Agricultural Prices

HC Deb 31 March 1993 vol 222 cc414-54

[Relevant documents: European Community Document No. 4620/92 and the unnumbered Explanatory Memorandum submitted by the Ministry of Agriculture, Fisheries and Food on 18th March 1993, on temporary national compensation for farmers in Germany, European Community Documents Nos. 4821/92, on the common organisation of the market in raw tobacco and on the 1992 tobacco harvest, 5018/93, on the allocation of quotas for certain varieties of tobacco in Greece, the unnumbered Explanatory Memorandum submitted by the Ministry of Agriculture, Fisheries and Food on 18th March 1993, on the progress made by Greece, Spain and Italy in the effective application of the milk quota scheme and on the situation on the market for milk and milk products, and the unnumbered Explanatory Memorandum submitted by the Ministry of Agriculture, Fisheries and Food on 22nd March, on national aid for sheep farming in France.]

7.28 pm

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

I beg to move,

That this House takes note of European Community Document No. 4608/93, on the prices for agricultural products and on related measures, 1993–94; and supports the Government's intention to negotiate an outcome on the price proposals which takes account of the interests of United Kingdom producers and consumers, builds upon the 1992 Common Agricultural Policy reforms, and takes full account of the realities of the budgetary situation.

The prospects for the farming industry are brighter than they have been for several years. I think that the House will agree that the first reason for that is that the uncertainty which has hung over the industry for so long has been lessened by the completion of the major part of the proposals for common agricultural policy reform. That provides a framework for the development of a competitive industry for the rest of the century. It gives farmers the stability they need to plan ahead. There is a great deal more to do, but for the major products that so dominate the British farming scene, we have laid the pattern for the coming decade.

The agreement contains several positive features. By cutting prices and reducing the role of intervention, it will bring farming nearer to the market and encourage farmers to pay much greater attention to the demands of consumers. It will reduce the resource costs of agricultural support in the Community. Overall, the costs imposed by the CAP on the consumer and taxpayer will be lower as a result of the agreement. The agreement marks a major step forward in the integration of environmental considerations into the CAP.

A last but important element of the agreement is that it does not discriminate against our farmers. The burden of reform will be borne by all producers—not, as the Commission proposed, simply by larger, more efficient farmers. Many people, including Labour Members, openly doubted that that was possible. They could not have been more wrong. None of the Commission's proposals which would have discriminated against larger producers was carried through to the final agreement. All the producers will benefit from the various compensation payments which now constitute such an important part of the reformed CAP. It was essential for the future of our farming industry that we won that point.

This year we shall begin to see what the agreement means in real terms. Whereas previously 7 per cent. of spending on the CAP came to Britain, now 9 per cent. will come to Britain. If the MacSharry proposals had been accepted, Britain would have received less than 7 per cent. So the increase that has been achieved by the negotiations is considerable. It will be seen in the returns that farmers will have this year and in future years.

In 1992 we also saw a welcome recovery in farm incomes. There is no doubt that farmers have done less well year by year. They often look at the rest of the country and point out that increases in food prices have been much outdone by increases in the prices of other products. It is surprising that, despite the excellence of food in Britain, every year a smaller proportion of the household budget is spent on food. It is a constant concern of farmers that their work is less respected and encouraged by the rest of the community.

Nevertheless, farm incomes rose by some 11 per cent. in 1992. That improvement was from a higher level than we predicted last year. The recovery is from a low base. Farm incomes have been under severe pressure in recent years and in real terms remain below the levels achieved 10 years ago. Those in the more exuberant organs of the press who tend to believe that farmers are doing extremely well should look at their own incomes and ask themselves whether they would like it if their income was lower in real terms than 10 years ago. It is important to make that clear lest people run away with the idea that the farmers are back to the income levels which were expected in the past.

However, there are encouraging signs for the future. The fall in interest rates is a major boost to many farmers.. Overall the industry's interest charges fell by 16 per cent. last year. Currently interest rates are at their lowest level for 15 years. Inflation is also down. Farmers are affected by inflation perhaps more than most other sections of the community, for they find it much more difficult to get back from the marketplace the inflationary additions which they have to pay on their inputs and their wages.

The farming industry has also benefited significantly from the green pound devaluations that have taken place since September, with support prices increasing by some 23 per cent. I wonder whether we might concentrate for one moment on the increase in the green pound and its effect on farmers.

In the past those in the sheep industry have reasonably groused that the arrangements for changes in the green pound have always been organised in such a way that they had to wait a whole year before they received the benefit. It is important to recognise that we ensured that the changes took place early enough for sheep farmers to benefit a year earlier than most would have expected.

So much of the extra money that will go to sheep farmers, especially to those in the less-favoured areas, has come not from the automatic reaction of the green pound but from the specific decision of a Government determined to protect the farmers' interests. As a result of the changes, farmers can be cautiously optimistic about their prospects for the year ahead. However, it is not feasible to look much further into the future because it contains other uncertainties, albeit fewer than previously.

The industry needs to make the most of the opportunities that exist now, using this better time to prepare for periods that may be more difficult in the future. We should take advantage of the competitive level of sterling. Already, exports of sheepmeat were up in 1992 by 30 per cent. Exports of pigmeat, in which we often think that we do not do so well, were up by 25 per cent. The industry must build on those successes and make itself fit for the rigours of the future.

We now have to implement the reformed CAP schemes. I know that there is considerable anxiety among farmers about the administrative burdens which they fear that the schemes will impose upon them. I am cheered that several people, including those who are not at all happy with the place of Britain in Europe or with Maastricht and the like, have said to me that they are pleased with the quality and care with which we have produced the documentation and forms that farmers have to fill in. That is a great tribute to staff in the Ministry of Agriculture, Fisheries and Food. We have brought farmers in at every point to ensure that the forms are as they would wish them to be—as simple as possible.

Dame Elaine Kellett-Bowman (Lancaster)

May I congratulate my right hon. Friend on the forms. I put a towel round my head and went through them last night. I thought that it was going to be awful. But they are extremely well designed, simple to follow and virtually foolproof. My right hon. Friend will be glad to know that the chairman of my local county farmers union has gone on record today saying emphatically that farmers must get the forms in by the crucial date of 15 May and no bones about it. I am convinced that farmers will be able to fill in the forms without making mistakes.

Mr. Gummer

I thank my hon. Friend. I hope that hon. Members will recognise that, whatever their concerns and wherever they stand on the issue of European integration, they must ensure that every farmer returns the forms before 15 May. That is crucial. A great deal of money hangs on it. There is almost £1,000 million this year and there will be almost £1,500 million next year. That money needs to come through.

There is a second important date to which I am sure that my hon. Friend the Member for Lancaster (Dame E. Kellett-Bowman) would have referred, if she had had time. We have put the date on a special piece of paper inside the package that will come to every farmer this weekend. I hope that every farmer will have it by Monday; some will have it on Saturday. The special piece of paper reminds farmers of the second date, which is 17 April. That is the last date on which Ordnance Survey can guarantee in its one-stop system to provide the maps that farmers need.

I hope that most farmers have sought the maps already. Anyone who has not done so should do so at once. The quicker that farmers obtain the maps, the quicker they can fill in and return the forms so that we have some chance of checking that they are right. I hope that there will be every opportunity to help farmers fill in the forms. Our regional service centres are staffed up to give advice. But again, the quicker that we receive the requirements, the quicker we shall be able to answer them. [Interruption.] It is all right for Opposition Members who will not have to fill in the forms. They will not receive the money and they would not lose out if they had not filled in the forms. I know that the hon. Member for Workington (Mr. Campbell-Savours) will go round his farmers making sure that they fill in the forms properly.

The penalty for mistakes in filling in the forms could be severe. But we are talking about a great deal of money. We are determined that the same rules will be carried through in every country of the European Community. I have looked at the forms in most other countries and our forms are very similar. However, the explanatory documentation that we have issued is much clearer. It is all in one place. Farmers will not have to scrabble around for different booklets and so on. This has been an example to others. I suspect that other countries will follow us in the future. I assure the House that the same information will not have to be produced next year. We hope to use a database to send the documentation to every farmer in the country, who will then only have to update it. That will make a major difference.

We are doing our best to keep the demands on farmers as low as possible. However, we also want to meet their major requirement, which is that they should not be asked to do in Britain what farmers are not asked to do elsewhere. That is why the forms are standard throughout the Community. The Commission and the Council will be able to check whether the forms are properly filled out and, if they are not, the farmers will not get the money. That will be as true in Italy as it will be in Britain. That will be a major change.

Labour Members who are keen on the European Community—[Laughter.] I understand that those hon. Members are publicly committed to a closer union in Europe and therefore share my attitude to the Community. They would do better if they giggled less and supported more. Many of us spend a great deal of time —[Laughter] When I make a joke, I shall ask hon. Members to laugh. It would help a great deal if we could get the rest of the Community to follow the high standards that we have maintained in Britain. However, I question whether the Community has the same determination as Britain to keep the documentation and the demands at the lowest level. We have therefore asked the new commissioner to consider ways to simplify the rules and he will come forward with proposals. We are also seeking to achieve that through the Council and other available mechanisms.

It is against that background that we should consider the Commission's proposals for price fixing. Quite frankly, they are disappointing. They are largely a roll-over collection of proposals at a time when there is a need for some fairly substantial changes. The reform of the CAP is not complete; we still do not have an up-to-date wine regime, we do not have changes in the sugar regime, we have not completed the work that we need to do on the beef regime and we still have the enormous expense of intervention hanging over the market. It is regrettable that the Commission has not even brought forward its proposals on fruit and vegetables, olive oil, rice and cotton. There is a need to reduce expenditure in all those sectors. Unless we do that, we will face real difficulty in paying the bill and meeting our expenditure within the guidelines.

We have made substantial progress in the reform agreement on integrating environmental considerations into the CAP. I should have liked there to have been more and I still want cross-compliance. I think that, in the end, the public will demand that, where the taxpayer pays out money, it must be to farmers who practise environmentally friendly farming. The farmers who are doing that—and they are the vast majority—will increasingly demand that their peers come into line, because the small number who do not farm in that manner harm the reputation of all.

Earlier today, I spent some time addressing the Association of Small Farmers, when it was brought home to me that the farmers felt considerable concern about their status and reputation, which are not what they were. Part of the reason for that has been the activities of a very small number of farmers and cross-compliance could go a long way to putting that right. If there was a more generalised system of cross-compliance, every suburban dweller and urban liver would know that, at the core of the system, was a concern for the countryside and the environment and a respect for the soil and husbandry.

I fear that the Commission's proposals take too little account of the difficult budgetary position that the Community is likely to face in 1994. With lower estimates of Community GNP, the guideline next year is now expected to be little higher than this year. With the increased costs of CAP reform beginning to have a real impact on the budget of 1994, there are fears that, on current trends, expenditure could be set to exceed the guideline even before the costs of the recent ERM realignments are taken into account. The Edinburgh Council agreed to some easing of the current rules to help with the latter costs, but any increase in the guideline remains out of the question.

In those circumstances, I feel that a prudent price settlement is required. We need now to bring spending under control, because otherwise the decisions later in the year will be much tougher. It is also essential that we do not agree anything that would increase the cost of the CAP. In particular, the agreement reached in December on the reform of the agrimonetary system must not be reopened.

You, Mr. Deputy Speaker, will be aware of the complicated nature of that system. You are no doubt familiar with the way in which the switchover mechanism works. If that has temporarily escaped you, I am sure that the hon. Member for Workington can explain it in detail. The system has an artificial effect on prices in countries with hard, tough currencies. One of the reasons why Germany has been able to maintain its view on the deutschmark is that the German farmer has been protected, because of the switchover mechanism, from the effect of too strong a currency. That is why it was only with the greatest reluctance that we agreed to the mechanism continuing for two years. Now, there is pressure on us to protect countries with strong currencies against even the small effect that the switchover system allows. That we cannot and will not do.

In addition to the price-fixing proposals in the dairy sector, the Commission has presented two reports to the Council. As, to some extent, they overtake the price-fixing proposals, it would be misleading if I did not mention them in the context of the debate. The first report considers the case for the 1 per cent. quota cut for 1993–94 that was provisionally agreed last year. The House will know that it is not the Government's policy to support further cuts in quota. We already produce less butterfat than we need—that has been so for most of the century and we have always imported large quantities of dairy products. A 1 per cent. quota cut has a much greater effect on a country that is 85 per cent. self-sufficient than on countries that produce considerably more than they need. Therefore, I have always believed that a cut in the butter price rather than in the quota is a better way to deal with these matters. For that reason, I am pleased that the report concludes that the market for milk and milk products has improved and that it proposes that the quota cut should be deferred and reconsidered next year. It also concludes that the butter market is very weak and proposes that the support price for butter should be cut by 5 per cent. for the coming marketing year, rather than the 2.5 per cent. provisionally agreed last year.

