European Community Common Agricultural Policy

HC Deb 01 December 1983 vol 49 cc1046-98

Mr. Speaker

There is a long list of hon. Members who wish to take part in the debate. Will hon. Members who wish to do so please leave the Chamber quickly and quietly?

7.20 pm

The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling)

I beg to move, That this House takes note of European Community documents Nos. 8068/83 and 8823/83, communications from the Commission to the Council on the further development of the Common Agricultural Policy; 9596/83, introducing a tax on certain oils and fats; 9797/83, relating to the continuation of New Zealand butter imports into the United Kingdom under special conditions; 9797/83, Addendum 1, Commission report on the operation of arrangements for the importation of New Zealand butter during the years 1973–1983; 9988/83, on the market in products processed from fruit and vegetables; 9989/83, on the market in cereals; 9730/83 on the granting of aid for the use of butter and milk products; 9986/83 and 9986/83 Addendum 1, on the market in oils and fats; 9233/83, on the market in milk and milk products; 9691/83, on agricultural structures policy; 9686/83, 9686/83 Corrigendum 1 and 9686/83 Addendum 1, Report on the rules for calculating monetary compensatory amounts; and 10422/83, Report on the sheepmeat regime; and urges Her Majesty's Government to negotiate arrangements which will contain the cost of the Common Agricultural Policy, constrain surplus production, bear evenly on all Member States and take into account the interests of producers, consumers and food processors. I welcome this opportunity for a debate on agricultural policy, especially on the Commission's proposals for adjusting the common agricultural policy following the decisions of the Heads of Government summit at Stuttgart in June.

My right hon. and learned Friend the Foreign and Commonwealth Secretary explained to the House on 14 November the Government's overall objectives in those negotiations, and earlier this evening he explained in more detail some of the budgetary aspects. We believe that a prime need is to secure more effective control of CAP expenditure. That strict financial guideline would be designed effectively to control agricultural spending in relation to the growth of Community revenue. My right hon. and learned Friend earlier dealt with that aspect, and I propose in this part of the evening to concentrate on the Commission's proposals on agriculture.

The fundamental problem is that over the years CAP prices have been set too high. Production has increased faster than consumption and the inevitable result has been that the consequent surpluses have become increasingly expensive to store and to dispose of.

The tragedy is that the Council of Ministers, over many years, decided to overrule the advice of my two predecessors — my right hon. Friend the Member for Worcester (Mr. Walker) and the right hon. Member for Lewisham, Deptford (Mr. Silkin) who both consistently argued for restrictive price policies. Surpluses of many products, including grains and milk products and some Mediterranean commodities, continue to increase.

In mid-November 8.5 million tonnes of grain were in Community public intervention stocks. At the same time, there was just over 1 million tonnes of skimmed milk powder and nearly 900,000 tonnes of butter in store. On the basis of present Community policies, the position must be expected to get worse.

Recently there have been some signs of a more realistic attitude. For example, the increases in farm prices agreed earlier this year were the lowest for many years, but that action has come too late to provide a solution. That was shown dramatically a few weeks ago when the Commission had to suspend certain advance payments so that the CAP could keep within the 1983 budget. Fundamental improvements are therefore now called for.

The most important and urgent problem on the CAP is the growing milk surplus and the financial burden that that represents. In 1983, the milk sector will cost about £3 billion, which represents almost one third of expenditure on the CAP and about one fifth of the total EC budget. There is now a general recognition of the problem and an acceptance that some really hard decisions must be taken.

Many hon. Members will have seen the statements by the England and Wales Milk Marketing Board and the National Farmers Union. I want to spend a few minutes commenting on the thinking of those two organisations, because that will take us to the very heart of the problem with which we are concerned.

The Milk Marketing Board argues for a policy based on a firm commitment to price restraint, with no increase in support prices for two or three years in all member states and with a small immediate reduction in the overall milk price. We, too, believe that action on the price level would be the best way of bringing production and consumption in the Community more into balance. Indeed, I have been saying that for several months.

But there is no evidence that member states as a whole will be ready, in Athens, to endorse a price policy sufficiently rigorous on its own to tackle the problems. As the Milk Marketing Board's document acknowledges, it would require more than a price freeze to bring the milk surplus under control over the next 12 months, let alone to produce any movement towards a reduction in that surplus.

It is worth noting that the price policy solution does not attract universal support from the various milk interests in the United Kingdom. The NFU's document is notably silent on price policy of the milk sector, and the Scottish milk producer interests, as well as those in Northern Ireland, are not advocating rigorous price policy as the way forward.

I wish briefly to discuss the Commission's idea for a tax on oils and fats, as that forms an integral part of the Milk Marketing Board's preferred solution. The Milk Marketing Board wants to see margarine taxed by an amount equivalent to the reduction in the butter price. In other words, it wants part of the solution to the butter problem to be a regressive tax on margarine. Let me say first that the impact of the Commission's proposal for a tax on oils and fats would not be limited to margarine; it would have wide-ranging effects in the food industries. It would also raise very serious international problems not only in the Community's relations with the United States, but in our trading relations with many developing countries.

The Government have firmly rejected the view that the problems of the dairy sector should be corrected by imposing additional burdens on producers and consumers of other products, and by transferring the problem of adjustment to third country trading partners, including, as in this case, many developing countries which are heavily dependent on the Community market. We have, therefore, consistently opposed the introduction of an oils and fats tax. The NFU's approach is that a system of levies should be based on national standard quantities of production with each member state free to choose, within agreed criteria, the method by which to apply the levy to its own producers.

We should be clear precisely what that would mean. First, it implies that the levy reflecting the cost of increased milk production would be applied nationally—not to the individual producer who had expanded over the base quantity, but to all producers, irrespective of whether their own production had increased. Therefore, an individual producer would not be able to protect himself against the levy by adopting a strategy of producing at the threshold level related to his own enterprise. He would be liable to a charge which would be determined by the production of all other producers. He would not, of course, know until after the event what charge he would face. I am not sure that that solution would be attractive to many British milk producers.

The second point on the NFU approach is more fundamental. The levy based on a national standard quantity would amount to a national co-responsibility charge. The milk industry has always been opposed to the co-responsibility levy approach, and for good reasons.

It is fundamentally wrong to deal with the problems of the CAP by effectively taxing consumers, which is what co-responsibility levies amount to. As experience has shown, they open the door to exceptions which act against our national interest.

The NFU's ideas clearly imply the possibility of different arrangements in different member states. We could, for example, have effective levels of support in France or Italy different from those in the United Kingdom. All of us would be worried about an arrangement which might appear not to be operating even-handedly.

The England and Wales Milk Marketing Board rejects the Commission's proposal for supplementary levy. We also reject the Commission's proposal as it stands for a supplementary levy. It would not meet our requirement for action which is effective and fair across the Community.

One particular criticism relates to the base period. There are significant difficulties about using 1981, as many producers in the United Kingdom and throughout the Community have expanded production significantly since then, sometimes with Community financial support.

Mr. Nicholas Winterton (Macclesfield)

Some have come into the industry since then.

Mr. Jopling

Basing farm quotas on 1981 deliveries would therefore be unfair to many of them. Those difficulties would be greatly diminished if the base were derived from 1983 production with a reduction to bring the total quota down to the agreed level on a Community-wide basis.

Another problem concerns producer retailers and producer processors. We are worried that there might be scope for producers who do not sell all their milk to dairies to avoid paying the levy. That point has been firmly registered, and the Presidency of the Council of Ministers has now proposed that it should be covered. It would also be essential to provide for some flexibility in the implementation of a supplementary levy to allow scope for transferability and the handling of special problems. I have in mind someone who has recently come into production, such as my hon. Friend the Member for Macclesfield (Mr. Winterton) mentioned.

However, given the serious objections to the alternatives, which I have explained, and given the need to find some means of tackling the milk problem effectively and quickly, we have to be prepared to consider the Commission's proposals for a supplementary levy to see whether what it has proposed, together with a restrictive price policy, can be turned into something which would be, if not our favoured solution, at least an acceptable second best. I understand that the three Scottish milk marketing boards have announced that their solution to the problem of the milk sector is to have a quota-based levy. There is a difference of opinion on these matters. However, the Commission's proposals, as they stand, will not do.

Mr. Robin Corbett (Birmingham, Erdington)

Liquid milk consumption in Britain could be increased by restoring supplies of milk to schoolchildren. Is the Minister saying that there are conditions under which he would recommend the acceptance of a co-responsibility levy?

Mr. Jopling

No. I was careful not to say that. I said that we should not proceed with the co-responsibility levy. With regard to school milk, I hope that local authorities will do their best to take up the relevant schemes.

The Commission has also proposed a special levy on the so-called intensive production of milk. I have firmly opposed this proposal. It would unjustifiably discriminate against a particular type of milk production. It would also be extremely difficult and costly to administer.

The Commission has also proposed the phasing out of the consumer butter subsidy on the grounds that it is not cost-effective. I much regret this short-sighted proposal. Butter is the main outlet for milk in the Community. Clearly it is unwise, in the circumstances of the milk market, to take measures which will reduce butter consumption. Consumers would find it difficult to understand that they should not secure any benefit from the surpluses which are available in painful quantities.

The Commission has also made proposals to increase the fat content of drinking milk. They would, however, only affect our semi-skimmed milk. Whole milk is sold here direct from the cow, and skimmed milk is also unaffected by the proposal. The overall effect on our drinking milk would therefore be very slight. We shall nevertheless be considering carefully the views of those affected by the proposals.

Still on milk products, though in our view not related to the post-Stuttgart negotiations, the Commission has submitted a report on New Zealand butter. It proposes import figures for the five years from 1984. The proposal is that imports should be fixed at 83,000 tonnes for 1984. Thereafter, they would be reduced annually by 2,000 tonnes a year over the five-year period. I have welcomed the Commission's proposal in so far as it provides a demonstration of the Community's commitment to New Zealand. I shall continue to press for an agreement that is fair to New Zealand and consistent with the Community's Dublin obligations not to deprive New Zealand of essential outlets.

Mr. David Harris (St. Ives)

My right hon. Friend stressed the importance of doing something quickly in the dairy sector. I am sure he is aware that, although farmers have moved for a change, they realise that they are facing a serious problem. Will my right hon. Friend accept that it would be fatal to bring about such a violent change in such a short term, as that would cause havoc in the dairy sector? Can he say a word about his thinking on the time scale over which the change might be introduced?

Mr. Jopling

I am conscious of the importance of that matter and I have already had discussions to try to see that there is not a massive and destructive move, whatever changes are made, whether through the price route, which we prefer, or through a supplementary levy.

Mr. Ralph Howell (Norfolk, North)

Can my right hon. Friend be a little more explicit about what he means and which system he advocates? He is getting very close to suggesting that we should have an individual farm quota, and if so I congratulate him, but perhaps he could be a bit more specific. This is the only way in which we shall ever get this problem under control.

I have been battling on this subject for 10 years. I recommend that my right hon. Friend reads the Howell report of 4 May 1979. When he does, will he disregard the main findings and read the minority report in my name and the annex to it? A great deal of serious work has been clone on how to solve this problem. We studied how the Canadians and the Swiss had solved the problem, and the only answer is to have an individual farm quota. That will eventually get rid of the 2 million surplus cows in Europe.

Mr. Jopling

I am grateful to my hon. Friend for that advice. I shall have the Howell report produced and put on my desk at the earliest possible date. I think that I read it many years ago, but I shall need to refresh my memory. I am interested to know that my hon. Friend, with his enormous experience of these matters, believes so strongly that farm quotas are the way out of this difficulty.

On cereals, the principal problem is again one of increasing production against a background of static consumption. The cost of disposing of the resulting surpluses on third country markets reflects the wide gap between Community support prices and those on the world market. High cereals prices have also upset our arable-livestock balance. The Commission's proposals place a welcome emphasis on the need for price restraint by maintaining the guarantee threshold scheme for wheat, barley and maize and by introducing such arrangements for durum wheat. I also welcome its proposal to accelerate the narrowing of the gap between Community support prices for cereals and the prices received by producers in other major exporting countries.

The Commission also suggests that the new controls should be imposed on certain so-called cereals substitutes, notably maize gluten feed and citrus pulp. The tariffs on both of these are bound in the GATT. In our view, the simplest method of stabilising or reducing imports of these substitutes would be to bring cereals prices down to more realistic levels, which would reduce the incentive to import and would help the imbalance between the grain and the livestock sectors.

I know from the discussions that I have had recently with members of the United States Administration that they feel very strongly about this proposal. Clearly it would be to the advantage of no one if the Community and the United States were to become embroiled in a sterile row on the subject.

I apologise to the House for having to deal with the esoteric subject of monetary compensatory amounts. The Government do not regard their removal as in any sense a priority for the post-Stuttgart discussions. Nevertheless, we have to recognise that some member states see this as a very important matter.

It is already clear that the Commission's present proposals for the elimination of MCAs are not likely to form the basis of agreement. This is due primarily to strong German opposition. We shall judge any other proposals primarily according to whether they are consistent with the Government's objective of containing CAP expenditure. We have also made it clear that any new arrangements must take properly into account the special problems of countries with freely floating currencies such as our own.

So far, discussion in the post-Stuttgart framework has concentrated on the milk and cereals sector, on MCAs, and on the proposed oils and fats tax. However, economies are also possible and necessary in virtually all other sectors. I hope that an acceptable package will emerge at the European Council in a few days' time. If it does, we shall be looking for a commitment in the package that measures will also be taken to restrain expenditure in other sectors. That is particularly the case with Mediterranean products, on which in recent years expenditure has increased dramatically. The Commission has explained in general terms how it envisages economies being made in other sectors. It might help the House if I dealt briefly with the more significant of them for our farmers.

Mr. John Spence (Ryedale)

I understood my right hon. Friend to say that there would be complete elimination of MCAs. I had understood that the negative MCAs would be retained. Is that incorrect?

Mr. Jopling

The aim of the Commission is to get rid of MCAs altogether. There is a great passion, particularly in France, to eliminate this gap, which the French believe gives the German farmers a large price advantage within the Community. The elimination of MCAs is being pressed by several countries, notably France.

Sir Peter Mills (Torridge and Devon, West)

Before my right hon. Friend leaves the subject of surpluses, will he confirm that there will be no special concessions to any country that is producing a surplus and that whatever agreement is finally reached will be fair to this country?

Mr. Jopling

Those were almost the words that I used in an earlier part of my speech. This is important, and it is one of the main reasons why we preferred the price discipline route for milk because it is, under those circumstances, almost impossible for there to be exemptions for certain states. I agree with what my hon. Friend says.

Rev. Ian Paisley (Antrim, North)

Will the right hon. Gentleman comment on the headline in The Irish Times, which said: Howe admits super-levy unacceptable for Ireland. The Foreign Secretary went on to say that there must be a concession for Ireland on milk. Will the right hon. Gentleman keep in mind the fact that Northern Ireland will need a similar concession if the South gets it?

Mr. Jopling

I have been aware for a long time of the views of the Irish Government on this matter, and Mr. Austin Deasy has lost no opportunity to tell me about his opposition to a super-levy.

In the beef sector expenditure is rising sharply. Over 80 per cent. of it stems from intervention or from export refunds. Accordingly, savings should in our view be achieved primarily in those areas. Therefore, we support in principle the Commission's ideas for a tougher policy on intervention purchasing. However, the Commission also proposes that the variable premium scheme should not be renewed after the end of the current marketing year. I believe that the scheme has served United Kingdom producers and consumers well. Its abolition would lead to a reduction in beef consumption and an increase in the Community's beef surplus, and therefore to an increase in FEOGA expenditure. I have made it clear to the Commission that we see no justification for the inclusion of this proposal in the measures designed to effect economies within the CAP.

The Commission has now reported on the operation of the sheepmeat regime and expanded on its proposals for changes. The United Kingdom is the Community's largest producer and consumer of sheepmeat. We believe that the regime should continue to take account of that fact. The regime should also operate without discrimination between member states. It should provide for the Community to honour its international obligations on imports, particularly as New Zealand is affected. We shall judge the Commission's ideas against those criteria.

