector, like that of producers in other United Kingdom sectors, depends on what is happening in the real world. That is what the lamb war was about. If we have the capacity to produce lamb efficiently and of a quality that is in demand in Continental markets, it is in the interests of our lamb producers, especially those in Scotland and in parts of the United Kingdom where agricultural incomes are traditionally not as high as they are in the more arable areas, as well as in the interests of the trade, that we should maintain and, we hope, develop a significant export trade to the Continent.

The main effect of this regime has been to knock that trade on the head. It is a total disaster for exports of lamb from the United Kingdom, not just to France—we were not exporting lamb there, anyway; the French were keeping it out, and that is what the argument has been about—but to Belgium and Germany. It is designed to prevent our exporting lamb not only to other EEC member States, but to third countries, such as Switzerland and Algeria, where we have a small but significant trade.

My right hon. Friend the Member for Battersea, South (Mr. Jay) asked whether this arrangement represented a levy or a clawback. It is true that the French have withdrawn their own levies and are no longer acting to prevent the access of United Kingdom lamb. However, this clawback is, in effect, a levy to prevent the United Kingdom's exporting lamb anywhere in the world. It has been remarkably successful. Our export trade has been decimated, and the traders are up in arms.

Given the botched-up regime that we have, I recognise that there has to be some limitation on the flow of lamb from the United Kingdom to France. That is essential to protect the interests of the consumer. However, it represents a tremendous curtailment of United Kingdom trade.

The clawback operates in a number of most unsatisfactory ways and has a number of features which make it difficult to see any significant trade developing in the future unless the arrangements are altered.

First, the rate of clawback—the rate of levy on lamb exported from the United Kingdom—is that applying in the week of export. As I understand it, that means that an exporter entering into an agreement to export lamb, say, next week has to guess what the deduction will be that week. He does not know exactly at the time what will be the penalty that he has to incur as a result of making that deal.

Secondly, and most importantly, although the theory of clawback is that it is clawing back a variable premium that is paid in this country but not in others, the practicality is that the clawback applies to all sheepmeat—lamb, mutton and everything else that is not from a pure breeding animal that crosses our frontier.

The subsidy—the variable premium—does not apply to all these animals. It does not apply to fat sheep. It does not apply to the lighter lambs that do not qualify for certification. The Government have altered the certification standards recently and have reduced the maximum level of variable premium paid per animal. The animals on which the claw-back operates amount to many more than those which are eligible for subsidy in this country. That is an indefensible situation. The word "clawback" implies that it is meant to claw back a subsidy payable in this country. It is, in fact, being applied to all sheep that are exported, even those sheep that do not meet our certification standards and would, therefore, not be eligible for variable premium.

Mr. Buchanan-Smith

Is the hon. Gentleman aware that we are widening the classes of animals that will qualify for the variable premium? As a consequence, we would expect that the vast majority of those animals currently going for export would qualify for the variable premium. I make that point as a matter of fact before the hon. Gentleman goes too far down that road. He could mislead the House and people outside.

Mr. Strang

I was coming to that point. I should like to know how far the Government are going to overcome the problem. I understand that they intend to establish at export abattoirs an arrangement whereby sheep that are to be exported will be certified. In other words, these new special certification arrangements will be introduced specifically for these sheep, which fall between the two stools and do not qualify at present for subsidy.

I am not sure whether that is the arrangement to which the Minister of State refers, namely, that it will simply be a means of designating those sheep to be exported which at present fall outside the certification arrangements and paying a variable premium on them that can be deducted when they are exported, or whether he is talking of a change in the arrangements that will mean the blanket payment of variable premium across the board to all sheep that might qualify for clawback when exported.

Mr. Buchanan-Smith

It is the intention to apply these arrangements broadly in the way in which the hon. Gentleman first described, namely, at export slaughterhouses and lairages. Arrangements are well advanced. We hope to have them in operation within the next two weeks.

Mr. Strang

I am grateful to the Minister of State for giving that information. Notwithstanding the new arrangements, there will be lamb that does not qualify for subsidy in this country. Fat lambs that have been rejected for variable premium as a consequence of the alteration of the certification arrangements to give preference to thinner lambs will not be eligible, I understand, for variable premium in this country, but will still be subject to the clawback if exported. One can argue that fat lambs are less likely to be exported than thin lambs, but the principle still applies. The clawback will apply to sheepmeat that is not eligible for subsidy in this country. I am grateful to the Minister for making it clear that the Government intend to reduce the number of animals that will be subject to clawback but will not be eligible for variable premium in this country.

I wish to refer to the level of the claw-back. I do not think that anyone expected that we would end up with a clawback fixed at 100 per cent. That was not the Government's intention. I understand that the Government were determined to secure a clawback of between 70 and 75 per cent., but that that was unacceptable to the French. I understand that in the Management Committee the United Kingdom was voted down on this issue. I do not believe that there is much hope of our sustaining a significant export trade with the Continent on a clawback fixed at 100 per cent. I hope that I shall be proved wrong. I hope, too, that the Minister of State's remarks about the current turbulence in the sheep market masking the true situation will be borne out, but I have the gravest doubts. These doubts, as I think the Minister will confirm, are shared by a substantial section of the trade.

I come now to the application of the clawback to third countries and to all countries to which the United Kingdom exports. I can understand that there is a desire to limit the extent to which our exports might compete with New Zealand in places like the Middle East—I shall leave that issue open—but it is a little severe, as the National Farmers Union has argued, to apply this clawback to trade with countries such as Switzerland and Algeria. I hope that the Government will look again at the whole question of clawback as agreed and as at present operating.

I wish now to cover two aspects of this regime concerning the position of France. One has to acknowledge that France has got open-ended intervention in the months that matter, between July and September, at high prices wholly paid for by the European Community. The Minister volunteered in at least one of his statements reporting back from Brussels meetings that the British Government were opposed to intervention. He was not answering questions. He nailed his colours to the mast. He was saying that he did not want the Community taxpayer to enter upon a new open-ended commitment to unlimited State buying at excessive prices, which has led in the past to an accumulation of substantial surpluses at the Community's expense. That is what we have in France.

France has the high prices, the intervention, and the block on British imports into its market. This regime goes a substantial way to meet our various interests in this matter, but it seems to me totally to meet the interests of the French. If lamb accumulates in intervention in France, what will happen to it? Will that not disrupt third country markets? I understand that such lamb becomes Community property in intervention. The Commission is free, as we have seen with subsidised exports of butter, to fix the price at which that lamb is exported. Is there any restraint on that? Are we embarking upon a regime that will lead to an accumulation in France of lamb in store—some of which no doubt will deteriorate—for which we, as a member of the Community with other member States, are paying and will be sold in various ways on the basis of decisions made purely by the EEC Commission?

What we have is not so much a common regime as a patchwork of national arrangements, barriers to trade between EEC member States and different systems of support in the different member countries. The squaring of the circle has been achieved and all these interests reconciled by producing a regime that is not only a botch-up, but is very costly. It goes some way towards meeting our interests. Looked at objectively, as an economic measure, as an international trading agreement and as a Community regime, it is indefensible, and represents a significant defeat for those in the Community who would like to have achieved a sensible new common regime in this area.

10.20 am

Mr. Geoffrey Johnson Smith (East Grinstead)

From what we have heard today, it would be rash to give more than a guarded welcome—but still a welcome—to the action that the Government have taken. As the Minister of State said, there are some advantages to the consumer and, in the longer term, to the producer.

However, the more one considers agricultural problems, the more one realises that there will never be a perfect regime so long as Governments want to protect their national interests, as they do in this respect. One yearns for the day when we might try the bold experiment of just going to the market to see what happens. In some areas, if we sweated it out for a year or two we might in the end be better off.

There is a long history in this matter of vested interests fighting it out, so that it is little wonder that nothing is wholly perfect. Given the imperfect conditions regard.

to be congratulated, even if some aspects have been botched up. There is one aspect, however, to which we should have regard.

The organisation of the EEC and its common agricultural policy is complicated. Much though one is delighted to hear that the Government have made representations to Mr. Gundelach, who will review the difficulties, the principle of this regime was announced many months ago. Farmers must earn a living, and they have had to cope with a dreadful summer. What is difficult to understand is why the scheme should be ushered in so imperfectly, with so many loose ends, in such a terrible muddle.

If the Minister thinks that I exaggerate, I can give one or two reactions in the first few days, as quoted in the Farmers Weekly. This great opportunity for British exporters was reported in these words: Some traders did sell to the Continent, but a significant section refused to export blind. The article quotes a West Country trader as saying: We cannot determine a selling price when we do not know, and will not know until next week, what clawback will be charged. A shipper is quoted as suggesting that delay could be averted by basing claw-back on the premium payable in the previous week. A slaughterer who is based close to my constituency said that he slaughtered no lambs in the first day or two, and added: The trouble is, producers do not know what their sheep are worth at market and we do not know whether to buy or what price to pay. That is a shattering indictment of how Governments go about these matters in the EEC. We should not be led into such difficulties. This is not the fault so much of the EEC as of the fact that the arrangements are not properly prepared. They can and should be.

I am delighted that this matter is to be reviewed, but how long will that take? I understand the reason for a clawback. Without it, we could sell British sheep-meat in France and it would not be too long until we had such a price advantage that much of it would have to go into intervention. Then we should really be in trouble. There is a need for clawback, but, as the hon. Member for Edinburgh, East (Mr. Strang) said, why is it 100 per cent.? Whoever thought in the early days that we would one day consider that that was a satisfactory way of proceeding?

