Common Agricultural Policy (Price Proposals)

HC Deb 03 March 1983 vol 38 cc381-423 3.58 pm

The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker)

I beg to move, That this House takes note of European Community Documents Nos. 4020/83, together with Addendum 1, Addendum 2, and Addendum 3, on agricultural prices and related measures, 11089/82 on proposals for altering the intervention prices for butter, skimmed milk powder and certain cheeses, 11946/82 containing a report on agricultural markets in 1982, and 4376/83 on aid for seeds in the 1984–85 and 1985–86 marketing years; recognises the contribution United Kingdom agriculture makes to the national economy; and supports the Government's intention to seek an agreement on 1983–84 farm support prices and related measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy, and to take account of the interests of customers and food processors. This is the traditional debate that we have at this time of the year prior to the price fixing negotiations. The House will notice that the motion is very similar to the motion that we tabled last year. There is, however, one slight difference this year, and that is that there is no amendment by the Opposition. We can only presume that the wording of last year's amendment would not have fitted in with the events that have occurred during the year since that debate.

In the amendment to our motion last year words were used to the effect that the CAP could not provide the British people with reasonably priced foodstuffs and that it could not provide the basis for a policy that would properly serve the interests of either the British farmer or the consumer. It would be rather difficult to put down such an amendment following a year in which British farming has made a substantial recovery from the difficulties of previous years and food prices have risen by less than at any time in 15 years. That is in stark contrast to the suggestions that were made by one or two passionately anti-European hon. Members on both sides of the House about the consequence of the price fixing last year.

Some hon. Members predicted substantial increases if the Commission's proposals were accepted, let alone anything higher than the Commission's proposals. As we have seen, none of those suggestions and threats has come to fruition. It is interesting to reflect that under the Government farm gate prices have been a successful element in the battle against inflation. The retail prices index has increased by 50.9 per cent., the food price index has increased by 34.7 per cent., but the farm gate price index has increased by only 23 per cent. The latest food price figures published for January show the smallest increase for 15 years. Fifteen years ago we were not even a member of the Community. It was suggested at that time that stable prices were the order of the day, yet stable prices have been achieved since.

Mr. Teddy Taylor (Southend, East)

Have the Government made any endeavour to give separate index figures for those foodstuffs that are covered by the CAP and those that are not? The Food Manufacturers Federation Inc. has produced figures showing that there is a wide variation between the two.

Mr. Walker

The figures that I have given on farm gate prices are for products covered by the CAP. It is argued that such products as coffee, tea, lemons, and so forth, not covered by the CAP have gone down in price during this period. If some of those prices—some of which are now escalating—have gone down during that period and farm gate prices covered by the CAP have gone up far less than food prices, it must be concluded that such things as the higher costs of distribution and wages have the main impact on food prices. That was the conclusion to which my predecessor came when he was asked how much the doubling of prices that had taken place under the Labour Government was due to the CAP. He had to answer that out of a 111 per cent. increase, only 10 per cent. was due to the CAP. Therefore, we can certainly claim that this has been a period of remarkably stable farm gate prices within the CAP.

There have been other areas in which this period has been remarkably successful, not just in terms of the food price figures that have been achieved for the consumer—

Mr. Tony Marlow (Northampton, North)

My right hon. Friend knows as well as I do that the consumer is also the taxpayer. Has he read in The Times today that expenditure under the CAP is already £330 million above the budget and that it is likely to run out of money by November this year? What will my right hon. Friend insist on to ensure that the consumer or taxpayer does not have to pay?

Mr. Walker

I shall deal with prices later in my speech. Having been subject to my hon. Friend's passionately anti-European views for four years, I know that at no stage did he predict that in 1981 the cost of the budget would decrease and that in 1982 there would be only a relatively small increase. No figures are yet available for the first quarter, but certainly they will be worse than was budgeted for due to a whole range of reasons, some of them climatic. However, if the first quarter's figures are projected over a year they give a completely wrong impression, because the first quarter and the last quarter are the high points of expenditure and the second and third quarters are very much lower.

One important advantage that we have enjoyed over the past four years has been the improvement of our self-sufficiency. In those areas in which we can produce food ourselves our self-sufficiency has increased from 67 to 76 per cent., thus benefiting our balance of payments. Over the last decade the food industry has started to have a remarkable impact on our export performance. I must point out to those hon. Members who are passionately opposed to the EC that much of that is due to the considerable improvement that is taking place in our food exports to Europe. In the mid-1970s we were exporting £300 million of food products, and in 1982 that figure was £2.5 billion. That is a remarkable achievement.

I am pleased that the predictions about effects on farming have not proved to be correct. 1982 was a year of almost perfect weather conditions for British agriculture—for milk and cereal production, for virtually all other major crops and for the livestock industry. During the year there was a substantial recovery in farm incomes. There has also been a real improvement in farm wages. In the last year of the Labour Government the average agricultural wage was £61 a week, while this year it will be £105 a week. I am also pleased to say that, unlike under the Labour Government, when, in real terms, agricultural wages went down, every year under this Government agriculture wages have risen in real terms. In addition, the relationship between manufacturing and agricultural wages is higher than it was in any year of a Labour Government. In a period of recession and a substantial drop in farm incomes, that has made a considerable contribution towards rewarding skilled farm workers.

The House will know from the White Paper that I have recently published that there was a substantial revival of farm incomes in 1982. I have noted the manner in which elements of the media and, indeed, some politicians have treated the recovery in farm incomes during that year. I particularly object to several commentators saying that the 450 per cent. increase in farm incomes in Northern Ireland was outrageous. All those connected with Northern Ireland will know that farming there experienced the disastrous effects of a combination of weather conditions and other factors. Although large in percentage terms, nobody should be complacent about the recovery of farm incomes in Northern Ireland, because a great section of Northern Ireland's agriculture still has considerable difficulties and problems. To treat the recovery in incomes in percentage terms as outrageous and almost immoral when the average income of a farm in Northern Ireland has risen from about £700 a year to £3,000 a year, is not the sort of comment that anybody informed on agriculture matters should make; rather it is a matter for relief.

In real terms, farm incomes dropped from 1976 onwards and by 1980 they were 52 per cent. of the peak figures of the mid-1970s. As a result of the recovery in 1981, which continued in 1982, they are about 77 per cent. in real terms of that peak. However, in cash terms they are substantially more—approximately 50 per cent. more than in the year before that in which the Government took office. That improvement is of great importance to many industries outside British agriculture. I am delighted that during 1982 investment in plant and machinery by British agriculture substantially increased, approaching about £600 million. There were similar increases in investment in buildings. These increases in investment are of substantial importance to our engineering industry in the midlands and elsewhere and to our construction industry.

Mr. Gavin Strang (Edinburgh, East)

The Minister referred to both fixed capital and plant and machinery. As he is very fond of making comparisons between his Government and the Labour Government—although after three or four years these should perhaps be cited less frequently—does he recognise that the investment which is taking place and which is estimated for 1982 in plant and machinery and in fixed equipment still falls far below the level in real terms during the last two full years of the Labour Government? For example, investment in plant and machinery is still only three quarters of the level of 1978 and 1979.

Mr. Walker

I am in no way complacent. I welcome the hon. Gentleman's intervention. Obviously he agrees that the important thing is to see that farm incomes continue to recover to the degree that proper investment programmes can take place. In 1982 the year for which I have quoted figures, there was not much improvement in the first half of the year, but a very substantial one in the second half. I hope that improvement will continue very strongly throughout 1983 and 1984. I fully agree with the hon. Gentleman that the substantial fall in investment in plant, machinery and buildings was bad not only for the future of British agriculture but for the future of the industries closely associated with it.

Mr. David Crouch (Canterbury)

On this question of investment in plant and machinery, is my right hon. Friend satisfied that there is enough "buying British" by farmers? So much today comes from across the Channel even though we are able to manufacture such plant and machinery in this country.

Mr. Walker

I am not satisfied in the sense that when it comes to combine harvesters, for example, there is no British machine available, but British machinery is available in other areas, and one of the most satisfying aspects of attending both last year's royal show and the Smithfield show in the autumn was to see a great deal of innovation in both ideas and applications in British manufacturing industry. I hope that British farmers will take full advantage of that.

Mr. John Farr (Harborough)

My right hon. Friend quite rightly paid tribute to farm workers for what they have done towards increasing productivity. We all welcome the rise in farm incomes. Can he assure the House, however, that he is aware of the unacceptably high level, not only this year but for the last two or three years, of fatalities on the land, particularly among those who operate the complicated machines of today?

Mr. Walker

Yes, I am very much aware of that. Safety on farms is a very important issue to which we must continue to give our attention.

At the end of 1982 British agriculture was in a strong position. It was continuing to return to high investment levels and I think we can claim that of the agriculture industries in western Europe it was the strongest and most viable. It was also benefiting in a comparative way from the former high interest rates and their subsequent fall. A great deal of credit for the manner in which British agriculture has come through a period of world recession is due to the basic qualities of the industry, its powers of innovation, the heavy investment of the past, the importance placed on research and its speedy application and the very good labour relations that have existed throughout the industry.

Over the period of this Government there have been some considerable changes, not only in the common agricultural policy itself and the cost and burden of it, but in the British relationship to it and benefit from it. We have throughout the period, as I have illustrated with the figures I have given of the increase in farm gate prices, pursued a policy of endeavouring to obtain prudent price increases. With no disrespect to the hon. Gentleman, who suggested that I might make comparisons between Governments less often, the average price increases during the period of this Government have been very substantially below t lose that occurred during the term of office of their predecessor. The cost of the common agricultural budget, about which my hon. Friend the Member for Northampton, North (Mr. Marlow) expressed such anxiety, went up by 210 per cent. under the Labour Government but under this Government has gone up by 20 per cent. When we came into office the proportion of the European budget accounted for by the CAP was 80 per cent. I am pleased to say that it has come down to 65 per cent.

A third important factor is that when we came to office the proportion of the common agricultural budget that came as direct benefit to the United Kingdom was 5 per cent. During the lifetime of this Government we have more than doubled that figure. We have over this four-year period steadily and by negotiation—tough negotiation at times—obtained a considerable change in the CAP. We did things that were positively advantageous to British agriculture.

We brought about the early revaluations of the green pound, which turned us from the most disadvantaged country in Europe to one of the most advantaged. During a period when there were both weather and other difficulties we were absolutely right substantially to increase the hill farm subsidies, which enabled agriculture in Scotland, Wales and parts of the north of England to come through a very difficult period and brought about the sort of recovery in farm incomes that took place last year.

On the cattle side, the total of grants, hill farm subsidies and suckler cow premiums is now nearly double what it was when the Government came into office. Had that not been done, immense devastation would have been caused to hill farming areas. We negotiated a sheepmeat regime, which is good not only for our consumers but for the British farming community and of considerable net benefit to the United Kingdom.

In a difficult period we have given aid to the horticulture industry to mitigate the disadvantage that it faced in comparison with the Dutch in fuel prices, amounting to £6.5 million a year. We gave help to the apple industry in marketing, and when that help proved successful we recently announced help for the replanting of orchards to take advantage of improved marketing.

We doubled the butter subsidy, improved the beef premium scheme and, more than anything else, endeavoured to bring about a substantial improvement in the marketing of all our various products.

I shall now deal with the Commission's proposals for the coming year. We have heard today about one of the issues on which at Council meetings we have been pressing very hard and on which I myself sent a very strong note to the Commission. Some progress has been announced by the Commission in lowering its initial proposals on the price of milk. I believe that that is right, and I welcome the reduction of 0.8 per cent., but I still think that by far the best thing for milk would be to eradicate the co-responsibility levy and have a nil increase in milk prices.

We have started to see a substantial improvement in the use of milk for manufacturing. I am pleased to say that in butter, cheese and other dairy products the United Kingdom is becoming far more aggressive at acquiring a proper share, not just of the domestic market, but of the overseas market. There is no doubt that the future for milk producers lies in increasing manufactured and processed goods. There is no future improvement for doorstep delivery, because it is at such a high and good level at the moment. I agree with the statement made yesterday at the 50th conference of the Dairy Trade Federation that the important thing now is for both the dairy trade and farm producers to do everything in their power to see that milk prices are kept as stable as possible over the forthcoming period.

Any comparison with milk prices of any kind anywhere in Europe shows that the milk delivered to the doorstep in the United Kingdom is a very good bargain for the housewife. I think that there is unanimity in the House and, I hope, among consumers that we must retain that delivery system, which not only gives us the highest milk consumption in western Europe and probably in the Western world, but provides an important service to many people, especially the elderly. I certainly intend to do everything possible to ensure that that service continues. Alas, however, I cannot regard it as a service offering great scope for improvement as it is already nationwide and consumption is already extremely high.

That being so, it is clear that a greater share of dairy product markets is the improvement that our industry needs to achieve. In historical terms, our performance worldwide has been very disappointing compared with that of our main competitors. When our position is compared with that of the Dutch, the Danes or the French in the cheese market, it is clear that there is enormous scope for improvement.

Mr. William Ross (Londonderry)

Everyone welcomes the Minister's stoic defence of doorstep milk deliveries, but will he comment on the milk prices paid by manufacturers in the various EC countries?

