Agriculture

HC Deb 27 February 1989 vol 148 cc27-110

[Relevant European Community Documents: Nos. 10140187 and 10419/88 on use of milk co-responsibility levy funds, 8502/88 on management and control of public storage of agricultural products, 8951/88 on the pigmeat market, 9658/88 on co-responsibility levy on cereals, 9275188 on aid for conversion of agricultural production and 10416/88 on extensification of agriculture.]

3.48 pm

Dr. David Clark (South Shields)

On a point of order, Mr. Speaker. May I seek your guidance? You will recall that during last Tuesday's debate there was much reference to an important report by Professor Southwood on bovine spongiform encephalopathy. In the course of that debate, the Minister acknowledged the importance of the report and promised that it would be published. Within the past half hour he has kindly sent me a copy. It has come to our attention however, that instead of coming to the House with a statement and allowing hon. Members to cross-examine him, the Minister has called a press conference for later this afternoon outside this House. As the report is extremely serious and links animal health with risks to human health, and as there were two parliamentary questions on the Order Paper for answer on Thursday in the names of the hon. Members for Bromsgrove (Sir H. Miller) and for Torridge and Devon, West (Miss Nicholson), can you advise us as to how we can get the Minister to treat the House with the courtesy that it deserves, by answering to the House rather than to the press?

Mr. Speaker

I hope that that might arise in the debate that we are about to have. Whether Ministers make statements is not a matter for me.

3.50 pm

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

I beg to move, That this House takes note of European Community Documents COM(89)40 on the 1989 Common Agricultural Policy price fixing proposals, Nos. 4536/89 on agricultural markets in 1988, 8960/88 on the sheepmeat regime, 10083/88 and COR 1 on imports of sheepmeat from New Zealand, and 9629/88 on cereals incorporation in animal feed and of the Government's intention to negotiate an outcome on all these measures which takes account of the interests of United Kingdom producers and consumers and of the need to keep Common Agricultural Policy expenditure for 1989 within the Budget figure and for future years within the budgetary guideline. The House has an opportunity for a wide-ranging debate on agriculture. There is much ground for me to cover in commenting on all the issues set down on the Order Paper. There are a formidable number of issues, but I promise to be as brief as I can and I hope to cover most of them. Without preamble, I will deal first with the central element of the debate—the Commission's proposals for agricultural prices in 1989–90 and related measures.

I should like to deal at the outset with a ludicrous and unwarranted charge by the Opposition which I would have regarded as too petty to mention had not the hon. Member for South Shields (Dr. Clark) tried to build it up over the weekend. That is the suggestion that the debate has been delayed. The truth is the exact opposite. We are holding it as early as possible so that the House can comment on the price package before we get down in earnest to the negotiations in the Agricultural Council. The debate is being held much earlier than last year, when it was held on 5 May. It is earlier than in recent years altogether. Before this year, the earliest occasion since 1984 was on 18 March. The debate could not possibly have been held earlier because last Monday I was at the Anglo-German summit in Frankfurt and, much more importantly, because the Select Committee on European Legislation needed to carry out its scrutiny first. I am grateful to the Committee for the work that it has done. I had an opportunity last week to give evidence to it. There is no substance in the Opposition charge.

With regard to the substance of the debate and the documents, I will begin with the price proposals for 1989–90. As the House is well aware, the negotiations on the Commission's price proposals are an annual event and in the past they have been protracted. Last year's settlement in July was painfully late. The Spanish presidency has set itself the commendable target of reaching a settlement in March or April. I am happy to work to that timetable and I hope that we shall be able to reach agreement in good time so that producers may make their decisions in the clear knowledge of the support framework that will obtain in the 1989–90 marketing years.

In making its proposals, the Commission emphasises that it has been guided by a number of principles. By and large, we find ourselves in agreement with most of the principles outlined in the documents. However, two of them are especially important. The first is the need to make production more market oriented. I firmly endorse that. The Council agreement of last February sent a clear message that agricultural production must become more attuned to the needs of the market place, and that support under the common agricultural policies should not be the major determinant in the operation of markets. The last price settlement reinforced that message.

There is still a way to go in reforming the CAP. I therefore agree with the Commission that these price negotiations should result in increased market orientation. This means, in particular, maintaining the restrictive price policy that the Community has followed in recent years, and continuing the process of making intervention less a market outlet and more a final safety net in the market. In those circumstances, it is logical that the Commission should generally propose a freeze in common prices.

At the same time, the Commission has rightly made it clear that it has no intention of adjusting the previously agreed stabilisers, which should be allowed to continue to work automatically when production exceeds the given levels. In all probability they will have the effect of reducing prices further for a number of commodities in 1989–90. There are two good reasons for that. First, while we have already made considerable progress in reducing the excess surpluses in most commodities, we cannot relax the pressures and allow them to grow again. Most people now recognise that the amount of taxpayers' money that we were spending on storage and disposal of surpluses was extremely wasteful of economic resources. Stabilisers are addressed precisely to that issue and must be allowed to work.

Secondly, one of the biggest threats to the CAP and hence to our farmers would be failure to achieve a successful outcome to the GATT Uruguay negotiations. In those negotiations to date, we have rightly claimed credit for reforms that we have already achieved. It would weaken our position at a crucial stage in the negotiations if we were seen to be going back on those reforms.

The House will be well aware that the new legal tests on budgetary discipline play an important part in the annual CAP price proposals. The cost of the package must be containable within the agricultural guideline. The Commission's latest estimate shows that in the 1989 guideline there will be headroom of the order of 2.1 billion ecu, or about £1.35 billion. Additionally, the Commission's proposals would save 28 mecu, or £18 million. In 1990, the guideline is provisionally estimated at about 30 billion ecu, or about £19.4 billion. No forecast of expenditure has been made, but the Commission has assured the Council that the cost of the package—94 mecu, or about £61 million—can he accommodated without difficulty.

Given those figures, some people have already started to argue that we can take the pressure off CAP reform, but the Commission—rightly, I believe—has warned that the effects of the drought in North America have a considerable impact on the headroom in the guideline. It would be irresponsible to allow this temporary improvement to distract attention from the long-term need to work, within the Community and more generally in GATE, to reduce the over-production and excessive support worldwide to which I have already referred.

Moreover, the guideline is a ceiling not an entitlement. Eating it up now by a generous price settlement would only store up trouble for the future, making it much harder and more painful to control expenditure when markets are not so favourable. By the future I could even mean next year's price negotiations. It makes no sense to relax the brakes now, possibly adding new aids, as some member states would wish, only to have to take further much more restrictive measures next year, which could be more damaging to our farmers.

Another requirement of budget discipline is that if the outcome of negotiations shows Council willingness to adopt a more expensive package, Finance Ministers must be involved in the decision-taking process. It was not necessary to invoke this procedure in 1988 as the Commission took management decisions which fully offset extra costs. If any changes increasing costs are made to this year's package, I shall press for equivalent savings.

As I have said, the Commission draws attention in its proposals to the need to tackle the problem of CAP fraud. This is a major principle in the Commission document to which I shall refer. It is an issue that I have been raising regularly in Council meetings since becoming Minister and there is no question but that the United Kingdom has been raising the question of fraud in the CAP more than any other country. I am therefore pleased to see the prominence now being given to it. It is largely as a result of pressure by the United Kingdom Government that we now have first, an anti-fraud unit established in the Commission and, secondly, this new emphasis on the subject. What we now need is action, and in the initial comments that we all made on the package in the Council on 13 February I devoted a large part of my remarks to this subject and to a suggested action programme. I will list briefly some of the points.

In its document, the Commission suggests that there is a need to strengthen both the checks that member states make to prevent fraud, and the penalties applied when fraud is detected. We agree. I believe that we need clear operational rules and to agree uniform standards so that member states all understand what is required and apply the rules consistently. I shall promote and support appropriate and cost-effective changes in that area.

I welcome the role of the Court of Auditors in examining the value for money of Community policies and their administration. It has recently highlighted specific weaknesses both in present rules and in the way in which they are being applied.

The Scrutiny Committee draws the House's attention to the importance of the European Court of Auditors' report on intervention. I welcome the Commission's initiative in setting up a working party to study the recommendations of this report. There is a clear need to improve the controls over intervention stocks. I have asked for a discussion in the Council before the end of June, in the current presidency, so that we can consider the working party's report and, I hope, appropriate Commission proposals to tighten up Community rules in this important sector.

The Court of Auditors' findings on export refunds contained in the annual report on 1987 are also worrying. I support strongly the court's view that there should be a minimum level of physical checks on exports, and that such checks should take account of the value of the refunds to be paid and the areas of greatest risk so that there is concentration on the areas that will reap the greatest returns in terms of effort expended. We shall also follow up the court's ideas for Community rules on taking samples and on tightening the system of proofs of arrival. I have pressed the Commission and the Council to agree to the incorporation of the court's recommendations in a regulation which would require all member states to meet those standards.

I have emphasised the importance of following up those two reports by the Court of Auditors, but at present there is no guarantee that any action will be taken on special reports although annual reports are scrutinised in Brussels and by the House. In my view it is essential for the Council to agree a procedure for the future so that the necessary action can be taken on all the court's reports and I have pressed for that. It is also essential that in considering any future policies or major changes to regimes the susceptibility of any new proposals to fraud, or indeed mismanagement, should be much more carefully considered and given greater priority. I believe that this is a vital consideration in examining any changes. Unless we get the system right from the outset and limit the scope for fraud as much as possible, however good the system is thereafter we shall run the risk of further fraud. I am glad to say that we are now beginning to get that message through. I have dwelt on the fraud issue because I know that it is of great concern to the House and to the country generally, as indeed it is to me. Now that the Commission is considering the matter seriously, I am anxious that we should have a major drive in this area.

As is the normal practice, the price proposals themselves fall into three distinct parts. The first part sets out proposals for institutional prices for 1989–90. Secondly, there are proposals for related measures. Thirdly, there are proposals for agrimonetary changes. On prices, the Commission has generally proposed a freeze. However, reductions are proposed for sugar, indica rice and certain fruits and vegetables, some types of wine, field beans and certain types of seed. The Commission also proposes a further reduction in the price of durum wheat, and an increase in durum production aid. Increases are proposed in rates of aid for hemp and fibre flax and for certan types of wine. The proposed cuts are generally in line with the restrictive price policy essential if the process of CAP reform is to continue. We therefore support them, although the Government oppose the increases that I have just mentioned and believe that there is scope for some reductions in support where the market situation indicates that that would be appropriate—for example, in the fruit and vegetable sector.

Mr. Michael Shersby (Uxbridge)

Does my right hon. Friend agree that there is a risk of increasing budget expenditure if, for instance, continental farmers grow non-quota beets and compensation has to be paid to the African, Caribbean and Pacific ocean states? What is his attitude to that?

Mr. MacGregor

I shall be dealing with sugar almost immediately. I shall then be able to respond to my hon. Friend's intervention.

First, however, I stress the point that I was about to make. When talking about changes in price policy and changes in support prices, it is often forgotten that we are talking about support prices, not prices in the market place.

The Commission has proposed a 5 per cent. cut in sugar support to prevent prices for sugar beet getting too far out of line with those for other arable crops. That is the way it has put it. I acknowledge the case that the Commission has made for a reduction in price, and we welcome any proposals that will carry forward the process of CAP reform. On the other hand, sugar is a complex part of the CAP. Any cut in price has major implications for domestic growers and processors, for ACP countries which export sugar to us under the Lomé convention and for the sugar cane refining margin. There are also complicated public expenditure implications. We need to ensure that these problems do not outweigh the benefit of any price cut, and I shall certainly wish to address these issues in negotiations on the price package before we reach a final decision. As in all these matters, that includes listening to what the House has to say today on these matters.

I shall concentrate on just two of the Commission's proposals for related measures. The first is the reduction of the level of monthly increments and access to intervention, where appropriate, in the cereals, rice, oilseeds and proteins sectors. The House will recall that the Commission proposed reductions in the level of monthly increments in 1988. The final settlement included reductions in these increments, though smaller than the original proposals. This year the Commission has proposed a further 25 per cent. reduction in the level of the increments, as well as deferring the start of intervention by one month in 1989–90 and a further two months in 1990–91. For the cereal sector, this would delay the start of intervention until November for the forthcoming harvest and until January thereafter.

These proposals on delays and intervention are generally welcome and would represent a significant step in reducing the role of intervention in determining the operation of the markets for these commodities. This should help to ensure the objective that we have set ourselves—that intervention should be used only as a last resort, as a final safety net, and not as an alternative market outlet. I am not convinced that the change in the intervention arrangement needs to be phased in over two years. I am doubtful, however, about the wisdom of reducing the level of the monthly increments for oilseeds and proteins, given the substantial price cuts for oilseeds in recent years and the comparatively severe nature of the stabiliser for oilseeds and proteins. Adoption of this proposal could lead to producers switching back into surplus cereals. The result could well be that the change would turn out to be more expensive for the Community budget. I think that the House would agree that that would not make sense.

The second of the related measures is the proposal to extend stabilisers in the fruit and vegetable sectors.

Mr. Ralph Howell (Norfolk, North)

I am concerned that my right hon. Friend is still suggesting that we should be cutting back on cereals. According to the Food and Agriculture Organisation, cereal stocks are at a dangerously low level. The FAO is calling for additional production of 200 million tonnes to bring stocks up to the safety level. It is calling for another 100 million tonnes to be produced to allow for the ever-increasing population that the world has to feed. The dumped market price of grain has just about doubled in the past year, yet we are still acting as though there were a huge surplus. I find that strange, and I think that we are on a most dangerous course.

Mr. MacGregor

If my hon. Friend turns out to be right about supply and demand in cereals, no one will be more pleased than I, but the threat that has been hanging over us in recent years and which has been the most difficult to deal with has been that of surpluses worldwide. Those surpluses have been driving down the world market price and increasing export refunds for the 30 million tonnes, approximately, that we have to export every year. This has been extremely expensive for the Community budget. In addition, there has been the risk of an international trade war in cereals, with no one benefiting at the end of the day. If my hon. Friend turns out to be right, I shall be delighted, but we cannot be sure that the position is as he describes it. The drought in north America last year has had a major impact on the present situation, but we cannot rely on continuous droughts and we know that a large proportion of the American land that was set aside is now coming back into production. We continue to have a substantial need to export cereals to Third world markets. Although world prices have risen, there is still a great difference between prices in the Community and prices coming out of intervention and the world price. We face an expensive arrangement in disposing of the surpluses through export refunds. There is still a problem of surpluses and the stabilisers are designed to correct it. There must be careful monitoring in the years ahead. I am quite sure that that aspect will feature in the GATT Uruguay round.

The second of the related measures extends stabilisers in the fruit and vegetable sector. The impact in the United Kingdom of any changes in this sector will be very small, but the sector is of great interest to us because it also needs the application of stabilisers and as a net contributor to the Community we are, as taxpayers, paying for the regimes. We therefore have a vested interest.

The Commission has proposed the introduction of stabilisers for two further products—apples and cauliflowers. That is sensible because both those commodities have been subject to substantial withdrawals in recent years. The extension of the stabiliser mechanism to them would mean that the vast proportion of expenditure in that sector would be covered by stabilisers. The Commission also proposes to extend the application of the stabiliser for some citrus fruits sent for processing and to extend processing aids to small citrus fruits. The first step is logical as it would subject both the main supportive disposal mechanisms—withdrawal and processing—to a common mechanism. However, we have doubts as to whether the extension of processing aids to small citrus fruit is justified and I shall be pressing the Commission to justify that proposal.

The third aspect of the price package relates to the agrimonetary proposals. Those are set against the background of the overall objective, to which both Council and Commission are committed, of eliminating real monetary gaps and therefore monetary compensatory amounts by 1992. As the House is aware, that is an objective for which the United Kingdom Government have strongly pressed. I believe that it is an essential aspect in achieving a single market in agriculture in 1992.

Devaluations or revaluations are proposed in this package for all member states with monetary gaps as a further stage towards that objective. For the United Kingdom, the devaluations already secured—the most recent of which took effect from 1 January 1989—taken with the strengthening of sterling, mean that our MCAs are now 24 to 29 points smaller than they were two years ago and are zero for beef, eggs, poultry and pigmeat. The Commission now proposes that one third of our monetary gaps, as they were at 1 January this year, should be removed in the price fixing. However, in spite of the agreement that I secured last year, it looks as though the Commission is proposing a faster dismantlement for those member states whose currencies are in the narrow band of the exchange rate mechanism. I have made it absolutely clear that I oppose any discrimination between ERM and non-ERM members. We shall take a firm view on the agrimonetary proposals and on the precise details, as is usual, in the later stages of the negotiations and in the light of developments in the sterling exchange rate.

Mr. Robin Maxwell-Hyslop (Tiverton)

Will my right hon. Friend clear up one point? When he says 1992, does he mean in effect 1993, that is 31 December 1992 or 1 January 1993? I think that many people misunderstand that terminology.

Mr. MacGregor

We are looking at three stages. I would hope that that means the marketing years 1990, 1991 and 1992. We would be seeking to get the changes completed by January 1992.

With regard to the price package, the Commission has estimated that the proposals would reduce average common support prices by 0.2 per cent. in the European Community as a whole. However, after taking account of the proposed green rate changes, support prices in national currencies would rise on average by 0.6 per cent. For the Community as a whole, that would represent a cut in support—again, I stress that we are talking about support prices and not market prices—of 3 per cent. in real terms. In the United Kingdom, support prices would rise on average by 1.6 per cent. taking account of the proposed green rate devaluations. That could add about £50 million to aggregate farming incomes in a full year. The proposals would have no measurable impact on the retail food price index or the RPI.

With regard to other aspects of the documents before us today, I wish first to consider the sheepmeat regime. The reforms of the sheepmeat regime are important proposals which would affect the United Kingdom particularly because we are the biggest producer, exporter and consumer of lamb in Europe. The Commission's proposals aim to create a single market in sheepmeat, without charges or restrictions, by removing all national and regional variations and concentrating support through a common ewe premium payable in instalments and subject to headage limits. The premium would be calculated on the basis of a single EC-wide average market price, but with three regional coefficients reflecting production differences. That would be achieved by 1993 with a transitional period during which existing variations would be phased out. It would—

Dame Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend give way?

Mr. MacGregor

I will give way when I have finished this sentence.

It would include the ending of the separate British stabiliser.

Dame Elaine Kellett-Bowman

That is exactly what I wanted to know. I thank my right hon. Friend.

Mr. MacGregor

I am glad to have been able, for once, to answer my hon. Friend briefly and completely satisfactorily.

The Commission's proposals have been extensively criticised by British sheep interests, most particularly because they involve the abolition of the sheep variable premium and also because of the headage limit which, as I have made clear, we oppose.

Mr. John Home Robertson (East Lothian)

That is what the Minister said about beef.

Mr. MacGregor

Yes, but we negotiated a substantial improvement in the headage limit on beef.

I have always stressed in Brussels the advantages of the variable premium schemes. The Commission's proposal on the variable premium is, however, just one of a number of proposals to abolish features of the present regime which give specific benefits to particular parts of the Community. For example, France would no longer enjoy special protection against imports from third countries, or the protection which clawback gives against imports from Great Britain. The Mediterranean member states would lose the concessions which give them a bonus on their ewe premium rates derived from the rate payable in France. In the comparatively brief discussions that we have had in the Council so far, therefore, the proposals have been criticised by most member states concerned from a wide variety of different points of view.

It is difficult to predict the outcome of these discussions on the future for the regime or when that outcome may be achieved, but I shall seek to ensure that there is a fair and affordable means of support to our sheep sector which ensures competitive terms to enable the United Kingdom to capitalise on its natural advantages as a sheep producer.

Mr. Ron Davies (Caerphilly)

Will the Minister confirm that, in effect, he has just announced the end of the variable sheep premium in Britain? Can he tell us when the last premiums under the present scheme will be paid?

Mr. MacGregor

No, I would not confirm that. The discussions are still at a very early stage and it is not clear in which direction they will go. There are a wide variety of different points of view about the Commission's proposals and I would expect pretty intensive negotiations. It would not be right to say that the end of the sheepmeat regime would be the consequence of what I have said, nor is it clear at this stage what conclusion the negotiations will produce. I am determined to ensure an outcome to the negotiations which produces the best position for our highly competitive sheepmeat sector.

Mr. Andrew Hunter (Basingstoke)

Will my right hon. Friend confirm that he will be seeking an increase on the present 18.1 million ceiling for breeding ewes? Is he looking for a larger capacity in Great Britain?

Mr. MacGregor

That relates to the separate stabiliser. We must try to make distinctions. While we have not reached agreement about the future of the sheepmeat regime, there is a separate stabiliser for the United Kingdom. It is not clear whether that will continue, but it was not possible to negotiate the same stabiliser for the United Kingdom as for everyone else because we have a different regime through the variable premium. In the current circumstances, it would not be possible to argue for an increase in that ceiling because the sheepmeat sector has become very expensive. However, we do not know what outcome will be achieved in the wider sheepmeat regime negotiations—in a unified regime there would be no separate British stabiliser—so it would be premature at this stage to say in precisely which direction we are likely to go.

With regard to the price level for sheepmeat and the position of the stabiliser this year, I agree with the Commission's view that a support price increase could not be justified. One way or another, we must tackle the level of support quickly, given that the cost of the sheepmeat regime is expected to double between 1987 and 1989 despite the operation of the stabiliser. The cost of the regime must also be of major concern in the forthcoming review, which is the key both to controlling Community expenditure on sheepmeat and to achieving future support arrangements which allow free and fair competition among producers in different parts of the Community.

In parallel with the sheepmeat regime proposals, the Commission negotiated with third country suppliers changes to the existing voluntary restraint agreements. The revised import arrangements for New Zealand sheepmeat are the first to come to the Council. That is an area in which a number of interests must be balanced. Community sheepmeat producers who had to accept the restraints of the stabiliser arrangements, and who face a major reform of the regime, understandably expect third country suppliers to share the burden, and I accept that. On the other hand, Community consumers do not want tighter restrictions on the range of products available to them. Moreover—this point is important in the context of the sheepmeat situation—New Zealand is entirely free to decide her own view of any constraint on access to the Community market in respect of sheep. New Zealand has established rights under GATT which the Community must respect, particularly at a time when the impetus is to open up markets.

In the Government's view, the Commission's proposal strikes the right balance and, as with the terms of today's motion, takes due account of the interests both of producers and of consumers. New Zealand has offered real concessions in terms of lower maximum quantities, specific limits on chilled sendings, and a price surveillance system. In return, the Community would make a further tariff concession and end the sensitive market area provisions. For me, that last point is very important.

In the cereal sector, the proposal for a cereals incorporation aid originated at the European Council last February, when the Commission was asked to consider ways of increasing the use of cereals in animal feedstuffs. The Commission made a proposal that was not accepted by the Council and which is strongly criticised—not least by ourselves. However, it was agreed that the Council, in considering the idea further, should be guided by a number of criteria—in particular, that any incorporation scheme must lead to increased use of cereals for animal feed, be controllable, and conform with the rules of GATT. In attempting to meet those guidelines, the Commission produced the present revised proposal.

I do not think that the Commission has succeeded in meeting the agreed criteria. Moreover, the scheme now proposed is very open to fraudulent abuse—an aspect to which I have already referred—and would create new distortions within our own animal feed industry and between member states. I know many people in this country who are concerned about that. For all those reasons, we are firmly opposed to the proposal. I am glad to report that when the Council met last December, the majority of other member states also had reservations.

The proposal concerning aid for small cereal producers follows an undertaking by the Council, reached as part of the 1988–89 farm price settlement, to arrive at a Community definition of a small cereal producer. In the event, the Council found it impossible to do so, but agreed instead that the existing rules, which permit member states to determine their own definition, can be maintained.

On other issues to which the documents before the House relate, there is considerable interest in encouraging farmers to switch to lower-intensity farming, which people feel can create real benefits for our landscape and environment as well as helping to reduce the output of unwanted crops. The extensification regulation—to use the ghastly jargon adopted by the Community—agreed by the Council last year, at the same time as the set-aside scheme, is an important step. It provides for member states to give financial incentives to farmers who undertake to reduce their output of certain surplus products by at least 20 per cent. That principle is easy enough to applaud—the difficulty is in finding acceptable and sensible ways of applying it in practice. As I have frequently said, such schemes must be properly run if public money is not to be wasted. Again, we do not want to open the door to fraud.

The administrative mechanisms necessary for extensification will need to be carefully worked out, especially in the livestock sector. That is why I was pleased when the Agriculture Council agreed this month that member states may apply extensification on a pilot basis until the end of 1990. That will provide an opportunity to try out schemes on a limited basis initially, to resolve some of the difficulties, and to see whether we can make such schemes workable and effective. We are now studying ideas for a pilot extensification scheme for beef, to be introduced later this year.

In the arable sector, the obligation to apply schemes begins next year. Ideas include the possibility of encouraging a switch to organic farming or to spring-sown cereals and rapeseed. We are looking carefully into the practicalities.

In June 1987, the Council decided on an aid scheme to encourage farmers to convert to the production of non-surplus products. That scheme should act as a further complement to the stabiliser mechanisms in helping to restore balance to sectors in over-supply. Rules for the conversion scheme proposed by the Commission are now under discussion in Brussels. We must accept that scope for conversion is limited. It is important to ensure that conversion incentives do not create new surpluses or lead to distortion of the market for those producers who have already converted to alternative crops. To try to avoid those problems, the Commission's proposal lays down restrictive criteria for the selection of products, and member states have discretion as to exactly which products they wish to aid.

Mr. Ron Davies

Before the Minister leaves the subject of extensification schemes, I remind him of an undertaking that he gave the House some months ago, when he acknowledged that it would be appropriate to include conservation headlands in extensification schemes. In the scheme that he proposes to place before the House later this year, will there be any provision for conservation headlands?