I shall now deal briefly with structures, where the Commission has put forward proposals for a new policy. Although we need much more clarification, it is apparent that the proposed new policy would in many respects be similar to the present one. There is a continuing provision of investment aid to agricultural holdings, though there is a general move in favour of the smaller farm. The Commission proposes, for example, lower financial limits and a simplification of the development plan arrangements. There is a significant tightening of restrictions on aid to products in surplus. Hill livestock payments would continue, with enhanced rates of capital grants in the less favoured areas. New measures are proposed to promote farm forestry.

There is much work to be done before I am able to take a final view on these proposals, though I am concerned at the bias towards smaller farms and also have reservations about the proposals on promoting farm forestry.

Mr. Jim Spicer (Dorset, West)

My right hon. Friend is concerned about the bias towards small farms. Is he not concerned that in what he has been saying there is a total bias against the United Kingdom? Ninety-five per cent. of the Commission's proposals will hit the United Kingdom farmer much harder than any other farmer in the Community.

Mr. Jopling

It was with that in mind, and knowing that there is a much smaller proportion of small farmers in the United Kingdom than in the rest of the Community, that I said that I was concerned about the bias of the proposals towards small farms. Most importantly, the considerable suggested increase in the guidance section expenditure would be very difficult to justify.

I hope that I have covered most of the important points in the documents referred to us tonight by the Scrutiny Committee. We are grateful to the members of the Committee for drawing our attention to these important matters. I hope that the House will support the motion.

7.55 pm

Mr. Mark Hughes (City of Durham)

It would be easy to follow the Minister in a general discussion of the proposals, or to go through the regulations and proposals seriatim and work out what the effect of this or that proposal might be. A vast number of highly specialised questions need to be asked. What is the right hon. Gentleman's view on individual farm quotas for the dairy industry? He fudged that. What is his precise view on the reduction in MCAs? What is his precise view on many other matters? I wish to be fair to the right hon. Gentleman, but he has not satisfied me and I suspect that he has not satisfied the House.

For example, there are the comments of the Royal Society for the Protection of Birds. That body is not insignificant. It has more supporters than the Tory or the Labour party, and more paid-up members, and therefore we should listen to it. The RSPB drew our attention to the proposals which reflect the Community's environmental policy—its policy on bird sanctuaries, bird life and the environment. The RSPB tells us that the proposals, or parts of them, would be helpful. The major difficulty lies in the Government's attitude.

The Government and the Community must ensure that there is a budget within FEOGA to fund measures to safeguard the environment. If necessary, the legal position of such payments must be clarified so that the good words in the draft regulations can be applied fully in Britain. When he replies, will the Minister assure the House that adequate safeguards in that specific area will be provided when we agree the proposals with the Community?

I want to refer to a document from the Cumbrian branch of the National Farmers Union. I am sure that the right hon. Gentleman will consider with care the comments of the NFU in Cumbria, which are headed: We who are about to die salute you". Is the Minister happy that his fellow members of the NFU Cumbrian branch regard the dairy proposals as the prospect of imminent death? The choice of 1981 as a base year for the dairy sector will militate against——

Mrs. Elaine Kellett-Bowman (Lancaster)

That is exactly what my right hon. Friend said.

Mr. Hughes

The hon. Lady should listen. She should not be shrill. It was in the expectation that a member of the Cumbrian branch of the NFU would listen to the comments of that branch that I drew the Minister's attention to those comments. I trust that when the right hon. Gentleman moonlights to Cumbria it is known that he supports the position of the Cumbrian NFU on all the matters raised in the letter of which I expect that he too has had a copy.

The Opposition's wish to question the package does not rest on such details. In our view, the package does not measure up to the requirements of a fundamental review of a common agricultural policy that is faced with bankruptcy. It is tinkering at the margins rather than dealing with the fundamental problems, weaknesses and insufficiencies of the CAP. We are not concerned solely with the case of the RSPB, however important it may be, or even with the belief of the Cumbrian farmers that they are about to die.

The basis of the common agricultural policy is unsound and always has been. None of these proposals meets the need for reform. Notional unification and a notional unitary market supported by MCAs and all the other paraphernalia lead to a fictional form of price stability.

The Commission starts on the basis of protectionism. Paragraphs 1.6 and 1.7 of document 8823/83 state: A cost-cutting exercise, conducted without regard to the social and economic consequences, would render no service to the development of the Community …The aim must therefore be to rationalize, not renationalize, the common agricultural policy. Only such an approach can give a good assurance of positive results. Those of us who have been to the European assembly or other European organisations know that the Commission says that the CAP's basic structure is inviolate. The Opposition say that its basic structure should be violated massively. We must get away from using price as the principal method of supporting farmers' income.

If price is the key, the bigger the farmer the greater the price. To him that hath shall be given. That is what has happened. The defenders of the CAP say that its aim is to support small farmers and keep them in business, but that policy has failed. The drop-out from the land has been faster since the inception of the CAP than it was before. Its supporters cannot ask for protection to avoid submarine warfare.

I accept that between 1940 and 1944 self-sufficiency was a proper aim of an agricultural policy. Much of the Williams Act of 1947 was based on that policy. We were short of shipping or dollars. We based much of our agricultural policy and our deficiency payments on the idea of self-sufficiency.

Mr. Nicholas Baker (Dorset, North)

The hon. Gentleman is advocating violent and radical change of the CAP. Is he aware of the widely held view that such a change, to whatever system, would cause considerable damage to the farming community, which apparently does not worry the hon. Gentleman or his party, but also to the consumer and others who depend upon agriculture? What will he say to those people?

Mr. Hughes

To continue down the road of madness will not, in the end, support the farming community, the consumer or others involved in agriculture. To pursue madness in perpetuity does not make it sanity. We no longer have the restraint of shipping or dollars to compel us, as an island, to become self-sufficient. The pursuit of constantly increasing production is not of itself desirable.

We cannot deny our farmers the technical means to increase production. The CAP does not address itself to the two contradictory problems. There is a technical ability to increase production by up to 4 per cent. per annum but there is no corresponding increase in demand. There is improved production because of better breeding, improved varieties of grain and so on. We cannot deny the farmer the right to use that technical ability. At the same time, however, we can be supplied from elsewhere at significantly lower prices. That is the difficulty, and the CAP is found most lacking when it seeks to resolve that difficulty. It relies on the price of the end product as the principal way to achieve the transfer of wealth from the industrial to the agricultural sector. Everyone in the House, of whatever party, accepts that as a necessary function of a civilised society. No one in the House wishes to see agriculture made bankrupt. That is not our objective. We want to see that transfer made efficiently and effectively. These proposals for the reform of the CAP do nothing towards achieving that objective.

Mr. William Ross (Londonderry, East)

I am listening with great care to what the hon. Gentleman says about surpluses and steadily increasing production. That has troubled any thinking farmer for a long time. The hon. Gentleman will be aware that other countries, principally the United States, suffer from the same problem. It has overcome that difficulty by taking certain lands out of production. What measures would the hon. Gentleman's party accept for the United Kingdom?

Mr. Hughes

I am grateful for that intervention.

The United States has done other things. There is the curious butter-for-bauxite barter trade. It seems wrong, internationally, to get rid of United States' surplus to give subsidised butter to Jamaica in return for bauxite.

The Community has done that on a greater scale and it has resulted in the distortion of world trade. The alternative to taking land out of production within the Community is to make production in the Third world uneconomic by flogging subsidised surpluses. The Third world cannot support them.

If European sugar is dumped on the market, it is not European land that goes out of production but Third world land belonging to the people who can least afford it. That is what happens now. It is wrong, immoral and must be prevented. Nothing in the proposals does anything about that. The wealthy European sugar producers continue to break the bank of the Third world sugar producers. It does not make it more palatable if they do it through a levy on themselves rather than the taxpayer; it makes it less. We are on the wrong track with a policy that starts by "beggaring my neighbour", but that is what the export of sugar by the Community does. None of these proposals does anything about that.

We are considering a policy that continues to maintain protection so that the price within the Community is significantly higher than the price outside the Community. It is a policy whereby the consumer, irrespective of income, continues to bear the burden. It is a policy whereby the cost of the CAP bears most heavily on the people who are paid least in the Community. These proposals for reform do not even start. Not merely do they fail; they do not start. If hon. Members want me to go through paragraphs 2.13, 2.14, and so on, in document 8823, I will do so, but that is not where we fundamentally disagree.

Mr. Andrew Rowe (Mid-Kent)

rose——

Mr. Hughes

When the budgetary pressure allowed this Government the opportunity to make a fundamental reform and press for that, they chose not to do so.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor)

I am sure that the House is listening with great interest to the hon. Gentleman. His speech is full of general criticisms, but he owes it to the House, in considering what should be done, and to Britain's farmers, who must be listening with great consternation to what he is saying, to tell us his practical proposals.

Mr. Hughes

Certainly. On milk, we do not believe that the removal of the butter subsidy is in the interests of milk producers or of the consumers. We wholly reject the fats and oils taxes.

Mrs. Elaine Kellett-Bowman

rose——

Mr. Hughes

No, I shall not give way. I am trying to answer the Minister. There are parts of this fiddling at the margins on which we agree with the Government. We totaly agree with the Government in opposing the fats and oils taxes—and on butter. There are divisions of opinion among us, as there are among Conservative Members, about individual farm quotas, as opposed to national quotas on the super-levy. We have to prevent the continuous overproduction of milk. That is common ground. On cereals, we agree with the Commission proposals to come down to within 5 per cent. of the world price. There is no problem there. It is agreed. That is not the difficulty, but it is the wrong way, even when we have agreed it. The right way——

Mr. John Carlisle (Luton, North)

rose——

Mr. Hughes

We are tampering at the margin. I have said it before, and I shall say it again and again. It is quite wrong to pretend that this is a real reform. It is not. It is a simple exercise in budgetary control, dressed up as something more.

The Secretary of State for Wales (Mr. Nicholas Edwards)

The hon. Gentleman said that these proposals do not start. We should like to know where he starts.

Mr. Hughes

I start from the basis that the fundamental philosophical argument for the CAP is wrong, and that to charge it on the consumer via protection is the wrong way to support agriculture. Ultimately, it will fail. The Government do not help the farming community by loading on the consumer the protection of an overprotected farming lobby. The 2.5 per cent. cannot ride on the back of the consumer for ever. That is the difficulty that faces us.

Mr. John Carlisle

rose——

Mr. Hughes

No, I shall not give way. If Community agriculture is to succeed…in expanding its exports and maintaining its share of world markets, it must increasingly accept the market disciplines to which other sectors of the Community's economy are subject. Those are not my words. That is what is said in the document.

If hon. Members believe that the coal industry in Durham and the shipbuilding industry in the north-east, or anywhere else, would be in the position they are now if they had been treated in the way the farming industry has been treated, they live in a diffferent world. Agriculture has been overprotected, and in the end consumers throughout Europe will revolt. The farming industry must recognise that these proposals for the reform of the CAP wholly fail.

8.16 pm

Mr. John Spence (Ryedale)

If I understood the hon. Member for Durham (Mr. Hughes) correctly, he wants to turn the CAP on its head. That would be to the great detriment of British agriculture and the British consumer. I shall attempt to get the hon. Gentleman's support for that statement.

A Bill dealing with coal is now going through the House of Commons. In fact, it is now in Committee. The argument being used by Conservative Members is that coal is one of the great natural resources of our country and the industry should therefore be supported. It is being supported in the Bill to the tune of about £2,500 million, and I am in favour of that. Coal is one of our great natural resources, it is under our own control, and it is an indigenous energy source. Agriculture, too, is under our control. It is an indigenous energy source, and I believe that in the interests of the Community as a whole it should be supported. I therefore ask for the hon. Gentleman's support in backing the prosperous agriculture of this country.

The hon. Gentleman developed the idea of turning the CAP on its head. I ask him and those who support him to consider an adaptation of the CAP, not its total reform, or, as he said, a fundamental and radical reform. Adaptation is a much better word. Any objective observer is bound to see that the CAP has benefited the consumer. It has been more than successful, and it is paying for that success.

Other hon. Members will deal with specific points. I want to lay down some markers on the general principles that are involved in the adaptation of the CAP. Agriculture is a long-term industry, much like the construction industry, with its major contracts, and the coal industry, with its long cycles of time. Any changes must be effected gradually over a reasonable period to give our fellow countrymen and farmers in Europe time to adapt. Sudden change is not suitable in the farming industry.

Our domestic agriculture requires a support system and a price structure. Farmers' incomes must be maintained. I am sure no hon. Member doubts that the maintenance of farm incomes is in the interests of the country and of those who are dependent on agriculture as a major industry.

Any change that is made to the common agricultural policy must be seen to be patently just and enforceable throughout the Community. Such a change will impinge upon the United Kingdom no more heavily than on any other country. We should not do anything to prevent young and new entrants into the industry. Although new entrants have not yet been mentioned, I should be very disappointed if that omission were ossified in its present form as a result of any action of the House.

I am sure that other hon. Members will deal in detail with the four or five methods proposed to deal with the milk problem. In view of the price restraint based on the 1983 figures, the 1981 figures would be unacceptable. I am glad to have the Minister's agreement on that. In my constituency several men would be made bankrupt overnight if 1981 figures were introduced. This must surely apply elsewhere in the country.

The next considerations are the super-levy, the co-responsibility levy and the national standard quantities. As they will be dealt with in detail I propose to say no more now.

I and my colleagues had a recent meeting in the House with dairy farmers who put forward certain proposals. Although I do not know the merit of the proposals, they were put forward by serious people and I put them to the Minister to see whether they could be considered and should be costed up.

What would be the effect on the surpluses if a herd diminution or slaughtering scheme were undertaken—not like the old scheme, which was loose and rather crude in its implementation, but one properly implemented and spread over a period of about 10 years so that people could not get back in too quickly? Such a scheme could be coupled with price restraint based on 1983 prices. Would that be a runner in attempting to control surpluses?

The second point put to me at the meeting with dairy farmers concerned price restraint plus national standard quantities based on 1983 figures. Although such a proposal would take some working out, I wonder whether that, too, might be a runner.

What I have referred to in no way diminishes the problem which my right hon. Friend faces in the negotiations which he is conducting with member states of the Community, which have widely different aims, objectives and historical backgrounds. My right hon. Friend should note that the farmers realise that the common agriculture policy must be made cost-effective and are in a frame of mind to look at constructive proposals which conform to certain principles, four of which I have attempted to enunciate.

I end with a word of warning. If a scheme is pursued that is not acceptable throughout the industry, is there not a danger of an almost phenomenal growth in the producer-marketing organisations? This would result in the producer going straight to market with a wide gap between the farm gate price and the retail price. Would that not be to the detriment of the industry and of the United Kingdom structure?

8.25 pm

Mr. Thomas Torney (Bradford, South)

Listening to the Minister making his speech, I hoped that he might have altered his views on the Common Market, particularly the common agricultural policy. However, as the speech continued, it became obvious to me that he was the same right hon. Gentleman as always. He is so completely immersed in supporting the beliefs of the Common Market that he can hear, see and feel no wrong in anything it does.

The Minister spoke at length about milk—a subject that has preoccupied the House in past weeks. Only a few weeks ago the House debated another aspect of the milk producing industry. I am sure that all hon. Members are concerned about the Minister's action, which will allow considerable quantities of foreign milk into the United Kingdom for sale in the supermarkets, with consequent falling sales on milk rounds and unemployment in the dairy and dairy supportive industries.

Dairy farmers, too, will be affected by the Ministers actions. Farmers may well wonder why they continually vote Tory when they can have little confidence in the Minister to fight against the Commission's proposals to introduce a super-levy.

The National Farmers Union said that the super-levy would be higly damaging to the UK dairy fanner and ancillary industries and their work forces''. The NFU continued: They do not accept that the application of a super-levy on farm quotas is an appropriate way of dealing with milk surplus. I hope that the Minister of Agriculture will show more consideration to dairy farmers than he did to dairy roundsmen a week ago.

Britain is self-supporting in liquid milk. Our farms are larger than the majority of French and German farms, many of which are worked on a part-time basis. I have visited Germany, so I can confirm that. The proposed levy will work in favour of French and German farmers while the United Kingdom farmer will have to pay. As a result, home-produced milk will become less competitive against foreign milk.

It is ludicrous that the United Kingdom should allow a system to continue that will bankrupt many dairy farmers. We have no surplus milk. However, the French, who produce a massive surplus, will be allowed—in effect, will be encouraged — by the proposals to continue producing and dumping their surplus milk in the United Kingdom.

