Common Agricultural Policy

HC Deb 10 March 1986 vol 93 cc677-760

4.6 pm

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

I beg to move,

That this House takes note of European Community Documents Nos. 4963/86 including Addenda 1 to 5, 10174/85, 4075/86, 8480/85, 5098/86, 10492/85, 4130/86 and 4150/86; and supports the Government's intention to seek an agreement on 1986–87 farm support prices and related measures, including a Community Milk Outgoers Scheme, which maintains the process of reform, and, in particular, which tackles the problems of surpluses and costs in the Common Agricultural Policy, which makes the policy more market-orientated and which does not unfairly disadvantage the United Kingdom, taking account of the interests of British agriculture and its associated industries, of consumers and of taxpayers. I am pleased that this year we are able to have a full day's debate on the farm price proposals. They are important proposals and it is useful to have this debate early in the negotiations so that we can take full account of the views of the House.

I know that there is the disadvantage that the proposals have been available for only a short time, but I hope that this will not cause excessive problems of difficulties.

The background to the Commission's price proposals for 1986–87 is important and I shall remind the House of it. Last year the Commission set in hand a wide-ranging review of the common agricultural policy by issuing a green paper called "Perspectives for the CAP". This looked at the policy in the context of production and markets for commodities and examined wider issues, including some environmental and related matters.

Fundamental to the green paper was the need to get markets into better balance and the wider implications that such a policy would have. During the autumn the Commission issued two memoranda on beef and cereals and finally in December a document setting out its conclusions on this debate. It identified a number of priorities, in particular: first, the need to reduce production of surplus commodities and so alleviate the budgetary burden; secondly, the need to diversify, and to improve quality; thirdly, the need to sustain rural structure and to safeguard the environment; fourthly, the need to contribute to the development of agriculturally based industries and to enable agriculture to advance technically. These are broadly the priorities which we support, but they also included as a priority the need to deal with the income problems of small and family farms, an issue to which I shall be returning later.

At present, the Commission has not made proposals on the structural or environmental issues. These will be important and the Agriculture Commissioner has said that a socio-structural package is being urgently prepared. It is likely to include proposals for early retirement, for taking land out of production, for forestry and for compensating farmers who use environmentally sensitive methods. The Commission sees this as forming an important counterpart to the tough measures proposed on farm prices. The House will wish to note their relevance and I am sure will want to consider them as soon as they are available.

The Commission's farm price proposals issued last month provide the specific measures to implement some of the major ideas emerging from the perspectives exercise. The main features of the proposals are a price freeze for the major commodities and substantial measures affecting intervention and other aspects of support.

Although the overall effect of the proposals is tough, against the background of massive surpluses and growing budgetary costs they are not a fully appropriate response to the problems we face. In its green paper the Commission stressed the importance of a long-term price policy rigorous enough to have a real effect on production. The proposal for a price freeze falls well short of the needs of the situation. While we strongly support the Commission's determination to have a process of reform, there are important aspects where they have fallen short.

The sector which demands major action urgently is cereals. For this, as in other sectors, price policy needs to be central to the Community's strategy. The simplest way is through the level of the support price itself. This is the way that appeals to me: it gives the clearest signals to farmers and traders—especially if maintained over a number of years; it reduces the cost of support and costs to consumers and it avoids discrimination. But last year Germany refused to agree price cuts and the Commission has chosen to follow another approach this year.

The Commission's proposal is a complex package of measures, some of which fall within its own competence through management committee procedure. The effect is that, while intervention prices for the main grains would be frozen at this season's levels, the overall value of support would be substantially reduced for many producers.

There are three key elements. First, in order to qualify for intervention at the full price, grain would have to meet a tighter quality specification, and tougher discounts would be applied to grain not meeting specification. Secondly, intervention would be available only between December and April rather than throughout the year. Thirdly, a co-responsibility levy would be charged on all grain sold off farms, subject to a rebate on up to 25 tonnes.

Sir Geoffrey Johnson Smith (Wealden)

Does my right hon. Friend agree that the co-responsibility levy, apart from its impracticability, puts in jeopardy any serious introduction or consideration of a set-aside scheme, which is surely a far better, fairer and more practical way to ensure correct production levels?

Mr. Jopling

I agree with a good deal of what my hon. Friend says, although I do not think that it would be impossible for a co-responsibility levy to run side by side with a set-aside scheme, but perhaps I could come to that later in my speech.

The combined effect of the package could be to cut by 10 or 11 per cent. the price paid on delivery into intervention for the lowest quality wheat or barley which is still acceptable.

Mr. Brynmor John (Pontypridd)

The Commission certainly does not agree with the Minister, as it says in paragraph 18 of document 8480/85: set-aside or land diversion is judged to be expensive and difficult to administer. That shows that the Commission does not favour such a scheme.

Mr. Jopling

We are told that the Commission is currently working on the possibility of a set-aside element in the cereals package for the future.

I am under no illusions about the effect that a series of measures of this kind would have on the arable sector in this country, following all the problems of the 1985 harvest, but the Council has ignored the problems of the cereals sector for too long and strong measures are called for.

Some of the particular measures proposed by the Commission are, in my view, misconceived. First, any co-responsibility levy is objectionable because of the administrative problems that it raises, because it reduces returns to producers without doing anything to reduce prices to consumers or exporters, and because it weakens the incentive for policy to respond to financial pressure.

In addition, the current proposal is illogical and discriminates fiercely against the United Kingdom. All grain contributes to the surplus, so it is illogical to charge a levy only on sales. Discrimination arises because the proportion of grain sold off our farms is much higher than the Community average, and because our farms are on average much larger. Taken together, those factors mean that about three-quarters of our cereal production would bear the levy, compared with about half for the Community as a whole. We could not accept a co-responsibility levy with those features. Instead of a 3 per cent. co-responsibility levy I shall be arguing that a price cut of 3 per cent. would make better sense. It would avoid the administrative and discriminatory objections to the Commission's proposal, and it would reduce prices to consumers, including the livestock sector.

There is much to commend in other parts of the cereals proposals. The approach on quality standards—that lower quality grain should be supported at a lower price—is right, and I support the proposal to make intervention play a less crucial role in the market by limiting its operation to any part of the marketing year. I also welcome the proposed elimination of a number of costly elements in the regime, such as the high support level for durum wheat.

Mr. John Carlisle (Luton, North)

Is my right hon. Friend satisfied that, with a fiercer and better quality intervention scheme, other member states would play the same rules as we do? Is he not worried that intervention grain that would not be passed here would be passed in other countries because of their lower standards of quality examination?

Mr. Jopling

I have a good deal of sympathy with that comment. Perhaps I could return to it at a later stage in my speech.

We shall be seeking changes in those elements of quality standards which would artificially distort support levels because they use criteria which have no place in the real market for grain within or outside the Community. That is important, in view of what my hon. Friend the Member for Luton, North (Mr. Carlisle) has said.

The Commission has reiterated its opposition to cereal quotas and I support it in that. It cannot make sense for the United Kingdom to advocate quotas, which would tend to ossify production patterns, when our industry has achieved so much through dynamic change. Quotas are not the soft option that many seem to believe them to be. To be effective, they would need to involve immediate very marked cuts in production or acreage. These would need to be intensified progressively as yields continued to increase. They would be no less painful for many British farmers than action on the level of prices and would reduce their scope to exploit their competitive advantages.

I am open to examining new measures in the cereals sector, but these must be designed to assist the implementation of the restrictive price policy that we are seeking. I have taken the initiative in calling for an examination of a Community set-aside system for cereals. Together with price cuts and sensible quality and intervention measures that could provide a worthwhile package enabling the Community to make real progress in tackling the cereals sector.

Mr. Douglas Hogg (Grantham)

I am glad to hear of the package that my right hon. Friend intends to bring forward, but will he clarify whether the set-aside aspect will be effectively a voluntary buy-out scheme or whether it will be compulsory?

Mr. Jopling

I said at the annual meeting of the National Farmers Union a few weeks ago—perhaps I should have said it again today—that I am thinking in terms of a voluntary scheme which might operate on a Community basis for people to divert to land uses other than cereal production.

Mr. Ralph Howell (Norfolk, North)

Will my right hon. Friend keep an open mind on the set-aside question and consider the advantages of a compulsory scheme which would do away with all the problems, tribunals, and so on that we have experienced in relation to milk?

Does my right hon. Friend accept that there is a contradiction between calling for a reduction in price as well as for a set-aside system? Surely a reduction in price will lead producers to try to increase production so as to maintain their income?

Mr. Jopling

My hon. Friend invites me to keep an open mind. In the face of his continual constructive and helpful thoughts about quotas, set-asides, price arrangements, and so on, one has no option but to have an open mind. In dealing with all my hon. Friend's good ideas, I certainly have an open mind, although I do not see the contradiction to which my hon. Friend refers. But perhaps we could discuss that on a future occasion.

Mr. Edward Leigh (Gainsborough and Horncastle)

Does my right hon. Friend agree that a compulsory set-aside system would be nonsense and would discriminate against the fertile east midlands because it is much easier to set aside 30 acres in the west country than it is in the east midlands?

Mr. Jopling

I have been around far too long to put my head in that noose. I think that my hon. Friends the Members for Gainsborough and Horncastle (Mr. Leigh) and for Norfolk, North (Mr. Howell) should get together and sort their act out.

There is a need for a major reappraisal of support policy for beef. That is clearly a part of the Commission's proposals. We must take account of the fact that beef is a cyclical commodity. The regime must support producers through the worst of the cycle, especially when much of the difficulty in the sector has resulted from measures taken to control the milk surplus.

The Commission proposes to freeze the support price. More important, intervention would be increasingly limited between now and December 1987. After that it would be held in reserve, for use only at times of serious market disturbance.

Intevention is not an ideal form of support for beef. Beef loses much of its value once frozen, and costs of storage are high. We support the case for a shift away from intervention, but we need to be clearer what the Commission is planning, including the circumstances in which intervention could be reintroduced after December 1987.

On premiums, the Commission proposes immediate replacement of the existing premium schemes, including the beef variable premium scheme, by a single premium. This would comprise two elements: first a basic cattle premium payable on animals over six months of age excluding those on dairy farms; and second, a suckler cow premium, broadly continuing the present arrangements at a slightly enhanced rate of aid.

I am glad to see the continued provision for assistance to the suckler herd. The proposal for the basic premium has, however, a number of unattractive features; in particular, payment would be limited to 50 head in any one herd. Such a restriction would bear heavily on this country, where average head size is greater than elsewhere in the Community. I have already made clear our objections to this in the strongest terms. The basic premium is also open to the criticism that it is payable at a flat rate, irrespective of market circumstances.

Mr. Tony Baldry (Banbury)

Will my right hon. Friend make it clear to the Commission that, whether one is dealing with the headage of beef herds or taking cereal tonnage off farms, no proposals will work unless they are seen to be fair? They must be fair between Community countries. If they are not seen to be fair they will not work.

Mr. Jopling

I am glad that my hon. Friend has made that point. It is a point I shall come back to because it is one of our most important approaches at this difficult time.

With regard to beef, no provision has been made for continuing the variable premium. I believe that the variable premium has served producers and consumers well by providing support to the beef market while helping to encourage consumption of the product by keeping prices down. We have always faced fierce opposition to the scheme in Brussels. Doubtless we shall again this year. But I want the House to know that I shall be pressing, during negotiations, for its continuation.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my right hon. Friend ensure that he gets what he pays for? My right hon. Friend agreed to the increase in milk quota granted to Eire specifically on the condition that the meat variable premium continued. If the beef variable premium does not continue, then the extra production of milk quota must be removed from Eire.

Mr. Jopling

If my hon. Friend looks up the record—

Mr. Maxwell-Hyslop

He did.

Mr. Jopling

—he will know that I made it clear at the time that, regardless of anything in the 1984 price settlement concerning the beef variable premium, if the opportunity had arisen—it did not—I would have voted against the special arrangements given to the Republic of Ireland, with regard to its extra milk allowance. I made that clear at the time and I can remember explaining to the House and to many audiences around the country, that it was only because the Netherlands Government were alone in supporting our opposition that we did not have the opportunity to block what I have always regarded as a very unfair allowance in the milk sector.

In the sheepmeat sector, the Commission has proposed a price freeze for 1987 with no changes to the present seasonal scale of guide prices. However, payment of annual premium would be limited to a maximum of 500 ewes per flock, 1,000 in less favoured areas; and Northern Ireland and the Republic of Ireland regions would be merged into a single region for the purposes of the regime. We agree to a price freeze for 1987 and the unchanged seasonal scale. However, the limit on annual premium would discriminate unfairly against British producers, because we generally have larger flocks than producers in other member states. We are also opposed to the merger of the Northern Ireland and the Republic of Ireland regions since it would work to the disadvantage of Northern Irish producers. Their higher productivity could not be fully reflected in the key economic data which determine annual ewe premiums.

On the basis of discrimination, I come back to the comment made by my hon. Friend the Member for Banbury (Mr. Baldry) a few moments ago. A common theme in the cereals, beef and sheepmeat proposals is the inclusion of elements that discriminate against the United Kingdom. This is the result of the Commission's declared policy of tackling the income problems of small or family farms, often by measures that penalise the larger farmer. This would particularly disadvantage our own industry which has a generally larger-scale structure; our farms, we should remember, are about five times the size of the Community average. The Commission's approach would penalise our industry simply because it has developed a more efficient structure and a larger scale of operation.

Mr. Tony Marlow (Northampton, North)

rose—

Mr. Jopling

The Government cannot accept that it is right to develop the CAP in a direction designed to stifle efficiency and which involves the introduction of a concept which is quite contrary to the philosophy of a common market. We shall be pressing in the negotiations for measures that are fair in agricultural terms between farmers and between member states.

Mr. John Carlisle

Can my right hon. Friend comment on the remarks made this morning by the new president of the National Farmers Union? The president said that the NFU would favour a devaluation of the green pound. Does my right hon. Friend think that that would help the situation?

Mr. Jopling

I will come to that point in a while, if I am allowed to continue.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

rose—

Mr. Marlow

rose—

Mr. Jopling

Milk quotas have been with us for two years now. They have cut production, but there is still a gap between supply and demand of about 14 million tonnes, or about 14 per cent. of production. The Community cannot afford such a large imbalance, which last year cost the budget almost £3,500 million. Reduction of the quota level is necessary and the proposed Community milk outgoers scheme offers the chance of a reduction of 3 million tonnes. This will make only a modest dent in the surplus. Price restraint is also needed, and I believe that it will be needed for some considerable time to come.

The Commission has proposed to freeze the target price for milk; I do not consider that this goes far enough. We need a substantial price cut and I shall argue for a 3 per cent. cut. I regret that the Commission has not proposed any reduction in the co-responsibility levy on milk. I would like the Council to commit itself to abolition of the levy, although for budgetary reasons I recognise that this would have to be over several years.

Mrs. Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend go into any greater detail concerning the milk outgoers scheme and the division between the landlord and tenant? I know that this is left unclear in the Commission's documents. We are all aware that there are some good landlords who do everything and some good tenants who do everything. But there is a large lump in the middle. Could there not be a system of arbitration to decide what is fair?

Mr. Jopling

I regret to tell my hon. Friend, as I have told some of my other hon. Friends who have interrupted, that I shall come to this point in a few minutes.

The Commission has proposed that supplementary levy payments should be made at six-monthly intervals rather than annually, as at present. This could help to ensure that producers throughout the Community remain within quota, but there are practical difficulties. We shall need to seek satisfactory arrangements to cover producers whose seasonal production patterns have changed since 1983. I was pleased to see that the Commission had proposed maintaining the Community quota reserve at its existing level for Northern Ireland.

On the Community outgoers scheme, although there is general agreement that output must be reduced, some member states argue that they should be either wholly or partially exempted from the scheme. I would prefer a scheme which as far as possible depends upon the voluntary surrender of quota by producers, but it is important that there should be a compulsory element in it so that all member states reach the target cut, and none suffers disproportionately. I hope that, in the context of the scheme, we may be able to get flexibility to deal with the differing regional structures in the United Kingdom.

The Commission proposal provides that tenants may take part in the scheme without their landlord's consent. This does not take sufficient account of the landlord's interest in quota. The proposal needs to be amended to allow greater flexibility, so that member states may adopt provisions which reflect their own individual land tenure systems.

Mr. David Maclean (Penrith and The Border)

I am obliged to my right hon. Friend for giving way to another hon. Member who represents an upland area. With regard to the apportionment of quota between landlord and tenant, does my right hon. Friend agree that, even if it was decided that it was fair that the landlord should get 70 per cent. and the tenant only 30 per cent. in a good lowland area, that would be very unfair on a tenant in an upland area who was probably not getting any super-quota whatsoever?

Mr. Jopling

I had better not be tempted down that path because I am negotiating with the Country Landowners Association and the National Farmers Union. It is a delicate matter and I have noted what my hon. Friend said.

Mrs. Dunwoody

I am grateful to the Minister for giving way because this matter is important in my area. Some tenants may have put all their savings into existing holdings and may lose a great deal of money on their capital costs. Can the Minister guarantee that there will be some arbritation to protect their interests?

Mr. Jopling

I assure the hon. Lady that the possible entitlements of the landlord and the tenant have been fully taken into account in our discussions.

For sugar, the Commission has proposed a freeze on prices. Production of sugar within quotas exceeds consumption by 1.4 million tonnes. The cost of providing export refunds is high, and there is an upward trend in yields. I agree with the need for continued price restraint in this sector.

The Commission rightly regards oilseeds as alternatives to cereals. It is important that the relativities in price of cereals and oilseeds should not inhibit the production of oilseeds as an alternative crop. I am concerned about the operational problems of the Commission's proposal for modifying the guarantee threshold system and will give that special attention in the negotiations.

For other commodities, the Commission is proposing a generally stringent policy. There is scope in some instances for tougher measures and I shall press for them where appropriate, and seek a fair balance between commodities.

The Commission has not yet made any proposal to adjust the United Kingdom green pound and monetary compensatory amounts. Given the movement of sterling, it is too early to take a view on whether any changes might later be appropriate.

In presenting its proposals, the Commission estimated that expenditure in 1986 will be 961 million ecu higher than forecast in the budget. Within this, the fall in the United States dollar against the ecu is estimated to increase Community expenditure by about 750 million ecu. The price-fixing proposals themselves are estimated to reduce expenditure by about 400 million ecu in 1986.

The Commission also says that a start should he made on special disposals of intervention stocks on a substantial scale. To help offset this cost, the Commission proposes to make economies and to reduce payments to member states for the financing of intervention operations.

When all the changes are taken into account, the Commission estimates that an extra 790 million ecu would still be required in 1986, and it intends to propose a supplementary budget for this amount. The expenditure provision would then be above the level indicated by the financial guideline.

The Council will have to examine critically the Commission's suggestion that expenditure above the guideline can be justified because of the exceptional circumstances. This is not an issue only for the Agriculture Council—the Finance Council, as the House may know, is considering it today. Furthermore, any proposal for a supplementary budget for agricultural expenditure would have to be considered by the Budget Council.

We shall insist that the scope for economies is fully and rigorously examined. It is certainly too early to conclude that the guidelines will inevitably be breached or that there will have to be a supplementary budget this year.

Mr. John

Does the costing that the right hon. Gentleman is giving take account of the destocking measures to sell off meat, cereals and the rest?

Mr. Jopling

The hon. Gentleman knows that that is a separate matter which the Commission has talked about in its approaches to dealing with the huge stocks.

The serious problems facing European agriculture cannot be escaped, but they are not simply European problems. There has been a worldwide expansion of agricultural production, and traditional importers such as China and India have been reaching self-sufficiency. Traditional exporters, notably the United States, are also having to adjust to the changes. There are major readjustments to be made, and they will place heavy and unwelcome burdens on the farming industry. The Government are determined that the burdens are shared fairly. The European Community must play its full part, always insisting that third countries, not least the United States of America, play theirs. Within the Community there must be a fair balance between member states and between farmers. We shall insist on that in our approach to the price negotiations.

Mr. Nicholas Baker (Dorset, North)

Every time that we discuss price fixing, my right hon. Friend makes the same sort of remarks about reform and changes in the common agricultural policy, but I begin to get the impression that there is not the same commitment to change among our European friends. Would it be possible for my right hon. Friend to instigate discussions with his European allies about reform of the CAP in the long term, quite separate from discussions of yearly price fixing and premiums?

Mr. Jopling

I referred to that earlier when I mentioned the perspectives exercise and the fact that, in the latter part of 1985, we considered where the Community and the CAP are going. I hope that, as we get more plans for set-aside, for example, we shall progress.

We must not allow agriculture to become entangled in a web of bureaucratic controls. A successful farming industry—and a worthwhile rural economy—depend on the scope for initiative and enterprise being rewarded. Whatever measures are adopted, we shall press for them to leave scope for efficient, hard-working and progressive farmers to develop their businesses and so contribute to a healthy agriculture which is better related to the needs of the market. We shall try to ensure that proper account is taken of the interests of food manufacturers and processors, other associated industries, consumers and taxpayers.

I commend the motion to the House.

4.39 pm

Mr. Brynmor John (Pontypridd)

As the bundle of documents that we are considering is about 4 or 5 in high, many hon. Members will have smiled wrily when the Minister ended by saying that the Government were determined not to get bogged down in bureaucratic controls.

The right hon. Gentleman was right when he began by saying that the debate has great merit in that we are considering proposals rather than settled terms, so we can state the views of the House. Like the hon. Member for Dorset, North (Mr. Baker) I am beginning to suspect that although there are differences between the parties—and I shall outline some of them—the ends sought by the United Kingdom are broadly agreed. I am, however, worried by the fact that although we all solemnly state the United Kingdom's position on these occasions, that has absolutely no impact on the other members of the European Economic Community.

Sir Peter Mills (Torridge and Devon, West)

That is not true.

Mr. John

The strength of the debate is also our weakness. Our weakness is that we are debating many months in advance of agreements. From previous experience we have learnt that today's debate may either never proceed further, or, if it proceeds further, will bear no relationship to the final decision, either in figures or philosophy. I suspect that that will be the case for both the price proposals and the common agricultural policy. Many months of debate must still be undertaken and, as we know from last year's experience, decisions will be taken after the most irrational horse-trading. We can only try to set the framework in which the discussions should be approached.

We should not make the mistake, which I detect in the Commission document, of believing that frequent use of strong words will itself remove the weaknesses of which the Commission complains. One cannot huff and puff the CAP away. Every month the desperate necessity for a thorough overhaul of the system, before it collapses under its insatiable demand for more and more money, is becoming clearer.

At present, surplus products cost the CAP 10.5 million ecu, which is an increase of 25 per cent. during the past year. In 1985 we have twice as many cereals in surplus as we had in 1984. The accumulative carry-over to 1992 is stated by the Commission to be 18 million tonnes, but that was controverted by the Home Grown Cereals Authority in its evidence to a House of Lords' Select Committee, which said that it would be about 130 million tonnes.

During the past year the butter surplus has increased by more that 1 million tonnes, and the beef surplus is 742,000 tonnes, plus a further 450,000 tonnes in private stores. That does not include the 400,000 tonnes of beef which were sold under what is called a preference scheme, but which is, in reality, a knock-down sale. The skimmed milk surplus is the only item which has decreased a little. Therefore, surpluses are increasing. The rest of the Community needs to appreciate that the increasing surpluses, which are apparently out of control, are intolerable to the British people, and should be intolerable to the electorates of all EEC countries, even newly joined members.

With regard to the milk outgoers scheme, as the Minister said, despite the imposition of a quota we are undoubtedly still running at about 14 per cent. above consumption. Without any other measures to check that, the figure will rise in 1992 to about 16 per cent., or just over. It is not always appreciated, not least in the House, because we tend to talk about the gigantic cereals sector, that the dairy sector is the most costly of all. For the 1986 budget that item will cost the Community £4.3 billion, which is about 31 per cent. of all guarantee expenditure, compared with 14.5 per cent. for cereals. Export refunds will cost £1.8 billion, and intervention will cost £2.5 billion. The guarantee expenditure on skimmed milk equals that on beef and veal, which shows the size of the problem and the urgent necessity to deal with it.

The Commission hopes to reduce the milk output by 3 million tonnes, or a further 3 per cent., in the next two years. Even if it succeeds, it will cut total expenditure in this sector by only one eighth, which is a fairly modest reduction over two years. We must consider the scheme carefully, not least because, as the Minister discovered in his session in the chair at the Agriculture Ministers meeting recently, there is little agreement about what to do, apart from the milk outgoers scheme, which was tepidly received. If we are to follow that road, it is important to secure equality of treatment. Five or six countries claimed special treatment at that meeting.

Mr. Jopling

Six.

Mr. John

The figure is six, if Luxembourg is included. That would be unfair to the United Kingdom and impractical, and would lead to further import penetration of our markets by other EEC countries. It is simply unacceptable for anybody to be unfairly treated or to have special concessions.

There must be a fairer deal for tenants than was secured under the original scheme. I heard what the Minister said, and many of us will have sympathy with him in not wanting deliberately to jump on a mine in the minefield in which he finds himself. The National Farmers Union and the Country Landowners Association have been negotiating for a considerable time, and appear to be set to negotiate for a further considerable time. It is rumoured that they are sending representatives to Panmunjon to see how the peace talks are going, because the likelihood of agreement is greater there than in the United Kingdom.

I must press the Government to tell the House what their attitude is. It is not good enough to sit back and say, "Others are discussing the matter, which is all too delicate, difficult and painful," because their attitude is the key to the attitude to the milk outgoers scheme as a whole.

