Common Agricultural Policy Prices

HC Deb 18 March 1985 vol 75 cc639-80 3.49 pm

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

I beg to move, That this House takes note of European Community Documents Nos. 4582/85, including Addenda I, II and corrigendum and III, No. 4637/85 on the situation of the agricultural markets in 1984, No. 6248/84 on the designation of milk and milk products, No. 11172/84 on the production refunds for starch, and the Ministry of Agriculture, Fisheries and Food's unnumbered explanatory memorandum of 16th July 1984 on the payment of an additional national aid to German farmers; and supports the Government's intention to seek an agreement on 1985–86 farm support prices and related measures which builds on the success achieved in 1984 in introducing greater realism into the operation of the Common Agricultural Policy, is consistent with the financial guideline for agriculture, maintains a policy of price restraint in the Common Agricultural Policy, avoids discrimination against United Kingdom interests, and takes account of the interests of United Kingdom producers, consumers, traders and food processors. Last year we made important steps towards a more realistic and cost-effective common agricultural policy. I remind the House that at the 1984 price fixing, common prices were reduced on average and, even after allowing for green currency changes, real prices were reduced in every member state. It was agreed that guarantee thresholds would be set for all products in or likely to be in surplus or for which expenditure was rising rapidly. Those were major achievements.

Additionally, the Council of Ministers agreed on a quota scheme for milk at a level of production about 6 million tonnes below that currently prevailing. Let there be no doubt that the quota scheme represents a major advance in bringing reality to the CAP. At the time it was introduced, every extra tonne produced could, on the Commission's own analysis, be disposed of only by applying subsidies at the level of the full target price for milk. In other words, every extra million tonnes of production — production was increasing by 2 million tonnes a year or more—resulted in an extra cost to the Community budget of 275 million ecu or about £165 million. Although we still have a substantial surplus in the milk sector things would have been very much worse without the quota scheme.

Other major advances made in 1984 included the conclusions on budgetary discipline, including a financial guideline for agriculture specifying broadly that from 1986 expenditure on the CAP should grow less fast than the Community's own resources base.

At the same time, it was agreed that our net contribution to the Community budget, much of which results from our disproportionate contribution to the CAP, which itself stems from our relatively small agricultural sector, would be offset to a considerable extent by a reduction in our VAT contribution to own resources.

There can be no doubt that in 1984 we made more progress than ever before in improving the CAP and in mitigating its adverse effects on the United Kingdom.

So far this year progress has been maintained by agreement—

Mr. Tony Marlow (Northampton, North)

Is it correct to say that we have reached an agreement whereby the proportion of Community expenditure on agriculture will become less only if the absolute amount of expenditure on agriculture in the Community becomes more? If so, what is the advantage in that?

Mr. Jopling

I am afraid that my hon. Friend is not right. The agreement is that the growth of spending on agriculture will not be faster than the growth in own resources. That is slightly different from the way in which my hon. Friend put it.

Mr. Nicholas Budgen (Wolverhampton, South-West)

When the financial mechanism was agreed it became clear that it depended upon the political will of the main nation states. I recollect that my right hon. Friend, particularly in 1984, pointed to the determination of the West Germans to hold down agricultural prices. We now hear that the West Germans have entirely changed their position and are once again in favour of high prices. What elements of political pressure are now available which will ally with my right hon. Friend in order to protect the consumer and the taxpayer?

Mr. Jopling

If my hon. Friend would allow me to develop my speech, I shall be talking about some of the issues where there may be a divergence between member states, including West Germany.

Mr. Gavin Strang (Edinburgh, East)

The right hon. Gentleman has just completed an important passage in his speech and I should like to refer to it. With regard to the statement about the CAP, will the right hon. Gentleman confirm that the British Government opposed the milk quotas that he now describes as a major advance? Secondly, will he confirm that, within any framework of quotas, it is desirable that United Kingdom agriculture should at least retain its total share of Community production?

Mr. Jopling

Yes. The House knows very well that I thought that a better way to bring the milk surplus and the overspending on milk under control would be through the discipline of price rather than quotas. The hon. Gentleman will remember that I told the House that on 1 December 1983, and I have always said that. Even though we should have preferred to do it through price, we have had to do it through quota because we were isolated. As I told the House, I believe that the quota system has done a good deal to bring the surplus under control.

So far this year, progress has been maintained by agreement on regulations to implement the European Council's decisions on a reform of the wine regime, and also on a structures package which entails a significant cutback from the level of expenditure proposed by the Commission and has other advantages for the United Kingdom. I have already explained those two matters to the House in the past few weeks.

However, major problems remain. Sensible decisions over a period of years will be needed if all the problems of the CAP are to be solved. It is very important that at this year's price fixing we should consolidate the gains made last year and take further steps in the right direction. I believe that this is necessary not only for budgetary reasons but because only a well balanced and efficient policy can provide our producers with the long-term security that they need.

My attitude to this year's price fixing will be determined by a number of key elements. First, a realistic view must be taken of the market possibilities in each and every sector. This ought to go without saying, but too often in the past over-sanguine assumptions have been made. In accordance with the agreement on guarantee thresholds, action must be taken to restore market balance if circumstances so warrant.

Secondly, proper account must be taken of the financial situation, and in particular decisions should be consistent with the constraints imposed by the financial guidelines for agriculture that I have just mentioned.

Thirdly, all producers and all products must be treated on a comparable basis. In recent years some products, notably the Mediterranean products, have secured consistently greater price increases than others, and it is therefore no surprise that Community expenditure on them has risen by very much more than the average for the CAP as a whole.

Fourthly, proper attention should be paid to the need for policies to be administered effectively. I am very conscious that our producers are concerned that policies should be fairly and equitably administerd throughout the whole Community.

Judged against those criteria, I can give a qualified welcome to the Commission's proposals this year. In general, I think that they recognise the overriding need to put the CAP on to a sounder and more realistic footing, although there are specific points on which I am disappointed.

With regard to the financial aspects, the Commission has produced figures showing that, so far as can be judged, at present its proposals are consistent with the Financial Guidelines for Agriculture, and this is therefore satisfactory.

On commodity aspects, dealing first with milk, the dairy produce quota tribunal has now virtually completed its work and it will shortly be possible to finalise production quotas. In the Council of Ministers earlier this month we agreed on a method of introducing greater flexibility for producers with direct sales and wholesale quota. We also secured some temporary relaxation in the rules relating to liability for and collection of the levy in recognition of the particular problems that producers have faced in the first year of quotas. As a result, producers in Northern Ireland are unlikely to be required to pay any levy in respect of production in 1984–85. Those amendments will be of great benefit to the United Kingdom industry.

In its price proposals, the Commission reaffirms its commitment to the proper enforcement of the quota system, including the cut in quotas of about 1 million tonnes, agreed last year, for 1985–86 and the consequent cut of 1 per cent. in the co-responsibility levy. It has made it clear that the implementation of the proposed price increases is dependent on member states abiding by the rules of the scheme. There is no longer any excuse for failure to apply the system properly, and I shall continue to press that the rules be properly respected in all member states.

At the same time, the detailed regulations still present problems in some respects, and I am especially conscious of the need for more flexibility in the rules governing the transfer of quotas. I shall seek a solution on this point as part of the price fixing package if this seems tactically advantageous, or, otherwise, shortly thereafter.

Mr. Robert Maclennan (Caithness and Sutherland)

I am grateful to the Minister for giving way to me, particularly as he answered a written question about this and we have not had an opportunity to question him about it. Why is he not prepared to press for a fully tradable system of milk quotas, which is preferred to leasing by the industry?

Mr. Jopling

For one particular reason. At this moment I do not believe that we are likely to get early agreement by the Council of Ministers and the Commission to sell and purchase a quota. I have taken the view that, while I am not philosophically opposed to that system, if we want more flexibility more quickly, the most practical way to get it is to go for the first stage of leasing. That was in the answer that I gave, if the hon. Gentleman cares to go back to it.

The Commission has proposed an increase of 1.5 per cent. in the target price for milk this year. Given the continuing surpluses in the milk sector — even with quotas fully operative, the surplus amounts to some 13.5 million tonnes—I do not believe that any price increase this year is justified. I shall press for a freeze, although it is already clear that some member states will press for an increase greater than that proposed by the Commission.

The Commission has proposed a further rebalancing of the butter and skimmed milk powder ratio which would result in a cut of 3.99 per cent. in the intervention price for butter. In this context, it would be acceptable to end the butter subsidy, as the Commission has proposed, as the two measures taken together should have no effect on the retail price of butter. I shall press for the freeze in the target price to be implemented by means of a smaller increase in the skimmed milk powder price than that proposed by the Commission.

Sir John Farr (Harborough)

rose—

Mr. Eric Deakins (Walthamstow)

rose—

Mr. Jopling

I have given way many times, but I shall give way once more to my hon. Friend the Member for Harborough (Sir J. Farr).

Sir John Farr

Were representations made by Her Majesty's Government, and, if so, what response was there, on the abolition of the co-responsibility levy, which is desperately unfair to British producers?

Mr. Jopling

I have consistently argued against the continuation of the co-responsibility levy, even at the level of 2 per cent., after we have made, as I hope, the reduction this year. On many occasions, I have said that I believe that the best way to help dairy farmers is to reduce the co-responsibility levy rather than to increase prices.

Production of cereal expanded enormously in 1984, and it was only the increase in the value of the dollar which prevented a very great increase in the costs of this sector. The Community must take full account of the very great potential financial liability represented by the current levels of cereal production. Calculations made in my Department show that productivity increases in Community cereals production in recent years have been such that real returns per unit area have increased significantly despite a reduction in the real price. Firm action on prices is therefore needed.

In my view, the full 5 per cent. reduction required by the application of the guarantee threshold should be applied without any norm price increase—that is, the common price level should be cut by 5 per cent. rather than the 3.6 per cent. proposed by the Commission.

Further, the Council of Ministers should give a clear signal to producers of its intentions to keep close control on this sector in future years by agreeing that for three years there should be no increase in the norm price, or by adapting the guarantee threshold by abolishing the ceiling on the price reduction to which it can give rise.

In general, we must allow for a greater operation of market forces in the cereals sector. There is clearly scope for increased consumption on the domestic animal feed market and also for increased exports if the price is right. I hope that the Council will endorse radical measures, such as those that I have outlined, although already some of my ministerial colleagues have shown their reluctance to consider any reduction in prices.

Mr. Peter Hordern (Horsham)

rose—

Mr. Jopling

I have already said that I had given way for the last time, but, as I know my hon. Friend, I shall make this the last time.

Mr. Hordern

Does my right hon. Friend agree that the Commission's calculations show that there should have been a decrease of 8 per cent. in cereal prices but that it felt bound to recommend a reduction of only 5 per cent.? Will my right hon. Friend assure the House that, in view of the gross oversupply of cereals, which looks likely to continue, especially if the dollar should fall, he will press for an even greater reduction in the price beyond the 5 per cent?

Mr. Jopling

I hope that tomorrow morning my hon. Friend will carefully read what I have said, because 5 per cent. is the maximum allowed under the rules. I repeat that I did not rule out the option of adapting the guarantee threshold by abolishing the ceiling on the price reduction to which it can give rise. I hope that I have covered my hon. Friend's point.

I am concerned that there is an imbalance between the support we give to arable and to livestock products. Much the best way of improving this balance is to cut cereals prices, which would not only reduce support for the arable sector but reduce the costs of livestock production.

The Commission's price proposal for beef takes proper account of the difficult budgetary and market situation for that product. In 1984, FEOGA expenditure on beef rose by 18 per cent. to almost £1.3 billion and Community intervention stocks increased by more than 60 per cent. In these circumstances, the proposed price freeze is fully justified.

Intervention buying-in prices are now based on the carcase classification grid, and I hope to ensure that there is no delay in proceeding to the second stage of harmonisation, which is due to take effect at the beginning of the 1985–86 marketing year.

I support the Commission's proposal to maintain the basic suckler cow premium and to abolish the costly and discriminatory calf premium. However, I see no justification for the proposal not to renew the beef variable premium scheme, which has served United Kingdom producers and consumers well. The premium scheme has wide support in the House, and I shall be fighting hard to ensure its retention.

Mr. Robin Maxwell-Hyslop (Tiverton)

rose—

Mr. Jopling

I was not going to give way again, but I see that that is a lost cause.

Mr. Maxwell-Hyslop

Does my right hon. Friend recall that he told the House last year that he agreed to the extra milk quota for southern Ireland only on the condition that we were allowed to retain the beef variable premium? Will he make certain that the Irish lose their extra quota if we lose the beef variable premium?

Mr. Jopling

With some fear and trembling, I take issue with my hon. Friend, who is so nearly always right. If he looks it up, he will see that at no stage did I agree to the extra milk quota for the Republic of Ireland. I have made it clear that if there had ever been a vote on that issue, I should have been against an extra quantity of milk being given to the Republic of Ireland.

I shall not give way to any more interventions.

In the sheepmeat sector, the Commission has proposed a price freeze for the rest of 1985 with a 2 per cent. increase in January 1986 after a change in the starting date of the marketing year. It also proposes placing a limit on the variable premium payable each week so that if, as at present calculated, it would amount to over 25 per cent. of the guide price, in future the amount actually paid would be abated by up to 5 per cent. of the guide price. Further, it has proposed a "recovery bar" to prevent the annual premium from increasing to compensate our producers for loss of income due to abatement. It does not propose any changes to the seasonal scale of guide prices.