Mr. Walker

As the hon. Gentleman knows, this is a complicated matter. Milk is available for our manufacturing industry on a considerable scale. Indeed, where we have begun to innovate and to be more aggressive, great and profitable progress has been made. In the absence of my dog I hate to mention Lymeswold cheese, but that has been a great success. Again, Stilton used to be sold to a very small number of people. It is now produced on a vast and growing scale. It could always have been produced on that scale, but we chose to treat it as a small novelty rather than as a product to be marketed worldwide. Considerable changes have been made and I believe that milk will be available to manufacturers in this country at prices that allow them to compete worldwide.

As the House knows, I took the view that last year's increase in cereal prices was unnecessary. I still believe that that was the correct view. This year the Commission has proposed increases of 3 per cent. for feed and 2.5 per cent. for bread-making wheat. I appreciate that with inflation in Europe at 9 per cent. and input costs rising that is a reduction in real terms, but I still believe that a freeze on cereal prices this year would be far more sensible. We shall certainly press for that in the negotiations.

Price increases in other areas of surplus production should also be more prudent, not only for wine and olives, which do not have a great impact here except on individual consumers, but for sugar for which the proposed increase is 4 per cent. Although that increase is below the average and through the B quota levy the producers make a substantial contribution towards disposal of the surpluses, I see no need for such an increase.

Mr. Robert Maclennan (Caithness and Sutherland)

It is interesting to know the Government's position on all these commodities, but does the Minister intend to put the Government's position at risk again this year as he did last year by seeking to link the budgetary question with the price fixing and allowing Britain to be overruled again for the same reasons?

Mr. Walker

Budgets and price fixing are linked in any case, because the budget is the cost of the price fixing. If the hon. Gentleman is asking whether specific matters will be voted on and the Luxembourg compromise ignored, that is a matter for other countries. The way in which Italy and France have behaved since the last occasion, however, suggests that to accept it as an established principle that the Luxembourg compromise should regularly be ignored might be damaging to their own vested interests on other occasions.

We shall, as always, attempt to argue the case on the price fixing objectively. In any price fixing by any Government compromises have to be made to produce an acceptable package. For every Minister to obtain everything on his list would be a contradiction in terms, because no two lists are the same. We certainly try to find allies, but difficulties arise because other countries have far higher rates of inflation and are thus more anxious for price increases.

Mr. Marlow

As we are net importers of food from across the Channel, if prices rise more than they otherwise might there will be an impact on the British consumer, because we shall have to pay more as a result. Last year the veto did not operate, but will the Luxembourg compromise allow us to veto any price increase that we do not like this year? Until last year that was always assumed to be the case. What is the position now?

Mr. Walker

In any negotiation one must consider the total package and the extent to which it is right for the Community and for one's own national interests. If we all operated on the basis of a perpetual veto of anything that did not ideally suit our requirements there would never be any kind of price fixing, because there would always be at least one country that did not approve of the price in question. Thus, as under previous Ministers, these matters are the subject of overall negotiations. One must decide whether the package finally available is good for the Community and for one's own country.

There is currently anxiety in two industries that are not enjoying the same confidence and prosperity as most of British agriculture and horticulture. There is considerable anxiety about the current level of pig prices and there have been protests by producers throughout the country. Two main suggestions rapidly come to the fore. One is that there should be a pig regime, just as there is a beef regime and a sheep regime. In my view, no Minister, whatever his political party, will ever bring in a heavy pig or poultry regime. The speed with which production can be increased in those sectors is such that if a price were fixed that was tolerable to producers a massive, rapid and permanent increase in production would result and would make such a regime impossible.

It is interesting to note that on three occasions under the Labour Government there were similar major crises in pig industry prices. On each occasion the then Minister made it clear that there was no possibility of a heavy regime on pigs. So far as I know, no Minister has ever suggested such a thing. Moreover, if the deficiency payment system were applied to pig production the cost would rapidly become crippling. There would then have to be quotas. Clearly, however, the Labour party and no doubt the SDP intend to suggest such a scheme. During a pre-election period, if any section of British agriculture is discontented it is perfectly fair for the Opposition to suggest a scheme. However, although such schemes may well feature in election addresses, pig and poultry farmers will know that if they ever came into operation they would have to be severely limited and quotas would ultimately have to be imposed—and British producers certainly do not like quotas.

Mr. Geraint Howells (Cardigan)

No doubt the Minister will argue the case for quotas whether or not he is in favour of them. Let me remind him that we are fortunate that we have a deficiency payments scheme for lamb that is working well. We also have a deficiency payments scheme for beef that is working exceptionally well. Going back a few years, we had a deficiency payments scheme for pigs, which worked well for pig producers. In my view, the majority of pig producers in Britain are keen to see the reintroduction of a scheme similar to the one that operated a few years ago.

Mr. Walker

The big difference with sheep and beef is the speed with which pig and poultry production can be increased. We will hear all sorts of suggestions in the coming election months. The Labour Government did not do anything throughout their period of office. If ever in the next 100 years there were an alliance Government, they, too, would find that because of the speed of increasing production it would not be an area in which they could introduce a heavy regime.

It has been suggested that as there are cereal surpluses the cereal price should be reduced. As is always the case with the disposal of surpluses, if the price were lowered to all those who take in feed, the cost would be considerable. If feed costs were reduced by only £10 a tonne, that would increase by over a third the cost of one of the most expensive regimes in the community. A judgment would have to be made about the desirability of adding billions of pounds to the cost of the regime.

During 1982 as a whole there was an improvement in incomes and a substantial increase in pig production. In the early part of the year prices were exceedingly good. There are two schemes available throughout the Community for pig producers. One is private storage and the other is a substantial increase in restitutions on exports to third countries. On the latest figures, although we have 10 per cent. of the total number of pigs in Europe, we are taking only 2 per cent. of all the money available from Europe for pig producers. That is because we have not taken advantage of world markets and the export restitution that is available to anything like the degree that the Dutch and the Danes have done. Nor have we yet caught up with the marketing qualities of our main rivals.

I hope that as a result of the launch of Charter bacon there will be a substantial improvement at long last in the bacon market in this country. The Danes have taken the British market, never by price cutting, but always by better quality control, marketing and packaging. The industry should recognise that there are facilities of which it could take advantage. I hope that Food from Britain will do urgent work to see what help it can give to marketing in this sphere.

There was no mention of pig producers in our debate at this time last year. Of course, the prices they were obtaining were very good. Over 1982 as a whole, as the figures show, incomes went up and production went up substantially. In what has always been a self-sufficient area, we must take full advantage of the market place. Our pig producers can produce pigs as well as—or probably better than—anyone in Europe. There must be aggressive marketing of those pigs in Britain and worldwide.

One of the other popular arguments among farmers is that the sheepmeat regime has done great damage to pig producers. Analysis of the 1982 figures shows that that is not so. In fact, throughout 1982 pig consumption went up and lamb consumption went down. If we compare monthly cycles of sheep prices and pig prices, we again see that there is no validity in that argument.

The other sphere of concern is the glasshouse industry, which has had difficulty, partly because of the currency exchange rate and partly because of the advantage that the Dutch have had in energy costs. Looking at the prospects for 1983, one sees that the currency exchange rate has moved to the detriment of the Dutch and to the advantage of our producers. In March, the Dutch energy price, as agreed by the Dutch Government, will be increased substantially, so our industry will be in a more competitive position. We have already started discussions with the industry about what we can do to conserve energy and encourage, if necessary, a switch to coal where that would be more economic. I have also discussed with the industry ways in which we can improve the marketing operations for crops that are fundamental to the glasshouse industry, such as tomatoes and plants.

Last year was a good year, because British agriculture took full advantage of weather conditions. Given normal weather, 1983 should be another good year for farm incomes. Farmers will get the full benefit of some of the regime increases that took place in the latter part of last year. They will have the benefit too of the lower interest rates. In a range of areas input costs have improved because of the lower inflation rate. Therefore, with normal weather conditions, 1983 and 1984 should be good years for British agriculture.

A minority of critics, some tinged with anti-Europeanism and some with other attitudes, wish to create hostility towards the industry. They say that it has received far too much aid and financial assistance from Governments and that taxpayers, money is poured away on it. By all criteria the industry is serving and will serve the country well. It has improved our balance of payments, reduced imports, increased exports and provided employment and new jobs. The aid that Governments give is primarily an incentive to investment, fundamental research and the speedy application of that research to the industry. In my judgment we have the best agriculture industry in Europe and it would be crazy not to take full advantage of it.

4.36 pm

Mr. Norman Buchan (Renfrewshire, West)

I must thank the Minister for his full resume. He said little about the motion. I want to pick up two or three points before dealing with the main aspects.

The Minister talked about those who were critical of the Common Market and the common agricultural policy and said they were either tinged with anti-Europeanism or objected to too much support being given to the industry. I reject that. Those of us who are trying to get sense into the European concept recognise that instead of creating a community of nations we have created a cockpit of warring interests in which the different nations are locked within inflexible rules which of themselves are creating difficulties and tensions. Those who do not believe me should speak to apple growers when they go to Brussels or listen to the criticism by some Tory Members of the European Parliament of their apparent colleagues.

Instead of projecting harmonious Europeanism, the Common Market has tended to split Europe. The Minister forgets that there is more to Europe than the countries of the Common Market. The Common Market has also created a situation in which anti-Europeanism is almost endemic at every meeting of the Council of Ministers. We who love Europe—Italy is my second country—resent that nonsense.

The Minister has said that we are tinged with the feeling that farming gets too much support from taxpayers. That might be true of the hon. Member for Holland with Boston (Mr. Body). Our objection is the opposite. It is that in a period in which the Government are withdrawing support from every other industry in Britain the same Government are increasing support to agriculture and trying to avoid facts by doing it under cover. They complained, for example, about my proposals for direct support, a deficiency payments structure, because it would be known and public, and therefore no Treasury would allow it in Britain. In other words, they agree with higher support by the taxpayer as long as it can be concealed. The hon. Member for Holland with Boston did a great job in publicising the nature of the support system. We are not tinged with opposition to direct support of farming. I cannot accept that. But we resent it when we see it applied to only one industry in this form, while day after day other parts of British industry are going down the plughole because of the Government's lack of support.

Mr. Richard Body (Holland with Boston)

Surely the important consideration is that before 1947 farm incomes were higher in real terms than they are now.

Mr. Buchan

That may be true in real terms. It was certainly true in the mid-1970s as we were beginning to move into the Common Market. However, I shall come later to the question of farm incomes.

In view of what the Prime Minister said this afternoon about the coal industry, I wonder what she would say if she were to apply the same support policy to the coal industry, and to say to it, "Keep every pit open, produce as much as you like, and in whatever quantities you like, and we will buy it." Indeed, the Government could go further, and I do not know why they do not, because the end point of much of the common agricultural support policy is the destruction of food. We could have a glorious blaze with the mountains of coal at the end of each year. What a pity that the Minister spoilt an otherwise reasonable review of agriculture with this infantile nonsense.

Mr. Peter Walker

The only true comparison between the coal industry and agriculture would be to pursue a policy of keeping cows when they were barren and ewes when they were 10 years old.

Mr. Buchan

That is what I meant about infantile nonsense.

The argument could also apply to steel. The same thing would apply to Mr. MacGregor and his steel exercise. I remember a distinguished former permanent secretary to the Ministry, Sir John Winnifrith, saying in a letter to me that this system is fundamentally unjust because it says to farmers, "Produce what you like and in whatever quantity you like, and the consumer, society, the nation, will purchase it." If it is good enough for one, surely it is good enough for the other. In my opinion, it is not good enough for one. We should have an intelligent method of support. We reject, not support for the industry, but the stupid and bizarre nature of that support.

Mr. Maclennan

Will the hon. Gentleman tell us whether the Labour party regrets or welcomes the increased production of food from our own resources? Does it welcome the fact that about 76 per cent. of our food is now supplied by British producers?

Mr. Buchan

If the hon. Gentleman were diligent in reading the farming press, he would know that I said precisely that. May I refer him to an article of about 27 January in which I made that very point? However, we must bear in mind that the reason for the expansion of production in this country was not merely the operations of the common agricultural policy. It is true that farmers responded rationally to the demands of the CAP, as well they might, because it gave them an open-ended guarantee. The real reason, to quote Sir Brian Hayes, another permanent secretary at the Ministry, was the application of science to industry, the new seeds, breeds, livestock improvements, and so on. The hon. Gentleman must not confuse the two and try to put words into my mouth. I am in favour of expansion in the British industry, consonant with cost, the environment, and the needs of the consumer. They must all be taken into consideration.

I want to comment on the areas that the Minister said were in difficulties in the glowing picture that he painted. He spoke about pigs. What an extraordinary proposition it is to say that it is beyond mankind's ability to devise a system of support for the pig industry! The reason is that we are locked into the inflexible rules of the Common Market. That is why we cannot support the pig industry. Let us consider the release of cereals. There are surplus cereals in Britain which at some point will be either destroyed or exported with heavy tax-paid support in the form of export subsidies. The Minister shakes his head. If he has a third solution, I hope he will say so. Clearly there is no third solution. So the surplus is either destroyed or exported at a subsidised price. There are only two things that one can do with surplus production: either destroy it or export it—or, of course, one keeps it in store. What else can one do with a surplus of which one cannot dispose? [Interruption.] Surely hon. Gentlemen have seen the colour photographs in The Sunday Times showing the continual destruction of food in the Common Market. By definition, there is nothing else that one can do with it. Let us admit that, so that we can proceed.