The House will recognise that that is another example of the Commission moving towards the United Kingdom's position rather than the position taken by other Community countries. That small group of hon. Members who still find themselves unhappy and uncomfortable within the European Community should recognise the degree to which decisions now being made are the same decisions that Britain would have made were it making them on its own, outside the Community.

There has been a fundamental change in the way in which the Community is moving, not least on agriculture. We should consider how the CAP is now operated. At a meeting earlier today someone said to me, "It is surprising how far we have moved away from the system that we took on when we joined the Community, towards the system which we once had and which was much closer to the market and to the mechanisms that we know to be good." Those are real victories for the United Kingdom.

The second report covers the implementation of the milk quota system in Spain, Greece and Italy. I hope that the House will distinguish between those three countries because they all have different issues at stake. There is no doubt, for example, that if Spain had had accurate production figures in the first place, it would have had a higher quota. Spain is, in any event, a deficit producer. It now has accurate figures and has already begun to cut its production. It is important for us that Spain should do that: the less that Spain produces, the greater will be our opportunity to oppose a cut in quota and the more markets there will be for over-production in France.

We have said that the Spanish will be given no help with their quota until they have made the necessary cuts. One million tonnes must be taken off the system before we can accept that Spain should have the quota that she would have secured historically.

Greece has a deficit in regard to the production of fresh milk. It cannot import from the rest of the Community and does not produce enough milk for its own internal needs. Obviously, Greece should be able to produce enough for fresh milk consumption; that is entirely sensible and does not interfere with our markets.

In Italy, the issue is much sharper. For years, the Italians promised us that the quota system was being implemented; later, it became clear that it was not. I have therefore made it plain to the Commission and the Council —as have a sufficient number of my colleagues—that we will consider very carefully before providing any help on the quota front. In its first report, the Commission says that Italy has not yet done what it must do before the Commission can make a recommendation on the basis that Italy has taken the necessary 1 million tonnes of production out of the system. We shall want clear proof of that.

I have made clear my feelings about the way in which Italy has dealt with these matters. I can, however, give one piece of good news. This year, for the first time, the Italian Government reported their own failures to the Commission. Some of the popular press said how appalling it was to discover the perpetration of fraud in, for example, the growing of durum wheat; what was not mentioned was the fact that that fraud was detected by the Italian Government. Satellite pictures were taken on the Italian Government's demand and they accepted that there would have to be a reduction in the money that they received.

That is a big change, which must be supported. I have seen no such development in my earlier dealings with the Italians. I think it only fair to draw attention to the change, given the tough way in which we must approach such matters. I hope to be able to discuss it with the new Italian Minister, who is the fifth with whom I have had to deal in recent times. I am sorry about the demise of the last Minister, in circumstances of which I know nothing; for the first time, an Italian Minister appeared to be on top of the job and to be getting on with the business of dealing with these matters. I shall, however, chase his replacement: I hope that he, too, will be on top of the job, with none of the attendant disadvantages.

There is already a success to report. I found it intolerable that the Commission presented proposals on vining peas, for example, when they were not supposed to be introduced to the arable area scheme and then took them out after people thought that they would be included. That left us all in a difficult position, legally and morally. The same seemed likely to happen with linseed; that would have been very serious for farmers in Britain and Germany, the two countries in which linseed matters most.

We have persuaded the Commission to announce that there will be no question of linseed's inclusion in the arable area scheme this year and that has set many farmers' minds at rest. We secured that assurance in the teeth of opposition and I believe that it shows that the Commission and, indeed, the Community are becoming much closer to the realities of life.

The decisions that we make each year in the annual price fixing are important to farmers, but they are concerned with the detailed workings of the common agricultural policy. In focusing on the detail, we must not lose sight of the larger picture—the reasons why we need a thriving farming industry and the reasons why that objective merits support from both Government and Opposition.

We need farmers to produce food. We may have surpluses in the European Community, but we would be very foolish to assume that surplus will never again be followed by shortage. The world is not as it has been in the past and it is not difficult to imagine a scenario in which shortages might arise. There need not be much climatic change, or a great increase in the taste for "temperate" food in developing nations—which is one of the first consequences of improved living standards. There need not be much effect on the speed with which technological change is introduced, because of environmental questions, for a change to take place in the whole way in which the supply of food is kept ahead of the population increase.

Why, in past years, were the gurus wrong—all those who told us that world population would change the patterns of life, and that the battle beteen south and north would replace the east-west battle? Because the population increase was outpaced by the rapid technological advances in husbandry. Such a result is possible only if the speed of development is maintained. Now, more and more people have real concerns, insisting that we take longer to license, take more care in what we do and are more sure of what we let into the atmosphere. Such action changes the pattern fundamentally.

I do not think it helpful to suggest that we rest on the assurance that there will always be a food surplus. I cannot say when the change will take place; indeed, I cannot be absolutely sure that it will take place. I know, however, that no Government or potential Government can sensibly leave the feeding of their people to such a hazard. It is essential that Britain's land continues to produce food and to be available for increased production; it is also essential for farmers to be able to bring about that increased production should the need come about.

It is no longer sufficient, however, for farmers simply to produce food. In the past, producing enough food to feed the whole population was an achievement in itself; nowadays, people want more. Consumers are used to a wide choice of foods and, to compete, our farmers need to produce what consumers want at attractive prices. I still hear farmers say that they do not want to produce a particular type of potato, or a particular weight of lamb, because they do not like it—although the customer demands it. In the end, it does not matter what the producer likes; what matters is what the customer demands. The producer can obtain a price—certainly, a premium price—only if he adjusts his production to meet the needs of the market. The farming industry must be focused increasingly on the market. It must be able to add value, diversify into new enterprises, lower costs and sell its products; it must be able to take a growing share of home and export markets.

We also need farmers if we are to retain our landscape and the countryside for which we care. That countryside was created by 2,000 years of farming and only by farming can we keep it—with all its glorious variety—for the next 2,000 years. It must be farmed in ways that respect its traditional characteristics and the natural environment. The great majority of farmers already farm in that way: they take pride in their role as custodians of the countryside.

That rôle deserves public support and is increasingly receiving it. Where we ask farmers to go beyond good agricultural practice to benefit the environment, it is surely right for the general public to pay. People cannot be asked to do what is expensive for the general good unless they are provided with some help. That is the principle that underlies the environmentally sensitive areas scheme, which was pioneered in this country—not least by my right hon. Friend the Member for Westmorland and Lonsdale (Mr. Jopling)—and has now been extended to the rest of the Community.

This is one of the ways in which Britain is leading the Community. All the major environmental schemes in Europe bear the stamp of Britain: we led the way. We persuaded Europe to make such measures the centrepiece of its CAP reform and we are generally regarded as the country that uses the most practical means to bring together the needs of the environment and the demand for food production. I took it a step further last week by announcing proposals to implement the Community's new agri-environment regulations. We are planning to build on the success of the ESA Scheme, with proposals for six new ESAs, and to introduce a number of new schemes, including measures to conserve moorland, to promote improved access to the countryside and to encourage organic farming.

I well remember that when I first joined the Ministry as Minister of State I was not allowed to use the words "organic farming". I remember finding it rather difficult to make an appointment with the Soil Association. I am not suggesting that the Government should say that organic farming is better than conventional farming; I am merely saying that Government should provide the opportunity for the choice to be made.

We are a nation that believes in choice and the pioneering work of my former constituent, Lady Balfour, who began the work of the Soil Association but who died recently, taught an attitude to the land that goes much further than the narrow tenets of the Soil Association. It was the concept of respecting the soil. I visited a farm that is farmed by one of our major farming companies—a very efficient outfit—and was extremely pleased when the first thing that the farm manager told me was, "That is where it is made: it is that soil, that tillage. Getting that right and respecting it is how we make the difference between profit and loss." That attitude should go much further than those who, properly, are the heralds of a different way of looking at the future of the countryside.

The proposals will add £31 million a year to the Ministry's expenditure on environmental schemes by 1995–96, bringing the total to more than £100 million by that time. When one recalls the small amounts that were possible when we piloted the first Bill through Parliament six or seven years ago, one realises that there has been a huge change throughout the country. No doubt the Labour party will suggest that more might be done—it did so at that time—but we have tried to build on our achievements and will continue to do so.

We can honourably say that every scheme that we have introduced has been a success and we have been able to extend it because of success rather than fear for its future because of failure.

I believe that the proposals will be money well spent if they contribute to the preservation of our countryside. We all need that countryside because the unfortunate fact is that the majority of our citizens live in towns and suburbs. They need the countryside for their green lung, which will be increasingly essential as the tempo of urban life accelerates. Rural life remains the guardian of continuing values. We would all be the poorer if they were lost. Farming families are at the heart of rural life. To produce food, to conserve the beauties of our countryside and to sustain working rural communities we need farmers farming the land. That belief is at the heart of the Government's policies on farming and rural society.

8.4 pm

Dr. Gavin Strang (Edinburgh, East)

I beg to move, to leave out from '1993–94' to the end of the Question, and to add instead thereof: 'welcomes the reduction in support prices contained in 1992 Common Agricultural Policy reforms; opposes the introduction of rotational set aside which will damage the rural economy and environment; regrets that the reforms do not adequately address the failures of the Common Agricultural Policy including its exorbitant cost to EC taxpayers; and calls upon the Government to press for a Common Agricultural Policy which breaks the link between subsidies and production, rewards environmentally sensitive farming, reduces the cost of food to the consumer and encourages employment in agriculture and the countryside.'. I agree with the closing remarks of the Minister. Indeed, all hon. Members would agree about the importance of the agriculture industry to our people. It is important because of the farm gate value of its output and because of the number of farmers and farm workers who are directly dependent on it.

It is even more important than that, because it provides the raw material for our food industries, which represent a large amount of investment and hundreds of thousands of jobs. Furthermore, the agriculture industry, in most rural parts of Britain, represents the core of the rural economy. Few employed in the industry are farm workers, but many jobs are dependent on agriculture. There can be no dispute about the importance of agriculture to our economy.

The Minister acknowledged—I was pleased that he did so—that the 1980s have not been easy for the agriculture industry. The Government cannot shirk their responsibility for these hard times. Britain's farmers did not see any of the Lawson boom. The latter half of the 1980s was disastrous for the industry, and only now are we beginning to see some slight recovery. As the right hon. Gentleman reminded us, that recovery still has not restored us to our position at the beginning of the 1980s.

The Minister said that the main factor for the increased optimism in the industry was that the CAP reforms had been settled. Who is he kidding? He does not believe that the MacSharry reforms are leading to increased confidence and hope in the British industry. He knows, like every other hon. Member, that the industry is looking forward to a better future because of black Wednesday—Britain's forced withdrawal from the exchange rate mechanism, the devaluation of sterling and the consequent increases in support prices. That is the first, second and third reason why British agriculture can, we hope, look forward to higher returns, which we want to see translated into more jobs and higher investment.

Last week, we debated the Agriculture Bill, in the course of which the Minister and I referred to the Agriculture Act 1947 and the good old days when we had an agricultural price review and all that the House had to concern itself with was support prices and the bargain struck between the Government and the agriculture industry. In some respects, those were halcyon days, since when things have become so much more complicated. We then had a far better system of support for the British consumer and the industry, but the reality is that the European Community is where all the major decisions on agriculture policy are taken, and have been taken for a long time. That is why this debate is the major agriculture debate in the parliamentary calendar.

I turn now to the documents, some of which the Minister, for reasons which may become obvious, managed to avoid referring to. I am sure that he will correct me if I am wrong, but at least two of the documents have something to do with tobacco production. I remind the Minister of what he said a couple of years ago: It is outrageous that we should subsidise the increased growth of tobacco … when most member states are seeking to reduce the consumption".—[Official Report, 6 February 1990; Vol. 166, c. 789.] He has changed his position a bit since then. On 12 June 1992, he said: It is not feasible to end … tobacco production."— [Official Report, 12 June 1992; Vol. 209, c. 565.] The Minister avoided the problem this evening simply by making no reference to the tobacco documents which are before the House. As the tobacco regime is costing the European Community about £1 billion per annum, and as the cost of the regime has been ratcheting up every year and was estimated to rise again in 1992, one is entitled to say that the Minister, by failing to refer to that regime, is guilty of a certain degree of complacency.

Mr. Gummer

I should hate the hon. Gentleman to feel that I am complacent. I could easily have said that under this system we are reducing the amount of tobacco which receives support from 460,000 tonnes in 1982 to 350,000 tonnes in 1994. In Greece, 200,000 small farming families are dependent on tobacco production. I believe that what I said on those occasions remains true. It is outrageous that we should be spending that money. We should reduce it—and we are reducing it, but it must be done at a pace which ensures that villages and small communities in southern countries are not wiped out at once. I believe that at the end of a reasonably short period of time there should be no support for tobacco. We are on the way. The measures have been so tough that the Greek Minister has held up many meetings because of the effect on his rural community. We can only move at a pace which takes account of the many livelihoods which depend on tobacco.