These teething troubles, which include the clawback level, are appalling and inexcusable. The standards of certification have not even been decided. That is no way to run an important industry. I hope that the Minister will tell us what progress he thinks will be made.

One farmer whose experience is not untypical tells me—perhaps this can be corrected if it is wrong—that his present subsidy is £12 per head and that the market price for his 20 kg lamb is £18, so he receives a total of £30. The meat is exported, and there is then 100 per cent. clawback, so he is back again to £18. He says that there is no way in which he can sell sheep at that price. Before the sheep-meat regime came in he had a thriving market in Belgium, Holland and Germany, but because of the regime it is subject to clawback and is no longer thriving. This whole process has got off to a thoroughly rotten start.

As for the effect that this will have on livestock, I understand that the clawback affects those sheep that are exported live, provided that they are exported for killing and not for breeding. If this muddle continues, I wonder to what extent people will export sheep allegedly for breeding but actually for killing. If that development is allowed, we shall end up with another problem—that those who encourage the export of livestock know that they face a powerful lobby opposed to such a trade. I hope that the Minister will understand that there is an added urgency about dealing with the clawback problem and the others that I have mentioned.

Can the Minister estimate the affect that this will have on home production in future? As he knows, we have until now benefited by being able to export to other EEC countries that did not impose tax at the border as the French did. That was a valuable trade. Does he consider that, as things balance out and we get over the teething troubles, the drop in trade to those countries will be more than offset by the increase in the export of meat to France?

I imagine that we shall benefit in the long run, because prices will be harmonised over the next four years. That will help us considerably, because it will lead to an annual fixing of prices, which on the whole will raise the price to the United Kingdom producer rather more than to the producer in, say, France. I hope that I am right and that the Minister will consider, when examining the working of the new scheme, the effect that it will have on our trade with the Middle East. That is a growing market, and I am surprised to learn that it is subject to clawback arrangements. That does not seem to be to our advantage.

The Minister will now understand why, along with others, I give the new regime only a guarded welcome.

10.27 am

Mr. J. Enoch Powell (Down, South)

We are gathered here today, contrary to what used to be the custom of the House before 1972, to acclaim yet another French victory and partially to enter some of the debris into our own law by the procedures of the House. Nobody but France wanted arrangements of this sort, and the French obtained it by a combination of force and bribery.

We understand how the force was organised. If the French had not set themselves persistently to break the law of the Community, secure in the knowledge that they could do so until they got what they wanted, we should not be considering these arrangements this morning, nor would there be a sheepmeat regime. The French paid a price—albeit a small one—for the achievement of their victory by enabling this country to continue to some degree to protect the interests of its consumers and of its producers under the new arrangements; but the idea that we will get a net financial benefit out of that is delusory. The French will charge upon the resources of the Community, to which we contribute, the cost of intervention in the French market. That will go a long way to offset the fact that the subsidy to our producers is in future to be knocked off the net contribution that we continue to pay to the EEC. I think that is the way the arithmetic works, and the way the French understand it to work.

As the Minister pointed out earlier, we are not debating the substance of the matter, because that is not before the House. Everything that has been debated so far—or almost everything—and everything that will be debated until the Minister winds up the debate is not in the order, which the House has the theoretical power to reject. It is all in directly operative Community law, which came into effect before there could be any discussion of it, let alone decision upon it, in the House. So we are witnessing the victory being imposed through that mechanism of the EEC which gives an external body the right, without the intervention of the House—indeed, while the House is on holiday—to make law in this country. Then we come along on a Friday morning and join in the general celebration, if that is what it is. I was not sure whether the hon. Member for East Grinstead (Mr. Johnson Smith) was commending or deploring it. At any rate, it is a celebration for the French.

If we had had the opportunity to debate such arrangements in a proper manner, it we had been debating this change in the law of the United Kingdom as we would debate other changes, one aspect would certainly have had to be dealt with and carefully considered. Since 1922 the United Kingdom has resembled all other member States of the EEC in that it has a land frontier. The existence of that land frontier will go a long way to make nonsense of these arrangements.

I have in my possession a document called "Agra Europe"—at first I wondered whether it was called "Aggro Europe"—dated 24 October. I should like to trouble the House with its vivid description of the activities which are to be expected under these arrangements across that land frontier of the United Kingdom. They arise, of course, from the fact that in this regime three different systems are to operate—I am not sure that there are not four different systems to be operating—inside the EEC. One is the French system of intervention; the second is the United Kingdom system which we are discussing this morning. The third is the general system of annual premium. I understand, however, that the Irish Republic is to have a variant upon that of its own. Perhaps the Minister will clarify that.

Thanks to what an hon. Member has already called a "botched-up" arrangement, the situation on the land frontier of the United Kingdom will be as follows: The opportunities for cross-border Iamb smuggling between Northern Ireland … and the Republic of Ireland under the new regime are almost endless and this is certain to prove a major problem. Lamb prices in Northern Ireland are over 120p kg while they are just over 100p kg in the rest of the United Kingdom; yet Northern Irish producers are paid a variable premium based on the United Kingdom average. So in addition to a high price they will receive a high premium (giving a return to the farmer well above the guide price); by smuggling across the border the lambs can then be exported to the Continent without having to pay the "clawback" of the premium. An Irish farmer"— that means a farmer of the Irish Re-public— of real resource"— many Irish farmers are men of very real resource— could push his lambs north"— a curious expression, but perhaps it has lost some of its flavour in translation— across the border for the premium and then bring them back again for tax-free export, while claiming the annual headage payment or 'compensation premium' in Ireland on his ewes. Much will depend on whether the Northern Ireland variable premium is paid on slaughter and what mechanism, if any, will be introduced for applying the clawback on exports to the south. Perhaps, as the Minister intervened in the speech of the Opposition spokesman, the hon. Member for Edinburgh, East (Mr. Strong) to say something about the claw-back arrangements for maritime export from the United Kingdom, he will say something about the arrangements for clawback which will be established on the frontier with the Irish Republic.

The document continues: if the premium is to be paid on live sheep, the clawback would have to be applied on point of entry to the Republic which"— here is another elegant piece of language— given the complexity of the border, would be difficult to administer effectively. Let no one afterwards say that the Government have not been warned of the nonsense, bringing these arrangements into discredit, which is visibly being asked for by the application of different systems not only within the EEC as a whole, but between two member States of the EEC which are separated by a land frontier, and by that land fontier in particular. The Government have been warned, the public have been warned, and the European Community has been warned.

I turn to the interchange which took place between the Minister and the Opposition spokesman. Both seemed to be privy to certain arrangements for claw-back. The House would welcome it if attention could be drawn to the instruments in which those arrangements, of which both hon. Members seem to be aware, were included. I have been looking as best I can at the order which the House has before it, and wondering whether I might have found something—been on the track of something—in article 5. Article 5 sets out the parameters for certification of eligibility for the premium payment. However, it introduces those parameters with the words: except where recovery of premium is required under article 9(3) of regulation EEC No. 1837/80 of the Council. In a footnote there is a reference to the Official Journal.

This is not the first time—there was a more serious case which inquinated the Finance Act of this year—that I have had to draw attention to the bad practice of legislating in this country and this House, not by reference—that used to be thought objectionable enough—to other instruments and statutes of the United Kingdom, but to pieces of legislation which are not, except under the EEC, part of the law of this country at all. Anyhow, it occurred to me that that phrase might be the fig leaf under which the arrangements, not concerted, but understood in common between the two Front Benches. are intended to be set up.

I hope that that might also be clarified by the Minister, but as the Minister was given warning of the points that I would raise on the consequences of a land frontier, I am sure that the House will expect him to deal with those matters fully if possible.

10.40 am

Mr. Peter Mills (Devon, West)

I must declare an interest as a farmer and a shareholder in a meat plant. I also declare an interest in that in my constituency there are more sheep than there are people. That is an important factor. I notice, too, that, on the lighter side of these serious matters, the little word "goats" creeps in. I have not heard the Minister or anyone else mention it. Perhaps my hon. Friend is separating the sheep from the goats.

Mr. John Home Robertson (Berwick and East Lothian)

The hon. Gentleman is trying to pull the wool over our eyes.

Mr. Mills

I do not think that my hon. Friend is trying to do that, but I should like to know a little about our goat exports. I do not think that there is much trade in goats from my constituency.

Mr. Dalyell

Goats may be a laughing matter for the existing members of the Community, but it will become much less so upon enlargement, because in Greece, Spain and Portugal goats are an important part of the economy.

Mr. Mills

I understand and accept the hon. Member's comment.

This is an important debate, for many reasons. My speech will not be in severe criticism of the Minister. Instead, I shall urge him to get on with sorting out the problem immediately. It is no good our continuing with the present position with our meat exports.

It would be churlish not to congratulate the Minister on his achievements. We know the hard battle that he fought and finally won. It was obvious that he had significant problems, particularly with France. However, the effects of this new regime on our meat plants is very serious. While the farmers have a copper-bottomed arrangement, the meat plants are in real trouble. The Minister and others have explained the position, but it is essential to have a reduction in the clawback arrangements on the variable premium. Unless that happens fairly soon many of our plants will have to go on short-time working, because they are export orientated.