Mr. MacGregor

That is obviously a possibility we must consider. The hon. Gentleman will know that we have a pilot project on conservation headlands in one of the environmentally sensitive areas, which will also help us in our considerations. I have also agreed to extend strips in the set-aside scheme, which to some extent is on the same lines. We are experimenting, but at this stage we cannot say exactly what we shall be able to include in the extensification scheme for the cereal sector. However, there will be plenty of opportunity to discuss it.

Mr. Roger Knapman (Stroud)

Will my right hon. Friend confirm that, if extensification is the name of the game, nitrogen control will be one of the options available to him?

Mr. MacGregor

As my hon. Friend knows, the nitrate issue and the possibility of protection zones will be addressed in due course, as the Water Bill progresses through this House. We shall be consulting widely on how to implement any proposals relating to them. However, although they share some of the same elements, that is not what I mean by extensification. My hon. Friend refers to extensification as the name of the game. Like many other things, it has a part to play in enabling farmers to adjust, and in achieving a better balance between intensive farming—now that we have surpluses and the capacity to produce so much more from the same amount of land—on the one hand, and environmental and countryside needs on the other. I do not suggest that any one approach is the name of the game—all have a part to play and we must not exaggerate the extent to which they can do so or suggest that any of them is a panacea for the problems that I have described.

Miss Emma Nicholson (Torridge and Devon, West)

Does my right hon. Friend agree that as the extensification budget is only 3 per cent. of the common agricultural policy budget we cannot yet place any vast reliance on it as a source of alternative farming income, although it is something that we must monitor carefully as it develops in the years ahead?

Mr. MacGregor

That is one reason why I did not want to suggest that extensification represented a panacea or a major way through the problems. There are other reasons for coming to the same cautious conclusion at this stage. Certainly we are considering the various possibilities.

I wish to refer to two other issues. The Commission's report on the pigmeat market, commissioned by the Council, set out the probable causes of the crisis in the European Community pigmeat market in 1987 and 1988, the measures taken by the Commission, and the outlook for 1989. The report concluded, in my opinion rightly, that over-supply was the main cause of the depression in prices, but that existing market management measures were effective in alleviating—and I emphasise the word "alleviating"—the situation.

As the House knows, the pigmeat regime is a "light" one, with very limited market support possibilities. During 1987, two were used. Export refunds were significanly increased on several occasions, and exports from the Community rose from 360,000 tonnes in 1986 to 440,000 tonnes in 1987. In both 1987 and 1988 aids to private storage played a small part in restoring confidence and stabilising prices at a time when the market was particularly weak. However, I have some doubt as to the real benefits of private storage aids—which are used very little in the United Kingdom—and I feel that such measures needs to be used very sparingly.

In the report the Commission also expresses a willingness to consider further policy alternatives to bring greater stability to this sector. I see no practical alternatives. As we know, it is very easy to expand pigmeat production quickly, so any scheme to provide more price stability would quickly lead to another production surplus and to escalating costs. Intervention arrangements have been tried in the past—before we joined the Community—but had to be quickly abandoned, and the reintroduction of such arrangements would lead only to greater instability in the long term. We should therefore continue to allow the market to be regulated by the free play of supply and demand and the judicious use of the support measures already available.

Finally, I must mention the two documents containing the Commission's most recent annual communications giving information to the Council on how milk coresponsibility level funds are spent. As the House knows, the Government have always disliked and opposed the levy as a means of tackling the costs of the dairy regime—I apply this equally to the cereal sector—and I continue to take that view. The problem for us, however, is that t he milk regime is still the most extensive and expensive in the CAP—at 4,700 million ecus in 1989, despite all the quota reforms. We can only consider reducing or eliminating the levy as those costs come down, which means, that we must achieve offsetting savings in other directions. I believe that a contribution can be made by the achievement of better value for money in the management of this market. In particular, I am pressing for the further reduction of subsidies for internal disposal of skim milk powder for animal feed.

The Commission's reports show that levy funds are used for two main purposes—to offset expenditure on dairy subsidies, and to expand the market for milk and milk products. The most recent Commission communication provides for an increase in the allocation of levy spending for promotional and market expansion measures from 31 to 51 million ecus, which is in tune with the views of both the United Kingdom industry and the Government. At the same time it is inevitable that a significant proportion of levy receipts will continue to be used to offset the heavy expenditure on subsidies in the dairy sector, and the document makes that clear.

Inevitably I have had to deal with many detailed matters in the large number of documents before us, but I hope that I have given an indication of the Government's position on all of them.

What is interesting about the Labour party's position is that, while Labour Members are quick to say that reforms are necessary—indeed, on a number of occasions the hon. Member for South Shields has given full support in the House to the position adopted by the Government on the CAP reform proposals, for which I am grateful—they somehow give the impression that such reforms can be achieved painlessly and without structural adjustment. Having been quick to call for reform, they are equally quick to complain about the consequences. That is the attitude of a party which never expects to have to make difficult decisions in Government because it does not expect to be in Government. That no doubt explains why there has not been a single constructive, thought-through proposal on agricultural issues from the Labour party—indeed, any of the parties opposite—and why we shall no doubt hear none today.

I hope that I have dealt with all the key issues contained in the formidable number of documents before the House. To pull the threads together, one of the main themes is that CAP reform—this can never be stressed too much—is in the farmers' interests as much as everyone else's. Without it, chaos loomed. That reform is now in place. Its pace is being maintained and must continue to be maintained, especially in the light of the GATT Uruguay negotiations. That is in the interests not only of consumers and taxpayers but of producers if we are to provide a stable basis for British and European agriculture in the 1990s.

While we are taking steps to make the CAP more market-oriented, we also need to prevent the money being spent on it, which is still a very large sum, from being directed into the wrong hands through fraud. We also need to pursue various policies to ease the process of change for farmers, to encourage less intensive farming and to promote policies to encourage and help farmers to create a new balance between agricultural production and the continued development of an attractive countryside for the benefit of all of us. It is my next objective to see real improvements in that regard, and I hope that hon. Members on both sides of the House will endorse our endeavours.

4.25 pm

Dr. David Clark (South Shields)

The aim of the debate is to give the Minister some guidance about the feeling on both sides of the House before he continues discussions with his European colleagues in the Council of Ministers meetings next week and, probably, a couple of weeks thereafter.

Perhaps I could begin by agreeing with the Minister. I join him in applauding the endeavours of the Spanish presidency to reach an agreement by April, and I am heartened that he is going to do all that he can to bring that about. It is important that farmers, who need to plan ahead, know with some certainty what price they can expect in the coming 12 months. I also support the Government in their effort to ensure that surpluses which have been removed at great expense are not allowed to build up again. Storage has been one of the disproportionate costs of the CAP, and we must not waste the hard-earned finance needed to get these balances down.

I also support the Minister's efforts to ensure that whatever package we end up with from the price fixing takes us some way towards an accord with the current GATT negotiations. In the long term we must try to evolve a system of agricultural support within Europe that can be compatible with the wishes of other parts of the world. Finally, I strongly support the Government in their assurance—I think that this is what the Minister was saying—that there would be no discrimination in the agrimonetary system which would worsen the position of United Kingdom farmers.

When we had this more or less annual debate about 10 months ago—price fixing last year was very late, adding to the uncertainty of farmers throughout the Community—the general mood, probably on both sides of the House, was also one of uncertainty. There was a feeling that agriculture did not know where it was going. I little dreamed, however, that in 10 months the system would have deteriorated so badly. It now seems that the Government have singled out agriculture for treatment that they have already given to the coal and steel industries, and indeed to the rest of the economy. The time will come when the nation will pay dearly for the Government's follies in respect of those other industries. If they succeed in their apparent policy of attrition against agriculture, the effect on the nation may be catastrophic indeed.

Sir Geoffrey Johnson Smith (Wealden)

We all recognise that agriculture faces considerable difficulties at present, nowhere more than in my constituency, but surely the hon. Gentleman would agree that it is not good enough to say that the Government are to mete out the same fate that befell the coal and steel industries. I suppose that the hon. Gentleman implies by that that the Government allowed those industries to go to rack and ruin: that is the impression that he has sought to create.

Dr. Clark

indicated assent.

Sir Geoffrey Johnson Smith

I see that the hon. Gentleman is nodding. I, on the other hand, believe that there is a lesson to be learned from those two industries. I agree that the short-term, drastic measures taken in those instances affected people personally and harshly, but those industries are now much strengthened and can look forward to a prosperous and profitable future. That, surely, is the Government's aim, and that is why my right hon. Friend the Minister at the end of his speech asked for positive proposals from the Opposition.

Dr. Clark

The hon. Gentleman has partly understood the case, but he has got it wrong. I happen to agree that agriculture is an essential industry for this country, and I accept that coal is as well.

Another example which is close to my heart and in which I have a deep constituency interest is shipbuilding. As an island and a maritime nation we need shipping and a shipbuilding industry. However, under this Government both shipping and shipbuilding have been treated in such a way that they no longer exist, which means that if and when the revival in the economy takes place, we shall not have a viable shipbuilding industry.

If we allow agriculture to be run down to the same extent, there will come a time when we shall be short of food and unable to supply our own needs.

Miss Emma Nicholson

With his interest in shipbuilding, the hon. Gentleman will know that Appledore Langham shipbuilders in my constituency has, in effect, been relaunched and is on the crest of a wave with orders pouring in as a result of the Government's privatisation policy. I have the greatest sympathy for Ferguson-Ailsa, which has not yet achieved that splendid result. However, the hon. Gentleman's rhetoric and deep feeling on this matter must not blind him to the good things that are happening and which point to the way ahead.

Dr. Clark

Obviously, I am pleased if there is a resurgence in the shipbuilding industry in west Devon. However, I find it sad that the town of Sunderland, which is in the constituency next to mine, and which was the largest shipbuilding town in the world, no longer builds ships, despite having the most Modern shipyard in Europe and despite it having received orders from overseas. As I have said, if we allow the same thing to happen to agriculture, we shall deeply rue the day.

We all want a pleasant countryside—nobody wants that more than I do—but it must be a living countryside. The people who work and live there, expecially the farmers, produce something that is absolutely essential to us—food. The British press, oriented as it is to London and the metropolitan areas, often forgets that food does not come from the supermarket shelves and that it must be produced; and that water does not come from funny green bottles, but from our reservoirs and deep wells. We must accept that the supply of such commodities must be planned.

We should remind ourselves that, building on the success of the Labour Government's Agriculture Act 1947, we developed a system of agriculture that has meant that food shortages have ceased to figure on our political agenda, which is very welcome. Indeed, my hon. Friend the Member for East Lothian (Mr. Home Robertson), who is a farmer, constantly reminds me that the success of our agriculture has been brought about by a partnership between state and farmer, which, as he constantly reminds me, is one of the best examples, along with the National Health Service, of Socialism in practice, with everyone benefiting, in this case both consumer and farmer.

Mr. Home Robertson

I just wish the farmers would vote for us.

Dr. Clark

Well, they may do. Anyway, at least one does—in East Lothian.

It is no secret that the Prime Minister regards farmers with disdain, as the last remnants of the welfare state. She fails to understand the delicate balance between shortage and surplus. Tragically, the Minister of Agriculture, Fisheries and Food, who should know better, seems to be going down the Prime Minister's route, as he made plain in his speech at the beginning of January at the Oxford farming conference.

Agriculture and food production is too important to be left to the whim of the free market. That is why it is essential that we have some partnership between the state and individual farmers. I have given that gloomy 'view because we have just received a report from the industry showing a drop of 25 per cent. in aggregate farm income last year, which was the worst year since the war. On top of that, farmers are now suffering badly from the Chancellor's policy of high interest rates.

Mr. Allan Stewart (Sherwood)

indicated dissent.

Dr Clark

I see that the hon. Member for Sherwood (Mr. Stewart) disagrees, but the farmers to whom I speak are worried sick about the high levels of interest that they must pay—

Mr. Stewart

And about the weather.

Dr. Clark

I accept that the weather is important, but it is not responsible for the high interest rates that the farmers are having to pay on their capital investment and machinery. Whether the weather is up or down, the high interest rates are the result of the Chancellor's policies and they are making life hard for the farmers.

As the Minister acknowledged in his annual report, to make matters worse some sectors of the industry have done better, while others have done worse. Overall, although some have done perhaps slightly better this year, they still have bleak, if not perilous, prospects. I am thinking especially of the upland farmers, who tend some of the most attractive, remote and environmentally sensitive parts of the country. The Minister's announcement this afternoon about the sheepmeat regime rang of defeatism in my ears. I hope that he will fight much harder than he gave the impression of doing this afternoon.

Hon. Members of all parties can agree that since the war agriculture's productivity has been second to none. If other sectors of industry had been as successful as agriculture, we should not have found ourselves in the economic mess that we have repeatedly been in. Morever, if the Minister pursues the policies that he outlined today, we believe that he will damage that productivity and that the success that has been built up over the years will not continue. That will mean that we shall be short of food and heavily dependent on other countries to supply our basic food, which is not a sensible policy.

The irony is that the, consumer has been paying an unduly high price for food. According to the report of the National Consumer Council, consumers have been paying roughly £14 per week too much. I know that the Minister accepts my point, but he does not seem to appreciate that most of that money does not go to farmers. Only about £1 in every £3 of the money spent on agriculture goes to farmers under the present common agricultural policy. I know that the Minister will probably agree with that figure. The other two thirds is spent on intervention storage, export restitution and—I know that the Minister acknowledges this—fraud. It is important that we do not allow stocks in intervention to build up, because the main expenditure is on intervention and the consequent export restitutions.

The Minister knows that the current CAP is madness. I know that he has tinkered with it and we applaud his efforts to try to improve the position, but the basic point, which I have made previously at the Dispatch Box, is that the Prime Minister is culpable for her failure to recognise that point in Brussels last year—

Mr. MacGregor

rose—

Dr. Clark

I shall give way when I have finished this point.

On that occasion, when the EEC was literally on the verge of bankruptcy, the Prime Minister had the unique opportunity to force a full-scale reform of the CAP, which, tragically, she fluffed. If she had taken the Minister with her, I do not believe that she would have made that mistake, but since then we have been trying to make the best of a bad job. However, I accept that the Minister has tried to improve things and I happily give way to him.

Mr. MacGregor

The hon. Gentleman has pointed out that much of the current cost of the CAP goes on export refunds, which enable Community products to be sold at world market prices, but he has given the impression that none of that money goes to the farmers. He knows that that policy exists to find a market somewhere for those products because we do not require all the products in the Community.

I am not clear what the hon. Gentleman is suggesting for CAP reform on that issue. Is he suggesting that we should dispense with export refunds altogether? Perhaps he will be more specific. The hon. Gentleman referred to the report of the National Consumer Council; he knows that a large part of the calculation of the cost to families is based on the assumption that, if we imported food at current world prices, food would be cheaper. Is the hon. Gentleman saying that we should seek to bring Community prices down to the level of world prices and that those are the prices that farmers should obtain? Will he make his views clear on both points?

Dr. Clark

It is interesting that the Minister linked those two points because by doing so he showed the weakness of the CAP—and he knows it. The answer is simple: the right hon. Gentleman is right to say that if there were no CAP, world prices would be higher—nothing like as high as those of the CAP but, I freely acknowledge, higher than they are now. They are depressed because the market has been flooded with many commodities, as the EC has dumped exports of many surplus products. The Minister knows that, because we subsidise those export restitutions. We as taxpayers, are paying double. That is the key fallacy of the CAP and I am most grateful to the Minister for allowing me the opportunity to expose the basic weakness of the agricultural support system.

Mr. MacGregor

What alternative can the hon. Gentleman suggest to the lines that the Government are pursuing?

Dr. Clark

The basic point of the Labour party has been that a fundamental reform of the CAP is essential. We have supported the Minister, and the point that I was making before he intervened was that we support him in not allowing too much food to build up in the intervention stores. That is why we support the limited storage period that is discussed in the price fixing: it makes sense. If there is no food in the intervention stores, equally there is no surplus food for export restitutions and money is therefore saved.

On the subject of money, I shall take up another point which the Minister mentioned several times—fraud. I think he is getting the message that the British people are beginning to tumble to the extent of fraud in the EC and, in particular, in the CAP.

The Minister knows that this fraud involves not paper clips or pens but billions of pounds each year. We do not know the precise sum, but people are agreed that something inside the wide perameter of 10 per cent. and 20 per cent. of the total EC budget is lost on fraud. Both figures are disgraceful. That is a staggering amount and something must be done about it.

I concede that the British Government and the Minister have raised the issue, but they have tended to dismiss it by suggesting that most of the fraud takes place in other countries. The general view in Britain was that it was people across the water, without good systems, who were always on the fiddle, and the finger was usually pointed at the poor Italians. At least, the British media saw it that way. However, I was interested to read an article in the French newspaper, 10 days ago which nailed that lie. It pointed out that Libération, while it was correct that the Italians had the worst record of fraud, with 131 cases in 1987, Britain, to our shame, came second with 93 cases, and France third with 75. I thought that it was staggering that we should be in second position. Furthermore—

Miss Emma Nicholson

At the risk of upsetting diplomatic relations, does the hon. Gentleman agree that it is probable that every case of fraud in Britain was found out and the people involved were brought to justice? Is it possible that that may not be the case for the league leader that he has just mentioned, and that the gap between us may be vast?

Dr. Clark

I listened carefully to the hon. Lady and the charming way in which she phrased her intervention. Fraudsters, whether Italian, British or French, are all equally guilty of fraud. We have not done ourselves justice by trying to hide that. Some of the tales are absolutely incredible.

When one raises this point with the Italians they say, "Yes, we accept that we are worse than Britain, but the British are behind so much of the fraud in Italy." The Italians cite the example of Charles Kingsland. This is a remarkable case in which a former mayor of a small town, Bagheria and owner of an IDA company, was head of a syndicate. Ships were loaded with water-filled containers and barrels and left Sicily for London, from where they were supposed to sail for South America. Two other phoney companies were created in London by the English accomplice, Charles Kingsland, who is currently on the run from police. The matter came to light in 1981, when a barrel that was supposed to contain tomato concentrate burst open while it was being loaded near Palermo and the fraud squad finally became involved. This amazing situation would be farcical and funny if similar cases did not occur on such a wide scale. We have further evidence that fraud exists on a wide scale in this country.

On 25 January I raised the issue with the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food the hon. Member for Mid-Norfolk (Mr. Ryder). I did not receive a meaningful reply. In his wind-up speech will the Minister confirm that the Government's serious fraud squad office is close to completing inquiries into two significant cases of agricultural fraud in Britain involving EC money amounting to many millions of pounds? Have there been any developments in the six weeks since I first raised the matter? What is the Minister's response to the comment made by Mr. John Wood, the director of the Government's serious fraud squad, who said: Our own domestic experience is that money obtained by fraud is being used to finance traffic in narcotics and is also being used to finance trade in arms and terrorism. That is disturbing, and millions of people will be shocked to think that fraud occurs on such a scale in this country under the guise of support for agriculture.

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

Is my hon. Friend aware of the incidence of fraud among defence contractors? Public Accounts Committee reports have established that very often prosecutions are not brought. Is not the important question whether prosecutions are brought? If we tabled questions on all the cases identified by my hon. Friend which put us second in the European league, could the Minister tell us in which ones prosecutions were brought; or did the Director of Public Prosecutions once again handle the matter in a sloppy way?

Dr. Clark

My hon. Friend is knowledgeable on such matters and an assiduous member of the Public Accounts Committee. He knows as well as I that the Government are loud on words about tackling crime but soft on action. That is obvious in relation to prosecutions for contamination of rivers or of companies selling contaminated feed for the poultry flocks in this country. The Government give no answers and there are no prosecutions. The same is true of fraud in the CAP.

I find it damning to think that the average family in the United Kingdom pays between £1.50 and £2 a week because of fraud, some of which appears to go as direct donations to organisations such as the Mafia or the IRA. That is reprehensible and I deplore the fact that the Government do not appear to act on it. Time and time again, they try to play the matter down.

As the report of the National Audit Office of February 1988 made quite clear, concerted action is now needed. The Government have dragged their feet for far too long. Lord Cockfield, a former Commissioner, told the other place on 14 February, that he had put forward the proposal, as a Commissioner, to curb fraud in 1986 and the British Government had vetoed it.

Mr. Campbell-Savours

Tell us why the Government did that.

Dr. Clark

The Minister will not tell us, so I shall turn to more detailed aspects of his price-fixing arrangements. Before doing so, I must point out that in a recent parliamentary answer, the Minister was embarrassed to have to tell me that he had met the National Farmers Union 37 times in the past 12 months and the National Consumer Council only twice. When pressed, he said that he met the farmers because the matter concerned them more, but as food prices will be greatly affected by the negotiations in Brussels he should tell us how often he has discussed these issues with consumer associations in the past month, and what their general advice was. There are two sides to this equation—producers and consumers. What have the Government been doing to advance the viewpoint of the consumers?

I mentioned the success of British agriculture since the war. Much of that success has been due to the industry's ability to adapt research and development to improving production, and such research and development here has won a high reputation overseas. How do the Government expect us to continue to reap the rewards of such work when they intend to decimate what is left of the R and D efforts in the United Kingdom? The Minister has already done infinite harm to those efforts; 2,000 jobs have already been lost from the Agricultural and Food Research Council in the the past four years. Scores of projects vital to food safety and agriculture have been lost.

The latest Government proposals to wield the axe even more fiercely are resisted in all quarters. The Farmers Weekly article on research and development makes depressing reading, with its revelation that another 2,000 scientists in ADAS and AFRC are likely to lose their jobs. It is also clear that alternative funds from the agricultural industry are unlikely to be forthcoming. This will result in an unacceptable decline in Britain's agricultural research and development, which will be detrimental to farmers and consumers and to the long-term interests of a successful industry.

When I raised the problem of bovine spongiform encephalopathy on a point of order, Mr. Speaker said that the Minister might deal with it in the course of his speech today, so it was sad to hear the Minister duck the issue. That has shown a lack of courtesy to the House—

Mr. Ron Davies

Uncharacteristic of him.

Dr. Clark

Indeed. The Minister has always shown the House of great deal of courtesy; he has always explained his views at great length and allowed himself to be cross-examined. I have not seen this important report yet, but I believe that it may show that up to 20,000 cases of BSE-infected cattle exist, and that there may be a link between the disease and the Creutzfeld-Jakob disease in humans. So the Minister should have taken wiser counsel and dealt with some of the questions that right hon. and hon. Members want to ask him.

Will the Minister assure the House that the research into the cattle disease BSE will not be held up, as it has been in the past, by the central veterinary laboratory, because of lack of funds? We feel offended that. the Minister will not answer such questions—

Miss Emma Nicholson

I am not sure whether the hon. Gentleman is aware of the answer to a question that I put down last Thursday which the Minister has given me today and which concerns the research consultative committee looking into BSE. Perhaps he has not yet seen a copy?

Dr. Clark

I thank the hon. Lady for intervening again; she always helps me and I appreciate that. She has underlined the point I was making. I know that she has tabled a number of questions about this subject, because her part of the country has been much affected by BSE, which was first discovered in the southern counties. She has been interested enough to table such questions—that one was on last Thursday's Order Paper, but there was no answer to it—which emphasises my point that there is great interest in this on both sides of the House, and that the Minister should have subjected himself to questions about it.

I hope that the Minister will confirm that there will be more research into this disease, as Sir Richard Southwood recommended. In view of the seriousness of the disease and its implication for human health, is it not time that the Minister banned the sale of sheep and cattle brains to the public? He knows that it was probably infected sheep brains which first caused BSE in cattle a number of years ago. That is Sir Richard's conclusion. He knows, too, that the brains of calves and sheep are used in the manufacture of brawn, meat pies and mock turtle soup. Yesterday's colour supplement of The Observer contained a recipe for a soup made of sheep's head, a traditional food for people in the north of England in the past. This disease is now endemic and remains latent in sheep and cattle for a long time, so the Minister should give us the benefit of the doubt and ban the sale of sheep heads. I am happy to give way to him now if he wants to announce that the Government are prepared to do that. Sad to say, he does not appear to want to.

Rather belatedly, 18 months after the event, the Minister made BSE a notifiable disease and announced compensation. But 50 per cent. compensation is not enough. Surely, to deal with a matter that is vital to human health, the Minister should propose 100 per cent. compensation for farmers; if he does not, temptation will remain—[Interruption]. The hon. Member for Sherwood (Mr. Stewart) denies that, but anyone who talks to farmers knows that when they are faced with the risk of losing £350 per beast, they may well send a cow to market even if they are in doubt and it should perhaps have gone for testing. Faced with such a loss, farmers will be tempted to do that. We suggest that it would not be very costly to double compensation to 100 per cent. In that way we would catch almost all cattle with the disease and start to eradicate it. We must go to the root cause of the problem, as we have done with other diseases of this nature.

I hope that the Minister will deal with the problem of feeding animal protein to other animals, an issue that was also outlined in the Southwood report. It would be courteous if the Minister intervened to answer these small points at this stage, before he goes off to the press conference to tell the world. By not doing so, he is failing to treat the House with the respect that it deserves—

Mr. MacGregor

From memory, I think I made at least four statements to the House about BSE last year—all in written form. That seemed acceptable to the House. The House and the public want the publication of the Southwood report in full and as quickly as possible after my receipt of it. That is what I have done today, and I have shown the action that the Government are taking in the light of the report. It is a detailed matter, and I hope that there will be many opportunities to return to it in the House.

On compensation, there is no evidence that farmers have evaded their responsibilities. But that is something that we monitor. The compensation relates to 50 per cent. of the full market value. Cows that are clearly showing symptoms of BSE will no longer be worth anything like the full market value, so it is a generous rate of compensation in all the circumstances. There is no evidence that the rate is causing farmers not to bring forward cattle for slaughter and compensation.

