Commons Sitting of 15 February 1988

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]

Imprisonment of a Member
Mr. Speaker: I have received a letter from the chief magistrate of the Belfast petty sessions informing me that Mr. Robert Roy Beggs, the hon. Member for Antrim, East, has been sentenced to imprisonment for seven days following non-payment of a fine for an offence under article 3 of the Public Order (Northern Ireland) Order 1987. I shall cause the text of the letter to be published in the Votes and Proceedings and in the Official Report.
Following is the letter:
Dear Mr. Speaker,
Robert John Beggs, Member of Parliament for East Antrim, was convicted by me at Belfast Petty Sessions on 11 December 1987, of taking part in a public procession, contrary to Article 3 of the Public Order (Northern Ireland) Order 1987. I fined him £2000, to be paid within 28 days.
As that fine has not been paid Mr. Beggs was today committed to Prison for a period of 7 days.
Yours faithfully,
C. P. McRandal
Resident Magistrate

Oral Answers to Questions
  ENERGY

    Power Stations and Overhead Lines
    Mr. Morgan: To ask the Secretary of State for Energy what representations he has received on Statutory Instrument (S.I., 1987, 2182) on the "Rules of Guidance for Public Inquiries into new Power Stations and Overhead Lines", since it was laid before the House on 18 December 1987; and if he will make a statement.
    The Secretary of State for Energy (Mr. Cecil Parkinson): In addition to the report by the Select Committee on Energy, I have received two representations from the public on this matter.
    Mr. Morgan: Does the Secretary of State agree that if nuclear power deserved even half the affection lavished on it by the right hon. Gentleman, the Prime Minister and the chairman of the Central Electricity Generating Board, proposed new power stations, such as Hinkley Point C—which will probably be the first subject of the public inquiry rules which are being promulgated under the statutory instrument — would be able to withstand a comprehensive and proper public inquiry, not one whose rules are rigged in favour of the CEGB?
    Mr. Parkinson: I am afraid that the hon. Gentleman has got it wrong. It was the Select Committee on the Environment that suggested that the rules should be modernised, and that was in 1985–86, long before Hinkley Point was first thought of.
    Mr. Colvin: Will my right hon. Friend confirm that the object of changing the rules is to speed up public inquiries, and that the Sizewell B inquiry took far too long? Will he also confirm that the public inquiry into Hinkley Point C should take less than half as long as the Sizewell B inquiry, in which three quarters of the time was spent on discussing the PWR? Those arguments are already concluded, and the only question that arises from the Hinkley Point C application is the environmental one.
    Mr. Parkinson: My hon. Friend is right. The inquiry at Hinkley Point will, in theory, reconsider some of the ground that was gone over during the Sizewell B inquiry. I stress, however, that the Government have no intention of shortening the inquiry or preventing objectors from having a say. We want a more orderly and comprehensive form of inquiry, which is what the Select Committee said was needed.
    Mr. Eadie: How does the right hon. Gentleman dispute the charge that the rules were slipped through two days before the Christmas recess and that no press release was issued — which was very mysterious, because the Department of Energy works through press releases? How does the right hon. Gentleman intend to make clear to the people and Parliament that all this is not contrary to the public interest and that rights have not been taken away?
    Mr. Parkinson: I repeat that a Select Committee of the House has said that public inquiries were too long and complex and were unfair to the objectors. It was because of the wishes of objectors, among others, that the new rules were introduced. The hon. Gentleman is basing his argument on a wholly fallacious point.
    Mr. Heathcoat-Amory: Does my right hon. Friend agree that all those who want a public inquiry to be a genuine inquiry, rather than a restatement of entrenched positions, will welcome the rules of guidance? Will he confirm that the provision against irrelevant or repetitious statements should enable the Hinkley Point inquiry, which will take place in my county of Somerset, to concentrate on aspects that are relevant to Somerset and to that site, rather than allow a four-year re-run of the Layfield inquiry into a similar power station in Suffolk?
    Mr. Parkinson: I believe that the Hinkley Point C inquiry should be comprehensive. I am afraid that, post-Chernobyl, there will be a re-run of some of the Sizewell arguments, but I do not think anyone stands to gain if the appeal procedure is used as a way of preventing decisions. That was never the intention of inquiries. We want a full inquiry, but we do not want a tedious, repetitious inquiry, in which people use the inquiry procedure to prevent a decision being made.

    Coal Prices
    Mr. Ray Powell: To ask the Secretary of State for Energy what information he has on the pricing of coal agreed between the Central Electricity Generating Board and British Coal.
    The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer): The price of coal purchased by the Central Electricity Generating Board from British Coal is governed by an understanding between the two industries agreed in 1986. In accordance with this understanding, pricing terms were reviewed on 1 November last year for the 12 months to October 1988.
    Mr. Powell: Will the review create a position in which considerably more imported coal will enter this country? Will the Minister consider the effects of this great importation on the closure of collieries, particularly in the Principality? Will he also consider whether it would be wise to try to expand the mining industry by opening the Margam mine?
    Mr. Spicer: The review has nothing to say about imports of coal. British Coal is making its prices more competitive under the terms of the present agreement. However, we have always said that when the electricity industry is privatised it will be able to buy coal in the best market. We say that because we know that British Coal is quite capable of being the best market.
    Mr. Andy Stewart: Will my hon. Friend confirm that, as a result of increased productivity in the past two years British Coal has reduced the price of coal by £4 per tonne —costing British Coal £400 million—and that the way to beat foreign competition is through productivity?
    Mr. Spicer: That is absolutely right. British Coal has reduced prices, and that reduction has benefited consumers by £500 million since April 1986.
    Dr. Marek: If the Minister is happy with the present pit-closure policy, what analysis has he made of the future price of coal on world markets?
    Mr. Spicer: The future of coal will be determined by those markets. We have made no particular analysis because, unlike the Opposition, we do not plan on these
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    things. However, British Coal will have to compete in world markets according to how the markets are determined.
    Mr. Sackville: Does my hon. Friend agree that there is a limit to how much longer consumers, including the elderly, should be expected to pay inflated prices for electricity so that British Coal can continue to sell at nearly twice the world market price?
    Mr. Spicer: The coal industry will have to bear that strongly in mind as it faces increasing competition. That is why we want to see new practices introduced into the coal industry and why each working day we are putting £2 million of taxpayers' money behind the coal industry.
    Mr. Haynes: I am not surprised at the kind of replies that we are receiving from the Minister today. Is he aware that, unlike him, I fight for Britain? What about the British coalmining industry and British mineworkers? I object to the South African imports, which are produced with cheap, slave labour. It is time that the Minister said, as we are saying, "Let us fight for Britain".
    Mr. Spicer: I have already said that the British coal industry should be backed. There is no question about that. However, it should be backed only if it can provide coal at competitive prices. Otherwise the electricity consumers—as my hon. Friend the Member for Bolton, West (Mr. Sackville) has said—will be the loser.

    Electricity Generation
    Mr. Stern: To ask the Secretary of State for Energy what proportion of the electricity produced by coal-fired power stations comes from stations on coastal sites.
    Mr. Parkinson: I am advised by the CEGB that, in the financial year 1986–87, 15 per cent. of electricity produced by coal-fired power stations came from stations on coastal sites.
    Mr. Stern: I thank my right hon. Friend for that reply. Does he agree that it is in the interests of the nation as a whole and in the interests of whatever company or companies are generating electricity that more coastal sites should be encouraged so that the electricity generation industry can take maximum advantage of acquiring coal at world prices, whether that coal comes from this country or abroad?
    Mr. Parkinson: As my hon. Friend has just said, when the industry is privatised we will not force it to buy British coal. Equally, we believe that if British Coal continues to be productive and to improve its performance it will become the supplier of choice. We cannot make it the supplier of necessity. We are not prepared to do that. We believe that it is capable of being the supplier of choice.
    Mr. Prescott: Will the Secretary of State tell us why he so emphatically believes that the coal industry, after privatisation of the electricity industry, should be dictated by market conditions and choice and that he should not force a decision upon it, when he is prepared to force a decision on the nuclear industry at higher cost to the CEGB? Why this inconsistency? Will the Secretary of State stop dithering and tell us that he will produce a White Paper before the privatisation of the electricity industry?
    Mr. Parkinson: The Government believe that there is an important security element in electricity supply which

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    comes from diversity. We want to see diverse sources of supply—nuclear, coal, gas, oil and renewables. There is nothing inconsistent about that.
    So far as the coal industry is concerned, the hon. Gentleman should use his influence with his friends in the National Union of Mineworkers and tell them that the more overtime bans and work to rules there are, and the more problems the industry imposes on itself, the worse its prospects will be.
    Mr. Robert B. Jones: Will my right hon. Friend confirm that, with the power stations located on the east coast, the Government will do their best to ensure that sulphur emissions are minimal, because of the effects on other countries?
    Mr. Parkinson: Yes. An investment programme of about £800 million is planned to introduce emission controls into some of our coal-fired power stations. All new power stations will have those controls built into them. My hon. Friend is on to an important point.

    Wind Power (Wales)
    Mr. Geraint Howells: To ask the Secretary of State for Energy if he has any plans to increase support for wind power development in Wales.
    Mr. Michael Spicer: My Department is discussing future plans for wind energy research and development with major wind turbine manufacturers and the generating boards.
    Mr. Howells: I have received many complaints from those in favour of wind power that the Government are not willing to support them, financially or otherwise. If this is true, why?
    Mr. Spicer: It is not true, so I should not have to answer the second part of the question. However, I can say that the current rate of expenditure on wind power development is £4 million. I hope to make an announcement about our plans for wind farms within the next month or so.
    Mr. John Marshall: Does my hon. Friend agree that it is significant that the energy suggestion of the Liberal party is wind power? Does he agree that such stations would have great difficulty if the wind blew in opposite directions, as it would do under any alliance?
    Mr. Spicer: My hon. Friend makes his own point. It is interesting that the Liberal party does not appear to take into account the fact that there are great environmental costs as well as benefits from wind power.

    North Sea Oil
    Mr. Irvine: To ask the Secretary of State for Energy what estimates he has made of levels of exploration and activity in the North sea in 1988.
    The Minister of State, Department of Energy (Mr. Peter Morrison): I have been encouraged by the general increase in offshore activity in 1987 compared with 1986, and the figures will be published shortly in the 1988 Brown Book. I am cautiously optimistic that the recovery will continue in 1988.
    Mr. Irvine: Will my hon. Friend tell the House how those levels compare with earlier levels stretching back to
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    1964, when exploration began? Will he confirm that the main area of activity is concentrated on the northern and central sectors of the North sea? Will he also confirm that the southern sector suffers a much less favourable tax regime, and will he tell the House what steps he proposes to take to encourage development of oil and gas reserves in the southern sector of the North sea?
    Mr. Morrison: In answer to the first part of my hon. Friend's question, it is the third highest level of activity ever. Given the price of oil, which is below $20 a barrel, that is satisfactory.
    In answer to the second part of my hon. Friend's question, may I say that he flatters me in thinking that I have the powers of my right hon. Friend the Chancellor of the Exchequer. The point made by my hon. Friend has already been made to me and has no doubt been made to my right hon. Friend the Chancellor of the Exchequer.
    Mrs. Margaret Ewing: Against a general and welcome background of increased activity in the North sea, will the Minister give some indication of what possibility there is for security of employment in the oil fabrication yards, particularly those in Highland regions, which are major employers and, obviously, would be expecting some spin-off effects from increased activity?
    Mr. Morrison: I am glad that the hon. Lady welcomes the increased activity. She will appreciate, representing Moray, that the time between exploration and development and orders from the fabrication yards is somewhat of a lead situation. One hopes that the activity will improve.
    Mr. John Garrett: Now that Britoil is on the point of being taken over by BP, which is one fifth owned by Kuwaiti interests, what steps is the Minister taking to safeguard the national interests in the North sea by the use of the golden share; a share insisted on by his predecessor to ensure the independence of Britoil? What does the Minister judge the national situation to be in terms of jobs in Britoil and the exploitation of Britoil assets in the North sea?
    Mr. Morrison: The hon. Gentleman cannot have been listening to what my right hon. Friend the Chancellor of the Exchequer has said. He has said that he will retain the special share so long as it is in the national interest. Talks are going on between Britoil, BP and the Treasury and they will ensure that Scottish and North sea interests are very much to the fore.

    Electricity Prices
    Mr. Pike: To ask the Secretary of State for Energy what further representations he has received regarding the proposed increase in electricity prices.
    Mr. Michael Spicer: I have received a number of representations.
    Mr. Pike: Has not the Secretary of State said that the rate of increases is faster than that which the chairman of the CEGB would have wished? Does the Minister recognise that this is of serious concern to many industries, which believe that this will put them at a disadvantage in the face of European competition? If the Government do not change their policy, they are likely to put more jobs in jeopardy.
    Mr. Spicer: Perhaps the hon. Gentleman will be interested in the facts about this. The United Kingdom's domestic electricity prices are among the lowest in Europe and will continue to be so after April. For typical industrial consumers electricity prices will remain at about the average for Europe after the increase in April. After the April increase, United Kingdom industrial electricity prices will continue to be lower than the average prices in the United States and Japan.
    Mr. Hannam: Is my hon. Friend aware that the South Western electricity board is proposing a 12 per cent. increase in prices next year? In an area of below average incomes, will this not be damaging? Will my hon. Friend have discussions with the electricity board to try to prevent such a large increase?
    Mr. Spicer: We have been enjoying such low electricity prices largely because the industry has been earning an exceptionally low rate of return on investments. As the industry now requires considerable new investment—
    Mr. Skinner: It is being fattened up.
    Mr. Spicer: Whatever the hon. Member for Bolsover (Mr. Skinner) may say about fattening up, whether the industry was in the public or the private sector, it would have to increase its rate of return.
    Mr. Hardy: When the Government announced the price increase, it was suggested that it was done to provide the CEGB with an adequate capacity to invest. When the figures were examined, it appeared that the CEGB had already budgeted for £1 billion of investment before the price increase. Is the Minister sure that this increase is necessary, or are he and his colleagues determined that the price increase will go ahead to provide a sweetener for privatisation and reduce the competitive edge of British industry?
    Mr. Spicer: Between now and the year 2000 there will have to be investment of £45 billion—in outturn prices— so that the industry can meet demand. To achieve that rate of investment, the industry—whether it is in the private or public sector—has to start to gear itself up to the approximate 5 per cent. rate of return that the Labour party agreed was an appropriate rate of return in the public sector.
    Dr. Michael Clark: Should not electricity prices be competitive to the user industry but commercial from the supply industry in order that the massive investment can be properly serviced? Do not some companies, such as chemical companies, use large amounts of electricity, particularly if they have to heat their products first before electrolysing them? Therefore, will my hon. Friend consider a special form of tariff for those high users of electricity in the chemical industry?
    Mr. Spicer: I agree with what my hon. Friend has said. There are arrangements whereby heavy users have a 6 per cent. discount.
    Mr. McAllion: Does the Minister accept that the rise in electricity prices is the third heavy blow that the Government have dealt to pensioners this winter? Already £3·5 million has been cut from the Government's allocation for home insulation grants, pensioners on supplementary benefit have been expected to meet 10 per cent. of the costs of insulation materials and now the cost of electricity is to increase at more than twice the rate of
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    inflation. Does the Minister not have on his conscience the report from Winter Action on Cold Homes, which is in The Independent today? That shows that more than 5 million pensioners cannot afford to heat their homes properly and that up to 30,000 pensioners die every year from cold-related causes. Why is he making them pay the price of privatisation?
    Mr. Spicer: First, there will be no rises until April. Secondly, when those rises take place domestic consumers will be 6 per cent. better off in real terms than they were five years ago. Thirdly, pensions have kept pace with inflation over the past five years and domestic electricity prices have fallen by 15 per cent. in real terms.
    Mr. Beaumont-Dark: Does my hon. Friend accept that most of us are anxious to believe the story that he tells us, but that we find ourselves with a certain complexity? Lord Marshall said that what the Minister now says is not exactitude and the Confederation of British Industry, which is involved in trying to make industry prosperous, also thinks that what the Minister said is an inexactitude. Who should we believe—them or the Minister?
    Mr. Spicer: Me, Sir.
    Mr. Matthew Taylor: The Minister speaks of the need to increase the rate of return for the industry. Does he not accept the CBI figures, which suggest that a 4·75 per cent. rate of return on Treasury figures is equivalent to a 16 to 18 per cent. rate of return on the normal, non-inflation adjusted figures that business uses and that that rate of return exceeds that of many high-risk, let alone low-risk, industries? Does he accept that many pensioners, industrialists and others are bitter and angry about the increases that are being imposed by the Government, not for a rate of return, but to make the industry privatisable and to increase the money going to those people who can afford to buy it?
    Mr. Spicer: The hon. Gentleman forgot to mention that if we are taking a historic cost basis of 16 per cent., the average historic cost basis for industry is 18 per cent. We are not even going to reach that level after this rise.
    Mr. Rost: Is not the main justification for demanding a slightly higher rate of return now the prospect of cheaper electricity in the future? It will surely stimulate investment in new technology, particularly by the private sector generators, which would allow more competition and lower prices in the future.
    Mr. Spicer: My hon. Friend is absolutely right on two grounds. First, it will encourage new and modern investment in the industry. Secondly, as we privatise the industry, there will be increased pressures on the cost efficiency of the industry, which in the long term will bring down the relative prices.
    Mr. Prescott: Does the Minister accept that his answers will not be acceptable to the House? Can he confirm that he is to meet the CBI to hear its representations on a study that has just been concluded by the London Business School, looking into whether the claims of the Government that the rate of return on capital and profits are necessary for investment in the industry? The conclusion of that report, which is quoted in the press, is that the rise in electricity prices is unnecessary and inappropriate and does not stand critical examination. In reality, the increase is totally unjustified. The Government

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    are simply fattening up the industry for privatisation, and the cost is being paid by the misery and deaths of pensioners who are paying price increases of twice the rate of inflation.
    Mr. Spicer: I can confirm that my right hon. Friend the Secretary of State and I will be meeting the CBI in the near future. At that meeting we shall be putting forward precisely the same points as I have been putting to the House this afternoon.
    Mr. Forth: Is my hon. Friend surprised at the reaction to the increase from, for example, the CBI, which is conceding up to 8 per cent. average wage increases when labour costs represent over two thirds of its total costs whereas electricity represents only a small percentage of those costs? Does my hon. Friend share my surprise at that?
    Mr. Spicer: I share my hon. Friend's surprise because electricity prices represent 2 per cent. of manufacturing costs whereas 46 per cent. of the average firm's costs are represented by labour costs, which have been rising in cash terms by 50 per cent. over the past five years.

    British Coal
    Mr. Jack Thompson: To ask the Secretary of State for Energy when he last met the chairman of British Coal; and what issues were discussed.
    Mr. Parkinson: I meet the chairman of British Coal at regular intervals to discuss all aspects of the coal industry.
    Mr. Thompson: At his next meeting with the chairman of British Coal, will the Secretary of State raise the question of the abysmal industrial relations that exist in the coal industry at present? At the moment the major miners' union, the National Union of Mineworkers, has no consultations with British Coal; the deputies union, the National Association of Colliery Overmen, Deputies and Shotfirers is in dispute with British Coal; the British Association of Colliery Management, the management union in the industry, has no confidence in British Coal, and the only union that consults British Coal is the Government-sponsored Union of Democratic Mineworkers. Does the Secretary of State not feel that there is a necessity for a full discussion of the industrial relations in that industry?
    Mr. Parkinson: I am sure that we all deplore the industrial relations record of the British coal industry, which is doing it enormous harm. The present NACODS' overtime ban is a totally mindless and senseless waste of time and money. I hope that the hon. Gentleman will tell NACODS that, in addition to putting at risk the jobs of its members, it is putting at risk the jobs of thousands of miners, and that the sooner it accepts the offer of binding arbitration, which is on the table, the sooner peace will return to the coal industry.
    Mr. Andrew Mitchell: When my right hon. Friend sees the chairman of British Coal, will he pass on his congratulations to the Nottinghamshire mineworkers, who have exceeded their previous figure for productivity per man shift three times this year? The figures is now 428 tonnes per man shift. Will he reflect that that figure would have continued to increase had it not been for the unfortunate disruption caused by NACODS in the coalfields?
    Mr. Parkinson: The way forward for British Coal must be through greater productivity and improved performance. If it continues to achieve that its prospects are good, but if there is industrial strife it will get the reputation being an unreliable and expensive supplier, and the future will be grim.
    Mr. Eadie: When the Secretary of State has discussions with the chairman of British Coal, will he find out why the South of Scotland Electricity Board decided to go for open tender for its coal supplies; in short, to invite foreign coal to come in and decimate the Scottish coal industry? Is that because the right hon. Gentleman gave the green light: that in the privatisation of the electricity industry foreign coal could be used in Britain by choice, which would mean jobs for foreign coalminers and unemployment for British coalminers? Is that his policy?
    Mr. Parkinson: There has been no change of policy. There has always been freedom to import. I hope that British Coal and the South of Scotland Electricity Board will reach an agreement and that it will be British coal, or Scottish coal if the hon. Gentleman prefers it, that is burnt, but that is a matter for British Coal, not for me.

    Coal Industry (Productivity)
    Mr. Knox: To ask the Secretary of State for Energy what has been the increase in labour productivity in the coal mining industry, since 1983–84.
    Mr. Michael Spicer: For the week ending 12 December 1987, average deep mined revenue output per man shift was a record 4–11 tonnes. This represents an increase of nearly 70 per cent. on the average of 2·43 tonnes for 1983–84.
    Mr. Knox: The figures show a very satisfactory improvement in recent years. Does my hon. Friend agree that Staffordshire miners have made a particular contribution towards that improvement?
    Mr. Spicer: Yes, I accept what my hon. Friend said. They certainly have. Indeed, as I understand it, they have been working full-time during the NACODS' dispute.
    Mr. Salmond: Will the Minister say what possible use increased productivity in the coal industry will be in Scotland if there is no deep-mined coal as a result of the impasse between the SSEB and British Coal? Should not the Secretary of State now accept his responsibility to intervene in these negotiations? Given that the relationship between the two public sector bodies has been destabilised by the privatisation policy, will the Secretary of State accept his responsibility and intervene to save the Scottish coalfield?
    Mr. Spicer: That has nothing to do with the privatisation policy. As my right hon. Friend said, the policy of the electricity industry in buying coal where it wants has been in place for some time. It is up to the coal industry throughout the country to respond to that. Although it may not be palatable to Opposition Members, there is a thriving opencast industry in Scotland.
    Mr. Colvin: Will my hon. Friend confirm that one way to encourage greater productivity is to improve the facilities for the importation of foreign coal into the United Kingdom? Rather than building a new coal-handling facility at Fawley, which the Central Electricity

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    Generating Board wants to do, would it not be better for Parliament to abolish the national dock labour scheme, as I am sure the House would do if the Government only gave us the opportunity?
    Mr. Spicer: The second part of my hon. Friend's question is not a matter for me or for my right hon. Friend, and nor is Fawley at the moment, because we cannot prejudge the results of the various appeal procedures in the planning process that might be forthcoming.

    Sacked Miners (Reinstatement)
    Mr. Skinner: To ask the Secretary of State for Energy when he next intends to meet the industrial relations director of British Coal to discuss the reinstatement of the miners sacked during the 1984–85 coal strike; and if he will make a statement.
    Mr. Spicer: The dismissal and re-employment of mineworkers is a matter for the management of the British Coal Corporation.
    Mr. Skinner: Is the Minister aware that it is now nearly three years since the end of the strike and that more than 200 miners are still victimised—sacked—because of the fight that they put up in the 1984–85 strike? Is he aware of the famous quotation from Shakepeare's "The Merchant of Venice":
    "The quality of mercy is not strain'd; It droppeth, as the gentle rain from heaven"?
    Some of that gentle rain dropped on his right hon. Friend the Secretary of State for Energy when he was out in the wilderness and he got his job back. Why does the Front Bench not do some negotiating to get these 200 miners their jobs back?
    Mr. Spicer: As the hon. Gentleman has recognised, this is a matter for British Coal. He should also recognise that out of the more than 1,000 miners who were initially dismissed the vast majority have their jobs back. Only 62 could claim to have been unfairly dismissed, and they have been fully compensated.
    The matter has to be seen in perspective. Indeed, 9,808 were arrested, 10,372 charges were brought, 160 were sentenced, 37 were sent to detention centres, and 2,550 fines were imposed. That is the context in which the dispute was settled, and it is worth reminding the House of those figures.

    NACODS
    Mr. Harry Greenway: To ask the Secretary of State for Energy if he intends to meet the general secretary of NACODS to discuss the pay levels of colliery deputies; and if he will make a statement.
    Mr. Parkinson: The pay of colliery officials is a matter for the management of the British Coal Corporation.
    Mr. Greenway: Will my right hon. Friend join me in welcoming the recent productivity increase in the coal industry? Does he share my disgust at the totally irresponsible action and behaviour of the NACODS deputies, who are putting jobs seriously at risk?
    Mr. Parkinson: My hon. Friend is right. There is a negotiating procedure between British Coal and NACODS, and, at the end of it, binding arbitration. British Coal has referred the matter to the tribunal, and
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    I hope that NACODS will do the same and that we can find an answer to this damaging and totally unnecessary waste of time.
    Mr. Hardy: I express my gratitude to the felicitous approach of the hon. Member for Ealing, North (Mr. Greenway). However, the Secretary of State's criticism of NACODS illustrates a serious lack of awareness of the fact that this strike, the first in the association's history, is related to a very much wider range of problems than simply salary. It involves the whole question of British Coal's aggressive approach. For the past fortnight I have been urging the Secretary of State and his ministerial colleagues to meet NACODS and discuss these serious matters.
    Mr. Parkinson: NACODS had a very strong position in the industry. It had an agreement with British Coal that it alone would supply overseers. The pay structure was adapted at its request, but it has not worked out as it had hoped. British Coal offered to return to the original structure and offered NACODS arbitration. If the hon. Gentleman has influence with NACODS, I urge him to urge it to go to the tribunal and accept binding arbitration.
    Mr. Jack: Does my right hon. Friend agree that industrial action outside the Nottinghamshire coalfield area does little to boost confidence in the minds of customers for coal, and thus undermines the long-term future of the industry?
    Mr. Parkinson: My hon. Friend is right. Apart from price, people want to feel that the supplier from whom they are buying is reliable. British Coal is earning a reputation as an unreliable supplier because it has a continuing stream of industrial action. I hope that that will stop and that British Coal will get on with the job of producing lower cost coal at a competitive price.

    Coal Prices
    Mr. Barry Jones: To ask the Secretary of State for Energy if the chairman of British Coal has discussed with him the effect the decline in the dollar has had on the price of coal.
    Mr. Michael Spicer: My right hon. Friend and I meet the chairman of British Coal at regular intervals to discuss all aspects of the coal industry.
    Mr. Jones: These are very uncertain times for the home industry. What plans does the Minister have to assist and protect the United Kingdom coal industry? May I remind him of the announcement last week of two pit closures in south Wales, in areas of very high unemployment where male unemployment is 1 in 4? We are saying to him that enough is enough. What will he do to protect the home industry?
    Mr. Skinner: The hon. Gentleman does not care.
    Mr. Spicer: The hon. Member for Bolsover (Mr. Skinner) says that I do not care. I remind him that in the last 20 years 70 per cent. of pit closures have taken place under Labour Governments. The hon. Gentleman should remind himself about that when he talks about people who care. On the question of caring, perhaps I should tell the hon. Member for Alyn and Deeside (Mr. Jones) that the Government have spent £6 billion in assisting this industry

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    —that is £2 million every working day. We have nothing to learn from the Opposition about caring for the coal industry.
    Mr. Neil Hamilton: Does my hon. Friend agree that our opencast coal has nothing to fear from the decline in the dollar? In the private sector at least, firms are anxious to open up new sites and expand the production of coal mined in Britain, at the expense of imported coal, but they are prevented from doing so by British Coal, which is unreasonably delaying the consideration of licence applications.
    Mr. Spicer: My hon. Friend is right to say that opencast coal is able to compete with world prices. What my hon. Friend also implies in his question is that the considerable sums of money that British Coal makes — over £200 million a year — from opencast coal go straight back into the development of deep mines. That is often forgotten by the Opposition.

  THE ARTS

    Education Reform
    Mrs. Clwyd: To ask the Minister for the Arts what discussions he has had with the Arts Council about the role of the arts in the proposed national curriculum.
    The Minister for the Arts (Mr. Richard Luce): I last discussed this matter with the chairman at our meeting in January.
    Mrs. Clwyd: I thank the Minister for that answer. No doubt he is aware of the widespread concern that all arts subjects, not simply art and music, should be taught to all children in all schools. Will he ensure that that is now a part of the Education Reform Bill, and will he assure us that parents will not have to pay extra for these subjects in schools?
    Mr. Luce: I know that the hon. Lady has played a prominent role in the past in connection with the Arts Council. As she may know, education is not my direct responsibility. Nevertheless, I am glad to say that art, music and English, are all core subjects. That shows the importance that the Government attach to this matter.
    Mr. Jessel: As my right hon. Friend has just said, it is extremely important that, for the first time ever, music and the arts are to be made compulsory subjects in schools. No Labour Government ever did that, thus proving that Conservatives are much more civilised in government than is the Labour party.
    Mr. Luce: As always, my hon. Friend is absolutely right. He is right to acknowledge that this is the first time ever that both art and music have been part of compulsory education throughout school life.

    UNESCO
    Mr. Menzies Campbell: To ask the Minister for the Arts what discussions he has had regarding the effect on the arts of the United Kingdom's non-menbership of UNESCO.
    Mr. Luce: None, Sir.
    Mr. Campbell: Does the Minister not agree that the continued self-exclusion of the United Kingdom from
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    UNESCO is damaging to the arts in Britain? Does he not also agree that if we wish to see changes in UNESCO we would be better involved now, rather than standing on the sidelines, especially as UNESCO is now under different direction?
    Mr. Luce: As the House knows, I am not responsible for decisions on UNESCO. That is the responsibility of my right hon. and learned Friend the Foreign Secretary. Having said that, I must tell the House that in the past when we have been a member of UNESCO there has been no particular benefit for the arts in Britain.

    Government Policy
    Mr. Bowis: To ask the Minister for the Arts what evidence he has about the effects of Government policies on the level of confidence among those involved in the arts.
    Mr. Luce: I think it fair to say that my recent three-year grant settlement and provision for incentive funding have been widely welcomed.
    Mr. Bowis: Does my right hon. Friend agree that the three-year funding for the Arts Council has been widely welcomed, and would be even more widely welcomed if that was fed through to the client groups sponsored by the Arts Council? Will he talk to the Arts Council to see whether this could be achieved?
    Mr. Luce: I am grateful to my hon. Friend for his support for three-year funding. I started by allocating this money to the Arts Council, and it is now up to the council to negotiate three-year funding agreements with its clients. As I understand the position, the council has decided to allocate next year's grants to a number of its clients. The next stage is to negotiate three-year funding agreements with as many of its clients as can convince the council that it is right to have such agreements. The sooner that that takes place the better.
    Mr. Tony Banks: In terms of confidence among the arts, what has the Minister been able to do to assure the arts world about the implications of the notorious clause 28 in the Local Government Bill, which was shamefully passed by the House? What discussions has the right hon. Gentleman had with his ministerial colleagues to ensure that there will he no imposition on artistic freedom by clause 28 being used by highly irresponsible homophobic individuals?
    Mr. Luce: I am happy, once again, to give reassurances. I have been in touch with my right hon. Friend the Secretary of State for the Environment, and I am advised that local authorities seeking simply to provide the public with access to a comprehensive range of artistic and literary material will not be put at risk by this provision. Indeed, recent Government amendments will strengthen that reassurance.

    Black Artists and Companies
    Mr. Boateng: To ask the Minister for the Arts how many black artists and companies received financial support from the Arts Council in each of the past five years.
    Mr. Luce: The arts present an opportunity for multiracial activities. Records held by the Arts Council do not differentiate between grants given to black and to Asian

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    artists and companies. Records are incomplete, but suggest a substantial increase from about 10 in 1983–84 to 64 in 1987–88.
    Mr. Boateng: I am much obliged to the Minister for his answer. He will be well aware of the good work done by organisations such as the Minority Arts Advisory Service and theatres such as Temba and Tara. Does he share with me a concern to ensure that the Arts Council's target figure of 4 per cent. of total funding is met by some of our great national institutions and by the regional art associations? Will the right hon. Gentleman accordingly agree to publish in the Library the results of the survey being conducted by the Arts Council?
    Mr. Luce: If the hon. Gentleman will take this in good heart, I should just say, before I answer his question more fully, that I observed his artistic performances at the weekend, and I think that there is plenty of room for artistic improvement in his work.
    In answer to the hon. Gentleman's question, it is right that the Arts Council has agreed to devote up to 4 per cent. of its expenditure to supporting ethnic art. This year it is devoting about £750,000 to supporting cultural ethnic minority art.
    Mr. Hayward: I thank my right hon. Friend for his earlier answer. May I encourage him to keep records and to award money merely on the basis of merit, and on no other basis?
    Mr. Luce: My hon. Friend is right. There is a great variety of culture to be encouraged. The more it is encouraged, the more it enriches cultural life.

    National Institutions (Funding)
    Mr. Butler: To ask the Minister for the Arts whether he intends to take powers to fund directly major national art institutions including the Royal Opera House, the Royal Shakespeare Company and the National Theatre.
    Mr. Luce: No, I think it better that funding arrangements should be made by the Arts Council.
    Mr. Butler: Does my right hon. Friend agree that the institutions are making very good progress as it is? Will he assure me that things will not change?
    Mr. Luce: I am grateful to my hon. Friend for his alertness. It is important to maintain the arm's length principle in the disbursement of all the sums of money to the performing arts. It is right that the allocation to the four flagships should be maintained by the Arts Council, and not directly by me.
    Mr. Fisher: Will the Minister confirm that the National Theatre, the Royal Shakespeare Company and the Royal Opera House are not only contributing in a fine way to our arts life, but are doing an enormous amount for the economy by attracting tourists? Why, then, is the success of the National Theatre being penalised by a standstill budget this year? If the Minister is serious about his Government backing success in the arts, why is the Arts Council not investing more money in the National Theatre?
    Mr. Luce: I have no doubt of the important role of the four organisations, not just the National Theatre. It is for the Arts Council to decide how it should disburse its
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    money, but it is worth pointing out that £30 million of taxpayers' money goes to the four national companies, which constituted about 20 per cent. of the Arts Council's total budget. It is perfectly open to organisations, such as the National Theatre, to bid for three-year funding, which I assume it will do shortly, and to bid for incentive funding over the next few months. I believe that if they can prove themselves they will be entitled to additional money. It is up to them to negotiate it with the Arts Council.
    Mr. Harry Greenway: Does my right hon. Friend agree that some of Peter Hall's productions, good as they always are, are extremely lavish and even unduly expensive? Does he also agree that Peter Hall is directing his target at the right base, which is the Arts Council, which has made its decision on the future funding of the National Theatre, not the Government?
    Mr. Luce: Yes, generally speaking the standard of artistic performance at the National Theatre is outstanding. My hon. Friend is absolutely right. It is for the Arts Council, the National Theatre and other big organisations to decide on the level of budgets. It is for them to negotiate direct with the Arts Council.