Dr. Strang

I am grateful for the right hon. Gentleman's intervention. He has mentioned some of the points that I was going to make at the end. Tobacco is a labour-intensive sector. It is true that many jobs in southern countries depend on it, but it happens to be the most costly regime per hectare of all the regimes.

My final quotation in this respect is from the British Journal of Addiction. An article written by two authors —one French and one British—states: The common agricultural policy of the European Community subsidises tobacco production to the tune of … £900 million. This amounts to … £1,700 per minute, and is more in one year than the total amount spent on tobacco subsidies by the US in the last 50 years. The purpose of this policy was to maintain farmers' incomes and adapt community production to demand … The policy has failed. Expenditure has spiralled out of control, production of unmarketable tobacco varieties has risen enormously, and the EC is the world's largest importer of raw tobacco. Despite the efforts to switch to alternative tobaccos, the regime is a disaster.

We must adopt a position of principle. Yes, we have to support the rural economy of the areas involved, but instead of talking about supporting the tobacco industry it is high time that the Government considered ways of enabling tobacco producers to move to other economic activities so that they are provided with alternative employment.

Did the right hon. Gentleman omit to refer to the document on national aid for sheep farming? I believe that he mentioned the document which provides for a continuation of temporary aid for the German agriculture industry when talking about the switch-over mechanism. I do not wish to make a major point of it, but does he accept that the Council of Ministers should make it pretty difficult for such national measures to be passed? If there is to be a level playing field and a common agricultural policy, it is not in the interests of our industry for other Governments who are prepared to spend their own money to be allowed to provide additional, large-scale subsidies over and above those available to our producers under the CAP.

The Minister referred to the documents on milk, especially the milk quota. He seemed to be trying to talk tough on the Italian milk quota, but if hon. Members take the trouble to read his words I do not think that they will find he was being so very resolute. Milk quotas were introduced in 1984, and the Italian Government have failed to operate the system for all those years. It would be utterly unacceptable if the Italian Government were to receive an increase in their quota as a bribe for implementing the system from now on. I should have thought it sensible for any increase in the Italian quota to depend on at least one year's operation of the existing arrangements, which they should have been operating since 1984. That is a very important issue for this country.

I was rather surprised that the Minister made a great deal of our lack of self-sufficiency. I do not disagree, but the problem with the British milk quota is that we have a very competitive industry. It is generally accepted, especially with the increase in support prices and the devaluation of the pound, that we would be able to increase our share of milk production in the European Community if there were no milk quotas but a genuinely free market, because of the efficiency of our milk processing industry and its scope for expansion.

Mr. Gummer

I know that the hon. Gentleman would not want to mislead the House. I find his argument difficult to believe. If we were using all our milk quota for high value products, which were to be found on supermarket shelves in France and Germany, I should be much happier. At the moment, however, we are turning our milk quota into skimmed milk powder which we are exporting at a subsidised price. That is outrageous. It shows that the system does not produce the competitive edge that it should, so the hon. Gentleman's case does not stand up.

I hope that there will be changes in the milk industry so that it will be possible to claim what he claims. Perhaps we can then buy quotas across national borders and do what we should be doing, which is making milk products in the countries with the rain and grass to do so.

Dr. Strang

There is more to the system than the right hon. Gentleman suggests. We have a built-in preference in the pricing arrangements for liquid milk in that we have rightly attached a high priority to maintaining higher liquid milk sales. I do not think that the hon. Gentleman disputes the fact that Britain's fundamental climatic advantages, as compared to much of the Community, and the fundamental efficiency of our milk processing companies are such that, if we were operating in a genuinely free market without quotas, we would have more investment and more jobs.

It is indisputable, as many of the dairy companies agree, that investment in many aspects of processing, including those which do not need a great deal of milk, is inhibited because there is concern about obtaining an adequate supply of milk. In a speech at the end of last year, the right hon. Gentleman seemed to agree that it was regrettable that quotas had become a permanent feature of the milk regime. There is an implicit agreement that as part of the MacSharry reforms quotas will continue until the end of the century. I am not over-enthusiastic about the sale of quotas across national boundaries. I should like to think that Britain would buy the quotas, but I am a little uneasy that some countries, especially France, will find a way of loading the system so that we shall not see the desired movement of quotas to this country.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. David Curry)

Would the hon. Gentleman favour the complete free sale of quotas within the United Kingdom?

Dr. Strang

I am in favour of getting away from quotas as soon as we can and of incorporating in the milk support arrangements other ways of maintaining the livelihoods and jobs in our industry. I shall finish with the milk issue because I have much more to say.

We welcome the decision to remove the co-responsibility levy. I was a member of the Labour Government when the levy was introduced in 1977. We opposed it then, and I think that we have been fairly consistent in our opposition to it since. School milk is currently financed from the co-responsibility levy. I hope that the Minister of State will give a clear undertaking that there is no question of school milk being jeopardised in the long term as a result of the removal of the levy and that the Government will accept the obligation to continue the funding.

I will deal briefly with the price proposals. The price proposals for the maor commodities were predetermined by the agreement last year on the MacSharry reforms. The cuts in cereal and beef prices are positive measures. The right hon. Gentleman recognised that reform of the wine and the sugar regimes is of enormous importance because of the huge costs to the overall EC agricultural budget. Our amendment says that there are some positive elements in the reforms, but that judged against the scale of the problem and the enormity of the CAP they are totally inadequate.

To appreciate that fact, we must take a minute or two to remind ourselves of how big a disaster the CAP is and continues to be. It continues to force up food prices and maintain them at an unacceptably high level, imposing high costs on all families in this country, especially on the poorer families who tend to spend a higher proportion of their household budgets on food. The CAP represents a monstrous cost to the taxpayer; the sums of money involved in intervention buying and export refunds are mind-boggling. It damages international trade, and especially the positions of many developing countries, because of the policy of subsidising our surpluses and effectively almost dumping them on world markets. In essence, considering the money that the CAP costs, it fails to provide anything like the support that we should expect for the industry and for employment in rural areas.

I remind the House of the issue of fraud within the CAP. An excellent report of the House of Lords Select Committee on the European Communities entitled, "The Fight Against Fraud" was published at the end of last year. An interesting study had been carried out on milk refunds and the money spent on them, centring on two companies, described as company A and company B, in two different countries which account for a high proportion–10 per cent.—of all the money spent on milk export refunds. The report showed that the companies had not been audited since 1966 and concluded: There is strong evidence that fraud and irregularity continue on a large scale, not only in the agricultural sector, but with the Structural Funds also, and that controls within the system are not sufficiently effective throughout the Community … As things are at present detected fraud is likely to be the tip of the iceberg, and serious dangers will remain until all concerned with the collection, administration, disbursement and use of these funds accept in full the principles of sound financial administration, reporting an audit … Notwithstanding the continuing efforts which have been made, the Committee are convinced that a great deal more needs to be done if fraud and irregularity are to be contained within tolerable limits. That in itself is a major indictment of the CAP as it stands.

What about the so-called fundamental reforms agreed last year? First, I shall examine briefly the accompanying measures. When the reforms were debated last June people were in the dark about much of the detail of what had been agreed, and much still had to be worked out. I hope that when the Minister of State winds up he will tell us about the early retirement package. Why is it not being applied at all in this country? I do not see that as a rationalisation measure but as a measure whereby older farmers can be helped to move out of the industry and provide opportunities for other farmers; every time that happened, it would mean that another person had been found a job at a time of high unemployment. Secondly, what about the regulation on the forestry measures? I am sure that most of us would agree that they would be positive. What is the Government's attitude?

Thirdly, what about the agri-environment programme? The Minister said quite a lot about that and, as he reminded us, on Friday he announced his proposals to meet the requirements of the programme. It is with some satisfaction over the years that we in the Opposition have seen the importance of the environment dawn on the Government. We support the change that has taken place over the years in their attitude, following the policies adopted by the Labour party. [Interruption.] If Conservative Members read the documents the Labour party has published over the years, they will see that we have led opinion in this country on the environment, and that the Government and the Conservative party have followed.

We must welcome the Minister's proposals, but an increase in his Department's environmental expenditure by only £31 million over three years, in the context of a departmental budget of about £8.5 billion over that period, cannot be said to represent a major shift in priorities. When my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) replies to the debate for the Opposition he will say more about the environmental impact of the changes and of the Government's policy.

Set-aside is the major supply control measure in the reforms, and the Opposition have deliberately singled it out in our amendment, because we do not believe that it is the right policy. We are sceptical about whether it will be effective—certainly about whether it will be as effective as the Government and the Commission try to suggest—in cutting cereal production. We believe that some of its effect will almost certainly be offset by greater intensification by farmers in their reduced acreage.

Of course, we strongly support breaking the link between subsidies and production, but we want the payments to be made for a positive purpose and to provide employment. We do not believe that we can possibly justify spending such huge sums on paying farmers to do nothing and to leave the land fallow. That is not an acceptable system, and we do not believe that it will be acceptable to the British people in the medium to long term. Rotational set-aside is not an environmentally positive measure and does not provide anything like the environmental benefits that we would like to stem from the policy of reducing cereal acreage in this country. Permanent set-aside is a different matter, into which it would be possible to build more effective environmental benefits, but here we are talking about rotational set-aside. For those reasons, we believe that the policy of set-aside should be opposed in principle.

Some of us were probably rather amused at the Minister's reference to the forms. He seemed to present as some great achievement all those documents that the farmers will have to complete. Yes, perhaps the Minister's civil servants have done quite a good job in producing all those publications—but does he not recognise that the very fact that they have had to go to such lengths, and that so much time and effort will be devoted to the forms, is in itself a fundamental criticism of what the Council of Agriculture Ministers agreed last year? The set-up is utterly indefensible.

If hon. Members have not read it already, I commend to them an article by David Brown, agriculture correspondent of The Daily Telegraph, which says: More than 240,000 farmers are affected by what is being described as the biggest farm information gathering exercise since the Domesday Book was begun in 1086 … The National Farmers Union has been running a series of road shows to keep farmers up to date with developments. So far about 30,000 farmers have turned up and thousands more are expected from this weekend. The Country Landowners Association has established a nationwide network of land agents to give 15 minutes of free advice to its members"— [Interruption.] I am quoting from The Daily Telegraph; I thought that Conservative Members might appreciate that. The article continues: While assuring that efforts would be made to simplify the forms next year, Mr. Gummer said that the Government had always feared such a system would bring too much bureaucracy. It certainly does. To try to make out that this is some great virtue is nonsense. It is itself a criticism of the system and of its complexity.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

The hon. Gentleman went on at great length about fraud in the tobacco regime. If he is so concerned about fraud in the common agricultural policy, how does he expect this considerable sum of money—amounting to £1 billion extra this year—to be given out without proper checks being made on those who apply for it?

Dr. Strang

That is the point. That is what I am saying. Given the system that was agreed at the level of the European Community, for which the Minister must share some responsibility, it was almost inevitable that one would end up with this sort of bureaucracy and with farmers having to spend hours of their valuable time filling in forms. But the hon. Gentleman is right: once you have the system in place, it follows that you must have all these forms.

Mr. Gummer

The hon. Gentleman has just said that his real objection to the system is not that we are having a system like this, but that it is not quite so environmentally directed as it ought to be. His own propositions would end up with precisely the same need for precisely the same information on precisely the same forms. The hon. Gentleman must not mislead the country. He would need the same information produced on the same forms, but he would not have bothered to spend the time that we have spent, making it easy for people to fill in the forms. He must not mislead the country.

Dr. Strang

No, I will not mislead the country. I am not convinced that the environmental policies that we have been advocating would require this kind of form, but even if they did the British people would understand because they would see some real environmental benefit. They will see nothing from this. This is simply another way of spending their money. It is a way of spending their money which constitutes direct aid to the industry and to that extent we support it, but I cannot believe that it is impossible to develop a better system of making these direct payments to producers than the one currently in place.

That is not our major criticism of the system, however—far from it. Our criticism is that it does not address the real weaknesses in the CAP. To a limited extent—we acknowledge this in our amendment—it addresses the issue of the inflated prices of the CAP. The cut in the cereal price and the cut in the beef price are positive, but they fall a long way short of what is required. Does MacSharry adequately enable the Community to look forward with confidence to any GATT agreement?

It was somewhat surprising that the Minister did not mention the word "GATT". Surely if there is a major issue on the horizon of the agriculture industry it is the implications of GATT. We do not know what the position will be in relation to the United States and the GATT agreement, or what the attitude of the new French Administration will be, but we must recognise that any test of the CAP reforms must include a reference to the GATT agreement and to the need to cut the volume of subsidised agricultural exports from the European Community. Many of us are not convinced that these reforms will adequately render the CAP acceptable to the proposals in the GATT agreement.

