Beef Industry

HC Deb 14 July 1998 vol 316 cc215-63

[Relevant documents: Third report from the Agriculture Committee of Session 1997–98, on the UK Beef Industry, HC 474, and the Government's response thereto, HC 720; second report from the Welsh Affairs Committee of Session 1997–98, on the Present Crisis in the Welsh Livestock Industry, HC 447; The Ministry of Agriculture, Fisheries and Food and the Intervention Board departmental report 1998, Cm. 3904.]

Motion made, and Question proposed, That a further sum not exceeding £142,691,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges which will come in course of payment during the year ending on 31st March 1999 for expenditure by the Intervention Board—Executive Agency in giving effect in the United Kingdom to the agricultural support provisions of the Common Agricultural Policy of the European Union; other services including BSE emergency measures; and administration.—[Mr. Rooker.]

Mr. Deputy Speaker (Sir Alan Haselhurst)

With this it will be convenient to discuss the following estimate: class IV, vote 2— That a further sum not exceeding £389,128,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges which will come in course of payment during the year ending 31st March 1999 for expenditure by the Ministry of Agriculture, Fisheries and Food on operational expenditure, agencies and departmental administration including BSE related measures; promote food safety; take action against diseases with implications for human health; safeguard essential supplies in an emergency; promote action to alleviate flooding and coastal erosion; to protect the rural economy particularly in Less Favoured Areas; encourage action to reduce water and other pollution and by other measures to safeguard the aquatic environment including its fauna and flora; improve the attractiveness and bio-diversity of the rural environment; implement MAFF's CAP obligations efficiently and seek a more economically rational CAP while avoiding discrimination against UK businesses; create the conditions in which efficient and sustainable agriculture, fishing, and food industries can flourish; take action against animal and plant diseases and pests; encourage high animal welfare standards; provide specialist support services, allocate resources where they are most needed; manage and develop staff; undertake research and development; and provide for the expenditure of the Ministry's executive agencies.

5.10 pm

Mr. Peter Luff (Mid-Worcestershire)

We conduct this debate very much in the shadow of the comprehensive spending review, which at first blush seems to have had a relatively modest impact on the Ministry of Agriculture, Fisheries and Food. The target of reducing the incidence and costs of bovine spongiform encephalopathy may prove to be one of the least demanding facing any Department at present—and I congratulate the Minister of State on that. It also appears that an end to the calf processing aid scheme has been announced, to which we shall need to return later in the debate.

I emphasise that in no sense is this debate a Conservative debate, as some parts of the farming press have suggested. The debate is essentially on two Select Committee reports, and is very much a House of Commons occasion. I therefore hope that it will not become a debate on MAFF's chapter in the comprehensive spending review. Our most recent debate on common agricultural policy reform was overtaken by a wide range of other issues. The beef industry deserves a debate of its own on the Floor of the House.

The report of the Agriculture Committee, which forms the basis of the debate, perhaps deserves a place in "The Guinness Book of Records", as two of its major recommendations were implemented while it was at the printers. The Government's decisions not to impose the costs of new specified risk material controls and the start-up and first-year running costs of the British cattle movement service were both very welcome and reflected the report's recommendations. However, I hope that the Minister of State will accept that the Government's description of those decisions as a total saving to the industry of around £70 million is a tad disingenuous. In fact, the Government's decision was, very rightly, not to impose £70 million of new costs on the industry.

I hope that the debate will be a forward-looking occasion—not an opportunity to allocate blame, but an occasion on which we look for solutions. Perhaps our colleagues on the Welsh Affairs Committee will want to say something about supermarkets. The long-awaited report from Tesco is now out. Many of us might not be totally convinced by it, but I shall leave others to dissect it if they choose. I hope specifically that the debate will not be about the history of BSE. The Phillips inquiry will report at about this time next year. For today's debate, let us start from where we are and not spend too much time worrying about how we got there.

Mr. Huw Edwards (Monmouth)

Why not?

Mr. Luff

Farmers are genuinely worried and do not want us to play party political games with their future; that is why not. We must look to the future. The Labour party and other parties might want to make the most of the Phillips inquiry in a year's time, but for today let us please concentrate on the real problems facing British farmers.

Farming is in an exceptionally serious state, and our words will be carefully scrutinised by those outside the House. The debate may be about the beef industry, but its problems are very similar to those in the rest of British agriculture. There are many misunderstandings about farmers and farming, which often flow from the misunderstanding between town and country. A Yorkshire farmer was recently prosecuted for depositing slurry on the highway under section 161 of the Highways Act 1980. A motorist skidded on the cowpat and prosecuted the farmer. I am glad to say that, in its wisdom, the court dismissed the case, judging the cow, not the farmer, responsible for depositing the load. I sincerely hope that this debate will reveal a similarly enlightened attitude to the problems of British farming.

Perhaps unusually, this is genuinely an estimates day debate. Even though I have already said that I do not think that we should debate the history of BSE, it is worth offering a pat on the back—

Mr. James Paice (South-East Cambridgeshire)

A cowpat?

Mr. Luff

MAFF deserves not a cowpat, as my hon. Friend says, but a plain pat on the back for last week's National Audit Office report, "BSE; the cost of a crisis". Whatever the rights and wrongs of the previous Government's policy, the NAO endorsed the quality of its implementation. The House's thanks must go to the officials for that. The report acknowledges the cost to the taxpayer, but on the implementation of the over-30-months scheme, for example, it says that the NAO regards these as impressive results in the circumstances". The report reminds us all: The pressure on the Ministry and the Intervention Board at that time to respond quickly and effectively to this catastrophe was intense. There was no precedent for this situation which struck uncertainty and fear into thousands of farmers, hundreds of companies in the trade, and millions of consumers. Against that background, a small team of officials did an outstanding job. The House should feel able to say, "Well done," to a small Ministry that achieved much against the odds but normally gets more than its share of brickbats.

This debate is about the future, but first I should like to describe some background. The National Farmers Union tells us that average producer prices of beef in pence per kilogram have fallen from 105.5p in 1996 to 89p today. The overall fall in farming incomes last year was about 47 per cent. I am glad to say that beef consumption in the United Kingdom is up by about 7 per cent. on this time last year, but without crucial export markets and given high levels of imports, producers still face great problems.

This debate is not just about farmers' problems. The beef industry is part of a much wider rural and, indeed, urban economy. Beef farmers play a vital part in the social life and the environment of much of the UK. Biodiversity, for example, in less-favoured areas, depends on traditional grazing patterns. An independent consultants' report to the Government on the economic impact of BSE on the UK economy in March said: In 1995, the beef industry with final sales of £4,100 million created gross added value in the UK economy of around £3,200 million. This represented 0.5 per cent. of the UK's gross domestic product and supported 130,000 jobs. It is a substantial industry by any standards.

Last year, in my county of—as it was then—Hereford and Worcester, the chamber of commerce, the county council, the Rural Development Commission and others demonstrated that 550 companies were ancillary to the beef industry. They were in agricultural services, meat wholesaling, slaughtering, agricultural engineering, road haulage, veterinary surgery and so on. A total of 5,200 jobs depended on those companies. At that time, as a result of beef farmers' problems, 56 per cent. of them had lost turnover. Total net losses to the county economy alone were as high as £40 million. At its worst, 260 jobs were lost. Therefore, the debate is about much more than farming.

Beef consumption may have recovered in the UK, but I hope that it is of some concern to the House to learn that, even now, according to the Meat and Livestock Commission, 80 British local education authorities are still banning beef altogether from school meals. Those LEAs include some predictable names, such as Islington and Greenwich. They include rural counties where beef production is important, such as Derbyshire and Oxfordshire. They include major cities, such as Birmingham, which is on the doorstep of both the Minister of State's constituency and mine. They include four Welsh authorities, including Swansea. Apparently, they even include otherwise sensible authorities, such as Wandsworth and Kensington and Chelsea. There is no party political point scoring to be had here.

There is no more justification for continuing those bans than the export ban. British beef is now unequivocally the safest in the world. As a memorable sign along the M5 in Worcestershire proclaimed last week, British beef is safer than sex. [Laughter.] I would not recommend both at the same time, however.

There is some concern in the farming community about the fact that the Government, understandably, often represent sums paid out in the wake of the BSE crisis as subsidy to farming. Much of that money is a means of protecting public health as much as protecting farming.

I think of Kites' Nest organic beef farm in my constituency, where not a single beast has contracted or could contract BSE. Yet it is obliged to sell its cull cattle into the over-30-months scheme and collect the so-called subsidy. The farm would be doing a lot better if customers could again buy its splendid organic beefburgers made from the same cull cows. The OTMS payments to that farm and to the many others totally free from BSE are not a subsidy to farming at all—on the contrary, they cost farms money—and the House should be clear about that.

Equally, we should be clear about the fact that farmers, my Committee, the Government, the House—everyone, in fact—would prefer agriculture to be moving towards a truly commercial marketplace. Farmers would rather farm food than subsidy. However, as our report said: Given the impact of the strength of sterling on subsidies and prices, as well as the continuing problems of the BSE crisis, we think that farmers are right to expect the Government to treat them sympathetically. We also said: the crisis in the beef industry demands a response from the Government which may be in conflict with what would be desirable for the industry in the long-term. The overwhelming message from my farmers—and, I expect, from the farmers represented by most other hon. Members—is "Lift the export ban and reduce the level of sterling." But there are also many important specific issues to which the Government will have to give responses in the next few months.

One concern that the Committee highlighted is the failure of successive Governments to pay enough attention to relative competitiveness, and the actions that Government can take in that regard. A Meat and Livestock Commission report on the competitive position of the red meat industry in Great Britain in relation to the collection, processing and disposal of animal by-products showed an extra £129 million in overall costs compared to the costs of our major EU competitors.

For beef, the total cost was £58 million—£26.73 per animal per year, or 9.2p per kilogram deadweight. That is just one relative cost. Animal welfare and environmental costs come on top, and so do Government charges. The Committee said: Many of the extra costs faced by the UK industry are not shared by their EU competitors. The Government's inability to supply more than sketchy information on the arrangements made in other Member States, specifically on charges for SRM controls and cattle traceability systems leads us to the conclusion that Ministers cannot have been able to assess the effects on the UK industry's competitiveness of their decisions in respect of those matters. This is of serious concern to us". In their response to our report, the Government supplied some information on the situation in other EU countries, but it could reasonably be described as still sketchy. Interestingly, Germany was entirely omitted from the list.

I shall now make some other brief specific points, to which I am sure the House will appreciate as many responses from the Minister as possible. There was much gratitude in the farming industry for what the Minister of Agriculture did in December last year, but now, with the coming of the euro, new proposals are on the table from the Commission for the future of agrimonetary payments.

How will the Government respond to those? What will be their attitude to further requests from the farming industry in general, and the beef industry in particular, for more agri-monetary compensation payments this year? As our report said, in the context of the most welcome 22 December support package: Should circumstances be the same at this time next year, the Government should be sympathetic to the plight of the industry. On present trends, it looks as if circumstances will be very similar then, so I hope that the Minister will keep his options open on that issue.

Clearly, the over-30-months scheme should be phased out at some stage. There is no logic in continuing it unamended after 1 February 1999, and it seems to be conspicuous by its absence from the comprehensive spending review. The Government will have to start thinking quite urgently about how a market can be re-established for older cattle, so that we can begin the phasing out of the over-30-months scheme. Beef from cattle older than 30 months is perfectly safe, but I believe that there may be some consumer resistance to that idea. Work needs to be done now, to enable the phasing out to take place.

The Government have recently been consulting on the future of the calf processing aid scheme. It has played an important role in removing surplus male, mainly dairy, calves from the market, but it is an intrinsically unpleasant scheme, and the Committee said that public support for it would probably wane. I think that we would all wish it to go as soon as possible, but probably not quite yet. There must still be a mechanism to keep the beef market in balance at least until the export markets reopen, and probably longer.

The farmers to whom I have spoken would prefer to keep the whole scheme until market conditions are much more normal. However, that may not be an option for the Minister. A much less acceptable alternative, but an alternative none the less, would be to ensure that all beef calves do not go into the scheme. The risk is that male dairy calves, reared and fattened on cheap cereal, could flood the market in 18 months' to two years' time, with serious consequences for beef farmers.

The comprehensive spending review appears to have trailed the abolition of the calf processing aid scheme. It has a £52 million full-year cost, entirely EU-funded; because of the Fontainebleau adjustment, that probably costs MAFF about £37 million. I shall be interested to hear what the Minister says about that scheme.

Mr. Andrew Hunter (Basingstoke)

Before my hon. Friend leaves the CPAS, will he extend his comments to embrace the point made by the Select Committee—that it was an indirect means whereby the United Kingdom was bearing the brunt of the restructuring of the European beef industry?