  CIVIL SERVICE

    Personal Communication
    Mr. Robert G. Hughes: To ask the Minister for the Civil Service to what extent senior civil servants are trained in personal communication skills.
    The Minister of State, Privy Council Office (Mr. Richard Luce): The Government place a high priority on training in oral and written communication skills for senior civil servants. Effective communications play a vital role within all Departments.
    Mr. Hughes: Does my right hon. Friend accept that these skills are increasingly important for civil servants who deal with the public, for those seeking to give good customer care and, in particular, for those who have to deal with the media?
    Mr. Luce: My right hon. Friend is right. There is no doubt about the importance of customer care and the relationship between the Civil Service and the public, especially when one considers the number of Government Departments providing services direct to the public. Individual Departments, such as the DTI, now run several courses which are designed to give special attention to training on customer care.
    Mr. Tony Banks: One of the civil servants most acquainted with communications with the press is Bernard Ingham, the No. 10 press officer. By virtue of the fact that he tends to go out of his way to stab Cabinet Ministers in the back, no doubt on the orders of the Prime Minister, is there a course on the back stabbing of Prime Ministers and Cabinet Ministers? If there is, may we on this side have a go so that we can get ready for it?
    Mr. Luce: In view of the number of diaries that have been published by ex-Labour Leaders, I would not have thought that the Labour party needed that sort of course.
    Mr. Robert B. Jones: Is my right hon. Friend aware that DHSS office managers in constituencies are good at writing letters that are both sympathetic and prompt, and

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    that this is a good example of communicative skills in the Civil Service? Will he ensure that his right hon. Friend the Secretary of State for Employment instructs office managers controlling unemployment benefit offices to take an equal interest in this important skill?
    Mr. Luce: I am grateful to my hon. Friend. I am glad that he has made a positive reference to the contribution of civil servants in dealing with the public and in the service that they provide. He is absolutely right. Sometimes they do this in quite difficult circumstances.

    Morale
    Mr. Terry Davis: To ask the Minister for the Civil Service what further steps he is taking to improve morale in the Civil Service.
    Mr. Luce: I am always looking for ways to improve morale in the Civil Service.
    Mr. Davis: Does the Minister accept that there are serious grounds for concern when 42 per cent.of the Inland Revenue staff vote against accepting wage increases of up to 16 per cent. simply because they do not trust their employer, the Government? Is it surprising that they do not trust the Government, when the Government decided arbitrarily and without consultation to give to charity the money that is due to retired civil servants because of the Government's error in calculating the retail prices index?
    Mr. Luce: Civil Service pay is principally a matter for my right hon. Friend the Chancellor of the Exchequer. Nevertheless, it is worth pointing out that we are moving increasingly to a position where we have flexible pay schemes and additions to cater, in particular, for recruitment and retention problems which arise either in specialist skills or in particular areas. That is the best way to deal with the special problems in parts of the Civil Service.
    Mr. Holt: Does my right hon. Friend agree that if there is low morale in the Civil Service in the London area it is because of staff shortages? Many civil servants are having to work undue and unnecessary overtime. Much of this could be eliminated if the Civil Service were moved to other parts of the country, such as my constituency in the north-east of England, where there are many who could fill those jobs, and therefore the morale of the people in the north and in the south would be improved.
    Mr. Luce: I take my hon. Friend's point. It is worth noting that four out of five civil servants are already working outside London, in various parts of the country, and that is a sizeable proportion. If, on cost grounds, it is justified to move other civil servants out of London, this continues to happen under the relocation process. In addition, Government Departments have been flexible on staffing and there is some room for manoeuvre in Customs and Excise and in the Department of Health and Social Security.
    Mr. Robert Sheldon: It is difficult to improve morale in the Civil Service when there is all this talk about breaking up the Departments and hiving off successive parts of their responsibilities. Does the Minister recall the words of the Fulton committee, which stated that any complete separation of policy-making from execution could be harmful? Is the Minister aware that the only way to settle this problem is to publish the Robin Ibbs report as soon as possible?
    Mr. Luce: One of the points to stress to the right hon. Gentleman is that all the evidence suggests that civil servants want to enjoy greater responsibility. In the past few years they have, increasingly, been given that responsibility under the financial management initiative, of which the right hon. Gentleman is aware. It is evident from all our discussions with the Civil Service that it would welcome greater responsibility. I believe that that will make for even more professional management in the Civil Service.
    Mr. Soames: Does my right hon. Friend accept that a lot of nonsense is talked about morale in the Civil Service? By and large morale is extremely high because civil servants know that most of them do an excellent job. Does my right hon. Friend also agree that there is great scope for civil servants to exchange more with industry and the private sector, and will he now seek to make substantial progress in that matter?
    Mr. Luce: I am grateful to my hon. Friend. It is certainly the case that in the last few years the Civil Service has achieved a number of great things. It is certainly more professional and much more efficient than it was about 10 years ago. As a result of efficiency scrutinies and the achievements of the Civil Service, more than £1 billion of taxpayers' money has been saved.
    My hon. Friend and I attach great importance to secondment and interchange. He will know that there has been a substantial increase in such secondments, and it is something that the Government want to encourage and strengthen still further. I hope that after I have completed my discussions with Government Departments, by about the spring, I shall be able to say something further on that subject.
    Dr. Marek: Does the Minister accept that arbitrary or high-handed decisions, without consultation, do nothing whatsoever to increase morale in the Civil Service? Did he listen to the "Today" programme on Radio 4 this morning? If so, he would have heard that the agreement of Mr. Keith Mack, the controller of the national air traffic services, to go to meet the IPCS to talk about safety had to be literally dragged out of him. Can the Minister tell us precisely why he did not talk to the trade unions and the employees—the civil servants— before giving their money away to charity because of the recent RPI error?
    Mr. Luce: The hon. Gentleman is aiming some of his questions at other Departments and it is for the relevant Ministers to answer them. I believe that we can say without any doubt that the Government's objective is always to take the interests of civil servants and the unions into account. That is what we seek to do, and that is what we shall continue to do.

    Performance Assessment
    Mr. Summerson: To ask the Minister for the Civil Service how the performance of civil servants is assessed.
    Mr. Luce: A new staff appraisal system was introduced in 1985, which assesses the achievement of results by staff against agreed objectives. All Departments have introduced, or are now introducing, the system.
    Mr. Summerson: I thank my right hon. Friend for that reply. To what extent is self-appraisal a major reason why my right hon. Friend's reforms have been S3 widely welcomed in the Civil Service, by both staff and managers?
    Mr. Luce: My hon. Friend is right to focus attention on this matter. The new system of staff-appraisal, which applies to all non-industrial staff, has, on the whole, been widely welcomed by the Civil Service. It means that there is much greater employee involvement in their own affairs and in the affairs of the area in which they work. It enables them to set themselves clear objectives, which I think is in the interests of the Civil Service.
    Mr. Allen: Will the Minister reassess the position of civil servants who will be in the firing line on 1 April when the social security changes come into being? Those are the people who will have to take the flak over the counter for the Government's policies. They are in the front line. Will the Minister reassess the terms and conditions of those whom the Government are putting in that exposed position?
    Mr. Luce: I shall draw the attention of my right hon. Friend the Secretary of State for Social Services to that point.

    Civil Service College
    Mr. Butler: To ask the Minister for the Civil Service when he next intends to visit the Civil Service college to discuss the future of the college.
    Mr. Luce: I discussed the future of the college with its management last week, and I shall be following that up when I visit the London site on 2 March.
    Mr. Butler: My right hon. Friend has informed me before of the beneficial close connections that the Civil Service college has with the private sector. Is it not time that the college moved into the private sector?
    Mr. Luce: It is right that my hon. Friend should draw attention to the fact that there is already close cooperation between the college and the private sector. Some 60 per cent. of all the speakers who come to the college are from the outside world, and a large number are from the business world. We want to develop that still further. The college provides about 5 per cent. of the total training of the Civil Service, its emphasis is upon general management, and some 20 per cent. of all the training is already done through outside organisations in the private sector.

European Council (Brussels)
3.30 pm
The Prime Minister (Mrs. Margaret Thatcher): With permission, Mr. Speaker, I shall make a statement about the European Council in Brussels on 11–13 February, which I attended together with my right hon. and learned Friend the Secretary of State for Foreign and Commonwealth Affairs. The Council's detailed conclusions are being placed in the Library.
This meeting concluded a major and far-reaching review of the Community's finances and policies. At the outset, the United Kingdom made clear, first, that any further increase in Community resources must be accompanied by effective and legally binding controls on expenditure; second, that there would have to be effective measures to reduce agricultural surpluses, to bring supply and demand much more into balance, and that automatic price penalties on individual commodities would be the principal weapon; third, there should be no oils and fats tax; fourth, that we were determined to preserve in full the system of abating Britain's budgetary contribution agreed at Fontainebleau in 1984, which has saved us some £3,000 million in the past three years. All of these objectives have been achieved.
I shall summarise the main elements of what has been agreed. First, on agriculture, we are now setting in place what have become known as stabiliser measures necessary to control both output and spending. The detailed arrangements vary from commodity to commodity. But the central concept is an automatic price penalty if an agreed quantity of production is exceeded.
For cereals that will mean that, if production exceeds a threshold set for the next four years at 160 million tonnes — that is, 8 million tonnes below the expected 1988 harvest—there will be price cuts of 3 per cent. a year. And the full 3 per cent. cut will apply to the whole crop if production exceeds the threshold by a single tonne.
Those cuts will be cumulative so that if harvests continue to exceed the threshold there will be a 12 per cent. price cut by the fourth year. In addition, there is provision for an increase of up to 3 per cent. in the co-responsibility levy.
For oil seeds, where in the last three years there has been a colossal increase in Community production, even more severe measures have been adopted. The forecast harvest for rapeseed for this year, for example, is 6.3 million tonnes. Nevertheless, the guarantee threshold for rapeseed has been set much lower at 4.5 million tonnes. If the harvest is as forecast, it will mean a price cut of 8 per cent. this year, on top of 10 per cent. last year. The price cuts become even larger in following years if production none the less continues to rise.
The Council had also expected to confirm agreement on stabilisers for eight further commodities, including olive oil, wine, tobacco, fruit and vegetables, milk products and sheepmeat, on which we had decided in principle at our Copenhagen meeting. This agreement has been delayed by France until the meeting of the Foreign Affairs Council on 22–23 February. The Dutch Prime Minister and I made clear that our agreement to all the measures before the European Council last week was conditional on the adoption of these eight stabilisers as they are.
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In the light of experience, we have insisted that all these controls should be in legally binding form. That is provided in paragraph 19 of the detailed conclusions adopted by the Council, which reads:
"All the elements set out above are legally binding decisions on the general principles of budgetary discipline. Corresponding legal texts will be adopted to replace the 1984 decision and will remain in force for the duration of the own resources decision. The stabilisers will be incorporated into the agricultural market regulations."
To complement the stabiliser arrangements and further discourage over-production, the Council has agreed to the general principles of a set-aside scheme to take agricultural land out of production. In order to qualify, a farmer must set aside at least 20 per cent. of his arable land for at least five years. Detailed agreement was reached on the maximum premium payable and the level of Community contribution.
To improve overall control of the CAP, we have also tightened the discipline of the financial guideline for agricultural spending. The guideline base for 1988 has been set at a figure of 27.5 billion ecu — about £19 billion—and its application has been reinforced in four separate ways.
First, it is agreed that the Commission's price proposals must in future always be consistent with the guideline.
Second, we have eliminated the general provision for expenditure in so-called exceptional circumstances. In future a specific and limited financial reserve will be established to take account of one factor only — the substantial in-year changes in the dollar/ecu exchange rate, with a budget effect of more than 400 million ecu. If the dollar goes up in value by more than that, there will be an automatic reduction in the amount spent on agriculture.
Third, it has been agreed that the cost of depreciating and disposing of existing surplus stocks will be financed outside the guideline, but within the budget, and that new stocks will be systematically depreciated as they are established.
Fourth, it has been agreed that the guideline itself will in future rise at a rate significantly lower than the total resources available for Community expenditure. The new rate will be three quarters of the rate of growth of Community GNP. Over time, that will reduce the proportion of Community expenditure taken by agriculture, so reversing the trend of the past.
As the second main element, the Council completed the review of the level and objectives of the Community's structural funds—the regional, social and agricultural structures funds. The Council concluded that commitments on the structural funds should increase annually over the period 1989–92 by 1.3 becu a year — —[Interruption.]
Mr. Speaker: Order. This is a statement that the House has been waiting to hear.
The Prime Minister: That is equivalent to a total real increase over 1987 of some 80 per cent., and will permit doubling for less developed regions. Particular provision is being made within these funds for a programme of industrial modernisation in Portugal.
Third, we have secured a tightening of arrangements for budgetary management. This will limit the use of carryover provisions and creative accounting devices, such as

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what are euphemistically called negative reserves, to which there has in the past been excessive recourse, and which have been particularly unwelcome to us.
Fourth, we decided on an increase in the resources available to the Community. These will in future be expressed in terms of Community GNP rather than, as now, of VAT. The Commission originally proposed that the own-resources ceiling should be raised from 1.4 per cent. of VAT to 1.4 per cent. of GNP, equivalent to 2.3 per cent. VAT—in other words, a 50 per cent. increase. The Council rejected this proposal. We decided instead that the Community's new own-resource ceiling for the Twelve should be 1.2 per cent. GNP, which is an increase of some 25 per cent. over the current figure and is realistic in the light of recent trends. This ceiling will last until 1992 at least.
In future, the cost to other member countries of the United Kingdom's abatement will be outside the agreed own-resources ceiling.
Lastly, as the House knows, a key United Kingdom objective throughout these negotiations has been to retain our Fontainebleau abatement in full. The need for it, and its scale, were challenged on various grounds, not least the recent rapid growth of the United Kingdom economy; and proposals were made to confine the correction in future to the gap between our share of Community GNP and our share of agricultural expenditure, and progressively to reduce it.
I made it clear that I was not prepared to contemplate any reduction in the benefit that we receive as a result of the Fontainebleau mechanism. I am glad to tell the House that the Council agreed to this. The Fontainebleau mechanism will, therefore, remain totally intact, and it will, once again, last as long as the new own-resources arrangements.
In practice, thanks to the abatement, Britain's gross contribution should remain a little over 1 per cent. of GNP—well below that of other member states.
The decisions reached will now be translated into firm and legally binding texts. Only when those texts have been agreed will the Government recommend to the House the new level of own resources.
Our achievement in securing more effective control of farm spending should benefit consumers, through lower prices, and farmers, through greater certainty about future market conditions. The share of agriculture in the Community's budget will decline. The British taxpayer will continue to get the full benefit of the Fontainebleau abatement.
The way is now clear for the Community to concentrate on its most important goal—the creation of a genuine single market by 1992.
I commend these substantial results to the House.
Mr. Roy Hattersley: If, as the Prime Minister claims, the objectives of her negotiation have been achieved, why has even the ultra-loyal Daily Telegraph described it as
"A British retreat on several fronts"?
More intriguing, what brought that retreat about? Why, for example, having dismissed a rate of growth in agricultural spending of more than 60 per cent. as "extravagant and indefensible", did the Prime Minister
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accept a figure that she admits to be 74 per cent. when on full, proper and accurate calculation the true figure is nearer 80 per cent?
Why, having described a cereal production ceiling of more than 155 million tonnes as an
"attack on the taxpayer and the housewife",
did the Prime Minister accept a ceiling of 160 million tonnes? That, as she knows — the Minister of Agriculture, Fisheries and Food is confirming it to her now — is worse than the Copenhagen agreement. No doubt the Minister is also reminding her that he rejected 158 million tonnes as an ineffective stabiliser, yet we now have 160 million tonnes.
On the overall budget figures, will the Prime Minister confirm that the new budget ceiling of between 1.2 and 1.3 per cent. of Community GNP, when compared fairly and properly with the old method of VAT calculation, amounts to a very considerable increase—from 1.4 per cent. to almost 2 per cent.? Those are the official figures. It is an increase not of a quarter, as the Prime Minister claims, but of more than one third.
In the words of The Times, even allowing for the vaunted rebate,
"Britain's net contribution will increase."
How does the Prime Minister justify that, and will she attempt to do so this afternoon?
The Prime Minister has offered one excuse for her capitulation — that she has opened the way for the internal market. Since the internal market that she proposes will do immense harm to Britain, she must not expect us to rejoice at that. In addition, her apologists have claimed that, without an agreement, the Community might have collapsed. It is true that the CAP might have collapsed, but the CAP and the Community are not one and the same. As the CAP does such harm to the British consumer and prejudices the whole future of the Community, none of us will rejoice that the CAP has been saved by the endeavours of the Prime Minister last weekend.
Having said that, I shall end with a word of congratulation. May I congratulate the Prime Minister on herself writing the epitaph on the summit before she went to Brussels? She spoke of running away from it—accommodating surpluses, not dealing with them. That is what she has done: she has run away.
The Prime Minister: I doubt very much much whether those who live in Community countries would endorse what has been said by The Daily Telegraph or the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). May I point out that the French newspaper Liberation says:
"The British Prime Minister can boast of having preserved her cheque … and above all of having won the point that she was refused at Fontainbleau: the checking of the inflationary spiral of agricultural subsidies."
Le Figaro says:
"It is likely that in the plane on the way back to London the British delegation was exchanging knowing smiles and satisfied hand-shakes."
In Germany, Die Welt stresses the financial sacrifices for the Federal Republic of Germany, estimated as costing Germany 4 billion deutschmarks rising to 10 billion by 1992.
Those countries know that Britain got a good deal. It got the Fontainebleau mechanism, the legally binding regulations that we have long sought, and the stabilisers, by virtue of price reductions. Perhaps the right hon.

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Gentleman will be aware that, as recently as 1985, Germany invoked the Luxembourg compromise over a 1·8 per cent. price cut. This time, we have price cuts of 3 per cent. over four years in succession, when it was only three years in succession in the case of Copenhagen.
The right hon. Gentleman asked about the 160 million tonnes. That 160 million tonnes—a good deal below the forecast harvest for this year — has the stabiliser operating in full at the first tonne over the 160 million.
Mr. Hattersley: Next year.
The Prime Minister: This year, a 2 per cent. price cut is expected to operate on the incremental arrangements that apply if people keep their own wheat and other cereals in store. Normally, they receive an increased amount. That will be cut, and the reduction will equal 2 per cent. price cuts. [Interruption.] Perhaps the right hon. Member for Manchester, Gorton (Mr. Kaufman) will stop muttering from a sitting position, which means that he cannot listen.
Mr. Gerald Kaufman: I can listen.
The Prime Minister: No, the right hon. Gentleman cannot listen. But perhaps he will listen now, if it is not asking too much of him—which I suspect it may be.
The 155 million tonnes did not have the 3 per cent. operating immediately. It went up steadily by only 1 per cent., and the full 3 per cent. was not reached until 160 million tonnes. The 3 per cent. operates immediately on 160 million tonnes, as it would have operated previously, and, because there would have been a slight improvement at 1 and 2 per cent. on the 155 million tonnes, we extended the 3 per cent. cut for a further year. Therefore, we have a 12 per cent. price reduction instead of a 9 per cent. reduction. [Interruption.] No, I do not expect that the hon. Gentleman understands it; it is, I confess, very complicated.
The right hon. Gentleman mentioned the ceiling of between 1·2 per cent. and 1·3 per cent. of GNP. The 1·2 per cent. limit is on a payments basis, because it is payments that must be financed—the 1·3 per cent. limit is on a commitments basis—and is equal to 1·9 per cent. VAT, which is equal to 1·72 abatement exclusive. That is the difference.
Several Hon. Members rose—
Mr. Speaker: Order. I have to take account of the fact that this is a private Members' day. It would be fair for questions to continue until quarter past four. An agricultural debate follows at 7 pm. I will have to take account of those hon. Members whom I call during this statement and those who may be called later.
Mr. Leon Brittan: Does my right hon. Friend agree that the Opposition's strictures ring hollow in the ears of those who know with what bitterness and virulence my right hon. Friend would have been denounced if she had broken up the summit? Will my right hon. Friend also—[Interruption.]
Mr. Speaker: Order. The right hon. and learned Gentleman has as much right to make his point as anyone else.
Mr. Brittan: Will my right hon. Friend also accept that the system that has been set up at the summit will, over a period, bring downward pressure to bear on output and
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prices in a legally binding way? Does she accept that this is a major step forward in controlling the common agricultural policy and is to be warmly welcomed?
The Prime Minister: Yes, Sir. One of the battles has been to get Germany to accept that reductions in agricultural production should be achieved by virtue of price cuts. As I have said, only two or three years ago Germany was using the Luxembourg compromise against that. Germany resisted it, but then agreed that this was the best way to proceed. Would Opposition Members like to have their incomes cut by 12 per cent. on one commodity and by 18 per cent. on another? I do not believe that they would. That is what is happening with wheat and oil seeds.
Mr. David Steel: Will the Prime Minister accept that some of us who have been critical of the CAP recognise that this agreement represents significant progress towards control over the agricultural budget — from 70 per cent. of the Community's budget to 50 per cent. by 1992? That should be welcomed as at least a step in the right direction.
The Prime Minister referred to the disposal of surplus stocks. Was that discussed in the context of Third world need? How will this country benefit from the increase in the regional and social funds in the light of the Government's reduced commitment to regional development in Britain? Will she accept that, unlike the official Opposition, those of us on this Bench accept that the collapse of the summit would have been much more costly to our national interests? The failure to reach a common market by 1992 would have been far more expensive for the Community as a whole than the present budget. Thank goodness that for once the lady was for turning.
The Prime Minister: With regard to surpluses, the right hon. Gentleman is aware that we have always said that we must operate on two fronts simultaneously — one to reduce surpluses, and the other to reduce production that has risen year by year. There has been a great effort with regard to surpluses over the past year. Surpluses of skimmed milk powder have decreased by 34 per cent. and surpluses of butter have been reduced by 31 per cent. Of course the cost of disposing of those surpluses comes within the budget as it will in future. However, in future, when material enters surplus store, it will be depreciated immediately by 20 per cent. and will depreciate slowly within the coming five years. It is likely that the existing surpluses will be disposed of and we shall get rid of the overhang.
That is accompanied by very substantial price penalties, as I have said. There will be a 12 per cent. penalty if it is triggered on wheat and cereals and even heavier price penalties on oil seeds. That will act on the production side to reduce prices and surpluses and possibly enable us to sell what we do not need. I should state that we are not self-sufficient by any means in oil seeds. We produce only 45 per cent. of our requirements.
With regard to the structural funds, we give something like — —[Interruption.] The right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) is entitled to a reply. We receive about £750 million from the structural funds. Indeed, we do fairly well out of the funds. We hope that that figure will increase to about £1,000 million in 1992. If we did not belong to the CAP, we would need very considerable subsidies by way of enormous

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deficiency payments or there would be considerable price increases in other directions through the imposition of even heavier levies at the port of entry.
Mr. Teddy Taylor: Is not the decision to give a real increase in spending of 25 per cent. to an organisation currently spending £233 million a week on dumping and destroying food and £40 million a week on financing fraud a bit of an insult to every local council and health authority struggling to keep within their agreed limits? With regard to the so-called legally binding controls, does not my right hon. Friend the Prime Minister agree that, last year, the Commission was obliged to stick to 1.4 per cent. under a legally binding control, but, despite that, it spent 20 per cent. more by a whole host of devices, including the famous metric year of 10 months? Is there anything in the agreement which will stop the Commission doing that in 1991?
The Prime Minister: As I said in reply to the previous question, surpluses of powdered milk and butter have gone down considerably by one third in the past year. We have to finance exports of cereals, in which we are more than self-sufficient, but if we pull out totally of allowing our farmers to export some of their grain, or if the United States and other countries allow their farmers to export, it is bad for the countryside. On oils and proteins, where there is a severe price reduction, we are not self-sufficient, but we thought it important, from the viewpoint of the Third world, not to have an oils and fats tax.
With regard to legally binding mechanisms for each of the agricultural stabilisers, I understand why my hon. Friend is sceptical. He and I have always wanted them to be legally binding and, hitherto, we relied on the word of the European Council. That is why, this time, we were not prepared to do that. This time, all of those stabilisers will be embodied in legally binding regulations, which will come before the House, or go into the agricultural regulations, and will, therefore, be enforceable. Unless and until that is done, I am not prepared to recommend to the House that own resources be increased.
Mr. Peter Shore: In spite of the bravado of the Prime Minister's words about achieved objectives, the House will recognise that this is a sad day for her and a sadder day for British taxpayers and consumers. Is it not a fact that, in exchange for extremely insecure and untried restraints on agricultural production, the Prime Minister has conceded an increase in the Community's budget of not 25 per cent., but, compared with last year's outturn expenditure, of almost 45 per cent.?
Further, is it not a fact that the right hon. Lady has agreed to introduce a new and fourth Community tax on the British people? Will she tell us whether there will be a larger British net contribution to the EEC in 1992 than there was in 1987? Will she also make it plain whether the £550 per annum that the Treasury told us the average British family was paying each year because of the CAP will be larger or smaller in four years' time?
The Prime Minister: First, on the agricultural point, there is evidence that stabilisers work, and the right hon. Gentleman knows it. He knows that we have tried very
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effective stabilisers on milk quotas and that they are working and reducing surpluses substantially. They are not untried mechanisms; they are tried mechanisms.
Over the past year, we have tried to persuade Germany to accept stabilisers by virtue, particularly, of price reductions. The Germans were anxious not to do that and proposed various other mechanisms which explains why they used the Luxembourg compromise only two years ago. We have persuaded them to reduce prices by 3 per cent. per year for cereals, if the amount produced goes over the threshold. That is a cumulative 12 per cent. to which is added an extra 3 per cent. co-responsibility levy, to which will be added another 2 per cent. this year for those who keep their own produce in store for very much longer. That is about 17 per cent. and is an effective price reduction over the coming four years. The price reductions for oils are even sharper.[Interruption.] Hon. Members would not like it if we came forth with a similar income reduction for them.
Secondly, there is a substantial increase in structural funds. People have often wanted to take a larger proportion, provided that we could get stabilisers on agriculture. We have got those stabilisers. The increase in structural funds was required to give the southern countries of Spain and Portugal, which have come into the Community, some hope of having a better deal. It was clear from the eight sets of minor stabilisers that they would not be able to produce surpluses as has, until now, happened in the northern countries. Those two matters have been dealt with.
The fourth resource, that allied to gross national product, does not make any difference to us because of the Fontainebleau rebate. We have arranged to get precisely the same amount as we would have received under the Fontainebleau mechanism related to VAT. That cancels out any different effect from the GNP, so long as the Fontainebleau mechanism continues. As I said, there will be an increase, up to 1992, of a maximum of about £300 million a year compared to the 1.4 per cent. VAT this year is over the rate at which we are spending this year. It is an increase of about £150 million to £200 million.
Several Hon. Members rose—
Mr. Speaker: Order. I ask for brief questions. [HON. MEMBERS: "And answers."] If long questions are asked, they attract long answers.
Sir Charles Morrison: That agreement was reached against all the odds and forecasts is a remarkable achievement and undoubtedly will provide a far better basis for farmers' planning in future. Does my right hon. Friend agree that the more effective the set-aside system turns out to be, the less need there will be for the application of stabilisers? Will it be up to the Council of Agriculture Ministers collectively to agree on the set-aside system or will it be up to the individual nations?
The Prime Minister: We have agreed on a ceiling available for set-aside which is of the order of 600 million ecus, and a maximum amount which can be paid. The precise amount which separate nations agree will be determined by themselves, but there is a maximum amount which can be found from the FEOGA guarantee. Set-aside is new country. Some people think that it will work extremely well and others are sceptical. That is why there is quite a severe ceiling on the amount which can be allocated from the common agricultural policy.

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I am grateful to my hon. Friend for his thanks. We got about 95 per cent. of what we set out to get, and anyone who thinks that 95 per cent. would have been available at Hanover is thinking in cloud-cuckoo-land.
Mr. Nigel Spearing: Why were these complex matters not put in the official communiqué in the Library before the statement was made? Is it the fault of the EEC or of the Foreign Office? When speaking about the new ceiling, the Prime Minister used two old figures —1·9 and 1·7 per cent.—on the old VAT formula. Does not this represent an increase in EEC expenditure of between 70 and 90 per cent? How does she justify it? How will the EEC, in the meantime, raise money for the 1988 budget? How will the new draft decision be placed before the House and when and how can the money be raised legally?
The Prime Minister: At the moment, the limit is 1·4 per cent. VAT, as the hon. Gentleman knows. He also knows that by various devices, to which I referred and which both he and I hate, such as carry-over and what is called negative reserve which we wanted to test in the courts but we were advised was legal, the Community is spending at 1·6 per cent. VAT, including the abatement. The 1·9 per cent. VAT would be the equivalent to the new ceiling, abatement inclusive. The 1·72 per cent. is the equivalent with the abatement excluded. Our abatement is now to be financed separately, so 1·72 per cent. is the equivalent figure to the 1·4 per cent.
The regulations will be brought before the House in the normal way. I entirely accept and agree that I should not recommend an increase in own resources until we have got those recommendations in a legally binding form. We did not get it at Fontainebleau. This time we have, and it is a major achievement.
Mr. Robert Hicks: In view of the effects that these proposals are likely to have on the level of farm incomes over the next few years, has any assessment been made as to the impact the proposals will have on the countryside and our rural areas as we know them today?
The Prime Minister: I think that our farmers were prepared to have considerable price reductions on cereals—wheat and barley—and on the oil seeds. I think that they preferred us to have quite a tough settlement, as this one is, on the ground that, if we got a settlement, they would know how to plan for the future. Some of them will want a set-aside scheme and will take advantage of it. Others will not, and will prefer to have different kinds of crops. I entirely agree with my hon. Friend: unless we have a reasonably prosperous farming sector, our rural communities will die and the state of the rural environment will be appalling. Apparently, the Opposition do not care about either.
Mr. Dafydd Wigley: Is the Prime Minister aware of the grave concern in those areas of Wales of marginal land where there is subsistence sheep farming? Can she give an assurance that, in announcing the doubling of the structural funds towards less developed areas, there will be a doubling for the western seaboards, which are dependent on elements that may be hard hit by the changes in the agriculture regime?
The Prime Minister: No, I cannot guarantee that there will be a doubling for a particular area. We do well from
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the social fund of the structural funds, but we shall not do quite so well from the regional funds because there are areas much worse off than we are. Nevertheless, we hope overall to have the amount that we receive now, £750 million, going up to £1 billion by 1992. Alas, I cannot give the hon. Gentleman, nor would he expect me to, a guarantee on exactly how it will be distributed.
Mr. James Kilfedder: The Prime Minister should be commended for the progress that she made, in difficult circumstances, at the summit, which might best be described as kicking for touch as far up the field as is humanly possible and in the face of tremendous odds. After her meeting with Mr. Haughey, does she know whether he is aware of the threat posed to people north and south of the border by the IRA which has murdered more than 250 RUC officers?
The Prime Minister: I had a meeting in the margins of the European Community with Mr. Haughey. It lasted half an hour and was calm and dignified. We both agree that the Anglo-Irish Agreement must continue. Mr. Haughey recognised that there would soon be a Council meeting under the agreement. We agreed that security cooperation across the border is vital not only for Northern Ireland but for the Republic of Ireland as well. The IRA and its tactics are a challenge to democracy in the Republic of Ireland, as they are in Northern Ireland. We recognise that my right hon. Friend the Secretary of State for Northern Ireland will be making a statement as soon as possible on the other measures with regard to the RUC which are within his jurisdiction.
Mr. Stanley Orme: On a point of order, Mr. Speaker.
Mr. Speaker: I will take it after questions on the statement.
Mr. James Lamond: When the Prime Minister was sitting in the middle of the night reflecting on the fact that she was being sworn at by Frenchmen and that the Common Market had interfered with almost everything in this country from cabotage to the size and shape of our passports, all at a cost of more than £10 per week for every family in the land, which is likely to increase in the next few years, did she not think that when, according to her, we are doing so well in this country with everything improving, employment going up, the balance of payments being right and productivity increasing, it is time to get out of the Common Market and stand on our own two feet for a change?
The Prime Minister: I really rather thought —[Interruption.]
Mr. Speaker: Order. It is no good the hon. Member for Bolsover (Mr. Skinner) continually shouting out from a sedentary position. It does not contribute to our debates.
The Prime Minister: When the Leader of the Opposition visited Brussels, I thought that he had made a statement saying that the Labour party had no intention of pulling out of the Common Market. It seems as if he did not know what his Back Benchers were thinking.
Mr. Nicholas Budgen: If, as is said, the EEC has so many noble and important objectives other than the gross subsidy and grubby protectionism of the common agricultural policy, why did

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not my right hon. Friend exercise the veto, run the risk of breaking up the CAP and allow the member states to subsidise their own farmers as they wish?
The Prime Minister: The effect of not agreeing when we had achieved 95 per cent. of what we wanted would not have been to break up the CAP. Do not let my hon. Friend delude himself. The CAP would have gone on. He knows that if we were not in the common agricultural policy, the amount we would have to pay in deficiency payments would probably cost more than the CAP does, because of the amount we would have to put on in levies to protect British agriculture and to prevent it from returning to something like its position in the 1930s, which my hon. Friend would not wish.
Having achieved so much, the effect of having a row would have been to have gone back to Hanover and not been able to get the Fontainebleau mechanism but to have something much more damaging to this country. What we have now is what we have wanted for a long time. We have legally binding and enforceable regulations, stabilisers on agricultural products, which will deal with the surpluses, and a mechanism of writing down and disposing of the surpluses that will get rid of existing surpluses by 1992.
Dr. David Owen: Could not the Prime Minister better achieve her negotiating position if she admitted that she had not achieved all her objectives, not even 95 per cent. of them, but that she had achieved the best deal available in the circumstances and that she will compromise no further? Does she believe that next week the French intend to reopen the eight other commodity stabilisers that have been agreed previously? If they do, I am sure that she will be supported by all hon. Members if she resists it totally.
The Prime Minister: It will come as no surprise to the right hon. Gentleman to find that I do not quite agree with him. We did very well in getting the price reductions on cereals to an extent greater than at Copenhagen and against the wishes of the Germans, who were not prepared to have so many price reductions. The Germans also compromised on having considerable price reductions without a ceiling on oil seeds, which affects them very considerably. I should have liked to have got away with a smaller increase on the structural funds. However, we decided, I think rightly, to give special aid to Portugal because it is the poorest country and one of our oldest allies. I think that we achieved a good deal for Britain, and a good deal for Europe.
Mr. David Curry: Does my right hon. Friend agree that the overwhelming interest to the United Kingdom in the Community is the pursuit of the genuine internal market? Does she agree that the compromises she made, however reluctantly, are an important contribution to that? Will she also resolve that she will not listen to the carping of the Labour party, whose defence of British interests in opposition is always more effective than when it is in government, as is shown by its last farcical renegotiation?
The Prime Minister: I think that we achieved a settlement on agricultural matters at Brussels of the sort we achieved on our abatement at Fontainebleau three years ago. That will hold until 1992 when, once again, we will have to look at our own mechanism.
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I take the view that we ought to have made more progress towards the internal market. We have been pressing for that. It is an objective independent of the CAP and in the treaty. Some of the people who proclaim that they believe in full open markets are not always ready to do so when we say, "You get down your lorry quotas, you allow our insurance people to sell in the Common Market, you allow us to have a freedom of movement in services such as that on manufactured goods." It is vital that we go ahead with that. It would be to the advantage of this country.
Mr. Stuart Bell: Will the Prime Minister accept that we welcome a reasonably prosperous farming community? That being the case, why has she not been as generous to British nurses as she has been to French and German farmers?
The Prime Minister: As the hon. Gentleman is aware, we have been very generous to British nurses, more generous than any other Government at any time—[Interruption.] I was just waiting to see how far we would be in order in going on with that the whole catalogue. The Labour party gave nurses, doctors and the National Health Service a shabby deal. They got a good deal from this Government.
Several Hon. Members rose—
Mr. Speaker: Order. I shall seek to take into account during the debate this evening those who have not been called to ask a question on the statement.
Mr. Orme: On a point of order, Mr. Speaker. In reply to an earlier question, the Prime Minister referred to the meeting with the Taoiseach and the Anglo-Irish Agreement. That had nothing to do with the Common Market negotiations. She made a statement to the House that we were not able to question. Therefore, I call on you, Mr. Speaker, to protect hon. Members and to ask the Prime Minister to make a separate statement on that issue.
Mr. Speaker: I anticipated what the right hon. Gentleman wished to say. Of course, until an hon. Member asks a question I do not know what he is going to say. As the Prime Minister stated, she had a meeting with the Taoiseach during the negotiations and she answered the question.
Mr. Hugh Dykes: On a point of order, Mr. Speaker. You got the support of the House earlier when you yet again exhorted the hon. Member for Bolsover (Mr. Skinner) not to keep shouting. However, immediately after your request to him he shouted out that it was official Labour party policy to withdraw from the Community. Therefore, would you guide us, Mr. Speaker, on whether official policy comes from above or below the Gangway?
Mr. Speaker: One of the problems faced by the occupant of the Chair is that the microphones are tuned so that when I listen to a right hon. or hon. Member from the Government Benches I do not always hear, thank goodness, what is said from the Opposition Benches.
Mr. Shore: On a point of order, Mr. Speaker. Further to the point made by my hon. Friend the Member for Newham, South (Mr. Spearing), the background to this inevitably complex and difficult statement — the EEC communiqué—was not available in the Library up to 3·30 this afternoon. That is a disgraceful oversight. As

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there are Ministers present — not only the Prime Minister herself but Ministers from the Foreign Office—I hope that we shall hear that that sort of treatment will not be meted out to the House again.
The Prime Minister: If that was the case, I apologise sincerely. I thought that the communique had been placed in the Library in the normal way. I assumed that it was available and that, if it was not, right hon. and hon. Members would have let me know. If they will do that in future, we will certainly ensure that the documentation is there in good time so that right hon. and hon. Members can study it.
Mr. Dennis Skinner rose—
Mr. Speaker: Order. I will not take further points of order that are a continuation of the statement.
Mr. Skinner: It is not a continuation.
Mr. Speaker: I was pretty certain that it would be.
Mr. Skinner rose—
Mr. Speaker: Order. The hon. Gentleman would be the first to complain if he were cut out of a debate as a result of points of order that were a continuation of questions on the statement. I have—
Mr. Skinner rose—
Mr. Speaker: Order. The hon. Gentleman must resume his seat.
Mr. Skinner rose—
Mr. Speaker: Order. The hon. Member must resume his seat.
Mr. Skinner: Anybody else bar me.
Mr. Speaker: Order. The hon. Gentleman gets called in the same way as every other hon. Member.
Mr. Skinner: On a point of order, Mr. Speaker.
Mr. Speaker: I am not taking a point of order unless it has nothing to do with the statement.
Mr. Skinner rose—
Mr. Speaker: Has it anything to do with the statement?
Mr. Skinner: It is to do with what the hon. Member said.
Mr. Speaker: Which hon. Member?
Mr. Skinner: You will recall, Mr. Speaker, that the hon. Member for Harrow—[Interruption.]—yes, without an "H"; that is what they say where I come from. The hon. Member for Harrow, East (Mr. Dykes) said that I made an intervention regarding official Labour party policy on withdrawal from the Common Market. I want to place on record that that is the case and that the official Labour party policy is for withdrawal from the Common Market as the last option. It would be handy if that went into Hansard.
Mr. Speaker: Order. That is one of the reasons why the hon. Gentleman wanted to get himself mentioned during his sedentary comments; normally that would not go into Hansard.