Labour has been consistent in its pressure for a swift settlement to those negotiations. Subsidised exports of surplus United States and European Community agricultural commodities have swamped and depressed international markets, disastrously pricing farmers in the developing world out of their own domestic markets. The House will remember that an EC/US GATT agricultural settlement was reached in November, including a commitment from the EC to reduce over six years the volume of subsidised exports of each product by 21 per cent. The Minister and the Commission insist that the commitments can be met as promised within the limits of the measures agreed in the CAP reforms, but many authorities disagree. Perhaps the right hon. Gentleman will agree that the way in which the Council of Agriculture Ministers has shaped up on this price package so far does not encourage much optimism about meeting the objectives, particularly in the dairy sector. The Minister himself implicitly acknowledged that.

Our major criticism of the so-called reforms of the CAP, however, is that they have failed to address the biggest problem—the huge cost to the Community taxpayer. The cost of the CAP has risen again in 1993. In the past couple of weeks the Commission has confirmed that expenditure this year will be higher than anticipated.

Much more serious, it has acknowledged that the cost of the CAP will go through the roof next year. It will certainly not come within the guideline. I quote from Agra Europe of 5 March: The senior controller of EC farm spending has conceded that the EC Commission is likely to have to resort to 'creative accounting' in order to avoid exceeding the budget guideline in 1994 … Michel Jacquot [director of the agricultural guarantee fund] stated that the combined impact of a lower budget ceiling next year … and the higher cost resulting from the maintenance of the switchover system would cause serious problems for the Commission next year. He goes on to explain what these creative accounting devices are, and they are pretty mind-boggling. They might include counting payments incurred in 1994 against the 1993 budget, closing the budget a year early or further delaying payments to member states—that is, the payments in our country by the intervention board to the agencies which intervene in the market.

The CAP reforms do not adequately address the huge cost of the CAP to British taxpayers and to taxpayers through throughout the Community. Because they fail to do that, because they fail to give confidence that we can meet the GAIT obligation, and because they fail to give any confidence that we shall see any reduction in expenditure in the long term, they are inherently unstable. That is a bad thing for the industry because, as hon. Members will acknowledge, there is rightly a limit to the amount of money that the taxpayer is prepared to spend on agricultural support, especially when it is spent as wastefully as it is in the common agricultural policy. Against that background, producers cannot be confident about what the long-term future holds for them.

The reforms which continue to dominate discussion about the CAP do not meet what is required. They introduce unnecessary bureaucracy. They fail to cut the cost to the consumer sufficiently. They will not provide long-term support to which the industry is entitled. They will not reduce the cost of the CAP to anything like a level acceptable to British taxpayers and taxpayers throughout the Community. For those reasons, we urge all hon. Members to vote for the Labour amendment this evening.

8.37 pm

Mr. Peter Atkinson (Hexham)

It is very easy for the hon. Member for Edinburgh, East (Dr. Strang) to stand on the sidelines and throw brickbats at the common agricultural policy because we all know that in many respects the common agricultural policy is a fairly unlovely creature. But it is all that we have and we must make the best of it.

I am grateful to be called first from the Back Benches tonight because it gives me the opportunity to thank my right hon. Friend and his team for what they have done in recent years to make the common agricultural policy far more acceptable, certainly to Conservative Members. They have improved it. They have moved it closer to the way that we wanted it, to the benefit of our farmers.

It is all very well for the hon. Member for Edinburgh, East to say that we should dump Greek tobacco farmers or that we should take a stern view of assistance given by the German Government to German sheep farmers, but if we do not concede this kind of compromise with our fellow members of the CAP, what will they do when we go, as we did recently, to seek an additional 70p on a ewe for hill farmers in my constituency? We must live together, which means from time to time swallowing things that we do not like to swallow. Improvement in the CAP has come slowly and that is why my right hon. Friend and his team have been impressive. The system is better because prices are Row closer to world prices and that has been our aim.

I intend to deal with some of the environmental aspects of the CAP. Once again, the Government have a very creditable record in dealing with the environmental aspects of set-aside in particular. We have certainly moved the environmental aspect of the CAP to the top of the agenda. It was of no interest to France, to the Italians or even to the green Germans. It was this country that pushed forward the cause of environmentally friendly set-aside, and that is another credit to my right hon. Friend and his team. Only the other day, there was the £31 million package for new environmentally sensitive areas arid for the restoration of moorlands and intensive grazing of hills. That is another great credit to our agricultural team.

There are problems—I accept what the hon. Member for Edinburgh, East said on this—about rotational set-aside or fallow. I hope that, just as my right hon. Friend has improved things in the past, he will be able to get a better system for rotational set-aside. It is no good opposing set-aside. We cannot magic it away. The system has been adopted by Europe and, again, we have to live with it and to make the best of it. The problem of rotational set-aside is the requirement that fields should be cut on or after 1 May. In environmental terms, May day is as much of a disaster as it has been for the country generally, although it is enjoyed by people over there. I should like the May day bank holiday to go and the May day set-aside day to go as well.

The problem with rotational set-aside and the 1 May date is that if one allows a field to go wild up to 1 May, it becomes a honeypot for all wildlife, especially game birds and ground-nesting birds. They move into the area because it provides them with shelter and with food left by the combines in the previous season. It is also a reservoir of insect life and of weeds that grow in May. If the farmer starts to work on the field on 1 May, he is not only cutting the grass or ploughing it up, but cutting or ploughing the young partridge and the partridge chicks. That is why I was pleased that there was a meeting yesterday between the National Farmers Union and a number of bodies interested in wildlife to see whether they could reach a better compromise on the date. I am sure that many farmers who are environmentally responsible will move that day back from 1 May at least to 1 June so that the chicks, the ground-nesting birds and other wildlife have been reared by the time the mower or the plough goes over the land. I welcome any changes in that rule.

The reason for the rule is the prevention of fraud, which is a real problem with which our Ministers have to deal. It is not beyond the wit of Greek or southern Italian farmers who farm cereal on rather sparse fields to claim that a field that appears to be growing crops is growing nothing more than volunteer grain from seed left over by the previous combine. I urge that in our continuing review and improvement of this aspect of set-aside, we try to reach a better date for the mowers to begin their work.

The recent meeting shows that Britain's farmers are concerned about the environmental aspects of their policies. They know, as everyone does, that the CAP is costing a great deal of money and that the public are entitled to something for their cash. That is why farmers will enter the longer-term set-aside schemes, the woodland schemes and the permanent set-aside schemes. They believe that the public are entitled to a return on that money. I urge Ministers in the coming year to try to re-negotiate that system and not to let a load of more crafty Greeks or Italians do a lot of damage to a scheme of set-aside that is potentially beneficial for our wildlife.

8.44 pm

Mr. Paul Tyler (North Cornwall)

We may find that there is an unusual degree of consensus about objectives across the Chamber this evening. I agree with much of what the hon. Member for Hexham (Mr. Atkinson) has just said about the long-term advantages that can be achieved by non-rotational set-aside. I shall come back to that point.

We get an opportunity to range over the strategic objectives of the CAP only once a year. In previous years, there has been a full six-hour debate whereas this evening, we may have four hours of debate. In the interests of restricted production, about which we are all talking this evening, I intend to be brief.

It is extremely important that the Minister's words about surplus and shortage should be at the heart of our debate. After a period of considerable surplus, it is all too easy to forget that shortage is even more dangerous. Surely a modest surplus is better than even the most marginal shortage. That must be true not only of the United Kingdom, but of the Community generally and of the world at large and it should be in the back of our minds throughout all our discussions.

Like the Minister, I have addressed meetings of and have had discussions with the Small Farmers Association today. One of the reasons why there is increased interest —outside the House at least—in all parts of the country, urban and rural, in the way in which the CAP is developing is not only that the CAP has got to a watershed in terms of cost, but that many people—non-farmers as well as farmers—are more aware of the visible products of the CAP than has been the case in recent years.

In the similar debate in February 1989, the then Minister, the right hon. Member for Norfolk, South (Mr. MacGregor), stated: 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 round".—[Official Report, 27 February 1992; Vol. 148, c. 28.] Those who now have their body clock adjusted to "Farming Today" and who woke up early this morning will have heard the new Trade Secretary of the United States speaking on the subject. It is far from clear, four years after the right hon. Member for Norfolk, South made his prediction, whether the GATT round is any closer to completion than it was six months ago, let alone 12 months ago. If anything, we seem to be slipping back rather than going forward.

Although it is true that in the autumn there seemed to be some ground-breaking in an agreement on agriculture, that is surely now under threat and there is still no GATT resolution in sight. I know that some Conservative Members were delighted by the recent election results in France. I wonder whether they will still be delighted when our Minister meets the new French Minister, Jean Puech, and discovers whether there is a meeting of minds on the future of GATT and of the CAP. I believe that a time-bomb may be ticking away there. If so, we may find that even the comparatively small advance made in the latter part of last year is now at risk.

When the CAP reforms were brought back to the House last May, the Minister did not use the phrase "peace in our time", but the piece of paper that he waved at us was represented as a major triumph. It was represented as a triumph for simplicity, as a triumph for economy and as a triumph for an even playing field. On 22 May he said: This was a major step forward … for British consumers and taxpayers".—[Official Report, 22 May 1992; Vol. 208, c. 629.] When we debated the agreement in full in June, the right hon. Gentleman said: Overall, the cost to the consumer and taxpayer will be lower under the reformed CAP."—[Official Report, 12 June 1992; Vol. 209, c. 555.] This evening, the Minister said firmly that what we are now debating is the increased cost of the CAP reform. Surely that is the issue about which people are concerned. Moreover, there appears to be no beneficial result from that increased cost. To many people, it is totally inexplicable where all those billions are going. It is clear that they are not going into the pockets of the comparatively badly off small farmers whom the Minister and I met today. Equally clearly, it is not going to the marginal parts of the country—the less-favoured areas. On the whole, it does not seem to be going to the livestock producers. Where is it going? Is it going into intervention costs, distributors, and processors' costs or supermarket profits? Of course, it may be going into fraud, in which case we shall no doubt see, with the tightening of the fraud provisions that the Minister has claimed are now coming into effect, where savings can be made.

As has already been said, there are in this bundle several detailed documents relating to farmers in the eastern Lander of Germany, tobacco growers in southern Europe, and so on. However, there are one or two significant omissions. It is true that there is a very useful document on attempts to tighten up in the case of the approach of three member states to milk quota, but a universal review of the milk quota system is surely long overdue. This matter was referred to in last week's debate. The Minister and I had an exchange on the whole issue of quotas and there was another brief exchange this evening. The Commission, under instruction from the Council of Agriculture Ministers, should undertake a universal review. The ad hoc attempt to deal with the Italian problem or the Spanish problem is not sufficient.

Similarly, for the reasons given a few moments ago by the hon. Member for Hexham, there is an urgent need for a complete analysis of the real alternative of non-rotational, permanent set-aside. Not only is this the core of the problems that affect the United Kingdom; the country is uniquely affected by them. From an answer that the Minister gave me a few weeks ago, it is apparent that we are imposing upon ourselves a degree of set-aside that is totally unrepresentative of the scale of our agriculture and is not reflected in any way in other member states. I believe that over 60 per cent. of the farmers of this country will be affected by the set-aside provisions. The nearest figure—34 per cent.—is that of Denmark and the level falls right away in many other countries. Set-aside has become the core of the United Kingdom's approach to the CAP reforms, rather than something that we can simply blame on Brussels. Indeed, this country has a terrible tendency—perhaps the Government encourage it—to believe that everything that is wrong with the CAP is "over there", or that if it is "over here", it must be the fault of people "over there". In this case, the reliance on set-aside is home-grown. It is a major mistake. This is only one of the reasons for the fact that the reforms that were put before the House last year, and are now coming slowly through the mincing machine, will prove to be very transitional. They are not a permanent solution to the major problems of the CAP.

On the question of environmental implications, I welcome all converts. I am delighted that there is unanimity in the House. I do not adopt the grudging attitude that Opposition Front-Bench Members display towards converts. My party and I were promoting these policies as long ago as 1978, when I co-authored a document entitled "New Deal for Rural Britain". I do not take any great pride in being 10 years ahead of others. Indeed, I am delighted that everybody else is with me now. However, if that is to be the approach, this country's insistence on relying on rotational set-aside flies in the face of all sensible and expert opinion.

It is impossible to provide new habitats for species by rotational set-aside. It is impossible to plan, on a long-term basis, to meet the needs of conservation with rotational set-aside. Even if it were sustainable as an environmental policy, it is quite unsustainable as a political policy to ask the people of this country, when they holiday in Cornwall—as I am sure they will—to pay' for organised dereliction: nettles, docks, and so on. Surely the appearance of total neglect is too high a price to ask the taxpayer to pay in tight times. It might work for a year, but I do not think that it would work for longer.