The Minister says that mankind cannot find a means of releasing that surplus to our pig producers at a price at which they would be prepared to sell to Russia or any other country. That is what the Minister is saying, and it is precisely because we are locked into the inflexible system of the common agricultural policy. That is why we cannot take advantage of that surplus to help our hard-pressed pig industry.

The hon. Member for Cardigan (Mr. Howells) said that there had been a deficiency payments structure that supported pigs. That structure contained considerable subtlety—from feed costs formulae to the middle band, and premiums on quality. It was a subtle and mature deficiency payments system. Why do not the Government apply it? It is not because of the speed of the production, but because we are locked in the inflexible rules of the Common Market. Thus, our view of the Minister's speech today must be tinged with scepticism.

I understand the Minister's dilemma. His permanent dilemma is that he recognises the stupidity of a system that is constantly escalating prices. Not only is the escalation of price written in, in the sense that that is the way support is given, but there is a written-in tendency, that can be obscured from year to year, of an increase also in the rate of price increase. It is thought that those of us who appear to oppose price increases do not support agricultural production. That is the dilemma. One way to deal with the dilemma is to leave the system. That is our solution. We say that by leaving the system we avoid the dilemma. However, I understand the Minister's dilemma.

The Minister was fair enough to say that he is now seeking a freeze on commodities in surplus. I hope that he does so, not only in our councils here, but in the Council of Ministers. He rebuked me for not having tabled an amendment to the motion. We tabled an amendment last year, and much good it did us. There was a 10 or 11 per cent. increase in prices as a result of the Council breaking the Luxembourg agreement. Therefore, perhaps it is better for us not to have tabled an amendment this year. We agree with what the motion says about measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy, and to take account of the interests of customers and food processors". We agree with the motion, but we want to see whether the Minister will carry it out in practice by taking the necessary measures.

I apologise for taking so long over my introductory remarks, but I was provoked. Let us consider the farming aspect. We are pleased that farm incomes are restored. The right hon. Gentleman has no reason to believe that there are objections in the country solely to the 45 per cent. increase in farm incomes. But when there are 3.5 million unemployed people in Britain whose incomes have been halved and proper increases in unemployment benefit are not forthcoming from the Government and when the general standard of living has decreased, those are two reasons why there are criticisms of the 45 per cent. increase.

Mr. Maclennan

Equality of misery.

Mr. Buchan

We believe in equality. The hon. Gentleman has moved fast since he joined the SDP. At one time he believed in equality. I am explaining why criticisms are made of the 45 per cent. increase. It is when 3.5 million people are unemployed and when the Government have reduced the earnings-related supplement and cut 5 per cent. from invalidity benefits. The hon. Gentleman should grow up and recognise how people feel about these matters.

Another problem is that the 45 per cent. is by no means evenly distributed. Forty-five per cent. sounds fine, but there are still many poor farmers in my area. One of the Labour party's objections to the farm support system is that it is unable to distinguish between the rich and the poor farmer. It creates an imbalance between livestock and cereals and between the big and the small farmer. The annual White Paper states that the top 13 per cent. of farm businesses produce 50 per cent. of the output. Therefore, the remaining 50 per cent. of output comes from 87 per cent. of farms. By definition, therefore, there is an unequal distribution of that 45 per cent. Some farmers are getting a hell of a lot, others are not. I object to that. I object to the taxpayer and the consumer helping to make the rich farmer richer. I wish to find a method whereby that can be equalised.

There is a discrepancy in the increase in different types of farm. From 1972 to the present time, all farm incomes rose by an annual 10 per cent. But the incomes of specialist dairies rose considerably more and the incomes of specialist cereal farms rose by almost double. The Labour party objects to that imbalance.

A great deal has been made of the fact that consumer prices—I am not sure of the present rate of inflation or the position during the past month or two—have been rising less than the retail price index. That is true. The figures are interesting. Let us begin with 1970, with a base of 100. That is two years before we joined the Common Market. The figure remained steady until 1972. From then, the increase in food prices rose dramatically because Britain had joined the Common Market. The reason was the double engine of the transitional period and the bringing in of common agricultural prices. The figure rose dramatically but has been declining since 1980.

Throughout the period 1970 to 1982, the increase in food prices was higher than the retail prices index figure. That is a factor in inflation. If food prices rise, there is no point saying, "They did not really rise," or, "They have not risen because the retail index is higher." It is part of pushing up the retail prices index. The charge of the Labour party is not that food prices have risen more sharply than the general retail prices index, but that they rose more than necessary because of the operation of the common agricultural policy. Do not take my word for it. Lloyds' Bank Economic Bulletin, which is a reasonable authority, states: British consumers are, however, paying over £3 bn more for their food than if world prices had prevailed. Another authority is Sir Brian Hayes, who is the Ministry's permanent secretary. He told the Select Committee on Agriculture two years ago that prices at that time were costing the British consumer £2.25 billion a year more because of the operation of the CAP.

The charge is that food prices are more than they need to be. That is a worse indictment than saying that prices had risen because of the operations of God. Prices have risen because of the operations of man and the common agricultural policy. If that £3 billion is divided between the population of Britain, numbering 55 million, the British consumer is paying about £55 a head. A family of four pays about £200 a year, or £4 a week—and the man may be unemployed or on low pay. He may be a farm worker—[HON. MEMBERS: "£5 a week. As always, I am as generous as possible. The additional cost to a family may be £4 or £5 a week because of the common agricultural policy.

A memorandum entitled "Guidelines for European Agriculture" expounded a long-term strategy for the adaptation of the common agricultural policy. The commission is becoming worried, and apparently it has more reason to be worried than the Minister appeared to be. It says: The Community needs to ensure that its agricultural prices are brought more into line with those received by producers in competing countries, or that its agricultural producers participate more in the cost of exports". That means that they must either reduce their prices or lose some of the export restitution.

What are the facts in attempting to bring the common agricultural policy into line with world prices? There has been an improvement during the past year or two which has been entirely due to the strength of the American dollar. I wish to consider an example of constant prices. In 1980 the gap in wheat prices was 37 per cent. between the United States and the Common Market. Today, at constant prices, the gap is 43 per cent. In a crucial commodity such as wheat there has been no improvement.

Those hon. Members who have, over a long period, looked at the relationship between EC prices and consumer prices can clearly see the link. The cost does not end there. This huge consumer cost is added to by a cost to the taxpayer in supporting the system.

The Minister is fond of saying that this percentage has been reducing. It has, but it is rising again. "The Agricultural Position in the Community" in 1982 shows that the percentage paid to support agriculture was dropping. In 1978 the figure was nearly 80 per cent., in 1980, 73 per cent. and in 1981, 64 per cent., as it was in 1982. The projection for 1983 is 69.8 per cent. When the right hon. Gentleman answered a question recently, he said that the figure would remain at 65 per cent. The European Community report suggests that the figure will increase to almost 70 per cent.

The prospects are that it will be increasingly difficult to get rid of the surplus on the world market. That is an obvious point. That will mean either more retained storage or destruction, at a further cost to export restitutions. Internal consumption—which is stagnating—is likely to fall, and production will continue to rise. Given those factors, it is inevitable that whatever happens to price fixing the support system will continue and increase. That adds up to increasing and open-ended expenditure, high prices and high taxation. There will be high taxation not for the pleasure of achieving cheaper prices, but to bring about dearer prices.

Mr. Marlow

Is it not true to say that the massive and increasing surpluses overhanging the world markets are depressing world market prices, which will make the cost of disposal even greater than it is at the moment?

Mr. Buchan

It will do three things. It will, as the hon. Gentleman said, depress the world market and put up the cost to the taxpayer of export restitutions. It will damage markets that we should be trying to protect, especially in the Third world countries. It is no wonder that alarm bells are ringing in the Common Market. The commissioners say: the rate of expansion of exports on the world markets will not continue in the medium term either because of the economic recession or because of intense competition from our major trading partners, particularly the US". That is the third factor. There is a possibility of trade antagonism between ourselves and the United States, and possibly between other countries.

The White Paper deals with public expenditure under the CAP and on national grants and subsidies. For market regulation under the CAP in 1978–79, it was £337 million. Last year, it shot up to more than £1 billion. For the first time, we are spending more than £1 billion on storage for the open market of surplus production. The cost has trebled in the past three years.

The Minister might not be worried, but it appears that the commissioners are worried. That is a significant change because they have not always been in the forefront of any anxiety about the future. They think that the EEC budget is in danger of incurring a £1,200 million deficit by the end of the year. Figures circulating within the EEC have led officials to wonder how long the CAP can continue without some radical change in the system. There was not a word of that from the Minister. He did not criticise the nature of the system. Some officials are obviously becoming worried and want there to be some change. They say that the cost is escalating.

Even without a possible trade war between ourselves and the United States, before agreement of this year's package advances by the commission on its farm budgets are £460 million more than last year, and already £330 million more than the 1983 budget provisions. That is the position that we face, and the Minister should have paid some attention to it.

Strange things happen in the method of support and the cost of the agricultural budget. I refer the Minister to the letter sent to him by my hon. Friend the Member for Ipswich (Mr. Weetch), to which he replied, and his reply to a question on 22 February. It is an example of what is happening, which the Minister appears to endorse. A ship leaves Rotterdam with butter and sails to Ipswich docks. Dockers unload the vessel, the goods are left on the quay, and two days later, they load it on to the same vessel and it sails back to Rotterdam.

The Minister, in defence of that, said that the traders are entitled to take advantage of the system. He said in his letter: Following the recent decline of sterling, pre-fixation of the monetary compensatory amounts is currently a benefit to UK exports. Provided export from the UK takes place it is immaterial whether the goods originated in the UK or were previously imported from another part of the common market; and whether they go to their destination directly or via another Community port. In other words, he investigated the case and decided that the traders were entitled to do that. His letter continued: I assure you that if there was evidence of abuse of the system, it should be—and would be—investigated. Nobody is saying that that practice is illegal. We are saying that such trans-shipment enables exporters to make so much profit that they can afford to hire a ship, load it, unload it, and then load it again.

Do not forget that that case concerned the export of butter. Who pays for that?—the British taxpayer. Yet the Minister said that if there was evidence of abuse it would be investigated. I suggest that he investigates the whole matter now. If such practice is not illegal, it is most certainly an abuse.

Mr. Geraint Howells

I have listened with great interest to the hon. Gentleman's remarks during the past five minutes. I understood him to say that he would welcome more production from Britain. He then said it might be cheaper to buy food on the world markets. If the Labour party intends to pursue such a policy, what good news can he today give to our farmers and the British consumers about such a scheme?

Mr. Buchan

I want to spend two or three minutes on that point towards the end of my speech—[HON. MEMBERS: "Answer now."] I can certainly do that if Conservative Members want to hear me say it twice. I had better do so, as they need teaching. If we took advantage of buying cheaply on the world markets, two things would follow. First, we would be in a position to deal justly with the consumers. Secondly, we could protect our farmers' incomes by operating a system of deficiency payments and guaranteed prices. The Common Market practice is costing the consumer, the farmer and, above all, the taxpayer.

We could assume that a commodity enters Britain at the price of "X". However, rather than that, let us assume that we have established a deficiency payment of "X". The product enters at X-20. We could do two things with that "20": we could benefit the consumer or we could impose an internal import levy which would provide revenues to pay for deficiency payments.

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

That is what the Community does.

Mr. Buchan

No; it does precisely the contrary. An internal levy would give resources to help with deficiency payments, and the guaranteed payment would remain as "X".

Sir Peter Mills (Devon, West)

I do not understand the hon. Gentleman's point. How can we buy products for consumption in Britain from the cheapest world markets if we have full production? That cannot be done. Something will have to give.

Mr. Buchan

I am not talking about commodities that are of easy self-sufficiency in Britain. I am talking about taking advantage when commodities are in deficiency. This country produces what it can, consistent with the needs of the consumer and with cost. When we cannot produce 100 per cent., we must import. We should take advantage of such imports rather than there being a loss.

I wish briefly to deal with surpluses. All signs are that the Commission envisages an increase in surpluses. In its papers, it states: the working hyposethes are as follows: the new prices will be established on the basis of the prices adopted for 1983–84, with application of the guarantee thresholds. The document says: Production will increase and will exceed the guarantee thresholds. It is expecting an advance and an excess in production. That is why it is introducing a 1 per cent. cutback on cereal and a 2.2 per cent. cutback on milk prices when they go over the threshold. It assumes that surplus will continue.

The Commission is anticipating a surplus production of butter of 600,000 tonnes. During the scandal of the butter market in 1980 surplus production amounted to 280,000 tonnes. It is now anticipating a butter surplus of 600,000 tonnes by the end of this year. If the right hon. Gentleman says that this is a sensible way of financing an agricultural policy, I cannot agree.

In a written answer of 22 February 1983 about stocks in storage, the Minister of State gave the following information. For wheat, the amount held in storage in 1982 was 2,700,000 tonnes; this year the figure is 6,297,000 tonnes. For barley, the amount in store last year was 623,000 tonnes; this year the figure is 1,500,000 tonnes. For butter, the amount held in store last year was 121,000 tonnes; this year the figure is 336,000 tonnes. The amount of the eight commodities held in store increased, with some doubling and some trebling. That is the end point of this ludicrous policy. It is no wonder that Ralf Dahrendorf, when interviewed on television about the EC, said that his experiences as a commissioner convinced him that the actual institution is essentially a miserable agricultural policy and one or two frills. These frills are what has hammered our manufacturing industries, but at least he recognises that it is a miserable agricultural policy.

