§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Burns.]
10.42 pm§ Mr. Paul Tyler (North Cornwall)This is the first, and perhaps only, chance that we shall have to discuss on the Floor of the House the current collapse in farm incomes in less-favoured areas and the failure of the Budget to tackle those problems. I therefore hope that there will be an opportunity for one or two other hon. Members to intervene briefly, because I know that my anxieties are shared across party and across the country.
The Ministry of Agriculture, Fisheries and Food has acknowledged a decrease in those incomes. In the severely disadvantaged areas, in 1994–95, the specialist sheep farmers have experienced a downturn of 24 per cent. on 1993–94, when the hill livestock compensatory allowance rates were about 20 per cent. greater. Even MAFF's very optimistic forecast for the current year shows a drop of 18 per cent. for 1995–96.
The specialist beef farmers have experienced a downturn of 17 per cent. in the same period, and it is forecast that they will be down 19 per cent. this year. Mixed cattle and sheep farmers have experienced a downturn of 16 per cent. for the same period, and it is forecast that they will be down 12 per cent. this year. In the disadvantaged areas, cattle and sheep farmers have experienced a downturn of 26 per cent. for the same period, and it is forecast that they will he down 17 per cent. this year. The forecast for 1995–96 is very similar to the actual index for 1992–93, when HLCA rates were very much greater. The index is now 131 compared with 133 then. The MAFF figures fail to take into account the current problems for beef in the market.
The National Farmers Union for England and Wales is even more pessimistic. It says:
For the second consecutive year, the Government has chosen to ignore the great need of our hill and upland farms for extra support. Four out of ten farmers in Less Favoured Areas have incomes of less than £10,000 per year and their pleas for help have been roundly rejected. This decision calls into question the Government's claim of a genuine commitment to the hills and uplands. Furthermore, this reluctance to act is inconsistent with the spirit and words of the recently-published Rural White Paper which speaks of a concern to strengthen the rural economy. Under the terms of the Chancellor's Budget, HLCA rates have been frozen for the coming year 1996/97. The decision is particularly painful coming on top of a similar freeze last year and a slashing of payments in 1993 and 1994. When the Government originally made these cuts it stated that if hill incomes fell in future years, it would look at reinstating the payments".Similarly, the National Farmers Union for Scotland writes:A standstill in payments for next year means that the real value of these important payments to hill farmers will be reduced. The incomes of these producers are already unsustainably low, and where they are below the tax thresholds, will not benefit from the tax cutting measures announced in today's Budget. The Government has therefore missed an opportunity to support this most vulnerable sector of our industry. The absence of higher HLCAs for 1996 will further reduce the confidence of LFA producers and, in all probability, will drive still more livestock and producers from the hills".The National Farmers Union in Wales writes in similar terms. It states:The real value of HLCA payments has been consistently eroded in successive reviews. Net farm incomes in Wales which fell by 28% in 1994/95 remain inadequate to sustain farming families in 811 the hill and upland areas, meet their investment needs and to make interest repayments. The Government has publicly committed itself to maintain the hill farming sector. This decision fails to reflect that commitment".The Hill Farming Initiative adds:The NFU, the HFI and the Newcastle Farm Business Survey in the North East Region are convinced that this year will be worse than last year. The late upturn in the market is no benefit to hill farmers. Hill farms ran short on grass because of the drought. Therefore the majority of hill farm lambs had to be sold in August/September before the late upturn in the store and fat lamb prices".Logic points to the need for a substantial HLCA rate increase this year, and I know that hon. Members on all sides of the House—including my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) and my hon. Friends the Members for Argyll and Bute (Mrs. Michie) and for Orkney and Shetland (Mr. Wallace)—have met representatives in their communities who have expressed real concern about what is happening.There is a 50-year commitment to maintaining the HLCAs as an effective mechanism, and successive Governments have endorsed it. As the National Farmers Union made clear, the rural White Paper refers specifically to that commitment as an important part of the armoury for maintaining incomes in rural areas. That point was reinforced by the Minister when we debated the matter in Committee on 25 October 1995.
Meanwhile, other European Union member states are using the mechanism to good effect. The Minister was kind enough to provide me with some provisional figures—I hope that he will be able to give us the accurate figures this evening—which show the way in which other member states are supporting their hill farmers. Not only do we appear to have the lowest level of support, but we are the only country in Europe that has cut its HLCA rate.
