Farmers' Incomes

HC Deb 24 February 1998 vol 307 cc273-80

Motion made, and Question proposed, That this House do now adjourn.—[Jane Kennedy.]

10 pm

Miss Ann Widdecombe (Maidstone and The Weald)

The issue which I am about to raise is of concern not just to farmers, on whose incomes I shall comment shortly, but to the economic health of the countryside as a whole. [Interruption.]

Mr. Deputy Speaker (Mr. Michael Lord)

Order. Would hon. Members leave the Chamber quickly and quietly, if they are going?

Miss Widdecombe

It is not insignificant that a point of order was raised with you earlier, Mr. Deputy Speaker, about the fact that an important statement affecting farmers has apparently been made available in advance to a pressure group whose principal aim is to make farmers' lives difficult, yet it has not been made available to Parliament. That sets the background for the way in which the Government look at the problems confronting farmers.

It is true that farmers have faced problems in the past. The main source of their current difficulty is the strong pound. Of course, this is not the first time in our economic history that we have had a very strong pound, but on this occasion there are other factors, not just in one or another section of the industry, but across farming as a whole. Those factors, taken together with the strength of the pound, are making life so difficult that we should be concerned for the future of farming if matters are not sorted out.

Mr. Christopher Gill (Ludlow)

Does my right hon. Friend recognise that the problem is not so much the strength of the pound as the weakness of the other continental currencies, as European Union member states pursue their convergence criteria, with all the resulting damage to their economies?

Miss Widdecombe

Yes indeed, but that weakness leads to the comparative strength of the pound, so what I am saying is a summary of the rather complex model that my hon. Friend was introducing.

I shall deal with specific parts of the fanning industry. Fruit farmers not only experience the difficulty of exporting in the face of the strong pound, but are confronted with all the results of frost in May. I could be cynical and say that I believe that frost in May greeted the arrival of a Labour Government, but I could say rather more realistically that frost in May has not happened for an extremely long time. No serious help has been given to fruit farmers, who make up a large percentage of the farmers in my constituency. No real help has been given to them, or much hope held out.

Cereals are facing an expanding world market in which additional supplies are coming from many quarters at the same time as a reduction in livestock has reduced demand, and once again the pound is strong. I hardly need to refer to the problems that are confronting beef farmers, which have not been helped by the Government's decision to ban beef on the bone. Finally, although this is not an exhaustive list, there is the problem of sheep farmers, who are also suffering from a strong pound and from the increasing difficulties of live exports.

Mr. Lembit Öpik (Montgomeryshire)

Is the right hon. Lady aware that in areas such as mid-Wales, including Montgomeryshire, we are facing a fully fledged recession on account of what has happened to sheep and beef farming?

Miss Widdecombe

I am indeed aware of that. Hon. Members must forgive me if I do not go into an exhaustive description of all that is wrong in farming. The number of hon. Members on both sides of the Chamber at this hour of the night is a sign of the concern that is felt in the House. I hope that the Government will take on board that concern and respond positively.

My debate has made special reference to the south-east, and that is because, notwithstanding the fact that there are obvious problems in other parts of the country, we have special factors. For example, huge capital investment followed the 1987 storm. There was the decimation of the hop market—it was more than decimation, of course, because that would have left 90 per cent.; that market was almost destroyed. There are higher labour costs in the south-east. There are also difficulties in transferring to something like beet because of the distance involved in haulage and processing. Also, in the south-east, we have a very mixed economy; there has not been, for example, the situation which until recently appertained in East Anglia, where there was extremely strong cereal farming, accounting for most of that economy.

At the same time, there has been a decline in the percentage of retail prices enjoyed by farmers. For example—these are only examples—in November 1995 a beef farmer received £2.35 per kg deadweight, which represented about 39 per cent. of the butcher's price. That farmer now receives only £1.78 per kg, which is slightly more than 30 per cent. of the butcher's price.