There are alternatives. There should be the immediate fulfilment of the election pledge given by the Tory party to freeze all commodities in surplus. I am glad that at long last the Tories have moved in that direction, and I hope that they win the battle. We shall be watching closely. There should be a swing of the balance of support from the consumer to the taxpayer because support by the consumer means that the poor pay more. The poor pay considerably more of the proportion of farm support than the rich. The poorest sector of the community pays about six times as much in relative terms as the high income sector. The Government could use direct methods to support less-well-off farmers. The Government boast about the 45 per cent. increase in farm income. We have shown that that 45 per cent. largely goes to the top 13 per cent. of the farming community. The Government could adopt national aids to achieve a better balance and give support to those sectors in need. The Minister dismissed the pig problem in a cavalier fashion. He should reconsider that. It is a serious problem.

Better still, we could leave the system. It is a bizarre system and is fair to neither consumer nor taxpayer. It does not encourage good husbandry in British agriculture. If we were to leave, we would have independence of action. We could have forward planning of production in relation to need. If we were to adopt a deficiency payments system, we could buy where we wished in world markets. We could use intervention where it would be helpful—for example, with potatoes, where it makes sense. We would make it a tax-supported structure rather than a consumer-supported structure. We believe deeply in the necessity of a healthy agricultural economy in order to provide a healthy rural community. The loss of 120,000 farm workers over the past two decades has not helped the countryside. We must find means to get that type of work back into the rural community. Despite what the Minister said about farm wages, a final indictment is that, in a year in which a 45 per cent. increase in farm incomes occurred, the farm workers were awarded only a £6 a week wage increase. There is still a larger number of farm workers having to receive family income supplement than any other group of workers. That is intolerable.

I have spoken at length. The Minister spoke for slightly longer. I did not expect such a tour d'horizon from him, so I have had to follow that. The commissioners' papers sound a warning. They ring the alarm bells strongly. I believe that the people of Europe, let alone Britain, will not long tolerate such a stupid, wasteful and expensive system. It is becoming an incubus on all of us. It has led to little harmony in Europe. It is harmful to international relationships and harmful to the Third world. It must go, and the swiftest and cleanest way is for us to leave.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. I remind the House that an important debate on the Scottish parliamentary boundaries follows this debate. It is desired that that debate should begin at about 7 o'clock. In view of the time factor, will hon. Members please bear that in mind?

5.15 pm

Sir Hugh Fraser (Stafford and Stone)

I should like to congratulate the hon. Member for Renfrewshire, West (Mr. Buchan) on his speech. It reminded me of an attack by a cleg on the mountains of Renfrewshire. The cleg makes a tremendous buzzing noise and has a terrible sting. For those hon. Members who do not know what a cleg is, it is a poisonous cow and horse fly. It is a dangerous thing to have around. The hon. Gentleman's speech will not have given much satisfaction to the British agriculture industry.

The speech of my right hon. Friend the Minister of Agriculture, Fisheries and Food does give a good deal of satisfaction. I must congratulate him and my right hon. Friend the Prime Minister on the robust attitude they have taken to the common agricultural policy. That is of overwhelming importance. Despite the Government's many successes—in the hill farming, the achievement of a Conservative Administration in increasing national self-sufficiency, in improving productivity and the improvement of farm incomes, which increased by 45 per cent. last year but are still lower in real terms than in the 1970s—we are faced today with two problems with the CAP.

The first relates to the CAP budget, to which reference has been made by Conservative Members and by the hon. Member for Renfrewshire, West. Whatever the forecasts are, it will run into immense trouble by the end of this year. Some people are talking about an increase in tax. The Times today referred to a leak from Brussels in which a budget deficit of about £1.2 billion was mentioned. I do not know whether that is true. We are running into immediate and colossal difficulties. That is why my right hon. Friend the Prime Minister was right to make it clear in the past few days that she will fight every inch of the way any increase in our payments into the CAP. I congratulate my right hon. Friends on that.

A matter of perhaps even more importance is the larger cloud which is appearing over world trade in agriculture. That is the most worrying matter. It besets not only this country, but the whole of the Western alliance. World trade in food amounts to about £300 billion a year. It is 15 per cent. of total world trade at the moment. It is almost as large as the trade in armaments. That is the size of the world trade in food. It is a colossal issue. What is unfortunate is that the EC is being used not as it should be, to try to form with the rest of the world—the United States and world organisations—a harmonious process, but in confrontation politics, which could be disastrous to Western interests.

Europe is now on the verge of an agricultural trade war with the United States. The impact would be alarming. We are looking forward to the Williamsburg conference. The whole thing could be wrecked by a row between the Americans, the Europeans, ourselves and the Japanese on agricultural trade. The matter will not get better because the surpluses that are emerging in the world will be pushed up further by two things—first, the fall in oil prices, which will increase the green revolution; and, secondly, countries such as Nigeria and Venezuela, about which I know a little, are good agriculture countries with a huge potential to redevelop. They will not do so immediately, but in the next year or so they will go back to producing surpluses of food, which will come on to the market.

Mr. Peter Walker

I agree with my right hon. Friend that nothing could be more disastrous for the Western world than a dumping war between the United States and the Community, but I think that my right hon. Friend will agree that it is not just Europe that has surpluses. The United States also has surpluses. The increase in surpluses in the United States has been greater than the increase in Europe. Government subsidies are substantial. What is needed is an understanding between both sides.

Sir Hugh Fraser

I shall come to some of the points that my right hon. Friend has raised.

Let us be clear. American farmers are jumping up and down because they are getting a thiird of the money value that they received 10 years ago. The American farming vote is immensely important. The fact is that 20 per cent. of total American production is in agriculture. The income of American farmers over the past three years has dropped from $25 billion to a projected $16 billion this year. Do not let us underestimate the force of American feeling on the matter. A major problem faces the West.

I shall give some of the world trade figures. Historically, America claims about 10 per cent. of world trade, which is about £30 billion. American farmers are complaining today that Europe is dumping food on the world market. What my right hon. Friend says is true. America is also subsidising food. Let us look at the difference in the level of subsidy. My figures are from the American Department of Agriculture. They may be right or they may be wrong, but I shall give them.

The Americans are paying $18 billion in direct subsidy to agriculture, and there is a quota system. In Europe there is a combination of direct payments and tariffs that amount to a load of $35 billion on the taxpayer and the consumer. At the end of the day there is no question but that American agriculture, compared with continental European agriculture, is more efficient. For example, the wheat price is 40 per cent. below the European price. The European sugar price is £300 a tonne, whereas the world price is about £100 a tonne.

Let us be realistic about those matters, and make certain that we do something to get it right. Otherwise, at this stage in history, with American-European relations fraught on defence and foreign policy, a trade war on agricultural products will inevitably mean a growth of American isolation from us. That is the gravest possible danger.

In those matters I regret to say that there is a great deal to be said against the way in which the CAP has worked by pressure from a farm lobby in Europe that does not have efficient farmers. It has a lobby of about 4 million farmers who each farm less than 40 acres of land.

I congratulate my right hon. Friend on his view on cereals and on another product that should be kept down—milk. Undoubtedly European agriculture is becoming more efficient and the butter mountain to which the hon. Member for Renfrewshire, West referred, which could be 600 million tonnes this year, will be considerably more if there is more efficient farming and better milk production throughout metropolitan France.

The war is already beginning. As Secretary of State Shultz said the other day when addressing Congress, if America were to have a war with Europe on agriculture products, it would be a disaster for the world economy. I could not agree more. It has already begun.

A week or two ago 1 million tonnes of flour was landed by the Americans in Cairo at $25 a tonne below the world price. That is just the beginning of what can happen. There has to be a reform of the CAP to make it realistic and to reflect the best interests of Europeans which it is not and does not at the moment. It could well go into bankruptcy in the next 18 months because of budget failures, and it will be destructive to Anglo-American and Euro-American relations. I hope that those matters can be put right and that there can be negotiations. I hope that there car be a world programme, perhaps giving away surpluses to the poor countries that really need them, but that is a dubious argument. It can be put right by some form of world wheat council or something like the arrangements made with New Zealand. It must be put right.

Unfortunately, at the moment in Europe an anti-American attitude is growing. People believe that we must shove our exports up. That can be done only by putting Europe's costly agriculture products on the world market with subsidies that fall upon the taxpayer and the Europeans and wreak havoc in world markets.

Mr. Strang

Will the right hon. Gentleman give way?

Sir Hugh Fraser

I am sorry. I shall not give way.

Unless there is a reform of the CAP, we must look at an alternative system through which this country and others in Europe can be responsible for their own agriculture policies. We are not a surplus-exporting country. We are not in the same position as some of the other European countries. We are still a food-importing country. The last thing that we want to get involved in is a trade war with the United States, which would be a disaster if all else fails. That can be avoided only by a national agriculture policy that will give our farmers what they deserve as the most efficient farmers and give our people cheaper and equally good food. If we cannot get an agreement with the Europeans to see sense, we must turn back to our own resources.

5.27 pm

Mr. Thomas Torney (Bradford, South)

Before I begin my speech I should like to dispel the feeling that seems to be abroad, through interventions and what the Minister said, that the Labour party in government would not sponsor agriculture, support it or want to see an increase in agricultural production. That is an absolute fallacy. I want to kill the suggestion once and for all.

We would still be prepared to put in taxpayers' money to support agriculture. We would still want to see greater agricultural production. We might have differences with the Conservatives over where the money went, whether it would be to the rich or poor farmer, but it has never been the policy of the Labour party to weaken agriculture or to produce less of our nation's food. We fully appreciate the economic gain to Britain if we can produce more of our food rather than buy so much from abroad. That should be made clear.

The Labour party objects to pouring taxpayers' money indiscriminately into the Common Market to support not just British agriculture but that of France and other countries. That is precisely what we are doing. All of the surpluses that are produced in France and sold cheaply on world markets are partly supported by the British taxpayers. I agree with the right hon. Member for Stafford and Stone (Sir H. Fraser). The Labour party utterly opposes using taxpayers' money to support the agriculture industries of other countries.

The motion refers to the Government's intention to seek an agreement on l983–84 farm support prices and related measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy, and to take account of the interests of customers and food processors. The Minister must know that the French, having established the agricultural make-up of the EC, will never allow us to change the CAP in the way that we want. The right hon. Member for Stafford and Stone was absolutely right. We want changes in the CAP so that those countries which produce surpluses pay for them and their disposal out of their own taxpayers' money, not ours. The French will not agree to that in a million years. I am sure that the Minister knows that. He must be talking with his tongue in his cheek if he believes that it is possible to change the CAP, because some member countries are concerned only to look after their own interests and are not prepared to help other people.

The milk lake and the butter mountain are just as serious a threat to the United Kingdom taxpayer and consumer today as they were on that unfortunate day when Parliament voted to enter the EC. The tide of milk production in the EC is still rising. That will push the Common Market into yet another budget crisis within a year. Output of dairy products has been rising much faster than consumption. There are 600,000 tonnes of surplus butter and 1.4 million tonnes of skimmed milk powder. Those are not my words. They are those of Poul Dalsager, the EC farm commissioner, at the Dairy Trade Federation conference in London yesterday. We in Britain pay dearly for the sale of the surpluses both through our contributions to the EC budget and through high prices for the consumer.

We have the further restriction of the co-responsibility levy. It does nothing to restrict production in the EC, but punishes the British farmer and consumer, yet we do not contribute to the massive EC surplus of dairy products. It merely allows the French and other farmers to go away scot-free. Indeed, they call the tune. They build up the surplus while we in the United Kingdom must subsidise it and pay for its disposal.

Milk production in the EC is increasing at a nightmare rate. Only two months into 1983 we have spent several hundred million pounds above the budget on stocking and subsidising exports of dairy products. If that trend continues as the dairy season gets under way, the 1983 farm budget might be more than £1 billion overspent. We also have the problem of EC-produced UHT milk and the European Court's decision which threatens our daily doorstep delivery.

I was pleased to hear the Minister speak of his support for our doorstep deliveries. These deliveries sell a lot of milk. Without them, United Kingdom milk consumption would fall still further and a considerable amount of unemployment would be created in the dairy industry and its allied industries. The milkman provides a free social service every day. That is a vital point when we consider the surpluses. I wish that the Minister had spent more time dealing with it. What are we to do about the surpluses and the mass of the EC budget that is spent on the CAP? Does the Minister really believe that there is likely to be agreement to change the CAP to the advantage of Britain?

I understand that the European Commission has launched a £4,000 million programme to help poor regions of the EC. That will involve a six-year investment programme. The mass of the money, which is to be provided by EC taxpayers—that includes the British taxpayer once again—is to be spent on a CAP that is wasteful for Britain.