We have the largest interest in the sheepmeat regime as both producers and consumers, and it is therefore particularly reasonable in this case to insist that the regime should take full account of our interests. Overall, the regime introduced in 1980 has been reasonably successful, though clawback has hindered our exports.

I am naturally willing to consider any non-discriminatory method of reducing Community expenditure, and in that context I could agree to a price freeze for 1985. Nor do I see the case for a price increase in 1986. However, adjustments must operate in a non-discriminatory way. The recovery bar would discriminate unfairly against British producers, and I am therefore determined to resist it.

I also consider that the existing seasonal scale of guide prices causes instability in our market and that savings in expenditure could be made by adopting a better scale designed to promote more orderly marketing. Last autumn, the Commission appeared to accept that argument, and it is disappointing that it has not proposed amendments to meet that point.

I shall just briefly summarise the Government's policy on other products.

We support the Commission's proposals on sugar, including the price freeze on sugar beet.

On oilseeds, the rapeseed price should be reduced to the same extent as that for cereals, and a greater cut should be made in the sunflower price than the 1.5 per cent. proposed by the Commission.

There is no case for any increase in olive oil prices.

A price freeze for wine is clearly needed, given the problems in this sector, which I explained to the House a short time ago.

Taking account of the mounting cost of the market regime and the level of withdrawals, support for some fruit and vegetables should be reduced by more than the Commission has proposed. The Commission has proposed useful changes to the regime for processed fruit and vegetables.

I support the price cuts proposed for tobacco and also the price freeze proposed for pigmeat.

The motion refers to other proposals on designations of milk and milk products and on starch. Both those proposals would have significant implications for our industry and consumers and therefore require further detailed consideration. I shall, therefore, do my best to resist any pressure from other member states to include those proposals in the price settlement, unless they have first been thoroughly considered.

Finally, given the current volatility of sterling, in my view, it is still too early to take a view on the proper level for the green pound. Any Commission proposal to adjust our green rate will be considered on its merits at the time.

These are very important proposals for United Kingdom taxpayers, consumers and food retailers and processors. I believe that the Government's policies are best designed to protect our national interests, and I commend the motion to the House.

4.14 pm

Mr. Brynmor John (Pontypridd)

Taken together, the documents before the House are about as long as "Gone with the Wind". However, they are not half as readable, and they lack any central theme. It is appropriate to consider them today for two reasons. First, today's debate is on the eve of our Budget. The £12 billion cost of this programme, taking up 75 per cent. of the total EEC budget, makes it especially important. Secondly, it is important to discuss them in advance of the meeting of Ministers. Although it is clear that there is no difference in sentiment between the two sides of the House in that all right hon. and hon. Members are determined to rein back the EEC Commission on this issue, it is a way of enabling the Minister of Agriculture to let his colleagues know the feelings of the House.

The one document that I have been able to read is the explanatory memorandum. It is a mere 110 pages long —a Booker prize entry compared with "Gone with the Wind". In that document the Commission itself makes noises of concern about the size of the surpluses now being produced. That being so, we shall be looking at achievement rather than at general sentiment.

The negotiations into which the right hon. Gentleman will be entering have changed radically in their nature. Perhaps one of the problems is that for a lot of EEC Ministers the negotiations are too often looked upon as a price-fixing operation for the coming year—in other words, an income operation—whereas it is now a matter of balancing what is an imbalance and of adjusting agriculture to the realities of the market.

I am disappointed that today's debate is somewhat limited in scope. I know the reason for that. But this occasion used to be the central debate of the agricultural year in parliamentary terms. Last year, it came on after 10 o'clock. This year, it is given a mere half day.

Notwithstanding the right hon. Gentleman's preference for price measures to control agricultural surpluses, there is now beginning a fairly wide debate on methods of controlling agricultural surplus. Even the National Farmers Union is considering the unconsidered—quotas in cereal prices. Therefore, whether it be in the Commission or at home, there will be a continuation of that debate.

I believe that Parliament should have a day devoted to a debate on this issue, possibly guided by a White Paper from the Minister. I know that White Papers of themselves do very little. However, they help to focus the debate and to set out the possibilities. I hope that the Ministry will agree both to publish a White Paper and to arrange for a debate on it so that right hon. and hon. Members can look in an open way at the future of agriculture.

I do not think that we could be more cruel to our farmers than to pretend that there will be no change in the next decade or no adjustments to which we need to turn our minds. That is instanced by the fact that, had we been debating the 1973 position today, the Commission area would not have been self-sufficient in cereals, sugar, wine, beef, veal, sheepmeat, goatmeat, eggs and tobacco. Now only sheepmeat, goatmeat and tobacco remain. Although we have passed the point of self-sufficiency in most of these products, the agricultural machine which has been set up carries on remorselessly.

I accept that it is unwise to aim for exact self-sufficiency in agriculture. We must retain some margin of surplus to buffer us against crop failure or a poor harvest and to enable us to play our full part in the fight against world poverty. But even overproduction would be tolerable if we could sell our surpluses on world markets. The tragedy of the common agricultural policy at the moment is that, although the strong American dollar has narrowed the gap between CAP prices and world prices, we still have dearer agricultural products than the United States of America.

The Minister rightly warns us that if the American dollar weakens, our prices will become uncompetitive and the cost of subsidising our exports will increase. I think that Mr. Pooley estimated that a 10 per cent. devaluation of the American dollar would cost us 700 million ecus. Consequently, as the recent very high levels of the dollar probably will not last, the present position, unsatisfactory as it is, is unlikely to be maintained.

We must also consider what will happen if the American farm Bill goes through without any change in farm support prices in the United States. It will force down the price of American products on world markets and will make EEC agricultural produce that much more uncompetitive. Although some surplus is justified, the present surpluses are intolerable and should not be supported. But if we cannot afford to sell our products, or cannot be sufficiently competitive in selling them on the world market, food mountains may well engulf us, and, I suppose, the wine lakes may drown us.

An idea of how inexorable overproduction has become in the EEC can be gained by looking at the intervention stocks in the United Kingdom since 31 January last year. We find that butter has risen by 15 per cent., wheat by 60 per cent., barley by 168 per cent., rye by 196 per cent., durum by 35 per cent. and beef by 49 per cent. That is an immense increase for one year and severe strain is being put on storage facilities. The EEC may say that the only answer is to extend storage facilities, but that is like saying that the answer to a crime wave is to build more prisons. Such a solution would be limitless, and we must tackle the problem at source instead of trying to treat the symptoms.

The Commission seeks to balance farm incomes with control of production. The disappointing aspect about the document and the Commission's proposals is that they do not do that, at least in their present form. Next year, there will be an increase of 138 million ecus. Although the figure falls in the following year by 34 million ecus, it is subject to so many assumptions as to be easily proved wrong by the time that we reach that date. The Minister knows that price discipline does not come into force until 1986, so his colleagues may be tempted, in negotiating with him, to bump up the prices in the following two years so as to anticipate the price discipline regime that will come into force in 1986.

The Minister rightly devoted much of his attention to cereals. The 1984 harvest was a record 144.2 million tonnes. But since 1978, cereal production has risen on average by 3 per cent. per year. To an extent that shows that, although we fear climatic change, some of the old fears about bad harvests and poor climates have been guarded against by the tremendous increase in crop yields. World production is at its greatest ever, and as a result farmgate prices have, as the Minister said, declined by 24 per cent. At least, that is the view of Mr. Capstick at the Ministry. Yet it is said that real revenue per hectare has risen by no less than 10 per cent. The reason for that is to be seen in the rising yields, where, in the case of wheat alone, we have a 43 per cent. rise in crop yield.

If there has already been a 24 per cent. fall in farmgate prices, yet the income from cereals has increased, what would a 3.6 per cent. reduction in cereal prices do that has not already been done? Despite the record nature of this year's crop, it is obviously not anticipated that it will be a freak crop. By 1990, the Commission expects cereal production to rise to 148 million tonnes, and many would say that it is being unduly conservative. At this rate, cereal production is more likely to be about 160 million tonnes.

However, consumption will not be rising very rapidly, and is likely to amount to about 115 million tonnes. Therefore, even on the Commission's figures, there will be a gap of some 33 million tonnes in 1990. That is why the Commission's proposal is so incredible. I agree with the Minister, and cannot understand how it can move from there to suggesting a 1.5 per cent. rise, to be set off against a 5 per cent. decrease. Obviously, there will be a 3.6 per cent. overall decrease. However, given the extra yield and the history of Britain in the past few years, that will not mean any real decrease in cereal incomes. Therefore, the idea that a 3.6 per cent. reduction will force people out of cereal production or will make such production unattractive does not bear examination. History has shown that better crop yields have more than offset price reductions.

If that price reduction is being brought about with a view to bringing surpluses under control some calculation must have been made of what a net reduction in the cereal price of 3.6 per cent. will do with regard to limiting cereal production. I hope that a calculation has been made of the decrease that will result. If so, perhaps the Minister will tell us, or ask for the figure to be produced. If the question of what reduction will flow from the 3.6 per cent. proposal has not even been considered, the Commission has failed at the first hurdle. Unfortunately, I believe that that calculation has not been made.

Nor is the logic of the attitude held on dairy products immediately apparent. The milk quota system was introduced with hardly any notice, and has caused the maximum dislocation and uncertainty within the industry. I refer the Minister to paragraph 34 of the explanatory memorandum, where it says: The introduction of quotas has proved difficult, and is not yet fully assured in all Member States". That is a fairly ominous and guarded statement about milk quotas, which the Minister did his best to rebut. But I wonder whether his robustness on this issue is shared by all his ministerial colleagues. Clearly, many countries are reluctant fully to implement the milk quota scheme. But having done that, as if to make a futile gesture of conciliation, a 1.5 per cent. rise is then offered. The quota system has brought no benefit to the producers, or—with the pressure for higher prices—to the consumers. Thus, there is bound to be lower consumption of the very commodities now so heavily in surplus.

The Minister mentioned the butter subsidy. In Britain, surplus butter now stands at 25,000 tonnes more than last year. If that is the present situation, what of the future? The EEC forecasts that even in 1991 we shall be producing 13 per cent. more of those commodities than we need, and will be oversufficient. The Commission's proposal will do nothing to bring about a long-term solution to the problem.

The beef and sheep variable premiums deal nationally with two different systems generally in a satisfactory way. The Commission's explanatory memorandum succeeds in being neither explanatory nor logical when dealing with the recommendation to scrap the beef variable premium. Anyone who has studied the matter will agree that the variable premium has stimulated consumption at a time of increasing difficulty.

The long term future set out in the explanatory memorandum states that consumption … is at best likely to stabilise. Since the variable premium's abolition would, according to Agra Europe, add 10 per cent. to the price of beef or, according to the NFU and the Consumers in the European Community group, add 7p per pound to the cost of beef, it would cut consumption. All the pointers are for the retention of the scheme. However, the Commission leaps in logic from arguing the case to asserting it and it suddenly recommends abolition.

The reason is set out in a brief paragraph. The reason is that the scheme is not tidy. It is a national scheme which happens to be working well, but it offends the Commission's bureaucratic sensitivities. The House will support the Minister if he defends the system because it is good for the consumer and for the producer. Far too few of the Commission's proposals can be said to be that.

The sheep premium involves different problems. We are only 75 per cent. self-sufficient in the production of sheepmeat. The Minister admirably outlined the results and details of the change. As he said, the farming press estimates that the change will result in a 5 per cent. cut in income for sheep rearers in Britain. That must be borne in mind when the EEC considers raising by 2 per cent. the price of sheepmeat from next January. The Commission propose a 2 per cent. increase, not a freezing of prices.

The problems of wine and fruit must also be tackled. I commend hon. Members with a fascination for the horrid to look at the explanatory memorandum, which deals with fresh fruit and vegetables. It discloses the most Alice-in-Wonderland situation ever. For example, page 66 refers to the withdrawal of fruit and vegetables from the market. The memorandum says that that is a major market outlet for growers. That is an analysis of nonsense and devalues much of the good work that is being done. That way of looking at things causes worry to consumers and taxpayers about the control to which the system is subjected and about how it will be conducted in the future.

When the right hon. Gentleman goes to Brussels he will represent the whole country. The remit for agriculture will no longer be—as it has been almost without break since the war—to produce at any cost, whether that cost is financial, to the taxpayer, or environmental.

The right hon. Gentleman has two serious problems. The first concerns the performance of the Council of Ministers. History is against him. I have expressed serious doubts about the Commission's proposals, but we must recognise that, although the Commission is fairly wobbly on prices, Ministers have not in the last five years even been willing to go as far as the Commission wants them to go.

On average, Ministers have allowed price rises which are 3.5 per cent. more generous to farmers than the Commission has proposed. If that happened on this occasion Ministers would wipe out at one stroke the cut in cereal prices and all the benefits that flow from that. It would be a total abdication of the Minister's responsibilities to the population of the EEC. In some cases— for example, in connection with cereals — the Commission does not go far enough. Sometimes its proposals do not do what it says that they will do. However, there is no case at present for being more generous than the Commission suggests, notwithstanding the remarkable German somersault on dairy products and wheat.