I could quote similar examples for milk, where there has been a reduction in the farmer's share of the end price from 72.5 per cent. to slightly less than 65 per cent. Lamb prices are now £2.16 per kg, which is only a 36 per cent. share of the butcher's price, which has increased from £5.37 to just under £6. Similarly, I could draw on the examples of pork and of cereals.

We have a strong pound and individual factors are affecting many sectors. We have a decline in percentage retail prices. In addition, we have a rise in the costs of regulation, which the Government want to pass on to the industry. The Government have proposed a food agency. I do not intend to argue the merits of such an agency, but I severely question the wisdom of making the industry pay for it. There are costs involved also in the traceability of individual animals.

All this is happening when others of the Government's policies are posing enormous threats to the countryside. For example, there is the proposal to build on the green belt—that proposal is now being somewhat softened, but it still remains, having been announced without, apparently, very much feeling for the farmers. There is a proposal to tax car parking. Who uses car parks? Who are the people who use cars to get to work? The answer is that cars are used by people who are coming in from the country, who do not have alternative forms of transport. There was also the iniquitous right to roam. There has been quite a U-turn on the roam towards that. Nevertheless, the proposals were made, and earlier tonight we were presented with an example of how closely the Government were co-operating, apparently, with one of the pressure groups involved in the right to roam.

Will the Government comment on their attitude to the rural White Paper? The previous Government's rural White Paper was widely respected by all sections of the countryside. It was welcomed, and its implementation was monitored. Is that monitoring to continue at the same level and in the same depth as in the past?

Low income from farming does not just affect farmers but has many knock-on effects on ancillary trades—on those who supply farm machinery, feed suppliers, dealers and hauliers and on the small trades or enterprises that depend on a healthy rural economy for their survival. There are various measures that the Government could take and I do not propose a complete prescription for solving the problem, but the use of agrimonetary compensation has been inadequate. I appreciate that this would be the responsibility of the Chancellor of the Exchequer rather than the Minister of State, but the Government could consider a longer period of tax averaging. Above all, they could try to reassure farmers that there is not a huge amount of ignorance involved in ministerial decision taking. The feeling of those in the countryside is that, although Ministers may understand the theory, they are not clued in to the practice of what goes on.

On Monday morning I was in Maidstone market, where I studied the last three years' auction catalogues and heard at first hand from farmers how sharply prices have declined. The Ministry's figures show that, across fanning as a whole, total income from farming has fallen by 35 per cent., but farming income alone—that of farmers and their spouses—has fallen by an overwhelming 45 per cent., which means that nearly half the income has gone. The value of output has declined by 11 per cent., yet output itself has risen. Despite the fact that more is being produced, there is still a net decline in the receipts taken.

I hope that the Minister will acknowledge that I have painted a dangerous picture and will not suggest that farmers are just being a bit awkward. I have quoted the factors chapter and verse. Farmers and those who depend on farming prosperity are entitled to know how the Government intend to deal with those serious issues.

10.12 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Jeff Rooker)

I congratulate the right hon. Member for Maidstone and The Weald (Miss Widdecombe) on securing this important debate. She is right to seek to raise the issues. Hon. Members on both sides of the House accept the picture she paints, although they may not agree with all her florid language. She has described, on behalf of her constituents, the problems in respect of farmers' incomes. We have freely admitted that—we have made no secret about it in terms of the information that we have published—and she is right to bring the matter to the attention of the House, as other hon. Members have done recently.

In view of the nature of the hon. Lady's constituency, I was not certain whether her speech would go much wider. The subject of farmers' incomes is as long as a piece of string. I suspected that she would raise the difficulty that growers in Kent suffered last May because of the onset of an unusually hard frost. That has been the subject of parliamentary questions and correspondence with the Ministry ever since. The answer is the same as it has always been: we cannot and will not legislate for the weather. What happened was most unfortunate. Recently, farmers in Spain, Portugal and Italy suffered droughts, earthquakes and floods, but no aid has been given especially because of those unique weather conditions.