Before we can wholeheartedly commend the outgoers scheme, we need to know the consequences of the successful implementation of the policy. The Dairy Trade Federation has calculated that a 3 per cent. cut in price would involve the disappearance of 1,500 dairy farms and dairy farmers, who will be specially compensated under the outgoers scheme, together with 1,500 farm workers and 500 dairy employees who will not be specially compensated for the effect on them. We already know from the experience in the constituency of my hon. Friend the Member for Carmarthen (Dr. Thomas), where 400 people recently lost their jobs because of the decision to close the Johnstown creamery, that it will not be acceptable for a future agreement to ignore the legitimate demands of those equally deserving refugees from the dairy disaster.

The price proposals, too, must be judged on two criteria. The first is the effect upon the rampant overproduction in various sectors. In cereals, the broad neutrality of the proposals is accompanied by the co-responsibility levy. Since 1978 cereal production has increased in this country at an annual rate of 2 to 3 per cent. At Question Time last Thursday the Minister of State got into one of his choleric states about the effect that the weather could have on the crop. The retort is that the period since 1978 has covered good and bad years. The wretched 1985 summer yielded the second highest cereal harvest of all time; the quality of that harvest was not good, but scientific advances have insured the volume against bad weather now and in the future. Therefore we cannot rely, as the Minister of State tried to do at Question Time on Thursday, upon the weather to help cure the problem from time to time.

Mr. Nicholas Baker

On the question of the allocation of milk quota between landlord and tenant, I listened carefully to the hon. Gentleman saying that the Government should decide, but he failed to give us his view. Does he agree that in the allocation of quota between landlord and tenant weight should be given to the amount of investment by each?

Mr. John

The prima facie case from which we start is the proposal of the Commission that no landlord consent should be necessary and that there should be no compensation for the landlord unless it is proved that he has contributed to the build-up of the dairy enterprise. The person who was hardest done by in the last milk outgoers scheme was the tenant. I am determined that the balance should be redressed. I apologise for having omitted that. It was not through unwillingness to state my position, but merely because I overlooked it. I am grateful to the hon. Gentleman for raising it.

To go back to cereals, I was saying that we cannot rely upon the weather to level the fluctations. Because of scientific advances, cereal harvests will increase in volume year in year out. Is price to be the answer? Clearly the right hon. Gentleman and the Minister of State think so. The size of price cut which various people estimate will lead to a cut in production differs. The Commission believes that a 20 per cent. price reduction will reduce output. A special paper commissioned for Agra Europe by a Commission researcher suggested that a 33 per cent cut in cereal prices is correct. Some people suggest a cut of up to 50 per cent. I think the right hon. Gentleman would not dissent from the view that even if prices were to stand still that would not dissuade people from producing cereals.

Going back to the central point, I fear that we are getting into shorthand when people shout, "Set aside the land," at every opportunity. Certainly land must be taken out of cereal production. That is the only way to control it. Over-production will not be controlled by price alone. Equally, if the farming industry is to have a reasonable future, it is not enough to say, "Set aside the land." The Government must indicate another purpose for which the land can be used. That is why I referred to farm woodlands and protein crops in a recent debate on rural areas.

The Government and the Opposition should indicate to farmers what they should move into. It would be easy for farmers to go out of cereal production and into another regime where over-production was repeated, with the build-up of more surpluses. We must tell farmers what they should turn their efforts to for the best agricultural advantage of themselves and the country.

The second test of the price proposals is that they should be non-discriminatory. The co-responsibility levy is not so much wrong as a pointless food tax. That is its real purpose. If it were to fulfil its original purpose it would have to be 6 per cent. to make the regime self-financing. We now have a halfway house with it being a tax on food without contributing towards any strategic decision by the Commission. With the first 25-tonne exemption, it seems to be targeted directly against the United Kingdom with its differing farm sizes. Because of farm size, we, who are growing 16 per cent. of EEC cereals, will pay 26 per cent. of the levy, according to the NFU estimate. On the other hand, West Germany, which is growing 18 per cent. of the cereals, will pay only 11 per cent. of the levy. That is directly discriminatory. It is to be abhorred and must be opposed.

Nor is discrimination against the United Kingdom a feature only of the cereal sector. The single premium system for beef is highly discriminatory against the United kingdom, as will be the new premium proposals. I shall return to the point, but it seems to me and to some other hon. Members, not least I think the hon. Member for Dorset, North, that United Kingdom farm structures are becoming increasingly difficult to combine with the small, often part-time, homesteads of the rest of Europe.

I am disappointed that the right hon. Gentleman did not refer to the stock disposal scheme, because I understand that it is covered in the documents. It cannot be taken as a serious contribution to the surplus problem. Mr. Peter Pooley, addressing the Oxford conference, said that it was a temporary and modest contribution only. Even if the new scheme is more sophisticated than the brainless Gadaffi butter scheme that we heard about recently, there is no guarantee that surpluses will not continue to pile up. After all, 400,000 tonnes of beef were disposed of by special measures last year, yet public stocks still rose by 70,000 tonnes. With private stocks that took the surplus to well over 1 million tonnes of beef. Despite all the measures that we have taken to get rid of butter on the most favourable and ludicrous terms, the surplus has still increased by 150,000 tonnes.

Some people feel that the only thing wrong with the common agricultural policy is the lack of proper marketing, but the encouragement of unlimited production is creating surpluses which neither consumption nor marketing can remove. It is worth reminding ourselves just how great is our over-production. We produce 361 per cent. of our needs of whole milk powder, 169 per cent. of concentrated milk and 142 per cent. of skimmed milk powder. I have a long list of products where we produce about 100 per cent. of our needs. The number of items in which we are still deficient in production is small. To summarise, the system is out of control, and this fact is crucial in this year's negotiations.

The Minister quoted some figures. In the Financial Times last week he will have seen that the extra cost of this year's budget over the draft budget will be £1 billion, or 1.5 billion ecu. Even if all the price proposals are realised this year, they will yield savings of just more than one quarter of that extra sum. In 1987, the savings, which are put at 786 million ecu, will be cut to just more than 250 million ecu because of the beef and veal measures.

Those savings will not induce any volume cuts. They are merely tinkering with the problem, while an attack on its root cause is deferred for another couple of years, which will mean the proliferation of other problems.

Mr. John Carlisle

The hon. Gentleman talks about cereal over-production and surpluses, and he also mentioned a surplus in skimmed milk powder. Will he reflect on the fact that we buy some commodities, such as cereal substitutes, from Third world countries? If we were to cut those imports, we could produce more in Britain. What would be the Labour party's attitude to a substantial cut in the imports of cereal substitutes from the Third world? Would the Labour party support a reduction in those supplies?

Mr. John

We have a duty to deal properly with the agricultural production of the Third world, and I do not believe that we could effect substantial savings on some of the commodities that we import from the Third world—[Interruption.] I said that we could not save on some of them. I wish that hon. Members would listen. Listening and talking at the same time is difficult, but they must make the effort. We have a moral and economic duty to help to support economies in the Third world, and I make no apology for saying that. We could equally cut the importation of protein crop substitutes from the United States. As the Minister will know from his recent trip to Washington, there are not the friendliest of relations between the agricultural regime of the United States Government and that of the European Community. The United States concedes that it does not owe us any favours, so we do not owe it any favours. I would prefer such an import-saving measure in a set-aside policy.

Sir John Farr (Harborough)

Will the hon. Gentleman give way?

Mr. John

I must complete this point first. I cannot answer another intervention before I have answered the first.

I was talking about the imperative necessity to remove the surpluses that are being created by the common agricultural policy.

Sir John Farr

What is the Labour party's attitude to the importation of New Zealand dairy and sheepmeat products? Does it favour continuing the arrangements?

Mr. John

The arrangements with New Zealand have been negotiated properly, and their amendment is not desirable, necessary or justified. I hope that even the hon. Gentleman will understand that clearly. If some Conservative Members believe that imports from New Zealand should be reduced, it is time that they said so. For a long time they have got away with their snide anti-New Zealand lobby, which never reaches the point of saying, "We do not want your products in Britain." It is time that the Government and the Conservative party said whether they favour the exclusion of products imported from New Zealand.

The present price proposals will do nothing to cut production to an acceptable level and will do little to save the runaway EEC budget. But even that remark may be too generous, because it assumes that the Commission's proposals will be adopted in full. However, we know from our experience last year that there will be a substantial difference between the present proposals and what is finally agreed by the Agriculture Ministers. Last year, Herr Kiechle was the villain. This year, Mr. Austin Deasy has been set up by Agra Europe as the villain of the piece. But we know that even those modest proposals will be savaged by the Council of Ministers in the following months of negotiations. Anyone who reads Agra Europe for 28 February will see that not one proposal from Ministers does not attract objections from one or more countries. Therefore, we must ask, especially when alluding to the document on the reform of the CAP, what policy we are discussing and what common agriculture there is in the Community.

Within the Ten, the percentage of the labour force employed in agriculture varies from 2.6 per cent. in the United Kingdom, which is the smallest, to 30 per cent. in Greece, which is the highest. Average farm sizes reverse the position. In Greece the average farm size is 4.3 hectares; in the United Kingdom it is 68.7 hectares. German farms are a quarter the size of those in Britain, and no other country in the Twelve has an average farm size that is even half that in Britain. That is the essential difference between the rest of the EEC and the United Kingdom.

From time to time we should set aside percentages and mechanics and examine how much we have in common in this common agricultural policy. In the Ten, part-time farming accounts for about 60 per cent. of the input, whereas Britain looks much more towards full-time employment. Paragraph 9 of the explanatory memorandum to document 8480/85 says that there is, enormous regional variety in the agricultural sector", with Spain and Portugal bringing in larger sectors and lower efficiency. Despite that, the CAP insists upon a maximalist system of intervention and a maximalist policy in which target prices are adopted for every commodity ranging from soya to silk worms.

The House must consider whether so integrated a system can work or will work in the Community of Twelve. I believe that it cannot work. Even though agreement to take account of the self-evident surpluses in pricing is nearly impossible now, with the enlargement to 12 it will become completely impossible. Yet the EEC clings to this detailed regime.

It is interesting to ask why the EEC does so. First, as the right hon. Gentleman said, it is honestly confused, in that it believes that laudable social objectives, such as the maintenance of rural areas and the environment, are properly a charge on the agriculture budget. Paragraph 8 of the explanatory memorandum shows that our subsidies amount to about 20 per cent. of the value of total production. It states that the expenditure is justified on social grounds and because of the positive role agriculture can play in protecting the environment. But social interests are not being protected by commodity subsidies. Nor do they protect rural areas. Since we pay separately for things such as environmentally sensitive areas to maintain the environment, by paying extra through the farming budget and surpluses, we are accounting twice for the same commodity. We believe that there should be separate payment for the environmentally sensitive areas and for all other environmental needs. But that means that there is no justification for the present detailed CAP.

The second reason given is the real reason why quotas are rejected. Stripped of all the EEC verbiage, it is clear that so detailed a regime exists, that quotas are ruled out and that we are having to undertake the labour of Sisyphus, in trying to limit production through prices, even though we know that the chances of success are so small as to be negligible, because of the spectre, as perceived in paragraph 13, of the renationalisation of agriculture.

We should at least be considering whether we should reorganise the CAP, so that it concerns itself with the major elements, while leaving their detailed implementation more in the hands of member states. I believe that the West German Government are challenging the EEC over national aids. We, too, should be considering the change in attitude that is now apparent. The time has come for the EEC to consider setting overall production targets, which I believe should be set at the level of consumption or with just a small margin. It should consider dividing them into national quotas. That would be difficult, but it should then be left to the countries themselves to carry out detailed implementation in the light of circumstances.

Mr. Douglas Hogg

What the hon. Gentleman says has much attraction, but in setting national quotas is the EEC to have regard to historical production or to the country in which the most efficient production of any quantity can be arrived at?

Mr. John

That is an interesting point. I concede that quotas have the disadvantage of appearing to ossify the problem. However, when mention was made of the fertile east midlands there was an immediate reaction about the west country. Consequently, we will never be able to say that we will strip everything in favour of the most efficient areas. National considerations will have to play a part.

Although some sort of compromise is always inherent in national quotas, we would at least then be free to implement the detailed policy that would best suit our farming sector. We could each choose how much to spend on the social factors necessary for the support of rural areas and how the money is spent. At present we seem to fall between all stools. That is a minimalist position compared to the present.

We live in an era in which there will be international retaliation, but the threat of art international trade war only heightens the need for the EEC to put its CAP in order once and for all. If we put off doing that from year to year, saying that we should leave it to the next price review, or that such interesting ideas cannot be followed up this year, it will serve only to further speculation and to fuel our debates.

We live in a part of the world in which the taxpayer can no longer bear the burden of this oppressive agricultural regime. We live in an era of surpluses. Most of us were reared in an era of shortages. I pay tribute to the farming community for transforming the situation, but both we and the farming community must live with the reality. That is why I believe that a much more radical look at how the CAP is geared is necessary—and necessary now.

Several Hon. Members

rose—

Mr. Deputy Speaker (Mr. Harold Walker)

Order. Many hon. Members wish to take part in the debate. I am sure that brief speeches will be appreciated. Sir Peter Mills.

Hon. Members

Hear, hear.

5.15 pm

Sir Peter Mills (Torridge and Devon, West)

I thank hon. Members. I feel very much like making my maiden speech again, but I certainly shall not do so.

In pondering these proposals we should all realise that these are crucial times for British agriculture and for all those who service that great industry. Dramatic changes are taking place. Food consumption patterns are changing and certainly do not help our current difficulties. There has been a 50 per cent. drop in butter consumption over 10 years, a 24.6 per cent. drop ir beef production and a 22 per cent. drop in the consumption of eggs.

Food production is still increasing. Every year there is a natural increase of 2 to 3 per cent. New varieties, new strains and new techniques are to be found, together with farmers who are prepared to use them to obtain better results. We also have the growing problem of food surpluses. Surpluses are increasing all the time, and, as has been said, every country, other than in the drought areas, is producing surpluses. Consequently, dramatic changes have taken place in the past few years. That all adds up to enormous difficulties for the Minister of Agriculture, Fisheries and Food and for his colleagues in Europe.

Without being rude to the hon. Member for Pontypridd (Mr. John), hon. Members, members of the NFU and those, such as the press, who are listening to the debate will not have gleaned much from his speech. His speech was pretty barren. We need to know exactly what the Opposition intend to do so that we can judge their plans, but his was a pretty barren effort.

Mrs. Dunwoody

Nonsense. It was marvellous.

Mr. John

Does the hon. Gentleman agree that the worst fate would be a draw between what Conservative Members know of the Opposition's views and what they know of the Government's views? After all, for the past year they have been screaming about that very point, as the hon. Gentleman—if he has ears as well as a tongue—would have heard.

Sir Peter Mills

That does not alter the position. Many hon. Members came to the House to find out exactly what contribution the Opposition would make to solving this difficult problem. The answer is, not very much. Incidentally I notice that the anti-marketeers are not here in force today. They seem to have run away. They always seek to cut and curb the cost of agriculture and its support. I agree with that, but they never put forward any policies designed to alleviate the situation. I hope that the hon. Member for Pontypridd is listening, just as he wanted me to listen to him.

Mr. John

I am.

Sir Peter Mills

If British agriculture continues to decline, the knock-on effect could be serious in our rural areas, not only for farmers, but for merchants, engineers, accountants and so on. In its excellent brief to us, the NFU rightly says: The Commission's farm price proposals for 1986–87 present a very serious threat to British agriculture and rural areas. The same goes for those who are anti the Community, in that they never give us a clue as to how we can stop that knock-on effect.

Mrs. Dunwoody

I shall be brief. Does the hon. Gentleman accept that for many years the Labour party has made it clear that if it is to support farm incomes, there must be clear evidence that things are done far more directly than can possibly be achieved under the CAP? Even the Conservative party must accept that we now see only a decline in farm incomes, without any benefit to the consumer. We have the worst of all worlds, after years of Conservative Ministers.

Sir Peter Mills

I regret that the hon. Lady has got it wrong. One of the best things that has happened to the consumer has been the small rise in the price of food over many years. That is a fact.

One of the problems with British agriculture is simply that it has been too successful. If other industries had even attempted to get anywhere near the success of British agriculture we would not be in the mess that we are in in some areas today. The Community's proposals discriminate against British agriculture. I applaud and support my right hon. Friend the Secretary of State's stand in Brussels. The Commission must be told that the proposals are just not good enough and we are not prepared to accept them.

I have real doubts about the outgoers scheme, unless it is fairly administered throughout the Community. I have a feeling that we are the ones who will carry it out while others will not. I am not prepared to put up with that. The result would be extremely serious for the manufacturing side. A 3 per cent. cut would be a 6 per cent. loss of manufacturing milk, more unemployed workers in our dairy factories, and more imports sucked in from the Community. Unless the outgoers scheme is watertight it cannot go forward.

An important point arises on the Irish situation. We cannot weaken one little bit on that. The Irish are already getting away with it. They have enjoyed the variable beef premium since the days of a previous Socialist Prime Minister. For every tonne of beef that comes into Britain, the Irish receive the variable premium. They have got away with it on milk and we should take a tough stand on this matter.

New Zealand should be assisted, but it should stick by the agreement. All sorts of disturbing things are going on. Irish butter is being added to New Zealand butter, packed in Britain and then supplied. That gets around the system and it should stop.

I am glad that there is a freeze on the sugar beet proposals, but I must tell my right hon. Friend—at least I know that he listens to me—that British Sugar must not be kicked around like a football. I am not a bit interested in the Italians buying the company. British Sugar should remain a British company, with all that it does for the factory workers and British agriculture.

Mr. Maxwell-Hyslop

Does my hon. Friend see any more reason why New Zealand dairy imports should count against Britain's assumed production than that France should bear the whole burden of wine imports from Algeria and Tunisia?

Sir Peter Mills

My hon. Friend, and my Member of Parliament, is right. Indeed, I would go a stage further. If there is to be a 3 per cent. or 6 per cent. cut in manufacturing milk in Britain, the New Zealanders should bear the same cut.

We should congratulate the Milk Marketing Board on the way in which it has administered the quota system despite all the difficulties. I hope that we shall have no more nonsense from Europe about disbanding the Milk Marketing Board.

Much could be done on beef and beef surpluses. Our meat plants are in extreme difficulty. The margins are small. Exports are extremely difficult to carry out. The clawback and the various other measures which prevent Britain exporting surplus meat are unfair. Something should be done. Devaluation of the green pound would help.

The Commission's proposals for lamb breach the principle of the EEC meat regime.

Sir Geoffrey Johnson Smith

Is my hon. Friend aware that the new beef premium restricts the premium to the first 50 beasts? It is discriminatory not only against the United Kingdom's beef producers but against dairy producers. Why should they not be allowed the premium?

Sir Peter Mills

Absolutely. I do not wish to criticise my right hon. Friend, but the hon. Member for Pontyridd did not pick that up. That is one of the most damaging things that could happen. Small farmers who produce milk and, as they have been encouraged to do, produce some beef to augment their incomes would be stopped from doing so by the proposals, so my hon. Friend is right.

We do not want lamb quotas and we want the clawback abolished. That is wrong. I support the NFU 100 per cent. in its desire to get that put right through the courts.

British agriculture needs time to adjust and to adapt to the new situation. Time and encouragement must be given rather than the constant criticism that we hear. My right hon. Friend has a tough assignment in Europe this time—probably the most difficult of all the assignments that Ministers have had. I wish him every support in what he is trying to do.

5.26 pm

Mr. Robert Maclennan (Caithness and Sutherland)

Today's debate takes place against an extremely sombre background for British farming. In a debate on 26 January, initiated by my hon. Friends in the Liberal and Social Democratic parties, we spelt out in some detail the appalling decline in agricultural incomes; the heavy indebtedness to the banks; and the collapse of almost 24 per cent. in fixed capital investment over the past year according to the Government's White Paper. Therefore, it will not be necessary in this debate for me to go into those matters at quite such length. The background has been well set out already.

It is exceedingly disappointing that the Minister of Agriculture did not address himself to the predicament of British farming in what is, I think by consent, the most important agricultural debate of the year. He devoted a great deal of attention to the black cloud hanging over the deliberations of the Finance Ministers today; the additional burden on the European budget flowing in part from the decline in the value of the dollar; the additional 1.5 million ecu to be found; and the prospect of the Community's budget ceiling being breached and even possibly knocking against the Community's VAT limit.

All those matters are vital, and it will be possible to judge the effectiveness of the Commission's proposal's and the Government's response to them by determining the extent to which their response deals with those macroeconomic problems. The debate will have failed if it does not bring home to the Minister, as apparently has not happened so far, the deep concern of British farmers about the absence of a strategy for British farming these many years after we have entered the EC.

The Minister's response to the Commission's proposals suggests that he has failed to recognise just how serious is that drop in incomes, not only for farmers directly but for those who supply them—the contractors the distributors and the rural economy in general. It will have been noted throughout the industry that he said that he considered that the European Commission's proposals were not fully appropriate to the problem that we face, because the price freeze falls well short of what is required. It would be interesting to know by how much he would have liked institutional prices to be cut to meet what he considers is required. Others chided the hon. Member for Pontypridd (Mr. John) for not being precise in these matters, but the higher duty rests on the Government, as they are responsible not only for the budgetary concerns of the Chancellor of the Exchequer but for the farming industry as a whole.

Mr. Baldry

rose—

Mr. Maclennan

I shall not give way because Mr. Deputy Speaker has invited hon. Members to be brief. I should like to give way, but time is pressing. If I do not deal with all the issues that have to be covered by the alliance parties, I shall be accused of having left out something of great importance. However, I shall give way on this one occasion.

Mr. Baldry

Does the hon. Gentleman recognise that, to protect British farming, there must be a credible common agricultural policy, which means that we have to tackle circumstances? That is why it is important to deal with issues, such as overspending in the budget, which are at the core of the future of the British farmer?

Mr. Maclennan

It was not necessary to give way to agree entirely with what the hon. Gentleman has said. However, I do not believe that what the Minister has outlined as the Commission's proposals, or the Government's response to them, would deal adequately with those problems.

In the earlier debate, I spelt out the view of the two alliance parties—that the proper approach to the particular problem of cereal surpluses is to limit the eligibility for support in quantitative terms to those in the industry. This system, if linked to the efficient family farm, could ensure equity and proper incomes for those in agriculture. That, not a straightforward set-aside scheme, to which the Minister appears to be increasingly attracted, is the proper proposal in principle.

Another issue of importance—on which again the Minister did not touch adequately—is the green pound and the growing spread of monetary compensatory amounts within the Community. The time has come for this country to enter the exchange rate mechanism of the European monetary system to ensure a fair relationship between the prices obtained by our farmers and those in other countries. That is a subordinate argument to the wider argument in favour of Britain's full entry into the EMS, but the Minister must recognise, even in his narrow, departmental job, that the time has come to advocate entry into the EMS.

I now turn to the particular price proposals and the Government's reply to them. It is proposed that there should be a price freeze on cereals, which represents a cut of 5 per cent. in real terms. The Minister has called for a further cut of 3 per cent. That is grossly unfair to our cereal producers, when one bears in mind the other proposed measures, including tighter quality standards, which might have the effect of reducing price support by between 2 and 10 per cent., the proposal to reduce monthly increments and the undoubted effect on prices of reduced access to intervention.

The Minister supported the curtailment of the period of intervention from 1 December to 30 April. I understand that there are good reasons for limiting intervention costs and for seeking to induce fanners to bear a heavier part of the storage costs, but all these factors add up to a rather savage attack on support price levels. It amounts to a cut of about 15 per cent. in producer prices for cereals. I do not know whether that will stick, but it is an objective that is too great to be desirable in one marketing year. I agree with the objective of reducing cereal prices, but this should be spread over several years. This change is unrealistically large, and will not be obtained in the price fixing. I would approach it not in this global fashion, but by means of introducing limits to the right to support which would be geared to the efficient family producer but not to the large producer.

Mr. Jim Spicer (Dorset, West)

rose—

Mr. Maclennan

I shall not give way.

The second point about the unfairness of the Commission's proposals and the Government's response is that the 1986 cereal crop has largely been planted already, and it is wrong to seek a change in quality standards at such a late stage of the growing year.

My third point is that if we accept a substantial reduction in the price of cereals—I have acknowledged that we must do so over a period of time—it is reasonable to look for help in diversifying into other crops. There is nothing of that in the Commission's proposals. However, there is a case for some action on controlling cereal imports and substitutes, and in particular manioc. There is a case for extending this to Third-world countries. There is no question about that. It requires to be done, because it does not assist the Third world to have the budget of the Community knocked sideways, as it has been, by the institutional arrangements operating to help the cereals regime.

The mooted proposals for the co-responsibility levy are extremely retrograde and ill-advised. The Minister was right to emphasise the discriminatory nature of those proposals, and I am glad that he has at least latched on to that. However, we should have learnt from history. The introduction of the co-responsibility levy for milk has done nothing to deal with the problem of surplus milk disposal, which went on for about seven years before the Government were dragged, kicking and screaming, into the quota scheme. The Minister should be ahead of the game, not running along on the coat tails of other countries in this matter. He should resist the introduction of the co-responsibility levy, not only because it discriminates against this country but because it is an ineffective method to deal with the problem of cereal surpluses.

There is a severe income problem for beef producers. The proposed modification of the support regime over the next two years, which will substitute for market price support a system of compensatory headage payments, is not acceptable as it stands. The amount proposed for the single premium payment of 20 ecu per head is far too low, and it will not offset the loss in income from the removal of market support.

The Minister rightly emphasised the discriminatory nature of the proposals—that the premium should be restricted to the first 50 cattle on non-dairy holdings. It will be a failure, which could be serious for the industry, if he does not manage to eliminate that proposal at least from the final settlement. Beef producers are certain to be under considerable additional pressure if the Community's milk outgoers scheme is introduced. Now is the wrong time to be exerting downward pressure on beef producers' income in that way.

I draw to the Minister's attention the fact that at the Committee of Agricultural Organisations in the European Community presidium recently, only Denmark was opposed to an extended use of the variable premium for which the Minister has battled for this country in the past. It would be right to look to that mode of support for the beef industry. I hope that the Minister will give greater thought to that aspect.

