Common Agricultural Policy

HC Deb 24 March 1994 vol 240 cc438-523

[Relevant document: European Community Document No. 4251/94, the Court of Auditors Special Report No. 7/93 on fraud in agricultural areas.]

Madam Speaker

I have selected the amendment in the name of the Leader of the Opposition.

4.17 pm

The Minister of Agriculture, Fisheries and Food (Mrs. Gillian Shephard)

I beg to move, That this House takes note of European Community Document No. 4616/94 on agricultural prices for 1994–95 and related measures, and of the Ministry of Agriculture, Fisheries and Food publication 'Agriculture in the United Kingdom 1993'. The common agricultural policy price proposals this year are relatively modest in their scope. This reflects the impact of CAP reform, which set the price and aid levels for many products for a three-year period starting in 1993. The proposals and the context in which they are set are, nevertheless, of considerable importance to our farmers.

I shall come to the price proposals shortly, but first I will address their context, much of which is described in the publication, "Agriculture in the UK 1993", referred to in the motion.

Since last year's CAP prices debate, many major changes have affected the fanning industry. The Agriculture Act 1993 has come into force, paving the way for important changes in the marketing arrangements for milk and potatoes. The CAP reforms introduced in 1992 are settling in and many of the teething problems have been addressed. Farmers have had to cope with difficult new tasks, not least the integrated administration and control system or IACS. Those affected, however—cereals farmers in particular—stand to benefit from a significant £1 billion in direct payments under the arable scheme.

Individual sheep and suckler cow quotas have been introduced for more than 115,000 flocks and herds. The vast majority of producers received their quota allocations automatically, and we are doing everything possible to meet the needs of the minority whose circumstances do not quite fit. As evidence of this, although we have not yet finalised the calculations, I am hopeful that we shall shortly be making a full quota allocation to producers in categories 1 and 2 of the 1993 sheep national reserve, and I am glad to announce that today we opened applications to categories 3 to 7.

Of crucial importance to British farmers is the agreement reached last December on the GATT Uruguay round. That agreement will provide a major boost to the world economy, which can only be good for Britain and British farmers. It also brings specific benefits for our farm industry.

First, it gives greater certainty about the future framework within which the CAP will develop. Secondly, it will help to reduce much of the tension with third countries which the CAP caused, thereby removing, for the time being at least, the threat of challenge to CAP mechanisms. Thirdly, it should lead, in time, to a better allocation of resources and stimulate producers to take a greater interest in improving their competitiveness.

Mr. Bernard Jenkin (Colchester, North)

On the question of the allocation of resources in the CAP, does my right hon. Friend's Department have a copy of the Thompson report which was prepared for the Commission and then suppressed by Jacques Delors because of its inconvenient implications for French farmers? Does she not think that this document should be made public, because we understand that it demonstrates how we can halve the cost of the CAP over a number of years, improve the efficiency of European farming, and reduce the burden on the British taxpayer?

Mrs. Shephard

I do not have a copy of what is in fact an internal EC study. There is no evidence that it is being suppressed, but according to reports that I have read it contains some very useful ideas, many of which we would support. It examines supply controls and the move towards world market prices, and gives an interesting critique of the CAP.

My hon. Friend asked whether I would press for the report to be made public. It is certainly one of the matters that I shall be raising when I attend the Agriculture Council meeting on Monday and Tuesday. I expect to be told that the report is for internal consumption, but I also expect the ideas that it contains to reach the light of day. They will be of great interest to the Government and, I am sure, to my hon. Friend.

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

May I press the right hon. Lady on this point? She says that she might be told that the report is for internal consumption, but she sits on the Council of Ministers which is discussing these matters. Surely the people who hold the report are European civil servants and the report is the property of the Council of Ministers—although there is a distinction between the Council and the Commission. Could she not insist that the report be made public, and having insisted, could she not make it available in the Library of the House of Commons because many of us would find it very interesting indeed?

Mrs. Shephard

Since I have not seen the report and am not yet aware of its status, I cannot answer the hon. Gentleman's question directly, but he can be certain that I will raise the matter at the Agriculture Council and with the Commission. Since it was commissioned not by the Council but by the Commission, there might be a slight awkwardness. What is of interest, however, is clearly the information that it contains as well as other reports of the same ilk.

Mr. Campbell-Savours

The hon. Member for Colchester, North (Mr. Jenkin) has raised an important matter. Does the Commission produce many documents to which the Council of Ministers may not necessarily have access? Is that an established position?

Mrs. Shephard

I am happy to answer the question, but I would then like to move on.

The Commission does a great deal of continuing work. If the hon. Gentleman asks the hon. Member for Hemsworth (Mr. Enright), who is sitting next to him and who has a great deal of experience of the subject, he will confirm the position. The papers that are commissioned by the Council of Ministers naturally come within its ownership. However, any information that can inform debate within the Agriculture Council is of interest to me, which is why I shall raise the matter next week—on Monday and Tuesday.

I was talking about the implications of GATT. I know that there is some concern among the farming community that further radical policy changes might be needed to meet the requirements of GATT. The National Farmers Union has done detailed work on the subject. I think that its estimates of the impact of GATT err on the gloomy side, particularly in relation to cereals and milk. We are closely in touch with the NFU on the details. Our analysis of the impact of the agreement supports the Commission's conclusion that common agricultural policy reform and the GATT agreement are broadly compatible.

Mr. John Greenway (Ryedale)

If the GATT agreement is broadly compatible with CAP reform, why is the Commission proposing a 1 per cent. reduction in milk quota, which would be deeply damaging to milk producers in this country? Will the Minister assure the House that she will resist that proposal at the Council of Ministers next week?

Mrs. Shephard

I shall come in a moment to the way in which I propose to tackle the price proposals next week. I assure my hon. Friend that I shall resist a cut in Britain's milk quota, and I shall explain that later in my remarks.

Mr. Ieuan Wyn Jones (Ynys Môn)

Will the Minister give way?

Mrs. Shephard

I shall not take any more interventions for the moment if the hon. Gentleman will forgive me. I am sure that he will be able to contribute later.

The fact that we believe that CAP reform and the GATT agreement are broadly compatible does not mean that there will be no further CAP reform. The need for reform of the Mediterranean and sugar regimes is clear, and the reform of the beef regime is only partly achieved. Those reforms would be required regardless of GATT, but the GATT agreement reinforces them and offers a coherent way forward.

My starting point in considering the price proposals must be my immediate objectives for agriculture, which is a major British industry, occupying almost 80 per cent. of the land area of the United Kingdom. Its importance for the prosperity of the rural economy and the maintenance of an attractive countryside cannot be overstated. It provides the raw materials for our food processing industry. It is the first —and an essential—link in the food chain, extending from the farmer, through the food industry and retailers, to consumers and their families. That chain employs 14 per cent. of the nation's work force and contributes 9 per cent. to the nation's gross domestic product.

The Government recognise the central importance of farming. Our objective is to ensure that British farmers are given every opportunity to compete successfully and to prosper. Provided that the conditions are right, the efficiency and flexibility of British farmers and their ability to respond to changing market developments and technological opportunities will ensure their success. We are taking important steps to ensure that the conditions are right. Central to our approach is my belief that our farmers will best be served by allowing them to compete in a free and open market, unencumbered by over-regulation or distortion and bureaucracy.

A key task is the removal of unnecessary regulation from farmers. That was the prime motive for legislating to change the arrangements for the marketing of milk. I have also announced a timetable for a free market in potatoes to be set up. When parliamentary time permits, I plan to introduce proposals to reform the agricultural holdings legislation so that more land will be let, more farms become available and more opportunities created for new entrants to farming.

Mr. Jonathan Evans (Brecon and Radnor)

My right hon. Friend rightly refers to the steps that she is taking in respect of the potato industry and of milk, but she will also be aware that there is a great deal of concern among farmers in the livestock sector, arising from the fact that the very measures introduced to reform the CAP have brought with them unnecessary bureaucracy. Although many farmers in my constituency welcome the changes announced at the end of the year, can my right hon. Friend tell us whether there are to be further changes to simplify what has become an unnecessarily complex system?

Mrs. Shephard

My hon. Friend is likely to be referring to the cattle identification documents for beef. We have achieved considerable simplification of those arrangements, as I announced at the annual general meeting of the National Farmers Union. The industry welcomed the simplification, but there is still some way to go. Some regulation is necessary to combat fraud, of course, as I am sure my hon. Friend will understand.

The Government will also need to fight for a level playing field for our farmers. I hope that that will be the only time I use the phrase "level playing field" in this debate, but I fear that it will not be. This sometimes means bringing other European member states up to our level —for example, in animal welfare, an area in which I have been pressing hard for legislation to put others on a par with our own high standards. Elsewhere, I have maintained the pressure on the Commission to ensure that Community legislation is properly enforced in all member states, especially in respect of state aids.

Mr. Nick Ainger (Pembroke)

I, too, would like to avoid the phrase "level playing field", but the Minister has referred to regulations in and differing practices between national states in the Community. Should we not first put our own house in order, particularly in respect of regional differences in relation to arable farming? The Minister will be well aware, as I have written to her about this, that Wales is discriminated against by comparison with England. A farmer in a Welsh less-favoured area will receive, at the latest estimate, only £110 per hectare for cereals, while a farmer in England growing cereal in similar conditions will receive £191. How does that square with what I shall describe for the second and last time as a level playing field?

Mrs. Shephard

The hon. Gentleman knows the answer to that as I seem to recall that he asked me the same question at our last oral Question Time. He knows that these matters must be dealt with for the United Kingdom as a whole, with the agreement of territorial Ministers and of the Ministry of Agriculture, Fisheries and Food. I also told the hon. Gentleman at the time that the arrangements pertaining to Wales are the responsibility of my right hon. Friend the Secretary of State for Wales.

Dame Elaine Kellett-Bowman (Lancaster)

Will my right hon. Friend give close consideration to the matter of inspection and try to devise a system in which countries do not supervise their own countrymen? It has been proved time and again that other European countries will not condemn their own nationals. If they were examined by nationals from other countries, it would be much easier to get on top of state aids and to reduce the fraud which still disfigures the Community.

Mrs. Shephard

My hon. Friend is correct to say that if there are to be higher standards—of animal welfare, or of compliance—the EC needs to pay attention to the policing and enforcement of those standards. At my insistence in a particular instance the Commission has opened proceedings against France in respect of support being given to its pig sector.

An important contribution to British farming's future comes from Government-funded research. My Department will spend about £117 million on agriculture and food research and development in 1994–95. That is a large sum. The benefits to farming of our research and development programmes are also substantial. They have led, for instance, to significant improvements in animal breeding, helping farmers to produce the better quality products that consumers demand.

We are also promoting work on non-food crops and animal welfare. Research into the precision application of farm chemicals has contributed to a better environment as well as improving efficiency. Looking further ahead, there are important benefits to be exploited from advances in plant sciences and molecular genetics. In all these ways and more, our research and development programme is designed to help our farmers and the industries and consumers whom they serve.

The Government also recognise the importance of successful marketing for the future of British agriculture. Here we have given a lead through a range of valuable measures, including refocusing Food From Britain, which we are supporting with more than £15 million over the next three years, the Continental Challenge and the proposed new marketing development scheme. I have asked my hon. Friends the Minister of State and the Parliamentary Secretary to involve themselves personally in specific areas where they have particular expertise.

Sir Teddy Taylor (Southend, East)

Before leaving the subject of aid, will my right hon. Friend tell the House and the public exactly what was the purpose of the very substantial and costly area payments that were introduced? According to information that has been provided, they have cost an absolute fortune, but quite a number of people are not terribly sure what they are for.

Mrs. Shephard

I shall be delighted to answer my hon. Friend's question. The new area payments system is part of the reformed common agricultural policy. It is designed to reduce support for the end product—in this case cereals, the reduction being 35 per cent. over three years. Payments are made direct to the producers, as compensation, on condition that they set aside 15 per cent. of their arable land.

It is widely agreed that within the single European market, and with the greatly increased trade in cattle and other livestock, we need to be particularly on our guard against the import of animal disease. That is why I have introduced newly strengthened measures to reinforce our defences. I have also made clear my determination to take whatever additional measures are necessary to safeguard this country's high health status.

Finally, and perhaps most importantly for the health of our farming industry, the Government are pursuing a sound economic policy, which has resulted in inflation at consistently low levels not previously achieved for more than 30 years. Interest rates are among the lowest in the European Union, and it is generally agreed that the economy is well on the way to recovery. This provides a sound foundation on which farmers can base their decisions in what is necessarily a long-term business.

Through all these means the Government are supporting British farming. We do so because it is an essential British industry, producing some 73 per cent. of the country's requirements for the food we are able to grow. Our total food and drink exports were worth some £8 billion in 1993 —6.6 per cent. of our total exports.

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

My right hon. Friend has just given export figures, but our imports are about £13.5 billion, which means that in the food and drinks sector there is a deficit of about £6 billion. Does my right hon. Friend agree that, while Food From Britain is doing an excellent job in promoting our exports, additional measures could be taken to encourage import substitution so that we might have more of our own produce, thereby reducing the deficit?

Mrs. Shephard

The efforts of Food From Britain and the group marketing grants are designed to achieve precisely this end. There is some limitation when it comes to achieving a complete wipe-out of the trade gap of £6 billion. This is due to our being unable to grow tangerines in Inverness, and so on. However, we could encourage domestic consumption and more energetic and vigorous export efforts.

Mr. Robert Hicks (Cornwall, South-East)

On import substitution, the alleged state aid in relation to pigs and pig meat is a classic example of the way in which United Kingdom producers can satisfy and enhance their section of the United Kingdom market. At present such an outcome is being prevented by alleged dumping, particularly by the French but possibly by others as well, as a consequence of subsidies being given to domestic producers.

Mrs. Shephard

We should certainly take action where we can prove that illegal state aid is being given by other member states. In the case of the illegal aid to the French pig industry, we were greatly aided by the helpful action of the French Government, who issued a press release telling us their intention. It is not always so easy to prove, but where there is proof I will act.

Mr. Christopher Gill (Ludlow)

Will my right hon. Friend give way?

Mrs. Shephard

I will give way, but I have taken some dozen interventions and after this one I should like to make progress.

Mr. Gill

I am sure that the House accepts that we cannot grow tangerines in Britain, but there are more fundamental problems of which the Minister is aware. In many instances they result from the fact that quotas limit the amount of raw material produced in Britain for our manufacturers. I was thinking particularly of sugar beet and milk. Those who add value to products cannot source raw materials at world prices, but have to pay the enhanced European Union price. That is surely one of the big, fundamental problems that must be addressed if we are to reduce the deficit in our food and drink balance of payments.

Mrs. Shephard

As so often happens, my hon. Friend puts his finger on the problem. The United Kingdom has never supported the use of quotas as a means of supply control because they distort the market, they are a disincentive for new entrants and they work side by side with all the market forces in a most difficult way. However, our argument did not prevail. Quotas were established to limit over-supply of commodities such as milk. Given that they now exist, I certainly do not want our industry disadvantaged by a further quota cut in important commodities such as milk when we are ideally suited to produce milk and certainly want the jobs that can come from additional manufacturing of milk products.

We support British farming because of its vital role in sustaining the most vulnerable and remote areas of our country and conserving the countryside. In that context, because farmers and some hon. Members have expressed concern following the recent cuts in hill livestock compensatory allowances, I should stress that our commitment to support livestock farming in the hills remains. We have no plans to abolish HLCAs, which are a long-standing and integral part of the Government's agricultural policy, but it is worth emphasising that the 67,000 livestock farmers in the hills will receive this year more than £550 million in direct payments. That is a measure of the strength of our commitment. Nevertheless, I am aware of the concern and I shall be undertaking a series of visits to our hill areas in the spring, summer and autumn. At the same time, we are integrating environmental aims more closely in environment policy.

Mr. William Ross (Londonderry, East)

The right hon. Lady has told the House that she intends to visit hill areas. Will that be in all parts of the United Kingdom, including Northern Ireland?

Mrs. Shephard

I have had an invitation to visit Northern Ireland and I hope that I shall be able to accept it.

Last week, I announced a further six environmentally sensitive areas, two in the south-west, three in the centre of England and one in Essex, taking the total to 22, covering some 10 per cent. of our agricultural land. That will be followed by a series of further new environmental measures that I plan to introduce in the coming months. They will lead to United Kingdom expenditure on agri-environmental schemes rising to £100 million.

Mr. Ieuan Wyn Jones

The Minister has touched on the important issue of agri-environmental payments. Is it now Government policy to shift support from production to environmental payments? If that is a clear shift in Government policy, will she consider simplifying the environmental payments as there are so many schemes with different criteria in different parts of the United Kingdom? A simplified system would be easier to administer and easier for the farmers to understand and would enhance the environment.

Mrs. Shephard

We are introducing an environment component into the support for livestock farming in the hills. That may be what the hon. Gentleman has in mind. I am aware of the problems of livestock farmers in some hill areas, who might have the misfortune to be the subject of several schemes which interlock but do not always quite work together and have proper demarcation. That is certainly one of the issues that I shall be examining when I visit our hill areas. We shall shortly also be issuing a consultation paper on how to improve the environmental contribution of the main livestock subsidy schemes.

A further important issue for the farming industry is the future of the Agricultural Wages Board, on which we have consulted widely. As I said earlier, the consultation exercise generated almost 4,000 responses, with the vast majority supporting retention. That consultation exercise has raised a number of important issues which I am considering carefully with my colleagues, and I hope to make a statement before Easter on the way forward. My right hon. Friend the Secretary of State for Scotland plans to make a statement on the future of the Scottish Agricultural Wages Board at the same time.

The past two years have seen farm incomes rise substantially. The information is given in detail in "Agriculture in the UK 1993" and "Farm Incomes in the UK" which have just been published. Total income for farming in the United Kingdom rose in 1993 by 38.6 per cent. in real terms, following an increase of 24.2 per cent. the previous year. That is good news after several years of decline. It has provided an opportunity for farmers to pay off debt and invest in replacement machinery. As I meet groups of farmers, I detect a slightly more buoyant feeling among them, although, as I always say, I would not want anyone to think that farmers have had a good year.

I recognise that not all sectors have fared so well. The pig sector is suffering from a difficult period of low prices, although there have been slight improvements in recent weeks. Parts of the horticultural industry, particularly apple and soft fruit producers, are experiencing difficult times.

Mr. Michael Lord (Suffolk, Central)

My right hon. Friend is well aware of the difficulties facing the pig industry and the apple growers, and I am sure that she is tackling them as robustly as she can. I must stress that speed is absolutely essential. Unless help comes quickly, or unless the countries which are helping their farmers are prevented from giving that aid, the crucial time will have passed, the damage will have been done and the opportunity will have been missed.

Mrs. Shephard

Clearly, the fruit and vegetable regime is due for reform, which should take place this year. It is sad that the industry is experiencing the current problems after the sterling efforts of English Apples and Pears in promoting a superb product. I have said before that if everybody in Britain ate just one more Cox's apple each week, which is not a hardship, it would go a long way to solving the problem. Nevertheless, reform of that regime is overdue. Those two sectors apart, the industry is in a happier position than for some time.

I have gone into the details of domestic agriculture because that determines my approach to the CAP in general and price fixing in particular.

Mr. Michael Jopling (Westmorland and Lonsdale)

Does my right hon. Friend recognise that dairy farmers, of whom I am not one, are extremely concerned that there should be an early decision about the plans put up by the milk marketing board? Will she always remember that the milk marketing board was set up because the dairy industry had small dairy farmers in remote parts of the country screwed down into a state of helplessness? Does she realise that, even now, those people in the dairy trade will never be satisfied until they have taken the milk industry back to the state of near helplessness that it used to be in and that the sooner she makes a decision to support dairy farmers, on the basis of what the milk marketing board is asking, the better?

Mrs. Shephard

I can reassure my right hon. Friend that the board's proposals on Milk Marque have gone out to consultation and we have asked for replies by 8 April. The vesting day of 1 November—the date proposed by the board, not MAFF—looks achievable, although obviously I cannot prejudge the effects of the consultation. I can reassure my right hon. Friend, however, that I am very aware of the vulnerability of milk producers, particularly those in the most isolated areas of Britain. I know that they want certainty, but equally they do not want a half-baked scheme that will then be prey to criticism from the competition authorities. It is most important that we get it right. I hope that 1 November is achievable.

Our objective is to get a CAP that will encourage a competitive and more market-driven European industry in which our farming industry is bound to succeed. This is the only realistic approach, bearing in mind the budgetary constraints that now exist and the movement towards a more liberal world trading system following the recent GATT agreement. As so often, thinking in the UK is well ahead of that of its partners. The NFU's recent discussion document "Real Choices" shows that it, too, is wisely taking a longer-term perspective. European agriculture will only prosper in the long run on the basis of being competitive in world markets. That is why we pressed so hard for reform of the CAP. The 1992 reforms were a big step forward. They reduced the overall cost of the policy, brought farmers closer to the market and improved the environmental aspects of the CAP. But they were only a first step. We need to take the reform process forward, initially by reforming the unreformed sectors—notably wine, fruit and vegetables, sugar and olive oil.

The beef regime needs further reform because of continuing market imbalance and high costs. The price proposals for beef rightly seek to limit excessive spending on the beef special premium scheme in other member states, but not in the UK. I am, however, disappointed that the prices package contains nothing on further reform for beef or the unreformed sectors, and I shall be pressing the Commission to come forward with early proposals.

We have consistently been concerned at the high cost of the CAP. The introduction of both the budgetary stabilisers and the agricultural guideline resulted from UK pressure, and placed a brake on other member states' spending ambitions. Earlier this week, my right hon. and learned Friend the Chancellor secured agreement on a new budget discipline decision that will reinforce the operation of the guideline in the context of the European Council decisions in Edinburgh. The cost of the CAP to consumers has been brought under control: indeed, the rise in the food price index has been consistently below that in the general retail price index in recent years.

Against that background, as I have already indicated, the price proposals are rather more limited in scope than they have traditionally been. For the most part, they make no adjustment to the price and aid levels set by CAP reform. Support for commodities still awaiting reform is, in the main, retained at last year's level. It is proposed to cut monthly increments for cereals to reflect lower costs of storage. The monthly storage refund for sugar is to be similarly reduced. The aid to linseed is to be cut. In the milk sector, the Commission has presented two reports to the Council: one on the market situation for dairy products and the other on the implementation of the quota system in Spain, Italy and Greece.

The market situation report concludes that the market for milk and milk products in the Community is currently in better shape than was feared at the time of CAP reform in 1992. But in view of its concerns about the fragility of the situation, the Commission proposes that milk quotas should be cut by 1 per cent. from 1 April. To address the specific problem of continuing structural imbalance in the butter market, it also proposes that the intervention price for butter should be reduced by a further 3 per cent. from 1 July, which would be in addition to the 2 per cent. reduction that has already been agreed.

The price proposals will generate budgetary savings of £26 million in 1994 and £1.3 billion in 1995. The very large saving in 1995 results mainly from the proposal to postpone the payment of olive oil aids so that they fall into the 1996 budget. For 1994, CAP expenditure appears likely to be below the guideline, but it is not clear that the proposed savings are sufficient to ensure that the guideline is respected in 1995. I shall be pressing the Commission for clarification on that, and it will be a key objective to ensure that the outcome of the price fixing respects budget discipline. In any event, I believe that CAP support levels are too high, and I shall be urging the Council—subject to questions of balance between commodities—to adopt reductions.

One of the most controversial sectors in the negotiation will be milk. The Government can support the proposed reduction in the butter intervention price; indeed, we would argue that an even deeper cut is justified. But we are opposed to a reduction in milk quota, for precisely the reasons I explained to my hon. Friend the Member for Ludlow (Mr. Gill). We do not have enough quota to meet our needs, and a further reduction in quota would deal a severe blow to the British dairy industry.

We will therefore oppose the proposed quota cut in the strongest possible terms. It is not justified by the Commission's analysis of the market situation and is not necessary to meet the Community's GATT obligation. It would have an adverse impact on the 1995 budget, largely because of the impact on the beef sector and the expensive accompanying compensation package that there would have to be for producers. And it would be indefensible at a time when large allocations of quota have been made to the acceding EFTA countries and when the Commission is proposing to make unjustifiably generous awards of additional quota to Spain, Italy and Greece.

That brings me to the Commission's report on the implementation of the quota system in the southern member states. It is clear from the report that, while all three countries have made progress, none has fully met the conditions on which additional quota was granted provisionally last year. Yet the Commission is proposing that Spain's additional quota should be awarded definitively for 1994–95 and beyond, and that the allocations for Italy and Greece should continue in 1994–95, albeit on a provisional basis and at a reduced level for Italy in view of its failure to meet its target for reducing surplus milk production.

These proposals cause me considerable difficulty. When we agreed last year to the provisional award of additional quota to those countries, we did so on the clear understanding that certain conditions would be met. The Commission's report identifies shortcomings in all three cases. They are perhaps not so serious in the case of Spain as to warrant the withholding of quota, but that quota should be awarded provisionally pending a further review of progress later in the year. The situation in Greece and Italy is more worrying still. There are significant deficiencies in the Greek system for administering quotas, and there are serious doubts as to whether Italy can achieve the target set by the Council for reducing surplus milk production. In the circumstances, the Commission's proposals are too generous and the allocations to both those countries should, at the very least, be reduced. I shall press for that.

I also believe that the Commission has failed to think through its proposals to reduce the aid to linseed. There is a risk, therefore, that it will increase rather than decrease expenditure, because the aid reduction, combined with the new requirement on linseed growers to set aside 15 per cent. of their land, will upset the balance with competing crops and lead to a shift out of linseed. The right approach, which I shall be urging on the Commission, is to cut the aid to flax. That crop is very expensively supported and it will expand significantly if we do not get the balance right.

A further important element of the Government's approach to the CAP is the fight against fraud. Fraud does not just damage the taxpayer's interests; increasingly, as total aid levels are subject to regional ceilings, it damages farmers' interests too. The United Kingdom has led the campaign in Brussels against fraud, and we shall continue to do so.

Yesterday's proposal by my right hon. and learned Friend the Home Secretary to launch a joint action is just the most recent UK initiative. Our efforts have borne some fruit: the tobacco regime has been changed, largely to deal with its vulnerability to fraud. The Maastricht treaty strengthened the role of the European Court of Auditors, and imposed a requirement on member states to treat fraud against the Community budget no less seriously than fraud against national budgets.

To an extent, CAP reform will help to reduce the scope for fraud in, for instance, export refunds and intervention —aspects that have been subject to much criticism. Direct payments to farmers are easier to control, and the integrated administration and control system, which we strongly supported, will ensure that the rules are the same in all member states.

Mr. Ainger

I must again raise the issue of the way in which Welsh farmers appear to be treated differently from English farmers, especially in regard to delays in payments of sheep and beef premiums. Does the Minister accept that, while we can criticise other nation states in Europe, we really must get to grips with the problems in the United Kingdom before we start criticising other countries?

Mrs. Shephard

I entirely agree. Certainly, where fraud is discovered in this country—we are talking about fraud, rather than implementation of the reformed CAP —it will be firmly and vigorously pursued, as I am sure the hon. Gentleman knows.

As for the administration of the arable area payment scheme in Wales, I am sorry to say that that is a matter for the Welsh Office; but I am sure that the hon. Gentleman will pursue the issue.

Mr. Ainger

rose—

Mrs. Shephard

No, I will not give way any more; that is it.

Mr. Ainger

On a point of order, Madam Deputy Speaker. We are debating the implementation of CAP prices in the United Kingdom. I understand it to be Government policy that Wales is part of the United Kingdom. I am asking relevant questions about this point, but I am told by the Minister that they are a matter for someone else. May I have your assistance, Madam Deputy Speaker?