The countries that are to join the EC are predominantly agricultural. Most of their agriculture is inefficient and they will gain from the programme that I have described. What is more important is that they will contribute to the already massive surpluses in agricultural commodities. Greece will receive 38.4 per cent. of the money that is spent under that scheme. Italy is to receive 44.5 per cent. and even France is to get 17.1 per cent. France is not a poor Mediterranean country, but perhaps a little of that country borders the Mediterranean. The plan calls for the spending of £250 of EC money on each of the 6 million Greeks involved, £53 on each of the 33 million Italians who are covered, and £56 on each of the 17 million French who live in the area involved. No one could ask for a greater indictment of the straitjacket that the Common Market imposes upon us.

If we could reform the CAP in the way suggested by the right hon. Member for Stafford and Stone we might be able to remove that straitjacket. However, we know that it is impossible, because the French would never agree to such a change. The Minister must know in his heart of hearts that there can never be agreement on the changes that we need. The obvious answer to the problem is to get out of the straitjacket, leave the Common Market and look after our interests as the French, to the detriment of everyone else in the Community, look after theirs.

Mr. Eric Deakins (Waltham Forest)

My hon. Friend will appreciate that the devastating figures that he has just quoted are as nothing compared with what they will be when, as we all hope, Spain and Portugal are admitted to the EC. Not only will the costs of the CAP and that part of it concerned with Mediterranean products increase substantially, but the pressures within the enlarged Community will be even stronger against any reform of the CAP.

Mr. Torney

I agree entirely with my hon. Friend. I tried to emphasise that danger when I quoted the figures.

As the previous Minister for Agriculture told us many times, food is meant for eating. We should look after the farmer by all means, but we should sell surpluses to our people cheaply. That is the way to get rid of surpluses. Today the CAP is as bad as it was when we entered the Common Market. That is enough reason in itself for Britain to leave the European Community.

5.42 pm

Mr. Robert Hicks (Bodmin)

The House will not be surprised to learn that I take a completely contrary view to that of the hon. Member for Bradford, South (Mr. Torney). The answer to Britain's economic ills and the future of our farming industry does not lie in the withdrawal of the United Kingdom from the European Community. One reason why British agriculture has not suffered to the same extent as other sectors of our economy during the world recession of the past three years is that we are members of the EC. The CAP has been much criticised, not least in Britain and in the House, and in some ways deservedly so. However, it is important to emphasise the fact that the CAP has been successful not only in ensuring continuity and regularity of supply of farm products, to the advantage of both the producer and the consumer, but in contributing to the economic and social stability of the countryside.

The proportion of the Community budget absorbed by the CAP in recent years has fallen from 80 per cent. to 63 per cent. That is an encouraging development, and it should be remembered that the CAP contains not only the price guarantee component—the major part—but a social support element, a rural development fund aspect and an overseas aid dimension. If those three elements could be separated formally and financially quantified, some of the criticisms currently aimed at the CAP and its financing would be removed.

This afternoon the main complaint about the present system has been the open-ended commitment to the producer, irrespective of market requirements. I accept that production for intervention is neither sensible nor economically sound. Indeed, it is wasteful. The remedy is to have greater national financial responsibility for the production of surpluses by the country involved when a product is in surplus both in that country and in the entire Community. We should work in that direction, but, as I have said many times in the Chamber, it will require considerable political will. If the financial resources of the Community become scarce, this proposal may be provided with another stimulus.

However, there is the added dimension that, whereas hitherto the CAP was effectively the only common policy in the Community and was therefore the anchor point, that is no longer true. Other Community policies are being developed, and there may be a willingness in the Community to adopt a more flexible approach to the fundamental position of the CAP.

Much attention has been paid to the recent Ministry of Agriculture review, which suggested that farm incomes had increased by 45 per cent. Concurrently, the Commission proposed increases in common prices of 5.5 per cent. Those average and global figures conceal real regional variations in the United Kingdom and differences between different sectors of production in agriculture.

The recent report of the agricultural unit of the department of agricultural economics at Exeter university suggested that one in six farms in south-west England failed to earn sufficient money to cover its costs in 1981–82 despite the sharp increase in farm incomes. The survey covered 265 farms of varying types and sizes in Cornwall, Devon, Somerset and Dorset, so it represented a genuine cross-section. Agriculture is a key industry in the southwest region's economy. This report is significant, because the hard evidence that it produces puts in perspective the position on the ground compared with the possibly false impression given by the widespread use of the 45 per cent. figure that was quoted in the White Paper. In this context, the Minister was correct to point out that farming incomes in real terms had still not returned to the levels of the mid-1970s.

I shall make two specific points. As the Minister knows, I have become increasingly worried over the years about the imbalance that has evolved in this country between the livestock and cereal sectors. I recognise the reasons for that trend, but I cannot believe that it is in the long-term interests of the country or of British agriculture.

In the south-west we grow the best natural grass in the world. It is ludicrous to have a system which encourages the development of cereal growing further west each year. That is why I was pleased to hear my right hon. Friend the Minister say that he supports no increase in cereal prices, and I hope that he will be successful in his discussions.

I welcome the continued support given by my right hon. Friends the Minister of Agriculture and the Minister of State to our hill areas. They are the source of young livestock and form an essential part of United Kingdom farming. In the wider context, it is important for the House and the nation to recognise that the prosperity of hill farmers determines the quality of the landscape in the upland areas. If they were neglected, they would be less attractive for other uses, such as tourism and recreation.

I believe, therefore, that it is necessary to ensure that we retain a prosperous agriculture in our hill areas so that a policy of sensible, multiple land use can continue. If we achieve that objective, the chances of conflict in the hill areas between the various users and interests will be minimised.

5.52 pm

Mr. Geraint Howells (Cardigan)

It is amazing that after 10 years in the European Community we should still be arguing about the advantages and disadvantages of our membership. I believe that, despite the flaws it the present agricultural policy, we were wise to join and would be wise to stay. When one considers the tremendous variety of farming methods, the huge number of farmers and the variety of food produced, the enterprise should be seen as a great achievement. I declare my interest as a farmer and vice-chairman of one of the marketing organisations.

It is important to remember that we have a supply of food. We need never go short. When great capital is made about surpluses, which in many cases amount only to some 10 or 15 days supply, critics should reflect that it is far better to have a surplus than a famine.

We should compare our plight within the EC with the plight of others throughout the world.

Mr. Marlow

What about our "plight" before the CAP?

Mr. Howells

The NFU has sent background notes to many hon. Members. It is wise to remind ourselves that Today, in 1983, the world population is around 4,500 million and it is expected to be around 6,000 million by the turn of the century—less than 20 years away. We are not meeting the problem of increased population. It is becoming worse. At the beginning of the 1980s the average African has 10 per cent. less to eat than he had at the beginning of the 1970s.

Mr. Teddy Taylor

From where does the hon. Gentleman get those figures?

Mr. Howells

Will the hon. Gentleman listen? He has had an opportunity to speak.

Mr. Taylor

What is the source of those figures?

Mr. Howells

There are 300 million hungry children in the world—more than the population of the EC, the United States of America or the Soviet Union.

Mr. Taylor

The hon. Gentleman has quoted a figure and tells us that African children have 10 per cent. less food. What is the source of that figure? The hon. Gentleman and his colleagues are constantly quoting figures about Africa and Asia and I do not know where they obtain them. Where did he get the figure? Whose figure is it? Where is the authority for what he has said?

Mr. Howells

As I said, it is a background brief from the NFU. If the hon. Gentleman doubts the figures, it is his duty to have a word with the organisation that produced the document. The world's farmers will need to double their production to keep pace compared with the 1960s.

Mrs. Elaine Kellett-Bowman (Lancaster)

rose—

Hon. Members

The hon. Lady has just come in.

Mrs. Kellett-Bowman

I have been in the Chamber throughout the debate except when I was called out. I have listened to nearly all of the debate. I have just returned from discussing with African countries the problems mentioned by the hon. Gentleman. We were not given that precise figure, but we were given some horrifying figures of the hunger that prevails in those areas. It is up to us to help supply those needs.

Mr. Howells

I am grateful to the hon. Lady for being on my side for once.

I want to deal with those who have complained that food prices have soared during the past few years. During the past four years food prices have increased by 43 per cent. compared with a 61 per cent. increase for all retail prices. It is a wonderful achievement. The food share of the nation's import bill has been cut from 30 per cent. in 1960 to 12 per cent. today.

I believe that the Government made a misleading statement when summarising the state of the industry in the White Paper. It is bound to be taken out of context and repeated with glee by opponents of farming and the Common Market. The phrase that has already been widely quoted is: Farming income alone is forecast to rise by 45 per cent. I do not doubt the figures, but, as we all know, statistics can be used to prove any point. Over the past eight years farm incomes have increased, according to my calculations, by only 12.5 per cent. It is an average over the eight years of 1.5 per cent. per annum. Overall, we have not done very well during the past eight years.

I note also from the White Paper that during the years of Tory Government farmers fared worse than they did under Labour. That is an interesting fact for us to contemplate. However, the figures show beyond doubt that both the major parties, when in government, have completely failed to encourage agriculture to produce to its maximum capacity. The Tory Government have a record of being the farmer's friend, but it is no longer true, if it ever was. They have failed to bring in long-term planning to provide a secure basis for the industry, and one sector after another has suffered as a result.

An overdue policy change is in the presenting of the annual price increases. Instead of awarding a percentage increase across the board—whether the figure is 5 per cent., 10 per cent., or 20 per cent.—as it is at present, there should be selective increases that correspond to the needs of each sector so that, for example, dairy producers in a lean year are awarded a higher percentage increase than, say, cereal growers who have had a successful and profitable yield.

A better system should be worked out for our surplus food. We all deplore waste, particularly when we know of people starving in other parts of the world and of old people or children in poor families who are in need. It should not be an insurmountable problem to devise a scheme that ensures that some of the surpluses are channelled into cheap provisions for the elderly and needy in our midst, and to the poor in the Third world.

Surpluses of milk should be supplied to our schools. This is a better way to deal with milk surpluses than the co-responsibility levy, which penalises dairy farmers for being too efficient. I am all for co-operation and co-responsibility, but applying a levy is not a fair way to solve the problem.

I know that the right hon. and hon. Members on the Conservative Benches are worried about the plight of pig farmers but do not like to come out and say that they are in favour of a deficiency levy. I should welcome the Minister's assurance that the Government will take steps to alleviate the difficulties of pig producers. It would greatly ease the problems if deficiency payments could be reintroduced to correspond with those operating in the beef and lamb sectors.

I should also like the Minister to clarify the position on the proposals for the less favoured areas. According to recent reports in the journal Farmweek, United Kingdom proposals for the extension of less favoured areas have not been submitted to the European Commission. I hope that the Minister will clarify this. Farmweek is subtitled plus Farmers Journal, the official organ of the Ulster Farmers Union". On Saturday, 19 February 1983 it said: Mr. Taylor who is also an Assemblyman on the agriculture committee affirmed that United Kingdom proposals for extension of the less favoured areas had NOT been submitted to the European Commission in Brussels. No less a person than European Commissioner for agriculture, Poul Dalsager, has told Mr. Taylor that he had still not received any application, or any submission, to the EEC from the United Kingdom government on LFA extensions! The Ulster MEP also said that Dalsager stated that even if a submission was made the European Commission could take no action. This was impossible until the national government, in this case Westminster, undertook to fund their share of costs incurred by LFA extension. With regard to the increases that are proposed this year, I am sure that hon. Members and right hon. Members will agree that whether the dairy producers of this country receive a 5 per cent. 10 per cent. or 20 per cent. increase, of suffer a 5 per cent. decrease, they will produce more next year than they did this year if the climatic conditions are as good as they were in 1982. The dairy farmers have geared themselves to produce, and produce more they will. Within the next 20 years we shall be overproducing milk not only in this country but in Europe. However, as we have had only a 1.5 per cent. increase every year for the past eight years, our farmers are entitled to substantial increases this year. I hope that the Minister will do everything in his power to ensure that he safeguards the interests of the agriculture industry in 1983.

6.4 pm

Sir Peter Mills (Devon, West)

I begin by declaring an interest. The farmers with whom I am concerned had quite a good year last year.

I cannot understand what the shadow Agriculture spokesman was getting at in his speech. I wish that he was in the Chamber. I cannot understand, and I have been in the House for many years—

Mr. Mark Hughes (Durham)

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) is absent because there is material in next week's business that requires him to be present elsewhere. His absence is in no way disrespectful to the House.

Sir Peter Mills

The hon. Member for Durham (Mr. Hughes) must not be so sensitive. I am not criticising the hon. Member for Renfrewshire, West (Mr. Buchan). I am simply saying that I wish he were here so that I could make my remarks to him direct. The hon. Member for Durham should calm down. There is no problem.

I have been in the House for many years and listened to many agriculture debates, but what the hon. Member for Renfrewshire, West said today confused me greatly. I cannot understand how one can have imports and increased buying all over the world when there is self-sufficiency in this country. Something is bound to give. It will be farmers' incomes. If that is what the Labour party wants, it should say so, and everybody will know.

Often, although not today, the Labour party says that it wants cheaper food for the consumer. However, it is against intensive methods of production. Over a five-year period, it will phase out some of the intensive methods. I do not understand that, and I am confused. The Labour party goes on about farm workers' wages, which it wants to see increased. I also want them to be increased. But the only way to achieve an increase is for the returns to farmers to be increased so that increased wages can be paid. The thinking of the Labour party on agriculture is confusing.

