§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John MacGregor)I beg to move,
That the draft Agricultural and Horticultural Co-operation Scheme 1985, which was laid before this House on 4th February, be approved.The main purpose of the draft order is to introduce changes in the rates of grant paid to agricultural cooperatives. The House will recall that reductions have been made recently in the capital grant rates available to individual farmers and businesses. These have been fully discussed and approved by both Houses.
As I told the Standing Committee which discussed these changes on 23 January—these are the broad and most important changes—three factors guided us in making our decisions. First, there was the desirability of reflecting changing priorities as the situation in agriculture develops, especially in relation to products in surplus. Secondly, there was the need, to which we give increasing attention, to take account of the conservation aspects. Thirdly, there was the need for agriculture to play its part in the Government's programme of restraint on public expenditure.
The first and third factors are both directly applicable to the subject under discussion tonight. We believe it right that the co-operative scheme should also bear its share of the global savings that are being made, but we are applying a policy of priorities in deciding on the changes.
Before dealing with the details of the new rates, I shall comment on the level of Government support for cooperation. The co-operative development division of Food for Britain has a statutory responsibility to encourage, develop and promote agricultural co-operation, and in the current year Government financial support towards those activities will amount to just under £2 million. That expenditure is separate from that on the co-operative grants scheme, the AHCS, under which Food for Britain makes recommendations to the Agriculture Departments on the worthwhileness and merit of applications.
In the last two financial years, 1982–83 and 1983–84, those recommendations—which we have accepted and on which we are thus committed to pay—came to just under £4.5 million and £5 million respectively — an indication that producers are fully aware of the benefits which can accrue through co-operation and that they are prepared to invest to achieve them.
Grant aid plays a part in stimulating this producer investment, and it is right, therefore, that, in taking decisions about where any necessary reductions should fall, we should be mindful of the particular needs of different sectors and of the priorities we attach to their expansion in conditions which continue to develop and change. It is for that reason that we have decided not to reduce the level of grant rates for horticultural co-operatives.
The reasons for making horticulture an exception are, first, to recognise the particular needs of the sector; second, further to improve horticultural marketing; and, third, to take account of its priority status in Food for Britain's co-operative development division's operating strategy. There is a continuing need to improve our 828 marketing ability and competitiveness in that area, and horticultural co-operatives are gearing themselves well to meet the increasing and more sophisticated demands of their customers. We hope that by holding grants at existing levels this development will continue.
For sectors other than horticulture we are reducing the grant rates for buildings by five percentage points, from 15 to 10 per cent. for cereals co-operatives and from 30 to 25 per cent. for others. I should emphasise that no other changes are being made. At presently estimated levels of demand, savings should amount to about £300,000 in a full year.
As I have just said, in reaching those decisions we have been guided by the desirability of reflecting changing priorities as the situation in agriculture develops. One aspect of this is the need to take into account the surpluses of some commodities—and cereals is a good example. Due to the highly successful efforts, aided by substantial support in a variety of ways, we have moved in 10 years from being a net importer to being a substantial exporter of cereals. Moreover, it cannot be disputed that the cereals sector is better able to withstand lower rates than others. Indeed, Food for Britain's draft co-operative development strategy recognises that major advances have been taken in this sector and that over 600,000 tonnes of sophisticated central storage are now owned by specialist co-operatives. Grants at 10 per cent., together with the commercial benefits which will accrue, should be sufficient to ensure that essential investment continues.
One particular feature of the AHCS is that grant rates generally are about 10 percentage points above those which apply to individual farms under the AHDS scheme. That is what is commonly termed the co-operative premium, which was introduced about five years ago to recognise the need for structured co-operative marketing. I know that Food for Britain regards the premium as an important aspect of the scheme and welcomes its retention.
The draft order that we are debating tonight is somewhat longer than would otherwise be the case for an amendment of this nature. There have been several amendments made since the scheme was last drawn up in 1971, and we are therefore taking the opportunity to consolidate at the same time. Perhaps I may draw the attention of the House to the main difference—indeed, the only one to which I intend to draw the attention of the House at this stage—between this draft and the 1971 order as subsequently amended.
Paragraph 2 now includes a definition of horticultural produce for the purpose of distinguishing those activities which attract the rates of grant set out in division C of column 2 of the schedule. As I have explained, rates for those horticultural co-operatives remain unchanged. The definition is the same as that used in the agricultural and horticulture grants scheme.