Mr. Luff

Indeed, that is a point to which I wish to return later. It was a matter of considerable concern to the Committee that there seemed to be some kind of agenda in play among our colleagues on the mainland of Europe to ensure that we bore the brunt of that restructuring. Clearly, that is unacceptable. There is over-production throughout Europe, and Britain must not bear the whole burden.

The rendering industry took a bit of a knock in the recent report by London Economics for Tesco. Indeed, I believe that at least one renderer is considering legal action against one or other of those bodies for what was said about it. However, whatever the rights and wrongs of rendering, we cannot duck the fact that the renderers' products have either collapsed in value or lost their markets altogether. For tallow, according to a Meat and Livestock Commission report, there are some opportunities for renderers at £70 per tonne, whereas before the BSE crisis they were getting up to £400 per tonne for the same products. I think that it is fair to say that the Government dismissed our suggestion of additional aid for the rendering industry, but I am not sure that that was the right response, and I shall be interested to hear what the Minister says about it.

As for restructuring, what exactly is happening? The Committee expressed its reservations about the EU scheme, and I know that the beef industry would appreciate some clarification by the Minister today. We were sceptical about the applicability of the EU scheme in the UK context, and there are also concerns about how far it can help tenant farmers. As my hon. Friend the Member for Basingstoke (Mr. Hunter) said, we are all concerned that the EU may be seeking to force the necessary restructuring of the Europewide beef industry on this country alone—perhaps as some kind of punishment for BSE. That remains intolerable and unacceptable, and I am sure that the Minister will resist it.

My Committee is currently considering rural development issues and the future of hill livestock compensatory allowances—a crucial issue in that debate. Alternatives to hill livestock rearing will not sustain many remoter rural economies, and traditional grazing patterns are crucial to the local environment. Again, some clue to the Minister's thinking in that area would be welcome.

Now I come to what is perhaps the most important issue. The success of the selective cull appears, after all, to be an important consideration for our partners in Europe before they will move on from lifting the ban on Northern Irish beef to implementing the date-based export scheme.

Reports in this week's farming press suggest that Emma Bonino's consumer affairs directorate has concerns about the success or otherwise of the selective cull, and also wants all cattle bones classified as specified risk material. Mrs. Bonino also appears to be concerned about the effectiveness of our traceability systems. The muddled mailing from the British cattle movement service has probably impressed neither farmers nor the Commission.

None the less, I should be interested to know what the Minister's assessment is of the prospects for the implementation of the date-based export scheme. The best guess for the House now appears to be that it will not happen until early next year. Moreover, it is important to recognise that even then, there will not be a full lifting of the beef export ban, only of the ban on exports of beef from cattle under 30 months old. Exports of over-30-months beef will remain banned even then. Again, the Minister's clarification would be welcome.

The Committee noted that the Government considered expenditure on promotion to be a matter for the industry, but in the context of the beef export ban it said: This position may have to be modified when the export ban is lifted to assist the UK beef industry in the difficult task of regaining sales in its previous export markets outside the EU. I feel, as does the Committee, that when that time eventually comes, the Government will have to assist in the drive to recover lost markets. After all the money that has been poured into the beef industry in recent years, to fail to do so would be to spoil the ship for a ha'p'orth of tar. The Government appear to have found £2 million for Northern Irish beef following the lifting of that ban, so something pro rata for the rest of the United Kingdom would seem appropriate. A precedent appears to have been set.

My final specific point is something to which I shall not devote time, because it is too complex—the reform of the beef regime within the common agricultural policy. The Minister may be able to give us a clue as to how things are developing there.

In conclusion, the four big themes are: ending the beef export ban; improving the industry's competitiveness; the problems caused by the strength of sterling; and the need for a clear Government strategy for the industry. That is not a criticism of this Government—the Select Committee was careful to say that successive Governments had failed in that task. Even within the constraints of the common agricultural policy and the World Trade Organisation, the Government can set a course for our beef industry. If, as they attempt to do so, the Government think about those four themes in all that they do, they will not go far wrong.

As we say in our report, once the industry is through its present serious difficulties, its future will be bright. We wish to see a prosperous and thriving UK beef industry, and we have confidence in the resolve of the industry to re-establish itself as a leading force in global markets. We said that the industry's economic revival should be built on the foundations of quality, safety, traceability, our comparative advantage as a nation of beef production, an end to market-based support mechanisms and the industry's own desire to set high animal welfare standards. We also spoke of the need for Government assistance for industry initiatives to improve marketing and management skills in the farming community—something to which the Select Committee attaches special importance.

Mr. Geoffrey Clifton-Brown (Cotswold)

Increasingly, the Commission comes up with schemes that involve more national discretion. Did the Committee address the question whether the Government would apply for that discretion, and, if they did not, whether other competing countries that did apply, such as France and Germany, would then be competing in our market from a lower cost base?

Mr. Luff

We did not do that in the context of the beef industry report, but it is a matter that we are keeping under constant review in our discussions about the future of the CAP reform and Agenda 2000. Many farmers are expressing precisely the concern raised by my hon. Friend, so it is important for the House to bear that in mind.

There are grounds for long-term optimism in the beef industry, but for the short term it will be very difficult indeed. One local farming business in my constituency wrote to me last week: Our future as an industry looks bleak. Agriculture is standing on the edge of an abyss and if we are not thrown a life-line soon, it is only a matter of time before we all fall in and disappear forever. However, Don Curry, chairman of the Meat and Livestock Commission, said, when introducing a report which predicts 2.4 per cent. annual growth in world meat consumption: all is not doom and gloom. There are long-term opportunities, but there are challenges too, and the British industry needs to improve competitiveness, particularly in relation to other EU countries. The opportunities are there, and the Select Committee believes that the Government can play their part in seeing the beef industry through to the time when it can take advantage of them.

5.32 pm

Mrs. Diana Organ (Forest of Dean)

When I meet beef farmers in the Forest of Dean, they tell me that they are just holding on. They have had a terrible time as the cash value of a finished steer or heifer has dropped 30 per cent. from 1995 values. They put the situation down to three factors—the high value of sterling, the dominance of the multiple retailers and the devastating effects of BSE leading to the beef ban and the loss of their markets and consumer confidence.

My beef farmers are a realistic lot. They tell me that, although Government policy has played a part in the strengthening of sterling, they recognise that European monetary union is a major pressure in that process, and they rather begrudgingly accept that, for the time being, the strong pound is a fact of life. However, they expect the Government to behave with the utmost sympathy during this difficult time—a point made during the Select Committee's inquiry, which was published earlier this year.

The hon. Member for Mid-Worcestershire (Mr. Luff), the Chairman of the Agriculture Committee, said that we do not want to go over history, but history is important if we are to understand the present. My beef farmers know that the single biggest factor in the present situation has been the BSE crisis; they are having to cope with the terrible legacy of it.

We have heard that the Conservative party has set up a shadow Cabinet sub-committee on the countryside and rural affairs. The right hon. Member for Fylde (Mr. Jack) said that the Committee's priority would be to act as whistleblowers on Government policy which would be harmful to the rural economy or way of life. The Government do not need such a committee to act as whistleblowers; the National Audit Office does the job much better in its report, "BSE, The Cost of a Crisis", published on 8 July.

Mr. James Gray (North Wiltshire)

rose—

Mrs. Organ

I am afraid that I cannot give way, as I want to make progress and I have only limited time.

The NAO has said that the BSE crisis has been the single most expensive peacetime catastrophe. The cost is set to rise to more than £4 billion before 2000, the biggest part of the bill will be compensation to farmers, and average compensation for younger animals being slaughtered is £1,400.

The previous Government's handling of the whole beef saga is a tale of mismanagement and ineptitude—such as the lack of response to the Select Committee's recommendation in March 1994 that they should ban offal and brain substances in the food chain. That recommendation was turned down. The NAO report points out that, in their panic after March 1996, the previous Government did not act in the best interests of taxpayers but threw money indiscriminately at the problem.

The report questions some of the financial deals struck with farmers, slaughterers and renderers. There was no proper competitive tendering—slaughter fees were simply set at £87.50 per animal in May 1996, even though there was over-capacity in that sector. In reality, the cost was closer to between £39 and £51 per animal, as Coopers and Lybrand found in an open book examination in July 1996. The fee was not reduced to £41 until late August 1996, and competitive fees did not come in until this Government put them in place in July 1997.

Mr. Hunter

Will the hon. Lady give way?

Mrs. Organ

I hope to make progress. There is very little time, and I grading would like other hon. Members to be able to get into the debate.

The NAO report states that the £670 million compensation paid to farmers in 1996–97 was too generous for beef animals. That financial mismanagement of the affair is an example of how the whole situation was handled. In addition, the lack of unity in the Conservative party on European affairs did not help. They continually call on us to claim agrimoney compensation that they know is not available. It is interesting that the Conservative party, over the period of the crisis, did not ask for it or get it. However, we have secured £85 million compensation, which we announced as part of an aid package in December 1997, using up almost all the aid that we can apply for.

The decline in farm incomes and the depression in the beef industry did not appear after 1 May 1997. We have had to pick up the pieces of the Tory legacy. We have introduced a raft of measures to help the beef sector—additional hygiene measures to restore confidence; the introduction, on time, of the cattle traceability system and paying for the set-up and first year running costs; the launching of the beef labelling scheme, supporting the assured beef meat initiative to the tune of £1.8 million; and publishing hygiene assessment scores from UK slaughterhouses.

I note that my two local slaughterhouses, Ensors at Cinderford and Lyes at Minsterworth, have excellent scores in this month's enforcement report. This Government, with other European Union states, the Parliament and the Commission, have worked tirelessly to lift the beef ban, with the first exports of Northern Ireland beef being reported in last week's Farmers Weekly.

Mr. Paul Keetch (Hereford)

Will the hon. Lady give way?

Mrs. Organ

I will not, as I have told other hon. Members. I want to make progress so that other hon. Members can speak.

We are pressing for a wider lifting of the ban under the date-based export scheme. The proposal to permit the export of beef from cattle born after 1 August 1996 has now been referred to the Standing Veterinary Committee. We will shortly press in the Council of Ministers for the decision to be made on a scientific basis alone.

As the hon. Member for Mid-Worcestershire said, the Government have agreed to almost all the recommendations in the Select Committee report. We have already put many of them into place. As the hon. Gentleman said, two of them were put in place while the report was being printed.

Another factor that beef farmers in the Forest of Dean claim is responsible for poor farmgate beef prices is the dominance of the retail multiples, which control 70 per cent. of retail fresh meat sales. Farmers know that their industry is cyclical. All livestock producers know that markets go up and markets come down. Sometimes it is good for producers, sometimes it is good for retailers, but since the mid-1980s farmers have faced increased pressure from retail concentration in the beef supply chain and hence surprisingly low returns.

Before the mid-1980s, farmers would grumble about the butchers making money, but they did feel that it was a matter of "a season for us, the next season for the butchers". That has gone; the game has now changed. Even during the present difficult situation, retailers have been able to hold their margins. The Meat and Livestock Commission states: Supermarkets have continued to make steady margins on beef sales over the past two to three years while returns for producers have slumped. That was the commission's conclusion in response to the Welsh Affairs Committee in March, and it remains the case.

In response to the London Economics report "The Supply Chain for Beef and Lamb"—commissioned by Tesco—Don Curry responded by saying: it is clear the multiple sector has not shared the reduction in industry returns in the past two years. That is bad news for producers and consumers, but not for the retail giants.

The London Economics report has an element of controversy about it, the second draft being a revision of the first; the comment that beef farmers had been inefficient and complacent operators immediately before the BSE crisis was withdrawn. The National Beef Association said that the report was not fair, factual or independent, as it was commissioned by Tesco.

The final report proved that supermarkets have not been making huge profits from the sale of beef or lamb. They have not been making excess profits after BSE, because their margins have been eroded due to the post-BSE added costs and the specified risk material controls, with the gap between producer returns and retails rising by 23p per kilo since March 1996 and the costs due to BSE increasing by as much as 27p per kilo. The incurred costs of the processing and market chain have not led to increased profits for retailers.

I should have thought that that argument was undermined by the obvious fact that slaughterhouses are paying less for cattle. Tesco is selling beef as a loss leader for other, more profitable, foodstuffs. It states that beef was the biggest loss maker in its entire meat category in 1997–98.

Whatever the report says, the multiple retailers are using their ever more powerful grip on the market and are abusing their buying power—and farmers are suffering as a consequence. That pressure—particularly when other supermarkets are buying meat on price alone from overseas processors who do not face the same regulations and have little regard to quality or concern about how the animal is reared—makes it difficult for our domestic producers to compete, even with their high quality, safety and hygiene regulations and some of the best animal welfare standards in the world. Labelling should inform the consumer of all that.