It appears that the co-responsibility levy for milk is to be retained and that there is to be a freeze on the target price for in-quota milk. Worse than that, it appears that the supplementary levy for those who go over quotas will be paid on account, on a six-monthly basis. These measures are too tough for the milk sector this year. They ought to be moderated, bearing in mind what has happened to the dairyman's income and to those involved in milk manufacturing. I do not hesitate to say that these changes in the downward production levels cannot be achieved in a short period of time. Such changes should be spread over a number of years. The Commission's proposals are too tough for this year.

It is essential that the cuts that are proposed in the outgoers scheme should be applied equally to all member states. If there is to be a 3 per cent. cut nationally, it must be a 3 per cent. cut in all Community countries, or there must be a compensating cut in the quotas of those countries. That is the single most important aspect of the outgoers scheme, and the farmers will attach great significance to that.

There is another important question on how article 4.1 of the proposed regulation dividing quota between landlord and tenant is to appear in its final form. I agree with those who have already suggested that the proper approach is not an arbitrary one, splitting the quota between the landlord and the tenant on the basis of some notional percentage of input into the milk enterprise. It must be done on an ad hoc basis, relating the particulars of each enterprise to an arbitration tribunal, and there should be no veto on that proposal from either the landlord or the tenant.

Mr. Maclean

Will the hon. Gentleman give way?

Mr. Maclennan

I shall not give way. Although this is a longer debate than usual, many hon. Members still wish to speak.

Another point in connection with the outgoers scheme, which is very much in line with the proposals that the alliance has been arguing in favour of for some time, is that the Government should purchase quota for reallocation to those who are either entering or are in particular difficulties in the industry. I hope that the Government will look favourably on and seek to promote that proposal within the Community.

In connection with sheep, there is a recommendation for a price support freeze from the end of the year—31 December. That is a strange proposal in the context of the conditions of farms in the hills, uplands and less favoured areas. However, an even more serious proposal for the future is the proposed limitation on the annual ewe premium eligibility to 500 ewes on the low ground and 1,000 ewes in the less-favoured areas. The Ministers must resist that as it is quite inappropriate for the structure of farms in this country.

Finally, I should like to discuss the missing structural proposals. The debate tonight is, in a sense, broken-backed because we do not have before us the positive parts of the Commission's proposals for modernisation, processing, marketing and early retirement backed by set-aside. Similarly, we do not have improved and strengthened proposals for the less-favoured areas, how the Commission proposes to enable farmers working in new commodities or woodlands to enjoy an annual income when income is normally derived only at harvest time after many years. Nor do we have the proposals for improving landscape in environmentally sensitive areas and how the Government would back them.

These important matters not having been deployed in the debate, it is more difficult to assess whether the sort of sacrifices that the Government are advocating are tolerable. Had we had these proposals before us, it might have been reasonable to take a different view about institutional prices. However, as they are missing and as only 4 per cent. of the common agricultural policy budget is at present devoted to these structural measures, it is right to adopt a somewhat sceptical attitude to the structural proposals as a means of improving farm income until we see the colour not only of the Commission's, but of the Government's, money. It is inevitable that if the Government are not prepared to back the structural schemes, the money will not be forthcoming from the European Community.

I conclude by emphasising that the industry is in travail. The rural economy is under greater threat now than it has been in the lifetime of the present Government or throughout the post-war period. If the decimation of the rural areas is not to flow from the Minister during his period in office, he must illustrate his intentions with a greater commitment and readiness to take more time to correct the structural imperfections of the CAP and a willingness to spend taxpayers' money to promote and protect the industry upon which our rural economy depends.

5.46 pm

Mr. Andy Stewart (Sherwood)

I welcome today's debate on the European Community's agricultural price proposals. The debate gives the House the opportunity to express to the Minister of Agriculture, Fisheries and Food the needs of our agriculture, but above all to calm the fears of our farmers caused by uncertainty and a lack of understanding at home and a totally discriminatory policy being peddled against this country from Brussels.

Over the years, British farmers have had a special love-hate relationship with the rest of the population. They were loved when food was scarce. In those days there was insufficient time in a week for farmers to fulfil all the invitations that came their way, on the unwritten understanding that their presence would be accompanied by some scarce farm produce.

Today, love has turned to hatred—not hatred towards the farmers individually, but against their industry. That has been brought about by the policies imposed on us by the mandarins in Brussels, particularly the policy of surplus food disposals. Those bureaucrats remind me of the New Zealand pilot who recently took his ship on to the rocks because he took the wrong route. The current proposals will similarly run the CAP on to the rocks within 18 months if they are implemented.

We had such an experience two years ago; before the lifeboats were allowed out, milk quotas were hastily imposed without the long-term implications being fully researched. That resulted in the loss of jobs on farms, and large numbers in the creameries and the dairy supply industry. However, the major lesson we learned then was the imbalance it brought between one sector of the industry and another.

For example, beef producers were hit when a large number of dairy cows were marketed as a result of quotas. Today's beef surplus of 750,000 tonnes is equivalent to the total carcase weight of dairy cows killed. The proposal for taking a further 3 per cent. of dairy cows out of production will only further exacerbate the beef problem. It will also have added implications for white meat producers while, in the process, it will drive a wedge between landlords and dairy tenant farmers over who should receive the outgoers' compensation money. However, if the two sides fail to agree, I hope that my right lion. Friend will adjudicate on the basis of a starting point of 50 per cent. each. The hon. Member for Caithness and Sutherland (Mr. Maclennan) advocates an arbitration policy for every single farm.

Further, there is also a call for an end to intervention buying and to our much traded beef and sheep variable premium schemes. If such a proposal were to be implemented, would British farmers receive in return the millions of litres of milk quotas that were given to other countries for the support of their industries in 1984? On what basis have the Irish Government the right to send prime cattle to the British mainland and collect the subsidy? This discriminates against British farmers.

The problems that I have already mentioned are small in comparison with the Community's greatest problem of surplus cereals, yet it is obvious from the proposals before the House that the Commission has put very little thought into drafting them. I refer to the price reduction, the co-responsibility levies and, what is blatantly discriminatory, the change in the intervention standards for cereals after British farmers have drilled their crops.

The proposals for wheat will not work, because agriculture has an inbuilt efficiency factor of 4 per cent. per annum. The 10 per cent. reduction in price will be made up by a further 9 per cent. increase in yield, equivalent to a 5 per cent. increase per acre. That can easily be achieved by attention to detail. I remind my right hon. Friend that British cereal farms are eight times larger than those of our continental cousins. A tonnage exemption levy will be acceptable only if it is multiplied by a factor of eight for the United Kingdom.

A price reduction in the cereal sector will also have a marked effect upon the income of sugar beet farmers. For example, last year's 1.5 per cent. reduction in cereal prices reduced this year's sugar beet contract by 4 per cent. because of the lower price obtained for sugar beet pulp. Since growers accept the constraints of the sugar quota system and the joint responsibility with processors of financing the cost of exporting surplus production, it is neither fair nor reasonable that we should be subjected to a continuing freeze of beet prices after three years.

The Commission's argument in favour of continuing the price freeze is based on the allegation that we are about to enter a two-year regime as against the normal five-year regime. This is patently untrue, since it is only existing quotas that will be reviewed after two years. The regime itself is for five years. Should quotas be altered after two years, production levies could be similarly adjusted to maintain the self-financing nature of the regime. To give an increase to beet would not create distortions within the arable sector because beet is subject to quota restrictions. Until the present cereal surpluses are disposed of and a self-financing regime is adopted, a short-term licensing system is the only way in which supply and demand can be matched. My right hon. Friend should look carefully at the constructive set-aside programme that has been put forward by the National Farmers Union.

The overall proposals are a further threat to the prosperity of the rural areas and the environment. If, as predicted, alternative uses need to be found for 11 per cent. of the land currently cropped, I suggest that we should seriously consider allowing all villages and towns with a population of under 7,000 to expand by 10 per cent. of their housing stock. This would allow the architectural slums of our cities to be replaced. I recognise that this would result in some population movement, but it would be better to give people pleasant surroundings in which to live than to pay vast sums for intervention storage. In addition, it would revive the rural economy—

Mr. Douglas Hogg

My hon. Friend has made an ingenious and unexpected suggestion. However, would it not have the disadvantage that, if we were to move once again, as we might, to a period of shortage—there is no reason to suppose that we shall always be in a period of surplus—we should have prevented ourselves from meeting our needs during that period of scarcity by increasing production thereafter?

Mr. Stewart

I respect what my honourable neighbour, my hon. Friend the Member for Grantham (Mr. Hogg), says, but I have been in agriculture all my life and I have every confidence that the industry will continue to increase production and to meet the needs of the British population.

Mr. John

On the mechanics of the hon. Gentleman's interesting idea, I understand that he is suggesting an acreage reduction of 10 per cent. and a population increase of 10 per cent. in villages and towns with a population of 7,000 or lower. The number of houses that would have to be built to accommodate such a population increase would not swallow up anything like the amount of acreage that would be taken out of agricultural production. What would the hon. Gentleman do with the remainder of it?

Mr. Stewart

That would be a matter for my right hon. Friend the Minister. I have not yet reached that position.

This would, as I have said, revive the rural economy and give a fillip to our excellent village schools, with an injection of additional pupils. The infrastructure is already there. Now, for the first time, land is available, so let us use it wisely.

The present method of disposing of surplus food in the Community is the principal reason why the common agricultural policy has become discredited in the eyes of the taxpayers. Literally, giving away food to the Soviet bloc countries is nothing short of criminal. The beef and butter mountains could be disposed of in a year without affecting normal shopping activities, by giving each of our 60 million Community pensioners a pound of beef and butter per month. That would be simple enough, but perhaps it has always been considered a non-starter because the "get-rich-quick" brigade would lose their pickings from the export gravy train.

Mr. Colin Shepherd (Hereford)

Does my hon. Friend recall that in 1972–73, when pensioners were given the entree to beef at low cost, the consequence was merely to crucify the poultry industry? The track record shows that substitution habits play an important part in such measures.

Mr. Stewart

I recognise that, but surely it must be sensible to give the produce of our farms to those sections of the community who do not regularly eat beef at weekends. To give one pound of beef and butter to each pensioner every month would not distort the normal shopping patterns for other produce.

Mr. Maclean

That would be better than giving it to the Russians.

Mr. Stewart

My hon. Friend is right.

The treaty of Rome was designed to pay farmers an income comparable to that of industrial workers. As for supporting each country's indigenous crops, is it equality when our Mediterrenean partners, in addition to the temporate foods, receive millions of pounds to create olive oil and wine lakes, not to mention £500 million for tobacco that cannot be used? This country's indigenous crop is grass. The Commission's present proposals, as they stand, would impose further restrictions upon milk and livestock production. Can we afford to stand aside and accept a policy which would result in the demise of our grassland farmers?

Finally, when my right hon. Friend the Minister next goes to Brussels, he must accept only a coherent package of measures giving farmers time to adapt and enabling a better long-term market balance between member countries. That is my bottom line.

6 pm

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I had intended to make a narrow contribution to the debate because I am concerned primarily about what is happening in the milk sector, especially on the Cheshire plain. However, I have sat through many sittings of the Agriculture Committee of the European Parliament and I am aware that price fixing has become an esoteric process. There are long arguments and there are often about 140 amendments to discuss. Absurd arguments, based entirely on narrow national interests, are advanced on each individual change. At the end of the negotiations, the Council of Ministers will stay up all night and produce a collection of policies which give no clear pattern or plan for the agriculture community and, in many instances, do not produce any positive benefits for the Community consumer.

I became concerned when listening to the Minister, because it seems that there is no clear idea of what the Government want out of the price fixing process. Most of those who are engaged in agriculture in Britain are concerned that they are part of a managed market in which they have little real say. In my view, it should be possible to ensure a genuine income for those working in agriculture, and that includes farm workers and farmers. It should be possible also to offer consumers the positive advantages of reasonable prices from which they can benefit.

It has been said that we hear nothing of the costs of support to the consumer. However, we know only too clearly from the Commission what the CAP costs the consumer. A House of Lords report on the reform of the CAP stated that food prices were approximately 10 per cent. higher than they need be in Britain. A more recent estimate by Ken Thomson of the university of Newcastle suggested that the cost to the consumer across the EEC is 182 ecu, or £107, per person per year. Therefore, we know the cost to the consumer. We know also that the Community is not doing the one thing that we were always told justified its existence. It is not protecting the income of the farming community. In Britain there was a 43 per cent. drop in farm income last year, and that has been reflected in real difficulty on the Cheshire plain.

Structural change could be dealt with positively within the Community if price mechanisms were used. Guidance expenditure represents less than 5 per cent. of the overall CAP budget, yet last year 95 per cent. of expenditure on agriculture went into the maintenance of simple price regimes.

There are vast and unmanageable surpluses that are costing the Community an enormous amount to store. It would seem to be much better to be in control of the means of storing surpluses than to be creating them or trying to sell them. An enormous amount of expenditure is directed to storage.

I waited for the Minister to tell the House what would happen if we went through the normal pantomime, or mild farce, which involves individuals saying, "If you give me a little of this, I shall give you a little of that." That is what the dance of death has now become. I wanted the Minister to say, "Nevertheless, we know that because of the falling dollar it may be that all our calculations in the price fixing process will he unworkable. It may be that the cost of getting rid of the surpluses because of the expense of the export restitution payments will be greater than that of meeting any other payments within the agricultural budget."

What an absurdity! What magnificent idiocy! The money will not be available to maintain farmers' incomes in disadvantaged areas or sectors, such as the Cheshire plain, where tenant farmers are suffering badly. There will not be a lowering of prices so that consumers will benefit. I agree that to give llb of beef to pensioners is better than nothing, but it is not the answer. That is merely another palliative.

At the end of the day, the only individuals who will benefit will be the rather sharp agents who collect vast amounts of export restitution payments by selling a great amount of produce to the Russians. If the produce is not sent to the Russians, the Community will put vast amounts of food on to the world market, where it will be in direct competition with the produce of other countries, many of which are only one-crop producers.

It is not acceptable for Westernised countries, which are highly mechanised and highly efficient and capable of producing large surpluses of food, to seek to endanger the interests of ACP and Third world countries. I am astounded that the hon. Member for Caithness and Sutherland (Mr. Maclennan), in purporting to speak for the Social Democratic party, should have the brutality to say that he would be prepared to support anything of that sort. The Community restricts access to its markets of produce from the African, Carribean and Pacific countries and does its best to manage the export of all their minerals to Europe. It is not prepared to do anything in agriculture, save to accept what are comparatively small amounts of produce. It is a disgrace that any Member of this place should seriously say, "I'm all right, Jack. I don't care what happens to you because you happen to come from a poorer, less efficient and less powerful country."

In the current price-fixing process we shall see the price mechanism used in a number of ways, all of them inequitable. Since the introduction of MCAs there has been constant financial tinkering. There has been a refusal to accept that if the price structure is to be used accurately it is necessary to direct available moneys to areas where income support is needed the most. That has not happened, and under this Government as much as any other the British have had the rough end of every agriculture deal. At the end of the farm price fixing review the British Minister is out-voted if he sticks out for his interests, with the result that they are not taken into account. That has happened before, and it will happen again.

One of the results of last year's price fixing review has been growing unemployment in the milk and related sectors. I am horrified by the pressures that are being put on workers in creameries, those who work in cheese factories and those in ray constituency who have traditionally relied upon the production of milk on the Cheshire plain.

Tenant farmers in Cheshire have been badly served by the current arrangements and they need the protection of a correct balance between landowner and tenant farmer. The Government seem not to care too much about what happens to tenants. For example, they are suggesting that many county authorities should get rid of smallholdings that are rented to tenants. Apart from that, they must offer existing tenants some protection of their incomes, by ensuring that they have the real benefit of some of the quota. The landowner should not be allowed to benefit from something to which he has not contributed. I hope that the Minister will fight strongly to ensure that there is adequate, clear and open arbitration. The way in which the base line was set meant that many Cheshire farmers, especially those who came in after the lines were laid, found themselves in considerable difficulty with large overdrafts and heavy bank commitments. They were placed in difficulty because they were required rapidly to alter existing lines of produce.

I know that many hon. Members wish to contribute to the debate, so I shall not detain the House for very much longer. I believe that we must return to a system of direct income support for the farming community. Conservative Administrations which were in office in the 1930s were quite happy to have agriculture suffer to an extent that led to many personal bankruptcies and a great rundown of agriculture. Nevertheless—this is ironic—Conservatives have purported always to speak for the farming community. In my area, that is manifestly no longer the case. There is no point in designating rural development areas if the people in those areas are deprived of their services, their schools, their income and their means of transport, but that is what is happening day by day. There is no point in announcing agricultural reform if many sectors of agriculture are required to undergo great convulsions of change without any positive attempt to cushion them against the economic winds or without their having any clear view of how they can plan for the future.

Many people have already suffered badly, and see no clear sign that the Government know what they wish to demand of the Community. There is no clear political line in agriculture in the Community. The consumer suffers, workers in the industry suffer, and the only person to whom we can turn—the Minister—simply tells the House that it is all very difficult and that he will have to think about it and see how to proceed in the future. If that is the best that he can offer, the sooner he is replaced by someone who understands the political implications, the better it will be for everyone.

6.11 pm

Mr. David Heathcoat-Amory (Wells)

In the early part of the debate my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) asked where all the antiMarketeers were. I would not describe myself in that way, but I have always been critical of the way in which the Common Market and the common agricultural policy are structured and financed. I represent an agricultural area and I am a farmer, so it is a difficult tightrope to walk. Nevertheless, I hang my hat firmly on the peg of price restraint and, if necessary, price cuts in the present circumstances.

A properly working price mechanism—a subject to which I shall return could meet some of the objections of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) when she complains about the consumer not getting a fair share. Painful price decisions for the farmer may benefit the consumer, stimulate additional consumption and help to find alternative uses for products in surplus. For instance, ethanol production is far from economic at current grain prices, but it could become economic if prices fell sufficiently.

Let us examine the background to the present price proposals. We heard fairly recently that the European Commission was seeking a supplementary budget. My right hon. Friend the Minister said that that was not necessarily certain, but in a letter dated 14 February the Commission plainly stated:

Accordingly, the Commission will submit a supplementary budget for 1986 in due course. We therefore know that a supplementary budget is on the way, but the story starts a little earlier.

In November 1985 the Council of Ministers agreed to a 1986 budget which included substantial increases over 1985. The British Government voted against that budget because it threatened budget discipline and the Fontainebleau agreement on budgetary and financial discipline, and because it was in danger of breaking the pledge given to the House when we agreed to increase the VAT contribution from 1 to 1.4 per cent. That budget was therefore passed only by a majority. The European Assembly, however—or should I call it the European Parliament?—

Mr. Maxwell-Hyslop

No, the European Assembly.

Mr. Heathcoat-Amory

The European Assembly, however, rejected that budget and added substantial additional amounts of expenditure under both the obligatory and non-obligatory headings. We regard that budget as illegal and the matter is before the European Court, but it remains the currently adopted budget of the European Assembly. We are now told that even that is not enough, and a supplementary budget has been announced, although not yet requested, of 790 million ecu, or about £500 million. According to the Financial Times, however, that is an underestimate and the sum may reach £1 billion.

In summary, therefore, we face a supplementary budget to an illegal budget, which itself substantially exceeded the Council of Ministers' budget, which the United Kingdom voted against because it threatened budgetary discipline. Of that supplementary budget, 750 million ecu was due to what are described as "exceptional circumstances". What are they? The hon. Member for Crewe and Nantwich mentioned currency movements. Because the dollar has fallen, it will be more expensive to dump surpluses on the world market. Currency movements may be exceptional to people in Brussels, but for the rest of us they are normal day-to-day occurrences of freely moving exchange rates and due allowance should be made for them in any responsible budget. After all, if the dollar had risen against European currencies, would we have got the money back? Because the dollar has gone down, should the House therefore grant additional expenditure to cover a budget which clearly did not foresee that development in the first place?

I hope that it is clear from what I have said that budget discipline has not been delivered. We are not even within shouting distance of it. The pledges made when we agreed to the increase in VAT contribution have already been broken. I am not blaming all that on my right hon. Friend the Minister. No doubt his colleagues from the Treasury and the Foreign Office will be seeking to explain themselves to the House in due course. Nevertheless, this shows how urgent it is to achieve a proper and fundamental reform of the CAP this time round. Agriculture is still absorbing more than 70 per cent. of the European budget, and the measures presented so far simply do not match the task before us.

I believe that farmers know that. They tell me, certainly in private, that they know that something radical must be done, because food mountains and wine lakes do enormous damage to the image of British farming. Both agriculture and horticulture both depend ultimately on public acceptance of what they do, and people do not like farmers producing food that no one wants at prices that people cannot afford.

Dumping the stuff on world markets is not the answer. It annoys the United States, which has a similar problem, and it does not solve the problem of world hunger. There is a place for famine relief, but let the House not imagine that it, is doing Third world countries a service by periodically and capriciously dumping surpluses on the world market.

Let us take the example of a Bangladeshi dairy farmer. What would he feel like if every other year several thousand tonnes of surplus EEC milk powder were dumped on his market and undercut it? We would not like it if that happened to our dairy farmers, and he would not like it if it happened to him.

Mr. Maxwell-Hyslop

My hon. Friend could even add that it was dumped just when he had to pay the money-lender.

Mr. Heathcoat-Amory

My hon. Friend reinforces the point. The situation is getting worse, not better. Last year the United Kingdom had a poor harvest, but 2 million tonnes of extra grain found their way into intervention stocks. Yields are increasing. Science does not stand still. The increase in production, better strains of plant, better animal husbandry and more efficient fertilisers are spreading southwards, and exactly the same transformation will be made to the agriculture of Spain and Portugal as has happened in northern Europe.

Getting rid of the surpluses is not, by itself, the answer. Surpluses are only the symptom of the problem—not the cause. The underlying cause is the striking imbalance between production and consumption, and supply and demand. I believe that farmers are ready for a much more radical reduction in prices—I say reduction rather than restraint—than is contemplated by Brussels. Of course they will not welcome it, and their organisations—the CLA, the NFU and so on—will resist it. That is their job. But the great resentment in 1984, when milk quotas were introduced, was caused by the suddenness of what was done by the change in direction and by the discrimination against this country, particularly in relation to Southern Ireland. That is why I am against the co-responsibility levy. I shall not dwell on that, because the point has already been made.

The co-responsibility levy is not a way of reducing surpluses. It is a way of financing surpluses. It does nothing for the consumer. The hon. Member for Crewe and Nantwich was right in saying that it does not get cheaper bread into the hands of the housewife. The system is difficult to enforce and police, and it is highly discriminatory against the United Kingdom. For all those reasons, I am against it.

I do not like quotas either. They were necessary in 1984, but squeezing the tube in one place makes it bulge somewhere else. Instead of reducing production, quotas shift it into other sectors, and in turn those sectors need quotas. I hope that we do not go down that road. I hope that we do not reach the situation where we need a licence to produce food—where it is a privilege to be a farmer. A permanent and detailed involvement by politicians in agriculture would be bad for politicians and farmers.

Mr. Charles Morrison (Devises)

Would not a combination of lower prices without a quota system—at least in relation to cereals—create the greatest difficulty for the smaller farmers, above all in the more marginal areas?

Mr. Heathcoat-Amory

I am acutely aware of that, as I represent many small farmers. I shall touch on that problem at the end of my remarks. I re-emphasise that we must return to the bedrock of market prices, although not completely, because there are few countries in the world where farmers are completely left to the vagaries of market forces. But I insist that the price mechanism should be fundamental. Price allows for change, and it allows our agriculture to evolve and adapt. Prices are non-discriminatory, and they reward Britain because Britain has more efficient farmers.

Mr. John (Pontypridd)

Much of the hon. Gentleman's argument against quotas depends on whether he thinks that his proposals in relation to the reduction in price are remotely likely to be adopted by EEC Ministers. Does he have any evidence to that effect?

Mr. Heathcoat-Amory

The drift of my remarks is that my right hon. Friend must return to Brussels and insist. He has on his side the arithmetic of the European budget. I know, and I suspect that he knows, that very shortly this House will be asked for additional money. In the past, reforms of the type that I am advocating have always failed because at the back of our minds other countries, and many people in this country, believe that somehow, somewhere, the taxpayer will stump up the additional funds. I am saying that the game is up. The CAP must live within the money that has already been allocated.

Last year that concentrated the minds of those responsible, and I hope that it will do so in future. I very much hope that my right hon. Friend and his Treasury colleagues will not return to this House to request additional money or even a supplementary budget. That would be, not a substitute for change, but a betrayal of pledges made to this House.

My commitment to the price mechanism is not one that I make alone. I know that my sentiments are shared by the Front Bench and by the green paper published last year by the EEC. Mr. Andriessen has a good grasp of the reality. As so often with the Common Market, the problem is that the political will does not exist to carry this through into action. That is why I am trying to bolster the resolve of my right hon. Friend.

There is an urgency, and at present the proposals are inadequate. It can be compared with moving the deck chairs on the Titanic. We must grasp this opportunity and not leave it to the future, or we shall have this debate next year and the year after.

I am an advocate, not just of price restraint, but, if necessary, of price cuts in those areas of production where we are chronically in surplus. But those cuts need to be planned and predicted. We must not stagger from year to year—from one price review to another—blindly hoping, like Mr. Micawber, that something will turn up. If necessary, this means separating the social from the economic aims of the CAP. Up to now, by attempting both those aims, we have failed to do either. If the social consequences of what I am suggesting are too serious, I contemplate direct grants or income support, rather than using the clumsy system of higher prices to help the smaller farmer. I also contemplate national as well as European aid.

