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§ Mr. Ieuan Wyn Jones (Ynys Môn)I welcome the opportunity to debate agriculture in Wales. I am grateful to the Under-Secretary for attending, because he has just finished responding to the debate in the Welsh Grand Committee. I gave him an idea of the issues that I intended to raise in the debate, and I hope that he will be able to respond positively to a number of my suggestions.
One of the important issues is the difficulty that many young people experience in entering the industry. The Minister is aware that agriculture makes a vital contribution to the economic, social and cultural life of rural Wales: indeed, it is the backbone of the rural economy. There is considerable concern about the difficulties faced by young people in entering the industry, bearing in mind that the average age of farmers in the United Kingdom is about 51, and there has been an upward trend in recent years.
Although the matter has been discussed for generations, very little has been done to address the problem. As far as I am aware, the Government have not suggested any solutions. As a member of the Agriculture Select Committee, which investigated the tradeability of milk quotas, I was struck by how little progress had been made in assisting young people to enter the milk sector. Some of the farming unions proposed a siphon system, whereby quota is sold on the open market. That proposal is currently being considered, among others. I must criticise the Government, because although they said they were prepared to consider initiatives made by the industry, they have not been able to give any idea which initiatives might be acceptable.
Another way to assist young people to enter the industry would be to introduce low or interest-free loans. The capital cost of entering the industry is a problem, and subsidised loans would be a way of cushioning the impact of crippling loans in the early years. Historically, the Government have refused to accept that proposal, preferring to provide capital grants to the industry as a way of investment. In recent years, the value of capital grants has reduced dramatically. I want to know whether the Government are more receptive these days to the idea of subsidised loans. Young people need some idea which initiatives the Government would be prepared to consider.
Another area of immediate concern to the farming industry, as the Minister heard in the debate in the Welsh Grand Committee this morning, is the hill livestock compensatory allowance payment. Two years ago, the Agriculture Select Committee held an inquiry into the cash cuts that were made at that time. I share the view of many in the industry that the Government are quite happy for HLCA payments to wither on the vine. Year after year, there is either a cash cut or a freeze, which, in effect, is a cut in real terms. Over a decade or more, the value of HLCA payments has been eroded year after year. That might fit well with the Government's intention to introduce a more market-oriented approach for agriculture.
How committed are the Government to maintaining HLCA payments? The Minister must be aware that the payments are much more important in Wales than in any other part of the United Kingdom. Less-favoured areas cover 80 per cent. of the land mass of our country, 337 whereas the figure is 53 per cent. in the rest of the United Kingdom. Net farm incomes in less-favoured areas in Wales are less than £11,000 a year—hardly an income for a young family. Low incomes and cuts in HLCA payments have led to a gradual reduction in the number of people employed in rural areas.
In England and Wales since 1987, the number of people employed full-time in agriculture has decreased by 35 per cent. The purpose of HLCA payments is, first, to maintain incomes and, secondly, to maintain the number of people in employment in rural areas, but the Government are effectively contributing further to the depopulation of rural areas in Wales by constantly eroding the value of the payments. We want to hear from the Minister that the Secretary of State for Wales is prepared to stand up to his colleagues in the Ministry of Agriculture, Fisheries and Food and in the Treasury and demand measures to protect those who live in our countryside.
It is worth noting that the Government are out of step with other European Union member states on the issue of HLCA payments. This year, for example, France has increased its payments. Finland, Austria and Sweden pay the maximum available under EU regulations. No other member states cut HLCA payments in 1993-94.
The Government's proposals to reduce the maximum number of ewes on which HLCAs may be claimed in disadvantaged areas is fiercely resisted in Wales. The cut from nine to six was slipped in surreptitiously in the general debate on HLCA payments in October. The Minister will be aware that farms in disadvantaged areas are quite small, and average incomes are even lower than in the upland areas. The average income is about £8,000 a year. These are small farms, and their economies are fragile.
Will the Minister listen to representations on these changes, having tried to slip them in through the back door in October 1995? The Government say that, effectively, they are trying to get rid of an anomaly between disadvantaged areas and severely disadvantaged areas, but it is an anomaly of their own creation, because they cut HLCA payments in 1993-94. There is a simple way to correct that anomaly: by returning the payments to their 1992 level. As I understand it, the European Commission has not demanded that this anomaly be addressed in the way that the Government propose.
Welsh farmers are also concerned about the possible threat to the transfer of their sheep and suckler cow quota from the Welsh LFA ring fence. I am aware that the Government have to reassess all the applications for developers' quota from the 1993 reserves, but any move to pinch quota from the Welsh LFA ring fence will be fiercely resisted. We know that the Government are under pressure to pay compensation in other parts of the country, but the Welsh LFA quota is not for transfer, and we demand an assurance that the Minister will stand up for the interests of Welsh farmers on this issue. If any quota is under-subscribed in the Welsh LFA, it should be used to assist young entrants in Wales. The Government could face a challenge in the European Court, because they may breach European Commission regulations if they act in the way that I have described.