Ireland and United Kingdom (Relations)
4.21 pm
Mr. Alex Carlile: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 20, for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"relations between the United Kingdom and the Republic of Ireland following the talks between the Prime Minister and Mr. Haughey".
The specificity of the subject speaks for itself. There has been a clear breakdown of understanding between the United Kingdom and the Republic of Ireland. Its importance is all too obvious. It affects nothing less than the security of the realm. It deals with relations between the United Kingdom and its closest neighbour. It concerns the enforcement of the law within the United Kingdom and mutual law enforcement between the United Kingdom and the Republic of Ireland, dealing with such important matters as terrorism.
In my submission, the matter is urgent on two grounds: first, because of recent reaction to the Sampson-Stalker report and the very limited reaction to that of the Secretary of State for Northern Ireland; and, secondly, the very recent meeting between the Prime Minister and Mr. Haughey and the frost that clearly grew on the walls of that meeting room. The House needs a debate on that issue. Although we heard from the Prime Minister during her statement that there would be a statement very soon from the Secretary of State for Northern Ireland on relations between the United Kingdom and the Republic, a statement is not an opportunity to discuss such an important issue. It is for that reason that I make an application under Standing Order No. 20 and am not willing to wait for a statement. In other words, this is an important matter that requires discussion and not simply a series of questions.
Mr. Speaker: The hon. and learned Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"relations between the United Kingdom and the Republic of Ireland following the talks between the Prime Minister and Mr. Haughey".
I have listened with care to what the hon. and learned Gentleman has said. I listened also to exchanges on the statement that the Prime Minister has just made. I regret that I do not consider the matter that the hon. and learned Gentleman has raised as being appropriate for discussion under Standing Order No. 20 and I cannot, therefore, submit his application to the House.

Self-Employment
4.23 pm
Mr. Robert B. Jones: I beg to move, That this House calls upon Her Majesty's Government to ensure that its policies and procedures maintain the substantial increase in self-employment: calls attention to the encouragement given to it by the Government's policies of encouraging enterprise and individual initiative; and calls on Her Majesty's Government to reduce obstacles to the spread of self-employment.
I begin by declaring three interests. First, for over 10 years I have had a friendly association with the National Federation of Self Employed and Small Businesses Ltd. and have co-operated with it on many projects, both before coming into the House and since. I should like to place on record a personal tribute to the work of its former parliamentary officer, Mr. John Blundell, and its present parliamentary officer, Mr. Ralph Jackson, who work hard for the cause with which they are associated. Secondly, since October 1987, I have been the co-proprietor of a small business involved in the manufacture of high quality furniture for kitchens, bathrooms, bedrooms and public houses. In my interest in that area I have come across some of the problems of small businesses. Thirdly, two years ago I was the co-sponsor of the Right to be Self-Employed Bill that was introduced by my hon. Friend the Member for Stirling (Mr. Forsyth), who, I am glad to say, is now the Parliamentary Under-Secretary of State for Scotland.
I welcome the fact that my hon. Friend the Minister of State, Department of Employment, will speak in the debate. Like manyof his predecessors, he has taken a close interest in the health of the self-employed sector and I pay tribute to his work. It contrasts with many of the activities of the Opposition parties. Given the paucity of the attendance of Opposition Members this afternoon, their interest in the self-employed must be in doubt.
Mr. Andrew Welsh: I hope that the hon. Gentleman does not include the Scottish National party in that. My party and the Liberal party have both taken a great interest in the self-employed. Indeed, I was personally involved with the beginnings of the national federation. If the hon. Gentleman is criticising, he should direct his criticisms accurately, rather than inaccurately.
Mr. Jones: I would happily exempt the hon. Gentleman were it not for the fact that during my period of office on Fife county council, prior to reorganisation, the Scottish National party's representatives on that council were extremely hostile to small businesses. I advise the hon. Member for Gordon (Mr. Bruce) that I shall comment on the alliance, or the mis-alliance, in due course. Perhaps it would be better to wait for that.
I attended the 1982 Labour party conference—not, I hasten to add, as a member of the Labour party, but as an observer. During that conference a debate was held on local government and a motion was passed urging Labour groups in local authorities to take action against contractors. Section (b) stated that they should insist that contractors are
"bona fide and employ all the people who are working for it (ie, not self-employed)".
That illustrates the attitude of the Labour party to the self-employed. I shall be interested to hear the contribution of
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the Labour Front-Bench spokesman in explaining how his party is now terribly sympathetic to the self-employed, whereas historically the reverse has been the case.
The hon. Member for Angus, East (Mr. Welsh) referred to the party of the hon. Member for Gordon and perhaps I should say—
Mr. Barry Sheerman: Does the hon. Gentleman not know that the Balcombe committee, which was set up by Tony Crosland and the Labour Government 19 years ago, created the job of his hon. Friend the Minister responsible for small businesses and that there has been a continuing interest in, and promotion of, small businesses by Labour Governments and by the Labour party when in opposition? We have nothing to be ashamed of on that score. Let us get the record straight in historical terms.
Mr. Jones: Working parties are no substitute for policies. It is this Government's policies that have been conducive to the growth in self-employment. It is significant that under the previous Labour Government self-employment declined.
I referred earlier to the hon. Member for Gordon, who was alleged to be a friend of the self-employed. When the Right to be Self-Employed Bill received the leave of the House to be introduced, I put a press release in my local paper welcoming the measure. My then SDP opponent, Mr. Nick Hollinghurst, described the Bill as barmy and irresponsible. That hardly indicates that he was sympathetic to the self-employed. Nor was he well-informed, because the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel) voted for that Bill, as did other alliance Members.
Mr. Eric S. Heifer: Will the hon. Gentleman give way?
Mr. Jones: Not at the moment.
The Government have done much to promote self-employment and to redress the imbalance of the 1960s and early 1970s, when the figures for self-employment were in decline. Since 1979 the number of people becoming self-employed has risen by more than 1 million. At the beginning of the year the total number of people classified as self-employed was 2.7 million—just over 10 per cent. of the total labour force. The reasons for that growth are many, but the principal factor has been the general ethos of the Government and their determination to remove the state from the activities of businesses, and the sustained drive for deregulation and a lessening and removal of some of the onerous burdens that affect small businesses.
Among other Government initiatives is the enterprise allowance scheme, which became national in 1982, and which has helped 300,000 previously unemployed people to set up and run their own businesses with some initial state support. Provision has been made for more than 100,000 new entrants this year, and some 110,000 people in 1988–89. That emphasises the popularity of self-employment.
The loan guarantee scheme, introduced in 1981, was designed to supply finance to small businesses to which no conventional loans were available. Despite initial teething problems, the scheme has been popular with very small firms which found it difficult to attract start-up investment finance, and about 20,000 guarantees have been issued. Those measures greatly help the self-employed and,

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together with general economic progress, highlighted by tax reductions, there has been a sustained attempt to create a conducive climate within which businesses, and specifically the self-employed, can thrive.
Despite the many excellent Government initiatives to promote self-employment and the small firms sector, which is reckoned to constitute one third of the economy and to contribute 20 per cent. of the GNP, some areas need attention if the self-employed are to sustain their renaissance. We can help to encourage the numbers of the self-employed by stimulating growth through taxation initiatives and by introducing greater flexibility and mobility in the labour market by clarifying the status of self-employed people.
The taxation or employment status of people regarded as self-employed is the key to the growth in self-employment. There is much case history about the definition of self-employment which often confuses people, and which, together with the statutory definitions, form a mosaic of conflicting rulings which need to be resolved. Tax inspectors determine employment status according to section A of the Income and Corporation Taxes Act 1970. North sea divers are exempted from schedule E employment status under the Finance Act 1978. There is another definition in the Employment Protection (Consolidation) Act 1978. Perhaps the most ridiculous definition of self-employment comes from the Health and Safety at Work etc. Act 1974 which states that a self-employed person is someone who is gainfully employed in Great Britain otherwise than in employed earners employment, whether or not he is also employed in such employment. It is no wonder that with such terminology the DHSS has been called the author of modern Church liturgy.
The case law definition comes down to whether individuals are or have been performing a contract of service—that is, employed—or are under contracts for services — self-employed. Individuals should have the right to determine their own classification of status, bearing in mind that they have to make a decision about the benefits and disbenefits of self-employment.
The one-customer test is particularly absurd. Under current classification criteria for self-employment, supposedly operated jointly by the Inland Revenue and the DHSS, a contract with one customer alone would not constitute a contract of service or self-employment, but would be a sign of employment. It is also absurd that the criteria that can be applied to reclassified self-employed individuals in the private business sector are not applied in a similar way to those who receive state support for their business ventures.
It seems natural that if people are made redundant from a business because it has decided to carry out that particular service by contract instead of by direct employment, they should club together to form a group which would then bid for the work that they had previously carried out. Under such circumstances, the Inland Revenue normally regards those people as directly employed. Clearly, it is a halfway house between their previous employment direct with the company and going into business with more than one customer. Similarly, if someone is employed to carry out a computer contract and contracts to a company, installing programmes and ironing out any gremlins in it, that work may well continue for one or two years, or for more. The Inland Revenue
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would regard such a person as employed rather than self-employed, although, manifestly, that is an increasing trend.
As retirement tends to occur earlier, there has been a growth in "release and re-engagement". This is where senior staff are released from direct employment but are able to continue to do work for their companies, thus easing the burden of retirement. This is to be welcomed, but the Inland Revenue does not see it in the same way.
Mr. Richard Page: Does my hon. Friend agree that someone starting in business for the first time is unlikely to start with a bank of 40 or 50 customers, but is more likely to start with one or two customers with whom he has personal contact in a particular industry? Would it not be more fair for the Inland Revenue to make a judgment on the start-up of new companies after three or four years to see whether their customer banks have expanded, instead of hitting them hard on day one?
Mr. Jones: I agree with my hon. Friend's first point. He has great experience in small businesses and has played an important part in promoting their interests. I am concerned about the second point. If there were a review after three or four years and the Inland Revenue reinterpreted the employment status of an individual, that could create a large and unwelcome tax bill for the person concerned. Therefore, I do not entirely agree with my hon. Friend.
Mr. Page: I do not want to leave the House with an impression that I was trying to put any tax on small businesses. I suggested that if after three years a company had not made a breakthrough and achieved a wider bank of customers, the Inland Revenue should say, "Unless you can demonstrate that you have more customers, we may have to interpret you on the basis of being employed by the company." However, I was not suggesting any form of back taxation.
Mr. Jones: I thank my hon. Friend for his clarification, and I agree with his point.
Perhaps it would be helpful if I gave an example of that. The partners of a light engineering firm in Slough, called Andron Engineering, were told by the Inland Revenue that eight of their engineering sub-contractors should be put on PAYE. Those self-employed engineers had their own keys, worked hours to suit themselves, and during that year had worked for other companies, as was shown by their respective tax returns.
Another example is that of a husband and wife team, Tom and Rita Fearon, who had worked for many years as self-employed children's entertainers. One of their contracts was with Pontins holiday group, where they undertook to work a summer season for roughly three months. Pontins assured the partners that they were confirmed as schedule D taxpayers and were self-employed for national insurance purposes. That did not stop the local tax office querying their status under that particular contract.
I move on to the question of 714 and 715 certificates — the particular interest of the hon. Member for Liverpool, Walton (Mr. Heffer). In the construction industry in the 1960s and 1970s, mass tax evasion led to a tightening of the rules regarding contracts and subcontracts, and through successive Finances Acts the

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eventual establishment of 714 and 715 construction industry tax exemption certificates. At that time many people regarded such certificates as little more than a licence to work. Others saw them as the legitimate way to self-employment, as they virtually meant that their tax status was inviolate. In practice, and especially latterly, the system, in seeking to regulate lump workers, has meant that it is expedient for many contractors to designate their skilled work force as self-employed sub-contractors and for both to enjoy whatever substantial benefits accrue. The test of the criteria or eligibility for the certificate is not always strict and certainly does not consistently conform to other criteria of the Inland Revenue and the DHSS.
I should like to quote from a speech by my hon. Friend the Member for Stirling. He said:
"That system is thoroughly wicked. It effectively operates as a licence to work. To get an exemption certificate to be treated as a self-employed sub-contractor, one must show that one has been employed for three of the past six years. If one cannot show that, one cannot become self-employed."—
[Official Report, 4 February 1986; Vol. 91, c. 148.]
That is plain discrimination against unemployed people and is quite outrageous.
I should like to make some suggestions about where we go from here. First, the Inland Revenue should be obliged to publish its criteria for judging these matters so that they can be debated and properly challenged. Secondly, it is vital that we have an independent appeals system that can judge this, quite apart from the Revenue. Thirdly, it should be axiomatic that people are self-employed, if that is the status that they seek, unless it can be proved otherwise.
I shall now move to other matters which are of concern to self-employed people and which need action. The first matter is the retention of profit. The self-employed unincorporated business is currently at a disadvantage in terms of taxation compared to a limited company. That is because the profit from that business is taxed in the same way as personal drawings from the business and there is no ability to defer part of that profit for future investment purposes. That is quite unlike limited companies, which have some form of deferment arrangements.
If the self-employed, small, unincorporated businesses had some control over funds for the exclusive use of investment in the business or for employment purposes, it would greatly help the newly established small firm and give encouragement to more people thinking about self-employment. They have to struggle in the early years, especially when tax and inflation wipe away their endeavours.
The operation of the business expansion scheme is also a problem, because its increasing institutionalisation and that of other funds means that it is much easier to raise sums in excess of £100,000 than it is to raise lesser sums. That is clearly an impediment to the smallest businesses about which I am especially concerned.
I shall make one point about planning. There is still too much hounding and persecuting of small businesses. There should be only three relevant criteria: whether the business is causing noise problems, problems of pollution or traffic problems. The simple existence of a business operating in a redundant farm building or something such as that should not of itself be sufficient grounds for the local authority to take action against it.
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The matter of Government inspectors has been of great concern to small businesses over many years. Although the Government started to do something about this, legislation is such that a great deal more bureaucracy seems to have sprung up. A study by the Forum of Private Business reported a couple of years ago that someone starting up in business had to do more than 24 hours of essential reading. This included reading on VAT, tax, health and safety requirements and employment regulations. I went into business fairly recently and I can confirm that an immense amount of reading has to be done in order to be familiar with such matters.
The National Federation of Self Employed and Small Businesses Ltd. published a report entitled "An Inspector at the Door", which detailed more than 200 different authorities which had a great number of inspectors who had the right to enter, search or seize and so on. That report was published in 1979 and it led to a review of those powers, which saw about 30 of them being scrapped and another 50 being revoked. Unfortunately, new provisions seem to have turned that tide and, to give one example, data protection legislation has resulted in more powers for inspectors.
If the Government are to maintain an equitable balance between enforcing the law and relying on the business community to act as unpaid tax collectors, the role and the powers of inspectors should be subject to some scrutiny. Each Government Department, possibly with guidance from the Enterprise and Deregulation Unit, should undertake yearly reviews of the number, type and extent of its own inspectorate, together with the levels of financial penalties that it can impose. More powers should be reduced than should be produced.
The final sector in which beneficial action can be taken is that of the public sector contractor. It is quite difficult for a small business to get beyond the tender lists held by local authorities and Government Departments. Some countries set aside a percentage of work each year for which small businesses alone can bid, and the evidence shows that rather good value can be obtained from that. I commend that system to the Minister.
This is a short debate and I do not wish to occupy an undue proportion of it. The self-employed have an enormous amount to contribute to our society, both by their intrinsic economic efficiency and through the self-reliance and independence that they promote socially. All the measures that the Government have taken have encouraged the growth of that sector, and I hope that during the coming years they will do more so that Britain can generate even more self-employment and raise it to the level of self-employment that exists in our competitor countries.
4.45 pm
Mr. Malcolm Bruce: I welcome this debate because we all recognise that the expansion of self-employment in small businesses in recent years has been and can continue to be an important source of new employment and wealth.
It is worth looking at the pattern of self-employment because we need to get to the bottom of why it is that in certain areas a high proportion of people are self-employed while in other areas the proportion is low. We need to see what can or should be done to try to alter that. An interesting point is the myth sometimes put about that self-employed people are by definition high earners or

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particularly wealthy. The proportion of self-employed people is highest in rural areas. Those people are the providers of essential services for the community and are often on small incomes in relation to the services that they provide. It is sometimes difficult for them to provide all the services that the Government expect of them.
A year ago I asked a question, the answer to which included a list of the proportions of self-employment in every constituency. The highest percentage is in rural constituencies in the Highlands of Scotland, in Wales and in the west country. The lowest percentage is in urban areas, especially urban areas in central Scotland. The middle range is in the suburban and rural areas in the south of England. That shows that, in a country such as Scotland, overall the percentage of self-employment is very low. However, the reason for that is fairly apparent: the opportunities are not so great.
That brings me to my second point. Why can people in some parts of the country thrive in self-employment? The most important answer is that they can find a market. The ability to find that market is the most important reason why a business can thrive and prosper. That is why the many areas of Britain that are most deprived are not getting their full share of self-employment.
Access to finance, especially finance to start a business, is crucial. There is clear evidence that the availability of risk capital is somewhat variable. The joint stock banks tend to look for security, for personal guarantees. If a self-employed person tries to launch a limited company, the immediate objective of the bank is to circumvent the whole benefit of limited liability by demanding that personal guarantees are put up front. It is an obvious disincentive to anybody starting a new business if he has to put everything on the line, especially if he is moving into an area where he could be competing with larger established businesses that could effectively cut him out.
Mr. Andrew Rowe: Does the hon. Gentleman agree that the loan guarantee scheme, which was an imaginative attempt to circumvent this problem, has been much less useful than it should have been because the banks have continued to insist on a level of security that is completely absurd?
Mr. Bruce: I wholly concur with the hon. Gentleman's comments. I have had complaints, as I suspect has the hon. Gentleman, from people in my constituency who feel that they have been led up the gardent path in terms of the availability of finance. They have found that the security requirement has been such that they might well have wasted their time. We must find a way of improving the method of financing.
One proposal which is worth exploring, and which the Government could usefully initiate, is to promote the establishment of local investment companies or local banks that would specifically provide risk capital, some of it unsecured, for small businesses — both established businesses wishing to expand and new businesses wishing to come on to the market. Of course, the proper safeguards—trustworthiness, the assessment of a business plan, general professionalism and understanding—should be taken into account, but it is unreasonable automatically to expect every applicant to put up his entire life savings without security when he advances a potentially viable idea out of which the backers can make money collectively but for which it is difficult to secure risk capital.
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This idea, which my colleagues and I have put forward for some time, is now supported by the CBI as an appropriate venture. It marches sensibly alongside the enterprise trust scheme, although it should be separate from it. Enterprise trusts have expanded rapidly in recent years and been valuable in providing new and existing businesses with practical advice on how to proceed. Often that advice is not to proceed—good advice, if one's idea will not stand up—hut at other times people are advised before they start their businesses how to ensure the greatest chance of success. The evidence is not so much that enterprise trust schemes have been responsible for creating jobs or for ensuring that businesses are better, but that they have ensured that a higher proportion of businesses succeed rather than fail in the first year, which is the regrettable experience for many.
The back-up of local investment banks providing risk capital for investment separate from, but marching alongside, the enterprise trust scheme would be extremely valuable. It would help if some funds were diverted from the City. Too often those funds are concentrated on large projects, because providing the finance for small projects is thought to be too fiddly, cumbersome and tiresome and because many of the City institutions do not have the necessary knowledge of the locality or the individuals to feel able to put up the money with any reasonable chance of a return. There is much evidence to show that such a development could have the double benefit of helping individuals to move to self-employment, thereby strengthening the economy in those areas.
Crucial to the new, successful, self-employed business is the ability to find a viable market. Without it, no amount of finance, advice or tax breaks will ultimately succeed in making a business successful. In a number of ways—the hon. Member for Hertfordshire, West (Mr. Jones) touched on them—central and local government could help to strengthen the market that is available to small businesses. Local authorities and central Government agencies should be encouraged to give small businesses a fairer opportunity to compete for contracts. I do not ask for positive discrimination—of course, the taxpayer and the ratepayer must be protected in terms of getting value for money—but the local authorities and agencies should ensure that small businesses get full and equal opportunities. Many of us have heard the complaints that small businesses are effectively prevented from taking such opportunities.
Large businesses have a responsibility to consider buying services from small businesses. The main customer for small business is often the bigger business. Large businesses have not been as helpful as they could and should be to small businesses.
Mr. Robert B. Jones: One problem with large businesses placing custom in the direction of small businesses is that the large businesses do not pay on time. In a way, that is more of a disadvantage than not getting business in the first place. GEC is an outrageous late-payer.
Mr. Bruce: I do want to comment on that particular example, but the hon. Gentleman was anticipating a point that I was about to make.
In recent years there has been a tendency for large companies to become much larger and for the corporate headquarters to draw into themselves companies that they

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have absorbed, bought out or merged with. The consequence is that more and more goods are bought centrally. Central purchasing tends to be directed towards the locality of the corporate headquarters and companies that are known to those headquarters. The opportunity for small businesses to supply locally is thereby proportionately reduced.
I understand that in Liverpool the local enterprise trust and the local council put pressure on Marks and Spencer to buy a significant percentage of goods locally. Marks and Spencer agreed to increase its local purchasing by 1 per cent. The upshot was that there was a useful injection of purchasing into the local economy, but it was interesting that this boosted the profitability of those goods to Marks and Spencer, which had not previously made the effort to find companies that could supply locally. Those companies were not big enough to supply the whole corporate enterprise, but they could supply the local branch. A mechanism that encouraged large businesses to behave in that way would give many small businesses the opportunity to supply goods which they are currently prevented from supplying.
The hon. Member for Hertfordshire, West touched on the fact that often big businesses do not pay fast enough to enable small businesses to do business with them. The small businesses cannot afford to fund the slow payment of some large companies. Action is needed to ensure that small businesses can guarantee prompt payment and not be penalised by the fact that they have secured that business.
The impact of large retailing developments on small local retailers is a controversial and difficult issue but it concerns retailers throughout the country. One may argue that consumers must have choice and the opportunity to buy competitively-priced goods at attractive stores. We must recognise, however, when we read in local newspapers that a major corporation is to establish a large development that will employ hundreds of people, that often those jobs will be at the expense of jobs in firms that will be put out of business by that expansion and that the net effect will not be so beneficial overall. There are many examples of the predatoriness of some large corporations. They are by no means necessarily as efficient or as knowledgeable about the local market as the established companies, yet they have the resources to squeeze out their competitors and draw business up from the smaller businesses below them.
The hon. Member for Hertfordshire, West referred to the somewhat arbitrary changes in the definition of self-employment. Do not the Government intend to give a clearer idea of the definition and how consistently it can be applied?
The new proposals from the Department of Trade and Industry—the Department for Enterprise, as we are now supposed to call it — have raised questions as to the availability of advice from consultants. I have mentioned aspects which are more important than a consultant's advice. In any case, the enterprise trust scheme is doing a good job for little or no charge. The Government's proposed fee for consultants seems to be betwixt and between: it is not enough for a good consultant, but it is more than necessary for basic advice. I have certainly seen one or two newsletters which state that the quality of advice will not be of a particularly high standard.
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The implication and impact of rates and rating changes on small businesses must also be considered. As a Scottish Member I found the whole rating debate on the introduction of the poll tax slightly bizarre. When we had our revaluation in Scotland the uproar came from small businesses. The National Federation of Self Employed and Small Businesses was one of the leading protagonists in criticising the Government and in demanding change. The immediate abolition of domestic rates was then proposed, with a deferred proposal to change the business rate. But many of the small business people with whom I have dealt feel that the change will be worse than the existing system. The uniform business rate will not help them. Indeed, in many cases it may make their circumstances even worse.
The proportion of turnover spent on rates is, generally speaking, higher for small businesses than for big businesses, so the burden falls unevenly on them. The uniform business rate is not the answer to the problem. I urge the Government to consider a system of business taxation that takes some account of the ability to pay and allows for local variations. A consequence of the change is that local authorities will have no incentive to be efficient in order to attract and encourage the development of new businesses in their areas.
Small businesses are often literally one-man or one-woman businesses, and the burdens imposed on them in terms of financial difficulties and administrative requirements are often extremely demanding. I ran a small business and can certainly testify that the endless form filling required caused genuine anxiety compared with the fundamental job of finding the market and ensuring that the product or service is delivered on time and competitively. The Government should do more to reduce that burden, instead of continuing to treat small businesses as their unpaid tax collectors; to provide some assistance to allow small businesses to cope; and to ensure that they are given the practical support that may make life easier.
What most people setting up in business find irritating is, first, that they must put up securities against borrowing; secondly, that they are a bad risk compared with established businesses, so they must pay a higher rate of interest; and, thirdly, that they must spend the first few months setting up systems for VAT, sickness benefits and other administrative burdens to please Government Departments. The Government have set up those systems, always thinking in terms of large companies which have the bureaucracy to deal with them and underestimating the difficulties facing small businesses.
Small business self-employment will be a growing component of employment, but there are great unevennesses in different areas. We must find ways of encouraging people to develop businesses, we must give them the necessary finance without always demanding securities and imposing penal rates, and we must ease the administrative burdens. If we do that, some areas, which so far have not shared fully in the prosperity from which most parts of the south are benefiting, can start to have a fuller say. I hope that the Minister will address some of those issues.
5.4 pm
Mr. Graham Bright: Much of what the hon. Member for Gordon (Mr. Bruce) said will strike a chord on this side of the House. I was particularly

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interested in his point about directing money from the City to many of our small start-up buinesses. I believe that we must pursue that.
I welcome today's debate on the self-employed and congratulate my hon. Friend the Member for Hertfordshire, West (Mr. Jones) on choosing this subject. It is important for the House to recognise the vital contribution that self-employed people make to Britain's economic prosperity. All too often in the past that contribution has been overlooked. Perhaps it is even more important to acknowledge the challenge facing them as our economic recovery gathers pace.
The truth is that for many years after 1945 successive Governments were preoccupied with policies designed to serve the interests of large organisations. We went a long way towards the corporate state, with huge public corporations, nationalised industries and public utilities striking deals with excessively powerful and privileged trade unions. In that process, the House was partially eclipsed and the interests of the self-employed, private individuals, small traders, professional people and small businesses were disregarded. As a result, the nation was impoverished, not just economically but socially and politically.
It was not surprising that the number of self-employed people had fallen dramatically by the time the Bolton committee of inquiry reported in 1971. What was surprising was the fact that so little was done until 1979 to relieve the burden of taxation and regulation pressing down upon them.
My hon. Friend the Minister is perfectly entitled to claim the credit on behalf of the Government for the transformation in the situation since then. There has been a remarkable expansion in the number of self-employed. A decade ago, there were only 1·9 million, and today there are more than 2·7 million — an increase of 800,000. Almost one in 10 of the work force now works for himself or herself. The figures for VAT registrations and the labour force surveys show continuing growth. It is heartening to see that about half the new jobs created since 1983 have come from self-employment.
We are witnessing part of the economic and social revitalisation of Britain. I do not accept the criticisms that the decline of the old manufacturing industries with their grotesque overmanning could have been avoided. These changes have taken place all over the world, and we could not have insulated ourselves against them. It is not in anyone's interests to deploy our work force inefficiently.
Nor do I agree that putting out subsidiary functions to competitive tendering is self-defeating. If large corporations or Government Departments can secure better catering, cleaning or secretarial services from outside agencies, the savings can be used to perform their essential tasks more efficiently. I seriously question whether we have yet gone far enough in opening up nationalised industries, local authorities, and big business and, dare I say it, even the National Health Service, to this process.
I am a strong supporter of the Government's measures to reduce the burden of taxation and regulation. They have undoubtedly helped to stimulate the number of those setting up in business on their own and to improve the prospects — this is particularly important — of those already in self-employment. But getting the state off the backs of the people is only the first step. There are other problems that must be positively tackled if we are to build on the success we have already had.
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The great bugbear for people setting up on their own is red tape. There is still a great river of it flowing out from the town halls, the Inland Revenue, the Customs and Excise, and so on. It deters new entrants to business and actually encourages the black economy. We all know of people who will do household or other jobs for cash, provided that there are no records and no questions asked. That is deplorable.
A prime policy objective for the future must be to reduce the tidal flow of bureaucratic paper. I see no reason why a simplified system of business regulation should not be introduced, with all the statutory obligations for new small businesses with regard to health and safety, fire precautions, insurance, employment protection and sick pay set out on a single A4 sheet of paper. My hon. Friend the Member for Hertfordshire, West mentioned the inspectorates. I am frightened every time I look at the number of such inspectorates. I believe that we should have one inspectorate rather than so many. I also believe that a standardised form setting out tax and national insurance on one sheet of paper is perfectly feasible.
I am aware that a White Paper on deregulation is to be published in the summer and that the enterprise and deregulation unit of the DTI considers all new proposals regarding requirements for businesses. However, the burden of compliance on the self-employed and their operations is not generally known or appreciated. Figures supplied by Graham Bannock and Partners — the country's leading small firms' consultants—suggest that small businesses and the self-employed have to bear a burden of compliance that is seven to 10 times greater than that borne by large firms. That cannot be right. For example, ICI and other such large firms have advisers to help them overcome all the mountains of paper and regulations. In comparison with ICI, we must remember that the small business man bears a burden that is seven to 10 times greater.
The problems are illustrated further by considering our VAT system. I have always believed that VAT has the merit of making small firms keep proper records. That element of discipline is desirable as it enables small firms to know how they are doing and whether they are about to face trouble before they go broke. However, the United Kingdom system is more complicated than elsewhere in Europe. As a result, it imposes a disproportionate burden on self-employed traders compared with larger firms. The cost of administration is also proportionately higher, even though input tax can be reclaimed. I am talking not about upping the thresholds, but making the system simpler and reducing the burden.
In general, the tax system encourages investment in property, pensions, insurance schemes and quoted shares. The hon. Member for Gordon also mentioned this. However, the tax system does not offer any comparable incentives for investments in small, self-financed enterprises. Therefore, small firms and newly established self-employed people are at a disadvantage.
I do not expect my hon. Friend the Minister to offer us a preview of the Budget. None the less, I hope that he will convey to my right hon. Friend the Chancellor of the Exchequer—as have my colleagues on the Back-Bench Committee on smaller businesses and the Small Business Bureau—our concern about the weight of taxation and the demands of the Inland Revenue and Customs and Excise on the self-employed.