Dr. Clark

We are grateful for the fact that the Minister has published the document in full, as he said he would in last Tuesday's debate. But just as he is right to say that it was important to publish the report in full, he should have come to the House and allowed us to put questions to him. I am sorry that even at this stage he has not answered some of our points.

We accept that there is no evidence, except for strong anecdotal evidence from people in the industry. But the Minister fails to understand the free market economy if he says that cows which have the disease are worth only 50 per cent. of their market value. If farmers send animals about which they have doubts—we must remember that it is a creeping disease—the purchaser may not be aware of the condition, and the market value will be 100 per cent. The NFU will confirm that it has cost farmers an extra £350 or £400 per cow.

Mr. Richard Livsey (Brecon and Radnor)

May I reinforce what the hon. Gentleman is saying? A farmer in my constituency suspected that an animal had BSE, but could not afford, and did not have the right transport, to take the animal on a 40-mile round trip to the veterinary investigation laboratory. The local vet wanted him to take at least the animal's head to the investigation centre, but in the end the animal did not get there. As far as I know, the animal got into the food chain. That is a serious state of affairs. Encouragement should be given to farmers to resolve the problems.

Dr. Clark

The hon. Gentleman makes a telling point. The Government have the Nelson approach of putting the telescope to the wrong eye. Just as they say that there is no evidence of fraud in Britain, so they say that there is no evidence of those problems. But we know that infected cattle are entering the food chain. It is time that the Minister answered that point and took action to eradicate this possibly terrible disease from the animal entering human food chains.

Mrs. Ann Clwyd (Cynon Valley)

Does my hon. Friend agree that if farmers had been given 100 per cent. compensation for every cow found to have BSE, it would have cost the Government only £1.25 million? That is a very small sum compared with the £18 million made available to egg producers.

Dr. Clark

My hon. Friend has made a good point. I hope that the Minister will listen to us and to some Conservative Members, among whom there is much sympathy for our argument: where there is a serious risk to public health, the benefit of the doubt—especially as this is a relatively small matter in financial terms—must be given to human health.

The Minister, having failed to achieve a fundamental reform of the common agricultural policy, was left with set-aside and stabilisers as the instruments to try to reduce surpluses. Only last Wednesday, he was explaining the success of his set-aside initiatives, expecting that about 1,820 farmers will take about 58,000 hectares out of production. Having seen the provisional effects of the scheme, may I ask the Minister whether he is still confident that the initiative will be sufficient to take enough cereals out of production to stop the intervention stores being filled up again? It would be helpful if the Minister would give us an idea of his assessment of the position.

Is the Minister aware of a practice which, to many people, appeared to be an abuse of the scheme? We know of several examples where farmers opt for set-aside, receive money for doing little—I will not say for doing nothing—and then make their farmworkers redundant. One farmworker in Suffolk has already been made redundant after working on an estate for 21 years. That was because his boss, the Leader of the other House and a former Conservative Agriculture Minister, opted for the set-aside scheme. We also know of a case in Scotland, where three farmworkers were made redundant when their boss opted for the scheme and set aside almost all his farm. There is no justice in that farmer being paid about £200,000 of taxpayers' money for doing little while his employees are made redundant.

Set-aside is likely to fuel the loss of farmworkers' jobs, which have dropped by more than 7,000 in the past year and by a staggering 37,000 since 1983. We do not say that the scheme is completely useless, given the difficulties into which the Minister has painted himself, but we believe that he should introduce a complementary scheme to allow special redundancy payments to be made to farmworkers who lose their jobs because of the scheme. In the name of equity and justice, that would be a much fairer way of improving the efficacy of the system.

Sir Nicholas Bonsor (Upminster)

I cannot see the difference between a farmer who decides on the set-aside scheme making his staff redundant and a farmer who goes from one method of operation to another making his workers redundant. It is very sad, and I accept the hon. Gentleman's point about Government money, but I doubt whether it makes much difference to the farmworker who loses his job. How can we differentiate between the two?

Dr. Clark

It is a matter of degree. Of course there is always a risk that a farmer might diversify from labour-intensive to capital-intensive production. That is a commercial risk which he takes on his own judgment. The difference is that he has not been encouraged to do so by the Ministry of Agriculture, Fisheries and Food. With set-aside the Minister has said to farmers, "If you will take out of cereal production more than 20 per cent. of your land, we shall pay you an amount annually for doing so." I do not disagree with the concept, but if no alternative work can be found for the farmworker, he should be given compensation for losing his job, just as compensation is paid to the farmer for taking his land out of production.

Before I leave the subject of set-aside, may I deal briefly with extensification—as the Minister said, a horrible word—or low-input farming. The Opposition want the Government to take a more positive approach to what we think would be another useful instrument in the Minister's battle to contain surpluses. The Minister will find that the concept strikes a chord not only with many farmers who would like to use the system but with many consumers, who would like food to be produced using less intensive methods.

Sir Richard Southwood has concluded that we should reconsider some of our techniques of animal feeding. I note that he says in his conclusion: We question the wisdom of methods which may expose susceptible species of animals to pathogens, and ask for the general issue to be raised. One has a great deal of sympathy for the German Agriculture Minister, Herr Kiechle, who complained of lack of enthusiasm for such voluntary production-curbing techniques.

Indeed, it is sad to note that the extensification programme has been delayed yet again. I know that the Minister is somewhat of a magician, and I thought that there was a sleight of hand in the way he presented to the House today the extensification discussion in the Council of Ministers. He said that it had been a great success. Of course, it was not a success; as he knows, it was a compromise put forward by the Spanish presidency. The sad thing is that it was a compromise for delay, and, saddest of all, the Minister was not able to support his German colleague, who was on his own in voting against the compromise proposal because he wanted the original extensification proposals to come into operation this year and not be postponed under two pilot schemes. As I have said, it is very sad that, again, the Minister wanted to play for delay. If he is trying to tackle the problem of surpluses, he should be using all the instruments at his disposal. We feel that extensification is one such instrument whose use he has delayed.

I was impressed by the Minister's statement today that—as I understood it—he is prepared to bring in this year a pilot scheme for beef. I think I am right in saying that that is obligatory in any case—he has got to bring in some pilot schemes. Can he advise us whether he has similar proposals for sheep? That is something which may also be of interest. Having mentioned sheep, perhaps I should refer to the whole question of the sheepmeat regime, which causes Members on both sides of the House a great deal of anguish because it has ramifications far wider than the production of lambs. I made the point—I think my hon. Friend the Member for Caerphilly (Mr. Davies) had the same impression—that the Minister was actually admitting defeat.

Mr. MacGregor

indicated dissent.

Dr. Clark

I am glad that the Minister denies it. Certainly he gave the very clear impression that he had thrown in the towel.

Mr. Home Robertson

He has done a Frank Bruno.

Dr. Clark

As my hon. Friend says, he has done a Frank Bruno. However, I am afraid that he did not last even five rounds—he seemed to throw in the towel almost before he had started.

Can the right hon. Gentleman give us a categorical assurance that he will fight to retain the variable premium, which, as he knows, has served the upland sheep farmer and the consumer very well over the years? Certainly it would be a retrogressive step if we were to lose that. The Minister admitted that the two-tier stabiliser regime already discriminates against the British producer. When pressed on the question of the income of the upland farmer—I think this was reported in The Guardian of last Friday or Saturday—he gave the rather dismissive reply that, if they had difficulty in making ends meet, they could simply go on social security. I find that offensive in the extreme. There is an avenue to help those upland farmers if the Minister chose to use it. He knows that the upland areas of this country face immense problems in terms of farming viability. Many small hill farmers, especially in Wales, are on incomes of less than £5,000 a year.

This is a real problem. My hon. Friend the Member for Workington (Mr. Campbell-Savours), who represents one of these constituencies in the Lake District national park, and my hon. Friend the Member for Clwyd, South-West (Mr. Jones), who represents a similar area in north Wales, know how difficult it is for the small upland farmer. The only animal that the farmers can rear is the sheep. If this is made uneconomic, the prospect is simply either insolvency or afforestation. I submit to the Minister and to the House that neither of those alternatives is the correct option for some of the most cherished landscapes in the United Kingdom. Those upland areas would simply remain unfarmed. They would go into a state of dereliction. They would become scrubland. Indeed, the tourist industry, which is so important as a provider in such areas, would lose its impetus, and many jobs would be lost.

I come back to a point that we have pressed on the Minister time and time again: why does he reject out of hand the direct income aids that are possible under the CAP rules? They have been agreed by the Council of Ministers, and he could bring them in. I submit to him that many farmers who look after our most attractive upland areas would accept direct income aids and would not find them as offensive as the Minister's suggestion that they could go on social security. The Minister may regret having made that statement—indeed, I think that, having thought about it, he realised that he had not meant it.

I will deal now with the issue of sugar—[Interruption.] Hon. Members may not be interested in sugar or the ACP countries—though, when they think about it, they probably are. The Minister spelled out his attitude in a little detail. Perhaps we can tease a little more from him about the 5 per cent. cut in prices. He knows that there is considerable concern that the Commission's proposal for a 5 per cent. cut in prices will have a dire effect on the economies of some of the producer countries.

The current sugar regime is widely acknowledged—the Minister himself acknowledges this—as one of the best forms of trade with some Third world countries. Indeed, it has been a cornerstone of the economic well-being of the ACP countries, and the very basis—and this is the irony of the situation—of their attempt to do what we keep telling them to do: diversify their activities into other economic spheres. We have calculated that the Commission's proposals would reduce the earnings of the ACP countries by £23 million a year. I know that compensation is mooted. Can the Minister say what level of compensation is being talked about?

Furthermore, bearing in mind that the whole of the European Commission obligations under the sugar protocol are carried out largely by Tate and Lyle at Greenock and at Silvertown, is he confident that that company will be able to discharge these important obligations if the price cuts go ahead? This is a very important point.

Mr. MacGregor

indicated assent.

Dr. Clark

The Minister is nodding his head. I know that it is a matter that he will include in his brief when he goes back to Europe. I hope he will fight for this, because it is important that, whatever arrangement is reached in respect of the sugar regime, we honour our obligations—negotiated very hard in years gone by—to the ACP countries.

The Minister mentioned pigmeat. He said that it was his conclusion, and the conclusion of the Commission, that the difficulties experienced by the pig producers in recent years were due largely to the problems of too rapid expansion and over-supply. He had come to the conclusion that the only way to regulate this was by the free play of supply and demand. I must tell him that that view is not shared by many people involved not only in pig farming but in other branches of agriculture in this country.

The Minister knows that the pig producers have had a raw deal under the agrimonetary system of the CAP. They have not, in their terms, been allowed to play on a level playing field, in spite of the fact that the support system for pigmeat is minimal in the extreme. It seems illogical that the British pig farmer, even bearing in mind the point about expansion and over-supply, and bearing in mind the rumoured—and I think that, on occasions, the rumour has been well founded—subsidies given by the Dutch and Danish pig producers, does not feel that it is simply a question of over-supply and over-expansion, I thought it was a pity that the Minister, who, in the past I had thought, had understood the plight of the British pigmeat producers, now seems not to share that point of view.

During the past 10 years the Government have failed to give agriculture the necessary lead. It is amazing that, after 10 years, we are still awaiting a White Paper on its future. We do not know which way the industry is going. We know that the Government pay lip service to the National Farmers Union, but these days the Government are in the pockets not of the NFU but of agribusiness and the big chemical companies.

This Government have failed consumers and farmers. The differences between the world and EC prices are wide, as the Minister freely acknowledges. Subsidies are far too large. Why should the British consumer pay 58p for a 250gm pack of butter when the world price is 25p? Similarly, why should the British consumer pay £1.18 for a pound of beef when the world price is 60p? The truth is that food in the EC is often twice as expensive as it should be, yet both consumers and farmers are losing, and much of that money disappears in fraud.

It is only under Labour that both consumers and farmers get a fair deal. As a farmer in the Minister's constituency recently said: Agriculture is doing infinitely worse now than at any time that I can remember. There had to come a backwash and this is it. A lot of farmers say they do better under Labour. That is right.

5.31 pm

Mr. Ralph Howell (Norfolk, North)

I must declare an interest, as I have been a farmer for 43 years. There is greater uncertainty in the industry now than I can remember in the whole of that 43 years.

I have listened to two Front Bench speeches. The speech of the hon. Member for South Shields (Dr. Clark) did nothing to reassure me. It is obvious that the Labour party has no answer to our problems. Neither am I satisfied with what I have heard from my right hon. Friend the Minister. He and I are fellow Norfolk Members and once shared a common constituency boundary. I consider him to be a great friend. I realise the immense difficulties under which he is labouring. Not only have the Government got agriculture wrong, but so has the EEC and the United States. My right hon. Friend is facing tremendous difficulties, added to which he has had a little bit of sniping from another Ministry.

We must rethink the whole of our agriculture policy. I should like to begin by giving the House extracts from a speech which my right hon. Friend the Prime Minister made when she opened the Royal Show in 1981. She said: I wish to pay tribute to the remarkable contribution which British agriculture has made to our prosperity over many years. If only the whole of industry had performed as well as agriculture, the economy of this country would have been transformed. You now produce 64 per cent. more than you did 20 years ago; a performance that is twice as good as that of our manufacturing industries; labour productivity has increased by over 150 per cent.—virtually three times the increase in productivity generally. The Prime Minister had more to say: Twenty five years ago, our farmers provided only 60 per cent. of the foods we need which can be produced here: today, the figure is 75 per cent. This improvement alone is now saving some £1¼ billion per year on our food import bill, but there are still many foreign imports which we can replace. She also said: In paying this tribute to British agriculture I am not being complacent—nor will you be. There is still plenty to be done. We can raise production still further. British agriculture did exactly what it was asked to do. In 1981, we were producing 75 per cent. of the temperate foods we need and we increased it to 82.5 per cent. of self-sufficiency. It has been slipping back ever since, and it now stands at less than 73 per cent. That has created tremendous uncertainty and unprofitability within our industry and damaged the balance of payments considerably. We must find a way to restore confidence to agriculture soon.

What has brought about this great U-turn in agriculture? I can only conclude that the Treasury has swallowed, hook, line and sinker, all the false information put about by the Cheaper Food League, and particularly by my hon. Friends the Members for Southend, East (Mr. Taylor) and for Holland with Boston (Sir R. Body). The time has come when we must recognise that the position has changed rapidly. If we carry on as we have been in the past two or three years, we shall endanger our agriculture and do grave harm to the environment as a whole.

Why on earth should we not be an exporter of grain? No other country can produce grain better than the eastern part of England. The Commission and the Americans are telling us that somehow we should not be in the exporting business. That is absolutely wrong. I wish that the Minister were listening. It is unfortunate that he is not, especially as he is my Member of Parliament. These matters need serious thought. We should be encouraged to produce grain to feed those parts of the world which have it in short supply. I cannot understand why, when the West has grain which the eastern bloc needs so vitally, we have to subsidise it to sell it to them. The whole approach to the export of grain has been wrong.

I recognise that the common agricultural policy is by no means perfect and is in need of reform, but the sort of reform that we are getting—of either depressing prices all round or freezing them while all other costs increase—is damaging. That is to put agriculture in this country and the wider advanced world—the United States and the rest of Europe—on a serious course which can only damage the economic health of the whole of the western world.

The question of sugar will be important, especially in Norfolk, which is the biggest sugar-producing county. There is no reason for the cut in the payment to growers. It is being done merely to bring the prices into line with the depressed prices which are being forced upon the cereal growers in some pretence that it will stop growers going into sugar production. Everyone knows that there is a quota system for sugar, so that cannot take place. I believe that Ministers will be in great difficulty if they go along with those proposals.

The scare about listeria in soft cheeses has done great damage to the whole of our cheese production industry. The French have gone quiet on this matter, so I can only conclude that the Minister has assured them that no harm will be done to them. However, it is well known that harm has been done not only to the producers of soft cheeses, but also to those of hard cheese in this country. That, coupled with the egg scare which has caused the killing of thousands of hens, will have one effect only—the consumers will have to pay higher prices than they would have had we not had so much nonsense from the scientists. I agree with the Minister that the time has come to put fewer resources into scientific research, because during the past few months scientists have caused a great deal of trouble in trying to justify their existence.

I believe that a fundamental reappraisal of our attitude to food is necessary. According to the latest set of figures—they have been rehashed this year so they are new to me—in 1984 we were spending 14.5 per cent. of our disposable domestic income on food, but we are now spending 12.2 per cent., while in 1979 it was 17.8 per cent. It has therefore been cut by one third.

In her speech in 1981, the Prime Minister made the point that the price of food had risen less than that of other goods which we purchased and, therefore, food is extremely cheap. I wonder, however, whether that is a good objective. One of our principal problems is that the Treasury believes that there is a lot of cheap food out in the wide world which would be a much better buy than supporting agriculture. Of course, if the 56 million people in this country depended on food from abroad, the Treasury would soon find out that there was no cheap food, and that we were at the mercy of the world for our food supplies.

How is it that the countries which have a different food policy—such as Japan, Switzerland and West Germany, which I include although it is part of the EEC, yet is always trying to defend its food production industry—are the countries which have the strongest economies? We must think again.

In my intervention in the Minister's speech I mentioned that the report of the Food and Agriculture Organisation of the United Nations must be taken seriously. We know that our stocks of milk powder have gone down to virtually nil. I am not sure how those countries of the Third world, which we were able to help with skimmed milk powder, will fare. The fact that the world is consuming 100 million tonnes of grain more than last year's production is a very serious matter. There are reasons to believe that the weather problems in the United States may not be one-off, but could occur again.

The time has come for a thorough reappraisal of our agricultural policy and it should be appraised in such a way that those engaged in the industry can understand what that policy is. I believe that it is fair to say that all the people involved in agriculture to whom I have spoken have not a clue what the Government's policy really is.

5.45 pm

Mr. Richard Livsey (Brecon and Radnor)

I wish to make a number of points about the price proposals for 1989–90 and to respond to some of the Minister's points. I am especially pleased that the price proposals have been produced early this year, which is quite an achievement. As a former lecturer in farm management, I was often having to explain to students a week before their examinations that there had been many nights of negotiation at Brussels in the previous two months. However, we must look at the background against which the proposals were being discussed. It is a serious matter that farm incomes in the United Kingdom, in real terms, are the lowest since the second world war. I believe that that was partially responsible for the National Farmers Union, at its annual general meeting earlier this month, giving in effect a vote of no confidence in the Government's agriculture policy.

In 1988, there was a 25 per cent. drop in farm income, which is a 28 per cent. drop in real terms. According to a farm management survey in my country of Wales, small dairy farmers are trying to exist on net incomes of £4,992 per annum. It is an extremely tall order to expect them to survive in that situation, but one way or another they do. Over the past few years there has been a fall of 9 per cent. per annum in farm incomes.

The problems in the livestock sector are becoming more acute, although I fully realise that in 1988 the weather badly affected the arable sector too. Much money has been borrowed by farmers—in fact, £6.5 billion—and the annual interest rate bill is £700 million. As we know, the Chancellor's present policy of high interest rates is hitting agriculture hard.

I believe that macro policies of the kind which the Chancellor is using to tackle credit card spending power in the high street are inappropriate, because that problem bears no relationship to those of farm incomes and long-term investment, which is what concerns farming. At the same time, the Government have failed to join the European monetary system, which undoubtedly would stabilise interest rates. Farm accounts, especially those of farmers who have joined the industry in the past 10 years, show that one of their highest costs is interest rates. The Chancellor must deal with that problem, not only for farmers, but for other small businesses which are also being hit hard.

The situation in the less-favoured areas must be protected and supported. There is still scope for more support, certainly for suckler cows and for hill ewes.

The loss of the beef variable premium as a result of an agreement struck in the new year will mean a considerable loss of income to beef farmers. The introduction of the beef premium scheme for steers and male animals—heifers do not receive the premium—means that there will be an overall loss of income. The new scheme is equivalent to 3.3p per kg, whereas, when the variable premium operated, 10p per kg was paid out in certain circumstances. Those figures illustrate the substantial loss caused by the new scheme.

I am pleased that the Minister has addressed the problem of the sheepmeat regime. Britain is in the driving seat when it comes to sheep because 70 per cent. of the EEC's sheep population are found in the United Kingdom. Sheep are crucial to upland Britain, especially when one considers that half the ewes of Britain reside in Wales and Scotland and that those countries are dependent on them. The north of England, the south-west and other areas, mostly in the west midlands, are also dependent upon sheep. Sheep are crucial in the less-favoured areas where farm incomes are low—in fact, in terms of disposable income, the income of the general populace of the rural areas is low.

The Commission's proposals to tackle some of the problems appear inappropriate, especially in relation to variable premiums on sheep, which have encouraged quality lamb production; this has been an extremely good thing. If the Commission wants to abandon the open-ended variable premium, that should be discussed, rather than it taking a decision to cut off the variable premium completely. I am sure that there is room for negotiation on that matter.

Mr. Christopher Gill (Ludlow)

I am grateful to the hon. Gentleman, my neighbour, for giving way. Does he consider that the support mechanism that we have experienced for the past 10 years has worked against the producers of livestock, because, for obvious commercial reasons, they have produced meat for the intervention stores and against the seasonal price scale, rather than for the end user, the housewife feeding her family? In a perverse way, the support mechanism has had a bad long-term effect upon farming. We should all exhort the industry to get back on to a basis where it is producing food that will be consumed. In that way, we shall be encouraging the industry to become a much healthier and profitable one. I know that it is debatable, but I should be interested to know the hon. Gentleman's views.

Mr. Livsey

I entirely agree that the intervention system has not been appropriate and has been wasteful in terms of expenditure, but that applies to the beef and cereal sectors, not to the sheep sector that I am discussing. The danger is that, if we abandon variable premiums, we may well end up putting sheepmeat into intervention stores, and I do not want to go down that road.

Mr. Gill

I submit that sheepmeat is a prime example of the divergence of opinion between what the consumer wants to eat and what the producer is producing. Now the producer has an incentive to produce lamb into the new year, when the seasonal price scales are at their highest. By that time, the quality of the lamb is less than it would have been in the autumn of the previous year and, in strict parlance, it is no longer lamb. Traditionally, the consumer is not in the habit of seeking to buy and eat lamb in the new year.

Mr Livsey

I am sure that the hon. Gentleman will accept that the variable premium system could be manipulated in such a way as to accommodate such marketing.

The Commission has proposed headage payments only, and I believe that great ewe premiums will encourage too much expansion of sheep production. Currently production is held at a level which means that we are 20 per cent. short of self-sufficiency. I was pleased that the Minister said that there was a possibility of easing the stabiliser system for sheep in Britain. The Commission has some curious ideas about the stabiliser system and the payment of ewe premiums on headages—payment will be made for 1,000 ewes on hills and 500 ewes on lowlands. I do not believe that those proposals are acceptable. I have heard Eurocrats talk as though everyone has a flock of 10,000 ewes, but in this country the average ewe flock is well below 400. The Europeans must recognise that.

The Minister's statement was not half strong enough. I felt that he was talking about the demise of the variable premiums, when I believe that they should be fought for tooth and nail. We should not accept the current unsatisfactory situation regarding the freezing of sheepmeat prices. The Minister intends to have negotiations about the European sheepmeat regime. I believe that the current regime is satisfactory and, although we might have to adjust the variable premiums to some extent, we should not abandon them. The alternative is a vast expansion of the sheep flock with a subsequent kickback to the less-favoured areas and the only enterprise that those areas can successfully run at the moment. Such a kickback is an appalling prospect.

When the Minister is negotiating with the Council of Ministers on the sheepmeat regime, he should abandon those talks and walk out if he cannot get satisfactory proposals from the Commission. So many livestock farmers depend for the living on sheep in Britain and, largely, they reside in the poorer areas. The Minister must take this matter extremely seriously, because there is an awful lot at stake.

The proposed price freezes represent a reduction in price because, currently, the stabiliser system is biting. As a result, the sheepmeat market has been rather depressed. Obviously, there is scope for green pound stabilisation, although that is now minimal, but in the long term it is hoped that we can abandon the green pound. That policy is absolutely right. Because of the rise in value of sterling, there is almost parity between that and the green pound, so there is little scope for reducing the green pound. As a result, the full brunt of the price reductions will be felt by our livestock industry and the small and medium-sized farm businesses will be undermined, especially as they are finding life extremely difficult now.

An alternative is available to the Government, although they have not decided to take it up, and that is direct income support. The Under-Secretary should state why the Government are not prepared to consider that option especially when one considers the plight of the small and medium-sized farmer. Wales is heavily dependent on the livestock industry. The Farmers Union of Wales has calculated that farm incomes have dropped by £15 million in real terms in comparison with 10 years ago. That represents an awful lot of money. Now that the retail prices index is more than 7 per cent., it is clear that input costs will rise. However. the Minister has said that prices are frozen. I hope that I have shown that they are reducing. The European price proposals for 1989–90 do not hold out good prospects.

Falling prices will hit our smaller producers. If the Government are not prepared to look at income support, what will they do? We cannot continue with a base interest rate of 13 per cent. which results in a further squeeze on farm incomes. As a result, less food will eventually be produced in certain areas, and that could lead to higher consumer prices and more rural depopulation.

The Government should accept that they cannot wholly rely on the market place to solve their problems. Why do they not accept that most advanced nations support agriculture and intervention? I mean that in the broadest possible sense, and not in the narrow EEC sense. Many countries use Government intervention to support agriculture. The Government should implement policies that are commensurate with that. It is important for farm incomes to be maintained and our rural populations must be kept in the countryside. Failure to do so is a negation of good government.

6.1 pm

Dame Elaine Kellett-Bowman (Lancaster)

For many years, I supported the importation of butter and sheepmeat from New Zealand, and I did so because of the contribution of the New Zealand forces in the 1914–18 and 1939–45 wars. When New Zealand ceased to make a full contribution to the defence of freedom by refusing to allow British warships to enter its ports for any purpose, including repairs, unless they publicly declared that they were non-nuclear, my support ended. We should look after our own farmers, especially now that their incomes have been much reduced. The sole criteria should be the interests of our farmers and consumers and the interests of New Zealand should be set entirely on one side.