The position, as it has been conveyed to me by my people in Devon is that, normally, last week they would have exported 19,000 lambs and sheep. The actual number was 4,000. Even that was achieved only by a combination of good will on the part of the buyers and price cutting by the exporters. There is no money in the trade. We have just priced ourselves out of the market by these arrangements. The German and Belgian markets are almost impossible for us to penetrate, as is fairly clear from the figures. Last week the price of English lamb was roughly 164p a kilo. The price of Irish lamb was 140p. So we are certainly being undercut, particularly in France, to which the Irish are still exporting through their profitable arrangements. I am sure that that is not what my hon. Friend either seeks or requires.

Let me quote here from Dick Cawthorne of North Devon Meat Ltd. in my constituency. He tells me: To return to the nutcrackers in which United Kingdom lamb exporters find themselves, the only way in which we can hope to offer a reasonably priced product is if we can purchase our raw material live lambs at fractionally below the average market price, so that when the weekly guarantee is calculated as a levy and added to our sale price, the total package offered will be no more than the average weekly target price. This is damned impossible as the lean lambs with good conformation must inevitably cost rather more than the average market price into which all sorts of conditions of sheep are added. In short, the business is not worth a candle at the present time and, as things stand, I can see no prospect at all for the improvement. That is the position. It is no good hiding from these harsh facts. I am sure that my hon. Friend will act speedily. I only hope that when he replies to the debate he will tell us that he will act a lot more quickly. We have to get this right.

The Minister has always urged us to take advantage of the opportunity to export. Agriculture has, of course, started to do that. Last year our lamb and sheep products exports to the Community amounted to £60 million. That is a lot of business. Surely it should continue and help our balance of payments. If we get this arrangement right it will not affect the consumer. There is plenty of good lamb about at reasonable prices. It is therefore a good system for the consumer. In our various researches into this subject we have always confirmed that it was advisable to hang on to some form of deficiency payments, and we have been proved right.

The problem being experienced by the meat plants is affecting, and will continue to affect, employment. Workers will no longer be required for the plants. Tremendous sums have been spent on getting the plants up to the standard specified for the export trade. This is a serious matter for those of us who have invested money in these plants—and I have already declared an interest. Already the margin of profit in any meat plant is extremely low. Do not hold me to these exact figures, Mr. Deputy Speaker, but though North Devon Meat Ltd. has a turnover of £36 million to £38 million, the profit is only about £500,000, or less. I believe that plants in Scotland and elsewhere are running at a severe loss. Some plants have even closed down. That is all very sad, because the plants provide employment and help the export drive. Now, as Mr. Cawthorne says, they have been knocked on the head.

One of the side effects of this problem is that very cheap lamb is made available to the consumer. I only wish that the butchers would reduce the price still further to reflect what is happening in the markets. However, that is having a great effect on other meat products such as beef and chicken. It is most important to secure a balance on these prices.

Another side effect is the problem with third countries. The clawback is pricing us out of the market, just when we have built up a fine export trade. We have done so against world-wide competition, including from New Zealand. That is what we should be doing with our products. The figures are highly revealing. Last year, and up to the start of the trouble, we were exporting 10,000 lambs a week to the Middle East and Algeria, again in the teeth of competition from all over the world. Certainly North Devon Meat Ltd. has failed to win renewal of a big South American contract that the South Americans were proposing to give us. Even if the Minister works fast and gets the clawback right it will be difficult for us to recover our position. There is a danger that because of these problems we shall have lost that hard-won export market. Surely that is not what the Minister wants.

I understand that there was no consultation with the meat plants over the problem before the regime was put into operation. I am prepared to be corrected about that. The Ministry should have talked to those who know the effects of these matters. I believe that the Ministry was warned, but there was no proper consultation.

The farmers are in a copper-bottomed position, but for how long? I understand that it is costing nearly £4 million a week—£16 million a month—from Community funds. For how long will that go on? This matter needs to be sorted out. Farmers are protected, but for how long?

I understand that the target price that farmers are getting will rise to 200p a kilo. What will the subsidies be after Christmas? How much will the Community have to pay for it? That matter needs watching very carefully.

The French are creating real problems. In a sense, one has to admire them for the way that they try to stop everything, even though agreement has been reached. For example, the week before last we sent a big refrigerator lorry from Plymouth to Cherbourg. We purposely put 100 export lambs on the back of that lorry so that the veterinary inspectors and officials could check them quickly. They did not have to dive to the forward part where the beef was hanging. What did they do? They held us up. I understand that every lamb had to be unloaded. They looked at the certification marks on the shoulders and hindquarters and if they were not clear—sometimes when people are in a hurry in a meat plant the carcases are stamped quickly and the stamps are not too clear—they rejected them. I understand that they have also brought in some new officials to monitor the system. I bet that their monitoring will be more than monitoring as the weeks go by if they do not want the lamb to come in. These are practical points made by a meat plant that is struggling to export lamb to France.

I am full of admiration for the way that my hon. Friend has helped the farmer and the consumer, but for the meat plants this is a disaster. The practical working out of this regime must be looked at again, and he has promised to do that. I ask him please to get on with it, because it is very urgent.

10.53 am

Mr. Douglas Jay (Battersea, North)

I note that the hon. Member for Devon, West (Mr. Mills) does not like most of the activities of the EEC, but that he wants this country to continue to be a member of it.

I do not propose to refer to goats. I wish to point out some of the implications of this extraordinary arrangement. I understand that there is to be a low retail price for lamb in the United Kingdom market and a higher price in France and the rest of the EEC. That immediately poses the question: what is to prevent low-priced lamb from the United Kingdom from being exported to the rest of the EEC? We are told that that is to be prevented by what was originally called a levy on United Kingdom exports and is now called a clawback of the premium that the United Kingdom producer will receive.

As I understand it, the United Kingdom farmer who produces and sells lamb in the United Kingdom market will get the low market price and, in addition, the premium—therefore he will get two receipts—whereas the French farmer producing and selling lamb in France will receive the much higher market price, which will be maintained by this system of protection in France. If the United Kingdom farmer exports, he will receive the premium and then pay it back to the EEC under the name of clawback. Therefore, he will receive less for his lamb than either the ordinary United Kingdom farmer producing for the home market or the French farmer producing for the French market. The result must be that exports of lamb from this country to the rest of the EEC will fall rapidly, if not cease altogether, which is obviously the French intention.

That is a somewhat extraordinary system. Apparently the clawback will apply to United Kingdom exports, not merely to the rest of the EEC, but to anywhere in the world. What is the justification for applying this export levy, which is what it is, to United Kingdom exports which are not going to France or the rest of the EEC? Is the intention to prevent subsidised exports, which is what they would be without the claw-back, from competing with New Zealand products? It so, that is a principle that we do not apply to other subsidised food exports from the EEC. Therefore, why should it be applied only to lamb?

It would be even more extraordinary if the lamb that was bought by intervention at a high price in the Continental EEC were sold like other EEC food exports at subsidised prices in the world in competition with New Zealand products and United Kingdom exports were not allowed to be similarly subsidised. Perhaps we can be told whether that is to happen. If there is to be a ban on subsidised lamb exports from intervention on the Continent to the rest of the world, what will happen to the lamb mountain that will be built up?

Those are some of the minor peculiarities of the system. Leaving aside the minor absurdities, the major point that seems to arise is that we are now to have a system of deficiency payments for sheep meat in the United Kingdom and a system of high protection plus intervention on the Continent. In principle, there is much to be said for that arrangement—indeed, many of us have long advocated such an arrangement—but it is not a common agricultural policy. If we can do that for sheepmeat, why not for the other main foodstuffs—cereals, butter and cheese? We are already doing it for beef to some extent.

We were told that this country had to have the common agricultural policy foisted upon it, with all its costs and disadvantages, because our previous system of low prices and deficiency payments and reasonably free access from countries such as New Zealand was contrary to the principle of the EEC and the common agricultural policy. That is no longer true. There is no common agricultural policy for sheepmeat, because it is in the interests of the French that it should not apply. If that is to be the arrangement for sheepmeat, may I ask whether the Government intend to extend it to the other main foodstuffs covered by the common agricultural policy? Would not that be of enormous advantage to the United Kingdom? If the Government do not intend to do that, why are we allowed to have that arrangement for sheepmeat, but not for other even more important commodities?

10.59 am

Mr. David Myles (Banff)

I welcome the chance to speak in the debate. I too, must declare an interest, both as a producer hill farmer of store lambs and as a director of a co-operative auction company which purchases lambs and passes them on to wholesalers, who perhaps export them. I therefore feel that I have a certain amount of expertise in this matter, which I should like modestly to make available to the House.

First, I congratulate my hon. Friend the Minister of State and our right hon. Friend on reaching this agreement. It is quite something when that fairly cynical, sceptical political organisation, the Scottish NFU—of which I was a part for quite a time—says of it: A substantial shot in the arm for the sheep industry … Ministers are to be congratulated on the satisfactory outcome of their efforts … For the United Kingdom the successful completion of this regulaion is an indication of what can be achieved in Europe if people at all levels of Goverment and the industry work constructively together to try to make the CAP work. I wish that those who are opposed to our membership of the EEC would realise that if we come out the French, Irish, Germans and Belgians will remain. At least we have some influence on the actions of the French Government, whereas we would have no influence at all if we did not belong to the EEC.