Persistent Ministry promises to compensate for adverse conditions in the less-favoured areas are being broken this year. It is a case of "Heads we win, tails you lose." In the past, when the Government have been able to point to some improvements in incomes, they have used that as a reason for reducing HLCA rates. The reverse should now apply.
There is broad cross-party support for an increase in the HLCA to meet the critical income fall. That was clear from the deliberations of the Committee that met on 25 October. There is a recognition that income levels that were considered acceptable in the 1980s have not been restored in the 1990s. Instead, the Budget contains a cut in real terms for all farmers in LFAs.
There is an extra cut for those in disadvantaged areas, as this year the Ministry decided to make a change in the eligible stocking levels for ewes. That represents a real cut. Farmers in the disadvantaged areas are facing some of the worst income drops. As the hon. Member for South-East Cornwall (Mr. Hicks) will know, we have that experience in Cornwall.
I want to make it clear that this is not a requirement of Brussels. It simply results from the Government's failure to maintain the severely disadvantaged area rates at a realistic level, so it becomes necessary to adjust the DA rates to maintain the ratio.
In recent weeks, a number of Conservative Members have expressed concern about the situation. 1 am sorry that the hon. Member for Taunton (Mr. Nicholson) is not here, as he has said that any cut in HLCAs would have 812 Back Benchers voting against the move. He is quoted as saying that in Farmers Weekly. All hon. Members will recognise from what I have said that there has been a cut in the HLCAs for the DAs, and a general real-terms cut as a result of failure to maintain the rates at a realistic level and to keep pace with inflation.
Logically, all Conservative Members from the LFAs should be with us when the time comes—if the time comes—when we have a chance to vote against these figures.
On the Ministry's own farm income figures, we should expect at least a return to the 1992 levels of HLCAs. But its optimism is not shared by many other commentators, or by the industry generally. If its figures are found to be over-optimistic, this year will he even more disastrous for hill farmers.
The Minister and his team have a reputation for personal integrity. I ask, therefore, how they could possibly have endorsed the press release in my hand this evening. I have some experience in the public relations industry—I make no apology for that. But if anyone in my company or department—any professional PR officer—had produced this travesty of the situation, I would speedily have dismissed him.
The press release is headed:
No Reduction in HLCA rates in 1996".That is simply not true. Worse, it is misleading, in that it fails to take account of figures included further down the same page. It is a worthless document, clearly written by an illiterate or innumerate spin doctor, not by a reputable politician. Ministers should have found some opportunity to correct the mistake made in their Department. The document is not even technically correct, and it reduces MAFF's credibility to an all-time low. It is a worthless bit of paper, and I hope the Minister will apologise for it.Why are the Government not honest with the House? Why does not the Minister admit in the privacy of this night that he and his colleagues failed to persuade their colleagues at the Treasury? No one will hold that against them; an honest Minister is such a rare sight these days that it would be extremely helpful for someone to do just that. Why not own up, and promise to try again? If Ministers did that, they would gain our respect.
§ The Minister for Rural Affairs (Mr. Tim Boswell)I congratulate the hon. Member for North Cornwall (Mr. Tyler) on securing an Adjournment debate on this subject. I know that it is a subject close to the hearts of many hon. Members. He has already referred to the stimulating debate that we had in the Standing Committee on Statutory Instruments in October, in the context of an amendment to the hill livestock compensatory allowances regulations.
I share the hon. Gentleman's view that farmers in the less-favoured areas play an essential role in the rural community. They are responsible for creating and maintaining some of our most beautiful countryside. They are vital in supporting living communities in some of the most remote parts of the country. Hill livestock farming is an essential element in our highly stratified livestock industry. Hill farmers fulfil these roles often in hard 813 physical conditions, with hard physical work. As the country owes so much to farmers in these areas, it is clearly right that we should all be concerned with their incomes.
It is perhaps worth reminding the House briefly of the nature of the less-favoured areas of the United Kingdom—hereafter LFAs, for short.
They are, by definition, areas in which extensive livestock farming is the only practicable form of agriculture. That is implicit in the criteria adopted for their designation. Grassland must account for more than 70 per cent. of the area used for agriculture, and the stocking rate must be less than one livestock unit per forage hectare. They are also, by definition, areas where farm income is below the national average. Farm rents must not exceed 65 per cent. of the national average, and family farm income per work unit must be less than 80 per cent. of the average for non-LFA farms.