Miss Widdecombe

Does the Minister acknowledge that the Conservative Government compensated fanners after the 1987 hurricane, to the extent of £2 per tree? We were able to do that, so why cannot he?

Mr. Rooker

I do not remember compensation being paid, but I remember the events of 1987. People who watch Michael Fish's weather forecasts are constantly reminded of them, as I was last weekend in Kew by the mural of the devastation caused by the hurricane. I do not have the details of any compensation to hand, and I cannot deal with that matter tonight.

The Government are aware that agriculture is going through a difficult time: we have made that abundantly clear. There is no doubt that the past year has been a bad one for farm incomes generally and, as the right hon. Lady said, for the livestock industry in particular. There are various definitions of total income from farming, but there is no argument about the figures she gave. Farm income fell by 37 per cent. in real terms in 1997. Some sectors—

Mr. Paul Tyler (North Cornwall)

Will the Minister give way?

Mr. Rooker

I must say a little more. I have a fair bit of time—rather more than I had in my previous Adjournment debate.

Some sectors have fared better than others, but averages can be misleading. The 25 per cent. fall in incomes for the general cropping sector is much less than the 51 per cent. fall for mixed farms, while that in the lowland sheep and cattle sector is 63 per cent. There is no question but that the principal cause of the across-the-board fall in incomes is the lower prices attracted by major commodities. As the right hon. Lady rightly said, the relative strength of sterling throughout 1997 has also had a major effect on prices attainable in the United Kingdom.

While sterling remains at its current high level, and there are structural surpluses in most agricultural sectors caused by over-production within the European Union, prospects for increased commodity prices, and therefore improved incomes in the short term, are not good. Everyone knows—I claim no special privilege—that Barclays bank has reviewed the prospects of agriculture. Its report notes the cyclical nature of farm incomes over the past 30 to 40 years. While agreeing with our short-term prognosis, and with the reasons behind it, Barclays predicts an upturn in the industry's fortunes in 1999.

I recognise the impact of the fall in farm incomes. The decline has been dramatic, particularly last year, and prospects are not good for this year. Although the decline has attracted the headlines and the difficulties are real, we must retain a sense of perspective when considering the damage to the industry as a whole.

Incomes fell dramatically last year, but that fall followed several good years; some were very good. Incomes rose steadily from 1990, peaking in 1995. At columns 91–92 of yesterday's Hansard, there is a written answer to my hon. Friend the Member for East Carmarthen and Dinefwr (Mr. Williams)—I apologise for my pronunciation. For example, in one farming sector, general cropping, net incomes in real teens at 1997 prices, deflated by the retail prices index, varied a great deal. The figures are: roughly £43,000 in 1989–90; £34,000 in 1990–91; £30,000 in 1991–92; £31,000 in 1992–93; £38,000 in 1993–94; £60,000 in 1994–95; £72,000 in 1995–96; £37,000 in 1996–97; and, provisionally, £28,000 in 1997–98.

There has been a great deal of variation in real terms. Some years were very good, others were modest, and there was a fall last year.

Mr. Tyler

The Minister will agree that farmers have long memories, and that they do not think that everything went wrong from 2 May. I hope that he is not saying that all sectors of the industry enjoyed the same profitability, as those figures imply. As a direct result of the previous Administration's cuts in support, livestock hill farmers have suffered incredible losses for several years. The cumulative effect is damaging. Barclays may be right to say that there will be an upturn in 1999, but some farmers will not make it to 1999.

Mr. Rooker

Hon. Members can look at Hansard. I gave information relating to dairy farms, cattle and sheep in less favoured areas, cattle and sheep in the lowlands, cereals, general cropping, pigs and poultry, mixed farming and all types of fanning, excluding horticulture.