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A reduction in the standard rate of income tax will undoubtedly be welcome. What would be even more welcome would be a simpler tax regime with far fewer forms. That is the only way to diminish the attractions of the black economy. That must be an important task for any Government to consider. Such measures are, of course, in the interests of large firms as well as the small ones. A competitive environment offers the best guarantee of the efficient use of our resources. Large companies must be encouraged to contract out as many non-essential functions as Government Departments, local authorities and the nationalised industries have done.
Small and large firms must make every effort to pay their bills promptly. We all know of companies, some of them big ones—GEC has been mentioned—that are not prompt payers. Recently, as a small business man, I had a run-in with a large distribution group. Fortunately, I was in a good position because not only was I supplying that group—it owed me a vast sum of money—but I also suddenly discovered that it was supplying me. I owed that group a small sum of money, but there appeared to be one rule for the rich and one for the poor. That company demanded payment from the small trader within 28 days, or no goods. However, as a small trader I had to give that company 120 days credit on some occasions. That is an example of the big company making money out of a small company.
Mr. John Carlisle: Name it.
Mr. Bright: I do not want to name it, but it is one of the large food distribution companies.
Mr. Martin Flannery: Do not be shy; name it.
Mr. Bright: All I would say is that it deserves the Booker prize.
It is not always clear when bills become due. I believe that if legislation was introduced it would make contracts much more complicated. However, big companies must be educated in this matter by the Government, the CBI—I am pleased that the CBI has put its weight behind such a campaign—and by the House.
Mr. Robert B. Jones: My hon. Friend says that the CBI has put its weight behind that campaign. Does my hon. Friend agree that it could put more weight behind such a campaign if it expelled those firms that broke its guidelines on the payment of bills?
Mr. Bright: That is certainly an interesting concept for the CBI. Unfortunately, the CBI derives its income from those very companies, and that makes it rather difficult. However, if such a measure was introduced it would certainly concentrate minds. Perhaps the small firms section of the CBI could push for such a measure. If small, self-employed traders have to wait too long for payment they will simply not be around to offer competitive services in the future. We must consider that problem.
When there are large numbers of self-employed, operating small and medium-sized enterprises, the best conditions for sustained economic growth exist. They provide a pool of enterprise that stimulates the exchange of information and technological advance. Some of those firms will grow into substantial businesses. However, in Scotland, the north-west and the north-east, where such
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people are thin on the ground, we find over-mature, declining industries and pools of unemployment. That is the price we have had to pay for neglecting the self-employed and small enterprises until 1979.
The Government have laid the foundations for economic recovery. The benefits are now coming through in the form of rapid growth, a rise in real incomes and falling unemployment. What we must now do is to ensure that the burden of taxation and of regulations is reduced still further. Removing the obstacles to self-employment is the way forward to a more competitive and flexible economy. I know that the Minister understands that and I believe that the House and country will support him in achieving those objectives.
5.17 pm
Mr. Eric S. Heffer: I join the hon. Member for Luton, South (Mr. Bright) in thanking the hon. Member for Hertfordshire, West (Mr. Jones) for tabling the motion.
I believe that there has been some confusion over the question of small businesses and support for them, as against the concept of self-employment, particularly in the construction industry.
I have a great feeling for small businesses. Most of my family were small business people. After coming out of the armed forces my father became what was known as a "snob", though not in a certain sense of the word. He was a shoe repairer and shoemaker. He was a small business man. I had uncles who ran fruiterers, florists and butchers shops. I understand the struggle that small business people have and the difficulties that they face, especially nowadays, when we consider the growth of monopolies and the fact that small business men have increasingly been pushed to the wall. Indeed, the hon. Member for Luton, South made the case for the small business man against the monopoly, whether private or public. I have great sympathy with that. None of us in the Labour party has ever argued that everything in this country should be run and controlled by large corporations and monopolies, which push small business people to the wall.
If my wife wants to have her leather bag repaired, she does not go to a large company in Liverpool—there is nobody there to do it anyway. She goes to a small business man, who does a fine job. The Soviet Union and East European countries are having to take such things on board. If one wants things done at that level, one must go to the small business. No Socialist has ever argued that there is anything wrong with small businesses.
Mr. Robert B. Jones: Will the hon. Gentleman give way?
Mr. Heifer: The hon. Gentleman would not let me intervene—
Mr. Jones: I offered.
Mr. Heffer: The hon. Gentleman did not offer. I shall not make a long speech. I wanted to make this point.
When I was a Minister at the Department of Industry, the Labour Government encouraged and helped small businesses. A section of our Department was concerned only with assisting small businesses. No one in the Labour party has ever said, "Crush the small business man." On the contrary, we have been very much in favour of helping to extend and develop small businesses.
Mr. Robert B. Jones: I am grateful to the hon. Gentleman for giving way. Can he remember saying on 4 February 1986:
"it is rubbish to suggest that the answer to our unemployment problems is self-employment. It has done great damage to the people of this country and to our industries". —[Official Report, 4 February 1986; Vol. 91, c. 149.]
How can the hon. Gentleman justify what he is saying now, having said that?
Mr. Heffer: The hon. Gentleman has just made the point that I was coming to. I was talking about the construction industry. I was born and bred in it, and spent my apprenticeship and worked in it most of my life, apart from my years in the war, when I was in the Royal Air Force. That is a different matter. The hon. Gentleman is confusing helping small businesses with the growth of so-called self-employment — lump labour — particularly in the construction industry. That has been pernicious, dangerous and has not helped the industry—it has done the opposite. That is the point that I wanted to make.
Competition leads to the growth of large companies and monopolies, and the destruction of small businesses. If Conservative Members do not understand that, they do not understand the nature of the society in which we live. Competition does not lead to the growth of small businesses. It leads to the very opposite. It leads to the growth of monopolies, and monopolies destroy competition. If Conservative Members do not understand that, they do not understand capitalism or the society in which we live. It is no good the Conservative Whip, the hon. Member for Staffordshire, South-East (Mr. Lightbown), laughing. That is the truth. Monopolies grow out of competition and destroy small businesses in the same industry. On an international scale, the great international corporations take over and, even on that scale, squeeze out other people.
The Government have been much in favour of privatisation in the aircraft industry. One of the competitive firms has now been taken over by a bigger firm. A private monopoly, as opposed to a public monopoly, is growing up. If Conservative Members do not understand that, they do not understand the nature of the society in which we live.
The hon. Member for Hertfordshire, West referred to the CBI. The idea of the CBI expelling those who break its guidelines is ridiculous. Those concerned know where their bread is buttered and who determines the position in industry. I see that Conservative Members are with me on that. It is true, and they know it, as I know it.
People like myself in the Labour party were against lump labour in the construction industry. I tried to introduce a private Member's Bill to ensure that lump labour was outlawed from that industry. It was not passed by the House, but the Labour Government tried to introduce such a Bill. We were defeated in the election in 1970, and the Bill fell. The Bill raised the question of what was happening to people who were not paying taxation or national insurance. The Government had to act. Even the Conservative Government rightly had to act on that issue. That is why we had 714 and 715 tax certificates for the self-employed. It was not the best way to deal with the matter, but it brought in revenue for the Government which otherwise would have been lost. It was wrong that those who were employed by direct labour—whether private or public—had to pay taxation and national insurance, but that those who were not were getting away with it and
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not paying their contributions to the nation. The Conservative Government had to introduce the new measure, because it was vital that people paid their contributions.
Let us look at lump labour, or self-employment, in the construction industry. It has been growing, certainly under this Government. Let us consider the problems that it causes. Despite the mass unemployment in the construction industry, we are now beginning to suffer because in certain areas we do not have the skilled labour that we should have. How do we get skilled labour? In the old days, large firms and local authorities employed apprentices. The apprentices were trained, and when they had finished that period of training—whether it was after five or seven years—they were able to do the job that was required of them as trained workers.
I am a joiner, and every time I come into the Chamber I look at the beautiful woodwork. It could have been done only by the trained joiners of my trade. I am always proud of that. When I look round, I think what a wonderful job those joiners did. When I worked on the big liners that sailed from Liverpool and I went into a first-class cabin or a great dining hall, I admired the beautiful work that had been done by trained joiners.
But what happened? My Government rightly decided to allow local authorities to have housing action areas where there could be modernisation to bring the houses up to a good standard. Bathrooms and so on were put in. Because we did not have the trained workers, the cowboys moved in. In those areas, people were sometimes worse off after the development than before the non-trained workers went in. That is what has happened in the construction industry. There is now a lack of skilled personnel. The work being done on some sites is not as good as it should be, because the workers have not been trained.
Training is only one aspect of self-employment. There are also the cowboys—half-trained, under-trained, non-trained—who move in, believing that they are trained workers. The result is a poor job. It upsets me that some employers, especially in the construction industry, put their hands on their hearts and say that they are not in favour of lump labour, but then, behind the scenes, encourage it because it removes their overheads. They do not have to worry about them and can avoid them. In this way they also avoid payment if there are accidents on the job. One of the problems in the industry is the growing number of people who are injured — largely self-employed people who are not receiving the support they would have received if they had been directly employed. Usually, they do not have a union to fight for them, and are thus left in a position in which they should not have been left.
So far I have discussed training, health and safety, the lackof apprenticeships and the cowboys who have spread through the industry. People like me are not against small businesses. We want them to develop, and we shall encourage and help them. We believe that the banks should help them, without charging high interest rates. It is marvellous when someone who has been made redundant starts up a small business on his own, develops it and realises his potential. We are not against that, and we never have been. However, we are against self-employment in the form of lump labour, which is undermining one of the greatest industries in this country. Sooner or later, we must control it.

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Many years ago, when we started developing in the big cities, in urban areas and in housing action areas, I suggested to my union that we should organise teams of our people to take on the contracts for this employment. It did not agree with me—or rather, it ignored what I said, so I assumed that it did not agree with me. Fair enough. However, in the long run, if we are to deal with these matters, self-employment will not be the important issue. There will have to be a growth of co-operatives at local level to do the job. I want the trade unions to play a full part in that and to involve themselves in the co-operatives' development.
The hon. Member for Hertfordshire, West has raised an important matter today. I did not know that Hertfordshire, West was on the Hemel Hempstead side. I was born and bred in Hertfordshire, which includes Hertford, Ware and Hoddesdon, and that is where I learnt about small businesses. My people were involved in them.
We in the Labour party are not against small businesses. We are against the growth of self-employment in the construction industry. It is undermining and doing great damage to an important industry.
5.33 pm
The Minister of State, Department of Employment (Mr. John Cope): I congratulate my hon. Friend the Member for Hertfordshire, West (Mr. Jones) on his luck in the ballot, and even more on his choice of subject, as did the hon. Member for Liverpool, Walton (Mr. Heffer).
The encouragement of self-employment and small business is central to our concern to encourage innovation, enterprise and growth. As has already been mentioned, many people tend to think of the self-employed as one-man or one-woman businesses; but, of course, self-employment covers all unincorporated businesses, whether or not there are employees in them—there often are — and partnerships and unincorporated cooperatives. In fact, self-employment covers anyone who is working, does not work for a company and is not an employee.
The growth in the numbers of self-employed has been a striking feature of employment trends since 1979. My hon. Friend the Member for Luton, South (Mr. Bright) said that in that year it was estimated that there were 1·9 million self-employed workers. That had risen to more than 2·6 million by 1986—a rise of more than 40 per cent. That growth is continuing strongly now. The ratio of self-employed to employed is now about one in nine, and the growth in self-employment has occurred in a wide section of industry — manufacturing, construction, transport and services. I accept what the hon. Member for Gordon (Mr. Bruce) said about the differences in the scale of self-employment in different parts of the country, but growth has occurred in all the regions of Great Britain. For example, there has been a 61 per cent. increase in Yorkshire and Humberside and at the same time an increase of 36 per cent. in the northern region, so the growth is widely spread.
The Government believe that self-employment has an important role to play in the regeneration of the economy and the reduction of unemployment. It brings benefits to individuals, to businesses and to the economy. The hon. Member for Walton made an interesting point about competition. He seemed to think that competition always
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works against the small business. It can work against it at times, especially if there is a monopoly, but often the small business can take advantage of its competitive edge and flexibility to make competition work in its favour. That is why there has been such a growth of small businesses in recent years.
The growth of self-employment has shown that there is a wealth of entrepreneurial talent in this country —among unemployed and employed alike—which, in the past, has been somewhat stifled by the economic climate but which, in the right economic climate that we now have, can flourish. Self-employment is a source of enterprise, innovation and growth and an important means of fostering the enterprise culture. It is also a valuable source of employment, a seedbed for new business formation, and one of the ways of increasing labour market flexibility, to the benefit of industry and the consumer. All those things are advantages to the economy, to the country and to individuals.
Self-employment provides opportunities for people to be their own bosses and to develop their own business ideas, entrepreneurial skills and job satisfaction. Many people, particularly women, also enjoy the flexibility in working hours that self-employment can provide; it can help them get on with the rest of their lives, too. Such independence of action also means that self-employed people must take far more responsibility for their own future — not only responsibility for the risks of their businesses, but for the provision of their pensions, and so on. However, the continuing growth in self-employment shows that people are willing and able to take the risks and responsibilities because of the satisfaction that they gain.
People, not Governments, create jobs. What we can try to do — and have done, I think, with success — is to create the conditions that encourage the growth of new and independent enterprises. That is the foundation of our employment and economic strategy. Our task is to remove the disincentives to enterprise so that people can exploit their potential and skills for their own good and that of the economy. A number of the steps that we have taken as part of that task are directly concerned with encouraging the creation and growth of small businesses, including those of the self-employed.
The flagship of all our efforts to support small business is the Government's small firms service, which offers a comprehensive nationwide service to all small businesses, giving advice on any relevant topic or problem, backed up by an excellent counselling service. No one in business, or thinking of going into business, is too small to qualify for help.
The small firms service is an important gateway for business in Government Departments, including the established DTI schemes and the new ones announced recently. It is a valuable institution and I am keen that it should be developeed to realise its full potential. We should ensure that it is known to everyone who might be able to benefit from it. It is expanding. In 1986–87 it handled over 280,000 inquiries and held over 38,000 counselling sessions. That represents increases of 12·3 and 8·8 per cent. respectively on the previous year's business.
I am anxious to do more to make that valuable service more widely available. The computerised reference book is central to the information service. It is a substantial database and is of direct relevance to small businesses. It is the main tool used by the inquiry officers when people call at or telephone the small firms centres.

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The reference book has sections detailing all the relevant Government schemes and gives particulars of the various interfaces between Government and business, including matters such as patents, company formation, export assistance, ACAS and more obvious matters. It has a section on Government purchasing. I very much agree with what was said earlier about Government purchasing, particularly the fact that small businesses can provide value for money when supplying to Government as well as to large companies.
The reference book contains a lot of information about training schemes and courses — not only Government schemes, but all the others—that are available in the area of the small firms centre and nationally. Open and distance learning are important to small businesses.
The reference book contains information on where to go for help with all sorts of problems. It gives particulars about franchising, European Community information, and so on. There is a national reference book that contains much national information, and regional reference books, held in the local offices, contain more local information.
I can announce that we have decided to make the small firms service's computerised reference book available to outside bodies, together with an updating service. It will be available to firms on their own computer systems, and they will be able to read it direct. Comprehensive and up-to-date information is essential to small businesses, not least on the purchasing side. Many other organisations, such as local enterprise agencies and chambers of commerce, make substantial use of the small firms service information when dealing with members and clients. Access to it at present is by telephone, but we shall improve on that in the way that I have just announced.
Local enterprise agencies have become a vital source of assistance to businesses. They are able to offer advice and counselling that is of particular relevance to those starting their own businesses, and they are of great help to businesses that are already off the ground.
Mr. Andrew Welsh: The Minister mentioned the many incentives that are available, to which we give a broad welcome. However, is he aware that other parts of Government policy act as a disincentive? Is he aware of an article in today's Glasgow Herald, which points out that many small businesses in Scotland are currently at a tremendous rates disadvantage? That will be insignificant compared to the problems that will arise if the uniform business rate is introduced in Scotland but not elsewhere in the United Kingdom. Is he aware of the many problems that that will pose for Scottish industry, especially small businesses?
Mr. Cope: I am not sure whether that is relevant to this part of my speech. As a rule, I do not see the Glasgow Herald very promptly, although I am devoted to it. I shall look for the article that the hon. Gentleman has mentioned. The issue of rates in England and Wales is under discussion elsewhere.
In many cases, local enterprise agencies provide a wide variety of services, including managed workshops, financial advice and other specialised forms of assistance. There are nearly 400 local enterprise agencies, which are supported by over 3,000 companies, organisations and individuals. It is extremely important that those agencies should keep their roots local and in the private sector. There is a need for a period of strengthening and
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consolidating established local enterprise agencies. We shall not see much more of the rather explosive growth in the numbers of agencies that we have seen in recent years.
The Government want local enterprise agencies to be firmly-based permanent features of the local economies in which they operate. It is important that they retain their independence and do not become permanent pensioners of the Government, with all that that implies for governmental and parliamentary direction and interference in their work. The local enterprise agency grants scheme is geared to that end. Agencies are encouraged to play a focal role in networks of organisations and people who are similarly committed to helping economic growth.
Many different groups of people are seeking to start their own businesses — young people, women, ethnic minorities, and so on. LEAs must be aware of the needs of those specialised groups. Moreover, it will contribute to the strength of the LEA movement if they can assure that, where appropriate, they make special provision for those particular groups. Some agencies are designed to help certain groups, but I hope that such agencies will contribute to the common effort to assist small businesses and that they will not over-emphasise different sectors.
One of the most successful programmes of the Department of Employment is of particular benefit to the unemployed—the enterprise allowance scheme. It helps the unemployed to start their own businesses by paying them an allowance of £40 per week for one year to help to overcome the disincentive of the loss of benefit as soon as they stop being available for work. I am glad to tell the House that more than 315,000 people have taken advantage of the scheme to start their own businesses or to become self-employed on an individual basis. Over 100,000 places are available this year, and there will be 110,000 next year.
The scheme does not simply provide jobs for people during the year in which people receive the allowance; it encourages—and is intended to do—the formation of viable businesses, preferably those with a potential for growth and job creation. Recent survey results showed that, of those who received the allowance for one year, 65 per cent. were still trading three years after starting up. At that point, for every 100 businesses still trading, 114 additional jobs have been created. Those results are encouraging, but we must not be complacent. We are examining ways in which the survival, growth and job-generating prospects of those in the scheme can be enhanced.
By way of encouragement to those who may be considering entering the scheme, I shall mention two examples of how it has helped unemployed people to set up successful businesses. First, four unemployed people on Merseyside formed an independent bus company called Fareway Passenger Services in February 1987. It now operates a fleet of 25 buses throughout the Merseyside area, and I am told that it employs more than 50 people.
A slightly younger business was started by Mr. David Rafferty, from Northumberland. He joined the enterprise allowance scheme from the dole in April 1987.
Mr. Heffer: The Minister has mentioned bus services. However, deregulation meant that a number of employees were thrown out of work. Although a small company may have achieved growth, the number of workers in the industry has not been enhanced.
Mr. Cope: The service to the public has certainly been enhanced in some areas, and that has enhanced the number of people working on the buses and able to supply the service. The point of bus deregulation was to permit people to start bus services wherever they thought that they were required, and I believe that that, too, has been achieved.
I was about to tell the House about Mr. Rafferty from Northumberland. In April last year he started Superior Cleaning Specialists. He had been unemployed for some time, but he identified a gap in the market and succeeded in winning a contract with British Telecom to clean telephone kiosks in Edinburgh. He now has over 100 employees and a turnover of more than £500,000 in a year. Thus, an unemployed person has started a very successful business with the aid of the enterprise allowance scheme.
Of course, not all businesses which take advantage of the scheme grow quite as quickly; nor can they be expected to do so. However, my examples show how the scheme can enable entrepreneurial talents among the unemployed to flourish. It has also contributed to the re-establishment of the enterprise culture. People are aware that, through the scheme, they have a chance to create their own businesses, even if they are unemployed. We have therefore deliberately kept the administration of the scheme as simple as possible, so that applicants are not deterred by bureaucracy. Moreover, we do not intend to pick winners from among the applicants. That is always very difficult to do with new businesses starting, and I do not think the Government are well placed to do it. In any case, it would conflict with the idea of the scheme.
Young people are another group to whom we give special attention. We believe that self-employment can provide them with many opportunities. About a quarter or those joining the enterprise allowance scheme are under 25, and measures aimed specifically at encouraging them include the technical and vocational education initiative, and the various schemes that help them to try out businesses while they are still at school.
The House will also know of the success of the youth training scheme. The Manpower Services Commission intends that, by 1990, enterprise training will be made available to all YTS trainees as an integral part of their courses. The introduction of enterprise training into YTS will be project-based and in partnership with the YTS managing agents.
My Department is also supporting the Prince's Youth Business Trust, which helps 18 to 25-year-olds who wish to become self-employed or to expand their existing businesses. We match the money raised by the scheme pound for pound until 1989, to make loans to young entrepreneurs. That is likely to result in a contribution by the Department of some £15 million by that time.
There are other schemes of the same kind, but I shall only mention Project Fullemploy, which provides young people with enterprise training, and is particularly concerned with establishing access to training for ethnic minorities.
In the past, there has been a temptation to think of self-employment as primarily a male preserve. Of course, that is not true at all. Self-employed men still outnumber self-employed women, but self-employment among women has almost doubled, from 356,000 in 1979 to 708,000 in 1987. That is a much steeper rise than for men.
Mr. Rowe: The Minister may wish to note that a new organisation has been started called Women Into Business, which is showing a remarkable capacity to attract and encourage women entrepreneurs.
Mr. Cope: I am indeed aware of that organisation, and I commend its work.
The Government also believe that self-employment and the establishment of small businesses can help to tackle the difficulties faced by some of our inner cities. We recognise that, while self-employed people running small businesses offer excellent potential for the creation of wealth and jobs and revitalising areas, they can face particular disadvantages in the inner cities. That is why the small firms service and the enterprise allowance scheme are made particularly readily available to local businesses and residents in such areas, together with the other national initiatives offered by our Department and other Government Departments.
Finally, let me mention the Manpower Services Commission's training for enterprise programme, which aims to equip potential and existing entrepreneurs with the skills and knowledge required to encourage and develop small businesses. More than 100,000 people will be helped in 1987–88, at a cost of £19·3 million. That is another important initiative.
Mr. Malcolm Bruce: Does the Department accept that there is a need for an additional source of venture capital for small businesses? I appreciate that the Minister is concerned with grants aimed at training for enterprise, but does his Department believe that it could promote initiatives to encourage the setting up of local investment banks or financial companies, as the CBI and others suggest?
Mr. Cope: We are always willing, particularly at this time of year, to listen to proposals involving finance. However, the hon. Gentleman cannot expect Ministers to comment on them in advance of the Budget. I am, of course, very conscious of the suggestions made by previous bodies to which the hon. Gentleman has drawn attention.
I have been outlining the various measures that the Government take to encourage and assist the creation of businesses. It would be illogical if we were also burdening them with a mountain of Government regulations resulting in a disproportionate cost to small firms, and there is always the danger of that happening. My hon. Friend the Member for Luton, South rightly emphasised the necessity for continuing and renewed vigilance, and for the greatest possible efforts to reduce the administrative and legislative burdens that the Government impose on businesses, especially small businesses.
It has been suggested that people should be able to choose self-employed status for tax and other purposes if they wish, without having to argue about it with the tax authorities. However, if we were to allow the individual to choose whether to be treated as self-employed or employed, I have no doubt that some firms would see it as being to their advantage to classify all their employees as self-employed, and so avoid their obligations as employers—not least the obligation to collect PAYE tax and national insurance. That is why the proposal is usually expressed not as a simple matter of providing a choice, but as a matter of changing the rules in less sweeping ways. It is also why it is, I believe, necessary for the various

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Government agencies involved to retain the ability to argue about the facts in individual cases, rather than merely having to accept the decisions of others.
We are very conscious of the problems of those individuals whose status is not clear-cut. That is why we have taken action to alleviate the difficulties faced by some self-employed people in establishing their status for tax and national insurance purposes. When people start up in business as self-employed, they wish to ensure, as quickly and simply as possible, that they will be treated as self-employed for tax and other purposes. To overcome the problems, the Inland Revenue and the Department of Health and Social Security, with our support, have taken a series of measures. They have issued better publicity on what constitutes self-employment — for example, the Inland Revenue leaflet "Tax: Employed or SelfEmployed"—and people are encouraged to seek advice.
Since April last year, each tax and social security office has had one official responsible for decisions on employment status, which can save people much time in explaining their circumstances. They can request a written ruling on their status, which will remain in force unless their circumstances change. It is perhaps still more important that a ruling by one Department will be accepted by the other, which ensures consistency and saves time. We are continuing to monitor the position to ensure that the measures alleviate the problem sufficiently.
I thank my hon. Friend the Member for Hertfordshire, West for the opportunity to discuss our policies and the measures for securing the continued growth of self-employment. I have noted the suggestions made by my hon. Friend and by others. No doubt other suggestions will be made, and I will consider them with care. I am sure that my right hon. and hon. Friends in the Treasury will take pleasure in examining the suggestions that concern them, and no doubt there will be many in that category.
My hon. Friend the Member for Hertfordshire, West is aware that the Government fully share his concern to encourage more growth in the number of self-employed people and in the number of small businesses generally. More people recognise the opportunities that exist in the United Kingdom today. People have the confidence to set up their own businesses in the knowledge that if they are successful they will be rewarded for their enterprise. Indeed, the country as a whole will be rewarded by their enterprise. I am glad to commend the motion to the House.
6 pm
Mr. Barry Sheerman: I also congratulate the hon. Member for Hertfordshire, West (Mr. Jones) on choosing self-employment as the subject for this afternoon's debate. It would be wrong of me to cast doubt on some aspects of the hon. Gentleman's motion. However, the Opposition consider the specific terms of the motion to be far too congratulatory of the Government. Part of my duty will be to expose the differences between the Opposition and the Government on this subject.
The Government are extremely good at presentation. Indeed, if they get top marks for anything, they get them for presentation. However, the presentation and the hype do not always lead to a true presentation of the facts as most objective observers would see them. This is certainly the case with self-employment and small enterprises. The present official Opposition, like previous Labour
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Governments, are tremendously in favour of small businesses and self-employment, as long as that self-employment is carried out for the right reasons, that what people choose to enter freely is rewarding, and that it leads to a reasonably good life for those involved in it.
One of the problems that we face in the debate is that the Government repeatedly present the facts in a distorted way. Very often self-employment can be a brutal and unhappy experience. It can often lead to an unhappy home life, insecurity, low pay and other uncertainties. The cost in human terms might be great. Someone may lose a job and then invest savings and lose them as well, in a vain and ill-advised attempt to embark on self-employment. Self-employment is excellent where it is right for an individual. However, it is not the be all and end all, at all times, for all people.
I corrected the hon. Member for Hertfordshire, West earlier when he did rough justice to the historical record. The fact is that in 1969 a Labour Government initiated the small business enterprise bandwagon. Tony Crosland, that much respected figure on the Labour party Benches, as the then President of the Board of Trade, set up the Bolton committee to consider ways to help develop small enterprise and small businesses, and to develop the environment in which those businesses could grow. Certainly the efforts of Harold Lever—now Lord Lever—in that direction are well known. The Bolton committee recommendations — many of which were accepted by the then Labour Government —led to the creation of the post now held by the Minister of State, Department of Employment, with its responsibility for small businesses.
I listened to the speeches made by Conservative Members and by the Minister with some surprise. The Minister did not refer to the role of local government in this very important area. I have visited many new enterprise initiatives around the country. The Minister has also visited initiatives, and he cannot be unaware of the fact that local government — consisting mostly of Labour-controlled local authorities — has made an outstanding contribution in terms of a partnership between the private and public sectors. Where that relationship is at its best it provides the environment for small businesses and self-employment to develop much more rapidly than they would normally do so. I have seen local economic development units in local authorities working closely and happily with local businesses to achieve common objectives.
The Labour party should receive credit for the wide range of initiatives that it has promoted for small businesses and self-employment. I want to refer to an example that the Minister has glossed over. ILEA has developed a scheme in association with the London enterprise agency, which is considered to be one of the premier agencies in the country. They have constructed the London education business partnership. The aim of the partnership is to bridge the gap between school and industry. The partnership between ILEA and local business is regarded as one of the most interesting and innovative in the country, but we have not heard a word about it because of the Government's prejudices against local government.
We cannot take all the credit for helping and encouraging people into self-employment. Sadly, the Government have done their best to force people into self-employment in the most savage way possible. We can draw

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a parallel between what is happening now and what happened in the 1930s. As unemployment went through the roof in the 1930s, self-employment was the only bitter alternative for many of our citizens. The Government have glossed over the fact that for many people self-employment is not something that they rush to, welcome or embrace because it is a wonderful life. For some people it is the only alternative at a time when unemployment has risen by between 300 and 400 per cent. It is no wonder that self-employment has risen by 40 per cent., when unemployment has risen by 400 per cent. under this Government.
We must get the perspective and the balance right. We should not claim that for some people self-employment is not rewarding, good or a better way of life, but we must recognise that many people are forced into self-employment. Some people invest their life savings or redundancy payments and then lose that money. The Minister referred to two glowing examples of people on the enterprise allowance scheme who had done very well. I could recite a catalogue of people who, perhaps inadvisedly, were forced to make some provision for their families and their future, who did not end up employing 50 people or making a £500,000 turnover. I could refer to people whose experiences were worse than that.
I do not want to dwell simply on that side of the coin, but we must recognise the reality. I believe that in the 1980s we have replicated the experience of the 1930s. Perhaps the Minister would like to challenge me on the statistics. I recently read a research paper by Dr. Martin Binks and Dr. David Storey. According to their research, 50 per cent. of self-employment start-ups are what they term "desperation led".
People did not embark on self-employment because they saw a hole in the market or because they had a wonderful innovatory idea. They did so because there was no alternative for them. Perhaps that introduces a note of reality into the wonderful hype that the Minister has given to self-employment. Given that, under the Government, unemployment has increased by 2 or 3 million, none of this is surprising.
Set-up rates may have been high since 1979, but, on the dark side, so have failure rates. Two thirds of small firms still operate on such a shoestring that they cannot offer good wages and conditions to staff. Surely the Government must recognise that. The general household survey and the labour force survey show that low wages and uncertainty are features associated with many self-employed people. Sixty five per cent. of start-up schemes never create any jobs at all, except for the people who found the schemes. That is another part of the story that we did not hear from the Minister.
The Labour party recognises the need for enterprise. For example, it had a policy of extending the enterprise allowance scheme to firms successful in creating jobs during their first year. I should have thought that the Government would have taken that on board by now. We do not begrudge the fact that the enterprise allowance has given many people the opportunity to have a go in small businesses. As a nation we should be tackling new markets and technology and trying to create wealth, so small businesses with potential for growth must be identified and winners picked.
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The enterprise allowance scheme has been in place long enough to have been modified and developed to help those businesses with an opportunity to move forward to grow. The hon. Member for Hertfordshire, West, who is not in the Chamber at present, believes that there is no Labour party policy for small enterprises. We always have a manifesto for small businesses. The manifesto that I helped to launch just before the last general election included many changes and modifications to the law that would have made small businesses grow more rapidly.
Mr. Rowe: May we take it that the policy of municipalisation, which was rampant in the Labour party in the late 1970s, is now a dead duck and that legislation such as the West Midlands County Council Bill, which would have municipalised half the small businesses in the west midlands, will never appear again?
Mr. Sheerman: The hon. Gentleman knows very well that what he calls municipalisation was part of a policy of partnership between democratically elected local authorities, local businesses and local trade unionists. We try to foster such creative partnerships, and that is what we were trying to foster when we launched our 12-point plan just before the election last year. Part of our emphasis was on a shift away from Whitehall to the communities in which jobs and wealth creation are needed.
If the Minister considers the history of the past nine years, he will see that hon. Members have shown repeatedly that the real gap in financial provision is in the £100,000 and less category of finance. If one wants £1 million or £2 million, one can get it from the City. One can obtain finance in the £100,000 to £1 million league, but sensitivity to local needs, personalities and markets must come from the local area. That is why local government were so successful with local business and why the small business lobby wants to return to such a partnership. Creating such a local enterprise partnership to encourage small business growth is what the Labour party is all about.
The Minister spent some time talking about local enterprise development. When local enterprise development is good it is very good, but when it is not so good it is pretty average. We need to generalise and spread quickly what is happening in the best areas of that partnership between the private and public sectors. The Minister did not suggest that the Government were planning to spread those best practices sufficiently rapidly to those areas that need help.
That part of our policy was very valuable, as was our emphasis on building in training. I was pleased to hear some of the Minister's remarks, but it was a case of too little, too late, when he referred to building enterprise training into the education system and youth training. Labour Members have been recommending, since the inception of the youth training scheme, that enterprise awareness should be taken seriously and not be seen merely as a couple of hours thrown in during the first week of youth training induction.
The Labour party has presented many policies to the electorate and the Government to improve the conditions in which small enterprises can flourish. The Labour party realises, much more than the present Administration do, that if this country is to be fit to move ahead and create wealth in the difficult conditions of competition over the next 10 or 20 years we must go in for high technology.

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Technology does not stand still. If we compare this country with West Germany, the United States and Japan, we see that small to medium companies in the hi-tech area are not developing as rapidly as are our international competitors. Some of the small start-up schemes never employ anyone, and we are lagging behind seriously in establishing the small to medium firms which will be the technology leaders over the next 10 to 20 years.
The gloss of public relations from the Department of Employment and the Department of Trade and Industry, or the Department for enterprise—I am not quite sure what it is called these days—does not fool people. I wish to refer to the remarks of my right hon. Friend the Member for Islwyn (Mr. Kinnock) when he recently addressed the British Institute of Management's annual dinner. He said that we need enterprise in Britain and an enterprise culture, but, unless it is linked to an investment culture, a research culture and an education and training culture, it will not mean very much at all. Without these other vital ingredients, the enterprise culture may be not so much a culture as an adventurous spasm, thrilling to some while it lasts, but transitory and ineffectual in its results.
Labour Members care very much about wealth creation. Self-employment and small businesses have an important part to play in that, but the Government are hoodwinking the nation if they believe that they are progressing as rapidly as they should in that vital area.
6.19 pm
Mr. Christopher Gill: Thank you, Mr. Deputy Speaker, for calling me in this important debate. On only one previous occasion have I had the pleasure of addressing such a crowded House.
We are a nation with few natural resources. We have some coal, and some gas and oil. Therefore, as a nation we have little to sell other than our labour. As one of the world's most populated countries, we have a surfeit of labour. Fortunately, as a race, we have always demonstrated resourcefulness, inventiveness and independence which have, in large measure, compensated for our lack of natural resources. Our place in the history of the world is in no small measure due to these attributes, which today are so typical of the many people who have become self-employed.
Anyone who has chosen to become self-employed will testify to the fact that this is not a soft option—quite the contrary. Sadly, in this post-war period, there is too much evidence not of encouragement but of downright hostility towards the small businesses and the self-employed. Regrettably, this hostility has stemmed largely from Governments — not just central Government but local government. The self-employed have been on the receiving end of blatant political hostility and a torrent of legislation by which successive Governments have sought to regulate and control the wealth-creating sector of the economy. This includes consumer protection legislation, employee protection legislation and fiscal legislation, where the employer now stands firmly in the shoes of Government as the unpaid collector of taxes.
What of the employer? To my knowledge, there is no protective legislation for him. Nor until recent times has there been much by way of recognition or reward. The Government have changed much of that. Today there is more incentive, more reward and more encouragement for those who demonstrate enterprise. It is important to
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recognise that the average entrepreneur—because that is what everybody starting in business is—does not look for Government assistance. On the contrary, all he wants is for the Government to keep out of the way. He wants not handouts but an environment which is sympathetic to business and in which enterprise and initiative can flourish. That means not more but less legislation and not more but less Government involvement.
The small business man seeks an environment in which he can do what he is best at—running his own business, identifying markets, satisfying those markets, buying and selling at a profit and employing people. Businesses which are established on their own are likely to survive on their own. I welcome my hon. Friend the Minister's examples of the unemployed who have become self-employed, but we must appreciate that not all unemployed people are frustrated entrepreneurs who can do a crash course in business studies and become tomorrow's employers. In the main, entrepreneurs are born, not made. In the main, they neither want nor expect the state to prop them up. Sadly, in this as in all other nations, they represent only a tiny fraction of the population.
For this reason, we must nurture and encourage these people. The future health and prosperity of the nation depend on them. We must do what we can to facilitate their progress. Here I pay tribute to my hon. Friend the Member for Hertfordshire, West (Mr. Jones), who has proposed constructive improvements in this important sector. I also congratulate the Government, who have done more than any other Government since the war to nurture the small business sector, on their progress to date. I wholeheartedly support my hon. Friend the Minister's initiatives to reduce the burden of bureaucracy on small businesses and to create a climate in which they can prosper and grow.
6.24 pm
Mr. Andrew Welsh: I congratulate the hon. Member for Hertfordshire, West (Mr. Jones) on initiating this debate, because he has done a great service to the self-employed and small businesses, and to the House, in attracting attention to this important sector. However, I take issue with him over his remarks about the Scottish National party. The SNP was the first party to appoint a parliamentary spokesman on this subject. It then became trendy, and the other parties did so. The SNP also controls the Angus district council, of which I was provost, which was drawn out for particular attention by the National Federation of Self Employed and Small Businesses and congratulated on its attitude and cooperation with non-domestic ratepayers, in consultation on rates. The SNP is proud of its record in assisting what we believe is a vital sector of the Scottish economy.
The Government are proud of their record, but for Scotland a caveat must be made, because figures given by the Minister to show increases in the number of self-employed do not apply in Scotland. Between 1979 and 1986, the number of self-employed rose by 40 per cent. throughout the United Kingdom but by only 19 per cent. in Scotland. Between 1983 and 1986, while it rose by 28 per cent. in the United Kingdom, it rose by only 14·5 per cent. in Scotland. I should like those figures to be vastly improved, because there is great scope for increasing the amount of self-employment and the number of small businesses in Scotland.