The paragraph also contains a definition of "recognised group". That relates to items 14 °and 15 of the schedule and to grants of 15 per cent. and 25 per cent. respectively for tractors and other machinery purchased by forage groups in certain hill areas. Although fairly small amounts of grant have been paid to such groups for a number of years under EEC directive 75/268, we have been advised that authority for such payments should now be provided for in the main scheme. At present those grants apply to the original less favoured areas but not to the extension 829 sought for so successfully by my right hon. Friend the Minister of Agriculture, Fisheries and Food and agreed by the Council of Ministers in 1984.
I am pleased to announce, however, that after the scheme comes into operation, proposals will be considered from forage groups in those marginal areas. This, I believe, is a useful extension of Government support, and one that will be of benefit to livestock farmers in the more exacting parts of the country.
There are some other technical changes, but no others of substance from the 1971 order, and I commend this scheme to the House.
§ Mr. Brynmor John (Pontypridd)When I was listening to wind-up of the debate in Committee, I wondered how in this debate the Minister of State could keep to the same emotional level of intensity. I am grateful for the fact that in his speech he did not even try to do so.
We did the Government a favour, because in asking that the matter be dealt with on the Floor of the House we gave the Government the opportunity to withdraw the original scheme and relay it. Basically, as the Minister said, it is in line with the earlier scheme on capital grants. It is right to record that that has had a singularly mixed reception, particularly in the poorer farming areas. I welcome the part of the scheme that pertains to horticulture because, as the Minister rightly said, there is no cut in the capital grant there, and if those people are to adapt to markets, they need an adequate level of capital grant.
I should like to deal with the second reason that the Minister aduced for restructuring the grants in the way that the Government have chosen. They are aligning grants more accurately with the environmental pressures on farming. That point has been made repeatedly not only by the Minister of State but by the Minister of Agriculture, Fisheries and Food. When he introdued the changes, he said:
In making these changes we are reflecting the Government's declared aim of achieving a closer integration of conservation and agricultural policies". — [Official Report, 11 December 1984; Vol. 69, c. 434.]The Minister of State said:
The second feature also reflects changing priorities. The changes take an important step forward in the integration of conservation and agriculture." — [Official Report, Fifth Standing Committee, 23 January 1985; c. 7.]When the matter was debated in Committee, a great deal of heat and not much light was created by the fact that hon. Members were arguing about whether some people were trying to compare Governments, good or ill. That is not the matter in hand. I am prepared to accept what the Minister of State said, that as a matter of Government policy that they should try to deal with the changing balance in favour of the environment, but I must ask whether the structure of grants and the way in which the grants have been changed achieves that object.
What the capital grants have done in this scheme as in the other one, is to discourage the unsatisfactory things that are being done on farms today which are adversely affecting the environment, but the Government have not taken the further step, which is equally necessary, of encouraging good things to be done on the farms. Although it is not relevant to the debate, stonewalling, which was in the original grant, is academic if fencing is 830 cheaper. If there is a significant difference, that is so much dressing to the debate and will not play any particular part in it.
Capital grants can play a role in environmental care, but we must recognise that capital grants of themselves have a limited impact. Instead of mere discouragement of bad practice—although that is a part of better environmental care — we should have had a series of proposals for grants, if we are to rejig the whole system, which recognised that positive measures can be taken.
I shall give just one example of Welsh woodlands. It is now generally accepted that the oak trees in several Welsh woodlands are becoming overmature because of damage by animals to the young oak trees. A fencing grant to preserve the younger trees and woodlands could have been introduced specifically to encourage conservation. Machinery could also have been devised to help in the covering of bare peat areas, again encouraging conservation. But nothing of that kind has been done. My criticism is not that the Government have failed totally, but that they have wasted a chance. Having decided to rejig the capital grants, they should have done the job properly and rejigged them in such a way as to give proper encouragement to the good things rather than merely discouraging the bad things.
The Minister must accept that the main way to promote conservation is through management grants rather than capital grants. The Royal Society for the Protection of Birds has commented that farmers cannot live on capital grants for dry stone walls. They need an alternative income if they are to be encouraged to take conservation measures. We should therefore be looking for management schemes with a direct and significant conservation element.