The rural scene and the EC farm price proposals are connected. I can understand my hon. Friends who are so critical of the Community and of the CAP, but I detect a bias against the rural areas in what they say and what they criticise. The rural scene and profitable agriculture are very important. To be fair, agriculture has had a good year—but not all sections, as has been said. The pig and poultry sections have had difficulty.

We must remember—particularly urban Members—that at least one third of the improvement in farm incomes this year has been due to the good weather, for which we should be thankful. That shows how dependent British agriculture is on the weather. Other industries do not have to deal with that problem, except perhaps the outside catering industry, hotels, holiday resorts and fishing. There is no second chance in British agriculture. Once one has a crop in, if the weather goes against one, there is no second chance to retrieve that crop. That is not so in industry or in other sectors of the community. Therefore, our urban friends and those opposed to British agriculture and its prosperity should remember the tremendous role the weather plays in getting the production that seems best for the consumer.

Mr. Colin Shepherd (Hereford)

Before my hon. Friend leaves the question of net farm incomes and agricultural returns, will he comment on the alarming increase in bank indebtedness of the industry, which is a point of great significance?

Sir Peter Mills

It is indeed. It has gone up to hundreds of millions of pounds. It just shows what it is costing the farmer to produce the food, provide the modern equipment and do all the other things he has to do to produce the food for the nation. It certainly is costing agriculture a lot. My hon. Friend is absolutely correct in putting me right on that.

Because agriculture plays such an important role in our economy—it is a success story, and would to goodness other industries were as successful—the need for sustained recovery is essential. That is the second point that I want to make. It is important, in my view, for both the consumer and the industry, let alone the farmer, that that recovery should continue, and the price review should be looked at in that light. I do not agree with the hon. Member for Cardigan (Mr. Howells) that there has got to be a very big increase in the end price to the farmer. That would only make the surplus problem even worse. We must have moderation.

My third point is that in this price review out policy must be "Up horn and down corn." That is a simple way of putting it, but there is no question about it. The balance is wrong. This is very serious, and I believe that it will have even more serious implications if we go on in this way. After all, one of the problems of the pig and the poultry industries is the high price of grain. Therefore, the pig and poultry producers have to pay considerable sums of money for their compound feeding stuff; while the cereal farmers benefit. I am a cereal farmer. Therefore, I benefit. However, this is having an adverse effect on the pig and poultry industries. That is an unhealthy balance, and an unhealthy structure in British agriculture is developing.

British agriculturists and dairy farmers have a wonderful record—none more so than those in the west country. As my hon. Friend the Member for Bodmin (Mr. Hicks) rightly said, we grow the best grass in the country. I would only say that I think that Devon produces better grass than Cornwall, but both areas produce first-class grass and therefore first-class milk.

It is obvious that there is overproduction of milk in the Community, but I do not believe that the solution to this problem is to increase the end price this year. We need to do away with the co-responsibility levy as quickly as possible. It is a tax on the consumer. It is unfair to the producer, and it is a levy against the United Kingdom producer in particular. It is wrong that this should continue. I hope that my right hon. Friend will make strong efforts during the discussions in Brussels to ensure that the co-responsibility levy is done away with. This would be a help to the producer and, above all, to the consumer, who would benefit considerably.

Even more important, there is a 3 per cent. fall in liquid milk consumption, and this might help to prevent that fall continuing. We need consumers to drink more liquid milk—not this horrible UHT. Let us have milk straight from the cow so that people can appreciate that A is a good, healthy product.

My final point concerns pigs. A very serious problem is developing. We should be perfectly frank and say to pig producers, unpleasant though it may be, that, with a 4 per cent. or 5 per cent. increase in the number of sows breeding twice a year with an average of eight or nine pigs a litter, there are bound to be problems. We are already producing 100 per cent. of the pork market and about 43 per cent. of the bacon market. This is a serious problem, so we must ask them not to increase the number of sows. We should ask them, too, to go for exports, with all the advantages that there are, to take advantage of the new storage scheme and, above all, to produce better quality bacon.

I have been criticised for what I have said in the House about the quality of British bacon. I am not repentant. Charter bacon is first class, but it is not universal. Only about 50 per cent. of all British bacon is charter bacon. The rest is very poor. If British pig producers want to regain that market—I believe it is not so much their fault as the curers' fault—we need to produce the right sort of pigs.

I hope that the Minister will look very carefully at any suggestions that come from the pig industry to help in this difficult situation, particularly assisting in marketing, and perhaps in exporting and storage. Further aid there is the right way forward, but there must be discipline in keeping the number of sows at about the level of a year ago.

I am always proud to speak about British agriculture. It is an object lesson to many industries. Of course it is helped and well looked after, but that is right and proper, as farmers maintain the rural scene so cheaply and effectively for the nation as a whole.

6.17 pm

Mr. Gavin Strang (Edinburgh, East)

I appreciate the support given by the hon. Member for Devon, West (Sir P. Mills) for a large successful and expanding agriculture industry in this country, but I hope that he will reconsider the suggestion that hon. Members on both sides of the House who take a different view on the operation of the common agricultural policy are somehow biased against the rural areas, particularly if they happen to represent urban areas. My hon. Friends are well able to take care of themselves, but I think that it would be unfortunate to introduce that sort of approach into our debates.

This annual debate on the European Community's proposed increases in agricultural prices has for many years been the one debate in the House in the year on the general state of our agriculture. It is unfortunate that it is becoming a half-day dabate on a Thursday, because the industry deserves a great deal more than that. It may well be that this has arisen because the industry has done rather better in the past year than it has in previous years, but it is already clear from this debate that half a day is not adequate.

How well has the industry done in the past year? In this context I find myself in fairly broad agreement with the Minister. The sectors that have done well in previous years, such as cereals, have again done well, and milk has done rather better than in the past, but the pig and poultry sectors continue to languish and we have lost productive capacity, jobs and valuable output there.

It is also the case, as the right hon. Gentleman acknowledged in response to my intervention, that the recovery in investment, significant and substantial as it has been compared to the last two years, still falls a long way short of the level of investment in tractors and other farm machinery during the last two years of the Labour Government. Thousands of jobs have been lost over the last two years in these important industries in the agricultural economy and we still need a significant increase in investment to get us back to the position that existed towards the end of the period of office of the Labour Government.

I was glad that the hon. Member for Cardigan (Mr. Howells) raised the issue of the proposed extension of the areas designated for assistance under the less favoured areas directive and the idea that there should be a separate zone of assistance for marginal farming. As the Minister of State will know, this was initiated by the last Government and many of us had hoped that at the very minimum a decision would be taken by the Council of Ministers on this issue in the context of the price fixing proposals. It is not part of the price proposals, but, as the Secretary of State knows, often these negotiations are a horse trading session in which all sorts of things are thrown in. I hope that the Minister will have something to say on that.

Although we have seen a sharp increase in farm incomes, that has not been reflected in the incomes of farm workers. I admire the Secretary of State for speaking at some length on the position of farm workers. That is a change, because in the past he has not said very much about them. He is right to point out that farm workers' wages have risen in real terms to a greater extent than under the Labour Government. Under the Labour Government farm workers did well out of the first phase of the incomes policy, but subsequently it operated against them. Therefore, the right hon. Gentleman is fully justified in making the point that they have done marginally better under this Government.

That does, however, not alter the fact that the gap between the wages of farm workers and those in other industries is deplorably and indefensibly high. As a nation we continue massively to underpay our farm workers. When we abolished the insecurity of the agricultural tied cottage I believed that that would increase farm workers earnings by increasing their bargaining power locally and giving them greater leverage to enhance the gap between their earnings and the minimum wage. That has not happened to the extent that many would have liked. However, it may be a factor in the improvements that have taken place in earnings.

The national pay group of the Transport and General Workers Union and the agriculture industry generally are worried about abuse of the youth opportunities programme, and perhaps that worry will extend to the Government training scheme. At the time of the last wage-fixing, a deputation, of which I believe my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) was a member, spoke to the National Farmers Union about farm workers' wages. That deputation was told that the union wanted to cut the wage of young farm workers because they could get workers on the cheap on the youth opportunities programe. It was spelt out almost as blatantly as that. The position of farm workers is worrying. The figures show that the number of full-time workers is falling while the number of part-time workers is increasing, and that is wholly unsatisfactory.

We can argue until the cows come home about the effect of the CAP on prices. The farm gate price accounts for only about a quarter of food prices. If one looks at what has happened to food prices since we joined the EC, one sees that the component of that increase that is directly attributable to the CAP is relatively small. It is certainly much smaller than other factors. The level of support prices, particularly for commodities such as milk and especially cereals, is pitched at too high a level. That is the overwhelming reason why we have grotesque surpluses. The right hon. Gentleman quoted some figures, but they referred to previous years. There is no doubt that we are seeing severe build-ups in the surpluses and the grotesque cost of the CAP. It is a grotesque and wasteful system for supporting agriculture on the Continent and even more so in Britain.

The right hon. Member for Stafford and Stone (Sir H. Fraser) rightly pointed out the effect of that on world trade and on developing countries. The hon. Member for Cardigan talked about the CAP helping the developing world. Any benefit that the developing world gets from food aid is massively outweighed by the damage done to the developing world by the CAP to commodities such as sugar. That was the case under the Labour Government, but then the EC was not part of the international sugar agreement, and that is still the case.

When we discuss this with our Socialist colleagues in the Community they argue that they want to support agriculture because of high unemployment and agriculture workers have no other jobs to move to, but when it is put to them that the money that is spent on the CAP could be better spent on creating work in other sectors of the economy they are forced to agree. Even given the French Government's desire to reduce unemployment—to some extent they are doing so—the CAP is not the most efficient way to spend taxpayers' money.

It is sad that whereas when the Government came to power the Secretary of State spoke about the need to reform the CAP—for example, when he spoke in Cambridge in 1980—his tune has now changed completely. When he was asked last month about his policy on the reform of the CAP, the word "reform" was dropped completely from the reply and he talked about the operation of the CAP.

The Government have been bought off by the budget concession that the Prime Minister obtained. I do not criticise the Government for using agriculture price fixing to secure concessions in the budget—that is the only lever that we have—but, sadly, it means that instead of taking a principal stand on the need to reform the CAP, so desperately needed by Britain, Europe and world trade, they have abandoned any real role in the context. They are happy to have been bought off by concessions such as the sheepmeat regime, which is satisfactory for our industry, but is hugely costly in relation to the benefits that it brings.

Labour Members support an expanding British agriculture industry. The Labour Government's record compares favourably with that of any other Government in terms of the advances and output achieved. However, we recognise that the CAP is a most inefficient way of supporting our agriculture industry. The whole system of intervention is wasteful. It is difficult to see how Tories can defend the open-ended commitment to state buying. However, we support our agriculture.

One reason—many would argue that it is the most important one—why we have such a successful agriculture is our research and development, as the right hon. Gentleman reminded us. That has undoubtedly made a tremendous contribution over the years and it is sad that real cuts are now beginning in that area. We could do much to help the developing world and to increase our agricultural production, but instead we are cutting back on research and slashing expenditure generally. That is bound to have a significant effect on the performance of British agriculture if it continues in the years ahead.

6.27 pm

Mr. Teddy Taylor (Southend, East)

There is a great deal of enthusiasm among Conservative Members for the appointment of Mr. Ian MacGregor to take charge of difficult industries where there are serious economic problems. I wonder whether those who have argued so forcefully for Mr. MacGregor to take over the coal industry after the steel industry have considered what his impression would be if he were put in charge of the CAP. Certainly if he had approached the problems of steel in the same way as the CAP we would not have closed any steel mills but would have the ideal position of high production and increased productivity so long as we charged a price which was twice that of elsewhere and so long as we gave a guarantee to all steelworks that we would buy all the steel produced irrespective of whether anyone wanted it and so long as we agreed to spend vast sums of money dumping that steel abroad at knock-down prices.

Frankly, the CAP is not only a costly nonsense but stands against all the principles of Conservatism and all the things that the Prime Minister has so valiantly been fighting to win for Britain.

There is no doubt, or the basis of the answers which the Minister so kindly and agreeably gives me, that CAP prices are about twice world prices and, in the case of sugar, three times the world price. Even though he may try to identify particular percentages—10, 20 or even 30—the plain fact is that the CAP prices are double what they are elsewhere and, in the case of sugar, about three times.

There is also no doubt whatsoever that we can mislead ourselves by talking only about the food price index because the index is made up of many items, some of which are covered by the CAP and some of which are not. To save time, I will merely say that I have asked the Food Manufacturers Federation to break down the CAP and non-CAP foodstuffs and its analysis shows, by and large, that the CAP foods have gone up about twice as much as the non-CAP foods. Full details are available in the letter I have in my possession.

The real problem is the disposal of surpluses. I was horrified to hear the total irresponsibility of the hon. Member for Cardigan (Mr. Howells), who is obviously out to please farmers in any way he can and to blazes with the consequences. He said it would help to dispose of the surpluses to give them to poor children in the Third world. Is he not prepared even to consider that part of the problem of poverty in the Third world arises because the Common Market countries are dumping food there at such ridiculous prices that these poor people are unable to earn a living? Much of the problem of poverty in the Third world has been created by irresponsible food dumping. We should be aware that, while we have been taking part in this debate, the Common Market has spent over £1 million to subsidise the dumping of cheap food abroad.