The right hon. Gentleman's second difficulty is his price restraint strategy, which is his preferred way of making the CAP more rational. I can see that there are many great attractions about that, but a year ago he adopted the same strategy for milk. He would be unwise to ignore the moves already under consideration for alternative methods of bringing surpluses under control.

In paragraph 50 of the memorandum the Commission states: A solution to these problems cannot be found solely in the policy on prices and markets. Paragraph 1.10 states: There is no doubt that … price policy, except where it is extremely restrictive, cannot be the only instrument used in future. If the price measures fail and do not reduce production and surpluses, other means might be sought to control the surpluses. The steady accretion of surpluses which are neither wanted nor capable of being dealt with constructively is becoming intolerable to all EEC inhabitants. We must bring surpluses under control. If the right hon. Gentleman intends to change tack, for heaven's sake let him negotiate a system which allows more time for preparation than was allowed for milk quotas. We must have a better scheme for those who will be forced to leave farming as a consequence.

My verdict on the EEC proposals is that they are radical in analysis and timorous in their practicality. The Council cannot possibly repeat its mistake. Heaven forbid if it should worsen it.

4.38 pm

Mr. Jim Spicer (Dorset, West)

I thank the Minister and his team warmly for their work over the past 12 months to reach this final stage in negotiations. The Minister made it clear that the 1984 price fixing marked a historic change in the attitude of all member states. For the first time, they accepted the need for a realistic price policy for the Community. That meant that we could hope to see an end to open-ended stock piling and the start of a policy to bring production more into line with consumption.

As I represent part of Dorset, I must tell the Minister that I thought that the milk quotas were too quickly introduced and not fully thought out. I do not blame the Minister. He has made it clear that the introduction of quotas was a Community decision made as a result of sudden agreement. However, it involved savage cuts for those least able to withstand them.

I know that in all discussions since quotas were introduced my right hon. Friend has made it clear that he understands the effects of the cuts upon the small family producers who represent the backbone of our farming industry, not only in their dairying capability on the family farms, but within the social structure of the countryside. I hope that my right hon. Friend accepts that it is the Government's duty to do all that they can to aid that particular group in the years ahead. Therefore, everyone in the House must welcome his statement and approach, especially on the need for quota mobility.

Once we dig beneath the harmonious layer on top of the European Community, we find that every nation plays its cards as hard as it can and will use every trick in the book at all times. I hope that my right hon. Friend—indeed, I know that he will as a practical farmer—will be up to all these tricks and that he will press his Cabinet colleagues to give even more support to every national scheme that we can use to help to alleviate the effects of quotas on smaller producers.

I fail to understand why we must still have the co-responsibility levy. We welcome the cut of 1 per cent., but what on earth does the co-responsibility levy actually do? Why do we have to have the 2 per cent? The architect of the co-responsibility levy was the late Finn Gunderlach, but within a short time of its institution he made it clear that he thought it to be a ridiculous instrument that was serving no purpose. It is not a co-responsibility levy in the sense in which it originally applied. It is a tax of 2 per cent., which could be used to give our farming community a much needed fillip in income in this and subsequent years without raising prices to the consumer.

The whole object of quotas has been to screw down the lid on production. Once that is done, every possible way should be found to help the small producer. Hon. Members will remember that when my right hon. and learned Friend returned from the final negotiations last year one great success was the retention of the beef variable premium for the United Kingdom. All hon. Members welcomed that. At the end of the negotiations this year, he must again return to the House and announce a similar success.

The movement of beef into intervention now stands at record levels. I wish to cite figures that show the absolutely astronomical rise of stocks going into intervention. In the Community as a whole in 1980, 302,000 tonnes went into intervention. By 1984, the figure had risen to 604,000 tonnes—a 100 per cent. increase. If the beef had not been boned, the figure would have been 660,000 tonnes. In the United Kingdom alone, the figure rose from 23,800 tonnes in 1980 to 47,000 tonnes in 1984. Where can we find the storage capacity for that quantity of beef going into intervention? It must be purpose built; it cannot be a converted aircraft hangar which might be suitable for dumping corn. We cannot support such increases in the years ahead.

It is in that context that I wish to make my final point. The United Kingdom has a beef variable premium without which prices would rise by 7p in the pound. Evidence given to the Select Committee on Agriculture last week by the Ministry team and the Meat and Livestock Commission showed that consumption would fall by 8 per cent. if the premium disappeared. What on earth is the Community thinking about when, at a time when all our efforts should be directed towards increasing consumption, it is trying, purely for the sake of dogma, to impose upon the United Kingdom the end of a system that has worked well and has helped to increase consumption? Instead, the Community should adopt a similar scheme, coupled with a positive policy of lowering prices to the consumer.

What can we do with 660,000 tonnes of beef in intervention? How long can it stay there and what is the cost of keeping it there? That is one area—although not the only one — that makes the Community look very stupid. Unless the other Council members are prepared to be flexible on this point, my right hon. Friend should go into the negotiations with that issue as a sticking point. He should try not only to obtain a year's extension of the premium, but to get it written in on a longer-term basis.

As we stand in the negotiations now, year after year our Ministers, both Labour and Conservative, have defended the beef variable premium and, in doing so, have had to trade off unnecessarily in other areas. That is an insupportable position. I hope that my right hon. Friend and his team will go into the negotiations determined to retain the premium and that they will hold firm for the sake of the United Kingdom farmer and consumer. My right hon. Friend has many long nights ahead of him, and I wish him and his team well in these negotiations.

4.47 pm

Mr. James Nicholson (Newry and Armagh)

I rise to speak mainly with the aim of bringing hon. Members face to face with the problems of agriculture in Northern Ireland. I do not want in the limited time available to go into the more heavy aspects of the CAP. I wish to emphasise that agriculture in Northern Ireland has been through a traumatic time during the past 12 months. The imposition of dairy quotas caused great difficulty because in Northern Ireland, when the dairy industry sneezes, everyone else catches a cold. That is what happened with the dairy quotas.

Northern Ireland has also had difficulties in finding storage for intervention beef. We have witnessed the continuing decline of our intensive sector. Although Northern Ireland is an integral part of the United Kingdom, because of its peripheral position both in the United Kingdom and in Europe, it has suffered. Our raw materials cost more, and when we have produced the finished products we have the added costs of shipping them to the markets.

The Commission's proposals will damage agriculture, and because of our greater dependence on agriculture than any other part of the United Kingdom the proposals will hit our farmers hardest. I am opposed to them because they do not offer any opportunity for our farmers even to cover inflation. Greater realism about the needs of agriculture is required.

In Northern Ireland the pig and poultry sectors, which have limited coverage in the proposals, are half the size they were when the United Kingdom entered the Common Market. That speaks volumes about what the EEC has done to the intensive sector in Northern Ireland. I shall not labour the point today, but a system must be developed to give us greater access to intervention grain at prices which will allow our farmers to compete on an equal basis not just with the rest of the United Kingdom but with the rest of Europe, especially as Northern Ireland is a net importer of grain. I am asking not for any special advantage but for parity—for a position closer to parity in the prices for the grain that our intensive sector requires to sustain. Nor am I asking for a great increase in production. I am asking for the stabilisation of the half that remains of the industry that we had 11 or 12 years ago. We have the expertise and the health standards to produce bacon and other intensive products as well as, if not better than, other parts of the United Kingdom. We merely ask for equal treatment.

The beef industry requires a period of stabilisation which has not yet been possible. Annual discussions about the variable premium have not helped the industry, as the hon. Member for Dorset, West (Mr. Spicer) has said. I appreciate that the Minister has constantly expressed his determination to retain the variable premium for the United Kingdom, but he should now strive to have it taken out of the price negotiations and agreed by our partners as an acceptable form of support. That would be a major stabilising factor and would give confidence to the industry. Other EEC countries can no longer object to that form of support to the United Kingdom beef industry since the introduction of clawback last year.

The premium not only assists the producer but keeps down prices for the consumer. I believe that its disappearance would mean an increase of 10p in the pound in the price of beef to the housewife. This form of support is most suited to the United Kingdom because a far greater percentage of our heifers are slaughtered, mainly for home consumption, than is the practice in other European countries. Dependence only on intervention support, which at present applies only to steers, would have to be modified to take that into account. Moreover, intervention as a support system gives cause for concern because it is costly and creates surpluses rather than helping the consumer.

The Minister should give greater encouragement to the suckler cow herd and consider increasing the suckler cow premium which has remained static since 1982. With the cuts in the dairy herd, the number of calves coming into the beef herds can only decrease, so we should be acting to avert the shortage that will occur in the future. We should also encourage a gradual expansion of sheep farming as this is the only commodity that is not at present in surplus and the United Kingdom has the stock and the capacity for expansion.

The milk industry has been an experiment in how not to implement quotas. It is important that the United Kingdom as a whole retains its share of the quota in Europe. It would be outrageous and deplorable if we lost any of the share that we now have. In Northern Ireland, the implementation of quotas has caused many people to consider production costs and has brought a new awareness and realism to the industry. It is no longer sensible to feed expensive concentrates merely to increase the milk surplus. Northern Ireland opted for an on-farm quota rather than a dairy quota, which was the right decision at the time because it placed the responsibility on the individual farmer. Northern Ireland has responded positively to the implementation of quotas, with a cut of 6.5 per cent. up to the end of January, compared with the rest of the United Kingdom which had greater drought problems last summer. That shows the responsible attitude of the vast majority of Northern Ireland dairy farmers.

For the coming year, Northern Ireland will join the rest of the United Kingdom with a quota on the dairies, but that will not of itself solve all our difficulties. Last year Northern Ireland was supposed to have received an allowance of 65,000 tonnes which would have placed us in an intermediate position between the United Kingdom and the Republic of Ireland, recognising our dependence on grass-based sectors, but many of us would still argue that that allowance was never received. Of one thing I am certain, and I hope that the Minister is also certain of it: we need the same 65,000 tonnes from the Community reserve next year. Indeed, I suggest that the Minister should aim to increase the amount not just for Northern Ireland but for the whole of the United Kingdom.

A further difficulty, of which the Minister is well aware, is the lack of uptake in the buy-out scheme. All these matters are intricately related to the imposition of dairy quotas in Northern Ireland. The buy-out scheme was reintroduced some weeks ago. We now have 12.5 million litres available instead of the 66 million litres that the Minister proposed to purchase. Dairy farmers in Northern Ireland are entitled to expect the Minister to strive to give them the same conditions as the rest of the United Kingdom. I refer to his proposal that diary farmers in England, Wales and Scotland with less than 200,000 litres annual production should be brought up to 1983 production levels. Northern Ireland farmers were told that they had to accept a 10.35 per cent. reduction on the 1983 level because of their extra expansion since 1981 while farmers in other parts of the United Kingdom faced reductions of only 6.25 per cent. to 6.39 per cent. Producers in Northern Ireland, especially the smaller producers, are entitled to the benefits that producers elsewhere in the United Kingdom are to receive.

I add my voice to the call for the abolition of the co-responsibility levy. That is the one way in which dairy farmers could achieve an increase in income without any harmful effect on the consumer. The levy should never have been introduced. It never achieved its aim and there is no chance of its doing so in the future. It is no longer necessary and the industry should not have to bear that burden any longer.

Northern Ireland farmers not only suffer from the imposition of quotas but have to take lower prices for what they produce. When the Secretary of State goes to Brussels to complete the final negotiations, I hope that he will remember that he has the livelihoods and responsibilities of many thousands of people at his disposal. I wish him well during the long nights of negotiation and urge him to bring back a package that will assist farmers not only in Northern Ireland but in the United Kingdom as a whole.

5 pm

Sir Hector Monro (Dumfries)

I am not sure whether the hon. Member for Newry and Armagh (Mr. Nicholson) will be supporting the Government in the Lobby tonight, and I am not clear why the Opposition are voting against us. I believe that the hon. Gentleman should thank my right hon. Friend for what he has achieved in the switch in levy, saving a great deal of expenditure by Northern Ireland.

Farming has been a great success story and farmers and farm workers have done so much in terms of productivity that they deserve our congratulations. It is ironic that that success is now marred by overproduction — whether caused through our domestic policies or through the CAP and price-fixing—which has caused uncertainty and lack of confidence.

We hear those views at conferences and in the press and, more importantly, in the market place and in talking to farmers themselves. High interest rates, overdrafts and loss of investment allowances, too, have all led to low and declining profits. The problem now is how to maintain income while curtailing uneconomic production and ensuring fairness throughout the EC on the issue of price fixing.

I know that our Ministers wish to help farming through this transitional period, which is really not of farming's making. We are at a watershed, and it is vital that we should use the mechanism of the CAP prices to our best advantage. That will be a difficult task, but not as difficult as it would be under a Labour or an alliance Government, when we would have to cope with rates on farms, planning controls and other thoroughly disagreeable policies.

We can lose ourselves in a mountain of statistics, but, whatever the statistics may say, our contacts with farmers and experience of farming tell us more about the facts of life. We know that livestock farmers have done far less well than those who grow cereals.' It is unfair that generalisations about all farmers enable the statistician to show that 1984 was a thoroughly good year for profits. No livestock farmers whom I know would agree with that. Profit is a most misleading concept. If one spoke to the members of any branch of the Scottish National Farmers Union or of the National Farmers Union, it would be brought home to one that there is great anxiety in the world of livestock and that it must be—as I believe that it is—the Government's highest priority to redress the balance and to help the dairy, beef, pig, sheep and poultry sectors.