Hon. Members

Bogus.

Madam Deputy Speaker (Dame Janet Fookes)

Order. I can do without sedentary help from hon. Members.

Mr. Ainger

Thank you, Madam Deputy Speaker. May I have your view on this? I have asked relevant questions, within the terms of the debate, to which I have been unable to obtain answers.

Madam Deputy Speaker

The Chair cannot adjudicate on the extent to which Ministers' answers satisfy hon. Members. In other words, that is not a point of order for the Chair.

Mrs. Shephard

Thank you, Madam Deputy Speaker. I have outlined my objectives for the forthcoming negotiations, and for the longer-term development of the CAP. My policy is rooted in my belief in British farming, which is a major player in the British economy. People tend to criticise farmers, while forgetting the essential fact that they produce food—three quarters of the country's indigenous food requirements. That is a contribution that we literally cannot live without.

British farming is pursuing a more market-oriented approach, with Government help and considerable success. However, the fundamental importance of agriculture to our economy, and the fact that nearly every country in the world provides support for its farmers—some to a far greater extent than us—mean that it does need Government support. Support must fall to more realistic levels, but as long as agriculture needs basic support we shall continue to supply it. Farming is not only the keystone of the rural economy; farmers are the traditional guardians of the environment, and they need support to help them to maintain that role.

Earlier today, the Labour party held a press conference. I think that it was about the CAP; it certainly was not about British agriculture. I am glad to say that Labour was very clear about its support for Government policy—reducing the cost of the CAP, reducing waste in the CAP and reducing fraud in the CAP. Those are all admirable objectives. What the party was not clear about was its support for the British farmer: there was not a word of praise, support or encouragement for him or her. I suppose that that is hardly surprising in a party whose preoccupations are entirely urban.

As for the hon. Member for North Cornwall (Mr. Tyler), no doubt we can look forward this afternoon to his explanation of how he and his party can square their intention to bring about a federal Europe with a separate agriculture policy for Britain. Perhaps that will not be too difficult for them; they have had a good deal of practice in facing both ways at once. Whatever they come up with, however, will not be good for Britain.

We should dispel the gloom of the faint-hearted. We can and do win in Europe, although we often stand alone. From that originally isolated position, my predecessor overturned the MacSharry proposals, which would have done so much harm to British farmers. What is more, it is the United Kingdom that has placed concern for the environment at the centre of the CAP and changed the emphasis of the CAP, bringing it closer to the market. Those are significant achievements, suggesting that our influence in Europe is greater than some would have us believe.

I shall be fighting to ensure that we continue to influence the CAP, and to ensure equality of treatment for all member states of the European Union. I believe that our farmers are the most efficient in Europe. We support them, but I want them to help themselves as well. This year's general agricultural prosperity gives them a sound foundation on which to build up their own image—to present themselves as the responsible business men that they are.

My intention is clear: to continue to fight for the success of a prosperous and efficient British agriculture. Agriculture is vital to the prosperity of Britain, the economic health of our rural areas and the environmental health of our landscape. It is a cause worth fighting for.

5.6 pm

Dr. Gavin Strang (Edinburgh, East)

I beg to move, at the end of the Question to add: 'commends the contribution which farmers and farm workers make to the economy and supports the maintenance of the agricultural wages boards in their present form in order to prevent an increase in poverty in the countryside; deplores the budget cuts in hill livestock compensatory allowances, in capital grants and in research and development which, coming on top of previous cuts, will inflict long-term damage on the industry; believes that the 1992 changes in the Common Agricultural Policy, including the introduction of set aside, which the then British Agricultural Minister, the Right honourable Member for Suffolk Coastal, described as very much in the United Kingdom's interest do not adequately address the failures of the common agricultural policy including its exorbitant cost to the taxpayer; and is of the view that the Government's claims to be tackling waste, fraud and bureaucracy are hollow as long as the Common Agricultural Policy continues in its present form.' I welcome the Minister to her first general agriculture debate. As she will probably recall, at one time we used to have a major agriculture debate each year, following the annual price review. After we joined the European Community, the major agriculture debate was held before the crunch decisions were taken on the annual EC prices package. As the Minister herself pointed out, because of the MacSharry reforms the annual price-fixing has become less significant. Therefore, in my view, it is still appropriate to hold the debate before the final decisions are made in the Agriculture Council, because they are important decisions. Nevertheless, the debate is really a general agriculture debate.

The Minister has already criticised the statement that I made this morning on the remarkable ground that I said nothing in support of Britain's farmers and farm workers. I suggest that the Minister begins by reading the Opposition amendment, whose first words are commends the contribution which farmers and farm workers make to the economy". I note that there is no reference to farmers and farm workers in the Government motion.

When the Minister took on her responsibilities about 10 months ago, we had high hopes. We thought that her appointment would lead to some change—at least some mitigation of the policies pursued by the Conservative party for so many years which have damaged the agriculture industry. As I shall explain, we have been disappointed: the Minister has failed to live up to that early promise. Indeed, I submit that there has been no substantial change in the general thrust of the Government's policy following her accession to her important position.

Let me remind the right hon. Lady that, in what I believe was her first intervention in the final stages of the passage of the Agriculture Bill in 1993, she spoke out about the Government's position on the potato issue. She will already have disappointed not only much of the potato industry but, dare I say it, even some of her own constituents with the outcome. I welcomed the Minister's statement on the potato marketing board during the passage of the legislation as it represented a clear change from the statements made by her predecessor. But the House needs no reminding that, within a few months, on 30 November, she made a definitive statement that Having considered all the arguments with great care, we have concluded that the Scheme must come to an end". Any hopes that there might have been some help for the potato marketing board were dashed within a few months.

I shall not blame the Minister for the disarray in the milk industry because she inherited the 1993 Act when it was too late to amend it. The state of the milk industry is a direct consequence of the irresponsible legislation introduced by her predecessor. If anyone cares to read the statements that we made during the passage of that Act, they will recognise that our line has been vindicated.

I remind the House that we wanted to retain the milk marketing boards, although we wanted to build in greater flexibility. A Labour Government fought with great difficulty to secure amendments to European Community legislation—I remember being in the Council of Ministers at the time—and the continuation of the milk marketing boards. Conservative Governments should have maintained that policy. Rather than confronting industry directly and saying, "Look, as Conservatives, we are against the milk boards because we think they are a form of pragmatic socialism"—a phrase used by a previous Conservative Cabinet Minister—the Minister's predecessor sought to hide behind the Commission's view that the milk marketing board scheme did not encompass skimmed and semi-skimmed milk. Since the legislation was enacted, however, the European Court's adviser, the Advocate General, has come out against the EC Commission and has supported the British industry's view that the scheme encompassed skimmed and semi-skimmed milk.

Mr. James Paice (Cambridgeshire, South-East)

rose—

Dr. Strang

I shall not give way as frequently as the right hon. Lady—she is the Minister—but I shall give way on a few occasions and with pleasure to the hon. Gentleman.

Mr. Paice

The hon. Gentleman fought hard to save or to continue the milk marketing board after our accession to the European Community in the early 1970s. Does he draw any conclusions from the fact that in the past 20 years dairy products from abroad have achieved a massive penetration of the British dairy market—it has suffered as a result—because of the inability of the milk marketing scheme to adapt to the pressures caused by the new marketing systems and the development of new dairy products?

Dr. Strang

The hon. Gentleman makes an interesting point. Part of the answer to his question lies in what the Minister said. She reminded the House that the Government had opposed the introduction of milk quotas, which place a constraint on the expansion of our milk industry. It is a worrying situation. As he may be aware, some multinational companies—I will not name them—are threatening to move their investment elsewhere because they are not satisfied that they will be able to get enough milk to produce the high-value products that he and I want them to produce in this country. We should have built some additional flexibility into the milk marketing boards scheme as it could have helped us to deal with the problem.

The milk marketing boards should have been retained. Once the Government decided that they were to be abolished, however, they should have accepted responsibility for the revised scheme. They should have said that they would consult the industry before deciding on the new arrangements for that hugely important industry. I put it no stronger than this—they might have concluded that the creation of regional, integrated co-operatives was the best way to secure a flexible market and competition with the big dairy companies. If the Government had considered that option—no doubt they would have paid great attention to the submissions of the milk marketing board and the Dairy Trade Federation—they might have reached that conclusion, in which case we would not have the present disgraceful state affairs

The introduction of the new arrangements has been delayed. I am sure that the Minister will correct me if I am misrepresenting the position, but, as I understand it, 1 November is the earliest that the new arrangements can come into force. There is a general belief that it will probably happen then, but I understand that the new revised arrangements are still under consultation. We do not yet know, therefore, whether they will satisfy the Government and come into operation on 1 November.

As the Minister implied this afternoon, the arrangements may be challenged on competition grounds by the United Kingdom or in the longer term—in two years or so —by the Commission. I am happy to give way to the right hon. Gentleman.

Mrs. Shephard

I am not a gentleman yet, but I may become one. I do not feel like performing like one at the moment.

I did not say that the arrangements would be subject to challenge from the competition authorities. I said that we had to arrange matters so that they would not be subject to early challenge by the competition authorities. I said so in an answer to a question from my hon. Friend the Member for Worcester (Mr. Luff), who wanted to speed up matters. I replied that, while I understood the problem of delay, I did not want that delay to result in an arrangement that was subject to early challenge by the competition authorities. I think that the hon. Gentleman perhaps misheard.

Dr. Strang

I am grateful for that clarification. The right hon. Lady will understand that her intervention confirms the substance of my point that the Government are trying to ensure that the new revised arrangements are not subject to a challenge, or an effective challenge, by the Commission in the future.

Mrs. Shephard

Among many other things.

Dr. Strang

We shall accept that clarification as well.

Mr. Campbell-Savours

If the Minister had accepted the structure that we proposed in Committee, she would have secured her objective six months ago.

Dr. Strang

I pay tribute to the valuable work of my hon. Friend the Member for Workington (Mr. Campbell-Savours), who led for the Opposition in the Committee that discussed the matter. I in no way disagree with him, but, whatever the Government do, and whatever the extent to which the Minister squares the position with her authorities, in two years' time, if not earlier, there is a possibility of a challenge from the Commission. Let us not forget that. We faced such a problem when we were in government. Understandably, the Governments of some member states will encourage the Commission to challenge the arrangements in this country.

We were disappointed by the Minister's statement on potatoes following the enactment of the Agriculture Act 1993. We were again disappointed by the outcome of the Minister's deliberations and those of the Government on public expenditure on agriculture. Hon. Members will understand that, in addition to the huge expenditure required under the auspices of the common agricultural policy, a substantial amount of expenditure is in the Government's control.

The Minister started by attacking the farm and conservation grants. The Government like to claim that they support the principle of a more environmentally friendly agriculture, but the Minister cut the grant for investment by farms in waste handling facilities. The Government also cut a range of other environmentally friendly grants, such as the grants for traditional walls—or for "dry stane dyking", as I believe hon. Members usually call it. The grants for the creation of hedgerows were cut too.

The Government have made it clear that when they need cuts in expenditure the environment is one of their first ports of call. So much for all their talk about the agri-environmental package and the need to encourage the building of environmental objectives into British agriculture.

The second target for cuts was, for the second year in a row, the hill livestock compensatory allowances. We listened carefully to what the right hon. Lady said about those. I welcome the fact that she is to visit the hill areas in England, and I am pleased that she will go to Northern Ireland. I hope that the Secretaries of State for Scotland and Wales will allow her to visit hill farmers in Scotland and Wales as well.

Perhaps the right hon. Lady could learn something if she spent time talking to the hill farmers of this country. She might learn about the contribution that those people make to the natural environment. The beautiful scenery in the hill areas is not natural in that it would not exist if the area were depopulated. It is the hill farmers, their families and the other people who work on the hill farms who make that environment what it is. The hill farming industry provides the basis for the infrastructure and the economic basis for tourism in such areas.

Many of the hill farmers are not well off. Many still earn less than the average industrial wage. As I have said repeatedly, it is all very well for the Minister to talk about increases in incomes. Of course an increase has taken place, but that has to be judged against the very depressed previous level, especially towards the end of the 1980s.

I do not believe that the industry will be encouraged by the Minister's statement that the Government do not intend to abolish the HLCAs. It would have been encouraged by a statement that there would be no further cuts in the allowances while the Government are in office, or even an assurance that there would be no more cuts in the next public expenditure round.

The Labour party strongly supports the principle that farmers in the hill and marginal areas, many of whom run relatively small farms, cannot be expected to compete on the same terms as lowland farmers. That is why we should maintain the differential level of support, to give hill farmers a chance to increase their incomes further so that they can restart the investment that we need in those areas. That is what the HLCAs are all about.

I must mention the cuts in research and development. I listened with interest to what the right hon. Lady said about agricultural science in this country. To listen to her one would not have known that the Government had decimated our scientific base. But when the long-term economic and social history of the Government is written it will probably be found that the greatest damage that they have done to our long-term productive base has been the systematic slashing of publicly funded research and development—and nowhere more so than in British agriculture.

As the House knows, agricultural research and development has been singled out for more swingeing cuts than other areas of scientific endeavour. Scientists are still being made compulsorily redundant from our research stations. Only last week, when I visited Rothamsted, I found out that another seven had been made compulsorily redundant. The people in the research establishments are demoralised. The number of personnel has been slashed by half since the Government came to power, and many of those who are left are on short-term contracts.

I appeal to the Minister to reconsider the Ministry's policy. What sense do short-term contracts make for young scientists who want to do long-term agricultural research? Most agricultural research has to be done over the long term. It sometimes takes about three years for the soil to settle down after what has been applied to it. Almost all the recently recruited scientists in the research establishments are on short-term contracts, and the idea that we should rely on such contracts is undermining morale and making it harder for the establishments to attract and retain the high quality researchers whom we need.

I listened with interest when the right hon. Lady talked about the contribution that our scientists have made to animal breeding. May I remind her of the development of artificial insemination that was carried out at Cambridge, not far from her constituency? That was achieved through what was then the Agricultural Research Council. It was not encouraged by the Ministry of Agriculture, Fisheries and Food at the time, but that is a different story. However, it makes the case for funding agricultural research not only through the Ministry but through the Office of Science and Technology.

I hope that when the Biotechnology and Biological Sciences Research Council comes into operation on 1 April the Minister will take the opportunity to call off the nonsense about yet more privatisation. The Government have sold off goodness knows what in research and development, and they are even considering privatising further some of the research establishments. But agricultural research is a long-term business, and much of it has to be done within the framework of the stale. Oil companies and fertiliser companies cannot do all the research that we need.

Mr. Clifton-Brown

Will the hon. Gentleman give way?

Dr. Strang

I shall not give way, because I want to move on now to the two major points that I wish to make, the first of which is about the future of farm workers and their wages boards.

Any hopes that we may have had that the Minister would mitigate the Government's excesses were greatly disappointed when she announced the publication of a consultation document on the future of the agricultural wages boards.

Farm workers earn only 67 per cent. of the average industrial rate. As I told the House at Question Time, even with the increase announced yesterday, they will still earn less than three quarters of the average wage of industrial workers. Taking the average of the Low Pay Unit and the Council of Europe's low pay thresholds, 43 per cent. of full-time male and 68 per cent. of full-time female agricultural workers have earnings below the low pay threshold. They earn £76 less per week than employees in manufacturing. That is a crude figure, but even with the recent increase the gap will still be £70 per week.

When the Government published their consultation document we heard the usual rhetoric. The covering letter with it says: On the basis of its view that statutory wage fixing arrangements distort the labour market and destroy jobs, the Government has already taken steps to eliminate statutory wages controls in others sectors where they exist. The Minister is, of course, knowledgeable on that subject, because as Secretary of State for Employment she presided over the final winding up of the wages councils. And evidence is already coming through that jobs in some of the low wage areas are being advertised at rates below those prescribed previously by the wages councils.

The right hon. Lady has acknowledged that the outcome of the consultation process has been an overwhelming view that the wages boards should be retained, but I fear that as a result the Government will announce a decision to retain the form of the wages boards, but not their substance. It is crucial that the House recognises that it will not be sufficient merely to retain the boards; it will be necessary also to retain the statutory provisions that underpin the wages and conditions of farm workers and their families.

We shall not complain if the announcement is delayed, but if it is made next week that will be all right with us. I hope that when the right hon. Lady makes that announcement she will be able to assure us that the Government will not follow their usual policy on wages councils—as illustrated by their opting out of the social chapter—of trying to compete with our European competitors on the basis of lowering the wages of some of the least well off and, in the case of farm workers, some of the most deserving, and also some of the most skilled, workers in the country.

When the right hon. Lady said that the Secretary of State for Scotland would also be making a statement—I do not know whether the Secretary of State for Northern Ireland will be doing the same because there is a Northern Ireland wages board—I took it to mean that it would be made on the Floor of the House. I do not know whether the fact that there is to be a separate statement by the Secretary of State for Scotland means that there will be some disparity in the announcements. Whatever the answer, it is an important issue.

The second major aspect that I wish to cover is Europe and the common agricultural policy. By way of introduction, I mention that the right hon. Lady rightly referred to animal welfare. She will be aware of the great concern expressed about the lorry loads of sheep that arrived in Birmingham in a deplorable state. I urge her to redouble her efforts on animal welfare in general and, in particular, to accept that the United Kingdom must take a firm stance and seek the agreement of other member states to reduce the maximum journey time for animals in transit from the current 15 hours to eight hours in the United Kingdom and 24 hours elsewhere in the Community.

In the remaining few minutes, I wish to deal with the Minister's position on the European Community and the common agricultural policy.

Mr. William Ross

rose—

Dr. Strang

I shall give way to my hon. Friend. I am sorry, I thought that it was an hon. Friend who was trying to intervene, but I give way to the hon. Gentleman with pleasure.

Mr. Ross

Perhaps I am his hon. Friend on this issue. Would not it be better to go further and encourage the slaughter of animals close to the point of production rather than the transporting of live animals?

Dr. Strang

I am not sure whether we can describe ourselves as hon. Friends, but we are in complete agreement on that issue. The Government should be doing precisely what the hon. Gentleman suggests.

The right hon. Lady has today been figuring in the columns of our newspapers in a rather big way. We understand that, on the 23 or 27 European Union blocking vote provision, the right hon. Lady has been arguing that the 27 blocking vote provision—the one which the hardline anti-marketeers, if I may call them that, are determined should not be foisted on the Government—might be quite useful in some spheres, including agriculture.

The Daily Telegraph reports: However, on agriculture, the single market and air fare regulation, Britain would be prepared to see the blocking minority increased to 27. The Daily Telegraph would probably like to regard itself as the Conservative party's best house journal—I do not criticise it for that because it is an excellent newspaper in many respects—but The Independent today carries a slightly fuller and more interesting report. It states that the Prime Minister reportedly pointed out at a lunch yesterday that in certain circumstances the higher minority of 27 would be helpful to Britain. For example, while the UK constantly finds itself in a minority on social legislation—often of only one, or in EU terms just 10 votes—it"— Britain— is in a majority in wanting to secure the form of the Common Agriculture Policy, a point emphasised last night by … the Minister … to the Cabinet. The Daily Mail, the last newspaper from which I shall quote, stated: 'The move has been supported by the Agriculture Minister, who believes that dilution of the veto will undermine the position of the heavily-subsidised 'olive oil' states. That is very interesting, but I suggest that the right hon. Lady should perhaps not relay that information to Spain, which is still lined up behind, or alongside, Britain on this issue. I am sure that she will be aware that a large amount of olive oil is produced in Spain. I think I am right in saying that last year more than 2,800,000 tonnes of olives were grown in Spain, producing more than 500,000 tonnes of oil.

It is also worth noting that the British Government are apparently again interested in reforming the CAP. Indeed, there was a hint of that today when the Minister said that the 1992 reforms were only the first step. Let us leave aside for the moment her remarks about new sugar and wine regimes because we knew that they were coming, but I presume that she means that the reforms are a first step in relation to what is needed.

The Minister is well aware that her predecessor, the Secretary of State for the Environment, was so enthusiastic about the reforms that he claimed them as his own. He said that they were no longer the MacSharry reforms but the Government's reforms. He strongly supported the reforms at the time and, indeed, exactly a year ago he repeated his statement that the reforms were his. He said: That is why we got rid of the MacSharry proposals and replaced them with our own. That is what the CAP reform achieved."—[Official Report, 25 March 1993; Vol. 221, c. 1228.] I assume that there is some movement in the Minister's p0osition and that she is gently bringing herself into line with the stance that the Labour party has consistently taken on the issue.

The truth is that the right hon. Lady has not dealt with the reform of the CAP. European taxpayers are now spending more than £30 billion a year on a common agricultural policy that keeps food prices high, builds food mountains and dumps cheap food on world markets. It has been estimated that in 1992 the CAP cost the average family of four about £20 a week in higher taxes and food prices. The Minister of State looks up with interest. I remind him that the Chief Secretary to the Treasury referred to that figure, although he put the figures in dollars, so the Government are now accepting the Organisation for Economic Co-operation and Development's figure.

Mr. Clifton-Brown

How can the hon. Gentleman square his criticism of the CAP's budget with the European manifesto to which his party signed up and which states that we need further substantial public resources which have been estimated at £77 billion, double the current EC budget?

Dr. Strang

We want a common agricultural policy that will effectively support farmers and farm workers in the rural economy—that is not what we have at present. We also want EC expenditure to be used to encourage industry, research and development, regional policy and social objectives throughout the Community, as well as agriculture. Of course, the Minister—

Mr. Clifton-Brown

rose—

Dr. Strang

No, I shall not give way again. The hon. Gentleman will be aware that farmers in Europe were paid to leave fallow more than 6 million hectares of set-aside land last year. Meanwhile, the grain mountain last weighed in at more than 19 million tonnes. European taxpayers spend £2.5 million every day on the tobacco regime.

The truth is that the CAP is a disaster. Since 1979, under the Conservatives, the CAP budget has been bloated to one and a half times its size, after allowing for inflation. The Agriculture Commissioner has already had to admit that the CAP will not be kept within its enormous budget for 1994.

I listened with interest to what the right hon. Lady said about fraud. Much of the fraud does not take place in the southern European states, although there is fraud there among the farmers in the sense that they do not properly declare what they are producing or do not produce what they declare. There is massive fraud and British firms are in it as are others, taking advantage of open-ended state intervention, buying and the subsidising of agricultural exports. I am not convinced that the Government have been tackling the problem, not least because they have not taken up all the money allocated by the European Union to chase fraud.

The right hon. Lady has not seen the wood for the trees in respect of her participation in the Council of Agriculture Ministers. Dare I suggest that she has been the voice of the Norfolk grain barons in the Council of Agriculture Ministers. She has secured minor changes to set-aside. I emphasise the fact that we regard set-aside as a scandal. It is an outrage that we are spending hundreds of millions of pounds on objectives that are doing nothing positive for the environment, that we are taking out a disproportionate amount of production in the United Kingdom and, what is more, that we are paying large sums of money, often to wealthy landowners, for no great national benefit.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Michael Jack)

I am most grateful to the hon. Gentleman for giving way as I know that he is just coming to the end of his peroration. All that he has done so far is criticise my right hon. Friend the Minister and say that he does not like set-aside. Will he confirm that that is the sum total of his party's agricultural policy? As he referred to certain cost items in terms of what his party would do, could he also tell us how much a Labour Government would spend in those agricultural areas and on what they would spend it?

Dr. Strang

I shall respond to the Minister of State in the one minute that I feel I can reasonably take.

First, we have made it clear that we want to see the subsidies disconnected from production; we are opposed to the continued use of subsidies to encourage production. The common agricultural policy was originally set up with that objective—it was a laudable objective at the time—in a deal between the French and German Governments. However, that should no longer be the objective. The deal was made before we joined the European Community.

We must break completely with a policy that continues to subsidise production. When we have surpluses, how can the Minister defend open-ended state intervention? For goodness sake, when will the British Government take a stand on these issues? We have a policy that is utterly indefensible and the 1992 MacSharry reforms, of which the right hon. Lady is still not prepared to let go, will not solve the problem; we all know that in our heart of hearts. How can anyone believe that set-aside is a solution to the cereals problems?

The British Government have failed agriculture. We all understand that an increase in farm incomes is the direct result of black Wednesday, the devaluation of sterling and the consequent increase in support prices. The Government are now threatening the incomes of farm workers by suggesting that they might abolish wages boards. They have utterly failed to address the excesses of the common agricultural policy. That is why my hon. Friends and I will vote for our amendment this evening.

5.40 pm

Mr. Kenneth Carlisle (Lincoln)

It is a great pleasure for me to take part in the debate and to follow so closely after the opening speech from my right hon. Friend the Minister. I welcome her involvement in agriculture. Her speech shows clearly her integrity and her wish for that great industry to do well. She also has a common sense approach to it; she wants to cut through all the complexities and get an industry that can stand on its own feet in the future. I agree that agriculture is one of our central industries and is crucial to the well-being of the countryside.

As my right hon. Friend said, the whole food chain accounts for 9 per cent. of the gross domestic product and employs about 14 per cent. of all people in work. Farming is at the heart of the food chain. However, despite the impressive increase in productivity recently, we still have a deficit of some £6 billion in the trade in food, as my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) said. Although we cannot grow tangerines, we could grow half of that deficit quite easily, and that is what we must seek to do. That underlines the need to press for efficient production, which we are good at. We must involve all the modern techniques that we can and we must also have better marketing of our products—we all know that farmers can market their products much better—a level playing field and fair competition.

The industry is going through a time of unprecedented change. That has been brought about not only by the surpluses but by the large cost of the common agricultural policy. As a farmer, I welcome the fact that prices are reducing to world levels. That is healthy. None of us is sure what the world level is, but it is good that we should be moving towards it. It means that food is cheaper, contrary to what the hon. Member for Edinburgh, East (Dr. Strang) said. As a result of the decline in prices—for example, the decline in the price of wheat by 35 per cent.—over the next few years, food will be cheaper. As a component of price statistics, the declining value of food, combined with the static value of other products, is the reason why our inflation rate is so encouraging.

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

Can the hon. Gentleman give an assessment of what the possible reduction in the price of food as a result of the cut in cereal prices might be, say, over the next three years?

Mr. Carlisle

Over the past year, there has been a 1 per cent. fall in seasonal food production—the prices came out yesterday. The figure stands for itself; it helps to keep the inflation rate low.

It is healthy for farming that subsidies are no longer disguised in prices. I think that all farmers preferred the old efficiency payment system where the subsidy gained for the farmer was absolutely clear. The common agricultural policy is trying to cope with the surpluses and at the same time lower prices to world levels. In addition, it is trying to provide a transitional period to farmers by making open payments to them. That is much better than hidden subsidies. If we explored, we would probably find that the cost of the CAP is less than the previous cost of the hidden subsidies.

Farmers are proud to be custodians of the countryside. They take great pride when the countryside looks good, is full of vitality and is good for wildlife. The current system provides exciting opportunities for the countryside, and for farmers to meet that role and make much better use of our land. The taxpayer will be prepared to continue subsidies only if he can see benefits to the countryside in a number of ways. Those benefits include proper conservation, the recreation of habitats and better access for the public where suitable. As that matter is so central to the continuation of subsidies to the farmer, I shall concentrate on it.