Before the Minister spoke, I was worried about the unfairness of having a separate stabiliser for United Kingdom sheepmeat production. I was almost reassured when the Minister referred to the ending of this unfair stabiliser which applies only to the United Kingdom. My anxiety was half reawakened by his response to my hon. Friend the Member for Basingstoke (Mr. Hunter). I hope that the separate Great Britain stabiliser is on its way out, because that is where it jolly well deserves to be.

In terms of beef, I regret that a ceiling is to be imposed on herd numbers. I appreciate the Minister's efforts in getting the limit raised to 90. However, I wish that a way could be found, without encouraging fraud in other countries, to enable support to be extended to clean heifers which are an important part of the United Kingdom's farming pattern. Since we are losing our beloved beef variable premium, which everybody in Britain liked, it is important to ensure that the special premium is available on the maximum number of cattle and that the suckler cow premium is paid at the maximum allowable rate.

In all previous agriculture debates, my hon. Friends and I have urged the Minister to devalue the green pound. The strength of the pound makes that unnecessary today, but if it should weaken, I hope that the Minister will take immediate action to prevent our farmers being placed at a disadvantage. The Minister rightly put much emphasis on eliminating fraud. As he recognised, nothing does more to damage the Community image throughout the EEC than the feeling that taxpayers are being milked by fraud. We police our agriculture and, indeed, our other industries much better than other countries; that means that, in Britain, the scope for fraud is limited. That makes it all the more galling when we see fraud running riot in other countries.

There has been a great deal of fraud in the production of olive oil. It is pointless to try to monitor olive oil production by aerial photographs, because an irrigated olive tree produces 10 times as much oil as an unirrigated one, and no aerial photograph will reveal that. It would be far more sensible to tie the receipt of Community money for olive oil to tax returns. That would mean that, if income were under-reported, subsidy receipt would be reduced pari passu.

I agree that it would undoubtedly be in the interests of farmers for the CAP to be reformed, but being done good to can be a painful process. I hope that the Minister will not administer such large doses of reform that farmers will disappear and everybody will go hungry.

6.5 pm

Ms. Joyce Quin (Gateshead, East)

Many issues are being covered in the debate. Like many hon. Members, I went to the Vote Office to collect the documents relevant to the debate and was filled with great alarm when I saw how many policy areas we were supposed to consider. The main aspect of the debate, however, is the agriculture price review and the eventual settlement that will be decided by the EEC. On the whole I welcome the Commission's proposals and hope that their main thrust will not be weakened in the coming weeks when some member states will have to take rather difficult political decisions at a time when the European elections are not far off.

Like many hon. Members, I believe that agriculture is vital and important for the health of our economy and that of the EEC. However, the interests of agriculture have to be balanced against other considerations. In the past, although it is less true today, the interests of large-scale agricultural producers semed to outweigh other considerations.

I am interested to see that the hon. Member for Skipton and Ripon (Mr. Curry) is in the Chamber, because he and I are members of the European Parliament and are on the Agriculture Committee. When I first joined that Committee I was astonished to see the strength of the farming interests among its members. If my memory serves me right, on the Committee there were beef farmers, pig producers, dairy farmers, olive oil growers, wine growers and on one occasion a buffalo farmer. That became apparent when we considered the importation of frozen buffalo meat from Australia. We realised that that would run counter to the interests of one member of the Committee who was a buffalo farmer from Italy.

Nowadays there is a better balance and other interests are being fully considered. I support the work of the newly appointed European Commissioner for consumer affairs who seeks to make sure that in all issues affecting the running of the EEC the voice of the consumer is heard. More such reform would be useful. For example, does the Minister agree that consumers and agricultural processors should be given a bigger say in some of the agricultural advisory committees in the Commission? Other current suggestions include the creation of an EEC food and drugs agency. That would be a useful initiative. Are the Government also prepared to support the idea put forward by consumer groups for an EEC food hygiene directive?

Within the better balance that I am talking about we need to make sure that we have effective and well targeted help for agriculture. I particularly support help for the less well-off areas—the upland areas that are difficult to farm but which provide many benefits for our society, not least in terms of advantages for the environment and for industries such as tourism.

Within the EEC, there are several schemes that will change the pattern of farming—for example, the set-aside scheme, which has already been mentioned. While this can make a contribution, I share the reservations expressed about it by my hon. Friend the Member for South Shields (Dr. Clark), particularly those concerning farmworkers, who may find that their livelihood is dramatically affected by this move. Extensification is a valuable measure, but I am concerned about the slowness with which it is being implemented. I hope that we shall be prepared to learn from countries that want to move faster down that road, and, at least within the EEC, there can be a useful sharing of experience.

I strongly support the measures that are being suggested to develop agriculture in an environmentally friendly manner. This will be particularly important in the years ahead. However, I regret that severe cuts in funding for some of the useful agricultural research, and for research into the effect of modern agriculture on the environment that the Government have been prepared to allow.

It is important for farmers, in Britain and in the rest of the EEC, to move away from the products that have traditionally caused the largest surpluses, but we have to be careful about how this process takes place. There is always a danger that, in response to the latest move in Brussels, farmers respond in a particular way. A few years ago we were all amazed, and not particularly pleased, by the enormous areas that were suddenly cultivated with oilseed rape, and the dazzling yellow fields of spring. While it is necessary to give incentives to farmers to move out of surplus production sectors, the effect on different parts of the EEC and different countries needs to be carefully monitored.

For example, I should not like to see farmers move over to forestry to such a huge extent that many of our upland areas become afforested. I am glad that we have turned away from some of the harmful coniferous plantations that have disfigured our uplands. We seem to be making further advances down the right road in England, but I wish that the Government would take on board the need to reduce the amount of coniferous plantations in Scotland and Wales, about which many environmentally minded people are rightly concerned. I would not like to see the natural diversity of the countryside and the rural areas in the EEC eliminated by the latest directive or proposal to move into the production of certain products.

It is important to help the poorer agricultural areas and I am glad that, under the EEC structural funds regulations, some progress is being made towards that. I know that the Government have agreed with Brussels that three areas in the United Kingdom should be helped by the structural funds—the Highlands and Islands, parts of rural Wales and parts of Devon and Cornwall. However, how did the Government decide on these areas? What were the criteria by which suitability for these funds was decided? Do those criteria apply equally to other areas that might be in need of special support, such as the north Pennines? I do not think that objective criteria were used in determining the areas to be helped. While I would not like to detract from the help that those areas will receive, I should like to know whether other areas fit the criteria and might be considered at future meetings between the Government and their EEC partners.

Several hon. Members have spoken about fraud, and, when EEC money is being allocated we want to be sure that it is wisely and sensibly used. I do not think that I shall be alone in being confused about the extent of fraud in the European Community. Over the past few weeks in the press I have seen figures ranging from £2 billion through to £8 billion a year and I should like to know whether the Government have any real idea of how extensive the fraud has been, whether in this country or other European countries.

We are anxious to help farmers, but we should be aware that there is a danger, as a result of the EEC system, of giving help to people who may not be full-time farmers. Are the Government urging their European colleagues to come up with a more satisfactory definition of "farmer"? Who is a farmer and who is a full-time farmer, and how should we define this? Should it be on the basis of what proportion of a person's income comes from farming activities? I should be interested to hear the Government's comments on that.

Mr. Maxwell-Hyslop

I hope that the hon. Lady is not implying that if, as a result of falling farm incomes, some small farmers are forced to take part-time jobs as well, they should lose financial support from the Government.

Ms. Quin

Indeed not. The force of my argument is that we should be helping those who need it and I am sure that the category described by the hon. Gentleman includes people who are deserving of EEC support. Many of us are worried that the recipients of EEC agricultural funds may already be wealthy people in their own right, and it is not clear how much of their income is derived from farming and how much from other sources. If we want to get value for money in EEC agriculture, we need to consider that. I accept many of the points made about the dramatically deteriorating incomes of many poorer farmers in some of the least well-off areas in Britain and the rest of the Community.

What we have been discussing has an effect on countries outside the EEC. I strongly disagree with the points made by the hon. Member for Lancaster (Dame E. Kellett-Bowman), about New Zealand. New Zealand suffered many problems as a result of the fact that, in the 1970s, the EEC countries were thoughtlessly expanding production and causing enormous surpluses. New Zealand is a friendly, independent country. It arrives at its Government policies on the basis of democratic votes, so we should not take exception to those policies being pursued by a friendly country, and try to deny it access to the EEC market as a result.

We should think strongly about the effects of these policies on the Third world. In all our negotiations with the EEC, we should be looking not just at the effects on us but at the effects on countries outside, which are often a great deal poorer than we are. In short, we want a fairer system of agriculture within the EEC that helps those who need it, without harming the interests of friendly and poor countries who are outside the EEC organisation. It will be a huge task to achieve this, but it is one on which we should determinedly set our sights.

6.19 pm

Mr. Robin Maxwell-Hyslop (Tiverton)

I noticed an apparent divergence in concern about public health which would be bizarre if its effects were not so harmful. Children often have to inhale tobacco smoke because they are in a home where one or other parents smokes. The damage that they can sustain from that is now known. Hundreds of thousands of people die each year from smoking, and a huge number die each year as a result of passive smoking. No one is proposing to make the sale of tobacco illegal, yet we hear rumours that green top milk is to be made an illegal substance to sell. It seems that unpasteurised cream may also become illegal to sell, as may cheese made from unpasteurised milk.

Mr. Home-Robertson

I am provoked to intervene by the hon. Gentleman's argument about cigarettes. I introduced a private Member's Bill in 1986, which is now the Protection of Children (Tobacco) Act 1986. That measure is supposed to ban the sale of all forms of tobacco from youngsters under the age of 16 years, but it is a dead letter because the Government cannot be bothered to enforce it. Appropriate legislation exists, but it is not being enforced very well, if indeed it is enforced at all.

Mr. Maxwell-Hyslop

Perhaps the hon. Gentleman failed to listen to what I was saying. I was drawing attention to the bizarre disjunction between allowing tobacco to be sold when passive smokers—those who have not elected to smoke—will probably suffer irreversible damage to their health, but suggesting that those who exercise an informed judgment to buy green top milk or unpasteurised cream should be denied the right to do so. To promote the second course in an alleged attempt to protect the consuming public while offering no protection to those who have not exercised any choice to inhale tobacco is such a bizarre disjunction of priorities that no Government could sanely embrace it.

I could have wished that my right hon. Friend the Minister for Agriculture, Fisheries and Food, whose recovery from illness I greatly welcome, had so arranged his programme as to have been present throughout one of our rare debates on agriculture. I do not commend his decision not to do so. Ministers control their own programmes, and I do not commend the decision of my right hon. Friend to be absent from the House since the speech of the hon. Member for South Shields (Dr. Clark) from the Opposition Front Bench.

I am extremely worried about a number of issues that I wish to share with the House. One is the fact that the health inspection of imported food depends on inspectors paid by the local authority at the port of entry when it should be a national inspection service and financed nationally. How can we expect ratepayers in an area where there is a port to provide adequate percentage of examinations for the benefit of the public throughout the rest of the country? That is another disjunction. I have complained about that arrangement in earlier debates.

We read in the reputable press yesterday of huge quantities of French flood-damaged food entering the United Kingdom, being relabelled and then being sold to an unsuspecting British public. It seems that the local inspectors were unaware of that. I do not blame them for that because it is not their fault that they are too thin on the ground, but it demonstrates more strongly than anything else the need for the food inspection service at the port of entry to be nationally financed and for central Government to be responsible for manning levels. It is consumers in the entire country, not just those who live within the local authority area around the port of entry, who are protected or not protected from heinously dangerous imports by too light a degree of inspection.

What of the state veterinary service? It is of such a size now that it can be overwhelmed if it has to deal with more than one problem at a time. Those of us who represent constituencies with an agriculture interest know that the system of control of bovine tuberculosis is slipping back because the state veterinary service is having to focus its attention on bovine spongiform encephalopathy instead. That is not to underrate the importance of focusing veterinary effort on BSE. It is already known that scrapie can jump from sheep to human beings. Anyone who read the letters in the British Medical Journal last year from veterinary officers or doctors—I think it was doctors—who had been in practice in tropical Africa, where exactly that had happened, would be aware of that fact. If that can happen, we have every reason to believe that it will happen at some stage from infected cattle, unless there is a 100 per cent. grant to withdraw such cattle from actual or potential consumption at the first suspicion of symptoms.

I learned as recently as 48 hours ago from an experienced veterinary surgeon that there is as yet no clinical way of anticipating behavioural symptoms as the sole means of detecting the disease in living animals. The presence of the disease is confirmed only after the beasts' heads have been cut off and their brains examined by qualified personnel. If these animals are to be removed at the first opportunity so as to avoid any possibility of their entering the food chain, only a 100 per cent. grant will suffice. We all know that. Ministers must know that. After all, they are not fools. If we are serious about preventing avoidable disease of an extremely serious sort, that is the action that the Government must take. It is within their power to take it.

I wish to compare the fate of the sheep variable premium with that of the beef variable premium because I believe that there is an important lesson to be learned from the comparison. When milk quotas were introduced, the then Minister of Agriculture, Fisheries and Food justified southern Ireland having an increased quota when Britain's quota was cut on the ground that we were allowed to keep the beef variable premium. Having spent that coin, the beef variable premium was negotiated away while Southern Ireland kept its extra milk quota. We did not catch up with southern Ireland, having lost what the then Minister pleaded as the justification for Britain's quota being reduced while Southern Ireland's was increased.

What will happen if the sheep variable premium is negotiated away? We agreed only to a "standard quantity", which for some reason is now described as a "stabiliser". when I first knew it in this place, it was called a "standard quantity", and that term is much more descriptive of what it is. I hope that the House will forgive me if I continue to call it a standard quantity, although I do not do that because my memory has gone from scrapie. If we are to lose sheep variable premium, which I trust we shall not, there must be no question whatever of our still having a standard quantity or stabiliser, the only justification for which was the fact that we had a sheep variable premium when other EEC countries did not. If one goes, so must the other. There must be no compromise whatever about that.

I do not know what is in the report that is now the subject of the press conference for which my right hon. Friend the Minister left the House some considerable time ago. We shall know that later. I can only say that this debate is the poorer for none of us knowing what is in that report before the debate started. That was avoidable, and it should have been avoided. I do not like to see the Government manage affairs in this way when it is clearly avoidable.

Lastly, I refer to the alleged lack of change in agricultural support in certain spheres. It is obvious to those in the industry that if it is the same in pounds sterling as it was last year, it must be worth 7 per cent. less. That is not no change—it is 7 per cent. less. If, as my right hon. Friend the Minister indicated, the effect of the relationship with the green pound and the other things that he has negotiated is a plus of 1.6 per cent.—I have no reason to doubt that figure—according to my calculation that leaves a net drop in expendable income of 5.4 per cent. if the amount is the same in terms of sterling as it was a year ago. Let us face the reality of that and not pretend that incomes are unchanged. We do not claim to have increased old age pensions when they are changed only by the cost of living index—we say that they have been valorised by the change in the cost of living index—so let us not pretend that paying the same rate in sterling as last year means that the recipients will have the same purchasing power, because they will not.

The industry is going through a period of dramatic financial contraction, the effect of which is not and cannot be confined to it. It is to be seen in falling employment in the sectors which supply agricultural machinery, not just agricultural chemicals. It is to be seen in the fall in incomes of sub-post offices and shops in rural areas, which need the income from local agriculture to sustain their own livelihoods. No part of rural Britain is isolated from income levels in agriculture. We should remember that fact as we debate agricultural problems in a House which I note remains as wholly bereft of Scottish and Welsh nationalists now as it was when the opening Front Bench speeches were made.

6.33 pm

Mr. Martyn Jones (Clwyd, South-West)

It is pure coincidence that the Minister's report to this House of more cuts, which will undoubtedly reduce the income of hill farmers, has been delayed until today. I am sure that it has nothing to do with the large number of such farmers in Richmond.

Many hill farmers in my area, and many more in Wales, are already struggling, like the rest of industry, with the Government's huge increases in interest rates and inflation. Specifically, the reduction in payment for the production of beef and sheepmeat will have disastrous consequences for hill and marginal farmers who have no alternative to livestock farming. The exclusion of heifer beef from subsidy will mean a loss of £50 a head for my producers. That will be especially detrimental for small producers who finish store beef for market. The exclusion of heifer beef is almost certainly due to the fact that the rest of Europe does not produce the same quality of heifer beef.

As I have said, Wales is traditionally a livestock-producing area. It is extremely likely that, if we get rid of our lamb variable premium under pressure from the EEC and substitute a headage payment on ewes, restricted perhaps to 500 head on lowland and 1,000 on upland areas, that would be woefully inadequate and would lead to upland areas becoming yet another industrial wasteland and—we have seen many of those in Wales.

Most of the sheep production subsidy comes to the United Kingdom, but I must stress that evening out the subsidy by 1992 or 1993 on citrus production, wine, olive oil and tobacco will hardly have a beneficial effect on the incomes of United Kingdom farmers.

My farmers noted with great displeasure the fact that the Government's figures show that agricultural incomes in the United Kingdom were down 25 per cent. and they were extremely disappointed with the Minister when he stated at the recent Oxford conference that only 50 per cent. of farmers rely on their agricultural income for their main income. The fact that many wealthy people buy country property with a few acres on which they graze the odd sheep more as a lawn mower or a hobby than as a living, makes a nonsense of the figures that the Government are using to decide policy.

Farmers acknowledge the need for the reduction of basic foods within the intervention system, but some stock must be retained and a great many farmers have expressed concern that the Government's current thinking seems to them to tend towards the suggestion that agricultural production can be changed overnight. Farmers are painfully aware, however, that there must be careful planning and consideration. A calf canot be produced at a moment's notice, nor can a lamb or a crop of wheat.

Farmers have always had a responsible attitude to food production and they have always responded to the demands of successive Governments. However, they are concerned that this Government's policy is undermining the industry. Their policy towards bovine spongiform encephalopathy is just one example. I agree with the hon. Member for Tiverton (Mr. Maxwell-Hyslop), and I am sure that all my farmers would also agree, that the only answer is for 100 per cent. grants to be paid on the value of the cow, whatever its state. We must stem the tide of 100 new cases of BSE a week. My farmers feel completely let down by the Government, and I am sure that consumers feel the same.

6.38 pm

Mr. Alan Amos (Hexham)

I am glad that we are having this debate this afternoon because I am becoming a little worried about the farmer-bashing which seems to be so fashionable in certain quarters. We owe our farmers a great debt. They are the most efficient farmers in Europe and they have never let us down in providing the nation with good and wholesome food. I for one do not pay too much attention to the nut-cutlet-eating, seaweed-juice-drinking, Guardian readers about these matters. Farmers actively embrace the latest technology and employ good working practices. They make a large contribution to our balance of payments and food prices have risen less quickly than the RPI in general. Apart from anything else, farmers are kind and generous people.

I notice that the hon. Member for South Shields (Dr. Clark) is in the Chamber. I am glad about that, because he is one of my constituents and he can confirm what I am saying. We have an obligation to help the farming community during this period of major transition.

The Government have generously given millions of pounds to manufacturing industry to help it adapt to the new technological era of the 1990s. Unlike those of all other sectors, incomes in agriculture are falling. Hill farmers in my constituency are in difficulties, and I am afraid that such farmers do not have alternative forms of employment. If they cannot be helped to stay in fanning, livelihoods and whole communities will be destroyed.

Mr. Ron Davies

The same can be said of the steel industry.

Mr. Amos

The steel industry has done very well because of the Government's generous support. I hope that farming will end up as stable and as prosperous as the steel industry.

Agriculture is of strategic importance, and before any right hon. or hon. Member refers to the level of expenditure on the common agricultural policy, I must point out that a little less than two thirds of that expenditure goes not to farmers but towards the costs of storage, disposal, export subsidies, and so on. Farmers themselves do not receive that money direct. There is need for reform.

It is a pity to see one of our great industries in a state of uncertainty. Farmers can handle the vagaries of the weather but find it difficult to deal with the inability of 12 sovereign European countries, with varying and frequent elections, to agree on overdue but essential reform. Some years ago, I was involved in agriculture, and it seems to me that milk quotas could have been avoided if our EEC partners had faced up to the problems of dairy surpluses earlier. Instead, they ignored the impending crisis and were forced into taking dramatic action—with all the attendant injustices of implementing and operating the quota system. Paradoxically, I suspect that most dairy farmers are happy to retain milk quotas for the certainty and stability that they now offer.

Matters cannot and will riot remain as they are, for the reason that, quite properly, limits have been imposed on the Community budget and on the CAP's proportion of it, together with the existence of real and potential market imbalances in most products due to technological progress—which is something that we cannot and should not try to halt.

Unfortunately, an area that needs a clear sense of direction and stability—agriculture—happens to be the only policy area that is controlled by the EEC, which is too often an institute known for inertia and pettifogging regulations. In the case of an industry that, in a very real sense, is a victim of its own success, politicians owe it a prosperous, albeit, generally, a non-expanding future. As manufacturing has almost undergone the fundamental transformation of restructuring, so too is agriculture about to embark on a similar exercise. That is not surprising. Farming is a cyclical business, as is the nature of economic development.

Northumberland, in which lies my constituency, has seen a dramatic change. Agricultural employment there between 1976 and 1986 fell by 14 per cent. Over the same period, the number of cattle fell by 22 per cent. Agriculture is extremely important in a county where three quarters of the land area is given over to its use. The county is vulnerable, because nearly 40 per cent. of that land is rough grazing. There is more land in that category in Northumberland than in any other in England or Wales. Northumberland has about 13 per cent. of the nation's total rough grazing.

In looking for solutions, careful consideration must be given to the structure of the particular sector of farming involved. In Northumberland, 60 per cent. of its farm area is rented—nearly half the farmers in my constituency are tenant farmers. It is gratifying to see that about one third of applications for the set-aside scheme have been submitted by tenant farmers.

The underlying reason for agriculture's present situation appears to be lack of demand. In manufacturing, poor competitiveness forced British consumers to look to foreign imports. In agriculture, the demand for basic foods in a high income economy has reached a plateau. Even the United Kingdom's remarkable status as a major food exporter is fragile and is propped up by the very subsidies that have helped bankrupt the Community budget. If the Soviet Union succeeds with its programme of reforms, the situation will only worsen as that market dries up.

The solution does not lie in finding more money, and allowing matters to carry on as they are. What is the point of increasing the CAP budget to allow farmers to produce more food that can neither be eaten nor exported? Nor should such a thing be allowed in respect of cars, shipbuilding, steel or coal. The solution lies in allowing agricultural restructuring, rather than pretend that such restructuring is not needed.

If we can make the Common Market truly a common market, and allow market forces to operate more freely, countries will specialise in those products in which they have a comparative advantage. That would be in the United Kingdom's best interests, for our efficiency and structural advantages would allow us to dominate in the production of cereals, sheep, milk, beef, pigs and poultry. I have that confidence in British agriculture. A freer market should be seen as a golden opportunity for British agriculture to prosper, not as a danger to be avoided at all costs.

The second aspect of a long-term strategy must be diversification, both in agriculture itself and in the rural economy generally. Any industry that wants to survive into the 1990s must be flexible and able to meet rapidly changing demands. That involves retraining, the acquisition of new skills, and—more importantly—a willingness to do so. The Agricultural Training Board is already doing much good work, and I congratulate the Government on introducing grants for diversification into tourism, craft industries, and so on, and on the establishment of the farm woodlands scheme. Few people can be given any guarantee about the permanency of their occupations. Right hon. and hon. Members do not expect such a guarantee—though my right hon. and hon. Friends may, more so than others.

Such adjustments can be painful, or they can be relatively easy if there is Government assistance. The ALURE strategy is one of the most significant statements in post-war agricultural policy.

Mr. Campbell-Savours

On a point of order, Madam Deputy Speaker. Can you tell the House whether you have been informed by the Leader of the House whether there is to be a statement on the arrest of four former and existing Marconi employees and on the further inquiries into that company that are to take place? Will there be a statement on that matter tonight or tomorrow?

Madam Deputy Speaker (Miss Betty Boothroyd)

Mr. Speaker has received no such request from any Minister.

Mr. Amos

The ALURE strategy is one of the most significant statements in post-war agricultural policy. While accepting that agriculture will remain the dominant user of land in rural areas, it makes a brave and radical attempt to face the future.

Another part of the strategy must be acceptance both by central and local Government of the need to preserve the livelihood of hill sheep farmers and cattle farmers—especially the smaller among them. We are talking about the future of whole rural communities. It must be realised that any decline of agriculture in areas such as Northumberland will mean the decline of whole economies. If the major employer contracts, so will the need for schools, shops and transport. That must elicit a national commitment, as any EEC policy to aid small farmers, while costing the British taxpayers a lot of money, will not, because of the European definition of a small farmer, help our own farmers. That is a case of agricultural and social policy becoming undistinguishable.

Real and vital assistance can be given through a fair and reasonable level of HLCAs for breeding cattle and ewes and through the grants policy on LFAs generally, together with paying the maximum allowable nationally funded element of the suckler cow premium under the new EEC arrangements for beef. Hill farmers in my constituency would certainly prefer the proposed special premium to be paid to the breeder.

A fourth aspect is encouraging farmers to extend their traditional individualism into taking even greater responsibility for their own industry. They have a duty to find better ways of marketing their produce, to identify market trends, an to become market leaders in supplying more quickly the demands of a rapidly changing market. They must grow for the market, meeting and anticipating change in the market place and in consumer preference.