I chose the example I gave—in fact, I had marked it before the right hon. Member for Maidstone and The Weald spoke—because I thought it more relevant, in general, to farms in the Kent area. It would be unfair for me to quote upland and less-favoured-area prices, which are worse. Nevertheless, the fluctuation is there.

There will be business failures in agriculture, just as there are in every other sector of commercial activity. Such failures, wherever they take place, are regrettable, but they are part and parcel of business life. It is not current income levels that determine whether an individual farm stays in business; that will vary according to individual circumstances, and what happens to the farm will relate more to indebtedness than to current income.

According to much of the information that is available, because of the number of good years that there have been recently, the level of indebtedness in agriculture is much lower than that in most other industries. There will always be examples in particular cases, but indebtedness—which is more likely to lead to bankruptcies than one year's low income—is much lower in agriculture than it is in industry as a whole. We must take a rational, long-term view.

Mr. William Cash (Stone)

May I ask the Minister to answer a question that has not been addressed in this important debate? Does he not agree with my point about the reform of the common agricultural policy? In practice, the real problem is that we are dealing with an artificial framework that is in need of reform. Whether the pound is strong or weak, the bottom line is that the framework requires significant reform. Will the Minister be good enough to address that?

Mr. Rooker

Yes. Indeed, I intend to do so a couple of paragraphs later in my speech. The hon. Gentleman is right: we are not in a completely free and open market, and the rules that would apply in such circumstances do not apply here. No one claims that they do. The Government, however, cannot change the rules on their own. We are members of a single market; we are a member of the European Union; we are constrained enormously by the disparity between what we can do and what we want to do.

We were elected on a platform that made it clear that one of our key aims was to seek reform of the common agricultural policy. The CAP is a disaster, in terms of its effect on the British economy and food prices in Britain. It has almost been designed to stop, for example, our dairy industry competing in the world market, because of the quota system. We are opposed to quotas: we want them to be lifted. We have modest proposals for change on the table in the form of agenda 2000. They are all that is on the table, and, although they do not go far enough, they are what we must adopt and proceed with.

There is no common view—if I may use that term—in the member states of the European Union in favour of reform of the CAP. The United Kingdom and Sweden stand out as beacons in their support of sensible reform of the policy. Many other EU economies that are on the leading edge of competitive markets, science and high technology do not want change in the CAP. That constrains us in seeking an agreement with our partners in the European Union, and we cannot deal with the matter alone.

There is no time to go into the matter in detail, but parts of the industry differ. I did not say this earlier, but pigs and poultry are quite different from sheep and cattle, in that they are in a much freer and more open market. I invite hon. Members to read the written answer to which I referred earlier. If they do so, they will see that, by and large, over the period between 1989–90 and the present year—in real terms—in areas where there were no subsidies, incomes were much higher than in areas where there were subsidies. It is not all one-way traffic in respect of the CAP. The CAP is a problem, however. It is a constraint within which we have to work, and the hon. Member for Stone (Mr. Cash) was right to mention it.

Because of that problem, as shown by my right hon. Friend's statement of 3 December 1997, we must secure permission to make the payments that we wish to make to our farmers—not so much from our own Chancellor of the Exchequer, which would be right, as from Brussels. As everyone knows, Brussels did not accept the way in which we wanted to proceed as announced on 3 December. We kept the total package the same—£85 million of support. I accept that that was only to cattle and sheep farmers, and it probably will not affect much of the right hon. Lady's constituency, but the pattern changed between the two announcements. That was because of the need to get the agreement of Brussels.

The right hon. Lady raised other issues, which 1 would love to deal with if there were more time. She did not quite attack the proposed food standards agency, but Conservative Members will make up their minds when the legislation comes before the House, either when it is here in draft form, as we intend, or later. The agency must be paid for. It will be paid for—as everything is—by the consumer, one way or the other. The item in the White Paper, on which there is still consultation, was only an example. We said that, if the 600,000 food establishments in this country, which did not include farms, paid a levy of £100, it would bring in £60 million of new resources to assist with the agency's operation. One cannot argue that £60 million is a small sum—and I would not do so—but I would argue that £100 is a fairly small and modest sum.