This package of measures proposed by the Commission is not the long overdue basic reform of the CAP. It is nothing more than a package of emergency measures designed to curb agricultural expenditure and to raise revenue. The overall effect of the proposals is to base more of the burden of agricultural support on the shoulders of the consumer and the EC's international trading partners. As production levies work their way through to the consumer, there will be higher prices in the shops and the true level of agricultural support will be largely undiminished. Food should be produced to be eaten. We should not ]massive surpluses, paid for by the British taxpayer and consumer.

The proposed tax on oils and fats will hit severely the food manufacturing industry and increase costs for the consumer. It is estimated that the tax could add £75 million to the consumer's food bill. That will happen when industry is passing through the greatest crisis in history, creating mass unemployment. The increases in the price of food will cause untold hardship to sections of the community which are less able than many to bear it.

In the past the Commission's objective on cereals has been to align prices with those of its main competitors. That objective is no nearer attainment today than when it was first stated in the Commission's document, "Reflections on the Common Agricultural Policy." It is to be hoped that the Commission will now take firm steps towards the implementation of the reflections and that the Minister of Agriculture, Fisheries and Food will press it to do so.

The Commission's document refers to the possibility of imposing a levy on cereals to cover all or part of the cost of exports. As levies in other sectors—for example, sugar and milk—have been reflected in higher prices to the consumer, I am concerned at the prospect of the cereal levy being passed on to the consumer.

The absence of any proposals for reform of the sugar sector illustrates clearly that the Commission is inspired by budgetary considerations. The regime is ripe for reform. High levels of production, encouraged by high prices, have created massive surpluses in recent years. Community exports have disrupted world market prices and incensed third country producers, obliging the Community to implement stockpiling measures. The cost, although theoretically borne by the large growers and the sugar processors through levies, is reflected in the high prices paid by the consumer. If the Commission really wanted to rationalise the CAP, it would produce proposals for reform in the sugar sector. The Community should act now to re-establish the CAP on a rational basis.

The current package of measures, which is designed to shift the cost of the CAP away from the overworked Community budget, does not constitute the basis for a viable long-term solution. These proposals will merely enable the Commission to disguise the true cost of farm support. I hope that the Minister will review his own attitude towards the EC. I am not suggesting that he should become an opponent of it. I realise that would be impossible. However, I ask him to view it more rationally and to understand that it has at least as many disadvantages as advantages for the United Kingdom. The Minister should attack those disadvantages in the same way as he often attacks and abuses those of us in the House who point them out to him.

8.34 pm

Mr. Jim Spicer (Dorset, West)

We start these negotiations with the great plus that my right hon. Friend the Minister of Agriculture, Fisheries and Food is himself a practical farmer and has been involved in NFU policy over the years. He knows the people with whom he is dealing and knows when they are talking from their hearts and mean it, and when they are just trying it on. In this particular year, he knows quite well, as we all do, that, particularly in terms of the dairy industry, no one is trying it on.

I represent Dorset, West. Dorset and Cheshire would no doubt battle it out to see which was the better and more efficient milk producing county.

Mr. Nicholas Baker

Dorset.

Mr. Spicer

I am grateful to my hon. Friend.

We must consider in the negotiations the effect of the Commission's proposals on our dairy industry. I tried to find out what was the split allocated to the dairy industry of the bank overdraft for the whole of the farming industry, which now stands at £5 billion-plus. I cannot find out what the figure is, but I am sure that my right hon. Friend will know that a considerable percentage of that overdraft level has come about because the dairy industry over the past few years has been encouraged to expand by production incentives from the common agricultural policy. We should all have thought a little more about the monster that we were creating in terms of production.

Let us consider the Commission's proposals. Many of them have been rejected by my right hon. Friend. First, the base year of 1981 is completely unacceptable. Secondly, the price freeze is completely unacceptable as it will bear heavily on those who have come into production recently and who bear a large part of the heavy overdraft burden at the banks. There are possible exemptions and one can see them queuing up now. One does not have to listen very often to the farming news in the morning to hear the Irish pleading their case and saying, "We are special people and we need special treatment." I am certain that they will find a sympathetic ear from a Greek Presidency.

Mr. Nicholas Winterton

A weak Presidency.

Mr. Spicer

I would accept that view of the Greek Presidency as well.

Thirdly, there is the proposal for the super-levy. I asked my right hon. Friend earlier about the Commission's package of proposals and where they would bear most heavily. It is clear that we can no longer trust the Commission. It has only recently tried to cook the books on our budgetary contribution and our commissioners in Brussels condemned that in forthright terms. Every aspect of the proposals coming from the Commission will bear most heavily on the United Kingdom farming industry. That is completely unacceptable.

I wish that I were full of thoughts and solutions to pass on to my right hon. Friend in the negotiations. I was scratching about in The Times—if one can scratch around in The Times—and I found a letter dated 15 November 1978 from Sir Henry Plumb, who at that time was president of the National Farmers Union. He was pointing out even at that stage the great discrepancy between self-sufficiency in terms of the United Kingdom and other member states of the Community. Is there not still a possibility that we could go a little further down that road and accept CAP support up to self-sufficiency at national levels and thereafter impose much greater burdens upon the national states if they go over the top? The difference between our 80 per cent. self-sufficiency and the 220 to 230 per cent. production levels which pertain in other member states in the Community is dramatic and comes about because of the explosion in their production figures from the mid-1970s onwards. Ours came much later. I put that forward, but perhaps it is far too late for us to move down that road.

I wish my right hon. Friend every success. He has many long days and nights ahead of him in these negotiations, but at the end of them, if the milk sector in particular suffers the disaster that might occur if the Commission's proposals go through as they are, the roll-on effect will not be held to only 2.5 or 3 per cent. of the population, but will affect the 9 per cent. of the population involved directly in agriculture and in the back-up to the agricultural community of this country. That could have a devastating effect on employment, not only for dairy farmers and milk roundsmen, but for people employed in factories, just at the time when we are beginning to see an expansion of production in farm implements and farm machinery.

8.39 pm

Mr. Robert Maclennan (Caithness and Sutherland)

Agriculture is and must remain one of the most important industries in Britain for its employees, for all industries which are dependent upon its production, for the extent to which it supplies our domestic market, which has increased to 76 per cent., and for its potential as a source of exports, both of basic commodities and, more importantly, of processed foods.

It is important, therefore, to recognise that British agriculture has flourished under the CAP. That must never be lost from sight and criticisms of the operation of the CAP must be seen in that context. It is important to recognise that since the CAP was introduced to the United Kingdom agricultural incomes have not risen steadily—indeed, the reverse is true. It is also important to remember that proposed changes for common funding and price support must be considered against the background of relatively declining agricultural incomes and of increased indebtedness to the banks. During the past five years of the Tory Administration, indebtedness to the banks has more than doubled to more than £5 million.

When the Minister opened the debate he spoke in terms that would lead the House and those who read reports of the debate to think that the CAP was in a condition of crisis. He spoke of fundamental problems requiring fundamental solutions. I listened with great interest to try to discover not only the Minister's diagnosis of what was wrong, but his fundamental proposals for tackling the problems of surplus production and, as he sees it, excessive budgetary expenditure on the support of agricultural products. But one listened in vain, because the Minister offered no fundamental proposals. He criticised some detailed proposals from the European Community, but offered not a scintilla of evidence that he grasped the nature of the problem or that he had any idea of the strategy required to tackle the problem.

Indeed, in at least one important respect the right hon. Gentleman misrepresented the position when he spoke of the excessive budgetary commitment to agricultural support. He missed the point that it must be judged by its cost-effectiveness and the extent to which it meets the purposes of the CAP as set out in the Treaty of Rome. Judged in those terms it cannot be said that excessive amounts are being spent globally on farming in the Community. It is about 0.5 per cent. of the GDP of Community countries. Agricultural support is no greater in Europe than it is in other industrialised countries, and he must know that. He is concerned with the Treasury's problems. He is not representing the interests of the farming industry, notwithstanding his personal understanding of the problems. He is the voice of the Chancellor of the Exchequer in the negotiations.

I shall not waste time by criticising the views of the official Opposition, because the hon. Member for City of Durham (Mr. Hughes), despite invitations from the Government Front Bench, gave no sign of what was their position about the fundamental problems of surplus production. His was a wholly negative speech.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Will the hon. Gentleman give way?

Mr. Maclennan

The hon. Gentleman will have the opportunity to reply to the debate and can answer then any points that I make.

Mr. Jim Spicer

The SDP is chasing the farming vote.

Mr. Maclennan

The hon. Gentleman says from a sedentary position that my party is chasing the farming vote. My concern and that of my party and my colleagues in the alliance is for a prosperous agriculture industry which, given the right measures by the Government and by the Community, could rise to greater heights than it has under the stewardship of the present Minister and his predecessor.

Several fundamental questions have been raised by the Commission in its interesting papers on how to tackle the problem of surplus production. They were nor even alluded to by the Minister. Nothing was said about whether it would make sense to set common prices for more than one year in advance. The Minister did not propose a rolling programme of price setting each two years so as to give the farming community more certainty. Nothing has been said about whether the Government would countenance a change of policy regarding the giving of credit to importers of British food products, which is a practice carried on by the French, and which would assist considerably in disposing of some of our surplus production. It would be far better than paying export restitution.

More importantly, the Minister failed to grasp the underlying difficulties of the CAP, or to tell the House of his attitude or the Government's attitude towards them. Through the operation of the price support system. there has been a tendency in Europe to increase the capital intensity of production and to introduce high-cost agriculture, which has been reflected in high land values and which has not operated entirely to the benefit of the farming industry. It has certainly operated against the young people who wish to enter the industry. It is too much to expect that the Minister would have reflected on such matters in the debate; but if he does not reflect on them at some stage, his claim to be concerned about the fundamental problems would be seen to be a sham.

I shall say something about how the fundamental problems should be tackled, but I cannot develop my ideas during what must be a short speech. The Minister appeared to say that the proper approach to the milk surplus was to take action on prices. That is what he and his predecessors did at previous price fixings; and, as he is beginning to recognise—although he will not admit it—that there is little prospect of Community-wide acceptance of a prudent pricing approach to milk, he is now backing into an acceptance of the super-levy proposed by the Commission, which he said was not, as it stands, acceptable to Britain. The Minister might have been more candid and said that he proposed to accept a modification of the Commission's proposal on the super-levy. There is no point in seeking to pull the wool over the eyes of the industry. The Minister is going to the negotiations to agree to this proposal in some form. We might as well have started with 1982–83 as the base year—

Mr. Jopling

I am not going. The Prime Minister is going.

Mr. Maclennan

I have no doubt that the Prime Minister will reflect the thinking of the Minister in whom she had sufficient confidence to appoint to his position. If the Minister says that he does not have responsibility for the agricultural proposals, the House will note that with interest. In a sense, he is underscoring my earlier point that as a spokesman for the industry he has effectively given way to pressures from the Treasury.

The super-levy proposal will be implemented and accepted. It is therefore important to ensure that it is not operated to the disadvantage of our domestic producers. It is likely to be the only possible solution to the problem. I believe that milk producers and farmers generally understand that quantitive restrictions of support are the only way in which we can hope to tackle this problem. It is widely recognised throughout the industry — the Minister is not prepared to voice that recognition; he will come in on the tail and not lead the vanguard—that price support must be operated on the basis of quantitive measures.

A stabilisation plan on cereal prices would be acceptable to the industry. If prudent pricing policies are to be pursued, they must be linked to production thresholds. The Minister did not, in my hearing, refer to one of the Commission's proposals which I would regard as considerably damaging—to tighten quality standards, which I believe would discriminate against the United Kingdom. The standards operated by the Community are linked not to market demand but to intervention. Malting barley and a number of other cereals that are important exports could be damaged if the Commission's suggestion were implemented.

It is a pleasure at least to be able to support the Minister in his opposition to the proposal to abolish the beef variable premium. It operates not only as a valuable protection for the producer but as a consumer subsidy.

Mrs. Kellett-Bowman

Will the hon. Gentleman give way? He has just misquoted the Minister.

Mr. Maclennan

I have not misquoted the Minister.

The Minister did not have much to say about the Commission's proposal to increase the suckler premium. That is not surprising as the Government are paying only 50 per cent. of the premium at this time. It would be of great advantage to herds and producers if the Government moved in that direction.

On sheepmeat, I agree with the Minister that the proposed limitation on the variable premium is unacceptable, certainly without altering the clawback mechanisms to secure the entry of our products into the European Community. The clawback on British exports to other Community countries should be limited to the same percentage of the guide price as that applying to the variable premium.

The Minister did not see fit to mention fruit and vegetables. Many people in that industry believe that the intervention rules operate against the interests of British domestic fruit producers by providing a back stop price which allows the French in particular to dispose of their large apple crop in this country at prices unfair to our domestic producers. For fruit and vegetables the alliance favours the Community market development fund proposals.

On fats and oils, I share the common view that the proposed tax is unacceptable and would be detrimental to our dairy industry.

The Commission's proposals on MCAs are a pious aspiration imbued with a certain unreality. For a number of years, the Commission has expressed the view that it would be desirable to eliminate the MCAs, but that could be done only by linking them to German values, which is clearly unacceptable at this time. I believe that the operation of MCAs has kept the CAP afloat over recent years when there have been divergent exchange rates.

It is a pity that the Minister did not take the opportunity to speak of the advantages to the farming community of Britain entering the European monetary system, which would eliminate a number of the uncertainties. There again, of course, the Minister is merely the poodle of the Chancellor.

On structures, the Minister made some rather alarming comments especially in respect of the impact of his policies in the marginal areas—the hills and uplands. He not only said that he did not favour the Commission's proposals, but went so far as to say that he would not favour an increase in guidance section spending within the Community which provides crucial assistance to the less favoured areas.

Mr. James Wallace (Orkney and Shetland)

Does my hon. Friend agree that the Minister's failure to deal with these matters, combined with the Government's entirely negative attitude to an agricultural development programme for the Highlands and islands, will cause great alarm to farming communities there?

Mr. Maclennan

My hon. Friend is quite right. The National Farmers Union of Scotland has strongly and properly criticised the Government for three years' fiddling while the proposal lay on the table with the Commission and for their clear unwillingness to do anything about it. Money is available if the Government will only move, but they will not do so because it would have an impact on their budgetary objectives, which are not farming objectives.

Finally, on the longer-term needs of surplus disposal, it must be recognised that quantitative restrictions of price support offer the best hope of tackling this problem in a realistic way. Price restraint proposals put forward in the past did not adequately take account of the need to avoid damaging the incomes and savings—often in the form of assets and land values—of the farming population. For that reason, we must move to a system of quotas, tradable ultimately across the Community but initially within this country. I was delighted that the hon. Member for Norfolk, North (Mr. Howell) referred to that matter. He was right in what he said and I hope that there will be a bipartisan recognition of the need to move in that direction, even if the Minister is the last person to be converted to what the farming community perceive to be the proper direction.

If such quotas were introduced for milk, production need not be adversely affected bearing in mind the way in which our marketing system operates. Any farm level quota for cereals would have to be established on an acreage and representative yield basis.

Different commodities face different problems, which are not insuperable given the political will. There has been no consistency of purpose in the Conservative Administration's approach to agriculture. We have been told that the fundamental problem must be tackled. Last year we were told of the need for a standstill and the year before we were told of the need for a 10 per cent. increase in institutional prices. On each occasion the Minister has been out of step with his European colleagues and has failed to give a lead. The farming industry and the country need a lead, and we pray that it will be forthcoming.

9.3 pm

Mr. Nicholas Winterton (Macclesfield)

I have never seen the hon. Member for Caithness and Sutherland (Mr. Maclennan) so worked up when delivering a speech. I consider it odd that he made a plea for bipartisanship in dealing with these problems, when his speech was anything but bipartisan. It was a most extraordinary contribution to the debate.

I congratulate my hon. Friends the Members for Dorset, West (Mr. Spicer) and for Ryedale (Mr. Spence), who have made positive contributions to the debate. I wish to be associated with much of what they said.

My hon. Friend the Member for Dorset, West said that the proposals were, in essence, unhelpful to the United Kingdom's farming industry. My right hon. Friend the Minister of Agriculture, Fisheries and Food, who was generous enough, when we were in opposition, to appoint me as his team member responsible for the dairy sector, will not be surprised if I direct my remarks to that sector.