Naturally, the institutions in Europe are against anything that smacks of renationalisation. But there is nothing wrong with adding to European money where necessary, with national aids specifically tailored to our own circumstances. It is necessary to look more widely and to consider rural policy in the round, as well as alternative uses of land.

My right hon. Friend must persevere. He must take a lead and insist on the radical reforms which for too long we have been promised. On no account let him or his right hon. Friends come back to this House for a supplementary budget or an increase in own resources as a substitute for that reform.

6.28 pm

Dr. Roger Thomas (Carmarthen)

Such has been the cut in creamery jobs in south-west Wales over the past three years that a local wag told me the other day that Ladbrokes has now opened a book on which creamery is to be closed next. Felinfach is 5–4 on; Whitland is 4–1; Haverfordwest is 7–4 and there is an even longer price on Llangadog. That is the present situation in south-west Wales.

Welsh Opposition Members—I do not see many Welsh Members on the Government Benches—are glad that the Under-Secretary of State for Wales, the hon. Member for Newport, West (Mr. Robinson) is present. I had hoped—perhaps a false hope—that the Under-Secretary would be able to reply to the debate—I think that he has that responsibility as agricultural responsibility has been devolved to the Welsh Office. I notice that the Minister of State, Ministry of Agriculture, Fisheries and Food is making voluminous notes, so clearly we will not have the pleasure of a reply from the hon. Member for Newport, West.

I wish to quote at moderate length from the speech made by the Secretary of State for Wales when we had the pleasure of a Welsh day on the Floor of the House. That debate is held as near as possible to St. David's day. In 1985, it took place on 28 February. The Secretary of State dealt at considerable length with Welsh agriculture. He said: The past year has been intensely difficult for farming and particularly for the livestock sector. I will confine my remarks this evening to the livestock sector. The Secretary of State also said that the dairy industry is undergoing a traumatic process of readjustment following the introduction of quotas for milk. He mentioned the spin-off effect on other sectors, notably beef, agricultural machinery and feeding stuffs. The Secretary of State said that, added to these difficulties,

farmers in Wales were badly affected by the drought during 1984"—[Official Report, 28 February 1985; Vol. 74, c. 500.] On our Welsh day a week ago, the Secretary of State did not dwell at such length on agriculture. Very little—certainly very little in the package we are discussing today—gives any cause for elation to the Welsh farmer, especially the dairy and livestock farmer in west Wales. I would like to discuss the milk sector in west Wales and the great effect on the livelihood of people in creameries. These creameries have been functioning for 40 years but the Milk Marketing Board through its marketing organisation, Dairy Crest, has suddenly brought down the chopper. People who have given 30 or 40 years service are, at a stroke—I remember that remark being made by someone in an elevated position on the Conservative Benches at one time—without a job.

A co-ordinated policy is essential for the livestock sector—the beef and dairy sector—of south-west Wales. I speak for many farmers in south-west Wales who are upset that the support for beef sector has been reduced when the margins for the beef producers are the lowest in history. The proposed package would cut total support by between a quarter and a third. The proposal to cut the variable beef premium scheme should be rejected. The scheme is highly discriminatory because it is confined to the first 50 cows and to those farms which are specialist beef producers.

The retention of the present scheme formed the keystone of what the Secretary of State for Wales said about agriculture a year ago. He said that this scheme and the sheep support scheme were absolutely essential for the health of agriculture in south-west Wales. In that part of the world since 1979, income has declined steadily, costs have risen twice as fast as the prices that farmers have been paid, and in the past year investment by farmers has been reduced by 12 per cent. The ripple effect on ancillary industries and the food supply industries has been all-round depression. On the other side of the coin, bank charges have continually increased and loans have become more and more of a millstone aroung the necks of farmers, especially small family farmers in south-west Wales.

The closure of the creameries began even before the imposition of milk quotas; we cannot blame the milk quotas for that. However, we can blame the inefficiency of the Milk Marketing Board, because in late 1983 when farmers were encoraged to expand—expansion comes late to areas such as Wales—creameries closed when milk production was on the increase. When the Teifi valley creamery closed, we felt that that would protect jobs elsewhere, but we were wrong. In March 1985, the Milk Marketing Board told us that creameries would be kept open, depending on the supply of milk. The creamery at Johnstown is due to close at the end of this month with the loss of 450 jobs. We are told that it is not because of the supply of milk but because of reorganisation implemented to meet import penetration. It is not the fault of the loyal work force; it is the fault of the organisation and effective marketing of those people who are supposed to be defending the livelihood of not only creamery workers but milk producers.

We have lost cheese production in south-west Wales. It is therefore easy to understand why we are so protective of our present milk production in south-west Wales. We cannot afford further cuts, whether through outgoer schemes or a reduction in percentage effort, because they will affect the jobs of people in Whitland, Felinfach, Haverfordwest and the other places I have mentioned. We want to make absolutely sure that, if there is a cut in milk production, that cut affects not only Wales and the rest of the United Kingdom but—the Ministers in Brussels must make this absolutely sure—other countries which produce far more milk than they use. They are more to blame for the production of excesses and they must obey the rules. It is no good the United Kingdom obeying such rules when some on the continent continually flout them. That is a loser's policy and for the past few years the Government have adopted a loser's policy to farming.

South-west Wales farmers are up in arms. I am sorry that the Secretary of State is not here for this part of the debate because I am sure he well remembers the magnificent, if rather rough, reception he received from the farmers of Llangadog three weeks after the introduction of the milk quotas. Perhaps the farmers over-reacted a little to the milk quotas, but 10 per cent. of the farmers in my constituency are still experiencing immense hardship as a result of the imposition of this quota. They are still unable to get out of the wood. If there is a further imposition of milk quotas the situation is bound to deteriorate.

My hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) mentioned the Cheshire plains. In south-west Wales milk is produced not only on the grasslands; much is produced on the undulating uplands. We are worried about the small family farmers on those uplands. They are aware that agricultural policies are to be imposed from Whitehall and Brussels. These policies have not been thought through. They are introduced in an unco-ordinated, piecemeal manner. They do not reflect a defence of the unique climatic and topographic conditions found in such proponderance in my area but not to such an extent in other EEC countries. There is a crying need for a comprehensive grassland livestock sector policy, and if such a policy does not materialise during the next six to eight years, that sector of the industry is in great danger of collapse and fragmentation. Refraining from a more nationally orientated interventionist policy will be dangerous and provocative to the farmers of south-west Wales. The farmers are right to fear that the Minister will bulldoze through or, as some of them say, rubber-stamp policies which have been thrust upon him and which he is not strong enough to resist.

I am sure that Under-Secretary of State for Wales, the hon. Member for Newport, West knows very well that, ever since the imposition of milk quotas, in April 1984, Labour Members have pressed the Secretary of State to negotiate in Brussels on behalf of Wales. He has continually refused. I hope that the Minister will take back a message to the Secretary of State tonight. The situation is deteriorating in south-west Wales. There is no excuse for the Secretary of State not knowing that part of the world, because his constituency is there. Carmarthen farmers are right to be apprehensive. The Minister's non-intervention will paralyse our rural areas and bring deprivation on a scale similar to that which has unfortunately afflicted the overburdened urban areas of Wales.

Welsh farmers ask about the interpretation of the word "common" in Common Market. Should it not reflect common beneficial attainments? It certainly should not be attainments that are patently disadvantageous and discriminatory. There must be a fair climate of competition, whether from products that originate in the antipodes or just across the Irish or English channels.

There is a great overlap and interdependence in agriculture, and errors of policy in one sector spread into others. Agriculture cannot be compartmentalised. The continuing lack of a comprehensive policy, particularly for the grassland livestock sector, bites deep into the stability of employment and unsettles the whole economy of that part of Wales. It threatens to turn that part of the Welsh countryside into a low-grade rural locality fit only for retirement and tourism and to bring back the scourge of depopulation.

6.42 pm

Mr. Michael Lord (Suffolk, Central)

The welfare of my constituency is inextricably interwoven with the welfare of agriculture, and for that reason I am pleased to speak in this debate. Farmers are constantly criticised. In some people's eyes they are guilty, first, of damaging our countryside, secondly, of producing food no one wants and, thirdly, of making too much money. Farmers are not guilty on all three counts.

It is true that, in some parts of thhe country, particularly where grain is grown extensively, to be more efficient, farmers have enlarged fields at the expense of hedges and trees. I live in the heart of East Anglia. It is still beautiful. Farmers have for a long time been aware of the impact that their operations make on the countryside and, with the odd inevitable exception, they have planted trees in enormous numbers and adopted sound conservation practices. With the assistance of the Farming and Wildlife Advisory Group, extremely forward looking local authorities and voluntary bodies, farmers are working to preserve and enhance all that is good in our countryside. The quite devastating effect of Dutch elm disease during the past 20 years is sometimes overlooked. The elimination of that fine tree, especially in the flat East Anglian landscape, has had a much more dramatic effect on the environment than anything that farmers have done. I suspect, however, that, without realising it, many people unconsciously blame the rapid alteration of our skylines caused by the loss of elms on our farmers, who are, of course, entirely blameless.

In the remaining non-grain growing farming areas of Britain, our countryside is, by and large, as attractive as ever. That is due in no small part to the beneficial effect of efficient farming, which creates what people enjoy. It would soon be missed if a decline in farmers' fortunes led to land being unused and neglected. As for producing surpluses, farmers have simply responded to past Government policies. They were asked to grow more to feed the nation and to reduce imports. Their only crime is that they have been too efficient. Farmers did not take the country into the EEC. Farmers did not construct the common agricultural policy. All that farmers have done is farm—probably better than their counterparts anywhere else in the world.

The third charge levelled against farmers is that they make too much money. Statements such as, "You never see a farmer on a bike," may well apply to certain types of farmer in certain years, but they do not apply to all farmers always. It all depends on the size of holding and what the farmer is producing. It is quite absurd to equate the income of a large corn grower in East Anglia with a small livestock farmer in Wales. Whatever may have happened in the past, all farmers now face serious difficulties of one sort or another, and they are unlikely to enjoy in the future those incomes that they enjoyed in the past.

Farmers stand guilty of being successful in doing what the nation asked of them. Who can blame them now for being alarmed and perhaps despondent if all that success has brought them is uncertainty and criticism? I hope that the House appreciates that farming's problems cannot be discussed in isolation. Farming is the hub of activity in our rural economy, and much depends on it. Although much labour has been shed from farming over the years, more farm workers may lose their jobs if things become so difficult that farmers have no alternative but to let them go.

I am sure that we all realise that it is no easier to be unemployed in the countryside than in the town. Many other industries depend on a flourishing agriculture such as the manufacturers and distributors of farm machinery, and of fertilisers or sprays, corn merchants and suppliers of animal feedstuffs. The very vitality of our villages hinges on farming. It is momentous for any nation to decide that it has too much food. Against a background of starvation in some parts of the Third world and the possibility of alternative industrial uses for cereals and sugar beet, I would like to think that we can explore every possible avenue, financial and industrial, to find out how to keep our agriculture moving forward, albeit at a reduced pace.

Nobody knows what the future holds. It is obvious that surpluses create grave problems, but insufficient food would cause even greater problems. We must constrain, but we must think carefully before we put such a successful and forward-looking industry into reverse and possibly into decline. To try to maintain some momentum in agriculture, while restraining production, we must pursue as energetically and urgently as possible the opportunities for improving our environment presented by the possibility of taking land out of farming and of using crops, such as grain and sugar beet, for new industrial processes.

As for conservation, it is essential that using land not needed for agriculture should not be portrayed as some form of set-aside just for the sake of farmers, but as an initiative on behalf of the whole nation to enhance our countryside. I am conscious that, without the necessary reductions in production, neither of the possibilities that I have outlined can solve our problems, but they may allow us to maintain an initiative and a different momentum in agriculture. That is important for the future.

I am pleased that our ministerial team is taking a robust stance on the present CAP proposals. As a farmer himself, I am sure that nobody appreciates more than my right hon. Friend the Minister of Agriculture, Fisheries and Food how great is the need for action, and how that action will affect our farmers.

Time is of the essence. Decisions must be taken as early as possible, and, hopefully, they will be determined by agricultural and financial criteria rather than purely political criteria as was the case with one of our European partners last year. We must remember that political decisions may be taken hurriedly, but farmers cannot react hurriedly without suffering serious damage. I am sure that the answer is to go for a package of restraints which, taken together, will have the desired effect, rather than to opt for any single draconian measure. Steady pressure on prices and the raising of quality standards for grain so that we do not grow that for which there is little demand, make sense.

The question is whether pressure can be brought to bear quickly enough which will not damage farmers too much yet will have the desired effect of reducing surpluses. Time is running out, and the possibility of quotas being used for cereals in the last resort must be a possibility. One of the many problems with quotas is that, whereas price reductions may force less efficient cereal growers out of production, the introduction of quotas may build inefficiency into the structure.

There is also a grave danger of the whole of our agricultural system ultimately being placed in a framework of quotas, entirely dependent on political decisions, and becoming increasingly divorced from the market place and the ebb and flow of competition and commercial changes. That presents genuine problems and means that in the long-term we could face problems which we have inadvertently created.

The beef variable premium has been extremely valuable because, above all, it gets beef eaten. I should like that sort of assistance to be given to producers of other products to help them similarly. However, because the beef variable premium has not been built permanently into the CAP structure, every year we have to give away another agricultural advantage in order to keep the premium. There must come a point when we have to decide whether it is in our long-term advantage to keep giving something away every year to retain the beef premium, or to negotiate some settlement once and for all.

I should like to remind the House of one important point behind our negotiations and difficulties. We have them because we are members of the EEC, and we are members, above all, to provide peace and stability for all European countries for the sake of this and future generations. No matter how hard we try, it will never be possible precisely to balance the financial books in Europe. With such a patchwork quilt of nations, climates, temperaments and political systems, there will always be some imbalance—some winners and some losers. That is the price that we pay for the peace and stability that we all enjoy. Sometimes we are in danger of overlooking that fact.

With that in mind, I hope that we can acknowledge the achievements of our farmers, appreciate their difficulties, and accept the responsibility for steering our agriculture into calmer waters, rather than, as some would advocate, abandoning it to its fate.

6.53 pm

Mr. Ken Weetch (Ipswich)

It is a pleasure to follow the hon. Member for Suffolk Central (Mr. Lord), and I listened carefully to what he had to say. However, I shall draw different conclusions from the same information.

Earlier in the debate an hon. Member asked where the anti-marketeers were today. I am one. I do not think that withdrawal is a viable option now, but at one time I was president of East Anglia's Get Britain Out Campaign, and I still hold the most fundamental criticisms of the common agricultural policy. In that light I shall consider the analysis presented in the big bundle of documents to which my hon. Friend the Member for Pontypridd (Mr. John) referred. Having read those documents, I would describe them as an attempt to be realistic in an overall framework which is wholly futile. They attempt to fix a current price framework and to look forward to changes in policies. Parts of the documents are ingenious, worthy, wordy, thoughtful and well-meant. They are a genuine attempt, by their lights, to come to terms with what the Commission refers to in the preamble as

the gravity of the present situation. While the proposals are all those things, they are destined to be of no avail, and the reasons for that are simple. No CAP is possible in Europe without the tortuous, agricultural acrobatics which we have year after year and which never change. There will be acrobatics next year and the year after, because the fundamental principles are wrong. The attempt to bind such diversity together in a common policy is wrong, and it will not work. Therefore, I challenge the documents on principle.

A Common Market with a satisfactory equilibrium for all is not possible. The CAP was an artificial creation, and it remains so. The labyrinthine proposals, which amount in principle to the lowest common denominator after everyone has used his calculator, are wholly unsatisfactory for almost all the parties involved.

The aims of the proposals are laudable. They aim to achieve a gradual return to equilibrium between supply and demand, which is unexceptionable; to make a realistic adjustment to market conditions; to begin a process of long-term adjustment so that we can eliminate structural surpluses which are too expensive and which are politically unacceptable; and to find a short-term middle-way adjustment between what is described as the full rigour of the market—I do not know what that means when it is translated literally—and decent incomes for farmers.

Both the Minister and my hon. Friend the Member for Pontypridd gave a fair description of the details of the proposals—and indeed they are a composite package with a great deal of complicated details. The proposals cover intervention buying for beef, intervention prices for butter, a co-responsibility levy for cereals, changes in oilseed regimes and a welter of other details. The House must appreciate the phraseology that the bureaucrats in Brussels turn out, because some of it makes entertaining reading. All of that is part of what is described as a continuous path to profound reform. I, and no doubt other hon. Members, will believe that profound reform when we see it.

As I am an East Anglian Member of Parliament and a neighbour of the hon. Member for Suffolk, Central, and as the port in my constituency is the most important grain exporting port in the country, I have a particular interest in cereals. The proposals rightly advocate the long-term aim of reducing the structural surpluses. Something has to be done. We cannot continue with the imbalance. The proposals must come to grips with that basic problem.

The statistic given in the Commission proposals for the European cereal crop for 1985 was nearly 140 million tonnes. That was the second best after the 1984 record. We are also told that production in 1991–92 is predicted to be 159 million tonnes and that that dramatic figure is the result of a well-marked trend in increased yields and increased productivity. I suspect that that is one of the roots of the trouble. British agriculture has long had the siege psychology of the war. For a long time we have urged farmers to produce, come what may. Then, over a short period, we tell them to try to put the whole process into reverse. It cannot happen. The slowing down of the psychological momentum is a difficult policy to put into practice.

The House should note that the record increases in supply have taken place in market conditions of almost static internal demand. Nor is it likely that milk and livestock activity will encourage greatly the feed element of grain disposal. Therefore, the future is not optimistic. The net result—vastly increasing supply, with static demand—is that stocks will continue to accumulate and will be a constant burden on the Community budget and on the British taxpayer.

The common price proposals are in paragraph 62 on page 47 of the report. One of the most controversial measures, which has occasioned much protest and on which I have had quite a number of letters from people involved in agriculture in my constituency, is in paragraph 65, which proposes to consolidate the financial co-responsibility of producers, policy on quality and changes in the intervention mechanisms. The co-responsibility levy has excited much comment. The report continues:

producers should bear some of the costs of disposing of production. We come back to the marvellous proposal that the levy will not be fixed at 6 per cent., so that industry would bear the full force of the rigours of the market—again I am not certain what that is—but will be fixed at 3 per cent. so that there is a more gradual adjustment. I am all for a more gradual adjustment, but I strongly suspect that in the adjustments that will take place in Community agriculture, British farmers will get the worst end of the stick because they consider proposals fairly and squarely and try to do their best by them. I am not confident that that happens in the rest of the Community. On my political journeys, I find that more and more people say that Britain is the one nation which always plays the game in agriculture and industry while others do not.

The right hon. Gentleman gave a fair description of the proposals. He had strong reservations about the levy and was right to criticise it. He also condemned quotas as a system which he said would fence in the existing inefficiencies. That is right as well. In trying to reduce the scale of supply in face of static demand there has to be a combination of administrative and price measures, but the accent must be on the price measures in the proposals. Quotas and management of quotas can become a bureaucratic nightmare.

To sum up my comments on the package, it is right to come to grips with over-supply and surpluses. The bureaucrats in Brussels who labour in notional grain fields are right when they say that, whatever they propose, someone will complain. Strong measures are needed. Some price adjustment is necessary. That is entirely logical, and we should emphasise it if we are to stop the accumulation of surpluses. In recent years farmers have suffered a fall in income. Nevertheless, if we consider the history of agriculture, we see that they have had good years. Any producer must take the good with the bad and must try to strike a balance.

The main point is that we need to undertake a long-term adjustment and some reduction in supplies. The key question is, on what principle should reductions be based? The reductions should be organised so that production is left with the most efficient farms. There is no future in propping up within a framework of agricultural support high-cost, non-viable units. The orthodox economic answer, and the most desirable answer, is to make reductions in such a way that production takes place in the most efficient units. The high-cost, non-viable units, especially on the continent, have caused distortions in the system. No system should be deliberately framed so that it is costed according to the structure of the least efficient unit.

Mr. Douglas Hogg

There is a great deal of force in what the hon. Gentleman says. Can he tell the House whether he thinks that national Government aid should be given to those farmers who are not among the most efficient producers?

Mr. Weetch

I shall answer that directly. Before the hon. Gentleman intervened, I had intended to conclude on this point. The hon. Gentleman made a relevant intervention in an earlier speech, and I made notes to answer the point, because it is a key point in the whole issue.

It is said in the proposals that to get the adjustment right we need yet more money from the consumer and the taxpayer. It is argued that we need short-term funds to put the problem right. The Minister should say, "There will not be any more money or, at least, it will be over our dead body." Perhaps I should not have said that, because it probably will be over our dead body. For as long as I can remember, the common agricultural policy has always been concerned with the philosophy, "Give us a little more money and we will make adjustments." We have always given more money, but I have not seen much rational adjustment, and surpluses are as bad as, or perhaps worse than, they have ever been.

I now deal with the point made by the hon. Member for Grantham (Mr. Hogg). I disagree fundamentally with the bedrock principle of the proposals as exemplified by this quotation from the explanatory memorandum: It is vital that the rigorous conditions imposed at Community level should not become a justification for a gradual process of 'renationalisation' of the agricultural policy. I disagree. The policy should lead exactly to that It is better to have the sum of individual national policies than artificially to bind them together in the way suggested.

When we set out on the common agricultural policy, it was obvious to most observers that it would work only —most people had their doubts whether it would work at all—as the result of tortuous, labyrinthine gymnastics. That must be done repeatedly to reconcile the absurdities. Agriculture in Britain accounts for less than 3 per cent. of the gross national product and employs about 3 per cent. of the working population. Yet we must bind that together with other agricultural producers, when the figures are different.

Mr. Robert Jackson (Wantage)

As the hon. Gentleman is in favour of renationalisation of agricultural support, whose farmers does he believe would be the losers in a subsidy race between the agricultures of Europe?

Mr. Weetch

Our farmers have always lost. Each nation should fix a scheme of agricultural support that suits its individual circumstances. That would be the honest thing to do. Agricultural prices should be fixed, not by bureaucratic fiat, but with some reference to supply and demand. If the market price that emerges puts farmers in difficulties, there should be open assistance from the taxpayer. That is the right way to finance the package. If that if heresy, I plead guilty. I see no future in repeating such discussions year after year when, in reality, the policy stands on a quicksand.

7.12 pm

Mr. Robert Jackson (Wantage)

A central theme in this debate, which was mentioned by the hon. Member for Ipswich (Mr. Weetch) and on which there was a cross-party consensus—interestingly, there have been many points of cross-party consensus in the debate—is the discriminatory aspects of the Commission's proposals. I will briefly rehearse them.

On cereals, the proposed exemption from the levy of on-farm consumption and of the first 25 tonnes will bear especially hard on the United Kingdom: in the Federal Republic of Germany only half of all producers would be eligible to pay, whereas nearly every British producer would do so. On beef, the proposed limitation on headage payments to the first 50 would affect Britain especially severely. On sheepmeat, the proposed limit of the new premium to the first 500 beasts would discriminate against Britain, which produces more than half the Community's sheepmeat.

All those measures undoubtedly reflect discrimination against British interests, as many hon. Members have said. But let us be clear what we mean by discrimination. We cannot, I think, charge the Commission with intentionally discriminating against Britain. The discrimination is one not of intention but of effect—although it must be said that one could understand the people in Brussels wishing to apply the greatest pressure on the agriculture of that country which has been most pressing in its demands for reforms of the common agricultural policy.

The discrimination we are talking about is the consequence of the particularities of the structure of British farming as compared with farming on the continent. It comes from the relatively large size of our holdings in Britain, and the relatively large-scale development of our sheep production. Thus, the discrimination of which we complain is similar to that inherent in the idea of higher quality standards for intervention cereals, which was mentioned by my hon. Friend the Member for Sherwood (Mr. Stewart). This inevitably penalises countries with a wetter climate, such as Britain, and favour those with a hotter climate.

However, the cause of our present difficulties is not just our relatively large holdings. After all, why should the size of holdings be relevant? The cause lies deeper: it lies in the desire, or the political necessity—one might almost call it the moral imperative—of Community Governments to safeguard small producers in an era of increasingly strict CAP regimes.

What does Britain think about the future of small producers? I fear that in the House, and perhaps even in Government circles, there is still a lack of clarity and insight into the problems of these small producers. Thus the hon. Member for Pontypridd (Mr. John) brushed aside in passing the small, part-time producers on the continent, and there was a similar flavour to the speech of the hon. Member for Ipswich. The general idea seems to be that the small producer is a continental problem, not a British problem. But surely under a common agricultural policy it is also a problem for Britain. This becomes clear when the Community's solution to the problem of the small producer leads, as it is now leading, to structural discrimination against our industry. In short, the lack of a clear view of how to tackle the problem of the small producer is a serious weakness in our position in the Community.

So what view should we take? There are two broad possibilities. First, many say that there is no need to protect the small or economically marginal producers. If they are squeezed, so be it: that is, after all, the rule of the market as we accept it in every other sector of industry. That was essentially the view of the hon. Member for Ipswich, and I thought it was the view of my hon. Friend the Member for Wells (Mr. Heathcoat-Amory) until I heard him say, interestingly, at the end of his speech, that we must separate the social and economic functions of the CAP. I agree with that. There are strong moral, social and environmental arguments for supporting the rural economy and a rural society based on the cultivation of the land.

Much more importantly, my right hon. Friend the Minister also believes that the market should not be left to find its own level. He also knows that the rural economy is important, and, moreover, he knows that he must operate in the Council of Ministers on a basis of political realism. That is, incidentally, the answer to the remark of my hon. Friend the Member for Wells about the use of the famous budget lever. No solution to the problems of the CAP is politically negotiable unless it takes into account the problems of the small producer.