It is not all doom and gloom, as the hon. Member for Mid-Worcestershire stated. Consumption is up and confidence is being restored. Beef is back on the menu in many schools. British beef is back in McDonald's hamburgers. There has been a 7 per cent. increase in home beef in the first quarter of 1998 over 1997. My local National Farmers Union representative, Robert Purdey, tells me that there has been a small increase in the beef price of late and that feed costs have gone down. Locally in the Forest of Dean, the small organic beef sector is faring extremely well, aided by the marketing strategy of the Forest of Dean food directory. I commend that document to the House.

Beef producers receive more than £500 million each year in normal beef subsidy. It is a difficult time, and producers are facing problems, but there are opportunities in the long and short term. It is predicted that there will be a 2.4 per cent. growth in world meat consumption in the next seven years.

The Meat and Livestock Commission has close contacts with Europe and, although it will take time, many caterers and retailers there want our beef. I look to the Minister to assist in promoting beef when the European market is open. If farmers come together, they should be able to put pressure on the retail markets. With assistance from the Government, we should be able to give the consumers what they want—quality and food safety, and good British beef that can be delivered competitively.

5.43 pm

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

In following the well-informed speech made by the hon. Member for Forest of Dean (Mrs. Organ)—and the excellent opening speech by the hon. Member for Mid-Worcestershire (Mr. Luff), the Chairman of the Select Committee—I start by saying that I hope that the hon. Lady will forgive me for reflecting that, at times, such was her clarity and authority that her speech sounded like a ministerial intervention in terms of the Government's response to the Select Committee report rather than a supportive contribution from the Government Back Benches. Those of us who have been in the House for a while remember another female politician who used the royal "we" in a similar fashion. Perhaps we were listening to a throwback to that a few moments ago.

I congratulate the hon. Member for Mid-Worcestershire and his Committee colleagues on the report. I link his name to that of the Chairman of the Welsh Affairs Committee, the hon. Member for Clwyd, South (Mr. Jones). That Committee has done some excellent work on the supermarket aspect.

The hon. Member for Mid-Worcestershire was right to say that the debate takes place in the immediate context—perhaps one should say shadow—of the Chancellor's statement, which immediately preceded it. Being a quintessentially fair-minded person, and never one to jump to instant conclusions, the hon. Gentleman spoke of what he thought of as the modest implications for MAFF of the statement. Having had no more time than the hon. Gentleman to look at the figures, I suggest that that modesty could be slightly more ominous in due course. Food safety, correctly, is being hived off to an independent agency, but the mission statement of MAFF is changing profoundly alongside that. Coupled with some of the initial figures—which we will need to look at in greater detail—some alarm bells may yet sound in agricultural communities and the various section heads in MAFF.

I, too, wish to touch briefly on the export ban, on compensation payments and controls and on the continuing problem underlying so many of the present difficulties—the strength of sterling. All quarters in the House and all parts of the country have welcomed the progress on the lifting of the export ban for Northern Ireland. That is good news, but we need more progress on the date-based scheme, which, frankly, appears to be bogged down by political shenanigans in Brussels.

I was in Brussels speaking to officials a couple of weeks ago. There is no doubt that the Standing Veterinary Committee has postponed further inspection consideration, and is unlikely to consider the matter again in Brussels until September. By then, the GB database on animal movements should be up and running, and one expects that DG XXIV will want that linked into the scheme. Allied to that, the German elections will be imminent. It is easy to see that the Standing Veterinary Committee—and the political and Council decisions that may flow from it—may be subject to further political delay as a result of the German elections timetable.

Some advantage has been taken of those events in a way that has not been designed—I put it no more strongly than that—to bend over backwards to help British Ministers and the British Government in their genuine efforts.

The hon. Member for Mid-Worcestershire was right: we must look forward in this debate. In looking forward, however, the recent experience examined by the Committee gives some important pointers. At the time of the March 1996 export ban, the veal calf market collapsed overnight, affecting about 500,000 animals. The calf processing scheme was brought in to compensate those affected—mainly in the dairy sector—by the loss of their market. That had the additional benefit of reducing the number of cattle produced in the EU. However, that has proved to be yet another example of action taken domestically here which has helped to bail out people elsewhere in the EU without providing any great return, merit or benefit to us.

Any halting of the scheme would lead to disaster if the veal market was not properly restored to farmers who have been hit. Once the date-based scheme is established, over-30-months cattle should be able to re-enter the food chain after February next year. That will lead to a serious early glut in the beef market, and it will be important that the ancillary measures taken in Scotland, England and Northern Ireland in terms of advanced promotion are redoubled by the Department to ensure that we can take as early advantage as possible.

Mention of February next year leads me in passing to something we debated in the House ad nauseam, if not ad infinitum—probably both: the ban on beef in the bone—[HON. MEMBERS: "On the bone."]—on the bone. The Minister may feel that it is in his bones these days, he has had to defend it so often at the Dispatch Box. The Minister knows the views of Opposition parties and I shall not rehearse them here, but there is not much practical need for that. I am not accepting the need for it here and now, but there will not be much further particular need for that beyond the date itself. That seemed to be the implication of the interview given recently by the Minister of Agriculture to the Financial Times.

I notice that the English court case against the restaurateur who sold beef on the bone has been rather quietly dropped. That being so, this is a further golden opportunity for the Government to save the public purse by not pursuing the Scottish case, which is now the only one outstanding and which has been referred by the Court of Session to Selkirk sheriff court. We know that we are beginning to see the light at the end of the tunnel, even given the stupidity and unnecessary nature of the policy, so why not just drop the Scottish case completely?

In 1997, a 47 per cent. drop in farm incomes was recorded by the NFU, showing suffering not only in the beef sector but across all sectors of the farming community. It can be seen most tellingly in the Welsh agriculture community, where beef and sheep rearing often occur on the same holding, subjecting farmers to a double whammy. That needs to be taken on board still further.

The London Economics report for Tesco has been mentioned. Even with the cloak of parliamentary privilege, no one wants to end up in the legal action that may yet be pursued as a result of all this but, as the hon. Member for Forest of Dean fairly said, that report revealed that whatever view one takes of the activities of supermarket chains—I incline towards the sceptical or critical view of their activities—the fall in farm gate prices is indisputable, not least because of the concentrated nature of the farming activity involved.

If the plug is pulled on someone's main or one of their two main activities, they are at the mercy of wider events and not in a position to exert much influence, but a Tesco or a Sainsbury that experiences a loss in one of its product ranges is always able to expect—indeed it encourages—the consumer to switch to other forms of produce and thus cross-subsidise product lines. The only group in the process, which includes the abattoir sector and the supermarket sector, that has been entirely exposed throughout since the imposition of the beef ban are the farmers, because they have no cushion and no alternative means of defence against the economic conditions that have been visited upon them.

The collapse in the beef market—BSE was central to it; for example, the Welsh market has fallen 28 per cent. since 1995—has been exacerbated by the strength of the pound and the unwillingness to access compensation funds available through the EU. Moreover, the additional regulatory controls imposed on our producers are not duplicated for competitors in other parts of the EU.

Those controls have been brought in to address understandable safety concerns. People will not object to them, but they have placed additional burdens at a time of massive disincentive and difficulty. The Meat and Livestock Commission has estimated that those costs come to some £27 per animal. Bearing in mind the prices achieved for the beasts involved, that is an horrendous further removal of any hope of profit—never mind viability—for many of the farmers involved.

The pressures have been eased, although not entirely alleviated, by the Government's removing the cost to the industry of Meat Hygiene Service inspections of abattoirs and paying the start-up costs of the computer traceability system and the first year running costs. At a time when the black art of spin doctoring is not commanding the most favourable headlines, the hon. Member for Mid-Worcestershire made a fair point: saying that the postponement or cancellation of a cost which is not being borne at the moment represents a net saving to the overall economics of an industry is perhaps an example of spin doctoring meeting voodoo economics. The Government need to be slightly more cognisant of that in their approach.

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

The work is still being done. The taxpayer is paying for the work in the abattoirs. That is new. It is not as though the work is not being done. The Government's decision that the taxpayer should carry the burden amounts to a cost saving for the industry.

Mr. Kennedy

I do not buy that argument. That is similar to saying that the private finance initiative, where one removes the cost on the broadly based taxpaying public and concentrates it on one specific community or area for the project involved, is somehow a net saving. It is not. It is an additional cost on the people who are directly involved rather than spread more broadly across taxpayers. An important political principle is involved there, and a similar principle applies in this regard.

The present level of sterling means that UK farming is rendered uncompetitive, even in commodities that we are allowed to export. That has opened up domestic markets.

We should access the EU funds that have been established to deal with the situation, as other Governments in the EU have done. We need lower exchange rates and lower interest rates. The options open to the Government are time-limited, the next time limit being 31 July, because the aid has to be accessed within 12 months of green pound revaluation.

Although we are not having a particularly party political debate this afternoon, the Government should be more seized of the wider economic issues because they, like us, are, in principle, committed to sterling's entry into monetary union. In the United Kingdom, only the Conservative party is not. The Government should recognise that sterling's early entry into EMU would in all likelihood reduce the strength of sterling, from which agriculture, like manufacturing industry, is suffering. They have to take note of the fact—the Tories are isolated on this—that the leadership of the NFU is now expressing support for the principle of sterling's involvement in EMU, precisely because it can see the benefits that would accrue to its membership.

I conclude on a point that I have raised a couple of times during Agriculture questions, which the Ministry needs to consider further. Given the sums of money that, according to the National Audit Office report, have been paid out for, one hopes, the extraordinary occurrence of BSE and its associated costs, and the follow-through costs because of the collapse in agricultural incomes generally, the Ministry, in its attitude towards taxpayers' money, needs to think more carefully about the extent to which the dramatic rise in the number of farmers and their families having to take additional social security and income support, which, in most cases, has never been necessary before, is proving a bigger drain on the economy than is necessary, given the sums that could be saved by accessing EU funds and doing something about the strength of sterling.

At the other end, surely we need to consider early retirement schemes. If they are to be applied, they need to be much more sensitively structured than is currently the case at European level. As proposed, they would lead to further amalgamations and bigger individual farming units and would have a detrimental effect on tenant farmers, who would have to give up their property and their homes and find somewhere else to live. The matter is not sufficiently related to the needs and realities of UK agriculture.

Mr. William Cash (Stone)

Will the hon. Gentleman give way?

Mr. Kennedy

If the hon. Gentleman will forgive me, I am about to conclude.

I congratulate both Select Committees on their work. They have given extremely telling pointers for the beef sector in particular, for the role of supermarkets in general and for the future of viable, family-farmed UK products as a whole.

5.59 pm

Mr. Paul Marsden (Shrewsbury and Atcham)

As a member of the Agriculture Select Committee, may I first pay tribute to the staff and particularly the Clerk, and to the Chairman, the hon. Member for Mid-Worcestershire (Mr. Luff), who has shown fine leadership and a certain fairness. We can safely say that our Committee is one of the most productive in terms of its reports.

Farmers in Shropshire have had to endure horrendous hardship. They have shown strength of character in having come through such trying times, and they still deliver some of the finest-quality products, despite difficult financial circumstances.

The beef industry's aim must be to deliver world-class, safe, traceable beef, but it needs a level playing field within the European Union. We must restructure the industry if we are to deliver a real future for our farmers. There is no going back, so we must take account of the BSE crisis. Farmers must recognise that high animal welfare standards are an integral part of any restructuring, and must embrace any improvements to the local environment. If they can achieve those aims, we shall be able to have a thriving and, importantly, a sustainable beef industry.

There has undoubtedly been a long-term decline in beef sales. In its recent controversial report, the London School of Economics said that, on average, there was a 2.5 per cent. decline every year between 1985 and 1995. Clearly, before 1996, there was an over-supply of beef in the European Union, which amounted to some 116 per cent. of consumption needs. That is why restructuring the industry is absolutely vital.

Mr. Gray

The hon. Gentleman is right to say that there is an over-supply of beef within the EU as a whole, but does he accept that the United Kingdom produces only some 70 per cent. of the beef eaten locally, so there is no over-supply in the United Kingdom?

Mr. Marsden

I note the hon. Gentleman's comment, but many farmers have suffered in the short term. Although they have great potential to meet requirements, there is still an over-supply. Once the European beef ban has been lifted, there will be enormous potential. I agree with the hon. Member for Mid-Worcestershire that the European market can allow for an expansion of beef exports and hence an expansion of beef production, but the figures do not support the hon. Gentleman's point.