As we know, there are many special schemes to assist conservation—sometimes, a bewildering number. At the top of the list, we have sites of special scientific interest and environmentally sensitive areas. I welcome the fact that there will be four more ESAs shortly. There are also schemes, such as the countryside stewardship scheme, aimed at restoring habitat and landscape types. There is the interesting Tir Cymen trial in Wales where 28 adjacent farmers on 2,500 acres are getting together whole farm management plans to find a balance between farming and wildlife. There is also the set-aside scheme.

All those schemes are bewildering to those who must work with the land and I ask my right hon. Friend to try to integrate them and make them more understandable. A conflict arises from the schemes. As an example, one need look only at the Breckland ESA between Norfolk and Suffolk, which was set up largely to help the stone-curlew. If a farmer has an environmentally sensitive area under the scheme, he cannot count that against set-aside. However, because set-aside payments are higher than what he would get for the ESA, many farmers are not encouraged to look after their land in the best possible way. Clearly, that is one example of how we can try to sort out some of the conflicts between the schemes, which are admirable in many ways.

The real value of set-aside is not that it is a specialist scheme but that it applies to the wider countryside. It gives farmers who cannot apply for special schemes an opportunity to improve the habitat and create diversity in the wider countryside. Last year—the first year of set-aside —we set aside 15 per cent. of our land. I welcome the possibility this year of having non-rotational set-aside over 18 per cent. of our land. That will give far more options on how best to use our land for set-aside.

However, the announcement came far too late for farmers to plan their operations in a way that would allow them to introduce that this year. Announcements from Brussels and the Council should come early in the year, so that we can make use of them as we plan ahead and purchase our seeds and fertiliser for the coming year.

Using non-rotational set-aside, I am looking forward to creating green veins through the countryside by setting aside 20 m next to my best hedgerows. I am also looking forward to leaving woods along woodland edges, and many farmers will do their best to recreate water meadows along streams, which non-rotational set-aside allows.

We are also learning—thanks to the advice of organisations such as the Farming and Wildlife Advisory Group, the Royal Society for the Protection of Birds, the Royal Society for Nature Conservation and others—how to manage set-aside better. One of the lessons is that we should avoid early mowing or early cultivation if we are to enable set-aside to provide a proper habitat for all sorts of wildlife.

Progress in the second year of set-aside has been admirable and it enables us to do far better than in the first year, but there is scope for further improvement. I hope that in the second, third and fourth years of set-aside we shall be able to be even more constructive and therefore merit the subsidies more.

I should like to describe some of the changes which would help. I know that my right hon. Friend wanted the planting of woodlands to count against set-aside. At the moment, that cannot happen if one enters the farm woodland premium scheme and I hope that my right hon. Friend presses on that. I can assure her that, if we were allowed that, there would be a tremendous planting of broad-leaved woods, coppices and belts throughout lowland Britain. That would enhance the landscape in 50 or 60 years more than anything else. It is time for the rebirth of Capability Brown.

I hope that my right hon. Friend will continue to press for the habitats scheme. It is important that it is not only a part of long-term set-aside, but should be allowed to count against set-aside despite the difficulty that she might have in winning that. The argument is simple. In the same way in which people will not plant woods unless that is counted against set-aside, they will be reluctant to go in for long-term set-aside under the habitats scheme unless that counts against set-aside.

We must review and take forward our policy on grazing and hay-making. The time-honoured way to produce good habitats in heathlands and water meadows is to graze lightly in late summer or take a light crop of hay. That has produced richly diversified habitats, but 1 September is too late to provide that.

The case for grazing is shown well by a friend of mine who has a mixed farm in Northumberland. He was keen to go for extensive grazing and yet he cannot put his set-aside land into pastures. If he could put his set-aside land into pastures and yet keep the same number of sheep and cattle, as he would have to do under the quota system, he could graze the totality of his pastures more extensively. At present, he must have a part of his land in set-aside and cram his livestock on to fields that are under grass. That, of course, gives the worst of both worlds, as there is over-grazing in some parts and unmanaged set-aside in others. We should look at the grazing regime if possible.

I would also like to see the green vein idea extended by allowing a 6 m stretch along hedgerows. I could then put those strips around all my fields giving access to the public and a greater variety of habitats for hedgerow plants and wildlife. The problem is that 6 m cannot be seen from a satellite, but 20 m can. I recognise that there are problems, but I hope that my right hon. Friend can do something about that.

I hope also that she will press ahead with the moorland scheme. It is important to reduce stocking densities in less-favoured areas, and I would be grateful if she would let us know when that is to be introduced.

There is also a real role for organic farming which, while it will never be dominant in this country, should be encouraged. Therefore, I welcome the support for new entrants, but I ask my right hon. Friend to remove the skew against existing organic farmers. It takes about two or three years to build up the fertility of a field to go back into cropping if one is an organic farmer.

During that time, the land lies idle but cannot be counted against set-aside. The organic farmer must not only set aside 15 per cent. but nurture those fields where he is putting back fertility. If we take into account that the average yield of wheat on an organic farm is 2 tonnes to the acre, as opposed to 3 tonnes for a normal farm, there is a good argument for trying to be more sympathetic to organic farmers.

The access scheme is admirable, and all or most farmers have land near to villages or communities that could contribute to the quality of life in those communities. I should love to set aside part of my land next to our local village on to which people could take their dogs, and on which they would have greater freedom to roam. I hope that those ideas can be put forward more constructively.

I want to emphasise the need to encourage conservation in the wider countryside and not just the special areas that we have nurtured so far. We should consider what is the best use of the huge sums that sustain the common agricultural policy. Next year, we shall spend some £2.5 billion on the CAP.

There is an argument that we should give greater payments to those farmers who take active measures to increase the diversity and sympathy of their land for wildlife. Some mechanism could well be found for that and, if so, the public will accept that the subsidies are needed during the transition stage and will understand that good constructive work is being done in return.

Just as economic pressures led to surpluses with prices encouraging production during the 1970s and 1980s, so economic incentives should help to bring good conservation practices to the wider countryside. I know the difficulties of negotiating in the EC and this is a good chance for us to make subsidiarity work here. There should be more subsidiarity on how we tackle the reductions in what we produce on the land.

Farming is good for that, because it differs so much in each country and also in each region of the United Kingdom. We know that sheep farming in Sicily is different from sheep farming in the Pennines, but there is also a huge diversity of countryside within the United Kingdom. We must be sensitive in nurturing that diversity and applying slightly different management techniques to each area. I know that my right hon. Friend the Minister has a robust attitude to Brussels. She is a good European, but she understands what subsidiarity should deliver, and agriculture is a sector where we could do better.

In conclusion, I think that we all accept that we need healthy farming. We need a strong food industry. Farmers are custodians of the countryside. We need to sustain farming. We need to sustain the industry that relies on it. However, the surpluses that the skills of farmers and scientists have produced give us a huge opportunity. Set-aside gives us an exciting chance to restore the countryside, to restore habitats and to encourage wildlife.

If I might give a mid-term report on our progress, I think that we have made some progress. I give every praise to my right hon. Friend the Minister and to my hon. Friend the Minister of State for trying hard, but we have to work even harder to develop the remarkable potential that set-aside gives to our land.

6 pm

Mr. Colin Pickthall (Lancashire, West)

I have listened to the Secretary of State and to my hon. Friend the Member for Edinburgh, East (Dr. Strang) with great admiration for their grasp of detail and their ability to ski round the issues with great skill.

I contrast their expertise and their erudition with what my constituents and, I believe, taxpayers throughout the country perceive as the nub of the issue that we are discussing—how much they pay, and for what, in subsidies and other measures involved with the agriculture industry. By and large, their answer to that question is that they pay too much and they pay it to too few. They perceive that the common agricultural policy forces them to subsidise a vast range of agricultural endeavour in a bewildering variety of ways, determined by incomprehensible formulae.

For example, The Times readers among my constituents —I presume that there are a few—will have read, on Monday last, 21 March, the story of Mr. Robert Sherriff, a farmer who has been paid £27,000 a year for growing only grass on more than half of his farm, which he has been doing for five years because he was part of the pilot scheme. It is quite a substantial article, headlined: Fields that grow nothing yield lucrative harvest". One interesting little passage in it is: As a master of foxhounds with the Enfield Chase, Mr. Sherriff appreciates more crop-free land for horses and hounds to hunt over. 'All field sports have benefited"' he says, 'because one of the few things you are allowed to grow on set-aside land is game cover."' Whatever one's views on hunting, the idea that the taxpayer should be inadvertently subsidising that activity is a nonsense that, I am certain, all sides of the argument would deplore.

Occasionally one hears a very sane speech in the Chamber. I think that we have just heard one from the hon. Member for Lincoln (Mr. Carlisle), and there was a great deal with which to agree in what he said. I agreed especially with two important and simple points that he made.

First, the hon. Member for Lincoln said that the taxpayer is only prepared to continue to pay for subsidies when he can understand and see the benefits. He was speaking especially of environmental benefits. I think that that would also apply to the taxpayers' instinctive knowledge of the difficulties faced by less favoured areas such as the hill farmers about whom my hon. Friend the Member for Edinburgh, East spoke at some length.

Secondly, the hon. Member for Lincoln said that he would ask the Secretary of State to work towards making the schemes more understandable. I am sure that everyone would agree with that, although I disagreed with his argument about the satellite. I would have thought that, these days, not only could the satellite spot a 6 ft strip, but it could spot the rabbits running along the 6 ft strip.

At one end of the subsidy debate are many of my constituents who are farmers in west Lancashire, which is an exceptionally rich growing area. They tell me, when I meet them, that all they wish to do is to do what they do best—to grow or to raise food. They point out that an area of 15 per cent. set-aside means 15 per cent. less employment, 15 per cent. less farm machinery bought for that activity and 15 per cent. less fertiliser—that might be a good thing—or seed or whatever, and all the multiplier effects of that cut on the general economy. They do not, and cannot, see the sense in it.

In a country that still imports a vast amount of its food —I acknowledge the fact that we cannot grow satsumas, but I would have thought that that was an unfortunate choice of fruit—the taxpayer can be excused for believing that he or she is in a mad world, where he or she is paying for farmers not to farm, and growers not to grow. In a world where half the population is underfed, the equation is even harder for them to bear.

Of course, we are economically sophisticated in this place and we fully understand the economic processes that allow millions of people to starve while we pay food producers not to produce. We know, unlike our electorate, the sheer economic stupidity of trying to square our capacity with other people's need. The people are, after all, silly innocents who think that high production or overproduction should result in lower prices for basic foodstuffs. They imagine that increased efficiency in production for a single European market and for export beyond that market should improve the lot of the fanner and remove his need for so much protection and subsidy.

In their innocence, the people of Britain will make great sacrifices so that the economies of countries struggling to find markets and to protect subsistence farming can survive, little appreciating the western need to grind them down through a general agreement on tariffs and trade which seems to me to be neatly arrived at to protect advanced economies.

I am tempted to adapt the famous remark of Bertolt Brecht that the people indeed are so silly in these matters that it is about time Parliament abolished the people and elected another.

I am in danger of getting tragic over this and missing some of the nitty-gritty points that I want to make about the way in which we shuffle money about to preserve producers in this, that and the other sector of European agriculture, and about the way in which we prevent the French or the Spanish getting one over on us, but of course I have to play that game too.

I note from the documents before us that we continue to support tobacco growing with subsidies while we are taxing tobacco consumption heavily on the grounds, I presume, of health protection as well as supporting the Treasury. We support tobacco production to the extent of 3.5 million ecu a day—I think that my hon. Friend the Member for Edinburgh, East gave the figure in real money earlier.

I know that the European regime still spends large amounts of money intervening to protect the wine-growing industry. Whereas in north America grape juice, as a fruit juice drink, rivals blackcurrant juice and grapefruit juice on every supermarket shelf, it is very difficult to find it in this country—I am not so sure about other European countries. That is mentioned in the documents and I am grateful for that. It seems to me that that is one major and positive way in which we could move forward.

We read of mountains of fruit destroyed or left to rot in Europe—15 per cent. of peaches and nectarines withdrawn, 1 million tonnes of apples this year, huge mountains of surplus lemons in Spain, Portugal and Italy. You may recall, Madam Deputy Speaker, if you read the newspaper The European, that last year it published a dramatic, huge colour photograph of what appeared to be a sky view of a range of mountains. It was in fact a range of apples being shovelled together by bulldozers to be burnt and destroyed. It was one of the most morally and economically disgusting pictures that one might see.

It would be easy for us to say, "a plague on all this", scrap the system of support and subsidy and ignore all the multifarious problems of the different sectors of the agricultural economy that must be considered while we are waiting for that system to be destroyed. I want to mention one which may seem small, but which is important to my constituency and perhaps others. In my constituency, many growers face ruin in spite of all those eleborate systems of support.

Last night, I received a phone call from a lettuce grower, Mr. Baxter, who has 12,000 dozen lettuces ready for cutting. At this time of year, he would normally cut 500 boxes—6,000 to 8,000 lettuces—a day. He sells through brokers right across the country. At present, he can sell nothing and will probably have to trash his crop because Spanish iceberg lettuces are flooding the market, particularly the Liverpool market in the case of the north west, at £1 a box. They are even being given away before they go off.

As a box costs about 60p and transport, even within the United Kingdom, costs £1.10, Mr. Baxter understandably cannot believe that that is happening to him and his colleagues in the trade without an unofficial subsidy helping the Spanish producers. Because he is losing his crop, he in turn must cancel his orders for the boxes, which are also made in my constituency, in an important factory that employs many people. When he telephoned the factory to say, "I am terribly sorry about this, I am embarrassed but I must cancel my order", the secretary who took the call said that she was not surprised as that had happened time and again recently.

This is the first year in some 20 years that Mr. Baxter has been unable to sell his crop. As the Minister of State represents an agricultural area not far from mine and probably similar in richness, he may have heard similar complaints from growers. Will he undertake to investigate lettuce dumping to see whether allegations of improper subsidy by Spain are true?

Mr. Jack

May I give the hon. Gentleman the assurance that he seeks straight away? If he can provide me with concrete evidence from Mr. Baxter and other growers in the area, we shall look at that claim and any others raised in this debate about unfair state aids.

Mr. Pickthall

I am grateful to the Minister of State for that intervention and I shall convey what he says to Mr. Baxter immediately.

It is not pleasant to hear, time and again, sectors of the industry complaining bitterly that other Europeans are not obeying the rules and stealing a march on the poor British, who naturally always obey the rules. It is even less pleasant to hear Europhobes in the House converting those complaints into what is sometimes a very saleable xenophobia. Although most of the farmers whom I represent welcome the European Union and the opportunities of the single European market, they have persistent nagging anxieties about the unevenness within the Union in the use and abuse of subsidy.

A consistent complaint in recent years has been about the power of big superstore chains to control prices, constantly driving down farmers' margins while not noticeably lowering prices for consumers. Any attempt by farmers to resist that process is immediately countered by the superstores' ability to switch their buying to elsewhere in Europe. Farmers suspect that that ability, for example on the part of the Dutch in the case of cabbage, to undercut British growers' prices so systematically cannot always be achieved through greater efficiency alone.

Mr. Baxter also tells me that at least one superstore chain, which formerly switched to English lettuce in May, will not do so this year. A simple change in timing of the switch to British produce can cripple the industry. Two years ago, the big stores did the same to tomato growers, immensely damaging them.

In the Select Committee's investigations into sea fisheries and the poultry industry, we have met persistent complaints about the rules being bent or even framed to favour the French or German industries—for example, in the size and make-up of battery hen cages. It is important that such accusations be taken up as swiftly as possible by MAFF and either promptly and clearly disproved or, if proved, rapidly tackled in Europe. It is depressing to hear those accusations, which may sometimes be myths, float around and gather strength and influence.

Yesterday, we were lobbied by the Small Farmers' Association which, in canvassing its interests, asked some of the right questions about the CAP and subsidies. It put forward three basic proposals: first, a ceiling or cap of £50,000 on the total amount of subsidy which a single farming business can receive in a year; secondly, within that, all subsidy payments to be tiered or modulated; and, thirdly, environmental premiums of an extra 10 per cent. for minimum use of pesticides and nitrogen and an extra 30 per cent. for organic farming.

I do not necessarily agree with the figures, which may have been put forward for debate rather than as concrete amounts. I do not even necessarily believe in the precise methods proposed, but I do believe that the association's underlying argument warrants attention. It says that: the only JUSTIFICATION for the huge expense of the CAP is that it should keep people on the land. The original purpose of the CAP was to ensure a decent livelihood for farmers, unfortunately no-one foresaw that the price levels necessary to maintain the average farmer were unnecessarily high for the larger ones. Over the years the smallest have dropped out and the ambitious have grown steadily bigger. The point has now been reached where 80 per cent. of subsidies are going to just 20 per cent. of farmers —the largest ones…This situation is not sustainable. The association fears that the impetus of the CAP is to bring about the gobbling up of smaller units by larger ones, with a consequent diminution of farming opportunities and the work force.

I fear that the abolition of minimum terms for tenancies will accelerate the process in the medium and long terms. I urge the Secretary of State to consider carefully before following the Country Landowners Association and the National Farmers Union down that road, which could be catastrophic for many tenant farmers in the future.

Mr. Cynog Dafis (Ceredigion and Pembroke, North)

May I offer some comfort to the hon. Gentleman and make it clear that not all farming or country organisations support the Government's proposals on tenancy. The Farmers Union of Wales and the young farmers federation in Wales are strongly opposed to the package proposed by the Government and believe that we still need a minimum term.

Mr. Pickthall

I am grateful to the hon. Gentleman for reminding me of that. I knew that the Farmers Union of Wales and the regional branch of the NFU in the north west were opposed to it. Many farmers in my constituency oppose it and have been here to lobby my hon. Friends and me on the issue.

It must be right gradually to remove subsidy from production and to ease the process by paying farmers as, for want of a better phrase, "environmental managers" responsible for keeping Britain a decent place to inhabit and, hopefully, for reversing the environmental damage created by some aspects of farming. In that respect, the removal of assistance or grant to recreate hedgerows is important in my area and the removal of grant for maintaining dry-stone walls is important to the Lake District, where I spend a great deal of time.

Will the Secretary of State, in her busy schedule, take time to look at the problems being created in areas like mine by the existence of the green belt? I do not complain about its existence—I am delighted that it is there. The Secretary of State may say that, like Wales, it is someone else's job. But when the Government decided to force local authorities to insist on planning permission applications from many small businesses operating in or on the edge of green belt, they caused what is about to become an economic calamity in my area.

Green belt planning regulations have threatened the closure of dozens of small enterprises. Ironically, these small enterprises were set up by members of the farming community who were trying to diversify into other areas, such as horticultural transport—hauliers wanting to garage their wagons, or centre their enterprises on old barns or the backs of houses in the middle of nowhere. That has created huge economic problems in areas where there is no alternative work. In fact, it might lead to a reduction in employment, especially in farming areas.

In closing, I ask the Secretary of State to talk to the Department of the Environment about the problems faced by legitimate agriculture-related industries in and around green belt.

6.20 pm

Mr. Robert Jackson (Wantage)

The agricultural chapter of the enlargement agreement with Austria and the Scandinavians has an interesting element of which I believe the House should take notice. It could contain the seeds of something very important for the future, and I urge the Government to build upon it in agricultural negotiations in the years ahead.

Norway, Austria and Finland subsidise their national agriculture to an even greater extent than the common agricultural policy subsidises the agriculture of the Union, and Sweden's agricultural policy has also been relatively highly protected and subsidised. As part of the transitional arrangements for Norwegian, Finnish and Austrian agriculture, it has been agreed that those countries may pay national aids to their farmers for the first four years of their membership of the Union.

There are also special arrangements for areas north of the 62nd parallel which will allow national payments to support farmers, with production ceilings based on historical levels of production. I understand that these arrangements will be reviewed after 10 years, but there is no doubt that the countries with Arctic agriculture will wish them to continue indefinitely.

The Scandinavian and Austrian enlargement thus includes explicit provision for national income aids to farmers linked to controls on output. I agree with my hon. Friend the Member for Lincoln (Mr. Carlisle) that this is the direction in which we should aim to develop the CAP in general in the years ahead.

The trend is there already, in the arrangements for set-aside with compensation to producers, and in the arrangements which allow national support for environmental measures related to agriculture. But compared with the developments I am advocating, the problem with the set-aside measures is that they are still funded from the Community budget, while the problem with the national environmental measures is that their scope is still far too limited.

Dame Elaine Kellett-Bowman

Does my hon. Friend not agree that, if we have national aids, the French will outbid us all the time and so disadvantage our farmers?

Mr. Jackson

I want to develop the argument, and I will return to the perfectly fair point raised by my hon. Friend. Obviously, measures of control will be required in any system of national aids. The fact is that the European Union has not yet faced up to the need to establish a proper regime for national aids to agriculture. I think that is the point that my hon. Friend is making.

This issue has been referred to already in this debate. Brussels seems to be incapable of reacting quickly enough to illegal national aids like those referred to by the hon. Member for Lancashire, West (Mr. Pickthall) and by my hon. Friend the Member for Suffolk, Central (Mr. Lord), who referred to the pig sector, and the illegal aid which the French have introduced into that area.

It is a highly cyclical industry, as is the case with lettuces, and a permanent advantage can be obtained if an illegal subsidy enables a national group of producers to ride out the bottom of the cycle. It is very important that there be a proper system of control of national aids, both in the existing CAP and under the future arrangements which I am advocating.

The rationale behind the common agricultural policy is the securing of a common market for agricultural products throughout the European Union. That is an important interest for the Union, and it must continue to be safeguarded. But it has long been apparent that the common price support mechanism as the central instrument for a common market in agriculture is becoming increasingly obsolete. The problems of the price support system are notorious. I do not disagree with what has been said by the hon. Member for Edinburgh, East (Dr. Strang) or the hon. Member for Lancashire, West in spelling out the problems.

Our food prices to consumers are high by world standards, which helps to undermine general European competitiveness in global markets. We are incurring very high budgetary costs for the storage and disposal of surpluses. The system has created a flow of transfer payments which has long been inequitable in the case of Britain and Germany, and which are becoming increasingly unacceptable to the Germans, if not to us.

Within the Union, these arrangements are coming under increasing budgetary constraints. At the same time, they are also subject to international restrictions through GATT, which I guess will continue to be tightened.

That means that, if the non-commercial or the less commercial sectors of European agriculture are to survive, they will have to do so on the basis of direct subsidies of one kind or another—for which GATT expressly provides. Provided that the output of the sectors is restricted so that they cannot displace genuinely commercial production, there is no reason why such direct payments should not be made from national budgets.

To ensure that the common market in agriculture remains open, there will have to be a closer regulation of such arrangements by the European Union than exists presently. But it would be absolutely in line with the principle of subsidiarity, to which my hon. Friend the Member for Lincoln referred, that there should be national aids to non-commercial agriculture reflecting different national priorities and preferences.

Needless to say, such a development would be of great benefit to the United Kingdom, whose vast net contribution to the European budget over many years—amounting to tens of billions of pounds—mainly reflects the imbalance of transfers under the common agricultural policy.

I emphasise that I do not believe that this policy would be disadvantageous to British farmers if—I know that this is a big "if"—it were designed properly. Much of British farming is capable of standing on its own feet commercially, not only in competition with the commercial sectors of continental agriculture but also in competition with commercial producers in other parts of the world.

But Britain also has small farmers, and farmers in areas of natural beauty. In every part of Britain, there is a countryside environment that we wish to protect. A deal which enables us to fund these worthy non-commercial objectives from our national budget, while controlling their output on a European Union basis, is perfectly consistent with the continued progress of British commercial agriculture. I suspect that a change of this kind would not be unwelcome to British farmers. If I have properly understood the discussion paper entitled "Real Choices" recently released by the NFU, that is the conclusion to which the NFU is coming.

But such a change would be greatly feared by many producers on the continent. That is why, in the present dispute about the size of the blocking minority in the Council, it might be worth remembering that, in the European Union, Britain is a revisionist state whose interests will generally be best served if it is easier, rather than more difficult, to outvote recalcitrant minorities.

Some hon. Members may find it surprising, but I believe that, in developing the common agricultural policy in the direction that I am advocating, it may be that we can make common cause with the French. Of course, there is a huge amount of historical baggage of Anglo-French conflict in this area. For some reason that I have never been able to understand properly, small farmers in France have believed that they benefit from European agricultural support arrangements which, as the hon. Member for Lancashire, West said, have really worked to the advantage of France's large commercial producers.

It seems that French small farmers and their political spokesmen have believed that they will get a better deal from a common agricultural policy based on price supports managed from Brussels than from a system of income aids managed from Paris. But I believe that recent developments in the CAP and the GATT are beginning to shift perceptions in la France profonde.

Certainly the Maastricht referendum was largely a vote of no confidence in Brussels by France's rural areas. Meanwhile, the French political leadership is beginning to recognise that it is inevitable that European farm price levels will converge with world markets, and that some system of direct payments is therefore desirable.

The main problem will be to persuade the French leaders that those payments should be funded on a national rather than a Union basis. We may be helped by the fact that, although the Germans want to protect their agriculture —which is not commercial in world terms—they also know that Germany cannot continue to sustain and increase its net liabilities to the Union's budget. We must make it clear, meanwhile, that there can be no question of reducing Britain's budgetary abatement.

The enlargement of the Union to include Austria and Scandinavia will be followed, quite possibly before the end of the decade, by a further enlargement towards the east. Each of the Visegrad four—Poland, Hungary, the Czech Republic and Slovakia—has substantial and relatively under-developed agricultural sectors. In Poland there is a marked fragmentation into smaller units.

Elsewhere, communism has left a legacy of large-scale, under-capitalised farm structures, such as those which the Union is currently absorbing in the five eastern lander of Germany. It seems inconceivable that the Visegrad countries can be assimilated into a common agricultural policy based on price supports. The only way that we will be able to absorb their important agricultural sectors will be on the basis that I am advocating for the Union as a whole—a low level of Union price support convergent with world prices, combined with the close Union-level regulation of national aids to farmers.

Britain should be encouraging the European Union to face up to the issue of national aids in agriculture. It is often argued that the so-called "repatriation" of the CAP would be inconsistent with a common market in agricultural products. But that is simply not so—there is express provision for national aids in the Community treaty in articles XCII to XCIV, which admit the possibility of national aids in certain circumstances, provided that they should not adversely affect trading conditions to an extent contrary to the common interest". The GATT arrangements also make explicit provision for non-distorting income support measures in agriculture.

The legal framework exists for the policy that I am advocating. Economic common sense has always pointed towards it; and now the balance of social and political forces is pressing us towards it.

6.31 pm

Mr. Paul Tyler (North Cornwall)

Debates such as today's are always of special interest, because we achieve some consensus across the Chamber. There have been a number of contributions from both sides with which I have sympathy, particularly those of the hon. Members for Wantage (Mr. Jackson) and for Lincoln (Mr. Carlisle). One reason is that, in a sense, we are all in a minority today, because we represent rural districts and are conscious that many other colleagues who represent the majority areas of urban electorate are not sympathetic to our considerations. That may be an important theme running through today's considerations.

I have recently celebrated—if that is the right word—the anniversary of my first appearance in the House 20 years ago—

Mr. Simon Burns (Chelmsford)

That is no cause for celebration.

Mr. Tyler

I thank the hon. Gentleman.

I first entered the House in 1974. I have been here slightly longer this time than when I previously came, when I entered the House on 1 March 1974 and departed in the autumn. The political landscape has dramatically changed in the countryside in that period.

Some 20 years ago, the Church of England was considered to be the Tory party on its knees, and 20 years ago the National Farmers Union was considered to be the Tory party on its hands and knees. That has all changed, and I suppose that I should pay tribute to the right hon. Member for Suffolk, Coastal (Mr. Gummer) for his single-handed efforts in making both those transformations.

