Rural Economy

HC Deb 10 December 1997 vol 302 cc927-47 9.34 am

Sir Robert Smith (West Aberdeenshire and Kincardine)

I welcome the opportunity to discuss the rural economy and to raise some rural issues that are specific to my constituency. The rural economy plays a very big part in my constituency. However, as the past week's developments have focused attention on one specific aspect of the rural economy, I shall keep my remarks brief, so that other hon. Members can speak on that topic.

I shall address wider issues in the rural economy before addressing the prevalent issue. I should like to hear the Government's philosophy on, and perception of their role in, supporting the rural economy. Is such support a priority for Ministers? Is maintaining a vital rural economy a priority, or are they happy for the drift towards purely urban environments to continue depleting the rural base? Specifically, I should like to hear the Government's views on the future of objective 5b funding—which affects part of my constituency—of structural funds, and of efforts to preserve the rural economy.

The oil industry dominates the city of Aberdeen and its outlying commuter areas, affecting especially house prices. How do the Government propose to encourage affordable housing in rural environments, so that families can stay in those areas? There is a crisis in the north-east of my constituency, because the only people who can live there are those in well-paid occupations who commute into the city.

At the heart of the housing problem is the need for the Government to confront capital funding for public sector housing. As Liberal Democrat Members have repeatedly said, it is farcical that money invested in housing that guarantees a return to the Exchequer is treated the same as money that brings no return. The Government must examine their accounting processes so that investment can be made again in council and other public sector housing in rural areas. The sale of council housing, and the general failure to build new housing, is creating a serious problem of keeping people and indigenous industries—which would stay when oil moves on—in rural areas.

Especially in the north of Scotland, there has traditionally been a recognition that, wherever one lives, one should be connected to society. The history of hydro-electric, particularly, demonstrates the belief that people should have equal access to electricity supplies regardless of where they live. Opening markets and a market-driven philosophy in running the economy have increasingly attracted people to urban environments, which provide all the quality public services. The worry is that rural areas will be left out of transport links and be less well connected to infrastructure.

There has been a proliferation of telecommunications masts in all the juicy spots in my constituency. Rival companies have been gaining access to the mobile telephone market, yet vast tracts of my constituency have no access to that network. Similarly, the BBC is developing new broadcasting technologies that will involve more people in the media, but parts of my constituency do not yet have access to current technology.

The fear is that, with less-regulated utilities, people in rural areas will become increasingly unable to obtain services, to stay in their community and to participate fully in society. I should like to hear the Government's assurances that they will encourage and sustain activity in rural environments, rather than encouraging people to move to urban environments.

Another important issue is the future of rural transport. As hon. Members on both sides know, bus deregulation led to a major downturn in the availability of bus services, and to a reduction in the quality and use of bus services. Significantly, on the same day that the Secretary of State for the Environment, Transport and the Regions was encouraging people to get out of their cars and start using buses, the local bus service in Finzean in my constituency was completely cut. Will the Government explore more imaginative ways in which to encourage community buses? Perhaps community councils could provide minibus services so that people without cars can continue to live in the rural economy.

In the light of the present headlines, it is difficult to have a debate on the rural economy without turning to the most pressing problem affecting many of my constituents—the crisis in farming. I shall keep my remarks short so that other hon. Members can go into some of the detail.

I start with the underlying philosophical aspects of the problem. Since the war, there has been a tradition of the state being heavily involved in the agricultural economy. All parties have accepted that the state has that role. There has been an unwritten contract or partnership between the farming community and the state under which the state has interfered in and operated in the market. That has led the farming community to be dependent on the actions of the state.

The Government have recognised that the previous Government's handling of the beef crisis led to a delay in finding a solution and to even more burdens being placed on the farming community. Ministers recognise that the state has a responsibility, but they have failed to recognise that the Government should assist the farming community. I should declare an interest at this point. Although I am not active in farming, I own a farm.

The crucial point that my constituents make to me is that the Government have a chance to compensate farmers for the fluctuations in the green pound. So far, the Government have failed to make their intentions clear. They have implied that they will not compensate farmers, but they have not ruled it out. The easiest way in which to boost the farming economy would be for the Government to give farmers access to funds.

The rules of the European Union allow Governments to compensate farmers for fluctuations in currency. If the Government fail to compensate our farmers, they will be forcing them to operate with one hand tied behind their back in an open market. If the Government believe that the rules should be changed, they should change them. The rules should be changed not as a result of Treasury decisions, but after negotiations in the European Union. That is fundamental.

The beef crisis has not affected only farmers. It has also affected the hauliers who take the cattle to market, the abattoirs, the markets themselves and the whole food processing industry, which is vital to the north-east of Scotland. One farmer said to me, "I may be very green, but I always thought that we grew beef for our own consumption." Farmers see farming not as a business, but as a way of life. The Government have failed to take that on board. If the Government withdraw economic support, there is no escape route for farmers. That is why there are high rates of depression and high suicide rates.

I hope that the Minister will give us some answers on the wider issues of the rural economy. I also hope that he will give us not just a message of sympathy—the Government are quite good at that—but some hope of concrete action and a commitment that they will use the powers available to them to compensate farmers for the crisis in farming, which was of the previous Government's making.

9.44 am

Mr. Alan Hurst (Braintree)

I am grateful for being called, Madam Speaker. I am also grateful to the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) for initiating this debate on a Wednesday morning, when there is an opportunity for a number of hon. Members to make a contribution.

The hon. Member talked about Government interference, a point which needs greater investigation. I talked to a farmer in my constituency on Friday about the history of farming. Between the wars, there was such a severe and prolonged agricultural depression that, in parts of East Anglia, it was possible to have a series of fields for three years before being expected to pay rent. The plight of farmers matched the plight of those who worked in heavy industry in the north-east of England at the time. The state "interfered" to assist farmers, to guarantee food production and to guarantee our position in the world after the second world war.

The situation has changed since then. The whole emphasis of the common agricultural policy has been to stimulate production, a process which has gone hand in hand with rural depopulation. I do not mean that the number of people living in rural areas has declined, but that there are fewer people working in agriculture and agriculture-related businesses.

The House of Commons Library assisted me yesterday by providing figures for the number of people employed as hired agricultural workers. The figure for 1945 was just under 900,000; the figure for 1996 was 250,000. Over that period, there has been a 70 per cent. reduction in the number of those working on the land. More recent figures suggest that the figure may have fallen to an even lower level—perhaps to 156,000.