Mr. Keetch

Would the hon. Gentleman like to comment on the view of my hon. Friend the Member for Ross, Skye and Inverness, West (Mr. Kennedy) that political constraints are stopping the lifting of the beef ban? Does he genuinely believe that the farmers of Shropshire, Herefordshire, Worcestershire and Gloucestershire will see the beef ban lifted before the German general election in September? That is what is stopping the lifting of the beef ban. Should not the Government press for the beef ban to be lifted on scientific grounds, in line with the Florence criteria, rather than simply wait for the results of the German general election?

Mr. Marsden

That is precisely what the Government are doing, and they have made great headway. The first stage has already occurred in Northern Ireland and great steps have been made in terms of the cattle tracing system and the date-based export scheme. Those great strides were not made under the previous Administration. The Government's success has a lot to do with how welcome Britain is within Europe: we are now given a fair hearing, whereas under the previous Administration we were not.

I agree that the strength of sterling has caused serious problems for exporters in terms of compensation rates. I also agree that the price of beef has fallen. In 1995, the price was 244.4p per kilo and, by the end of 1997, it had fallen to 182.4p per kilo. We must remember that, in the two previous years, it fell by 30 per cent., so the origins of the substantial fall, which has translated into a substantial fall in farming incomes, go back many years before the Labour Government came to office.

Mr. Cash

Will the hon. Gentleman give way?

Mr. Marsden

I should like to make a little more headway.

I shall sum up some of the Government's actions to date. They have achieved maximum application of EU agrimonetary compensation for the beef industry. They have made progress on lifting the beef ban, which is critical. As other hon. Members have said, that is the first priority. The cattle tracing scheme is progressing well and, despite a slight hiccup in setting up that impressive system, which is clearly leading Europe and, arguably, the world, the system will shortly be implemented. The date-based export scheme is proceeding well, as is the quality assurance scheme.

As a former quality manager, I have found that the quality assurance scheme works well, and will be important when it comes to labelling British beef abroad. Once British beef is labelled and allowed to be sold abroad, there may be problems. By guaranteeing our product in the first place, we shall quickly win over consumers abroad.

The Government are taking a partnership approach. They have made good progress, but farmers must realise that change will come in great abundance.

Mr. Cash

I invite the hon. Gentleman to cross the border from Shropshire to my constituency in Staffordshire and chat to some of the farmers there. I spoke to them only last weekend, and they certainly do not share the views that he has just expressed. Interest rate rises, not to mention the ban on beef on the bone, have brought disaster to rural communities. I live in Shropshire, so I also hear what the hon. Gentleman hears in his surgeries.

Mr. Marsden

I thank the hon. Gentleman for his comments, which show that the Conservative party is split from top to bottom on Europe. Farmers have been hurt in the past, but the blame lies fairly and squarely with the previous Administration. Farmers are now far more hopeful of having the beef ban in Europe lifted than they were 12 or 13 months ago.

There are some good practices around in the farming industry. Although the industry now offers high-quality products, it must continue to improve its farming techniques and to raise animal welfare standards. I acknowledge that our farming industry leads the way but, to stay ahead of the game, it must continue to improve.

I press the Government at every opportunity to create a Ministry for rural affairs, which would alleviate some of the problems of lack of investment in certain rural areas. I trust that, as the Government refocus the Ministry of Agriculture, Fisheries and Food, they will look actively at implementing my suggestion. I share the Select Committee's distaste for the calf processing aid scheme, and the concerns of hon. Members that Britain is taking on far too much in respect of the CPAS and Europe is not implementing its fair share.

Talking to farmers day in, day out, I still find that they would not want subsidies if they had a level playing field. I urge the Government to move slowly but clearly, to hold their vision of where agriculture will be in the 21st century and to ensure that we phase out support schemes, but at such a pace that farmers can cope. Quality assurance schemes are working well, and we must have better dialogue between the ministerial team, Parliament and rural communities, which perhaps should be listened to and understood better than they have been. The sharing of best practices is a way forward, because some farms can clearly produce their produce far better than others—we must learn from each other.

Conservative Members called for vast investment in farming communities, but where would that money come from? That is the central question; it is easy to call for extra funds in opposition, but, if they are serious, which hospitals and schools would they cut and where would they find the money?

Mr. Michael Jack (Fylde)

Will the hon. Gentleman give way?

Mr. Marsden

I am wrapping up my comments, and I should like to finish on this point, because it is the central problem facing the Opposition.

6.11 pm

Mr. James Gray (North Wiltshire)

I welcome this timely debate, and congratulate my hon. Friend the Member for Mid-Worcestershire (Mr. Luff), the Chairman of the Agriculture Committee, on its fine report. It is a bit of a disappointment that it has taken the report to prompt such a debate in the House, and many of us are disappointed by the scant regard given by the Government to the beef industry over a number of years. [Interruption.] It is indeed a year and a half, which technically counts as years.

The Government have given scant regard to the beef industry during their time in power. The debate is the third on the subject, and all have been very brief. Equally, this is the third debate in which the Minister of Agriculture has failed to appear. It may be said that it is not his role to answer such a debate, but he failed to turn up when we discussed the beef on the bone ban. We discovered him in the Smoking Room, with a large glass of brandy and a cigar in hand, while the biggest crisis to face British beef farmers for many years was being debated in the House. It would have been nice if he had shown good grace and turned up to listen to what we were saying about beef farming.

Wherever I go in the farming industry, there is a marked shortage of Labour appearances, for example at agricultural shows. I was at the Bath and West show a couple of weeks ago, and seven Conservative Members attended. I understand that, far from any Minister turning up, invitations to Ministers' offices were not so much as answered. That is the experience at agricultural shows up and down the land. At the royal show last week, four Ministers turned up—

Mr. Deputy Speaker

Order. There is limited time for the debate, and many hon. Members want to speak. I recommend to the hon. Gentleman that he stick closely to the subject at hand.

Mr. Gray

I shall indeed do so, and I am grateful for your correction, Mr. Deputy Speaker.

The Government seem to have scant regard for the deep crisis facing our beef farmers, so I thought it reasonable to make the point that Ministers are not turning up to agricultural shows to find out what beef farmers have to say. In contrast, my right hon. Friend the Member for Fylde (Mr. Jack) came to Chippenham livestock market in my constituency and spent three hours not with managers or the National Farmers Union, but on the floor of the market, talking to beef farmers and finding out what they had to say.

I would challenge the Minister, if he were listening rather than chattering, to let me know how many livestock markets he has visited this year, and how many livestock farmers he has spoken to. Perhaps his parliamentary private secretary will let him know that I asked the Minister that question, because he is plainly not listening. If he took the trouble to meet beef farmers in the way that my right hon. Friend the Member for Fylde has done, he would come across things such as the headline in our local paper this morning: "Profits Alert As Farmers Hit Meltdown". As we all know, 47 per cent. were affected last year.

The report in the Western Daily Press last Friday suggests that beef farmers face an 88 per cent. cut in their incomes in the year ahead. The Western Daily Press analyst refers to a 66 per cent. reduction in the number of beef farmers in the west country. That is not a problem or a crisis; it is a catastrophe.

Mr. David Drew (Stroud)

If the hon. Gentleman read the article to the end, he would see that it says that things are looking much better for those farmers who will stay in beef.

Mr. Gray

The hon. Gentleman is right: 66 per cent. of west country farmers will go out of beef, so things will be better for the 34 per cent. who are left. For the 66 per cent. of farmers in my constituency who will be out of beef within two years, that is a tragedy, and the Government should be deeply ashamed of it. It is also a tragedy for small family farmers, who are so well represented in the hon. Gentleman's constituency and in mine.

The hon. Gentleman is right in that huge agribusinesses with huge acreages and huge numbers of cows may be all right but, according to the article in the Western Daily Press, small family farmers such as those in my constituency, who have been laying off their help and who are now running their farms themselves, will be out of business. Such farmers in his constituency will also be out of business, and I am surprised that he takes such a light-hearted attitude to that approaching family tragedy.

In the context of the care given by the Government to rural life and beef farming life in particular, it was interesting that the hon. Member for Shrewsbury and Atcham (Mr. Marsden), to whose careful speech I pay tribute, referred to a Ministry for rural affairs, which was promised by the Minister for the Environment on the splendid occasion of the 1 March rally in London. He also promised a rural White Paper, but it has been discovered through recent parliamentary questions that I have tabled that the Government are backing off hard from the notion of such a Ministry.

When the Minister of Agriculture was due to address Action with Rural Communities in England recently, the original title of his speech was "Towards a Rural Affairs Ministry", but I understand that, under pressure from the Deputy Prime Minister, he changed the title and moved away from any reference to such a Ministry. I challenge the Minister of State to say whether the Minister for the Environment was accurate on 1 March when he said that the Government would be moving towards a Ministry for rural affairs, and whether the Minister of Agriculture changed the title of his speech to the ACRE conference last week.

Mr. Rooker

I gave the speech to the ACRE conference.

Mr. Gray

In that case, we can have it from the horse's mouth. I am delighted that the Minister has given us that information. Was the original title of the speech "Towards a Rural Affairs Ministry"? Was he forced, under pressure from the Deputy Prime Minister, to change the title to one that bore no relationship to that matter? I shall happily give way if he wants to say categorically that he never planned to make a speech with such a title. The Minister seems to be shaking his head—it is often hard to tell whether he is shaking his head or nodding it. I shall happily give way if he will tell us about the title of the speech to ACRE.

At the time of the 1 March rally, the Government promised a rural White Paper, which is important for our rural areas and our beef farmers. From answers to recent parliamentary questions, it appears that they are backing off from the notion of a rural White Paper and they have of course given up annual updates to "Rural England" and "This Common Inheritance".

I shall move rapidly on to the beef industry, Mr. Deputy Speaker, before you pick me up on my remarks, although I defend what I have said: these issues are of key importance, and if we face a 66 per cent. meltdown—

Mr. Deputy Speaker

Order. If the hon. Gentleman has already started to dig himself into a hole, he should stop digging.

Mr. Gray

Thank you, Mr. Deputy Speaker.

The Minister should address three issues. The first, about which we have heard a great deal, is the beef ban. When will it be lifted? We know that the five conditions in the Florence agreement were fulfilled many months ago and that the Government said that they would be listening carefully and working hard with their close friends in Europe to lift the ban. Here we are, 18 months or so after they came into power, and there is no sign of the ban being lifted for the mainland, although we all welcome the lifting of the ban—albeit partially—in Northern Ireland.

Incidentally, it would be interesting to hear from the Minister whether Northern Ireland beef processors will be allowed to export beef on the bone. I understand that, currently, they will not be allowed to do so. That brings us to the second great issue: the ban on beef on the bone, which has had such damaging effects on consumers' interests. Will the Minister shortly turn around, admit that he made a mistake and overreacted to the report by the Spongiform Encephalopathy Advisory Committee, and lift that absurd ban?

Another issue that preoccupied the beef farmers whom I met on the floor of Chippenham market last week was the over-30-months scheme. Will the Minister now consider whether the scheme still has a role to play? Will he consider whether beasts born after September 1996—particularly those with no signs of maternal transmission—can now be excluded? If so, with what will he replace the current arrangement?

The hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy), who is no longer present, mentioned the calf processing aid scheme. It has been argued that the scheme has outlived its usefulness, and perhaps is producing some curious anomalies. I believe that, in some quarters, low-quality calves are being bred specifically for its purposes. If the Minister is considering doing away with the scheme, does he agree that that would have to occur when the export of live calves was reintroduced? If he acted before that, the results would be disastrous for beef farmers.

The Minister must also pay urgent attention to the Government's entire approach to the economy. There is no doubt that the strength of the pound is having appallingly deleterious effects on beef farmers. Even if the ban were lifted tomorrow, if the pound remained as strong as it is now, who is to say whether the strength of imports would continue? I suspect that beef farmers would find themselves in a position similar to the current position of milk producers who, no matter how much they produce, cannot export it because of the strength of the pound.

Moreover, strong interest rates—which, irrespective of whether the Government have given control of interest to the Bank of England, are the Government's fault—are bearing down especially heavily on beef farmers with mortgages. Most of the small family farmers in my constituency have mortgages, and, month by month, must find cash to repay them. When will the Government act to lower interest rates, and to safeguard the interests of those family farmers?

Urgent and decisive action is required if the Government are to address the real problems that have been outlined today. I invite the Minister to visit Chippenham livestock market on any Friday that he cares to mention, between 11 am and 2 pm—I know that the farmers will welcome him—and to hear first hand from my farming constituents how life has become increasingly difficult over the past 12 months.