In this regard, we shall have a major problem in the near future. There is the question of a wider awareness in this country of the needs of a hungry world, including the needs of a hungry eastern Europe. I believe that rotational set-aside will prove to be the undoing of the whole of the package. It is as if the package contains the seeds of its own destruction.

There has been much reference to the integrated administration and control system forms. The Minister was kind enough to reassure me last week that these would be in the hands of the entire farming community by 2 April. For a reason about which we agreed—All Fools' day—he said that 1 April would not be appropriate. What is important is the way in which the forms will be processed and treated. I have asked that the comparable forms to be used in the other 11 member states be placed in the Library for us all to see. I hope very much that those will be available before the House rises at the end of the week. With the new system of monitoring the whole way in which the CAP is operating, it is critical to ensure that the same amount of information is available to all Governments and that those Governments are in a position to act on it.

Of course, we support attempts to control fraud. Of course, we are anxious to ensure that the right information is available. It will be difficult enough in this country to ensure that maps are sufficiently up to date to meet the requirements. Are we confident that, in the case of peasants in Greece, the right information will be provided? Are we confident that if information is not provided, or is provided in a deliberately misleading way, Ministers in other Community countries will insist on the same attention to detail, monitoring and policing as applies in this country? We are not against the IACS forms; what we are against is an unreasonable degree of bureaucracy in this country which is not matched by effective monitoring in the other member states. The Minister was quite right in referring to the need for a system of uniform effectiveness throughout the Community. One of the advantages of the Maastricht treaty is that it will give more teeth to the implementation of such systems.

We are not discussing potatoes in this debate. Potatoes do not yet feature in an EC regime. However, I hope that the Minister takes very seriously indeed the widespread misgivings—misgivings expressed in all parts of the House last week—about too fast a transition from the present managed market to the unknown of a regime that we do not understand. We do not yet know how it will work. That all-party concern is reflected by all sectors of the industry and by many other parts of the agricultural community.

There is a specific mention in the package of the sheep regime in France. The concern expressed earlier about the extent of derogation to national Governments will be widely supported. If we are to have a common agricultural policy and if there are broadly similar circumstances for particular sectors, it should be the exception rather than the rule that a Government, like the French Government, should be able to come forward with quite specific proposals for their sheep sector when that will obviously affect the competitive advantage of other sheep sectors in other member states.

It is difficult to ensure that the level of derogation is kept to a reasonable limit. However, we should be conscious of the potential conflict between increasing subsidiarity on the one hand and the initiative to which I have just referred on the other, which then calls into question the overall common agricultural policy. That may also affect what is eligible and what is not eligible for the so-called green box in the GATT negotiations.

If there is too much derogation and subsidiarity among member states' Governments, the green box might be called into question. That, again, is why there is an advantage in a Community-wide approach to issues such as set-aside and environmental advantages. Those issues will clearly fall in the green box and should therefore not be subject to any undermining by the GATT negotiations.

I have been brief as I am conscious that other hon. Members may want to contribute to what should he an overall assessment of what is happening to the CAP. There will be widespread support in all parts of the House for the concern expressed this evening for the health of the agriculture community. However, in my book, that is only part—although a vital part—of the concern that we should all share for the health of the rural economy, of the rural environment and of balanced communities in rural areas.

Of course, agriculture remains the core industry for most parts of the countryside, but it is not the only part. One of the complaints that is often voiced by many interests is that in the past the CAP has concentrated far too much on a selection of agriculture production objectives rather than on the health of the rural economy as a whole. That was why many of us were so concerned about the way in which the hill livestock compensatory allowances were downgraded in the past few weeks.

I hope very much that the new regime in France will not destabilise the CAP. However, we should all be conscious of the fact that, even with everything going the right way, the CAP reforms are by no means as permanent as they looked last summer. The Minister said this evening that uncertainty has been lessened. Last summer he said that it had been removed. The best that we can say this evening is that the CAP reforms may last a year or two, but, before very long, Ministers will be around the table again.

9.2 pm

Mr. David Harris (St. Ives)

I hope the fact that the House sat all night has not upset my normal placid attitude and reputation. However, I want first of all—I have given notice of this—gently to chide the hon. Member for North Cornwall (Mr. Tyler). While he was speaking, I could not help noticing that his Bench was as empty as most Benches. I mention that simply because he wrote a letter to the Western Morning News which I found rather silly and, if the hon. Gentleman will forgive me for saying so, a little sactimonious. In reference to last week's debate on agriculture, the hon. Gentleman wrote: Conservative MPs representing Cornish and Devon constituencies were, however, conspicuous by their absence. As the hon. Gentleman knows, we often speak in the House to a less packed audience than we would perhaps like. For my part, I was missing last week because I was in Brussels on business as a member of the Select Committee on European Legislation. I have no doubt that the hon. Gentleman's leader, who did not vote at the end of last week's debate, also had an equally good reason for being absent.

Mr. Tyler

I must confess that my colleagues have a curious choice of priorities in that they came to listen to the Minister this evening, but did not stay to hear me.

Mr. Harris

They did pop in for a few minutes and then left to return to their dinners or to their pressing engagements. I fully acknowledge that we all have many engagements. I will not labour the point, but I hope that the hon. Gentleman will have the grace to acknowledge it.

My real criticism is directed at my right hon. Friend the Minister—and perhaps this is the effect of an all-night sitting. I said that I was in Brussels last week as a member of the European Legislation Committee. Last night, during the all-night sitting, I read the papers relating to that Committee. A particular paper was tagged to the papers for this debate—so that I am able to refer to it—on national aid for French sheep farming, a subject to which the hon. Members for North Cornwall and for Edinburgh, East (Dr. Strang) referred.

I have had the advantage of seeing some of the papers in more detail because of my position on the European Legislation Committee, and I have been astounded by what they contain. During a meeting of the Agriculture Council on 17 March, the Minister—I informed him that I would refer to this issue—apparently agreed to a proposal that France should be allowed to put in place an £8 million subsidy scheme for its sheep farmers. The papers to the European Legislation Committee point out clearly that the Commission had considered that the provision of that national aid to French sheep producers was incompatible with the Common Market. The reason given in the papers was that a letter had been written by the Minister of State to the Chairman … of the European Legislation Committee … explaining why Mr. Gummer gave his agreement, thus contributing to the unanimous decision, as required if the Commission's ruling was to be overturned. This involved assurances by the then French Minister of the Interior that his Government would take all necessary steps to secure the free flow of goods, particularly fish. Two points immediately arise. First, should our Ministers have put faith in the assurances of the then French Minister of the Interior on 17 March, knowing that the following Sunday was to see the first round in the French general election? As we know, that saw the exit of the previous French Government and, with them, the exit of that socialist Minister of the Interior. But apparently his assurances were worth while, and for that reason we went along with giving that extra aid to French farmers.

The second point is more fundamental. I do not for the life of me see why the British Government should be giving a special dispensation to the French Government to do what they have a duty to do, which is to allow and facilitate the import into France of legitimate produce from this country, be it sheepmeat, poultrymeat, dairy produce or fish. Whatever assurances were given, there have been continuing difficulties in getting produce into the French market.

I praise the Minister for doing his utmost to get the French Government to behave in a more reasonable manner. It is true that arrangements have been put in place to enable convoy facilities and protection to be given in respect of fish going into France, and I welcome that; but we should not have gone along with giving national aid to French farmers, apparently on the basis of assurances that the French Government would behave in a proper manner on matters on which they had an absolute duty—in particular to facilitate imports into France. There may be a completely different aspect to the story which has not been brought out in the documents which I have quoted. I am ready to listen to any explanation given by my right hon. Friend the Minister, and perhaps there is one.

We all know about the disgraceful behaviour in France, particularly over imports of lamb from this country, let alone fish. When a Government, be they French or any other, in the European Community do not carry out their duty on imports of agricultural produce, our Government should make it clear that, instead of giving them special dispensation to get their co-operation, we will, if necessary, in conjunction with the Commission, take action against them by using article 169 of the treaty of Rome, which makes it clear that a member state has a duty to ensure that legitimate imports get through.

I am sorry to go on about the matter, but there is another important aspect. The Community is in the process of giving £8 million as national aid to French sheep farmers. That may well make it more difficult for sheep farmers in the south-west of England, for example, to export legitimately to France, because the French farmers will have additional assistance. Earlier, I chided him, but I will support what my hon. Friend—I call him that deliberately because we both represent Cornish con-stituencies—the Member for North Cornwall said about the position of farmers in the south-west when we are considering national aid by other member states to their farmers.

Speaking on behalf of the Opposition, the hon. Member for Edinburgh, East made heavy weather, as does the amendment, of trying to attack my right hon. Friend the Minister of Agriculture. The Minister has done a good job in trying to lead the reform process on the common agricultural policy. The hon. Member for North Cornwall is correct; this is not the end of the story. I would be appalled if it was. I hope—not fear—that Ministers will be back round the table working for further sensible reforms. Despite the great advances that have been made, aspects of the common agricultural policy still need to be reformed; it is a continuous process.

I welcome various points in the price review and the measures surrounding it. I was very pleased that there is not to be a further cut in milk quotas in the coming year. That is welcomed too by milk producers.

Having read the briefing notes provided by the National Farmers Union and the Country Landowners Association, I cannot help contrasting the nature of those notes and their comments on the current position with the briefing notes which we all received a few years ago. There has been a distinct change in the reaction of farming unions, farming organisations and other bodies associated with rural life. That is very welcome.

For example, the National Farmers Union welcomes the Commission's intention to end the milk co-responsibility levy from 1 April this year. We can all say amen to that, because hon. Members on both sides of the House have opposed that nonsensical levy. The Country Landowners Association starts its briefing note by saying: The annual European Community CAP prices negotiation may be less controversial than usual this year. We can read between the lines of that and see that, the position is not too bad. The association goes out of its way to congratulate the Minister, rightly, on the green package and other aspects of the matters which we are debating tonight.

If I considered agriculture in my constituency and the county of Cornwall, I would conclude that there was a distinct and significant improvement in the returns for farmers, despite their difficulties. Farmers have not stopped grumbling and they still have problems. The hon. Member for Edinburgh, East is correct to say that the improvement in returns is due partly to the value of sterling, but I do not think that it is entirely due to that. For example, I noted that broccoli—Mr. Deputy Speaker, you know it as cauliflower, but in Cornwall we refer to it as broccoli—and spring cabbage prices have been fairly good this year. The price of livestock has also been good: one need look only at beef prices. I am in no way saying that everything is wonderful or that the agricultural industry does not have its problems.

I take the proper point that my right hon. Friend made—that the improvements, which we all welcome, start from a low base as far as incomes are concerned. I am not for one moment suggesting that everything is wonderful but, when there is an improvement in income, at least we should point it out and say that that is good and we are moving in the right direction.

Attendance at this debate, which is not overwhelming, is perhaps in some way a reflection of the fact that there is not the anxiety about agriculture that there has been recently.

Mr. John Greenway (Ryedale)

Quality.

Mr. Harris

The quality is high.

My mind goes back to previous debates on agriculture when the House was fairly full. I agree that the attendance tonight should not be interpreted as in any way detracting from the importance of agriculture. Agriculture is the backbone of my constituency and of the economy in Cornwall and in many other parts of the country. We all want to ensure that agriculture has a future, in which people in it can have confidence. Without wishing to overstate the case, I believe that we are at least debating the issue in a much better atmosphere than in the past and with more knowledge of where we are going.

9.17 pm

Mr. George Stevenson (Stoke-on-Trent, South)

The motion asks us to take note of the prices … and on related measures, 1993–94: and supports the Government's intention to negotiate an outcome … that will take account of the interests of United Kingdom producers and consumers, builds upon the 1992 Common Agricultural Policy reforms,". I read that out purposely, because we need to examine carefully exactly what we are building on.

The Government say that the general principle underlying the price package is stability. We can all say "Hear, hear" to that, because, if there is one thing that agriculture has been lacking for many a good year, it is a set of objectives and a sense of stability to which the industry can look forward. That principle is extremely important. When we talk to farmers, as we all do from time to time, the one thing that they impress on us is the need for a set of clear objectives—where we are going—and a need for stability. On that basis, I shall judge whether we can build on the reforms that were agreed in 1992.

It seems that the Government's measure of stability is that prices this year are unchanged. Vital long-term stability is not especially evident. The Minister said that it is not feasible to look further into the future than next year. What sort of confidence does that give agriculture? However, I do not blame him for saying that. When we consider what we are facing as a result of the so-called reforms, I think that the Minister was wise to say that we should look no further than next year. Short-termism is evident throughout the so-called reforms.