Today, large areas of rural Britain are no longer represented by the Conservative party and feel that it has neglected them, as was evident in the county council elections last year. As the House will recall, the Liberal Democrats were left in charge of four county councils, and provided the lead in another 10. The Tories were left with a rump of one. The political landscape reflects an important change of attitude among the people in the countryside. The certainties that have been removed in that period were summed up in the certainty that was previously attached to the common agricultural policy, but has now come tumbling down.

When the then Minister came to the House in July 1992, he told us that he had achieved a great deal in Brussels. He said that he had put the CAP on a secure footing and that it would cut its costs, complexities and surpluses, and yet still leave farmers with improved competitiveness and improved standards of living.

I think that, 18 months later, we have heard evidence in every speech today to show that people recognise that that was not a solution—it was but a transition. It may be necessary to unravel it to a considerable extent if we are to achieve the sort of healthy economic countryside referred to by many hon. Members today. I noticed that the Minister said that the reform package was settling in. The contributions of Conservative Members, let alone those of Opposition Members, show that many of us feel that it is not so much a matter of settling in as of setting out major changes.

It is unsustainable for British agriculture and the British economy as a whole to maintain that deal for any length of time. I am convinced, and have long been convinced—I said so at the time of the then Minister's statement—that a tremendous backlash is developing among the taxpayers of the more urban population to the cost of the ill directed, ill targeted investment in agriculture. That backlash is building up to a such level that the policy simply cannot be sustained.

The elements that are most visible to the public through the media are the set-aside payments. I think that it was the hon. Member for Lincoln who said in a previous debate that the £840 million—the estimate at the time—being invested in set-aside did not bear cheerful comparison with the cuts being made in the modest budgets of the sectors that he mentioned today. If hon. Members were to tell their constituents that they were asking for a 28 per cent. pay rise, but intended to set aside 15 per cent. of their correspondence and leave it unanswered, that would not be considered productive or good value for money.

Today's debate is traditionally the opportunity to review the past year. It is sad that we have not had a major agricultural debate for so long. There is clearly a perception that the way in which the Government are implementing the CAP—quite apart from the CAP itself —is making the more isolated farming and rural communities comparatively less well off over a period. That is nowhere more apparent than in hill farming regions.

I make no bones about the fact that I am not a farmer, but I live in a hill farming area, and the majority of my right hon. and hon. Friends come from hill farming areas. I mentioned that fact in my speech to a lunch of the Guild of Agricultural Journalists today, and said that those areas were less-favoured areas. The audience thought that I was making a political comment—I leave it to the House to judge whether that was so. What I said was factually correct.

The way in which the Government approached the decision has been taken by the industry—not just this sector—as indicative of a false sense of priorities. The original justification for hill livestock compensatory allowances was not to put money in the pockets of specific farmers, but to enable fanning to continue in landscapes that would otherwise be uneconomic. The HLCAs were deliberately introduced to bridge a gap, and were precisely the sort of target investment to which the hon. Member for Wantage referred. However, they fell victim to the Chancellor's axe, whereas other ill targeted general expenditure in other sectors did not.

Without question, the less-favoured areas account for some of the most important landscapes and ecological and environmental habitats in the United Kingdom. The public, even the urban majority, want to invest in just such a scheme. Not only do the vulnerable rural communities in our country deserve that support, but the nation wants to give it. That is why many of us feel that the policy adopted showed that the Government have their priorities wrong. Any dispassionate study would soon show that the true position in the hills is not one of massive increases in income over recent years. Of course it is true that LFA farmers' incomes have risen, but they started from a very low point and are only now returning to the levels of 1988–89. In 1992–93, nearly a third of the full-time LFA hill farmers with livestock in England had a net income of less than £5,000 a year.

In Scotland, the situation is just as bad. I was given the figures by the National Farmers Union of Scotland, representatives of which met some of my right hon. and hon. Friends today. If anything, the situation is more critical in Scotland, where hill farming accounts for about 90 per cent. of the agricultural land. Even after increases this year, however, Scottish hill farm incomes still averaged only £13,000. That is insufficient for reinvestment in farm businesses and for maintaining the economy of the LFAs. What is more, the extra money that is coming in is having to be used both to service debt and to replace aging machinery.

We know that there have been some improvements in the past 12 months, principally because of the one-off change in the green currency, not because of the HLCAs or because of any targeted investment in hill areas. Black Wednesday was directly responsible for the change; unless the Minister can announce today that there will be a regular black Wednesday each year—that would cause some consternation if the City were still operating at this time of night—we cannot expect it to happen again.

Other factors have also affected the hill farming economy in the United Kingdom. The fall in the value of sterling meant that sales of light-weight lambs to France and Spain rose and inflated stock prices well above the norm. But since last August, an increase in sterling has meant that lamb prices have dropped again.

Then there was the outbreak of foot and mouth disease in some parts of eastern Europe; that meant that the Italians started purchasing bull beef from other European Union states, especially this country. That too had a considerable effect, mitigating some of the difficulties confronting our farmers. We cannot expect that to happen all the time, either—it would be very depressing if it did.

Given those special factors, we cannot expect hill farmers to be able to benefit again as they have done in recent months.

My principal concern is not just this decision itself but the fact that it seems to be indicative of how the Government approach the whole future direction of the CAP: not the more effective direction of investment, to which the hon. Member for Lincoln and other hon. Members have referred. This seems to be a Treasury-driven policy to get its hands on what it is easy to get them on—farm conservation grants, HLCAs, waste water grants and the Agricultural Development Advisory Service. All these cuts have the Treasury's fingerprints on them.

I hope that Conservative Members will be stroppy in this debate. If they are, they will be helping the Minister, who wants more muscle in her discussions with the Treasury. We, the minority who represent rural areas, must ensure that, when the Minister indulges in her arm wrestling with the Chancellor, we are behind her telling her to be stroppy.

Mr. David Nicholson (Taunton)

I do not propose to be stroppy, either with the hon. Gentleman or with my right hon. Friend. He will recall that I intervened in his speech a year ago on this same point. He, I and, I believe, my right hon. Friend will all agree that farming in the upland areas needs continued support, so that it can be done in an environmentally sensitive way. The hon. Gentleman is paying due regard to the complexities of this matter, but I ask him to bear in mind the many, and increasingly environment-related, subsidies that are available to farmers.

Mr. Tyler

I understand that point, and I welcome the hon. Gentleman's general support. A study of the budgets available for what I call selective help of that sort shows that they are minute—they are chickenfeed—compared with the huge sums put into area aid and the set-aside scheme. The danger is that, if there is a backlash, it will be against all forms of support, and that would be extremely dangerous to the whole industry.

Hon. Members have already referred, rightly, to the compatibility of the CAP with GATT. I listened with great interest to Sir Leon Brittan when he spoke via a television link to the NFU AGM recently. In his first few sentences, he said that he was convinced that the general outline of the CAP package was entirely compatible with GATT, but the whole of the rest of his talk was devoted to identifying areas in which the CAP needed further reform if it was to be compatible with GATT and to achieve the sort of objectives that Sir Leon felt European taxpayers wanted.

This is of critical importance to us all. If the main driving force in Brussels, where I have been for the past 48 hours, is to continue improving the CAP far beyond the state reached in 1992, it will be disastrous if we talk about the status quo settling in. The last thing we want is that it should settle in. We must improve on it.

I do not know the contents of the report prepared for the Commission, to which the Minister referred earlier. She apparently does not know the contents either, although it is extraordinary that such a document could be produced at such a high level for the Commission with no input from the British Ministry of Agriculture—or, indeed, from Britain. Someone, somewhere, must know what is in the document. I hope that the Minister will be able to produce it soon.

In any event, if the document says that the answer is repatriation, I must point out that there are major dangers in that. Fulll repatriation of farming policy may be politically seductive in the short term, but in the longer term it could be damaging and dangerous to British agriculture, to the environment of our countryside and to the economy.

Under repatriation, who would be responsible for ensuring that member states did not move even further the boundaries that they have been asked to adopt for their subsidiarity? Who would be responsible for future GATT negotiations? It was difficult enough to stand up to the Americans in the last GATT talks, but if there is no central European Union strategy in future, what will happen? Would we have to have a whole army of Euro-snoopers to make sure that the increased subsidiarity did not wholly undermine the rules of the single market?

British farmers in particular might find themselves in extreme difficulties. Our holdings are generally larger—hence, proportionate to the electorate, the farming community is smaller in our country than it is in most member states. As our farmers know to their cost, that could mean their having a much reduced political impact. Secondly—this would have a lot to do with public opinion —subsidiarity could easily push up the costs of regulation and control. This has happened in the past. There might be a corresponding reduction in the costs of other member states which take these matters much less seriously, however.

I suspect that all hon. Members receive a great deal of correspondence about animal welfare issues. I suggested to the Minister a few weeks ago that the pressure from the —chiefly urban—public to increase standards in this area would increase costs, thus making the competitive position of British producers even more difficult.

Mr. Clifton-Brown

Does the hon. Gentleman agree that one of the consequences of repatriating our agricultural policy would be the ensuing damaging effect on animal welfare? We would then have little influence over our EC partners, whose standards are much lower than our own.

Mr. Tyler

That is a fair point, and a useful warning, of which I hope the Minister will take note.

Mr. Campbell-Savours

rose—

Mr. Tyler

I want to make progress, and I am conscious that other Members want to speak.

Other countries of the European Union are investing to a very considerable extent on the border of support systems: in marketing, in forms of assistance of all sorts —this has been particularly true of horticulture, to which several references have been made—in pigs and, indeed, in potatoes. Those forms of support at the national level and at the regional level in most other member states reflect yet again the importance that these states already attach to the promotion of agriculture.

They do so in a way that I doubt would be found easy by our Minister, who has to deal with a more urban country. There is a grave danger that, if subsidiarity is pushed to its logical position—if we totally repatriate whole elements of the policy—the uneven playing field will be made a great deal more uneven, that it will be tilted even further to the advantage of our competitors.

Where do we go from here? This direction is something that I and my party have made very clear. I was interested in the Minister's comments. Clearly she has not been briefed by Conservative central office. Our party documents contain great detail on these matters. We have so much policy that it seems that central office has a whole team permanently poring through it. I am delighted with this interest—and I say so as someone who was a Member of the House at a time when such views were not taken nearly so seriously.

I have very little doubt that, when the Agriculture Ministers get round the table again, as they will have to do within the next two or three years, to review the success of the common agricultural policy package and its compatibility with the general agreement on tariffs and trade, the points that have been raised in this debate will have to be uppermost in their minds. That being the case, those of us who come from rural areas must try to indicate the criteria by which we shall assess the proposals.

It is clear that there will have to be a strong element of decoupling, as most hon. Members will recognise. But the decoupling must be used to promote a sustainable, richly diverse, viable rural economy. Indeed, we must recognise that diversities within the United Kingdom, and not just in relation to other member states, will have to be sustained. I hope that, as a result of the National Farmers Union initiatives of this week and, indeed, of our having a different Minister, it will be possible to achieve more consensus with regard to these objectives.

Many people are now talking about a common rural policy. This is something that my party and I were promoting many moons ago. Now, it is a truism that such a policy is desirable. Clearly the objective must be the protection and enhancement of rural communities, as well as food production. Agriculture will, of course, play a core, but not an overwhelming, role. In these circumstances, we must ensure that the public can see clearly what they are getting for their money, in terms of environmental, social and employment benefits, as well as of production.

In debates such as this one, contributions from farmers are always welcome. We have heard from that quarter today that help might take the form of the provision of access or the replacement and renovation of landscape detail—stone walls, hedgerows, Cornish banks, and so on —or full extensification. I share the view of the hon. Member for Lincoln about help for those who are already promoting organic husbandry. Such people may even be propagating rare breeds. All such projects are entitled to support.

But the essential point is that the farmer must be given an element of choice. It is not right that he should be forced into a particular type of husbandry. There should be a menu approach, as in the pilot Baden Wurtemberg scheme in Germany—the MEKA system. That system has the huge advantage that it provides a degree of continuity at the regional as well as the national level, and relative security for the industry.

I should like to refer briefly to the unsung issue of the afternoon—milk marketing. It is very significant that not until the right hon. Member for Westmorland and Lonsdale (Mr. Jopling), a former Minister of Agriculture, raised this issue did the Minister spend any time on it. It is quite extraordinary that it has taken so long to digest the milk marketing boards' proposals—to the extent, it seems, that the proposals for the residuary body were not prepared and ready at the time of the original submission.

Setting that matter to one side for a moment, I have to say that it is quite extraordinary that we should now be told that those producers who have signed up with Milk Marque will have a cooling-off period—they will have time to break the contract—whereas those who have signed up with anybody else will find that they are locked in, or, according to the Minister, that legislation may be brought forward to allow them to break contract. Either way, it is an extraordinary situation. This seems to my hon. Friends and me to be yet another attempt to hamper what could be the last real chance of achieving a power block of producers in the market, with a real producer co-operative.

I should like to give voice to a new concern—a matter that has been drawn to my attention within the last 24 hours. Representatives of the Agricultural Development Advisory Service seem to be entering the fray, taking up a position between the competitors for the new contracts. ADAS is an executive agency, but the buck must stop with someone, and presumably that person is the Minister, who is responsible to the House of Commons.

I have been told that ADAS officials have appeared on the same platform as people setting up milk selling groups. It seems to me that this constitutes a withdrawal from the position that ADAS has always adopted—the provision of unbiased advice on a non-commercial basis. I hope very much that, at the end of the debate, the Minister will be able to assure us that there is no new question mark over the impartiality of ADAS officials. This matter is causing great concern in milk producing areas all around the country, and especially in my area of Devon and Cornwall.

It is clear that there will be drastic changes in the CAP. It was clear during my discussions in Brussels, and it is clear every time the Minister comes to the House, as it is clear in the contributions of hon. Members on all sides. But reorientation of this huge investment in rural areas, to ensure that in future it is selectively targeted to support the most vulnerable sectors, communities and landscapes, will require the attention of all of us. I hope that, to this end, the Minister will build on consensus, and not simply occupy the position of a puppet on a Treasury string.

6.56 pm

Sir Roger Moate (Faversham)

I apologise to the House for having missed the opening speeches, especially that of my right hon. Friend the Minister of Agriculture, Fisheries and Food. I should like to take this opportunity of recording my admiration for the very robust way in which my right hon. Friend is leading British agricultural policy, and I thank the Minister of State for the robust way in which he has been helping the fruit industry.

I am very glad that I did not miss the speech of my hon. Friend the Member for Wantage (Mr. Jackson), although he—sensible chap—is missing mine as he is temporarily out of the Chamber. His eloquent presentation of the argument for the repatriation of much of agricultural policy was music to my ears. For many years such a speech in this House would have been regarded as sheer heresy when uttered by someone like my hon. Friend who is supposed to be a passionate believer in the European cause. How refreshing it is that, these days, we can have a sensible, open debate without people being accused of being anti-marketeers or pro-marketeers.

My hon. Friend is clearly right to say that the price support mechanism and the intervention system are obsolete and need to be replaced. He is clearly right to suggest that as the Community enlarges and other nations such as Norway and the Visegrad Four are brought in, no one in their right mind would refuse regions in those countries with very special needs the right to sustain agriculture in those regions.

If that argument is to be upheld, however, we shall have to move to different form of support. I think that my hon. Friend suggested that we should have to move to a proper regime for national aids. This answers the point made by the hon. Member for North Cornwall (Mr. Tyler). Already we are seeing real threats to many sectors of agriculture —particularly horticulture, with which I shall deal in a moment. It is clear that the system is not working. In a European Union of perhaps 20 nations we shall have to have mechanisms to prevent distortions of intra-Community trade.

The Minister of State, admirably, leapt to his feet to say that of course he would vigorously challenge any evidence of unfair state subsidies. But very often the distortions of the market are not caused by overt state subsidies or even by covert state subsidies. Very often, dumping can be carried out by commercial organisations trading simply for cash flow. If they do it at a particularly vulnerable moment, when another country is marketing its product, it can be extremely damaging.

The European Community, or Brussels itself, will have to move away from being a great machine for recirculating money; it will have to become a more sensitive organisation, trying to monitor trade distortions within the Community and operating an orderly marketing system. It will not be only the British who will suffer if that does not happen; the Spanish and other nations whom we sometime accuse of damaging the markets will also be affected.

The points made so far in the debate about the philosophy of the CAP underline the importance of the report that has been much mentioned today—the famous report that appears to have been suppressed by Brussels bureaucrats. The publication of such a report would contribute to a healthy debate about the future of agriculture. We need that report, and presumably we have paid for it, or part of it, so we are entitled to have it.

I have some of the press releases of the time. The defence in Brussels of its non-publication was: There could be as many as 100 studies going on at the moment … These reports are ten a penny. I bet that they are not 10 a penny; this one took two years, was produced by 10 leading agricultural economists and must have cost a great deal of money. It seems to be an important report.

I will also quote some of the comments in the newspapers: The two-year study concluded that the CAP could no longer be justified, and said farm prices should be left to fall to world market levels, with subsidies, import barriers and production quotas all abolished. The result would be cheaper food in the shops, with every British family saving at least £530 as artificially high prices tumbled.". Another article stated: According to Professor Kenneth Thomson … one of the report's authors, it would also save British and other European consumers about £37.5 billion per year in food prices". The report proposes renationalising agriculture and passing back to nation states the obligation—an important condition—to pay farmers direct income support and other national supports. That is extremely important and is music to our ears. Many of us have been calling for the repatriation of most agricultural policy for a long time. We may be right or wrong, but we should be debating the issue. I hope that my right hon. Friend the Minister will ensure that that report is out in the open and published very soon.

I shall be brief as I know other hon. Members wish to speak. I shall concentrate my remarks on horticulture. The hon. Member for Lancashire, West (Mr. Pickthall) talked about one of his constituents having to destroy a large quantity of lettuces. I speak not for lettuces, but for apples in particular, and other horticultural production from Kent. We might be talking about lettuces—or apples, as we do in my part of the world and other parts of United Kingdom —but many horticultural products are equally vulnerable. Something has to be done in the near future, not just in the interests of the British horticultural industry, but ultimately for other horticultural interests throughout the European Community.

I particularly welcome the report that my hon. Friend the Minister of State instituted—the survey of horticulture. I understand that it is very wide ranging and will cover all aspects of horticulture. I hope that my hon Friend will beef up the report, because it comes at a crucial time and is of tremendous importance. We have very high expectations of it. I hope that my hon. Friend is aware of that and will deliver an analysis of the problem and a range of answers.

One of the key criteria on which that report works is market co-ordination, matching volume and continuity of supply to requirements". That is a magnificent objective, but what on earth is the point of having a British study trying to match continuity of supply to requirements if virtually every horticultural product from Britain can be challenged and its marketing distorted overnight by floods of imports from overseas, whether from other members of the European Community or from outside Europe?

We need to deal with excessive imports into the United Kingdom. It is no good saying that we must improve our marketing arrangements, as has happened with apples, improve our research and development to the point of perfection and do everything possible to sell our lettuces, blackcurrants, apples or pears, if we cannot prevent a sudden flood of imports into the market just when we are trying to market those products. That is the crucial point.

I return to apples—the product that concerns us most in Kent at the moment. As hon. Members will know, a few weeks ago we had a splendid lobby of apple growers at the House of Commons. They did a wonderful job and put a very strong case. The price of quality Cox's apples has dropped by nearly a third since last year and they are facing a serious threat to their livelihood. We tabled an early-day motion and hon. Members from all parts of the House signed it enthusiastically.

There is tremendous understanding and support for the English apple grower. The English apple is a super high quality product—one of the best apples in the world, if not the best. Everyone knows that the industry has done everything it can to help itself. It has paid for much of its own research and development and improved its marketing to a high level, but what is the point of all that if there is a structural surplus in the European Community, a growing world surplus and freedom to dump products on the market where our product is on sale? It requires only a small volume to kill a price.

On the other side of Westminster bridge there is an enormous advertisement for every variety of French apples, all with good Anglo-Saxon names. It is surprising how the French abandon their passionate belief in their language when it comes to marketing their apples in the United Kingdom.

In Sittingbourne in my constituency—the heart of the apple country—there is an advertisement for United States apples. At this time of year, when our apples are still coming out of store—many have been stored for a long time—we need high prices, but just at this very moment in come floods of foreign apples.

Some 20 years ago, as my hon. Friend the Minister of State who is in the business will know better than I, there used to be a sensible marketing arrangement with countries in the southern hemisphere. They did not market in our season but came in when English apples were no longer available. In the interests of all producers—they all have an interest in an orderly market, leaving markets intact and not destroying a market or their competitors—it must surely be possible, within the European Community and with our main importers from abroad, to try to engineer an agreement such as the one that applied many years ago to the southern hemisphere. If we can do it for apples, we can also do it for a range of other commodities. It will never be perfect, but orderly marketing arrangements—perhaps operated throughout the European Community—are vital.

People might say that I am concerned about apples because I am from Kent or that I am concerned only with my own backyard, but it is important that the House of Commons and the nation should understand the importance of horticulture. Today we have a debate on agriculture. We seldom have a debate on horticulture; yet its contribution to the national economy is enormous. It is one of the Britain's major industries. We are told that agriculture contributes 1.2 per cent. of gross domestic product, but all the industries looked after by the Minister of Agriculture, Fisheries and Food represent some 9 per cent. of GDP. That shows how far reaching are the implications of the agriculture industry.

Agriculture accounts for 14 per cent. of all employment. I understand that horticulture accounts for about one third of that in production terms and, I suspect, much more in employment terms. It is hard to get figures. Perhaps I can make a plea to my hon. Friend that a serious effort be made to have a proper analysis of just how many people are dependent on horticulture, because if we can understand that factor, we might get a regular and more robust defence of British interests whenever they are threatened. In my constituency alone, in which some 2,000 people are dependent on agriculture, during the summer season, some farms will each employ several hundred pickers. One can multiply that figure quite dramatically. They are employed for a few months—and pay their national insurance, just in case anybody doubts that. That income is very important for those families.

Horticulture is of tremendous importance and that is not fully understood. Some £2 billion in production comes from horticulture.

Mr. Tyler

I have listened with great interest to the hon. Gentleman's argument, but having made an eloquent plea for the repatriation of the CAP he now seems to be developing a case for a common horticultural policy negotiated right through the Union. It is a good case, but one needs both.

Sir Roger Moate

Perhaps I did not express myself as clearly as I should, but in fact I am saying exactly the opposite. I do not believe in the CAP: I believe that we should have national agriculture policies controlled by the European Community within a free trading area to try to prevent market distortions. That is what we are moving to anyway and I welcome it very much. It is not easy to operate, but the present system is failing in any event. No system of protection operates efficiently. We are moving away from centralised price support systems and we should do the same in horticulure.

Mr. Cynog Dafis (Ceredigion and Pembroke, North)

I presume that the hon. Gentleman means within European budgetary limits. That is, national or member state expenditure would have to be within budgetary limits set by the European Union.

Sir Roger Moate

I believe that nations could administer these policies, as they are nationally sensitive matters and are best done nationally. That is the theme that is emerging. What I am trying to say is that, in horticulture matters, there is a great international and national interest in trying to protect each sector of the market. It is easy to say, "Well, it is only £50 million or £100 million, and it might be tomatoes today or lettuces tomorrow," but every one of those sectors is important. It is all too easy to sacrifice any one of those to a competitor one day—Spain, for instance. That is a dangerous road to go down.

Mr. Ainger

rose—

Sir Roger Moate

I will not give way. I apologise, but I have spoken for longer than I intended.

It is important to emphasise the importance of horticulture and to take legitimate steps to protect our interests, not just because of the employment factor or its high gross product, but because it is one of the highest added value factors in agriculture. We argue about the value of wheat or cereals. An acre of wheat might produce £200 or £300 while an acre of strawberries might produce £5,000, £7,000, £8,000 or £10,000 of product for UK Ltd. and generate a lot of employment. The same applies to top fruit, and right across the board. We should be wary of allowing sectors of horticulture to be undermined or destroyed. That is a good message for every member of the European Community. We should take steps to protect our home markets and home industries at the sensitive time of the season.

With regard to apples, what we are asking for will not cost money; indeed, it will save money. In my view, the intervention system must be changed. It is a great distortion and must be modified and, ultimately, eliminated. That in itself will save money. Europe has a large structural surplus. A number of varieties of apple are in serious surplus and need to be grubbed out. We are asking the Government to support a European-wide grubbing-out scheme. That is being proposed in the European Community and I hope that it will come to pass. It will pay for itself in a very short time because it will save a great deal of fruit from being wasted or taken into intervention.

I thank my right hon. and hon. Friends on the Front Bench for the support that they have given so far. I urge the strongest possible support for structural change, especially for apples, but also that we give a great deal of backing in future to studying new regimes within the European Community to prevent marketing distortions, particularly with minimum import prices for products coming into the United Kingdom.

7.14 pm

Mr. Alan W. Williams (Carmarthen)

I strongly sympathise and agree with the hon. Member for Faversham (Sir R. Moate), particularly on the first half of his comments about the need to repatriate part of the CAP. I like the word "subsidiarity" in the Europe-wide context and within Britain, too, in terms of the regions. It is important that we move towards devolving as much power as we can, especially concerning the CAP.

My hon. Friend the Member for Edinburgh, East (Dr. Strang) made quite a scathing attack on the whole of the CAP. I have had similar views, as have the general public, for decades. Indeed, when we joined the European Community, the cost of the CAP was one of the big problems. The policy was devised for France, Germany and Italy, not for British farms, which are larger and more economic and efficient than French or Italian farms.

The nonsense of the CAP seems to carry on and on in terms of its cost, the support mechanism, surpluses, the dumping of those surpluses and their effects on third world trade, and high food prices for the consumer. Its environmental effect is very damaging, because the whole thrust is on production and that has encouraged more and more intensive agriculture.

I have sat through debates in the House on reform. We talked about stabilisers in 1988. We talked about the MacSharry plan and its variations. We debated GATT and the influence that it might have on the CAP. We are on some kind of roller coaster, in that no matter what we try to do, it seems to get more expensive by the year. I notice that, in the current reforms, the CAP will cost us £30 billion this year—£4 billion more than it did last year.

My hon. Friend the Member for Edinburgh, East talked about set-aside and the absurdity of it. The general public cannot understand why we need to put away 5, 10 or 15 per cent. of our land and not grow anything. Environmentally, it does not help in any way. It is even questionable whether it reduces production substantially. I notice that, in the United States, which has had set-aside for decades, only some 13 per cent. of the land is efficient, because the land that is set aside is usually the poorest land and therefore the farmer will grow even more intensively to maintain his output on the rest of his land. So that for every hectare that is set aside, only one third is effective in reducing production.

The compensation amounts that are available to cereal growers for set-aside fill the general public with fury. I read a few weeks ago of subsidy payments for set-aside as high as £1 million. I presume that those farmers are millionaires. We need to find some alternative to the whole idea of set-aside.

Mr. Clifton-Brown

Having made a study of the subject, I believe that only one body in the country is paid £1 million under the IACS—the Co-operative Wholesale Society.

Mr. Williams

I do not have access to my sources of information now, but about a month ago The Sunday Times quoted several people to that effect. I am sure that the hon. Gentleman agrees that a £50,000 maximum, in terms of income derived from agricultural support for any one holding, makes good sense. As was suggested earlier, that should apply to all farmers, whatever their source of subsidy—set-aside or otherwise.