As part of that process, we must begin to develop a truly rural policy. There are some glimmers of light that encourage me to hope that we shall do so in future. We must develop all aspects of the countryside—the village school, the village hall, the bus services, the shops and post offices — in order to maintain a viable rural community of which, of course, profitable agriculture must be the keystone. My right hon. Friend has done exceptionally well in assisting the less-favoured areas. I am glad that he has been able to extend them. It is now the duty of the Commission to consider these areas specifically.

I warmly congratulate my right hon. Friend on what he has achieved in terms of conservation. He has achieved a great triumph. There has been a major swing in policy among all the major European agriculture departments. When he negotiates with the Department of the Environment and his own Department I hope that he will be able to ensure that the assistance that may be available to agriculture will be simple in form and will include support for habitats and other aspects of conservation and especially for afforestation.

I hope that my right hon. Friend will reconsider, in that context, the issue of capital grants for draining and fencing. The conservation lobby may wish to persuade us that all drainage is a bad thing. I accept that we do not wish to see the marshes and the wetlands drained unnecessarily, but the regular tile drainage of arable fields and grassland must go on in a rotation system. The tile drains must be replaced regularly. That grant should be maintained at as high level as possible, for obvious reasons.

I welcome what my right hon. Friend has done for the less-favoured areas in respect of livestock in general. There is the hill compensatory allowance, which is vital, the beef premium, the suckler cow subsidy and the sheepmeat regime. He should look carefully at clawback and the seasonal weighting, and at the impact of those factors on the export market, which we should be developing.

I quite agree with my hon. Friend the Member for Dorset, West (Mr. Spicer) that it is most important in the interests of the housewife and the farmer to keep beef out of intervention. Let us eat beef and avoid putting it into store. That is the right policy.

The crucial issue is the dairy sector. This has been a dramatic year. I pay tribute to the Scottish NFU and to the Scottish Milk Marketing Board for their constructive approach throughout the year to helping the dairy farmers in Scotland to come to terms with a very nasty surprise. The panels and tribunals have all done good work. However, we must not underestimate the effect on farms and creameries.

I agree with my hon. Friend the Member for Dorset, West about the co-responsibility levy. Once we are locked into a quota system, we must look at the levy again. The figure is 3 per cent., of which 1 per cent. has been rescinded this year to help the transition to the quota era. Let us now try to rid ourselves of the other 2 per cent. It is a tax on dairy farmers. It will not affect the price to the consumer but it will have a tremendous impact on the price to the producer. Let us try to remove the rest of the coresponsibility levy. The dairy farmer has really been hit twice, with the dairy quota and the co-responsibility levy. That double impact is less than fair on an industry that works long and hard to produce a worthwhile product.

I am pleased about what my right hon. Friend has been able to do for the producer-retailer and for the cause of flexibility in quotas within the United Kingdom. In the circumstances, the outgoers scheme has been a great success. I hope that when we have additional quota from that scheme my right hon. Friend will be able to move it to the most hard-pressed areas and to some of the producers who have suffered most but who have not received much response from tribunals.

It is not easy to diversify without large resources. Investment is stagnant and bank borrowing is increasing. Interest rates are high and, in Scotland alone, will lead to an increase of some £20 million in 1985—half of last years' supposed income. In 1984, incomes were 7 per cent. lower than in 1982 and only half, in real terms, of those in 1975. That is why we need renewed confidence through the CAP prices system.

Our aims must be to keep grain at a standstill price, to avoid putting it into any form of quota system and to switch any resources from that standstill to livestock, especially with a view to retaining some profitability in the milk sector. As to beef, my right hon. Friend should remember that the suckler herd is now 29 per cent. smaller than it was in 1975, so it is essential to keep up all possible help to less-favoured areas and the uplands. As for sheep, I know that my right hon. Friend is doing his best with the variable premium and the ewe premium. All hill farmers look forward to another increase in wool prices.

My right hon. Friend has done exceptionally well through a most difficult period and has never deserved the criticism that he has received from many directions. He has stuck up for farmers in the CAP negotiations and gained the enormous advantage of environmental assistance. He should keep up the good work. If so, he will get all support from his colleagues who are determined to ensure that agriculture remains profitable and provides employment for the best workers in the world.

5.12 pm

Mr. Gavin Strang (Edinburgh, East)

I am happy to follow the hon. Member for Dumfries (Sir H. Monro). Although I shall not comment on much of what he said, his reference to the possibility of quotas on cereals is important.

I get tired of Conservative Members reminding us of our experiences under a Labour Government, but today I cannot resist, having listened to the Minister, recalling the things he used to say to Labour Ministers. I welcome the change in the Minister's stance on the cost of intervention buying. I remember when beef stocks were belittled and intervention buying was presented as a great system for farming. Far from the costs of the CAP and intervention buying declining, they have increased in the past few years. The CAP is a grotesque misuse of resources, just as it was under Labour. It involves massive spending on supporting agriculture, and most inefficiently. A more effective system of support would enable us to sustain our farmers and the small producers in, for example, France and Italy.

Mrs. Elaine Kellett-Bowman (Lancaster)

Does the hon. Gentleman acknowledge that, under Labour, British farmers were occasionally paid 45 per cent. less than their counterparts in Germany because of the green pound, and that my right hon. Friend and his predecessor, now the Secretary of State for Energy, have got the CAP into far better shape than did the right hon. Member for Lewisham, Deptford (Mr. Silkin)?

Mr. Strang

If the hon. Lady knows anything about agriculture, the level of production, the level of investment, what happened from 1974 to 1980 and compares that with what has happened since, bearing in mind the fact that investment is the key test of the industry's future, she should be a little restrained. She and the National Farmers Union know that such statements have no basis in fact.

I do not wish to make party political points, but the fact remains that CAP expenditure is continuing to rise sharply. In 1983, it increased by 28 per cent., in 1984 by 14 per cent., and in 1985, on the basis of the Commission's current proposals, it is estimated to rise by 16.5 per cent. Moreover, CAP spending has risen as a proportion of total EEC spending.

I do not blame the Minister for that increase. He knows that it is the consequence of strategic decisions taken by the Government. The Prime Minister and the Government made a great mistake when they put all of their effort into getting a clawback of our contribution to the EEC budget rather than into a more long-term view and trying to change the CAP to help us to get a bigger share of CAP spending.

I hope that we shall not have the Prime Minister telling us that Spain and Portugal should not enter the EEC because that would increase CAP expenditure. It is equally valid to argue that their accession will help us to get to grips with the problems of the CAP. The Government's policy has been to support the entry of Spain and Portugal. I hope that that continues to be the Prime Minister's policy when she goes to the EEC summit. The Select Committee on Agriculture, of which the hon. Members for Dorset, West (Mr. Spicer) and for Newry and Armagh (Mr. Nicholson) and I are members, has examined this matter closely and is anxious that British interests, not least fishing interests, are protected, but in my view the case for Spanish and Portuguese entry is overwhelming on political grounds.

I hope that the Government will obtain a quid pro quo in the lamb sector if we have to have a change in the system of payments for premium. The Minister of State knows that there is a strong case for moving away from the sharp fall in price guarantees in June. I put that argument on behalf of Scottish industry. With lamb production the way it is in hill areas, especially in the north of Scotland, lambs will not be finished in June. There is a good case for altering the sharp fall in price, although many of the lambs are bought by lowland farmers and sold in winter. The problem with the lamb regime, as the House was told in the debate on the sheepmeat regime, is that it has been designed to keep our lamb out of the French market. It would be much better to tackle the problem of clawback.

The Labour Government negotiated the beef variable premium scheme in 1975 as part of our renegotiation of the CAP. No doubt Ministers will correct me if I am wrong, but I recall that when the Labour Government left office the regime provided for other member states to implement a variable premium on beef. That regime was changed under the present Government. I do not suggest that there is collusion between the Commission and the British Government, but I do not believe that the removal of the variable premium is a serious possibility. That indefensible proposition is put forward every year, but, even in terms of managing the EEC market, let alone in British terms, there is no case for it.

I hope that we can at least make progress towards a change in the regime that will enable us to make it more permanent, which will probably mean the inclusion of a provision to enable other member states to operate a premium.

Mr. Maxwell-Hyslop

The hon. Gentleman is reminding us of what the Labour Government did, but did not that Government sign the agreement whereby, when we send beef into Europe, we have to repay the subsidy, but when Eire sends beef into Great Britain it does not have to repay the subsidy? That gives southern Irish farmers an unfair advantage over own own farmers.

Mr. Strang

I believe that was the deal that was negotiated by Lord Wilson of Rievaulx when he was Prime Minister. It at least secured some offsetting benefits for manufactured goods.

The Minister of Agriculture is right to take a stand over cereals. We must have no moves towards quotas in cereal production. The right hon. Gentleman rightly said that there has been an imbalance between cereal and livestock production. That is one reason why it is important that we should not introduce cereal quotas. There is an overwhelming case for a free market in cereals and for tackling the problem of cereal surpluses by a policy of price restraint. Quotas mean higher prices in the long term.

Some arguments that apply to cereals do not apply to milk. For example, cereals are a major input in other sectors of agriculture. I should like to make a number of other points about cereals, but I shall confine myself to saying that we are stuck with intervention, though I hope that the emphasis will be on holding to the Commission's proposal for a price cut. The motion makes no reference to that.

I reminded the Minister of Agriculture that his Government were opposed to the introduction of milk quotas. I was not trying to make a party political point, because I have reluctantly accepted milk quotas. I noted at the weekend that the Farmers Union of Wales has come round to accepting milk quotas as a means of achieving a balance between production and demand—though there is still a long way to go.

The cut in United Kingdom production required as a consequence of the quota negotiated by the Minister of Agriculture is greater than the Community average. I acknowledge that it is not as bad as the cut accepted by some member states, but it compares unfavourably with the position of Ireland and France — neighbouring countries which could easily supply the British market.

It is crucial that there should be no further erosion of the British quota as a proportion of the Community quota. The Minister of Agriculture met a deputation from the Transport and General Workers Union on Thursday. I was a member of that deputation. I assume from what he told us that there is no likelihood that we shall be able to increase our share of the quota. Therefore, I urge him to get a settlement in the price fixing round that maintains the 1 per cent. Community cut for the next milk marketing year. We do not want anything worse than that to cope with.

If we have to go to great pains to establish a quota system, we want it to work. I stress to the Minister that that may require a few more civil servants. We also want to maintain the maximum share of production within the Community and to help the parts of this country that have been hard hit by quotas. I refer particularly to west Wales, the south-west, the north-west and west Scotland. As I said at Question Time last week, many of those farmers do not have an alternative to milk. They can only grow grass. Beef and lamb are not viable options because of the size of holdings. Therefore, we have to build into the quota system a means of minimising the damage done in those areas. I visited west Wales with members of the TGWU a few weeks ago and we saw the determination of local people to fight for their communities and their production — just as the miners fought. It was a sign of the importance of this matter to that local economy.

I hope that the Government will not adopt the policy of a free market in quotas proposed by the SDP in the person of the hon. Member for Caithness and Sutherland (Mr. Maclennan). Such a policy would not be in the interests of milk producers and the areas that have been hardest hit by quotas.

The Minister of Agriculture says that he is committed to leasing, but I urge him to recognise that that must be within the framework of a central agency and controls. It has been suggested that the milk marketing boards could take on that role, but I am not so sure about that. The Government might be well advised to do the job themselves or to set up an agency for that purpose.

It would he unacceptable if wealthy farmers, who may have made a fortune out of cereal production, were able to bid for quotas in an open market against smaller producers in Wales and elsewhere. Even with the system of panels and tribunals, some producers have been hit unfairly by the quotas.

The system of buying quotas, establishing an outgoers scheme and redistributing quotas was a good idea, and there may be a case for pushing it even further. I agree with the Select Committee on Agriculture that we need a parallel scheme to the outgoers scheme offering compensation to workers in agriculture and to those in the dairies, the feed compounders and the milk dependent industries, who lose jobs as a consequence of the implementation of quotas.

Eventually, there will be a horse trading session when the Government will have to make some concessions. The price-fixing exercise should be judged, above all, on what is achieved on cereals and milk. We want changes in lamb and the retention of the beef variable premium, with a commitment to change in the beef regime, but, above all, we need a cut in cereal prices — which is of great importance to the future of the CAP and of our industry —the removal of the co-responsibility levy in milk and the maintenance of Britain's share of the Community quota. I hope that the right hon. Gentleman will accept that we are confident that he will be able to retain the variable beef premium. We wish him well in his efforts in that direction, but he will be judged by the House on the other issues.

5.30 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

When my right hon. Friend the Minister of Agriculture, Fisheries and Food was generously giving way during his speech, I intervened to ask him whether he would not have agreed to the extra quota for Eire, had it not been for the quid pro quo of the variable beef levy. He replied that my memory had let me down, and that he had not agreed to the extra quota for Ireland. I therefore remind the House of what he said on the occasion that I had in mind. He made a statement to the House on the final meeting of the Agriculture Council to settle details of the quota. The record reads:

"Mr. Robin Maxwell-Hyslop (Tiverton)

Is my right hon. Friend aware that a settlement that allows Southern Ireland, which greatly contributed to creating the problem, an increase as compared with others members of the EC is disgraceful and not a basis on which many right hon. and hon. Members would regard it possible to grant any more resources to the EEC?