The restrictions that are imposed on our liberty by adhering to the CAP and the rules of the EEC equally apply to the French, despite the fact that occasionally they seem to get round them. As has been said, both the producer and the consumer benefit substantially from this agreement. But what of those in between? My hon. Friend the Member for Devon, West (Mr. Mills) eloquently made that point. The large wholesalers and exporters really operate the scheme, and they are squealing. I must be careful about what I say, as sheep farmers have been wholly dependent upon them, but those people are usually fairly good at adapting and running their businesses. They are usually fairly well attuned to the market and all the operations therein.

They are fairly good at making sure that the difference between what they buy and what they sell leaves them a profit, and they have control over that. I welcome the fact that my hon. Friend has recognised that many store lambs in Scotland and elsewhere were sold on the market before this agreement was ratified. There was some scepticism that it would ever come into being because of efforts over the years to achieve such a regime. Those markets were extremely depressed. Equally, the market for cast ewes—and I do not mean cast ewes that would breed again, but those destined for slaughter—collapsed, the reason being that the clawback would affect those cast ewes. I welcome the fact that that is no longer to be so. However, I should like my hon. Friend to remind other members of the Government that there is a way in which to recompense people who have lost, and that is by increasing the hill livestock compensatory allowances to farmers in less favoured areas who sold their store stock at a disadvantage.

I come back to the wholesalers. Their main complaint seems to relate to the effects that this agreement will have on exports which they have recently built up in Belgium, Germany and elsewhere with the help of a United Kingdom subsidy. Certainly this year quite a substantial United Kingdom subsidy was placed on lambs that were exported to Belgium, Germany and so on. Now that virtually all sheep, including ewes and light lambs, destined for export are to receive the premium, I do not think that there should be too much difficulty, although I fully recognise that Continental consumers will no longer get their sheep-meat at subsidised prices, or will they? If they want sheepmeat, they will have to pay the price that it is thought necessary to produce it. I do not think that there is much to complain about in that respect.

The right hon. Member for Down, South (Mr. Powell) referred to the Irish situation. Perhaps my hon. Friend will enlighten the House on how the Irish will operate this agreement, because if they allow sheepmeat that is in receipt of subsidy to be exported without any claw-back, our exporters will be disadvantaged. I sincerely hope that my hon. Friend will take note of that point and sort it out.

I am slightly puzzled by what has been said about home market prices gradually moving towards those on the Continent. I should have thought that our adoption of the system of variable premiums, even though none of the other European countries has done so, would almost guarantee that our market prices would drift further apart. I should like to be reassured on that matter. However, the agreement undoubtedly represents a step forward in inter-Community trading, and therefore we must approve of it. I hope that its operation will be carefully watched and that sensible alterations will be made if they appear to be necessary.

11.8 am

Mr. Robert Maclennan (Caithness and Sutherland)

It is fair to say that there was no strong British thrust towards the development of a sheepmeat regime until the French became extremely stroppy and brought in their own measures to exclude our sheepmeat. As soon as that pressure began to develop and our access to the French markets was periodically cut off illegally, it became necessary for the Government to press to have the situation regularised. It was also clear that, in reaching some kind of settlement that would be satisfactory to all members of the Community, it would be necessary to strike a balance between the interests of consumers, producers and New Zealand.

From the beginning it was clear that a uniform system of support throughout the Community would not solve the problems involved, given the disparity of price between the French and ourselves. It is no criticism of the Government's package that a uniform sheepmeat policy has not been produced. I take issue with my right hon. Friend the Member for Battersea, North (Mr. Jay) and with the right hon. Member for Down, South (Mr. Powell). My right hon. Friend seemed to think that lack of uniformity was a criticism of the Community. It is highly desirable that differences of national interest should be reflected in the Community's arrangements.

Mr. Jay

If my hon. Friend thinks that every country should follow the policies that suit them and that they should not be forced into a uniform regime, he must agree with me.

Mr. Maclennan

I am far from agreeing with my right hon. Friend. I hope that the Government's objective is to harmonise national interests rather than to unify policies. I differ from my right hon. Friend, because he seems to believe that if we were not members of the European Community we would have harmonious relations with the French, and greater ease of access to the French market and to any other market in the Community. He opposes a Utopian trading situation to the real trading situation.

Mr. J. Enoch Powell

Perhaps the hon. Gentleman will allow me to have a go, as he was good enough to give me an honourable mention just now. Does he realise what he has said? He has said that if France, or any other member State, persistently breaks the law, some arrangement must be made to give that country satisfaction. That is what he is saying.

Mr. Maclennan

I had intended to deal with the infraction of Community law. The right hon. Gentleman has put a gloss on my remarks which does not reflect my thinking. Our sheep producers should have access to the European market. The Government could be criticised for not demonstrating any sense of urgency in reaching an agreement on the sheepmeat regime. The illegal action taken by the French has concentrated their minds. I have often complained about that in the House.

The Minister did not mention the Government's final position on the illegality of the action taken by France, nor did he mention the losses suffered by the sheep industry. For almost two years there was a continuous infraction of Community rules. When the Minister of Agriculture, Fisheries and Food emerged from the negotiations he declared that the British Government would not seek any recompense for the losses suffered by British sheep producers. He said that no action would be taken through the European Court or by any other means to recover the tens of millions of pounds that had been lost. Does the Minister think that that is a fair or appropriate response to the industry's predicament?

For diplomatic reasons one might back down in the face of flagrantly illegal action. The Government might experience difficulties in pursuing this matter any further with the French. However, why should an inability to reach any accommodation with the French be paid for by the sheep producers? In particular, those who did not enjoy the benefit of the regime's introduction during the summer store sales have suffered. The Minister himself mentioned the producers in Scotland.

The Minister could help that section of the industry by making an upward adjustment of the hill livestock compensatory amounts. I strongly support the plea made by the hon. Member for Banff (Mr. Myles), to the effect that the Government should look favourably at that possibility in the autumn review. They should not consider present market trends alone; they should consider also the losses suffered throughout the last two trading seasons as a result of the failure to reach agreement on the sheepmeat regime.

I agree with my hon. Friend the Member for Edinburgh, East (Mr. Strang), that the Government have done a good job in protecting consumer interests. Ultimately, the buoyancy of our domestic sheep trade depends upon consumers being able to buy meat at prices that they can afford. I agree also that in the short term the situation as regards New Zealand has been adequately settled. In addition, I agree with the Minister that some satisfaction can be taken from the fact that the major share of Community expenditure will come to the United Kingdom.

The right hon. Member for Down, South suggested that the United Kingdom would have a debit balance as a result of the arrangements. I am not sure that that is so, but I hope that the Minister will clarify that point.

The National Farmers Union of Scotland has welcomed the agreement, but I am not certain that it understood just how unsatisfactory were the exporting arrangements. The anomaly of the claw-back arrangements as applied to exports to extra-Community countries must be sorted out quickly. The Community has no great interest in opposing such an arrangement.

The Minister dealt rather sketchily with this subject. He said that the Government were waiting to see how the market would settle down before finalising any thinking on the proper approach. I do not know how long he intends to wait or whether he expects something to happen that will clarify the issues involved. Those issues seem clear, although the Minister may think that they are not. My hon. Friend the Member for Edinburgh, East said that the export of sheep meat had virtually dried up. He was supported by the hon. Member for Devon, West (Mr. Mills). If that is true, the Government should take urgent action.

Perhaps the Minister will clarify the type of action that the Government could take. I understand that the Community has agreed to the present arrangements. Reopening the discussions will not be easy. I hope that the Minister will clarify the situation, because those of us who believe that the industry's interests are being damaged may wish to make representations to the Community.

It is important that it should be widely understood that this is happening, not through any pusillanimity on our part, but through the direct opposition of the Community to our interests. If that is so, we shall wish to support the Government in any changes that they consider necessary on the clawback front, and to do so forcefully and speedily if that is what they have in mind.

I am glad that the Government are taking such measures as lie in their own hands to introduce new certification procedures for sheep at export slaughterhouses and lairages and that they hope to have these arrangements operating within a couple of weeks. However, I understand that a decision on the level of the clawback, namely, 100 per cent., does not lie in the Government's hands. Any change in the level of claw-back will require renegotiation with the Community. It is on that nub point that the Government will have to focus rapidly. The Minister was not clear on exactly what considerations he has in mind in waiting for the market to settle, nor was he clear on exactly what he has in mind on exports. I hope that he will be able to say more about those matters when he replies to the debate.

Notwithstanding the serious export problems, especially to third countries, I think that the Minister has struck a difficult balance. I am glad that at least some progress has been made in the direction that has been established by the regime.

11.22 am

Mr. Colin Shepherd (Hereford)

That part of me that represents the lamb producers in my constituency welcomes the development of the regime. That part of me that represents the consumers in my constituency, or those who are not related to the producers, also finds a note of cheer in the regime. However, I find myself having to strike a note of caution when I consider the important sector in my constituency that is involved in the poultry industry, and the knock-on effect of what is proposed.

About 2,500 of my constituents are directly employed in the poultry processing industry, through Sun Valley Ltd., in my constituency. The company has several hundred more employees in plants throughout the country. It is viewing with great concern the situation that has arisen from the Iamb regime. I do not know whether that concern has crept through the operation completely. However, those who are looking to the future of the industry have expressed their concern to me in no small measure.

I am reminded of the occasion in the period from 1973 to 1975 when the beef token scheme was introduced to remove the surplus of beef intervention in Europe. It was observed that as a result of the introduction of the scheme no additional meat was eaten by the pensioners who qualified for the tokens, but that there was a switch away from the cheapest meats towards the more prestigious meats such as beef. The chicken business suffered enormously.