We really should not be talking about the principles of the CAP. What we should be accepting, as the Minister in an extremely encouraging speech rightly said, is that there is a real problem with the CAP now. It will get worse and we have to find a solution. It is rather a waste of time talking about reforming the principles of the CAP because, after 10 years of trying, there is not the slightest indication of any change taking place in these principles. I can see no way of persuading all the countries of the Common Market to agree on a major overhaul. They will scarcely do this voluntarily. As the Minister has understandably and courageously said today, we must try to hold down prices in the hope that this will restrain surplus production. Sad to say, there is not a great deal of evidence that holding prices at their present high level will bring down production. Far from it. There may be evidence that if we hold down prices we may encourage farmers to increase production still further in order to maintain their incomes.

I was sad to hear my hon. Friend the Member for Devon, West (Sir P. Mills), who is normally polite and agreeable, suggesting that those who were against the CAP were opposed to the prosperity of agriculture. He should be aware that many of those who are critical of the CAP are very concerned to secure long-term future prosperity for British agriculture. Many of us care as deeply about farmers and agriculture as he claims to do. It will not help them to be put on a path which will lead to temporary prosperity but long-term disaster.

We may be forced into having quotas of production. If we have Community-imposed quotas, they will be desperately unfair to the United Kingdom and its farmers because we have no problem with surpluses; despite the remarkable advances in production, there is no overall British surplus. There is, however, an appalling Continental surplus. It would be very wrong if our farmers were to be advised to restrain their production because of the problem of surpluses on the Continent.

The alternative would be to get rid of the system altogether and to make, as my right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) suggested in a splendid speech, each country responsible for its own agriculture.

We are in a crisis. The surpluses, admittedly boosted by the good weather, are very substantial and rising fast. They will increase further as production increases further. The solution is either quotas, which would be very unfair to this country, or each country to be responsible for its own agriculture. I believe it would help European unity rather than weaken it if we could work together as a group of nations without this nonsense of the CAP which not only is unfair to the consumer and to the Third world and bad for long-term agriculture but, as a constant source of division between the countries of Europe, helps to divide Europe rather than uniting it.

6.34 pm

Mr. William Ross (Londonderry)

I have an interest in agriculture and therefore a natural bias towards the welfare of the farming community as a whole, but this evening, rather than discussing agriculture in a United Kingdom context, I want to restrict my remarks to the problems of Northern Ireland where our intensive sectors in pigs and poultry have been very severely hit over the years because we lost the cheap grain imports from North America on which those industries had been built.

Eighty per cent. of the cost of producing pigs and poultry is in feed. This afternoon the Minister drew attention to the problems in Great Britain in those two sectors. The House will be interested to know that in Northern Ireland it is rather worse: they have suffered exactly the same cuts in the sums received for the end price but at the same time have suffered a rise, averaging between £6 and £9 per tonne of feedstuff, which means that production in those sectors is totally uneconomic. Whenever we consider this situation and read in the mass of literature before us that the EC is concerned with the import of cheap substitutes for grain from the far east, our worries about the future are greatly increased.

I listened with care to the right hon. Gentleman's reply when he was asked about the introduction of a pig regime, because he suggested that if the price of pigs were set at a profitable level, because of the great speed with which the number of pigs in the country could be increased, we would have an absolute Everest of pigs. There is no doubt that his assessment of the situation is correct, but the basic principle for any other sector is exactly the same; it just takes a little longer to build it up. The right hon. Gentleman shakes his head, but if he looks at document 11089/82 he will see that milk product intervention prices should be reduced by 2.2 per cent. That product is in surplus. The reason for the reduction in price is to try to get rid of the surplus. I fear that the point made by the hon. Member for Southend, East (Mr. Taylor) is correct, that decreasing the price only makes farmers produce rather more. So we come back to the old argument about whether we should go for a deficiency system, favoured by the hon. Member for Renfrewshire, West (Mr. Buchan), or keep the present CAP. I fear that the constraints on the CAP are such that eventually the system will break down.

Turning from the great problems of the pig and poultry sectors in Northern Ireland, which will have to be resolved in the near future, to the other problem exercising hon. Members' minds this evening, the less favoured area extension, this argument has been going on for years and years—it must be nearly a grandfather by now—and still we do not have the benefits of the extension. Even if we did have the extension through the Commission, there would be no commitment from the Government to provide the funds necessary to finance it. I wonder whether the Minister, when replying, will be in a position to say whether the Government are prepared to make extra cash available when the thing has actually trundled its way at a snail-like pace through the EC procedures.

The argument about the criteria for extension is far more complex than the upland farmers believe. There are bound to be enormous rows, because wherever the line is drawn there will be a large number of people on the wrong side of it. The question of what is marginal or less favoured does not depend solely on height. There are many other factors. There will continue to be problems with islands of less favoured land surrounded by perfectly fertile soil. I see no way of resolving that, so I believe that we are stuck with the present policy, with all the anomalies that it involves for the less favoured areas.

The hon. Member for Cardigan (Mr. Howells) referred to the case prepared by a member of my party, Mr. Taylor. I believe that the quotation was incorrect, as it is clear from an answer by the Minister that the case has been sent to the Commission. The politicians may not yet have seen it, but the officials certainly have and, apparently, have asked for further information. Considering how long it took to prepare the case, I imagine that it was soundly based and carefully thought through. Perhaps the Minister will therefore tell us what questions the Commission is asking. The only meaning that I can attach to this further delay is that someone is deliberately dragging his feet in order to deprive the upland farmers of the benefits of the policy.

There should be no question about the quality of the land in the extension areas as the only thing wrong with the former area was that it was too small, especially in Northern Ireland where a substantial extension is now being requested. Perhaps the Minister will also tell us when the answers will be sent to the Commission as it is vital that the matter should be cleared up as quickly as possible. The number of beef cattle will undoubtedly continue to decline until the problem is resolved and there is an incentive to produce more stock from the hills. The position in Northern Ireland is extremely serious. The number of beef cows has fallen from 339,000 in 1974 to 202,000 in June last year. I have not seen the latest figures, but that is already a decrease of 40 per cent. There has been a similar decrease in the Republic, so the whole of Ireland—for many years there has been a single market and an enormous amount of cross-border traffic—is in serious deficit. Something must be done about that because, whatever the hon. Member for Devon, West (Sir P. Mills) and his hon. Friends may say, we can grow as good grass in Ireland as anywhere; we certainly have enough rain.

We are told time and again of the substantial increase in farm incomes in 1981–82, but the matter should be considered over a longer period. There is cash change, percentage change and real change, and the real change—the pound in the farmer's pocket—is what really counts. In 1973, the net income of Northern Ireland farmers was £54 million. Taking the figures at constant prices, there has been great variation. The figure was £27 million in 1974, £25 million in 1975, £32.5 million in 1976, £38 million in 1977, £32 million in 1978, £15 million in 1979 and only £3.4 million in 1980. An increase of 45 per cent. on that last very low figure is of very little benefit to farmers in Northern Ireland. A great deal more needs to be done.

The hon. Member for Bodmin (Mr. Hicks) said that individual countries should be responsible for their own overproduction. The Minister must know that he will not get far with that idea as some EC countries depend on agricultural exports to survive, so they will certainly not accept the cut to the level of their home consumption that is inherent in that idea. We should take careful note of the fact that total productive capacity on the Continent is far in excess of present production and far in excess of the amount of food that can be eaten by the people who live there. As a result of the CAP, capacity is bound to increase, with changes in structure, land improvement, fertilisers, new plant and stock varieties, and so on. The problems of overproduction will therefore increase as the years go by.

Finally, the motion takes no account of the interests of the farming community. It recognises the contribution United Kingdom agriculture makes to the national economy; and supports the Government's intention to seek an agreement on 1983–84 farm support prices and related measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy, and to take account of the interests of customers and food processors", but the farmers are not mentioned at all. There is nothing whatever in the motion to give any confidence to the farming community of the United Kingdom.

6.46 pm

Mrs. Elaine Kellett-Bowman (Lancaster)

As usual, I declare an interest as a small farmer.

I welcome my right hon. Friend's warm tribute to our farmers for their major contribution in the battle against inflation and for keeping our larders filled with first-class home-produced food at prices that the housewife can afford. But for his efforts, the housewife would very soon have been unable to buy English lamb, because our sheep farmers would have gone out of business and our hills would have been abandoned. Three years ago, sheep farmers in my area were on the verge of bankruptcy. Their plight had been ignored by the Labour Government, but, thanks to the sheepmeat regime secured by my right hoe. Friend, our hills are now thriving again and home-produced lamb is secure. My right hon. Friend has also improved the beef premium scheme, although, to be fair, I should add that this was introduced by a previous Minister who is now in another place.

Our farmers need a prompt settlement of the price negotiations so that the new prices can take affect in April and farmers can plan ahead properly. Most farmers—myself included—dislike intensely the linear co-responsibility levy. I believe that the vast majority would far rather abolish the levy, which is open to abuse in other countries— not here, because we always play by the rules — and have lower milk prices to compensate, which would also encourage consumption, which is currently sagging. However, if the levy is retailed, I hope that my right hon. Friend will strongly oppose any exemptions that militate against our efficient farmers.

I am concerned at the delay in the alteration of the less favoured area boundaries. The marginal farmers have the worst of all worlds. They miss the hill subsidies and lack the hill runs that would enable them to stock up more heavily; they have to take the drainage from the hills, and they lack the stocking levels of the downlands. The new boundaries must be agreed with the Commission as quickly as possible so that those marginal farmers can be helped.

Another matter of concern is the high level of borrowing in the agriculture industry. It has increased fourfold in six years and now stands at £4 billion. Thank goodness the Government's efforts to conquer inflation are now bearing fruit, so that borrowing costs are much less. Nevertheless, as my hon. Friend the Member for Devon, West (Sir P. Mills) said, we cannot always rely on having the weather that we had in 1982. Farmers must have a fair return for their produce so that they can reduce their bank borrowing.

This year the balance between the livestock and cereals sectors must be altered in favour of livestock. There is a tremendous market to be tapped in Europe for our agriculture exports. The industry is to be congratulated on its efforts—not by any means without considerable encouragement from the Minister, who also is to be congratulated—to improve our export performance. The conference held at the Barbican centre two weeks ago and the Food from Britain and Naturally British exhibitions are evidence of a greater awareness of the importance of marketin.

I wish my right hon. Friend well in his negotiations. I am sure he is more than a match for Madame Cresson.

6.50 pm

Mr. Robert Maclennan (Caithness and Sutherland)

In the dying minutes of the debate I shall not detain the House long. It is unfortunate, as the hon. Member for Edinburgh, East (Mr. Strang) said, that our annual debate on agriculture has to be crushed into three hours on a Thursday afternoon. I hope this will not be a precedent that the Government will follow in future.

The Minister opened the debate fairly with an assessment of the agriculture industry. I shall not follow him in his coverage of each commodity. I shall concentrate on those areas that are doing less well. The right hon. Gentleman had nothing to say to give satisfaction to the pig or poultry-producing section of the industry, or to encourage those in the glasshouse industry. Nor did he have anything to say about the prospects for those in the top fruits industry when the European Community is enlarged to include the Mediterranean countries.

It will be more the dogs that did not bark that will be noticed. The Minister's speech was largely a self-congratulatory performance of the kind with which those of us who follow agriculture have become familiar over the years. It is a pity that the Minister did not take the opportunity to speak on his forward thinking. He did not enlarge at all on how he sees the European Community tackling the undoubted problems of surpluses.

No doubt in the Minister of State's reply the opportunity will be taken to say that I have not spelt out at length the policy of the Social Democratic party. May I forestall that by pointing out that it would be impossible to do so in the time that is left to me in the debate.

The Government have made a great strategic error in seeking to link Britain's budgetary aims with the price fixing negotiations, because these are separate matters, and they ought to be kept separate. Britain's budgetary problem will never be resolved by adjustments in agricultural prices. Such an adjustment can be achieved only at the long-term expense of our agriculture. The budgetary problem can be resolved only by the development of other Community policies. Incidentally, I suggest that the time has come for the Government to cease their opposition to the proposals of the National Farmers Union for an agricultural development programme for the highlands and islands and to throw their full weight behind a programme that would ensure that more money was forthcoming from the European Community for our coffers.

I draw the attention of the Minister to the imbalance that is revealed in the annual review set out in the White Paper. Unfortunately, the size of the United Kingdom's beef breeding herd fell in the last year by about 1.5 per cent. Home-fed beef production is expected in 1982 to be about 4 per cent. lower than in 1981. These figures conceal a significant drop in production, particularly in the hills and uplands.

I agree with the hon. Member for Lancaster (Mrs. Kellett-Bowman) that this year's price fixing ought to lean more towards livestock and less towards cereals. The cereal men have had a bumper year, in part because of the extraordinary harvest conditions, but also because of inducements to produce in excess of what is needed. It is an unhealthy tendency that good grassland is being put under the plough and cereal production is being increased. I hope the Minister will acknowledge that that tendency ought to be resisted.

The picture of incomes, on which the Minister was right to dwell, conceals great differences in the global increases which have been remarked upon. It should be noted that the indebtedness of farmers has risen again to £4,000 million. Although some of that may be attributed to the increase in capital investment, which has for the first time in five years taken a turn for the better, there is still heavy indebtedness, which I fear will lead to increased production where it is not needed.