Mr. Kenneth Hind (Lancashire, West)

Is my hon. Friend aware that in some areas, especially rural Lancashire, the vast majority of farms are small—about 100 to 120 acres—and produce only vegetables? The remainder of the agricultural sector consists of smallholdings producing tomatoes and other foods under glass. Does he agree that we must consider the effect upon such communities of alterations in pricing structure such as those that we are discussing here?

Mr. Jackson

My hon. Friend confirms my point, and I agree with him. However, he should always remember that we are considering the concept of the small producer in the Community context. What is small for him or for us may be large by continental standards.

The second way to help the small producer is for Britain to say, "We must look after the small producer as defined in the Community, but we must not do it in the way proposed in the strange ideas that are coming from Brussels—that is to say, by way of size-related-exemption from levy and by size-related hillage payments." I think that this is what my right hon. Friend the Minister is saying in the negotiations and that that is what has been said today. On national grounds, we have a good case for adopting that position, but the weakness of our position is that we do not seem to be putting forward alternative ways of addressing the problem of the small producer.

I understand the inhibitions felt by hon. Members on both sides of the House when it comes to devising such alternative ways of assisting small producers. Any community policy that will help small producers will be disadvantageous to the United Kingdom, as we have fewer small producers than continental countries. Nevertheless, it is important to remember that in parts of the country, such as Northern Ireland, small producers do exist even on a continental definition of that concept.

But despite the difficulty, it is in our interests to press for less damaging ways of protecting small producers. It is in devising alternative ways of dealing with the problem that we shall find the key to our credibility in resisting the Commission's present approach, based on farm size. From Britain's point of view, the key lies in shifting the burden of support for small producers from the backs of our larger producers—as the proposed system of levies with exemptions entails—towards the Community budget. In short, the Community budget should take the strain of supporting small producers.

Two policy instruments could be used to cut European farm production and to protect small producers, without damaging British farming interests. But both those instruments would be expensive to the Community budget. The first has already been mentioned several times—I refer to set-aside. In my view this should be concentrated on the best land and on the biggest producers, so that we can achieve the maximum effect on production with the minimum social disruption. However, that would be costly.

The second policy instrument—I echo the words of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)—is the introduction of a system of direct income support payments for those small producers whom we want, for whatever reason, to support. Of course, that should be linked to limitations on their output so that we can limit the economic irrationality of the social policy that we want to pursue. This again would be costly.

There are, of course, many ideological and practical difficulties to implementing such concepts. Perhaps the most fundamental political difficulty lies in their cost to the Community budget. No doubt that consideration will be uppermost in the minds of our Treasury Ministers—indeed, Ministers in all countries will give it a high priority. I beleive that it is also uppermost in the minds of my hon. Friend the Member for Wells and the hon. Member for Ipswich, who both spoke about the need to restrain the budget.

But while there is no doubt that set-aside and direct income payments from the Community budget would be expensive to that budget, from the British point of view that should not by itself be a serious objection, given that Britain's net contribution to the Community budget is automatically limited by the Fontainebleau agreement. Surely it would be better to take the strain of supporting the small producer on Britain's cash-limited net contribution to the Community budget than to let it fall on the backs of Britain's farmers—which would only bring great economic, and possibly great fiscal, costs to Britain.

In talking about the Community budget and allowing it to increase, we raise a new set of issues, particularly the phobia which many of us have about its growth, but we must overcome that phobia not just for wider reasons but also for the sake of British agriculture.

7.23 pm

Mr. Richard Livsey (Brecon and Radnor)

There is much cross-party agreement, and the Minister should take that back with him to Brussels. After all, the Community should know of the broad cross-party agreement that exists.

We must not forget that agriculture is still one of the United Kingdom's major industries. Any tinkering with it will have a major ripple effect throughout our economy. Remarks have been made about the effect on the rural economy, and there are serious implications there.

We have all heard of the 43 per cent. drop in farmers' incomes, as published in the White Paper; but hon. Members should recall, too, that there has been a 75 per cent. drop in farm incomes in Scotland, which represents a severe setback to farmers in that part of the world. Indeed, in my part of the world, Wales, many medium and small farmers are on net incomes of about £67 a week. I do not believe that small farmers can live or raise families easily on that sort of money. Moreover, it is not possible to service borrowings on that sort of income, so the situation is serious.

Some of the remarks of the hon. Member for Wantage (Mr. Jackson) are relevant in terms of discriminating between social policy and policies that generally support the Community's agriculture. From the 7 March edition of Agra Europe it can be seen that the figure for the input-output relationship in the United Kingdom for the past 12 months is minus 3.1 per cent. compared with 1984. However, the figure is plus 1.1 per cent. for the Community as a whole. That is indicative of the discrimination against United Kingdom farmers. In the last round of price fixing, the United Kingdom was awarded an average increase of 0.2 per cent. to offset inflation of 5.4 per cent. But the average price increase for the European Community as a whole was 1.8 per cent., with inflation of 5.3 per cent. Thus our farmers were left in a less competitive position than their European colleagues.

That situation is confirmed by the White Paper and the figures for 1986. Moreover, bank borrowing and advances to agriculture in the United Kingdom continued to rise throughout 1985 and were, at £5,520 million, 5 per cent. higher than during the previous year. Interest charges accruing to the industry rose by 19.6 per cent. to £687 million. Those are enormous sums, and the industry as a whole has been dealt a severe knock.

I do not agree with those who say that the consumer has been particularly hard hit. Food price increases have been below the level of inflation, so the consumer has had a good deal out of the CAP. Rather, the issue is how to tackle the problem of surpluses. Several measures could be implemented which could lead to a possible reduction in prices or the imposition of quotas, but clearly the argument is not as simple as that. When Mr. Andriessen was here not long ago, he gave the classic European view against quotas. He said that quotas were always pitched too high. In other words, there was not the political will to impose them at a lower rate. That can be seen in milk production quotas, which range between 14 and 16 per cent. over and above production levels. He also says that quotas freeze production and that quotas represent a further step in state control with more political interference in agriculture and markets. He also said to the Farmers Club that there was unanimity against quotas in Europe as a whole.

Those who advocate quotas and control of production in the United Kingdom must face the fact that in Europe there is a great deal of unanimity against quotas. To advocate those unilaterally, as some people may, is a difficult hill to climb.

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

The hon. Member for Caithness and Sutherland (Mr. Maclennan) suggested that the amount of farm produce qualifying for the full guaranteed price should be geared to what can be produced on an efficient family farm. Could that be done in any way except by fixing quotas on each and every item for each and every farm?

Mr. Livsey

I am assembling my argument for the case that the European Commission has set against quotas. I shall not be advocating out-and-out quotas, but I shall be following lines similar to those of the hon. Member for Caithness and Sutherland (Mr. Maclennan) who did not advocate an absolute cut-off point, but demonstrated that it was possible to have something like standard quantities with open-ended production, where producers could produce an additional amount and they would have to accept a lower price in the marketplace if they produced above the guaranteed standard quantity.

Mr. Gummer

Quotas.

Mr. Livsey

That is the right hon. Gentleman's definition of quotas, not mine. I should have thought that a complete cut-off would have been an out-and-out quota.

There is great agreement across party lines on many aspects. We see absolute opposition across the parties to co-responsibility in the cereal market. All the arguments against that have already been put forward. I merely underline that we are against that, too, and that co-responsibility is counter-productive to agriculture.

We on these Benches believe that price support for farm production can no longer be open-ended and that eligibility for price support should be limited so as to release an increasing share of present support costs from wasteful storage and disposal programmes. We are looking at the problems of intervention storage funds and making funds increasingly available for positive measures aimed at supportable objectives. We would certainly see those objectives as supporting the family farm in a situation where policies could discriminate in favour of such units.

We support the objectives of environmentally sensitive areas, and existing support to less favoured areas must be continued and developed. We also recognise that with the entry of Spain and Portugal the CAP must be adjusted to the increasingly diverse nature of European agriculture. The limits on eligibility must be adopted in each country and be appropriate to its farm structure. We must have a policy overall which takes account of the farm structures in individual countries in the European community. It is no longer possible to have a generalised CAP which, for example, must apply in Portugal which I believe has an average of only three cows per herd in its dairy herds. Problems arise in different national situations.

As a supporter of the EC I believe that the CAP has done a great deal to help British agriculture, but there must be a move to sort out the general administrative guidelines of the CAP within individual countries. If that can be done, account can be taken of farm structure problems in the United Kingdom, and that issue would not be fogged by small farms in other European countries.

There must be more realism about the competitiveness of grain on the world market. The scheme that we are outlining would make additional production more competitive on the world market.

The outgoers scheme foresees the possibility of a 3 per cent. reduction in milk output. As many hon. Members have stressed, that should be applied evenly throughout the EC. The United Kingdom must not go along that path alone. This is a serious matter, because we do not wish our producers to be at a disadvantage. We certainly would not wish to see a reduction in milk quotas in the United Kingdom. We prefer the outgoers scheme. However, that scheme must be administered fairly and equitably between tenents and land lords. That will be difficult to achieve, but the scheme must be seen to be fair.

The problems of the super-levy in the United Kingdom, in particular, come from the proposal to have a six-monthly calculation. That is clearly not to our advantage. Indeed, it does not take account of the seasonality of production in Britain and it may militate against us. Therefore, we reject the six-monthly calculation for super-levy and wish to see it kept on a 12-monthly basis.

If there is to be a reduction in milk output through the outgoers scheme, the EC must arrange compensation for job losses in industries associated with the milk industry. It is no good accepting a loss of production if we then see, as the hon. Member for Carmarthen (Dr. Thomas) described, 450 jobs being lost in a creamery in one fell swoop. That problem is not unique to west Wales. It occurs in the west country and the north-west of England as well.

The problems of a price freeze for milk to the small farmer are considerable. We must find ways of allocating more quotas to small and medium milk producers. In particular, there is a need for a pool of quota to be administered by the milk marketing boards in an evenhanded way. Wherever additional quota is available, it should be given to those most in need.

I agree with much that has been said about the retention of the beef variable premium. It is essential. It benefits the consumer as well as the producer. It is likely that the scrapping of the variable premium would result in a loss of £40 per beast, whereas the 50-beast headage payment works out at just under £13 a head and is no replacement. We are seeing at least a £27 per head net loss on the sale of every beast if we accept that scheme. Clearly, as has already been said, 50 beasts is far too low a figure anyway. I am sure that that message will be taken back to Brussels because our beef farmers are already making losses on their beef enterprises. It would be a disaster to stop the beef variable premium. Britain is the subject of the weekly scheme for target prices, and the last time we abandoned that, in 1973–74, we saw a complete disaster for the industry, with a loss of confidence and beef prices plummeting as a result.

The sheepmeat regime must be kept, and variable premiums have a significant part to play in that. In the longer term I want to see something done about the possibility of gradually trying to reduce the amount of New Zealand imports and to assist New Zealanders to develop markets in the far east, which appears to have a booming economy.

Mr. Jim Spicer

I have a slight problem when I am talking to those people who have been taking aid to the Third world. Will the hon. Gentleman make clear his position about what the hon. Member for Caithness and Sutherland (Mr. Maclennan) said about wanting a ban on feeding stuffs from the Third world? Such clarification would be helpful to us all.

Mr. Livsey

I did not hear my hon. Friend the Member for Caithness and Sutherland say that he wanted a total ban on all such products.

New Zealand lamb is often included as a bargaining counter with our lamb in our negotiations with the European Community. This is a complex programme at which we have to look carefully. We reject the limitation of headage annual payments for sheep to 500 in the lowlands and 1,000 on the uplands. This rejection has cross-party support, and that message should go back to Brussels.

The general principles involved in any reform of the CAP must be protection of the position of small and medium-sized family farms, particularly those in the United Kingdom. I have not been able to understand—but I am sure that there will be a valid explanation—how it is possible for farmers with the equivalent of 50 acres in Brittany to be able to make a worthwhile living for both father and son, when it takes a farm three times that size in the United Kingdom to support a similarly high standard of living. That highlights the problems of different farm sizes throughout the Community and the need for national administration of the CAP.

We must protect the position of farmers in the less favoured areas. I welcome the announcement of increases in suckler cow headage payments, made at the end of last autumn. We must continue to monitor closely the less-favoured areas farm incomes. There has been a 75 per cent. drop in farm incomes in such areas in Scotland, and there is evidence that, in similar parts of Wales, there has been a 60 per cent. drop. We should maintain farmers' incomes on family units, and, if necessary, support them directly.

There is a strong case for devaluing the green pound to protect our agriculture. I make a plea, in particular, that there should be a drive to support rural areas as well as the farmers as a major change in policy. Rural policies have been pressed home hard within other countries in the European Community. We should follow them on that. If we do not, we shall see a grave rundown in our rural areas.

7.42 pm

Mr. Jim Spicer (Dorset, West)

My right hon. Friend the Minister made it clear that this debate comes early in the price-fixing round for this year and that we are in the preliminary skirmishing stage. We all wish him and my right hon. Friend the Minister of State well, and we know that they will make a substantial team.

I am glad to see the hon. Member for Caithness and Sutherland (Mr. Maclennan) back in the Chamber. When I think of the rough-house in which my right hon. Friend has been and will be engaged in Brussels, my farmers in west Dorset and I thank our lucky stars that we have our team batting for us, and not a team made up of some Opposition Members from the Liberals and SDP. There is a poor attendance on the Opposition side of the House. They have been in and out on to the Labour Benches, and now there is just one Front Bench spokesman and one other Member. We have one of the SDP and one member of the Liberal party.

We are delighted to see my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) back here and in such fighting form. He has said practically all that I wish to say, whereupon others will ask why the devil I do not sit down. I shall not do so, because I shall turn to some of the long-term problems.

My hon. Friend the Member for Torridge and Devon, West, was a little unkind to the hon. Member for Pontypridd (Mr. John), who made a valid point. Year after year, we in the Conservative party have said at the annual price fixing that we should have been doing this five or six years ago. Three years ago, my right hon. Friend the Minister was saying this at the first price fixing that he attended. We must get this thing straght, but at the moment I am sorry to say that we are tinkering with this matter, which is a time bomb.

The cost of the CAP goes up annually. There are various estimates of what it is today, but it must be in the region of £11 billion or £12 billion a year. That in itself might be acceptable, but what is not is the cost of storage of surplus foodstuffs, which amounts to nearly 50 per cent. of the total. We know that the need to dispose of foodstuffs will continue. We have talked about the plight of our farmers, the drop in incomes of 43 per cent. for 1984 and, we would guess, worse to come in 1985. If all the cost of the CAP were going direct to our farmers in the form of support to keep up their incomes as they need to he kept up, half the problems would disappear.

As we go into this tough negotiating period, we should not lose sight of the need for a root and branch reform of the CAP. Two factors make such reform imperative. The first is the entry into the Community of Spain and Portugal, and the second is the ever rolling programme of national elections. It is self-evident that olive oil and milk do not mix. It is equally self-evident that within the Community we now need two common agricultural policies—one for Mediterranean products and one for products from the temperate climate. Sooner or later we shall have to make a decision to separate the two regions, because we have what might be called a Mediterranean time bomb. It is ticking away, and three or four years after the entry of Spain and Portugal, while we concentrate on temperate products, the production of olive oil, wine and other Mediterranean products will increase and the cost will go out of control.

The rolling election programme is our second problem. In our heart of hearts we know that we go into the price fixing not knowing who will be the French Minister of Agriculture this time next week. I am sure that my right hon. Friend the Minister has a fair idea of who it might be, but in the preliminary encounters the French have not been playing any positive role. They have been blocking as they go, because they have been waiting. We do not know what the position will be after next Sunday.

We know that the German elections take place in January next year, and we know the situation in Bavaria, which has an important part to play in those German elections. The attitude of the German Minister of Agriculture on price fixing has shown that he is concerned not about prices but about the votes of German farmers.

Some of us had the privilege of spending time with the Prime Minister of Bavaria last Monday and Tuesday. We know that uppermost in his mind is the query: what will suit my farmers? That is what he will deal with and already in the German agricultural policy team thinking goes very much towards some form of support outside the CAP, using every possible means to support the smaller farmers, in Bavaria in particular.

Mr. Maxwell-Hyslop

Before my hon. Friend continues, will he agree that the only form of support that does not increase surpluses is one that involves quotas?

Mr. Spicer

I do not believe that that is the case. I shall refer to that matter shortly and comment on that suggestion.

The Prime Minister of Bavaria made the following points to us quite clearly. He said that by 1969 he had recognised that the common agricultural policy in the form in which it was evolved in 1957–58 had outlived its usefulness. He wanted to see a change in the CAP at that stage, but he was overruled by others. We have therefore gone on year after year pursuing a policy that will get us nowhere except increasingly into trouble.

I have some thoughts for the structural changes that are necessary in the longer term for the CAP. My first idea is that there should be a separate policy for Mediterranean and for northern products. That will have to come about in some form or another. The second is for a Community funded programme for everything that relates strictly to really efficient food production. That programme should, in the general interest, be economically viable and derive from viable farms. This area and its produce should be the responsibility of the CAP.

Many hon. Members have already said that we need to develop a genuine rural policy that is a social policy as well. It would be wrong for agriculture always to be locked into the social needs of Bavarian farmers and small farmers throughout the Community. We must get genuine farming away from social needs, although I do not know how that new social structure and rural policy should be funded.

It was with some forethought that in 1975–76, Sir James Scott-Hopkins, just before he became leader of the Conservative group in the European Parliament, produced a document on a rural policy that described the way, that we should proceed. Whether that policy can be funded partly by the European Community and partly from the national Exhequer I do not know, but unless we have a scheme along those lines we will increasingly see some areas, parts of west Dorset, west Devon and of Wales and Scotland, where the bottom, poorer quality farms will be squeezed and farms will be on the market not for a month, or two months before they are sold, but for a year, two years or three years. It is no answer to see the upper end of the market, the grade 1 land continuing in full production and to see those areas comprising land further down the scale become what they were in the 1930s. That is my great fear, and all hon. Members should share that fear.

The time for bodywork restoration on a European common agricultural policy which is some 30 years old is almost past. We must look to a time when we will buy "a new car" with a new engine and new bodywork. We do not know just what shape that car will take, but one thing is clear—that a newly enlaged Community cannot possibly cope and that other measures that might be taken will not be administratively feasible. For example, hon. Members can see the impossibility of trying to administer quotas on milk within some member states of the European Community. If we then try to adopt more involved measures to control production, we have to build up a new bureaucracy to administer that. We must have a simple solution which can be applied across the whole of agriculture in the Community.

If we do not go for radical change, sadly we will slowly go on spending more and more money to less effect. In the meantime, the Minister and the House know that we must fight our corner, and we look to the Minister and the Minister of State to do that over the next few months in Brussels.

7.54 pm

Mr. Eric Deakins (Walthamstow)

I must first apologise to both Front Benches for the fact that I was unable to hear the opening speeches. I had to attend a Select Committee which went on for rather a long time. I came to the Chamber as soon as I could.

The hon. Member for Dorset, West (Mr. Spicer) made a very thoughtful speech. To a surprising extent, I agreed with his comments. However, like many such speeches on the common agricultural policy—we shall hear more and more of them as the years go by while we are in the EEC—it sounded very good but will have virtually no impact. Such speeches will have no impact for the reason given by the hon. Member for Dorset, West—because the agricultural lobby in southern Europe has been strengthened by the admission of Spain and Portugal.

The hon. Gentleman said that we should have two agricultural policies. I do not know how that would work; in effect, we have two agricultural policies already in the CAP and we have had them for some years. For at least five years I have beeen warning hon. Members that the admission of Spain and Portugal would mean vastly increased costs for the CAP. It was obvious then, and it is obvious to all hon. Members now, that over the years countries such as France and Italy, and latterly Greece, knowing that Spain and Portugal were going to gain entry, tried to ensure that their own positions were strengthened in advance. They tried to do this, first, by a system of price incentives for olive oil and such products and also by a series of programmes called integrated Mediterranean programmes to strengthen the rural infrastructure in those areas. These have added greatly to the cost of the CAP in advance of the entry of Spain and Portugal.

Once negotiations were under way, those countries secured even more concessions, so that they could meet the competition from Spanish and Portuguese agricultural producers. Now that Spain and Portugal are in, all five Mediterranean countries will be working together in mutual support to ensure that they do not compete too much and that they each have a better standard of living. They are achieving that as a result of support from northern European countries in the Community. I agree with the concern expressed by the hon. Member for Dorset, West about that matter.

The unusual feature of this debate is that it is the first to take place when circumstances are changing in the Common Market. This is the first year that we have debated agricultural prices in the Community when a financial guideline has been in operation. I was overjoyed, until I read the motion tonight, to learn that the Minister had told the House in an answer on 6 March: The Commission and the Council are committed to the financial guidelines. It will be an important objective to ensure that it is held to in the coming negotiations on the CAP."—[Official Report, 6 March 1986; Vol. 93, c. 430.] The Prime Minister said on 5 March:

A key objective of Her Majesty's Government when examining new expenditure proposals is that they should be compatible with the budgetary discipline conclusions adopted by the Foreign Affairs Council on 4 December 1984."—[Official Report, 5 March 1986; Vol. 93, c. 146.] The motion, although full of good phrases which will no doubt appeal to Government supporters, says nothing about the budget discipline agreements or the financial guidelines for agriculture. It is now 10 March and I wonder whether in the past five days there has been a change of heart, since the Minister of Agriculture, and the Prime Minister firmly told the House that they would be approaching the CAP price negotiations in the light of the budget discipline agreements.

We now know, of course, from the Commission that its original estimate of agricultural prices of 20,445 million ecu for 1986 was within the financial guideline of 20,619 million ecu. Since then, the Commission has come forward with a supplementary estimate of 790 million ecu, making a total of 21,235 million ecu, which goes beyond the financial guidelines.

When the Minister of Agriculture noted this point in a written answer on 26 February he said that he was concerned about the fact that the Commission had put forward proposals that were outside the financial guidelines. I query his use of the word "concerned". If I had been the Minister, I should have been appalled that, in the first year of the operation of the financial guidelines, the Commission had thought it necessary to make price proposals for the 10 members of the Community—I use figures that relate entirely to them, not to Spain and Portugal—that exceeded the financial guideline.

Despite assertions to the contrary from some Conservative Members, there will be a supplementary budget in 1986. If and when that comes about—I think that it will—the House should note that there will be hell to pay. It will go right against assurances given to us by Her Majesty's Government about their approach this year to the common agricultural policy price negotiations. The fanning lobby in Britain will find that the climate becomes increasingly hostile—not because of a general hostility to farmers, which I do not believe exists, but because of hostility to paying out more and more money without the exercise of any control so that more and more surpluses can be produced.

I do not want to deal with the deficiencies and evils of the common agricultural policy—they are well enough known and appreciated, even by those who support British membership of the European Community—but I want to stress that this pressure on the budget is likely to have an unfortunate effect upon British agriculture. Eventually the poor taxpayer, let alone the consumer, will revolt. I think that Treasury Ministers also will revolt eventually and say, "We cannot go any further; we must cut agricultural spending. We do not mind how it is done, but it has to be done." That will be the worst of all worlds, in particular for British agriculture.

If cuts are to be made, and I believe that they have to be made, they should be made in the interest of British farmers and British agriculture. They should not be the result of the kind of Treasury chops that have had to be made in recent years in so many other areas of public expenditure. They should be well thought out.

The problem with the common agricultural policy price negotiations is that the package deals that emerge at the end of the day are not well thought out. The packages do not appeal to every member of the Community, but there is sufficient in them to carry the support of at last a majority of the members of the Community. We have to accept that system. I think that it is an absurd system, and other hon. Members may believe it to be absurd, too, but we cannot escape from it. Therefore, all the fine words about living within our resources and keeping CAP prices within the guidelines are as words thrown into the wind, because at the end of the day the power of the farming lobby in Europe, which is much stronger electorally than it is in this country, will have its way.

I have a message for my hon. Friends on the Opposition Front Bench and, indeed, for the country. The Labour party has promised—at the next general election I expect that the Conservative party and the alliance will also promise—to reform the common agricultural policy. However, the electorate should be warned that there can be no effective, radical reform of the CAP. To mix my metaphors, it is not that kind of animal. Its basic principles and objectives are unalterable. There is no way in which it can be so radically altered that surpluses will cease to be produced or costs cease to escalate. The escalation of costs in recent years is as nothing compared with what is likely to happen in the next few years, particularly with the admission of Spain and Portugal.

Consumers will also become increasingly dissatisfied when they see that some countries with inefficient agriculture—like the Soviet Union, which must have one of the most inefficient agricultural industries in the world—can make up for the deficiencies in their agricultural policies by riding on the backs of farmers in western Europe and buying tip their surpluses extremely cheaply.

Mr. Baldry

Is not the point that the common agricultural policy enables us to feed our people, whereas the agricultural policy of the Soviet Union does not enable it to feed its people?

Mr. Deakins

I do not recall that there was any starvation in Britain before we entered the Common Market. We had a completely different agricultural policy then. I worked for a long time in agriculture under the provisions of the 1947 and 1957 Acts, and I do not recall any starvation.

Mr. Colin Shepherd

I take the hon. Gentleman's point on board, but is it not the case that the previous system of agricultural support was the cause of grave concern to the Treasury and that it was clear that it would have to be radically overhauled? The move to the common agricultural policy was not so much one of support as of bringing costs under control, for the previous deficiency payments were way out of control.

Mr. Deakins

I do not think that what the hon. Gentleman says is right, but I stand to be corrected. However, I am not aware that the costs of the previous policy were out of control. When it looked as though they were getting out of control—once or twice on pigs, for example—we introduced the concept that the hon. Gentleman mentioned, of standard quantities. There were deficiences in that system—I know of no agricultural system which does not have its faults—but it was much better than the present system. Moreover, we were not then living as neighbours with a continent that was producing food surpluses, because in the 1960s and the early 1970s the common agricultural policy had only just got going.