I recollect the manager of one of the largest firms involved in intensive chicken production expressing his distress at that time. He claimed that the industry was being ruined. When I see a large amount of meat coming on to the United Kingdom market of a nature different from chicken, and at a price that is extremely competitive, my immediate reaction is to think back and ask myself whether we shall upset the delicate balance of the availability and supply of meat to the consumer. If that will be the result, are we going to knock the sales of poultrymeat by the introduction of low-cost lamb into the consumers' price range? That is my main worry about this set of proposals.

Lamb producers should be worried, as well as those in the poultry industry. What the producers regard as a copper-bottomed market may be less stable than they think. If there are too many stresses and strains, there will have to be changes.

The manifestation of the knock-on effect has already shown itself. We have a nervous poultry market. It has taken 3p a pound off the price of chicken. That may be attractive to the consumer now, but I do not think that it is good in the long term. The industry feels that it may have to drop its prices yet lower to sustain the level of consumption. If that is so, it will be only a matter of time—it will be a very short time—before the margins start to disappear from the broiler industry.

We have taken poultry for granted and regarded it as a basic staple of our diet, because of its blandness, and because of the many ways in which it can be presented. It can be served in a variety of ways. However, all of a sudden it might not be available. The cost will be enormous, in terms other than unemployment. The consequences will flow to the other fanners who are engaged in grain, barley and cereal production in the poultry feed industry. We must take account of all the other ramifications of that important sector of agriculture.

It is with caution that I observe the entry of this source of low-cost meat. Matters may stabilise themselves, and it may be that as a nation we shall he unable to continue to eat large quantities of lamb. It is a meat that I find delicious, but it could pall if I had it day in and day out, without variety. The effect that I have described may be ameliorated if we cease buying lamb after a period.

If that is so, another dimension, which has not been covered in the debate, enters the equation. We have a large amount of sheepmeat coming on to the market. This year production increased by about 13 per cent. I have read in the Farmers Weekly that over the next four years we are likely to have a steady increase in meat production. This is confidence-inspiring for those who are producing it. However, fat lamb or finished lamb—I do not wish to get confused with the grading element—is coming to the market place every week. If there is nowhere for it to go abroad through the export trade, to where does it go?

If we are not eating it in Britain, it must go somewhere. I understand that lambs are now being punched and put out to pasture again until the price comes up to the right level. I do not recognise that as a long-term solution. We are not particularly flush with pasture at this time of the year. It is only a matter of time before positive feeding will have to be given to lambs that have failed to find an abattoir. Stress is being built into the system even now. We must address our minds to finding a solution to the problem.

Much has been said about the export clawback. That serves to underline the necessity to resolve the problem. We must re-establish the export market in some way. No one can duck out. The industry as a whole, including the National Farmers Union, the Scottish National Farmers Union and the Country Landowners Association, cannot toss the problem to the Government and say "Resolve it. That is your job." They have a valuable input to make to the discussion and they must take the problem on board.

Lamb producers now have a copper-bottomed market. The poultrymeat producers, be they farmers growing broilers on their land, farmers growing cereals, or those employed in processing into the style in which we pick up chicks from the shelves in Marks and Spencer, have an interest. They are at risk.

If the industry is to look after itself, and if it is to be positive and constructive, it must pool its ideas. A possible solution—I should be interested in the Minister's views on this—is that the aspirations of guarantee might be ameliorated by taking 1p or 2p off the guaranteed price. That money could be put towards funding a reduction of the clawback for exports to third countries, or even to Community countries. We could do that with the same amount of money, and thereby solve the problems of the industry, without jeopardising any of the advantages of the regime. Without doubt there have been advantages.

Much is hanging on what happens to the export trade. We produce more lamb than we eat. No amount of eating lamb for breakfast, lunch, tea and dinner will make us consume all the lamb that we are capable of producing. We must export. That is the crunch of the issue. If we can develop and sustain proper export markets by coming to an arrangement on clawback, possibly related to an internally financed system through the moneys coming from the Commission, we stand a chance of ensuring that we do not upset the delicate balance of supply and demand. We could then achieve the confidence necessary for the producer, consumer and everybody involved in employment, industry, and agriculture as a whole. That is the real point to which we must address ourselves.

11.32 am

Mr. John Home Robertson (Berwick and East Lothian)

I share the concern of the hon. Member for Hereford (Mr. Shepherd) for the poultry industry. Earlier this week I led a delegation from my constituency to meet the Minister of State, Scottish Office, following the declaration of 80 redundancies at one poultry unit in East Lothian. That was the direct result, not of the issue that we are debating, but of other aspects of Government policy, and I had better dwell on the order before the House.

Like many hon. Members on both sides of the House, before the Summer Recess I pressed the Government to introduce the sheepmeat regime quickly. Obviously I welcome the regime, as it is designed to affect the sheep market in Britain, but I must qualify that by saying that I deplore the scheme, introduced under the same umbrella, that will operate in France. I welcome the scheme for Britain, because, fundamentally, it is a deficiency payments system. From virtually every point of view such a support scheme is inherently better than the intervention scheme that will be used in France. It is better for the producers, because it supports their prices, and it is better for the consumers because it is designed to ensure that cheaper meat is available.

It is worth commenting on the confused state of agricultural support mechanisms within the Community. As the right hon. Member for Down, South (Mr. Powell) said, it is supposed to be a common agricultural policy. We seem to have goodness knows what in agricultural support mechanisms floating around the Community—intervention buying for cereals, butter and beef, for France and mainland European countries, intervention buying for sheep and goats, the new deficiency payments system for the sheep meat regime in Britain; and the blanket support measures, such as the capital grants, hill livestock compensatory allowances and the headage payment on suckling cows. All those must be extremely complicated and expensive to administer. It is confusing for all in the trade, except for some specialists who wheel and deal in various food commodity markets. I shall say something about them later.

The subsidies are intended to support livestock farming and to ensure good supplies of meat at reasonable prices for the housewife. Because European Community schemes tend to be so complicated, and so potentially lucrative, we now have another body to consider as well as farmers and consumers. I am not referring to legitimate dealers and butchers in the meat trade. I am not sure who I am talking about—it could be the Vesteys, the Dewhursts or any number of large-scale operators in the meat trade.

Under the arrangements that came into force with the order on 20 October, a great deal of money appears to have gone missing from the market. According to information that I have obtained in my constituency, before 20 October the market price for lamb was about £1.20 per kilo. That was 10p per kilo less than the price in England—which is always a bone of contention for Scottish farmers and producers. A 30p per kilo British Government subsidy was paid to supplement the market price of £1.20. Therefore, the Scottish farmer was receiving £1.50 per kilo for his lamb. Since the new regime came into effect farmers have been receiving, not £1.20 per kilo, but only about 90p. That is supplemented by a Community subsidy of up to 70p per kilo, bringing the total to £1.60 per kilo.

For each kilo sold the farmer receives 10p more, the buyer—but not the retail buyer—pays 30p less, and the Community pays 40p more than the British Government were paying previously. It appears that 30p per kilo has gone missing. It would be interesting to know where it has gone. The fanner and the housewife do not have it. The Minister should discover the identity of the ghosts who are getting the cash. He should try to prevent that practice before the EEC Commission steps in and puts a ceiling on the premium.

As the hon. Member for Devon, West (Mr. Mills) said, the scheme is costing between £4 million and £5 million a week. That cannot continue indefinitely, especially as neither the consumer nor the producer is benefiting. That practice could bring the whole system of deficiency payments into disrepute. I hope that the Minister will be able to throw some light on where the money is going. I hope, too, that he will say when and how the consumer will benefit substantially from the scheme. He spoke about the market settling down. The trouble is that the market price to producers has settled down, but there is no evidence that the price to consumers has fallen to a similar extent.

I have evidence that lamb prices are not significantly lower in the shops. It is worth remembering that housewives have less to spend on meat because of the recession that the Government are deliberately making worse, for reasons best known to themselves. However, that is another issue. Under those circumstances, it is hardly surprising that the housewife is buying less prime meat than she did previously. I discovered last week that the butcher in the village of Churnside in Berwickshire, who for many years called on neighbouring villages and sold meat from door to door, stopped doing so because his turnover was not high enough. People were buying less. That is sufficient evidence that the consumer is not obtaining much benefit from the present position.

Mr. Dalyell

Is he not calling at Hirsel?

Mr. Home Robertson

That is an interesting thought. Perhaps my noble constituent, Lord Home, can afford to buy meat, but many working people, the unemployed, and those on supplementary benefit cannot afford to do so, even under the present scheme. The situation is worrying, because if the deficiency payments system were working prices in the shops would be substantially lower. That is the housewife's side of the story.

Let me move on to the effect of the regime on sheep producers, of which there are many in my constituency. I am not sure that I can match the hon. Member for Devon, West by saying that there are more sheep than people in my constituency, but we cannot be far off that position. There are both upland and lowland farmers in my constituency. I do not know who they vote for, but many Scottish farmers are saying that the regime has come too late to prevent serious damage being done to the industry.

During August I took a brief holiday at the home of my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan). I attended lamb sales at markets at Thurso and Lybster, where good quality north country Cheviot lambs were being sold for £20 a head less than last year. That represents a 40 per cent. drop in the income of those hill farmers. Added to the fact that their costs have increased by 20 per cent., it means that they are 60 per cent. worse off.