If there is scepticism, as there is, about the more extreme claims of the health food lobby, where are the counter-arguments? The farmers must make them. "Food from Britain" should be viewed not with suspicion but as an invaluable ally in diversification into growth areas. Why do the French, for example, have such a hold on our market for high value-added dairy products? Equally, it is not unreasonable for a partnership to develop between the private and the public sectors in research and development. If, however, the agricultural community is to be asked to make larger contributions, it is only right that it should be given more say in how the resources are used.

When there is change—which, in principle, farmers accept must come about: they are realists—let us provide enough time for that change to be carried out properly: for instance, charges for ADAS services and research and development. I recently visited some of my horticulture farmers. They accepted the new policy on near-market research, but, quite reasonably, they wanted a fair period in which to adjust to the new circumstances. The amounts involved are not large for the Government, but they are large for farmers. Agriculture is not like manufacturing; its output cannot be increased or decreased by the market. It is a long-term business, and we must give it time to adapt. That is only fair.

In the short and medium term, a number of measures should be taken, but I shall mention only two. Given that a certain amount of agricultural land will become surplus to requirements, particularly for cereals, the voluntary set-aside scheme now established should commend itself as one that all sides of the industry can at least agree to accept. Such an idea, however, is not easy for the Government to sell to the general urban population, so it would be in farmers' interests not to pitch their demands unreasonably high.

The price mechanism must also be given a bigger role to play in establishing a larger element of market realism in most sectors. Mention of the price mechanism need not produce shudders of fear. The ability and potential of the farming community to achieve ever higher rates of productivity should be part of any consideration of future agricultural policy. Talk of nitrogen quotas for cereals, for example, I consider misconceived. Apart from the impossibility of enforcement, we should be encouraging the use of technology to improve yields to maintain our competitive advantage, thereby raising demand for our produce. If we spurn modern techniques, hon. Members may rest assured that our competitors will not, and they will soon overtake us.

Although the demand for organically produced food will continue to represent a tiny fraction of the market, there will be some expansion as incomes rise, providing an opportunity for diversification. I should like at this point to pay tribute to one of my farmers, John Whaley, who is doing a great deal in that regard.

Other short-term but essential measures must include further devaluations of the green pound if the pound falls back from its current high level. That raises the central and perhaps dominant question of free and fair competition. Too many of us feel that the British always play by the rules and lose out as a result. I believe firmly that as long as United Kingdom Ministers fight our corner doggedly in EEC negotiations the British farmer is better off inside the Common Market than outside it. Our Ministers are doing exactly that.

For example, the FEOGA-funded element of the suckler cow premium was increased by 60 per cent., the headage limit on beef was raised to 90 per cent. and a larger than expected devaluation of the green pound took place recently. Our message is getting over in the EEC, but the message to our EEC colleagues must always be: "If you do not follow the rules, don't expect us to do so."

Equally, we must be ever vigilant over European discrimination against British interests—in headage limits for beef or sheep to replace the variable premium schemes, and the exclusion of heifers from any new beef arrangements. I know that those have been more or less decided, but none the less we must constantly fight against them, as they affect Britian in particular. Such measures are not only anti-United Kingdom, but anti the most efficient producer, which makes no sense from anyone's point of view.

All things being equal—although they never are—my guesstimate is that, by the end of the century, about 90 per cent. of British agriculture will be carrying on as before. Provided that the inevitable changes are phased in gradually and with Government support and help, our agriculture will be highly efficient, more balanced and prosperous. It will continue to make a tremendous contribution to the United Kingdom balance of payments, and will be well able to face the challenges of the future.

6.54 pm

Mr. Elliot Morley (Clanford and Scunthorpe)

There is no doubt that farmers face real problems related to their income and the pressures imposed on them. Those pressures are caused not merely by the CAP, but by external factors such as high interest rates and the cuts in research and development—a major concern to farmers in my constituency. During election campaigns, however, when I see the colour of the posters in farmers' fields, I sometimes wonder whether they really want the policies that the Government whom they presumably support are bringing in. Farmers seem to suffer from split personalities: what they want and the way in which they vote do not always coincide.

The farm price proposals do not deal with farmers' falling incomes, or with their other problems. I am concerned about farmers' incomes, because I know that many farmers are caught on the treadmill of borrowing money and then trying to repay it by increasing their income from crops, using more and more fertilisers to make up the shortfall, with undesirable environmental consequences.

It is also clear that the common agricultural policy is a Frankenstein's monster out of control—a monster with an insatiable appetite for milk and wine lakes and cereal mountains. According to figures from the Consumers Association, costs that are protected are kept artificially high in the Community compared with world prices. The figures show that the price of butter in the EEC is 132 per cent. higher than the world price, the price of skim milk powder 37.9 per cent. higher, the sugar price 100 per cent. higher and the beef price 96.6 per cent higher.

I am afraid that I have not noticed the Government's measures to deal with the excesses of the CAP having much effect. There is a good deal of sabre-rattling when various Ministers—even the Prime Minister—go across to Brussels, but there has not been much change. Although there has been a reduction in structural payments, 'there are still more increases in subsidies.

There is no doubt that some industries could survive and be competitive without such support. All that the pig farmers in my constituency ask is parity of treatment in the European Community. They do not ask for any subsidies or special help; they just want to be treated in the same way as pig farmers in Belgium, Holland, Germany or Denmark—and I am sure that the same applies to many other farmers. For example, it is no use bringing in new controls on pesticide levels if, in 1992, produce is to be imported into this country which does not comply with the standards that we would rightly expect from our farmers.

The proposals contain a 5 per cent. reduction in price support for the sugar industry. I concede that, according to the Consumers Association, sugar is very over-priced in world market terms, but I nevertheless believe that there is scope for new markets for sugar beet, especially in this country. In particular, sugar products can provide the chemical industry with biodegradable plastics. Part of the problem with developing that industry is caused by the quotas currently imposed on sugar beet growers in this country. Those need to be looked at if we are to ensure that there is a viable market. It is worth pointing out that the planting of sugar beet is environmentally advantageous, contributing to nitrogen levels in the soil. I also believe that the green pound should be abolished in due course and MCAs as soon as possible, even before 1992.

Although, on the face of it, the reduction in structural support, which has declined from £392 million in 1983–84 to £209 million in 1988–89, may seem desirable, some changes could be beneficial, in particular the move towards environmentally sensitive areas. Similar structural changes such as grants for drainage have been damaging, so I am pleased that there will now be controls on them.

There could be greater scope for controlling food output and caring for the environment by extending the use of the environmentally sensitive areas scheme. At the moment, such schemes account for only 0.5 per cent. of MAFF's budget, so there is considerable scope for increasing that. There is also scope for extending low-input farming instead of using set-aside. I have never been in favour of set-aside, because it is a negative use of public money. It is not constructive in terms of reducing surpluses. Evidence shows that the set-aside scheme has not made any great impact on surpluses, especially on cereals. I should prefer the emphasis to be placed on low-input farming and on giving financial support to farmers who farm in environmentally sensitive ways.

Cuts in research and development also pose problems. As the hon. Member for Hexham (Mr. Amos) pointed out, if we are to succeed and survive in Europe, we must use modern farming techniques. That being the case, there is no justification for the recent announcement of the £30 million cut in research and development over the next 3 years.

One environmentally sensitive project, aimed at controlling pests in soil by the use of nematode worms instead of chemical pesticides—which would not only be advantageous to farmers in reducing the cost of chemical inputs, but to the advantage of all of us as it would be a natural rather than a chemical method of pest control—has had its funding cut by one quarter. I see no justification for cuts on that scale.

There has been a dramatic reduction in support over recent years. We need careful planning. I am not saying—I do not believe that any of my hon. Friends would say—that farmers should be cut off from any kind of suport. In fact, that would be disastrous, because if it happened as part of a unstructured plan, farmers would try to make up that lack of support in higher outputs from their farms and would farm in far more environmentally damaging ways. Therefore, there must be a structure. Support should be given in a planned and structured way, but it should be linked to environmentally sensitive methods of farming, rather than to set-aside and other schemes.

We must consider our overall strategy of what we grow in this country and what we import. It may well be to the advantage of the consumer that we import more cereals from the Third world, rather than grow them in our inclement climate with the use of high chemical inputs. That would benefit the economy of the Third world and free our farmers to grow other crops, perhaps those attracting a higher premium because of rarity value or the way in which they have been grown.

We must also bear in mind New Zealand's traditional role in the supply of cheese and butter. I believe that we should support the New Zealanders and that their products should be to our market. However, it seems strange that New Zealand can export its products halfway round the world and still sell them at a lower price than some of our producers. Surely that raises questions about the efficiency of some of our producers.

I want to take issue with the hon. Member for Lancaster (Dame E. Kellett-Bowman), who is no longer in her place, and who made some remarkable comments about New Zealand and its policy of being a non-nuclear zone. There is no justification for victimising a country such as New Zealand simply because it has such a policy. We could extend the logic of that to the Americans, who have taken steps to penalise our computer manufacturers for exporting computer parts to Russia and the Soviet bloc, and take steps against US imports.

Our farmers can meet the modern challenge of diversification. I believe that they can operate so that direct support can be reduced. Green consumerism will force changes on farmers and producers, because people will use the power of their pockets when buying consumer goods that have been raised or produced in a way that they regard as environmentally unacceptable. That will apply to intensive animal products. There has been a great deal of comment recently about intensive methods of animal rearing. There is scope for de-intensifying that, which may lead initially to a rise in the cost of those consumer products. However, I believe that many people will be prepared to pay a premium for not having the present methods of animal rearing.

In conclusion, the solution to the problems of price support and the CAP lies in a carefully structured package. The free market will simply lead to a return to the situation of the 1930s and force farmers off the land. Farmland and fields will return to the derelict state that they were then. It is important to keep farmers on the land. They are not only producers in an industry, but people who can protect our common heritage. Many farmers have been forced, often against their will, to operate in ways that they know are damaging, because of circumstances beyond their control—especially interest rates and financing packages. There is now an opportunity to reduce surpluses and to support farmers to the advantage of all—consumers, the countryside and farmers.

7.5 pm

Mr. Andrew Hunter (Basingstoke)

I shall be brief. I intend to concentrate exclusively on the Commission's price proposals. In so doing, I welcome the fact that the debate is so early this year and that negotiations are advancing so rapidly, because no one benefits from delays such as we have experienced in the past.

I shall make just one general point and seek to illustrate it from the first volume of the Commission's proposals. The general observation that I wish to make has become common ground in the debate. All hon. Members who have spoken have acknowledged that the gravest problem facing British agriculture at the moment is the pressure on farm incomes. This issue must be kept in proportion. It is not a problem that is consistently or uniformly experienced. It varies from one sector of agriculture to another and, by definition, from one region to another. However, the essential point is that there is now pressure on farm incomes such as has not been experienced for many years.

It is absolutely right that production should be controlled, but we must be wary of the situation that we have created, whereby in controlling and limiting production we put pressure on farm incomes and replace one set of problems with another.

The proposals as a whole worsen the position rather than improve it. That can be seen clearly from three sections in the proposals. The first concerns sheepmeat—a subject which has featured prominently in the debate. There is clearly some good news on that front. The EC is now advancing steadily towards self-sufficiency—the figure is now about 81 per cent.—so there is scope for more improvements. There have been improvements in recent years, with an increase in total headage of about 5 per cent. two years ago and nearly 4 per cent. last year. It is good to note that the United Kingdom has had more than its fair share of that increase—with an increase last year of about 8 per cent. It is also good to note that consumption is increasing within the Common Market, albeit fractionally, by about 1 per cent. per year. It is likewise good to note the fractional drop in imports from about 259,000 tonnes in 1987 to 250,000 tonnes in 1988.

However, now comes the bad news, which has already featured in the debate. There are to be no institutional price changes in the sheepmeat regime. As my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said, that is something of a non-event. The impact of inflation means that sheep farmers are suffering a 7 per cent. loss in support in addition to a 10 per cent. drop in market prices in the past year.

It is clear that sheep farmers are far less well off than they were even two years ago. The basic reason for that has been the operation of the Great Britain stabiliser mechanism, which has been far too harsh. Perhaps I misunderstood the observation made by my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman). The argument is not that we alone have a stabilising mechanism, because such mechanisms exist throughout the Common Market. The argument is that it is too harsh in this country and that a softer regime operates elsewhere.

Dame Elaine Kellett-Bowman

There is a separate stabiliser mechanism here. We would not mind having the same structure as other countries, but it is unfair that we should have a different one.

Mr. Hunter

I now understand more fully the point made by my hon. Friend, and she is correct. That brings me to my next observation, which concerns the variable premium.

The ceiling on breeding ewes has been acceptable so long as the variable premium has existed. I emphasise the point made by my hon. Friend the Member for Tiverton: that if there is a concession on one, we must be doubly on our guard—if we lose the variable premium, we can also lose the ceiling on breeding ewes; conversely, if we keep the variable premium we must be prepared to accept a ceiling of some sort.

If I heard him correctly, the Member for Brecon and Radnor (Mr. Livsey) gave a statistic of which I was unaware. I believe he said that we account for 70 per cent. of sheep farming in the Common Market. Did I mishear him?

Mr. Livsey

I said that 70 per cent. of EC sheep were in the British Isles.

Mr. Hunter

I thought that that was what the hon. Gentleman said. The significant point at the moment is that, under the existing regimes we receive only 30 per cent. of total EC sheep support. Given the total support that we obtain, the hon. Gentleman's figure shows that even now the situation is far from acceptable.

Mr. Livsey

Does the hon. Gentleman agree that support for sheep in the European Community represents only 2.5 per cent. of the total budget, so it is a relatively small element in the CAP budget?

Mr. Hunter

I entirely accept that.

Attention has already been drawn to the fact that the existing regime is under review and we can expect substantial reforms in the near future. I am sure that the key words here must be "caution" and "vigilance".

For all the reasons given in this debate, sheep fanning is vital to many parts of the country and I urge the Minister to pay great attention to ensuring that sheep farming, particularly in the uplands, remains economically viable, because there is no alternative.

In the beef sector, again, there is a combination of good and bad news. Perhaps there is a moral to be learned from this with regard to reforming the sheep regime. The current beef regime is substantially harsher than the previous one. Intervention remains unchanged, but that is only a small part of the problem facing beef farmers. The annual limit of intervention to 220,000 tonnes, the arguably too low trigger for intervention buying, the inadequacy of the special premium compared with the variable beef premium, the limitation of the premium to 90 head instead of the variable premium, and the absence of a heifer premium all without doubt place a heavy burden on the British beef farmer.

All this is taking place against a favourable backcloth. The position as regards beef and intervention in the Common Market during 1988 was not so bad as in previous years. Under the old regime, there was a reduction in production. Almost 5 per cent. less beef was produced in 1988, which brought us back to about 96 per cent. self-sufficiency.

In 1988, too, public intervention and private storage were appreciably down on the 1987 figures. A drop in buying and an increase in sales resulted in the most significant decrease in the stocks in intervention. The warning to which one must pay heed is that, arguably, the change in the beef regime has proved to be an over reaction. Consequently, the British farmer is at a greater disadvantage than he need otherwise have been. I sincerely hope that that lesson will be learned when we reform the sheep regime.

Finally, with regard to cereals, pages 31 to 35 of the Commission's proposals do not make happy reading. Clearly, stabilisers did not work last year. Salient quotations can be drawn from page 31 of the Commission's report, perhaps the most depressing of which is the acknowledgment that there is a risk of ongoing imbalance between supply and demand over the next few years. So far, stabilisers have not achieved the required and hoped-for decrease in production, but they have increased the financial pressure on cereal growers.

Intervention prices remain the same but conceal a greatly increased burden on the cereal farmer. The latest green pound devaluation goes no way towards compensating for that. In effect, intervention has been reduced by an additional 3 per cent. because the supplementary levy was invoked last year. Target price has been reduced by 1 per cent. The co-responsibility levy has remained the same and the monthly increases have been reduced by 25 per cent.

These facts show that, without any doubt, pressure on farm incomes will continue and we are facing a serious problem. The full seriousness of the situation will reach different sectors at different times. For many farmers, alarmingly, the writing is on the wall. We urge them to become rural entrepreneurs, and circumstances force them to do so. We also expect them to be the custodians of the environment. Increasingly, we also expect them to contribute to the financing of research. The farmer has an excellent record as a custodian of the environment and has often responded to the needs of research. The worry is that, unless the increasing pressure on farming incomes is put into reverse, the farmer will be unable to perform the tasks that the Government expect of him.

7.18 pm

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

I wish to support what the hon. Member for Basingstoke (Mr. Hunter) said, particularly about the role of the farmer as custodian of the environment. Certainly, in the Lake District, which forms a great part of my constituency, the hill farmer plays a very important part in that task.

I join the hon. Member for Tiverton (Mr. Maxwell-Hyslop) in his condemnation of Ministers' failure to make a statement on bovine spongiform encephalopathy, a point mentioned by my hon. Friend the Member for South Shields (Dr. Clark). Many hon. Members would have liked to question the Minister on whatever proposals he might have, if only because they are under pressure from their own constituents.

The county of Cumbria has experienced severe difficulties in the disposal of carcasses and confusion has been sown in the minds of councillors which, I understand, is entirely due to the conflicting information given by departmental officials. Councillors pressed me on such matters and hoped that, at some stage, Ministers would make a statement—not merely give a written answer—to Parliament, which would give us the opportunity to debate these matters at greater length.

I wish to refer more specifically to hill farm incomes and the problems of hill farmers in various parts of the country, particularly in the Lake District.

Since my earliest years, I have been a passionate supporter of the European Community; I campaigned for entry to it as a teenager, and in the 1970s when it was an important political issue. I believed then that, although my party suggested that the EC might hold back the social reforms that Labour advocated in the 1970s, the EC would inevitably lead the way with such reforms. The Labour party is now relatively pro-European, and that derives from the fact that the Community is at the forefront of social change. The Government, by contrast, take a reactionary position on these matters, as is evident from their attitude to farming.

A proposal was put to the Council of Ministers on direct support for hill farmers. It would have changed the incomes of hill farmers in my constituency, and I cannot understand why the Government rejected it. The EC is taking the initiative in these matters, and I hope the Minister will tell us why the Government rejected this positive initiative, which would have helped many people in Wales, Scotland, Yorkshire and the south-west.

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Richard Ryder)

I shall deal with that in my wind-up speech.

Mr. Campbell-Savours

I am glad to hear that.

Fraud has already been mentioned. I intervened during the speech of my hon. Friend the Member for South Shields when he was discussing an article that he had found in the French newspaper Libération which dealt specifically with remarks made by the Prime Minister at a summit, when she estimated fraud in the Community at 63 billion francs, which is 20 per cent. of the budget of the European Community. She referred to 93 cases of fraud in the United Kingdom in 1987, a figure somewhat at variance, by extrapolation, with information given to members of the Public Accounts Committee for its 30th report of the Session 1987–88 on external trade measures for agricultural products. At that time, we were provided with details of the outcome of action taken by the Department on the 130 irregularities reported by the United Kingdom in the period 1980 to 85". That was an average of about 26 cases a year, which does not seem to square with the Prime Minister's figures for 1987.

During my earlier intervention, I commented on the incidence of prosecutions. According to our report, Fifteen cases resulted in prosecutions with fines totalling £161,120 being imposed in 14 cases and one resulting in a 3 year prison sentence. 20 other cases were settled by compounding". Compounding is an interesting term, which means no more than doing a deal with the Revenue. It means that a person commits fraud and, in general, if the fraud does not exceed £70,000, he does a deal with the authorities, who let him off with a slapped wrist, telling him not to do it again. The person also pays back the money. That is not the sort of approach that will help to solve the problem. Compounding is not the answer to fraud—prosecution is. In the cases I have referred to, compounding drew only £85,155 from the people who were responsible. Goods were seized in 13 cases and restored on payment of an appropriate sum. Full recovery was obtained in 33 of the remaining 73 cases and is being pursued or has been partially successful in another 33 cases. In seven cases proceedings had been discontinued. Paragraph 30 of the report continues: Looking at the extent of the improper use of EC funds, we found it impossible to believe that the figures of irregularities reported by member states to the Commission should be regarded as realistic. We consider that either the basis of reporting is incorrect or there is under-reporting; in any event, there is clearly no common system of reporting. The Committee went on to recommend that MAFF press vigorously for the introduction of a reliable and uniform basis for reporting CAP irregularities so that member states can assess the extent that CAP funds are misused. We continued: We agree with the C & A G's conclusion that, despite promptings from the EC-appointed Cheysson Committee, and the various reports of the ECA and the European Parliament, only very limited reforms to reduce the complexity of the CAP have taken place. We are disturbed to find that so few changes to improve and simplify regluations and reduce irregularity have occurred since the Committee examined CAP frauds, irregularities and exploitation in Session 1977–88. We are particularly concerned that the United Kingdom as a net contributor to the EC is meeting the cost of error and fraud in other member states. A couple of years after I was elected to the House, my hon. Friend the Member for Blackburn (Mr. Straw) made a speech from the Dispatch Box late one night in a debate on fraud in the EC based on the report of the European Court of Auditors. This must have been in about 1981. I remember that what was said then was little different from the problems that have been identified today—one wonders what has happened in the past eight years. Have the Government turned a blind eye?

As the Prime Minister increasingly recognises that she cannot extract from her European partners the money that is necessary to fund the reductions that she wants in our contribution, has she instead turned to hyping up fraud by exaggerating and drawing the Community's attention to it? Action, not shouting, is needed. What action is being taken? If the Italians, the French, the Brits and the Belgians are breaching the rules, what is being done to stop them? Is a framework powerful enough to bring fraud rapidly to an end being put in place? It seems to me that little apart from shouting has happened in the past few years.

I want to draw to the attention of the House the problems of security of tenure that face hill farmers in various parts of the United Kingdom, with particular reference to sheep farmers. I had hoped that the European Community would have introduced a directive to give them greater protection in areas in which domestic legislation has failed. Certainly, every effort should be made to implement the directive on direct payments to hill farmers that I have already mentioned. A particular farm in my constituency sets a precedent and should he the subject of discussion in the Community. It may be only a small farm, but in many ways it shows how we are slipping back towards feudal values.

Mr. J. A. Gaskell, a farmer in my constituency, is famous in the north for what has happened to him in the past few weeks. He lives and works in Thirlspot farm in Thirlmere near Keswick in the heart of my constituency. This gentleman has a farm with outbuildings. Next door is the King's Head hotel. My constituent, Mr. Gaskell, is a tenant of the water authority. The hon. Member for Brecon and Radnor (Mr. Livsey) may have heard of this case. The owners of the hotel are Mr. Eugene Morgan and Mr. E. W. Hayles, one of Dobson road, Bolton, Lancashire, and the other of 142 Hulme Hall road, Cheadle Hulme, Cheshire. They have taken it upon themselves to make a planning application, not for property or premises that they own on the King's Head site, but for Mr. Gaskell's farm buildings which have been rented from the water board for the past 40 years. His father was the first tenant, and his son will be the tenant in the future—or would have been were it not for this appalling affair. At the end of the day, we do not know what will happen.

As the law stands, the owners of the hotel are entitled to make that planning application and in the event that they secure planning permission from the Lake District planning board and the appropriate district authorities, the water authority will be required under section 31 of the Agriculture Act 1948, as modified by the Agricultural Holdings Act 1986, to serve a notice to quit on my constituent, taking away his buildings and causing him to lose his livelihood. Those farm buildings are vital to the development of his business. If the planning permission is successful, that man will be put out of business by the callous actions of the two hotel owners. That is appalling.

It may be of interest to the House to hear what is happening in that case. I would expect matters to be very different should the EC take initiatives in this area. The farm buildings which are the subject of the planning application are essential to the viability of the farm. They are used for the storage of winter fodder, for livestock, the housing of cows, the fattening of wedder lambs and the storage of machinery and implements. Mr. Gaskell's sheep-selecting and dipping pens are situated on Thirlspot farm. The farm includes 100 acres of inside land, of which 59 acres are rough grazing, and the fell sheep run on the land up to Helvellyn. My constituent's father first became a tenant of the North West water authority in March 1949. The farm comprises 600 ewes and shearling ewes, and 170 ewe hogs, including 140 of The landlord's—the water authority's—stock. More than half the flock are pure herdwicks and the rest are herdwicks cross Swaledales. Of the 350 lambs born each year, the gimmer lambs are all kept to replace the draught ewes and about 170 wedder lambs are kept and fattened in one of the farm buildings.

Mr. Gaskell also keeps 20 suckler cows, and their calves are sold as stores at approximately 12 to 18 months of age. Over the years, Mr. Gaskell had followed Government and European guidelines arid diversified with his caravan, camp site and farmhouse bed-and-breakfast enterprises, which supplement his income from the farm. He has to do that while the Government persist in blocking in the Community direct support initiatives for hill farmers. One of the buildings has been converted to a toilet and shower block for the camping and caravan business. Mr. Gaskell has established use rights for six permanent static caravans, limited camping places and three caravans for 28 days annually. If the proposed scheme were to proceed, it would not only remove the farm buildings and toilet block, but would deny Mr. Gaskell access through the farmyard to his caravans and camp site.

This is a very important matter. We have law on the statute book which enables a large enterprise, in the form of a hotelier, who has nothing to do with the Lake District and who lives in Bolton, but who happens to have bought a hotel in the Lake District, to come in and close down a farmer who has been in operation for the past 40 years. In effect, it would wipe him out.

Had it not been for the fact that two or three weeks ago I attended one of my bi-annual meetings with the NFU in my constituency, no one would have known of this case. The matter came up during discussion of the European initiatives and the package that the Government have recently announced to the House. The person to whom I was talking became quite agitated and told me the story. A feudal system operates in Cumbria and throughout the United Kingdom which can allow an enterprise to wipe out the income of a farmer who makes a contribution not only in working the land but in the maintenance and upkeep of environmentally important areas. Thirlmere is one of the most beautiful parts of western Europe.