The whole thrust of the CAP has been to neglect employment in agriculture as a means of earning a living. I hope that during the Agenda 2000 negotiations, the Government will follow up one of the points raised in the document, which says: The Union should make a parallel effort to enhance the economic potential and the environmental value of rural areas and their capacity to provide sustainable jobs. The policy thus far has not been to provide sustainable jobs, but rather the reverse. Even since 1992, there has been a substantial reduction in the number of people employed in agriculture.

My submission is that the way forward is—to use one of the jargon words that bedevil agricultural economics—decoupling. We should take away support and subsidy for production on an accelerated basis.

Mr. Gary Streeter (South-West Devon)

I am following the hon. Gentleman's argument carefully. Does he agree that farmers in his constituency and in mine are in a serious crisis? Does he agree that they require the Government, who were, we were told, elected to look out for the many and not just for the few, to help them? There are many farmers in serious crisis. Does he agree that the Government should seek to unlock the compensation funds in Brussels as a priority? Farmers are not just business men. They are the guardians of the countryside, and they require our help.

Mr. Hurst

I am grateful to the hon. Gentleman, who has clearly read a synopsis of my later remarks. I agree entirely that the Government are pursuing a strong policy to support farmers. The figure of £1 billion of support because of the bovine spongiform encephalopathy crisis flips off my tongue, in addition to the £500,000 to support the beef industry.

Mrs. Angela Browning (Tiverton and Honiton)

The hon. Gentleman mentions £1 billion. We were told by Ministers at agriculture Question Time last week that the figure was £1.5 billion. I hope that he understands that that money was negotiated by the previous Government, and was in addition to the agriculture budget. That was done to help the beef industry in a crisis. It is incumbent on the Minister to go back and negotiate more money from his Chancellor in another crisis. I hope that the hon. Gentleman will encourage him to do so.

The Government cannot just parade £1 billion as money that they have obtained. It was obtained in a crisis by the previous Government. We are asking the new Government to do the same now.

Mr. Hurst

I had hoped to avoid going into the origins of the BSE crisis and apportioning blame. The issues should be raised above the political knockabout so that we can examine the root cause of the problems in agriculture. I am sure that others will deal with the party political points in due course.

To sustain the rural economy, people have to work in it. That can be achieved by decoupling the payments from production and supporting the farmer for being the custodian of the countryside. The farmer has two important functions: to produce food and run his business; and to act as the custodian of the countryside. The countryside is for us all to enjoy and appreciate, but it cannot be managed on the cheap. It is only right and proper that farmers should be paid for sustaining environmental projects, keeping the countryside as we like it and supporting the conservation of wildlife.

The advantage of moving subsidy in that way is that conservation schemes are more labour intensive than non-conservation schemes. A hedge can be taken out overnight with a tractor and a man on overtime. It has then gone for a long time. Putting a hedge in requires continual care and cultivation over many years. The more hedges that go in, the more sustainable jobs there are. The more deciduous forestry plantations there are, run in proper woodland management schemes, the more labour will be required to coppice. The more traditional industries that are brought back to agriculture—such as charcoal burning to meet the ever growing barbecue market—the more jobs are put back into agriculture. The growth in game conservation will also put jobs back into agriculture. Each genuine rural job that is put back in agriculture is a boost to the rural community—the shop, the church, the pub and the village hall. It sustains traditional communities that have existed for generations and creates a real countryside, as opposed to a commuter haven for visits at weekends or during the summer.

Several hon. Members

rose—

Mr. Bernard Jenkin (North Essex)

I am grateful to the hon. Gentleman for giving way. Was he giving way?

Mr. Hurst

I always seek to do so if I possibly can.

Madam Speaker

I was not sure whether the hon. Gentleman had finished or was giving way.

Mr. Jenkin

It is early in the morning. I am a constituent of the hon. Gentleman, and we share a problem as constituency neighbours. Our rural communities are threatened by the supposed need for 4.4 million houses to be built in the south-east of England over the next 20 years. Does the hon. Gentleman agree that that is a lose-lose scenario? It will destroy our rural communities. There will be no sense of community if vast new housing estates are to be plastered all over our rural areas.

Will the hon. Gentleman join me in resisting the logic that says that such houses are needed in those areas? It will be bad for the rural economy, bad for the environment, because people will be dependent on cars, and bad for those who will have to live in those soulless housing estates.

Mr. Hurst

As my constituency neighbour and one of my constituents, the hon. Gentleman will know that I have frequently spoken in the constituency against the building plans for that part of northern and central Essex. However, now is not the time to pursue that issue. We had a debate on it recently, when hon. Members aired their views widely.

I shall seek to reach a conclusion, because this is a short debate. Rural communities cannot be sustained without rural employment. Without agricultural subsidies directed at providing incentives for farmers—or business men who are farming—to employ people, there will be ever fewer people working and living in the countryside. That will result in the horror of large housing estates for commuters or retired people built on green-field sites with no economic connection with the local area.

9.54 am

Mrs. Ann Winterton (Congleton)

I am grateful for the opportunity to speak briefly in this important debate. I congratulate the hon. Member for—is it Aberdeen and Kincardine?

Sir Robert Smith

West Aberdeenshire and Kincardine.

Mrs. Winterton

I apologise. I congratulate him on introducing this debate on the rural areas of our country, which are so important.

As a representative of a rural community, I pay tribute to the farming community, particularly at this time when it is facing such tremendous difficulties in all sectors. The contribution of the farming community is often undervalued. Wherever one drives in the United Kingdom—I say United Kingdom advisedly—one sees the most beautiful scenery and well-husbanded land. We do not give enough credit to the farming community for keeping it like that.

The first principle of farmers is to produce good, wholesome food, which has been done throughout the ages. The second is to recognise the impact of agriculture on the environment. They are the custodians of the countryside; environmental policies can be introduced through them. In addition, they provide the habitat for wildlife.

Farmers in Cheshire are interested in, and committed to, the land that they farm. They do all that they can to plant new woodland and habitats for wildlife wherever possible. That can be done only where the industry is profitable. As we have heard so often recently, the industry is in a state of crisis and its future is under threat.