Like the Government and farmers' unions, my party realises that the CAP is not appropriate to British agriculture, but we are not clear about what should replace it over five, 10 or 15 years. We know that the replacement system should sustain the rural economy and maintain farmers on their land, given the current size of holdings: we have already been through a massive amalgamation phase. The system should also contribute to the environment, helping to bring about less intensive farming and maintaining the landscape. I wish that the Government had spelt our more clearly their long-term vision of a replacement. There is probably a fair consensus that the present support mechanisms are based too much on production, and need to be based more on people and the environment.

I am no expert, but I have seen how New Zealand has moved to a free market. I am amazed that a Conservative Government should be so supportive of what must be the most rigged market in the world. Every country has its agricultural support mechanisms; the arrangements become curiouser and curiouser, and more and more complicated, with every twist and turn of every new agreement that is worked out.

A recent television feature seemed to suggest that, despite terrific fears before the introduction of the free market and real problems of adjustment to it, New Zealand's agricultural system has become attuned to the new arrangements. It is producing its food more cheaply and efficiently than any other part of the world, developing its exports and becoming environmentally friendly by using less fertiliser and similar products.

Mr. Peter Atkinson (Hexham)

Is the hon. Gentleman really suggesting that we should follow New Zealand's example? He must realise that one of the effects of moving in that direction was the devastation of hundreds of farms, and the driving of hundreds of farmers off the land. Is that what the hon. Gentleman proposes for this country?

Mr. Williams

I have already confessed that I am no expert. I understand, however, that those were exactly the fears that New Zealand farmers expressed before the move to a free market. There were enormous demonstrations—the kind organised by French farmers—before the changes were introduced. According to my most recent information, however, those fears have not been realised. I do not explicitly advocate such action; I am merely suggesting that we should work towards a long-term, concrete replacement for the absurd common agricultural policy. We should think about the position in 10 or 15 years' time. The CAP is unsuitable for us; it is unpopular with consumers because it means high food prices, and it is not good for the environment.

Mr. Campbell-Savours

The House should not shut its eyes to the New Zealand experience. We can learn lessons from it without entirely dismantling the present policy.

Mr. Williams

I am grateful to my hon. Friend for putting the matter in context. Let me suggest a possible long-term alternative. A free-market mechanism could be backed up by a form of income support, or similar social payments, to maintain the rural population; but the largest contribution should come from farmers, whose role should be to maintain the environment. That involves an enormous amount of work.

Given the present framework in the European Community, however, I cannot see how such an arrangement is possible. That brings me back to the question of subsidiarity. The CAP needs to be devolved as far as possible to individual component states, and to the regions: Wales, for instance, should be treated differently from Scotland, and the same should apply to the various agricultural areas of Wales—horticultural, cereal-growing and grassland.

One of the major long-term alternatives to the CAP must involve the role of farmers in environmental protection. Last summer I wrote to the Welsh Office asking for a breakdown of the environmental grants now available to farmers in Wales: what were the individual schemes, and how much did they provide altogether? In the current financial year, total planned expenditure was £16.6 million; total support for the CAP in Wales is £197 million. I was surprised and pleased to learn—I could not quite believe it—that some 8 per cent. of support for agriculture in Wales is now environmental.

The Welsh Office administers a plethora of schemes —far too many, in fact. There is a range of them, involving environmentally sensitive areas such as Tir Cymen, sites of special scientific interest, management schemes and so forth. I think that it would be much wiser to amalgamate them into a single scheme as was suggested by the hon. Member for Ceredigion and Pembroke, North (Mr. Dafis).

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

The hon. Gentleman has made an important point. May I amplify it? He said that he was surprised at the amount being spent on such policies. He should know that there is no doubt that the United Kingdom leads all the European countries in the progress that it has made within environmental farming. United Kingdom farmers and the Government can be very proud of that.

Mr. Williams

I wish that I could agree with the Parliamentary Secretary; unfortunately, I cannot.

I am pleased that the Welsh Office is showing the way to the rest of the country. According to figures from the Council for the Protection of Rural England, the Government have provided a total of £43 million in environmental grants. In her opening speech, the Minister mentioned a total of £100 million in a budget of about £5 billion for agricultural support. That means that only about 2 per cent. is provided in environmental grants across the country. As I have said, I was pleased to learn that the figure in Wales was 8 per cent.

Hill farmers in my constituency have a particular problem. Their morale has been generally knocked by a second successive year of cuts in hill livestock compensatory allowances, and there is an air of despondency about the future. Farm incomes have risen, and Welsh farmers have shared in that increase—although there is a problem with the statistics; we do not know which figures to believe. The NFU tells me that the average for less-favoured areas throughout England and Wales is between £13,000 and £14,000, and quotes the Ministry as its source; ministerial statements, however, mention £19,000 a year.

The NFU branch in Llandovery, in my constituency, has 127 members, 51 of whom are on family credit—a staggering 40 per cent. of farmers in the area. The average age of hill farmers in Wales is 57, and young people see no future in hill farming. They drift from the land to other professions and to the towns because of a lack of confidence in the future of hill farming. I hate to think who will be managing the rich landscape of Snowdonia, the Brecon Beacons, Carmarthen and Ceredigion in 10 or 20 years' time. The hill farmers' role in maintaining that landscape should be recognised.

I read a briefing earlier today about the Lake District which stated that in 1991 3 million people visited Cumbria, generating £470 million for the local economy. The rich landscape that those people come to see and admire has not come naturally but has been created and maintained by farmers in the region.

Mr. Campbell-Savours

Many people go to the Sellafield visitors centre.

Mr. Williams

I do not think that that industrial plant helps the landscape.

Hill farmers work in the tourist regions of Snowdonia and mid Wales and we should maintain them in their profession.

I have been certain for the past 20 years that the common agricultural policy is the wrong way to support agriculture and I think that 90 per cent. of the British public agree with me. As a society we need to develop a clearer vision of the future—that goes for the political parties and farmers' union—and of where farming should be at in 10 or 15 years. Support for agriculture should be based not on production but on people and the environment.

7.31 pm

Mr. James Paice (Cambridgeshire, South-East)

I declare an interest. As stated in the Register of Members' Interests, I am a director of a farmers' co-operative and I have a very small farming interest that, even in Portugal, would be recognised as such.

The hon. Member for Edinburgh, East (Dr. Strang) responded earlier to my intervention about the milk marketing board and the penetration of the British produce market by imported dairy produce. He laid the blame for that penetration on the quotas, which were introduced in 1994, and on the fact that we do not have enough quota for our production. He is shaking his head, but that was clearly his answer. That penetration was already taking place during the 10 years before the introduction of the quotas. Since their introduction, we are continuing to put butter into intervention because of the rigidity of the milk marketing scheme, which prevented our dairy industries from facing up to the challenges of the market place.

Dr. Strang

The hon. Gentleman makes an intelligent contribution to our discussions. There is common ground between us in that we both want more production of high-value products. The milk marketing scheme encouraged the consumption of milk in liquid form because the Labour party supported, and still strongly supports, the doorstep delivery scheme and the idea that preference and priority should be given to the liquid market. Since the statutory arrangements were abandoned, that has changed, but I hope that the hon. Member will acknowledge that point and give us support for the doorstep delivery service.

Mr. Paice

Like the hon. Gentleman, I do not want to engage in cross-party bickering over the matter. Like him, I have followed these debates for many years. When he was in Government, I watched his performance from outside or from other parts of this Chamber and I am aware of his knowledge and genuine understanding of the issues. The penetration of the British dairy market resulted from the rigidity of our system, which meant that changes had to be made. I agree that we concentrated on the liquid milk market and the doorstep delivery service and I want that to continue wherever possible, but we have to face the fact that many people prefer to buy milk in supermarkets or elsewhere.

When the hon. Gentleman was a member of the Council of Ministers, there were only nine member states. Even then—as he will have experienced—it was difficult for the nine member nations to reach genuine decisions and to speed up those decisions. There are now 12 member states and we are moving towards 20 in a few years. By castigating the Government for failing to destroy the CAP, he fails to recognise the reality of power, as opposed to the desires of the Government in power.

I was interested in the hon. Member's kind comments about my contributions to debates on agriculture. It is five years since I spoke in an agriculture debate, having spent four and a half of those years as a Parliamentary Private Secretary in the Ministry of Agriculture, Fisheries and Food, when I was prohibited from participating. Never in my lifetime, which has been spent in or close to the agricultural industry, has farming and agricultural policy been so unpopular.

That unpopularity has been brought about by many factors. Memories of the shortages during and immediately after the war have become dim and do not exist in many people's minds, including those of my generation. I believe that £28 per family per week—the alleged cost of the CAP —is a spurious figure. It is based on the assumption that Britain could meet all its requirements on the world market at today's world market prices. We all know, however, that the world market price is not a true, free market price—it is achieved by the competitive dumping of surpluses, as each major trading bloc seek to out-subsidise each other's dumped exports.

The current dissatisfaction is caused by the supposed desecration of the countryside by agricultural policy. That has been massively exaggerated, but none of us can deny that that concern has some foundation. The policy of set-aside is another reason for the unpopularity of agricultural policy, as are the health scares caused by pesticides, nitrates and other chemicals in food, which are of particular interest to my hon. Friend the Minister of State. Often those concerns are based purely on emotion and the fact that modern technology can detect almost anything in anything rather than on genuine scientific evidence.

It must be recognised that farmers have shown in some cases an unwillingness to change. That is changing dramatically, but they have shown themselves unwilling to face the free market. It cannot be denied that the cost of the CAP—£21 billion a year—to the European Community taxpayer is excessive. There have been successive efforts to adapt a system that was designed to deal with shortages to one that will deal with surpluses. There have been co-responsibility levies, the advent of quotas, and set-aside. Under the latest system, we are faced with the spectre of politicians and bureaucrats deciding how many acres of each crop should be grown and how many cows or sheep should be kept. It is a system of supply management gone completely mad. It is little different from the planned economies of the former Soviet Union, where politicians decided how many cars, tanks or widgets should be produced.

With every turn of the screw as we have tried to reform the common agricultural policy to reduce production, it has become more and more complex, with more and more bureaucrats and paperwork. Hon. Members have already mentioned the mountain of paperwork that landed on farmers' doorsteps a year ago, and I join in the congratulations that some of my hon. Friends have already offered the Government on having dramatically reduced the paperwork in this year's integrated administration and control system—IACS—round.

The more complex the system has become, the more open it has been to fraud. We have all heard the stories of olive groves that apparently moved, or did not exist at all, and of the Italian milk quota farce, whereby the quotas have not existed since the system started 10 years ago.

We have a system of intervention, and it is difficult to justify intervention with perishable commodities such as apples, which have already been mentioned, and, even worse, cauliflowers. I cannot help thinking that if my hon. Friend the Member for Welwyn Hatfield (Mr. Evans) were here he would say that not the scheme but the people who designed it were the real cauliflowers—or Janice might tell him to say that. Already this evening, the question has been asked, how can we justify a system that supports tobacco growing at a cost of £1 billion a year when at the same time the Community wants to ban tobacco advertising altogether?

While I am in destructive mode, I shall add that the events of the past two years, since the alleged reform of the common agricultural policy, have demonstrated the nonsense of the whole shooting match, the nonsense of the idea that politicians and bureaucrats should try to manage an agricultural industry. In 1993–94, expenditure on agricultural support in the United Kingdom alone, through both the CAP and the Treasury, has risen by £1 billion —that is, by one third. That is another £40,000 for each holding in the country. That is crazy. No farmer would say that he is £40,000 better off than he was last year. The system is designed to lose the money within it, yet there have been extremely small reductions in our production levels.

The reforms agreed on the back of the original MacSharry proposals were designed to reduce production, but they ignored two factors. The first was that agricultural production relies as much on mother nature and the weather in any particular season as on any other factor. The first year after the reforms were introduced there was a substantial increase in yields in much of the country, and that completely got rid of any suggestion of a reduction in yields. Coming as it did on the back of the devaluation resulting from our leaving the exchange rate mechanism, it meant that farmers' incomes rose dramatically.

Opposition Members will not be surprised to hear that I do not criticise our Ministers for what has happened. Within the present framework, British Ministers have fought hard for British interests. My right hon. Friend the previous Minister, now the Secretary of State for the Environment, fought hard against the original MacSharry proposals to get rid of the discrimination against large-scale farmers that would have ensured that virtually all the support went to the smaller-scale farmers in mainland Europe, with very little coming to this country.

Our present Minister has worked hard on the issue of pigs, as we have heard, on trying to encourage the Commission to allow woodland to be planted on set-aside and on dealing with unfair national aids in other resources. For example, the proposed limits on nitrate residue levels in vegetables have hit the lettuce growers in my constituency hard.

I do not blame farmers either. Of course there are rogues in every fraternity, and one cannot deny that a few farmers have probably over-exploited the system. But the vast majority have done exactly what both successive British Governments and the Community have encouraged them to do. They have made the right business decisions based on the situation that faced them at any one time. They have now had 47 years' experience of varying systems of market support and they have responded to the challenges.

The hon. Members for Edinburgh, East and for North Cornwall (Mr. Tyler) criticised the Government for not laying out their policy clearly. Those two hon. Gentlemen cannot have listened to some of the speeches and comments that my right hon. Friend the Minister has made. She has rightly said that we must move towards world prices. Judging by the speeches in the debate so far, that view seems to be shared almost universally throughout the Chamber.

I want not only to support that view but to emphasise the fact that prices should not be supported either directly or indirectly—it is important to mention indirect support, too. The Commission cannot be allowed to decide acreage payments—not simply the principle that we should have such payments, but whether we should receive X for oil seed, Y for cereals or Z for something else. That is going back to the policy of the madhouse. How can people in Brussels decide on such issues, given the scale of even the present Europe, let alone of a future Europe that I hope will stretch from Trondheim to Athens, and from Dublin to Gdansk? It is a system of the madhouse.

Every time that we try to do something about the problem the system becomes more complicated and more absurd. How are we to make progress? I came to the debate thinking that I had a good idea—I am somewhat chastened to learn that everybody else seems to have had the same idea. We must not only get rid of price and market support but bring into play the concept of subsidiarity. We must get rid of market and price support and all the paraphernalia that goes with it—intervention, acreage payments based on crops, headage payments, export restitution, and so on. Those are all part of product support.

All that must be done quickly. The longer we allow the system to wither on the vine the more time there will be for the weak-willed among politicians to lose their resolve and to back-track. We saw the first example of that over the GATT negotiations, with the need to buy off France.

However, I do not believe that British farmers can survive just like that, without an alternative form of support. There must be alternative measures, otherwise the massive bankruptcies that would result from the destruction of the asset base that would inevitably follow would devastate our rural communities. As several hon. Members have already said, that would also destroy the British landscape as we know it and as it is maintained and nurtured by our farmers.

The concept of subsidiarity should be brought to bear on the CAP. I do not believe in the wholesale repatriation that some of my hon. Friends have suggested; I believe that there is a halfway house, and I shall return to that idea in a moment. There is one sound reason why I do not wish for total repatriation, and it is a point on which the hon. Member for North Cornwall sought to chide the Government. As any Government have always known and always will know, ultimately the Treasury wields the whip. We all know that it is unrealistic to expect the British Treasury, with an agricultural industry very small in comparison with that of the rest of the Community, to pour in the resources that many of us believe are necessary to support agriculture. That is why I do not want total repatriation of the CAP.

At the Brussels level we should stick to setting up a framework of support, with budgetary controls and an allocation of resources to individual countries, for each nation. Common standards should be set for pesticide levels, animal welfare criteria and many other matters relating to common trading and production terms. After that, each member nation should be allowed to decide how to use its allocation of resources within the criteria set by the GATT green box. That is the most important thing.

In the United Kingdom, as has been said so many times, the system would have to be based on environmental matters and on the enhancement of our environmentally sensitive areas. My hon. Friend the Member for Lincoln (Mr. Carlisle) made a most sensitive speech on that subject, reflecting his genuine concern and knowledge of such matters. We must make the whole country, not just those parts of the country that we seek especially to protect, a conservation and environmentally sensitive area. The countryside stewardship scheme has considerable potential to be extended to deal with such matters. There would obviously have to be substantial enhancement for the upland areas, the less-favoured and the severely disadvantaged areas.

Mr. Tyler

Will the hon. Gentleman give way on that point?

Mr. Paice

I shall give way but only briefly because I know that I am taking a long time.

Mr. Tyler

I am grateful to the hon. Gentleman for giving way. I am sympathetic to what he is saying, but does he support the cuts in HLCAs?

Mr. Paice

Yes, I do, and I shall quickly explain why. First, they are an annual payment which, as the hon. Gentleman said earlier, is made to compensate for whatever else has happened to affect the income of the producers in that particular year. The matter is reviewed every year and the payment depends on what has happened. Secondly, because the payments are related to headage, which is a pity, they are production linked, and I do not believe that that is the way to proceed in the long term.

An ever-increasing number of farmers now recognise that we can and should move towards a free market. Let us consider the wheat crop, which is the most important in my constituency. Economists believe that, contrary to the present low levels of world markets for wheat, the price will rise, probably to about £90 a tonne. Most wheat producers can survive at that level, provided that they are operating on reasonable land. The hon. Member for Pembroke (Mr. Ainger) referred to support levels for cereal growing in Wales. Many of us wonder why anyone in Wales grows cereals as the land there is not appropriate. [Interruption.] Most of it is not. One of the results of the CAP has been that much of the land that has been put into cereal production is not appropriate for it.

Mr. Ainger

I do not know when the hon. Gentleman last visited Pembroke, if, indeed, he has ever done so. Perhaps he does not realise that parts of Pembrokeshire are traditional grain-growing areas. I have here information which, if I have the opportunity to make my own contribution to the debate, will show that 8 tonnes is the average in certain areas, even in our LFAs. The hon. Gentleman should not run away with the wrong idea. I am sure that the hon. Member for Vale of Glamorgan (Mr. Sweeney) can also tell the hon. Gentleman that there are significant yields in Wales, some of which are certainly comparable with those of many parts of England.

Mr. Paice

I am delighted to hear it, but the principle still applies—most of the cereal growing in the marginal areas has come about because of the development of the CAP. That is not to the long-term advantage of those areas.

A free market would enable us to compete and not only to increase our self-sufficiency in products that we are good at—cereal, livestock products, particularly where they are grassland based, and sugar beet—but to fight back on the export market. I know that that point is of particular interest to my hon. Friend the Minister of State. We would be able to fight back against the countries that have taken our markets and start to penetrate theirs. I use an example from my own constituency.

Celery is grown on a massive scale in the Fens near Ely and much is now exported to the mainland of Europe, for example, to Italy. That product is entirely within the free market but it shows that even in the horticultural sector, which, as my hon. Friend the Member for Faversham (Sir R. Moate) said, is often under considerable pressure, it is possible to fight back successfully. However, I believe that a small proportion of the money released by the ending of price and market support should be used to encourage further the development of export markets and marketing groups.

Another advantage of the move to the free market is that there would be much less room for fraud because the system would be so much simpler, and it would therefore be harder for fraud to be hidden. I now differ from some of my colleagues because I believe that it would also do away with much of the opportunity for national aid. The amount of money spent by each country would be clearly ring fenced and allocated from the Community. Any national aid that might arise would be clearly identifiable. At this point, I announce my support for what the hon. Member for Lancashire, West (Mr. Pickthall) said about iceberg lettuces about which the Minister knows I am concerned.

My right hon. Friend the Minister also referred to regulation and bureaucracy. Farmers in my constituency complain about the ever-increasing bureaucracy more than anything else. They not only complain about the total amount but believe that other countries do not face the same level of bureaucracy. They do not believe that other countries are adhering to, or enforcing, their regulations. The problem, of course, is that of proof.

When officials from the Ministry of Agriculture, Fisheries and Food talk to their opposite numbers in Paris, Rome, Madrid or anywhere else, they are reassured that regulations exist and are being enforced. That is understandable but the evidence on the ground is that they are not being enforced. We have to examine ways to find out more clearly what precisely is happening in other countries.

Most important, a free market would correct the bias against alternative production. In terms of livestock, there are deer, goats and even horses in the free market, but in arable terms, many potential new crops for industrial purposes—oil-seeds, sugar as an industrial feedstock, coppice and energy and pharmaceutical crops—currently have to compete against subsidy, and they cannot but fail.

Britain has a high population density and an increasingly urban population who regard the countryside as their place of recreation. I do not believe that they would stand for long for what would result from a complete abolition of all support for agriculture, although some hon. Members may think otherwise. The devastation of part of the countryside as marginal land was left derelict and as better land was farmed even more intensively would eventually cause a public outcry. Therefore, it is essential that we produce an alternative system based on environment factors so that the farmers can face the public with their heads held high and say that they are providing tangible benefits for the public's money, benefits that the public can recognise and respect, such as access to woodland areas for recreation and other purposes. Otherwise, we shall continue as we are.

The proposals that we are discussing today merely tinker with the reforms that we have already introduced and the CAP will continue like some Frankenstein monster, still charging on while every attempt to shackle it fails and we have to keep trying. It is time that it was demolished and rebuilt in a completely new form. To do that would be to the advantage not only of farmers but of taxpayers, consumers and the countryside.

7.57 pm

Mr. William Ross (Londonderry, East)

I listened with interest to the hon. Member for Cambridgeshire, South-East (Mr. Paice) and, when he spoke about the change to the present system of support, I thought that I was listening to a faint echo of my own words in the Chamber from nearly 20 years ago. At that time, not all the countries of Europe had reached their present level of production per acre, or per hectare. Those of us who knew farming and knew the quality of land in Europe wondered what on earth would happen if there were surpluses and food mountains, which duly arrived. That could not possibly have caught Members of either Front Bench by surprise because they had only to look across the Atlantic and examine the long experience of the United States. However, we followed the same route with set-aside and so on. Having said that, I do not propose to follow the hon. Member for Cambridgeshire, South-East any further other than to say that some of what he said, and some of what other hon. Members have said, will be of general interest.

We have a mass of paper to wade through but the bottom line for farmers is the money in their pocket or money in the bank. Many farming sectors have had a hard time in Northern Ireland. Pigs have been mentioned in the context of the United Kingdom as a whole but, in Northern Ireland, the price of pigs is currently about 94p per kilogramme whereas the production cost is 98p per kilogramme—one does not have to be much of an economist to realise that farmers will not make a fortune at that rate.

Weather conditions led to problems for the potato crop last year, which was the second consecutive bad year. In the less-favoured areas of the Province, we find that the net average income is less than £5,000 per annum, ranging from a top income of some £12,000 down to £900. The reduction in compensation levels in Northern Ireland' cost £4 million out of a total cut of £25 million. If people in that area of the Kingdom think that they have been harshly treated, they have good reason. We should note that it is the areas with the harshest climate and environment that suffered the most.

If the bottom line for farmers is money in their bank accounts in profits, the bottom line for the taxpayer is the cost of agricultural support. I can remember the searchlights over Belfast and the fires burning when t was a small child. I still believe in security of the food supply. We would be wrong to run down our farming industry to the point where we could not feed our people. Farming is a long-term business. There is a long lead time to increase production if it goes down, and we do not want that to happen.

Having said that, I am sure that no farmer could possibly be happy with an economic structure in which subsidies in one form or another can sometimes amount to more than the net farm income in certain parts of the country. I understand that that is not only happening in some areas but it will be the consequence in many more areas because of the CAP reform package that was agreed in May 1992.

On top of that, we have a desire to keep a pretty countryside through which people can wander—hedges, stone walls, and attractive, viable villages. Hedges and walls were not planted or built simply to be pretty; they were planted and built to fulfil the need for shelter for stock, marking field boundaries and farms and making life easier for the farmer. Villages were built as a result of the economic need of the day.

Enough has been said in the debate to show that people who have an interest in the matter have all been driven to the same conclusion: those things can be kept in the long term, if they are not an economic necessity for the farmer—farmers will not spend money on them—for tourists or our own people only if there is some system of subsidy or grant to landowners to keep them in existence. If society wants to keep such things, society will have to pay for them by a grant in some form or another; they are not cheap to keep.

Machines do much of the work that used to be done by hand. However, laying a hedge, building a stone wall or monitoring stock can eventually be done only by hands, eyes and feet on the ground, and all farmers know that. The question then arises whether the rest of the population—the taxpayer—will continue to finance them. Even if the taxpayer is prepared to continue to put large sums of money in the agricultural industry, for so much of farmers' spendable income to come out of the taxpayers' pocket is unhealthy. I am concerned about that, as is every farmer in the country. The question is, how will our agricultural production and food production generate the necessary money to provide an income for farmers throughout the United Kingdom?

Earlier this year, I asked a number of questions about farm incomes in Northern Ireland. Hon. Members who are interested in the precise details can look them up in Hansard from 24 to 28 February. I shall run through one or two of them; they will be of interest to many people because they show what the real income in agriculture has been. Between 1964 and 1993, the number of farmers and partners in Northern Ireland fell from 42,600 to 32,400 —a decrease of 10,000 people. The number of full-time hired workers fell from 7,300 to 1,900—in other words, there is about only one quarter of the number in 1964. The number of all regularly employed family workers fell from 24,700 to 6,000—just under one-quarter of the work force in 1964—and the total agricultural labour force fell from 100,600 to 56,500. Those are considerable decreases.

I then asked a number of questions about the total income from farming in the same years. The total income rose in cash terms from £45.5 million to £272 million—a multiple of nearly six. The number of farm businesses decreased from 37,000 to 28,000, and the income for farm business in cash terms rose from £1,228 to £9,483—a multiple of 7.2. I hope that hon. Members will keep that figure in mind. The annual wage per full-time hired male over 20 rose from £14 per week, or £728 per annum, to an annual salary of £8,306—a multiple of 11.4. In other words, during that long period, the agricultural paid worker improved his position much faster than the income per farm business or, for that matter, the income of the farmer.

The total income from farming in real terms—taking 1993 as 100—was 126 in 1970, 119 in 1971, 120 in 1972 and 133 in 1973. In 1980, it went down to 39.79, and at one time it was 53. At no other time during that long period did it pass the present level in real terms. It was almost the same story for the income for farm business, and the annual wage per hired male rose overall by 50 per cent. in real terms. The average gross weekly earnings for full-time employees in manufacturing industry in the Province during that time went from £29 in 1971 to £279—a multiple of 9.5—with a present salary of some £14,500 per year. That is £6,000 more than the salary for an agricultural wage earner.

If one thinks that that will attract people to farming and help them to stay in farming, one is living in a dream world. The reality is that young people in farming are voting with their feet. Throughout my lifetime, they have continued to get out of farming; farmers are an aging population, and the farming industry in this country simply cannot afford that. Unless we raise the level of farm income for farmers and farm workers, farmers will literally die on their feet.

Several other interesting statistics came out of those figures and I hope that hon. Members will listen to them. In 1984, the total amount for farm buildings and works was £134 million in Northern Ireland. The provisional amount for 1993 is £55.79 million. Total plant and machinery rose from £44 million to £68 million, but that is only keeping pace with inflation. People were not putting money into long-term investment in buildings and works; they could not afford it. However, they had to continue to replace plant and machinery, and they did so as best they could.

Farming is not doing well despite the rise in the past year or so. The farming industry has long been one of decline, low income, low investment, low spendable income and a drift of people out of farming. In those circumstances, we must think seriously about what we are doing and how we will increase farm income in the years ahead. That must not take a long time—it must be done swiftly.

There will not be a big increase in the amount of food which we need and which we produce, and we are probably producing a fair percentage of what we can produce. The costs of production are unlikely to fall by much more, while the costs of transport will probably increase. That leaves only an increase in farm gate prices, an increase in consumer prices or a shift in profit from the middle men and food retailers back to the farmer. In her opening speech, the Minister mentioned the retail cost of food over the counter at the supermarket and at the farm gate.