My hon. Friend the Member for Caithness and Sutherland has spoken on behalf of his constituents. I met a number of my constituents in Caithness, where they have traditionally bought lambs. Those farmers and dealers told me that they were spending less on lambs in Caithness for two reasons: first, because they had less to spend, which is a direct result of Government policies, such as high interest rates and so on; and, secondly, because, despite all the Minister's assurances, they had no confidence in the scheme that he had announced.

Like virtually all business men in the United Kingdom, sheep farmers in my constituency are tightening their belts this year, because of the Chancellor of the Exchequer's home-made recession. They are buying fewer lambs, which is a supplementary enterprise of many lowland farms. That is all very well this year, but can the highland producers, who have to provide the lambs for fattening enterprises on the low ground, afford to stay in business for another year? If they cut back on production there will not be the lambs for my constituents to buy next year, and that part of the industry will die.

The Minister should be aware of the crisis in hill farming, because the Ministry has been consulting the NFU in Scotland and elsewhere this week about the review of hill farming that takes place at this time of the year. The hon. Gentleman knows that in the past three years there has been a reduction of 15,000 in the number of hill ewes in Scotland, and a reduction of 15,000 in the number of hill cows in Scotland. That is the crisis that the Minister must face.

The result of last year's review of hill farming was pitiful. There were inadequate hill livestock compensatory allowances and the sheepmeat regime has been brought into effect a year late, when most hill producers are already one step nearer the brink.

A number of hon. Members have referred to the effects of the clawback on the export trade. It is unlikely that we shall ever get a major foothold in any export market, whether in France or anywhere else. That is serious for Scottish farmers, because 70 per cent. of the lambs produced in Scotland have to be exported. We consume only 30 per cent. of our production. The rest must go south of the border or overseas. We could even face the final irony of opening up the French lamb market just in time to realise that our breeding flock has been reduced to such an extent that we cannot supply that market.

Other hon. Members have touched on the Irish aspect. It seems that the Government of the Republic of Ireland have been able to get over the clawback pro- blem by introducing a compensatory ewe premium which enables farmers in the Republic to compete in the French and Belgian markets. Our people cannot compete, and we are losing in those markets.

Mr. Peter Mills

Which system does the hon. Gentleman think is best for our producers—that they should be paid on a ewe basis, or under the deficiency payments system that the Government have chosen?

Mr. Home Robertson

I said at the outset that the deficiency payments system is the right way to support the market. The trouble is that we are competing in markets where the deficiency payments system does not operate. Consequently, the Minister will have to fight on two fronts.

It is also important to emphasise that the reduction in sheep numbers in the United Kingdom is bad news in the long term for our consumers. If it continues, there will be a scarcity of lamb on the market, which will result in high prices, and once again the housewife will suffer.

I appeal to the Minister to try to do much better this winter for all concerned. He knows that the situation on many upland farms is critical. It is time that he realised that it is no good giving inadequate assistance too late, which is what has been happening every year. In the view of many hill farmers, he might as well save his money and stop prolonging the agony.

If the Minister wants a strong British livestock industry, he must accept that we need the sheepmeat regime to work properly and that we need a substantial cash injection to overcome the damage that has been done. A number of hon. Membes have suggested that one way of achieving that is for the Government to provide substantially bigger hill livestock compensatory allowances. That would pump much-needed money into the hill areas.

One way or another, by hook or by crook, the Minister must get more cash for the industry, certainly for the uplands, either from the Treasury or from the EEC—regardless of the Prime Minister's fetish about support for industry. The time for debating whether aid should be given is long past. The need is self-evident, and the collapse in hill ewe numbers shows that the damage has been done.

If the Minister fails, we shall see more bankruptcies and redundancies and further depopulation of hill farming areas. There will also be drastic reductions in livestock enterprises in lowland areas. There will be redundancies in places such as the counties that I represent. It is a bleak outlook for all concerned, except perhaps the New Zealanders, who are waiting on the sidelines to take over the markets and jobs of those whom I represent.

The Minister has a heavy responsibility. Many shepherds, lorry drivers, farmers, butchers and all their families in rural areas are depending upon him to rescue the industry. The order is not enough. We need more for the industry, and I am sure that the whole House wishes the Minister well in the fight that lies ahead.

11.50 am

Sir Anthony Meyer (Flint, West)

In the early part of this year feelings in my constituency and in the whole of North Wales over the so-called lamb war were running so high that my constituents would not understand if I failed to intervene in the debate, however briefly, to welcome the arrangements that my right hon. Friend the Minister of Agriculture, Fisheries and Food has managed to make. For all their imperfections, they have at least taken the heat out of the argument.

The amount of enthusiasm for the arrangements detectable this morning would not constitute a mountain in Common Market terms. In particular, those who know the subject a great deal better than I, such as my hon. Friends the Members for Devon, West (Mr. Mills) and for Hereford (Mr. Shepherd), have pointed out not merely the difficulties and drawbacks, but the fundamental flaws in the arrangements.

If a sheepmeat regime of any kind had been basically in this country's interests, no doubt the Government would long ago have pressed for it, but we must take account of realities. In the situation in which we found ourselves the balance of advantage lay in concluding some such arrangements as have been made. If not three-quarters satisfactory, they are at least two-thirds satisfactory.

Speaking as the chairman of the Franco-British Parliamentary Relations Committee, I must rejoice over the fact that one particularly sharp thorn in the flesh of Anglo-French relations has been temporarily eased out. Of course, it was the attitude of the French that rendered the whole matter particularly difficult, but we should not be too hasty in condemning it. We ourselves stand up for our national interests. I listened with some astonishment to a report on the radio this morning that in the unenviable league of those who have been caught out in violations of the common customs tariffs at the borders, and in frauds arising therefrom, Britain is No. 2, with the Germans at the top. Believe it or not, the Italians are at the bottom.

Mr. Colin Shepherd

They must be better at being undetected.

Sir A. Meyer

There may be an element of that.

We do not want to be too self-righteous. We want to avoid being too smug and too condemnatory of the way in which people introduce electoral considerations into these matters. The French Government will face an election long before we in this country shall. We must take account of the realities.

Whatever the drawbacks of the present arrangements, which have been eloquently and graphically pointed out by hon. Members on both sides of the House, they have one great advantage. For the first time they introduce the principle of deficiency payments into the common agricultural policy. I part company from the right hon. Members for Down, South (Mr. Powell) and Battersea, North (Mr. Jay), who ridiculed that arrangement on the ground that it made nonsense of the whole principle of the CAP. I rejoice that the CAP will now look a little like the British constitution, and in particular like the British Parliament, in containing elements that are indefensible, but which work.

That is exactly the kind of thing at which we, as British pragmatists, should aim. My worry about the CAP was that it was something that the other countries of the Community regarded as absolutely basic to the Community's existence, because it was the only common policy that was 100 per cent. in operation, but was so rigid that it constituted a danger to the Community's structure. The fact that an element of flexibility has now been introduced into the operations of the CAP must be a good thing.

As for the long-term outlook, I very much rejoice—this is why I welcome the arrangements—in the fact that the morale of sheep farmers in my constituency, and I am sure in other constituencies, has been noticeably raised at a time when it was hideously low. That must be good.

Long-term, it seems to me—though here I speak with no knowledge—that no way out will be found by trying to readjust the apportionment of the market for sheepmeat within the Community. I wish my hon. Friend the Minister of State joy in trying to follow up the interesting suggestion made by my hon. Friend the Member for Hereford, of reapportioning some of the money available in order to promote exports. I hope that that can work. It suggests to me that the best long-term future is to try to expand enormously the market for sheepmeat, particularly in the Middle East.

Two years ago I spent Christmas Day in—of all extraordinary places—the rose-red city—‘half as old as Time’". Petra. I was unfortunate enough to eat my Christmas lunch in the hostel there, and ate the nastiest mutton that I have ever eaten. It was unfit for human consumption. I remarked how nice it would be if some decent Welsh lamb could have penetrated as far as those remoter parts of Jordan.

Seriously, in an area whose buying power has been vastly expanded through its oil revenues, there must be possibilities for an exponential increase in the export of lamb from the temperate countries, both from Europe and from the Antipodean countries, to provide a better long-term outlook for sheep farmers.

I welcome the arrangements before the House, with all their drawbacks, which I do not deny. I welcome them on the ground that they diminish the damage that the CAP was beginning to do to the Community. I have never made any secret of my view that the Community is an essential element in this country's recovery.

11.56 am

Mr. Tam Dalyell (West Lothian)

I should like, first, to indulge my curiosity. Many words have been spoken on the subject of the debate, both in the full sessions of the European Parliament and in its Agriculture and Budgets Committees. How much guidance, notice, attention—call it what one will—have Her Majesty's Government paid to the goings-on in the Parliament or Assembly, describe it how one will, according to taste? In the formation of policy, has any serious attention been paid to what has been happening in Brussels or Strasbourg?

I made a new Session resolution—how long I shall keep it is another matter—not to interrupt the speeches of the right hon. Member for Down, South (Mr. Powell).

Mr. J. Enoch Powell

We are still in the old Session.

Mr. Dalyell

At the European Assembly, on the Budgets Committee, we heard endless stories of what happened on the Irish border: how sheep and pigs—and, for all I know, goats—were paraded many times from one side to the other. The stories, which may be hairy, reached the level of comic opera. Everyone smiled at them, but they are becoming less than amusing and must be taken seriously. The right hon. Gentleman is not the only person who will be interested in the Government's response on the question of Northern Ireland and the movement of animals from one side of the frontier to the other, which is right out of Gilbert and Sullivan.