Milk is important in Cheshire. The strength of sterling has driven down the produce price, but my farmers do not see much reduction in supermarket prices to reflect that. We can safely say that some people's margins have increased dramatically at the expense of our farming community. That should be said loud and clear. Supermarkets have introduced great benefits to the housewife, providing a wide range of fresh, good-quality food, but there is a down side to the control that they have. We must recognise what is happening. I was pleased to hear the Minister of Agriculture, Fisheries and Food say last week that he would speak to the chairmen of all the main supermarkets and tell them that he was disgusted by their behaviour.

Mr. James Gray (North Wiltshire)

Does my hon. Friend agree that the same phenomenon applies to the beef industry? Last week, we saw the lowest prices ever for beef on the hoof in Chippenham market, but the supermarket price remains miraculously unchanged.

Mrs. Winterton

My hon. Friend is right. One of the problems with beef is that, while the hind quarter has sold exceptionally well since the beginning of the BSE crisis, there have been difficulties in shifting the cheaper cuts.

The dairy industry works hand in hand with the beef sector. It provides the cull cows and breeds some of the bull calves, although they do not go into the beef industry. Both sectors have been equally hard hit by the recent crisis.

Dairy farmers in my constituency ask me how it is that Britain has been the second largest net contributor to the budget of the common agricultural policy, yet our Government will not apply to Brussels for green pound compensation for the four revaluations this year that have caused them such difficulty. They also say that the present Government have given up one lever that they could have used in respect of interest rate policy by handing over responsibility for fixing interest rates to the Governor of the Bank of England, who is advised by an unelected committee of experts.

We believe that the Government should apply to the European agri-monetary compensation fund to assist our agriculture industry. Beef prices are down throughout the United Kingdom. Beef farmers have been hit by the weight restrictions in the over-30-months scheme and hill farmers in particular are in dire straits. The good stock is bred and raised by the hill farmers before going down to the lowlands to be finished. If the hill farmers do not survive, vast tracts of the country will go to rack and ruin. Hill farmers look after the environment, produce exceptionally good stock and have a very hard life indeed.

It is all very well for right hon. and hon. Members who work in the warm facilities of the House of Commons and elsewhere, but hill farmers get up very early in the morning to work in all weathers and we should recognise the valuable role that they play in our uplands.

I served on the Select Committee on Agriculture for 10 years, including during the beef crisis. The previous Government were advised by the Spongiform Encephalopathy Advisory Committee, which comprises distinguished scientists in the field. The Government of the day have always followed its advice to the letter. The hon. Member for Braintree (Mr. Hurst) tried to apportion blame, but it is indisputable that the BSE crisis cannot be blamed on anyone.

Last week, I was horrified to hear the new ruling on deboning. Scientists can advise, but Ministers and politicians must make policy decisions. It was a political decision.

Mr. David Drew (Stroud)

I am rather perturbed to hear that. When we debated the issue last week, I thought that there was unanimity on a difficult decision. As it is widely understood that we do not know what caused BSE, surely the precautionary principle should be foremost. Does the hon. Lady agree?

Mrs. Winterton

No. I disagree with the hon. Gentleman, as the Minister was faced with three options and took the most severe one. In doing so, we have all let common sense fly out of the window. Naturally, we all regret the people who have died from the new variant of Creutzfeldt-Jakob disease, but those numbers must be balanced against the fact that the chance of contracting the disease is one in 600 million and falling because of the policies that have been introduced over the years to minimise the risk.

The British people showed what they thought of the new decision when they rushed to the supermarkets last week to buy ribs of beef and T-bone steaks. We live in an age when we are expected to take no risks. I probably took more risks getting out of bed this morning and coming to the House than ever I would by eating T-bone steaks every day for the rest of my life. Last week's decision lacked balance and judgment, and beef farmers will suffer as a result.

I have represented Congleton for 14 years. Although there have been ups and downs, there has never been so much depression and such low morale in all sectors of agriculture.

I should also mention badgers and tuberculosis. My hon. Friend the Member for Tiverton and Honiton (Mrs. Browning) commissioned the Krebs report on badgers and TB, and we are awaiting its publication. The problem is extremely serious; Members representing the west country may wish to mention it later. The disease is spreading northwards to Shropshire and Staffordshire, where it has a considerable impact on the farming industry.

Let me quote from an article in Farming News on 28 November to emphasise the damage the badger moratorium is causing". It was about a Staffordshire farmer who has lost 20 cows through TB. He was aiming to expand his herd to 120 cows and took on a herdsman in the summer, but after 20 reactors were found, his expansion plans are back on hold. There is strong circumstantial evidence that the badger is implicated in the transmission of TB to cattle. The present policy is not working because it does not allow proper clearance of infected badgers. I agree with the many people who believe that the system should be changed to allow clearance and that it should be a top priority. Badger numbers are growing dramatically in certain parts of the country and, where badger numbers are high, there is a strong likelihood of spontaneous outbreaks of TB. Shropshire is a graphic example; the badger population there must be managed.

Compensation to farmers is grossly inadequate. It needs to be at least 125 per cent. of replacement value to cover the increased costs involved and the long-term effects on farm businesses.

I am grateful for the time of the House today. I have tried to impress on the Minister the need for positive and urgent Government action to assist British agriculture.

10.7 am

Mr. Charles Kennedy (Ross, Skye and Inverness, West)

I am grateful for the opportunity to contribute briefly to this important debate. I congratulate my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir R. Smith) on his good fortune in being able to initiate a debate on the rural economy at such a pressing time.

I shall confine my remarks entirely to agriculture, and I hope that the Minister will communicate to his ministerial colleagues in the Scottish Office and other Departments the strength of feeling—underlined by the presence of so many Members on the Liberal Democrat Benches—about the present crisis. The word crisis is often overused in politics and in the House. None the less, if anything underlines the fact that there is a genuine crisis not only among farmers but among their leadership, it is the resignation of Sandy Mole yesterday as the president of the National Farmers Union of Scotland.

People such as Sandy Mole do not walk away from the jobs that they have been elected to do, and which they have done with diligence and honour, unless there is a deep-rooted problem. I hope that Scottish Office Ministers will have observed the sad fact that he has given up his post before the end of his term of office, and will recognise that that is a sign of the crisis of morale that has gripped Scottish agriculture, as it has gripped United Kingdom agriculture as a whole.