Of course, there is the possibility of restructuring farm sizes. That is not an unmixed blessing, and it has been going on for years. If we want it to continue, we need to make up our minds about to what extent we want it to continue and how swiftly we want it to come about. If we want it to come about quickly and easily, we must look urgently at a farm early retirement scheme.

The economic background which I detailed for farming during the past 25 years has left little scope for the farming community—either the workers on farms or the farmers themselves—to provide for their retirement. So far as the rural scene generally is concerned, we must keep more people in rural areas and, preferably, those who were born there because they know what to expect. It is not always a happy experience when urban dwellers move into the country.

I believe that the planners have a part to play to encourage work other than agriculture in rural areas, and to encourage people to stay there. Schools and viable shopping should exist and there should be a measure of social life.

I want to finish as quickly as I can, and I will mention just two short items. First, environmental improvement has been dwelt upon by a number of hon. Members. I say to those on the Government Front Bench that if they could solve the problem of silage effluent and render the stuff harmless, they would probably do more for the environment and for the agricultural scene than anything else which they can think of.

Secondly, I want to mention salmon cages to the Minister because he was on the Front Bench when I asked him a question about that subject today. There is a pollution problem, as the Minister knows. This may be the only fishing matter which has been mentioned today. There is a problem with lice on sea trout which has been ruinous. Most people believe that that has to do with sea cages for salmon. I am just trying to save a stamp, because the Minister asked me to write to him on the matter.

The hon. Gentleman will understand that most salmon cages are in sheltered lochs, but there is one off the coast of Antrim at Larne which is in the open sea. I understand that it has stood up fairly well and there is no problem with lice there. That is probably because the stronger tides and the more open water allow them to dissipate. Will the Minister please look at the matter?

Mr. Deputy Speaker (Mr. Michael Morris)

Order. Before I call the next hon. Member, I must point out respectfully that there are eight hon. Members who wish to catch my eye. We have 70 minutes before the wind-up, and if hon. Members show a degree of modesty about the length of their speeches, everyone can be called.

8.13 pm

Mrs. Jacqui Lait (Hastings and Rye)

I shall try to be brief, and I will certainly not follow the hon. Member for Londonderry, East (Mr. Ross) down the line of fishing, as a number of hon. Members will understand.

I have listened with enormous interest to all of the speeches today, and they have encompassed practically every issue involved with the common agricultural policy. There seems to be an agreement that the CAP is not perhaps the most appropriate policy for this day and age. Probably all of us who have been involved in politics during the past 20 years are conscious that the United Kingdom has never found the CAP an easy policy to live with.

I am equally concerned that some of the suggestions which are being made to improve the CAP would not help the problem greatly in terms of over-production and under-production. Those of us who remember the system of deficiency payments will equally remember that there would be far too much of one thing one year, and then everybody would switch to something else. There were great peaks and troughs, and to bring back national aids to each member country would, I suspect, exacerbate that problem. Hon. Members may multiply that problem by 12 at the moment, by 16 soon and by 20 in a few years.

I wish to refer to the speech by my hon. Friend the Member for Faversham (Sir R. Moate). During the past few years, there have been screams of agony and pain from the farming community, and those are beginning to become muted—I would put it no higher than that. However, there are great screams of pain within the horticultural industry, particularly in Kent, east Sussex and my own constituency.

I am delighted to say that my constituency has a mixed farming base, so we have a one-constituency common agricultural policy. Every inch is covered by environmentally sensitive areas, areas of outstanding natural beauty and sites of special scientific interest. One particular farm, which has rediscovered the 18th century seed bed, is becoming a European SSSI. We are all proud of that.

To diversify, a number of farmers have rightly and historically turned to fruit growing. I endorse everything that my hon. Friend the Member for Faversham said about the need to sort out surplus production, particularly of apples and even more particularly of Cox's. We need grubbing grants and a reduction in intervention prices.

We also need to encourage as far as possible—I am delighted that the Ministry is doing this—the further development of marketing grants and the encouragement of collaborative and co-operative efforts. The screams of pain in my constituency are coming most clearly from those who grow blackcurrants. That may seem to be a tiny part of the market, but it is an exceedingly valuable part —or it was a few years ago.

The problem is that there has been increased planting throughout the EC. Germany is now the largest producer, while there have been planting grants in France which, I am happy to acknowledge, are soon to end. There is a particular problem in eastern Europe. Probably all of us remember when the iron curtain existed, and one of the great imports from Poland then was soft fruit.

Increased planting has meant that United Kingdom prices have tumbled during the past few years. Last year, growers were able to get £250 a tonne, but now it is £200 a tonne. One of the criticisms which has been voiced tonight is how slowly the Commission reacts to setting minimum intervention prices. I believe that the Commission is likely to set minimum intervention prices in May, but that is of no help to my constituents who are fixing their contracts now, at a time when there is no floor to the market. It is possible that they will not make a profit, but will make significant losses.

My hon. Friend the Minister of State and my right hon. Friend the Minister should bear that in mind when they come to talk in Brussels about the reform of the fruit and vegetable package. We must ensure that the minimum intervention prices come in at a time when they are crucial.

The other issue which is of enormous concern is the fruit which is being produced in eastern Europe. I am not for one moment suggesting that we do anything to reduce trade, access to hard currency or any of the other benefits which have flowed from the ending of communism in eastern Europe. I want to see the markets strengthened. However, one of the problems with which we have to deal is that there is no knowledge in eastern Europe of what a market is.

The countries had centrally controlled and directed economies, so nobody knows what profit, loss, costs or everything else are and blackcurrants grown in eastern Europe are coming into the EC at giveaway prices. One of the suggestions which I would like to put to the Minister —I would be grateful if he would pass it on to my right hon. and hon. Friends in the Foreign and Commonwealth Office—is that we use the know-how fund to bolster the economic knowledge of growers in Poland, Hungary, the Czech republic and Slovakia.

One of my constituents, who is a blackcurrant grower, is going out to eastern Europe next week and will inquire directly into that problem. I have asked him to produce a report, which I shall ensure that the Minister of State receives, containing his recommendations to try to establish a knowledge of markets in eastern Europe.

The other part of the policy that needs reforming is that in relation to the wine market. England is not, shall we say, one of the great wine-growing nations, but over the years we have improved English wine enormously. We are facing problems in the European Community, especially with France, in terms of recognition of the vines that are being used, hybridity and many technical areas that I do not want to pursue. I urge the Minister of State to bear in mind that that high-quality product should be encouraged as part of the continuing diversification in farming. If we can encourage farmers to broaden their production and to ensure that, one way or another, they receive an adequate return, we shall continue to have the mixed and varied countryside that is so important to us all.

8.20 pm

Mr. Cynog Dafis (Ceredigion and Pembroke, North)

I have to declare an interest—the ownership of 32 acres of agricultural land, no more than that. What I have to say, by and large, will be in tune with the general theme of the debate, but I need to start with a few words of criticism.

The Government's position on these price proposals seems to be characterised by the fact that the Government are especially enthusiastic in support of cuts, except insofar as they are not sufficient in the area of milk, sheep, and beef—crucial sectors for my constituency and for Wales. The Government support cuts or call for deeper cuts. That cutting theme is of a piece with other measures that have aroused the ire of the agricultural community in Wales, and which I want to mention.

The reduction in hill livestock compensatory allowances has been justified by the Government in terms of the increase in incomes since 1990. However, those increases were from a very low level—still lower than they were in 1988–89, and attributable largely to the devaluation of the pound. Those increases are already being eroded by the increase in the value of the pound. Will the Government undertake to increase the value of HLCAs if the pound continues to gain in strength and less-favoured area incomes decrease?

The reduction from 50 per cent. to 20 per cent. in the farm and conservation grant scheme for the disposal of silage effluent, slurry, dirty water and so on is most unsatisfactory. In my constituency the effect will be that many small farmers, especially middle-aged ones, will be unable to meet the capital costs of works, will find themselves facing the possibility of heavy fines for pollution, will leave milk production, will sell their quotas and will thus eliminate a farm as a viable unit. That process has very damaging social and cultural effects in rural areas.

That is the opposite of what we should be trying to achieve nowadays. We need measures to strengthen and maintain small family farms. I endorse the suggestion of the Farmers Union of Wales that if we are to have a milk quota cut—I notice the Government's undertaking not to support such a cut—the first 240,000 litres, for example, should be exempt from any such cut.

Even more fury has been aroused in Wales by the way in which the arable aid scheme discriminates against cereal growers in the way that has been mentioned. The basic injustice of the lower level compensation in Wales has been compounded by the Government's efforts to get out of difficulty. First there was a carve-up in Wales on parish lines, with some farmers gaining at the expense of even lower levels of payment for their neighbours on identical land just the other side of the parish boundary. That was followed by the less illogical, but still unsatisfactory, LFA/non-LFA division.

Welsh farmers want parity—no more and no less—with their English counterparts. I am asking for an undertaking from the Secretary of State for Wales that he will fight for that parity until we get it, but of course the Secretary of State for Wales is not in the Chamber. His absence is astonishing. I cannot believe that when we are debating such a vital industry in Wales—an industry that in mid-Wales, for example, employs about 20 per cent. of the work force—the Secretary of State for Wales, who is the Minister of Agriculture for Wales, is not present, especially in view of the many grievances that Welsh farmers have these days.

The rest of my remarks are based on the relationship between agricultural policy and the environment and on environmental sustainability. I express my great pleasure at the emerging consensus of the importance of bringing those two themes together. Environmental sustainability must henceforth be the guiding principle of all policies, not simply in agriculture. All development henceforth must be based on the principle of sustainability. That is recognised by the international community in new international conventions, by the European Union in very important policy documents, and by the British Government in documents published a month ago. The Government have declared that they will work for a higher proportion of EC expenditure on direct payments to farmers to be applied to encouraging more environmentally sensitive farming". It is good to read that type of commitment. We have to wait and see whether it amounts to anything substantial. The Government also speak about the application of environmental conditions to support payments — interesting stuff.

We have the beginnings of such a trend in many initiatives in Wales—useful and praiseworthy enough, but their number, as has been suggested, constitutes a problem.

Agri-environmental schemes for Wales under EC directive 2078/92 include, on the Wales-wide level, the farm woodland premium scheme, the farm and conservation grant scheme, the hedgerow renovation scheme and the habitat improvement schemes. They also include the organic farming scheme, which is a scandal and needs to be rectified because of its very unfair treatment of organic farmers. Also there is the moorland extensification scheme. Those are on an all-Wales level.

On a territorial basis we have Tir Cymen, we have sites of special scientific interest management agreements, and of course we have environmentally sensitive areas. Those are administered by the Welsh Office Agricultural Department and the Countryside Council for Wales. In addition, other schemes are available in and through national parks, by local authorities, and by the Forest Authority. We thus have a plethora of schemes, some overlapping—two, for example, concerning woodland, one obviously inferior to the other and therefore never taken up —administered by three national organisations, plus the national parks and local authorities.

Countryside and agricultural organisations are at one in lobbying for rapid progress towards a single consolidated scheme for the whole of Wales. Such a scheme would be more cost-effective than the existing ones; it would avoid the danger of double funding; it would be easier to evaluate and to modify to improve performance; it would be much more comprehensible to farmers and their advisers and so would be more readily taken up, because currently people are no doubt confused by the multiplicity of schemes and organisations. A single scheme would provide the one-stop shop where users would deal with one organisation—one officer.

The Countryside Council for Wales reckons that the net additional costs of an all-Wales agri-environment scheme at 1993 prices would be about £26 million per annum. Simply on economic grounds, that would be an excellent investment, in my view. It would provide an element of stability for farm incomes. It would be good for tourism. Midmore and Jenkins of the university of Wales, Aberystwyth, have calculated that there would be significant employment gains in rural areas. There would be a certain amount of loss of employment through reduced inputs and so on, but there would be a significant net increase in employment through increased demand for labour and materials in relation to environmental tasks such as fencing, hedge restoration and tree planting.

The environmental benefits would considerable, obviously in terms of the visual attraction of the countryside but also, and more importantly, in the crucial area of biodiversity. It is impossible to over-emphasise that consideration. Biodiversity is the subject of an important Government document published a month ago, along with the sustainable development strategy. Socially and culturally, such a scheme would be extremely advantageous to rural areas. Unfortunately, the Welsh Office failed to set in train a process of creating such an all-Wales integrated scheme a year ago. The possibility existed but was not taken up.

However, the Secretary of State for Wales set up a working group to consider the issue in October and I understand that the working group is about to report to him. This debate should concentrate his mind on what he should do with that report. I trust that it will not turn out to be a mechanism for postponement and that the Secretary of State for Wales will see the opportunity for Wales to play a pioneering role in the area. I was delighted to hear the hon. Member for Carmarthen (Mr. Williams) say that the percentage of support in Wales was higher than in the rest of the UK.

I strongly believe that agri-environmental payments should occupy an increasingly central role in agricultural support on a European level. Currently, they constitute no more than 5 per cent. of the European Union or British agricultural budget. There is every reason to believe that they could and should become the primary mechanism for agricultural support, rather than continue to occupy their present marginal position. They would encourage an extension in production, a way of reducing overproduction infinitely preferable to the set-aside scheme and its inevitable corollary of intensified production on the remaining acreage.

Agri-environmental payments would work through management agreements on environmentally-sensitive farming systems in return for direct, annual, area-based payments plus capital payments for specific environmental enhancement. Good husbandry, skilful crop management and efficiency would be rewarded in the market place and in profit margins. There is ample evidence, including from the Organisation for Economic Co-operation and Development, that direct area-based payments are easily the most cost-efficient means of providing agricultural support. In the interests of maintaining small-scale family farms and a living countryside, those area-based payments would have to be modulated. I know that that was once a dirty word for the Government, but they would have to be modulated or tapered on an acreage basis. The scandalous state of affairs whereby 20 per cent. of farmers receive 80 per cent. of the subsidy is unsustainable morally, socially or in public relations terms. There is little doubt that such agricultural support would be legal under GATT and would come within the green box.

With CAP reform due in 1996, now is the time to explore in detail the mechanisms and implications of such a switch. If we merely limp and lurch from cut to cut, as is currently happening, we shall end up with environmentally damaging agricultural business and a devastated countryside, neither of which we can afford. What we need is not cuts but a pro-active approach to environmentally sustainable farming applied flexibly throughout the European Union according to local circumstances. That requires a radical redirection of support aimed, at the very least, at maintaining the agricultural population at its present level. There is no justification for continuing to reduce the agricultural population.

Agri-environmental payments would provide greater stability and confidence in forward planning and would probably provide economic security for greater numbers of people at a significantly reduced cost to the taxpayer. That is the way ahead.

8.33 pm

Mr. Peter Atkinson (Hexham)

I am grateful for being called to speak. I hope that the House does not consider it a discourtesy that I have been absent for much of the debate, but I am serving on the First Scottish Standing Committee, from which there is no parole. I represent a constituency in which agriculture is still the largest industry. Much of it is in less-favoured areas and I shall concentrate my brief remarks on hill farming.

The reform of the CAP coupled with a reduction in the value of the pound has brought considerable benefits to farmers in my constituency whose incomes plunged to disastrous levels in 1990–91, when they dropped by several thousands pounds to an average of £5,000.

The Government should be congratulated on changing, in the CAP negotiations, the method of paying premium on lamb. The switch from a variable premium has given a considerable boost to the market for exporting live lamb. In my constituency, some 30 to 40 per cent. of lambs are exported. The measure has been particularly valuable for hill farmers because the small, hardy hill ewes produce small carcasses that are popular in southern France and Spain, while the bigger carcasses now go to the rest of France. Although that is good news for hill farmers, it is bad news for English consumers who must now pay continental prices for their lamb.

Nevertheless, hill farmers still face problems. One of the reasons why there was such an outcry when hill livestock farming allowances were cut was that they were based on average incomes. For every farmer on average or above-average incomes, many more are on below-average incomes and they have suffered because of the HLCA cut. I understand the logic of cutting the payment, which is meant to go up when incomes go down and go down when incomes go up. The difficulty is that farmers on small incomes see it simply as a reduction in their income, which can be crucial if their earnings are very low.

I agree with my hon. Friend the Member for Cambridgeshire, South-East (Mr. Paice) that one of the disadvantages of the HLCA payment is that it is paid on headage. I hope that the Government will move away from a headage-based support to switching at least some of the premium payments to area payments in the hills. I know that such a way forward has been pushed by the National Farmers Union and the Moorland Association, but it would improve the guarantee of an income for upland farmers without forcing them continually to increase stocking.

The time for hill farmers has come. I appreciate the fact that agricultural Ministers have been busy with the CAP reform, GATT and other important negotiations like the reform of the milk marketing board system, but the problems facing hill farmers should now move up the agenda. One or two things can reasonably be done to help them. Apart from de-coupling premium payments and replacing them with area payments at no extra cost to the taxpayer, another great help would be to pay all the special premium on beef in a lump sum to producers. The idea of paying it in two parts after eight and 24 months is fine but it is unsuitable for hill farmers, who cannot keep beasts that long.

It would be a great boost to such farmers if the money could be paid to the producer as it would simplify much of the administration. It would also have the benefit of improving the marketing of beef. At present, much of the beef is going on the market because of the payment of the second part of the premium rather than because it is the optimum size for slaughter, so the measure would improve the quality of the carcass at the same time.

The Government could also continue to resist pressure by animal welfare groups to reduce the hours that animals can spend in transportation. As I said, 30 to 40 per cent. of the lambs produced in my constituency are exported. A restriction to eight hours would instantly wipe out that market. If those regulations are to be changed, they must not disadvantage farmers in hill areas.

The Government could also consider improving relationships between farmers and MAFF. With all those forms in the past two or three years, the relationship between the Ministry and farmers has deteriorated because of farmers' difficulties in filling in forms and the advice on them that they receive. I hope that my right hon. Friend the Minister understands that, as a result of quotas and IACS forms, some farmers in my constituency who have no quota have been fined for filling in forms incorrectly, in that they have not received their premium. I think that this has caused an unhappy relationship between MAFF officials and some farmers. When a farmer simply fills in the wrong box on a fairly innocent form, having spoken to the regional office, he can suddenly discover that he is short of his quota by 100 sheep. That is unfortunate. MAFF was a friend, but it is becoming less friendly and that is a pity.

These are some of the things that can be done to help hill farmers. I think the time has come to consider the hill farmer. We do not want to see our upland areas turned into television sets for series such as "All Creatures Great and Small". We want a continuing, viable hill farming community where people can live and work.

8.40 pm

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

I am very conscious of your strictures about time, Mr. Deputy Speaker, and therefore I will be brief. I had wanted to go further down the road of the debate about potatoes and milk that we had last year when the Agriculture Bill was going through the House, but I will raise just two issues in this debate.

We heard two very interesting contributions this evening from the Government Benches. One of them came from the hon. Member for Wantage (Mr. Jackson) and the other from the hon. Member for Cambridgeshire, South-East (Mr. Paice). I thought those contributions were significant because those hon. Members are obviously peering through a window that is of interest to a number of hon. Members on both sides of the House.

I served briefly on the Front Bench, and know that one is constrained to some extent as to how freely and openly one can discuss what is going through one's mind about agricultural reform. Perhaps I am now able to express a view or two on those matters a little more freely.

Having examined the brief for a year, I believe that there is an argument for patriating agricultural policy. I do not think that it is a problem in the way that the hon. Member for North Cornwall (Mr. Tyler) suggested. He seemed to think that we were talking simply of repatriating the policy in terms of regulation and standards. That is not the issue.

Everyone who takes a sane approach to these issues accepts that there must be a level playing field throughout the Community in terms of regulatory arrangement, whereby there are common standards and whereby a producer in Italy, Germany, France and the United Kingdom complies with broadly the same rules.

However, I think there is room for increased patriation of the budget. The proposition is that one necessarily has to have a level playing field on the budget throughout the Community. We can survive within the Community without that level playing field. I will give an example from the United Kingdom. The arrangements for area payments in Wales are different from those in England. While there may be those who would object to that, it shows that we can run two regimes side by side that do not provide for a level playing field. There might be a need to recalibrate, but that establishes a principle.

It is quite insane that the financial mechanisms that apply in the United Kingdom in terms of subsidy should necessarily apply in the Mediterranean countries of Europe. They produce different products in different circumstances and it might be that their climates are more favourable to one product as against another, just as our climate is more favourable to a particular product. It is really a question of accepting that there may be conditions in which a level playing field may not apply but countries are not necessarily placed at a competitive disadvantage.

The National Farmers Union should consider those matters, as there is a very good case to be made. I do not want to go too far down this route tonight, but I see budget funding in that light. Brussels advocating money for a specific purpose is not an ideal arrangement. One could establish a system whereby moneys are allocated to individual nation states based upon a mathematical formula. Once those moneys have been allocated, within an agricultural budget—some people might even say outside it—they could be spent in whatever areas national Governments decide will be their priority.

In other words, if the Italians want to resist spending money on environmental improvement—as I understand it, various countries within the Community do not want to spend money in particular areas and one is always negotiating to find a standard arrangement for allocation —let them have their money, and if they want to spend it in certain ways they should be allowed to do so.

However, why not then allow other countries to spend their money by way of area payments as against headage or promoting particular forms of production? This is how I was thinking privately during the time when I had some responsibility in such matters.

An extremely important subject is not being addressed in the debate, and there must be wide support across the House for the principles that I am about to enunciate. We have failed persistently—for decades—to deal with the problem of fraud in the Community. The problem is far greater than we are led to believe because our information sources are limited. The reasons why they are very limited can be found in the reports that were placed in the Vote Office for hon. Members to read. I do not want to go into the details today, but they suggest to me that we are only sampling what may be a much bigger problem.

Some interesting work on those matters has been done in the House of Lords. The other place has produced three reports: one released in 1988 entitled "Fraud Against the Community", another in 1992 entitled "The Fight Against Fraud", and, from the Select Committee on the European Communities, a very interesting report of 14 March this year entitled "Fraud and Mismanagement in the Community's Finances". I shall quote from that report some sections that are particularly relevant to our debate. It refers to the first two reports that I have alluded to and says: we noted that some of these proposals"— the proposals in the reports— have been implemented to varying extents. However, we concluded that there was still a lack of strong political will in the Council of Ministers to bring fraud to an end and put the management of the Community's finances on a firmer footing". In reference to a statement in one of the auditor's reports attacking failure to act, the Committee then goes on to say: This statement is depressing enough, but our concerns are heightened by the fact that the Court feels that there has been 'little or no improvement' in the financial management of the Community, despite repeated criticisms made in its annual reports. The Court considers that the Commission has had sufficient time to act or to launch any necessary legislative initiative, but has failed to do so. The Court's report also issues the warning that, unless there are radical changes, it may not be able in future reports to provide the statement of assurance about the reliability of the Community accounts and the legality of its underlying operations which is required by the provisions of the Maastricht Treaty. They are heavy criticisms, but it is interesting that, before producing the report, Committee members wrote to the Chancellor of the Exchequer. The paper to the Chancellor sets out what the Committee believed to be the alternative approach. It proposed that a task force should be set up. The paper stated that it was suggested that a high level Task Force should be set up by the Heads of Community Governments to inquire into the financial organisation of the Commission and also of the Member States, insofar as Community funds are involved and to make specific recommendations … We propose that the Task Force should be established as a temporary measure for, say, five years. It should not be a new institution and should not be seen as in any way usurping the functions of the Court of Auditors … we suggest that it be a small independent group comprised of, say, 4–6 persons with wide experience in the administration of large concerns". I believe that on Monday this week the new Commissioner responsible for such matters was supposed to report to ECOFIN on his proposals for dealing with fraud in the Community. I understand that there has been some delay—the proposals should have been published this afternoon.

I keep asking myself whether, despite the fact that the Commissioner has been appointed specifically to deal with fraud, we are once again going to dodge the issue and not face up to our responsibilities. The fact that has always worried me is that the existence of the rebate to some extent compromises us in negotiations and prevents us from laying down the law by demanding major reform.

I understand that there has been some change and that the Home Secretary's proposals will be considered by the Community. I hope that some action is taken to deal with this important sector of Community finance.

8.51 pm

Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury)

I thank you, Mr. Deputy Speaker, for allowing me to catch your eye at this time of the evening. I am glad to follow the speech of the hon. Member for Workington (Mr. Campbell-Savours).

Our purpose is to consider European Community document No. 4616/94, which I have with me and which is a bulky document—who says that the EC is not bureaucratic? We also have to consider the excellent booklet prepared by my right hon. Friend the Minister entitled "Agriculture in the United Kingdom 1993", which is a much better document. It is clearer and more informative.

Today's important debate on agriculture comes at a critical time following the 1992 CAP reform and, particularly, the 1993 GATT Uruguay round, concluded so successfully in December by my right hon. Friend the Prime Minister. It brings 116 countries within the GATT mechanism and means that, for the first time, the GATT will cover agriculture. It puts us on the road to reforming the excesses of the CAP—to a certain extent, we have the Americans to thank for that.

There are advantages in the GATT because direct export subsidies would be reduced by 36 per cent. over six years and subsidised exports would be reduced by 21 per cent. over the same period. Unfortunately, the French introduced a last minute stopgap in the Breydel agreement and extended the period to nine years. Nevertheless, at the Edinburgh summit we undertook to restrict the budget to 1.27 per cent. of our resources. The French again introduced a rider stating that if additional measures proved necessary, the requisite steps would be taken. In other words, there is a get-out clause. Despite the fact that my right hon. Friend the Minister said earlier that the Chancellor had agreed this week that the ceiling would not be breached, a get-out clause exists. We must watch carefully if expenditure within the CAP is not to go on and on mounting.

The Blair House agreement introduced a new scheme of subsidising the land rather than production. Many hon. Members have called for the ending of subsidised production, which simply extends the system of ever-increasing subsidies. The integrated administration and control system—IACS—introduced last April brought about that welcome change. We shall now gradually be able to tie subsidies to the land and perhaps, which would be even better, to the person involved.

Under IACS we set aside 15 per cent. of land throughout the EC. That amounts to about 666,000 hectares—about 1.5 million acres—in this country. That is not the correct policy for the long term. We have seen what has happened this year—farmers have taken out their best land and employed better crop husbandry techniques and better techniques generally. Although we have taken out 15 per cent. of our land, the EC as a whole has reduced its production by only 2 per cent. A scheme costing many billions of pounds in the EC that reduces production by only 2 per cent. cannot be sensible. In the long term, it will be unsustainable.

The set-aside regime did not originate in IACS, but had been operating earlier. There was a five-year set-aside scheme and, thanks to my right hon. Friend's efforts at the last Council meeting, there is now an environmental scheme over 20 years. That has enabled us to introduce more environmentally friendly farming, of which much has been said today. My hon. Friend the Member for Lincoln (Mr. Carlisle) mentioned the subject in great detail. In the time available to me I cannot develop the subject in such detail. I agreed with a number of the points made by my hon. Friend.

I have been urging on my right hon. Friend the Minister that we should include forestry in the set-aside regime. England has a forestry cover of only 8 per cent.—the lowest cover of any country in Europe. I know the problem facing my right hon. Friend within Europe where there is a much higher percentage of forestry cover. But it must make sense to plant more trees—I believe that many farmers would wish to do so—on land that will not come into production again in the near future, if ever. It would make sense to put some of that land into forestry.