Dr. David Clark

I am shocked by what my hon. Friend has said. Hon. Members on both sides of the House must be concerned that those two people, who have no ownership rights, can force that farmer out of business. Does my hon. Friend know whether the Government approve of that project under the alternative land use in rural areas package that was announced about 18 months ago? It would seem to fit with the Conservative philosophy that the free market should determine what use is made of agricultural land.

Mr. Campbell-Savours

I remember when that statement was made in the House. Unfortunately, I was unable to catch Mr. Speaker's eye on that occasion—although I have been fortunate many other times, so I do not complain. When that announcement was made, there were many worried people, not only in the national park where I live and part of which I represent, but in every national park in the United Kingdom. Farmers were most concerned that they might be manipulated by outside interests. Every initiative taken by the Government in this area during the past few years only serves to confirm their intention as set out by my hon. Friend the Member for South Shields.

I never interfere in planning matters. In the eight years that I have been Member of Parliament for Workington, when approached about planning permission and planning applications I have always refused to interfere, on the basis that they are matters for local authorities to determine. Parliament has clearly laid down for local authorities a responsibility that Members of Parliament should not usurp.

I intend to break with tradition tonight. I appeal to every authority in the county of Cumbria that is involved in this affair to stop what is happening, not for planning reasons but for moral reasons. If we cannot get an initiative from the Government, and if the European Community is unable to draw up a directive or rules to resolve such difficulties, it is left to people like me to appeal to the authorities concerned to make sure that such applications are rejected because they are not in the public interest. We certainly have not met the objectives set by the Labour party for the protection of the countryside and national parks. If I am to believe the rhetoric of the Government, and certainly the rhetoric of the Prime Minister in her most recent "Green Goddess" position, she should be on our side.

I await the formal response of Ministers to my statement tonight. The Minister might like to write to me on this matter, and he might also like to make representations to the water authority about it not exercising the right that it has under the Agricultural Holdings Act 1986.

Mr. Ryder

I should very much like to take the hon. Gentleman up on his offer. I shall certainly look into the case that he has outlined in considerable detail. Any further information that he could provide would be greatly welcomed. Of course, I shall write to him as soon as possible and, if need be, we could set up a meeting between ourselves.

Mr. Campbell-Savours

I appreciate the Minister's positive response. I can assure him that tomorrow the media in the north of England will give extensive coverage to what he has said in so far as this matter has become a cause celebre in the border area of the United Kingdom.

I want now to move on to another area of concern to me—the whole question of the linkage between food production and food preparation, which must, to some extent, affect the judgments and views of hon. Members and, certainly, of the general public. The crisis is not only in food production. The hon. Member for Brecon and Radnor referred repeatedly to the crisis in food production and the problems of hill farmers. There is a major problem developing for the whole of agriculture public relations in this country. It derives from the recent adverse publicity in the area of food preparation. Unless rapid action is taken, this country could witness the total collapse of confidence in agriculture and in food production, with its consequences for farmers.

That is why it was so important for the Minister to make a statement today on BSE. The accusation that my hon. Friend the Member for South Shields has made repeatedly at the Dispatch Box is that the Government could have made a much clearer statement last July about salmonella. If they had been far more forthcoming in June or July, and if there had been full parliamentary accountability in debate, action then could have avoided much of the public reaction that has taken place over the last few months. But the Government failed to be open and to allow questioning in Parliament. We see that again today.

The hon. Member for Tiverton expressed concern about the fact that we are not allowed to ask questions in Parliament on these matters and to get full responses here. Questions are limited when we have to submit them in written form to the Table Office. Questions on the Floor of the House are not limited in that sense. We needed those replies, if only to avoid the same kind of agricultural scandal—if I may use that term—later this year, when perhaps more information on BSE may surface.

The other day a very important report was produced by the boroughs of Hillingdon, Hounslow and Spelthorne. For some reason that I do not understand, it managed to attract the attention only of a journalist on The Guardian, who managed to write a few column inches on it. Yet the findings in that report were of major national consequence and should have been across the front page of every newspaper in Britain. I want to draw attention to that report because it shows how, if things are hidden under the carpet, and if suddenly, an allegation comes out at some stage in the future, public hysteria can be whipped up, whereas if debate had taken place in Parliament, this might well have been avoided.

The Hillingdon, Hounslow and the Spelthorne borough councils surveyed the microbiological quality of airline meals. When someone flies British Airways, wherever in the world he may be, he presumes—at least, I presume that he presumes—that the food comes from Britain. If he were to see this report he would find some very frightening information. It says: The tightening-up of the standards for producing pre-cooked, chilled airline meals is recommended in a report issued by the three environmental health authorities covering Heathrow airport. Environmental health officers say that in future airline caterers, enforcing authorities and other organisations directly associated with the aviation catering industry should adopt a common standard for producing such meals—the guidelines on pre-cooked chilled food laid down by the Department of Health in 1980. The Institution of Environmental Health Officers supports the argument for legislation to achieve this. I ask hon. Members to follow very closely what I am saying; they may well have listened to the media, but they should hear it in Parliament. The move comes after the results of a two-year survey by the councils and the public health laboratory service into the microbiological quality of airline meals produced by 10 catering companies serving London Heathrow. The names of those 10 companies are not revealed. Of 1,013 samples examined, 24 per cent. contained levels of bacteria considered excessive for this type of catering, while salmonella was found in 0.4 per cent. of the samples. The samples ranged from 349 starter dishes, such as canapes and prawn cocktails, which are served without reheating, 375 main courses, mainly served hot, 235 cold desserts, 53 snack dishes, and two sauces. Those most frequently containing high levels of bacteria were starters, containing 38 per cent., salami 40 per cent., poultry 30 per cent., and additional snacks 44 per cent. One in 240 starter and main course meals contains salmonella contamination. If that is extrapolated to 55 million meals produced by the 2,200 catering workers in that area, the 55 million meals identified in this report, it means—and I checked the figures today with the borough of Hillingdon—that as many as 110,000 airline meals may have been contaminated by salmonella enteritides.

Madam Deputy Speaker

Order. What the hon. Gentleman is saying is very interesting indeed, but I think that it is more appropriate to the debate we had last week. Perhaps I could refer him to the scope of this debate and to the documents that are relevant to it.

Mr. Campbell-Savours

I anticipated your intervention, Madam Deputy Speaker some hours ago, when I was considering these matters and took the advice of my hon. Friends. The issue here—

Madam Deputy Speaker

Order. The hon. Gentleman must take the advice of the Chair on these matters.

Mr. Campbell-Savours

As you know, Madam Deputy Speaker, in these matters I always defer to the Chair. However, I should like to point out how what I am saying is in order. We are debating extensification of agriculture. Extensification is the reverse of intensification. It moves us away from the food manufacturing process, which is very much at the heart of, and indeed is responsible for, the development of these diseases and conditions in animal carcases.

Madam Deputy Speaker

Order. The hon. Gentleman might be persuasive at other times, but he is not persuading me tonight that he is correct. This debate covers specifically the proposed revised voluntary restraint agreement with New Zealand and the implications for other such exporters of the future Community trading in agricultural products with third countries. It relates also to the documents that are listed in the Order Paper. I hope that the hon. Gentleman will now refer to those.

Mr. Campbell-Savours

You helped me, Madam Deputy Speaker, when you referred to trade with third countries. As you will know, we supply to other countries the food that is manufactured by the 2,200 people who work for those 11 catering companies at Hounslow.

Madam Deputy Speaker

Order. I have no intention of getting into a debate with an hon. Gentleman. His argument is very convoluted, and I insist that he now refer to the documents. There are other hon. Ladies and Gentleman who wish to speak in the debate.

Mr. Campbell-Savours

In the light of your intervention, Madame Deputy Speaker, perhaps I can curtail my remarks. The figures produced by those boroughs are frightening and Parliament should note them. If the other two strains of salmonella are added to the 110,000 cases of salmonella enteritidis extrapolated from those figures, the total comes to nearly 200,000 salmonella cases.

Hon. Members may wish to speak, and I intend to conclude. Never before have I managed to catch your eye, Madame Deputy Speaker, or that of any occupant of the Chair during an agriculture debate while I have been in Parliament. I hope that in future I will be called, although on this occasion I veered slightly out of order.

7.50 pm

Mr. Robert Boscawen (Somerton and Frome)

Our primary producers have come to expect little real joy from the annual negotiation quadrille in Brussels in recent years. This year they are worried that their position could worsen. The uncertainty surrounding the short and medium-term future of our producers is haunting them. Their stalwart and phlegmatic character is being tested to the full by the uncertainties in which they find themselves. Their achievements have been tremendous and they have helped British consumers and our exports considerably. My right hon. Friend the Minister has spelt out that there can be no turning back towards the Community's proposals and we fully understand that. I welcome a few of the proposals—sadly, not many, but I will begin by welcoming the few.

I am pleased by the move to end the green pound differential and the fact that it is to be phased out over the next two years—and the sooner the better. Our farmers must be able to compete on equal terms with other competitors. I am pleased that my right hon. Friend is making a great attempt to end the fraud in certain parts of the Community. What worries our producers more than fraud is that some of our Community partners connive to ensure that Community regulations are ignored in a way that is to their advantage arid seldom to ours. Perhaps our Ministers should look carefully at last year's example concerning the Dutch Government and our pig producers in case it occurs again.

I am worried, as are many hon. Members, about drastic changes in the variable sheep regime. I urge my right hon. Friend to move slowly and cautiously with any changes that it is intended to bring about. The sheep regime is becoming increasingly expensive and more of our producers—perhaps too many—are going into sheep farming in areas which have not had sheep before. That affects an important part of our countryside and, at least in the short term, there must not be drastic changes in the regime.

Our farmers have genuine problems with their income and they realise that European Community support will not bring a great improvement—certainly not if it is support for an increase in surplus production which is ultimately paid for by our taxpayers and consumers. That message has come strongly from our Front Bench today and strongly from the Commission in the past year or so.

Our producers cannot increase their income by cutting their costs still further or by increasing their production. They will not get other than short-term bonuses from such artificial measures as selling dairy quotas or taking advantage of planning consent and the housing boom in the countryside. They will not get a great deal of change from their non-farming sources of income. Some have had to have other sources of income for many years, particularly west country small farmers, but that does not necessarily increase the prosperity of the countryside, although it may help prosperity in other areas.

Although extensification and diversification have their part to play in improving the prosperity of the countryside, as my right hon. Friend the Minister said, they have only a part to play. The set-aside scheme, environmentally sensitive areas, woodland grants, and so on, all help to some extent, but they will not reverse the position overnight. Above all, the primary producer wants to stick to his last—his basic business is food production and it is from that that the prosperity of the countryside for years to come must derive.

As my right hon. Friend the Minister said at the Oxford conference, the best rewards and the premium prices will go to those who look to their markets and tailor their production accordingly. That is true for some of the industry. It must watch the markets and go for good prices for high quality, specialised goods. But the whole industry must turn its attention much more to how it can maximise the return from the market. I welcome the new thinking, for example of the Milk Marketing Board, in terms of whether higher prices can be attained for produce without necessarily increasing the price to the housewife. The producer's share of the return in the complete food chain could and should be improved. It is far too low a proportion at present. Consumers, too, do not want to see a green, neglected, impoverished countryside. If they squeeze producers too hard by always demanding cheaper cuts and bottom quality food, they will get an impoverished countryside.

The EEC price proposals point the way in which the industry is going. It is a landmark and a warning. Over the years, farmers have shown themselves to be adaptable. Many of the younger farmers, who are now investing in new developments and producing new, high-quality produce, are showing the way. Many more farmers must do the same if they are to survive.

My right hon. Friend's Ministry has, of course, a most important part to play. First, as we fully understand, the quality of food and food hygiene are of the utmost importance to the future of our primary producers. Ministers are giving this matter the maximum prominence, and no doubt will continue to do so.

Secondly, there is the question of the near-market research changes. I ask my right hon. Friend the Minister to ensure that he does not push too far too fast along that road. The Minister should not drop out of the picture until he is sure that the industry and the marketing side are prepared to pick up the ball and run with it.

I am concerned to see that it is proposed—not by my right hon. Friend's Department, because the responsibility does not lie there—to close two of our veterinary colleges. I hope that my right hon. Friend will use as much influence as he can to save those two colleges. We need as many veterinary surgeons as we can train. We are only too well aware of that in the present difficult situation in food hygiene.

This is a difficult time for the primary producers whom I represent. They look to us in this House to do what we can to ensure that we retain a prosperous countryside. We must do that, and I know that my right hon. Friend the Minister, too, will do all that he can to ensure that it is done.

8.2 pm

Mrs. Ann Clwyd (Cynon Valley)

This is an interesting debate. It is the second occasion that I have participated in an agricultural debate in this Parliament. I was previously a member of the European Parliament for quite a large farming constituency, but I am sorry to say that I have only one farm in my constituency at present.

I would like to refer to EEC document 8502/88 on the management and control of public storage of agricultural products. This is an important document to consider, especially in view of the many comments made by hon. Members on both sides of the House about the importance of food hygiene and storage. I am reminded that the World Health Organisation said recently that the primary means of transmission of food poisoning to humans is through foodstuffs contaminated during storage, production and processing. Therefore, the management and control of public storage of agricultural products is pertinent in that respect.

My hon. Friend for Workington (Mr. Campbell-Savours) referred to an interesting report that was highlighted in The Guardian at the weekend. It appears to have had very little coverage in the national press, but it is especially important to the safety of hundreds of thousands of airline passengers each year. I am especially concerned about the Minister, who must make frequent overseas visits to various Community countries and hon. Members on both sides of the House—and Members of the European Parliament—who, again, must make frequent visits and use air transport for that purpose.

Mr. Home Robertson

When travelling to Scotland too.

Mrs. Clwyd

Indeed, not only external flights: they must make internal flights within the United Kingdom. Of course, we must not forget the civil servants who also make frequent visits to the Council of Ministers, to the European Commission and to the Parliament. Their health is just as important as that of Ministers or hon. Members.

Excessive levels of potentially dangerous bacteria have been found in nearly a quarter of all airline meals tested at Heathrow airport. More than 1,000 separate foods were sampled by environmental health officers, who found some of the worst contamination in paté appetisers, main courses of beef, and rice pudding. One wonders whether the quality control of stocks of some of these products, which may have been in intervention stores, is adequately supervised.

The tests were conducted on freshly made meals which had not even left the ground. Therefore, they had not been contaminated while they were in flight and, by the time the meals reached the passengers, bacteria levels would often have been higher because of poor temperature control.

I am concerned about the health of Ministers who no doubt must eat frequently on these flights when they attend meetings in the European Community which are often called at short notice. Ministers are often kept up all night in the Council of Ministers arguing their cases and are forced to partake of airline meals because they have not had time during their busy meetings to eat the no doubt sumptuous meals that could be put before them in the Council of Ministers.

A particular concern is whether the public storage of some of the products in in-flight meals is adequately supervised. It is important that the best possible food is used for in-flight catering, because it is a vast and highly specialised growth area. Outbreaks of foodborne infections—involving a wide range of organisms, including salmonella—have been reported in association with in-flight meals. When those surveys were made by Hillingdon borough council and the other councils concerned, they were not looking for listeria poisoning, because at that time listeria was not an in word. No doubt, if they had examined some of that food for listeria poisoning, high quantities of contamination would have been found.

The survey was an interesting and comprehensive one of the microbiology and hygiene of food products in airline catering and it involved 10 in-flight caterers serving London Heathrow Airport. It took representative samples of all types of food produced. It analysed the results to identify shortfalls in the system. It has now made constructive recommendations to improve the microbiological quality of airline meals. I would be interested to know what action the Minister proposes to ensure that those recommendations are effected.

Because of the kinds of food that are contained in intervention stores, perhaps it would be useful if I mentioned some of the outbreaks of foodborne infections associated with airline meals. I know that the Minister does not travel from London to Sydney via Bahrain, but had he done so he might have been one of the 47 people affected when they ate the hors d'oeuvres on that flight. Of course we all know that an hors d'oeuvre contains eggs.

If the Minister had gone on another London to Sydney flight via Bahrain he may have been one of the 64 people infected after eating chopped egg garnish. If he had gone on the Tokyo to Paris flight via Anchorage and Copenhagen he might have been one of the 197 people infected after eating the ham in omelette. If the Minister had gone on the charter flight to Las Palmas he might have been one of the 550 infected after they had eaten egg salad. As a result of several flights to Paris, 290 people were infected after they had eaten a variety of cold dishes. In 1984, after several flights from London, 766 people were infected after eating something covered in aspic glaze. If the Minister had been travelling on the Faro to Gatwick flight, he might have been one of the 30 people infected after they had eaten mousse with cream.

It is quite possible that some of the stocks held in intervention stores were responsible for some of those outbreaks of food poisoning. Unfortunately, I was not present for the debate on 21 February because was consolidating our wonderful victory at Pontypridd, but I am conscious that the Minister said: Let me start by stressing that we see it as our responsibility, first to ensure the safety of all food supplies, regardless of their source"— it is quite possible that some of those food supplies come from intervention stores— secondly, to ensure that the interests of consumers and of the industry are taken fully into account; and thirdly, to ensure that, throughout the food chain this is particularly pertinent when we are talking about proper storage in intervention stores, as mentioned in EEC document 8502/88— there is effective monitoring and a framework of fully adequate regulations and the right framework to enforce them."—[Official Report, 21 February 1989; Vol.147, c. 931.] Those are particularly significant words in the context of this debate.

Sir Nicholas Bonsor

After the hon. Lady's fascinating description of the problems of airline flight meals, I wonder whether she could tell us which of the foodstuffs that she has mentioned as contaminated might have come from intervention stores, because I can see no relevance in what she has said to our debate?

Mrs. Clwyd

Obviously the hon. Gentleman does not know about the vast amounts of milk powder or butter that are kept in intervention stores, both of which can be used in the preparation of airline meals.

Sir Nicholas Bonsor

rose—

Mrs. Clwyd

No, I shall not give way a second time.

With regard to the physical control of intervention stores, the Community believes that the system is self-controlling. The theory is that the Community's financial interest in the stocks is adequately safeguarded as to quantity and quality by the fact that the prices at which transactions take place are determined by the opposed interests that exist at points of entry and release between storekeeper, seller and buyer respectively. The member states are financially responsible to the European agricultural guarantee and guidance fund for any quality or quantity losses that exceed natural tolerances However, that reasoning does not adequately take into account the risks inherent in public storage operations. I do not need to spell out the main risks to the Minister, because he knows them only too well.

The quality of a product accepted into intervention storage may be overstated and may even be substandard. That point is clearly made in the Hillingdon council report. The report also states that deterioration of the quality of a product as a result of inadequate care taken during storage is possible. It also speaks of the substitution of the product accepted into intervention which may be brought to the market with a similar product of a lower quality at some stage during storage". The report also describes manipulative discrepancies between ingoing arid outgoing qualities, which can pass unnoticed because even for an important deterioration of quality it is difficult to distinguish the effects of time and weather from other factors which lead to the deterioration of a product being stored". The report underlines that the risks are accentuated in any one or more of the following situations; a combination or an association of interest on the intake side". The obvious case is an intervention centre run by a producers' co-operative, but it can also be a matter of local business structures and relationships that render the storekeeper more or less dependent and perhaps impair his objectivity.

It is also clear from the report that food aid deliveries and free food distribution schemes provide outlets for the direct human consumption of such products. We know only too well that recipients are not of course in a position to compare the quality of the product received with the quality shown in theory in the records of the intervention agency. In practice they are unlikely to complain". No action is taken by the Commission services in respect of quality control unless member states report abnormal quality deterioration or complaints are received from dissatisfied buyers of intervention commodities As to the member states' arrangements for quality control of intervention stocks: Important differences in nature and intensity exist between member states and between products. Quality control at entry, for example, sample-taking and physical chemical analysis, is in practice carried out by the intervention agency's own technical staff, officers of specialised technical Government services, including state laboratories, experts of specialised commercial firms, including private laboratories or the storekeeper's technical and laboratory staff Obviously we are discussing the systems of surveillance of storage conditions that are put into practice by member states and it is clear that storage conditions for the same product vary from one member state to another and cover important technical differences. That point is clearly made in the report from Hillingdon council, which concludes: The great variety in technical instructions issued by the intervention agency to the storekeepers in respect of the quality surveillance of some of the intervention stocks … differences in the minimum freezing temperature for butter prescribed by national regulations as opposed to the case of beef meat … the Community regulations give no standard of freezing temperature storages for butter. While in most member states minus 16 deg. C is the norm, there are countries which allow less—one country even up to minus 10 deg. C. Obviously there are great differences in the quality control of storage. The report continues: Sample-taking procedures on butter in some countries is surrounded by more professional ritual than others. It is clear from the report that the quality rating systems are more elaborate in some countries than in others and that, in general, quality testing differs by definition, because no common definition exists for the storage of butter even within the Community.

It is not surprising that all sorts of problems have been shown up in the Hillingdon reports. For instance, it states that the surface colony counts of bacteria are in excess of limits in certain airline meals: High counts in certain foods could be attributed in part to one of the following reasons"— I am sure that the Minister will want to respond to this— The presence of ingredients which naturally contain large numbers of organisms due to production methods used for that food, for example, fermented food such as salami, parma ham or yoghurt, or the presence of raw garnishes or vegetables which may contain large numbers of organisms. In this survey each dish was examined as a single composite sample and not as individual ingredients. The requirement of airlines for meats to be served pink and vegetable crisp on the aircraft requires the flight caterers to part cook the foods with the remaining cooking regeneration taking place on the aircraft. Thus, at the point of sampling the main course dishes were undercooked. A frightening disclosure is that many of the foods were prepared by the cook-chill method, which has been implicated in many of the recent cases of listeria food poisoning to which I had to draw the attention of the Minister by way of a Standing Order No. 20 application at the beginning of January. The report continued: Twenty-four per cent. of the foods tested harboured 1 million bacteria per gramme, 100 times more than the maximum recommended by the Department of Health for cook-chill food used by hospitals and schools. Salmonella was found in four dishes, which included a chicken appetiser, and an excessive level of E. coli, the bacteria associated with faecal contamination, was found in 209 separate dishes. Those most often contaminated were sandwich snacks, salads, patés, beef dinners and rice desserts. It is incredible that foods were contaminated with a bacteria that is associated with faeces. I am sure that the Minister will be worried about that and will want to do something about it very quickly. I hope that he will tell us precisely what he will do.

Mr. Michael Jack (Fylde)

Could the hon. Lady reassure the House about the statistical information she has given on food contamination in airline meals? Does any of her evidence refer specifically to meals originating in the United Kingdom?

Mrs. Clwyd

I am sorry that the hon. Gentleman did not hear the beginning of my speech. We are talking about catering outlets serving Heathrow. That means that the origin of the contamination was this country.

Flight catering uses a cook-chill system and a minor element of cook-freeze. All the environmental health officers involved in this important survey found that the caterers were reluctant to adopt a formalised system of cook-chill as specified by the guidelines laid down by the DHSS. The environmental health officers concluded: The problems identified in this report would be greatly reduced if caterers would adopt the procedures laid down in the guidelines for pre-cooked"—

Mr. Deputy Speaker (Sir Paul Dean)

Order. I am finding it a little difficult to relate the hon. Lady's speech to the European Community matters that we are discussing. The debate is on various European documents and I think that the hon. Lady is straying into other matters.

Mrs. Clwyd

I am coming to the end of my speech, Mr. Deputy Speaker. We have talked about the common agricultural policy, and the European Community, intervention stores and many other matters related to the EEC documents. It is of great concern to the Opposition that those who have to argue for reform in the common agricultural policy and who have to travel regularly by air to Luxembourg, Brussels and Strasbourg are at their fittest when they are arguing into the small hours of the night the case for reform of the common agricultural policy and for other changes in the Community.

Mr. Geraint Howells (Ceredigion and Pembroke, North)

I have been listening to the hon. Lady with interest for a long time. She knows the state of Welsh agriculture because of family connections. Does she attribute any of the blame to Welsh producers? If she does, I should like her to clarify the position at once.

Mrs. Clwyd

The hon. Gentleman is a client of my brother-in-law who, as the hon. Gentleman knows, has a great interest in agricultural problems. I am certainly not attributing any of the blame to Welsh producers, who work to the highest standards.

Last week, the Minister said that food safety was an international problem. It is an international problem on airlines and it is important for Ministers to remain in good health. As the Minister is partially responsible for food safety, may I ask him to tell us what he intends to do about the worrying problem that I and my hon. Friend the Member for Workington have brought to his attention?

8.26 pm

Mr. David Curry (Skipton and Ripon)

I hope that I shall not be regarded as idiosyncratic if I attempt to talk about agriculture. Parts of the debate have shown an underlying concern about agriculture and the changes that it faces, and there has been a tendency to defend the status quo. I should like to break with that consensus and suggest that it is not necessarily in our interests to defend the existing system. I shall be the devil's advocate on the sheepmeat regime and firmly suggest to my right hon. Friend the Minister that I do not want him to go to Brussels and bat to maintain the variable premium in its present form.

I recognise that there are problems with the alternative suggested by the Commission, and I do not suggest that the Minister should buy that off the shelf, but there are cogent arguments for suggesting that the variable premium has now achieved the purpose that it set out to achieve and that it is now becoming a problem rather than an asset for British producers. The first reason for that is the operation of the standard quantity as it applies to Great Britain, which means that, as the numbers of ewes increase, the revenue earned by the producers declines. There is no benefit to the producer in simply persisting with the present system, because there will be a continuing decline in his returns. I am especially concerned about farmers in the breeding business because I have many of them in my constituency. Hill breeders can only benefit from being part of the Communitywide standard quantity system rather than the British quota.