I hope that any sense that the Government may have had that this is all just farmers crying foul, or Opposition politicians demanding action, has now disappeared. There is much more than that. This is serious stuff. That is why my hon. Friend the Member for West Aberdeenshire and Kincardine was right to use the opportunity to raise the matter today.

While we are talking about individuals, I must point out that the Government have one great worry—the sole unequivocal support that the Minister of Agriculture, Fisheries and Food received in the House last week came from his immediate predecessor, the right hon. and learned Member for Sleaford and North Hykeham (Mr. Hogg).

There may have been a perception at European level that the previous Minister of Agriculture was doing too little, too late, but the great worry is that in connection with beef on the bone, the present Minister may have done too much, too soon. None of us, especially among the Liberal Democrats, would disagree with the idea of making available to the public scientific advice that is in the pipeline and is being put on Ministers' desks, but it would have been more sensible if the Minister, while reflecting on the advice that he had been given, had passed it on to the public and allowed them to make their decision.

The consequences of that decision over the past week, in terms of both prices and morale, have been catastrophic. I hope that the Government will realise that they have added to an already inflamed situation at the ports, and that they therefore need to take decisive action.

What decisive action should the Government take? I said that I would contribute only briefly to the debate, so I shall confine myself to making two essential points. First, for the rural economy in general and for agriculture in particular, the fact that British taxpayers are subsidising beef production and imports everywhere else in the European Union except in the United Kingdom adds insult to injury. That is a crazy state of affairs; it is like an episode of "Yes, Minister". The Government must do something about it.

Secondly, cognisant of the fact that we must send the right signal not only to United Kingdom farmers but to Brussels, the Government must get off the fence and clarify and confirm the terms and the remit of the independent inquiry that will be set up into the whole sorry saga of BSE.

The state of affairs at the moment is ludicrous. My hon. Friend the Member for North Cornwall (Mr. Tyler) and I raised the matter in the House last week. The Prime Minister's press secretary—let us be clear about who I mean; it was Alastair Campbell—was briefing people at No. 10 that the decision had been taken in principle some time ago, and that we now had to move ahead with a remit.

However, in the House both the Minister of State and the Leader of the House responded to questions from me and my hon. Friend by saying that no final decision had been taken, and that the Government were not yet in a position to clarify matters. Why are the Government at sixes and sevens over the issue? They should listen to the voices in the Chamber, where it has been made clear that the Labour party is in favour of, and my party has been a long-standing advocate of, an inquiry. The dog that will not bark is the Conservative party. The Conservatives are the only people who are not calling for an inquiry into BSE.

Mr. Malcolm Bruce (Gordon)

I wonder why.

Mr. Kennedy

We know only too well.

Mr. James Paice (South-East Cambridgeshire)

Will the hon. Gentleman give way?

Mr. Kennedy

In a moment. My hon. and learned Friend the Member for North-East Fife (Mr. Campbell), who has experience of the Scott report—and the scars to prove it—will be the first to underscore the need to confirm not only that an inquiry will take place, but that it will not take the same form as the Scott report. It must be open, independent and accessible, as that process was not.

Mr. Paice

May I make it clear to the hon. Gentleman that the Conservative party is happy to have a public inquiry? However, we are anxious to ensure that the setting up of an inquiry is not used by the Government as a smokescreen to curb other action that may be necessary immediately. I am sure that the hon. Gentleman will agree.

Mr. Kennedy

I certainly agree. There will be no disagreement among the Liberal Democrats with the statement that a public inquiry should not be used as a smokescreen. That is not the point of a public inquiry, which is a flushing-out rather than a covering-up exercise. I note the hon. Gentleman's recommendation and the endorsement that he has given on behalf of his party. I expect that we shall rediscover his comments in due course, as and when such an inquiry takes place—or, more important, when it reports.

The history of the problem, which goes back far beyond the immediate BSE crisis, will demonstrate that actions taken by the previous Government on deregulation and so on are extremely relevant to the situation in which we now find ourselves. I am talking about not only agriculture but the rural economy as a whole.

I hope that the Minister who is to respond will be able to say something positive about the need to access European funds to help the farming community, and about how swiftly the Government will press ahead with an independent inquiry.

There is no doubt about the strength of feeling. The Minister will know that, if he has spoken to his Secretary of State. When 500 people turn out in Kirkwall to confront the Secretary of State for Scotland, as they did last Thursday night, to make their point in a peaceful and considered way, that is an expression of the depths of despair in the agricultural community. I know that that point is not lost on the Secretary of State, and I hope that it will not be lost on the Minister.

Mr. Paul Tyler (North Cornwall)

Did my hon. Friend note that no fewer than 1,000 south-western farmers turned up at Milbay docks in Plymouth on Friday night, as well? As well as the points that he has already made, will my hon. Friend emphasise the need to restore hill livestock compensatory allowances, which were cut by the previous regime, to a reasonable level if we are to help some of the hardest hit of our livestock farmers?

Mr. Kennedy

My hon. Friend is right about HLCAs. The same is true of the cuts in the over-30-months scheme that the present Government have endorsed. If ever there was an example that makes the case that the Liberal Democrats have argued before, during and since the election—that we should not adhere to the somewhat arbitrary spending limits of the previous Chancellor of the Exchequer—it is the decisions that the present Administration have taken on agricultural expenditure.

Mr. James Wallace (Orkney and Shetland)

Does my hon. Friend agree that one of the great concerns for many farmers, especially tenant farmers who own no land, is the way in which the cut in the money for the over-30-months scheme has cut the capital value of their businesses? For many farmers, that capital value represents their pension. With a stroke of a bureaucratic pen, many British farmers' pensions have been cut.

Mr. Kennedy

My hon. Friend—[Interruption.] I am sorry, my hon. and learned Friend—[Interruption.] It is good to get something out of constructive opposition—[Interruption.]—but I am told that the honour predates the present regime. My hon. and learned Friend is right. How many farmers, as well as seeing their pension prognosis scuppered, have seen the value of their herds, their stock and, therefore, their bankability, wiped out overnight? In backing my hon. Friend the Member for West Aberdeenshire and Kincardine, I urge the gravity of the situation on the Minister.