My right hon. Friend said that the dairy sector of the CAP accounted for £3 billion, which is one third of the total CAP expenditure, and represents one fifth of the total expenditure of the European Community. We must put that fact into context, because the United Kingdom dairy industry is not producing the surpluses that we see mounting up in Europe. Britain is not self-sufficient in milk and dairy products, but since the Conservative party came to office, we have increased our dairy production from 70-plus per cent. to some 90 per cent. of our national requirements. Having spoken yesterday and today to several dairy farmers in my constituency—one of whom is a member of the council of the National Farmers Union—I am advised that we will be self-sufficient in milk and dairy products by the end of next year. Britain is not responsible for the surpluses in the dairy sector The measures contained in these documents should not penalise the United Kingdom dairy farmer. That is an important factor which must be noted and accepted by the Minister.

The EC spends about 0.5 per cent. — that figure comes from the brief of the NFU—of its gross domestic product on central agricultural support. That figure is not out of line with the expenditure of other developed countries, all of which support agriculture in various ways. In support of our dairy industry, and to reduce the atmosphere of crisis which many think may emanate from the debate, I believe that the statistics to which I have referred put the issue into a better perspective.

I take the view of the NFU, which believes that certain principles should be rigidly respected in the current discussions and negotiations on the CAP. They include the maintenance of an effective system of agricultural support, the gradual introduction of changes where they are agreed to be necessary, the equitable application of any new policies throughout the Community, and the proper recognition of the importance of Community preference. If we are to be part of the club, let us have preference.

I must tell the hon. Member for Antrim, North (Rev. Ian Paisley) that it would be wrong to the Community to make an exception of the Republic of Ireland in any proposals that might emanate from the discussions and ultimate agreements. That would be unfair to Northern Ireland as well as to the remainder of the United Kingdom.

The debate is especially important. I am critical of my right hon. Friend the Minister because I wanted to hear exactly on what basis we were going into the final discussions. I agree that he did tell the House of certain matters. First, he said that he would not accept the EC proposal on oils and fat, and we warmly welcome that. I understood him to say also that we would not accept the super-levy. Opposition Members appeared to think that we would accept the super-levy, but we must not do so because it would be extremely damaging to the British dairy industry. It would also work against the best interests of the producer—the dairy farmer.

Like my hon. Friend the Member for Dorset, West, I make a plea for those farmers who have entered dairy farming during the past three or four years. They cannot be expected to pay back money on their investment on a reduced volume of milk. That would be quite unacceptable. I am delighted that my right hon. Friend said that the 1981 level was not acceptable to the Government and that he hoped — I am sure that the whole of the dairy industry hopes—that it would be based on the 1983 level of milk production, minus no percentage. I come from one of the areas which is a major milk producer. I am, of course, referring to the county of Cheshire, and Macclesfield in particular —[Interruption.] I shall not vie with Devon or Dorset about which is the most effective and efficient county in milk production. Cheshire is certainly one of the most efficient dairy producing areas of the United Kingdom. My dairy farmers are one of the most hard-working groups in the farming industry.

Mr. Jopling

I am listening intently to my hon. Friend. He says that a super-levy based on 1983 production should be minus no percentage to keep it at present Community production of 103 million tonnes. If we based it on that level, which is about 6 million tonnes above the production threshold, how would my hon. Friend bring production down from that level to a manageable level?

Mr. Winterton

That is my right hon. Friend's duty and responsibility, not mine. I am here to represent not the French, German or Dutch dairy farmers, but the British dairy farmers, and I do so with all the strength that I can muster.

Mr. John Maxton (Glasgow, Cathcart)

Will the hon. Gentleman give way?

Mr. Winterton

No, much less to someone from the centre of Glasgow. The hon. Gentleman might have gone to Eton, but that makes no difference. I am here to argue the case of the United Kingdom dairy industry. It is not self-sufficient and does not produce sufficient milk to meet Britain's needs. What is being done in the Common Market is quite another matter. That is why I support the NFU's request that the Government should adopt a national standard quantity as the basis for the problem facing the dairy sector in the EC. If we do not do that we go against the wishes of the NFU which has produced a brief rather late in the day, and I am critical of it for that.

I know my dairy farmers well. Never in almost 13 years of my being here have so many farmers gone to the trouble of telephoning me here in such a short period of time. They are deeply worried that what the Government might be talked into at Athens will be extremely damaging to our dairy industry. The result could be more imports of milk, in whatever guise. That would do irreparable damage to rural areas. As my right hon. Friend is aware, I feel deeply about that.

I have not dealt with doorstep deliveries. That subject was debated quite recently. On that occasion I registered my objection to what the Government are doing. I sincerely ask my right hon. Friend to think carefully about what is decided when my right hon. Friend the Prime Minister goes to the final negotiations. A great deal is at stake.

The documents have been rushed through because of a crisis. There is a crisis in the cash flow of the EC. We should not try to adopt policies in the short term to remove a temporary embarrassment. My hon. Friend the Member for Southend, East (Mr. Taylor) has campaigned vigorously against certain aspects of the CAP and the EC's budgetary policy. If we had acted sooner the problems that we are debating today would not be with us. One thing for which I shall not vote when the time comes is any policy which damages the United Kingdom dairy industry. It is extremely important to many parts of the country, and what adversely affects it will have a domino effect on many other industries.

I welcome the assurances relating to the variable beef premium. My right hon. Friend has taken a robust stand on that. I also welcome the additional assistance that is to be given to marginal areas. So far, only the hon. Member for City of Durham (Mr. Hughes) has mentioned that. That too, is an important matter. I hope that my right hon. Friend will take a message to the Prime Minister to the effect that there are hon. Members who will not tolerate a sell-out of United Kingdom dairy farming.

9.13 pm

Miss Joan Maynard (Sheffield, Brightside)

Once again we are engaged in a debate on reforming the CAP. As in the past, it is likely to remain just talk. The Commission's proposals for reform are weak, but they demonstrate that even the Commission is worried about the huge cost of the CAP.

It is good to be self-sufficient in food but it is not good to be self-sufficient regardless of cost. More subsidy or public money is given to agriculture than to any publicly owned industry. Expenditure on the CAP in 1983 has increased markedly. It is expected to be 30 per cent. higher than it was in 1982. One could imagine what would happen if a worker asked for a 30 per cent. increase in income, and, in particular, if a farm worker asked for a 30 per cent. increase in his meagre wage. The farmers would hold up their hands in horror.

The Commission confirmed that the rate of growth of agricultural expenditure is now higher than the rate of increase in the Community's own resources. It considers, and not before time, that price guarantees cannot be unlimited. We are told that the essence of the Common Market is its belief in competition, but the Commission considers that the Community's external trade should be based on a combination of elements such as co-operation with its principal competitors to maintain world price levels. I thought that that was called price rigging. I cannot see that that has anything to do with competition.

If food prices were held down, that would increase consumption, which in turn would reduce stocks. Is it not criminal that in a world in which millions are starving some American farmers are being paid not to crop lands and in the EC we have huge stockpiles of food? There must be something wrong with a system that produces such a result. The cost of disposing of surpluses has gone up from 46 per cent. of expenditure in 1977 to 62 per cent. in 1982.

Surplus stores of food have increased enormously in the past four years. For instance, in 1978 there was a wheat surplus of 591,000 tonnes; in 1982 it was 5,292,000 tonnes. In 1978 there was a barley surplus of 140,000 tonnes; in 1982 it was 900,000 tonnes. In 1978, there was a butter surplus of 308,000 tonnes; in 1982 it was 548,000 tonnes. Storage, too, has increased in expense. In 1982, storage cost £1,125,000. In 1983 it cost £1,746,000, and it is estimated that in 1984 it will cost over £2 million.

We pay another price for the effects of the CAP apart from the monetary one—the environmental price. The CAP is changing the face of the English countryside, and usually for the worse. An example of this is straw burning, which to some extent arises because large areas of the countryside are now made over entirely to cereal farming. There used to be a system of mixed farming and the stock on the farm required the straw, but that is no longer the case in many instances.

The big cereal farmers are picking up some of the largest amounts from the CAP in subsidy. One of them described this as "a bit of a cake walk" and this was an accurate description from their point of view. Most cereal farmers are big farmers, and it follows therefore that the big farmers have benefited most from the CAP. The British cereal farmer is very efficient. In 10 years, the cereal acreage has increased by 7 per cent., while the increase in yield has gone up by 50 per cent.

The CAP has also encouraged farmers to cash in on new technology. There is nothing wrong with that except that it has been done regardless of demand. The big cereal farmers are among the wealthiest farmers in this country. One 3,000-acre cereal farm in East Anglia now employs 13 or 14 men. At the end of the second world war it employed 85 farm workers. Technology, capital and energy have replaced labour on farms. The farm today is no longer the farm that we used to know. It is more like a factory, with a computer, and walkie-talkie sets for keeping in touch with the men.

Another aspect of modern farming which has been encouraged by the CAP is the amount of chemical fertilisers poured on to our land. It seems that we neither know nor care what the long-term effect will be, even though in some areas phosphates have been poured on to the land at such a rate that they have got into the water supply and water for babies under six months old has to be boiled.

Sir Peter Mills

Is the hon. Lady suggesting that British cereal farmers should return to the old methods of harvesting, and that coal miners should go back to the pick and shovel?

Miss Maynard

I do not know how the hon. Gentleman could interpret my remarks in that way. I should like British farmers to return to the rotation of crops. I do not like to see one cereal crop follow another. In the long term, we will pay for that. There is nothing as honest as the land. If we treat it honestly, it will treat us honestly, but we cannot afford to exploit it. We live off the top six inches of the land, and if we exploit it we will live to rue the day. What will be the effect of non-organic fertilisers finding their way into our bread and eventually into our stomachs? Many people are interested only in how much money they can earn in their lifetime, but there is a long-term price to be paid.

These farming methods are destroying our wild flowers. Wetlands have been drained and habitats destroyed. Hedgerows have been uprooted with the aid of CAP capital grants and bulldozed to ease the path of the combine harvesters.

Dairy and sheep farmers are doing well out of the CAP. The pig farmers are doing less well. Cheaper world food has been kept out, and so the consumer has lost out twice. He is paying higher prices for food, and he is paying the huge contribution to the CAP.

Farmers are quick to criticise when others receive subsidies, but they are ready and willing to receive them themselves. One of the aims of the CAP was to ensure a fair standard of living for the agricultural community. The farm workers are one of the most important ingredients in the agricultural community. Without their skill and devotion to duty no wealth would be created. They have not benefited from the huge amounts of money poured into the industry.

Mr. Nicholas Winterton

But farmers are farm workers.

Miss Maynard

Some, but by no means all.

Let us consider the standard of living of the average farmer and the average farm worker. The farm worker still collects more family income supplement than any other working person, and one cannot draw family income supplement unless one's income places one below the poverty line.

The CAP aimed to ensure reasonable consumer prices. It has failed to do so. Even the Conservative political centre believes that it is essential to make the CAP less expensive to the taxpayer and the consumer, who are one and the same person.

The CAP is now absorbing two thirds of the £15 billion EC budget — a colossal amount. According to the Commission's own figures, EC grain and feeding stuff prices are still 100 per cent., meat, about 100 per cent., and cheese and butter 300 per cent. above world prices. The retail price of grain, cereals, meat, dairy produce and sugar is on average 20 per cent. higher than it would be if we were not a member of the Common Market. That is serious for consumers in this country, who are the majority of the population.

The CAP widens the gap between the rich and less-well-off farmer. Will France give way to help Great Britain in the next round of negotiations that we are discussing tonight? So far it has been unwilling to do so. There is strong opposition not just from France but throughout the EC to giving us further refunds, despite the runaway costs of the CAP which fall so unfairly en Great Britain.

As we know, the Community is near to bankruptcy. That is especially embarrassing in election year. French and British interests are opposed. The market which was to unite us divides us. The reforms that we have sought on many occasions are not forthcoming, and I doubt whether they will be forthcoming on this occasion. We should like to curb farm spending and end the national budgetary imbalance. That is the least that we need to achieve. The only solution to the problem for the British people is to leave the Common Market at the earliest opportunity.

9.26 pm

Rev. Ian Paisley (Antrim, North)

It will come as no surprise to the House that I have always been suspicious of the Common Market. I am more suspicious tonight because of all nights we chose to discuss this matter is the night when for the first time the Ulster orchestra is visiting London. It is in Smith square with the famous Ulsterman James Galway playing that instrument which is well played by Ulstermen, the flute, and in the presence of that wonderful lady the Queen Mother. I would have preferred to represent the people of Ulster there tonight than be in the House, but it is my duty to be here to state the case for the farmers of Northern Ireland because of their position under these proposals.

Mr. William Ross

I assure the House that the people of Ulster are being properly represented at that gathering by my party leader.

Rev. Ian Paisley

In reply to the hon. Gentleman's suggestion that his party leader's is the only voice that speaks for Ulster, may I say that my vote in the European election was more than those of his two party colleagues. The ballot is the answer.

If the hon. Gentleman intervenes much more, he will not catch your eye, Mr. Deputy Speaker, and will make no speech. I shall therefore be the only person to speak for Northern Ireland in the House tonight. In Ulster, the dairy industry and its ancillary industries employ 3.5 per cent. of the working population. Agriculture is not a small problem for Ulster. We are talking about one part of our industry which employs 3.5 per cent. of those lucky enough to have jobs in Northern Ireland. The proposals for a super-levy based on 1981 deliveries of milk would have cost the Northern Ireland milk industry £25 million out of a total income of £189 million this year.

That will strike a death knell for the dairy industry in Northern Ireland, and I associate myself with the remarks of those hon. Members who have spoken about the seriousness of the situation.

Northern Ireland farmers are opposed in principle to a supplementary levy based on 1981—or, indeed, on any other year. A much more constructive approach, they say, would be a policy of price restraint, coupled with financial inducements to encourage farmers to cease production for a substantial period. That is the evidence that has been put to the Agriculture Committee of the Northern Ireland Assembly by the farming community in the Province.

We see no point in doing away with the subsidy on butter and forcing people to eat margarine. Surely it would be more sensible to keep the price of butter down, thereby increasing consumption and reducing the cost of intervention procedures.

I shall say a brief word about cereals. The organisation of the cereals sector is of the utmost importance to our intensive livestock industry. This part of our industry in Northern Ireland employs 10,000 people and depends heavily on imported cereals with consequent high transport costs. The United Kingdom Government should argue strongly that intervention stocks should be available on equal terms to all grain deficient regions, where a need can be demonstrated. Surely we in Northern Ireland have better arguments than most people have to justify the transfer of intervention grain for storage here.

In 1982, the value of beef produced in Northern Ireland was more than £220 million. That is more than one third of the value of our total agriculture output. That part of our agriculture sustains a large number of jobs, not just in farming but in meat processing factories, cold storage, transport, distribution and marketing. About 70 per cent. of the beef that we produce is exported, mainly to Britain and the rest of the Community. We also have a valuable and increasing trade in non-member states. The industry is, therefore, of great importance and is of immense value in terms of our total economy.

Unfortunately for us, most of our beef is exported in carcase form, and a move towards more sophisticated products seems necessary. Such a move would mean the creation of more jobs in the industry, particularly in processing. For such a development, we need a strong stable basis at farm level.

The beef industry in Northern Ireland is a most important sector of our industry, and there is enormous potential for further development. As with milk production, the beef sector is based on our lush grasslands, which is the main raw material and is in abundant supply throughout the Province. When we joined the EC, the beef industry was expanding and developing. However, since 1974, for various reasons, the industry has suffered a crisis of confidence, and as a result there has been a steady decline in the beef herd. However, in the last couple of years EC aids introduced into Northern Ireland the calf premium scheme, and the extra payments under the suckler cow premium scheme have helped to restore confidence in beef farming and the first signs of a halt in the decline in cow numbers are there to be seen. This trend is most encouraging. I hope that we shall see the rebuilding of our national herd towards the levels of a few years ago.

It is true that the Community produces more beef than it consumes, that production is rising faster than consumption and that the general world expansion in beef production will make it more difficult for the Community to market its surplus in other countries. We all recognise these facts and that the Commission feels that it must recommend some changes to the support measures to prevent any serious imbalance occurring in the beef market of the Community.