The present system of marketing is nonsense. The upper limit to qualify for variable premium is 26.5 kg. The market asks for lambs with a weight of 17 to 19 kg, yet hundreds of marts across the United Kingdom must have lambs of 25 kg that receive variable premium. Those lambs are not wanted by the export trade or by the domestic trade. We cannot blame the farmer, who will obviously rear to the weight that will maximise his return. If the politicians are fools enough to allow him to do that, it is to his credit that he takes advantage of the system. It cannot be maintained that the variable premium is serving the interests of the consumer either, because it encourages the farmer to produce something other than what the market wants.

Mr. Livsey

Does the hon. Gentleman agree that, although the parameters are not correct, the policy could be amended to allow variable premiums to concentrate on the weight limits demanded by the market?

Mr. Curry

The hon. Gentleman would be right, but for my next three points, which I believe will meet that argument. First, we face a problem with the clawback. Barely a molecule of British lamb gets to France because the clawback operates as an effective barrier to imports, and the French have perfectly good access to alternative supplies from Ireland and Spain where the clawback does not operate. The United Kingdom therefore has insuperable problems in getting lamb into that market, and it is on that export market that the fate of our lamb-rearing industry depends. Domestic consumption is declining and the variable premium may have arrested it. We cannot prove statistically that that is so, but the growth market is on the continent and, above all, in France.

The second reason is the competitive position of lamb in relation to other meats. I have a great deal of sympathy with the pig producer, who gets little support from the Community and does not want it. The situation is increasingly hard for those sectors which get little support, or where the regime has already been reformed, as is the case for beef, and the new regime will apply from 3 April. Although many producers are not sure how it will apply, there is still a level of support of £840 per tonne. In other words, the equilibrium in the meat sector is being distorted by the existence of both reformed and unreformed regimes.

Thirdly, the regime is now an extremely expensive affair. In 1988, the estimate of expenditure was 1 billion ecu and it was necessary to add 300 million ecu to that. This year, the allocation is 1.45 billion ecu and my information is that at least 220 million ecu will have to be allocated to meet the commitment. There are reasons for that. In 1988, that budget had to cover advance payments which would otherwise have been made in 1987 because of the crisis in the budget. The number of uses for which application has been made has also increased significantly, partly because the system on the continent uses the French premium as its market premium. That premium, of £15 or £16, is of great assistance to Mediterranean producer's in particular and gives them a greater incentive both to claim and to rear.

We must also remember that the goat element in the system is becoming more important. My hon. Friend the Member for Basingstoke (Mr. Hunter) said that we were now taking only 35 or 30 per cent. of the revenue from the sheepmeat regime. A few years ago, we were taking about 90 per cent. of the revenue from the system. The change is the result of the Iberian accession to the Community, which has diluted the share that the United Kingdom had. It has also reinforced those who might be able to live with the status quo.

The variable premium in its present form is difficult to support either in budgetary terms or in terms of consumer interest, and it is no longer an infallible support for the producer. There is a good case for saying that the British interest, which lies in access to the continental market place, is no longer served by a system that has become a barrier to access to that market. I know that my right hon. Friend the Minister will say that all the cards are still to play and that most countries do not know quite what they want from the new system, and I accept that that is the case. However, I would not wish him to leave the debate with the impression that there is a unanimous belief that we should defend the variable premium to the last. I for one no longer believe that its maintenance is in the interests of the United Kingdom.

I urge my right hon. Friend to press on with the policy of stabilisers, with those additional ancillary measures such as set-aside and the woodland scheme which are designed to soften its impact and provide relief for farmers with particular difficulties. The reason for this is to do with the international situation, the background being the GATT talks with the United States. The United States has made a major error of negotiating policy in putting forward the zero-zero option, which has let Europeans off the hook. Nobody will negotiate seriously from that starting point. Even the Australians say that it is an untenable negotiating position.

At some stage, the American negotiator will agree to abandon that objective because it is no longer obtainable, and many people, including some hon. Members, will applaud that magnificent gesture. But he will then say to the Community, "We want to remove your trade-distorting measures." That is where the Community must get into the real negotiations. The trade-distorting measure, in the American definition, is the double pricing system that lies at the heart of the CAP. The Community will not negotiate that away. It is inconceivable that a majority in the Council of Ministers will agree to give the Commission such a negotiating mandate. If we cannot negotiate on that, we must prove that we shall continue the process of gradual reform, or we shall find ourselves in a major clash with the United States.

One can illustrate this by the demands made, particularly by the German Minister, for cereals. I hope that my right hon. Friend will take the opportunity to say what a ludicrous idea that would be. The philosophy behind the quota is that, if one limits the quantity, the price can rise, but if the price of cereals rises we shall become more vulnerable to the cereal substitutes which enter the Community without any restraint on quantity and with a relatively small tariff that is bound by GATT.

Sir Nicholas Bonsor (Upminster)

My hon. Friend is right in that, but does he agree that one of the problems is that no farmer can control his cereal ouput? He cannot know what it is until after the harvest is brought in, so any attempt to control that by way of quota is doomed to failure because all that it will do is to put the cereal farmer in a still worse position.

Mr. Curry

I am grateful for that intervention. My hon. Friend has made an additional point that I shall add to my list of arguments against the imposition of a quota. I am sure that he will be aware that there are people on the continent, and in the United Kingdom, who want the security of the quota system. That is not compatible with liberal world trading arrangements, for the reasons that I have already set out. If we limit quantity and seek to raise prices, we shall become more and more uncompetitive in comparison with the substitutes coming into the Community. As a result, we would have either to cut the quota progressively or limit imports. If we limit imports, who will pick up the bill for the 55 million tonnes of substitutes that come into the Community? That is when we would really get into a shooting war with the Americans.

The international situation determines the nature of the reforms that the Community is able to undertake. However, there are other reasons to pursue the policy on which we have embarked. The first is the fragility of the world market. Hon. Members have referred to the Soviet Union as the principal importer of grains from world market places. On average, the USSR loses 12 per cent. of its grain crop between the field and the silo every year. That is roughly 24 million tonnes of grain, which is about what the Community exports in a year. In other words, the equivalent to the total Community export perishes because of inefficiency in the Soviet agricultural system. If Mr. Gorbachev ever gets his agricultural reforms, that is one major sector of the world market that will slip away from everybody, including the European Community.

Another reason to continue the policy is that underlying technical improvements are still feasible. Leaving aside the average 2 per cent. per year increase in grain yields, without doing one extra jot of research the potential for increase in yield by the end of the century is between 5 and 10 per cent.—equivalent to about 15 million hectares' worth of production. That is why turning down the wick, going a little more carefully and taking the pressure off is not a valid long-term option in the interests of agriculture.

The final reason is the demography in the sector. Half the Community's farmers are over 55, and half of them have no natural successor. That means that there will be a process of consolidation of farms and the building of more efficient units. It also means that moving towards a more market-oriented policy becomes more acceptable in social as well as agricultural terms.

It is worth applauding the fact that this farm price proposal falls within the financial guidelines set a year ago at 28.62 billion ecu. The actual forecast is 26.74, and that is on the hypothesis of a dollar worth 0.81 ecu. Over the past six months—the year runs from August to July for the purpose of the calculation—the average value of the dollar has been 0.88 ecu, so there is a potential saving of 800 million ecu on the purely monetary factor by the summer of this year.

The importance of that, the importance of the reforms that were instituted a year ago, and the importance of the system of stabilisers, which at the time were derided as being almost nominal in effect and of no significance—stabilisers plus the Almighty in the form of weather have had a much sharper effect than many realize—is that for the first time Community policy is predictable. It means that there is a chance for premeditated change. It means that the improvised, botched and budget-dominated changes which have been seen over a number of years need no longer be the norm in the Community.

I hope that my right hon. Friend the Minister will bear one or two issues in mind during his negotiations in Brussels. I hope that he will reaffirm his opposition to the co-responsibility levy, including that on milk. I know that the regime is expensive, but a quota system plus co-responsibility is a logical nonsense. Many farmers would prefer a quota reduction to the present bizarre way of penalising farmers without benefiting consumption. It would be preferable to have a price reduction than the mechanism of a co-responsibility levy.

The same applies also to cereals. I know that the Minister has fought gamely on our behalf and I know that he will continue to do so. I hope that he will give what reassurances he can on the continuation of the quota system after 1992. Farmers contemplating the purchase of quota cannot afford to see assets disappear within a few years. I hope that my right hon. Friend will reaffirm his determination, in so far as he is able, to have zero monetary compensatory amounts when we arrive at 1992. That is especially important. I hope, too, that my right hon. Friend will do his best to ensure an increase in the suckler premium when we reach the time of year when he would normally decide at what level payments are to be made for the following period.

We are now quite a long way through the period of extremely difficult change. Now that we are on the threshold of a sensible, premeditated reform, it should be understood that a diversified range of policies will enable only some farmers to find new sources of incomes while remaining true to their main purpose as producers of foodstuffs. We have this opportunity, but I hope that we shall go for the last push and ensure that there is sensible reform rather than accept the process that we have seen develop over so many years until recently. That process has made it clear that the task has been undertaken with reluctance. It was pursued with hesitation and abandoned before it was complete; simple multiplication of the policies then ensued.

8.42 pm

Mr. Win Griffiths (Bridgend)

The debate takes place against an ever blackening background for farmers in the United Kingdom and, indeed, for farmers in many countries across the Community. The farming community in the United Kingdom finds that inflation is running at over 7 per cent., with the likelihood that it will increase during the year. Interest rates are high and are likely to go higher. At the same time, farm incomes are dropping. It is undeniable that it is necessary to maintain control of spending on agriculture. Given the various forms of support that now exist, farmers in Britain cannot look forward to brighter times.

However good the demolition by the hon. Member for Skipton and Ripon (Mr. Curry) of the variable premium with the sheepmeat regime, and irrespective of his comments about the number of farmers aged 55 in the Community, the hon. Gentleman's observations were aimed at 15 or 20 years hence, instead of being directed at the problems with which farmers have to grapple now. The problems for farmers with relatively small holdings are even more acute and desperate than those which face those with larger farms. Farmers with more substantial holdings have the option of being able to switch from crop to crop, or from livestock to arable and back again. They have many more options than those which are available to farmers with 50, 100 or 150 acres, which are the sort of farms that might typically be found in many parts of Wales.

Stabilisers have been reasonably successful in helping to remove the peaks and troughs from agricultural spending, but they do not augur well for farmers in future. They will not guarantee farm incomes. Instead, they will tend to put the squeeze on farmers. Given the developments within the sheepmeat regime, farmers in the hill country will experience greater and greater difficulties. I note that some Conservative Members are shaking their heads in disagreement, and in response I can only say that it might be possible to return to this issue in a year's time, when it will be easier to make a judgment.

There is a need, inevitably, to control spending under the CAP. Farmers' incomes will be damaged, and we must consider how we can help those with smaller farms. The difficulties will become greater on the hillsides and there will not be a welcome in the valleys for across-the-board policies to control expenditure. As we have grappled with the existing systems and advanced reasons why they must be changed, there has not been evident a great deal of long-term thinking about what we should put in their place.

Conservative Members have been extolling modern technological developments in the countryside. They have emphasised how important these were in increasing food production during the years when that increased production was needed. There is no doubt, however, that the intensification of modern farming methods is inflicting severe and untold damage on to the countryside. We are witnessing wholesale pollution, especially with nitrates running off the land into water courses. The expression of the hon. Member for Sherwood (Mr. Stewart) suggests that that is not a problem, but in Wales more and more rivers are being polluted, and that is the position throughout the United Kingdom. Water authorities everywhere are expressing concern about nitrate pollution in particular.

We are aware of the intensive methods of factory farming. There is the raging spread of salmonella. There was a television programme yesterday—it appeared on the screen shortly before my lunch, unfortunately—on bovine brain disease and how it is spreading. In the pursuit of higher production, we are putting at risk the health of the people.

Many of us are aware of the way in which systemic pesticides are used. There is good evidence that pesticides remain in crops after they have been harvested, and that they are a potential danger to the consumer. It would riot be too much of an exaggeration to state that factory farming at the moment is producing a festering cauldron of potential fever, plague and food poisoning in the countryside.

The ever-increasing demand for higher yields on a given acreage is threatening the health of the general public. There is no doubt that, as the days go by more and more dangers are being exposed. The CAP should now be trying to ensure that there are reasonable levels of production without using methods which are potentially harmful to consumers' health. I know that the Minister has immense problems in grappling with the CAP to keep spending under control. However, it would be nice to hear that the Commission is looking at major alternatives to current agricultural support, so that we can look forward to a safer future in terms of the food that we eat.

On the programme yesterday to which I have referred there were some pitiful scenes of farming in the countryside. I saw a cow reeling about helplessly. At times it was waddling along or sliding on its stomach because it no longer had any control over its muscles. We must take these problems seriously and not try to push them to one side or say that this or that cannot be proved. Undoubtedly there are problems, and I hope that the Minister will tell us today what, apart from the steps that are being taken to bring the immediate problems under control, in the long term the Government and other Community Governments intend to do about the system of agricultural support. I hope that he can tell us what they will do to end this headlong rush into making continually higher yields from the land, so that we are not placing our lives in danger by eating farm produced food.

In his scintillating demolition of the variable sheep premium, I waited in vain for the hon. Member for Skipton and Ripon to offer us an alternative which would make sense to the British farmer and in particular to the Welsh farmer who relies on that premium. I do not deny that there are obvous needs for change in the variable sheep premium. It is obvious that a new problem is being created when we watch the flocks coming down from the hillsides into the valleys in areas where it is not traditional for sheep to be farmed. Perhaps the Minister can tell us whether the Ministry has any thoughts about a better system of support. I am sure that farmers in Wales look forward to his comments on that.

8.53 pm

Sir Nicholas Bonsor (Upminster)

With one exception, this has been an extremely useful debate, and one in which the House has largely been agreed. I declare an interest, in that I am a farmer. In the light of some of the contributions from Opposition Members, perhaps I should also declare that I am chairman of a food hygiene and advisory service. I do not believe that that should be strictly relevant to this debate, but it is relevant to some of the contributions that have been made.

I will confine my contribution to farming and to its future. I would be extremely grateful if the Minister will consider several areas of concern; if he cannot deal with them today, perhaps he would write to me later.

My first concern relates to the method of control which my right hon. Friend the Minister and the Government appear to favour, particularly in terms of cereal farming, which is the price mechanism. I cannot understand how the price mechanism will solve the problem of the European Community surplus without ruining the country's cereal farmers. I was worried that the Minister made no mention of the cost of production or the way in which the price control mechanism can be kept at a level which will be above that which it has cost the farmer to produce the product.

Mr. Micawber would be more than a little worried at the state of British farming. It is costing 20s 6d to produce 20s-worth of goods in most areas. That applies to cereals, most livestock and throughout the farming community generally. However, it is particularly and increasingly true of cereals.

I want to consider whether cereals can be controlled by quota. As I tried to make clear in my brief intervention during the comments made by my hon. Friend the Member for Skipton and Ripon (Mr. Curry), I do not see how quotas will work. A quota on cereals might be introduced in one or two ways: it could be introduced to limit the amount that a farmer can produce and receive full pay for or we could limit the amount of land which he was allowed to sow to achieve his output. As my right hon. Friend the Minister is aware, there is no way in which we can assess what a farmer will produce until after he has produced it, by which time it is too late to solve the problem. If the quota level is set wrongly, it will either be extraordinarily expensive or ruinous for the farmer. Either way, we are losers.

My next area of concern relates to fair competition with our European partners. I have culled a few brief examples from my experience about ways in which we are currently at a disadvantage compared with our European partners. First, we are at a disadvantage with regard to the MCAs. My right hon. Friend the Minister has said that he hopes to bring that under control to achieve parity by the end of 1992. To be perfectly honest, I think that it is most unlikely that he can achieve that. If he can, I will be the first to welcome it.

Cheap loans are available to farmers in France, but there is no system of subsidised loans in this country. It is impossible, particularly for smaller farmers and those who wish to start up in the business, to compete effectively against French farmers while that disparity remains. The French also have access to a much cheaper supply of fertilisers than is available in this country, largely because of the quantities which can be ordered by the vast farms in northern France. That gives the French a completely uneven advantage in comparison with their British competitors.

As my right hon. Friend is aware, Germany can buy livestock feeds from East Germany, because it has an exception from the general rules for buying animal feedstuffs from outside the European Community at world prices. West Germany has access to East Germany and by exemption is therefore able to buy animal feed through East Germany at world prices, and it can then undercut other member states.

The subsidies enjoyed by states in southern Europe—Portugal, Spain and Greece—clearly come from the more prosperous states in northern Europe. It is extremely hard to understand how Britain can benefit by putting far more into the subsidy system than we shall ever be able to take out of it. I am not sure how my right hon. Friend will deal with that problem, but I hope that he will bear it in mind in his negotiations.

As my right hon. Friend knows, West Germany is heavily funding research into all forms of agricultural activity—in terms not only of hygiene, but of productivity and efficiency. If Germany continues subsidising that aspect of its activities, it will have a substantial advantage over Britain. It is extremely unfortunate that the Government are cutting agricultural research at this moment. I hope that my right hon. Friend will review the Government's proposals and will give more support to research than is intended. ADAS has given invaluable service and its research capacity has been second to none. I do not believe that the agricultural community, in its present state, is in a position to provide the business backing for research that the Government clearly wish it to do.

Finally, I do not believe that the farm woodlands and set-aside schemes and so on can do more than scratch at the problems facing the future of British agriculture. Unless we can find a way in which the support level for the production of our goods remains above the cost of producing them, in the next few years, we shall have no proper agricultural business left.

9 pm

Mr. Calum Macdonald (Western Isles)

I apologise for not being present to hear the opening speeches in the debate. This morning, I travelled to Inverness on a train that broke down and left me stranded in Kingussie for one hour and 40 minutes, thereby causing me to miss my plane to London.

In that connection, I was interested to hear the remarks of the hon. Member for Skipton and Ripon (Mr. Curry), when he said that 12 per cent. of Russia's grain production spoiled before it reached its market. I understand that one of the major reasons for that is the terrible state of Russian roads. They are so badly pot-holed that much of the grain falls off the back of the trucks and rots at the roadside. It appears that infrastructure is a major obstacle to the development of Russian agriculture. After my experiences this morning, I fear that it is also a major obstacle to developing the agriculture of the Highlands and Islands.

I shall concentrate on the sheepmeat regime. It is a subject that I broached in previous debates, and I return to it without apology because it is one of major importance to my constituents in particular, and to the economy of the Highlands and Islands as a whole.

Sheepmeat production in the Highlands and Islands is worth £52 million annually, excluding all Government support and EEC grants. It is important not only in terms of its sheer monetary value but because the terrain and land of the Highlands and Islands are such that there are few viable alternatives there to lamb farming. The land is unsuited to most other types of use. Crofters in particular face a change in the sheepmeat regime with considerable concern, not only because of the industry's value to them but because of their fear that recent changes in other areas of agriculture—particularly in the lowlands—will cause their incomes to suffer as a result of increased lamb production. Because of the nature of the terrain in the Highlands and Islands, crofters have no viable alternatives in the face of increased competition for lamb production from areas that enjoy better soil and climate—in simple practical terms, better lambing percentages.

The latest figures I have from the Scottish Crofters Union suggest that, if lamb flocks in the lowlands continue to increase to the extent that they have in recent times, crofters will suffer a cut in the value of the support they receive from the sheepmeat regime of as much as 12 per cent. over the next four years. That is clearly very worrying.

One solution suggested by the Scottish branch of the National Farmers Union is to introduce two stabilisers, one for the less-favoured areas and another for the more-favoured low-ground areas. The Scottish Crofters Union, while not necessarily opposed to such a solution, feels that, so great is the difference between the terrain in the Highlands and Islands and that in even the worst of the less-favoured areas in the rest of the United Kingdom that a third stabiliser for the Highlands and Islands alone might almost be justified. Such a solution, however, would cut across the grain of current developments in the Community and the CAP: there is a wish for increased simplicity rather than increased complexity.

I feel some sympathy with the attacks by the hon. Member for Skipton and Ripon on the variable premium, and his support for the principle of a single European stabiliser. Crofters in the Highlands and Islands would, I think, accept the loss of the variable premium, although they can see that it has led in recent years to improved quality and efficiency in their sheepmeat industry, feeling that perhaps the time has come to adopt a single European stabiliser. They would accept it, however, only with a caveat. First, they would demand an enhanced ewe premium in the less-favoured areas; secondly, they would like the Government to put much more thrust behind the marketing of sheepmeat in the Continent—a point also made by the hon. Member for Skipton and Ripon.

Let me return to the point with which I began. The inadequacy of transport, communications and infrastructure between the Highlands and Islands and the continent suggests that, unless a determined effort is made to boost Scottish lamb products in the Common Market—and those from the Highlands and Islands in particular—we will be the losers.

I understand that the EEC has suggested restricting eligibility for the ewe premium to a certain number of ewes per farm—500, I believe. The Scottish Crofters Union has made a suggestion that I find very interesting: that, as well as the restriction on numbers—which would be altered according to whether the farm was in a less favoured area or on low ground—a device should be built into the premium to reward, encourage amd promote increased employment. Farms that employed more shepherds would also receive a higher premium. That would provide a bonus not only for less-favoured areas but for farms, sheep stock clubs and other kinds of sheep breeding practice that led to the creation of more jobs, thus keeping more people in rural areas. That is important if such areas are to flourish.

Hon. Members on both sides of the House have pointed out that the CAP needs to be changed because of its costs, but that cost must be seen in perspective. Although it eats up the lion's share of the Community budget, it is only a tiny percentage of Community GDP.

The real problem about the CAP is not so much the amount of money involved as how it is spent. Hon. Members of all parties have suggested that we need to get away from spending that amount of money on increasing production while retaining the objective of income stability and trying to achieve parity of income for all farmers. Rather than trying to increase production, we should direct the same amount of money to projects on farming practices and on increasing employment in rural areas. If we used that principle when approaching the changes to the sheepmeat regime, farmers in my constituency would be a lot happier, and the operation of the regime would be a lot more satisfactory all round.

9.10 pm

Mrs. Gillian Shephard (Norfolk, South-West)

I am delighted to be able to contribute to the debate, although I do not have a personal interest to declare, save to say that agriculture is of vital importance to my constituency of Norfolk, South-West. The debate is of particular significance, given that 1988 saw a 25 per cent. drop in farm incomes. We all know that that figure conceals a wide diversity of farm incomes across the country and that that diversity is recognised by the industry. As my right hon. Friend the Minister of Agriculture, Fisheries and Food said in Oxford, it matters when farm incomes fall as they did in 1988. It matters especially in Norfolk, South-West, where one sixth of our jobs depend directly on agriculture because the prosperity of agriculture underpins our whole rural economy.

Today's debate was given particular point for me because of three meetings that I had at the weekend. The first was with directors of Barclays bank who began by expressing their deep disquiet about farm incomes locally, especially in the light of cereal prices and last year's bad harvest. They said that their accountants had no record of any previous year in which no farmer had made a profit on a cereal harvest, but that 1988 was such a year.

The second meeting was with a grain merchant, who not only corroborated the concerns of the first, but said that, because of bad European harvests and droughts in North and South America and in China, the world currently has stocks of grain for up to 100 days. That point was also made by my hon. Friend the Member for Norfolk, North (Mr. Howell).

The third meeting was with a smallholder, who works a holding of 55 acres on which he was born and which his father had before him. That man, who is in good health, has seven or eight years before he reaches retirement, and is waiting to see whether there will be the threatened cut of 5 per cent. in the price of sugar before he decides whether to give up his holding next Michaelmas.

Those three meetings illustrate the practicalities of what we are discussing. There has been great concern about the technicalities of this issue, but I remind the House that we are not talking academically or technically; we are talking about real people, real anxieties and a real industry.

One unfortunate thing about agriculture is that many of those who pronounce on it believe that eggs come out of boxes. They are stuck in the attitudinal time warp of the 1950s and believe that farmers are still feather-bedded. To all those people I say that during the past five years agriculture has absorbed as much change as any industry could be expected to absorb. As my right hon. Friend the Minister said in Oxford, agriculture faces the challenge of the speed of change today, in technology, production processes, ever higher quality, new ways of presenting products and so on". Responsible farmers have long accepted that change. They have long accepted the fact that CAP policies encourage costly surpluses and that that policy needs to be changed. One result would inevitably be a drop in farm incomes—that is the pain that was mentioned earlier by my right hon. Friend.

Moreover, these same responsible farmers have taken advantage of the many useful measures introduced by the Government, such as diversification, environmentally sensitive areas—one of them is largely in my constituency—and set-aside. I have been a little disappointed by the extent of set-aside take-up in East Anglia. Obviously, it is easier to set aside land from larger holdings, but it is a pity that good land should be taken out of production. I would have hoped that more would have been taken out of production from marginal land.

It is in this atmosphere of change that I would like to plead for the retention of two areas of stability so that we might, in my right hon. Friend the Minister's words, ease the process of change for farmers. The two crops involved are sugar and potatoes. Norfolk produces 32 per cent. of all beet sugar in the United Kingdom. The Wissington sugar factory in my constituency employs 450 people. Sugar is vitally important because as a crop it helps to cushion farmers against price falls and bad harvests in other crops.

The Commission proposes a 5 per cent. price cut. I understand that its reasons are, first, that this will make sugar more competitive with artificial sweeteners. That seems a curious argument because I thought that competition would be on calorific value not on price. Secondly, the Commission said that a price cut would discourage over-production. Again, that seems curious, given that the crop is subject to quota. Thirdly, it said that a price cut would save the EC money. That cannot be so, because the EC price cannot be reduced without reducing the ACP price, and to compensate the ACP countries would be in breach of the Chirac-Godberg compromise agreed by the Council of Ministers. There is unusual unanimity between British Sugar, Tate and Lyle and the ACP countries, which speak with one voice on the matter, as do the producers, who rightly point out that there has been a six-year price freeze.