Farmers are not by instinct or tradition militant people. The last thing they want to do is to stand at British ports, checking out vehicles and lorries from other parts of the British Isles. The fact that they feel moved to do so is a recognition and a reflection of a situation that is desperate and is getting worse. As Guy Fawkes said, desperate diseases require desperate remedies. To date, the desperate remedies from the Government have not been sufficient in terms of the overall profundity of the situation. The Minister has a good opportunity today to send the right signal from the Dispatch Box. I hope very much that he will do so.

10.20 am

Mr. David Drew (Stroud)

I am glad that we are having another debate on rural Britain. I think that this is the third time we have been down this course—it shows the importance of the matter. The hon. Member for West Suffolk (Mr. Spring) proposed a similar debate and I was able to initiate a debate on the housing problems that affect the countryside.

We take a dim view of being lectured by the Conservatives on these problems, as much of what is wrong with rural Britain is their responsibility. They had 18 years to put some policies in place. In the six months we have held power, we have tried to deal with what I admit are serious problems in the farming community and we seem to be picking up some of the blame for the Tories' inadequacy.

I want to refer to two issues that relate to agriculture and to the way in which the farming community has been affected. I noted the remarks of the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) and I share many of his views. We feel that the blame should not be attached to us; if the previous Administration had taken more prompt action on BSE, we would not be where we are today.

Sir Robert Smith

My point was that the responsibility of government to an individual in a state exists as a continuity, regardless of the fact that there may have been a change in the party of Administration. The present Government have recognised that the previous one was at fault, but the liability lies with the Government to redress some of the burdens put on the farming community, albeit by the actions of a different party; it was still the Government in terms of the relationship with farmers.

Mr. Drew

I agree with the hon. Gentleman. That is why we will see through the culling process, although it is causing great angst. There is no alternative if we are to get our beef back into world markets. We must go along with those desperate measures and it would seem, on the basis of all the evidence, that they are now working. Some say the crisis will come to a natural end next year, or possibly at the start of the year after, when the stock that could have been affected by BSE has been removed.

We are in a peculiarly difficult position. Although emphasis, understandably, will be placed on the beef market, there are difficulties in the milk and arable sectors. Never in recent years have so many agricultural products been in so much difficulty. That is why I understand what farmers are saying: I understand their anger and why they want action. The Government are listening and will take appropriate action.

Mr. Edward Garnier (Harborough)

What specific measures will the hon. Gentleman press on the Minister of Agriculture, Fisheries and Food to provide the answers that he is so hopeful of?

Mr. Drew

If the hon. and learned Gentleman lets me finish, I shall propose some measures.

The farmers I feel particularly sorry for are tenant farmers, who are often mortgaged to the hilt and face increases in input prices and now have the difficulty of an insecure market.

To take the intervention of the hon. and learned Member for Harborough (Mr. Garnier) in the spirit in which it was intended, I will make some suggestions. I want to refer to the remarks of the hon. Member for Congleton (Mrs. Winterton), who said that as much as the Government can do things, action is very much up to those who buy farm produce; dare I say it, the consumer. I would like to stress that the Government—this is not a party political point—have done everything to prove that the quality and standard of British beef is the best in the world, yet many of the problems that have angered farmers have been caused by their being undercut by cheap foreign imports.

I plead with supermarkets to listen to farmers and to a view that is shared throughout the House; if they make more effort to stress the fact that British beef is safe—we can argue about last week's measures—the situation can improve. Next month, the full traceability scheme is to be introduced, but consumers could be faced with imported beef that is not of the same standard as, and which may be older than, the under-30-months British beef that we presume is being sold here. Supermarkets have an obligation to explain that.

In a free market, we cannot say that supermarkets should take all imports off the shelves, but they should stress that British beef and British products in general are the best. That is why I asked a question on the statement last week. We encouraged the introduction of the food standards agency, which stresses how vital it is that we get our act together and do things right. The consumer will make the right choice, but there are ways in which the consumer can be helped to make that choice.

I do not want to lose the opportunity to talk about some other aspects of the rural economy. Although agriculture is not all of what goes on in the countryside, it is a very important part. It is still the major employer, particularly in the more marginal rural parts of Britain. We are faced with a series of dilemmas which the Government will address.

The document we produced in advance of the election, "A Working Countryside", was a good position paper and the previous Administration's rural White Paper was a statement of how things were. We would argue that the previous Government did not take the issue any further and did not take the action that could have been taken. There is much to be done.

Mrs. Browning

The rural White Paper was not a static document and there was an obligation on the Government to report progress annually. I hope that this Government will continue that.

Mr. Drew

I hope that the Government will consider ways—although not necessarily the same ways as the previous Government—in which to ensure that the rural debate is at the top of the agenda. The Government must genuinely show that action is being taken.

The legacy is painful. As has been said, we have had bus deregulation, a continuing decline in the number of shops and other services and the imposition of signing on in person and the jobseeker's allowance. The last has caused an enormous number of problems in my constituency. They have tried to sign on in person, but there are no buses.

Poverty does not affect only urban Britain. Because the number of rural poor is small, the problem is not statistically recognised, but rural poverty exists and has been made worse by rural decline. I strongly support the establishment of the social exclusion unit, but we must ensure that it has a rural as well as an urban dimension. I believe that we can and will do that.

I was very pleased to hear my right hon. Friend the Deputy Prime Minister say that regional development agencies will have a rural dimension. That shows what the Government can do. Some may say that that is at the cost of the Rural Development Commission, but my view is that that quango had served its purpose. I believe in taking decisions at the lowest possible level; that will surely be the role of regional development agencies.

This is a debate that must continually be heard. Serious problems afflict agriculture at the moment, but there are wider rural issues and I look forward to the Government addressing them in the appropriate manner.

10.31 am

Mr. James Paice (South-East Cambridgeshire)

I want to follow the example of the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) and concentrate entirely on agriculture, in particular livestock producers in the hills and uplands, where the crisis is most acute.

A survey by the National Farmers Union in 1995 showed that 42 per cent. of farmers in the less-favoured areas had a net farm income of less than £10,000. By any reckoning that is a low figure and it is the background against which we must view the worsening situation.

The hon. Member for Braintree (Mr. Hurst) was right: agricultural employment has been falling for a long while. That is happening predominantly in the arable areas, whereas the hills and uplands tend to have family farms and the fall there has been significantly smaller.