Over the years, farmers have come to accept that agri-environmental payments will play an increasingly vital role in support mechanisms for the industry. Any 338 reform of the CAP must be seen in the context of further aid for uncoupling from production and increasing payments to farmers as stewards of the countryside. Such payments are entirely consistent with the general agreement on tariffs and trade.
Agri-environmental schemes have had mixed success in Wales. There is no doubt that Tir Cymen has proved much more successful in its pilot phase than environmentally sensitive area payments. In my area, for example, ESAs have not been as successful as predicted, and fewer farmers have joined the schemes than I expected. Will the Minister assure us that, when the Tir Cymen scheme is being evaluated and the pilot scheme is being concluded, the Welsh Office will consider the introduction of an integrated agri-environmental scheme operated by a single organisation? Such a scheme could involved tiered payments; farmers could participate at whatever level they wished. That would save on administration, make the scheme easier to understand and ensure a consistent and coherent approach throughout the country. Wales could be a pioneer.
The Minister will be aware that the European Commission will shortly consider further reforms to the CAP. As agriculture is so important to Wales, I hope that the Secretary of State will play a leading role in the discussions, and will attend the Council of Ministers to ensure that the voice of Welsh agriculture is heard in the forum where real decisions are made. Eighty per cent. of decisions affecting agriculture are made not in Westminster but in Brussels. I am sure that I need not remind the Secretary of State for Wales that he is also Minister with responsibilities for agriculture in Wales. He should not take his lead from the Ministry of Agriculture, Fisheries and Food or from anyone else; he needs to understand that we in Wales have different needs and concerns.
In the past few days, the European Commission has produced a paper on CAP reform and enlargement. It proposes incremental reform rather than a radical programme for change. We need to consider the issue differently in Wales, because our economy has a different agricultural base. We are primarily a livestock-producing country; we have small and medium-sized family farms, and few opportunities for diversification. Wholesale reform of the CAP in a short time, which the Government seem to be proposing, would be disastrous for our rural economy.
In the early 1990s, when these matters were last discussed, the Government attacked the MacSharry proposals for reform on the basis that they did not go far enough and seemed to protect small and medium-sized family farms. It must be said that the Commission and MacSharry understood the problems of Welsh agriculture much better than the Minister of Agriculture in the United Kingdom. As it happened, when the package of proposals was agreed, it was, on the whole, well received in Wales.
We feel that any proposals for change must build on the MacSharry proposals. The Minister must remember that most Welsh farmers work in an inhospitable climate, with difficult land and—as I have said—little scope for diversification. We cannot afford to introduce overnight drastic changes that would threaten an already fragile rural economy. Support measures are vital if the economy is to prosper. 339 As the Minister knows, the way in which support is given may change. The structure of payments may alter, and more emphasis may be placed on agri-environmental payments than on aids to production. Nevertheless, maintaining support is crucial, and the Welsh Office must argue that case where it counts.
I am aware that one of the reasons that the Prime Minister has given for wanting expansion of the European Union is the fact that it gives us an opportunity to revamp the CAP. That means radical change. It means cutting the budget, and it means that Welsh farmers will be affected. In its proposals for change, the Welsh Office must argue the case for Welsh farmers, the Welsh countryside and the Welsh rural economy. I hope that the Minister will be able to reassure us.
I am sure that the Minister will wish to pay tribute to the tremendous contribution of Welsh farmers to the Welsh economy. I have highlighted some of the problems that we face in the short, medium and long term; I feel that the industry needs a clear indication of the Government's attitude. As I have said, those farmers have made a tremendous contribution to our economy over generations. The Minister should recognise the contribution by offering not just words of praise, but a detailed programme of action and support.
§ The Parliamentary Under-Secretary of State for Wales (Mr. Gwilym Jones)I congratulate the hon. Member for Ynys Môn (Mr. Jones) on securing this important debate. I thank him for his acknowledgement of what was necessary to enable both of us to appear here this morning—the unusual coincidence of the Welsh Grand Committee's sitting ending just as this debate was due to begin—and for giving notice of the matters that he intended to raise.
The hon. Gentleman's concerns and my opening of the Royal Welsh winter show in Builth Wells yesterday seem to have coincided. Indeed, I was struck by the similarity of what the hon. Gentleman said about the importance of agriculture to the rural economy with what I said yesterday, to which this morning's Western Mail has helpfully given full coverage.