The long-term problem faced by any British Government in discussions in the Community stems from the fact that farm incomes within the Community, far from being excessive as has been implied by some hon. Members, including the hon. Member for Southend, East (Mr. Taylor), are poor compared with the incomes for the economy as a whole. An index produced by the European Commission, taking 1974 as the base year, shows that in 1982 agricultural income stood at 97 as opposed to 105 for the economy as a whole. Until agricultural incomes throughout the Community match those of the economy as a whole, there will be constant pressure for increased prices. That is a disturbing long-term trend with which the Minister will have to grapple.

When summing up this short debate, I hope that the Minister will take the opportunity to comment on the remarks of the right hon. Member for Stafford and Stone (Sir H. Fraser) about avoiding an agricultural trade war. This is a serious issue, and the Government should explain how they propose to tackle it. I believe that the other parties to the potential agricultural trade war are no less prone than the European Community to dump on the market and to give hidden subsidies. That applies to the United States and even to New Zealand in regard to milk products. This calls for negotiation and a determined round table discussion before the talking becomes too tough and damaging to the interests of world trade.

6.58 pm

Mr. John Farr (Harborough)

We have had an all too short but interesting debate on the common agricultural policy. It has been interesting to see how Members on both sides of the House have come to different conclusions about how the prosperity of the country either hinges on a strong CAP or does not. My hon. Friend the Member for Holland with Boston (Mr. Body) produced an effective book recently on the matter.

The best way to answer all the critics of the CAP is to ask oneself what has happened to us under the CAP in recent years—has it been good for Britain, and has it been good for my constituency? Having considered the facts and figures, which show how the Government through the CAP have transformed British agriculture in the past three or four years, I must come to the conclusion that the answer to both questions is in the affirmative.

For instance, we have made remarkable achievements in self-sufficiency in all food consumed since 1976, which has gone up to 62 per cent., and in all indigenous-type foods, which has risen to 76 per cent. of all that we now consume—a rise of 13 per cent. since 1978. Our food prices during the past year have gone up by only 1 per cent., compared with a much greater retail prices index rise. Also, since 1978, there has been a massive increase in labour productivity, which again brings greater efficiency into British farming and agriculture. There has been an increase of 25.9 per cent. since 1978, which is a large increase. Farming income has gone up substantially during the past year, although, as has been said, that was partly due to the weather, and in real terms it is still well below the high level of the mid-1970s, when it was considerably higher.

In answer to those arguments, one might say, "So what?" What strikes one between the eyes—it is something that no one can ignore—is that in the past few years we have increased our self-sufficiency by a staggering amount, but our balance of payments in the same period since 1978 has improved by no less than £1 billion, and our food exports have increased since the mid-1970s from £300 million a year to £2,500 million in 1982. Those facts and figures are good for our constituencies and for our country.

There are many difficulties and faults in the CAP. It is not perfect. One of its faults that critics seize on immediately is the massive surpluses that are building up and that tend to fluctuate. They constitute a real problem. The answer surely is to be found in the motion and that is to back related measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy". The simple way to deal with a surplus in the CAP is to freeze cereals and all CAP product prices. I am convinced that that, in turn, will have the effect of eroding the surpluses over the years.

If the Government could put into effect a firm policy, as advocated by the Consumers Association and a number of other bodies, including the Dairy Trade Federation, and my right hon. Friend, and persuade the continentals to agree to a price freeze on the CAP, I am sure that the real problems of surplus would erode and disappear. Everything is not quite perfect, even apart from surpluses. As my hon. Friend the Member for Canterbury (Mr. Crouch) said, massive inroads are being made by foreign machinery importers to Britain. Also, as I briefly mentioned in an intervention in my right hon. Friend's speech, we have an unacceptably high level of accident statistics on farms. Apart from that, Britain and its agriculture are on the right road with the present policy, which I fully back.

7.3 pm

Mr. Mark Hughes (Durham)

First, I congratulate, through the Minister, those who put on the Naturally British pavilion at the International Food Exhibition yesterday and the day before. It is a delight to go to a trade exhibition and see British food and agricultural products properly put in competition with international exhibitors and winning. I take the opportunity of this debate publicly to thank and congratulate the Naturally British stand.

I wish I could say the same about the speech of the Naturally British Minister of Agriculture, Fisheries and Food today. What disturbs me is that, in his British myopia, he did not look sufficiently at the major problems facing the Community in its budgeting and in its relationship with the Third world and other parts of the world. It was left to the right hon. Member for Stafford and Stone (Sir H. Fraser) to bring us back to the disruption of international trade that the current operations of the Community are producing.

Nor was the Minister's defence of the activities of this Government and the Community in the difficult problems involved with pigs, poultry and the glasshouse industry remotely adequate. No pig producer who reads the Minister's opening speech will feel satisfied that the Minister comprehends, sympathises with or wishes to solve the problems—and they are major problems. The Minister gave no comfort to help to the hardest pressed internal elements of British agriculture. Nor, indeed, did he give sugar producers in the Third world, the cereal producers, the United States Department of Agriculture, or anyone else among our potential competitors an iota of comprehension of the damage that dumping on the Third world—competition with subsidy—can do to international relations on a long-term basis. There was not an inkling that a trade war in agricultural products between us and the United States had entered the Minister's mind when it came to price fixing. The attitude is: "It is a matter for the Foreign Office to deal with. We have to satisfy our farmers, and when we have done that we shall later deal with our difficulties with the Americans." I find that attitude wholly unacceptable.

As we are so pressed for time in this debate, I shall not repeat all the arguments about the inadequacy of the Community and the CAP. Those arguments have been well rehearsed, and most of us have heard them repeatedly. I only ask why, as this is a debate on specific documents, the Minister spent no time on paragraph 66 of AGRIORG 3, AGRIFIN 1, which is one of the splendid documents that we are debating—No. 4020/83. I quote: As regards the market situation, the long-term trends remain a matter of serious concern. For several important products, the rate of increase in Community production continues to be higher than the increase in Community consumption; meanwhile on the external markets, despite an active export policy, the Community like other exporters encounters limited possibilities because effective demand is governed by the lack of economic growth and the growing problem of indebtedness on the part of the importing countries. As the Community is a net exporter of a number of agricultural products, it is in its own interests to contribute to the stabilisation of world markets, within the framework of its international obligations. The other major document—AGRIORG 621—which is the subject of the debate, states on page 21: If it is to be concluded that the rate of expansion of exports on the world markets will not continue in the medium term, either because of the economic recession or because of intense competition from our major trading partners, particularly the US, then it is clear that the present arrangements still need to be adapted in order to ensure that the increasing production volume available can be disposed either internally or externally, at reasonable prices whilst safeguarding farmers' incomes. As in other sectors of the general economy where the rise in unemployment continues unabated, it will not be possible for agriculture to be shielded indefinitely from the realities of the market place". I regret the supposition in the Minister's opening speech and in much of the debate that agriculture can, under the common agricultural policy, be indefinitely shielded from the realities of the market place. I regret Britain's membership of the Community because the common agricultural policy represents a shield of unreality.

7.12 pm

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

I compliment the hon. Member for Durham (Mr. Hughes) on the brevity of his speech. I wish that he had been able to deploy all his arguments because I should have enjoyed dealing with them.

I thank the hon. Gentleman for his remarks about the Naturally British stand at the food exhibition at Olympia. I was there yesterday and I agree with everything that he said. I was interested, when I visited the stands of other countries, to hear the tremendous praise for this new British initiative. People said that it was better than anything they had seen at any other trade fair. I wish to emphasise that the effort on that stand was not the effort of a single section of the industry. It was a combined effort by producers, marketing boards, co-operatives, processors and others. It is only through such combined efforts that we can achieve a more prosperous future for our farmers and our food industry.

Three areas of concern have been set out in the debate. First, the hon. Member for Edinburgh, East (Mr. Strang) mentioned farm workers. I share his view, as does my right hon. Friend, who expressed his opinion at the commencement of the debate, about the important part that farm workers play in our farming industry and in the records of achievement of that industry.

My right hon. Friend mentioned the way in which, during the past four years, there has been a consistent improvement in real terms in agricultural wages. That delights me. The hon. Member for Edinburgh, East made a fair comparison between levels of earnings in agriculture and those in manufacturing industry. Since 1972 the gap has narrowed considerably, but that may not be enough. In 1972 the figure was 70 per cent. and it was 80 per cent. in 1982. The Government are pleased with that achievement and I hope that it continues. I pay tribute to our agricultural labour force.

Secondly, the hon. Member for Cardigan (Mr. Howells) mentioned pigs. This is one of the problem areas. If the hon. Gentleman believes that the answer is to introduce a deficiency payment system, he does not understand the limitations of that system. In the days when there was a deficiency payment system, the production of pigs was hedged with more restrictions, standard quantities, fluctuations in the degree of support, and so on, than any other sector.

Mr. Buchan

rose—

Mr. Buchanan-Smith

I do not intend to give way. The hon. Gentleman spoke for more than 30 minutes. I have six minutes in which to reply. I do not have time to give way.

There are problems in that area and I wish to work with the industry to try to resolve them. In those areas where the Government can help—they have had discussions with the industry and I intend to continue those discussions—the industry can take advantage of the private storage scheme and the export refunds that are available. This Government were instrumental in getting those schemes introduced in Europe on 1 February, because they realised the troubles that were coming and the problems that were arising over exports. That is why I have had meetings with the industry. If those problems can be resolved, I intend to resolve them.

We must not close our eyes to the fact that the industry can do an enormous amount for itself. It must improve the quality of its produce and its grading and assure the housewife that that quality will be maintained. There is an enormous amount of scope for improvement in the industry and the Government are prepared to work with the industry to try to achieve that.

Thirdly, my hon. Friend the Member for Bodmin (Mr. Hicks) and the hon. Member for Londonderry (Mr. Ross) raised the question of marginal land. Our proposals having been lodged with the Commission at the end of December, it put a number of questions to us. It wants clarification and further information, and the Government are providing that. I assure my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) and those who have raised this issue that the Government will push ahead with this as quickly as possible. We have done a great deal to assist hill areas. In 1982 the Government paid more than £100 million in compensation. That is a large sum of money. Levels have been increased by 76 per cent. since we took office. Hill cows were a special worry, but the rate of payment is now up by 96 per cent.

The hon. Member for Durham referred to agricultural surpluses. Deficiency payments would give rise to surpluses and standard quantities would have to be introduced. I remind the House of the opposition of the farming community to standard quantities.

The Community is committed to taking 1.3 million tonnes of sugar from the ACP countries at a proposed price for 1983–84 of nearly £264 a tonne, which compares with a world price of £104 a tonne. Therefore, it is wrong to say that through the direct policies of the Community the Government are not showing concern for those countries. During the past 10 days the high commissioners of the ACP countries have been in my office arguing that the price of sugar within the Community should be raised. That demonstrates my point.

My right hon. Friend the Member for Stafford and Stone (Sir H. Fraser) raised a major point about the United States. In recent years it has supported its agriculture industry by providing it with just over $12 billion. That figure is considerably in excess of the support that is given within Europe. My right hon. Friend must remember that the Community is still the world's largest single importer of food. It takes about one quarter of the total of world food exports, and about £9 billion-worth comes from the United States.

I agree that it would be an absolute tragedy if the Community and the United States became involved in a trade war, because no side could win. It would be to the detriment of both the Community and the United States. It is encouraging that, during recent years, the Community—for example, in its arrangements with New Zealand—has shown that co-operation between it and the remainder of the world leads to orderly world marketing and proper shares of the market for all concerned.

I appreciate that we need price restraint. That is shown in the price proposals. The Government have practised price restraint since they took office three years ago. Although milk prices have risen by 25 per cent., cereals by 22 per cent. and sugar by 27 per cent., that must be compared with an inflation rate of more than 50 per cent. in the Community.

I have not heard any of those who have criticised the CAP voice any recognition of the reform that has been achieved during recent years. There has been the introduction of thresholds for cereals and milk, so the surplus production does come back on the producer. There has been a tightening of quotas on sugar and the introduction of levies that have enabled the Community to talk about an international sugar agreement—something that we all support.

I should have more respect for what Opposition Members have said if they had shown some recognition of the steps that have been taken to improve the CAP. There is still some way to go, but, with the restraint that we have shown during recent years and the improvements that we have achieved, matters are progressing.

I reject the alternative put forward by the Opposition. They suggested deficiency payments, but did not say how that would deal with surpluses. They suggested that alternative in addition to their policy on nationalisation, the rating of lands, and the devaluation of the pound—which, for agriculture, would be a disaster. For those reasons, the Opposition have not had the courage tonight to divide the House. I therefore commend the motion to the House.

Question put and agreed to.

Resolved, That this House takes note of European Community Documents Nos. 4020/83, together with Addendum 1, Addendum 2, and Addendum 3, on agricultural prices and related measures, 11089/82 on proposals for altering the intervention prices for butter, skimmed milk powder and certain cheeses, 11946/82 containing a report on agricultural markets in 1982, and 4376/83 on aid for seeds in the 1984–85 and 1985–86 marketing years; recognises the contribution United Kingdom agriculture makes to the national economy; and supports the Government's intention to seek an agreement on 1983–84 farm support prices and related measures designed to reduce surplus production, to limit the cost of the Common Agricultural Policy, and to take account of the interests of customers and food processors.