Beet production brings stability for untold numbers of farmers. I listened carefully to what my right hon. Friend the Minister said in his opening remarks, which were, perhaps, a little delphic. However, I believe that they hold a glimmer of hope because my right hon. Friend continues to consider the position. He may wish to refer to my plea and that made by other hon. Members during the debate.

The second area of stability that I should like to mention is potatoes. As my right hon. Friend will be aware, they are the second highest value crop in the country, after cereals. They, too, are of great importance in underpinning agricultural incomes for both large and small farms. They are not included in the commodities covered by the price proposals, but I have no hesitation in mentioning them, since in this debate we have been taken on airline tours and a number of other diversions.

There can be no doubt that the future of the potato crop is looming large in producers' minds. As my right hon. Friend knows, that is because the future of the Potato Marketing Board is under discussion. As hon. Members will understand, that board is always criticised when it refuses quotas, but I think that its response to the consultative document issued by the Government has been thorough and serious.

I also believe that the consumers in the United Kingdom enjoy a far wider variety of quality potatoes than that enjoyed by their European counterparts. That variety and quality, coupled with good marketing methods, has increased our national consumption of potatoes—despite the best efforts of the media recently to prove that if one ate a tonne of green potatoes at one sitting one might be poisoned.

In my constituency potatoes are extremely important and growers there—and, I believe, throughout the country—are unanimous in their support for option 3 in the consultative document, which will retain area and quality control in a self-financing way. I hope that, during the consultation, my right hon. Friend will consider that unanimous response carefully.

Finally, I want to comment briefly on the need for my right hon. Friend, while of course protecting the consumer by ensuring the safety of our food, to encourage our important agriculture to be proud of its products, which have taken an unprecedented knock—almost without ceasing—during the past couple of months. I believe in British foods; the hon. Member for Cynon Valley (Mrs. Clwyd) believes only in the quality of Welsh food, but I believe in the quality of British food. Our farmers should have the confidence to pursue successful and aggressive marketing policies.

My hon. Friend the Parliamentary Secretary, the hon. Member for Calder Valley (Mr. Thompson), spelt out that need recently when he described the keystone of success as a careful and solid approach to marketing. Of course, he would admire anything that was careful and solid, but I hope that Food and Farming Year will be given wholehearted support by all hon. Members, by all at MAFF, by my right hon. Friend and by the industry. It needs a boost.

9.21 pm

Mr. John Home Robertson (East Lothian)

I am happy to join the hon. Member for Norfolk, South-West (Mrs. Shephard) in her comments about the future of the Potato Marketing Board. I am glad that all hon. Members who wanted to take part in the debate have been able to do so. We have heard thoughtful and considered speeches from all sides. The cliché about these debates is that they are wide-ranging, and this one must have been the widest of the wide—not least because we are debating 3.8 kilos of European Community documents. I defy the Minister to tell us that he has read every word of them; I have not, but I did get around to weighing them in the post office.

I flicked through the documents and discovered that we could have debated the minimum price for sweet lupins, the intervention price for paddy rice—possibly a reference to the leader of the Liberals—the aid that is available from the European Community to support silkworm eggs, and the buying in price for satsumas. In spite of all that, my hon. Friend the Member for South Shields (Dr. Clark) and the hon. Member for Torridge and Devon, West (Miss Nicholson) managed to have a wee debate on the shipbuilding industry. Later we had the wonderful experience of hearing the hon. Member for Hexham (Mr. Amos) explaining what a key industry agriculture is and how communities that depend on it must be defended at all costs. How much I agree, and how I wish that he and other Conservative Members and people in the farming industry had said the same thing when the axe was hanging over mining, shipbuilding and various other industries. Never mind: the hon. Gentleman has the point now and I hope it will stick.

In his fleeting visit to the House this afternoon, the Minister mentioned a wide range of subjects in the documents, some of which I hope to touch on. He dwelt at length on fraud in the CAP, a subject that must have been discovered recently by the Prime Minister and which seems to merit a great deal of attention. Advocates of the sleazier aspects of the enterprise culture are not at their most convincing when they are being holier than thou on the subject of fraud. The Government's position on it was fatally wounded by their erstwhile colleague Lord Cockfield, who explained to the House of Lords not long ago that, when he put forward proposals as a European Commissioner that would have dealt with the problem of fraud in the CAP, it was the United Kingdom Government who vetoed his proposal.

The role of the Minister of Agriculture, Fisheries and Food must surely be to be the guardian of the nation's food and to provide agriculture with leadership. One of his functions should be to tell the industry what he wants it to do. The industry requires leadership and needs to understand what policies the Government intend to implement. I have no doubt that it would respond as it—often has in the past—to a lead if ever it got one.

More than 10 years have passed since the last White Paper on agriculture made clear the Government's ideas for the future of agricultural policy. Sadly, the industry is adrift in many ways and lacking leadership. If the Minister will not take that from me, perhaps he will take it from his constituency neighbour, the hon. Member for Norfolk, North (Mr. Howell), who made that point very clear.

Is the Minister taking a responsible overview of food and farming policy, and is he playing a constructive part in United Kingdom and European Community decision-making on agricultural policy? I fear that on both counts the answer must be no. In concluding his speech he asked what our policy is. He will recall that at the general election the Labour party made it clear that it wanted to fight for the repatriation of decision-making on the common agricultural policy and to pursue the policy of quotas which his Government pioneered. He will have to wait and see what policy will come out of our current policy review. That will be coming soon, and I assure him that it will be a great success.

May I go round the various commodities that were covered in the debate, starting with beef. The price package that we are debating comes immediately after the settlement of a new beef support regime, which we debated not long ago. There was unanimity in the House on how we wanted the Minister to approach negotiations on the new beef support regime, but he failed to get what he wanted, and said lamely that he voted against it in the Council of Ministers. He failed to take his colleagues with him there, and unfortunately that will give rise to severe difficulties for our industry and for the beef market in Britain. I wonder whether the Minister is aware that Lord Sanderson, the Minister of State, Scottish Office, said that one aspect of the beef package would discriminate against efficient specialist beef herds in Scotland. There is no doubt that that is true. We have been saddled with a problem and the industry will have to cope with it.

During our previous debate on beef, I pointed to the potential for increasing beef consumption in the European Community and in the United Kingdom, where consumption is comparatively low. Policies that could lead to such increased consumption of beef and red meat would not only be a bonus for consumers but would be conducive to more extensive grazing on farms. That policy would be worth achieving, but we are not getting there. We welcome the thrust of any policy leading to extensification on farms: that point was made by my hon. Friend the Member for Gateshead, East (Ms. Quin).

The Minister knows that he had the House behind him when he was negotiating to continue the beef variable premium. It is a great pity that he failed, not only from our point of view, but from that of other people in the European Community. There is proof of the success and efficiency of the beef variable premium in the figures for beef production and beef intervention in the European Community. Great Britain produces 10.7 per cent of the beef of the European Community, but we contribute only 1.8 per cent. of the volume of beef that goes into intervention. That must show that the beef market was functioning comparatively efficiently in Great Britain, and that the variable premium which made that possible was a useful mechanism. Sadly, it has been lost.

Now we have the new special rearing premium. which will be introduced from 5 March. It will be payable at the rate of £28.42 a head for 90 male animals from each herd. That is just one month away, and it would be useful if the Minister would take the opportunity of this debate to tell us a little about how it will be administered. Will it be paid on the farm, at the market or at the slaughterhouse? How will the Government ensure that the cut-off point of 90 male animals per herd is observed if the scheme is administered at the slaughterhouse?

It is time the industry was given some indication how this new scheme will operate. Certainly we require an assurance that the Minister will take steps to ensure that British producers will be able to take maximum advantage of the new machinery and also of the hill livestock compensatory allowances and the suckler cow premium.

At the same time, it might be useful if the hon. Gentleman could say something about the question of harmonisation in the European Community. We have been on the brink of a trade war with the United States of America because of the EC ban on hormones in beef. There is a lot of legitimate doubt about how efficiently the ban is being applied and enforced in parts of Europe. It would be useful if the Minister could say a word or two about that.

Let me turn from the ditching of the beef variable premium to the other extensive livestock sector—sheep. There seem to be very clear indications that the sheep regime will be the next casualty in the overhaul of the CAP. Indeed, the hon. Member for Skipton and Ripon (Mr. Curry) seemed to suggest that that was quite a good idea. I do not know whether he is in cahoots with Mr. Peter Pooley of the European Commission, who used some rather extravagant language about Britain milking the system and about it being a racket. He is quoted as having said: I have not been discriminating against lamb producers up to the present, but, by God, I think I may have been neglecting my duty. I think he was giving notice that it is the intention of the European Commission to put the boot into the British sheep sector. I hope that, whatever the hon. Member for Skipton and Ripon may have said, the British Minister will be fighting for British interests on this occasion.

I was a little worried when I heard the assurance from the Minister that he would oppose the kind of headage limit on sheep subsidies that might be applied in future. This is the self-same Minister who sold out on the question of headage limits in relation to the beef subsidy. Clearly there will be a drastic review of the support machinery for sheep, and it appears that Mr. Pooley and others intend to give the United Kingdom producers no quarter. This really is a matter of the gravest concern in the hills and uplands of this country. My hon. Friend the Member for the Western Isles (Mr. Macdonald) was quite right to point out how important it is that producers in the hills and uplands of Britain be protected against the cuts that the European Community seems to have in mind.

I want to move now to the dairy sector, which has certainly benefited from being a regulated and efficiently managed market because of the imposition of quotas. We supported the principle of quotas, though we may not have supported every detail of their application. We would have applied them in a different way—perhaps more like the manner in which they have been applied in Denmark—but we certainly support the principle. With those quotas, the future for the milk sector should be reasonably secure, provided that our milk marketing boards can be retained.

I am pleased that the Minister took the opportunity to reiterate his distaste for the co-responsibility levy for milk. That is certainly an absurd imposition on small dairy farmers—a point made by the hon. Member for Brecon and Radnor (Mr. Livsey). What the Minister did not mention were certain other points that are of acute importance to the dairy sector.

First, there is the question of public confidence in the product and, in particular, public confidence that milk is free from artificial contamination. We are still waiting for the Government to give us some indication that they will rule out the use of bovine somatropin in milk. The producers do not want it—in fact, nobody wants it—but the Government refuse to take any action to ban it. In connection with health standards in relation to milk, we have heard also about listeria and about BSE. Indeed, BSE has been the great unmentioned point in this debate from the Government's point of view.

The Minister has been away for much of the debate. He did not mention BSE in his opening remarks, but he put out a press statement and a reply to two planted written questions on controls for BSE, which were tabled last week. At the beginning of the debate, on a point of order, my hon. Friend the Member for South Shields said that the Minister must give a statement to the House on this matter, which is causing such legitimate public alarm. If the Minister will not take it from my side of the House, perhaps he will listen to his hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), who used equally strong language in saying that it was an abuse of the House for the Minister to brief the press on BSE instead of telling the House of the Government's response to it.

The Minister did not mention BSE in his speech. He spent much of the day talking to the press about it and his written replies to his hon. Friends the Members for Torridge and Devon, West and for Bromsgrove (Sir H. Miller), which had been embargoed rather conveniently for 3.30 pm today to make it particularly difficult for hon. Members interested in these matters to deal with it.

I have referred to the Library and I understand that the Minister proposes to set up a research consultative committee on BSE. I hope that it does its work efficiently and quickly. I understand that no offal may be used in baby food. Whether it is at present must be a matter of some doubt. The Government have not said whether they will increase the level of compensation to farmers whose stocks must be slaughtered. [Interruption.] They are not. There is no question of 100 per cent. compensation, so there must be a risk that farmers with infected stock will not notify the authorities. The Government are failing to deal with the most fundamental aspect of the problem.

The intensive livestock sector is under severe pressure following the salmonella shambles. The Minister said that over-production in the pig sector, for example, can best be regulated by market forces. That is the roughest possible form of justice. The Minister has wider obligations for those who work in these industries. It would be useful if he would say something about the health implications of the abolition of frontier controls in 1992. Several hon. Members have referred to 1992. What about the controls that will apply to imports of pigs which may be infected with Aujesky's disease?

The cereals and arable sector is carrying its share of the general gloom and depression. We all know that changes are inevitable, but stabilisers are a crude mechanism. They are a method of restructuring by redundancy or bankruptcy. The hon. Member for Norfolk, South-West made that point as a result of discussions with local bank managers on the impact of the Government's policies on this sector. These policies should go hand in hand with incentives for restructuring, change and development. The continuing problem of monetary compensatory amounts arises from the imbalances in green currencies. I agree with hon. Members, including my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley), who feel that British industry should be able to compete on a fair basis, not just in 1992 but as soon as possible.

The only gesture towards restructuring in the arable sector is the business of set-aside. Farmers can collect £80 an acre for setting aside a minimum of 20 per cent. of their arable land. That is supposedly to reduce intervention buying, but it is a form of intervention itself. It is an intervention in the land market. It takes a percentage of land out of circulation. It is a sort of rental intervention to prevent a fall in market rents for farms. It is inevitably a haphazard affair. The public are paying farmers to do nothing, which is difficult to understand, and in some cases people are paid off. People are losing their jobs as a result of the scheme. Will the Government make any provision for workers who are made redundant or lose their standard of living because of set-aside? No, we are getting nothing for those workers.

Even the Leader of the other place has caused people to be made redundant and has not made any compensation available to them in connection with this scheme, which is grossly unsatisfactory. I gather that his explanation was that he wanted to set an example to other farmers to take advantage of the set-aside scheme.

We must press the Minister to explain the position of the United Kingdom Government on the income aid element of the European Community agricultural programme. That would be an eminently sensible way in which funds can be obtained to pay people to help them to adjust to policy changes and to protect employment. Why can that not be done in connection with set-aside? Why are the British Government alone in refusing to take advantage of that aspect of the package? That does not make sense.

The Minister appears to be dismissing the evidence of the collapse in farming incomes in recent months and years. He says that everyone has many other sources of income, which is not accurate or fair. The Minister knows that the vast majority of people in the agriculture industry mostly earn their livings from working directly in agriculture, and he should make policy decisions to cater for those people.

I have not time to mention the further deplorable cuts in research and development. The reports last week in the Farmers Weekly were extremely alarming. As has been mentioned by hon. Members on both sides of the House, that was an outrageous Government decision that will do great damage to the industry and to the public interest. The Minister must reconsider that decision. I hope that those reports will turn out to be rumours, but I suspect that they are well founded.

The Minister of Agriculture, Fisheries and Food came to his post widely tipped as a future Chancellor of the Exchequer, but I am afraid that his reputation has slipped a little in recent months. Where there was research, he has brought ignorance; where there was a rural economy, he has brought rural bankruptcy; and where there was despondency, the has brought alarm. He has even managed to be the second Tory Minister of Agriculture on the trot to earn himself a vote of no confidence from the National Farmers Union—not to mention the vote of no confidence that he received last week from the voters of Richmond.

Agriculture is in a sad condition, and the Minister knows. The Labour party has a proud record of partnership with agriculture. I do not believe that this Government could do any worse than they are doing now, and I suspect that the industry will be much happier when we can return to a Labour Government.

9.42 pm

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Richard Ryder)

I was going to say that this has been a wide-ranging debate, but after what the hon. Member for East Lothian (Mr. Home Robertson) said at the beginning of his speech, I shall refrain from doing so. I would describe it as a well-informed debate, and I shall endeavour to deal with as many of the points as I possibly can. If I do not answer every question—probably well over 100—I promise to write to the hon. Members concerned.

It is important not to forget that the CAP is being radically refashioned. The House may argue about the nature of the reforms, but no one can seriously deny that the wheel of the supertanker has been put hard over and that a change of course is already taking place. Budgetary discipline is working. Stabilisers—though some are tougher than others—have triggered support cuts across the board. The mechanism is in place and will continue to operate automatically. We must all hope that the GATT meeting in April will also enable progress to be made outside the Community.

I join the hon. Member for South Shields (Dr. Clark) in applauding the assiduous efforts of the Spanish presidency to reach an early conclusion to this round of price fixing, and I thank the hon. Gentleman for his limited support of a few parts of the Government's general strategy. I concur strongly with my hon. Friend the Member for Wealden (Sir G. Johnson Smith) in stressing that it is incumbent on the Opposition to formulate firm proposals of their own. Alas, the hon. Member for South Shields told the House in great detail what he objected to, but for all his sincerity, he failed to outline his alternatives. Is this because he backs our general approach, or is it because the Labour party simply has not devised viable alternative policies? Last week we saw designed Socialism without a food label—today we saw designer Socialism without a farming label.

The hon. Member for South Shields had the audacity—I commend his bravery—to draw attention to food prices, but this Government have always taken their responsibilities to consumers far more seriously than the Labour Government did. Since we took office 10 years ago, food prices have increased on average by 5.6 per cent. per annum, which is nearly 2 per cent. per annum below inflation. Prices are now 17 per cent. lower in real terms than they were in May 1979 when we took office.

When the hon. Member for South Shields referred to farm incomes, one of my hon. Friends murmured about the effect of the weather. The scale of the drop in farm incomes last year was due to problems in the cereal sector. If last year's yields had been at 1984 levels, for example, farm incomes would have shown an increase.

The hon. Gentleman alluded to the fact that the aggregate income from agriculture has declined by 25 per cent. in 1988 compared with 1987. That single figure, however, masks a complex position. Despite what the hon. Gentleman and the hon. Member for Brecon and Radnor (Mr. Livsey) have said, for all parts of the United Kingdom, incomes on hill, dairy, less-favoured area and upland livestock farms show marked increases.

The less-favoured areas, which account for half the United Kingdom's agricultural area, one third of United Kingdom farm holdings and 15 per cent. of farm production, received substantial assistance and have appreciably benefited from the sheepmeat regime. Incomes in the dairy sector—there are 50,000 holdings in all—have gone up every year in the past five years. Certainly, as I have already observed, arable sector incomes have been adversely affected by poor weather and low prices, and the intensive sector is still prone to production and price cycles, but it is not defensible to play up the areas where income is poor without noting the substantial areas where that income has improved.

The hon. Member for South Shields, the hon. Member for Workington (Mr. Campbell-Savours) and many others have mentioned fraud. From 1984 to 1988 inclusive, there were 41 cases of detected fraud under the market support section of the CAP. As the hon. Member for South Shields has already said, 22 were settled out of court and 19 were prosecuted, leading to nine prison sentences and fines up to £40,000. In 1986, the Commission made several anti-fraud proposals, including one at the suggestion of the European Parliament for direct investigations by Commission officials into Customs matters in member states. That proposal was withdrawn following unanimous opposition from member states. Since then, the Commission has made various proposals particularly for strengthening controls over export refunds, and has brought forward new suggestions in this year's price package.

The European Court of Auditors has pointed to serious weaknesses in the intervention and export refund systems and has recommended changes. The Government are urging the Council of Ministers to act on the proposals already before it and have urged the Commission to make further proposals where the need has now been demonstrated. My right hon. Friend the Minister stressed this point again at the last Council meeting a fortnight ago. I should like to quote briefly from a press release that he put out as a result of the intervention that he made at the Council meeting. On 13 February he said: I make no apology for returning to the subject of fraud which I have raised in the Council on several occasions before. My right hon. Friend is constantly pressing the Council to reach conclusions on this matter. He went on to say: In the nature of fraud there are no firm figures. But it is clear that the problem is very large indeed—not as large perhaps as some recent reports have suggested, but large enough to be of the most serious concern to us all. It simply cannot be right in any way that large amounts of Community money are being wasted. It is for us—the Council and the Commission—to tackle the problem and to show that we are doing so. After my right hon. Friend's intervention at the Council meeting a fortnight ago, the presidency emphasised the importance that it attaches to sorting out this problem as soon as possible.

Contrary to the assertion by the hon. Member for South Shields, we take full account of consumer interests across the whole range of our activities. Ministers and officials have always been ready to meet representatives of consumer organisations. Ministers had seven major meetings with consumer organisations last year and I am not aware of Ministers refusing any requests for further meetings during that time. Last year, officials had 31 meetings with consumer organisations such as the National Consumer Council, with which I had a meeting on Friday, the Consumers Association and the Coronary Prevention Group. In 1988, we consulted 40 consumer organisations on no fewer than 225 occasions on 35 different issues. On the proposed new food Bill, we have consulted 28 consumer organisations and 14 health organisations.

In response to my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman), I can tell the House that, as part of the recently agreed reform of the beef regime, the suckler cow premium paid from Community funds will increase to £28 per head. As my hon. Friend may know, there is also the possibility of a national top-up. The Government will take a decision on that in the normal way before the start of the next annual scheme on 15 June.

Hon. Members have said a great deal about sheepmeat. My right hon. Friend and I have noted those views and the importance that the House attaches to the subject. I can well understand the anxiety about this matter at a time when radical change is proposed and when the future shape of the regime is uncertain. The United Kingdom sheep sector has every reason to be confident. As all hon. Members would acknowledge, it is a success story. Since 1985 the United Kingdom breeding flock has increased by 15 per cent., production has gone up by 10 per cent., and exports have increased by 56 per cent. We intend to ensure that our producers can continue to build on their natural advantages. A genuinely free market in lamb must be good for British producers, who are efficient and competitive. We may face a time of change and uncertainty, but it is also a time of opportunity.

Hon. Members asked about the sheepmeat regime and about the future of the variable premium. We shall look for a solution that takes full account of the needs of our sheepmeat sector. This may involve' continuation of the variable premium which is well suited to our stratified sheep sector. We continue vigorously to oppose headage limits, as we have done in previous negotiations about sheepmeat. They are not in the best interests of the British sheapmeat sector and they are particularly damaging in areas where there are few, if any, alternatives to sheep. Hill producers are the backbone of our sheepmeat industry and the future regime must enable them to remain so.

My hon. Friend the Member for Lancaster asked about the separate GB stabiliser. We had to accept a separate stabiliser because it is only in Great Britain that this applies to the variable premium. We must ensure that future stabiliser arrangements are equitable. With a strong pound, exporting is not so easy, and levels of clawback are high, but this is an inevitable result of applying the variable premium. The cost of the sheepmeat regime is rising quickly and is expected to double between 1987 and 1989. The stabiliser system is not sufficiently effective. I can assure my hon. Friend the Member for Basingstoke (Mr. Hunter) that the United Kingdom share of EEC expenditure is in line with our number of ewes.

The hon. Members for South Shields and for Gateshead, East (Ms. Quin) expressed misgivings about set-aside. My right hon. Friend the Minister has never claimed that set-aside is intended, in itself, to bring about a full reduction in surplus. It is complementary to a prices policy.

Several hon. Members were concerned about extensification. The Government have pressed for the provision of pilot schemes, particularly for beef, because of the major problems of effective enforcement of such a scheme in this sector. It makes sense to test out the problems on the ground on an experimental basis before applying the scheme nationwide. In view of the concern of the hon. Member for South Shields to prevent fraud, I should have expected him to support this approach wholeheartedly.

The hon. Members for East Lothian, for Brecon and Radnor and for Workington suggested that we should consider introducing income aids for small farms. The House will know that an EC income aid scheme was agreed as part of a package at the January Council. It is optional for member states, and my right hon. Friend the Minister has always made it clear that we do not find it attractive. We do not think that it is helpful to the necessary process of the CAP reform to make expensive FEOGA payments to producers to shield them for a few more years from the need to come to terms with the market. In the United Kingdom we have a social security system designed to cater for the whole population. To have a preferential system for farmers alone is unnecessary and potentially divisive. Moreover, as I have already shown, the level of farm incomes varies markedly from sector to sector and from year to year. That means that any blanket income aid scheme is inappropriate.

The hon. Member for South Shields and my hon. Friend the Member for Norfolk, North (Mr. Howell), who is not in his place, queried our position on sugar. I can understand the concern that has been expressed about the Commission's proposal to reduce prices for sugar and sugar beet by 5 per cent., but the Commission's arguments for it merit respect. In world terms, the Community sugar price is extremely high—more than three times the price in the open world market—although I recognise that the largely self-financing nature of the sugar regime distinguishes it from other CAP commodities, where cuts in support have been necessary for budgetary reasons.

Cutting the Community price would also have implications for imports of preferential ACP sugar. The Commission has referred to the possibility of compensation, but it is not clear what form this might take. This is the important aspect which remained to be clarified. I assure hon. Members, and in particular my hon. Friend the Member for Norfolk, North, that the Government will bear the views expressed in his debate very much in mind during the forthcoming negotiations.

The hon. Member for Gateshead, East asked about the criteria for the selection of rural areas. The reform of the Community's structural funds includes the objective of developing selected rural areas. The arrangements are laid down in the Community regulations adopted at the end of 1988. The regulations contain a list of objective criteria—such as unemployment, level of incomes or remoteness which—have to be met. As the hon. Lady may know, discussions with the Commission about an initial selection of United Kingdom areas which appear to be eligible are in progress. Applications have been made on behalf of several other areas, and each of these is being carefully considered.

I have tried to answer as many of the points raised in the debate as I can. I have also committed myself to writing to those hon. Members whose points I have not yet answered. This has been a well-informed debate, during which it has become clear that the Opposition lack any policies for farming. Only the Conservative Government are standing up for Britain's agriculture at this time of change. I ask the House to support the measures.

Question put and agreed to.

Resolved, That this House takes note of European Community Documents COM(89)40 on the 1989 Common Agricultural Policy price fixing proposals, Nos. 4536/89 on agricultural markets in 1988, 8960/88 on the sheepmeat regime, 10083/88 and COR 1 on imports of sheepmeat from New Zealand, and 9629/88 on cereals incorporation in animal feed and of the Government's intention to negotiate an outcome on all these measures which takes account of the interests of United Kingdom producers and consumers and of the need to keep Common Agricultural Policy expenditure for 1989 within the Budget figure and for future years within the budgetary guideline.