The hon. Member for Hereford (Mr. Shepherd) raised what is an important issue for my constituency, that of poultry. I have the firms of Ross Poultry and D. B. Marshall at Newbridge. I know from Denis Chiappa, an executive member of the National Union of Agricultural and Allied Workers, who works in D. B. Marshall, that the firm is extremely concerned about the future for poultry. However, we must not stray on to that question. Some of us will long remember the hon. Gentleman's speech, if only the part in which he asked for our sympathy "for poor lambs that fail to find an abattoir".

In answer to my question about costs, the Minister replied that if I was asking for a price tag he would tell me at the end of the debate.

when the markets have settled down. I say, with a degree of kindness to the Minister, that the markets will not settle down between my asking the question and when he replies to the debate at about 12.15 pm. If I have him wrong, no doubt he will correct me, but, in my view, on all orders of this type Ministers should come to the House fairly well briefed about the costs of what we are to discuss. Far too often in the Committee dealing with European legislation, as the hon. Members for Flint, West (Sir A. Meyer) and for Devon, West (Mr. Mills) and others know so well, we have no idea of the relative importance of things, because we do not have even a rough estimate of the sums involved. The position is becoming a little better in that respect, but before talking here about clawback, we should have a rough idea of the Government's estimate of the sums involved.

My hon. Friend the Member for Berwick and East Lothian (Mr. Home Robertson) represents East Lothian, and I represent West Lothian. Whereas I concede that the constituency of Berwick and East Lothian has more sheep and is a beautiful farming constituency, West Lothian, too, has its problems for hill farmers in the Stoneyburn, Fauldhouse and Blackbridge area, and it is partly on their behalf that I wish to speak, because they are concerned about fuel prices and interest rates.

My hon. Friend the Member for Berwick and East Lothian was in no way exaggerating when he said that farmers were going through the most difficult time that they had ever faced. Of course, farmers complain. They shake their heads and tend to be a bit lugubrious, but on this occasion I think that there is really the possibility of many bankruptcies. I do not pretend that it is simply a matter of what is happening as a result of our membership of the EEC. That is not the position. There are many other factors that make it important that the hill livestock compensatory amounts should be treated generously in the autumn. I join the hon. Member for Banff (Mr. Myles), my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) and other hon. Members who have asked that favourable consideration be given to the compensatory amounts.

I should like to devote the second part of my remarks to the general principles affecting the Community. Anyone who has spent four years on the Budget Committee of the former European Parliament knows that there is only a certain time for which major payments can go on. I ask the direct question which my hon. Friend the Member for Edinburgh, East (Mr. Strang) and others asked: how long will the Community go on spending £4 million or £5 million a week? These coffers are not bottomless, and there will come a time when people will say "Enough is enough".

I agree that under this arrangement it seems that the producers have an initial benefit, but we are concerned about exports. My hon. Friend the Member for Edinburgh, East spoke of 30 per cent. I was told that roughly a third of the lamb produced in Scotland—

Mr. Buchanan-Smith

indicated dissent.

Mr. Dalyell

If the Government dispute that, the Minister will no doubt do so when he replies to the debate. However, I gather that a substantial part of the investment already made has been geared to export markets, not only to Belgium and Germany, but, in the case of my own constituency—a major sheep producer—to the Middle East.

I couple with that the question asked by the hon. Member for Devon, West about abattoirs. I have had considerable dealings with the ins and outs of the Bathgate abattoir. It really is on a shoestring. If developments take place as we have heard this morning, what is to happen to people who are worried enough as it is and may go back to the receivers, for all I know? I do not refer specifically to the Bathgate abattoir, because I do not discuss people's personal affairs in general terms, but there is no doubt that some will go back to the receivers.

Surely it was no part of the Community's policy deliberately to prevent United Kingdom lamb from going anywhere else in the world—

Mr. J. Enoch Powell

Oh, yes, it was.

Mr. Dalyell

Then all I say is that I remember the referendum very well, when many speeches were made by Conservative Members and by some of my senior colleagues to the effect that if we joined the Community there would be great improvements in export potential for the farming community.

Mr. Peter Mills

indicated assent.

Mr. Dalyell

The hon. Member for Devon, West agrees. The clear understanding given in the Usher Hall by the former Leader of the Opposition and many others at that time was that the farming community could expect a considerable rise in exports. It was in good faith that some of us commended the Community on those grounds.

At the same time, it is fair to mention from the Back Benches that I wish that the farmers' organisations would be a little clearer a little earlier on about their attitude to proposals. I gather that I am not the only one who got the impression from the rather efficient Scottish NFU—I am grateful for its press releases, which keep us informed—that this proposal was all right. If the NFU says that a proposal is all right, one is inclined to believe it. Understandably, the farmers can be angry, but they should also be a little angry with their own organisations.

I deal now with France and certification. This is a matter that has to be gone into, because we all have stories about it. The hon. Member for Devon, West talked about 100 lambs displayed prominently on the back of a lorry. This is happening all round the clock now. Exactly the same story in a different form could be put forward by British Leyland at Bathgate, where there are great difficulties with French certification. It may take up to a year, with endless paperwork and the problem of what is termed "homologation", which I raised in a previous debate on Tuesday in the House in relation to product liability in the motor industry.

At almost every point the French are being difficult and slow, and speed is of the essence. On the other hand, we, when importing French vehicles, are very quick and efficient.

This is a matter of sauce for the goose and for the gander. Again, in a different form, I ask a different Ministry to look into the rules of the game by which the French are playing the Common Market.

What is happening in agriculture and in the motor industry is perhaps hap- pening in many other industries. We have to make it clear that if the French intended to be slow about documentation we can become equally slow. As an unreconstructed pro-EEC man, I do not like advocating tit-for-tat, but there comes a time when we have to make our interests clear. If the French do it, we shall do it.

A number of hon. Members have spoken about goats. I, too, saw this reference in the document: 'Sheepmeat and goatmeat' and opposite thereto in the second column there shall be inserted the words ‘Live sheep and goats’. Possibly I ought not to take up the time of the House with that or indulge in any wisecrack about sorting the sheep from the goats. But this is not a laughing matter. Whereas, comparatively, there are not many goats in the existing countries of the Community, there are a great many in Spain and Greece. We are brought, then, to consider the sheepmeat regime, given the enlargement of the Community.

The entry of Spain will reinforce the French interest. The number of sheep in Galicia is large. Spain is a major sheep-rearing country. In terms of the enlargement and the different circumstances, what thought has been given to the operation of a sheepmeat regime and the kind of optimum regime that is desirable? Have the applicant States been consulted about these arrangements? The right hon. Member for Down, South asserted that no one but France wanted them and that the French had got their way by will power and bribery. Is that true? I add a further question. Have the Spaniards and the Greeks been consulted? If so, what is the Government's reaction on the issue of enlargement? There are other questions that could be asked, but hon. Members have planes and trains to catch.

12.12 pm

Mr. Buchanan-Smith

I thank those hon. Members who have taken part in the debate. It has been a useful debate on a matter that is rightly of concern, not only in this country, but, as the speeches have shown, throughout Europe. I assure the hon. Member for West Lothian (Mr. Dalyell) that we pay attention to debates in the European Parliament. They are only one element of many different considerations that we take into account. There are our own discussions internally, and with our own producers. From time to time I have direct dealings with those individuals who take an active part in the European Parliament on agriculture matters.

A large number of different points have been raised, and I shall deal first with one or two specific points of fact. I should like to put out of the way one point which, on the face of it, is important. It relates to goats. It is true that the term "goats" is included. Goats are included in the regime for limited reasons, especially in relation to trade with third countries, and also in relation to a limited area of aids for private storage that do not affect us.

The internal arrangements that we have been discussing apply only to sheep and sheepmeat. It is correct to say that if they applied to goats the implications would be enormous, particularly if other countries accede to the Community. The implications following accession have been discussed with Greece. The financial implications are included in the 1981 budget proposals of the Community. No date of accession has yet been agreed with Spain. This will be an item for discussion in the accession negotiations with that country.

The proportion of export trade is another question of fact raised by the hon. Member for West Lothian. I do not have to hand the figure for Scotland. The hon. Gentleman may be right about Scotland. The amount of United Kingdom trade affected by exports is about 20 per cent. of total production. I accept that it is probably a proportionately higher figure for Scotland.

I shall deal with one or two matters of a more general aspect before returning to the nub of the debate, which is about exports and the operation of the regime itself. I share the concern expressed by my hon. Friends the Members for Hereford (Mr. Shepherd) and for Devon, West (Mr. Mills) on the question of substitution. If the price for lamb falls, that can affect consumption. I assure both my hon. Friends and also the hon. Member for Berwick and East Lothian (Mr. Home Robertson) that this is one of the implications that we shall be watching. If it works in the way that it looks as if it should work for producers in hill and upland areas, it could affect cattle production in those areas.

The hon. Member for Berwick and East Lothian and my hon. Friend the Member for Hereford cannot both be right. If there is a softening of price for the consumer, that will lead to substitution. If there is no softening of price, substitution will not take place.

My hon. Friend the Member for Banff (Mr. Myles) and also the hon. Member for Berwick and East Lothian raised the question of hill farmers. I mentioned that matter in my opening speech. A different marketing pattern operates in England and Wales, and hill farmers in Scotland did not benefit from this regime in regard to production this year because of the date of implementation. That matter will be taken into account in the current consideration of hill livestock compensatory allowances.