Mr. Jopling

I opposed the proposals for Southern Ireland throughout the discussions, but was forced in the end to accept the package because there would otherwise have been no way in which to have got all the other things that are of benefit to us, especially the continuation of the beef variable premium." —[Official Report, 2 April 1984; Vol. 57, c. 667.]

It was therefore wholly right to ask my right hon. Friend whether, if we lost the beef variable premium, he would insist that Eire should lose the corresponding advantage which it got when we agreed to that increase on condition that we had the continuation of the beef variable premium. If the one does not continue, nor must the other. That was the point that I sought to press on my right hon. Friend. As I have refreshed his memory that his memory, not mine, is at fault, I again ask him to assure us either by intervention now or through his hon. Friend the Minister of State who will reply.

I shall draw attention to only two matters because of the short span of the debate and because many of my hon. Friends wish to speak. First, there are cases in which tribunals have misdirected themselves, because either they have read the regulations wrongly or they have arrived at conclusions that no reasonable person could reach. Under the present system there is no redress for that, as my hon. Friend the Minister told me in a letter. Therefore, a farmer who is ruined by a wrong decision from a tribunal can only go to the High Court and ask for a judicial review. However, that is impossible for most of them, unless they do so in person without a lawyer— because in many cases they cannot get legal aid—or unless my right hon. Friend gives an undertaking that the dairy produce quota tribunals will not ask for costs. That is a wicked way of depriving farmers who have been done down by clear errors of tribunals from getting the only source of justice left to them.

Secondly, the quota system is proving to be the only system which could bring excess milk production under control, as some of us said as long ago as 1977. I am still of the opinion, as I was then, that to have relied on massive cuts in prices to producers would only have resulted in a reduction in milk production at the point of multiple bankruptcy. That system would then have been far worse. The tragedy is that the milk quota system was not introduced when some of us foresaw that happening, in 1977, before the massive French and Irish expansions and, to a lesser extent, expansions in other countries. If it had been introduced then, the quota that could have been allocated would not have resulted in personal disasters, many of which resulted from expansion schemes financed by taxpayers until the day before quotas were introduced with the full encouragement of the national agricultural advisory service, for which my right hon. Friend is responsible. Those facts will not go away.

5.36 pm

Mr. Robert Maclennan (Caithness and Sutherland)

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) is entirely right in saying that if the Government had considered the introduction of milk quotas earlier, done their homework and made contingency plans, the hardships that have been felt this year by the dairy sector, especially in his part of the country and in west Wales, would not have been felt. I am frightened that the Ministry is equally unprepared to deal with the problem of a continuing imbalance between supply and demand in the cereal sector. It was notable how little the Minister had to say about what the Commission had said about that. The Commission drew attention in its explanatory memorandum to the probability that price restraint alone would not in the long term deal with the problem of surplus. Apparently the Minister is not prepared, even now, to take that problem on board. As we suffered hardship in the dairy sector, we can expect also to suffer hardship in a few years' time in the cereal sector.

I do not know why the hon. Member for Edinburgh, East (Mr. Strang) is so rootedly opposed to the introduction of cereal quotas. He did not explain why today. Although I recognise the considerable administrative problems involved in introducing cereal quotas, it is right that both the National Farmers Union and farmers' representatives should consider how best to tackle them, and the Government Departments that will be responsible when the Community tackles the problem.

Mr. Strang

rose—

Mr. Maclennan

This is a short debate and the hon. Gentleman has made a speech. I must press on. He misrepresented me when he spoke about the attitude of the Social Democratic party to milk quotas. I remind him that before the Government were prepared to talk about that, we advocated the introduction of milk quotas, subject to three important conditions being met: first, that the position of the small dairy men in particular should be safeguarded; secondly, that there should be a regional framework for the introduction of quotas; and thirdly, that the position of new entrants should be considered. None of those matters was properly considered by the Government before they followed this path. That is partly why we have seen so much suffering, so many bankruptcies and an impossible position created for tribunals, to which the hon. Member for Tiverton properly addressed himself.

I fully support what the hon. Gentleman said about legal costs. It would be outrageous if those who sought judicial reviews were forced to bear the legal costs of the public agency that is responsible for the administration of the scheme. I hope that the Minister has listened to that.

The Minister showed today that, as ever, he is far from having a firm hand on the tiller. Once again, he showed the limitation of his capacity to steer the industry. He has no clear sense of the direction in which he wishes to go. It was noticeable that when he discussed the tests that he would apply to the ultimate settlement in the Community he did not for one moment consider the incomes of British farmers. He talked about what he called a realistic view of market possibilities, and said that the settlement must follow the financial guidelines. He said that all producers and products should be treated on a comparable basis, and talked about the need for effective administration of the schemes throughout the Community.

No doubt each of those factors is worthy of debate, but he failed to mention the predicament of the farmers upon whom we depend, not only for the prosperity of our food production but for the prosperity of rural economies. He has not faced the fact that, under his administration and that of the Chancellor of the Exchequer, the indebtedness of the industry has become a crippling burden. According to his White Paper, last year borrowing increased by no less than 14 per cent. Thanks largely to the favourable weather, incomes — in the cereal sector especially —recovered substantially, in global terms, from last year's figures. However, tables 26 and 27 of the White Paper show the reality of what has happened to farm incomes: in the livestock sector, the position remains bleak, and for the milk industry as a whole incomes decreased by 50 per cent. during the past two years. It is extraordinary that the Minister should come to the House for the most important agriculture debate of the year and fail to draw attention to the need to tackle those matters, and to have them in mind when negotiating for our national interests in Brussels.

I share the Minister's objective — I hope he is successful—in eliminating the co-responsibility levy. As has been said, it is a tax on food which is naturally treated by farmers as though it were an additional input cost to be recouped by a quota addition to the support price. With the reduction in milk profits such as I have described, perhaps an increase in quota price is justified, notwithstanding the remaining surplus production. It is wrong to try to switch milk production on and off as though it were a light bulb. It is impossible for farmers to adjust to such sudden lurches in direction without tremendous hardship and bankruptcies.

The Government must give some help to milk producers. Beef production has been especially hard hit by the increased cow culling following the introduction of quotas, and there is a considerable case for an increase in the suckler cow premium to encourage quality beef production.

No doubt the Government will attach their usual high priority to the proposal to end the variable premium scheme. Hon. Members on both sides of the House recognise the necessity to resist that proposal, but it must be regretted that, once again, it will not feature as a central objective of the British Government. No doubt when the Minister succeeds in retaining it he will trumpet it as a great success. Every British interest that has been surrendered to save the beef premium, because the Minister failed to put it on a proper lasting basis, will be overlooked. It is an entirely unsatisfactory way to proceed. It is time that the beef premium was put on a longer-term basis, because it is a wholly sensible measure introduced by the previous Administration.

We must change last year's arrangements for lamb, especially the seasonal scale. The hon. Member for Edinburgh, East was right to say that it is outrageous that there should be a drop in support in June at the level that was agreed by the Government. The litmus test of the Government's commitment, especially to the hills and uplands, will be whether they succeed in effecting an appropriate change in the seasonal scale.

On cereals, which from a budgetary point of view and the point of view of the expenditure involved are the greatest problem, the Minister will be assisted by the bad spring in continental Europe. The harvest this year is likely to be much below what was thought likely. Although it is true that, to some extent, weather is no longer the conditioning factor that it was, the Minister need only travel through the cereal-growing prairies of France to see what a bad spring it has been. Therefore, I hope that it will not be necessary to attack cereal production too savagely in one year. I recognise the need to edge down prices, and farmers are satisfied that that can be done without undue hardship to the cereals sector and with great benefit to the cereals-using sector. A reduction along the lines proposed will be acceptable.

I commend to the Minister the need seriously to start thinking about the introduction of cereal quotas. It is imperative that we are not caught late again, with the Minister trailing behind the rest of the Community saying, "I was the odd man out and there was nothing I could do. I was outvoted. The package is not mine, but I will do my best to make it work." That will not wash next year.

Mr. Jim Spicer

Throughout his speech, the hon. Gentleman has referred to the British Government beating the table hard. He is the only representative of his party in the Chamber, and he has no support from the Liberal party. What would happen if we had a representative of his party at the negotiations? The alliance has sold the pass in advance and said that there will be no veto and no standing firm, because it is communautaire. What would happen if the alliance were conducting the negotiations?

Mr. Maclennan

The hon. Gentleman must come to terms with the fact that it is being communautaire to try to tackle the problems of surplus in a way that has a chance of succeeding. That is what the Government have plainly not grasped. Not only is it not communautaire to proceed down the road which the Minister has taken this year and last year; it is profoundly against the interests of the British farming community, about which I have talked during my speech—

Mr. Jim Spicer

No veto.

Mr. Maclennan

The hon. Gentleman keeps saying, "No veto", from a sedentary position. I do not know what he is talking about. The two alliance parties have always been in favour of maintaining the Luxembourg agreement. Where the national interest is at stake, properly defined, we would use the veto, but only then. In any event, the Minister is always the odd man out and does not attempt to wield the veto.

I conclude with a matter that the Minister mentioned but with which he did not deal at great length—the green pound.

Mr. Jopling

The hon. Gentleman has made a very clever speech. He has avoided coming to grips with the central question, with which, to do him justice, the official spokesman for the Opposition did deal. Will he tell us what is the view of his party and also of the Liberal party, if he can speak for its members, too—

Mr. Albert McQuarrie (Banff and Buchan)

They are not here.

Mr. Jopling

I know that the Liberals are not here, but presumably the hon. Gentleman is speaking for both parties. Can he tell us about the attitude of his party or the Liberal party to the general price proposals that the Commission has put forward? The hon. Gentleman has alluded rather obliquely to cereals, but could he tell us whether the Commission's proposals are too stringent or whether he believes that we ought to be a little more stringent in certain ways? The hon. Gentleman ought in justice to give the full picture to the House.

Mr. Maclennan

I am very gratified at last to have received some praise from the Minister. He has described my speech as a very clever speech. I shall find it useful to refer on other occasions to that bouquet from the Minister. May I say to the Minister, as he said to so many hon. Members who intervened during his speech, that if he reads carefully in Hansard what I have said he will find precisely my reaction to the specific proposals and also my reaction to what he has had to say about them. The Minister will have to do rather better than that.

I want to deal with two points before I sit down. The first relates to milk quotas and their tradability. It is a great disappointment not only to me but to many in the farming industry that the Minister does not appear to understand the need to move towards tradability. It is another example of the Minister running behind opinion instead of leading it, as he ought to do.

As for the green pound, in recent months a small, negative monetary compensatory amount has come into effect in this country. Although I acknowledge the force of what the Minister had to say about the uncertain level of the pound, I believe that during the price fixing negotiations we ought to lay on the table, as undoubtedly will be done by Germany and France, the case for a green pound devaluation. Although there is some instability in the rate of the pound, it is more noticeable in relation to the dollar than in relation to the other European Community currencies. I hope that the Minister will be no less trenchant in his defence of British farming interests than his colleagues in the countries of continental Europe will be in defending theirs.

5.52 pm

Sir Paul Hawkins (Norfolk, South-West)

May I first refer to the remarks of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) about the unfairness of tribunals. In Norfolk there is a fairly large number of dairy farmers. One dairy farmer, not a constituent of mine, sold his herd but retained all his in-calf heifers and young stock from a pedigree breeding herd because he had been prosecuted by the Anglian water authority and made to spend a very large sum of money upon putting right the means of disposing of his effluent. Having retained all his young stock, including the in-calf heifers, he wanted to return to milk production. In fact he is producing milk again but he has not been awarded one single gallon of quota. This kind of treatment is grossly unfair and it is one of the injustices that needs to be looked at again, as my hon. Friend the Member for Tiverton pointed out.

I apologise for having arrived halfway through the speech of my right hon. Friend. However, I congratulate him upon his forthright and clear explanation. He has received a hell of a lot of stick from those who ought to know better, in particular from the National Farmers Union. Although it cannot be compared to a carthorse, like the TUC, the NFU seems to be rather like an ancient and perhaps valuable motor car that is running on only a couple of cylinders. It does not appear to be looking after the interests of the smaller farmers. The Tenant Farmers Association and the Small Farmers Association would not have developed as they have if the NFU were looking after their interests.

The speech of the hon. Member for Pontypridd (Mr. John) was excellent. I am grateful to him —as, I am sure, are other hon. Members—for the support that he has given to the Minister in his battle in Brussels. As has already been mentioned by my hon. Friend the Member for Dumfries (Sir H. Monro), farming has been a tremendous success story in recent years. We are now able to go to the supermarkets and obtain anything that we want. In Poland they have to queue for the smallest rations of meat, butter and other commodities. Who would prefer to live in Poland rather than in this country? British agriculture has been a great success.

Farmworkers are often thought of as walking about with a piece of straw in their mouths. In my part of the country they are highly skilled men. They are very well equipped to look after the very expensive machinery that is used in farming today. When farming falls upon difficult times it seems as though a pack of wolves or hyenas gather round the farming community and try to pull it even further down. Although I am in favour of caring for the environment, I believe that some of the environmentalists have gone much too far. The best way of ensuring the preservation of a lovely countryside and the retention of a beautiful England is to have a profitable farming industry. Farmers look after their farms well, 99 per cent. of them.