The Select Committee on the Environment was a great deal harsher on the Ministry than was the RSPB. Its report make it clear that the present capital structure, far from encouraging conservation in agriculture, is one of the greatest factors in discouraging it. Paragraph 29 states:
Nearly all witnesses were agreed that the present grant and price support structure was the major obstacle in the way of a comprehensive and successful conservation programme in this country.The Government must look at the financial structure of capital grants—they have missed an opportunity this time, but I hope that it will not be long before the matter is examined again—to try to promote conservation. It emerged in paragraph 31 of the Select Committee report, which said:All of our witnesses, except MAFF, recognise the need for a serious change in direction.The Select Committee concluded:We recommend that MAFF fundamentally change its approach on financial structures so that resources are redirected away from environmentally damaging operations and towards conservation-conscious methods.Two things are therefore needed, but only one has been attempted by the Government in their reorganisation of the capital structure on this occasion.I appreciate that this may not be the best time to mention the National Farmers Union annual conference to Conservative Members, but Farmers Weekly reported on it as follows:
Extra grants to help farmers in their conservation efforts and to control pollution were demanded at the NFU annual meeting. The recently imposed cuts in farm capital grants were strongly 831 criticised. Speakers suggested that if the Government really wanted farmers to improve the environment, there would have to be extra money to do so.The NFU has committed itself to a process and a policy of conserving the environment, but farmers often working at the margins in hill areas must have an alternative source of income if they are to he encouraged in that. The gravamen of our disappointment is that the Government have neglected an opportunity to put this right.
Mr. Nicholas Lye11 (Mid-Bedfordshire)I am happy to show that there is support across the Floor of the House for the remarks of the hon. Member for Pontypridd (Mr. John). The headquarters of the Royal Society for the Protection of Birds is in my constituency and the postbag of my hon. Friend the Minister of State, Ministry of Agriculture, Fisheries and Food is full of letters urging him to promote positive management schemes for the protection of the environment and the benefit of farmers in marginal areas. I welcome what the hon. Member for Pontypridd has said.
I wish to address myself to capital moneys for cooperatives coming not from capital grants but from the co-operatives themselves. The tax treatment of moneys which represent profits of co-operatives are treated much less favourably than the profits that a farmer achieves on his own farm. I ask my hon. Friend the Minister of State to treat with the Treasury on this matter so that the profits that are earned in a co-operative can be reinvested in the cooperative with the same tax benefit to the farmer who is selling his produce through the co-operative as would be achieved if they represented the profits from his own farm.
This issue has been drawn to my attention by Bedfordshire Growers, which my right hon. Friend the Minister of Agriculture, Fisheries and Food and my hon. Friend the Minister of State will recognise as one of the best and most effective horticultural co-operatives in the country. At a time when we are having to reduce the capital grant, it is nonsensical that we should not be doing everything in our power to ensure that moneys from the best of all possible sources — the profits of the co-operatives—are reinvested in the co-operatives.
If a farmer is a member, for example, of Bedfordshire Growers, the co-operative makes a profit and he is asked —this request is often made of farmers by co-operatives including Bedfordshire Growers—to leave in his money as working capital for the co-operative, he will not have the same beneficial tax treatment as if he ploughed the money into investment in plant or machinery on his own farm. This seems to be foolish and to have no justification.
When my hon. Friend the Minister of State approaches the Treasury he will be met with the suggestion that to allow such investment would be to permit abuses on a wider basis. The Treasury always says that sort of thing but I do not believe that it will be able to sustain the argument if my hon. Friend presses the case that I am urging. For such investment to be tax deductible by a member of a co-operative, it would be necessary to show that he was a member of a recognised co-operative and to produce accounts to show that it was in the co-operative that his money had been left. It would be for the co-operative to show that the farmer's money had been invested. In these circumstances, the chances of abuse would be extremely limited, if not nil.
832 My hon. Friend the Minister of State appreciates that co-operative marketing societies, whether in agriculture or horticulture, are important in enabling British farmers to compete, especially in the fresh vegetable market, both at home and in the hinterland on the Continent. I am sure that we should do all that we can to encourage them.
§ Mr. MacGregorI shall reply shortly to this short debate if I may have the leave of the House to do so, Mr. Deputy Speaker. The hon. Member for Pontypridd (Mr. John) will recognise that all his comments except his opening welcome to horticulture grants were not relevant to the scheme that is before us. In the three factors that I outlined in the changes to the general capital grants scheme in Committee, the second factor, the environmental one, is not relevant to the particular changes in the co-operative sector. The co-operative grants are for a different purpose. Nevertheless, it has given me an opportunity to repeat some of what I said in Committee, and I am grateful to him for that.