I hope that the electorate, if not the House, will take note of the fact that there cannot be reform. Whenever politicians on all sides talk about reform, the electorate ought to take their words with a great pinch of salt. The only way to change the common agricultural policy is by having a different agricultural policy, not more of the same.

8.6 pm

Mr. Andrew Hunter (Basingstoke)

My speech will be very short. It is obvious that a number of hon. Members still hope to catch your eye, Mr. Deputy Speaker.

I want to return the attention of the House to what seems to be a lesser theme in the debate and to concentrate again on the problems of milk production. I shall speak very briefly on the co-responsibility levy, the super-levy, and the outgoers scheme.

Before I do so, I shall break my self-imposed discipline and refer to an extraordinary exchange earlier in the debate which intrigued me. I regret that the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) is not present. Were she here she would hear me say that for the very first time I find myself in total agreement with her. I refer to that most extraordinary revelation by the hon. Member for Caithness and Sutherland (Mr. Maclennan) which led to an intervention by my hon. Friend the Member for Dorset, West (Mr. Spicer). My hon. Friend and I—and, no doubt other hon. Members—will tomorrow study very carefully his words in the Official Report. It is certainly my impression that, at the very least, he said that it is official SDP policy to restrict imports from the Third world, despite the moral implications of that policy, despite the impact that it would have upon the economies of Third-world countries and despite the fact that it would undermine so much of what our official aid programme is seeking to do.

I wish to refer briefly to the co-responsibility levy. I was heartened by what my right hon. Friend the Minister of Agriculture, Fisheries and Food said at the beginning of the debate. His attitude has become well known, and I hope that in the near future it will be possible for his words to be translated into action. The continuation of the levy is profoundly unacceptable. Milk supplies are controlled effectively by quotas. They will be controlled further when the outgoers scheme is introduced. The levy has not materially affected supply. Moreover, the money raised by the levy has not been directed—although this was its original justification—towards expanding the market. Many hon. Members will hope that my right hon. Friend will continue most vigorously to champion the immediate end of the co-responsibility levy, or at least to phase its ending over a number of years.

I turn with equal brevity to the super-levy. I accept the comments made by the hon. Member for Brecon and Radnor (Mr. Livsey), for on this issue there is appreciable common ground. I think that we all accept and support the principles that were expounded by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills).

I find that there is much merit in the argument that is being advanced by the Milk Marketing Board and by others. They are saying that there is every reason to be concerned about the proposed twice-per-year payment of the super-levy. Hypothetically, not improbably, we can visualise circumstances whereby there is over-production during one six-month phase and under-production the next. In those circumstances, we could witness the absurd fiasco of a levy that has been raised being refunded. Such a programme could not be justified.

I imagine that the six-monthly volume would be based on the 1983 production figures. As we so often remind ourselves, 1983 was a typical year. The Milk Marketing Board observes also that a six-monthly levy would work counter to its own campaign of trying to encourage milk producers to change their original monthly pattern of milk production so that more efficient use could be made of manufacturing capacity while ensuring that sufficient milk remained available for the key parts of the market. I hope that my right hon. Friend the Minister of State will comment on that when he replies.

In a fraction more detail, I shall address myself to the outgoers scheme. I believe that there is a need for an EEC outgoers scheme, but I agree with my hon. Friend the Member for Torridge and Devon, West that it must be applied evenly to all member states. Uneven application would be unacceptable.

I welcome the little that my right hon. Friend the Minister of Agriculture, Fisheries and Food said on this subject in his opening remarks, but I wish that he had said a little more. He has to perform a balancing act between potentially conflicting interests—between landlord and tenant. The hon. Member for Crewe and Nantwich championed the cause of the tenant, and I do not blame her for doing so. I did that myself when the Agricultural Holdings Act 1984 was passing through the House. I appreciate the dialogue that I have established with the Tenant Farmers Association.

In this instance I am influenced by the arguments of the Country Landowners Association, which has drawn attention to the drastic implications for the landlord-tenant system if article 4 of the proposed regulation becomes reality. I hope that this issue has been taken on board by the Government. Quota is attached to the land, and the basic proposition advanced by the CLA is that landowners have an interest in quota and that quotas should not be disposed of without the landlord's consent. The hon. Member for Crewe and Nantwich did not take that consideration fully into account.

If the tenant were to be allowed unilaterally to dispose of quota, he would effectively have the power to ensure that economic milk production could not be carried out by a following tenant on that farm. Surely that cannot be right. The existing tenant took on the farm, which had potential for dairying, and there is little justice in his being able to deny that right to future tenants.

Mr. Maxwell-Hyslop

What my hon. Friend is saying can be true only in the absence of transferability of quota. If not, compensation would enable the landlord to buy in quota.

Mr. Hunter

I accept what my hon. Friend has said. If he bears with me, he will find that I shall be expanding on that issue.

I was referring to the proposed change to article 4 which the CLA has advanced. It is as follows: In the case of rural leases, the request for compensation should be presented by the lessee with the consent of the lessor, that consent not to be unreasonably withheld. The CLA suggests that it is reasonable for a quota to be retained so that the farm can be relet with quota. The quota could be reallocated by the landlord to make another dairy farm or estate viable. In general terms, that would allow sound and good estate management to be followed.

The Commission's proposal to pay part of the compensation to the landlord, provided that he has effectively contributed to milk production, cannot be accepted. The Commission does not regard the provision of land as a contribution to milk production. I believe that is wrong. The provision of land must and should be seen as an effective contribution to milk production. My right hon. Friend the Minister of Agriculture, Fisheries and Food must in negotiations on the outgoers scheme protect the landlord-tenant system and ensure that article 4 is amended to require landlord consent. I hope that my right hon. Friend the Minister of State will return to this in some detail when he replies to the debate.

8.17 pm

Mr. Charles Morrison (Devizes)

It is a pleasant surprise to be called by you, Mr. Deputy Speaker, to contribute to the debate. Farming has had its ups and downs over the years. Many of us who have been in the House for a considerable number of years have attended many debates of this sort, and it must be admitted that sometimes when things have been going quite well some members of the farming community have cried wolf and have not been believed. As a consequence, the same members of the farming lobby have not been believed by many Members of this place when things have been going badly for agriculture. The current position is serious, however, and if anyone wants confirmation of that he has only to read table 23 on page 40 of this year's White Paper, the "Annual Review of Agriculture 1986". Part B of the table refers to income indicators in real terms. In 1972 the index for farming income was 200, whereas in 1979 it was 129. In 1984 it was 146, and in 1985 it was a mere 78. That is serious. What is more, there is great apprehension about the future.

As my hon. Friend the Member for Dorset, West (Mr. Spicer) said, most of the issues that he wanted to raise were covered earlier by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). I find myself in precisely the same position, but I hope that by repeating some of the points which my hon. Friend made I and others will be of some assistance to my right hon. Friend the Minister for Agriculture, Fisheries and Food in his negotiations in the Council of Ministers.

We know that 1985 was a bad farming year because of the weather, but in essence the problems of agriculture are those of success. For that success, there are two reasons above all others. First, farmers have made the very best use possible of advances in agricultural knowledge and science, and the result has been huge increases in production and enormous improvements in farming productivity. Secondly, the partnership of agriculture and Government has exceeded the wildest expectations. I warmly applaud the partnership and wish it had been repeated elsewhere in industry. However, agriculture is suffering from being too successful. The fault does not lie with my right hon. Friend the Minister, for he has done his best to slow down the dynamic progress of agriculture and its expansion. Unfortunately, he has received precious little or no support from his colleagues in the Council of Ministers.

It is impossible to ignore the size of the market forever. If the Council of Ministers does not face reality very soon, it will bankrupt the CAP and almost certainly bankrupt the European Community as well. That is outwith the fact that the cost of the CAP is exorbitant in comparison with other European Community expenditure needs. I therefore disagree strongly with the hon. Member for Walthamstow (Mr. Deakins). I understand why he thinks that the CAP will not be reformed, but I believe that force of circumstance will necessitate that reform very soon, if not this year. I join my hon. Friend the Member for Wells (Mr. Heathcoat-Amory) in calling for fundamental reform. It is certainly necessary, and the sooner it begins the better.

I welcome the forthright comments of my right hon. Friend the Minister about his opposition to a co-responsibility levy for cereals. I oppose the 25-tonnes levy-free off-farm sales exemption, but I also strongly oppose the co-responsibility levy itself—above all because I believe that it will have no effect whatever on surpluses. Indeed, far from stabilising production, I believe that it is likely to increase production still further. As my hon. Friend the Member for Norfolk, North (Mr. Howell) said, farmers will try to increase production to overcome any extra cost that is imposed. I was therefore very glad to hear the comments of my right hon. Friend the Minister.

It is essential that the Commission and the Council of Ministers should look at the world scene in relation to surpluses. The Community is not making itself very popular with the United States, given the problems of excess agricultural production there. Quite apart from that, however, a looming threat to the sale of Community surpluses in the future is the probability—in my view, almost a certainty—that the Russian agricultural system will become increasingly efficient. I believe that the leadership there is at long last adopting a far more modern economic approach. The effect of that will be apparent riot least in agriculture, and the consequent increase in the Russian output will be a disadvantage for other world producers, because for so long Russia has been able to soak up surpluses created elsewhere.

All those developments emphasise the need for control of surpluses. The success of the milk quota, after certain initial teething pains, leads me to support the idea of a grain quota system based, as the NFU suggests, on an annual licensing and set-aside system. For a long time, I did not support quotas and believed that production might be controlled by price alone, but I believe that we have now passed that point and that we must have a quota system, because control by price alone would have a very harsh effect on smaller farmers, especially those in the marginal areas. We cannot simply divide agricultural policy from social policy, because however much we seek to do so we shall not be able to cope adequately with the problems.

I agree that the co-responsibility levy on milk should be abolished, because it has achieved nothing, and I am glad that the Community has decided to propose an outgoers scheme—somewhat ironically, in view of its earlier opposition to the idea.

At home, it is important that agreement should be reached between the NFU and the CLA. I do not entirely agree with my hon. Friend the Member for Basingstoke (Mr. Hunter) on this. Both organisations have strong arguments to support their case, but I believe that if there is any bias in the balance ultimately struck it should be in favour of the tenant farmer. Nevertheless, I cannot believe that it is beyond the ability of the NFU and the CLA to reach a sensible solution without my right hon. Friend the Minister having to impose one, and I hope they will be able to do so.

I hope, too, that my right hon. Friend the Minister will support devaluation of the green pound. There is no doubt that the devalued pound has been of benefit to British industry generally, and a devalued green pound would be equally beneficial to agriculture.

A number of farmers and agricultural traders in my constituency have raised the subject of capital allowances. There is no doubt that the reduction in those allowances has already adversely affected capital investment to some extent, but it is feared that in the coming financial year the effect will be very serious indeed. I hope that my right hon. Friend the Minister will press the Chancellor in this regard. While he is arguing with the Chancellor, he might also put in a word about the adverse effect on farmers of high interest rates.

I have taken enough time, so I end by wishing my right hon. Friend the Minister well in his negotiations in the Council of Ministers. I hope that he feels that he has the full support of his Back Benchers in his endeavours to fight for British agriculture.

8.27 pm

Mr. Colin Shepherd (Hereford)

It is a pleasure to follow my hon. Friend the Member for Devizes (Mr. Morrison) in this very important debate. I strongly agree with much of what he has said, as my subsequent comments will show.

There have been some very interesting interventions, especially those of my hon. Friends the Members for Dorset, West (Mr. Spicer) and for Wantage (Mr. Jackson). My hon. Friend the Member for Dorset, West said that it was time for a major reappraisal of the whole common agricultural policy and the Common Market approach to agriculture. I disagree with my hon. Friend only to the extent that I believe that that thought process is already well in hand. The bright point of the year was the introduction of the green paper entitled "Perspectives for the CAP."

I suggest that my right hon. Friend the Minister should do the same for British agriculture. At a time of intense change, it is right to broaden the debate as far as possible and to obtain the views of those likely to be affected as early as possible so that known views and problems can be taken into account in developing policy. That is what the green paper set out to do.

I was pleased at the rate of progress of that document. Document 4130/86, published at the turn of the year, sets out the Commission's response to the consultations in connection with the green paper and is most constructive. It confronts a large number of problems head on and sets out some very interesting guidelines for further discussion. I must, however, express some disappointment—with the Commission rather than with the document, as the one merely reflects the other.

In his explanatory memorandum, my right hon. Friend the Minister paraphrases the document when he says that the consultations have brought out the importance of the family farm and the diversity of structure and conditions of production". That is the nub of the matter before us. Where is the base line to be drawn in considering the family farm?

In opening for the Opposition, the hon. Member for Pontypridd (Mr. John) drew attention to the differences in average sizes of holdings in the various member countries—from 6.7 hectares in Greece to 67.5 hectares in the United Kingdom. I believe that the right place to start is at the point of self-standing viability rather than taking the size of the farm as such and assuming that it must produce a living for its incumbents.

In considering the point of viability, it is important that my right hon. Friend the Minister should bear with him a copy of his own White Paper to the Commission and to the Council of Ministers.

In that White Paper he said that the small family holding dairy farmer of England—average size, 30 hectares—had a net farm income of only £3,637. He also said that the small cropping farmer—average size 44 hectares—had a net farm income of £2,672. By today's standards those are not viable farms. They are not the sort of farm incomes that we want to see. However, at 44 hectares or 30 hectares, the size is large. There are many dairy farms with smaller acreages than that.

These figures show what the base level of viability should be. That being so, the remarks of my hon. Friend the Member for Wantage fall into place, as do the remarks of my hon. Friend the Member for Dorset, West. Income support for those smaller farmers should be found from separate sources and under a separate aegis, rather than from the agricultural commodity support mechanism. There has been a strong thread of harmony throughout the debate that the two should be separated, that one confuses the other, and that we run into immense difficulties if we take the lot on board as a single entity. That is because the shape and size of the structure is different and is too great.

Given that in the latter six months of the year my right hon. Friend will become President of the Council of Ministers, it is important for him to try to get this point across. British agriculture is very important in this respect, and in no way must it be penalised. In the past it has gone through a number of traumas which continental Governments have not imposed on their producers. If my right hon. Friend wants to reinforce this point, I suggest that during his term of office as President he brings across those members of the Commission who seem to have set their faces so steadfastly against the British scene. If he would like to give them three action-packed days of tours and visits in Herefordshire—which as well as having the best farms contains the smallest and most difficult—I would be delighted to arrange that. It would be valuable if they got away from the ivory tower of Brussels.

One of the purposes of the debate is to give muscle to the arms of my right hon. Friend and the Minister of State when they go to Brussels to continue the negotiations in which they have been heavily engaged for such a long time. We have heard that the House dislikes the co-responsibility levies. I welcomed what my right hon. Friend said about firmly and resolutely seeking the cessation of the milk co-responsibility levy. That has been totally ineffective, as my hon. Friend the Member for Basingstoke (Mr. Hunter) said. In fact, it has become a source of revenue to the Commission, and, as with any other sources of revenue, it is difficult to wean Governments or Commissions off them.

My hon. Friend the Member for Devizes, like my right hon. Friend, spoke of the unfairness of the cereal co-responsibility levy. We cannot agree to such a concept. In no way can I envisage that levy dealing with this problem, unless it is set at such a level as to cope completely with the funding of the disposal of the surplus. The Commission has blown its own argument by shying away from the full level of co-responsibility that would be necessary and by setting it at 3 per cent. Therefore, the Commission denies itself its own argument and lacks credibility. It must therefore be resisted with the strongest possible will that my right hon. Friends can summon up.

The delayed opening of intervention will not make intervention the primary market. British agriculture will be disadvantaged if that is the case. We do not have the agricultural structure of the continental cereal producers, who through their co-operatives can store the grain until it is possible to offer it into intervention. Our farmers will therefore be forced to accept a lower price sooner than will their counterparts in the Community. There must therefore be a transitional mechanism to enable the structure of British agriculture to match its cross-Channel counterparts so that it is possible to bat on the same wicket.

Beef is another area of discrimination against the British producer. I do not understand why it is necessary to exclude the dairy farm from assistance under the headage premium, as is proposed in the beef regime. We have made it very difficult for the small dairy farmer to continue to produce an income, and the figures that I quoted earlier demonstrate that.

Mr. Maxwell-Hyslop

And no suckler calf subsidy for dairy herds either.

Mr. Shepherd

Exactly. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) puts his finger on it. Farms in the south-west and in the west of my own constituency find it difficult to do anything other than use the land for grass. If we accept this aspect of the beef regime, we deny them the ability to do anything else with their holdings. The figures do not show that they can sustain such damage to their enterprises.

The United Kingdom rears sheep well. Initially, one of the basic tenets of the treaty of Rome was that agriculture should develop in those parts of the Community that are best suited for it. With regard to sheep, that is an argument that we should deploy in our favour. We are good at producing sheepmeat, but yet again we find ourselves discriminated against by Commission officials who have drawn together a set of proposals based, from the beginning, on a premise that was wrong.

My hon. Friends the Members for Basingstoke and for Devizes mentioned the outgoers scheme. I should like to know the progress of negotiations between the CLA and the NFU. Is there a prospect of agreement? I am worried about the future of the landlord and tenant relationship if this problem does not have a proper solution. It is in the interests of the NFU and the CLA to achieve such a solution. The landlord and tenant relationship can easily be damaged. I hope that the arguments put forward by the CLA to amend item 4:1 of the regulations are taken seriously. I hope that the question of reasonable consent is dealt with properly to provide a long-term solution.

The green pound differential is currently running at 12.5 per cent. I hope that my right hon. Friend the Minister will give consideration to and press for the devaluation of the green pound. I get nervous when the green pound differential moves into double figures. I remember the damage done to the pigmeat industry in the late 1970s when, under the auspices of the then Labour Government, the green pound differential was allowed to let rip. Such action proved a positive disadvantage to the bacon industry. However, the bacon industry has been doing great things to try to recover. If we allow a green pound differential to develop, we will damage that recovery as sure as bacon is bacon and eggs are eggs.

I wish to comment on the use of land which might be called set-aside land, or land that is taken out of production, and the incentives for doing that. The paper work that surrounds this notion makes repetitive mention to the desirability of establishing forestry, farm woodland or whatever phrase one seeks to use. I urge that this is pursued with urgency, to finding the source of resources for it from within the Community budget, to make parallel representations to other Departments to get the tax position right. If that were done, the cash flow position would be dealt with and long-term incentives would be granted so that farmers could deploy their land in this respect at an earlier rather than a later date. There is a need to start right away to get land out of agricultural or cereal production into a non-agricultural use, such as forestry.

I am on borrowed time. As my peroration, I think that the Commission and the Council of Ministers should be left in no doubt, as a consequence of our debate, that this House, this British Parliament, will not go along with measures which discriminate against British farmers. I think that the aggregate of our debate expresses that message well.

8.43 pm

Mr. Douglas Hogg (Grantham)

I shall heed your injunction, Mr. Deputy Speaker, to be brief.

I think that one of the most worrying features of this debate and perhaps of the Secretary of State's speech is that we cannot give any clear guidance to agriculture as to where we are going in the course of the next decade or, indeed, what farmers are to do. I do not blame the Secretary of State for that. We are the prisoners of a system which precludes us from exercising any control over what has happened. Perhaps even worse than that is the fact that the system prevents us from having a vision of where we are going

In the course of the debate hon. Members have stressed the importance that they attach to curbing surpluses. I accept that we must curb surpluses, but I am conscious, whenever we speak of that as a policy objective, that we are also talking of curbing farm incomes. Whenever I come to that realisation, I am acutely conscious of the needs of those farmers whom I represent.

The objective of curbing surpluses must not ignore the interests of our own agriculture. That is not shallow nationalism, nor is it merely a different political point. I represent perhaps one of the most efficient farming areas in this country—

Mr. Maclean

Next to Cumbria.

Mr. Hogg

My hon. Friend may wish to suggest an alternative site, but few people would deny that Lincolnshire is one of the most efficient farming areas. That makes me conscious not only of the position of farmers, but of the extent to which the rural economy is bound up with the viability and prosperity of agriculture. I should be slow to support any policy that would do permanent injury to agriculture and, thus, to the rural areas which I represent.

Any proposals that we put forward as policy objectives should be interpreted not merely against the question whether they will abate surpluses, but also against the question of the effect they will have upon the agricultural interests that we represent. I am not sure which is the most important. I am by no means certain that the conventional wisdom of constraining surpluses is necessarily more important than the desirability of maintaining a prosperous agriculture. I am prepared to pay a price in terms of surpluses and of costs to protect and preserve a prosperous agriculture industry.

My right hon. Friend the Minister of Agriculture, Fisheries and Food made a powerful speech to the National Farmers Union on 11 February. He set out the broad principles that he will adopt in negotiations with Agriculture Ministers and echoed those principles here today. He said that all measures should be sufficient, by which he meant that they should be adequate to achieve the purpose. My right hon. Friend said that the principles should be even-handed—that they should not be discriminatory between the United Kingdom and other EEC countries. He also said that the negotiations should not impose a straitjacket upon British agriculture. I question whether any of those principles are maintainable within the fabric of the common agricultural policy as we know it.

That brings me to my central and last point. My right hon. Friend has often told the House, rightly so, that the CAP was devised in a time of shortage. It was an effective instrument to increase production, and that happened to coincide with the other purpose of increasing rural incomes. That has now changed. We are living in a time of plenty and the instrument that we have designed for a previous age is now inappropriate. I am concerned that we cannot use that apparatus to meet the problem of containing surpluses and at the same time of achieving the maintenance of rural incomes. I wish to do that.

I support the package approach that my right hon. Friend has put forward. I am prepared to back the policy of gradual change. I not think we should be over-panicked by the high cost of surpluses, but I deeply doubt—I am very sceptical—whether we can ever use the CAP, as it exists, as a means, on the one hand, of constraining surpluses and, on the other, of maintaining and protecting agricultural incomes. I suspect that we will have to alter the framework of the CAP. It is imperative that any agriculture policy that is characteristic of European policy should have some form of national aids designed to support farming incomes in areas which are not categorised as the most efficient. I hope that nothing will be done to work against what I hope will be an inevitable process.

8.49 pm

Mr. Charles Wardle (Bexhill and Battle)

Ever since our entry into the Common Market, I have made no secret of my view that the advantages of being a member significantly outweigh the disadvantages and that the benefits of participating more or less freely in a market of more than 200 million people—now 270 million people—means much more to our long-term prosperity than any isolationist attempt to go it alone in an increasingly competitive world. My enthusiasm for membership has always been based on the assumption that, although we should have to prove our worth in the market, we should be able to do so under a set of rules that are in the main equitable, and by means of a mechanism which is basically workable.

During the past week we have had the opportunity to read the report of the European Court of Auditors, especially those parts of it which concern CAP finances, the document, "Perspectives for the CAP" and Mr. Andriessen's paper, "A Future for Community Agriculture". The premises on which I have previously made judgments about membership have been somewhat shaken. Taken together, those European papers present a depressing picture of vast over-production, resulting in large and increasingly expensive surpluses against which, as the Court of Auditors report shows, there are scarcely any effective controls and few properly co-ordinated policies for diversification or restructuring except at the very margins of agricultural production. For many products, the imbalance between supply and demand in the Community has beome a chronic and embarrassing difficulty which will get worse as farming efficiency improves and yields increase. Nor is there always a solution to be found by exporting from the Community because, as we have heard today, agricultural trends in eastern Europe, north American and Australia are following similar lines. Aid to Africa and the famine-stricken Third world is only a very partial answer for European surpluses, which are not wholly suited to tropical and sub-tropical diets, as there is a pressing problem in countries such as Ethiopia to help improve indigenous farming methods rather than dumping European surpluses.

The root of the CAP problem is the need to reduce capacity. That will not be achieved by generalised policies which no more than tamper with overall targets. Nor will it be achieved by abrupt pricing changes which deter more efficient and ambitious producers from seeking further productivity gains and therefore undermine the need for continued improvement and progress. That answer can lie only in fundamental restructuring such as my right hon. Friend has repeatedly advocated with his European counterparts. The recent record suggests, however, that it is extremely doubtful whether there is sufficient will in Europe or sufficient common interest among member countries to tackle restructuring with the necessary resolve and efficiency. I hope that I am proved wrong.

Some of the figures in the Court of Auditors report highlight the monumental size of the problem. In 1984, budgeted CAP spending was just below 18 billion ecuroughly equivalent to £11.2 billion. The original budget for that year had been struck at just over 16 billion ecu and it was later revised to about 18 billion ecu, but the final outturn was 18.3 billion ecu. In the current year, it was expected to be about £12.6 billion in sterling equivalent but, to judge from what my right hon. Friend has told us today, the outturn is likely to be above £13 billion.

It is worth bearing it in mind that some £800 million of those revenues will be spent on storage charges and interest payments for surpluses with a book value of about £5.6 billion, much of which is perishable and will be destroyed in due course. There can be no other business in which Britain has a significant stake which costs about £13 billion a year to run and has warehouse stocks with a book value of more than £5 billion. On the basis of our 21.7 per cent. contribution to Community revenues in 1984, our contribution to this year's budgeted CAP expenditure will represent about £2.7 billion. Bearing in mind the Treasury's strictures on the major spending Departments, which seem often to involve intense negotiations about relatively small sums to be pruned from the domestic programme, how in the name of common sense can we part with £2.7 billion to help pay for a massive exercise in over-production and subsidies, merely to add to unsold surplus stocks which already cost more than £5 billion? It is nothing less than a huge exercise in social engineering which is poorly targeted and inadequately controlled. Moreover, it does very little for the British taxpayer.