The hon. Gentleman asked about the support that the Government give to people entering the agriculture industry. Both the quota schemes that currently operate in the beef and sheep sectors include special arrangements allowing new entrants access to quota from the sheep and suckler cow scheme national reserves. The introduction of farm business tenancies will help to ensure that more land is available for new entrants to rent.
A wide range of courses is available to prospective new entrants through agricultural colleges. New entrants can also take advantage of the extensive range of training courses that are available through ATB-Landbase and other training providers. We are working with ATB-Landbase to raise awareness of skills gaps and deficiencies, and the benefits to both new and established businesses of strategic business planning and training.
The agricultural element of the objective 5b programme is partly financed by the European agriculture guidance and guarantee fund, which provides opportunities for the farming community in relation to business development, agri-tourism and countryside enhancement. Young 340 farmers have been identified as a priority group to receive benefit from that programme. Training and enterprise councils also have a role to play through business start-up activities, and business links will be an important contact point for new entrants seeking advice on business set-up and development matters.
I can tell the hon. Member for Ynys Môn that, at the end of 1994, bank borrowing advances were lower than they were in 1993. That reduction reflects the improvement in incomes that occurred in 1992-93 and 1993-94. Last week, we announced that the 1996 rates of hill livestock compensatory allowance would be maintained at 1995 levels. That is a positive step, which demonstrates our continuing commitment to upland farmers, despite another tight public expenditure round this year.
Net farm incomes are forecast to increase by an average of 13 per cent. in the less-favoured areas as a whole in 1995-96 compared with 1994-95. Notwithstanding reductions in HLCA rates in 1993, real-terms incomes in 1995-96 are still 27 per cent. above the average for the difficult years of 1990-91 and 1991-92. That economic data, which form the basis of the autumn review, did not support the farming industry's call for a restoration of the amount cut in the previous year. The forecasts do not take account of the recent devaluation of the green pound, which will result in a further increase in sheep annual premium rates from 1995 and an increase in suckler cow premium scheme and beef special premium scheme rates from 1996.
Going beyond our determination to sustain current hill livestock compensatory allowance payment rates for a further year, I am aware of the anxieties that have been expressed about the recent statutory instrument relating to a number of eligible sheep in the disadvantaged region. I reiterate what has already been said in the Welsh Grand Committee: that was a technical amendment necessary at the time in order not to prejudice the outcome of the autumn review. The final decision on the stocking rate will be taken once we have a clearer idea of the exchange rate that will apply for the 1996 scheme. Meanwhile, producers should understand that the exchange rate fluctuations that have forced that amendment mean that the payment rate will be at least that of 1995—£2.44—and probably higher.
It must be remembered that hill livestock compensatory allowances are neither the only nor the most financially significant of the subsidies being paid to farmers. As my right hon. Friend the Secretary of State for Wales explained at the Welsh Grand Committee, planned expenditure in the next financial year on the three main market support schemes—the sheep annual premium, the suckler cow premium scheme and the beef special premium scheme—is £43 million, 28 per cent. higher than expenditure only two years ago.
Concerns over the safety of beef have increased recently. I think that the hon. Gentleman would join me in saying that we must not overreact to that issue. There is no scientific evidence of a link between bovine spongiform encephalopathy and Creutzfeldt-Jakob disease. The latest report from the national Creutzfeldt-Jakob disease unit confirms that there has been no change in the epidemiological or clinical characteristics of CJD since the occurrence of BSE. The incidence of the disease is similar to that in countries with no BSE or scrapie. 341 All the available evidence continues to confirm the Government's view that the feed ban will lead to the disease's end. The number of suspect cases of BSE reported up to October 1995 was nearly 43 per cent. lower than the same period in 1994. The Government have introduced a comprehensive range of measures, based on the best independent scientific advice available, to safeguard the public from any remote risk to human health from BSE. Beef is recognised as safe by the Department of Health's chief medical officer, and I freely say that I find that advice totally reassuring. I am more than content to continue eating beef on a very regular basis.
I think that the hon. Gentleman will agree with me about the considerable inroads that we have made in Wales in implementing schemes approved by the European Commission.
§ Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)The greatest step that the Minister and the Government could take would be to introduce an early retirement scheme, favoured by the European Union and in fact, to a large extent, financed by it. Why will not the Government put their hand in their pocket and do the right thing?
§ Mr. JonesAs I have tried to explain before to the hon. Gentleman, when making spending decisions, one must make choices about priorities. I was going to acknowledge later that his party is the exception in that it is committed to increasing taxation on the people of Wales. [Interruption.] The people who had to go to the High Court or wherever else may also be in favour of it, but he and his small party say that the people of Wales should pay higher taxation.