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One of the problems is that Parliament is not built to discuss the problems of the small businesses and the self-employed. It is designed for the two-party system. It is entrenched in vested interests—the management on the one side and the trade unions on the other. Last week's debate on employment showed this vested interest gulf only too clearly. This is all happening at the centre of British political power. The system is designed to suit the unions or the management, and no one seems to speak exclusively for the self-employed or the small businesses. Perhaps that is not a complaint but a hope, because if their cause were taken up across the parties it would be of benefit to the economy.
The Bolton report, which was itself a breakthrough, is now more a historical document, and it must be updated to meet present-day needs. The period of discussion to which the hon. Member for Huddersfield (Mr. Sheerman) alluded has produced a recognition of the role of small businesses. There has been some advantage in the form of special small business governmental organisations — I acknowledge the Government's move on this — and a Minister for small businesses. In spite of all that, as yet there is no integrated small business or self-employed policy in the United Kingdom.
If the self-employed and small businesses are to play a more important role in the economy, there must be a more serious attempt to meet their specific and specialised needs. There should be a package for them which would shore up their weaknesses, caused by their size and their starting difficulties, and which would also play on their strengths. In particular, I point to the problems over the status of the self-employed and their classification. An act catering for the self-employed would clearly define who the self-employed are and would greatly assist them in carrying out their tasks. Special attention must be paid to the early days of such small businesses in terms of advice, back-up services and finance. There is always the irony that once they are established everyone wants to give them funds, but when they need the cash and are being established people do not want to know them.
The self-employed require a taxation package to allow them freedom of decision making and maximum help, especially in the first years of any new business. The self-employed must be given a better deal on the welfare state and various benefits. Benefits should be available, if they are available at all, to all citizens. The self-employed get a poor deal in terms of the benefits from which they are excluded. That acts against the self-employed and must be considered.
I should like to see the role of the Scottish Development Agency extended to allow assistance in the retail and service industries, as happens with the Highlands and Islands Development Board. Current regulations favour industrial or manufacturing processes at the expense of valuable opportunities in the retail and service industries. There is room for great expansion there.
I should like to ask the Minister questions relating to the unified business rate and the 1990 revaluation. When will small businesses be told the exact level of the unified business rate? When will that become "uniform" throughout the United Kingdom? I hope that I have intrigued the Minister enough for him to rush out and buy the Glasgow Herald, because the article in that paper points to some real fears and difficulties for businesses in
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Scotland. The Government must act to clear up the fears and worries facing small businesses and the self-employed over the present rating system and the proposed unified business rate.
Currently Scottish businesses are being massively disadvantaged when compared to their Welsh and English counterparts because of our increased rates burden. That burden has less to do with any local government spending than with the Government policy of withdrawing rate support grant. It is a worry because Scottish businesses will face yet another revaluation in 1990 and everybody knows the problems that hit them during the previous revaluation.
People want to know the details about how the unified business rate will work. Will it appear in 1992 throughout the United Kingdom as was scheduled or, as is becoming increasingly more obvious, has that timetable now gone? Will Scottish businesses again be the losers because we have a tax burden shared nowhere else in the United Kingdom? I should like to hear an answer to that question, whether now or at an early opportunity. I noted that the Minister, perhaps wisely, skated over such questions.
That tax is a potential death trap for Scottish jobs and businesses and is causing great concern. I remind the Minister of what was said by Bill Anderson, the Scottish secretary of the National Federation of Selfemployed and Small Businesses. He said:
"A uniform business rate is likely to hit industry and commerce in lower rated areas and could clear businesses out of rural Scotland like the highland clearances."
How will any of that "encourage" the self-employed and small businesses as this motion urges us to do? It will do the very opposite.
The Government must carry through their promise to recognise the role of the self-employed and small businesses in germinating new ideas and new services and providing the yeast for the industrial system. Although a start has been made, I believe that co-ordination in the form of a package for the self-employed and small businesses must be created. That package should include finance, welfare, back-up and resources. Do that and Parliament will at last be recognising the true importance of small businesses and the self-employed to our economy, and that is a day I shall certainly welcome.
6.33 pm
Mr. Roger Knapman: As the richness of an area lies in the energy of its people, I am truly a lucky man to represent Stroud. Within the towns and valleys of that part of Gloucestershire there is a great diversity of interests and enterprises that readily adapt to ever-changing markets. When my hon. Friend the Minister has finished reading the Glasgow Herald, he may care to look at the business section of The Times today. There is a headline which states:
"Pagoda winner for tents that are too hot to handle."
The article goes on to say:
"Traditional bedouin tents are facing a new and startling rival in the desert—a high-tech 'space cover' produced by a fledgling company in the chillier climes of Stroud in Gloucestershire."
That company has received £2·7 million worth of orders in the first year. The article goes on:
"Several Arab states, including Saudi Arabia, the United Arab Emirates and Oman, have been among a score of countries queuing to buy the Pagoda tents".

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It may interest hon. Members to know that one of those pagodas will be displayed in the exhibition hall in about a month. As they give protection from hot air, I can recommend close inspection.
In addition, and only last week, I received a letter about another company which said:
"We are a relatively young company, incorporated in 1984 for the purposes of supplying solutions to Engineers, based on personal computers. As a husband and wife team, we set out with minimal capital and have now grown to provide employment in this area for a staff of 10 … The climate for young companies, like ourselves has never been better, owing to the management of our excellent Government who have set the long-term future of our country on course. Our products and services are aimed at the small to medium sized companies who have the foresight to invest in new technology for designing and manufacturing their products. As with most young companies, we are reasonably proud of our enterprise and long term success and would like to share our news. We anticipate having an official opening".
In the last month I have met two high-tech firms which together employ more than 250 people in my constituency. They were both founded in the past 10 years. In fact, they were both founded and funded by people still in their thirties who have good ideas and, just as important, the energy to implement them.
There are many other companies like that and their contribution is vital. The traditional large employers in my constituency, and I suppose in many others, have declining labour forces. The traditional employers in my constituency are largely engaged in engineering, textiles and the manufacture of diesel engines. They have one thing in common — they employ less labour than they did 20 years ago. For instance, the manufacture of diesel engines employed 4,000 people at its peak, but it now employs 1,300. It is equally certain that in future they will become more capital-intensive and even less labour-intensive; that is if they are to be able to compete in the future.
It is a great privilege to be self-employed and we must do all we can to encourage such people and help them to achieve success. Initially, the self-employed are likely to be not just managing director but designer, shop floor worker, financial controller, teamaker and bookkeeper. Any new business is more likely to survive those first few crucial months if the founder's mind can focus on the business rather than on peripheral activities such as puzzling over national insurance contributions.
How can we help the growing ranks of the self-employed, which are increasing at the net rate of some 500 every week? Increasing the threshold for VAT purposes would certainly help in the near future. Increasing the threshold at which a full audit becomes compulsory would be useful. In this country we have more auditors as a proportion of the total population than any other major country. Let us look again at employer-employee relationships in small firms. Surely it is essentially an agreement. At its most basic it is the payment of money in exchange for the provision of a service, either full or part time.
What is the difference between an employee and a sub-contractor? Why should they be taxed on different bases? The Inland Revenue should not be obliged to differentiate between an employee who works for one person and is provided with a hammer and a sub-contractor who works for perhaps two people and, more importantly, supplies his own hammer. By all means let us ensure that employers subtract the standard rate of tax from payments to all those supplying a service in the form of labour, but let us
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simplify taxation and the deductions from wages and salaries so that each looks after his own. Perhaps it is too much to hope that every employee with a small firm could be a sub-contractor.
The pattern of employment is changing fast. The taxation of employed people has changed little, but I suggest that it should change more.
6.39 pm
Mr. Frank Haynes: I shall be brief in the interests of other hon. Members who want to speak. I have an association with the National Federation of Self Employed and Small Businesses in Nottingham. We meet regularly to discuss various problems.
I should like to refer to what the Government said in 1979, pre-election and after the election, and since about self-employment and small businesses being the areas in which jobs will be made. I take note especially of the end of the motion, stating that the House
"calls on Her Majesty's Government to reduce obstacles to the spread of self-employment."
I congratulate the hon. Member for Hertfordshire, West (Mr. Jones) on his motion and accept that part of it to which I have just referred. Indeed, it is those obstacles about which I should like to speak.
I am bothered by big businesses steamrollering little businesses. Not long ago I experienced that in a public inquiry concerning a massive retail firm that wanted to set up a store just outside my constituency. The end result would have seriously affected many small businesses, employing a fair-sized number of people in my constituency, which would have closed.
I want to make a political point. Indeed, I feel that I must do so because the big steamrollering firm that I am talking about contributes to Conservative party funds. That is not helping but hurting. The Minister is ducking out because the issue of East Midlands airport concerns other Departments, such as the Department of Transport and the Home Office. Several small businesses in my constituency do a fair amount of exporting. However, they find difficulty at the airport because not enough customs officers are on duty to clear the warehouses so that those exporters can bring in their products, put them on the aircraft, and fly them out. If the warehouse is chock bang full because there are insufficient customs officers to do the necessary inspections, those small firms that are making a massive contribution, not just in my constituency, but right across the country, have to lay off people.
I praise some of the things that the Government have done concerning the self-employed and small businesses. I praise also Nottinghamshire county council, which has done a marvellous job. I served on that council for 15 or 16 years before I came to this place and realise exactly what it is doing. Its industrial development committee is doing a marvellous job. I praise councillor Paddy Tipping, who is leading the committee in the direction that it should be going, by providing land on which entrepreneurs can set up small businesses and create employment, because there is a fair amount of unemployment in my constituency. Therefore, I have nothing but praise for what Nottinghamshire county council is doing. That relates also to Ashfield district council and to the cooperation between the county and the district in what they are doing to encourage small businesses to create jobs and to help the economy.

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Small businesses are upset about the incoming poll tax. It is no good the Minister saying, "It is not the responsibility of the Department of Employment", because there is a connection. The Minister must consider this and use his influence and that of his Department on the Department of the Environment. The self-employed people I have met are frightened to death that they will go out of business because of the pressure that the poll tax will put on them. They do not know what is going on or what will happen if the community charge goes on the statute book. Therefore, I ask the Minister to talk to the Department of the Environment and to cool it off because the direction in which it is going will not help small businesses or the self-employed.
I have made my point and hope that it will be considered in the interests of those people who are trying to set up firms in my constituency and, at the same time, give employment to those who do not have it.
6.44 pm
Mr. David Atkinson: If there is one measure which will be of immense help to small businesses and the self-employed, and which will help to reduce the black economy, it must be to raise the VAT threshold to a much more realistic figure. I have called for that consistently, as have many of my hon. Friends over the years.
If the turnover for VAT registration were £100,000 today, it would effectively release hundreds of thousands of small businesses and entrepreneurs from the time-consuming burden of VAT registration and administration. It would cost the Treasury nothing because the cost of administration is about as much as the revenue obtain from that source. Indeed, it serves only to keep civil servants in jobs unnecessarily.
I shall, of course, be referred to the European Community's sixth directive which prevents such an initiative on our part unilaterally. However, the Minister will be aware that such a move is recommended in the White Paper "Lifting the Burden". I hope that the Government will not allow themselves to be beaten on such an initiative which must surely benefit all small businesses throughout the community.
I want to use the opportunity of this debate to refer to a situation allowed under current law which detrimentally affects self-employed traders and those operating small businesses in areas subject to a local redevelopment plan. It arises from the experiences of several of my constituents, which have since been confirmed by a report last month from the local ombudsman.
Briefly the facts are as follows. In 1980, my local borough council began to prepare a plan designed to revitalise a local shopping centre. The draft plan, published in 1982, contained proposals for the pedestrianisation of a busy local high street, the construction of a new link road to take the diverted traffic, and the redevelopment of the area including a new bus station and multistorey car park. Thus, it involved two local authorities; the borough council as the developing authority, and the county council as the highways authority.
Today, nearly eight years later, while most of the properties concerned have been purchased by the developer, no start has been made on the development. As
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the House will appreciate, the effect of the uncertainty and of the inevitable blight on business has been devastating on some of those who live and work in the area. Three such people complained to the local ombudsman that, in their view, there had been an inordinate delay on the part of the local council in implementing the development.
In his report, which was published last month, the ombudsman accepted that there had been certain delays but stated he did not see them as being of the council's making or that they could realistically have been foreseen. He did not, therefore, uphold the complaint. He did, however, accept that there had been maladministration in the way in which the council had responded to the blight notices that had been served — in seeming not to be concerned at the hardships caused by the time taken to determine which of the two authorities was the appropriate one upon which to serve blight notices under the Town and Country Planning Act 1971. He recorded the sad case of one of my constituents whose blight notice on the borough council resulted in a counter notice, reference to the Lands Tribunal, ultimate reference to the Secretary of State whose decision was then the subject of a judicial review, and a fresh counter notice.
As the House knows, the findings of the local ombudsman are not for us here but are for local councillors to determine in the light of the remedies that the ombudsman has proposed to compensate for the injustices caused to the complainants.
However, in the light of that experience and, I am sure, many hundreds of others throughout the country, it must be right to ensure that when a council decides to prepare a local development plan it should be absolutely clear which is the "appropriate" authority before it publishes that plan so that blight notices can be served and accepted without delay as soon as it appears that hardship is threatened.
Furthermore, the statutory compensation code as it stands today does not allow businesses the same loss payments as are allowed, as a moral gesture, to those residents who will be displaced from their homes. Few councils will exercise any discretion to compensate for the anxiety and hardship which blight imposes on businesses affected by such plans. The lives and livelihoods of self-employed people are at stake. I believe that the House should no longer tolerate such a situation and I hope that the Minister will take note in advance of the further representations that I propose to make.
6.49 pm
Mr. Andrew Rowe: I shall be brief because time is very short. I wish to make three points. First, it is encouraging to find that, at least at rhetoric level, there is considerable agreement in the House about the important part to be played by self-employed people.
It is not unreasonable to make a distinction between those who are self-employed by choice and those who are self-employed by necessity. I accept the Opposition argument that we need to do more to make sure that those who are self-employed by necessity get the support that the Minister is busily engaged in extending to them in a variety of ways. I hope that they will be able easily to obtain information about where to go for help, and that they will go for help early enough to be able to benefit from it. Too many people seek help too late.
Secondly, although it will not happen this year or next year, we need to change the benefit rules so that people can

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ease themselves into self-employment by working part time in a way which does not deprive them of the benefits to which they are entitled. The enterprise allowance is one method of doing that. I had hoped that it would be part of the introduction of a whole range of attacks on the tremendous barriers against self-employment. I believe that the black economy would shrink dramatically if people were allowed to top up their benefit to the taxable level openly by working as self-employed people while they tested the market to see whether they could grow a business.
Thirdly, I should like to re-emphasise the point made by my hon. Friend the Member for Hertfordshire, West (Mr. Jones) about the bumph that falls on the desk of anyone rash enough to imagine that he would like to take on an employee. That is probably the largest single reason why so many self-employed people remain at the level of employing themselves alone and do not take on anyone else. We have to make a distinction between those who have one or two employees and those who go the whole way. At the moment that would be quite impossible.
Some big companies come in for a lot of stick in the debate, and some behave extremely badly, but there are some remarkable examples of companies that have taken imaginative steps. I found on my desk the Shell guide to would-be suppliers, a remarkably clear and admirable publication for small firms to study. I very much hope that many other companies will follow suit.
There is the great experiment of what is called the Xanadu option whereby Rank Xerox could provide full-time employees who wanted to become self-employed with a network build-up for their small businesses. It has been an enormous success and was very well worth doing.
As the secretary for the all-party group on franchising, I must say that, for those who find that being self-employed without any back-up is too frightening, franchising is filling a remarkable gap in the market, is growing extremely fast and is encouraging a large number of people to go into business.
6.54 pm
Mr. Jacques Arnold: I have a considerable vested interest in the subject as I represent the borough of Gravesham. Only eight years ago, the economy in my borough was based on heavy industry, and during the recession there was a decimation of employment within those industries, yet the borough recovered, largely due to the success of a considerable number of brand new businesses and self-employed people. In the census of 1981, the borough of Gravesham had 3,657 self-employed people. Today there are well over 5,000. That is due not least to considerable practical initiatives by central and local government.
This afternoon my hon. Friend the Minister for Employment spoke about the work of the enterprise agencies. I should particularly like to commend the Gravesham enterprise agency which is financed mainly by local industry, commerce and banks. It works through taking in people with ideas for small businesses and presenting to them the facts and the problems of going into business, particularly the problems of marketing. The most valid question that it asks such people is, "Why should anyone buy products from you? Why should anyone use your services?" A significant number of people have good ideas but have not thought about marketing.
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The results of the Gravesham enterprise agency are quite significant. Of those who have consulted the agency, 29 per cent. have gone on to self-employment and have set up small businesses. By asking the enterprise agency to sort out their ideas, they have achieved a failure rate of only 10 per cent. compared with a normal rate of some 30 per cent., which shows the quality of such an agency. I should like to get across to my hon. Friends on the Front Bench that those enterprise agencies are based on the community and on the voluntary participation of industry and commerce and they have great value.
Although I have great enthusiasm for the Government's small firms service, I believe that we should take care not to extend it at the expense of support and encouragement to the enterprise agencies. I have seen such enterprises springing up in my borough because of the provision of starter units which have been a great success and are a basis for future growth. I commend such activities to the House.
6.56 pm
Mr. Robert B. Jones: We have had an excellent debate, and I should like to thank all hon. Members who have put their points of view on this important issue. No doubt the Minister will carry away a great bag of suggestions to pass on to other Departments and to consider in his own Department. That was one of the purposes of the debate.
Hon. Members have spoken from personal experience and from experience in their constituencies with advisory groups that help small companies and the self-employed and from their contacts with such pressure groups as the National Federation of Self Employed and Small Businesses. I am sure that that has led to a better-informed debate.
The message of the debate is clear. I draw the attention of the House to the comments of Graham Mather of the Institute of Economic Affairs in an article in the Journal of Economic Studies:
"Self-employment is the employment success story of the year since 1979. It is growing. It could grow faster if the remaining legal obstacles were removed. The result would not only be more jobs, but more independence and personal provision, not only more flexibility in the labour market but more choice and freedom to choose a congenial pattern of work. To the economic benefits would be added the social benefits of fostering a work force confident in its own capacity to make an independent contribution to economic growth."
Those are laudable aims. They are the aims of laudable people who often sacrifice the benefits that others receive through the welfare state to pursue their own ideas and careers and the development of the products and services that they can offer to the community. They are estimable people, and it is appropriate that the House should spend some time in addressing them.
After such a good debate, it is only right for me to say that the matter has been common to all political parties, whatever their ideological stance on the question of self-employment. The aim of encouraging small businesses is surely common to us all, and I hope that that will result in yet more policies that will lead to further regeneration and growth in this important sector.
It being Seven o'clock, the proceedings lapsed, pursuant to Standing Order No. 13(8) (Arrangement of public business).

Agriculture
Motion made, and Question proposed, That this House do now adjourn. [Mr. Maclean.]
7.1 pm
The Minister of Agriculture, Fisheries and Food (Mr. John MacGregor): In a general debate on agriculture such as this I would normally talk about a wide range of issues germane to agriculture and which I spoke about or which were raised during the discussion period at the annual general meeting last week of the National Farmers Union. Those issues are about the future of dairy quotas and the reviews in the coming months of the sheepmeat and sugar regimes. I would have talked also about progress on environmentally sensitive areas, and that would have helped me to underline the substantial achievement that has been made in just a few months during which there has been a most encouraging response from farmers and environmentalists. I would have talked about our pioneering approaches to giving help, much of it also helpful environmentally, to assist in the process of taking land out of agricultural production. Perhaps I would have said rather less than usual about that because we debated it recently on the Second Reading of the Farm Land and Rural Development Bill, particularly in relation to the farm woodland scheme.
I would have dwelt on topical issues such as rhizomania, the progress of ADAS in its first year of charging, the position about the pigmeat industry, private storage aids, MCAs for the pigmeat industry and the free food scheme. All those matters are of current interest to farmers and, with the exception of one of them, the free food scheme, they were all discussed with me last week. I mention those issues to show that there are issues other than the ones upon which I wish to concentrate. If my hon. Friends would like to raise any of those other matters, my right hon. Friend the Minister of State will respond to them in his winding-up speech.
Mrs. Margaret Ewing: Does the Minister agree that there is a need to discuss the problems facing agriculture? Will he perhaps emphasise to the Leader of the House that we need a general debate on agriculture very soon?
Mr. MacGregor: That is not a matter for me, but I shall ensure that the hon. Lady's comments are passed on. I would not say that they are all problems, because some of them are challenges and exciting opportunities. Many sectors of agriculture are doing very well.
I have listed the topics upon which I shall not go further in the debate, and I apologise for that. In the debate the House will expect me to concentrate on the agricultural aspects of the outcome of the summit. It is timely that, following the statement today by my right hon. Friend the Prime Minister, I am able to report on that and that we are able to have a debate so soon after the event. As I have said, to cover all the other issues as well would necessitate an inordinately long speech, but if hon. Members wish to deal with those topics we shall have an opportunity to reply to them in the winding-up speech.
I shall now turn to the outcome of the summit and make one or two preliminary comments. First, as the Prime Minister reminded us, the Government and my right hon. Friend have achieved 95 per cent. of all our negotiating objectives — including all the fundamental
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ones. I noticed in the exchanges following the Prime Minister's statement that the Opposition were picking up one or two of the details about agriculture. For example, they talked about the maximum guarantee quantity for cereals, to which I shall return. However, they were details, and it was noticeable that the Opposition concentrated on them. It is important to look at the fundamental issues in the negotiation and at the outcome in relation to those.
In any negotiation, one rarely achieves 100 per cent. of one's initial objectives. The fact that we have succeeded on all the fundamental issues is crucial. I would certainly compare this with the renegotiation in 1975 of the United Kingdom's entry terms into the Economic Community. That was intended crucially to alter the entry terms, but did absolutely no such thing. It is crucial to realise the importance of the fundamental issues and the fact that we have achieved 95 per cent. of our objectives. Secondly, primary among those fundamental objectives is the continuation of our Fontainebleau abatement. That is unchanged in its effect, despite the fact that the French and German Governments, amongst others, were strongly opposed to it for much of the negotiations. That is an important issue that will not be discussed in this debate. However, it must be in our minds as we approach the overall outcome.
Let no one underestimate what has been achieved for agriculture. One has only to look at the French and German press to see what has been achieved. Nor should we underestimate the effect of these measures in the event of over-production. Certainly the French and German Governments are under no illusions about that. My third general comment is that in looking at the results the House must compare what is in place now as a result of the summit with what was in place before it. We must not compare it with the package that was in front of the Heads of State at Copenhagen. At that meeting the French and German Heads of State refused to sign up. If we compare the outcome of the summit with what was in place before, we see that it is undoubtedly clear that the previous system will be substantially changed as a result of the summit.
Sir Jim Spicer: Perhaps my right hon. Friend will go on to illustrate what might have happened if there had been a total breakdown. That is too horrifying to contemplate, because we would have seen financial breakdown throughout the Community and our farmers would have been left with total indecision, not for three or six months, but throughout the presidency of the Greeks, and then next year the presidency of the Spaniards.
Mr. MacGregor: That was certainly one of the possibilities, and in looking at the outcome one must consider the overall future of the Community and the importance of achieving the single European market. My hon. Friend the Member for Dorset, West (Sir J. Spicer) makes a fair point about agriculture, on which I hope to elaborate. It is that for our farmers one of the critical issues, and one of which they are well aware, is that in this world of surpluses they must face adjustment.
As was constantly said to me when I was going round the country, what farmers want most of all is an end to the uncertainty. They want to know what the new regime will be. That, too, was another factor that had to be taken into account. As I think the Opposition will argue, it would have been possible to hope for a different package in another summit. As I shall show, we have achieved

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considerable changes in agriculture. We have achieved most of our objectives, and one of the factors that had to be considered was the importance of ending uncertainty.
Having made those preliminary wide comments, I shall now turn to agriculture and to the key differences brought about by the summit. The first is that we now have a legally binding overall budgetary ceiling for agricultural spending. Let no one under-estimate the importance of that. The last major agreement was reached in 1984, when there were real attempts to achieve budgetary discipline in agriculture. In the following three years spending on agriculture rose by 40 per cent. As a result of this agreement, spending on agriculture over the next five years will rise by 7·8 per cent. This will be a legally binding agreement as soon as the full regulations and legal requirements are put into effect. That 7·8 per cent. over the next five years compares with 40 per cent. in the three years after 1984. It is 8·5 per cent. if one includes the cost of disposing of existing stocks and contributing to set-aside. I shall return to that.
Mr. Teddy Taylor: While I accept what my right hon. Friend says, that the actual budgetary discipline was binding on the Council, but not legally binding, may I ask whether he agrees that under the Dublin agreement the 1·4 per cent. VAT maximum was legally binding? Despite that, last year the Commission, by using budgetary devices, increased that to 1·6 per cent. Can my right hon. Friend say where in this new agreement there is anything that can prevent the Commission from doing exactly the same in future by having, as it had in 1987, a metric year of 10 months to make sure that it kept within the so-called legally binding 1·4 per cent.?
Mr. MacGregor: My right hon. Friend the Prime Minister this afternoon commented on some of those aspects in relation to what we know as creative accounting, but which can be known as negative reserves and other things of that sort. In the context of agriculture, I shall deal later with some of the other key differences that make this a much more effective and legally binding settlement.
I shall deal further with the matter of the overall budgetary ceiling, because I should like to put one or two aspects of it to the House. I have already said that the figure for the next five years is likely to be 7·8 per cent. or 8·5 per cent. if one includes the cost of disposing of existing stocks and the contribution to set-aside. Inevitably that must be an estimate, because it is related to the projected growth in GDP across the Community as a whole in the next five years, but it seems a reasonable estimate.
In considering the 40 per cent. increase since 1984 one must take account also of the fact that there was no provision for the disposal of existing stocks. I am now including in the 8·5 per cent. increase over five years the cost of disposing of them. That was a big hidden cost—an overhang on top of the 40 per cent. increase. I have put the cost of disposing of those existing stocks — the penalty which we now face for the result of previous budgetary indiscipline—into the figures, but there is an even more significant point. Under these arrangements, any new surplus stocks will be included within the agricultural guidelines. These stocks will depreciate year by year, which means that the depreciation element will have to be included in the year in question within the overall agricultural ceiling. That is a further budgetary discipline and an important change.
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I come to the point that my hon. Friend the Member for Southend, East (Mr. Taylor) must have had in mind. We had a political undertaking at Fontainebleau to agree a guideline, but it was in the minutes, not in a legally binding text. The guideline could be overridden at the will of the Council in what were known as "exceptional circumstances", and it was. I remind the House that, in the 1985 price fixing, the German Government invoked the Luxembourg compromise for the first time in the Community's history over a 1·8 per cent. price cut for cereals. Now, exceptional circumstances will apply in only one case. A change in spending can occur only if the value of the ecu against the dollar changes by more than 5 per cent. If the dollar appreciates, that will mean an automatic reduction in the amount spent on agriculture. Previously, the guideline was not reinforced by the necessary changes in the regulations for each commodity; now it will be. There is a clear definition of exceptional circumstances and there are changes for each commodity.
Mr. Teddy Taylor: Will my right hon. Friend give way?
Mr. MacGregor: No.
Mr. Taylor: This will be the last time, honestly—never again.
Mr. MacGregor: I shall take up that promise by giving way.
Mr. Taylor: I promise my right hon. Friend sincerely that I shall not intervene again in this debate. My right hon. Friend, who has a reputation for being honest, sincere and straight in all the years in which he has been a Minister, should surely tell us about annex V. He has said that there is only one reason to allow a break through the limits—a fall in the value of the dollar. What about annex V, which says that if the majority of member states think that any other country has not done a proper job in restraining agricultural production they can increase spending by any amount that they like? Would it not be fairer to tell the House that we should consider not only this definition of "exceptional circumstances", but annex V on page 41 of the presidency notes, which drives a coach and horses through every word that my right hon. Friend says?
Mr. MacGregor: I am sure that annex V does not say that, although I do not have the text in front of me. I have had a quick word with my right hon. Friend the Minister of State, who will give a full reply on the point about annex V.
Mr. D. N. Campbell-Savours rose—
Mr. MacGregor: I should like to continue, because there is much that I want to say.
In a very different change from 1984, the stabilisers are now a guaranteed automatic mechanism for each commodity where there is over-production beyond a certain point, or over-expenditure. This is a major achievement. When I first became Minister and we started to talk last summer about stabilisers, it seemed to me that it would be a massive task to get the Community to sign up on stabilisers in all major commodities. That has now been achieved. That is why — [Interruption.] I shall elaborate on that later. That is why the Government's overriding concern in the many months of negotiations has been to secure effective control over CAP expenditure through the installation of stabilisers. We have stressed

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throughout that there need to be effective stabilisers for all major commodities— a mechanism that will automatically bring about a reduction in levels of support when production exceeds a given threshold. That automatic nature is very important in this outcome.
Dame Elaine Kellett-Bowman: Will my right hon. Friend stress to the farmers that that may well secure stability in production, but that he will be going hell-for-leather, as he pointed at the National Farmers Union annual general meeting, to ensure that it also secures fairness for our farmers by ironing out the problems of the green rate?
Mr. MacGregor: As my hon. Friend knows, that is a separate issue from what was agreed at the summit. I have made clear my position on the green rate. There is one important aspect. The way has now been cleared for working towards the single European market, but if we are to achieve a single European market in agriculture it is crucial that we secure the objective of phasing out all monetary compensatory amounts by 1992.
As for stabilisers in all products except cereals, oil seed, peas and beans, my right hon. Friend the Prime Minister made the position clear this afternoon, and this point was raised by the French Government at a late stage in the summit negotiations. My right hon. Friend said:
"The Dutch Prime Minister and I made it clear that our agreement to all the measures before the European Council last week was conditional on the adoption of these eight stabilisers as they are."
That is an important point. I had to fight hard in the Agriculture Council in the negotiations after Christmas for the inclusion of stabilisers in all the other products within the package to be considered by the summit. A number of Governments wished to weaken the stabiliser regime by, in one way or another, getting changes in their products. That would have reopened the whole package in front of us at Copenhagen and made it difficult to achieve agreement at the summit.
It is important that the decision is carried through in the Foreign Affairs Council. These other commodities are wine, tobacco, fruit and vegetables, sugar, milk, sheepmeat, olive oil and cotton. There was no further discussion on the substance of these stabilisers at the summit or in the Agriculture Council, except in the attempt to take them outside the overall package in the Agriculture Council leading up to the summit.
There are, of course, elements in those other products that we do not like. I fought strongly on one or two, and that was true of all member states. If that package were reopened, all of us would have fought for the changes that we wanted. That would have made it even more difficult to achieve a successful outcome at the end of last week. It is important to bear in mind that those other products must be part of the final arrangement.
Mr. Colin Shepherd: I am following my right hon. Friend's comments as carefully as I can. As sheepmeat is not yet in surplus, nor is likely to be for a while, how does this affect the sheepmeat regime and the discussions on the regime's development if we were in the very first stages of negotiation, as my right hon. Friend said last week?
Mr. MacGregor: It does not really affect the discussions on the future of the sheepmeat regime, to which we shall
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come in due course. There had to be a stabiliser on sheepmeat because, although we are not in surplus in sheepmeat, the supporting cost to the CAP of the regime was escalating fast and was projected to be more than 1 billion ecu in the coming year. One must have regard to the extent to which the support for any one commodity is rising very fast, and this was true in the oil seed sector as well. That is why if we argued that there had to be a stabiliser in all the major commodities—excluding only a few—a stabiliser for sheepmeat had to exist.
There were two elements which I disliked and on which I fought hard in respect of the sheepmeat stabiliser. The most crucial element — I think that all our farmers accept this — was the proposal to have a ceiling on headage payments of 1,000 in the less-favoured areas and 500 elsewhere. Despite the fact that we had little support in the rest of the Council from other member states, we were able to negotiate that out in this package. It is important that it stays out, which is a reason why I want the other products package to remain as it is.
There was another discriminatory element in relation to the variable premium which I could not negotiate out. One cannot negotiate everything out, and the headage payment was the most important.
Mr. Campbell-Savours: This is a debate on agriculture and the right hon. Gentleman is the Minister. In the light of the recent malicious and squalid attacks of the Minister of State on the clergy, will he now sack the Minister of State? He is an embarrassment to the Government and he is offending people throughout the country —[Interruption.]
Mr. Deputy Speaker (Sir Paul Dean): Order. This is a short debate and that has nothing to do with the subject.
Mr. MacGregor: I was about to say that, in view of the shortness of the debate and the fact that so many hon. Members wish to speak, I would not give way again. In view of the complete irrelevance of the hon. Gentleman's intervention, I wish that I had said that before he rose.
Mr. Nigel Spearing rose—
Mr. MacGregor: No, I shall not give way again. I am afraid that the last intervention was completely irrelevant and wasted a great deal of time. I must get on with my speech.
Mr. Spearing rose—
Mr. MacGregor: I am sorry, but I cannot give way again. I am sure that the hon. Gentleman will make his own speech.
Mr. Spearing: This is an important point.
Mr. MacGregor: In that case I will give way.
Mr. Spearing: I am extremely grateful to the Minister and he will find my point relevant. From the statement and document we know that there is an arrangement for a 3 per cent. cumulative reduction in the intervention price if the cereal limit of 160 million tonnes is exceeded. On what evidence does the Minister conclude that that will be sufficient to keep the agricultural budget within the 75 per cent. of any increase in GNP year on year?
Mr. MacGregor: I was about to come to the cereal stabiliser and I shall deal with that point, but overriding the decisions in the annual price reviews is the need to keep the agricultural ceiling within the limits that are set down in the regulation that will come before us.