We also know, having read the documents, that the Commission stated: A cost cutting exercise, conducted without regard to the social and economic consequences, would render no service to the development of the Community. If these cuts and the Commission's proposals go ahead, they will lay the axe at the very root of one of the few businesses in Ulster that is progressing at present and promising the possibility of more jobs.

The Commission's proposal on beef will have very serious social and economic consequences for Northern Ireland not just now, but by placing the future potential for employment in our Province in serious jeopardy.

On the question of sheepmeat, Northern Ireland will be in great difficulty, for it is clear that the Commission wants to stop the advance payment of the annual ewe premium. Our producers currently get a proportion of the estimated premium at an early stage and the balance is paid at the end of the year when the final value of the premium is calculated. If this advance payment is stopped our producers' cash flow problems will be increased.

It must be remembered that most of our sheep farming is concentrated in the hills. These are the less favoured areas of our land where it is necessary to apply special measures to aid our farmers.

As a final word to the House, I wish to say that I am seriously alarmed at a report in The Irish Times: The British Foreign Secretary Mr. Geoffrey Howe acknowledged here yesterday that the EEC milk super-levy proposal presented an 'unacceptable situation' for Ireland … A British official said last night that Mr. Howe's remarks were intended to be 'mildly helpful' to Ireland. Its having been stated there would be no concessions there now seems to be a concession in mind.

If there is any concession and any imbalance as a result of that concession, it will tell against the interests of Northern Ireland agriculture which is the basis of our economy and the largest employer.

When Lord Mansfield came to the Agriculture Committee of the Assembly he said: If as a result of the negotiations this or that class or race of producers obtain some kind of advantage we must see to it that the Northern Ireland fanner is not disadvantaged. Will the Minister say whether the Government are sticking to that principle? Will the Government ensure that Northern Ireland does not get the rough end of the stick as the result of our membership of the EC?

9.43 pm

Mr. William Ross (Londonderry, East)

I am always grateful for the care which the Chair exercises in the protection of minorities in the House, not least today. The House has heard speeches from many parts of the United Kingdom, but I fear many of them have concentrated on milk. Indeed, the hon. Member for City of Durham (Mr. Hughes) said that he would not discuss the individual categories of farm produce. Certain sections of farm production, therefore, have been barely touched upon and it might be wise to look at some of those sections.

I shall start with the question of support for sheepmeat as set out in the Explanatory Memorandum 10422/83. The proposals in that document seem to hit specifically at the small man or the person starting out in farming. There is no easier or cheaper way in which a young man can start livestock farming than by buying a few sheep. There are many hundreds, if not thousands, of young men who are now farming on a fairly large scale and who began in that way. However, we find that the one remaining entry point into farming that is open to anyone who lives in a rural area is to be hit if the recommendations in the memoranda are to be put into practice. It is proposed that those with fewer than 10 ewes will be treated less favourably than those with more than that number. I realise that there is an exception for Greece, where only five ewes are needed. In other parts of the documents we read that there are to be measures to help the small farmer and those farmers who I assume are currently below the standards which the Ministry of Agriculture, Fisheries and Food would consider viable.

When the Minister was opening the debate he did not say what constituted a small farm or what changes in criteria were to be applied under the proposed regulations. If the criteria are to be loosened to allow those who hitherto did not receive subsidy to receive it in future, the farming community and the House should be told what those changes will be and the effect that they will have.

The Commission is taking the view that advance payments of the annual premium within the sheepmeat regime should be curtailed. The payments are extremely useful to the farming community if only because they improve cash flow and save a certain amount of bank interest for many farmers. I am wondering whether the Government intend to oppose the change. I am also curious about the proposal to change the sheepmeat marketing year from April to January. Conditions in this country — we are the major producer — will raise difficulties for the producers of spring lamb. I hope that the Minister will comment on this when he replies.

There is the astonishing statement that an effort will be made to relate the annual premium to the average weight of lamb produced per ewe. If the premium were to be related to the average number of lambs produced per ewe, one could see some sense in that proposal. I cannot understand what is meant by the average weight of lamb. Does this proposal mean that a farmer who sells his lambs when they are relatively small will receive less for them than a farmer who sells when his lambs are larger, or is a sliding scale to be introduced? Will different attitudes be taken to lowland breeds as opposed to texel sheep, which produce three or four lambs? Will there be a special category of payment for hill sheep, for example? This is an important matter for producers of hill sheep, and before the debate concludes the Minister should tell us what the proposals really mean and how the Ministry understands them.

In document No. 9797/83 there is reference to the impact that the proposals will have on New Zealand's exports of butter to Britain. As someone who is fond of New Zealand and New Zealanders, I am worried that the quantity could be reduced. Here is another instance being brought to light of where the EEC is digging its hand ever deeper into the rule of this country. This example is hidden in the regulations in such a way that most readers of them have not yet noticed it. Every time we come across such an instance we should make it plain to the House that there is a steady nibbling or constant erosion of the House and the rule of Britain.

The same document refers to the saving that can result by buying in a certain amount of New Zealand lamb, but that is an arm's length saving. By buying in we shall maintain the world price of lamb and thereby reduce EEC meat export credits.

Enough has been said about milk to let the Minister know exactly what the House and the farming community in general think of the proposals. I will not say more except to point out that milk production is a job that I have never liked—most right hon. and hon. Members will recall that I was once a farmer; indeed I still own land—because I do not like the propect of being tied seven days a week morning and night to a cow's tail as so many farmers are. For the average farmer, who is a working farmer, milk must be profitable or he will not slay at it, and, of course, at the present time, there is little else for him to produce profitably.

Mr. Nicholas Winterton

Are the hon. Gentleman's remarks of a few minutes ago about the size of farms as appropriate for dairy farms as for sheep farms? Does he not agree that we should have an explanation from the Minister as to what the British Government or the EC means by a small farm? Does he further agree that the exceptions and concessions that might come out of this agreement will all be unacceptable to the British dairy farmer, who is certainly the most efficient in the EC?

Mr. Ross

The hon. Gentleman makes a valid point. Many small dairy farms might be affected by this. No doubt the Minister when he comes to reply will reveal all. The House is waiting to hear just exactly what the position is.

By and large the proposals are unacceptable to British farming. There is no change here in the policy of the EC on farming. There is no change in the common agricultural policy. There are now so many areas in which the EC is more than self-sufficient—in other words, it is in surplus—that it is forced in the documents to call for an end to an open-ended commitment to agriculture. I cannot see how the common agricultural policy as it has operated until now can be reformed to the extent that I think is needed. There is a nibbling around at the edges to transfer some of the Community's commitments on agricultural imports to third countries. That will hit the poorer peoples of the world and some of the other traditional exporters such as Canada, which even yet sends us some produce, and New Zealand, which has special arrangements, and perhaps many others, who will be even less able to afford the attack that will be made on their national incomes. This will not help the consumer in this country because by restricting those imports we will force up our own prices.

Page 2 of document 10422/83 says that we need to negotiate, within the framework of the voluntary restraint agreements, more restrictive import arrangements. This is a series of protectionist measures. Protectionism by a nation such as ours, which lives by trading, must inherently be bad. This change in our traditional attitude has surely come about because of our membership of the EC. It cannot be denied that many people in this country and, indeed, many hon. Members foresaw long ago that higher production would result from the totally protected market, especially with the quantity and quality of land and the climate in Europe, which is outstandingly good for the production of all temperate foodstuffs. The position in which we now find ourselves was inevitable, and no one can deny it.

We are now in the same position as the United States, Canada, Australia and New Zealand, although that is a much smaller country, which have enormous productive capacities and enormous surpluses. We are different in one vital respect in that they have low cost production. Our cost of production has become extremely high, which means that through the years the CAP has increased the cost of food and, therefore, lowered consumption—more food is eaten when it is cheap. During the drought years of 1976 and 1977, potatoes became scarce and reached a high price, and we all know what happened. Previously, people had picked two dozen spuds, cooked and eaten some of them, and chucked out the rest; then people picked out as many potatoes as they needed for their lunch, dinner or for fish and chips in the evening and did not waste any. We in western Europe live in an affluent society and when food is cheap, there is enormous waste. That waste disappears when food gets scarce. Much of the surplus results from that and from the fact that the population is not expanding as fast as it was.

No one can say that by encouraging more production, production will be cut. Farmers are not fools, and at the end of the day they realise faster than do most politicians that prices are reduced by increased competition. The CAP has closed all competition. Farmers are like most other people; they are like 999 out of 1,000—[Interruption.] The hon. Member for Birmingham, Erdington (Mr. Corbett) supported the members of his union who came out on strike for higher wages. Why does he blame farmers for doing the same? Farmers are not interested in surpluses because they know that surpluses are not good for markets or for incomes. They are interested in incomes.

The hon. Member for Caithness and Sutherland (Mr. Maclennan) said that agriculture had flourished since we joined the European Community, but the House should question how well farming has flourished in the EC since 1973. This afternoon I took the opportunity of digging out a few figures. No one knows better than the farming community and the Minister that it is difficult to determine the net income of farmers because of the nature of their work and the way in which they can spread their income from one year to another by deferring expenditure when money is tight. When a farmer has enough money to buy a tractor or a new machine, he buys it, but when he does not, he defers buying it until the money is available. According to Government figures, in 1973 farmers' incomes were about £858 million. Between 1973 and 1982 the figure fluctuated in percentage terms like a yo-yo. In cash terms, there was a steady increase up to 1982, when the figure reached £1,849 million. In real terms it fell from £858 million to £540 million. If we take 1973 incomes as being 100 per cent., by 1982 the figure was 62.9 per cent. If that is the picture of flourishing agriculture, I do not want to be around when it gets into the doldrums.

The position arose because the policy is basically wrong.

The policy has distorted agricultural production and costs, and it is getting no better. The longer we persist with the CAP, the deeper we get into the bog. Sensible people know that this is not, and can never be described as, a serious effort to reform the CAP. This action is nibbling round the edges, just as a mouse nibbles round the cheese in a mouse trap. There is nothing here to give me confidence that a serious effort has been made either by Britain or by any other Community country to seek the root and branch changes that are needed for a common agricultural policy or, even better, for a national agricultural policy, which is vital to the welfare of Britain and especially to British farmers, who have done nothing but suffer under the common agricultural policy.

Mr. Deputy Speaker (Mr. Ernest Armstrong)

Order. The Front Bench spokesmen hope to catch my eye at 10.50 pm, and several hon. Members are anxious to speak in the debate.

9.55 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

There is general agreement in the House that no special case should be made for Eire, which has brought about the chronic excess of milk production by expanding its output during the past few years, when it was already clear that the Common Market would have to take steps to deal with a problem that was out of control. Similarly, Denmark deliberately raped the mackerel stocks of the south-west so as to generate existing use rights before the Community developed a realistic fisheries policy. We must not allow a country to benefit by becoming the Johnnie-come-lately of matters that are out of control.

It is not enough to talk, as the hon. Member for Caithness and Sutherland (Mr. Maclennan) did, of joining the European monetary system, unless he is prepared to say at what parity we should join. The implications of joining the European monetary system are completely different if we join at a high parity or if we join at a low parity. By simply recommending that we should join the EMS, without stating at which parity we should join, the hon. Gentleman hopes that the alliance can be all things to all men, as it generally tries to be.

Mr. Maclennan

rose——

Mr. Maxwell-Hyslop

If the hon. Gentleman wishes to tell the House at which parity he believes we should join the EMS, I shall give way to him. If he does not, I will not.

Mr. Maclennan

It would be advantageous to the farmers if we joined at the present parity.

Mr. Maxwell-Hyslop

Does the hon. Gentleman mean the present parity with the deutschmark? There is a deafening silence from the hon. Gentleman, I suspect because someone else wrote his speech and he does not know what it meant.

The most devastating problem in the Community—its consequences rub off on Britain—is the milk surplus, although in the United Kingdom we produce less milk than we use. However, the Milk Marketing Board has become confused. It is said that if the producer price of milk is reduced, output will be reduced. If that happens, either those producers who have a high interest loading because their production has been modernised or they have expanded on borrowed money, will be driven into bankruptcy, or individual producers will reduce their output. I do not believe that the latter will be the case.

What will be the effect on individual milk producers if the flat average price is reduced? They will increase their output so that they can aspread their fixed costs over a large gallonage. The only way to break out of that cycle is to have a system whereby a negative yield is recorded for output above the quota. It would then not pay the producer to feed concentrate to produce the extra gallonage.

It has been suggested that there is some novelty or indecency in having national quotas. I draw the attention of the House in general and my right hon. Friend the Minister in particular—so that he can whisper into the ear of my right hon. Friend the Prime Minister before she goes abroad to the negotiations, so that this point is not forgotten—that this system is already accepted in the EEC's handling of textiles. There are not just EEC quotas, but national quotas, and there is no free trade between EEC members. If British importers use up their quota of a textile that is covered by a national quota, they cannot buy textiles that were unused in the German quota and import them into Britain. I do not debate whether that is wise or foolish, right or wrong, but it drives a coach and horses through the theory that there cannot be national quotas—we have them already.

Would a sensible policy be to try to check output in those countries which over-produce, or those which under-produce? Such a policy should try, of course, to check those countries which over-produce. This will not be done merely by having a low unit price for the whole of output. A part-time farmer in Germany will not be driven out of business by a low price because he does not depend on income from farming to stay in business. Such people are village postmen or something else.

Mr. Nicholas Winterton

A car worker.

Mr. Maxwell-Hyslop

A car worker or whatever. It is a fallacy to believe that output per producer is reduced by lowering the average price. That is why I believe that the EEC will need to have national quotas. That will mean that in the United Kingdom there will be an individual farm quota. That is the only way in which to achieve a fair return for the producer for the milk that the country needs, without using bankruptcy as an instrument.

Mr. Teddy Taylor (Southend, East)

Is my hon. Friend confident of achieving the unanimous agreement of all member states to cut their milk production, but we would not cut ours?

Mr. Maxwell-Hyslop

I am never confident of achieving unanimous agreement anywhere, and certainly not in the EEC. We are in a position to say to those countries that if they do not agree they should try paying more for their milk surplus, as Britain has been doing for too many years. If we had a Government who removed Britain from the EEC, the Community would be faced with the question of how to pay the piper when Britain no longer paying—so the problem will not go away.

Finally, on the question whether it is possible to obtain unanimity now with 10 members in the EEC, I merely say that if it is difficult now, the difficulty will increase geometrically with the increase in membership to 12 when the olive oil pool is added to the problem of surpluses and when in addition to the battles between French and Italian wine producers there will be Spanish trucks to turn over, too.

When the Select Committee visited the EEC to investigate competition two or three years ago, officials told us that the extra cost to the EEC when Spain and Portugal joined would be £2,000 million per year, so anyone who thinks that there are budgetary difficulties now has not seen the part of the overdraft that has not yet come out of the envelope.

Those are the realities and that is why, at the eleventh hour, we must get the CAP right, especially with regard to milk. If we do not do that now, we are unlikely to be able to do so once we have the additional problems of Spain and Portugal on our plate.

10.6 pm

Mr. Robin Corbett (Birmingham, Erdington)

There is a well known saying, "If the cap fits, wear it." We are suggesting that neither the Minister nor the Prime Minister should do so.

I had hoped that it would be universally recognised by now that the CAP is an expensive folly, subsidising unwanted production at prices often well above 'world market rates. The United Kingdom consumer is twice robbed—first as a taxpayer to provide the subsidies and the costs of intervention, and, secondly, as a consumer in paying higher prices than necessary as a result of the subsidy system. If the saying, "The CAP must be reformed" were worth a £1 note every time it was uttered in the House the money would encircle the globe at least twice by now.

I hope that the Minister will deal with various specific points today. The common agricultural policy is not all common. It deals with some commodities but not others, although sensibly, especially in agriculture, the impact of decisions about one commodity should properly be taken into account in relation to others. The poultry sector is a case in point

Poultry meat and eggs account for about 11 per cent. of total United Kingdom agricultural output according to the Ministry and about 14 per cent. according to the British Poultry Federation. Both agree, however, that the annual turnover is about £2 billion. The poultry sector is a substantial customer of other agricultural sectors, buying cereals, proteins and equipment. It is also a major source of food supply and a major employer. Indeed, the number of jobs on the processing side is rising.