If the right hon. Lady is arguing that using traceability to protect our food supply is not the future, she is wrong. [Interruption.] It appears that she does not argue that, so we agree that traceability must be the order of the day. In the end, it will probably apply throughout the whole of the food chain and in all sectors. I have made no commitments in that respect, but I think that that is the way in which we are going. With organic sheep farmers, for example, we have traceability. Sheep are tagged all the way through the system, but we do not have traceability in the rest of the sector.

Cattle traceability, of course, started under the previous Administration, which was absolutely right. A computerised system for Great Britain that meets our requirements will be up and running by the end of this year. We have had such a system in Northern Ireland for several years, which is why we hope to achieve the first breach in the ban.

The running of that system is exclusively for the benefit and in the interests of the industry as a whole. That has been accepted; no one argues about that. Therefore, I remind the right hon. Lady that, last week, in the four minutes that I had to reply to the hon. Member for Ludlow (Mr. Gill), who in another life was my pair, I pointed out that we had not yet made our announcements and final decisions about the costs of traceability and specified risk material controls.

Miss Widdecombe

The Minister has three minutes left in which to answer my debate, having already taken a quarter of an hour. Do I gather from what he has said so far that, to the simple question, "What will this Government do to alleviate the current problems with farmers' incomes?" his answer is, "Nothing at all"?

Mr. Rooker

We are going to provide more money fast. We have already announced support of £85 million. If the right hon. Lady says that that does not matter and that no one wants it, she is wrong. We have promised that that will be paid, if possible, by the end of March and certainly by Easter. That is the aim.

Mr. Michael Jack (Fylde)

rose—

Mr. Rooker

I am not giving way again, because I have only a couple of minutes left.

The right hon. Lady raised many other issues. She has what I would call a chocolate-box image of the countryside. There are enormous difficulties and deprivation in the countryside. It is not the idyllic place she describes when she talks about the green belt. We are reversing the building programme in the green belt that we inherited from the previous Government. It is not urban dwellers who are digging up hedgerows and over-using pesticides. The image she presents is totally wrong.

Mr. Jack

rose—

Mr. Rooker

I am not giving way to the right hon. Gentleman, because everyone knows that, at 10.30 pm, the debate finishes. I was hoping to ask him and the right hon. Member for Maidstone and The Weald to deny that, this year, £1.7 billion is going to the livestock industry. The idea that we are doing nothing is ludicrous beyond belief. We are giving the livestock industry—

Mr. Jack

rose—

Mr. Deputy Speaker

Order. The Minister has said that he is not going to give way, and this is, of course, a Back-Bench debate.

Mr. Rooker

In 1997–98, we are giving the livestock industry £1.7 billion. By anyone's standards, that is a massive sum of public expenditure. Conservative Members say, "Give more." We are working to the budget that we inherited from the Conservatives—[Interruption]—including the mouthy Conservative Front Bencher, the right hon. Member for Fylde (Mr. Jack), who shouts from a sedentary position.

The Government recognise the concern felt by farmers about the pressures faced by their industry and in particular about the immediate effect on farm incomes. We are doing what we can within the constraints of the European Union and the budget we inherited from the previous Government, consistent with our responsibilities to the rest of the population. Unlike the previous Government, we are pledged to work quickly for the long-term future of United Kingdom farming by seeking common agricultural policy reforms. During the presidency, we will do all we can to ensure our success and to ensure that our successors have to take matters forward.

If Opposition Members find that we are not spending the cash that they left the present Government for the industry, we will be pleased to look into it. The right hon. Lady has not yet given a single example of where we could use the money that is consistent, after examination, with what we have discovered. We have not had one example in terms of agrimoney—

The motion having been made at Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Ten o'clock.