It has been implied this morning that the whole of the problem in the hills falls to the BSE crisis. We cannot get away from the fact that it is a significant factor, but we should consider some more up-to-date information. The peak of the crisis came at the end of March 1996, when the market collapse took place; market prices climbed back during 1996 and other livestock prices benefited from the collapse in beef prices.

Today, fat cattle are about 90p per kilo, compared with £1.09 12 months ago, after the recovery. Store cattle have fallen by more and fat sheep by dramatically more, to 94½p from £1.39 per kilo a year ago. That picture is mirrored across all other farm produce. Imports are coming from countries that use inputs such as mammalian meat and bonemeal, which are banned in this country.

We have had four currency revaluations in 1997, of which two were under the previous Government, because of the appreciation of sterling. As my hon. Friend the Member for Congleton (Mrs. Winterton) said, the two later revaluations must have been partially affected by the handing over of the control of interest rates to the Bank of England.

It has been estimated that the total cost of the revaluations to the agriculture industry is about £2 billion off farm gate prices. The consequences are there for all to see. The Meat and Livestock Commission estimates that in 1997 sheep exports will be between 400,000 and 500,000 head, compared with 1 million head in 1995 and 770,000 in 1996: a dramatic decline and one significant reason for the fall in sheep prices.

In January to September this year, beef imports from the Republic of Ireland were up 72 per cent. on the same period last year. Those from the rest of the European Union, including many countries that do not have all the controls that we have, but where BSE is known to be present, were up 42 per cent. In particular, it seems odd that we can import beef from over-30-months cattle, whereas we quite rightly cannot consume our own.

The price falls show that a significant part of the current crisis falls to events of the past few months. The Government's actions do them little credit. They abandoned the regional panels within days of taking office, thereby severing the contact with the industry that would have let them know what is going on. The over-30-months scheme cost the industry £29 million, but one should consider that farmers in the less-favoured areas, with an income of about £10,000, would have to dispose of only two cull cows to reduce their income by 10 per cent. because of the difference in price over the past 12 months.

Hill livestock compensatory allowances have been cut. The hon. Member for North Cornwall (Mr. Tyler) said that the Conservative Government cut HLCAs. I acknowledge that they did in some years, but that was against the background of a falling pound, rising exports and increasing prices.

The Government decided to charge farmers £5 to £10 for cattle passports. The Conservative Government said that we would fund the setting up of a computerised system; the current Government have abandoned that. The Minister of Agriculture, Fisheries and Food said the other day that the existing passport scheme costs about £7.2 million; but his proposed figures could raise anything up to £38 million. When I challenged his Minister of State, he refused to rule out the possibility that the Treasury might make a profit from the fees.

The Meat Hygiene Service will cost the farming industry about £44 million. I share the views of the hon. Member for Ross, Skye and Inverness, West on the subject of beef on the bone. I believe that the evidence demonstrates that the public believe the ban to be an overreaction.

The Minister of Agriculture, Fisheries and Food has criticised my party for urging extra public expenditure on monetary compensation, but he refuses to take on board the fact that some money is available to him. The sheep annual premium scheme will underspend in the current year, so there will be a significant increase in our Fontainebleau rebate in the next financial year; Treasury figures suggest that it could be in excess of £100 million. That money could be reallocated back into the Ministry and used to help with European compensation without an overall increase in public expenditure.

In the past few months, the Labour party has made a great deal of its alleged representation of rural areas. There is a great difference between representing and caring. The Minister of Agriculture, Fisheries and Food has already garnered a reputation for being distant, remote and unwilling to meet representatives of the farming and other industries for which he is responsible. By getting rid of the regional panels, he has cut himself off from the one link that he had. He has been worrying about new names and logos for his Ministry, but the current problems may lead to a dramatic diminution of the agriculture industry for which it is responsible. I hope that the Minister will take on board not only the views of hon. Members on both sides of the House who have spoken this morning but the views of the thousands of farmers across all sectors, but especially in the livestock sector, who face a desperate future. They have gone out on the streets and to the docks. I do not condone any violence, but I recognise the plight that has driven them to those actions.

I hope that the Minister will go back to his colleagues and say, "Act now. We cannot let farmers face the new year in this abysmal situation; the pound continues to harden and prices continue to fall." In this densely populated country of ours, we cannot afford to let the countryside fall into dereliction, but that is what will happen to our hills and uplands if we do not assist farmers now.

10.40 am

Dr. Liam Fox (Woodspring)

I begin by congratulating the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) on obtaining the debate and enabling us to discuss some topical and important problems that confront the countryside. As he began in Scotland, I too shall begin with comments about Scotland.

I sometimes wonder whether those who live in the central belt of Scotland understand that rural Scotland not only comprises 90 per cent. of Scotland's land mass but is home to one third of the Scottish population. That seems sometimes to be forgotten in Scottish domestic politics. It is certainly forgotten by Labour Members, because they have not bothered to turn up this morning.

Employment in rural Scotland increased by 6.5 per cent. between 1981 and 1991; the population rose by 3.5 per cent. In office, the Conservatives set up the rural partnership fund, which was worth £3.7 million in 1996–97 and £4.2 million in 1997–98. In response to a specific point made by the hon. Member for West Aberdeenshire and Kincardine, I remind him that under the Conservatives capital allocations to housing were substantially higher for rural Scotland than for urban Scotland. He made one or two valid points.

Sir Robert Smith

The Conservatives also introduced rules under which receipts from sales of council houses had to go towards repayment of debt rather than investment in the quality of the local housing stock.

Dr. Fox

I shall not go into that argument. Repayment of debt is important when some councils in the United Kingdom have debts higher than those of some third-world countries.

Today, we have had the rural Liberal Democrats trotted out. More townie than townie or more country than country are the Liberal Democrats, depending on the audience. In a different debate, we will have the townie Liberal Democrats trotted out. A party that cuddles up so closely to the Government—and with a leader who waits under the Cabinet table for any crumbs of prestige that might be dropped on him—is in danger of being found guilty by association with the Labour Government.

The Government do not regard the countryside as a real place with real people or real jobs. For many members of the Government, the countryside is somewhere where people from Islington go at weekends. We have to ask what the Government have against the countryside. They have increased interest rates. The rural development agencies will be based in urban areas. In the south-west—a matter that is important to my hon. Friends the Members for Tiverton and Honiton (Mrs. Browning) and for South—West Devon (Mr. Streeter), who were unable to speak in the debate, the RDAs will be dominated by Bristol and Plymouth, not rural areas. The local government settlement has a rural to urban bias.