There is no intervention regime for poultry and the CAP review does not have to take account of that part of the industry. Yet the farm budget share for that sector is less than 1p in the pound. As a heavy user of cereals for feed in both meat and egg production, the poultry sector has to start work with the decisions already taken about cereals—in other words, the largest part of its costs is settled behind its back.

I suggest that the Minister should support the demand of the British Poultry Federation for a direct voice in the CAP reviews, as much in the interests of the industry as for the consumer. I hope that when my hon. Friend the Minister replies to the debate he will give me that assurance.

I accept the NFU's claim that the Commission's proposals discriminate against British lamb producers and consumers. I am alarmed that the NFU should give its support to the Commission's proposals to cut the level of New Zealand lamb imports. Historic ties of friendship exist between Britain and New Zealand, strengthened by two world wars. Pledges underlie such ties and I do not believe that they can be brushed aside.

Lamb and mutton is one of the rare commodities about which the CAP has not encouraged unwanted overproduction. The pre-war and immediate post-war availability of assured supplies of quality New Zealand lamb to our market are principally responsible for the maintenance of a large market and a public taste throughout the year for lamb. British producers have never provided more than a thin slice of total supplies.

The lamb trade dates back to 1882. Until the 1950s the United Kingdom was virtually the only market supplied by New Zealand. That fact shows the measure of interdependence. We must remember that that was a two-way trade. It suited New Zealand lamb producers as much as it suited successive United Kingdom Governments and consumers. Despite the distance involved, New Zealand lamb was available in Britain for 12 months every year. The New Zealand sheep industry is geared to exporting 90 per cent. of its production, which earns that country one third of its export earnings. The trade is critical.

When the EC sheepmeat regime began, New Zealand accepted an annual ceiling of 245,500 tonnes bone-in weight in return for a reduction in the tariff to 10 per cent. The voluntary restraint agreement was an important gesture by New Zealand. The Minister will recall that agreement.

New Zealand's share of United Kingdom lamb consumption fell from 55 per cent. in 1977 to 45 per cent. in 1982. The importance to the United Kingdom and its lamb producers is that the year-round availability of New Zealand lamb supplies helps to maintain domestic consumption in our off-season. That is no mean achievement. Once a market begins to slip because of seasonal or uneven supplies, it can be lost and replaced by another commodity. Our market needs New Zealand lamb supplies for reasons of its own as much as New Zealand producers have a need to supply it. New Zealand agencies have spent millions of pounds on helping to sustain and expand the general market for lamb and especially on promoting unfamiliar cuts.

If trade between EC member states and third countries is a two-way street, as I believe it to be, that involves accepting the special needs of outside trading partners such as New Zealand. I refer to this need in relation to dairy products. There are special difficulties in this sphere because of vast over-production within the Community. That was the position, and was foreseen to be so, in March 1975 when the Communities' Heads of Government accepted a declaration that: These"— the arrangements— should not deprive New Zealand of outlets which are essential for it. Irrespective of the party in office, our habit is that once a commitment is given in the name of a Government on behalf of the British people it lasts not only for the lifetime of the respective Parliament but in perpetuity unless an agreement is made to change it. No such agreement has been reached. I believe that the undertaking which the then British Government entered into, which has not been repudiated, remains. That undertaking, to which we put our name, is as valid now as it was then and I expect the Minister to take the lead in honouring that obligation.

I was amazed when the Minister, in opening the debate, said that he was minded to pursue a revised quota of 83,000 tonnes for New Zealand dairy products, falling by 2,000 tons a year over five years—[Interruption.] If the right hon. Gentleman is not going along with that, I shall gladly give way to him so that he can say so.

Mrs. Kellett-Bowman

For goodness sake get on with the speech.

Mr. Corbett

Although the Minister will not get off his Bench, I am pleased that he appears to be indicating that he will not put his name to that proposal.

New Zealand output is only 6 per cent. of total EC milk production. It would be unfair, unjust and unwise to try to solve the problem of over-production of milk within the Community at the expense of New Zealand producers and New Zealand itself. EC producers and their national Governments — and collectively through the Heads of Governments—should put their houses in order. Even if New Zealand supplies were further taxed, it would make no real or lasting contribution to solving the problem within the EC.

There is another serious argument, which I know the Minister will take on board. As a major world dairy producer, we need New Zealand's co-operation in the management of the small but specialised world butter market, of which New Zealand's share is a tiny, but important, 3 per cent. As the New Zealand Dairy Board has warned, without New Zealand having access to its traditional markets, the basis for that co-operation will be lost. I assure the House that those words were not written lightly.

Consumers have barely been mentioned in the debate. We tend to look at the problems of the CAP mainly from the viewpoint of the farmers and producers. The organisation, Consumers in the European Community Group, wants to see a much fairer balance between the interests of farmers and consumers … this can only come about through a much more realistic level of support prices putting Europe's food needs first. It continues, and I endorse this: The Community cannot be allowed to continue paying money it hasn't got to encourage the production of more food that Europe doesn't need at prices consumers are increasingly unwilling to pay"— it might have added, "and unable to pay because of the 12 million to 13 million unemployed people in the EEC, about one in four of them in Britain."— and to increase exports which actually lose money. That is well said. I hope that the Minister will make clear whether or not he accepts that view.

The claim in the brief which the National Farmers Union was kind enough to send us about the very real achievement of the CAP is ludicrous. At a cost of £10,000 a year for every one of its members, it would in any event be bought at too high a price. The brief lists the so-called achievements as rapid improvement in productivity, assured food supplies, reasonable consumer prices". It might have had the grace to acknowledge, as my hon. Friend the Member for Sheffield, Brightside (Miss Maynard) said, that those improvements in productivity have nothing to do with the CAP or our membership of the EC. They stem from the remarkable performance of the industry's falling full-time work force — people who have led the way in adapting to new techniques and tools in return for the pittance on which they are supposed to live.

The claim about reasonable food prices is just as hollow. The one family in seven forced on to welfare benefits by the Goverment will not make much of a Christmas dinner off those fine words in 24 days' time. Prices might be reasonable to people on average incomes, but to those on the poverty line they appear all too unreasonable.

The Minister, the NFU and farmers generally should show much more concern for the interests of the consumer, on whom the industry relies for its living. That is the imperative for real reform to end the vulgar over-spending and surpluses which the present mish mash of CAP produces.

10.19 pm

Mr. Robert Jackson (Wantage)

Having failed to catch your eye in the earlier debate, Mr. Deputy Speaker, I shall be brief and will concentrate on the question of how to contain and reduce expenditure on agricultural guarantees. Of course, this is not the only perspective in which to see this matter. Along with our other interests, such as the control of public expenditure, we must bear in mind the hopes and fears of the millions of people who work on the land. That is the attitude of our Community partners, and it is realistic to recognise that fact in our negotiations with them.

The cause of expenditure on agricultural guarantees is the excess of supply over demand. It is as simple as that. If the supply of agricultural commodities in the Community were to be balanced with the demand, or if there were less supply than demand, the cost to the agricultural budget would be nil. How can we bring supply and demand into balance? That is the central and essential question.

There is no doubt that Conservative Members agree with my right hon. Friend the Minister that such a balance is best achieved by operating on prices. We would prefer to do it that way. It is the least bureaucratic solution, and it is also the least open to abuse. The signal would go directly to the producer. If the price reduction were sharp enough, there would be a reduction in supply and possibly an increase in demand. Moreover, such a system would do least damage to British farmers, whose resources should enable them to adjust relatively flexibly to price reductions.

In an ideal world we should address the economic and financial problems of European agriculture by reducing prices and we should address its social problems by direct income supports to the smallest producers. Unfortunately, we do not live in an ideal world. In agriculture, as in many other respects, the rational progress of mankind is held up by two great scourges—politics and science.

The politics are obvious. Bearing in mind the low elasticities of demand and supply in this area, the price cuts would have to be extremely large, and sustained for a long time, if they were to have the desired effect. That simply will not happen. Moreover, farmers know that that will not happen. If farmers know that price reductions will not be sustained, the rational course for them is to increase output and hold on against the day when the politicians flinch. That is what happened when the Community's tough policy broke down last year.

Just as important as political factors is the impact of science on modern agriculture. The high and rising levels of farm output in Europe and the United States are not simply a function of high prices. They are perhaps even more a function of scientific and technological innovation, quite a large part of which happens irrespective of the level of price support. I suppose that we could kill off most scientific progress in agriculture if we reduced prices sharply enough. Short of that, the fact remains that the potential for increasing output in Europe, simply by the natural spread of existing best practice, is enormous.

Although we should rely on the price mechanism to the greatest possible extent, I am driven to conclude, like many other right hon. and hon. Members, that we must consider other ways of bringing supply and demand into better balance. That is why we must consider the limitation of supply by quotas. My right hon. Friend has fought a gallant rearguard action in the Council against the super levy. But if my argument is right, it follows that the line he has pursued cannot succeed in limiting the budgetary costs through the reduction of ouptut by means of price cuts. Therefore, with a heavy heart but in a spirit of realism, I urge him to shift his ground, at least with regard to the dairy sector. It might be possible to deal with other sectors by means of the price mechanism. But in the longer term, bearing in mind the accumulation of cereals in the United States and Europe, I wonder whether we shall not be driven to employ quotas and other methods in that sector too.

However, if we are to climb on board the super levy bandwagon, let me join those in the debate who have said that we must endeavour to get the Community to take full account of the relatively disadvantaged position of our producers at the moment when the whistle is blown. Let us limit, or prevent if we can, exemptions in favour of small producers. Let us resist any discrimination against intensive producers. Let us seek to reduce the rigidity of the quota system by making quotas as tradeable as possible within reasonable limits. Above all, let us negotiate for our producers a more favourable base year than the one proposed by the Commission.

Let there be quotas, but at the same time let us not think that quotas alone will do the trick. For quotas alone will not be able to effect the necessary savings to the budget. Let us assume that we succeed in fixing the base year at the point that we would prefer, the point least unfavourable to our producers—the level in 1983 minus 6 per cent. The fact is that at that level the Community would be 120 per cent. self sufficient at current levels of demand, and even if we were to accede to the Commission's proposal of a base year of 1981 plus 1 per cent. the Community would be about 115 per cent. self sufficient.

We must recognise that this excess of supply is the source of the problems of the European farm budget. Under the CAP system, these surpluses are disposed of by expensive subsidies either to increase domestic demand or for export. On the export market, the level of the subsidy required is determined by factors that are outside our control, such as the New Zealand and United States sales on world markets. Let me remind the House that in the United States dairy stocks are now running at 7 million tonnes which is 11 per cent. of America's annual production.

We must have quotas, but quotas are not enough. We must also have a tough prices policy that will, over time, bring the supply covered by the quota into a better balance with demand. Other methods will help, including cooperation with the Americans and the New Zealanders in managing world dairy markets. I agree with the hon. Member for for Birmingham, Erdington (Mr. Corbett) on this. We must also look at the Commission's proposal on the level of fat content in milk: we should increase it on the Continent, where the fat content is lower than it is here. But let us be clear that the introduction of quotas cannot and must not be taken as a signal for lax price decisions within the quota.

Earlier today some hon. Members showed that they believe that the answer to the problems of the European budget could be found by reducing agricultural expenditure. That was the thrust of the very effective intervention by my hon. Friend the Member for Wells (Mr. Heathcoat-Amory). I hope that those who have followed my argument tonight will understand why this is not feasible. Wasteful spending on agricultural guarantees must be eliminated. This can be done over time if quotas are accompanied by strong price discipline.

But let us be under no illusion. The problem of farm expenditure and farm surpluses cannot and will not be eliminated, to use an evocative phrase, at a stroke. We cannot hope to solve the budget problem in that way. On that happy note, may I wish my right hon. Friend good luck in the gruell ing negotiations that lie ahead of him.

10.28 pm

Mr. John Home Robertson (East Lothian)

I declare an interest as a farmer. There are not many others on this side of the House who are farmers—only my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan) as far as I know, and, come to that, not many of us in the Labour party represent rural constituencies. I want substantially more Labour Members of Parliament representing rural constituencies. I cringe when I hear people in the Labour party attacking the whole industry, as seems to happen from time to time, simply to pander to the daft, middle-class environmental lobbies about which we hear so much. I want to see production, industry and employment in rural Scotland. If we are to achieve that, we have to promote agriculture and the related industries throughout Scotland. They are inextricably linked with the social well-being of rural Scotland.

Mr. John Maxton (Glasgow, Cathcart)

My hon. Friend supports the idea of subsidies for industry and help for all industries, not just the agricultural industries. He does not share the hypocrisy of Conservative Members. Every economic tenet in which they believe has been broken by every Conservative Member who has referred to subsidies this evening.

Mr. Home Robertson

My hon. Friend is quite right. I believe that agriculture should be supported, just as I believe that other industries should be supported. I do not believe in special pleading.

As manufacturing industry is essential to urban areas, so agriculture is essential to rural areas. In Scotland, 60,000 people are employed directly in agriculture and a further 150,000 are employed in related industries.

The Labour party deplores the power and privilege and the residues of the feudal system which still exists in rural areas. However, when we have swept all that away—as we will—and established a civilised and fair society throughout the United Kingdom, we shall still need a strong agriculture to provide food and to provide employment in rural areas.

I am one of the lonely hon. Members on the Opposition Benches who have consistently regarded ourselves as pro-European. The only thing that can counter multinational capitalism is multinational Socialism, and we will continue to campaign for it.

The intervention system of the CAP is beyond redemption. It has none of the virtues of Socialism, but it does not have the virtues of capitalism either. It is not even achieving its supposed aim of protecting little farmers. It has been exploited mercilessly by big agri-business. What is happening in some areas is obscene.

Some of my hon. Friends have referred to the monstrous expense of the CAP and the absurd accumulations of surplus stocks. It is distorting agriculture. It is encouraging more and more peoples in traditional livestock-rearing areas of Scotland to plough up their land and grow more and more feeding grains. Goodness only knows what those cereals will be fed to. In my part of the world there is a specialist mill which wants to buy oats to mill into porridge oats. Can it get local farmers to grow suitable oats? It has no chance. They are too busy growing big-yield feeding wheat and feeding barley. The farmers have lost interest in the market.

The Under-Secretary of State for Scotland (Mr. John MacKay)

The hon. Gentleman has more than a few acres in the Borders. Can he explain to the House why he is not growing oats in order to help the mill?

Mr. Home Robertson

My reasons are exactly the same as those of any other farmer. If economic conditions encourage people to do daft things, one should not be surprised if they do them. The same could be said of malting barley and many other quality crops which could be grown throughout the United Kingdom. More and more feeding barley and wheat is being grown, and I am blessed if I know who is going to eat it. We shall be left with mountains of unsaleable feeding cereals.

The Government, with other Governments throughout the Community, should be seeking to restructure the common agricultural policy completely. I would rip it up and start again. We need two separate policies. On the one hand, we need a policy to deal with food and agriculture in Europe, and on the other hand we need a separate social-cum-regional policy to encourage employment in rural areas. They are in entirely different spheres and it is rather absurd to try to cover them both in the CAP. However, for the time being, given the tameness of the present Administration, we are stuck with the current daft CAP. Our objective should be to replace it, but we shall have to make the most of it for the time being.

If we must spend money on the CAP, let us try to spend it sensibly. Instead of dumping all these surplus feeding cereals abroad why not make it possible for livestock, pig and poultry farmers in this country to reap the benefit. It is absurd to have great intervention stores with hundreds of thousands of tonnes of feeding wheat in store at the taxpayers' expense sometimes only half a mile away from the poultry and pig farmers who cannot afford the feed that they need. The Government should be trying to find ways to ensure that our producers and consumers obtain the benefit of cheaper Scottish meat and Scottish produced feed, or British produced feed as we are still in the United Kingdom Parliament. That is not my fault. I look forward to the day when I can get in to a Scottish assembly which would be responsible for agriculture, but that is another issue.