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The cereals and oil seed stabilisers featured in the summit. The need for such stabilisers is particularly acute for cereals and for oil seeds as costs have been escalating in those sectors and without such a mechanism could soon be out of control. For cereals, for example, the price more than doubled in two years to about £3·5 billion in 1987.
For cereals the new stabilising mechanism is linked to a production threshold of 160 million tonnes. Earlier this afternoon there was some criticism about the fact that we have agreed to a maximum guarantee quantity threshold of 160 million tonnes, but what has not been understood is what we have achieved in return. Two critical points mean that in effect it will be as effective a stabiliser in our judgment.
First, what was on the table prior to the summit—in other words, what left the Agriculture Council — for cereals was a maximum guarantee quantity threshold of 155 million tonnes with a 1 per cent. price reduction for every 1 per cent. increase beyond that. That meant that in order to achieve a 3 per cent. price reduction the maximum guarantee quantity threshold would have had to increase to 159·6 million tonnes, which is little short of the 160 million tonnes. But the new change that has been introduced is that above 160 million tonnes it will be not a one for one, but an immediate automatic 3 per cent. price cut. Given that the projected harvest for next year is likely to be about 168 million tonnes, it is in effect as effective a stabiliser.
Secondly—
Mr. Campbell-Savours: We all follow these matters.
Mr. MacGregor: After the hon. Gentleman's comment, I would not expect him to understand.
Secondly, the new regime will apply for four years instead of for three years, which was on the table before the summit began. It is a marginal change and the stabiliser will continue to be effective.
We have regretfully had to accept that the stabiliser should operate through the co-responsibility levy as well as through price. That is certainly not a satisfactory method of market regulation. That, as much as anything else, has caused many of the long debates that the Agriculture Council has had since Copenhagen. The German presidency wanted to put much more emphasis of the stabiliser on to the co-responsibility levy and I was strongly opposed to that. There are many reasons why it is not a satisfactory method, but the Commission and every other member state felt that that must play a part in the stabiliser and, indeed, some wanted it to play a bigger part than it does now.
We have insisted that the levy should play a subordinate role to price cuts. Thus, the additional levy will increase by 1 per cent. for each 1 per cent. increase in production up to 3 per cent. in any year while price cuts will cumulate at 3 per cent. a year so long as the guarantee threshold is exceeded. Moreover—this is an important point when one considers what was proposed earlier in the negotiations — the maximum additional levy of 3 per cent. is much lower than the 7·5 per cent. originally proposed by the Commission. When one combines that with the fact that we have managed to ensure that price cuts play a bigger part than the co-responsibility levy, and with another important point—
Mr. Ralph Howell: Will my right hon. Friend give way?
Mr. MacGregor: I said that I would not accept any other interventions, but I will accept this last one in view of my hon. Friend's position. I wish to make one other important point on the co-responsibility levy which again demonstrates how much we have succeeded in minimising its impact on the stabiliser.
Mr. Howell: Will my right hon. Friend explain how this extra hardship which is to be imposed on our cereal growers will in any way diminish cereal output? All cereal farmers will have to try to grow more to maintain their income or to reduce their losses, bearing in mind the serious situation in which they find themselves at present.
Mr. MacGregor: I am well aware of the difficulties of adjustments, but one of the benefits of a stabiliser is that it has automatic price and other penalties if production continues to rise. Therefore, in terms of the CAP it helps to keep costs within a reasonable amount and, from the farmer's point of view, it will prevent the CAP from collapsing under its own weight, so it is necessary.
The other important point which I should like to emphasise is this. We have successfully opposed the proposal, which was in the negotiations for some time, for a flat-rate exemption of 20 tonnes on co-responsibility levy— this was introduced by the German presidency — which would have resulted in the levy having a disproportionate impact in the United Kingdom where 20 tonnes represents a much smaller proportion of average cereals output per enterprise than in other member states. Had that been in the package, 70 per cent. of the co-responsibility levy would have been met by Britain and France, and only 10 per cent. by Germany. I am glad to say that we have negotiated that out.
I recognise that there is concern among farmers about the potential impact which these measures may have on their incomes. I appreciate that their incomes have been under pressure and that many were hit by the bad harvest last year. However, we are faced with the imperative need to put the Community's agricultural support system on a credible and viable basis. It is the farmer who would be most adversely affected if the system were left unrestrained to collapse under its own weight. Some discipline had to be introduced to ensure a stable foundation for the industry in the long term.
Moreover, the burden of over-production of cereals is not simply a problem for the Community alone. It is one of the key issues being discussed in the Uruguay round. If the Community had not put its house in order, disagreements on cereals could sour these negotiations and exacerbate the existing difficult trading relations between the Community and the main agricultural exporting nations such as the United States. At a time when the United States has set aside 10 million hectares of wheat-growing land—equivalent to 30 per cent. of the total Community cereals area — and has cereal stocks of about 150 million tonnes, it will not accept that the Community should do nothing to reduce its cereal production; or that it should try to solve its problems by increasing its highly subsidised exports or by restricting imports of competing products, such as cereal substitutes. That is an important international context in which to view the matter.
I stress that we are not relying exclusively on stabilisers for cereals. The European Council also agreed that stabilisers should be complemented by new proposals on

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set-aside. I particularly welcome that. As the House will know, we have persistently argued that, to be fully effective, a restrictive price policy needs to be accompanied by a set-aside scheme. That would provide an acceptable alternative to those growers who might have difficulties in coping with a more rigorous pricing regime. The Commission's new proposals are set out in document COM(88)1, to which I draw the attention of the House.
In view of the lateness of the hour, I shall mention just a couple of things about set-aside. There has been a significant change regarding the set-aside that I proposed in the consultative document—I referred to it earlier — that followed the extensification agreement reached in the Council last year. We are now talking about a set-aside scheme for all arable crops. Now that agreement has been reached on the principles, that scheme will overtake the consultative document that I introduced. Nevertheless, the responses that I had from the farming community and others on that consultative document were extremely useful in the very long discussions and negotiations that we had on the set-aside scheme now before us. In view of the time, I shall not go into more detail on the set-aside scheme.
Mr. Robin Cook rose—
Mr. MacGregor: I am sorry, but I cannot give way. I must get on.
In the documents before us the House will see that there are some items which the Council has now signed which will provide the basic principles for operating the set-aside scheme. Member states will still have considerable choice over the details — exactly what rates to pay and what conditions to attach—and they are clearly a matter for further discussion in the Agriculture Council.
On cereals, I stress that the stabiliser mechanism, in contrast, for example, to quotas, will not prevent the most efficient farmers from competing for a greater share of total Community production. I emphasise, "in contrast with quotas." As the United Kingdom farming industry holds a leading position in the Community for efficiency, that is a challenge to which our producers should be able to respond and they will not be held back by artificial quotas.
The same considerations apply to oil seed and protein crops. The past few years have seen a dramatic increase in Community oil seed production—from 14½ million tonnes in 1979 to 10 million tonnes last year. In the past three years alone expenditure has trebled from £700 million in 1985 to more than £2,100 million in 1987. The regime is also among the most expensive per hectare. Last year it cost nearly £700 per hectare. Tough measures were needed to restrain escalating costs. There was already a threshold system for oil seeds but subject to a limit of 10 per cent. on the price reductions which could be made under it. That limit will be removed so that if oil seed production continues to increase support prices will be reduced automatically to avoid an increase in budgetary expenditure. The extent to which support prices can be cut will increase after the first year of operation of the new system. The new maximum guarantee quantities have been agreed at 25 to 30 per cent. below production.
I ask those who argue that the final outcome on oil seeds was not enough to consider the rigorous discipline of that sector as it now stands. On the basis of forecast
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output in 1988, there will be price cuts of up to 8 per cent. on top of the 10 per cent. price cuts already applied to the 1987 crop. The mechanism will result in automatic further price cuts thereafter if production continues to expand. A similar system will apply to peas and beans. I stress, however, that oil seeds and peas and beans are profitable crops, as is evident from the rapid rate of expansion both in the United Kingdom and in the rest of the Community. They should continue to be attractive, but while production may continue to expand it will in future have to be on a broadly cost-neutral basis.
While discussing oil seeds, I remind the House that agreement on the stabiliser package has been achieved without the introduction of an oils and fats tax, for which some member states had been pressing most vigorously up to the last minute and to which we have been, and will remain, adamantly opposed.
To understand just how successful the outcome of the negotiations has been in achieving our objectives, I should like briefly to compare the opening positions of other member states—they were held for a long time during the negotiations—and what those states have had to accept. For example, the German Government were opposed to a stabiliser for cereals that would bite and they wished to rest entirely on set-aside. They had to accept that set-aside is not an alternative to an effective stabiliser, but complementary to it. It was a bitter battle. The German, French and Irish Governments would have liked a maximum guarantee quantity for cereals that was over 160 million tonnes. On oil seeds and proteins, the French wanted a different system in which price cuts were linked to productivity and not to area expansion. That would have considerably eased the position for French producers. The French Government fought vigorously for that system, but failed to achieve it. The French in particular, supported by Ireland and Greece, were the main proponents of the oils and fats tax; it was a key negotiating objective.
On set-aside, Greece wanted higher Community funding. On wine, France and Italy were strongly opposed to the regime that is now coming in. On sugar, Germany and France wanted the new additional levy to be switched to "A" quota—that would have adversely affected our sugar beet growers — rather than to "B" quota. They failed in that objective.
Spain, Greece and Italy were opposed in many respects to the new stabilisers for fruit and vegetables. Greece, Italy and Spain were also opposed to the new limits on the maximum guarantee quantity for tobacco. I could go on, but the plain fact is that to achieve a new, effective agricultural regime every member state had to make sacrifices. That brief list demonstrates that many other member states had to go a long way from their opening negotiating positions.
I have listed the substantial number of changes made to the whole agricultural regime to achieve a better budgetary discipline. Those changes add up to a much more effective system of discipline over agricultural spending. We have achieved our major objectives and the outcome will greatly assist us in the Uruguay GATT round negotiations because it demonstrates that the Community can put its house in order, not just in relation to the latest outcome, but in the context of the milk and beef changes that were agreed under the United Kingdom presidency in December 1986.

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I am well aware that the changes will mean some difficult adjustments for our farmers, and, even more, for many farmers in other member states. However, our farmers are aware that in a world of surpluses it was inevitable that there had to be changes in the CAP regime. I believe that the outcome gives our farmers a much more stable basis on which to plan. I hope, first, that we have now avoided the need for constant emergency measures that disrupt farmers' business and, secondly, above all, prevented CAP from collapsing under its own weight. That would have been to the detriment of our farmers as well as farmers elsewhere in the Community.
For all those reasons, I believe that this was an effective deal. It is the right deal for the future of the Community, and the right one for the taxpayer and the farmer. I commend it to the House.
7.38 pm
Dr. David Clark: According to the farming press, I understand that at the NFU annual meeting the other day the Minister charmed the delegates.
Dame Elaine Kellett-Bowman: So he did.
Dr. Clark: The hon. Lady agrees with that view.
The Minister presented his case in a charming and plausible manner. I believe that if anyone could defend the case that is before us tonight, it is the Minister, and he did it very well.
The Minister started by attacking the Opposition for their response to the Prime Minister, and said that we were paying too much attention to detail without being able to consider the summit as a whole. I assure the Minister that it is because we see the summit as a whole that we are especially annoyed. Tonight I hope to explain why and also to ask why some of the details that we feel are important to the whole have been omitted. We shall be seeking further explanation on a number of points.
As the Minister explained to us at the beginning of the debate, this is the annual debate on agriculture. Now that the debate has been overtaken by the result of the summit, I hope that we shall have the opportunity of another debate on agriculture, as the hon. Member for Moray (Mrs. Ewing) suggested. That was an admirable suggestion, and I think that the whole House would like a further debate.
The debate comes at a most propitious time. We have had the publication of the annual review of agriculture for 1988 in the past few weeks, the annual general meeting of the NFU last week, and over the past 72 or 96 hours there was the historic meeting in Brussels, which will take up so much of our time, and which witnessed the humiliation, I am afraid, of the British Prime Minister.
All those events have occurred against a background of despair in British agriculture or, perhaps more accurately, in the words of Simon Gourlay, the president of the NFU, on yesterday's BBC farming programme, an air of uncertainty. As I travel up and down the country meeting farmers, I constantly hear of the lack of direction and leadership from the Ministry, and a sense of confusion. British agriculture does not know where it is expected to go. Indeed, it is in a state of crisis. [HON. MEMBERS: "Come on."] Local and regional press confirm that description. I have a copy of the Western Mail of 4 February, which refers to the "Crisis in Welsh farming." The South Shropshire Journal carries a headline saying that for
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agriculture in south Shropshire "The future looks grim." One could go on. The picture throughout Britain is of crisis. The situation is serious.
If one wants confirmation of that, one need only look at the Government's own annual review of agriculture. Even if one reads it through rose-tinted spectacles, it makes disturbing reading. Bank borrowings have risen further, from £5,909 million in 1986 to £5,962 million in 1987. All that is against a background of falling assets, amounting to only £49 billion in 1986 compared with £56·5 billion only three years before. That is not a good background of economic viability.
It is little wonder that there are predictions that one in 10 farmers is likely to face bankruptcy in the next few years. Agricultural confidence is particularly fragile. It is not the wish of Opposition Members to see farmers go bankrupt. Far from it.
Mr. John Home Robertson: Hear, hear.
Mr. Andy Stewart: Capitalist.
Dr. Clark: The Minister's PPS may shout "Capitalist" at me—
Mr. Stewart: Not at the hon. Gentleman, but at the hon. Member for East Lothian (Mr. Home Robertson).
Dr. Clark: I think that farmers do a good job in keeping Britain's countryside attractive, which is what we want. We want to try to encourage them so to do. That is the view that we continue to put forward.
It is against that background, as well as the background of the lack of economic viability, that the Prime Minister went to Brussels last Thursday to protect British interests—of farmers and consumers alike. The Prime Minister's nerve cracked and the other leaders watched her "dramatic climb down". [HON. MEMBERS: "No."] Those are not my words; they are the words of the Financial Times, whose agriculture and diplomatic correspondents were there, which is more than can be said of any member of the Ministry of Agriculture, Fisheries and Food. I am more inclined to accept the viewpoint of the people who were there and saw the effect of the Prime Minister's "dramatic climb down", as the Financial Times said.
Mr. Paul Marland: In view of the shortness of the debate, it would be helpful if, rather than standing at the Dispatch Box and lambasting what has happened, the hon. Gentlemen told us what he thinks should happen.
Dr. Clark: I am sorry that the hon. Gentleman cannot take it. He has obviously been listening too carefully to the Government's propaganda machine, which has been put into overdrive over the past 48 hours, in an effort to turn the truth on its head.[Interruption.] We are debating agriculture. We are debating the result of the summit, when the Prime Minister sold this country short. It is right and proper for us to debate that.
In spite of all the efforts of Conservative Members, the truth will come out. For example, The Times—not exactly a house magazine of the Labour party—reported:
"The post-summit consensus as the drama of the summit fades is that, on the whole, Mrs. Thatcher did give way, and not only on the farm question."
That is another observation by someone who was there. I know that the hon. Member for Gloucestershire, West (Mr. Marland) does not like the truth, but he will get it, whether he likes it or not. Modern European politics will

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never be the same again. The iron lady cracked. For some unexplained reason, at the 59th minute of the 11th hour, her confidence went and her judgment faded.
Sir Geoffrey Johnson Smith: Is the hon. Gentleman saying that the Prime Minister should not have given an inch or given way at all? In what areas would he not have given way?
Dr. Clark: I shall address that point in a moment. I am not trying to evade the issue.
We in the Labour party have a right to feel betrayed by the Prime Minister because we gave her our support. We had a debate on 24 November, when we said that if the Prime Minister and the Minister fought for the interests of the British people in Brussels, to make sure that there was a reduction in the amount of money spent on the CAP, she and the Minister would have our support. They have not delivered the goods. As a result they have let down not only the British people but the people of the Third world.
I now come to the point made by the hon. Member for Wealden (Sir G. Johnson Smith). I should like to spell out in detail the critical position that the Prime Minister and the British people were in when she made that eventful journey to Brussels. There is no doubt that the EC was in difficulties. There was no budget. By about August, the money would have run out. That was the simple scenario. As the House knows, the reason for that budgetary impasse was that the CAP was simply too expensive for the European Community. Almost two thirds of the whole EC budget is eaten up by the CAP. Even worse, almost two thirds of the CAP goes towards the storage and disposal of surpluses, sometimes including destruction. Only one third gets through to the farmers. That is the key point that we should address. It is the key point that the Prime Minister did not address in the discussions in Brussels.
The CAP is sheer nonsense. The complicated bureaucratic system that was devised about 30 years ago to protect — I understand why—European consumers and farmers has grown into a monster, which now threatens to destroy the very purposes that it was set up to achieve. It has become the cuckoo in the European Community nest.
The British farmers know that. They realise that the harvesting of subsidies can be only temporary because, to use another ornithological simile, they see that the goose that once laid the golden eggs is now laying addled eggs. Our farmers know what the situation is, as do the consumers.
The consumers in Britain have paid dearly for the agricultural system of support. Indeed, they have not appreciated how dearly they have been paying. We have been trying to get the point across, admittedly without a great deal of success, so we were most encouraged last week when our case was given a fillip from a most unexpected quarter — Her Majesty's Treasury. The Treasury produced its "Economic Progress Report", which is well worth reading, headed, "The challenge of agriculture." The document sets out some principles that should guide agricultural reform in the European Community, which the Prime Minister evidently forgot last Friday. It was strange that that document should appear from the Treasury on the day that the Prime
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Minister went to Brussels. It is quite unclear to me why it was produced, but it contains the truth and is therefore worth examining.
One of the key findings of the document is that
"consumers have to pay much higher prices for food than would otherwise be necessary. The additional costs of higher food prices together with higher levels of taxation have been estimated at over £550 per year for a non-farming family of four in Europe."
In other words, it costs in excess of £10·50 a week for every family of four in Europe—
Mr. Ralph Howell: Is the hon. Gentleman aware that that document is based, among other things, on cereals at £50 a tonne? Does he realise that no one anywhere in the world can produce cereals at £50 a tonne? Does the Labour party support that sort of figure?
Dr. Clark: I am familiar with the study. Not only have I read it in detail, but I have read in detail the computer model that went with it, and the variables. It was based on 1979, and updated to 1986 prices. The figures produced by the study are accurate. We stand by them, and the Treasury stood by them last Thursday, but it no longer seems able to do so.
Mr. Ralph Howell rose—
Mr. Tim Boswell rose—
Dr. Clark: I have given way a great deal, and other hon. Members want me to continue.
I have read the document; I have it here and I happen to have read the associated comments from Australia and the OECD. I shall return to one of those in a moment.
As the hon. Member for Norfolk, North (Mr. Howell) knows, the document was produced by the Department of Primary Industry in Australia. But Conservative Members need not go as far as Australia; we have many excellent agricultural economic departments in this country. If the hon. Member for Norfolk, North had gone to Newcastle university he would have found similar work. As I pointed out in our last debate, the university calculated that in 1968 an average household of four in Britain — not Europe—was paying £11·50 a week in tax and inflated food bills—in other words, approximately £8·25 on the food bill and £3·25 in tax. If we update that figure, it probably means that the average British family of four will pay £12·50 a week to support the CAP. But that is not the end of it. The Newcastle university figures match the Australian and the OECD figures. Almost all academic agriculturists agree on the figures, give or take the odd statistical point.
The key point is that it is not only the academics who accept these figures; the British Government accepted them last Thursday, although they have cold feet now. The Treasury document and the original report go a bit further. The Treasury document, referring to the costs to the housewife and the consumer, states:
"Even these heavy costs borne by consumers and taxpayers do not tell the whole story. Far from preserving employment and output, the effect of the CAP is to reduce employment in other sectors."
The most recent study, parallel to the one that I have just quoted, which was also done in Australia by the Bureau of Agricultural Economics and the Centre for International Economics, published the figures for 1986—the latest available—and concluded that in the EEC the CAP has cost 1 million jobs in manufacturing and

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services. In Britain alone, 480,000 jobs have been lost in manufacturing and service industries. So hundreds of thousands of urban and rural workers in non-agricultural industries have lost their jobs on account of the common agricultural policy—in addition to the tens of thousands of agricultural workers who have suffered the same fate. The CAP is nonsensical—
Mr. Quentin Davies: The hon. Gentleman started by presenting himself as the champion of farmers, and proceeded to argue that the regime that should have been imposed on them at the end of last week should have been even harsher than the one that was agreed. That is hypocrisy. Will he now face the facts and tell us what he proposes should have been done last Friday?
Dr. Clark: Apparently the hon. Gentleman was not listening to what I was saying. Incidentally, I am charmed to be called the champion of farmers. I did not expect that, but I am pleased to hear it—however temporarily I may have been given the title.
Under the CAP, two thirds of the cost of agricultural support goes not to farmers; it goes to buying storage and disposing of surplus products. That is nonsense.
Mr. Quentin Davies rose—
Dr. Clark: I cannot continue to give way to the hon. Gentleman.
Only one third of the money gets through to the farmers.
We are discussing not only money on the direct budget. It costs about £7 billion for the British citizen to protect agriculture, taking into account levies and taxation. To put that figure in perspective, it means that we are spending four times as much on agricultural support as we are on unemployment benefit each year. That cannot be right, and that is what the Prime Minister had a chance to change in Brussels last week — [Interruption.] Conservative Members do not understand the fact, but it was an historic occasion. The Community was in crisis. Like British farmers, it was going to run out of money. The British Government had the power of veto, and if the Prime Minister had insisted on the demands that she originally said she was going to stick to before she went, she would have effected a reform in the EEC that would have changed its whole nature. By failing to do that and by not waiting for the summit in Hanover, when the political problems of the French and the Germans would have been eased, she failed to obtain a better deal. For some reason she gave in.
The Minister has proclaimed that the deal struck at Brussels—he was very convincing at a superficial level—would substantially reduce agricultural production. Many hon. Members on both sides are sceptical about that claim. It is difficult to see how it can be true. Certainly, the NFU does not take that view; nor do informed agricultural observers. Over the past two or three weeks—and, in particular, the past two or three days—there has been a messy compromise. It has arisen out of stabilisers. The mechanism by which the Minister believes he can reform the system is that of stabilisers, and various other means. Stabilisers were the core of his argument. Why did he agree to increase the limit at which stabilisers come into play from 155 million tonnes to 160 million tonnes? He has said in the past that stabilisers are ineffective at that level. I
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understand the relationship of the compensatory levies that are paid at the beginning of the year. This is a complicated subject, but will the Minister confirm that if the maximum guaranteed quantity of 160 million tonnes is exceeded in one season, the 3 per cent. reduction will not become operative until the following season? Am I right in thinking that?
Mr. MacGregor indicated assent.
Dr. Clark: The Minister indicates that I am right and that I have read the documents correctly.
Will the cut be made only in the nominal price so that the Agriculture Council will not be free to increase the buying-in price in the following year? If that is so, it could negate the stabiliser effect.
The thrust of the Minister's argument was that there will be a capping of the agricultural budget. We have repeatedly seen the other 11 nations cave in when we have got to that budget. That is a specific point, but I am sure that the Minister will agree that it is important.
Did discussions take place within the Community's agrimonetary system? So far, they have not formed part of the negotiations. How will we ensure that individual nations do not manipulate their green currencies to offset price cuts for their farmers, thus negating the effective use of stabilisers? I think that was the point that the hon. Member for Lancaster (Dame E. Kellett-Bowman) was trying to make when she talked about the green pound in Britain.
Mr. Boswell: Has the hon. Gentleman noted the early-day motion regarding the disparity between green currencies as they affect the British farmer? Is he disturbed about that matter, or is he ruling out any change in that arrangement in the future?
Dr. Clark: The hon. Gentleman, who is very knowledgeable about these matters and who always participates in these debates, is making the point for me. Of course Ministers can change their green currencies by negotiation, but will those changes be used to negate the purpose of stabilisers?
Mr. Spearing: The cogent points that my hon. Friend is making highlight the question that the Minister courteously allowed me to put: that there is no statistical proof or evidence to back up the assertion that the Community will get within the 75 per cent. GNP limit. Should we not sympathise with the Minister, who was not present in Brussels when British agricultural policy was made over a 48-hour period by the Prime Minister?
Dr. Clark: My hon. Friend talks common sense. I believe that if the Minister had been present good sense would have prevailed and the good sense of British agriculture would have succeeded. It is a pity that he was not present to give first-hand advice to the Prime Minister when she so obviously needed it.
The hon. Member for Hereford (Mr. Shepherd) mentioned sheepmeat. We have heard little detail about the proposals for sheep stabilisers. We have always given the Government our general support on cereals, but not on sheep stabilisers. As I understand it, the Copenhagen agreement discriminated solely against the United Kingdom in that stabilisers were to be exclusive to Britain and that they were related to the variable premium. That

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is discrimination against Britain, which we should not tolerate. There should not be discrimination against an individual nation.
Although, as the Minister explained, the limit on the payment of the annual ewe premium to 500 ewes in lowland areas and 1,000 ewes in less-favoured areas has been withdrawn, the Commission has said that it wil renew this proposal in this year's review and that it could become operative on 1 January 1989. Will the Minister give the House an assurance that there will be no discrimination against sheep farmers in the United Kingdom? Does he realise how vital this matter is for upland farmers, who are on extremely low incomes?
One of the other issues that was way down the list to be discussed in Brussels was direct income support. It is interesting that the Treasury's "Economic Progress Report," which I keep praying in aid, with regard to the best way to help farmers on low incomes, says:
"Low income farmers would be best helped through direct income support rather than price guarantees or output related assistance."
When we have advanced that argument, the Minister has always disagreed with it. As that statement was agreed by the OECD Ministers and endorsed by the Venice economic summit in June, why does the Minister still refuse to rule out that course of action? As it has been accepted in Brussels, does that mean that it is on the table and that there is a chance of income support for our upland farmers? Any comments that the Minister could make about that matter would be helpful and would end the uncertainty, which the Minister acknowledged, in British agriculture.
We have been asked to consider a document relating to set-aside, but I do not think that it will receive the attention that it deserves. I am sure that the Minister will agree that this is an important matter, and I hope that we can have a debate on it. Does the Minister appreciate that if the system is introduced in a clumsy manner and farmers are paid for doing nothing, we will be bitterly opposed to it, as will the overwhelming majority of British people?
We are prepared to support proposals aimed at utilising land for more sustainable agricultural and environmental needs. It is sensible to encourage the planting of broadleaved woodland, as the Minister said when he presented a Bill to the House a couple of weeks ago. Are the Government committed to set-aside as a positive method of improving our environment? Are they prepared to build on the experiences of the environmentally-sensitive areas, to which the Minister referred at the beginning of his speech and which have been a tremendous success? We believe that we should build on those experiences to encourage farmers to farm in a less damaging and more ecological manner. I hope that the Minister will take that point on board.
There is specific reference in the reports from Brussels to the concept of fallow grazing. That is a sensible possible use for land taken out of cereal production. However, if the system is to be effective, how will the Government contain the progeny aspect of it?
With regard to set-aside, will the Minister consider the proposal for which we have argued—the development of low-input farming, which has the advantage not only of protecting the land and the landscape but of retaining labour and machinery on the land?
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The House has a right to expect the Minister to explain what proposal has been made to stamp out the fraud that so bedevils the CAP. As the Minister knows, this is a serious problem. Some experts estimate that over £2 billion—10 per cent. of the CAP budget—has been lost in fraud every year.
Mr. Robin Cook: Before my hon. Friend leaves the set-aside issue, I should like to put forward a point that I tried to put to the Minister. The effect of set-aside will be to encourage the most marginal land to come out of production first. That could have a serious regional impact, particularly in Scotland, which has not a surplus of cereal but a deficit. It could have serious knock-on effects on other consumers of cereals, such as the poultry industry, which is well represented in Scotland and which will be a less economic location as a result of set-aside.
Dr. Clark: My hon. Friend is right. Cereals for feed, especially in an area such as Scotland, might be the commodities most taken out of production. As we understand the Commission's proposals, the amount of support from FEOGA for more marginal land — the land to which presumably the Government will be giving lower grants—will be at a higher level than the more productive land, for which the Government will be giving higher grants.
Mr. Peter Hardy: My hon. Friend mentioned fraud. It seems to me that people can go on television and confess to the most astonishing frauds without any action being taken. That may be common in Britain, but it is even more frequent abroad. What does my hon. Friend have to say about member state Governments who do not implement arrangements that they are obliged to implement under the EEC regulations? For example, the Italian Government have not introduced milk quotas.
Dr. Clark: My hon. Friend has raised a point with which both sides of the House sympathise, and which worries many of us. We are concerned that the British Government and British farmers adhere to these agreements. Certainly, there is a suspicion—I choose my words fairly carefully—that that is not always the case in other countries.
The domestic scene is very depressing. In real terms, farming is at the second lowest level since the end of the war. Twenty thousand jobs have been lost in the past couple of years, and investment in plant, machinery and vehicles is at a post-war low. That is not a very happy state of affairs, and we believe that the time is now right for the Minister to give a lead.
We are especially critical of the Government's handling of research and development. We know that they have already made considerable cuts, and we also know that the Ministry is now carrying out a thorough review of its research and development, with a view to indentifying areas of research that can be funded by the industry rather than with public money. The technical term, I believe, is "near market research". That research has been hurried through behind closed doors, with no formal consultations, and to those concerned there seems to be no clear definition of the objective. However, the Opposition are quite clear. A time when the farming industry is in a state of crisis is entirely the wrong time to start cutting down on research and development and on advice services. I hope that the Minister will think again.

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The debate has largely centred—and, I am sure, will continue to do so—on the recent Brussels summit. The agreement reached there, as one eminent agricultural journalist has written,
"is remarkable for the number of concessions made by the British to the Franco-German position on the agricultural section of the package."
The Minister attacked us earlier for being too specific, but I hope that I have raised a number of specific points. He also criticised us for not seeing the issue as a whole. What has annoyed Opposition Members so much is that the Prime Minister had the chance of a decade to obtain a fundamental and far-reaching reform of the CAP. That would have been of long-term benefit to the British people—farmers and consumers—to the people of the Third world, who will now have food dumped on them in a glut, and, of course, to the European Community. The Prime Minister went to Brussels proclaiming her intention of imposing absolute financial limits on agriculture, but, as we know, her nerve broke. Now, tragically, the CAP will trundle on and on.
8.12 pm
Mr. Ralph Howell: I recognise that both Front-Bench spokesmen have concentrated on the summit statement. That was inevitable. However, I prepared my speech for the debate on agriculture which was originally intended, and I mean to say only a word or two about the summit. I have not had time to study the document, and I do not know precisely what has been done, but, judging by what I have heard so far, I would sum it up as another typical EEC fudge which may damage British farmers. The only good thing that I can say is that it will probably damage them a little less than might have been the case.
Agriculture is in a very serious position, not just because the weather has made it a very bad year, and the awful autumn and winter will probably make next year very bad as well, but because of the uncertainty and loss of confidence in the industry. Somehow, that must be put right.
My first point concerns the necessity to solve the green currency problem. As far as I can see, it is a great swindle. British farmers have been swindled under both Governments, and the time has come for that to end. I also believe it to be a self-inflicted injury. We have had artificially low food prices in this country, and this is a way of keeping them low. I can substantiate what I say. Last week, in reply to a question, I was told that food prices had increased by an average of 5·8 per cent. since 1979, while all other prices had increased by 7·8 per cent. That has seriously damaged the farming industry.
As a result of that holding back, and because of the green currency fudging and swindling, the assets of British farmers have gone down to a dangerously low level—66 per cent. of the total assets of 1979. This means that British agriculture has lost £21 billion of assets, which is a huge figure.
We are now suffering the second lowest level of profits since the war—that is, for those who are making profits. A number of people are making losses. Profitability for cereal producers is down to 10 per cent. of the 1979 level. I am calling for an overall rethink, not just in this country but throughout the EEC. I cannot understand how the way ahead can possibly be achieved by restricting output and lowering prices.
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Before he came to the House, my right hon. Friend the Minister was a banker. If one of his customers had gone to see him and told him that his business was in difficulties and that he proposed to reduce production and sell at cheaper prices, he would have been drummed out of the office pretty quickly, because that is the road to disaster. In farming, or any other industry, if output and prices are reduced at the same time, the result cannot add up.
We should recognise that the present troubles of our pig farmers are entirely due to the green currency system. The artificial price levels in this country mean that they are doubly damaged by the effects of the MCAs, which are already causing so many problems.
Mr. Michael Lord: Does my hon. Friend agree that when we talk to farmers we find that the problem falls into two separate halves? One half is the problem of sorting out surpluses, with all the complications that are involved. The other half— this comes over loud and clear—is the fact that it is all about fairness.
My hon. Friend has made the point made earlier by other hon. Members about the green pound and the MCA, which is hurting our pig farmers so much. That is all down to fairness. If we could get it right we would still have problems to tackle, but our farmers would have much more sympathy with all that we are trying to do.
Mr. Howell: I entirely agree. There is no doubt that British farmers could compete with any other fanners in the world on a fair basis, but we cannot compete as we are.
I wonder why the cereal farmer is under such attack at present. I must declare an interest—I am a cereal farmer — but I should like to tell the House how well our cereal industry has done. In fact, it is one of the most successful industries in the country and is of great help to our balance of trade. In that respect it is the fourth most important industry in the country. Only invisibles, oil and chemicals are more successful. The chemical industry has improved our balance of payments position by £837 million since 1979. The cereals industry has improved it by £812 million—almost as much as the chemical industry. Steel, coal, motor vehicles and other visibles all reflect adversely on the balance of payments.
Why is it generally accepted that the United States should have such a great share of the export trade in cereals? Why should the United States, which exports 74 million tonnes, export more than the EEC, Canada and Australia put together? The 20 million tonnes that we export help the European balance of payments in general.
I now want to consider the myth of how much agriculture costs us. Will my right hon. Friend the Minister of State set out clearly just what we are paying for agriculture? My right hon. Friend the Minister of State has said that we are paying less now in support of agriculture than we paid in 1961. In 1961 we spent £263 million in support of agriculture. At 1961 prices we are spending £246 million this year. To bring the figures up to date, we are told that agriculture is costing us £1,443 million, yet we receive a refund of £1,480 million. We need to know how much agriculture is really costing the taxpayer. I believe that we will be amazed at the real figure.
The hon. Member for South Shields (Dr. Clark) referred to the Treasury document that was released last week. The Treasury should disown that document. There is no substance behind it. Why does the British Treasury