The Government failed to fight for beef at Amsterdam. They have failed to compensate for the rise in the pound. They have introduced cattle passport charges, new Meat Hygiene Service charges and extra abattoir waste costs. They have cut over-30-months scheme cattle compensation and the hill livestock compensatory allowance. The Government seem to serve no one's interest but their own. They are there to serve the cult of the Prime Minister's ego, not the people in the countryside.

The question is—[Interruption.] The Liberal Democrats should stop for one minute and contain themselves. Why does the rural economy matter? Because it has a £17 billion turnover. It represents 1.5 per cent. of the United Kingdom's gross domestic product. It employs 608,000 people—more than transport, mining and quarrying, research and development, post and telecommunications, or the energy or water supply industries. It makes an important contribution to our trade. It is important for our investment. However, the key measure of farm investment—the agricultural gross fixed capital formation—will be hit by the current loss of confidence and the Government's raising of interest rates.

Farmers are the natural custodians of the countryside. Under the Conservative Government, more than 5,200 farmers signed up to the countryside stewardship scheme. By designating environmentally sensitive areas, which cover more than 15 per cent. of UK land, we encouraged integration of agricultural practices with sensitive conservation management. Under the farm woodland premium, more than 17,000 hectares of tress have been planted. Those are all important environmental gains.

The problem with farmers is that they are capital rich and cash poor. When a crisis hits, they stop spending, which presents a potentially catastrophic downturn for rural service industries. The low incomes associated with the current situation mean that the young will not enter farming. Where will the next generation of farmers come from? If people leave farming, prices will fall, there will be a loss of capital value and we shall have a spiral downwards. That is the root of the crisis. As several of my hon. Friends have said, we face a genuine crisis in the countryside.

Then again, the countryside and environmental management require farming to make a profit. Stone walls do not build themselves. Hedges do not look after themselves. What those in towns tend to call nature is in fact a constant battle against nature, waged on the nation's behalf by those who look after our countryside.

The point made over and over again by hon. Members from all parties is the plight of the beef industry. I represent a constituency which has a large number of beef and dairy farmers. There is a need to understand exactly where we are at present. We have fulfilled the conditions that were set out at Florence. We have kept our part of the bargain. We have the safest beef in Europe. That has been accepted by hon. Members on both sides of the House today. The public view what the Minister announced last week as an excessive knee-jerk reaction, but we must accept that the beef ban is now political and economic. It is nothing to do with safety. It is a protectionist measure levied against British farming by a protectionist mentality in the European Union that seeks to protect European farmers from higher-quality British products.

The Government should feel most ashamed of their failure to fight for beef at Amsterdam. We have made it clear that we would not have allowed the Amsterdam process to come to a conclusion without the lifting of the beef ban, but it was cast aside callously by the Government, who have no regard for what was happening.

Mr. Charles Kennedy

Will the hon. Gentleman give way?

Dr. Fox

No, I do not have time. The pictures of the Prime Minister being embraced by Euro mobs are an adequate price for a few farms going out of business—as far as the Government's news management is concerned.

A strong pound has driven down farm incomes. It means more imports and fewer exports. It means that minimum prices in the United Kingdom are cut. As my hon. Friend the Member for Congleton (Mrs. Winterton) asked, why are the Government doing nothing with agrimonetary aid; every other eligible state in the European Union pays its share? Why not Britain? The Minister who is to reply, who has responsibility for Scottish farmers, should tell us why we in the United Kingdom will not support Scottish farmers but, as EU taxpayers, we are subsidising every other group of farmers in the Union.

In Scotland alone, the costs are £7.6 million for cattle passports, £8.3 million in new Meat Hygiene Service charges and £12 million extra in charges for abattoir waste disposal. HLCA payments are down by £50 and sheep support has been frozen at the 1996 level. What will the Minister tell Scottish farmers when they are confronted with those drops in income and when the service industries face reductions in their income as a consequence? He cannot simply sit back and say, "Well, there were 18 years of Conservative government, so we have no responsibility for the crisis you face." Much of the crisis that farmers face at present lies fairly at the door of the Labour Government.

There is no doubt that the rural economy is in crisis. Farming needs action; not inquiries or soundbites. Farmers have not sought confrontation; it has been forced upon them. Everything the Government have touched has been bad for the countryside. Everything they have said shows a callous disregard for farmers; and everything—from the Prime Minister's pictures in Country Life magazine, posing as the country boy, onwards—shows that their appeal to the rural electorate was, like so much else, a web of deceit.

10.49 am

The Parliamentary Under-Secretary of State for Scotland (Mr. Malcolm Chisholm)

I congratulate the hon. Member for West Aberdeenshire and Kincardine (Sir R. Smith) on securing this debate on the rural economy. We have had an informed and wide-ranging debate that has covered many areas of public policy. The House will be aware that I do not have responsibility for all—indeed, for most—of those areas, but since May I have visited many parts of rural Scotland in connection with my responsibilities for transport, local government housing and European structural funds.

I have 10 minutes in which to speak and I propose to spend five minutes on the general matters the hon. Gentleman raised and five minutes on the beef question. He started by asking about the Government's philosophy and their role in supporting the rural economy. The Government have been elected on a manifesto commitment to sustain vibrant local communities in rural and remote areas. We recognise that those who live and work in rural areas have special needs. Our manifesto also stated that we recognised that the countryside is a great natural asset and a part of our heritage that calls for careful stewardship.

On 31 October, in Scotland, we published a discussion paper, "Towards a Development Strategy for Rural Scotland", which set out the aims we plan to follow in all our policies for rural Scotland. It stressed that sustainable development is at the heart of those policies. In rural areas, such development requires an integrated approach to three main policy objectives: economic, social and environmental. In economic life, we want more job opportunities and improved education and training to enhance the life opportunities of the rural population. In the social area, we want to improve services and enable local communities to retain population and expand social and cultural facilities. In environmental matters, we want to safeguard our natural heritage in a way that recognises that people continue to have an active place in the rural environment.