Milk production is a central concern to farmers in my constituency and it demonstrates the anomalies and difficulties that we face with the CAP. Milk production last year cost the Community about £4.3 billion, of which our share, I calculate, was more than £900 million. Much of the money went towards the cost of storing surplus butter and other dairy products. Much also went on the various means employed to reduce overall production from 112 million tonnes in 1983 to the target of 107 million tonnes in 1985. While Britain reduced its output of milk to dairies by 1 per cent. in 1984, Germany, which produces a much greater volume of milk, cut its production by only 0.27 per cent., France cut its by just 0.36 per cent. and Ireland made no change whatever. In addition to the contributions by member states, producers paid about £350 million through the co-responsibility levy.

Much has been said about the levy's unfairness and inappropriateness, so it might be worth bearing it in mind that the elimination of storage and interest charges on butter surpluses alone would go a long way to fund the revenue now brought in by that levy. In other words, if we got rid of most of the butter surplus, which will only be destroyed in due course anyway, we would do much to obviate the need for the levy. With tight financial controls such as most major commercial enterprises employ, the levy could be quickly removed.

The quota system was undoubtedly needed and will continue to be needed if adequate restructuring is to take place. However, the system has been difficult to understand and harder still to administer, at least in its early stages. It began full of anomalies and hit hardest the many producers who are quite small by British dairy farming standards—those with herds of 50 to 80 cows—but who are far from small in European terms. The inability to buy and sell quota or to lease it in a secondary market, and the lack of flexibility in the outgoers scheme, especially for tenant farmers, have been damaging to east Sussex dairy farmers, many of whom are highly geared at the bank and whose commendable drive for greater efficiency and productivity has been thwarted by the application of quota limits.

What can be done? My right hon. Friend the Minister of Agriculture, Fisheries and Food pointed the way. I should like to divide the priorities into two categories—immediate and short term. There are several immediate priorities. First, the co-responsibility levy must be abolished. It is out of place and I hope that I have already shown how the revenue that it generates could be saved elsewhere by more efficient financial management of the CAP. Its removal would be a major coup for my right hon. Friend, and an important psychological boost to British milk producers. Secondly, we need to ensure that any levy payments that are charged are collected in a fashion that pays heed to seasonal fluctuations in output and to farmers' cash flows. Thirdly, we need to ensure that the outgoers scheme is more flexible. Fourthly, we need to ensure the ability to trade quota between farmers. Fifthly, we need to ensure that our quota reductions are matched 100 per cent. by each of the other member states.

Against that background it should be possible to stabilise the market, which is still highly uncertain, and then to concentrate the inevitable need for further reductions in quota in a relatively orderly fashion. For the short term, we also need two positive commitments from our European partners, and my right hon. Friend has already campaigned for them. The first commitment is to bring about tighter and more commercial financial controls on CAP finances, and the second is to agree without reservation a determined programme of restructuring which goes well beyond the present bland recommendations about diversification, and which acknowledges, at last, that social engineering in rural communities should not be the principal goal of the CAP.

If we do not tackle those problems soon, we shall suffer increasingly from a system that offends taxpayers and farmers. My right hon. Friend has shown the way to remedy the problems, and it is in the interests of many of my constituents that he succeeds in the near future.

8.59 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

Many hon . Members on both sides of the House have taxed themselves with what they be Lieve to be the incompatible requirements of limiting European Economic Community expenditure under the common agricultural policy without producing surpluses. It is offensive to a large proportion of taxpayers to spend huge sums on taking food into surplus storage which deteriorates at great and continuing cost. However, that dilemma is artificial, because the quota system enables surpluses largely to be avoided, payments to be controlled, and a social structure to be achieved by those payments which is held to be desirable.

That being so—I am entitled to say this now as I said it in 1977—the ideal time to inaugurate programmes is when quotas can be allocated which will still enable individual enterprises to expand. It is only because the desirability for quota systems was ignored by successive Governments that, in the moment of disaster, they are not applied until they entail diminishing the output from individual enterprises. That is not an inherent vice of a quota system; it is due to the inherent cowardice of Governments and international organisations which do not implement them until it is unduly late. Even so, better unduly late than unduly later still.

Let us not go off on a red herring about the additional cost of bringing Spain and Portugal into the EEC and the effect of that on the EEC budget. That was known four or five years ago when the Trade and Industry Select Committee was discussing problems within its sphere, as it periodically does, with officials of the EEC in Brussels. The unofficial figure then was that their accession would cost an additional £1,400 million a year to the EEC budget. That was a known, estimated cost of following a certain political line. It is, must, and should be wholly divorced from considerations of financing the CAP, because it is not connected to the vagaries of that.

I have already mentioned in an intervention in the speech of my right hon. Friend the Minister of Agriculture, Fisheries and Food the astonishing anomaly that the reasons for giving New Zealand access to the EEC for milk products and lamb are substantially the same as the reasons for giving Algeria and Tunisia access to the EEC for wine.

In the case of New Zealand the burden is carried by the British farmer. In the case of wine from Tunisia and Algeria, it is carried not by the French wine producer but by those who pay the budget of the EEC as a whole. More wine now has to be distilled into ethanol, at a cost to the European budget, because of the wine imports from Algeria and Tunisia, which were negotiated because Algeria and Tunisia wre once part of metropolitan France.

I do not dispute the logic of that so long as it is accepted that by the same logic the economic cost of the EEC taking New Zealand lamb and milk products should be borne by the membership of the EEC as a whole, not by the British taxpayer, nor by the British farmer. If the cost is not to be borne by the EEC as a whole, it should be borne by the British taxpayer, since it depends on political considerations, rather than by the British farmer, since it is not because of agricultural considerations that those imports are allowed. I do not see how that proposition can be disputed.

I turn to the spending of the same penny more than once. It has become apparent that when something is unacceptable to the United Kingdom Government, nevertheless it is permitted to happen in the EEC. We are told that something which is unacceptable to the German Government cannot be permitted to happen merely because it is unacceptable to them, particularly with their elections coming up. The same considerations must apply to both.

It is no good my right hon. Friend asking me to look up the record. He may have forgotten that once before he challenged me to do that, and I produced the record and defeated him on it. He has told the House before that he safeguarded the beef variable premium by agreeing to a massive increase in quota for Eire, which had made such a large contribution to bringing about milk surpluses in the first place. My right hon. Friend cannot go on spending the penny of claiming that he has to do this or that to keep the beef variable premium. If those were the conditions on which Eire got that extra quota, if the beef variable premium is done away with or restricted, so must be the coin that was given in exchange for it—the extra quota for Eire. We must be adamant on that point, which is one of elementary integrity and justice.

As for the difficulties of the new outgoers scheme proposed by the EEC, I wholly endorse the frequently uttered proposition that the decrease in production which it brings about must be the same throughout the EEC. None of us can foresee the future with clarity, but we have observed that new crises produce new measures which have new base years. We have seen that in fisheries and in many other contexts. If the British proportion of EEC milk output is permitted to be reduced, I predict with confidence not the year in which it will happen, but that it will happen. The new lower base would be inaugurated at some time for United Kingdom production as compared with that of other member states.

It is sometimes alleged that quotas freeze agricultural output in an inefficient posture. Nothing could be further from the truth. The inherent error of that proposition is to confuse maximum output with efficiency. There was a time when we feared that we were running out of agricultural land in Britain. Each year, we heard about the rate of erosion of our agricultural land by roads, town expansion and industrial development. The Labour Government produced a document, "Food from Our Own Resources," which the House accepted; but the same Government omitted to provide the financial basis to put it into effect.

That mattered a great deal, because farmers assumed that it was a temporary aberration and borrowed the funds to put the policy into effect. The evil consequences of that are still with us. Last year, the debt service costs on British agriculture increased by nearly 17 per cent., while incomes decreased by 43 per cent. The Labour Government have a heavy burden of responsibility to bear for that. They were kept in office at the time by the Liberal party, without which they would have fallen. That Opposition Front Bench bears great responsibility for the indebtedness that besets the industry now.

Confusing high output per acre with efficiency has other evil consequences. It has led to the gross over-use of phosphates, which has materially harmed the quality of our drinking water supply where, as to a large extent it does, it comes from rivers which take the off-flow from agricultural land. The quota system has refocused attention on lower-input farming, which makes better use of agricultural land—not maximum use in terms of output per acre, but use more compatible with the needs of the community that those farms serve. In many cases, good crop rotation has suffered from the pursuit of maximum output per acre, as heavier and heavier tonnages of fertiliser are applied in lieu of proper crop rotation.

A quota system would enable a proper income to be supplied to the farming community without open-ended budgetary commitments and avoiding the scandalous waste inherent in stocking deteriorating surpluses. Of course, quotas got off to a bad start because they were associated with milk. Those quotas were introduced not at zero notice, but retrospectively, after frequent assurances that, whatever happened, there would be no quotas. That is not the way to introduce a quota system that is designed to avoid anomalies and injustices in the best way possible. That is why we should be bringing in quotas on all the agricultural produce that is likely to go into permanent surplus in the foreseeable future. Without that, the distortions caused by quotas on any one section will merely overflow into other sections. That is the only way in which a reasonable income to preserve the social pattern in rural areas, budgetary disciplines that are necessary to contain the burden of the Euro-budget on national taxpayers, and the avoidance of evil and wasteful surpluses can be ensured. It is the only way in which that circle can be squared.

The proposed EEC outgoers scheme must not result in a massive transfer of milk quota from owner-occupied land to landlord-controlled land. Yet if only owner-occupiers are free to accept the outgoers scheme and tenants are not, that will inevitably happen. Most of the outgoers will be confined to the section of producers that can give their consent without the interdiction of another party.

The way to overcome the problem that has been posed on behalf of landlords is to introduce transferability, so that, if a man wishes to spend part of the compensation accruing to him, he can do it on transferable quota. It is widely agreed in agriculture that when quota is transferred, a percentage should be put into a pool that is used for two proposes: to deal with identifiable hardship cases thrown up by the inflexible boundaries of the quota system as introduced, and to enable new entrants to commence milk production. Those two flexibilities can be secured only if there is a percentage fine—say, 10 per cent.—that goes into such pool on the transfers.

It has also been suggested that there should be an additional 3 per cent. quota—there is no magic about that figure—by which national Governments can buy in quota for reallocation. However, if they do not do so, the quota would go into an EEC pool for cancellation. Over and over again my right hon. Friend has pointed out, when it suited his case, that the British Government cannot interdict a development of which they alone, or they and the Netherlands, disapprove. Of course, Spain and Portugal could also disapprove, but without interdicting. But if my right hon. Friend is unable to prevent such an additional outgoers scheme from coming into existence, the British Government must buy in the whole of that quota. If they do not, Britain will have a declining percentage base when new measures are taken.

I turn to the division of compensation between landlord and tenant under the proposed outgoers scheme. It is not enough to say, "Leave this to arbitration," because arbitration can be wholly inconsistent in different parts of the United Kingdom unless the criteria are laid down in advance. If those criteria are not quantified as to maxima within the total formula, again there can be completely distorted assignments of compensation as between landlord and tenant. Therefore, it is most important—[Interruption.] Does the Parliamentary Private Secretary wish to intervene? He does not. Perhaps he finds this an embarrassing point for me to raise. Is it one with which he is unfamiliar? No. Good. He will find that it is one with which the agricultural community is familiar.

I take as my starting point 50 per cent. as the maximum for the interest in land element. Unless that is constrained specifically in the arbitration it will undervalue the other elements in the formula to such an extent that the tenant's interest will become inadequate. There must be no interdiction by the landowner on the tenant exercising the right to avail himself of the outgoers scheme, given an allocation of compensation between the two parties along the lines that have now been discussed. To say that it should be left to the NFU and the CLA to come to an agreement begs the question why anybody should suppose that agreement will ever be reached. There is no obvious interest that propels the CLA to reach an agreement on the issues as long as it can interdict outgoers on the ground that the value of the landlord's land will be reduced by participating in the outgoers scheme. That is a reality that will not go away. Saying, "Let them reach agreement," can only mean eroding still further the tenant's legitimate interest in the compensation under the proposed outgoers scheme.

This debate need not end until 11.30 pm. It is not subject to the 10 o'clock rule. As we proceed with the debate at a crucial moment for agriculture, let us not be hurried in our deliberations by the belief that the debate must end at 10 o'clock. These issues are far too important. They will be no easier next year because they are not properly debated or decided this year. That is most assuredly so.

I hope that my right hon. Friend the Minister will bear it in mind when he replies to the debate that he must not try to spend the same coin yet again. The Government must not agree to any restriction on the beef variable premium scheme. We must not limit headage payments under the sheepmeat regime or under the hill schemes, whether they apply to sheep or to cows. We must not adhere to a co-responsibililty levy which was imposed as a budgetary trick and which cannot be the mechanism for discouraging surpluses. Lastly, my right hon. Friend must acknowledge the Government's abandonment of the exploded myth that reducing prices reduces output. Unless that is carried to the point of bankrupting producers, the most probable effect of reducing prices is to increase output to spread the overheads over a greater volume, thereby increasing the budgetary costs of storing surpluses. Those are the considerations that will not disappear tonight if my right hon. Friend refuses to recognise them.

9.24 pm

Mr. Tony Baldry (Banbury)

In any debate on EEC price fixing one must never forget that Britain is an agricultural country, that British farmers produce 80 per cent. of Britain's food and export a considerable amount, and that only 20 per cent. of land is not used for agriculture. Secondly, agriculture cannot simply be considered like any other industry, because it is not like any other industry. Therefore, we cannot extrapolate what happens in agriculture simply by looking at other industries. Agriculture is different, not least because one must have a system that enables a sufficient number of people properly to steward the land. Thirdly, any system of agricultural support can be expensive, and I venture to suggest that if the old system of guarantees and efficiency payments were still in place the cost to the taxpayer would be three times that of the CAP.

The mechanism of the CAP is the cheapest form of agricultural support, provided that one does not produce too much. Beef production today is only 4 per cent. above what it was four years ago, but the amount of beef intervention is 50 per cent. more than it was four years ago, and the cost of storing beef surpluses in intervention is 200 per cent. more than it was four years ago. It is because of the gearing of this ratio that surpluses are expensive, and we should seek to tackle them, not seek to undermine Britain's agriculture or rubbish the CAP, which guarantees people in the Community access to secure supplies of food.

If somebody does not believe that, he should go to Warsaw or Cracow and see the Poles queueing daily for the necessities of life—bread, butter, flour and sugar. The only reason why we can sell butter and beef cheaply to the Russians is that their system of agriculture fails to feed their people, while our system of agriculture succeeds in feeding ours.

We should be attacking, not British farmers or the CAP, but the surpluses. Tackling surpluses today is increasingly difficult because the European Community is not the only part of the world that is over-producing. There has been an agricultural revolution throughout the world. For example, last year the Chinese fed a quarter of the world's population and still had surpluses to export. Last year, India gave more food aid to Ethiopia than did the whole of the Soviet bloc. Tackling surpluses today is increasingly difficult because of the speed of improvement in agricultural productivity. In 1975 we were getting 2 tonnes of cereals to an acre, and in 1985 it was 4 tonnes. We have doubled agricultural productivity in just 10 years.

In tackling surpluses, we must not forget that at the end of the day it is better to have surpluses than to have a shortage. We should be grateful that we have enough to feed our people. Therefore, in tackling surpluses we have to find a way to restrain production without undermining our rural economy. Such a way must find a solution that will work, and a system that is fair, so that no country should have to say that it is bearing a heavier burden than anyone else.

Also, we must have a system that does not exclude enterprise, invention and innovation or exclude new entrants, because we cannot seek to hold agriculture in a developmental time warp. We must have a solution that will work, and that means a solution that will curb the surpluses and prevent further surpluses. It makes no sense to allow cereal surpluses to increase from 30 million tonnes today to a projected 80 million tonnes by 1991. That is roughly 5 cwt of grain for every man, woman and child in the Community. There will have to be price restraints that lead to long-term market balance.

Let us be clear that a solution which will work, which will cut prices and help dispose of present surpluses, will mean more money for the CAP in the short term. That will almost certainly mean a supplementary budget. It will therefore behove all those who constantly and properly urge reform of the CAP to support such a supplementary budget when it comes before the House.

We need a system that is fair between countries, producers, retailers and consumers. For example, the proposed 3 per cent. co-responsibility levy on cereals is not only largely irrelevant in tackling surpluses, but treats British farmers unfairly. It applies only to off-farm surplus after the first 25 tonnes. It would operate unfairly between farmers who use their own cereals and those who sell them. That would mean that virtually all British farmers, but only half the West German farmers, would be subject to the levies. That cannot be fair. We cannot and should not accept policies which ask Banbury farmers to bear an unfair proportion of the cost over Bavarian farmers, simply because so many of our family farms are larger than those on the continent.

A realistic solution to cereal surpluses must inevitably involve price restriction, but I strongly suspect that in the not-too-far-distant future we shall seriously have to consider ways of taking land out of cereal production, although I would not go as far as some hon. Members, who have suggested that we should remove the whole of Wiltshire from cereal production.

Similarly, any changes should be fair to beef producers. A proposal to limit headage payments to the first 50 beasts can only be seen as discriminating against British beef producers. Likewise, any reductions in milk production should apply equally to all member states, without exemption or qualification.

I hope that the National Farmers Union and the Country Landowners Association will be able to agree a fair and workable formula for the outgoers scheme. To date, that scheme has helped considerably. After all, those milk producers whose development awards formed a large part of their total quota will now have sufficient quota restored to them to ensure that they have at least 90 per cent. of the quota that they would have had if there had been no cuts. Small producers with development awards would have their quota restored in full up to 200,000 litres.

I recognise that some farmers may not necessarily like what they hear about the need to tackle surpluses, but from the meetings that I and my European Parliament colleague Sir Henry Plumb have had with our farmers, I am sure that sensible farmers will support the Government's realistic approach.

We should not forget that, thanks to the brains and brawn of British farmers, combined with the CAP, food today is cheaper in real terms than it has been for 30 years. Grain is cheaper today in real terms than it was in 1900 and beef is cheaper, in real terms, than it was 30 years ago. Because of these improvements, people have to spend less of their disposable income on food today than ever before. That means that our pensioners are spending less in real terms on a loaf of bread than ever before and need to use a smaller proportion of their income to do that.

There are substantial problems to tackle here and in Brussels. It will not be easy and will need commitment and clarity of thought. However, in tackling surpluses let us not undermine all that the British farmer, British agriculture and the European community have achieved in the past 30 years.

9.33 pm

Mr. David Maclean (Penrith and The Border)

I imagine that during the past six hours practically everything that it is possible to say on the current and future problems facing agriculture has been said, and well said, by hon. Members on both sides of the House. I do not therefore propose to go over the same ground and quote the same statistics.

I agree with the stance taken by my right hon. Friend the Minister and the stance that he proposes to take in Brussels. When one adds to that the excellent suggestions and exhortations of my hon. Friend the Member for Torridge and Devon, West, (Sir P. Mills), and the analysis of the chronic problems facing agriculture by my hon. Friend the Member for Grantham (Mr. Hogg), I shall be well satisfied if he can go some way towards achieving what they described.

I shall concentrate on a small problem which I raised earlier when I intervened in my right hon. Friend's speech. I shall understand if he cannot elaborate tonight, because negotiations are at very delicate and tricky stage. I suspect that they will continue to be at that stage for a long time to come.

I do not believe that the Country Landowners Association will want to give any ground. There is no need for it to budge an inch. However, the National Farmers Union has moved a considerable distance. I refer to the apportionment of quota between Landlord and tenant. As I understand the Ministry's embryo proposals, there will be a basic quota of approximately 4,500 litres not 5,000 litres. It will be based on 1.35 cows per grassland hectare.

If a formula were invented to take account of the value of tenants' improvements that is based upon the gross rental value of the whole estate, tenants would receive approximately 17 per cent. of the basic quota. Any production over and above the 4,500 litres would be called super-quota and would be added to the tenant's entitlement. The average tenant of a lowland dairy farm in England and Wales would therefore receive 17 per cent. of the basic quota and his super-quota. At the very most he would receive about 33 per cent. This is only an average formula, which means that in some areas it could be increased to 50 per cent. It may even be increased to 70 per cent. in an extraordinary case.

If this formula were applied, the result would be the reverse of what many of us had hoped would happen. The landlord ought to receive 30 per cent. of the quota, while the tenant, in extraordinary cases, should receive 70 per cent. However, we find that normally the tenant will get 30 per cent., and 70 per cent. only in extraordinary cases.

This formula cannot be worked on an ad hoc basis, as was suggested by the hon. Member for Caithness and Sutherland (Mr. Maclennan). It would be crazy to say that if both sides cannot reach agreement each case must be treated on its merits. An interpretation of that kind was not even included in the Rent Acts. We lay down basic guidelines for the arbitrator. There may be extreme cases at each end of the margin, but the House has a duty to say to my right hon. Friend that if he is unable to give the details tonight—rightly so, because the negotiations are at a delicate stage—this is what we want him to do.

My right hon. Friend ought to pay close attention to the fact that my right hon. and hon. Friends have presented to him the CLA's arguments. I have no doubt that the NFU's arguments will also be put to him. I leave my right hon. Friend merely with the thought that if the formula for the average dairy farmer for the lowlands provides the tenants with only 33 per cent of the outgoers scheme, we have to consider the effect that this will have in the upland areas, where there will probably be no super-quota at all. It means that tenants in upland areas will come out of this very poorly indeed. One may even find on upland farms that although the tenant has carried out most of the improvements he will not receive even 50 per cent. of the quota.

I do not think that that will be regarded as fair by the country or by Conservative Members. If my right hon. Friend bears that point in mind, I am confident that when he has to act as piggy in the middle, or, as may be more appropriate, as bully in the middle, he will come down on the right side, if he has to come down on any side at all.

9.38 pm

Mr. John Home Robertson (East Lothian)

I agree with the final point made by the hon. Member for Penrith and The Border (Mr. Maclean). If we could draw an extra export restitution for every Scottish Conservative Member whom we have exported south of the border, we should be doing quite well out of it. The experience that the hon. Member has gained from dealing with members of the Scottish Landowners Federation in the Black Isle will stand him in very good stead in his dealings with the Country Landowners Association in Cumbria.

It seems a long time since I came into the House this afternoon. Before I did so I looked at the Press Association tapes and saw that for the second year running a supplementary contribution will have to be made on top of the £20 billion budget of the common agricultural policy in order to stop the CAP going bust. It is appropriate, therefore, that the House should be debating such a critical matter at this time. It is inevitable that this has been a wide-ranging debate. My hon. Friend the Member for Pontypridd (Mr. John) had the strength, which I have not, to pick up the entire bundle of documents that we are supposed to be debating. I had them weighed last week in the Post Office and I was told that their combined weight was 2.1 kg, which in English is 4½ lb of paper. It is inevitable that the debate has been wide-ranging. I welcome the helpful contributions of my hon. Friends the Members for Crewe and Nantwich (Mrs. Dunwoody), for Carmarthen (Dr. Thomas), for Ipswich (Mr. Weetch) and for Walthamstow (Mr. Deakins).

The Minister suggested at the beginning of the debate that he was beginning to follow the ideas and the lead of my hon. Friend the Member for Pontypridd of setting aside land and encouraging the change of use of land to forestry. I hope that he will pay due attention to our proposals for creating incentives for small farmers, making land available for new entrants into agriculture and taking out of production land that has been used to grow crops that are in surplus. For the present, we have what is fundamentally a package of price-cutting or freezing proposals. It is a variation on what was debated in the Council of Ministers last year, when the then proposals were vetoed by Mr. Kiechle of the Federal Republic of Germany. What prospect is there that he will not use the veto this year?

We must all acknowledge the need to cut the cost of the common agricultural policy. We must recognise that farming has been led into a state of chaos. The present production package is the result of European Community incentives which have applied throughout recent years. I suggest that the European Community has the responsibility to help to restructure the pattern of agricultural production for the future.

It is not good enough merely to talk about cutting prices, although price cuts must be an element of the package. There must be scope for proper and constructive incentives so that the industry knows in which way it is supposed to be heading.

Cereals form the best known mountain in the European Economic Community. We have read recently that the Intervention Board for Agricultural Produce managed to double its stocks last year from 2,831,000 tonnes to 5,701,000 tonnes. Some of the stocks have been in intervention stores for as long as three years.

The Commission has three proposals. First, it is proposing a 3 per cent. co-responsibility levy, leaving the first 25 tonnes from each farm for off-farm sales that are exempt from the levy. It has already been said by my hon. Friend the Member for Pontypridd that Germany is producing 18 per cent. of cereals and will pay only 11 per cent. of the levy under the proposed arrangement. We in Britain are producing 16 per cent. of cereals, and if the proposal were implemented we would find ourselves paying 26 per cent. of the levy. We say that the proposal is discriminatory, and I hope that the Minister will be negotiating against it in due course. Secondly, the Commission is proposing that intervention should apply to cereals only for the five months between December and April. Thirdly, it is proposed that there should be far stricter quality criteria.

All these proposals seem likely to discriminate against the United Kingdom. In effect, we are being presented with back-door price cuts of 12 per cent. for wheat and 15 per cent. for barley. That would be fair enough if it were part of a package, but it is not. There appears to be no positive guidance towards set-aside or alternative uses for land. The Minister has said that he is prepared to start thinking about set-aside and the use of land apart from other measures and I agree with that principle. Perhaps the Minister of State will explain when he replies what we shall start moving into as an alternative use for land. If land is taken out of cereal production, what shall we do with it instead? We could do with a constructive debate on that subject. Agriculture is waiting for it from the Government and from the House.

I hope that the Minister will now admit that price restraints alone would be either intolerable or ineffective. As the hon. Member for Tiverton (Mr. Maxwell-Hyslop) said, for it to be effective there would have to be draconian price cuts which would be intolerable for the rural economy. If it was tolerable and did not hurt anyone, the chances are that it would merely jack up cereal production. In addition to price restraint, constructive guidance is needed. Set-aside would clearly be part of that, but we need more elucidation as to what the Government wish the industry to do.