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need to get hold of an obscure Australian publication to prove its point? Many people are employed in the Treasury—probably too many. We should be able to work out the figures for ourselves. I shall table a question tonight to ask my right hon. Friend the Chancellor of the Exchequer either to substantiate the figures or to withdraw the document.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): I wonder whether my hon. Friend would return to the point that he was making to the hon. Member for South Shields (Dr. Clark). Did I understand the hon. Member for South Shields to say that he was happy for British farmers to receive £50 a tonne for wheat? If so, would my hon. Friend care to explain the input cost of wheat and state whether £50 a tonne would in any way meet the farmers' requirements?
Mr. Howell: I am most grateful to my right hon. Friend for his intervention, because I might have forgotten who to attack. I did not hear an answer from the hon. Member for South Shields.
The Australian document—and here I am shooting at the Opposition and the Treasury at the same time—was based on wheat at £50 a tonne. I do not believe that any farmer in the world can grow wheat at £50 a tonne. I am sure that my right hon. Friend the Minister of State will understand that the farmers in his constituency cannot compete with that price either.
Mr. Marland: To be more precise, can we say that the input costs of growing an acre of cereals in this country are probably between £90 and £100 an acre? Therefore, it is ludicrous to try to produce wheat at £50 a tonne.
Mr. Howell: I am grateful for that information.
One or two people hanker for the past, but anyone who believes that the Labour party has anything to offer agriculture with wheat at £50 a tonne is seriously mistaken.
Dr. David Clark: My hon. Friend the Member for Workington (Mr. Campbell-Savours) commented on the Minister of State—
Mr. Gummer: Completely irrelevant.
Dr. Clark: The right hon. Gentleman says that this is completely irrelevant. A few minutes ago the Minister of State said that I had said that British farmers could grow wheat at £50 a tonne. That is not true. I have never said that. The Minister of State's statement needs rebutting now. The credence of the comments made by my hon. Friend the Member for Workington have some standing if the Minister of State intervenes and makes allegations that are basically untrue.
Mr. Howell: I should explain that the hon. Member for South Shields referred to the document and said that it proved his case. That was based on £50 a tonne—
Dr. Clark: It was not.
Mr. Howell: Let us argue the point further. According to the document, the figure is 80 ecu for wheat. That is almost £50.
Dr. Clark: Perhaps I can clarify this. The hon. Gentleman is obviously very knowledgeable on these matters. I am afraid that I was not quoting from the secondary source from which I believe the hon. Gentleman
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is quoting. I was not quoting from the "Economic Progress Report". I was quoting from the original document based on the 1979 figures, which have been updated to 1986. I referred to the figures in the primary document, not to those in the secondary document which the Treasury put out. I cannot be responsible for what the Treasury says all the time.
Mr. Howell: We have established the point that the figure is based on 80 ecu, which is roughly £50 a tonne.
I want to refer to world food production in general. We have reached a point where we are consuming more wheat than we are producing. It is quite possible that by the time some of the penalties are in place we will penalise ourselves and will have reached a serious position of food shortages.
I also want to refer to the damage that this general low food price is having on the Third world. It is all very well for the Geldofs of this world to try to do something about it, but so long as the advanced nations insist on holding agricultural prices down to the present absurdly low levels we will damage indigenous agricultures throughout the world, including the Third world.
I want to explode the myth that food prices are high. They are actually low. In 1979, in Britain, 21·2 per cent. of consumer expenditure was spent on food. We now spend 15·6 per cent. Some 25 per cent. less is spent on food so that we can buy more videos and other goods. I have already said that food prices generally are lagging 2 per cent. behind other prices. That has cost our agriculture industry £17·6 billion since 1979. That money should have been ploughed back into the industry.
If the Government are still not convinced that food is relatively cheap, I remind the Minister of the bottle of water that I gave him some weeks ago. I bought it in this House. It contained a fifth of a litre of English Ashbourne mineral water. I paid 55p for it. If the Minister had bought that bottle full of milk, he would have paid less than 9p for it. If he had been a farmer and had filled it with milk, he would have received 3p. That is a startling revelation of how we are prepared to pay for non-essentials, but not prepared to pay for food. It is impossible to buy a litre of mineral water for less money than one pays for a litre of milk.
The way ahead is obvious. For those commodities that are over-produced we must find a way of effectively restricting production. The sooner that we go over to some form of compulsory set-aside, the better. It is no good fiddling about with these petty little schemes that we have on the stocks at present. We must be serious about this and stop over-producing those commodities that are costing us so much in storage. We must recognise that if we restrict production we must allow prices to rise. If we were to allow prices to rise we could escape from the system of subsidising food. Why not pay for it over the shop counter and stop fiddling about with this awful mess of subsidising? It merely helps an army of bureaucrats and achieves very little.
One thing comes out of the summit. We now recognise that we are in Europe, that we must stay in Europe and that we must make Europe work sensibly. I hope we realise that the uncommon market in which we have been for the past 15 years cannot last. We must make a proper common market, and Britain should be playing her full part in taking serious steps to get us in to a proper common

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market. The first and most sensible thing that we can do is to join the European monetary system and prove that we are really determined to make Europe work.
Finally, I am convinced that British agriculture has a tremendous part to play in the well-being of the economy of this country and in maintaining a good and sound environment. It will do that only if agriculture is prosperous and thriving. It simply cannot pay for the enhancement of the environment if we are pushed to the borders of bankruptcy. I trust that the Minister will do his utmost to have a total rethink of our agricultural policy.
Mr. Geraint Howells: It is always a pleasure to follow the hon. Member for Norfolk, North (Mr. Howell). I agree wih many of the points that he made—and, just for information, may I say that we are not related. If we were in charge of the Ministry of Agriculture, Fisheries and Food, there would be many wealthy farmers on the east coast and the hills of Wales.
I am proud to be a dedicated European, like many other hon. Members on both sides of the House. I am also proud to be a farmer and, at times, a politician. From my experience, confidence in agriculture is at its lowest ebb since the war. I am sure that the Minister and his two colleagues will agree. I know from experience that they are genuine and sincere in their deliberations to help agriculture. They realise that, at present, agriculture is being clobbered, but, unfortunately, they have to toe the line, so far as the Prime Minister is concerned, and have to pursue policies that are not acceptable to them.
Throughout the recent discussions on the EEC budget and the common agricultural policy, what has been most striking is the Government's attitude to the farming community in the United Kingdom. Anyone hearing the Prime Minister speak this weekend would not realise that British agriculture was the most efficient industry in this country, if not the world. No one would believe that, after being encouraged by the Government to increase production to enable us to be self-sufficient, the farmers of this country responded and achieved the desired results. Indeed, instead of being praised, agriculture has been reviled, dubbed the villain of the piece and accused of wantonly producing more and more food and creating mountains and lakes as far as the eye can see. Farmers are being criticised by those who used to be their friends. The Tory Government have truly turned their back on British farmers.
It is a great pity that, during their discussions in the European Community over the weekend, greater emphasis was not given to the marketing of our surpluses within the Community and to the intervention system. As we have been members of the Community for many years and the common agricultural policy has been in existence for a long time, it is time to set up an independent inquiry into the CAP. Many farmers do not realise what is happening in Italy, France and West Germany in comparison with what is happening in Britain. Something must be done in the near future to give extra clarification to British farmers on how agriculture is faring in other countries within the Community.
For some years agriculture has been coming under great economic pressure and the strain is beginning to tell. It has been estimated that, in 1987, total investment in agriculture was cut by 15 per cent. and the average net income of farmers fell by 1·5 per cent., following years of
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similar falls. In some sectors, such as specialised dairy farms in Wales, there was an estimated fall in income of 8·2 per cent. in 1987. That excludes interest paid on loans. It must also be pointed out that, over the past decade, food prices have risen by only 73 per cent. of the increases in the retail prices index. Farm gate prices have increased by just over one half of the rise in food prices.
Why, then, is the industry being so fiercely attacked? This is why we are not as ready to consider the problems of our farmers as sympathetically as our European partners do. We cannot expect the farmers to produce less, to do away with the surpluses and to accept a reduction in income at the same time. It is not compatible and it will never work in this country. Many small and medium farmers will be in dire financial trouble and the social consequences of many of these new regulations will be far-reaching.
For example, in Wales, where the livestock industry accounts for 85 per cent. of agriculture, there is great alarm at the probable effects of the measures being taken to curb production. They are seen as measures against the family farm and, thus, against a way of life and the rural economy.
The use of stabilisers, set-aside schemes and diversification are fine in theory and may well have limited uses in some sectors, but there are drawbacks. For example, it has been argued that land set-aside would be the least productive in any holding. The remainder of the holding could be intensively farmed to bring up production to previous levels, thus defeating the object of the exercise. When he replies to the debate, I know that the Minister of State will clarify the comment of the Minister of Agriculture, Fisheries and Food that 20 per cent. of the land will be taken out of wheat and cereal production over a period. What effect will that have on the less productive land? We need more clarification on the question of set-aside. I have always held the view that farmers should be paid if their land is set aside. Will those farmers who take 20 per cent. of their land out of production be able to grow something else, such as a crop of rape to feed lambs, for short-term benefit? They should be able to do so if they choose to go for that instead of taking the money under the set-aside scheme.
Mr. Gummer: Does the hon. Gentleman agree that, even if farmers do not do that, the land would still need to be looked after? Therefore, the idea that they would be paid for doing nothing is a calumny on the farmers of Britain and it does no good, in an attempt to change our agriculture system, to throw this calummy about, as seems to be the policy of the Labour party.
Mr. Howells: I agree with the Minister on this occasion—we do agree now and again.
The British Poultry Federation has pointed out that this scheme could alter the structure of its industry, and it is dependent upon the cereals sector. Marginal land will be taken out of production and in some regions the poultry sector will suffer the consequences.
There are millions of sheep in Wales, particularly in the hills of Plynlimmon and mid-Wales, where I farm myself. On behalf of the sheep producers, I ask the Minister not to dismantle the sheepmeat regime if it is at all possible. I disagree with the Prime Minister, who said earlier today that we cannot revert to the deficiency payments scheme. The present scheme is operating under another name, but

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it is still a deficiency payments scheme. It has worked well for the sheep producers over the past 40 years, and may it remain doing so.
I believe that the Minister said some months ago that the year of the introduction of stabilisers would be based on the stock numbers in 1987. Is that still the case, or is the year now 1988? Will other countries within the Community accept a similar scheme for sheep?
There is an obvious example of restraint from producers causing prices for the consumer to rise. Cattle prices are already rising because of the shortage of supplies and the Sunday roast of a succulent beef joint is becoming prohibitively expensive. The Government extensification plans for cattle look as if they are already heading for trouble, and any surplus will soon be replaced by shortages, which can only harm the family budget in the long term.
What plans have the Minister and the Government to help dairy farmers in particular? I know that the majority of them are doing reasonably well because there is a good export trade to the continent in cows and calves. This is due to market forces, and if things go wrong and we revert to a poor trade in those two commodities the dairy sector would be in trouble once again.
Another grave concern is the ever-decreasing budget for agriculture research. In my constituency we have the world-renowned Welsh Plant Breeding Station, which deserves great support. I should like the Minister to reassure us that the recent report from the Institute of Professional Civil Servants that it is planned to take a further £75 million from research, with a loss of 7,300 jobs in agricultural research, is without foundation.
I will leave many of the points that I wished to raise, Madam Deputy Speaker, because I want to give other hon. Members an opportunity to raise matters concerning their constituencies.
I have had a word with one of my parliamentary colleagues in Scotland, who has pointed out how the new 50 per cent. rule for the suckler cow premium scheme will discriminate against farmers and crofters, particularly those in the islands. Their way of life must be protected, and I urge the Minister to look into the working of this scheme with particular reference to this sector.
We are committed to stabilisers, extensification and diversification. These may help in the short term to control farm spending, but my worry is that unless the Government show willing to support the genuine farmers the whole industry will degenerate. It is only reasonable that, if we are interested in the future of farming, we should look at fiscal measures to aid the family farmer through this difficult period. Many EEC farmers are able to take advantage of bank loans at a lower rate than many farmers in Britain. I wonder whether those schemes in Europe could become optional for farmers here instead of the capital grant scheme.
It would be helpful to set up a Royal Commission to review the effect of capital transfer tax and capital gains tax on the industry and the rural economy so that the future of small family farms can be safeguarded from one generation to another. I hope that the Minister will respond to this suggestion.
I am anxious to see an inquiry set up into the comparative effects of the CAP in various countries and the way in which the regulations are operated within each
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state. My interest is to see that British farming is given a fair deal and is enabled to compete on equal terms with other countries in Europe. It is difficult to believe that this is so and the Government are partly responsible for not ensuring that there is fair play.
Several Hon. Members rose—
Madam Deputy Speaker (Miss Betty Boothroyd): Order. I appeal for short speeches. There is a great deal of interest in this important debate and if speeches go on as long as they have so far, many hon. Members will be disappointed.
8.47 pm
Sir Geoffrey Johnson Smith: I shall do my best to oblige, Madam Deputy Speaker. It is a pleasure to follow the hon. Member for Ceredigion and Pembroke, North (Mr. Howells) — I am more familiar with the second part of his constituency. The hon. Gentleman knows what he is talking about, and I specially welcomed his sympathy for the small farmer. I have a number in my constituency, and the small farmer has a vital part to play in maintaining the prosperity of the rural community. We will not solve this problem as easily as Ministers thought they might at one time. The existing structure of the common agricultural policy is not as helpful as it ought to be.
I appreciated the constructive tone of the speech of my right hon. Friend the Minister of Agriculture, Fisheries and Food. I liked the way in which he approached the matter. He said that there was a challenge but that there were exciting opportunities ahead. He did not minimise the severe problems, but he was right to point out that 95 per cent. of the Government's objectives were achieved. It has been forgotten in the debate that has been raging today that in these negotiations my right hon. Friend the Prime Minister clearly demonstrated her commitment to Europe.
I have a great personal regard for the hon. Member for South Shields (Dr. Clark), but he was less than fair to suggest that my right hon. Friend should have gone to the summit like some latter-day Boadicea, shaken her fist, so that all the other nations would fall down before her, and smashed any idea of agreement, thus causing considerable confusion and uncertainty among the British farming community, which she desires to protect. How arrogant to assume that someone should have the power to do that, when two powerful nations which are facing elections, and many other nations which are not quite so powerful nor facing elections, did not happen to agree with the hon. Member for South Shields, and certainly would have disagreed profoundly with such an approach by my right hon. Friend. That is an arrogant assumption, and we should not behave arrogantly.
Had the Prime Minister behaved in that way, I know what sort of speech the hon. Member for South Shields would have made. He would have talked about the "Iron Lady" and the Prime Minister thinking that she knows better than anyone else. What rubbish. We do not like that sort of speech. The hon. Member for South Shields sought to redeem himself later on in his speech.
Mr. John Greenway: Is it not a fact that there is no politician in the world who could have negotiated a better deal for this country than the Prime Minister has done?
Sir Geoffrey Johnson Smith: My hon. Friend is right. The Prime Minister needs no lessons from any Patsies on the Opposition Benches on how to stand up for Britain. I admire her for her capacity to achieve considerable savings when the majority were against her. In fact, all the other nations were against making the sort of substantial savings that we have been able to achieve. The hon. Member for South Shields knows that that is true. I have now got that off my chest.
Although we have achieved some of our objectives, we have not achieved everything that we would like, nor will we. With the common agricultural policy as it currently exists, we will not be able to sort things out at a session such as that held in Brussels over the past few days. However, the National Farmers Union has said in its press release:
"It is good for Europe that the ECs internal financing problems have now been resolved. This should now allow the Community to concentrate on achieving the objectives which it has set itself and, in particular, the completion of the Single European Market."
Of course, there are uncertainties, because this is an uncertain time. However, most of us who want to be fair-minded about this matter would agree that the Community has now set up a system that gives a better chance of providing the additional prosperity and stability that farmers seek. It will not benefit just the farming community. Taxpayers can feel that the Government have not neglected their interests. The British budget rebate was saved, and we received £3 billion for the last three years. The saving will continue at that rate over the next five years. To those who believe that the Government have not established the importance of reducing the proportion of the Community's budget by reducing the common agricultural policy's budget, I should say that we know that it will go down from 75 per cent. of the budget as a whole to 50 per cent. in 1992. That is a reduction of 25 per cent., and it is not bad.
We know that farmers face serious problems of adjustment. I do not know of any industry that has been called upon to face a 12 per cent. price cut such as that faced by the farming industry in respect of cereals. I am glad to note that the Minister was able to see that the exemption limits were negotiated out of the agreement.
We know that farm incomes have dropped. I shall not go into the details of that, because it has already been mentioned by hon. Members on both sides of the House. I shall not develop my indignation at the impact of the green pound, except to join my hon. Friends in saying that I believe that that is of profound concern to the farming community. I wonder to what extent the Government's reluctance to seek devaluation of the green pound arises from the fact that it will result in higher farmgate prices, which would affect the set-aside proposals. Or is it the Treasury that complains that it would be a subsidy to farmers?
Mr. Allen McKay: I have been talking to the farmers in my constituency. I have been talking to the pig farmers who, without a shadow of doubt, are going bankrupt. I have been talking to the farmer who has a farm in Yorkshire and one in Germany. Therefore, he is able to compare what is happening in Yorkshire with what is happening in Germany. Also in my constituency there is the manufacturer of industrial
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machinery who has had to dismiss 49 people because of the roll-on effect. A 10 per cent. devalutation of the green pound would offset that.
Sir Geoffrey Johnson Smith: I fully accept what the hon. Gentleman has said. He has anticipated my comments about the MCAs. The patience of farmers has been stretched to breaking point.
I understand the Government's intentions on set-aside schemes. My right hon. Friend the Minister is right to pursue them with all the vigour that he can command, but he must ensure that they are effective. From what I hear, I do not know whether the amount that is to be paid to farmers to set aside land will be sufficient. It is a mammoth problem. I hope that it will not be too expensive before it becomes effective. That is one reason why some of my hon. Friends believe that it should be compulsory. That is a matter for the future.
I am indebted to the magazine of the Country Landowners Association. It has provided me with some information which sets out the massive scale of trying to make an impact on production by a set-aside programme. It pointed out that in France the land surface area is 55 million hectares. A total of 55 per cent. is used for agricultural purposes, 29 per cent. is made up of woods and forest and 9 million hectares are used for other purposes. France faces the prospect of 6 million hectares being taken out of food production. That is quite a lot.
The editorial says:
"Even if 300 new golf courses are built and 10,000 tennis courts and 1,000 camping and caravan sites, they will account for no more than 30,000 hectares, leaving 5,970 hectares facing a fate, which the Franch call desertification."
A few golf courses were established in my constituency years ago. It was announced recently that one of the few large farms in my constituency is to go out of farming and that at least one international standard or championship course will be built, with perhaps another for less ambitious players. That is the trend. It may be helpful in diversification and in bringing in new employment.
There is another aspect of trying to cope with such massive production. Diversification has been the policy embraced by the Ministry of Agriculture, Fisheries and Food and the Department of the Environment. The figures show that the Ministry of Agriculture gives £1·5 billion in price support in this country. It gives £150 million to special areas and hill livestock and £100 million in capital grants. Most of that money goes to the bigger farmers.
What has happened to grant-aid for diversification since 1986? I read a report saying that virtually nothing had been handed out. There is a Development Commission for Rural England, which receives £30 million. I am not prepared to say that all the money should be taken away, from the hill farmers and those living on marginal land, especially when I see the Celtic fringe facing me on the Opposition Benches. However, the size of the budget, where it goes and the emphasis that is placed on other things shows how inadequate it is to support a diversification programme.
A start has been made in encouraging woodland management. However, to us in the south-east, that seems to be unduly biased towards the planting of hardwood, for which there is less anticipated demand than for softwood. Prices for pulpwood are discouraging.
In this general debate on agriculture I should like to digress for a moment to talk about woodlands and to

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underline to my right hon. Friend the Minister of State the despair that is felt by those woodland owners who face horrendous and crippling financial burdens to clear up the mess that was left behind in the wake of last October's hurricane. The Government now have the facts, the Forestry Commission has looked at the matter, and there is every reason to believe that the costings have been made. What encouragement is there for woodland owners, and what untold long-term damage has been done to our forests and woodlands in the south-east? There will be long-term damage if nothing is done to help clear the fallen trees.
Mr. Lord: Does my hon. Friend agree that the most important thing is to recognise that in the woodlands that have been so badly damaged, and where trees have been blown down, there is not only the problem of replanting and replacing those trees, but the enormous cost that will be involved in getting rid of the huge roots, which is totally out of all proportion to normal forestry work? This is not the kind of thing that farmers, or even woodland owners, normally have to cope with, and it will add massively to the bill. Does he agree that that must be taken into consideration if we are to be fair to those people and get on with the reinstatement?
Sir Geoffrey Johnson-Smith: My hon. Friend is totally correct. I am delighted that the Select Committee on Agriculture visited three woodland sites in my constituency and saw just that sort of damage. It is ludicrous to suggest that anything can be done in the way of replanting, least of all getting an agreement on replanting, by the deadline of 30 March this year unless this vexatious problem is dealt with as a matter of urgency by the Government.
9 pm
Mr. Elliot Morley: Although I do not want to go over some of the points that have been made in the debate, other issues have been raised that need emphasising in terms of my own constituency and in general.
The effects that monetary compensatory amounts have been having on pigmeat and on the pig industry in terms of the green pound have been mentioned. I know that the discussions that took place were centred mainly on grain and on oil seed crops. Nevertheless, the pig industry always seems to be pushed to the bottom of the pile when it comes to negotiations. What impresses me about the pigmeat industry is that it is asking not for subsidies but only for a chance to compete fairly. That is unlike the grain farmers who are subsidised up to the hilt in many ways. All the pigmeat industry wants is fairness in terms of imports entering this country and undercutting our producers.
I should like to deal briefly with the set-aside policy. Hon. Members of all parties have agreed—perhaps for different reasons—that the set-aside policy will not work in terms of reducing the overproduction of cereal crops. There are many reasons for that. One is that the amount of money that will be paid in set-aside grants will not compensate the very large cereal farmers, even it they go over their target figures and suffer the 3 per cent. price
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reduction. I do not believe that that 3 per cent. price reduction will in any way deter them or induce them to go over to the set-aside scheme.
Therefore, we need alternative ways to reduce the overproduction of grain. One way—the Government are considering this and I support them—is the alternative use of land for the planting of trees. It has been said that 29 per cent. of France is covered by forests, which is a far higher proportion than that in this country. I think that I am right in saying that we have the lowest proportion of land covered by forests of any European country. Therefore, there is a need, a demand, and a market, especially in the hardwood sector. I hope that the Minister will consider that point seriously.
I know that this matter does not come under his control but I hope that when the Government consider investment in forestry they will do something about the tax dodges, whereby people, such as Lady Porter, can receive about £500,000 in tax relief. That is more than many people in my constituency could hope to earn in a whole lifetime of work. Although we must encourage forestry, we should do so in a way that does not put large sums of taxpayers' money into the pockets of private individuals.
I do not want to waste time by going over all the points that have been raised. I agree that food overproduction in the common agricultural policy is a serious problem. The problem with the CAP is that many farmers have been caught in a trap that is not of their own making. Over recent years they have been induced to produce more and more food. They are caught in what has been termed "a treadmill effect"—not a term that I would coin myself. However, because the farmers must produce more and more to get the money, they invest more and more in fertilisers, equipment and other things. That was bound to have the effect that has made the CAP so damaging to our farming community and to our environment because of the way in which many farmers have moved over to agriculture. They have done most of the damage by ripping up hedgerows and chopping down trees simply to increase their production so that they can get more and more in terms of grants. In many cases, it is the small farmer who is suffering as a result of those policies.
There is scope for improvement. I accept that it is a difficult concept. I agree with my hon. Friend the Member for South Shields (Dr. Clark) that the Prime Minister went to Europe spouting more rhetoric, instead of trying to achieve something. No matter what has been said, because her veto would have held up the whole negotiation, and frankly because the bankruptcy of the Common Market was hingeing on that, the Prime Minister had a tremendously powerful lever and could have achieved real changes. I do not believe that the change that she did achieve will seriously dent the overproduction of grain in Britain.
9.5 pm
Mrs. Ann Winterton: I shall participate in the debate only briefly, but I should like to second the plea made by other hon. Members that we have a much longer debate at some stage in future. It has been quite impossible for many hon. Members to speak and to make their points. The subject is important.
I speak tonight in the full knowledge that farming incomes are down to approximately half in real terms compared with five years ago, and that the present return on capital in the industry is negative and employment is

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falling. It is very difficult to be optimistic about the future of agriculture in Britain, unless that efficient hard-working industry is enabled to return to profit and reinvest for the future.
The details of the internal financing agreement of the EC are too new to be fully digested, and some are completely indigestible, but I fear that they will not benefit agriculture in Britain, although I realise that it is difficult to be 100 per cent. positive until the next price-fixing round has been completed. The set-aside proposal is a mixed blessing. In theory, set-aside would appear to be the answer to reducing production by taking marginal land out of production. In practice, it is difficult to see how it will be of benefit until the monetary level is fixed at a reasonable rate; and the minimum would need to cover fixed costs. No one is likely to be attracted to the scheme by less than that. The proposal that half set-aside land should be green fallow is ludicrous and would seriously exacerbate the problems in other commodities such as beef and sheep.
The present proposals for the sheepmeat regime are quite unacceptable, as they discriminate against British agriculture, although the worst proposal of all has been shelved, at least for the moment. Sheep represent the one area of hope in which we have been supremely successful, especially in the export markets, having escaped the MCA system. To have to control ewe numbers if we retain the variable premium is quite deplorable; and it would enable France, for example, to build up its flock whilst ours was being tightly restricted. The Minister will appreciate how devastating that stabiliser mechanism will prove, not least to the hill farmers in less-favoured areas.
The other commodity being devastated at present is the pigmeat regime, which has been mentioned by many hon. Members. I urge the Minister to fight hard for the abolition of the MCAs on this product as soon as possible. Because they are receiving lower prices now than they were five years ago, many producers in my constituency are losing money hand over fist. That cannot be sustained for any length of time. Urgent action must be taken to ensure that our pig farmers can compete in a fair market. The Dutch farmers are receiving a payment of £70 for every tonne of bacon that they export to the United Kingdom at present, and they are, of course, paying £16 per tonne less for their feed.
Finally, it is absolute nonsense for the EC to try to depress cereal production while allowing cereal substitutes to be imported. Surely it is quite obvious that one cancels out the other.
Uncertainty may well have been ended by the summit agreement, but that emotion has been replaced by dismay at the prospects for British farmers compared with others in the industry elsewhere in the Community.
Mr. Speaker: I thank the hon. Lady for a commendably brief speech, and say to the remainder of hon. Members waiting to speak that if they follow suit many of them will be called.
9.9 pm
Mr. Eric Martlew: I shall try to be brief. I should like to make three points. First, it is agreed in the House that the common agricultural policy is nonsense. It is agreed by the Opposition that the Prime Minister failed in her objectives in Brussels because she failed to achieve what she told us she would achieve.
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My hon. Friend the Member for Workington (Mr. Campbell-Savours) teased the Minister of State about his attacks on the Church of England. It was only when I read the London Standard that I realised that the Prime Minister had had a secret meeting with the seven bishops. Perhaps she and the Minister of State have been trying to get the churches to stop praying for a good harvest. The last thing that we want is a good harvest. Perhaps the Minister of State has been trying to ban harvest festivals.
The common agricultural policy is nonsense, and so is the cereal deal concluded this year in Brussels. Are we really saying that what we need is an epidemic of slugs on our cereal land? Perhaps somebody in the Ministry of Agriculture, Fisheries and Food is working on some sort of disease that will attack the crops. That is the sort of nonsense that we find in the common agricultural policy.
The wood pigeon is a much maligned bird. I have been doing some research on it and perhaps after I have outlined my findings the Minister will make it a protected species. The Ministry of Agriculture, Fisheries and Food says that each wood pigeon eats 20 kg, which I understand is over 40 lb, of grain per year. There are between 5 million and 10 million wood pigeons in the United Kingdom. Therefore, in five to 10 years it could eat Britain's grain mountain. We should breed more wood pigeons but, unfortunately, we might end up with a wood pigeon mountain, such is the nonsense of the common agricultural policy.
Some hon. Members have said that we are so efficient that only 2·5 per cent. of our work force works on the land. We criticise the French for having 10 per cent. and the Germans for having 5 per cent. However, it is we who are stupid because the French and the Germans are preserving their rural communities. They are not decimating the villages and closing the village schools because people are leaving the land. The sooner we get back to putting people on the land, such as was done by the Land Settlement Association brought in by a Tory Government in the 1930s—
Mr. Lord: I am carefully following the hon. Gentleman's argument. I am sure he appreciates the effect on labour costs and on the price of food if we put all those people back on the land. Is he recommending a large increase in the price of food?
Mr. Martlew: I am saying that the French and the Germans are doing very well and that we are doing badly. If the hon. Gentleman asks the housewife whether we have cheap food, she will laugh. We do not have cheap food because of the common agricultural policy. If we had a free market and allowed such things as sugar to come in from Jamaica, we would have cheap food. We have the worst of both worlds.
I should like to mention a local point about milk quotas. I accept the need for the quotas. We got a bad deal in 1983 when the Government agreed that it was a bad year. A creamery in my constituency has just closed because of the quotas. We have heard much talk about looking after the farmers but not much talk about the people who work in the food industry. People in Europe tried to get rid of the Milk Marketing Board. I support the Milk Marketing Board because I worked in the milk industry for more than 20 years and I know that it does an excellent distribution job and looks after its markets.
Dairy Crest does a terrible job. One would expect the chairman of Dairy Crest to drive around in a Volkswagen

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Polo because that company was getting into milk production when all the smart money was getting out. It is the sort of company that married the kitten when she turned into a cat. In my constituency Dairy Crest spent £7 million building a factory at the time when a reduction in milk quotas was on the cards. That factory has been closed.
Many of my hon. Friends have signed an early-day motion about New Zealand butter, but I am afraid that I cannot sign it because the butter workers in my constituency are out of business. I have had letters about the matter. If we are talking about set-aside, can the Minister set aside a little money to compensate those dairy workers for the loss of livelihood? We are always talking about compensating farmers, but the Milk Marketing Board is offering dairy workers the most miserable redundancy money one could imagine. It is diabolical. The trouble with the Milk Marketing Board is that, as it is a farmers' co-operative, it has always treated its workers like farm labourers. It is time that the Government gave some thought to helping those people who will be made redundant by the common agricultural policy and this decision.
There is a factory which was once efficient but is now a blot on the landscape in my constituency. Is there an opportunity to get money from the CAP to convert that factory into a food-processing factory? If that is not done, it will be an insult to the people of Carlisle. I should like in a year's time as many people to work in that factory producing a food product as there were working there before the redundancies.
9.15 pm
Mr. Paul Marland: In recent years, whenever there has been a summit on the skyline, the farmers have trembled at what may come out of it. The speech of the hon. Member for Carlisle (Mr. Martlew) will make them tremble even more. His idea of trying to supply an improved diet for wood pigeons, with no recompense to the farmers, would put all of them out of business in one season.
Mr. Frank Cook: It is a grain of sense.
Mr. Marland: That must be recognised.
When I say "farmers", I mean the farmers about whom we are all concerned — not the agri-businesses that operate on grade 1 silt in East Anglia. The traditional farmers on the poorer soil are facing the most difficulty. They are being told repeatedly that they must produce less and produce more cheaply. They wonder, rightly, where it will all end and whether there will be any safeguards for them and their families and for those who work in the ancillary industries. Euro-economics is in an unbelievable muddle with far too much money going into the wrong hands.
What is the result of this policy of levies, price reductions and green pound imbalances? It is impoverishment and sacrifice for certain for those on poorer land and for all but the most well-financed. Pressure on price to reduce output is obviously the most efficient method to cut reduction, but it is socially unacceptable.
I was pleased to hear my right hon. Friend the Prime Minister say this afternoon that she wanted reasonably
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prosperous farming. Short-term expedients have allowed politicians to tamper at the edges with the CAP and completely wreck it. Thank goodness, last week-end we had some direction and sanity as to the future. I congratulate my right hon. Friend on her efforts, for at last farmers can begin to plan for the future. They know that our partners in Europe will be bound by the same rules as we are. All too often the farmers in this country have thought, rightly, that member states on the other side of the Channel have been bending rules to their advantage.
Let us return to basics. As others have said, the European Community was intended to be a single tariff-free trading area — a single European market. The problem is that we do not have a single European market. Fortunately, we are working towards that in 1992. It is disgraceful that so many British farmers should have to trade in the face of such unfair competition because of green currency variations. The pig industry well reflects that point. All those who are involved in the pig business know that the industry is cyclical, but there is no doubt that the depression this time is deeper and more serious than for many years. It is true that the Dutch and the Danes are operating and exporting their production to this country with a £60 a tonne advantage—an advantage to them of £60 a tonne and a disadvantage to our farmers when they seek to export.
Mr. Christopher Gill: Does my hon. Friend agree that it is difficult for pig farmers to appreciate the difficulties that they find themselves in when, on the one hand, they are batting on an unfair wicket against foreign competition, yet, on the other hand, they see grain surpluses building up in this country which an additional 4 million pigs would help to absorb?
Mr. Marland: My hon. Friend makes a good point. I was about to plead with my right hon. Friend to make available grain in intervention so that farmers and others can take it out in small lots. At present the minimum lot that anyone can remove from an intervention store is 100 tonnes. Pig producers in my constituency tell me that it would be a great help if they could have access to grain in smaller lots. As the price of intervention grain is to be depreciated, it would be a great help if pig fatteners and others could have access to the grain in smaller lots.
Quotas in the dairy industry have successfully cut the output of dairy products. It is good news that butter in store in the past 12 months has decreased by 39 per cent. When we introduced dairy quotas, why did we say that those with a quota of less than 200,000 litres would be exempt from any further reductions? I understand that in 1988, when the 2·5 per cent. quota reduction is introduced, it will also apply to small dairy farmers. Why has there been that change of mind? I should be grateful if my right hon. Friend would touch on that in his reply.
Dairy quotas have undoubtedly reduced the output of milk and dairy products, and cereals and oil seed are undoubtedly the bugbear of the CAP today. The last time I spoke on this subject I advocated national quotas in order to share out the pain equally, for there is no doubt that quotas restrict output. We see that with milk, sugarbeet and potatoes. I accept that I have lost the battle to introduce quotas on cereals. Since then we have had price cuts and co-responsibility levies, which are again to

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be extended, but they have never reduced output. Co-responsibility levies are simply a soft option for European bureaucrats to raise more money. They are simply a political fiddle.
Now the new arrival on the scene is stabilisers. Price cuts are to follow the year after a surplus and I dare say that they may work. It is an ingenious but complicated way out of the problem with all this interlinking of price reductions, levies and goodness knows what else. Nevertheless, it will not reduce the surpluses. Against that the farmers are ever set on growing more if prices are reduced. They are assisted in that by plant breeders who reckon that they can improve output by 2 per cent. per annum, as a result of studies in plant pathology, by increasing the output from each acre. Stabilisers will have only a small effect on reducing output and will not achieve our aim.
In the past farmers have been urged to diversify into other enterprises to reduce their dependence on cereals. They have gone into bed and breakfast, growing borage and evening primrose, and some have even planted vineyards. This week's Farmers Weekly tells of a farmer's son who has gone into chopping pasta in Guildford. All that is enterprising, but can only be described as exotic at its best.
What was CAP originally designed for? Among its basic aims was to put money into rural communities, so farmers and those living there should have been the beneficiaries. But that most certainly is not what is happening today. The beneficiaries of today's CAP are store keepers and Russian housewives. Between 50 and 60 per cent. of the CAP is spent on storing and disposing of surpluses. Russian housewives are enjoying a subsidy from European housewives of £60 a tonne for every tonne of grain exported from the Community to Russia. As Opposition Members have said, why should our families pay £10 a week to subsidise Russian housewives? The money is not going to rural communities. I believe that we should rearrange things to ensure that it goes to such communities in Europe, not in Russia.
I welcome set-aside and am pleased that we have moved in that direction, but we must make it work. In 1988 I believe that we have a golden opportunity to introduce set-aside at minimal cost to the overall budget because less money will have to be spent on storing and disposal. Our stores are now emptier than they have been for many years. The prospects for the 1988 harvest are not that great. Those of use who are involved in farming know that we have had an incredibly difficult autumn — the amount of autumn planting has been extremely low in comparison with previous years—and I do not believe that we shall have a monster harvest in 1988. Therefore, we have a golden opportunity to divert money into set-aside rather than to the store keepers and the Russian housewives.
If we have a successful set-aside it will remove the need for stabilisers because we will not reach the targets. Unlike others, I believe that the set-aside should be voluntary rather than compulsory. I also believe that set-aside should be generous so that farmers queue up to take it. I believe that it should be £150 an acre at least. Farmers would then come forward and take the land out of production. If such a rate was set, I believe that we would have a queue of farmers from here to Exeter waiting to take advantage of it.
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As regards all the land in marginal areas being taken out of production, I believe that those who organise the farmers who will be eligible for set-aside can plan where production should take place. Therefore, it will not only be the farmers in the north or in the marginal areas who will take advantage of the set-aside. I accept that set-aside is a form of quota, but I believe that it gives great flexibility to our planners. The costs would be fixed once the amount to be set aside had been established. I urge my right hon. Friend to consider seriously the possibility of making set-aside a great deal more interesting for our farmers.
9.27 pm
Mrs. Margaret Ewing: I followed with great interest the arguments of the hon. Member for Gloucestershire, West (Mr. Marland) about the need to protect our rural communities. It will not surprise him to discover that I wish to devote a substantial amount of my speech to the Scottish rural community, especially as I am the only hon. Member representing a Scottish constituency who has sat through this debate.
I wish to draw attention to some particular Scottish statistics that are measured separately from those for England and Wales. They will place the Scottish position within the context of this subject. In the past decade Scottish net farm incomes have fallen by one third, and that is set against the background of rising interest charges. The overall pressures on the Scottish agriculture industry have been particularly harsh. Investment has fallen substantially — by 17 per cent. in building and ancillary additions to farms, and by 6 per cent. in plant and machinery. That reduction has an overall knock-on effect for the rural community. It deprives youngsters of the opportunity of taking apprenticeships in, for example, agricultural engineering, and it drives more and more people away from the rural communities into the towns, and it is not as though there are presently many jobs in those towns.
Moray is placed within the Grampian region for local authority purposes, and about 30 per cent. of the region's output is totally dependent upon agriculture. If there were a 20 per cent. reduction in farm employment in the region, 3,500 people would be seeking alternative employment. That demonstrates the importance of agriculture to that region.
The various issues that have been touched upon in the debate have similar effects in Scotland as in England and Wales. Every farmer I speak to emphasises the need for the devaluation of the green pound. The Scottish NFU has pointed out that a 10 per cent. devaluation of the green pound would result in less than a 0·5 per cent. increase in the cost of living. I believe that that is a small price to pay to ensure that our farming communities can compete effectively, efficiently and fairly with their opposite numbers.
Much has been said about the set-aside scheme for the cereals sector, but other aspects of the farming industry that are dependent on the cereals sector are crying out for help. The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) referred to the poultrymeat and egg industry, and I agree with what he said. I should like to refer also to the pig industry. Some 50 per cent. of Scottish pig production is based in the Grampian region, and the producers are facing bankruptcy. The industry is based historically in Grampian because of Lawson's of Dyce, which was a major employer until it moved south. The