I have received representations from the farmers in my constituency, as have other hon. Members, and from the National Farmers Union of Scotland. I am grateful to them for giving me their views on these proposals. The National Farmers Union of Scotland has grasped part of the intervention nettle system in respect of cereals. In its submission it says: The union must also reflect the requirements of the livestock sector as a major customer for cereals. We therefore accept the need for new price relationships between cereals and other commodities". So far, so good; it is learning. It goes on and spoils it: but at the same time re-emphasise the absolute importance of maintaining the basic structure of the intervention system. Why on earth should we? It seems to me that the system is irredeemable if we want to achieve a useful agriculture support system. Why cannot we think about some variation of the good, old-fashioned deficiency payments system? It worked pretty well and had the advantage of producing cheaper food for the consumers and providing an incentive to producers to produce quality crops. There is something to be said for that.

The trouble with so many things in this type of debate is that there is no such thing as a free market in food any more than there is a free market in anything else. In the complex economy of the late 20th century the only people who still believe in fairies and the free market are the Conservative party of Great Britain.

Mr. Maxton

Except in agriculture.

Mr. Home Robertson

My hon. Friend is right, but they are interfering with it in the wrong way. We are all for supporting industry, but why go about it this way in this one sector?

Our competitors are all manipulating their markets. Any significant switch from European-produced food to imported food would probably result in a significant increase in world prices. There is no joy in that for anyone.

If we are to be stuck with and tinker with the CAP intervention system, there must be no discrimination against Scottish producers. It might be superficially attractive to raise the standards for intervention buying of cereals, but geographic and climatic factors would mean that that would penalise cereal producers in the north of Britain and Scotland. It would give further encouragement and subsidies to the prairie farms of south-east England. There can be no justification for that.

The National Farmers Union of Scotland calls for the retention of the variable premiums for beef and sheep. The Minister of Agriculture said as much when he spoke at the beginning of the debate. I listened carefully to his defence of the variable premiums for beef and sheep. I agree that they are useful, practical and cost effective support mechanisms which help livestock producers and have the side effect of encouraging balanced farming. That is going out of the window in some pans of the country. At the same time, they promote consumption, as opposed to the stockpiling of food.

The variable premiums are almost alone among all the paraphernalia of the common agricultural policy. They aid the housewife and the farmer, and as such should be retained. As I said, I listened to what the Minister said, and I heard his fine words about the variable premiums. However, he did not say that he would go to the wall to ensure that they are retailed. Will he use his veto, if necessary? I hope that when he winds up he will say more on that subject.

I should be happy to talk about the need to sustain capital investment in agriculture, particularly in drainage—partly because it would help with job creation among contractors and other people in rural areas, but particularly because of the urgent need to replace much of the collapsing 19th century arterial and field drainage systems. Something needs to be done about them, because they will give rise to serious problems in millions of acres of land throughout the United Kingdom.

I do not want to waste time in this important debate. I therefore conclude by saying that we should all be determined to do away with the fundamental and scandalous distortions, surpluses and excessive prices of the CAP. In particular, we should seek to do away with the excesses of the intervention system. It is nearly Christmas, and I would love to give the Minister the benefit of the doubt, but I am afraid that in his speech today, and in his actions so far, he has not demonstrated that he is up to the job of getting this shambles properly reviewed—and properly replaced, because that is what is needed. I do not believe that this system will be done away with and something better put in its place under his stewardship. He rather reminds me of the Sorcerer's Apprentice. Instead of finding himself being swamped in more and more water, he will find himself swamped in vast tonnages of surplus milk and dairy products—barley, wheat, and all the rest. I do not believe that we can trust him, but we live in hope.

10.43 pm

Mr. Terence Higgins (Worthing)

The House has heard several maiden speeches recently, and in one sense my speech tonight is also a maiden speech, because this is the first occasion on which I have had the courage to speak in an agriculture debate. I shall not, therefore, follow some of the matters that were raised earlier by hon. Members who know more about agriculture than I do.

However, I want to raise a number of important issues in the short time at my disposal. First, there is a clear link between this debate and the one that preceded it, in increasing the Community's own resources. I am bound to say that even if we reach an agreement that is satisfactory on the budget and the CAP, the case for increasing own resources at any rate has not been made so far. I was, therefore, glad to note that my right hon. Friend the Chancellor of the Exchequer did no more than say that if we were able to reach agreement on those two issues, he would consider, but no more than consider, an increase in own resources. The late lain Macleod used to say that one never had to worry too much if the Minister said that he intended to consider something, and that it was only when he said that he would do something that one had to worry.

I want to concentrate on one issue. In the Vote Office there is a series of Supplementary Estimates. One of them, class II, Vote 10, "Budget of the European Communities", is for a sum of more than £436 million. This additional provision is said to be sought because in response to further invitations from the Commission of the European Community under Article 10(2) of the Council Regulation 2891/77 and together with other member states The Government agreed to bring forward payments of agricultural levies and duties collected under the Common Customs Tariff to ease the cash shortage of the Commission pending the adoption of their supplementary and amending budget for 1983. This supplementary estimate raises some considerable questions. As I understand it, it is proposed that this vast amount of money covered by the supplementary estimate will be paid out of the contingency fund. The House would then be asked to reimburse the contingency fund by an adjustment of the consolidated fund.

When this matter was raised on 16 March 1982 the then Financial Secretary assured the House that the Government would keep the House informed on this kind of matter and give it every opportunity to control the Government in the matter of such expenditure. Because of the deplorable failure of the House to set up the departmentally-related select committees it has not been possible for the estimate to be scrutinised by the House nor for the House to take any evidence upon it. There is, therefore, some danger of the estimate coming before us for approval without that scrutiny having taken place.

Can the Minister therefore give the House an assurance that it is not the Government's intention to bring forward that estimate for approval until that has been done?

The Treasury on previous occasions has pointed out that there are very serious objections to the use of this very roundabout procedure. Apparently the Government do not feel that they can pay this amount direct from the consolidated fund. The Government appear to take the view that it would be improper. Accordingly, the Government pay the amount out of the contingency fund and subsequently reimburse the contingency fund. The contingency fund is designed for use in emergencies, but this is not an emergency. The Government are simply helping the cash flow of the European Community.

I am not at all clear why the House should respond, in the words of the Treasury note to this estimate, to the invitation of the Community to provide this money in advance. The House has not yet approved the transfer.

Since this is a considerable strain on the contingency fund, it might be relevant to ask to what extent there are any remaining amounts in the contingency fund and, if so, the precise amounts.

The legality of the proceedings has been questioned in previous reports to the Select Committee and this should give the House cause for concern. Before the estimate is approved, under the new procedures, if they are put back into operation, as most surely they ought to be, the House should have the opportunity of debating the matter and voting on it. On that occasion I hope there can be a full examination following closer examination in the select committees. Until that time comes, I hope I can have the kind of assurances from my right hon. Friend that I have asked for.

Grave concern has been expressed in the House about the general level of agricultural support through the EEC. I referred to some £436 million. A similar sum appears in the figures of the Chancellor of the Exchequer's autumn statement not for the year 1983–84 but for the year 1984–85 where it is pointed out that a sum greater than £400 million will be additional public expenditure as a contribution to the EEC and the agricultural intervention board.

It will not escape the notice of the House that that sum is not dissimilar to the amount implied in the Chancellor's autumn statement by which he might have to increase taxes next spring. The House should consider that matter very carefully when assessing priorities on public expenditure.

The Economist rightly pointed out a short time ago that in addition to all the expenditure through the EEC a very large sum is being spent in direct support to agriculture on a more domestic basis. The question of agricultural support needs to be examined much more closely. I find little argument in favour of working the two systems in parallel.

I therefore hope that my right hon. Friend will consider these points very carefully. We must have a better system of parliamentary control than the present one.

10.50 pm

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

It is appropriate that I have been called to speak immediately after the right hon. Member for Worthing (Mr. Higgins), who said that he made his maiden speech in an agriculture debate. I am making my maiden speech from the Opposition Dispatch Box. I saw the former Speaker, Lord Tonypandy, on television last week when he appeared in the television programme entitled "The Great Palace". He said that the Dispatch Boxes had some magical qualities about them——

Mr. John MacKay

The Opposition Dispatch Box will need those qualities tonight.

Mr. Foulkes

—that turned sows' ears of notes into a silk purse of a speech. I can only hope, like the Under-Secretary of State for Scotland, that the former Speaker was correct. Little did I think when I used to rant and rave from the Back Benches——

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner)

Exactly.

Mr. Foulkes

The hon. Lady knows me well. When I used to rant and rave from the Back Benches on Scottish rating or the invasion of Grenada, for example, I did not think that I would end up replying on behalf of the Opposition on the common agricultural policy. However, it is not an inappropriate subject.

I have listened to eloquent contributions about the great farming attributes of the counties of Dorset, Devon and Cheshire — the hon. Member for Macclesfield (Mr. Winterton) is no longer in his place—as well as East Lothian and Berwickshire. I represent a rural constituency and accordingly I represent many farming interests. Ayrshire potatoes and Ayrshire cattle are known throughout Britain if not throughout the world.

Rev. Ian Paisley

They are even known in Northern Ireland.

Mr. Foulkes

Yes, even in Northern Ireland.

I concur with my hon. Friend the Member for East Lothian (Mr. Home Robertson) in saying that the Opposition are not intent on bashing the farmers. That was not the intention of my hon. Friend the Member for City of Durham (Mr. Hughes), who has unfortunately left the Chamber. We are here to——

Mr. Tristan Garel-Jones (Watford)

Bash the European Community.

Mr. Foulkes

No. Our purpose is to present a balanced view and make some critical comments.

It is appropriate that my hon. Friend the Member for City of Durham adopted an agricultural point of view when opening the debate on behalf of the Opposition and that I shall take a wider perspective as one of the Opposition's European spokesmen. The right hon. Member for Old Bexley and Sidcup (Mr. Heath) said in the previous debate that agriculture must be placed in a much wider context in the European Community debate.

The House will have noted that the Opposition have not tabled an amendment to the motion. The Minister of State, Ministry of Agriculture, Fisheries and Food, who is to reply on behalf of the Government, and the Minister of Agriculture, Fisheries and Food, who introduced the motion, challenged my hon. Friend the Member for the City of Durham on the absence of an amendment. We have not tabled one because we do not disagree with many of the Government's criticisms of the Community documents. They have been expressed more forcefully by the Minister on previous occasions than his equivocation suggested this evening. We do not disagree with that criticism, but we have serious doubts about the Government's commitment to achieve some of their stated objectives.

Mr. Nicholas Baker (Dorset, North)

All my right hon. and hon. Friends are glad to see the hon. Gentleman in his elevated position. I asked the hon. Member for City of Durham (Mr. Hughes) to tell us precisely what he and his party were proposing and whether he accepted that any violent and radical change that was made suddenly would be bashing farming and the consumers and everyone else who we represent with an interest in agriculture.

Mr. Foulkes

We are not suggesting that there should be a sudden and violent change. The prime responsibility rests on the Government and the Minister to make suggestions, but I hope to make some positive suggestions in my few remarks.

There is no doubt that the CAP is out of control. I think that that would be the unanimous view of the House if it were not for the presence of the hon. Member for Caithness and Sutherland (Mr. Maclennan), who used to be my hon. Friend. He would be a dissenter because he is one of the Euro-fanatics. The commentators think that the EC is out of control and that, as The Guardian suggests, there is a "runaway agricultural budget." It said: The EEC Commission committed itself last night to spending the last of its cash reserves to fund the runaway agricultural budget. The move dramatically deepened the sense of financial crisis in the Community, which has a strict legal limit on the amount of money it is allowed to spend"— the own resources to which my hon. Friend the Member for Livingston (Mr. Cook) referred earlier. The EC budget is out of control.

We could understand all this money being spent on subsidies to agriculture if it meant lower prices for our consumers, but the opposite is the case. The prices to our consumers are in many cases two, three or four times higher than world prices. That is the irony. We are spending more money on agricultural support, we have higher prices and yet we have waste with surpluses at record levels. I am sorry that the hon. Member for Southend, East (Mr. Taylor) was not called to speak in either debate today. He was told in a written answer of 27 June of the extent of the surpluses, which are larger now in most commodities — wheat, barley, milk, beef and pigmeat—than they have been in recent years. We object to paying the money but not getting the lower prices.

The pattern of agriculture is being distorted by the common agricultural policy. The CAP favours rich farmers — Sir Henry Plumb and some Conservative Members — in the south-east of England, not poor marginal farmers in the south-west of Scotland whom I represent. It favours the rich countries. Some of my hon. Friends have pointed out the way the changes will adversely affect the world.

I should like to now to deal with the Commission's proposals. It proposes not radical change but a tinkering with the CAP. The hon. Member for Ryedale (Mr. Spence) spoke about adaptation; the Commission talks about adaptation. But that is not what we want. What we want is reform.

The Minister has been quoted in the past as being critical of the super levy and as saying that it would institutionalise the disparities of production. I think that the Minister said that the super levy was unworkable. As my hon. Friend the Member for Livingston used to say, passing strange. The Minister was very much trimming his sails tonight. The French Minister of Agriculture would not appear before the National Assembly and trim his sails in the way that the British Minister of Agriculture did today.

The hon. Member for Wantage (Mr. Jackson) said that the Prime Minister should shift her ground on these negotiations. That is not the way to go into negotiations or to look after the British interest, about which the hon. Member for Macclesfield spoke. Hon. Members should not say to the Minister that he should shift his ground in the negotiations—[HON. MEMBERS: "He is not going."] The Prime Minister is taking on the responsibility as usual. I sometimes get the feeling that she does not need other members in her Cabinet; she can do the whole job herself.

Mr. Jackson

Does the hon. Gentleman agree that there is a problem in deciding what the British interest is in this matter? It is not adequate to talk about farming as being the supreme British interest. We must also take measures to contain the cost.

Mr. Foulkes

I understand that, but first I shall discuss the proposed oil and fat ban. The Minister of Agriculture says that he will oppose the ban, but I was not impressed by the firmness of his declaration.

Mrs. Kellett-Bowman

Will the hon. Gentleman give way?

Mr. Foulkes

No. I have very little time, and l must continue.

The oil and fat ban sums up some of the thinking in the Community, and sums up the nonsense that has been discussed in the European assembly, of which the hon. Member for Lancaster (Mrs. Kellett-Bowman) is a part. Although the market is already heavily over-supplied, the guaranteed price of butter has been increased so that producers produce more and consumers use less but turn instead to the cheaper substitute of margarine. However, rather than remedy the root cause of the problem—the high cost of butter—the Commission tried to penalitse the consumer——

Mrs. Kellett-Bowman

rose——

Mr. Foulkes

—who wishes to eat margarine, by using the oil and fat ban to increase margarine prices.

Mrs. Kellett-Bowman

Will the hon. Gentleman give way?

Mr. Foulkes

I have only six minutes left, and I do not have the time to give way again.

Mrs. Kellett-Bowman

rose——

Mr. Deputy Speaker (Mr. Paul Dean)

Order. It is clear that the hon. Gentleman is not giving way.

Mr. Foulkes

I hope that when the Minister of State replies to the debate he will give firmer guarantees about the Commission's other proposal, the one on the sheepmeat regime, than did the Minister. We want an absolute guarantee that there will be no backsliding on that regime. As the chairman of the National Sheep Association said today in the Glasgow Herald: The sheepmeat regime takes only one tenth of the support for milk. Sheepmeat—I prefer to call it mutton or lamb—is not in over-supply. We should encourage the British farmer to produce more, not penalise him.

Hon. Members on both sides of the House have said that if we go ahead with some of the proposals there will be a hostile reaction from the United States. That was confirmed in a speech given at Edinburgh university last Friday by Mr. Lloyd Cutler, the former special counsel to President Carter. He talked about American relations with the Common Market, and he identified the common agricultural policy as a major area of future conflict between America and the Common Market. It is so serious that it might cause greater conflict than did steel exports to America, the pipeline controversy, or even the difficulties in Grenada. I hope that the Minister will ensure that the Prime Minister takes that into account when she discusses the matter in Athens.

My hon. Friend the Member for Newham, South (Mr. Spearing), who is Chairman of the Select Committee on European Legislation, reminded us that the Government must look after consumer interests. The Select Committee stated: Consumers' organisations feel the proposals will do little or nothing to reduce surpluses, that the consumers are being asked to provide the money to prevent the limits on the EEC budget being exceeded, and that the only satisfactory solution would be to cut prices to the consumer. I say, "Hear, hear", to that.