There has never been any doubt that the CAP was in need of fundamental reform; we know that it has been a spectacular failure. Unfortunately, I have severe reservations about the deal that was reached in May 1992, which is contained in the documents that are before us. It does not constitute the fundamental reform that will bring stability and confidence to agriculture throughout the Community, and especially in the United Kingdom.

With cereals, there has been reform, but even that is flawed. The system still discriminates against larger producers, who must still put 15 per cent. of their land into set-aside to qualify for compensation. Those with holdings of up to 20 hectares—there are many such holdings in other EC countries—do not have to do that.

The Commission says that at the heart of the reform of the CAP is the desire to sharpen or reduce price support, to compensate farmers for a fall in income and to preserve the level of agriculture that is based on family farms. For my sins or otherwise, I have spent some time as a Member of the European Parliament. I know that, if one issue has been discussed more often in agriculture debates than anything else, it is what constitutes a family farm. My clear impression is that what we in the United Kingdom describe as a family farm is far distant from that which is recognised as such in the rest of the member states. Unfortunately, the so-called CAP reforms have been slanted heavily towards the interpretation of a family farm in the rest of the Community, to the disadvantage of United Kingdom agriculture.

The so-called reform that we are discussing will benefit smaller and less efficient producers. That needs to be underlined. Some systems of agriculture in the Community are relatively old-fashioned. They are relatively less efficient, but we must be careful about how we judge efficiency. It can be judged by how much money comes out of the public purse to a producer. If it is judged by how much is produced per hectare, the clear result is that United Kingdom producers are very efficient. That is not the position in many member states, because of the size and structure of agriculture.

The various reforms reflect a dramatic shift in emphasis. There is the danger that they will lead to the support of less efficient producers instead of efficiency. That will lead in turn to the danger of an ossification of backward practices. That could affect the ability of European Community agriculture to compete on the world market. That is particularly important when we consider that all the evidence shows that efficiency is likely to be penalised and lack of efficiency likely to be supported. We shall say to Portuguese farmers who work on very small holdings, "Do not change. We will support what you are doing," while at the same time we are in danger of penalising the more efficient producers. That is not the right framework to take us into what we hope will be a more liberalised world market in which competition will become more the order of the day.

Some Conservative Members have criticised my hon. Friends for criticising the Minister of Agriculture too much. I suppose that we are all sorry about that, but it is not my intention to do that. I certainly do not want to be accused of being churlish. There have been some improvements on the original package. The cereals compensation has been improved. Larger farms will receive compensation for all the land that they set aside. However, I still argue that the system discriminates against United Kingdom producers. We must never forget that. Larger producers will still have to set aside 12 per cent. of their land to qualify for compensation. That is not the case for smaller producers.

In the sheep regime, the headage limit has been increased from 750 in the original proposals to 1,000. That is to be welcomed. I also welcome the increase from 350 to 500 for lowland areas and the continuation of the 50 per cent. of the premium above those limits. All those improvements came out of the negotiation, and we should recognise and welcome them.

I also welcome the environmental moves that have been made. Certain CAP subsidies will be tied to observation of basic environmental standards by the producer. The Minister referred to the so-called cross-compliance when land is set aside. These are all small but welcome developments. I also welcome the greater emphasis on projects such as the creation of environmentally sensitive areas, although the amount of money involved remains lamentably small.

I have mentioned the most notable examples of the improvements that resulted from the negotiations. However, by no stretch of the imagination do even those improvements provide a stable framework for agriculture, especially in the United Kingdom. If one asks farmers the length and breadth of the land whether they feel more confident now about the future, they may say that they feel more confident about the coming year, but they may not feel so confident about the future.

Agriculture has to be a long-term project. One cannot turn the tap off from one year to the next. Therefore, while we shall see improvements this year, we shall be in danger of deluding ourselves if we consider that they represent the confidence and stability which farmers look for. Indeed, there are already signs that the deal is falling apart at the seams.

There is a continuing controversy about the compatibility of CAP reform and the GATT agreement. A special committee meeting of the Council of Ministers on 18 February reported little progress on the issue. It recorded that some member states had severe doubt about the compatibility of the CAP reform and the GATT agreement. Heaven knows what will happen when the new French Government carry out their threat. Perhaps they are another Government who will not keep their promises.

However, let us ignore that controversy for the moment and examine the issues that cause anxiety to everyone in the agricultural industry. People know that it is not possible to continue pushing costs up and up. They are not daft; they are business people.

Let us consider the reality. The 1993 budget for agriculture was set at 34 billion ecu. There is about 80p to an ecu, but I shall not do the conversion; I shall leave that to hon. Members. In mid-January, just two weeks into the budgetary year, the Commission said that it wanted a 1 billion ecu increase. Some of that, but not all, was due to currency changes. Some was due to the considerable increases in unplanned costs resulting from additional production. The estimated result for the 1993 budget is now 3.9 billion ecu above the 1992 budget. That is significant because the 1992 budget showed little increase over the 1991 budget. It is therefore obvious that the position is rapidly deteriorating.

Before I am again told that that is a one-off problem, I want to go into a little detail about the projections for 1994. The documents give estimated costs of 36.7 billion ecu, which is 2.7 billion ecu above the original 1993 budget and a staggering 5.6 billion ecu above the 1991 budget. In just three years, the European agriculture guidance and guarantee fund has increased from 31 billion ecu to 35.5 billion ecu. There is the prospect that, if we do not take account of the coming year, farmers' incomes will not increase. That is hardly an example of budgetary control.

The level of stocks also gives rise to significant concern. No one could argue that we should continue to hold such massive stocks. I accept that we need to be self-sufficient and to have a buffer, but there can be no justification for holding such enormous stocks. Indeed, it has been a central part of policy to try to reduce them.

This year, 30 million tonnes of cereals will be in stock. That is a dramatic increase, despite a relatively poor harvest. There are also high stocks of beef, despite a very costly programme under which 1.1 million tonnes were exported. According to the Commission, beef stocks are now approaching 1.2 million tonnes, which is a record high. Stocks generally are now reaching record proportions, although, to be fair, stocks of butter and skimmed milk powder have fallen.

If we take account of the various scenarios being considered by the Commission, the impact of the proposals on cereals—the one area that could rightly be described as reformed—over five years could result in 1997–98 production being as high as 173 million tonnes. If that estimate is correct—I think that it is on the low side —that is only 7 million tonnes less than production in 1991–92. It is only a 4 per cent. reduction in cereal production despite measures which, on the Commission's own admission, will cost 5–6 billion ecu more than they cost in 1991.

Beef production is set to increase up to 1997 and the Commission expects a considerable rise in both surpluses and stocks.

Hon. Members have mentioned milk reform: they have mentioned the agreed cut in the quota of 1 per cent. in successive years from 1993 onwards. That has already been deferred. I suppose that the milk industry and the farmers will be pleased, but the position cannot be described as consistent. It cannot be consistent to agree a reduction of 3 per cent. over three years in May, and to change one's mind within months.

If I were a milk producer, I would say, "Hang on a second: if that can happen in a matter of months, they can change their minds again. How am Ito plan for the future? How will my investment be affected? I do not know what is happening from one month to the next." The documents before us present an inherent threat of inconsistency, instability and short-termism.

Other hon. Members have mentioned Italy. I see no justification in agreeing—even in principle—to a 900,000 tonne increase in the Italian quota, even if such an increase is circumscribed by the conditions mentioned by the Minister. His faith in Italy is touching: he assured us that he would expect the Italians, as well as us, to fill in the forms to which other hon. Members have referred. I hope that that happens, but I cannot embrace that touching faith, given the Italians' record—particularly their record in regard to milk. The 900,000 tonne increase is unjustifiable, especially as neither the Minister nor anyone else has asked the question that I would ask. We are not self-sufficient in milk production; are we fighting for additional quotas for our producers?

It is no good saying that quota is useless because we cannot convert it into added-value goods. That is because, owing to our not having sufficient quota, we are closing down processing factories. We are in a vicious circle, but the Minister did not seem to recognise that.

Italy has never implemented the system, and I believe that this agreement defies even the most charitable logic. According to European Community officials, consumers —a group we all represent, but who are not mentioned in our debates as often as they should be—may benefit from a paltry 2 per cent. reduction in food prices in three years. Devaluation has put paid to that. Already the pressure on food prices is increasing, especially in the case of sugar.

The Court of Auditors usually delays judgment until after the event, but it has seen fit to comment on the so-called reforms before the event. It has said that the reforms are a bureaucratic nightmare and a recipe for fraud.

I see no real, long-term progress towards the objectives that are in the interests of agriculture, the consumer, the environment, budgetary control and a system that will lead us into the next century. There is no perceptible benefit for consumers; indeed, as I have said, devaluation has brought about the opposite. As the documents demonstrate, the taxpayer will be asked to dig deeper into his pocket to fund additional expenditure, and fraud is certain to increase; indeed, I believe that the fraudsters are already doing their homework. Meanwhile a volatile, uncertain future remains for farmers, particularly in the United Kingdom.

Even according to the most favourable assumptions, this reform is designed not to eliminate but to mitigate the problems. There must be a will for such fundamental reform, and that demands a basic rethink. It is complacent in the extreme to base future policy on so-called reforms, as the Government motion proposes, and I hope that the House will support, in strength, the amendment in the name of my right hon. and learned Friend the Leader of the Opposition.

9.39 pm

Mr. John Greenway (Ryedale)

As usual in these annual CAP debates, the debate has been good natured. I do not wish to spoil the consensus, but I must take issue with the hon. Member for Edinburgh, East (Dr. Strang), who complained that the Government deserve no credit for the increased farm incomes which have resulted from sterling's departure from the exchange rate mechanism. Until black Wednesday, the official Opposition supported sterling's exchange rate in the ERM at DM2.95. Some Conservative Members called for devaluation and for sterling's exit from the ERM, which has had the beneficial effects that we now see and which is why most Conservative Members refer to it as golden Wednesday.

The hon. Member for Edinburgh, East overlooked the fact that the benefit of devaluation flowed to United Kingdom farmers only because of the reform of agri-monetary arrangements which my right hon. Friend the Minister negotiated. If we still had the nonsense of the green pound and monetary compensatory amounts. which used to characterise these debates, we would have been given much more meaty briefs from farmers. Thankfully, all that is past, thanks to my right hon. Friend's initiative and persistence.

The debate always enables us to look at where we have reached in the long process of CAP reform. Listening to my right hon. Friend the Minister at a Back-Bench meeting yesterday, I was musing about the complaints of farmers and others about the common agricultural policy: it is expensive, bureaucratic, open to fraud and, despite the cost, does not give adequate support to farmers. There is a lack of environmental safeguards and some member states do not play by the rules, about which we have heard much tonight. It discriminates against United Kingdom farmers, especially on the agri-monetary arrangements, to which I have referred; thankfully, it no longer does. It distorts world markets, encourages over-production and fails to encourage farmers to produce what the market wants.

Not surprisingly, many proposals for change have been made: that farmers need to produce for the market and that we need to reduce cost, direct support at the producer rather than at the intervention store, reform the green pound system, end discrimination, strengthen enforcement and limit production. There have been many arguments at the farmers' meetings that I have attended, not about whether we should have set-aside but about whether it should be voluntary or compulsory. We have heard much argument about the need to incorporate environmental safeguards.

We can take stock of several years of debate and argument about how all the changes should be achieved. We should also recognise that the hand of the European Commission was eventually forced by budgetary pressures —the need to keep the CAP within Budget. I remind the House that my right hon. and noble Friend Lady Thatcher campaigned repeatedly year after year on this point, and she deserves much credit for our current position in controlling the European Community budget.

I recall that for about three years we had a series of proposals from the European Commission, the central feature of which was discrimination against United Kingdom farmers. Despite what has been said tonight, it is still my view that, by and large, my right hon. Friend negotiated most of that discrimination out of the eventual package of measures which was agreed last year in the CAP reforms.

That is not to say that there are not protectionist pressures in other member states. Such pressures clearly exist, as can be seen in France at the moment. Nor does it mean that there will not be other member states of which it is valid to say that they are not complying with the regulations. Both those issues imply certain discrimination, but my right hon. Friend consistently refused to accept the discrimination that was central to the MacSharry reforms and he won the argument.

We should also remind the House that the package of reforms is not my right hon. Friend's package, but the European Commission's. The price fixing that we are debating follows on from that package. The hon. Member for North Cornwall (Mr. Tyler) said that the set-aside policy was my right hon. Friend's policy, but that is not so. Over the past three or four years in these debates, I have heard my right hon. Friend say repeatedly that set-aside seems to be the only proposal that we have, and that we must argue with other member states that they must play by the rules. I do not think that he has ever stood at the Dispatch Box and said that such supply management was his preferred option. I do not believe that it is. I note from his reaction that he confirms what I say.