Mr. John Home Robertson (East Lothian)

There are no profitable farms in Scotland.

Sir Paul Hawkins

I do not know about Scotland. I have been there only once, although I should love to go there again. However, the opportunity has not arisen.

May I continue by referring to Norfolk, not Scotland, although we had an invasion of Scotsmen in the 1920s and 1930s. The farmers of East Anglia are modern, scientifically minded, and highly efficient, and are quite prepared to accept cuts by increasing yields by using modern strains of seeds and by the use of up-to-date equipment, sprays and artificial manures. If the cutbacks in the amounts of sprays and artificial manures were to mean an increase in livestock on land previously cultivated for grain, this would be a very welcome move. The beef premium is absolutely essential.

Mr. John

I hope that the hon. Gentleman will not encourage unduly diversification on cereal farms. It is comparatively easy for farmers in Norfolk to diversify but the reverse process cannot happen on the western side of the country. The hon. Gentleman's suggestion regarding diversification would spell ruin for many farmers in the west who are dependent upon livestock.

Sir Paul Hawkins

East Anglia has always had a high head of livestock. Pig fattening is one of the largest industries in East Anglia. In my youth there were always fattening cattle in the yards in winter. That produced fat cattle when supplies were short from the west country, the Welsh hills or anywhere else. There is room for livestock production on the grain farms, which can use some of their own grain, thus creating more employment in East Anglia, which has been cut back so much recently.

The beef premium is essential. Beef consumption must be increased. The price is far too high at present. Sadly, the best beef is being put into intervention. That is ridiculous.

I hope that my right hon. Friend will agree to the request of the hon. Member for Pontypridd for at least a day's debate. If there were not so much nonsensical legislation we would have time for three days' debate on agriculture. I hope that my hon. Friend will press his colleagues for at least one day. Half a day on this most important subject at what is a turning point for so much in agriculture is essential. We should discuss not just EC prices, but the structure of farming and the rural communities. We have lost far too many family farmers, particularly in my area. They are the backbone of the countryside. We must help and encourage them in the same way that many smaller farmers are encouraged in Germany and France.

I wish my right hon. Friend the best of luck and good fortune in the further meetings that he will have in Brussels.

6.1 pm

Mr. Eric Deakins (Walthamstow)

I agree with much of what the hon. Member for Norfolk, South-West (Sir P. Hawkins) said, particularly his remarks about the contribution which farm workers make in agriculture, especially in his part of the country. He should have added that they are not well paid. One of the aims of agricultural policy should be to try to do more for them without at the same time necessarily giving all farmers higher wages.

I apologise to the Minister and to my hon. Friend the Member for Pontypridd (Mr. John) because I cannot be here for the wind-up speeches. I have a previously arranged outside engagement and must leave at about 6.30 pm. I hope that they will forgive me.

The motion assures us that the Government will ensure that we shall obtain an agreement consistent with the financial guideline. That is a matter of great importance, although it has not been considered in this afternoon's debate.

It would be difficult for us to know whether any agreement which emerges in Brussels will be within the financial guideline. Will the Minister give us some guidance on that? An anomaly goes on from year to year. We are dealing with farm prices in the agricultural marketing year 1985–86 but the financial guideline relates to decisions taken in 1985 which affect expenditure in 1986, the calendar year of the Community. On that ground alone it will be difficult to tell whether any final agreement in Brussels will be within the financial guideline, although we have the Government's assurance that the Commission's proposals come within that.

The new own resource legislation will come into effect on 1 January 1986. No doubt that will come before the House later this year. The own resources available to the Community next year will increase by 15 to 20 per cent. Out of that extra amount must come the cost of accession, and, in particular, the integrated Mediterranean programme which has not yet been agreed within the Community. That will still leave a certain increase for what is called ordinary agricultural expenditure on the present members of the Community whose prices we are debating this afternoon.

I do not understand—I hope that the Minister will give us some guidance — by how much, if the Commission's present proposals come within the present financial guidelines, those proposals could be increased and still remain within the financial guideline. There must be some limit. Are we talking about an extra 1 or 2 per cent. or 5 or 10 per cent? Can the Minister give us an idea? We must bear in mind that we are debating price proposals within the guideline, but the outturn in terms of agricultural expenditure could be well in excess of that. We shall have to watch that this year and in future years.

We have debated the problem of surpluses time and again in the House since the mid 1970s. It was a theme of the Minister's speech and that of my hon. Friend the Member for Pontypridd. Milk has created major problems of surplus production, intervention stocks and sales on world markets at knock-down prices at a fantastic cost to the CAP, the taxpayer and the consumer. Over several years price restraints on milk and milk products did not achieve their objective and suddenly quotas were introduced. As the hon. Member for Caithness and Sutherland (Mr. Maclennan) said, quotas were introduced suddenly and we should have prepared for them, but it is the principle that worries me.

In the circumstances of the CAP I tend to agree that quotas are a good idea, but why is the Minister so optimistic that we can get away with reducing cereal production without considering the need for quotas? He is optimistic. Cereal productivity has increased apace in the past decade or more under the impetus of higher prices in the Community and the investments that cereal producers, large and small, are putting into production—good luck to them—and will go on doing so.

One of the dilemmas of the CAP has always been that we cannot always control the volume of production by price incentives or disincentives. Farming is not like a factory where production can be turned off. It is not always based on economic incentives. There is such a thing as the farming way of life. There are many instances in the postwar history of British agriculture where producers whose whole production was relatively uneconomic have nevertheless gone on producing because of their addiction to the way of life. Who can blame them for that?

We should consider carefully whether a price cut in cereals in particular, which is what we are being offered and what the Minister is supporting and thinks should go further, will be a disincentive. My forecast, for what it is worth, is that it will not and that cereal production in 1985–86 — subject to the weather because obviously there may be a bad harvest—will continue to grow in the long term despite the price disincentive. Therefore, we should be prepared to consider other means.

Cereals are important and will form the crux of the arguments which the Minister will have in Brussels. Government policy on that is unclear. In parliamentary answers in the past week the Government have admitted that neither the Commission nor the Government are proposing that the Council should take any direct action on the volume of cereal production in the CAP. The Government's objective is a better balance, not merely between cereals and livestock, which has always been an objective of British agricultural policy, but a better balance in cereals, whatever that may mean. When I asked the Minister during Question Time last week whether the Government were in favour of an increase or decrease in cereal production in the Community he avoided giving a direct answer. I hope that we are in favour of a decrease in total cereal production because surpluses are getting larger and larger.

Even if all the Commission's price proposals are agreed by other members of the Council, they will be subject to green currency devaluations and revaluations which can make a tremendous difference. Moreover, we have heard from the Minister that there will be difficulties and that it is unlikely that they will be agreed in their present form. The notional prices in the Community as a whole for cereal production for next year are all well and good—perhaps there is a cut—but when we learn what the Commission is proposing on green currency devaluation for France, and appreciate, as Agra Europe has pointed out, that the effect of that green currency devaluation will be to increase the prices to French cereal producers by 1.9 per cent., no wonder the French are sitting back and saying, "Yes, we will accept the Commission price package". It is coupled with a green currency devaluation which will make life for French cereal producers, if not rosy, a lot better than for other countries in the European Community — and France is the largest cereal producer in the Community. That is another reason for our being concerned even about the present Commission price proposal.

As my hon. Friend the Member for Pontypridd said from the Opposition Front Bench, we have to consider the position of the United States. It will not necessarily affect cereal marketing in the coming year, although, if the dollar were to begin to slide, that could have an effect. My hon. Friend mentioned the United States farm Bill, which will make more surplus grain available from the United States for export to world markets at lower prices, with the cutting back of the Federal budget and the efforts to reduce the United States deficit, and so on. That is with a very strong dollar, which makes United States farm exports relatively uncompetitive in world markets. As hon. Members know, when a country has a very strong currency it is much more difficult for it to export, because the country's goods are so much more expensive for the rest of the world.

If in addition to the United States farm Bill— if it goes through—there is a weaker dollar, that will add even more to the pressures on the Community in regard to costs of disposal of surpluses, because it will be competing with much cheaper world prices which are in large part determined by American export prices. We have to consider that for this year and for the future.

Agra Europe has estimated that the extra cost of the common agricultural policy by 1988–89 could be as high as 1.5 billion ecu as a result of what the United States proposes to do this year.

My last point on cereals—it has not been mentioned in the debate so far—is that the Government and the Commission are looking favourably on the use of surplus cereals for other purposes. I refer to a recent answer by the Minister of State: The Government are always prepared to consider the merits of new uses for grain but we would have to be convinced that a project involving the conversion of grain into plastic or other non-food materials was viable."—[Official Report, 14 March 1985; Vol. 75, c.266.] In support, the Commission has proposed that there should be some investigation into the possibility of using cereals —the French have taken it up, as naturally they would —for conversion into starch, ethanol and chemicals Is not that disgraceful when there are millions of hungry and starving people in the world, particularly in sub-Saharan Africa? Yet here we are considering not making food available more cheaply to the rest of the world—there would be some argument for that—but continuing to produce surpluses, not to feed human beings but to turn them into industrial products.

Mr. Nigel Spearing (Newham, South)

Shame.

Mr. Deakins

We shall be paying for that, and at the same time other people in the world will be going hungry.

The Minister of State's answer could not have been off the cuff because it was a written answer, but I hope that he and his Department will at least reconsider the policy. I believe that there would be tremendous public objection throughout Britain if we were to subscribe to a policy which enabled cereals grown for human consumption to be turned into plastic, ethanol or some other non-food material.

I apologise again to the Minister for the fact that I shall not be present to hear his reply, but I shall read it with great interest. I hope that the debate will enable the Minister to approach his colleagues much more firmly next time so that we may have a full day's debate on a very important subject. We are dealing with between £1 billion and £2 billion of public expenditure from Britain in support for the CAP, the EC and all its works. It is wrong that we should be given only just over three hours in which to debate the matter.

6.15 pm

Mr. David Maclean (Penrith and The Border)

I add my congratulations to those already given to my right hon. Friend the Minister of Agriculture, Fisheries and Food not only on his remarks to this House but on the stance that he has taken in negotiations in Brussels.

My hon. Friend the Member for Norfolk, South-West (Sir P. Hawkins) congratulated the Opposition spokesman, the hon. Member for Pontypridd (Mr. John), on his remarks. I also found myself in agreement with the hon. Gentleman from time to time.

Like my right hon. Friend the Minister, I found the speech of the hon. Member for Caithness and Sutherland (Mr. Maclennan) clever. Indeed, it was a cunning speech. It reminded me of those exciting, interesting, but rather esoteric discussions that one used to have in the students' union at 2 am over innumerable cups of coffee on the subject of existence or "Am I really here?". I say to my right hon. Friend the Minister that by the time I sit down he will be in no doubt whatever about what to do concerning the price of milk or cereals. The hon. Member for Pontypridd touched on a wide range of subjects, with many exhortations to the Minister. It may have been my fault, but at times I was at a loss to know what specific point the hon. Gentleman was urging on my right hon. Friend.

I agreed with much of what was said by my hon. Friend the Member for Dumfries (Sir H. Monro). I think he said that it was the efficiency of farming that had brought us to our present problems. That is certainly the case. When I was a lad on the family farm, we were urged to expand and to produce more. Our whole mentality in the industry was that it was our moral duty to produce more from our land, and eventually to hand over good farms to our children and successors, so that they in turn would be able to produce more.

Mr. Maxwell-Hyslop

"Food From Our Own Resources."

Mr. Maclean

Yes, that may have been the slogan, but the attitude of mind to which I referred arose from the fact that during the war we were dependent on the convoys. There was a feeling in agriculture that never again should the British Isles have to depend on food from abroad, and that we should grow as much as we could. That attitude has continued through two generations in farming, and it is still present.

Now, suddenly, in 1985, we find ourselves in surplus in nearly every commodity. If we had not joined the European Community or if we had put the brakes on earlier, it might have been another two or three years before Britain was self-sufficient in dairy products — New Zealand produce is another factor — but in any event we were heading for self-sufficiency. We are self-sufficient in beef and we shall become self-sufficient in sheepmeat, especially if we continue our present expansion, as many farmers are doing. We must seize more export opportunities for sheepmeat. Marvellous things are being done, but we must maintain the pressure. Great quantities of sheepmeat are going into the middle east from Australia and New Zealand. We may soon have a surplus in sheepmeat.

We are now at a watershed in agricultural production, and I feel lost. I wish I could give guidance to farmers. Indeed, I wish I could give guidance to my brother on the family farm. I wish I were able to say, "This is what I think you should do over the next few years," but I cannot see the way ahead. I know that some things cannot continue. I know that we must have a subsidy system to support the small family farm. But if one has a small mixed arable and beef unit, with 70 acres of grain, the subsidy system which gives a cereal grower a reasonable, just and fair living gives to the man with 1,000 acres of grain a grossly inflated income. That is what has caused most of the cereal side of agriculture to get a very bad name in recent years.

My hon. Friend the Member for Dumfries complained that farmers are purported to have had a 14 per cent. increase in profits last year when the increase in the capital value of their land is added. That is like saying that hon. Members had a 15 per cent. increase last year because they had a 5 per cent. pay increase and house prices rose by 10 per cent. When we analyse farming income sector by sector, we find that the increase was caused by the grain farmers, who have had an exceptionally good time in the past few years, but it cannot and should not continue.