The most recent figures relating to incomes in the LFA are those prepared for the 1995 autumn review of economic conditions in the hills and uplands, which considered the rates and conditions for the HLCA scheme for the 1996 scheme year. The tables were placed in the Library on 28 November. I should tell the hon. Gentleman that, of course, they reflect the outcome of discussions with the farming unions, and they are an objective measurement of the circumstances on which he drew for some of his figures.
The autumn review tables give information on three measures of income: first, net farm income, which represents the return for the labour and investment of farmer and spouse on the assumption that the farmer is tenanted; secondly, occupiers' net income, which is based on actual tenure and indebtedness to the farm; thirdly, cash income, which represents the difference between receipts and expenditure in the year.
I shall restrict myself to net farm income figures, which traditionally have been used to monitor economic trends. Although net farm income on average cattle and sheep farms in the LFA fell by some 20 per cent. in real terms in 1994–95, it is forecast to recover by 4 per cent. in 1995–96.
I remind the House that HLCAs are intended to compensate farmers for the permanent natural handicaps in the hills and uplands. In contrast, all factors which affect farming incomes in the years in question are taken into account in the tables prepared for the autumn review. The income figures which inform discussions on the rates of HLCA therefore also reflect short-term factors such as adverse weather conditions.
The fall in net farm incomes in 1994–95 to which I have referred was the result of a cold, wet spring and a dry summer, leading to higher than usual lamb mortality. In addition, the cold winter and long wet spring obliged farmers to draw heavily on their stocks of winter fodder. The dry summer restricted grass growth, especially in the east, leading to poor fodder production and high fodder costs in the autumn of 1994, but those factors were not universal. For example, the fall in income experienced in other parts of the United Kingdom was not recorded in Northern Ireland. Those regional variations reflect differences in weather conditions and market prices.
Nevertheless, many hill farmers started the 1995 season with low fodder stocks. In consequence, the drought in the summer of 1995, on top of a previously difficult year, 814 has affected feed and fodder stocks and prices appreciably. I need hardly add that lowland farms suffered equally, if not more, from the dry summer weather.
Despite two years of unfavourable weather conditions, net farm income in the LFA 1995–96 is expected to be about the same in real terms as it was in 1992–93. While HLCAs compensate for the particular difficulties facing livestock farmers in the less-favoured area, it would be misleading to consider them outside the context of the total Government support for livestock in those areas. In 1995, it is forecast that some £610 million will be paid in direct subsidies to livestock farmers in the LFA. In 1996, it is forecast that the figure will rise to £655 million, of which only some £108 million will come from HLCA.
Moreover, special support for livestock farmers in the LFA does not come exclusively from HLCAs. The LFA supplement to the sheep annual premium is making an increasingly important contribution. Taking account of the recent devaluations of the green pound, that supplement in 1995 is expected to amount to £5.69 per ewe. The tables prepared for the autumn review show that the increase in food and other input costs during 1994–95 should he set against a forecast increase in direct livestock subsidies, including those that I have referred to, and better returns from sales.
For example, the rate of payment under the suckler cow premium scheme will increase from £115.12 to £143.04—a rise of 24 per cent. The payment made under the beef special premium scheme will rise 28.5 per cent.—from £85.09 to £114.03. The rate of payment under the sheep annual premium scheme is forecast to rise from £22.21 to £26.28—an increase of 18 per cent. Those figures do not take account of further increases in the rates of payment that will affect the 1995 sheep annual premium and the 1996 beef special premium and suckler cow premium, following the recent devaluations of the green pound.
Despite the remarks of the hon. Member for North Cornwall, returns from the autumn sales increased. Prices for all types of sheep this autumn were buoyant, and most cattle prices showed some increase over 1994.
§ Mr. Robert Hicks (South-East Cornwall)I am sure that the House appreciates the criteria used in determining the level of financial support given to hill farmers this year, but does my hon. Friend agree that, comparing the situation with our European counterparts, this country is not supporting its hill farmers to the same extent? Is it not relevant to take into account the contribution that hill farmers make to the management of the uplands in the overall rural economy? Is that not equally valid?
§ Mr. BoswellI am grateful to my hon. Friend for his intervention, because he represents a long and continuing interest in the problems of farmers in his area, including hill farmers. We are lucky to have on the Hill Farming Advisory Committee Mr. Cornelius from Bodmin, and to have that Cornish influence and discussion of the affairs of that county.