If we are to have a supply management package, there is bound to be a great deal of paperwork involved. That is the central problem. I have outlined some of the things that we have said are wrong with the CAP and some of the things that people say we should do, but some of those objectives militate against one another. The most obvious relates to bureaucracy. A supply management scheme cannot work without a great deal of paperwork.

I hope that my right hon. Friend is right. I know that he has put a great deal of effort into producing the forms so that farmers can understand them. I read the article in The Daily Telegraph to which the hon. Member for Edinburgh, East referred, but it did not appear to be too critical of what the Minister had done. It may have been critical of the fact that farmers will have to fill in forms, but if there is to be supply management there must be forms to fill in. I expect that in my constituency and those of other hon. Members there will be merry hell to pay initially, but I do not doubt that with the help of the farming unions we shall persuade farmers that it is not quite so bad as it seems, that the scheme can work and that if they do not fill in the forms and send them off by 15 May they will lose out financially.

I do not want to be churlish and break the spirit of our good-natured debate but I must take issue briefly with something else that the hon. Member for North Cornwall said. We are all worried to death that member states will not play by the rules, but it does not help one jot for us to say so in the House. We should take the opportunity to tell my right hon. Friend and the Minister of State, who has a lot of negotiating to do, that they have the House's support. If other member states do not play by the rules, every hon. Member should give the Ministers the support that they need to ensure that the reforms are properly implemented. The Commission should be forced to tell other member states that unless they fill in the forms and play by the rules they will not get the money. Unless we are really firm, the whole system will collapse, as some hon. Members have said.

I believe that farmers now recognise that reform of the agri-monetary system, coupled with the devaluation of the green pound, has had a profound effect on agricultural prices. That is extremely welcome and was much needed. Farm incomes have been at rock bottom for some time, with farmers struggling along hoping for better times. For the moment, to a degree, those better times have come —but I am not sure how long they will last. There are signs that sterling may revalue upwards a touch. There have been suggestions of that in the financial pages of the heavy press for some time. There may be some technical revaluation, which will immediately have the effect of reducing prices under the system. Cuts in support prices will therefore follow, but under the reforms there will be cuts in support prices anyway. I believe that from the year beginning 1 July cereal support prices will be cut by up to 25 per cent. That was the central thrust of the package; in time, it must have an effect on the market price and eventually on the price that the farmer gets.

There has been some adverse effect on food prices, but by and large that is overstated. We have heard some criticism tonight to the effect that food is expensive. I do not believe that it is. Over the past 14 or 15 years food price rises have generally been below the rate of inflation. If we take a longer-term view we find that it is not so much the price at the farm gate which affects the price of food in the shops as all the other pressures in the commercial world —pressures in the grocery trade and the retail trade, the cost of transporting food around the country, the cost of imported food, and so on—which have a much greater effect.

Tonight we must consider whether the proposed CAP reforms will have the desired effect. I have asked three questions. First, will they direct more money to the farmers? I think that they will, and that the new set-aside scheme—the cause of all those forms that farmers will have to fill in—will provide almost £1 billion in income for United Kingdom farmers in the year ahead, and nearly £1.5 billion for the year after that. My right hon. Friend the Minister of Agriculture, Fisheries and Food said in his opening speech that the United Kingdom's share of the common agricultural policy budget will increase from 7 to 9 per cent. That welcome 30 per cent. increase in money was much needed.

My second question is whether the reforms will reduce output. There is more reason to doubt whether they will have the effect that we want in terms of reducing output because farmers constantly strive for greater efficiency. Year on year, we have seen yields rising.

Thirdly, will the reforms encourage production for the market? I think that there will be some limited success there, especially when we see the impact of the fall in support prices central to the reform package.

We also need to consider other ways of helping farmers to become more market oriented. I greatly welcome my right hon. Friend's continuing commitment to helping with marketing grants to marketing schemes, in which farmers can effectively combine together to gain a little more power in the market place and to improve the quality and consistency of their products.

There is an important stumbling block, however. I still feel that consumers generally do not know enough about where their food comes from. I want to mention to my right hon. Friend an article which he may have seen and which appeared in The Sun yesterday. It is not just where the food comes from; it is what people drink as well—they do not know where that comes from. The article tells us that my right hon. Friend pushed a bottle of the famous spring Perrier water out of his sight after finding it in front of him at a London conference. Mr. Gummer said, 'Perrier fizzy water is not as good as those produced in the UK.' A Sun survey agreed. The best is yet to come—just remember that bit about the United Kingdom. Here are three brands that are TWICE as nice and only HALF the price—Strathmore … Buxton … and Evian". That is one for a "Tell me another" book, I am sure, but it makes me think that we need to do a lot more to inform the consumer, the housewife and the busy shopper where the food that they are buying is produced. We have nothing to fear in the United Kingdom across our agriculture sector in marketing British products wherever we can.

I would like to mention three specific issues to my right hon. Friend. First, the beef special premium scheme is exceedingly unpopular in my Ryedale constituency and I dare say that it is unpopular in other hon. Members' constituencies. I have been in the House since the debate began and I am surprised to find that I am the first hon. Member to mention it. Auctioneers and farmers in my area tell me that they will have grave difficulty making it work. I implore my right hon. Friend to be as flexible and helpful as he can. I am sure that he will be as I know that he is concerned particularly about the beef sector, especially in relation to the continuing fall in demand for red meat. Even Dr. Peel, following my three yearly medical check-up here in the House, advised me to eat less red meat. I am not sure that I shall take much notice as I enjoy beef and Yorkshire lamb, but it is advice that I suspect that many doctors are giving to other people, too.

I should like also to mention the linseed regime. The decision to drop set-aside for linseed was very welcome, but some United Kingdom growers have planted or are ready to plant on land which has now been declared ineligible for arable crops because it was outside the arable rotation at the end of 1991. I find this very difficult, but I have one young farmer who is a new entrant and who spent £1,500 on the seed. He was all ready to go and has now been told that because of the change in the rules he cannot have the money. Because of the support for linseed, what he would get for it on the market will not make the exercise worth while. I understand that within the linseed regime there is still a deficit across the Community. That in itself suggests that more support might be justified and that we need perhaps to re-examine that.

Thirdly, I want to mention sugar. There is as yet no proposal from the Community, but my right hon. Friend knows the great importance of the sugar crop to farmers in the vale of York, around Malton and in the vale of Pickering. When it comes to arguing in Brussels, as I know that he will with all the power and strength at his disposal, will he please bear in mind that we produce about 50 per cent. of our sugar needs in the United Kingdom on United Kingdom farms? That suggests that we should not suffer sizeable quota cuts. This crop has helped to sustain many farms in my constituency through some difficult times in recent years.

This year's price proposals carry forward the process of reform agreed last year. The CAP is far from perfect. We all have our doubts about its future and more reforms seem inevitable to many of us. Two crucial points matter: first, we must keep within budget; secondly, there must be no discrimination against United Kingdom farmers.

9.59 pm

Mr. Nick Ainger (Pembroke)

Many hon. Members have referred to the fact that agriculture is a vital part of the rural economy and I do not contradict them. However, west Wales and especially the county of Dyfed comprise an area which, by the EC's own data, could be considered as having the same problems as Portugal, Greece and Ireland, because it has only 76 per cent. of the average per capita income of the EC and thus would qualify for objective 1 status. Unfortunately, that is not a possibility because of its population size, although the statistics on income would merit that status. For an area such as west Wales, which is so dependent on agriculture, any changes will have a significant effect.

I am worried about compulsory set-aside, about the reduction in cereal support in Wales compared to the reduction in England, and about the hill livestock compensatory allowances, which we debated a few weeks ago. My farmers do not believe any of the figures given by the Minister. I am also worried about the fact that, even after the 1984 imposition of milk quotas, Britain remains at an enormous disadvantage compared with many other European countries.

As a member of the Committee on the Agriculture Bill, I had an interesting meeting yesterday with representatives from Unigate, which runs the creamery in my constituency. The representatives made the point forcefully that Unigate, as a major producer of cheese, wanted to purchase at least another 20 per cent. of milk in my constituency. Unigate cannot do so because of the quotas and, as a major British food manufacturing company, it is extremely annoyed to see on supermarket shelves significant amounts of cheese imported from Ireland, from EC countries and from Canada.

It is important, when considering the reforms, to address the issue of income for our rural areas. Conservative Members have almost congratulated the Minister on the effects of black Wednesday. It is rather peculiar for policy to appear to be set by accident rather than by design. It is a bit rich for Conservative Members to tell us that they had been calling for devaluation before September. I do not recall hearing such voices on Conservative Benches. I have never believed that we should have supported the benchmark of DM2.95 to the pound.

The current levels of surplus in storage, to which my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) referred, and the cost of maintaining those surpluses, are robbing the rural community. On current levels, only £3 out of every £10 of expenditure on the CAP goes to the farmers. A significant proportion of the remaining £7 is wasted in storage costs, intervention costs and export subsidies. That issue must be addressed fundamentally if there is to be a significant improvement in the CAP regime generally.

The hon. Member for Ryedale (Mr. Greenway) let the cat out of the bag when he indicated that he sees set-aside as a means of increasing farm incomes, while admitting that it is highly unlikely to reduce production. If that is the case, why on earth have it? Why should British cereal producers be told, in effect, that they will have to set aside 15 per cent. of their land if this is to have no effect on surpluses? For the reasons that I gave earlier, I hope that it will have some effect. In the long run, farmers are robbed of income.

It is rather worrying that, in a debate of this nature, which many Conservative Members have described as important, there are no representatives of the Scottish Office or the Welsh Office on the Government Front Bench to reply to points relating to Scotland and Wales.

Mr. John D. Taylor (Strangford)

Nor is there a representative of the Northern Ireland Office.

Mr. Ainger

I accept the right hon. Gentleman's point.

I do not know the reason for the absence of such representatives. Perhaps Ministers have business elsewhere. Agriculture is the mainstay of the rural economy in Wales, and we have significant numbers of people employed in the food industry generally. That being the case, it is strange that no Welsh Office Minister could be bothered to come along to what is a relatively rare debate.

Mr. Gummer

Given that agriculture is so basic in Wales and that there are more than 25 Welsh Labour Members of Parliament, perhaps the hon. Gentleman can tell us why he is the only one who has bothered to turn up. I exclude the Whip, who has to be here as he is on duty.

Mr. Ainger

I do not have to defend my position, and I certainly do not have to defend the position of my Labour colleagues.

It is also significant that not one representative of the Welsh National party is present, despite the fact that all Welsh nationalist Members represent rural constituencies. I admit that, in one respect, I am unusual. However, I like to think that I represent a trend—Labour Members from Welsh rural constituencies.

With regard to set-aside, the farmers of my constituency say that it is far better to use land productively—not for food production, but for industrial production—than to abandon it to weeds and brush, in which small partridges can find nesting places. This is a matter to which the hon. Member for Hexham (Mr. Atkinson) referred. The National Farmers Union branch in Haverfordwest has considered in great detail the option of producing rapeseed oil on set-aside land, perhaps taking over land used for cereal production, in the hope that the Government will recognise the importance of bio fuels, which are environmentally friendly.

The energy technology support unit has estimated that, if all the United Kingdom's 1992 set-aside land were turned over to the growing of rapeseed, 743,000 tonnes of fuel could be produced. That would replace more than 600,000 tonnes of conventional, mineral-based diesel. The effect of that on the environment would be a 3.5 per cent. cut in carbon dioxide emissions. Not only is that a way of increasing incomes in the rural economy and of making good productive use of land without adding to the surpluses, but it also assists by cleaning up the environment and reducing the problem of global warming.

Among the many disappointments in the Chancellor's Budget speech was the lost opportunity to assist the farming industry in a move to industrial crops. Under the current EC regime, pilot schemes for such crops receive a specific tax benefit. It was unfortunate that the Chancellor missed that opportunity. I understand that, in a new directive, the EC tax Commissioner is proposing the possibility of a 90 per cent. reduction in duty on biodiesel. If that is true, it is welcome, and I hope that the Government will push for it in negotiations in Brussels.

Instead of setting land aside and reducing farming incomes, and thereby further reducing prosperity in our rural economy, it is a great shame that that opportunity is being missed. Following the Rio summit, it has been acknowledged that all countries should take steps significantly to reduce carbon dioxide production. By moving to far more environmentally friendly fuels such as biodiesel, we could at a stroke solve some of our problems in relation to global warming, and also add value to land that is currently set aside.

It is extremely worrying to hear constant assurances from Conservative Members that the deal has overall been a good one. They rightly admit that the increases that have stemmed from the package, although small, are from a low base. As I have said, the rural economy in my constituency is in a crisis that is linked to other problems, such as the closure of Ministry of Defence bases.