The proposals for milk come on top of the very unhappy experience of the imposition of milk quotas two years ago. There are three detailed proposals. The first is to retain the co-responsibility levy at 2 per cent. That is no more and no less than a milk tax and has nothing to do with co-responsibility. I see that the Minister agrees and I hope that he will be more successful than in the past in his negotiations on that.

Secondly, it is proposed that the super-levy should be collected every six months on account. The Milk Marketing Board, among others, is strongly against that. Apart from anything else, we could have a ludicrous situation in which the board has to collect the super-levy on excess production in the first six months only to pay it back if production falls in the following six months. That is not a very clever proposal, and I hope that it will be rejected.

Thirdly, an extended outgoers scheme is proposed in relation to milk. We support the principle of such a scheme, although we understand the concern expressed by landlords, tenants and others, because it is always complicated and it was an agonising experience for the industry last time. I have read what the National Farmers Union and the Country Landowners Association have said about it. I hope that on this occasion the Government will also bear in mind the impact of another outgoers scheme on people working in the dairy industry.

I trust also—I keep returning to this—that there will be more positive guidance as to what should happen to the land. It is not good enough to say that the land must simply be taken out of milk production. If the Minister wants it to come out of production altogether and lie fallow, he should say so. If not, let us have sensible incentives to help the industry to go in a different direction. On the last occasion, much of the land simply went over to beef production. The result was a knock-on effect, with further surpluses being generated in the beef market and also in the sheep market.

I appreciate the controversy that the new outgoers scheme has generated and I agree that an outgoing tenant should not be able irrevocably to strip the assets of a farm, including the milk production quota, by selling the quota, but neither should the landlord be able to dictate who can and cannot take part in the scheme. I believe that there is a strong case for an independent body to adjudicate in such cases.

Perhaps the Minister will also tell us what has happened to the Agriculture Bill. We hear rumours that the Government may put a new clause into the Bill on Report in connection with the outgoers scheme. The Bill had its Second Reading in November and came out of Standing Committee on 30 January. We even have a bound volume of the Committee proceedings, but there is still no sign of Report stage. Perhaps the Minister will tell us the fate of that Bill. Some of us would be happy for it to disappear without trace, but it would help if the Minister could explain what is going on.

Once again, the beef variable premium is under threat from the Commission. The sheep premium is constantly being undermined by the French and by the illegal clawback mechanism—we wish the Government well in their legal action on that.

The beef variable premium must be defended. It is good for consumers and producers, and in that respect it is unique in the CAP. The industry and all hon. Members must be getting sick of the recurring threat to the beef variable premium. There are signs that this question is raised by the Commission year after year only as a red herring in the hope of getting other concessions out of the Minister. It is time that this was consolidated once and for all into the support system, and that is what the Minister should be working towards.

There is also the proposal to phase out the intervention scheme for beef and to replace it with a single premium headage payment for up to 50 cattle over six months old on each farm, and a further premium for suckler cows, wherever possible from national funds. The figure of up to 50 animals per farm will clearly be restrictive and discriminate against British farmers. Similarly, the restriction to 500 sheep on lowland farms in Britain and 1,000 in the less-favoured areas to qualify for the sheep premium will also be discriminatory against British farmers, and such discrimination must be resisted.

It is plain that these proposals are discriminatory and the Opposition and the industry expect the Minister to resist them in due course. By all means let there be penalties to discourage over-production, but let them be fair throughout the Community. That is all that we and the industry are asking for.

There is a proposal to reduce surplus stocks by means of a three-year disposal programme. That is obviously necessary, because we cannot continue to keep stocks in intervention stores for ever. We know that the CAP accounts for 60 per cent. of the entire budget of the European Community, of which 30 per cent. goes towards the storing and disposing of surpluses. We must get rid of that so we can cut our losses, but why on earth, year after year, are such surpluses given to the Russians and Libyans at cut price? If anyone is to have the benefit of highly subsidised beef and dairy produce, it should be British pensioners and people on low incomes.

We must ensure that we do not produce further costly surpluses in Britain and in the rest of the Community. We must learn from the past. If necessary, let there be milk quotas and effective action to control the beef surplus. The ultimate irony is that the Russians, the Libyans and so on get the benefit of our dumped surpluses. They are the only beneficiaries of this costly and complicated system of agricultural price support.

The CAP must be seen as a wholly mixed blessing for British agriculture. It has undeniably distorted our industry beyond recognition. Indeed, the Minister's last annual review of agriculture confirmed that £2.2 billion went into support for British agriculture, whereas net farm income in 1985 was only £1.1 billion. In other words, only half of the subsidy going to the industry showed up as net farm income at the end of the day. Therefore, something is seriously wrong with the system.

From time to time, Ministers and others tell us that agricultural support expenditure is intended to support the entire rural economy. An interesting paper published by the Scottish Office last year attempted to defend the Government's record in rural Scotland, and it gave figures that showed rising public expenditure on assistance to rural economic activity". The total figure quoted was £311 million, of which £204 million went on agriculture, and of that £109 went on price support. Last year, more money was spent in Scotland on agricultural price support than on the whole gamut of expenditure on rural industry, forestry, tourism and fisheries. That did not help the economy of rural Scotland much; in effect, it distorted it. We need a comprehensive rural policy, rather than this approach.

Mr. Maclennan

Would the hon. Gentleman like to complete the Scottish picture by pointing out that, despite that expenditure on agriculture, agricultural incomes in the last financial year stood at 12.5 per cent. of what they did a decade ago, in real terms?

Mr. Home Robertson

It is undoubtedly true that, largely because of the weather but also because of other factors, farm incomes last year were about as low as they have ever been since the second world war.

Mr. Gavin Strang (Edinburgh, East)

In addition, is it not a scandal that the Government are closing research institutes and cutting the number of those productive scientific jobs?

Mr. Home Robertson

I intend to refer to that, if my hon. Friend can contain himself.

British agriculture is at a turning point; the Government have a duty to guide it in the right direction by a combination of incentives and advice. As my hon. Friend the Member for Edinburgh, East (Mr. Strang) said, we know what has been happening to the research and advisory services. I ask once again: what has happened to the Agriculture Bill? Not that I ever want to see it again, but part of that package is a 41 per cent. cut in the funding of the advisory and research services in Scottish agriculture, with parallel cuts in England and Wales.

We also know that the Government are cynically playing off colleges and research institutes in Scotland against one another in this vicious regime of cuts. We have seen the tragic spectacle of two excellent agricultral research institutes in Scotland—the Hill Farming Research Organisation and the Macaulay Institute of Soil Research—having to fight it out because of the cuts to see which will survive. That is tragic, because the industry will require all the scientific guidance that it can possibly get in the coming months and years.

This is relevant because, when and if Ministers do manage to agree on the way forward, it will not just happen; it will involve restructuring the whole industry. It will involve changes of use, new crops and trees on land which has hitherto been in agriculture. We shall obviously need an effective advisory and research service and other incentives.

Last year's statistics show that farm incomes are close to an all-time low, as the hon. Member for Caithness and Sutherland (Mr. Maclennan) said. Having experienced the 1985 harvest in Scotland, I have a good idea what has caused that fall in returns. It had much to do with the weather, but that bad year followed a succession of extremely profitable years.

That brings me to the problems facing farm employees. Quite apart from the low incomes of far too many faun workers, we should be concerned about the number who have been laid off or made redundant in recent months, following the bad harvest. Farmers will not enhance their reputation by calling men out at all hours to save the harvest and laying them off the following month at only a few weeks' notice. It is worth remembering that in Scotland redundancy from a farm can also mean homelessness, because we still have the agricultural tied housing system.

The hon. Member for Torridge and Devon, West (Sir P. Mills), who is no longer in the Chamber, said that he deplored the difficulties of rural areas and warned about the effect that a further squeeze on agriculture would have on rural communities and the economy of rural Britain. Until today, the Minister of Agriculture was advocating indiscriminate price cuts. He must know that such a proposal would be a further burden on the rural economy. Marginal price cuts will simply increase production. If the cuts are to be big enough to have the effect that the Minister seeks, they will have an intolerable impact on the rural economy. Price restraint must obviously be an element of this strategy, but it cannot possibly be the whole story.

However, I welcome the Minister's belated conversion to set-aside and other mechanisms to restructure the industry. He is following the lead given by my hon. Friend the Member for Pontypridd (Mr. John) in advocating incentives for planting trees on land currently used for surplus crops. Perhaps he will also pay attention to what we will say about the provision of land for new entrants to the industry and about the strategy which my hon. Friend intends to outline shortly on income support for small farmers and on a tonnage-based quota system for cereals. My hon. Friend suggested a whole new national approach to the CAP, which was echoed by the hon. Member for Dorset, West (Mr. Spicer).

Mr. Jopling

The hon. Gentleman seems to be giving us a sneak preview of the Labour party's next election manifesto, so could he tell us whether the manifesto will still say that Labour would nationalise alternative land?

Mr. Home Robertson

The Minister will have to wait and see, but I think that that is a little unlikely. I have just come from the Labour party conference in Scotland at which a whole range of resolutions on this subject were passed, but that was not among them.

Mr. Douglas Hogg

How many tenants has the hon. Gentleman got?

Mr. Home Robertson

I do not know why Conservative Members get so excited. If a Conservative Member is a farmer, he is a good, honest, hard-working yeoman farmer, but any Labour farmer must ipso facto be a rapacious landlord.

Mr. Hogg

But how many tenants does the hon. Gentleman have?

Mr. Home Robertson

None.

We recognise the need to cut surpluses and the need to cut costs drastically, but it must be done responsibly and it must take account of the needs of the full British rural economy. The Labour party has a proud record of care for agriculture, which started with the Agriculture Act 1947. We intend to maintain that record.

These proposals might well turn out to be academic if Mr. Kiechle of the German Federal Republic vetoes the whole package, as he did last year and if it is not the German Government it is just as likely to be the Irish or someone else and meanwhile another year's crop has been sown. Next year's surplus is being grown. There is a long lead time in agriculture and we cannot go on putting off decisions for ever. That is why my hon. Friend the Member for Pontypridd has suggested that the agricultural support system should be repatriated, subject to clear guidelines laid down by the EC. That means that if the United Kingdom had production quotas for milk, beef, sheep or cereals, our Government would take whatever steps they thought appropriate for British conditions to achieve those targets, subject to penalties for overproduction. Such a scheme would include national measures to support the rural economy and to restructure agriculture.

It would be too complicated and take too long to negotiate a comprehensive package for the entire EC of 12 countries this year or next year. The surpluses for 1987–88 are already in the ground being grown. We should seriously consider repatriating national agricultural policies.

The industry is now in a crisis and this debate will not settle the matter—I wish that it would. The Opposition are working on detailed proposals for food supplies to Europe and the future of agriculture, but there was precious little sign, at least until this evening, of any constructive thought from the Government. We were interested to hear what the Minister of Agriculture said. It was in marked contrast to what his noble Friend the Minister of State, Scottish Office said when he addressed the annual general meeting of the National Farmers Union of Scotland at Coylumbridge last week. When Mrs. Fiona Dalrymple, an NFU representative from the Lothian region, accused the Government of being irresponsible, saying that land would have to come out of production without showing a policy direction, Lord Gray of Contin said: I am all ears. You tell me what the policy should be. If that is the state of mind of the Minister of State responsible for agriculture in Scotland, we urgently hope that more constructive views will be forthcoming from the Minister of State with responsibility for agriculture in the rest of the United Kingdom.

10.4 pm

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

During today's debate we have seen that a number of issues have brought both sides of the House close together. First, there has been a demand that the common agricultural policy should be accepted, and that whatever we do must be addressed to the problems of surplus and solving them. Secondly, it has been demanded that the CAP should be fair and should not discriminate between farmers or nations within the European Community. Thirdly, it has been demanded that the policies should be open in the sense that they should enable the industry to take on new recruits and to reward efficiency and success.

Those three points seem to have become the common currency of all who are concerned to reform the system. I understand that the hon. Member for Walthamstow (Mr. Deakins), who has long-standing views on the matter, does not believe that the system can be reformed. He is becoming an ever lonelier figure, but he takes a consistent view, which we must accept as his. It is more sensible than the proposals of the hon. Member for East Lothian (Mr. Home Robertson) for the repatriation of the agricultural support system. That would mean that we would retain within the Community all the issues about which we argue most, and that we would have to argue first about what the pointer would be, and then what suitable national decisions would be. Without guidelines about what would be suitable, we would soon complain about the French using their internal arrangements to undermine the markets that we have created for ourselves. We would be the first nation to argue about that, if the guidelines were not tight, fair and properly implemented.

The hon. Gentleman talked as if it would be easy to ensure that no country overproduced. Many Labour Members have put that argument tonight. They have played the usual Labour trick of saying that all foreigners cheat, and we never do. That is almost true, but it is not utterly true. A certain amount of policing would certainly be needed. The hon. Gentleman's solution to the problem was merely a restatement of the present problem. It is that we must come to agreements about the way in which we share the supply of food to a market which is diminishing, and which faces increases in supply.

My hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) put his finger on a most important point. It is not merely that our ability to poduce food is increasing, but that our ability to consume it is decreasing. In many major respects the population of western Europe has decided that to eat less of certain sorts of food would be beneficial for health, and that is for it to decide. While we are producing more dairy products, the demand for them is decreasing.

The hon. Member for Caithness and Sutherland (Mr. Maclennan) came to the House with what appears to be yet another version of SDP agricultural policy. He said no to every suggestion, saying that every suggestion was unsuitable, unworkable and would have to be delayed and given time. After listening to his speech, it was impossible to imagine any workable proposal, but one. I hope that hon. Members on both sides of the House will remember what he said—that we could not put up with the Third world knocking the CAP sideways.

That is an interesting view—to kick the poorest people in the world because we cannot solve our problems. As that party is constantly saying that it is supported entirely by Church of England clergymen, I hope that every parish priest in Britain heard what the hon. Gentleman said. I hope that he realises that the poorest people in Thailand who provide manioc for the EC will hear what he said tonight. Having told us that no farmer can bear any restriction put forward by my right hon. Friend or by the Commission, or any change, because it has to be given time to work, he has said that the people of Thailand can be kicked in the teeth because none of them has a vote for the SDP. That is the reason for that choice.

Mr. Maclennan

rose—

Mr. Gummer

I shall not give way.

Mr. Stephen Ross (Isle of Wight)

Sit down, you cheat.

Mr. Gummer

I shall not give way. I have checked the record. The hon. Member for Caithness and Sutherland refused to give way the last time he spoke, and today he refused to give way until he was forced to do so. Therefore, I see no reason why I should give way to him.

Mr. Stephen Ross

Sit down.

Mr. Gummer

The hon. Member for Isle of Wight (Mr. Ross) was not even here. The farmers on the Isle of Wight—an agricultural area—must wonder why their representative has not been here.

For most of the evening the House has had the opportunity to listen to two different agricultural policies put forward by the Liberal party and the SDP. I have considered carefully the difference between them, and I have looked carefully at the debate that the hon. Member for Caithness and Sutherland asked us to read. In that debate the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) suggested that we should have no quotas. Then I discovered that the hon. Member for Brecon and Radnor (Mr. Livsey) said that we should have quotas, but they were not really quotas because they were to be open-ended; in other words, there should be quotas on everything, but if a farmer grew too much he could sell it wherever he could get a market for it. So we have a new kind of quota—the open-ended quota.

Then we had a most interesting statement from the hon. Member for Caithness and Sutherland. I hope that hon. Members on both sides of the House will remember it. It is one about which we shall hear a lot—if not from him, certainly from us. He said:

If, instead of an open-ended system of support, limits are placed on the amount of farm produce qualifying for the full guaranteed price and that amount is geared to what can be produced by an efficient family farm, anything produced above that limit can be allowed to find a price level on the open market."—[Official Report, 29 January 1986; Vol. 90, c. 1037.] I have read that carefully. As I understand it, it means that every farm product will have a quota based on the most interesting and obvious objective standard—that which can be produced by an efficient family farm. An interesting thing about SDP Members is that they swap the word "family" for the word "small" regularly. But that is not true of many farms. In my constituency there are many family farms, which are large even by British standards, but several families live off and round them. Are they the kind of farm that the SDP is talking about? If they are, there will be no quotas at all. If the whole of Britain raised its ability to produce to the standards of the best land in Suffolk, we would have a bonanza for surpluses, the like of which we have never seen before. The hon. Member for Caithness and Sutherland did not mean that. What he meant, no doubt, is an idyllic weekend farm of the kind the SDP is always talking about. That is when SDP Members do their farming. The hon. Gentleman will produce a figure which will no doubt be satisfactory for his purposes. That is what he will do. Then he will tell everyone else that they have to work to that. Where will come all his sadness for the poor position of farmers under our proposal? Farmers would be worse off if every product had to be checked upon. Can we imagine people calling round checking on the quotas per farm? What makes it believable is that the SDP wants people to go round checking the day on which piglets were weaned. That would help the unemployment problem, because more people would be checking in agriculture than has been dreamt under any policy we have known.

The SDP claims that it is the natural party of agricultural opposition. That is where it should stay. I must not leave that point without mentioning the hon. Member for Brecon and Radnor, who made an important contribution to the debate and applied himself to the problems listed in this series of documents. But in the middle of it, he said something that we must press a little harder, and I hope that in future he will have the opportunity to answer it. He said that gradually—very gradually—the imports of New Zealand lamb should be slowed down and that we should find it new markets, probably in the far east, for what it produces. As a policy, that lacks some certainty. It has a fuzziness which some have suggested might often apply to Liberal policy generally, But it has the advantage of possibly being carried out and, therefore, it shows another difference between the two parties in the alliance.

The noticeable aspect of the official Opposition was the paucity of its attendance during the dabate—

Mr. Maclennan

Will the Minister give way?

Mr. Gummer

No, I will not give way. The hon. Gentleman may set me an example on the next occasion, and I promise to give way then.

My hon. Friends the Members for Dorset, North (Mr. Baker) and Wantage (Mr. Jackson) tried to discuss the future of the common agricultural policy and looked for ways in which the system, which was so successful in times of shortage, should be changed to meet times of plenty. The House should have heard more speeches from the Opposition putting forward their views on the CAP. However we may fare in the continuing debate during the next few months, we must find an answer to the surpluses and we must find that answer within the CAP.

I am sorry that the hon. Member for Ipswich (Mr. Weetch) is not present, for he spoke with great compassion on the subject. His constituency borders mine. He said that Ipswich is a great grain port. What does he think made it a great grain port? It was the common agricultural policy, which turned Britain from a net importer of grain to the sixth largest exporter in the world. It is a good thing for the people of Ipswich that the hon. Gentleman's policy on the Common Market was not followed. The hon. Gentleman not only opposes—

Mr. D. N. Campbell-Savours (Workington)

My hon. Friend supports the Common Market.

Mr. Gummer

The hon. Gentleman was not here for the debate, so I can report to him that the hon. Member for Ipswich is president of the "Get Suffolk out of the Common Market" movement. The hon. Gentleman should return to Cumbria, about which his facts are more accurate.

My hon. Friend the Member for Basingstoke (Mr. Hunter), in connection with our arguments on the landlord and tenant legislation and tenants going out of milk production—the point was signally lacking from the speech of the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)—remarked that however important it is to find a solution, it is not easy to find such a solution. It must be true that both landlords and tenants have an interest in quotas. The tenant must have a clear interest in the quota. It must also be true that if a tenant removed from a landlord's land a milk quota, thus leaving the landlord with land worth much less than it would otherwise be, the landlord also has some interest in the quota.

If it was easy, as the hon. Member for Crewe and Nantwich suggested in her rather typical anti-landlord speech, as if somehow landlords could be discounted entirely, because, according to Labout mythology all landlords are wicked—[Interruption.] The truth is that we did not want to go into the details of the discussions this evening because we wanted them to be fruitful. It is all very well for the hon. Member for Caithness and Sutherland to laugh, but such a result could be jeopardised. It would be a good thing if landlords and tenants could reach a conclusion, and it would be a bad thing if the House made that more difficult.

The problems of the quotas for milk production were exacerbated, as my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said, not just because the quotas came in so rapidly but because they were in many ways implemented retrospectively. Indeed, my hon. Friend is right to say that quotas cannot properly be evaluated on the basis of that experience.

However, my hon. Friend the Member for Tiverton underestimates the degree to which quotas can ensure that an industry becomes inflexible, unable to change to meet new demands, unable to open up to new entrants and unable to take on the effects of efficiency resulting from the new technologies. I beg him to accept that there are those who feel that quotas are not the sensible solution to our problems. Nevertheless, I accept that his points must be properly considered. He is right to suggest that it would be unfair to judge quotas merely according to our dairy experience.

I hope that my hon. Friend the Member for Tiverton will not be carried along by the thought that quotas are somehow inevitable. That is not so. We must find an alternative that resolves the problems. Thus, it is perfectly right for us to continue to say what we have always said—that there must be price restraint at the centre of any package. After all, none of the suggestions can work if the price continues to rise in a world of surpluses. That would be economic nonsense and would be seen as such by all those who complain about how the CAP now works. Price restraint must be a central part of any package.

The rest of the package must be judged on three criteria. First, it must work; secondly, it must be flexible enough to allow for technical advances, success, and for new people coming into the industry; and thirdly, it must be fair between countries. When my hon. Friend the Member for Hereford (Mr. Shepherd) made that point, he was echoing several others. He said that for farmers in Britain, as, I believe, for farmers in the rest of the Community, the first criterion is whether other people are being asked to shoulder a smaller burden than they are.

Our farmers are most concerned to know whether the burden is fairly shared. They accept that major changes must be made and that surpluses do farming no good. Indeed, several of my hon. Friends made that point. But having accepted that point, they ask that the burden should be shared among the countries of Europe. In that, I must echo the words of several hon. Members who demanded that we should fight not only for Britain's interests in the round, but for a fair share that must not be imperilled by the sort of special arrangements that were made recently, for example, in the case of Ireland and dairy quotas.

The hon. Member for Carmarthen (Dr. Thomas) made several points about the problems that the dairy industry ran into with quotas and which would continue if there was a reduction in production; but he must also accept that we very much take the point that every country must obey the rules. It is not just that things must be seen to be fair theoretically, but that other countries obey the same rules as we do. That is always difficult because it is common practice in all European countries to claim that one's own nation obeys the rules while all the others do not. However, there is no doubt that we in Britain are more efficient than some in controlling and checking such matters. Part of our policy must be to ensure that that fairness is not only theoretical but actual.

My hon. Friend the Member for Sherwood (Mr. Stewart) properly reminded the House that the inevitable result of dealing with agricultural surpluses one by one is that there is a knock-on effect and an increasing imbalance between the sectors. I fear that we cannot face all the problems at once. What we are seeking in this particular round is to deal with some of them effectively, but we should not ignore what my hon. Friend said in our search for a solution.

My hon. Friend the Member for Wells (Mr. Heathcoat-Amory) made a particularly helpful speech from his point of view. He is no lover of the CAP. However, he rightly supported the price cuts, and also made the point about restraints being central to any package, which I think the House in general would accept. I do not want to encourage him in his views about ethanol. However low the price of grain were to fall, I cannot see that it would be sensible to make it into ethanol, particularly as the oil price falls. We must be careful about misleading the farming community by suggesting that there are simple answers of that kind to these complex problems.

My hon. Friend the Member Devizes (Mr. Morrison) put clearly the reason why he was opposed to a co-responsibility levy. We share with him that reason, particularly the point about the 25-tonne cut-off. It cannot be acceptable that Britain, whether intentionally or merely by accident, should be discriminated against because of the different structure of our family farms.

My hon. Friend the Member for Grantham (Mr. Hogg), whose speech I missed, sadly, but which was reported to me in detail, returned to the question of national aids. We can only see a successful means of helping those who most need help in agriculture, whether it be in Portugal or in Britain, if we deal with the surpluses overall. That will give us the elbow room to deal with specific problems. I refer again to the speech made by my hon. Friend the Member for Wantage, which will be well worth reading.

My hon. Friend the Member for Banbury (Mr. Baldry) made the point that is often missed on the gearing of the CAP. There is no doubt that that policy is supremely successful as long as surpluses are not easily made. It becomes faster and faster and more and more expensive even with small increases over the amount needed for consumption. My hon. Friend mentioned the 4:50:200 gearing. Four per cent. over production means 50 per cent. more in intervention and 200 per cent more on the price. That is a devastating picture. However, it should be compared with the fact that if we went back to the system of deficiency payments, the increase in the cost that Britain would by paying for the CAP would be well over the £1,500 million. There is no solution that way. The real solution comes in reforming the CAP, guided by three principles. It should be done in an effective way, in a fair way and in a way which keeps farming open to new entrants and to new ideas and technology.

The sadness about the debate is not the common attitude that so many of us share on the present discussions, not even the small number of Opposition Members who attended and spoke about the future; the sadness of this debate is that, in discussing the arguments, the Labour party put forward its views of the future with great vagueness. However, it managed to achieve something, which I am sure in retrospect alliance Members will wish that they had achieved. The Labour party did at least manage to put forward some policies rather than putting forward so many policies which showed most of us that alliance Members would be wholly unsuited to run anything, least of all an agricultural policy.

Question put and agreed to.

Resolved, That this House takes note of European Community documents Nos. 4963/86 including Addenda 1 to 5, 10174/85, 4075/86, 8480/85, 5098/86, 10492/85, 4130/86 and 4150/86; and supports the Governments intention to seek an agreement on 1986–87 farm support prices and related measures, including a Community Milk Outgoers Scheme, which maintains the process of reform, and, in particular, which tackles the problems of surpluses and costs in the Common Agricultural Policy, which makes the policy more market-orientated and which does not unfairly disadvantage the United Kingdom, taking account of the interests of British agriculture and its associated industries, of consumers and of taxpayers.