I am very concerned about the report in the Western Daily Press that suggests that 66 per cent. of beef farmers in the west country will shortly go out of business, and that—in the words of its headline—the beef industry there faces "meltdown". I question whether the Government are as concerned as I am; I suspect that their interest lies with the consumer rather than the farmer. If, however, the Minister says that he is as concerned about family farmers as I am, will he visit my constituency? Will he visit the Chippenham markets? Will he go into the beef ring, as my right hon. Friend the Member for Fylde did last Friday? Will he address the farmers? Will he tell them what he intends to do about the catastrophe that they face, and when the ban will be lifted? Will he tell them how concerned he is—not so much about consumers, but about the farmer?

6.23 pm

Mr. Martyn Jones (Clwyd, South)

I am grateful to Madam Speaker, and to the Chairman of the Agriculture Select Committee, for the opportunity to debate the Welsh Affairs Committee's report entitled "The Present Crisis in the Welsh Livestock Industry"—along with the very good report published by the Agriculture Committee.

Our inquiry was launched in response to the real concerns and problems of farmers in Wales. Welsh farmers were the first to take direct action—which was a sign of their deep frustration, given that they are basically conservative, with a small "c". They threw beef in the sea, and blockaded ports. Such action is not to be condoned, but it should be noted.

The Committee's inquiry resulted from a joint request by the National Farmers Union and the Farmers Union of Wales. We were happy to examine the problem, as we had been asked to do. We had a unique experience in the joint NFU-FUW evidence session. Given the animosity between the two unions in Wales, it is notable that they were able to make such a concise and eloquent case in describing their problems. The phrase "double whammy" was used earlier, but Wales faces a triple whammy: the green pound is affecting sheep prices, dairy prices and, of course, beef prices.

The evidence given by the unions suggested that there might be an element of profiteering among major supermarkets. Market and supermarket prices did not seem to relate. Supermarket prices had maintained their level over the past year and a half, while cattle market prices were plummeting.

The inquiry went from strength to strength. Every time we invited someone to give evidence, that evidence raised more questions than it answered. Eventually, we were asking for evidence from frozen-food producers, meat manufacturers, representatives of all the major supermarket chains in Wales, caterers, the Meat and Livestock Commission and, of course, the Welsh Office. It is fair to say that, on the whole, our conclusions on the beef problem coincide with those of the Agriculture Committee, but I want to concentrate on a subject that that Committee did not cover—supermarket profiteering, or the possibility of such profiteering, if only to enable supermarkets to defend themselves from the challenge.

Our Committee went as far up the food chain as we could. Our broad remit in Wales allowed us to stray into strange areas into which the Agriculture Committee may not have been able to stray. I am afraid, however, that we were still left with more questions than answers. I do not believe that the independent report commissioned by Tesco, which was mentioned earlier, is particularly convincing in its assumption that price spread broadly reflects increased abattoir costs. That assumption is probably not justified, and it certainly should not be tested.

Our conclusion that supermarkets are not profiteering but, on the other hand, not experiencing pain is probably correct; but the Government ought to ask the Office of Fair Trading to intervene with a full-blown expert inquiry into the meat chain. That is essential if we are to secure the kind of expert evidence, for long-term purposes, that our Select Committee could not have secured without treading on too many other Committees' toes.

There is one example of the Committee's turning its gaze on a problem resulting directly in a good effect. I am sure—the figures seem to bear this out—that retailers, at least, are making real efforts to buy British beef. That must help.

I believe that the various Government measures that have been outlined so far—I am sure that the Minister will say more later—have already helped. Moreover, I am sure that the Government's recognition of the urgent need to lift the beef ban, and the welcome moves that have been made in that direction, bode well for the beef industry in the medium term.

6.28 pm

Mr. David Curry (Skipton and Ripon)

I hope that the Minister will not mind if I refer to two or three items in "Modern Public Services for Britain", on which the Chancellor made a statement today. They are quite important in the context of what we are discussing.

The document from the Ministry of Agriculture, Fisheries and Food is, I assume, the Ministry's mission statement. It does not quite set the pulses racing, but it looks like a mission statement for an eventual department of rural affairs—although I suspect that we shall not have one as soon as we expected. Interestingly, this mission statement does not mention agriculture or fisheries at all; we have moved on to rather grand, vague terms such as "the rural community" and "the coastal community". The word "community" is clearly seeping into every part of parliamentary and political language. We ought to define what is meant by "community"; the term is used very loosely.

I also note, in the context of higher standards of consumer protection, that the charging of meat establishments is likely. I assume that that is what that paragraph means.

I hope that the Minister will clarify a matter that causes me concern and is central to the debate. The review states: the Government intends to end production-related support for hill farming and replace it with a scheme to maintain the environment and social fabric in the hills. I am not sure what that means. It then says that that will depend on the progress made on Agenda 2000. I am not clear whether the Government are saying that they hope that Agenda 2000 will give rise to policies that will enable them to end production-related support. Depending on what replaces it, we may support the Government on that. We all want a system that liberates the farmer from dependence on production subsidies, and that assures the livelihoods of farmers by means that are perhaps more acceptable to the wider "community".

I want to know what is meant by that phrase, because it is important to us. Is it a unilateral policy that the Government will introduce, and does it depend on the outcome of Agenda 2000? The crucial question that will inevitably arise is, how will we ensure that measures implemented in the United Kingdom are at least analogous to those implemented elsewhere? The constant perception of farmers is that they receive less favourable treatment than that doled out to continental farmers.

The Government's belief that support in the hills should have no minima makes farmers circumstantially suspicious of the Government's attitude. My constituency in the Yorkshire dales is a less-favoured area, although a large part of it is a national park. Farmers in my area are bound to be preoccupied by those considerations.

Mr. Jack

Did my right hon. Friend find anything in the mission statement about the competitiveness of the beef industry?

Mr. Curry

The mission statement seemed to show the Department's desire to be seen as a Department that supports the consumer. I have no quarrel with that: I believe that it is right. If there are no consumers, there is no point having any producers. However, I would have liked to see that view balanced by remarks about the need to produce competitively for the marketplace, and to secure the social and environment fabric to which the document refers. As in all things political, there is a balance to be struck, and the Government should find out where it lies.

We should look to the future rather than to the past. It is now common wisdom that there will shortly be no intellectual or security justification for the continued existence of the 30-months scheme, because none of the animals coming into the food chain will have consumed contaminated produce. It is important to find a way of introducing that beef into the marketplace so that the consumer no longer believes that it is tainted beef. The danger is psychological. If we are to get people to eat beef—it is actually the better, slow, grass-reared beef: the older animal—we must ensure that we can sell it.

I see that Labour Members have been paged. Perhaps it is to tell them that they are now on a one-line Whip, or to give them some really useful information as opposed to the information that they are usually given via their pagers.

The ban on beef on the bone is important, because it also has a psychological effect. We are reaching the point at which it will be difficult to maintain that the ban is justified in terms of actuarial risk. The Government will probably be delighted to get rid of the ban, partly because they have dug themselves into a hole and partly because they will inevitably have no choice but to ban green-top milk. After all, the actuarial risk of green-top milk is a great deal higher than eating beef on the bone. It would be bizarre if one were to be banned and not the other, especially given that there is such a difference between England and Scotland. It will be interesting to see how No. 10 adjudicates on that problem.

We all want the export ban lifted, but we should not fool ourselves into believing that the act of removal of the ban, when it eventually comes, will represent a golden dawn for the agricultural industry. Those markets will be very hard to win back.

The continental consumer in the most important, high-value market is now conditioned to think of British beef as having a problem associated with it. There is real paranoia in some continental markets. No one on the continent will go out of his way to market British beef to the consumer. The new European labelling regulations, which will be in force compulsorily by 2000, will enable people to display a large notice saying, "Don't eat this beef, it's British", if that is how they want to play it.

There will not be a golden new dawn when the export markets are opened up. There will have to be tremendous political good will to enable that to happen, and British beef will have to be promoted so that people believe that they are getting a good deal.

The fundamental problem we face is the high value of sterling. The problem is not an accident of God: it is a matter of policy. Until the Government define Britain's relationship with the single currency and declare our intention to join it, the pound will remain a volatile currency at a rate that is too high.

Just six weeks ago, people were talking about the fact that the pound was declining, and that it was down to DM2.80 or DM2.70. We had marvellous visions of the pound declining, but it is now back up to the rates that everyone was complaining about before it started to decline. Sterling is set for a volatile career until the Government set out a pathway for Britain's relationship with the emerging single currency. That will affect all industries. Even if the export markets return, the price problem of getting into those markets will remain serious.

This problem does not affect only agriculture, but it does so in particular ways, because of the price determinations in agriculture. That is why the arrangements for the new agrimoney conditions will be important once we get past January 1999 and the single currency is, to all intents and purposes, in existence.

The Government are right to say that everything depends on the outcome of the negotiations on Agenda 2000. Agenda 2000 will not happen in a day. It will be subsumed in the World Trade Organisation talks, which is a more powerful, inescapable instrument of reform than enlargement of the European Union. We want a move away from production-related aid. The Government's position is that there should be compensation for the removal of that aid, which would become degressive. I do not think that that will do the trick.

I want a coherent menu of environmental aids—what the Government refer to as aids to support the social fabric—into which farmers can buy. We talk about the merits of environmentally sensitive areas and countryside stewardship schemes. It would be interesting to know what the costs would be of the generalisation of those schemes to start with, and to what extent those and the equivalent Welsh programmes represent a blueprint into which farmers can opt.

Hill farmers in my constituency and in the constituencies of those Labour Members who have a long-standing reputation for defending the legitimate interests of farmers in disadvantaged areas would be maintained. The consumer would get something that they would be willing to pay for, and we would get away from the confrontational perception of agriculture as a forced tax on everyone else. We need to spell that out soon, or we shall all blather about the conventional wisdom of moving towards environmental aid and no one will set out the mechanics of how this can become a practical, rather than an aspirational, objective.

It is crucial to begin this work, so that we know where we stand. This problem does not affect only upland farmers. I continue to believe that lowland livestock farmers are in the most serious difficulty of anyone in agriculture. Aid available to hill farmers is not available to them. They depend to some extent on what is happening in the hills, because of the traditional patterns of agriculture in the United Kingdom. They cannot compete with larger lowland farmers, which is the link in the chain that is closest to breaking point. We must face pressing new realities, and whether we like it or not the World Trade Organisation discussions are part and parcel of enlargement. They are inextricably linked.

Farmers will have to come to terms with environmental demands. The reaction against intensification underlies the argument about genetically modified food, which has become the lightning conductor for the wider concern of intensified agriculture. We must be careful that the legitimate concerns about the broader ecological impact of galloping technology do not render farmers unable to take advantage of cost-reducing technology that will help them to become more effective.

Another reality is consumer preference. Whatever our views on supermarkets and on whether they are profitable, those super-powers are in place, and the Orwellian world of competition between them will remain. Most citizens benefit from that, because it guarantees cheap food. Supermarkets are rather like global super-powers, in that we cannot pretend that they do not exist. The President of Mexico said, "Poor Mexico. So far from God, so close to the United States." The farmer might say, "Poor me. So far from the market, so close to Tesco."

Mr. Martyn Jones

The right hon. Gentleman speaks about competition between supermarkets. Is he unaware that their profits are about 7 per cent., whereas in other European countries supermarket profits are about 3.5 per cent.? They may not be delivering what he says they are delivering to our consumers.

Mr. Curry

That is true, but I do not think that continental supermarkets are more efficient than British ones. The hon. Gentleman may go to Calais more often than I do to collect beer, but in my experience British supermarkets are extremely efficient. That is shown by their expansion overseas. There is severe competition between them in the United Kingdom, and, if the margins were lower, the competition would become even more severe.

It will intensify, because Government planning policies, with which I agree because they were started by their predecessors, will make it more difficult to develop out of towns. That will result in more intensive competition for city centre sites, and an increase in pressure to sell more goods in city centres. Farmers do not have to love supermarkets, but they will have to live and work with them. Those are the new realities.

I hope that the Minister will address the issues that I have raised, because they flow from today's document. We could all speak about the incomes of our farmers and about the threat to traditional life in the uplands. However, there has been a structural change, and it is likely to be permanent. Prices will not recover to earlier levels. The market will have to operate in a different way, and that will put immense pressure on the industry. I should like to know how the Government intend, over the longer term of reform, to show some landing lights so that farmers will know where they are. That is probably agriculture's most reasonable expectation, and I have no doubt that the Minister would like to meet it.

6.42 pm

Mrs. Janet Dean (Burton)

I am grateful for the opportunity to take part in the debate, because my constituency not only produces excellent beer—a product mentioned by the right hon. Member for Skipton and Ripon (Mr. Curry)—but covers a large area of rural Staffordshire. The hon. Member for Mid-Worcestershire (Mr. Luff), the Chairman of the Select Committee on Agriculture, said that we should not go over old ground, that the debate should start from today. That is impossible because, as some hon. Members have said, the issues go back to the BSE crisis, and many of them are intertwined.