It is no good the Government saying that they are trying to reduce the effects of the CAP, when at the same time they are reducing incomes in the rural economy. Ultimately, the taxpayer will have to pick up the bill in one way or another. It is important to try to reduce our surpluses significantly. When the Minister responds, I hope that he will refer to biodiesel and to biofuels, as they are a far better way of using productive land than producing weeds.

10.13 pm

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

Madam Speaker, I hesitated before rising as I was hearing some most useful technical information from behind when you called my name. However, I am very grateful to you for calling me. I am also grateful for the fact that I have passed the magical witching hour of 10 pm. I would not have liked to foul up the 10 o'clock rule, so that I was responsible for keeping my hon. Friends here all night listening to me. That would have been most unfortunate.

I will be extremely brief. However, this is a very important debate. We are talking about the third largest industry in the country, after the combined chemical industries and the North sea oil industry. This subject affects all our constituents, because they are all consumers. It also intimately affects the performance of our economy. Although it is such a large industry, we have a £5.5 billion deficit in the food and drink section. It is therefore vital that we promote policies which boost the performance of that industry. That is why I welcome the new Agriculture Bill, for in the potato and milk sectors we shall have the opportunity to compete on equal terms in an unrestricted way and add value in both sectors.

I thank my right hon. Friend for writing to me in the past week announcing the new Cotswolds environmentally sensitive area. It is part of his new agri-environmental package amounting to £31 million, with an extra £12 million for the six new environmentally sensitive areas. My farmers in Cirencester and Tewkesbury and in the Cotswolds will be grateful for his action, and will grasp the opportunity with alacrity. I quote my right hon. Friend's description of the Cotswold hills, because it sums up my constituency beautifully The Cotswold hills are an outstanding example of limestone scenery. The area is dominated by steep escarpment rising dramatically from the vales of Berkeley, Gloucestershire and Evesham. [Interruption.] I suggest to some of my hon. Friends who are conducting conversations that, if they listened more and came to my constituency, tourism might benefit considerably.

The many hours that my right hon. Friend and the Minister of State spend in Brussels trying to negotiate a satisfactory reform of the CAP must be frustrating in the extreme. I assure them that I am aware of the hours, days and nights that they spend there trying to produce a suitable package, only to return here to be greeted with carping criticism, more carping and more criticism, from Opposition Members who never produce any positive proposals of their own.

The package that the Minister managed eventually to negotiate, contrary to the original prediction that Ray MacSharry would sell us all down the river and that our farmers would be put out of business, represents a considerable step forward. In the current economic climate, with GATT not having been renegotiated and the CAP in the middle of renegotiation, no Minister or farmer can be certain what the future holds.

I am delighted that the socialist Government of France have been chucked out. They were unreliable and useless. I hope that the incoming Prime Minister, Mr. Balladur, and his Ministers will not seek to revisit the agricultural part of the GATT negotiations. If they do, the whole thing will unravel and we shall not stand a chance of securing the Uruguay round.

I remind the House that not only the farmers of the western civilised economies benefit from the GATT round —[Interruption.] I urge Opposition Members to listen to me more carefully. Instead of being critical, they should listen and learn. Those who benefit most from the conclusion of any GATT round are the poor countries of the third world. They desperately need to trade their produce. If trade barriers are erected against them, they will continue to remain poor and rely on overseas aid. I am all for trade with the third world and want open and free trade to remain the order of the day for as long as possible.

The shift in support from the processor to the producer is an important part of the reform. Much has been said about CAP money merely going to producers and lining the pockets of skilful entrepreneurs instead of going to the farmers, the primary producers, who need the aid. Support is best given in that way, for four reasons. First, we need to target the huge amount of money that will be given out under the CAP. We can target it to produce benefits that the public really want, environmentally friendly farming systems and more organic farming. Organic farming is not the panacea that many environmental organisations would claim, but at least it has a place. Any mechanisms that my right hon. Friend can negotiate under the CAP reforms to encourage it must be of benefit to the general public, and particularly to those who want to buy organically produced goods. An increasing number of consumers want such goods.

Secondly, it has been possible to produce a Communitywide scheme. In my intervention in the speech of the hon. Member for Edinburgh, East (Dr. Strang), I made the point that a Communitywide scheme would cut out fraud. It does not behove any hon. Member to say, "Why have we got this scheme, when the Italians, the Greeks, the Portuguese and the Irish will not enforce it?" My right hon. Friend should go to Brussels with all guns blazing and produce a scheme which everybody will enforce. It we enforce a scheme and others do not, we will become less and less competitive. I shall come back to anti-fraud measures.

Thirdly, contrary to all the rumours and predictions about what Ray MacSharry would inflict on us, the package has not discriminated against our large farmers. There were scare stories about them being penalised, but there will still be a level playing field. That was a significant achievement by my right hon. Friend.

Fourthly, the package is particularly advantageous to the United Kingdom, because it will increase our proportion of the CAP budget from 7 per cent. to 9 per cent. As my hon. Friend the Member for Ryedale: (Mr. Greenway) said, that represents a 30 per cent. increase. There will be an additional £1 billion this year and an additional £1.5 billion next year. These are important extra funds which my right hon. Friend has managed to negotiate for our farmers.

On the enforcement aspect of the package, as hon. Members will be aware, part of the package is the production of a new, integrated administrative control system. If I achieve one thing in the debate, it is to say to farmers that, if they do not fill in the forms by 15 May, they will not get the money to which they are entitled.

The package is not complicated. I have read all 80 pages which accompany it. The booklet is fairly readable for those who take time to peruse it. Much information is needed to fill in the forms. No doubt we will get many letters from our constituent farmers in the next few weeks about the forms. Farmers should sit down and read the booklet. It is not complicated: my right hon. Friend and his civil servants have done a good job in making it as simple as possible.

I do not believe that it is beyond the capability of most farmers to fill in the forms correctly. I stress that they should get on with it as soon as possible. As my right hon. Friend said, they have to lodge an application to the Ordnance Survey to be sure of getting the maps. The date of 15 April is not far hence. Therefore, the loud and clear message to all farmers is that they should get the maps and get their forms into my right hon. Friend's divisional offices. If the forms are submitted in good time, officials will have a chance to look at them and send them back if they are wrong. If farmers submit their applications on 15 May, the deadline, there will be no time for the Department to send them back. I urge farmers to fill in the forms correctly. The message is that they should fill in the forms if they want the money. As my right hon. Friend said, an important point about the forms is that similar requirements will be produced for the other 11 member states.

The committee which will be responsible for implementing the system will be able to scrutinise the forms after 15 May. It will be able to scrutinise and demand production of the forms of individual properties of farmers in the member states to see whether they have been filled in properly. All sorts of new enforcement-checking measures, including aerial photography, will be available. It will be easy for us to demand that aerial photographs be taken of areas of Greece, Portugal and Spain to see whether farmers in those countries have completed the forms and whether the aggregate figures on the forms confirm the totals which one is able to glean from the photographs. The age of compliance is upon farmers in all the member states.

An important part of Maastricht is the new increased powers provided for the Court of Auditors. We have been told that the common agricultural policy budget this year will be 34 billion ecu. I do not want my taxpayers' money to go to Spanish, Portuguese, German or any other farmers if it does not go to the people who are entitled to it. As a British taxpayer and a British farmer, I want to see enforcement across the Community, and I will be urging my right hon. Friend every step of the way to ensure that that happens.

We all want security in the future for our farmers. For the past 15 to 20 years, farmers have been telling us that that is absolutely paramount. However, it is difficult, especially with the new Democratic Administration in the United States. I was in the United States before Christmas, and there is no doubt that those Democratic senators whom Labour Members so revere are increasingly protectionist. They do not want to see a GATT agreement or the north American free trade agreement: they want protectionism.

For all the reasons which I gave earlier, it is absolutely essential for the United Kingdom—where 40 per cent. of our total gross domestic product is exported—that we have as free and fair trade across the world as we can possibly manage. I repeat loud and clear my earlier comments: I hope that no EC Government will want to renegotiate the agricultural part of GATT. It will be difficult enough to get the textile, steel and various other parts of GATT negotiated. I hope that Labour Members will welcome the motion and support it in every possible way.

My right hon. Friend has worked extremely hard to get a fair package for our farmers. The package will give them a thoroughly good deal in the current economic circumstances provided by my right hon. Friend the Chancellor, of low inflation, no unit wage cost increases at all this year and low interest rates. Those are precisely the conditions which farmers and all businesses need to succeed in the United Kingdom. They now have the opportunity. They should reduce their debts, accelerate their investment programmes and make hay while the sun shines, because things may not be quite as rosy in the future.

I hope that Labour Members will welcome what my right hon. Friend has achieved. When I explain my comments to constituent farmers up and down the country, they will realise that this Conservative Government have treated them as well as could possibly be done in the circumstances by any Minister negotiating for us in Brussels.

10.28 pm

Mr. George Walden (Buckingham)

I shall be brief, not least because I was, unfortunately, not able to be in my place for the earlier part of the debate, for which I apologise to my right hon. Friend the Minister and to other hon. Members.

My hon. Friend the Minister of State was kind enough to meet Buckinghamshire farmers recently. Many issues were discussed, and he produced a persuasive and useful performance, not least on the potato issue. Buckinghamshire farmers are grateful to my hon. Friend.

I shall not say that my right hon.Friend the Minister is said by the farmers in my constituency to be doing a good job; they have not said that. I judge from the relative lack of complaints that he is doing a brilliant job. Nowadays, I do not hear so often the traditional complaints. Instead, I am told about bureaucracy and petty controls. Time and again, individual farmers and the National Farmers Union, at group meetings in my constituency, produce the most mind-boggling examples of ever-increasing bureaucracy.

Despite what has been said about the integrated support system, a farmer who is engaged in small or medium mixed farming is almost overwhelmed with form filling. My hon. Friend the Minister of State will remember that the matter was raised when he met Buckinghamshire farmers. If it is conceivable, I ask him at Brussels to find ways of reducing the bureaucracy that is being imposed on farmers, and especially those who run small and medium farms.

The Government are right to say that farming incomes have increased considerably–22 per cent. is quoted. However, farmers are hard-headed people, and after being a Member for about a year I stopped trying to soft-soap them in any way. Nowadays, we tend to talk rather more realistically, and it seems that there are three realistic things that have to be said about farming in future.

First, the hon. Member for Pembroke (Mr. Ainger) was right to say that we should not make too much of the improvement in farm incomes, which has come fortuitously through the revaluation of the pound. But how far can we base the future of the industry on devaluation? I think that my doubts are felt generally by those who are engaged in agriculture.

My hunch is that, over the next few months, the French Government will decide that they cannot sustain the power of the franc and will find a way to devalue it. Leaving aside what will happen to the exchange rate mechanism, that will have a damaging effect on the United Kingdom. We shall find that we are engaged in competitive devaluation. Farmers had a good year last year, and things may not be too bad this year, but we must be realistic. It must be accepted, however, that the way forward for us and the French is not competitive devaluation.

Secondly, there is the general agreement on tariffs and trade. It is not popular to say this—for that reason, I shall say it—but the French have a point on GATT. Perhaps that is a terrible thing to say, but it is true. It is not by chance that all French political parties feel constrained to support the farmers. It is because the social structure of France is entirely different from that of the United Kingdom. Agriculture in France is crucial for the viability of many small towns, as well as for individual farmers. Enormous numbers of people live in small towns, rather than the huge and anonymous areas of suburbia in the United Kingdom. That is a fact of life.

Political pressures in France, whether we welcome them or not, to take a tough line on the GATT will not go away. We might as well reconcile ourselves to a tough struggle. The French will be pretty hard-line after their election, and we know the presidential election is due in two years. We do not make life easier for ourselves by denouncing the French as self-seeking or as wreckers. There are strong social and political pressures, and the French Government, whatever complexion they may have, will react to them. If we do not take account of that reality, we shall make life difficult for ourselves. When I talk to farmers, I find that they recognise that reality perfectly, because they are in the same business. So let us be realistic about that.

I know that my hon. Friend the Minister understands that, in the long term, British and western European agriculture has not even started to face difficulties. We shall face increasing competition from eastern Europe. Only the artificial sterilising effect of communism has stopped us facing that competition in the past. People in eastern Europe and Russia are not congenitally unable to produce things: it is only that their political system has prevented them from doing so. So, one of these years, they will start growing and exporting things.

If western Europe wants to export industrial products to former communist countries, it will have to come to some accommodation with them. I shall not go into that now, but my local farmers and undoubtedly the farmers in my hon. Friends' constituencies are perfectly aware that the troubles of British agriculture are not over. They know that geographical—and, if you like, historical—pressures will come to bear on them.

Diversification will be the name of the game in future, as it has been in the past few years. That is not new to my hon. Friend the Minister, but, while respecting all the environmental desiderata, we need realism in the planning regime if farmers are to be kept in business.