The Commission's proposals on surpluses are gutless. There should have been an 8 per cent. cut because of the market last year, but it did not ask for that. It could have cut the maximum allowed under the rules by 5 per cent., but it settled for 3.6 per cent. The NFU says that producers need time to adapt to lower prices, but farmers did not need time to adapt to higher prices on the way up. What is good enough on the way up should be good enough on the way down.

We all know that cereal prices are causing distortion in the market. Some of my hon. Friends might not like what I am saying, but they will be left in no doubt of my feelings. Many of my constituents wish that they had 1,000-acre grain farms. In my constituency I have five times the national average of dairy farmers and livestock producers. They, the few poultry producers in my constituency and the few pig producers that are left, together with the beef producers, want lower cereal prices.

A few weeks ago I saw one of the Sunday farming programmes. It may have been the Border Television station Tyne Tees, or it may have been the BBC. Mr. Rowan Cherrington was interviewed on lower input farming. He was asked how big a cut would be needed in cereal prices before it would drastically reduce the surpluses, or before farmers would say, "This is all too much. I am getting out of cereals or cutting down." He replied that it would take a cut of about 30 per cent. before there was any serious difference.

Sir Paul Hawkins

Cherrington always makes funny remarks.

Mr. Maclean

I was naive enough to believe his reply.

If we have evidence to the contrary—that a 10 per cent. cut in cereal prices would solve the problem—let us hear it. However, does any hon. Member believe that a 3.6 per cent. decrease in cereal prices will cure the surpluses? There is no way that it will. That is why we hear demands for quotas. I am gravely suspicious about talk of quotas in cereal production. I am afraid that we would end up with a quota system that might take 10 or 15 per cent. of land out of production, but farmers would then pile on the concentrate, and, with the new grain strains, produce every bit as much as before. The product would be pegged at a price that would be too high, and with the remaining land they would go into beef production and we would end up with beef in Norfolk once again. I do not mind that, provided that it does not destroy the living of my beef farmers in Cumbria. That is what it is all about.

Sir Paul Hawkins

There is much better beef in Norfolk.

Mr Maclean

I regret that my hon. Friend the Member for Norfolk, South-West has been to Scotland only once. All good Border men and Scotsmen came south for their cattle and their women, in that order. As a good Border man, I assure my hon. Friend that if he comes to Cumbria he will find not only food cooks and women, but, more importantly, the best stockmanship in the country.

My right hon. Friend is right to argue for a price freeze in milk. It gets me no votes in my constituency to say this, but there is no doubt about it. Even quotas have not solved the problem of surpluses. Much as I should like to say to my dairy farmers, "Here is a bit more, because it has been tough over the past few years," I could not put my hand on my heart and justify a price increase in milk. We are now seeing reports in the press that there has been an increase of 17 per cent. in gross margins over concentrates. We are beginning to see what my right hon. Friend said would happen. Although quotas were rushed in, things have settled down. Farmers are beginning to plan, to adjust and to change their inputs to live with the quota system.

I know that many farmers have shown incredible hostility to the quotas, but they were necessary and had to come. I was critical of my right hon. Friend because of the speed with which he introduced quotas. However, it is interesting to note that I now find many farmers who are saying that it is not as bad as they thought it might be, and they feel that they can live within the system. Now we must have the flexibility in all of it that my right hon. Friend has brought to some parts of it.

My right hon. Friend has been good in getting the transferability quotas and in working hard on leasing, but I agree with my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) that some hard cases are not covered by the quota legislation, or, if they are, they are being misinterpreted. Farmers will not be able to afford to go to the High Court, so the only solution will be to find a quota from some other source. We shall have to examine the matter again and keep the tribunals open for another year. We shall have to look at it again and find a little more quota from another source to deal with such people.

In my constituency some farmers, who have been on a development scheme, intended to go into milk production later this year. They went to their tribunal and were asked how many cows they would be milking on 1 April. When they said, "None", they were allocated no quota. Other farmers took the advice and played cautious. They were on a development scheme to go up to 60 cows, which is about the minimum viability level—one is not a big farmer at that level—but they played cautious and had about 40 cows. They did not want to expand because they were not sure about the effect of quotas. When their neighbour, who bought all the cows that were going at a cheap price a few months ago when there was uncertainty in the market, was asked the magic question, "How many cows will you be milking on 1 April?", he was allowed a quota of all that he wanted, minus 9 per cent. But the person with 40 cows had to cut production even on that level. We must redress that injustice.

Let us get rid of the co-responsibility levy. There is no longer any case for it. As for the super-levy, I should like my right hon. Friend to say that it will be assessed and collected, if it is to be collected next year, on an annual, not a quarterly, basis. Many dairy farmers are way over in the first two quarters, frantically have to adjust, and may have to pay the super-levy. However, in the third and fourth quarters they may be under, and, at the end of the year as a whole, they may be in balance or even under the level. It would be unfair if they were clobbered because they are making adjustments. Let us average out the whole thing.

The Commission's proposals for lamb would reduce the benefits available to Great Britain under the lamb regime. There is no doubt that they would discriminate severely against British producers. The proposed limitation of the variable premium is acceptable only if there is also a change in the seasonal price scale. That has to be changed to reflect British marketing patterns, if the revenue lost through the cut-off in the weekly variable premium is to be taken into account in determining the annual new premium.

There is no doubt that every hon. Member, and even the hon. Member for Caithness and Sutherland, feels that the beef premium scheme must remain. We all acknowledge that the United Kingdom is out on a limb on this one. The United Kingdom seems to be the only country arguing for the system, because the Europeans do not like it, but we all know that it is eminently sensible. It puts the best bits of beef down the throats and into the stomachs of the housewife and her family, and that is where it should be. The prime cuts of beef should not be stuck into intervention.

My hon. Friend the Member for Norfolk, South-West spoke about the success of British agriculture. I saw a slogan on the rear window of a young farmer's car in Cumbria, a slogan that all hon. Members should remember. It said, "Don't criticise British farmers with your mouth full." Other countries have to queue for grisly scraps of meat, but we have some of the best beef. Let us keep the variable beef premium scheme and make sure that beef is eaten.

What can my right hon. Friend do in Brussels? How can he keep the scheme? He should not make any concessions on milk, except possibly to permit a small price increase. I should like to see a freeze in prices, but as a fall-back position, to keep the beef variable premium, I should concede a small price increase in milk. We cannot make any concessions on lamb or sheep. We must demand a larger cut in cereal prices. I should concede only the 3.6 per cent. reduction, if we must do that, to keep the beef variable premium scheme. If we go in threatening that we want a bigger cut in cereal prices, that may be the quid pro quo for keeping the beef variable premium. I hope that my hon. Friend the Minister of State will say that that may form part of his negotiating stance.

6.30 pm

Mr. Nigel Spearing (Newham, South)

I rise just in time to speed my hon. Friend the Member for Walthamstow (Mr. Deakins) on his way out of the Chamber with the bad news that for some years millions of pounds of British taxpayers' money have gone into converting British grain into starch for chemical feedstock. My hon. Friend's fears are not only well founded; unfortunately, they are already to be seen in fact.

I am glad that we have heard from hon. Members who represent Norfolk constituencies. I want particularly to take up one remark by the hon. Member for Norfolk, South-West (Sir P. Hawkins) about family farms. It appears that the EEC is incapable of providing the policies for which it is ostensibly in being. I thought that it was the very objective of keeping people on the land that was one of the reasons for having a common policy.

The hon. Gentleman also dealt with another important topic, bearing in mind that Halvergate marshes are in that county. It concerns conservation. The hon. Gentleman was a little hard on some people because today we have a system of high inputs and high outputs and, if maximum profits are based upon such a system, land values are related to that system of farming.

We need a system of farming of reasonable or medium inputs and reasonable and medium outputs which both provides the farmer with a reasonable margin on which to live and at the same time is good husbandry so that our farms can be passed on in good heart to those who come afterwards.

I put it to the House and especially to hon. Members representing Norfolk constituencies that that is not happening. The common agricultural policy neither encourages it nor permits it.

Mr. Teddy Taylor (Southend, East)

Will the hon. Gentleman give way?

Mr. Spearing

I regret very much that I cannot give way. The Government have chosen to devote only half a day to this debate, and I have only four or five minutes left to me.

It is neither right nor proper to debate the price mechanism for British agriculture in three hours. It is disgraceful. The Leader of the House and the Government have been criticised heavily about their parliamentary timetable and their attitude to Parliament. This debate is a prime example of the way in which they treat hon. Members and of their apparent contempt for agriculture. I appreciate that we have had only three hours or so in the past three years, but I do not feel that this is an adequate way to treat the House.

The Parliamentary Under-Secretary of State was good enough to appear before the Select Committee on European Legislation, of which I happen to be the Chairman. The hon. Gentleman gave us an hour of his time last week. As a result, we have produced not a "Gone with the Wind" volume and not a 100 page memorandum, but we have tried to present a 22-page summary, which is in the Vote Office and will be published as House of Commons Paper 5/XIV in due course, of the whole of these difficult negotiations.

Let us be under no illusion. Unlike tomorrow, when the House will be invited to decide on a system of taxation, and unlike the Estimates on a system of expenditure, the House has lost control of British agriculture. We do not know what the prices will be. There will be no real estimate of the expenditure, although it is in a notional budget. Even the Commission's best efforts are only estimates. We do not know the price level. All that we know from what the Under-Secretary told us last week is that the likelihood is that the Council will decide on price scales which are higher than those that the Commission has proposed. That is bad news for the British taxpayer, even though it may be preferred by some other members of the Community.

Contrary to the Government's wishes, and contrary to the terms of the motion, the Under-Secretary will not be able to get what he wants. He may not even be able to salvage what the hon. Member for Tiverton (Mr. Maxwell-Hyslop) wanted him in logic to salvage—the beef premium.

Life in the EEC does not work like that. It is package bargaining all the time. A lot of people foresaw it, hence the speech and the interventions by the hon. Member for Dorset, West (Mr. Spicer) which, welcome though they may be, echo some of our remarks 10 years ago. I welcome the hon. Gentleman to the club.

I take up a point made by my hon. Friend the Member for Walthamstow, which was also touched upon during the Select Committee's proceedings, about the prospects for the control of agricultural expenditure. I am sure that the Under-Secretary will agree that the so-called mechanism will not be assessable until this debate two years hence, in March 1987, for the reasons that my hon. Friend the Member for Walthamstow and I gave the other day during Question Time.

Secondly, this agricultural disciplinary mechanism, of which there was talk at Fontainebleau, is applicable only in respect of the guarantee scheme. It does not include guidance money which may be given out in some form of compensation.

Thirdly, we do not know whether the mechanism will work at all because it is not obligatory and it is not written into the legislation. It is only a conclusion and a desire of members of the Council.

Fourthly, the base from which the mechanism is to be started is the average of prices in 1984 and 1985. Therefore, there is every incentive for other members of the Community which do not agree with the Government's point of view to up prices in 1985 so that the threshold from which we start is higher than it would be otherwise.

I fear from the examination of the Under-Secretary by the Select Committee and from the contents of its report that there is naught for our comfort and naught for our desire in the prospects for this agricultural price round, which is outside the control of the House. The Minister of Agriculture may be a tiller of the soil, but his hand is not on the tiller because the House has no rudder on its agricultural ship.

Mr. Deputy Speaker (Sir Paul Dean)

Mr. John Home Robertson.

Mr. McQuarrie

On a point of order, Mr. Deputy Speaker. You will recall that earlier today we had a private notice question after Question Time which took up half an hour of the time of the House. This debate was supposed to continue until seven o'clock. It has been reduced by that half hour. I seek your guidance—

Mr. Deputy Speaker

Order. I understand the hon. Gentleman's point. We are governed by a decision made by the House some time ago that this debate should end at seven o'clock. I am afraid that there is no question of injury time.

6.38 pm

Mr. John Home Robertson (East Lothian)

I am sorry that my hon. Friend the Member for Newham, South (Mr. Spearing) has had to cut short his speech. We all know what a deep interest he takes in these affairs, and I have no doubt that he could have enlightened our proceedings considerably more than the limited time available to him enabled him to do.

We have had an interesting debate on the farm price proposals. As my hon. Friend the Member for Pontypridd (Mr. John) said, the documents are physically weighty — to be precise, 1.6 kilos. They cover everything from sunflower seeds to silk worms. This mass of detail cannot conceal the failure of the Council of Ministers to address itself to the scale of the problem which the CAP has generated. I rather doubt whether mere amendments to the policy will ever succeed in achieving the policy's stated objective of protecting both consumers and producers.

The hapless Commissioner, Mr. Frans Andriessen, looks rather like the Dutch equivalent of the sorcerer's apprentice about to be overwhelmed by the surpluses being generated by the common agricultural policy, which are massive. The Parliamentary Under-Secretary of State should know that even in British terms we are set to have a carry-over of about 3 million tonnes of wheat in intervention stores into the next crop year—wheat which was harvested in 1984 and which will still be in intervention stores after the harvest of 1985. That is a sign of the scale of the problem.