The hon. Gentleman ought not to underestimate the extent to which we are shifting the balance in the capital grants system as the agricultural scene changes so that much greater attention is given to environmental considerations. We are making much more of a shift in that direction than did, the Labour Government. I admit that we are making changes in capital grants for other reasons, but I hope that the hon. Gentleman does no underestimate the extent to which we have had environmental considerations in mind when making changes this year and last. The hon. Gentleman said that the discouragement of what he described as bad practice was minimal, but I am sure that he does not underestimate the value of removing grants for pulling up hedges, land clearance and reclamation work.
§ Mr. JohnI am happy to recognise that, and thought that I had done so in my speech. I also thought that I had eschewed comparisons of Governments and avoided mentioning the Environment Select Committee talking of the Ministry of Agriculture, Fisheries and Food dragging its feet, for example. As I recognise the importance of what is being done, will the Minister recognise the importance of the further steps that should be taken, by which I mean encouragement of that which is right? "Thou shalt not" is an inadequate moral basis for life.
§ Mr. MacGregorWe are talking about thou shalt not get grants for doing things that are environmentally damaging. The hon. Gentleman obviously support what we have done.
§ Dr. David Clark (South Shields)Is the Minister saying that the Ministry of Agriculture ought to he under an obligation to take environmental factors in to account when pursuing its main statutory duty?
§ Mr. MacGregorI listened carefully to the Second Reading debate of the hon. Gentleman's Bill two Fridays ago. He will remember what my hon. Friend the Parliamentary Under-Secretary of State for the Environment said. On one of the clauses in the hon. Gentleman's Bill, my hon. Friend advanced a convincing argument on constitutional matters. I am saying that we are taking environmental issues into account when making changes to the capital grants schemes.
833 I should like to consider just one more of what might be called the negative aspect —this year's significant changes in grants for field drainage. The changes are more significant than some of the other changes in, for example, the removal of grants for hedging. I hope that hon. Members appreciate the environmental importance of that.
Last year, we introduced, in the less favoured areas, advantageous rates of grant for certain environmentally desirable investments such as the building, replacement or improvement of walls built of a material traditional in a locality and the provision or improvement of hedges and shelter belts. I admit that that was not a huge leap forward, but it is a positive step. Other changes have been made, and they build up a picture. For example, £9 million of additional money has been given to the Countryside Commission and the Nature Conservancy Council this year. It will obviously go to environmentally important subjects. Only recently, my hon. Friend the Parliamentary Under-Secretary of State for the Environment announced a new experimental scheme for the next three years in the Hapvergate marshes in Norfolk, in which the Ministry of Agriculture is participating to the extent of 50 per cent. funding and a considerable management input. That is an interesting experiment which has important environmental connotations.
My right hon. Friend the Minister of Agriculture, Fisheries and Food has taken the lead in the past nine months—I have been assisting him in the Council of Ministers in Brussels on the new structures directive to try to get a conservation initiative written into it. As the hon. Member for Pontypridd knows, that structure will last five years. We shall continue with that initiative at the next Council meeting next week. I hope that the hon. Gentleman will recognise that we have in mind the conservation aspects of the changes to capital grants.
My hon. and learned Friend the Member for Mid-Bedfordshire (Mr. Lyell) asked about the taxation of agricultural co-operatives. As he will know, that is essentially a matter for my right hon. Friend the Chancellor of the Exchequer. I understand that the changes introduced to capital taxation in the Finance Act 1984 were intended to maintain broad neutrality of treatment between co-operatives and other enterprises. However, the Federation of Agricultural Co-operatives, with which I have discussed the matter, has made representations to the 834 Chancellor that the changes bear unduly harshly on co-operatives. I shall ensure that my hon. and learned Friend's remarks are drawn to the attention of my right hon. Friend.
It has been a short debate. I have heard no criticism of the changes that we are making through the order—
§ Mr. Robert Maclennan (Caithness and Sutherland)It would be a mistake to allow the debate to conclude without any criticism. I thought that the debate would be longer, and wish to interject briefly. What does the Minister believe to be the total financial savings from the cuts? He mentioned a figure of about £300,000 in connection with one part of the scheme, but I was not sure whether he was referring to the totality of savings.
§ Mr. MacGregorI was referring to the totality. The figure is about £300,000 in a full year.
There seems to have been little criticism. I cannot count that intervention as a criticism, and, therefore, perhaps I can say that there is no criticism of the order. I hope that the House will approve it.
§ Question put and agreed to.
§
Resolved,
That the draft Agricultural and Horticultural Co-operation Scheme 1985, which was laid before this House on 4th February, be approved.