I also urge my right hon. Friend to consider the management regime for set-aside. Last year we introduced a system whereby farmers were obliged to cut the weeds from their land to prevent it from becoming too untidy prior to July. Many nests and much wildlife were disturbed. I should like a regime, particularly on non-rotational set-aside, that allowed a moratorium between April and July so that the land could be left alone.

My hon. Friend the Member for Lincoln mentioned the 20-year environmental set-aside scheme. The problem is that no one will implement it at present. It is not in IACS and is financially unattractive. It would be sensible for us to have an environmental set-aside scheme, and I urge my right hon. Friend the Minister to consider that.

As well as EC environmental schemes there are domestic environmental schemes. I congratulate my right hon. Friend on creating six new environmentally sensitive areas—I am particularly grateful for the two which affect my constituents and which will be welcomed by them—the upper Thames tributaries and the Cotswolds. I am grateful to my right hon. Friend for helping my constituents and I hope that, in turn, farmers in my constituency will take up the policy with alacrity and farm in a more sympathetic way. That is exactly what the public want. I hope that, as

provided for under the ESA scheme, the public will have greater access to the beautiful regions of the Cotswolds and the upper Thames tributaries, which are well worth a visit.

I should like to move to the question of how we should deal with the common agricultural policy budget. We should be grateful to the Americans. A system that encouraged ever more subsidy and the dumping of exports on the third world at prices way below those of its indigenous products was crazy. That did the poorest countries no good at all, because their own farmers could not possibly compete, so they went out of business or—even worse—started producing drugs, tobacco or other undesirable crops.

I welcome the fact that we will reduce the subsidising of exports dumped on the poorer countries, but it is incumbent on all politicians to find a solution to the problem of starvation in the third world. World population must surely be the key to the solution. There are five billion people on this earth. That number is set to double in the next 30 or 40 years, and it will double again to 20 billion by the end of the 21st century. Neither my right hon. Friend nor I will live to see that, but my children's children certainly will. It is a sobering thought that in 100 years' time there will be four times as many people on earth—an horrific prospect for this country, too.

That is one reason why we must sort out the CAP. But there is a much more pertinent reason for doing so—to benefit our taxpayers, our farmers, and above all our consumers. We spend roughly £3 billion on our agriculture every year. The Minister's excellently produced booklet tells us that fact. Given our population of 56 million, that works out at about £60 per person per year. That is certainly a large figure, but it is not huge in the context of the Government's other expenditure. I would not claim that the public are getting value for money, but they are getting something for their money—cheaper food than they would get if we had a free market. They are also getting the sort of countryside that they want. Increasingly, the countryside will be run on environmentally friendly lines, and the public expect to have to pay for that.

There has been some discussion of repatriating our agriculture policy. As long as we are members of the Common Market, that simply is not possible. If we repatriated our agriculture policy, the French and perhaps others would continue to subsidise their farmers. That is exactly the problem for our pig farmers at the moment. The French are subsidising theirs, but we are not subsidising ours—with the result that they have to sell pigs at between lop and 20p a kilo below the cost of production. Under repatriation, how would we control that sort of problem?

We need an agreement between the 12, the 16, the 20 or whatever the EC becomes. Perhaps we can repatriate some financial policy, but we need carefully to consider the regulatory side. Regulation must be done EC wide, so that we prevent increasing numbers of subsidies.

An interesting letter appeared in The Daily Telegraph the other day, under the title "Stalking farm subsidies": We want to bring down support prices to the point where supply and demand are brought into balance. This would enable supply controls such as production quotas to be dismantled. Where compensation for price cuts is provided in the form of direct aids, this should be progressively reduced. My right hon. Friend may recognise those words—they appeared in her letter of 5 February. I agree with every word of it.

It would be wrong to follow the example of New Zealand in this matter as long as we remain in the EC. An excellent article in The Daily Telegraph of 17 March described how New Zealand has completely deregulated its agriculture. Despite predictions of doom and gloom that many of New Zealand's 60,000 farmers would go out of business, in the event only 1,500 went out of business. Perhaps many years from now we will be able to deregulate our agriculture, but it will never be possible to do so completely while we are a member of the European Union.

I should like to correct a wrong fact adduced earlier in the debate. Four countries are about to enter the EC. One of them, Sweden, has to a large extent deregulated its agriculture already. It will be a large net contributor to the EC—it will contribute about £1 billion, despite having a population of only seven or eight million. That compares with our contribution of £2 billion and our population of 56 million. Let us hope that these large net contributors join soon and bring some of their glasnost to the common agricultural policy so that we can progressively move towards deregulation and the repatriation of some budgetary mechanisms while retaining the regulatory mechanisms.

Let us ensure that GATT really works, and that we do not end up having to set aside more and more land just to accommodate the Americans, who would then increase their production and take our markets.

9.4 pm

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

I should like to begin by expressing agreement with the comment of the Minister of Agriculture, Fisheries and Food that this debate must be viewed in context. Its context is the reform of the common agricultural policy. The right hon. Lady was right to say that the farmers are to be commended. We should, indeed, commend the workers and all those who live in increasingly difficult circumstances in rural communities, which cannot, of course, be divorced from agriculture.

In the short time that is available, I shall concentrate on the issue of costs and what has happened since the introduction of the reforms. Clearly there is among hon. Members, including myself, a feeling that the reforms that have been introduced since 1992 have taken on all the attributes of a mirage. A person is in the desert and is desperate. He thinks that he has found something to meet his needs, but then it disappears. The CAP reforms of 1992 have taken on those attributes.

One means of establishing the truth of this assertion is to consider costs. The Minister told us that the reforms would keep costs within agricultural guidelines. Nothing of the sort has happened. In the time available I cannot go into great detail, but I can say that since 1992 expenditure on CAP guarantees has increased by no less than £4.2 billion—not bad going. According to the European Commission, the guidelines will not be breached next year —the figure is about 37 billion ecu, which I reckon is about £33 billion—provided that no account is taken of the cost of devaluation and of the monetary changes, which is about £1.16 billion; that we transfer £900 million of olive oil support to 1996 and take no account of it; and that we start to spend the monetary reserve even before the budget is agreed. I should remind the House that the monetary reserve was created outside the guidelines to meet fluctuations in exchange rates. Thus, unless the Minister, when she is battling for us, can change the situation, we shall have to spend money outside the guidelines to keep us within. That is absolutely crazy.

Those costs will not disappear, so they will have to be met. I estimate that between 1992 and next year we shall have increased agricultural expenditure by approximately £6 billion. These are not my figures or the Labour party's; they were produced by the Commission.

Are right hon. and hon. Members satisfied that simply noting such a horrendous situation—which is what the motion we are debating asks us to do—is good enough? Opposition Members think not. We believe that it is necessary to take a far stronger line in respect of these things. It is for that reason that we think it important to point out exactly what has happened since 1992.

What does the situation demonstrate? It demonstrates that CAP expenditure is as much out of control today as it has ever been. In fact, it is accelerating. The increase that I have mentioned amounts to about 30 per cent. The consumer and the taxpayer are being clobbered. We are pouring increasing resources into the black hole that is called the CAP. The 1993–94 budget is bogus, as is accepted by the Commission, and I have demonstrated as briefly as possible that the 1995 budget is a cruel illusion.

The CAP has a voracious appetite. We hear a great deal of Euro-sceptic jargon—"We're battling for Britain", and so on—but none of this would have happened, and there would have been none of these horrendous increases, if the Government had not agreed. That point can fairly be put to the Minister. Why, over this period, have Ministers, on behalf of the Government:, gone to Brussels saying "We're fighting our corner. We're going to control costs'"? Next year the Government, if they agree to this arrangement —and I hope that they will not—will have presided over an increase of about £6 billion.

I have one or two questions to which I hope the Minister will reply in his winding-up speech. Where will the Minister find the £1.2 billion that, according to the Commission, represents the cost of the monetary alignments of black Wednesday? Will the Minister agree that the £900 million of olive oil payments that, according to the Commission, should be deferred until October 1995 should be transferred into the 1996 budget? If so, what justification can the Minister give us this evening to agree to defer nearly £1 billion of expenditure simply to remain within the guidelines?

Will the Government agree to spend the money in reserve? It was never intended to bolster up a crisis within the CAP but only to meet changes in the exchange rate. It was never intended for that purpose and it is outside the guidelines.

In the last few minutes of my speech I shall make one or two observations on specific issues. On cereals, the Commission stated that cereal stocks were 43 million tonnes at the beginning of 1994. It estimates that, even with the reforms in place, by 1998 we shall have 175 million tonnes of production and, if everything goes right this year, we may end up with 33 million tonnes of cereals in store. I remember the halcyon clays before the reforms when we had only 18 million tonnes of cereal in store. What progress have we made when the reforms bite into the regimes yet we end up with twice the amount of cereals in store?

On milk, the Secretary of State is quite right not to agree to quota cuts in the present circumstances, but logically, if we do not press for a quota cut, we shall remain in structural surplus because the quota is 12 per cent. more than consumption. In addition, the disadvantages to the United Kingdom because we are not self-sufficient will continue. That is not good enough; we need something more positive from the Minister. Although she is right in the circumstances, we cannot tolerate continued structural surpluses because of the quotas while the United Kingdom continues to be disadvantaged.

On beef, clearly there have to be some changes because of the 1992 reference year. The regional quotas that qualify for the special premium are now out of control—something like 30 per cent. more than was anticipated. However, there is great danger in agreeing to a reduction in the density from three to 2.5 livestock units per hectare. That will hit the United Kingdom harder than elsewhere.

The Select Committee report stated that the CAP price proposals constitute an issue of considerable political importance". The Select Committee is right. The issues that are of considerable political importance demand that tonight we do something more than simply note the United Kingdom's horrendous and critical position.

I hope that the Minister is right. I hope that she can get across her view that the 1992 reforms were the first step. In the light of the agricultural crisis in our rural communities, what is the next step?

9.13 pm

Mr. Walter Sweeney (Vale of Glamorgan)

I take issue with the hon. Member for Ceredigion and Pembroke, North (Mr. Dafis), who criticised my right hon. Friend the Secretary of State for Wales for not being present this evening. That was rather cheap, considering the efforts made by my right hon. Friend, of which the hon. Gentleman must have been aware, to secure equal treatment for cereal farmers in England and Wales. Despite his efforts, he was unsuccessful, but at least we have a scheme that takes account of the high yield produced by cereal farmers in constituencies such as mine in the Vale of Glamorgan. I certainly welcome half a loaf as better than none.

Mr. Ainger

But does not the hon. Gentleman accept that his farmers in the Vale of Glamorgan, and mine in Pembrokeshire, are discriminated against—if they were jetting the same yields as their English counterparts, they would receive significantly more, whether they are in less-favoured areas or non-LFA areas? Does he accept that the Minister of State may well have done his best, but that it was not good enough?

Mr. Sweeney

I have already accepted that my hon. Friend was unsuccessful, but the point that I am making is that he has tried on behalf of farmers in Wales. The hon. Gentleman will be aware that the background to the discrimination between Welsh and English farmers is based on the fact that, by and large, because of the nature of the terrain, yields in Wales can be expected to be substantially lower than those in England. Clearly, in parts of Wales, as the hon. Gentleman knows, the yield is comparable in every way with parts of England. That is why I feel that the solution, although less than ideal, is certainly better than the original proposal.

A remarkable feature about the debate has been the range of views expressed by hon. Members on both sides of the House, which seem to have favoured radical reform of the CAP, and the considerable support for repatriation of agricultural policies. I congratulate my right hon. Friend the Minister and her predecessor on their efforts to reform and improve the CAP. I am sure that all hon. Members know full well the difficulties that the Government face in securing improvements. I wish my right hon. Friend well. If I may use an agricultural metaphor, I hope that she will take the bull by the horns and urge substantial reform.

Personally, I would like to see the CAP in its present form abolished. On the need for reform, a few statistics will make my point for me. The average family of four in the UK pays more than £18 per week extra for its food as a result of the CAP in its present form. No other industry enjoys that level of subsidy. In 1992, consumers in the European Union paid an extra 40 per cent. for agricultural products. In 1992, the average value of subsidy to European Union farmers was equivalent to 47 per cent. of their income. With the prospect of four new members joining the European Union, the level of subsidy may become even worse. The average value of subsidies to Finnish farmers is 68 per cent.; to Norwegian farmers it is 77 per cent.

I found myself agreeing with the hon. Member for Lancashire, West (Mr. Pickthall) when he pointed out that our constituents might not know very much about the detail, but they know instinctively that they are paying too much for their food as a result of the existing CAP. Naturally, I disagreed with him when he went on to say that he favoured the abolition of set-aside because he felt that it was encouraging hunting. As a hunting supporter, I disagree, although I agree with his underlying sentiment that set-aside has been a failure. Although I start from the Conservative premise that subsidy is a bad thing and should be eradicated, I realise that suddenly to abolish subsidies would harm British farmers and farm workers. Instead of advocating the abolition of subsidies, I therefore suggest that, on an interim basis, farmers should be paid direct payments linked solely to farm income. That would be less market-distorting than subsidies tied to price intervention or production levels.

A system of direct payments would be better in a number of ways. First, the true level of support would be visible through taxes rather than food prices. Secondly, it would be more efficient. Only 40 per cent. of the existing CAP budget goes to farmers, while 60 per cent.—£27.6 billion a year—is spent on administration, the cost of exporting intervention surpluses, storage costs and fraud: in Italy alone, fraud cost £64 million last year.

The link between direct payments and area under-cultivation should be dropped. As I have said, set-aside has not worked; leaving 15 per cent. of arable land to one side reduced last year's cereal harvest by only 1.4 per cent.

Agricultural subsidies in Europe are designed to keep inefficient producers working: the same applies to steel and other problem industries. Politicians in each member state should consult their constituents, and decide how much subsidy is appropriate. The legitimate desire to protect the countryside might be served better by the establishment of national parks than by subsidies for inefficient farmers.

According to a recent report from the Centre for Economic Policy Research, agriculture is a major area to which the principle of subsidiarity should be extended. The European Union should have no role in the payment of incomes, as conditions and practices vary throughout the Union. That point was made very well by the Opposition earlier. Conditions in England may be very different from those in Greece, for example.

The role of the European Union should be confined to the creation of a statutory framework for national income support, to limit market distortions. National Governments would specify income thresholds below which subsidies should be claimed; the European Union would impose a cap limiting the maximum subsidy available. Within the new framework, each national Government would be free to decide how large their nationally financed direct income support should be. No longer would British citizens have to subsidise French farmers indirectly by paying a much higher net contribution to the European Union budget.

The ultimate objective should be the abolition of agricultural subsidies throughout the European Union. Meanwhile, the new framework would be a great step forward for the EU—a step away from the common agricultural policy and towards cheaper food, lower subsidies and more competitive markets.

9.22 pm

Mr. Nick Ainger (Pembroke)

As I have already been fortunate enough to make a couple of interventions about some of the issues with which I wished to deal, my speech will be brief.

Today's debate has confirmed that hon. Members on both sides of the House agree on one thing: the common agricultural policy as a whole is a failure. Moreover, as is suggested by the figures cited by my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson), the reforms have not produced the result that the Minister claimed they would produce a year or so ago.

There is an additional measure of the success or failure of the CAP. Not only is the budget growing and growing; those who were supposed ultimately to benefit from the system—consumer and producers—are not doing so. Farmers—especially those in less-favoured areas who should be receiving reasonable hill livestock compensatory allowances and the like—are feeling the pinch.

The Minister tells us regularly, in various press releases, that hill farmers have received significant increases—up to 30 per cent. year on year, which was the figure between 1991–92 and 1992–93. Sadly, however, the base year to which the Minister refers—1991–92—was the worst year for nearly a decade in terms of farmers' net incomes. Using that as a base year was totally and, in my view, deliberately misleading, and did not warrant the cuts that were made last year and this year.

Our rural areas have a serious problem. Because of the CAP's failure, we are not encouraging young people into farming; the age profile in the industry is rising every year. The latest figures, based on the past 15 years, show that, on average, 26 people leave farming every day. That is catastrophic for rural regions, which many hon. Members represent.

There seems to be a consensus—if one can use that term these days—among hon. Members on both sides of the House that we must move away from a CAP that deals only with price and product support towards a CAP that involves the environment and people rather than products. If we do that, we shall be moving in the right direction. It is nice to see Conservative Members moving in that direction because I fought the 1992 general election on the basis of such a policy. The Conservative party is at last starting to listen to what not only the Labour party, but people who represent rural communities' interests have been saying for some years.

Sadly, as my hon. Friend the Member for Carmarthen (Mr. Williams) said, people in rural communities depend not only on CAP subsidies, but on family credit. Many small hill farmers, dairy farmers and sheep farmers, particularly those in Wales, but also those in Cumbria and south-west England, depend on state handouts to support their families. That is further proof of the failure of the CAP.

We have to get to grips with fraud, although that is not such a problem in this country. I am willing to accept that, in the main, the British farmer is honest and tries to earn an honest crust, but there is massive scandal and fraud throughout Europe, which is not being properly tackled.

Hon. Members on both sides of the House have mentioned the need to return to national aids, yet, sadly, the one national aid over which we had some control—the hill livestock compensatory allowance—has been cut again and again. I accept Conservative Members' comments that the HLCA is not necessarily a good national aid because it is a headage payment, but at least it was there in principle and the Government had a great deal of control over it. They should have considered applying the HLCA not on a headage basis, but on the basis of environmentally sensitive farming, lower inputs and lower outputs.

I shall finish because my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) has just given me a dirty look. We in Wales expect the Secretary of State for Wales to be involved in debates such as today's. It is rare that we have a full day's debate on agriculture. I should have thought that the Secretary of State or the Minister of State could have attended part of the debate. Every time I intervened to ask about a Welsh issue I was told by the Minister of Agriculture, Fisheries and Food that it was not her concern, but a matter for the Secretary of State for Wales. When we debate agriculture in the whole of the United Kingdom, the Secretary of State for Wales should be present for some of the time.

9.28 pm

Mr. Elliot Morley (Glanford and Scunthorpe)

I welcome the opportunity to debate agriculture and to examine the effectiveness of CAP reform and how it operates in the United Kingdom. The Labour party has always expressed doubt about the CAP reforms and whether they would work. My hon. Friend the Member for Edinburgh, East (Dr. Strang) made that clear in moving the amendment, and demonstrated the weaknesses of the scheme.

The set-aside scheme, which is at the heart of the reforms, wastes resources. We are also not convinced that it will meet its objectives. Agra Europe wrote on 29 October last year: The problem for the Community is … that the new support system and current agricultural technology is encouraging farmers to minimise the impact of set-aside on cereals and, in particular, to maximise their output of high yielding wheats. The report also contains some good news, however. It went on to say that, because of the new technology, United Kingdom farmers would be far more competitive in a world market than some of them seem to believe. Recent figures appear to bear that out.

The 1993 provisional figures for wheat, for example, show that, although the area for wheat production is down —from 2,067 million hectares last year to 1,759 million this year—the yield increased from 6.82 tonnes per hectare in 1992 to 7.31 tonnes in 1993. I know that yields can be influenced by the weather, but the yield in 1993 was the highest since 1989, and it was higher than average yields between 1982 and 1984, which were 6.81 tonnes.

European agriculture is still a heavily subsidised sector. Measurements of producer subsidy equivalents, produced by the Organisation for Economic Co-operation and Development, show that European Community farmers obtain 47 per cent. of their income from agricultural support, compared with 28 per cent. for farmers in the United States.

When considering the United States, it is also worth considering the implications of the general agreement on tariffs and trade. Not much has been said about GATT, apart from the fact that there is a linkage between it and the CAP reforms. However, some serious issues have yet to be resolved in relation to the GATT agreement.

The first is the question of opening EC markets to food imports, amounting to 5 per cent. of domestic consumption. I am not clear whether that figure is for the Community or whether it is an aggregate figure. It could mean that the United Kingdom, which has traditionally imported a high percentage of its food, could be taking more than its fair share of that 5 per cent. penetration.

The second problem is that of food additives and drugs in animals, which is very serious. In many cases, drugs are used abroad, but their sale is banned in the European Community. Hormones in beef are one example, and bovine somatrophin—BST—which is being legalised in the United States, is banned in this country at least until the end of the year. We must deal with those problems within GATT.

Many third countries with poor animal welfare standards and almost non-existent enforcement procedures will export meat products to this country. We need to ensure that our producers, who have invested in high welfare standards, are protected from what I regard as unfair competition. Ways of doing so might include clearer labelling, which will allow consumers to ensure that they are choosing foods that have been produced to the highest standards. Another way is to put minimum standards into place through the GATT agreements and negotiations.

Animal welfare standards are a cost to the industry, but it is a cost that many within it are prepared to accept. Such high standards can be a marketing aid, and I was pleased that the Parliamentary Secretary endorsed that view in Agriculture questions today, when he recognised that it can be an advantage to market food that is produced in this country to the highest standards.

What is the sense in exporting low-value live sheep to the continent, where farmers simply add value to the carcasses? Apart from exporting live animals, that is exporting British jobs, and it does not help the food deficit in this country.

I was appalled to hear the hot.. Member for Hexham (Mr. Atkinson) say that he hoped that the Minister would resist improvements in animal transportation times, because it would affect his farmers and the live export of sheep. The French must be laughing all the way to the bank at the attitude of the hon. Member for Hexham. We should ensure that we are adding value, rather than simply exporting live animals, which is not good economically or in animal welfare terms.

Sheep exports increased from 81,000 in 1985 to between 2 million and 3 million in 1993, and that concerns me. We should be proud of the quality of British lamb, as well as that of our beef and pork, which are also mainly a carcass trade. We should vigorously market British lamb as chilled carcasses—marketing on the hook, rather than on the hoof.

It is a pity that Food From Britain has to operate with one hand tied behind its back, due to the way in which the Government have frozen its budget and restricted its activities. If we are to tackle the deficit in food imports, we must have a stronger marketing system.

The problem is that the CAP is still hugely expensive and wasteful. The original scheme proposed some modulation of support, as has been mentioned by the hon. Members who spoke on behalf of small farmers. It is fair to ask whether a limit should be imposed on the people who receive their highest income from agricultural support.

In response to a written question, we learned that the highest individual payment to a fanner was £1.25 million —[Interruption.] Indeed, that was the Co-op. The Co-op manages farms; that is a growing part of its business. So it is not fair to suggest that one individual farmer received that money. Nevertheless, the written answer also informed us that other people were receiving payments of more than £1 million, and that many farmers were in receipt of payments running into hundreds of thousands of pounds. We should give some consideration to people who are in a less fortunate position in terms of agricultural support.

The detail of the CAP figures shows that there are still a number of substantial increases, although expenditure is supposed to be decreasing. Cereal compensatory payments are increasing by 40 per cent., although admittedly as part of the agreed reforms. Potato starch compensation is also being increased by 40 per cent. That does not apply to the United Kingdom, but it still adds to the overall costs.

Olive oil production aid is up by 44.7 per cent. Again, that is not a United Kingdom matter. The beef annual premium is increasing by 25 per cent. and the suckler cow premium by 36 per cent. That represents unfair competition with the unsubsidised pig and poultry sectors which, as we have heard, are going through a difficult period.

The total EC agricultural support budget for the current year will increase by 23 billion ecu. We want the overall budget to decrease, not to increase in that way. A CAP budget currently running at about £30 billion is obviously open to fraud, as has been described by my hon. Friend the Member for Workington (Mr. Campbell-Savours).

There are more interesting issues buried in the papers that the Government must examine, and must press firmly in the Council of Ministers. Tobacco is certainly one such issue. Some hon. Members have already said what nonsense the tobacco subsidy is. According to the figures, tobacco prices have been frozen for this year and will not be reviewed until 1996. I see no reason why the review should be put off for so long. Alternatives must be sought for people who depend on tobacco crops, but at present tobacco is the most heavily subsidised crop per hectare in the European Community.

Protein plants, too, are subsidised, in the form of dried fodder payments, which have been identified as costly and inefficient. Fibre plant subsidies, which include silkworm subsidy, constitute another costly scheme identified by the Court of Auditors as open to fraud. Linseed, a big United Kingdom crop, still receives a £438 per hectare subsidy, which represents an extremely small reduction.

I am concerned about the proposals to raise the minimum alcoholic strength of wine—although I imagine that some hon. Members will not be too worried about that. The strength is being raised not for the benefit of the consumer, but to reduce current wine surpluses.

Many hon. Members have said that what we need in the CAP is a major shift to decouple subsidy from production. Farmers and the industry as a whole already recognise that. The Labour party wants existing CAP funds to be better used, for the benefit of farmers, farm workers and the wider rural economy.

There are alternatives. My hon. Friend the Member for Workington and others have mentioned repatriation and subsidiarity—interesting concepts, which need to be examined. However, when we discuss repatriation, we must always bear in mind the need for equality in subsidies between the different agricultural sectors. The market would be distorted without the equality that can come about only through a common policy.

The Labour party welcomes the shift towards environmental support payments. We welcome the increase in environmentally sensitive areas recently announced—something that we have long advocated and for which we have long campaigned. However, the total of all the various schemes for environmental support is only about £100 million, which pales into insignificance when compared with more than £2 billion of subsidy in the arable aid programme and set-aside.

The Government's commitment to the environmental programmes is also in doubt. They have recently cut the farm conservation scheme, and research and development programmes.

In addition, there have been changes to the Agricultural Development Advisory Service, which means that it is no longer regarded as supporting farmers but is evolving into a private consultancy whose services many farmers can no longer afford. The Government have an important role to play in providing such support.

The Government's green credibility has also been damaged by their failure to honour their promise on hedgerow protection. Indeed, the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) and his pal the hon. Member for Hexham were involved in hedge-killing activities. Labour Members will not forget their role in destroying a Bill to protect hedgerows, and will remind their constituents of it when the time comes.

There are alternative methods of support through green premium payments, which the Labour party has been advocating. We could promote alternatives, such as the restoration of traditional wetlands, which is advocated in a recent excellent report by the Royal Society for the Protection of Birds. Wetlands can also help to control floods and provide sea defences by the creation of radical habitat creation schemes of salt marsh and reed-beds.

A connected issue, which I hope the Minister will take into account in future negotiations, is that, if we are to use long-term set-aside for environmental reasons—especially for wet pasture and flood defence—there is a need for grazing on that long-term set-aside. At the moment, such grazing is prohibited under the set-aside regulations. There is a need to negotiate a way of licensing grazing as part of conservation and long-term set-aside management. I hope that the Minister will take that into account.

Diversification can be encouraged through access agreements, and rural planning policies can encourage the use of farm buildings. We also need to encourage more organic farming, which involves an integrated approach. There is a little support for conversion, but in fact organic farming is second only to environmentally sensitive areas in providing an alternative to farmers.

We want to encourage alternative crops—non-food crops, such as linseed for oil, wheat and sugar beet for ethanol, rape for bio-diesel[and biomass schemes. There is still a long way to go, but there are niche markets where a biodegradable fuel would be useful, such as in waterways and sensitive areas.

Lord Carter recently gave an excellent paper in which he identified other markets for bio-oils, such as lubricants, technical oils and chemical feedstock. All these, of course, need support for research and development, and marketing, in partnership with industry. That is something of which the Labour party is not afraid, and we pledge to undertake such research. The money is available. There is a total of £30 billion of CAP funding, which we believe needs a change of direction and application. Only the Labour party can achieve that, because the Government have isolated themselves. They are currently involved in a row and, through their new-found attraction to the block vote, are supporting measures that will make it more difficult to reform the CAP—they are supporting a smaller vote in countries which will, of course, be only too pleased to try to delay it.