I do not accept the general criticism of the hon. Member for Berwick and East Lothian, who is a member of a party which, despite being in Government for four years from 1976, never raised the hill livestock compensatory allowances. In their last year in office they added only 50p on sheep. The Government do not require lectures from the Opposition. Last year, on coming to office, we gave the biggest increase ever. I am prepared to stand by what we have done as a demonstration of our concern for the hill livestock producers of the United Kingdom.

Mr. John Home Robertson

Is the Minister arguing that the present level of hill livestock compensatory allowance is sufficient to maintain ewe flock numbers in the hill lands of Scotland?

Mr. Buchanan-Smith

That is the precise point under discussion with the National Farmers Union and others at present. If the hon. Gentleman thinks that it is not sufficient, how much less sufficient was it in the last four years of the Labour Administration?

My hon. Friend the Member for East Grinstead (Mr. Johnson Smith) raised the question of the export of breeding stock and how this stock is distinguished. Sheep being exported for breeding need a certificate to that effect. A greater safeguard, as my hon. Friend knows, is that stock going for breeding generally goes at a higher value than stock going for meat purposes. My hon. Friend mentioned the new standards and consultation with the industry. Although all the details were not known when the sheepmeat regime was introduced, it is the case that grading standards were announced in September after consultation with the National Farmers Union and other interests. There was reasonable warning.

The right hon. Member for Down, South (Mr. Powell) raised two specific points in relation to Ireland. The first was the system operated in the South. The South is operating an annual premium system in the same way as other countries in the Community are operating such a system. The fact that it operates that variation does not mean that it operates in a peculiarly Irish way. It is operating in a way in which it has been laid down that the system should operate, without varying from the principle.

The right hon. Member for Down, South also raised the question, as did the hon. Member for West Lothian, of cross-border transactions. The customs arrangements for handling the movement of stock on the Irish border are the same as those at other borders. That still begs the question that, because of the nature of that border, it is not so easy to operate those customs arrangements in practical terms compared with movements controlled through ports. Nevertheless, although this arrangement can, in certain circumstances, encourage the movement of stock one way or the other, it does not of itself necessarily introduce new elements. Although differences develop on either side of the border and add to existing difficulties, the new scheme of itself does not create the problems described by the right hon. Gentleman. The scheme has been in operation only since 20 October, and we know that it gives rise to new problems and differences which encourage illegal trade. We shall do our best to deal with that.

Discussions are continuing with the Irish Government. As the right hon. Gentleman knows from his practical experience, far better than I do, this practice cannot be controlled successfully by one Government. The system must be operated on both sides of the border. The Irish Government are alive to the matter and we shall be discussing it with them. If anything arises that the right hon. Gentleman would like to draw to my attention, I shall be pleased to hear from him. There are peculiar problems with which we want to deal.

Mr. Dalyell

There is no doubt that the same sheep have many times tramped one way across the border and padded back the other way.

Mr. Buchanan-Smith

The hon. Member's allegations underline my point, that the difficulties described by the right hon. Member for Down, South are not created by the sheepmeat market. They have existed for some time and need to be watched—and not simply in this respect.

The heart of the matter relates to exports and clawback. The Commission's attempted justification for clawback on exports to third countries is that without it our exports would be unfairly subsidised, because of our premium system, compared with those of other European countries. We do not accept that argument. We believe that modification is needed. In further discussions on this aspect, as well as on the general matter, we shall continue to press this point.

Mr. Strang

Is the Minister talking about discussions that will take place in advance of the normal price-fixing discussions, or does he envisage that the arguments about changing the regime will be subsumed in discussions preceding the settlement on the overall EEC prices package for 1981–82?

Mr. Buchanan-Smith

This matter is urgent and I expect the discussions to take place this month.

The hon. Member for Edinburgh, East (Mr. Strang) and others asked why the clawback should be 100 per cent. We argued that it should be lower, for the reasons that the hon. Gentleman gave, and we shall continue to work to that end in the monitoring process and in discussions on the wording. We believe that 100 per cent is unrealistic.

I also agree with the hon. Gentleman about the calculation of the week to which the clawback applies, which interferes with traders' legitimate considerations. We argued that this should take place earlier, at the time of the export. We shall pursue that in the hope of getting it changed.

Although I acknowledged that at the moment the clawback mainly affects Belgium and Germany—the effect has been dramatic up to now—we should not forget that the premium to be clawed back will be 70p or so a kilogram as against the illegal levies of 80p to 90p formerly operated by the French. Those levies have now gone; the French market is open. It is important to get this into perspective. There are difficulties now—after all, this is not the traditional time for entering the French market, because of their marketing arrangements—but that is what will happen.

I have taken on board the point made by my hon. Friend the Member for Devon, West and the hon. Member for West Lothian, that I should be aware of other obstacles. Our embassy in Paris is watching this matter, because we have had evidence of procedural and documentary difficulties. In one instance, however, obstacles were swiftly withdrawn. To be fair, I think that the difficulty arose because of a misunderstanding. It is sometimes difficult to distinguish between a genuine mistake and an obstacle.

Mr. Dalyell

If it is a mistake, the French must be in a perpetual state of error, but we know that they are not. Some of us think that this matter should be taken up at the highest level between the Prime Minister and Giscard d'Estaing.

Mr. Buchanan-Smith

I did not say that the French were always right—far from it. I said that we were alive to this matter and would watch it carefully. We shall take action if necessary, as we have already done in one case since the regime was introduced.

I was not trying to mislead the hon. Member for Edinburgh, East in what I said about the cost of the clawback. I know what the total cost of the regime is expected to be, because it appears in the EEC budget. That is the figure that I said I would give at the end of the debate. The figure allowed for this year is £32 million, and for 1981 it is £166 million. What I cannot give is the precise cost in the short term of the amount of clawback that will be applied until the present disruption of the market settles down.

That brings me to the fair question of how the monitoring will be conducted.

We are aware of the problems. I have discussed this matter with some of those concerned, including the operators of the Bathgate slaughterhouse, with whom I have had a meeting in the last three days. I have therefore had the information direct from those concerned.

I am not trying to misrepresent the situation. Although some people in the trade believe that the Government should act now, others, who are involved in a big way, have fairly told me that their commercial assessment is that the position has not yet settled down. One has to judge to what extent the present effect is short-term and likely to improve when the arrangements come fully into effect and to what extent it represents a long-term structural defect in the system. Some traders believe that the situation is long term and that more time is necessary to make a proper commerical assessment.

Officials in my Department will keep in touch with individuals in the trade. When we think that it is time to make a proper assessment we shall have the advantage of commercial advice from people who operate in the trade. In the next week or so we shall keep in close touch with the trade and try to judge whether the problem is short or long-term. If it is long-term, more radical action might be necessary.

We have made it clear to the Commission and Mr. Gundelach that the position is unsatisfactory. Mr. Gundelach has given us the absolute assurance that the regime is not intended to disrupt trade with Europe. We shall watch the situation closely. When we judge it to be right we shall take the appropriate action.

The right hon. Member for Down, South and the hon. Member for Edinburgh, East were at fault in saying that the regime is a victory for France. The regime is not a victory for France. France wanted a system of total intervention for the whole of the Community. That has not happened. France wanted to unbind the tariff rate for New Zealand and other traditional suppliers and to replace it with a traditional CAP system with variable levies. France has not achieved that. The intervention price system applies only in France. The intervention price is below the market price that France enjoyed prior to the introduction of the regime. These arrangements are limited to certain times of the year. It is a travesty to describe the arrangements as a victory for France. They are not. There are compromises in the agreement, as there are in any agreement. To describe the arrangements as a victory for France is wrong. Our producers gain considerable advantages.

Hon. Members cannot have it both ways. The hon. Member for Berwick and East Lothian wanted the system introduced earlier so that it would help the hill livestock producer in the current lamb production year. We should have liked to introduce it earlier. His hon. Friends should not cavil and say that we should have waited longer and made more arrangements. If we had waited our producers would not have benefited to the extent that they are benefiting now. I should have liked to introduce the scheme earlier without some of the deficiencies in it, but a balance must be struck. Would those who criticise us prefer to be the scheme delayed? In their heart of hearts they will accept that it is better, even with the deficiencies, to introduce the scheme now.

We must remember that the United Kingdom has the system that it wanted. That is not a victory for France. It is significant that every other country, with the exception of France, is adopting a premium-type system. That is a victory for the United Kingdom and for common sense. Is it wrong to have a national-type system that varies between countries in order to suit different conditions? That demonstrates a flexibility and a more sensible approach to the Community.

The right hon. Member for Battersea, North (Mr. Jay) criticised the regime, but he and other critics do not question the system on practical grounds. Their opposition is based on doctrine.

We have achieved a good scheme. It is good for producers in terms of their returns and in terms of the prospects over a number of years. It is good for the housewife. That matters, because under the deficiency payments system the housewife will benefit from lower prices than would exist under an intervention-type system. It is good for New Zealand, in that it secures for it a continuing share of the European market. It is good for Britain as a whole, because under the scheme we receive a major contribution from Community funds. For all those reasons, I commend the order to the House.

Question put and agreed to.

Resolved.

That the Common Agricultural Policy (Agricultural Produce) (Production of Community Arrangements) (Amendment) Order 1980 (S.I., 1980, No. 1562), a copy of which was laid before this House on 17th October, be approved.