Since before I was elected, I have been aware of the unprecedented difficulties of farmers. I was brought up on a farm, and I know that farmers have always had to cope with the day-to-day problems of our changeable climate, and with epidemics such as foot and mouth disease. However, nothing compares with their problems over the BSE crisis.

Time and again, the previous Government failed to tackle BSE. Their record was one of continual failure. The announcement on the fateful day of 20 March 1996 of the possible link between BSE and new variant Creutzfeldt-Jakob disease caused great fear among farmers attending my local cattle market in Uttoxeter. However, the announcement did not clarify the situation or define the measures that would be needed to tackle the problem and protect the public. Those first few days of uncertainty exacerbated public concern about the safety of beef. Sadly, the previous Government went on to blame everyone but themselves for the crisis.

I welcome the report by the Select Committee on Agriculture, and above all I welcome the Government's response to it. The report shows that the Government have worked hard over the past 14 months to restore confidence in British beef, to find a way to lift the export ban and to ensure that British beef is as safe as any. I have had regular meetings with members of the National Farmers Union branches in Burton and Uttoxeter. Throughout the months since the election, they have expressed their concerns to me. Of course they continue to struggle because of the drop in farm gate prices resulting from the high value of the pound, and they are greatly concerned about the industry's future and the uncertainty.

My farmers appreciate the work of Ministers, especially in negotiation with our European partners. Burton NFU members asked me to pass their thanks to the Minister for his efforts in negotiations in the European Union, and they expressed their appreciation of the fact that the Government are to provide initial funding for the cattle traceability scheme and specified risk material controls.

Many issues that were raised with me and which are raised in the Select Committee report have been addressed by the Government. Of course there is still concern. Farmers in my constituency want a level playing field so that they are on a par with their European neighbours, and they do not want to carry the bulk of the cut in EU capacity. They remain concerned about the difference between wholesale and retail prices.

Uttoxeter NFU members conducted a study which showed a wholesale price of 90p a kg. That compared with £13.49 a kg in local supermarkets and £8.47 a kg for a similar cut from a family butcher. There is obviously a great difference between the price of meat from a local butcher and that from a supermarket, and an even greater difference between those prices and the wholesale price.

Farmers recognise the need for restructuring agriculture, and for a retirement scheme that will allow older farmers to retire with dignity and does not discriminate against women farmers. I am grateful to Ministers for their consultations on the European Union early retirement scheme. I hope that there is a satisfactory outcome.

There have been some traumatic years for agriculture, and there has been a knock-on effect on associated rural and urban industries. I welcome the Government's progress towards a complete lifting of the beef ban. I hope that our European colleagues will continue to work with Britain to ensure that British farmers have a level playing field, and that the lifting of the ban proceeds in accordance with scientific evidence and is not delayed because of any national self-interest. British farming has suffered much, but the quality of its products and the determination of the British farmer will win through. They will be supported by a Government who have worked steadily towards establishing safety and confidence in British beef.

6.48 pm

Mr. John Hayes (South Holland and The Deepings)

I am sorry to start with a negative comment, but I cannot agree with the hon. Member for Burton (Mrs. Dean) about British farmers' faith in the halcyon new age and the marvellous new Government who have done so much for them. That view is certainly not shared by the farmers I meet as I travel around my constituency and more widely.

Of course, the crisis, which has been described by Labour Ministers as the worst crisis facing agriculture for a century, is not entirely a result of what has happened over the past 14 months, and it would be foolish to pretend otherwise. Of course BSE is a major factor in the problems facing the beef industry. That is implicit in any discussion about the industry.

I shall identify 10 key points that are a direct result of matters that have arisen over the past year. I shall try to cover those points a little more speedily than my hon. Friend the Member for North Wiltshire (Mr. Gray), who took us on journey round the livestock markets and shows of Great Britain, or the hon. Member for Shrewsbury and Atcham (Mr. Marsden), who took us on a journey from false logic to science fiction.

The first point is that farm incomes have fallen in the past year. There may be history to that, but in livestock terms, farm incomes have fallen by 62 per cent. in the past year. Throughout that year, the Government have claimed to be making great progress in their support for British beef.

Secondly, the strong pound is a direct result of Government monetary policy. The hon. Member for Forest of Dean (Mrs. Organ) tells us that that is something to do with the Government, but it is also the result of other factors over which the Government have no control. The truth, however, is that we have had two Budgets that have failed to stimulate savings and control consumer spending.

Interest rate authority has been passed to the Bank of England, which has used that authority to raise interest rates and maintain an artificially high pound. That has had a dramatic effect on the ability of our farmers, like all other manufacturers, to export. The high pound can be attributed only to the Government's failure to grasp the economic issues that surround it.

The third issue is that no serious attempt was made during the British presidency of the EU to deal with CAP reform. Despite the rhetoric, when Britain held the presidency CAP reform was relegated so far that it fell off the end of the list.

Fourthly, there has been no genuine progress on the lifting of the export ban. Granted, it has been lifted in the case of Northern Ireland, but that is pitiful after 14 months, when Northern Ireland never had a case of BSE anyway. Let us not forget that, when the current Government were in opposition, in 1996, they spoke about a firm timetable for an immediate lifting of the ban. The previous Conservative Government were criticised at the end of 1996 for not achieving a lifting of the ban.

At one of his first Question Times at that Dispatch Box, the Prime Minister promised us early progress. That was more than a year ago. Since then, there has been the paltry lifting of the ban in Northern Ireland. Welcome as that is, it is paltry when set against those high targets.

Mr. Gray

Will my hon. Friend give way?

Mr. Hayes

Very briefly, as long as we are not going back to Chippenham.

Mr. Gray

I shall happily take my hon. Friend back to Chippenham some time, if he would like to come with me. He might learn a thing or two. Will he pay tribute to our erstwhile right hon. Friend, Lord Mayhew, who put in place the negotiations that led eventually to the lifting of the ban in Northern Ireland?

Mr. Hayes

Indeed, an excellent point. The truth is that the lifting of the ban in Northern Ireland would have happened—

Mr. David Taylor (North-West Leicestershire)

rose—

Mr. Hayes

I shall give way, as the hon. Gentleman is such a fine chap.

Mr. Taylor

The hon. Gentleman stated that there had been no cases of BSE in Northern Ireland. My information is that there have been 1,770 such cases. Would he care to correct that?

Mr. Hayes

I am delighted to bow to the hon. Gentleman's superior knowledge in these matters. He is an extraordinary authority on all affairs Northern Irish. I shall qualify my remark by saying that no one would have expected the Northern Ireland ban not to be lifted, regardless of Government policy and regardless of which party was in government. To herald that as a great sign of progress and the result of Government policy is a fallacy.

Mr. Rooker

rose—

Mr. Hayes

No, with the greatest respect to the Minister, I shall not give way again. I said that I would make 10 points quickly, and I have made only four.

The fifth point is that there has been no firm guarantee of the necessary marketing support that will be required, once the ban has been lifted. As we have heard, enormous support will be required to assist with marketing, to re-establish confidence in the European marketplace, yet we have had no firm guarantee, in the form of facts and figures, from Government.

The sixth point is that there has been a fall in beef prices while the Government have been in office. That may have been part of a more general trend—I shall deal with restructuring in a moment—but there has been an explicit fall in beef prices, which I suppose brings us back to the issue of the strong pound.

The seventh point is the Government's failure to apply for agrimonetary compensation. When people speak of the Fontainebleau protocol, perhaps they should remember that its terms mean that the rebate that we were receiving, which is collected and used by the Treasury for all sorts of purposes, could well have been allocated to support agriculture during this difficult time, quite apart from the money that would have been claimed back under the European scheme. There is no real excuse for not claiming that.

Mr. David Taylor

rose—

Mr. Hayes

No—no double whammy.

The eighth issue is the cut in hill livestock compensatory allowance. Given that 70 per cent. of beef farmers are in less favoured areas, they are particularly hard hit. As hon. Members will recall, the Select Committee report paid particular attention to the plight of tenant farmers. Tenant beef farmers are probably the worst affected of a badly affected industry, yet there have been cuts in support to them under the current regime at the Ministry of Agriculture.

The ninth point is beef on the bone, which is self-explanatory. I need say no more about a policy that was considered ludicrous by everyone, with the possible exception of the Minister and his cohorts.

The 10th point is the style and approach of the team at MAFF, which has found so little favour with farmers and all those associated with the rural economy. For any Government to have stimulated a countryside rally, as this Government did after a few months in office, is a sad testament to the regard in which they are held in rural Britain.

In conclusion, I shall deal with the issue of restructuring. Much has been said about the over-production of beef in Europe. It is true that supply outstrips demand. The Select Committee examined the matter carefully. We are told piously by the hon. Member for Shrewsbury and Atcham that we must restructure because of over-supply, but the restructuring must be Europe-wide.

At present, purely for market-driven reasons, Europe is obliging Britain to restructure—in other words, for beef producers to go out of business—so that European beef producers can continue to thrive, prosper and supply the market, such as it exists, across Europe. It is unfair and unreasonable for Great Britain to bear the brunt of European restructuring to bring supply in line with demand.

Mr. Paice

Does my hon. Friend agree that we may need to restructure and deal with the over-production of beef in Europe, but that an early retirement scheme to reduce the number of producers will not necessarily lead to a reduction in production levels—indeed, it is possible that, with greater efficiency on larger-scale units, production could rise as a result of such restructuring?

Mr. Hayes

My hon. Friend is right. That matter was addressed by the Select Committee, which agreed that the Government had no strategic view of the British beef industry. They had no notional view on the number of producers or the amount of production. Those two things, as my hon. Friend says, are quite different, but it seems that the Government do not have a business plan for either.

The Select Committee—a cross-party group—acknowledged that there was no strong sense that the Government had a two, three or five-year plan for British beef. If we do not have a strategic long-term view—a business plan with notional figures, measurables and targets—for the number of producers and the amount of production, we are unlikely to instil confidence in our beef producers, let alone in the European markets that we need to open up again if that industry is to prosper.

I promised to be brief, but I have been a little longer than I intended because of some interesting and telling interventions, mainly from my hon. Friends. Specific questions need to be answered. The first is whether the Minister will answer the question about the relationship between the winding up of the over-30-months scheme and the explicit link to the data-based exports scheme. What about progress in Europe on those specific discussions? Will the Minister come clean about the noises being made currently, questioning the viability of our traceability package, which seem to signal continued prevarication and unreasonable response from Europe?

Will the Minister be explicit about the further, and in my judgment necessary, financial support that the Government will offer the beef industry, not for early retirement, but on a positive note to support the industry and to go out and sell the products in the wider world? What package will the Minister reveal to the House to support and market British beef—the best beef in the world—to the rest of the world?

7.1 pm

Mr. Alan Hurst (Braintree)

I am delighted to follow the hon. Member for South Holland and The Deepings (Mr. Hayes). He put me in mind of a certain type of constituent: when one acts on someone's behalf and has a minor success, one writes to them expecting perhaps a modicum of praise; one waits for the letter, and when it comes, it says, "Thank you very much for your help, but it should have been quicker. By the way, I have another problem." The hon. Gentleman gave grudging and scant praise—the word "praise" is probably an overstatement—for the substantial steps that the Government have taken to overcome this serious problem.

The hon. Gentleman and other hon. Members serve with me on the Agriculture Committee, under what appears to be the almost sanctified chairmanship of the hon. Member for Mid-Worcestershire (Mr. Luff). One of the witnesses who came before the Committee was my constituent Mr. Peter Hawes, of Shalford Green. He is a beef farmer and gave a moving account of the hard work and risk facing beef farmers and of their current financial plight. He carried the extra burden of being a tenant farmer. He said that the value of his herd had diminished by 50 per cent. over three years. That herd is his asset—his capital.

The freehold farmer is in a bad position, but not in as bad a position as the tenant farmer. I do not know whether hon. Members understand the agriculture property market, but it bears no relationship to the real value of the land. It goes up and down, presumably on a speculative basis, rather like the stock market. Neither of those amazing institutions relates to the commercial worth of the commodity. Tenant farmers cannot take advantage of the vagaries of the agricultural property market. If the price of a herd goes down, such farmers often come close to ruin. They may have borrowed from a bank on the security of the herd and, as the livestock market goes down, the bank sees the value of its security go down. Such people are the most hard pressed.

History has been referred to. The hon. Member for Mid-Worcestershire said that he did not want to discuss history at all, and my hon. Friends the Members for Burton (Mrs. Dean) and for Forest of Dean (Mrs. Organ) wanted to deal with modern history. I do not want to go back to ancient times, but it would be helpful to consider beef over a longer time than just the past three or four years.