Tonight, I had to attend a meeting of Steel Action, a group comprising steelworkers from all over the country. They are asking why the Government are not taking up a real issue in Europe and fighting against unfair steel subsidies, for example, instead of being involved in the nonsense of qualified majority voting. The truth is that someone has recently grabbed the Prime Minister's arm and explained to him that such voting will never lead to reform of the CAP, so we now have a further nonsense of a two-tier approach to qualified majority voting—23 for everything else but 27 for agriculture where it suits the Government.

That approach makes the Government a laughing stock, and alienates support in Europe. It puts at risk the membership of countries that will be net contributors to the CAP and which should be natural allies of this country —or, should I say, of the Labour party, in this instance. There will never be changes unless we work towards co-operation rather than alienation, unless we work for a common position rather than one that cannot stand up to examination but brings the Government into disrepute.

9.44 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Michael Jack)

Before I address this excellent-quality debate, I should say that we have just heard a speech from the hon. Member for Glanford and Scunthorpe (Mr. Morley) which convinced us that the Labour party is bereft of any sensible and positive ideas for agriculture and food in this country. I shall develop that theme in my remarks.

This has been an interesting debate; I genuinely congratulate all hon. Members who took part in it. We had some remarkably thoughtful contributions. In particular, I congratulate my hon. Friend the Member for Lincoln (Mr. Carlisle) on an excellent speech on environmental matters. Clearly, he has carefully thought through his position about the development of the new challenges for agriculture and the environment, and I look forward to him contributing to the work that will be undertaken to assess the environmental impact of set-aside.

My hon. Friend the Member for Wantage (Mr. Jackson) made an extremely well-thought-out and thought-provoking speech, taking into account the expansion of the Community, the challenges it will face and some of the real long-term challenges as it comes to terms with large-scale expenditure on agriculture. That was the theme of many other speeches.

My hon. Friends the Members for Hastings and Rye (Mrs. Lait) and for Faversham (Sir R. Moate) raised issues connected with horticulture and the food industry. They did so with compassion, conviction and knowledge, and I shall deal with some of their detailed points in a moment.

My hon. Friend the Member for Hexham (Mr. Atkinson) dealt with his constituency knowledge about the problems of hill farmers and animal welfare—key issues in a debate on agriculture.

My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Clifton-Brown) took us to a central issue that underpins much of our consideration of the common agricultural policy—the context in which we see the CAP in terms of the general agreement on tariffs and trade. If the United Kingdom had not worked tirelessly behind the scenes, we would not have reached a GATT agreement; we would be living in a world facing protectionism. Sadly, that is something that has been lost by Labour Members.

Finally, my hon. Friend the Member for Vale of Glamorgan (Mr. Sweeney) talked about the cost of the common agricultural policy.

I shall speak in more detail about the speeches by Opposition Members, especially the hon. Members for Edinburgh, East (Dr. Strang) and for North Cornwall (Mr. Tyler). I was taken by the comments of the hon. Member for Lancashire, West (Mr. Pickthall) who talked about a subject that I know well—horticulture. I was grateful for his contribution.

The hon. Member for Carmarthen (Mr. Williams) talked about the change in the common agricultural policy; the hon. Member for Ceredigion and Pembroke, North (Mr. Dafis) took us through his view of the environment; and the hon. Member for Londonderry, East (Mr. Ross) gave us perhaps a cautionary tale about what change in agriculture means in terms of the effect on employment.

The hon. Member for Londonderry, East perhaps omitted a very important point, which has been missing from the debate—the fact that agriculture is the start of the food chain. Agriculture is the process which provides food manufacturers, food producers, and ultimately the consumer, with the food we eat. As the number involved in primary production has declined, we may see more people entering other parts of the food chain.

The hon. Member for Pembroke (Mr. Ainger) surprised me, because he did not mention his marvellous early potatoes. I thought that he might at least take the opportunity of a little light advertising, but he failed to do so. However, he joined in the wider debate on the reform of the common agricultural policy.

This debate is of considerable importance, because it touches the lives of those who form 2 per cent. of our work force. As I said, it is important because it is the starting point for our food chain. It is also important because the issues that we have discussed touch on the whole question of the well-being of our rural communities.

In a year in which we will see an increase in farm incomes, and other matters which I shall refer to in a moment, we can see a strengthening of the rural economy. The work that we have done—for example, in campaigning for funding under things such as objective 5b status—is a clear sign of the coherence of our policies in terms of the rural economy. The debate has demonstrated that it is in the Conservative party that some of the best thinking is going on about the future of the common agricultural policy in terms of its impact on our rural communities.

I must say that I trembled slightly in preparing for this debate, because I had understood that the Opposition were to make an announcement on the CAP. I stood by the Press Association printout expecting to see a long list of quite devastating new thinking; to my absolute relief, I got a copy of the Labour party press release on the CAP.

I have here a £5 note. I am not offering it to anybody this evening, but I was offering it earlier to anybody who could find a vestige of an agricultural policy from the Opposition. This is safe money, because nobody has managed to find that missing policy. I searched the Opposition's manifesto for a reference to agriculture, but I could not find one. I searched today's document for some new policy. It says that the hon. Member for Edinburgh, East condemns 14 years of Tory Euro-waste. All I can say is that this document is a waste of the paper it is printed on.

It is the Conservative party which can take the credit for being the driving force behind the reform of the CAP. It is this party which is conscious of cost and which has tried hard, within the overall budgetary limits which my right hon. Friend mentioned, to drive down EC expenditure on the CAP. It is this party which has been taking the lead on integration of, for example, environmental policies with the reform of the CAP. It is this party which understands about free trade and its importance to agriculture.

That is why we have been pioneering in terms of the GATT. This party understands that the success of our food and agriculture industry is determined by consumers buying the excellence of its output, as good wholesome food. I looked to see if the Labour party had any ideas on the subject, and I saw what it said when its former leader was in office. The Labour party said that dismantling the CAP would provide money which—believe or not—could be spent on the cohesion fund, which transfers money to poorer European Union nations.

This evening, we have heard nothing to rebut that position. I can only assume that that largesse from Walworth road—

Mr. Morley

Who said that?

Mr. Jack

It was the former leader of the hon. Gentleman's party. He may not be in touch with what his party's former leader used to say.

The Opposition have also said quite clearly in other documents that the savings which they see coming from changes in the CAP should go towards financing other Community projects. We have heard nothing this evening to rebut that, and I can only assume that that is their objective.

I was interested that the hon. Member for Edinburgh, East entertained us with some of his notions about social policy and his view of agriculture. One thing which the Labour party would like to sign up to is the social chapter. I have noticed recent reports in the press which have suggested that the hon. Gentleman's party might want to introduce some social benefits for part-time workers. Perhaps he has not costed that, but if his proposals were applied to part-time workers in agriculture, he would simply add about £11 million to the cost of UK agriculture. That is how much the Labour party cares about the cost base of our agricultural production.

The hon. Gentleman told us that, in some way, the Government had left agriculture in a disastrous position.

Mr. Paul Flynn (Newport, West)

Hear, hear.

Mr. Jack

The hon. Gentleman should wait until I give him the facts.

The hon. Member for Edinburgh, East said that we had done nothing to strengthen agriculture. Our economic policies in fact reduced interest rates to farmers in 1992 by £743 million and in 1993 by £506 million. There was an increase in tractor sales in 1993 of 19,000. Those are tangible examples of the better state of agriculture that the Government have assisted in bringing about.

The hon. Gentleman also challenged the Conservative party, as did several Opposition Members, about our general policies on the way forward for the common agricultural policy. I want to remind the hon. Gentleman of what my right hon. Friend the Minister said on 7 January. I think that that will be of interest to the whole House, because it maps out succinctly and clearly the Government's view of the way forward. She said: Over time we want to see a further reduction in support prices to levels which bring supply and demand into balance. If we succeed in this, artificial production controls will become redundant. However, I will not pretend that reforming the CAP in the way that we want will be an easy task. Most of our Community partners will take a good deal of persuading. I have listened to the voices from the Opposition Benches attacking the Government and Conservative Members as though we were the villains of the piece, when it was we who introduced help to the campaign for financial stabilisers; we who fought for legally binding ceilings on the Community expenditure on the budget; we who campaigned for the reform of the common agricultural policy; we who campaigned for the GATT reform; and we who achieved the latest breakthrough in terms of budgetary discipline and control of fraud.

I suggest that Opposition Members spend some of their energy and time speaking to their counterparts in France, Italy, Spain and Germany—the countries that have been the bulwarks against the positive reform of the common agricultural policy that we want.

My right hon. Friend is not only wedded to those excellent words of general policy, but supports the next stage of change in the common agricultural policy—the reforms of the regime of sugar, of olive oil, wine, fruit and vegetables. There is much more to be done. Beef will have to be considered. Those things are on our agenda, but we are but one of 12 nations in the Community, and we have a powerful job persuading them of the case. Nevertheless, it is a task that we shall not shirk.

The hon. Member for Edinburgh, East attacked us for delaying the reform of the milk marketing scheme. I refer him to the report of the Select Committee, in which the blame for that was clearly put on the cavalier attitude of the milk marketing board.

The hon. Members for Edinburgh, East, for North Cornwall, Carmarthen and for Pembroke, and my hon. Friend the Member for Hexham (Mr. Atkinson), all mentioned the reductions in hill livestock compensatory allowances.

My right hon. Friend had a difficult balancing job in reaching her decision, but she realised that about £550 million of income would be available to farmers in the hills. She considered the situation in which, in 1991–92, the income of farmers—especially sheep farmers—in the severely disadvantaged areas was £19,000, of which £7,000 came from HLCAs. She found that the amount of subsidy that they received had increased in 1993–94 to £27,000, of which £5,500 would come from HLCAs. She realised that more income was coming from the increases in sheep annual premium and other sources of income, —for example, environmental programmes—and took a sensible decision to balance the difficulties of the hills with the need for budgetary constraint. She achieved a sensible position, which has allowed the incomes of farmers in the hills to increase, but which has made sense in terms of our United Kingdom Budget.

The hon. Member for Edinburgh, East mentioned research and development grants. He was perhaps unfair to say that, in spite of minimal cuts—£6 million in the agricultural sector—we shall spend £125 million on agricultural research and development. I refer him to my right hon. Friend's latest announcement, on 23 March, about new research fellowships in food process engineering. That is a clear example of the way in which we envisage things progressing in research.

The hon. Member for North Cornwall is a member of the Liberal party, which produces a thing called "The Farmers' Charter." That charter tells us that his party supports the reform of the CAP so that farmers are paid "proper prices". What on earth does he mean by "proper prices"? He told us nothing of that. He says that his policy is to support small and family farms, but at the same time he does not want Britain's large farms to be disadvantaged, because the average size of our farms is greater. The hon. Member's policies are utterly, totally and completely inconsistent. He says in a document that he wants to reform the price structure of the CAP, but he does not want Britain's farmers to be exposed to unfettered world competition. The best he can find is local management agreements administered by councillors.

My hon. Friends the Members for Faversham (Sir R. Moate) and for Hastings and Rye (Mrs. Lait) mentioned important matters connected with the fruit and vegetable regime. I assure them that we shall campaign strongly for a reform of the intervention regime. If that is accepted by other Community countries, it opens the way for the grubbing-up grants which they seek.

This has been an extremely good debate on agriculture, but it has clearly shown that it is the Conservative party that understands food and farming, and that we go forward with strength, from seed to supermarket.

Question put, That the amendment be made—

The House divided: Ayes 229, Noes 298

Division No. 180]	[10 pm
AYES
Abbott, Ms Diane	Fraser, John
Ainger, Nick	Fyfe, Maria
Ainsworth, Robert (Cov'try NE)	Galloway, George
Allen, Graham	Gapes, Mike
Anderson, Donald (Swansea E)	Garrett, John
Anderson, Ms Janet (Ros'dale)	George, Bruce
Armstrong, Hilary	Gerrard, Neil
Ashdown, Rt Hon Paddy	Gilbert, Rt Hon Dr John
Ashton, Joe	Gordon, Mildred
Austin-Walker, John	Graham, Thomas
Banks, Tony (Newham NW)	Grant, Bernie (Tottenham)
Barnes, Harry	Griffiths, Nigel (Edinburgh S)
Battle, John	Grocott, Bruce
Bayley, Hugh	Gunnell, John
Beckett, Rt Hon Margaret	Hain, Peter
Bell, Stuart	Hall, Mike
Bennett, Andrew F.	Hanson, David
Benton, Joe	Hardy, Peter
Bermingham, Gerald	Harman, Ms Harriet
Berry, Dr. Roger	Henderson, Doug
Betts, Clive	Hill, Keith (Streatham)
Boateng, Paul	Hinchliffe, David
Boyes, Roland	Hoey, Kate
Bray, Dr Jeremy	Hogg, Norman (Cumbernauld)
Brown, Gordon (Dunfermline E)	Home Robertson, John
Brown, N. (N'c'tle upon Tyne E)	Hood, Jimmy
Burden, Richard	Hoon, Geoffrey
Byers, Stephen	Howarth, George (Knowsley N)
Caborn, Richard	Howells, Dr. Kim (Pontypridd)
Callaghan, Jim	Hoyle, Doug
Campbell, Mrs Anne (C'bridge)	Hughes, Kevin (Doncaster N)
Campbell, Menzies (Fife NE)	Hughes, Robert (Aberdeen N)
Campbell-Savours, D. N.	Hughes, Roy (Newport E)
Canavan, Dennis	Hutton, John
Cann, Jamie	Illsley, Eric
Chisholm, Malcolm	Ingram, Adam
Clapham, Michael	Jackson, Glenda (H'stead)
Clark, Dr David (South Shields)	Jackson, Helen (Shef'ld, H)
Clarke, Eric (Midlothian)	Jamieson, David
Clarke, Tom (Monklands W)	Janner, Greville
Clwyd, Mrs Ann	Jones, Jon Owen (Cardiff C)
Coffey, Ann	Jones, Martyn (Clwyd, SW)
Cohen, Harry	Jones, Nigel (Cheltenham)
Connarty, Michael	Jowell, Tessa
Cook, Robin (Livingston)	Kaufman, Rt Hon Gerald
Corbyn, Jeremy	Keen, Alan
Corston, Ms Jean	Kennedy, Jane (Lpool Brdgn)
Cousins, Jim	Khabra, Piara S.
Cryer, Bob	Kinnock, Rt Hon Neil (Islwyn)
Cummings, John	Kirkwood, Archy
Cunliffe, Lawrence	Lestor, Joan (Eccles)
Cunningham, Jim (Covy SE)	Lewis, Terry
Dalyell, Tam	Litherland, Robert
Darling, Alistair	Lloyd, Tony (Stretford)
Davidson, Ian	Loyden, Eddie
Davies, Bryan (Oldham C'tral)	McAllion, John
Davies, Rt Hon Denzil (Llanelli)	McAvoy, Thomas
Davies, Ron (Caerphilly)	McCartney, Ian
Denham, John	Macdonald, Calum
Dewar, Donald	McKelvey, William
Dixon, Don	Mackinlay, Andrew
Donohoe, Brian H.	McLeish, Henry
Dowd, Jim	McMaster, Gordon
Dunnachie, Jimmy	McNamara, Kevin
Dunwoody, Mrs Gwyneth	McWilliam, John
Eagle, Ms Angela	Madden, Max
Eastham, Ken	Maddock, Mrs Diana
Enright, Derek	Marek, Dr John
Etherington, Bill	Marshall, David (Shettleston)
Evans, John (St Helens N)	Martin, Michael J. (Springburn)
Fatchett, Derek	Martlew, Eric
Field, Frank (Birkenhead)	Maxton, John
Fisher, Mark	Meacher, Michael
Flynn, Paul	Meale, Alan
Foster, Rt Hon Derek	Michael, Alun
Foulkes, George	Michie, Bill (Sheffield Heeley)

Michie, Mrs Ray (Argyll Bute)	Salmond, Alex
Miller, Andrew	Sedgemore, Brian
Mitchell, Austin (Gt Grimsby)	Sheerman, Barry
Morgan, Rhodri	Sheldon, Rt Hon Robert
Morley, Elliot	Shore, Rt Hon Peter
Morris, Rt Hon A. (Wy'nshawe)	Simpson, Alan
Morris, Rt Hon J. (Aberavon)	Skinner, Dennis
Mowlam, Marjorie	Smith, Andrew (Oxford E)
Mudie, George	Smith, C. (Isl'ton S & F'sbury)
Mullin, Chris	Smith, Rt Hon John (M'kl'ds E)
Murphy, Paul	Smith, Llew (Blaenau Gwent)
Oakes, Rt Hon Gordon	Soley, Clive
O'Brien, Michael (N W'kshire)	Spearing, Nigel
O'Brien, William (Normanton)	Squire, Rachel (Dunfermline W)
O'Hara, Edward	Steinberg, Gerry
Olner, William	Stevenson, George
O'Neill, Martin	Stott, Roger
Orme, Rt Hon Stanley	Strang, Dr. Gavin
Parry, Robert	Thompson, Jack (Wansbeck)
Patchett, Terry	Turner, Dennis
Pendry, Tom	Tyler, Paul
Pickthall, Colin	Vaz, Keith
Pike, Peter L.	Walker, Rt Hon Sir Harold
Powell, Ray (Ogmore)	Wardell, Gareth (Gower)
Prentice, Ms Bridget (Lew'm E)	Wareing, Robert N
Prentice, Gordon (Pendle)	Watson, Mike
Prescott, John	Welsh, Andrew
Primarolo, Dawn	Williams, Rt Hon Alan (Sw'n W)
Purchase, Ken	Williams, Alan W (Carmarthen)
Quin, Ms Joyce	Wilson, Brian
Radice, Giles	Winnick, David
Randall, Stuart	Wise, Audrey
Raynsford, Nick	Worthington, Tony
Redmond, Martin	Wray, Jimmy
Reid, Dr John	Wright, Dr Tony
Rendel, David	Young, David (Bolton SE)
Robertson, George (Hamilton)
Roche, Mrs. Barbara
Rogers, Allan	Tellers for the Ayes:
Rowlands, Ted	Mr. Peter Kilfoyle and Mr. John Spellar.
Ruddock, Joan

NOES
Ainsworth, Peter (East Surrey)	Bruce, Ian (S Dorset)
Aitken, Jonathan	Budgen, Nicholas
Alexander, Richard	Burns, Simon
Alison, Rt Hon Michael (Selby)	Butler, Peter
Allason, Rupert (Torbay)	Butterfill, John
Amess, David	Carlisle, Kenneth (Lincoln)
Arbuthnot, James	Carrington, Matthew
Arnold, Jacques (Gravesham)	Cash, William
Arnold, Sir Thomas (Hazel Grv)	Churchill, Mr
Ashby, David	Clappison, James
Aspinwall, Jack	Clarke, Rt Hon Kenneth (Ruclif)
Atkinson, David (Bour'mouth E)	Clifton-Brown, Geoffrey
Atkinson, Peter (Hexham)	Coe, Sebastian
Baker, Rt Hon K. (Mole Valley)	Colvin, Michael
Baker, Nicholas (Dorset North)	Congdon, David
Baldry, Tony	Conway, Derek
Banks, Matthew (Southport)	Coombs, Anthony (Wyre For'st)
Banks, Robert (Harrogate)	Coombs, Simon (Swindon)
Bates, Michael	Cope, Rt Hon Sir John
Batiste, Spencer	Cormack, Patrick
Bellingham, Henry	Couchman, James
Bendall, Vivian	Cran, James
Beresford, Sir Paul	Currie, Mrs Edwina (S D'by'ire)
Biffen, Rt Hon John	Curry, David (Skipton & Ripon)
Booth, Hartley	Davies, Quentin (Stamford)
Boswell, Tim	Davis, David (Boothferry)
Bottomley, Peter (Eltham)	Day, Stephen
Bottomley, Rt Hon Virginia	Deva, Nirj Joseph
Bowden, Andrew	Devlin, Tim
Bowis, John	Dickens, Geoffrey
Boyson, Rt Hon Sir Rhodes	Dicks, Terry
Brandreth, Gyles	Dorrell, Stephen
Brazier, Julian	Douglas-Hamilton, Lord James
Bright, Graham	Dover, Den
Brooke, Rt Hon Peter	Duncan, Alan
Brown, M. (Brigg & Cl'thorpes)	Duncan-Smith, Iain
Browning, Mrs. Angela	Dunn, Bob

Durant, Sir Anthony	Knight, Mrs Angela (Erewash)
Dykes, Hugh	Knight, Greg (Derby N)
Eggar, Tim	Knight, Dame Jill (Bir'm E'st'n)
Elletson, Harold	Knox, Sir David
Evans, David (Welwyn Hatfield)	Kynoch, George (Kincardine)
Evans, Jonathan (Brecon)	Lait, Mrs Jacqui
Evans, Nigel (Ribble Valley)	Lamont, Rt Hon Norman
Evans, Roger (Monmouth)	Lang, Rt Hon Ian
Evennett, David	Lawrence, Sir Ivan
Faber, David	Legg, Barry
Fabricant, Michael	Leigh, Edward
Fairbaim, Sir Nicholas	Lennox-Boyd, Mark
Fenner, Dame Peggy	Lester, Jim (Broxtowe)
Field, Barry (Isle of Wight)	Lidington, David
Fishburn, Dudley	Lightbown, David
Forman, Nigel	Lilley, Rt Hon Peter
Forsyth, Michael (Stirling)	Lloyd, Rt Hon Peter (Fareham)
Forth, Eric	Luff, Peter
Fox, Dr Liam (Woodspring)	Lyell, Rt Hon Sir Nicholas
Fox, Sir Marcus (Shipley)	MacKay, Andrew
Freeman, Rt Hon Roger	Maclean, David
French, Douglas	McNair-Wilson, Sir Patrick
Fry, Sir Peter	Madel, Sir David
Gale, Roger	Maitland, Lady Olga
Gallie, Phil	Malone, Gerald
Gardiner, Sir George	Mans, Keith
Garnier, Edward	Marlow, Tony
Gill, Christopher	Marshall, John (Hendon S)
Gillan, Cheryl	Martin, David (Portsmouth S)
Goodson-Wickes, Dr Charles	Mates, Michael
Gorman, Mrs Teresa	Mawhinney, Rt Hon Dr Brian
Gorst, John	Mayhew, Rt Hon Sir Patrick
Grant, Sir A. (Cambs SW)	Mellor, Rt Hon David
Greenway, Harry (Ealing N)	Merchant, Piers
Greenway, John (Ryedale)	Mills, Iain
Griffiths, Peter (Portsmouth, N)	Mitchell, Andrew (Gedling)
Grylls, Sir Michael	Mitchell, Sir David (Hants NW)
Hague, William	Moate, Sir Roger
Hamilton, Rt Hon Sir Archie	Monro, Sir Hector
Hamilton, Neil (Tatton)	Montgomery, Sir Fergus
Hampson, Dr Keith	Moss, Malcolm
Hanley, Jeremy	Needham, Richard
Hannam, Sir John	Nelson, Anthony
Hargreaves, Andrew	Neubert, Sir Michael
Harris, David	Newton, Rt Hon Tony
Haselnurst, Alan	Nicholls, Patrick
Hawkins, Nick	Nicholson, David (Taunton)
Hayes, Jerry	Nicholson, Emma (Devon West)
Heald, Oliver	Norris, Steve
Heath, Rt Hon Sir Edward	Onslow, Rt Hon Sir Cranley
Heathcoat-Amory, David	Oppenheim, Phillip
Hendry, Charles	Ottaway, Richard
Heseltine, Rt Hon Michael	Page, Richard
Higgins, Rt Hon Sir Terence L.	Paice, James
Hill, James (Southampton Test)	Pattie, Rt Hon Sir Geoffrey
Hogg, Rt Hon Douglas (G'tham)	Pawsey, James
Horam, John	Pickles, Eric
Hordern, Rt Hon Sir Peter	Porter, Barry (Wirral S)
Howard, Rt Hon Michael	Porter, David (Waveney)
Howarth, Alan (Strat'rd-on-A)	Portillo, Rt Hon Michael
Howell, Rt Hon David (G'dford)	Rathbone, Tim
Howell, Sir Ralph (N Norfolk)	Redwood, Rt Hon John
Hunt, Rt Hon David (Wirral W)	Ronton, Rt Hon Tim
Hunt, Sir John (Ravensbourne)	Richards, Rod
Hunter, Andrew	Riddick, Graham
Hurd, Rt Hon Douglas	Rifkind, Rt Hon. Malcolm
Jack, Michael	Robathan, Andrew
Jackson, Robert (Wantage)	Robertson, Raymond (Ab'd'n S)
Jenkin, Bernard	Robinson, Mark (Somerton)
Jessel, Toby	Roe, Mrs Marion (Broxbourne)
Johnson Smith, Sir Geoffrey	Rowe, Andrew (Mid Kent)
Jones, Gwilym (Cardiff N)	Rumbold, Rt Hon Dame Angela
Jones, Robert B. (W Hertfdshr)	Ryder, Rt Hon Richard
Jopling, Rt Hon Michael	Sackville, Tom
Kellett-Bowman, Dame Elaine	Sainsbury, Rt Hon Tim
Key, Robert	Scott, Rt Hon Nicholas
Kilfedder, Sir James	Shaw, David (Dover)
King, Rt Hon Tom	Shaw, Sir Giles (Pudsey)
Kirkhope, Timothy	Shephard, Rt Hon Gillian
Knapman, Roger	Shepherd, Colin (Hereford)

Shepherd, Richard (Aldridge)	Townend, John (Bridlington)
Shersby, Michael	Townsend, Cyril D. (Bexl'yh'th)
Sims, Roger	Tracey, Richard
Skeet, Sir Trevor	Tredinnick, David
Smith, Sir Dudley (Warwick)	Trend, Michael
Smith, Tim (Beaconsfield)	Twinn, Dr Ian
Soames, Nicholas	Vaughan, Sir Gerard
Speed, Sir Keith	Viggers, Peter
Spencer, Sir Derek	Waldegrave, Rt Hon William
Spicer, Sir James (W Dorset)	Walden, George
Spicer, Michael (S Worcs)	Walker, Bill (N Tayside)
Spink, Dr Robert	Waller, Gary
Spring, Richard	Ward, John
Sproat, Iain	Wardle, Charles (Bexhill)
Squire, Robin (Hornchurch)	Waterson, Nigel
Stanley, Rt Hon Sir John	Watts, John
Steen, Anthony	Wells, Bowen
Stephen, Michael	Wheeler, Rt Hon Sir John
Stern, Michael	Whitney, Ray
Stewart, Allan	Whittingdale, John
Streeter, Gary	Widdecombe, Ann
Sumberg, David	Wiggin, Sir Jerry
Sweeney, Walter	Wilkinson, John
Sykes, John	Willetts, David
Tapsell, Sir Peter	Wilshire, David
Taylor, Ian (Esher)	Winterton, Mrs Ann (Congleton)
Taylor, John M. (Solihull)	Winterton, Nicholas (Macc'f'ld)
Taylor, Sir Teddy (Southend, E)	Wolfson, Mark
Temple-Morris, Peter	Wood, Timothy
Thomason, Roy	Young, Rt Hon Sir George
Thompson, Sir Donald (C'er V)
Thompson, Patrick (Norwich N)	Tellers for the Noes:
Thomton, Sir Malcolm	Mr. Sydney Chapman and Mr. Irvine Patnick.
Thumham, Peter

Question accordingly negatived.

Main Question put and agreed to.

Resolved,

That this House takes note of European Community Document No. 4616/94 on agricultural prices for 1994–95 and related measures, and of the Ministry of Agriculture, Fisheries and Food publication 'Agriculture in the United Kingdom 1993'.