The difficulty with the CAP is that it is paying too much cash to the wrong farmers for producing too much of the wrong food. The original intention was to support the incomes of smaller farmers. I suppose that it is predictable that an indiscriminate high-price intervention system has created a disproportionate incentive for bigger producers and perverse penalties for consumers. The result is a grotesquely distorted agriculture industry. We have farmers growing for intervention rather than for a market. We also have excessive food prices for consumers, and there is still a continuing struggle to survive in the so-called less-favoured areas. The CAP appears to be failing on practically all counts.

The debate has demonstrated growing despair on all sides about the basic concept of the CAP. It is time that we thought of more constructive and positive ways of supporting rural areas and agricultural enterprises which need to be sustained in order to protect Britain's rural economy. It is worth remembering that some farming areas already face a crisis. It has been drawn to my attention that even now in Scotland the net farm income for the current year is likely to be about £141 million, while bank borrowings for farmers in Scotland stand at £870 million. Thus, it is not surprising that, despite all the money supposedly thrown at the industry, some people face bankruptcy in certain sectors.

I wish to mention some specific commodities, starting with cereals. As has been repeatedly said, we have 30 per cent. too much grain in the EC. On the one hand, the Commission proposes a 3.6 per cent. net cut in prices for cereal producers, and, on the other, the Minister suggests that there should be a 5 per cent. cut. However, both of those proposals would have only a minimal impact on the level of cereal production in the EC. Tinkering with prices will not solve the major problems. The minor adjustments which the Minister or the Commission suggests would not be sufficient to encourage a significant rise in consumption or to deter effectively the increase in production.

It is too late anyway to do anything about surpluses in 1985–86, because the crops have already been planted. But even for the future, minor price cuts will probably stimulate extra production as farmers try to maintain income by boosting production. In that sense, I disagreed with my hon. Friend the Member for Edinburgh, East (Mr. Strang), who referred to the possibility of quotas.

It would take absolutely savage price cuts to have a significant impact on cereal production. Indeed, I think that that was the point made by the hon. Member for Penrith and The Border (Mr. Maclean). Such cuts would lead to bankruptcies among many small farmers, and that sort of measure would be politically intolerable for any party.

When I hear the Minister going on about price restraint I cannot help thinking that I have heard some of the arguments before. Only a year ago, the same Minister said the same things about milk. Perhaps we are going full circle, because the NFU and the farming press now publicly canvass the idea of quotas for cereal production. Quotas could be a fairer mechanism for controlling cereal production, because they can protect the interests of the smaller growers. The concept of quotas has, however, been given a bad name, probably because of the shambles that the milk sector has been suffering from for the past 12 months, largely due to the Minister's hasty introduction of quotas.

But with that in mind, I sincerely hope that the Minister will at least consult the industry about contingency plans for cereal quotas. Incidentally, before we all go overboard about cereal surpluses, we should pay heed to the fact that some areas would dearly love to have the volume of surpluses that Europe has. I hope that the Commission will do more about exporting some of them to areas that desperately need them, such as sub-Saharan Africa.

I shall deal briefly with beef and sheep. The variable premiums must be retained. They are good for consumers and producers, and scrapping them would simply put 7p a pound on the price of meat for consumers. There is nothing to be gained from doing that. I agree with all those who have referred to this issue. The Minister must ensure that the premiums are retained.

The Minister already knows what we think about the way in which he has handled the dairy sector in recent years. He has been stampeded into a quota system that has discriminated unfairly against British farmers, and which falls miles short of the objective of bringing dairy production into line with demand — about 12 million tonnes of milk short per year. National quotas will presumably have to be revised downwards sooner or later in order to get surpluses down to a strategically sensible level. But the House must make it clear that British dairy farmers have already borne more than their fair share of last year's cuts. We must demand that other nations bear an appropriate share of the next round of cuts, whenever they come.

The quota system and the super-levy give us ample power to control production, and I agree with all those who have said that the co-responsibility levy should be scrapped. There is no need for it, in addition to the other measures that are available to the Minister. The Minister should be familiar with our views about how the quota system should be made to operate more flexibly and fairly. At this stage, my only observation is that British dairymen have taken a hammering over the past year, and our objective should be to ensure that dairy farmers can make a reasonable return from producing milk within their quota restrictions, in so far as that is compatible with the interests of consumers.

Farming organisations are deeply concerned about the Government's lack of leadership. We know that the Government's main objective in life is to cut public expenditure, and they are doing that in relation to national support for agriculture and things such as agricultural research. We also know that the Government have no positive strategy to sustain the British rural economy. They must stand condemned for that. I wholeheartedly support the call of my hon. Friend the Member for Pontypridd for a White Paper on British agricultural policy. It has been too long since my right hon. Friend the Member for Lewisham, Deptford (Mr. Silkin) published the last White Paper on that subject.

This package will not achieve any radical change. Inasmuch as the Minister says that he is prepared to fight for effective controls on production while defending the special British interests, we support him. However, his performance in opening the debate did not inspire great confidence—[Interruption]. I listened carefully to what he said and on no fewer than four occasions he said that he would give way just one more time. On the fifth occasion, when the hon. Member for Tiverton (Mr. Maxwell-Hyslop) stood up, he threw up his hands in despair and said that it was a lost cause.

Sir Richard Butler has said that the Minister is ineffective and inept. I sincerely hope that the Minister will prove that judgment wrong in the coming negotiations. The British housewife, British farmers and the British taxpayer depend on his ability to get a fair settlement.

6.47 pm

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

The debate may have been relatively short, but it has been very constructive and thoughtful, and much has flowed from it. The tone was set by the speech of the hon. Member for Pontypridd (Mr. John), which was positive and reflective in its analysis. However, the tone of the debate was slightly let down towards the end of the speech of the hon. Member for East Lothian (Mr. Home Robertson). The example that he chose to show a lack of determination on the part of my right hon. Friend the Minister was both trivial and far from the point.

The debate has also been marked by a recognition in all parts of the House, perhaps for the first time in such debates, that we face a new situation because of the arrival of persistent surpluses in a considerable number of products. They are the result of what my hon. Friend the Member for Dumfries (Sir H. Monro) rightly called a great success story. In that sense, it has been a realistic debate, with the exception of the contribution of the hon. Member for Caithness and Sutherland (Mr. Maclennan). As so often happens with the alliance, he tried to make his speech appeal to all outside interest groups without facing up to the critical policy decisions. It was a cunning speech, but I think that the House saw through it and I hope that others will. He failed to say precisely what the alliance would propose on prices, yet that is what we were looking for. He knew that it would mean difficult decisions, but he was not prepared to face up to that.

Mr. Maclennan

Read the record.

Mr. MacGregor

I shall read the record, but I heard what the hon. Gentleman said.

I was anxious to let hon. Members speak in the debate, so I have had to cut short my speech. Consequently, I shall have to concentrate on only a few of the main points raised, which involved the cereal, milk and beef sectors. I have taken note of what has been said about all the other matters to which I do not have time to refer.

The cereal sector is at the heart of this year's negotiations. The projected expenditure in the cereals sector is running at a high level, although nothing like as high as in the milk and dairy produce sector. The latest Commission estimate for the 1985 calendar year is about £1,420 million, with the possibility, depending on what happens to the dollar, of a further increase. The estimates suggest that that could mean a further 700 mecu to 1,000 mecu, depending on what is included, for every 10 per cent. weakening of the dollar. We do not know if and when that will happen, but it is a possibility about which we must be fearful. It is right to concentrate on that sector, not only because of that, but because of the importance of achieving an even better balance between the livestock and cereal sectors.

Hon. Members have commented on our approach this year and urged further restraint on prices than that proposed by the Commission. There are a number of reasons why it is right for the Government to take their present line on prices rather than the alternatives. First, the proposal is on the table and it is likely to be negotiated this year. Secondly, price restraint linked to the guarantee threshold, if properly applied, can be effective. The House should not underestimate its effects.

We are not talking about the price support level alone. A 1 per cent. cut was made at last year's price fixing. We are urging a 5 per cent. cut this year and the Commission is proposing a cut of 3.6 per cent. In addition, if harvests follow their present trend for a number of years, the guarantee threshold will bring about further reductions.

The delay in intervention payments introduced at the beginning of 1984 cut prices by about £5 per tonne. The reductions in the premium for the intervention buying of bread-making wheat and the 3 million tonnes quota for that type of intervention in 1984, followed by this year's proposal almost to eliminate intervention for bread-making wheat, will also have their significant effect.

We are talking about significant reductions in support prices in real terms after taking account of inflation. The National Farmers Union, in the memorandum that it sent to hon. Members in advance of today's debate, said that the Commission's proposals would reduce cereal prices by over 4 per cent. in nominal terms. Such a cut, following last year's price reduction and changes in intervention payment arrangements, will substantially reduce producers' returns and discourage production. The scheme must be rigorously applied over a period of years. If it is not, we shall have to face more disruptive and less attractive alternatives. We have done our homework on all the alternatives so that we are prepared for any future debate. That work points out the real disadvantages of such alternatives as quotas in the cereal sector. The current favourite among those who are looking for alternatives is the co-responsibility levy, to which so many hon. Members have objected today in relation to milk. That is the alternative that is most likely to be put forward. I believe that we are right in this year's price negotiations to take the line that we are taking on the reduction in support prices.

The hon. Member for Pontypridd asked whether the Commission had made any estimate of the likely production under the 3.6 per cent. proposal. Such calculations involve many imponderables, not least the forthcoming harvest. I am not aware of any precise estimates by the Commission. We shall certainly discuss that in relation to our position.

The milk price review for this year attracted attention to concentration on the co-responsibility levy. My hon. Friend the Member for Dorset, West (Mr. Spicer) referred to this and many other hon. Members urged that the co-responsibility levy be abolished. My hon. Friend the Member for Dorset, West asked what effect it was having. The levy still produces funds of about £380 million, or 530 mecu. The key programmes, in order of expenditure, are milk powder stock-feed, the use of butter in ice cream and pastries, the school milk scheme and publicity and promotion within the Community. If the co-responsibility levy disappeared this year, those programmes would disappear, or alternative means of financing them would have to be found—or a combination of both.

We certainly want the co-responsibility levy to be phased out, although other member states do not. Some other way would then have to be found of financing such measures or of achieving savings. I am aware of the feelings in the House and the agriculture industry about the co-responsibility levy. We share those feelings because it is clear that the levy has not reduced production.

My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) referred to what my right hon. Friend the Minister said on 2 April. I wish that I had more time to go into the details and the background. My right hon. Friend never suggested that there was a direct trade-off between increased Irish milk production and the beef premium scheme. What happened was much more complicated than that. Many other things were of benefit to us as well as the beef variable premium scheme.

At the ultimate stage of negotiations, if we had voted against the increase in milk quotas to southern Ireland—which we opposed throughout, but which other member states supported — we should not have defeated the proposal. However, we should have lost the beef variable premium scheme because no one else would have supported that.

My hon. Friend the Member for Tiverton also asked about the costs of judicial reviews. I have taken note of what he said, and I shall reflect on it.

My hon. Friend the Member for Dumfries urged that we should consider other hard-pressed areas, in relation to the quota system, which are not at present taken care of by the tribunals. We hope to make an announcement soon about secondary quotas this year as the tribunals reach the end of their work, and about money for the outgoers scheme. Our declared aim is to help the small producers next year and the exceptional hardship cases through the outgoers scheme. We shall then have to consier what scope we have to help others, and how to allocate that help. We have been keeping a list of the cases that current regulations exclude. I cannot make any promises, but we shall be examining that aspect.

From all sides a call has been made for the retention of the beef variable premium scheme. We have made it clear, and we shall do so in the negotiations, that retention is the United Kingdom's wish. Several speeches have emphasised the argument that we have constantly used about the scheme.

Regret has been expressed that the scheme has to be renewed annually. We have been urged to make the scheme more permanent. The hon. Member for Caithness and Sutherland mentioned this. His Government and that of the hon. Member for Edinburgh, East (Mr. Strang) negotiated that annual renewal originally. I do not know whether there were difficulties, but it is more difficult to negotiate a permanent retention once the original decision has been taken.

I regret that it has not been possible to answer all hon. Members. We have heard interesting comments on what the Government should be doing in the current negotiations. I warn the House that they will not be easy. There are already signs that some member states are losing sight of market and financial realities. It is extremely helpful to know that in taking the line outlined by my right hon. Friend we are carrying with us a surprisingly wide spectrum of views in the House, coming from quarters that do not usually agree. However, on this occasion they have agreed with us, and have given us support in what we are seeking to achieve.

Question put and agreed to.

Resolved, That this House takes note of European Community Documents Nos. 4582/85, including Addenda I, II and corrigendum and III, No. 4637/85 on the situation of the agricultural markets in 1984, No. 6248/84 on the designation of milk and milk products, No. 11172/84 on the production refunds for starch, and the Ministry of Agriculture, Fisheries and Food's unnumbered explanatory memorandum of 16th July 1984 on the payment of an additional national aid to German farmers; and supports the Government's intention to seek an agreement on 1985–86 farm support prices and related measures which builds on the success achieved in 1984 in introducing greater realism into the operation of the Common Agricultural Policy, is consistent with the financial guideline for agriculture, maintains a policy of price restraint in the Common Agricultural Policy, avoids discrimination against United Kingdom interests, and takes account of the interests of United Kingdom producers, consumers, traders and food processors.