Of course we compare our efforts with those made in other European countries. We have one of the largest LFA sectors, and, although the provisional figures are only being released at this stage and on a confidential basis, it is clear that we tend to have a larger overall unit level of payments, even if some direct headage comparisons are less favourable. I acknowledge my hon. Friend's point about the importance of hill farmers to the wider rural 815 economy. I prefaced my speech with a reference to that aspect, and I happily reiterate that recognition. We wish to do our best for hill farmers.
Trends in the labour force are more encouraging than the hon. Member for North Cornwall suggested. Figures prepared for the autumn review show that the agricultural labour force in the less-favoured areas is declining less rapidly than outside them. In England, the labour force on agricultural holdings in non-LFA has declined 1.7 per cent. per annum over the eight years from 1986 to 1994, while the equivalent reduction in the severely disadvantaged areas of the LFA is 1.2 per cent. In the disadvantaged areas, the decline was only 0.8 per cent. Those figures suggest that the Government's policy of providing support for hill livestock farming has been successful.
Farm incomes in the LFA should be viewed in perspective, and I will compare them with farm incomes in other areas. Two comparisons can easily be drawn. We can compare net farm income in the LFA with that for all types of farm. Incomes from cattle and sheep farms in the LFA are lower than the average incomes of all types of farm. Published figures on UK farm incomes show that, in 1993–94, average net farm income on cattle and sheep farms in the LFA in England was £18,000, whereas the average for all types of farm in England was £23,800.
But that does not compare like with like; it is more a reflection of the difference between extensive livestock farming and other more profitable types of agriculture, such as dairying or arable. Also, to some extent, the lower income of cattle and sheep farms reflects the fact that they are generally smaller than other types of farm, in terms of scale of enterprise.
Secondly, we can compare the incomes of cattle and sheep farms in the LFA with such farms in the lowlands. That comparison tells a very different story. In England, the average in the LFA, which, I remind the House was £18,000, compares favourably with net farm income for lowland cattle and sheep farms of only £9,400—barely half. The special subsidies available to LFA farmers helped to maintain that comparative advantage.
No debate on incomes in the LFA would be complete without some comment on the proposed rates for HLCA in the approaching scheme year, and the hon. Gentleman made a great deal of that. In reaching a decision on the rates, Agriculture Ministers have to take an overall view. This year's public expenditure round was very tough. Against the background of the rising cost of agricultural support on other fronts, and in particular a forecast increase in the level of expenditure on other direct livestock subsidies, to which I referred, rates of payment under the 1996 HLCA scheme were bound to come under severe pressure.
816 Farming interests argued in the course of the autumn review that the cuts in HLCA in 1993 and 1994 should be restored in full. That would have cost about £50 million. In the circumstances, it was not possible to agree to such an increase. Indeed, the increase in net farm income forecast in the autumn review simply did not justify such action.
Not surprisingly, those who argued for an increase concentrated on costs to the sector, especially those resulting from the poor weather conditions, and took no account of the increases in subsidies and market prices, which I think are essential to give a rounded picture. I say to the hon. Gentleman, who made rather a lot of it at the end, that we issued our press release. We believe it to be accurate, we stand by it, and I am in no sense minded to advise the House of any intention to withdraw it.
§ Mr. TylerI am following carefully what the Minister is saying, but will he acknowledge that the change in the number of ewes that are eligible in the disadvantaged areas results in a cut? It cannot be interpreted in any other way. I ask him to confirm that that was not required by any direction from Brussels.
§ Mr. BoswellI am grateful to the hon. Gentleman for mentioning that point, as it has caused confusion.
As I think I have already made clear, the background to the announcement of a reduction in the stocking limit was precautionary, and it enabled us to allow the autumn review, which was reaching its conclusion, to consider the level at which the amount on payments in respect to the ewes in the disadvantaged areas should be fixed. As we have not announced the figures, because we need to await the announcement of the sterling ecu rate on 1 January, the hon. Gentleman's concern, although strongly felt and genuinely intentioned, is somewhat premature.
In the measures, including the rates that were announced by my right hon. Friend on 28 November, it is clear that the overall aim was to consider the economy in general—notably in respect of maintaining tight control of public expenditure and continuing to reduce the public sector borrowing requirement. Those are important parts of our programme and I do not resile from them in any respect.
Equally, it should not be forgotten that hill farmers, too, stand to benefit from the measures to reduce taxation and to control inflation which were announced in the Budget. Therefore, against the background of a difficult expenditure round, I am pleased that we were able to work hard to maintain the rates of HLCA at 1995 levels, as I have described to the House tonight.
§ Question put and agreed to.
§ Adjourned accordingly at eight minutes past Eleven o'clock.