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farmers there wish the industry to continue. They are angry that Holland will be importing 22 million tonnes of cereal replacer over the next five years, while we are being asked to set aside. That seems strange to them. They are left at a disadvantage, particularly in competition with the Dutch producers, which is unfair. The Minister has mentioned that in previous debates. I hope he will say that he will take steps to eradicate that unfair competition, and particularly that he will bring about the early abolition of MCAs, to ensure that the pig industry has a future.
9.31 pm
Mrs. Gillian Shephard: People in my constituency of Norfolk, South-West, not all of whom farm on grade 1 soil, are realistic about the necessity to reform the CAP and to tackle the problem of surpluses. Our farmers are business men who, like any business men, want a framework in which to plan their future, in which to plan for perhaps reduced outputs in some crops and diversification to others, but above all the opportunity to compete on the fairest terms possible within the European market place and beyond.
The settlement that was announced this weekend moves towards the provision of a framework in which our farmers can work. The legally enforced regulations, provided that they work effectively, will be popular with our farmers, who for some time have been under the firm impression that only British farmers have been keeping the rules, especially with co-responsibility levies.
I know that I must be extremely brief. I should like to have talked about non-agricultural use of land and biotechnology, but I shall confine myself to some remarks about the pig industry. If farming is in crisis, it is most in crisis in the production of pigs.
As other hon. Members have said, it is a cyclical problem, but since the previous crisis in 1983 the industry has done an enormous amount to put its house in order. It does not benefit from direct support, such as intervention price, but producers have studied the market, produced pigs that the market wants, have not over produced, in contrast to their Dutch competitors, for example, and above all have developed their marketing.
I think that nobody has mentioned marketing in the debate. Perhaps no one else present in the Chamber visits supermarkets and butchers as I do, but over the past couple of years I have been struck by the evidence in the retail sector of the industry's determination to market pork attractively — not just joints, but fillets, kebabs, stir-fry, spare ribs, casserole pork and lean pork steaks. That is a good example to producers in the other meat sectors. The pork producers have also cashed in on the healthy eating fashion by demonstrating the many uses of lean pork.
The industry has been assiduous in developing its export markets. A supplier in my constituency has negotiated excellent outlets in Japan and the United States. However, all those efforts have been defeated. Why? Because our producers are being forced to compete against the Dutch, Danes and French, who are able to export their pork to us with a subsidy provided by favourable MCA rates, while our producers have to battle against an export tax from unfavourable MCAs. In effect,
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our taxpayers are spending £5 million a year to help the Danes, Dutch and French put our pig producers out of business. That cannot be right, and it is not good enough.
I know that my right hon. Friend is fully aware of the problem. I know that he is determined to move to an early abolition of MCAs, if possible. I know, too, that the short-term private storage aids will give temporary relief, but pigmeat MCAs should be abolished as soon as possible, otherwise our producers will be forced out of business, only to have their place in the market filled by more imports.
Our farmers are efficient, well organised and ready for change. Like my right hon. Friend, they know that their best interests are to be served by an orderly and sustainable change in agricultural policy. Moves towards the abolition of MCAs and a devaluation of the green pound will enable British farmers to compete fairly with our neighbours, and we must strive to give them that chance.
9.36 pm
Mr. Alan W. Williams: The common agricultural policy brings the European Community into disrepute. If one could hear the call of people in the street, I am sure that an overwhelming majority of them —more than 90 per cent. of the electorate — would be hostile to the CAP. It is nonsense. Food prices and the guaranteed prices of intervention for most products are up to 40 per cent. above world prices. The regulations involved in the common agricultural policy are complex and difficult even for experts to understand. As an hon. Member representing a rural constituency with an interest in agriculture, I can assure hon. Members that the regulations are difficult for ordinary people to understand.
The cost of the CAP, as we have heard, is £19 billion or £20 billion. That amounts to about 40 per cent. of the value of the products. The extent of the subsidy is horrific. The public are well aware of that. What makes it particularly ugly is the fact that most of that benefit goes to farmers who are already rich, while small farmers are still being driven to the wall. The pricing mechanism is wholly based on production: large farms with large outputs receive a large subsidy, whereas small farms with smaller outputs are under great pressure.
The CAP is drastically in need of reform, and we had hoped that the Prime Minister would have achieved something worthwhile for the people of this country last weekend. Instead, she caved in to the French, the Germans and the other members. I shall give only one figure to show that — for expenditure on the EEC next year. The proposal was for an increase from 1·4 per cent. of the VAT base to 1·4 per cent. of GDP. In the circumstances, the Prime Minister settled for 1·2 per cent. of GDP. In today's statement she acknowledged that that was a 25 per cent. increase in our contribution to the Community next year. We challenge that figure. My right hon. Friend the Member for Birmingham, Sparkbrook (Mr. Hattersley) said earlier today that the real figure was an increase of at least one third. My own calculations put it nearer 40 per cent. Even if we accept the Prime Minister's figure, there will be a 25 per cent. increase in our contribution to the European Community next year.
What other sector is receiving a 25 per cent. increase? Will our Health Service or our education service receive

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that much? Our pensioners will receive only an inflation-linked pension with no real increase, yet the Prime Minister bends the knee to the European Community and allows this phenomenal increase.
Let us compare the amounts allocated to the Health Service and the EEC. The cost of the CAP—we have heard it several times this evening—is about £10 a week for every family in Britain. The cost of the National Health Service, as we have heard the Prime Minister say dozens of times over the past few months, is about £20 per family per week. I am sure that if there were a referendum on scrapping the CAP and giving the money to the NHS it would carry a 90 per cent. — or higher — majority. [Interruption.] That is what the majority of the British electorate feel. With the CAP, we are pouring money into a virtually bottomless pit. The Health Service is desperate for resources.
There is agreement throughout Europe that we must dramatically reform the CAP. I give a cautious welcome to stabilisers, even though the Prime Minister again made a major concession by raising the amount from 155 million tonnes to 160 million tonnes. I represent an area with a strong dairy farming interest. When milk quotas were introduced there was a 7 per cent. cut right across the board. The agreement that has been reached is much softer on cereal farmers than the agreement on milk producers a few years ago.
As to set-aside, I cannot but feel that there is something fundamentally immoral about not using land. The problem is that the CAP tries to treat the symptoms, but that results only in problems and absurdities such as growing tomatoes and then subsidising farmers to plough them back into the land. Set-aside is an illogical, immoral absurdity. In effect, it means that we are paying rich farmers for doing nothing. I do not believe that we should pay anybody anything for doing such things.
Farming, through the subsidies, has experienced that sort of feather-bedding for many years. As the Government acknowledge, difficult times lie ahead for farmers. When the recession hits agriculture, the broadest backs that have been doing so well should carry the burden. Small farmers should be protected. We must protect our rural communities and the social structures within them.
We must reform pricing mechanisms and productivity restraints which discriminate against small farmers. When milk quotas were introduced in Germany there was a threshold below which there were no quotas. That helped to protect small farmers. The same should apply to all other pricing mechanisms and quotas. We must protect small farmers to protect our rural communities.
I represent a Welsh-speaking area where the Welsh language is under severe threat. The Government's policies, with milk quotas being applied across the board, are driving small farmers out of business. That poses a strong threat to the Welsh language, to rural schools and to community life. The small farmers who look after the countryside best are being driven out of business. It is large farmers who are bulldozing hedgerows, spraying pesticides and pouring masses of fertiliser on their fields. Small farmers enjoy a much more harmonious relationship with the environment.
It is ironic that the CAP was introduced to protect small farmers. However, it has been perverted. It is guaranteeing fortunes for the very rich and is driving small farmers to the wall—the trend is relentless.
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We need a redistribution of income right across the board in Thatcher's Britain in the 1980s. Rich farmers have had it too good for many years. We should take income from them and, through pricing mechanisms and production restraints, use that money to support small farmers and rural communities. That is what I would describe as a Socialist agriculture policy.
9.45 pm
The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer): I carefully checked the constituency of the hon. Member for Carmarthen (Mr. Williams) because it seemed almost unbelievable that he should represent a farming constituency when we heard his mixture of comments about the common agricultural policy. If we followed his proposals, very few of his farming constituents would be able to pay the bills at the end of the week.
I was sad that the hon. Member for South Shields (Dr. Clark), who opened the debate for the Opposition, used the sort of quotations that can be seen outside London theatres — a few odd words from the middle of a newspaper statement, intended to encourage people to go to see the play. What the hon. Gentleman might have done was to look at the foreign press. If he had done that, he would have seen what our competitors thought about the results of the summit. I quote but one, Le Figaro which is after all a French newspaper. [Interruption.] It is evidently a very pro-British newspaper. Let us hear what it says about the decision:
"To assert that the victor of the Falklands has given way is a sign both of a slight unfamiliarity with Community affairs and of a failure to appreciate the mettle of the Head of Government of Her Britannic Majesty."
That is what that "anti-British" newspaper said.
I feel that it is rather an overestimate of the hon. Gentleman's speech to refer to a "slight unfamiliarity" with Community affairs. The problem is that the Opposition are determined to say two entirely opposite things. On the one hand, they demand that we obtain a price structure that is close to world prices; on the other hand, they complain about the lack of direction, the worries and the low incomes of farmers. They cannot have both at the same time.
The truth is that Opposition Members cannot get by by quoting out-of-date Australian figures about world prices and believing that the farmers will then take their views seriously. The hon. Member for South Shields made it clear that he wanted our agriculture policy to be based on an attitude to world prices involving about £50 a tonne for grain.
Dr. David Clark: That is not true.
Mr. Gummer: The hon. Gentleman may have misstated his case. He must read what he said. I was very careful. He has not given me enough time to say any more.
Dr. Clark rose—
Mr. Gummer: The hon. Gentleman has interrupted on this point on several occasions. If he listens to what I say, I think that he will realise that I am not doing him a disservice. He drew our attention to the £50 a tonne world price for grain, and suggested that the Government would have done a great deal more good if they had come nearer to that price. But that would not do our farmers any good whatever.

795
My hon. Friend the Member for Norfolk, North (Mr. Howell), in his fine defence of the farmer, made it perfectly clear—
Dr. Clark rose—
Mr. Gummer: The hon. Gentleman knows perfectly well that he has already answered my point. I am now answering his point. He also knows perfectly well that I have 13 minutes before the end of the debate, and I intend to answer the comments that have been made.
Dr. Clark: The right hon. Gentleman is not telling the truth.
Mr. Gummer: The hon. Gentleman does not like what I am saying; that is why he says what he does.
The hon. Gentleman went on to say that in the proposals for set-aside farmers would be paid for doing nothing. He knows that that is not true. Farmers will be paid for looking after the land, and there are various forms of set-aside that we are seeking to implement. My hon. Friend the Member for Congleton (Mrs. Winterton) suggested—
Dr. Clark: Will the Minister give way?
Mr. Gummer: No, I shall not give way. I have made that perfectly clear.
Dr. Clark rose—
Mr. Speaker: Order. If the Minister will not give way, I am afraid that the hon. Gentleman cannot intervene.
Dr. Clark: On a point of order, Mr. Speaker.
Mr. Speaker: Order. It is not a point of order. I think that the hon. Gentleman is distressed about something—
Dr. Clark: The Minister is not telling the truth.
Mr. Speaker: Order. Every right hon. and hon. Member makes his speech in his own way, and I have heard nothing unparliamentary so far.
Dr. Clark rose—
Mr. Speaker: Order. The hon. Gentleman must give the Minister a chance to answer the debate.
Mr. Gummer: My hon. Friend the Member for Congleton referred to green fallow. As she rightly said, this is a very new proposal and all the details are before us. She may have misunderstood the proposal. The proposal is not that 50 per cent. should be green fallow, rather if a country agrees to have a green fallow system it can pay only 50 per cent. of the rate for bare fallow. That is where the 50 per cent. comes in and my hon. Friend will agree that it is a less worrying proposal than the proposal that she was rightly concerned about.
I must tell Opposition Members, including the hon. Member for Ceredigion and Pembroke, North (Mr. Howells), that it will not help the farmers to suggest that there is no cost in caring for the land. The truth is that costs will be involved in any system. The purpose of set-aside is to ensure that the costs to the taxpayer are not inflated by the production of food that we do not want. The common agricultural policy alone has not resulted in surpluses. There are surpluses throughout the world. Even India and China can export food, something that we would not have thought possible 10 years ago.
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We are concerned for the developing countries. I know that the hon. Member for Moray (Mrs. Ewing) will want to consider this carefully. I have heard her speak with gratifying support for the developing countries. However, it is difficult to say that we should exclude from this country agricultural products from all other countries, especially as we are part of a group of nations based on a trading community. This Government could not possibly support such a policy. It would be wholly against any reasonable international trading policy to tell the Thais that they cannot export manioc, one of their major products, to Europe. It would also be against the morality of international policy. It would also be wholly against our national interests because we would not be able to sell to those countries if we were not prepared to buy at least some of their products.
I can assure my hon. Friend the Member for Southend, East (Mr. Taylor) that there is nothing in annex V that adds to any powers that the Commission or the Council possesses at present. Many countries in the European Community want to underline the fact that if the European Community cuts back on its production they will expect other surplus producers which subsidise their farmers to do likewise. We would not wish our farmers to bear the brunt of surplus production and leave other countries to produce surpluses to fill the markets.
Mr. Teddy Taylor rose—
Mr. Gummer: My hon. Friend will forgive me if I do not give way. I have already said that I will not give way in the time left to me.
My hon. Friend the Member for Wealden (Sir G. Johnson Smith) rightly referred to the fact that 95 per cent. of the Government's objectives have been achieved. Perhaps we should consider the horrific situation that might have occurred. If we consider the position of other countries in their negotiations, we realise that this is an enormous achievement. Those who wanted to quote selectively from the newspapers did not continue with the quotation from the Financial Times which said that any attempt to leave this to the next discussion would have been worse for Britain and for British farmers. The hon. Member for South Shields should have paid the House the honour of continuing the quotation.
The hon. Member for Glanford and Scunthorpe (Mr. Morley) referred to pigmeat. I agree that pigmeat is seldom the centre of debate largely because it does not have the same kind of regime as other products. He was right to say that pigmeat producers believe that because they receive so little support—only indirect support in the form of private storage aids—they are often not at the centre of the discussion. However, the hon. Gentleman would agree that the discussions were not concerned about the green pound or MCAs. Therefore, we must consider the decisions that will be made in the price fixing where Britain has always insisted that the decisions should be finalised. The Community is committed to the eradication of these by 1992 and the Government are wholeheartedly in support. We need that if we are to have the Common Market and the kind of competition that we all want so that Britain can succeed.
I agree with the point made by the hon. Member for Glanford and Scunthorpe about forests. We are trying hard, through our recent proposals, to get matters under way. I hope that he will support us in the difficult task of

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encouraging farmers to see that forestry can be one of the jobs and that woodlands can be a crop. It is not an easy change to make and I hope that the hon. Gentleman will help us.
I wish to make one point to my hon. Friend the Member for Congleton. We made it clear that we intend to fight for the interests of British sheep farmers, and those battles will continue to ensure that the sheepmeat regime will meet their needs.
We should forget the argument about the wood pigeon put forward by the hon. Member for Carlisle (Mr. Martlew) because it will not go down well with his farming constituents.
Mr. Martlew: Will the Minister give way?
Mr. Gummer: No, I shall not give way. There are many farmers in the hon. Gentleman's constituency who shop in Carlisle, but they will not have much with which to shop if he pursues his wood pigeon policy.
The hon. Gentleman also suggested that, if we allowed sugar to come in from Jamaica, we would have cheap food. It is one of the great triumphs of the CAP that we pay to those who produce sugar in Jamaica a similar sum to that which we pay to those producing sugar in this country. That is one of the ways in which we support the poor economies of many West Indian countries. If the hon. Gentleman is suggesting that we should cut the price that we pay for sugar to some of the poorest people in the world, that is not the way in which I want to reduce the cost of food in this country.
My hon. Friend the Member for Gloucestershire, West (Mr. Marland) rightly said that co-responsibility levies are not the answer to the problem. They are, in the inimitable language used by successive Ministers of Agriculture, a load of old rubbish. We should much prefer not to have them as part of the stabiliser mechanism, but we have ensured that they are a much less important part than the price reduction section of that mechanism and that they are a considerably less important part than other European countries, particularly West Germany, wanted them to be.
We have also ensured that co-responsibility levies do not contain the particular trick sought by some other countries, which would have meant that the major part of
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the cost of the co-responsibility would fall on the backs of British and French farmers and very little upon the backs of German farmers. I agree with my hon. Friend the Member for Gloucesterhire, West that, as in any negotiations, although we have not done all that we should have liked, we have done a great deal more in respect of co-responsibility than anyone would have thought possible before those negotiations.
I have taken the points made by the hon. Member for Moray (Mrs. Ewing) about the problems of smaller farmers and those on difficult terrain. I hope that she will help us to convince Labour Members that the proposition in respect of set-aside will help smaller farmers as well as larger farmers. I hope that she will also help us with our propositions for diversification. She has already raised with me the problems of crofters. I am not ignoring those and, as she knows, I have put those matters to my colleagues at the Scottish Office. Our ideas for diversification are designed to make it possible, not just for those with larger amounts of land, but for those with smaller incomes, to find alternatives. We need to find those answers together. The answers do not lie in further production. Over-production is the result of technical advance, not of any particular system of farming support. Every country must consider and deal with that.
My hon. Friend the Member for Norfolk, South-West (Mrs. Shephard) rightly emphasised that fairness is a crucial part of acceptability. That was why we fought so hard against the unfair policies proposed in the sheepmeat stabiliser regime. That is why we are pleased to have got out of it that headage limit which would have distorted it. I hope that she will agree that we must be fair in that regime, as in others. It would have been odd if we had asked for stabilisers for all the other regimes but not insisted on one in the sheepmeat regime. My hon. Friend is right to press the fact that the pig industry, of all industries, depends greatly on the rate of the green pound. That is why we are committed to the phasing out by 1992 of the differences that make for that unfairness.
Altogether, the proposals from Brussels mean that, for the first time, we have a clear budgetary ceiling on spending on the CAP.
It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Taxis and Drivers' Safety
Motion made, and Question proposed, That this House do now adjourn.—[Mr. Alan Howarth.]
10 pm
Mr. David Amess: When I was first elected, an article described me as a member of the new breed of Conservative taxi driver Members of Parliament. I know that this description was meant as a compliment, and that is what I took it to be. Whether they cut me up in traffic, or ignore me when I hail them, taxis and taxi drivers are an essential part of the British way of life. I am sure that most people at some point have welcomed the assistance of a taxi.
My hon. Friend the Minister felt at first hand the warmth of taxi drivers in Essex when he addressed the annual conference of their association in Basildon last year. He had the task of explaining the details of Government proposals for taxi sharing and so on. My lasting memory of that conference will always be the point at which one person accused my hon. Friend of purchasing his suit from Savile Row, to which he replied that it had been purchased at Marks and Spencer. After that my hon. Friend could do no wrong, and I trust he felt that his visit was more than worth while.
My first point is about taxis and the accommodation that they are able to offer handicapped people. At the moment about 10 per cent. of councils—32 out of 360—grant special licences to taxi owners for vehicles to carry handicapped passengers. Although a licence is not strictly necessary to convert a taxi, there is little or no incentive to make it worth while. The purpose of the specially adapted vehicles is to provide a much needed service for handicapped peope who find it too difficult to use transport facilities.
Following deregulation of the bus services, some rural areas are becoming increasingly isolated, as the routes to and from them are uneconomical to run. This particularly hits handicapped people. I hope that my proposals will fill that gap. In Basildon we have one licensed taxi which is used to transport handicapped people. It has been so successful that two more are to be granted licences in the coming year. Over 500 wheelchair passengers were carried last year, and the response that has been reported by the driver is so great, and the service is so appreciated by disabled people, that he has every confidence that it would be successful if it were enjoyed throughout the country. The scheme works and I should like to see it extended to as many councils as possible.
Will my hon. Friend examine the possibility of setting up a pilot scheme in just one or two councils, under which new hackney licences are not issued except to taxis contracted specifically to handle disabled passengers without their having to leave their wheelchairs? Business would not suffer, as the taxis would be able to take able-bodied passengers as well.
Taxi drivers operating the scheme for the disabled complain that at present they have to book ahead for disabled people. It would be much simpler if more taxis were capable of providing the services on an ad hoc basis. I should add — I am sure that my hon. Friend the Minister will appreciate this — that the scheme I am suggesting would not cost the Government a penny.
It is a case for much sadness and concern about the state of society today when we have to consider the
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increasing incidence of violence towards property, animals and, most serious of all, people. It seems that life nowadays has somehow become cheap. The incidence of violence is reaching such proportions that although such events are reported daily in our newspapers they gain little or no attention. My right hon. Friend the Home Secretary recently delivered an excellent Peel Memorial Lecture speech in which he made some telling points about the increase in violence and to which he posed some possible solutions. Any measures would be taken in the hope of finding a long-term solution to the problems of violence. Of course, my hon. Friend the Minister has to deal with the circumstances with which we have to cope now.
In July last year I asked my hon. Friend the Minister about his policy for protecting taxi and private hire drivers from attacks by passengers. I asked him what measures were planned to increase their safety. My hon. Friend said that he had no reason to believe that it was a serious problem, but that if I had any evidence to the contrary I should give him that information. I have to tell him that I am able to produce evidence that will show clearly that there is a serious problem, and I hope that my hon. Friend will wish to tackle it.
Last year there were 116 attacks on taxi drivers and three taxi drivers were murdered. I wish to tell my hon. Friend the Minister about some of those attacks. In July 1986 there was a report in the Evening Standard with the headline,
"Minicab driver's gunman ordeal."
The article went on:
"Police were questioning a man today after a minicab driver was forced to drive through London at gun-point. The incident happened just after midnight when the taxi went to an address in Clapham to pick up a passenger who then pulled out a gun. The shabbily-dressed attacker with a scar on his face held the gun at the driver's stomach and forced him to drive to Whitehall."
In June 1986 there was a report in the Daily Telegraph about a taxi driver whose throat was cut. It said:
"A taxi driver had his throat cut from ear to ear by a six foot bearded and bespectacled customer yesterday. Mr. James Sinnot, 40, of Roland Avenue, Runcorn, Cheshire, drove half a mile to hospital with blood gushing from a wound six inches long and three-quarters of an inch deep".
The attacker robbed him of just a few pounds and 50 police were involved in the chase after that assailant.
Last year there was a report in the Daily Express of a taxi driver being attacked by a mob. It said that taxi drivers were boycotting one of Britain's worst council estates after a cabbie was attacked by a mob of 25 young people.
"The gang on the Stonebridge estate, Harlesden, North London—armed with wooden staves, a crowbar … tried to overturn Paul Samuel's cab after failing to lever open the locked doors".
It went on to say that the police were extremely worried about that area, where there were constant outbreaks of violence by up to 200 young people.
We read about a "murder charge" in The Times in August last year, which stated:
"A youth aged 16 was charged last night with the murder of a minicab driver. Mr. Dudley Young, aged 47, a father of four, was stabbed seven times in the chest and stomach, allegedly during an argument over a fare in south London … The body of Mr. Young … was found after his car had hit a wall."
We then learnt the circumstances of the teenager who was charged.
Finally, only this year we have read about a
"Black cab in foiled bank raid".

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The article stated:
"An armed man hired a taxi to act as an unwitting accomplice in a foiled bank raid yesterday.
The well-spoken man hired a black taxi in Harley Street, central London, and asked to be driven to the Coutts bank branch at Cavendish Square, Marylebone.
There he told the unnamed driver to wait while he 'popped into the bank to pick something up', police said.
The man walked into the bank, pulled on a black balaclava and produced a gun … He then asked the driver to take him to Baker Street … 'The cab driver didn't have a clue that anything was afoot', police said."
The attacks that I have outlined tonight were extremely serious, and there is reason to believe that such incidents are increasing. Forty-three of the attacks were physical assaults by one or more assailants, 39 attacks involved knives, 12 attacks involved the use of guns, and all the other attacks involved various weapons, for instance, belts, bottles and metal weapons.
Some taxi drivers have resorted to carrying weapons for self-defence. Many admit to carrying weapons. I know that there has been widespread reporting in the press about the use of stun guns. Of course, the taxi drivers understand that the use of such retaliatory weapons is illegal.
My hon. Friend should recognise that, although I have outlined several incidents tonight, we believe that apparently only one in ten incidents of assault are reported because many people cannot he bothered to go through the process of reporting them to the police.
The alarm system that I should like my hon. Friend to consider is the most favoured. It is a floor stud-operated alarm which emits a high-pitched noise and operates the hazard warning lights on any taxi. I understand that strobe or flashing lights would not be permitted, and that a noise alarm would not necessarily be permitted. At the moment, the construction and use regulations of the Transport Act 1985—regulation 37(4)—mean that such alarms can be carried only on vehicles such as buses. I am asking the Government to include taxis as an exempted vehicle under the regulations. What I am suggesting is a modest measure, and I advise my hon. Friend once again that it would not cost the Government any money.
The other day a taxi driver said to me that the violence on the streets was coming into the cabs. That is a shocking indictment of society today. The system that I am suggesting is universal and would be usable by both black taxis and minicabs.
Some drivers feel that even to mention the fitting of alarms is dangerous, as some people will see that taxi drivers are capable of being attacked. They believe that the fact that people would recognise that taxi drivers are carrying money might make them more liable to commit an assault.
I know that when my hon. Friend the Minister addressed the Essex Taxi Association's annual general meeting last year he listened sympathetically to the points that were made by those who attended the meeting. Following the question that I put to him last year, I hope he will agree tonight that I have produced the evidence that, sadly, the incidents of assault are increasing. Taxi drivers, who are recognised by the British people as carrying out a very useful function, deserve our support and our protection. I hope that my hon. Friend the Minister will support me tonight and give them that protection.
10.15 pm
The Minister for Public Transport (Mr. David Mitchell): In his typically ebullient way, my hon. Friend the Member for Basildon (Mr. Amess) has raised an important matter which affects the taxi trade. I am very much aware of his keen interest in that trade from his attendance al the meeting in his constituency to which he referred.
My hon. Friend has raised two questions. The first relates to the use of taxis to carry people who are dependent on a wheelchair. As he said, a good deal of progress has been made in London since the assistant commissioner who is responsible for the public carriage office decided in 1985 that any new type of taxi approved for use in London would have to be capable of carrying a wheelchair. I can tell my hon. Friend that the decision was taken partly at least at the suggestion of my Department. The new Metrocab does, as he says, comply with that requirement, and I am happy to say that there are already more than 250 of them operating on the streets of London. I understand that new Metrocabs are coming into service at the rate of about 20 a week. The other manufacturers of London taxis — London Taxis International—are already producing the FX4W which is capable of carrying a wheelchair and I know that this is widely welcomed by people who need to use wheelchairs.
My hon. Friend urges me to go further and take some initiative elsewhere in the country. Here I am afraid I must be rather more cautious. The conditions to be prescribed for taxis outside London are a matter for the district councils which license them, unlike the system which operates in London, and I have, of course, noted the examples which he has quoted of authorities which have made the purchase of a wheelchair-carrying vehicle the condition of issue of new hackney licences. I am by no means sure, however, that that is the right way to proceed in all cases. My hon. Friend has pointed out that such a move would involve no cost to the Government. No doubt he sees that as an attraction. That may be true, but it would certainly involve a cost for the purchaser of a new taxi—perhaps someone who has only just been able to get together the money to set up in business for the first time on his own.
The House should consider whether it is right that in all areas of the country—in small towns and villages, as well as in major cities—any person coming into the trade for the first time should be compelled to buy a relatively expensive London-style taxi equipped to take a wheelchair. They are the only kind of vehicles that are likely to be able to meet that requirement. I would remind my hon. Friend that it is only in a minority of areas that the standard London cab is a prescribed requirement for taxi operation. I believe that we would have to think very carefully before making it a requirement for the country as a whole, especially if the new rule were to be imposed — as it must be — in such a way as to discriminate against new entrants to the trade.
However, in response to the specific suggestions from my hon. Friend that, as an experiment, councils should reserve a couple of licences for taxis with wheelchair facilities, I have to say that I find it an interesting and thoughtful suggestion, but it must be one which local authorities are persuaded to introduce, for they have the power of licensing. It may well be that, either through his connections with the taxi trade or through disabled groups, it will be possible to draw his suggestions to the

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attention of local authorities who license taxis and hire cars in their areas to the point at which they are prepared to undertake the experiment that my hon. Friend has suggested. Perhaps this is an interesting way forward, and I urge my hon. Friend to pursue it through those two channels.
My hon. Friend has referred to the consequences of deregulation of buses in rural areas. I would by no means accept that deregulation has diminished the supply of bus services to rural areas. In many areas the opposite may be true. My hon. Friend may be surprised to know that in the shire counties 17 per cent. more mileage is being operated by buses since deregulation than before. In any case, if the local authority considers that further buses are required, it has the power to provide those services that it regards as socially necessary. As local authorities have saved just on £40 million of taxpayers' and ratepayers' money, there must be very few places in which they cannot afford to provide further bus services if they are needed.
As this is a debate about taxis, I would like to stress that the 1985 Act did a great deal to open up new ways in which the taxi trade could improve its business by offering new services to the public. I hope that the trade will be more active in future in taking up opportunities, such as taxi sharing, and its new ability to run regular scheduled services, just like a bus, over set routes. I use the opportunity of the debate to express the hope that local authorities will do more to encourage such activities by arranging their tenders for subsidised services by bus or taxi-bus in such a way that they are attractive to the taxi trade. I hope that they will take the opportunity to promote taxi sharing.
One of the things that has most disappointed me since deregulation is the extent to which the taxi trade has not taken up the opportunities offered by the taxi-bus, especially in the area of tendered services and of some of the commercial services. Early-morning and late-night services that do not warrant the running of a full-size bus are ideal for a taxi-bus operation. I blame not only the taxi trade for lacking initiative in taking up opportunities, because very often local authorities have not made it clear, easy and attractive for taxi operators to bid for those contracts.
The other matter raised by my hon. Friend was crime. All hon. Members are concerned about that. The latest figures show that, even though there has been a welcome drop in the level of crime in general, crimes of violence against the person continue to increase. We all know that among the most frequent victims of such crimes are servants of the public who are attacked by vicious, often drunken, hooligans while actually providing the service on which the public relies.
It is fair to say that the Department of Transport has been at the forefront of moves to develop a co-ordinated response to these problems across the whole field. It was one of our initiatives which led to the establishment of a joint committee chaired by the Health and Safety Executive and bringing together representatives of the CBI, the TUC and the Home Office. Its purpose, and that of other Government Departments concerned, is to pool the ideas and experiences of all those who have been involved with problems of violence in different types of work place.
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My own Department established a working group on violence to road passenger transport staff which published a report in 1986. The working party has now been converted into the Standing Committee to which my hon. Friend has referred. Its objective is to keep up the pressure on this issue and to ensure that everything possible is done to fight the kind of threat with which bus crews are all too often faced. In the light of what my hon. Friend has said, I should like to take the opportunity offered by the debate to issue an invitation to the taxi trade to be represented on that committee. In view of my hon. Friend's speech and my concern in the light of what he said, I shall tomorrow morning instruct officials to get in touch with the trade to make arrangements for such representation.
My hon. Friend has raised the issue of the green light taxi system which has been developed with the assistance of the East Anglia Federation of Taxi Associations. The problem is that the system incorporates a flashing green light and an audible distress call which, I understand, is designed, when switched on, to be so strong as to make any occupant want to leave the cab immediately.
Mr. Amess indicated assent.
Mr. Mitchell: My hon. Friend agrees. I understand that it is so effective that there must be real grounds for concern about what the effect might be if, for example, the system were switched on by accident when there was an elderly passenger in the cab. We must think about that.
There are also, I gather, additional sound systems and revolving lights which the driver can fit if he wants. As against all this, the Road Vehicle Lighting Regulations 1984 require lamps on vehicles to show a steady light at all times. There are exemptions in the case of the blue, amber and green beacons which certain emergency vehicles—such as fire engines, ambulances, police cars, doctors' cars and road maintenance vehicles — are authorised to use in an emergency. But the view has always been taken that it is essential to exercise very tight control over the circumstances in which such exemptions can be authorised, otherwise the value of the exemption will be undermined, and vital emergency services will not get the priority that we all recognise that they need.
The question we must ask ourselves is whether the arguments put forward by my hon. Friend are strong enough to justify a further exemption for taxis. Let us remember that we are talking about a completely new system, untried and untested, which has, so far at least, been developed in a small way. The developer has not, as yet, contacted my Department for discussion or submitted his system for testing. I suggest that he does just that. We can then take it from there. I must warn my hon. Friend that we shall take some convincing that the degree of protection which this particular system provides for the taxi driver is really appropriate to justify a further exemption from the regulations.
More constructive is the fact that there are other kinds of systems with which a taxi could be equipped without contravening any regulations. For example, there would be nothing to prevent a taxi from being equipped with a steady light, which could be switched on in an emergency, together with a sign showing a suitable message such as "Help" or "Emergency". Perhaps my hon. Friend would like to explore this kind of solution with his constituents.
We will look sympathetically at any proposals for an alarm system which are put before us. We would very

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much welcome representation of the taxi trade on the Standing Committee, to which I have already issued an invitation this evening and which is already advising us on the kind of action that can be taken to counter violence
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against bus staff. It would be helpful to extend its activities to cover criminal violence against taxi drivers and others in the taxi trade.
Question put and agreed to.
Adjourned accordingly at twenty-eight minutes past Ten o'clock.