All the evidence shows that beef consumption in these islands has declined by about 50 per cent. since 1950. That is a substantial decrease, and it has taken place notwithstanding the advent of BSE and the introduction of the hamburger. Take hamburger consumption out of the equation and, by golly, there has been an absolute collapse in beef consumption since 1950.

There are several reasons for that and I need not detain the House by discussing them in detail; whatever policies are followed, however, the restoration of confidence in beef must be the prime consideration. People talk about over-production, but we could equally talk about under-consumption. The Government have been helpful in stimulating public awareness of the safety of British beef. They have committed sums of money and set up programmes that have helped in that way. We can never do enough.

My swan-song speech—if I may mix my animals—at Essex county council was about urging that council to restore beef to school menus. I am pleased to say—I do not take all the credit for this—that that has now happened, and I believe that other councils are moving in that direction. When we have proved beyond doubt that we have an entirely safe product for anybody to eat, it is absurd that it should remain banned in public institutions over which we have any influence. I am pleased that my county has taken a step in the right direction.

I want to enter a word of controversy on beef on the bone. Whatever the statistics relating to the risk—I believe that it is slight and that it might be easier to catch a flying fish in Rochdale than to be infected by eating beef on the bone—the point we must consider is confidence. The banning of beef on the bone was about confidence. It was one more step to show that we are prepared to do anything that is necessary to protect the public and to restore public faith in British beef. It may be a coincidence, but since the prohibition took effect last December, domestic consumption of beef has risen.

We all talk about our beef farmers as if we were proprietors in some way. The beef farmers I speak to in my division do not appear to be obsessed with beef on the bone. They want the reopening of the export markets and they want understanding, which I believe they are getting from the Government, about their difficulties in the foreseeable future. When the BSE crisis ends, there is the danger of a glut in the market. That is why we should not wait to re-establish the domestic market. However, there is no point in maintaining the domestic market if, at the same time, it is flooded with imports that take up that demand.

I shall conclude by narrowing my speech to a plea that we should redouble our efforts to promote British beef, not only as a wonderful product but as an entirely safe product which we should be proud to talk about, and which we should all encourage all and sundry to eat.

7.7 pm

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

It is obvious to all of us in the Chamber and beyond that there is a deep crisis in agriculture in the United Kingdom. It is also obvious to Welsh Members that the crisis is deeper in Wales. For example, in my constituency it is estimated that one family in five is in some way connected with agriculture. The loss to the various rural economies of Wales is extremely deep.

Some weeks ago I had the privilege of conducting some research in Dyfed with the Select Committee on Welsh Affairs. I was astonished by what I heard. I shall preface my remarks by saying that, when a nuclear power station was closed in my constituency, there was gloom and doom and talk of economic disaster. That closure involved a loss of £10 million per annum to the local economy of south Meirionnydd. I was astonished to hear that, because of the current collapse of the milk price, no less than £9 million per month is being lost in the old county of Dyfed. One should try to imagine the effect that that is having on local businesses and on the structure and—to use a word used earlier—the fabric of rural life. It is an absolute crisis.

The hon. Member for Clwyd, South (Mr. Jones) mentioned double or triple whammies. We have a beef crisis, and—because of the strength of the pound—a lamb crisis. Moreover, the milk price has collapsed completely. As all hon. Members are aware, there is a complete crisis whose existence only a fool would deny.

The House should be questioning supermarkets' role in the crisis. It is often said that bank managers are quite ready and willing to lend one an umbrella, but that they will want it back when it rains. I am beginning to wonder whether supermarkets have been entirely forthright with their customers and with Select Committees. I am absolutely certain that, in the past couple of years, they have not been very discerning in the way in which they have sourced their meat. They have a lot to answer for. Supermarkets have used the perceived unpopularity of British beef to fill their shelves with rubbish from abroad. Although I am not anti-European or against any foreign country, I am sure that Welsh and other British beef is the best, safest, cleanest and generally healthiest available.

I readily admit that I am not an economist. Nevertheless, I cannot understand who on earth is making any money when producers and abattoirs are being paid less and supermarkets are selling at a loss. Businesses have been mentioned in this debate. Before I was elected to the House, I had a business and employed 28 people, so I am not completely ignorant of business practice. I have to question the role played by supermarkets in the crisis, however.

Representatives of one supermarket chain appeared before the Welsh Affairs Committee, and said—with a straight face—"Yes, we are losing money. We have been losing money on meat for the past two years." I am not gullible, and I am not completely convinced that that is the case. Although I understand the idea behind loss leaders and realise that some supermarkets have over the years sold milk at a loss to bring in customers, I do not accept that that applies to meat.

When questioned, representatives of one chain store—including an army of economists and other experts—could not answer simple questions from people such as me. Although I do not understand accounts very well, I had to ask about columns marked "miscellaneous" on the expenditure side. The hon. Member for Monmouth (Mr. Edwards) nods; perhaps he recalls that exchange. The experts could not reply to our questions and did not know what the miscellaneous expenditure comprised. However, curiously enough, that expenditure was precisely the thing that tipped the balance and made it unprofitable to sell meat. I shall leave the matter there.

Mr. Oliver Letwin (West Dorset)

I have a great deal of sympathy with what the hon. Gentleman is saying. Does he agree that a most helpful statement on a related matter that the Minister could make today—his doing so would cast light also on the beef issue—would be to ask the Monopolies and Mergers Commission specifically to investigate both the retail and the wholesale sides of the milk market?

Mr. Llwyd

I fully agree with the hon. Gentleman. That market also is a very great concern, and I urge the Minister to deal with that matter in his reply. Huge swathes of rural areas in the United Kingdom are under extreme pressure. His point was well made.

The Welsh Affairs Committee concluded that there was a very strong case for an in-depth independent study of the retail pricing of meat products to be conducted. Perhaps the Office of Fair Trading could conduct such a study and really delve into the matter, to establish the exact nature of the problem and whether we are being informed of the true situation. Our report stated that research commissioned by retailers—however impartial it may be—will not be convincing.

Ironically, at the same time as we are dealing with the retail problem, producers' bargaining power is being limited—indeed, greatly weakened—because of the development of so-called producer clubs in which farmers sell animals straight from the farmyard. As soon as a sufficient number of farmers have joined such clubs, cattle auctions will close and a near-monopoly will be established, directly affecting prices. The hon. Member for Forest of Dean (Mrs. Organ) mentioned those points, and I fully agreed with her.

Earlier today, there was a lobby in the other place, in the Attlee Room. I should like to apologise—I cannot apologise any more publicly than in Hansard—for not being there. [Interruption.] I was waiting to be called. The lobby was advocating that we should ensure that we keep our cattle auctions and a reasonable price floor, both of which are extremely important.

Let us not make any mistakes about the matter. Even if the ban is lifted tomorrow—I hope that it will be lifted very soon—the market will not recover overnight. Sterling's strength has already been mentioned in this debate, and I shall not deal with that issue again. However, we have also lost markets to other producer parts of the world. The loss of those markets should bring home to the Minister the importance of marketing. Marketing is key, and it is vital that we get on with it as soon as possible. Improved marketing is how we will recover our markets in the medium term.

A few weeks ago, I had the privilege of meeting the Austrian and Irish ambassadors, as part of a programme initiated by Plaid Cymru to try to urge our colleagues on the European mainland to help in lifting the ban and getting things moving. I was pleasantly surprised when not only those ambassadors but others said, "You in Wales, rural England, Scotland and Northern Ireland have an excellent product. You have a truly green product that is properly reared. But people in Europe don't realise that."

The Austrian ambassador said, "Welsh, English, Scottish and, of course, Northern Irish branding is very important. You could split it up in that way." She said that some small Austrian valleys produce one type of cheese, whereas neighbouring valleys produce a completely different brand. All their products are to serve a discerning market. We have to emphasise such branding and markets in developing our marketing strategies. However, I agree also that—as has been said in this debate—we have to encourage everyone in Britain to insist on home-produced meat.

We have been told that red meat consumption has been declining. We will therefore have to diversify our products and put more value-added products on the shelves.

I ask the Under-Secretary of State for Wales, the hon. Member for Bridgend (Mr. Griffiths) when the all-Wales environment scheme will come on line. Although the scheme was—rightly—much trumpeted in last year's royal show, we are still waiting for it. There have been no details about it. May I urge him, with respect, to ensure that the scheme is financially attractive to farmers. If it is not attractive, it will wither on the vine and be of absolutely no use. I am sure that that one small step could be taken.

In opening the debate, the hon. Member for Mid-Worcestershire (Mr. Luff) said that the Agriculture Committee had been very successful because at least two of its recommendations had been implemented while the report was at the printers. The report perhaps should be included in "The Guinness Book of Records". Alas, the situation has not been the same with the Welsh Affairs Committee's report. We said in our report of 12 May: There is immediate need for emergency aid to enable farmers to survive. We await that emergency aid. Nothing has appeared so far, although the crisis is deepening daily. I urge Ministers please to do what they can to get the industry and the Government moving, because there is a crisis.

We have heard much about agrimonetary compensation. Although it is true that a sum has been drawn down from Europe, more could be drawn down. I fully understand the Fontainebleau protocol, which—when boiled down into ordinary people's language—means that 71p in each pound of compensation will have to be paid by the British taxpayer. I tell British taxpayers that the whole of the UK's rural economy is suffering a real crisis. I am sure that British taxpayers could be persuaded that the help that is needed should be provided. A crisis deserves crisis management or an answer that solves the crisis. Simply saying that the taxpayer will not accept something is no answer at all.

Some weeks ago I was at Ysbyty Ifan in my constituency to speak to a group of young farmers. There must have been in the region of 40 or 50 youngsters there. Incidentally, Ysbyty Ifan is probably one of the most Welsh villages in Wales. It is a very well established community that goes back many centuries. I was speaking about life on the Westminster farm which can be pretty dirty, although it is clean this evening—at least, I do not have my wellington boots with me tonight.

A youngster of 14 or 15 had a piece of cake and a cup of tea with me. He told me that his parents, their parents and three or four generations of his family had farmed in Ysbyty Ifan. This youngster, in my presence and in the presence of 40 or 50 other people, had tears in his eyes when he asked what the future held and whether I thought that he and his little brother would be able to take over the farm. I said that I was sure it would all come right, but that it would need much hard work.

The Minister of Agriculture is not here today, but with all due respect—I do respect him—his response to the crisis has not been worthy of him. He may be constrained by the Treasury or by something else—I know not—but I think he could have done more. It is no use sitting on the fence any longer. I know that something has been done, but it is not enough. I plead with Ministers, because the clock is ticking. We need to get things moving as soon as we can. If more is not done in the short term, the electorate will be confirmed in their view that new Labour either does not understand rural life or does not care. I am not sure which is worse.

The time to act is now, and I urge the Under-Secretary of State for Wales, the hon. Member for Bridgend and the Minister of State, Ministry of Agriculture, Fisheries and Food to act on the recommendations made by both Select Committees. Let us move forward in concert and get the industry back on its feet for the sake of all our rural areas.

7.21 pm

Mr. David Drew (Stroud)

In the spirit of the debate, I shall keep my remarks brief, so that everyone who wishes to contribute has the opportunity to do so.

The introductory sentence of the report by the Select Committee on Agriculture is prophetic, not to mention stark: The beef industry in the UK is in a critical condition, because of the BSE crisis, the strength of sterling and the long-term decline in consumer demand. The first two of those three reasons have been well rehearsed, but it is worth reminding the House that the cost to the Exchequer, as outlined in the National Audit Office report, will be something over £4 billion by 2000. Even on the day that we heard about the comprehensive spending review, that is a seriously large figure.

Another aspect of the problem is the loss of sales. In the United Kingdom alone, at the peak of the crisis there was a 30 per cent. fall in sales. Overnight, the introduction of the beef ban, not only by the European Union but by other interested parties, led to some £500 million in exports being lost. However, the real impact of the crisis, which has taken up most of the debate, is the cost to individual producers.

We all know that there has been a massive fall in farm incomes. Labour does not hide from that fact. Indeed, my hon. Friend the Member for Burton (Mrs. Dean) waxed lyrical in explaining exactly what that fall means, and Opposition Members highlighted how the industry has faced the decline, even though it has been difficult.

The strength of sterling has also been well documesnted. Although we could argue with the analysis of Opposition Members, what sticks in our craw is their rhetoric. It is easy to outline the problem, but they offer no solutions. We all know that the problem with the pound at the moment is that it is being used as a hedge against the euro, whether the euro works or not, and that is something we have to face. Whatever the Government's strategy, the euro debate will be held in due course, and we shall continue to face the problem of the rising value of the pound until there is clarity on all sides of the debate.