I know that, if his party's policies were followed through to the ultimate and we were separated from the rest of the United Kingdom, we would pay very high taxation, but decisions must be made: either we put taxation up—and I believe that we are absolutely right in responding to the public demand to return to cutting taxation—or we must take money from elsewhere. I invite the hon. Gentleman to volunteer whether we should take it from health, from education or wherever else to fund such a scheme, if we do not increase taxation. I acknowledge that there is a difference between us on that matter. He is in favour of increased taxation.
I remind the House of the considerable progress that we have made in Wales in implementing schemes approved by the European Commission. Schemes for Wales encourage farming methods that will help to protect the Welsh landscape and habitats, and provide opportunities for people to enjoy the countryside. New measures approved by the European Commission include an organic scheme launched on 1 September 1994, a countryside access scheme launched on 8 September 1994, a habitat scheme launched on 9 January 1995, and a moorland scheme launched on 1 May 1995.
Wales has six environmentally sensitive areas, covering about one quarter of the land. On 1 March this year, new payments to promote public access were launched for all Welsh environmentally sensitive areas. The environmentally sensitive areas scheme is innovative, in that it was the first to adopt a "whole farm" approach rather than to target individual habitat types. It has been approved by the European Commission, along with the 342 Countryside Council for Wales's pilot Tir Cymen scheme, which also has a strong agricultural and environmental focus. Taken together, environmentally sensitive areas and Tir Cymen schemes cover about a third of the agricultural areas in Wales.
I think that the hon. Member for Ynys Môn will have heard me say at Welsh questions on Monday that Tir Cymen is to be reviewed at the end of its planned five-year life. I am confident that the review will consider all the points that he has in mind.
We are paying 99 per cent. of management agreement claims within the two-month charter target, but we are taking longer than I would wish to process new applications. That is partly because we are providing farmers with more help in preparing their applications, which takes time, but in the end it will lead to a better arrangement.
It is in the long-term interests of farmers, consumers and taxpayers that there should be a fundamental reform of the common agricultural policy. At present, other European Union member states remain to be convinced of that, but the European Union's commitments under the general agreement on tariffs and trade and the potential accession of eastern European countries make change inevitable. We need to move away from a production system to a market-driven one. Any change must allow a period of transition during which farmers can adjust, but now is the time for producers to consider how best to meet the market's demands. The industry in Wales is well placed to meet the greater challenges of a more competitive market.
In leading the Welsh Office trade mission to Australia and New Zealand, I was struck by comments about what New Zealand had done in its agriculture sector. That was initiated by a Labour Government who have revolutionised the approach. One comment that I recollect from my visit to New Zealand—which was far too brief, and I do not claim to be an expert on the matter there—showed that the relevant standing of farmers had been increased. That appeared to be acknowledged on all sides.
This is not the stage to say that what has been done in New Zealand must be done here, but it shows that there is room for study. The hon. Gentleman drew some European comparisons, not all of which were strictly relevant, as it is always difficult to take things in isolation, but what happens in some other countries could be examined to find out whether they apply here. I give no more commitment than that, other than to state my interest in the revolutionary approach in New Zealand—a country that has many similarities with Wales, including size and devotion to our national game.
§ Mr. Ieuan Wyn JonesIt is much better than us in that.
§ Mr. JonesOnly at the moment. I remind the hon. Gentleman that we won the last game.
The Government continue to provide substantial support for the agriculture sector in Wales. As my right hon. Friend the Secretary of State announced earlier today, planned expenditure will rise by £9 million—a 3.4 per cent. increase—to £271,500,000 for the next financial year. I should have thought that this morning's debate in the Welsh Grand Committee would have established the point that we are responding to an 343 overwhelming demand—it is coming from practically everywhere except Plaid Cymru—that we should return to cutting taxation.
§ Mr. LlwydIn a very wide poll in last Sunday's edition of The Sunday Times, 70 per cent. of respondents said that they were not in favour of tax cuts. Conversely, they wanted more public spending.
§ Mr. JonesThere are lies, damned lies and statistics, if I am permitted to make that observation in this place. I certainly hear those demands from constituents and others throughout Wales, and I should be surprised if the hon. Gentleman did not hear substantial demands. As I have said, his party is one of the rare exceptions in not calling for more tax cuts.
We do not know where the official Opposition stand in Wales, because they will not come clean on the subject. Their only approach to the debate on taxation is that they do not know. However, they broadly agree that we should return to cutting taxation. That is evident from their not voting after the Budget debate last night. We are responding to the public demand to cut taxation and, in our honest way of managing Government business, we are ensuring that that is balanced by expenditure. In so doing we have placed a high priority on farmers.