In short, we are committed to a living countryside. We reject the assumption of general rural prosperity that underlay the previous Government's 1995 rural White Paper. We recognise that there are specific rural problems: low wages in some sectors of the rural economy; inaccessibility for new businesses; and lack of employment opportunities. These are not new problems, but the Government are committed to enhancing opportunity and promoting employment and investment for sustained economic growth. Our aim is to enhance the life chances of rural citizens, especially those who suffer from social exclusion—as mentioned by my hon. Friend the Member for Stroud (Mr. Drew).

Mr. Laurence Robertson (Tewkesbury)

When the Minister discusses employment opportunities in the countryside, will he bear in mind the enormous impact a hunting ban would have on countryside employment?

Mr. Chisholm

How I voted on that issue is a matter of record and I do not propose to speak about it now.

Since coming to power in May, the Government have taken decisive action to help rural communities. First, our proposals for devolution will enable far more extensive discussion of rural issues in Scotland; a proportional voting system will ensure that the new Parliament is an inclusive one in which rural Scotland has a strong voice. Secondly, we have announced our intention that national parks will be established in Scotland, ending many years of indecision on that matter. Thirdly, we have established a land reform policy group for Scotland, in fulfilment of our manifesto commitment to initiate a study into the system of land ownership and management in Scotland".

I shall comment briefly on the three specific areas mentioned by the hon. Member for West Aberdeenshire and Kincardine: structural funds, housing and transport. He will be pleased to learn that a press release today will announce objective 5b funding for his area of the country and we are determined that structural funds for rural areas should continue under the new objective 2 arrangements.

We are also determined to keep funding for the highlands and islands and hope to invoke the sparsely populated area criterion to establish that. Some hon. Members might be surprised to learn that the highlands of Scotland are almost as sparsely populated as Finland. We shall also make use of the new treaty language on islands. I am especially aware of the problems of island communities, having visited the western isles this summer. I recently wrote to the chairman of Caledonian MacBrayne asking him to reconsider the decision to raise fares on the Ullapool-Stornaway route.

In the past two weeks, we have started three major housing initiatives that will help housing in rural areas: the energy efficiency initiative, which is tied in with welfare to work; the empty homes initiative, about which there will be announcements next week; and on Friday we announced £35 million for new housing partnerships, and I have said explicitly that that should apply to rural as well as to urban areas.

In many recent transport speeches, I have emphasised that solutions appropriate to urban areas might not be appropriate to rural areas. We shall have a new framework for bus services, which the hon. Member for West Aberdeenshire and Kincardine mentioned. I have also flagged up the importance of community transport and I hope that there will be an announcement about that soon. I have ensured that a member of the Community Transport Association is on the national transport forum which I recently convened.

Beef contributes between one quarter and one third of Scotland's total gross farm output. The continued presence of beef production on our hills and uplands is testament to the Government's commitment to this sector and the extent to which, as a Government, we are prepared to continue to support it. To put that contribution into perspective, I remind the House that the beef industry in Scotland received £127 million in direct subsidies in 1996, not to mention the institutional support that is provided via intervention. Put another way, direct subsidies represent between 200 and 300 per cent. of net farm income on specialist beef farms in our less-favoured areas.

Mrs. Browning

Will the Minister give way?

Mr. Chisholm

I have only four minutes left, but I shall take an intervention at the end of my remarks about beef.

On average, each beef farmer in the less-favoured areas receives roughly £25,000 in subsidy. Much has been made—understandably—of the present difficulties that confront beef farmers. In considering that, one has to recognise that various forces are at work. First, there is the long-term downward trend in beef consumption. Secondly, bovine spongiform encephalopathy is having a major impact on the sector. Thirdly, as has been mentioned in the debate, sterling is strong at present, which is a clear reflection of the confidence investors have in the current Government—unlike the previous one.

Much has been made about the downside of a strong pound. I acknowledge that it is aiding imports to this country, particularly from Ireland. It is hardly surprising that farmers—especially beef farmers—are queuing up to press for agrimonetary compensation. There was, however, no such queue when the pound was weak and farmers were overcompensated to the tune of £100 million per year on average between 1992 and 1996. Even taking account of recent revaluations, common agricultural policy prices in the UK are converted at a rate that is 5.6 per cent. higher than it was in January 1990.

Mr. John Burnett (Torridge and West Devon)

Will the Minister give way?

Mr. Chisholm

In a minute.

Such is the Government's commitment to the beef sector and such is our recognition of its importance to Scotland that the claims of the beef farmers are not being ignored, pending a review of whether they are justified. If any help is possible—I use the word "if' advisedly—it will have to take account of the tight expenditure provisions within which the Government as a whole have to operate. All the calls for European money ignore the fact that much of that will have to come out of general public expenditure.

Several hon. Members

rose—

Mr. Chisholm

I have only three minutes left, I so I shall take only one intervention, from the hon. Member for Tiverton and Honiton (Mrs. Browning).

Mrs. Browning

Does the Minister recognise the difference between the situation facing beef farmers today and that of a year ago? The new situation has arisen because of high interest rates and the strength of the pound. On mixed farms, when beef was down, farmers could continue to survive through milk cheques and payments relating to other sectors, but now all sectors are down. That is why the current situation is such a crisis.

Mr. Chisholm

I accept that point. The Government are giving it further consideration, although some of the factors, such as high interest rates, have to do with the incipient inflation we inherited from the previous Government.

The hon. Members for Congleton (Mrs. Winterton) and for Ross, Skye and Inverness, West (Mr. Kennedy) referred to the deboning issue. I am well aware of the effect on the industry of the measures we had to take. Although the Spongiform Encephalopathy Advisory Committee perceived the risk from that source to be extremely small, it was only prudent—given the policy of successive Governments of regarding public health as paramount—that we should take action to safeguard the consumer.

Time is running short, but I should like to refer briefly to the BSE inquiry referred to by the hon. Member for Ross, Skye and Inverness, West. My right hon. Friend the Minister of Agriculture, Fisheries and Food will make an announcement about that soon. Time will not allow me to mention reform of the common agricultural policy, except to say that we are keen to achieve that, and CAP reform proposals set out in Agenda 2000 are an important step in the right direction.

As I have already said, rural policy reaches into almost every public policy. We have had an interesting and informed debate. The Government are committed to a living countryside and we are sure that the measures we are putting in place will ensure the maintenance of vibrant, productive local communities.