The food manufacturers were mentioned by the Select Committee as well. The Food Manufacturers Federation has written to me, and no doubt to other hon. Members, saying: we have been campaigning for a long time for the CAP to be reformed and for its excessive costs to be reduced. One of our particular concerns is that the price support system operates in a way that destroys demand and ignores the added value that the food manufacturing industry confers on its raw materials with inevitable consequences for employment in the industry. We have already seen the threat to the United Biscuits factory in Liverpool. We talk about the loss of jobs in farming, but what about jobs in the food manufacturing industry? That industry must pay a high cost for raw materials. The food manufacturers have made more criticisms about the proposals.

The scene is set for Athens. CAP reform has been discussed in the House since the 1960s. Conservative Members may say that the Labour party could and should have done something about the problem, and there is an element of truth in that, but there has never been a better time than now for any British Government to achieve a reform of the common agricultural policy. The Minister of Agriculture, Fisheries and Food, the Prime Minister and the Government representatives who will be at Athens have the best opportunity for reform that has ever existed. The Community is on the verge of bankruptcy. This Parliament ultimately has a veto on any increase in resources. Therefore, we can demand CAP reform and ensure that our farmers', consuners' and taxpayers' interests are properly defended.

The Minister has made many promises. He has spoken of his strength of feeling on the super levy, the beef and sheepmeat premiums and the oil and fat tax. On 14 November, the Chancellor spoke of the importance of effective control of agricultural expenditure—we shall be watching for that — and about legally binding guidelines. That was a clear and unequivocal statement. We shall judge the success of the Athens meeting by comparing the results of that meeting with the statements and promises made by Ministers before it.

Sometimes I wonder about the motivation of Conservative Members. In my mischievous way, I had a glance through the Register of Members' Interests. There are no farming interests among Labour Members apart from my hon. Friend the Member for East Lothian and my right hon. Friend the Member for Cardiff, South and Penarth (Mr. Callaghan), but there are dozens of farmers among Conservatives, many of whom are here today.

Reference was made to the Minister as representing the interests of farming. The Minister of Agriculture, Fisheries and Food is here to represent not the interests of farmers but the interests of all the people — the taxpayers and the consumers. He should represent the national interest. On 13 October, the Home Secretary's brother, writing in the Financial Times, said: Contrary to popular myth … the Cabinet is full of farmers, who unlike other businessmen, are not required to put their activities 'on ice' The Cabinet must still represent those interests.

I am conscious of the fact that I must draw my remarks to a close. Like my hon. Friend the Member for East Lothian, we do not underestimate the importance of farming, but we cannot have an open-ended commitment to unlimited finance for the farmers. We must eliminate waste, and farming must become cost-effective throughout the Community. Prices must be reduced, or at the very least stabilised.

Sir Peter Mills

What about the coal miners?

Mr. Foulkes

The hon. Gentleman mentions the coal miners. The coal miners would love to have a common coal policy similar to the common agricultural policy, and they would like the subsidies that the farmers receive. The coal miners would like Community preference. If the hon. Gentleman compares the support for the farmers with the support for the industrial workers he will find that the farmers do very well indeed. [Interruption.] People such as the Under-Secretary of State for Scotland, the hon. Member for Edinburgh, South (Mr. Ancram), who favour European co-operation should be the most eager to reform the CAP because the waste, the cost of storage and the disposal of surpluses discredit the Community that he purports to support.

Reform is long overdue. There has never been a better time for it. We shall be watching how the Government defend the interests of the consumers and the taxpayers as well as the farmers. If they do not come back with the goods, they will have to face the music from us.

11.10 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor)

I begin by welcoming the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) to the Front Bench. He clearly found the crutch of the Dispatch Box helpful. I remember when he and I worked closely together in Scotland on the "Scotland into Europe" committee — no doubt highly relevant experience for his present position.

On this occasion, the hon. Gentleman's contribution was relevant and he did not rant and rave, except towards the very end. I should perhaps remind him that a Bill now in Standing Committee will provide considerable subsidies for the coal industry.

We have had a most valuable debate at an opportune moment for the House to express its views on the developing negotiations. Many hon. Members have done that and done it well, sometimes expressing conflicting views as to the course that should be taken on individual items and thus illustrating some of the difficulties that face the Government.

My right hon. Friend the Minister concentrated on the major issues in his opening speech, and I shall do the same. If I cannot cover some the minor points raised by the Opposition, I hope that hon. Members will forgive me. My right hon. Friend made our position on the key issues very clear. One or two hon. Members tried to go into very detailed matters, but I am sure that the House will understand that as we are still negotiating it is not possible to be pinned down on the details of every item. No other member state would expect to negotiate on that basis. At the end of the day, one sometimes has to concede one or two aspects that one dislikes in order to reach agreement. Nevertheless, my right hon. Friend gave a clear indication of the position.

Before going into detail, I remind the House of the benefit to United Kingdom agriculture as well as to the consumer — I assure the House that we think of the consumer all the time—and to the economy of our 10 years in the Community from the agricultural standpoint. United Kingdom self-sufficiency has risen from 62 per cent. to 76 per cent. in 10 years. In the past five years alone, there has been a saving on our balance of payments rising to £1.25 billion per year. From being an importer of cereals we have moved to being an exporter. Moreover, in the past five years the increase in food prices has been appreciably less than that of all prices. All those points are clear proofs of the success that we have achieved in the Community.

We all recognise the difficulties that we now face, but we received no guidance at all from the hon. Member for City of Durham (Mr. Hughes) in his opening speech. He constantly called for fundamental reform, but what did the Labour Government do about the matter? Costs were very high then, just as they are now. If they had tackled the problem then, we should not be facing some of the present difficulties now that costs are soaring. I found nothing constructive in his speech apart from agreement on two aspects that the Government oppose as well. There was plenty of criticism, but not one constructive point.

The hon. Gentleman referred to the Cumbrian NFU brief, but the logic of his comments was death and burial for the British agriculture industry and for many of our rural areas. The hon. Gentleman referred to the NFU brief. My retort is to send the Cumbrian farmers a copy of his speech and they can reflect on what he said.

Many hon. Members have referred to the milk sector, which has high and rising milk surpluses. As Britain is not yet self-sufficient in dairy products, suggestions have been made to the effect that we should have some exceptions and exemptions. The United Kingdom must play a full part in dealing with the dairy surpluses. My right hon. Friend the Minister said that the cost of the surpluses this year in the dairy sector alone will be about £3 billion. Last year they were £1.85 billion.

The United Kingdom is already 91 per cent. self-sufficient in butter fat and 131 per cent. self-sufficient in non-fat solids. I will have to refer the comments of my right hon. Friend the Member for Worthing (Mr. Higgins) to my right hon. Friends with the relevant responsibilities. However, he referred to an increase of £422 million in the intervention costs next year. Almost that entire sum is directed towards United Kingdom problems of skimmed milk and surplus butter. In United Kingdom intervention stocks, there are today 214,000 tonnes of skimmed milk powder, which is 752 days' supply, whereas there is only 233 days supply throughout the Community. We have 105,000 tonnes of butter, which is 130 days' supply. We have about 20 per cent. of the Community's intervention stock of skimmed milk powder and slightly under one-sixth of its butter stock.

If we argue across the board for exemptions for single situations, we face the danger that other member states that are well short of self-sufficiency in dairy and milk products would argue that they play a smaller part in dealing with the surplus. If we begin to pursue the course of exceptions to reflect the positon of individual nation states, there will be no end to the applications for exceptions. Such a policy would apply in many other spheres. The impression that I gained from the debate was that hon. Members did not wish Britain to agree to exemptions and special exceptions across the board with other member states.

Mr. Higgins

I hope that the Minister will not refer all the points I raised to his right hon. Friends, as some are related to his Department. Why is it necessary, by using the curious device of the contingency fund, to pay the money to the Community in advance rather than wait until the money is available in the consolidated fund?

Mr. MacGregor

My right hon. Friend is referring to accounting matters, about which I shall write to him. They are complicated, and I have to deal with many matters.

The position of the Southern Irish producers was referred to by the hon. Member for Antrim, North (Rev. Ian Paisley), and is relevant if the Government were to ask for exceptions for the United Kingdom.

Mr. Higgins

My hon. Friend is referring to the transfer of funds to the Community for agricultural purposes, and that is a matter for his Department. He should know the answer.

Mr. MacGregor

That is standard practice, and I shall write to my right hon. Friend. I vaguely recall the point. I have not had an opportunity to consider it tonight.

We do not accept that there could be any justification for allowing Irish producers to increase production and add to surpluses while producers elsewhere were being restricted. We have expressed, and will continue to express, our strong opposition to that. However, that fact is relevant when we ask for exceptions.

I wish to refer to some of the possible solutions to the milk problem, which my right hon. Friend covered in considerable detail. I had intended to draw attention to the many advantages of our general approach throughout the negotiations in dealing with the dairy surplus through price restraint linked to the guaranteed threshold. I need not spell out those reasons, because that was done admirably in the succinct speech of my hon. Friend the Member for Wantage (Mr. Jackson).

My hon. Friend the Member for Macclesfield (Mr. Winterton) and other hon. Members raised the question of national standard quantities. There is not a generally agreed view on that within the farming community. For example, the Scottish NFU and the three Scottish Milk Marketing Boards are advocating the super levy on farm quota system.

There are many difficulties with national standard quantities. What will the individual farmer face? A national standard quantity applied in the United Kingdom would effectively mean a return to the co-responsibility levy. The excess of the national standard quantity in the United Kingdom would be levied on the farmers. There are two real problems with going down that road. First, the farmer would not know at the time that he was producing his milk what levy would be applied to him. We would not know by how much we had exceeded the national quantity, so the levy would be retrospective. The individual farmer, once he realised the implications of that, would regard it as unfair.

Secondly, the farmer will be levied not on the basis of by how much he had kept within his share of the quota, but on what others had done. Those farmers who did not exceed their milk production quota could subsequently be charged a levy because some of their neighbours had exceeded their production quotas. Not many farmers would regard that as fair.

Mr. Maxwell-Hyslop

I have not heard any Conservative Member recommend national standard quantities — only national quota and individual farm quota, which is something entirely different.

Mr. MacGregor

I was referring not to my hon. Friend's speech but to the speech of my hon. Friend the Member for Macclesfield, who did argue that case. Indeed, we all know that the NFU also argues that case.

There are other problems with a national standard quantity. Many of my hon. Friends and many farmers who have made representations to me are worried about the whole area of quotas, super levies or national standard quantities. Although we would apply them fairly in the United Kingdom, they are afraid that other countries would not do so. With the national standard quantity system, where each member state is allowed to apply it any way it chooses, there is no way of achieving uniformity of application, no way of achieving consistency and no way of checking what is happening. That is why we want a system that is seen to be fair across the Community and operating consistently. That is an important factor to bear in mind.

The NFU proposal is for pooling the costs of any excess above the national standard quantity. As I said, that goes back to the co-responsibility levy. Our experience of that is that it has pushed up support prices and consumer prices. The message to both farmers and consumers is that the danger in going down that road is that the system would collapse.

The present co-responsibility levy already has gaps and exceptions which disadvantage the United Kingdom. For example, there is an exception for mountainous areas. Those who favour an increased levy want other changes so that it would operate more heavily on larger enterprises. With our large herd sizes, there is a real danger that our producers would end up paying far more levy. There are many difficulties with national standard quantity and increases in co-responsibility levy that have led us not to accept that as a proposal.

The hon. Member for Caithness and Sutherland (Mr. Maclennan) spoke about the super levy. My right hon. Friend made it clear that given the various objections to the alternatives, given the fact that there is not unanimity about dealing with the problems solely by price restraint, and given the need to find some way of tackling the milk problem effectively, we must be prepared to consider the commission's proposals for a supplementary levy. We must decide whether its proposals, which must be coupled to a restrictive price policy, could be turned into something that would be acceptable, even if second best.

My hon. Friend the Member for Ryedale (Mr. Spence) spoke about the need to ensure that the producer-processors' problem does not allow leakage — which would happen much more in other countries—and about the problems with the base year, and so on. We have taken those points on board in our approach towards the super levy.

The hon. Member for Antrim, North (Rev. Ian Paisley) referred to the butter subsidy, as did others. My right hon. Friend made it clear that we oppose phasing out that subsidy. We recognise the importance of the dairy industry to the economy of Northern Ireland. Some hon. Members referred to the equivalent of the dairy herd conversion scheme. There are problems with it. Such schemes have been extremely costly and have had little useful effect. Even if we build in strong conditions about producers not coming back into the industry, other difficulties remain. Some producers accept the subsidy when they intend to get out of that area anyway and as some producers accept payments for genuinely giving up, others add to their herds and expand production. On past experience, we feel that such schemes will not be one of the main items that will help us to deal with the problem.

The hon. Member for Caithness and Sutherland (Mr. Maclennan) referred to the problem of quality standards for exports of cereals. We have made our stance on that clear. There are several reasons why we believe that that is a major change of policy which would have to be discussed in the Council of Ministers and why we are unhappy about the proposals. The hon. Gentleman was wrong in regard to structures. My right hon. Friend referred to the extremely large increase which is being proposed by the Commission and which we do not think will be cost effective. That is why we are examining it closely. Hon. Members should consider the grant changes that were announced yesterday and other announcements that my right hon. Friend has made. It cannot be said that we are taking away benefits from the less favoured areas—quite the reverse.

The motion urges that we contain costs.

Mr. Maxwell-Hyslop

What about milk quotas?

Mr. MacGregor

That is one issue that must be discussed within the super levy. I apologise to my hon. Friend. There are many points to cover and I cannot deal with them all now.

The motion urges us to contain costs. We are facing up to that request in our policies in that we are emphasising the need for price restraint. We are trying hard to get written into Commission proposals the suggestion that price restraint should extend to items other than dairy produce and cereals. As my right hon. Friend said, it is important that we get that system extended to include Mediterranean products.

The motion refers to constraining surplus production. We have accepted that. We have urged price restraint with regard to surpluses. We reflected that in the grant changes that were announced yesterday. We are prepared to examine other Commission proposals, not all of which we like in detail.

The motion urges that changes should bear evenly on all member states. That is the most important part of the motion. It is firmly in our minds when we tackle these issues in the Community.

Mr. Nicholas Winterton

What about small farms?

Mr. Corbett

What about New Zealand?

Mr. MacGregor

I apologise to the House but I am not able to cover everything.

The motion refers to the interests of producers, consumers and food processors. The hon. Member for Carrick, Cumnock and Doon Valley dwelt on this matter. If he examines the points that my right hon. Friend made in his opening speech, he will see how we are endeavouring to get the balance right. We want to retain the variable beef premium because we believe that it strikes the right balance between consumers, producers and food processors. We oppose the restrictions on the import of cereal substitutes because it does not take into account the interests of some of our livestock producers and consumers.

Our stance on New Zealand reflects our anxiety to get the balance right. Our stance on the oils and fats tax, with which the House agrees, also demonstrates our concern for the consumer. I agree with what many hon. Members have said about the nonsensical way of dealing with rising expenditure and surpluses by asking for increased revenues through such things as oils and fats tax.

We have shown today that we are determined to play our full part in these negotiations to bring about the necessary changes that will bite on the surpluses and contain costs, and we are doing so in a way that is fair, as far as we can achieve that, to British producers and consumers.

Question put and agreed to.

Resolved, That this House takes note of European Community documents Nos. 8068/83 and 8823/83, communications from the Commission to the Council on the further development of the Common Agricultural Policy; 9596/83, introducing a tax on certain oils and fats; 9797/83, relating to the continuation of New Zealand butter imports into the United Kingdom under special conditions; 9797/83, Addendum 1, Commission report on the operation of arrangements for the importation of New Zealand butter during the years 1973–1983; 9988/83, on the market in products processed from fruit and vegetables; 9989/83, on the market in cereals; 9730/83 on the granting of aid for the use of butter and milk products; 9986/83, and 9986/83 Addendum 1, on the market in oils and fats; 9233/83, on the market in milk and milk products; 9691/83, on agricultural structures Policy; 9686/83, 9686/83 Corrigendum 1 and 9686/83 Addendum 1, Report on the rules for calculating monetary compensatory amounts; and 10422/83, Report on the sheepmeat regime; and urges Her Majesty's Government to negotiate arrangements which will contain the cost of the Common Agricultural Policy, constrain surplus production, bear evenly on all Member States and take into account the interests of producers, consumers and food processors.