I shall speak briefly about the third reason for the crisis, as identified by the Select Committee. It has been mentioned, but it is difficult not to underestimate it—it is the changing nature of the beef industry itself. On the one hand, beef producers feel sore and are asking for more support. On the other, the Government—and, to be fair, the previous Administration—have put considerable resources into the industry to support it.

There have been several initiatives: the over-30-months scheme, the cull, the calf processing aid scheme, agrimonetary compensation drawn down at Christmas, help in setting up the cattle traceability scheme and the decision not to pass on the specified risk material control costs to the industry. Specific help to, for example, the hill livestock compensatory allowance areas, and help with marketing via the Meat and Livestock Commission, have always been part of the support that the industry has received from Governments of all colours. That help continues to be offered, but, as the Select Committee makes only too clear, we are considering an industry that is experiencing long-term change, if not decline. We cannot hide from that.

It is good to hear that the consumption of beef is recovering. We can play about with the statistics, but in terms of agricultural output, the beef industry is of greater importance in this country than the EU average. That puts the matter into context, but there has been a fall in the consumption of red meat for a long time. Consumer tastes are somewhat fickle. I was pleased to hear the right hon. Member for Skipton and Ripon (Mr. Curry), who is no longer in his place, mention consumer resistance to genetically modified organisms and to the use of antibiotics for livestock. Consumers are increasingly aware of what they are being asked to buy, and if they do not like something, they will not purchase it. We cannot escape how those factors have affected the industry.

If one reads all the documentation that has become available, one cannot but be confused about how the food chain operates for the beef market. It is convoluted and difficult to understand, and perhaps change is long overdue. We do not have to go as far as the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) suggested—he spoke about producer clubs—but we can nevertheless understand that rationalisation of the industry is long overdue.

It is good to see the symmetry between the Government's response and the Select Committee's original report. Often, a Government's response and the recommendations of a Select Committee are at variance, but that is not so in this instance, which has already been mentioned.

There has been a lack of progress in one respect—it has nothing to do with the Government, but is connected with drawing down money from Europe—and that is the retirement scheme. As has been said, greater efficiency will not solve the problem, as it could result in increased surplus production of beef. Many producers simply want a way out, and they should be allowed to retire gracefully. We hope that others will come into the market as it recovers.

Two further considerations should be borne in mind. The first, which has been touched on in the debate, is the overall price of food. I am not frightened to say that the price of food has probably bottomed out. We cannot combine quality and price reduction. We learned an awful lesson from the BSE crisis. We drove down prices to such an extent because of the belief that imports could be reduced, and we have borne the consequences.

The second point, which is linked to the first, relates to the structure of the food business. There is a need for producers, middle persons and retailers to work together, but there also has to be a level playing field. Reference has been made to the Tesco-sponsored report by London Economics. One can be sceptical about the final report, but there is obviously an element of truth in the finding that there is not excessive profit making, as additional costs have had to be borne by all elements in the food industry, not least in food preparation. I visited my local Co-op supermarket—and I am a Co-operative Member—where I saw the care and quality that go into food preparation.

In conclusion, it is important that we take into account all those important factors. The Select Committee has produced a good report to which the Government have responded, but we must look for long-term change in the industry, and I believe that it will happen.

7.31 pm

Mr. Huw Edwards (Monmouth)

I am grateful for the opportunity to speak in the debate, which has been well informed and based on two authoritative reports. I am a member of the Welsh Affairs Committee, which produced a report on the crisis in the livestock industry in Wales. I congratulate my hon. Friend the Member for Clwyd, South (Mr. Jones), who chaired the Select Committee. We interrupted another inquiry in order to undertake this one, and we worked on it for six months to produce an authoritative report that criticises much of what has been going on. It is an honest report, and I commend it.

I gave a presentation on the Select Committee report to the National Farmers Union in Monmouthshire recently. There is a significant farming interest in my constituency. Indeed, farming is probably the largest single industry in Monmouthshire. I am also grateful for the briefing material that the NFU and others have supplied.

All but two of the hon. Members on the Welsh Affairs Committee represent constituencies with significant farming interests. We took evidence from the main farming unions and from the Welsh Office. I am grateful to the Under-Secretary of State for Wales, my hon. Friend the Member for Bridgend (Mr. Griffiths), for listening to the debate this evening. We also had the opportunity to question the supermarkets—Tesco, Sainsbury, Safeway, the Co-op and Marks and Spencer. We tried to reflect the concerns of farmers in our constituencies about what was happening in the supermarkets and the allegations of profiteering.

Having heard the evidence—sometimes in confidence—we remained unconvinced. I do not wish to make accusations, although I know that they have been made against Tesco, which claimed that it has not made any money from selling meat for five years. Tesco will shortly be opening a new store in Chepstow in my constituency, which is welcome. The Tesco distribution centre in Magor employs 400 people, many of whom are my constituents, so I do not want to join the bandwagon criticising certain supermarkets.

The Select Committee made a number of visits to food producers in Wales and obtained a considerable amount of evidence. We looked into the crisis affecting farmers, the meat supply chain and the changing relationship between producers, prices and imports. We discovered that, if there is a crisis in the United Kingdom industry, it is worse in Wales. The decline in farm incomes has been 37 per cent. in the United Kingdom and 44 per cent. in Wales. The Select Committee concluded: The prices that farmers get for their animals has fallen dramatically… prices now barely—and in some cases do not—cover the cost of production. Cattle prices in Wales have fallen by 30 per cent. in two years and lamb by 39 per cent. The price of milk has fallen by 17 per cent. in a year. Welsh agriculture is dominated by livestock production. The beef, sheep and milk sectors account for 87 per cent. of the gross output in Welsh agriculture and 80 per cent. of Wales is designated less-favoured areas where 40 per cent. of farms returned incomes of under £10,000. One in four jobs in rural Wales are in agriculture, and for each job in agriculture there are four to five in related ancillary industries. Farming is at the heart of Welsh life and at the heart of Monmouthshire life.

The Select Committee stated: It is no exaggeration to suggest that much of Welsh agriculture will be destroyed within a decade unless urgent action is taken to reverse the decline. We took evidence from the Meat and Livestock Commission, which showed that the price spread for British beef increased from 48.6 per cent. in 1996 to 54 per cent. in November 1997.

We concluded that the industry is in crisis, and in Wales it is harder hit than elsewhere. The crisis strikes at the heart of Welsh rural life. We do not condone the violence that occurred in some of the ports, but we sympathise with the frustration that led to it. The Select Committee called for immediate help, to enable farmers to avoid bankruptcy. On the basis of the available evidence, we could not tell whether supermarkets were profiteering, but there was some scepticism about the costs that they claimed were being borne in the retailing of meat.

The Select Committee recommended that the Government should aid the long-term development of the meat industry. We were particularly concerned to find that there was no freezing facility in Wales. Frozen food manufacturers claimed that they got all their lamb from New Zealand because they could not get the quantity or quality that they required in Wales. If Wales has an abundance of anything, it is certainly lamb, but the frozen food manufacturers are not using it because there is no freezing facility in Wales. I urge the Government to consult other organisations and bodies to find out whether that is an important aspect of rural economic development.

I welcomed the Government's announcement before Christmas of £85 million for Wales. It was more than some of us had feared it might be, but it was not as much as many of us had hoped. Some of the farmers in my constituency have received very little of that money. The Government's paying the start-up costs of the cattle traceability system has been welcomed, as has the fact that the charges for specified risk material will not be borne by the industry.

The introduction of the beef labelling scheme to ensure that beef is not inaccurately labelled, and the establishment of the Food Standards Agency, have also been welcomed, as has the lifting of the beef ban in Northern Ireland. I urge my right hon. and hon. Friends who will be involved in the negotiations to do their best to ensure the lifting of the beef ban as soon as possible.

The Select Committee recommended that more could be done to satisfy the demand for organic produce and to help farmers form co-operatives, and that the lack of a freezing facility for lamb should be remedied.

Tonight there is a reception on behalf of the livestock auctioneers and markets. There are two livestock markets in my constituency, in Abergavenny and in Monmouth. They are part of the culture of those towns. I should hate to see them lost, especially to new supermarkets, as that would make the situation worse. Next week, my hon. Friend the Member for Clwyd, South and I will be attending the royal Welsh show along with other right hon. and hon. Members.

We cannot deny that there has been a crisis, and we urge the Government to do more. I hope that the worst is over, but I fear that that may not be the case. If the Government can ensure the lifting of the beef ban and the value of the pound declines, I hope that we shall see a future for our industry, especially the small family farms in Wales.

7.39 pm

Mr. Michael Jack (Fylde)

This has been an extremely good debate, with the House of Commons on its best behaviour debating well-informed Select Committee reports. I congratulate all right hon. and hon. Members who have made informed contributions to this serious subject. Anyone standing at either Dispatch Box must take seriously what the Select Committees have to say about an industry that, as my hon. Friend the Member for Mid-Worcestershire (Mr. Luff) said in his excellent opening remarks, is worth some £1.7 billion.

Beef is a serious industry. It is crucial to the United Kingdom's rural fabric. As the two reports acknowledge, its difficulties cannot be ignored. The Meat and Livestock Commission has told me that 327,000 people are employed on holdings on which there are cattle. The importance of the beef industry should not be underestimated.

I am glad that my hon. Friend the Member for Mid-Worcestershire drew attention to the fact that the measures taken against BSE—the problem that underpins the crisis in the beef industry—were aimed at protecting public health. Before the awesome announcement on 20 March 1996, the previous Government had maintained beef markets in Europe open, with expenditure of £240 million, as the National Audit Office report reminds us. Only after that did new science illustrate some of the problems, and the cost of BSE rose towards £4 billion. That money was not shovelled into farmers' pockets and did not make them rich. Perhaps some of it could have been spent better, but the need to act quickly in the interests of public health drove the policy of the previous Government.

I was interested in the Government's reply to the Select Committee. Some hon. Members have talked about the asymmetry between it and the Select Committee report. I was saddened by the lack of vision, passion or enthusiasm for the beef industry in the Government's cold words. When I talk to those involved in the livestock industry, their passion and commitment comes through. It is their life. The BSE crisis has been one of their most traumatic experiences. They have seen many good animals that they have raised go to slaughter. That has not been easy. The Minister has referred to that many times, and I pay tribute to him for doing so.

Like my hon. Friend the Member for North Wiltshire (Mr. Gray), I have spent time with beef producers in preparing for the debate. I should like to repeat the questions that they are asking. I asked them what they wanted to know from the Government in response to the Select Committee. They want information about the lifting of the beef ban, a clear indication on the calf processing scheme, some guidance about the over-30-months scheme, answers to queries about the operation of cattle passports and, above all, a clear statement from the Government of their confidence in British beef.

Reference has been made to 70 local authorities—of which 64 are Labour-controlled—that are not serving beef. That shows the job to be done. When I rang Birmingham city council's direct service organisation—I thought that the Minister's influence would move his council—I found a schizophrenic situation. I was told that the council had made no decision to approve and endorse the serving of beef, but in pursuit of better value the direct service organisation was going to try to reintroduce it to schools. That is just one local authority. When I asked whether it would help if the Government made an announcement that would help to boost confidence, the clear answer was yes.

I appreciate that the MLC has a vital task in rebuilding confidence in British beef and helping to turn back the tide of declining beef consumption. Whatever the Minister and the Minister of Agriculture, Fisheries and Food can do to help reaffirm the safety of British beef will be a service to all the farmers, I have met and, to the beef industry.

Raising the beef ban must be the number one issue. I know that the Government have been working hard to get other European heads of state to agree that the Florence requirements—an agreement that the previous Government negotiated—have all been implemented. I wrote to the other 14 member states to find out what the barriers were. I wanted to show them that we have done everything we have been asked to do, and to know why they do not agree to the lifting of the ban.

Sadly, some of the comments in the European press made by people in France and Germany when the Commission agreed that we had met the requirements and that the ban should be lifted leave me with a nagging worry about how long other Governments will keep up the pretence that we have not done all that we have to do. In an article entitled "Vache Folle" in Le Monde on 11 June 1998, a French Minister was reported as saying that the French Government would examine the proposal to ensure that the safety first principle of the Florence agreement was respected. What on earth does he mean by the safety first principle and respecting it? I thought that we had done everything.

It would be helpful if the Minister could tell us where we stand. I share the concern of other right hon. and hon. Members that not until the German elections are out of the way will we stand the remotest chance of getting the ban lifted. The CDU representative, Mr. Boge, who chairs the German Parliament's BSE investigation committee, was reported in the Frankfurter Allgemeine Zeitung as wanting BSE exterminated before he would contemplate the lifting of the ban. Sadly, there is still scepticism among our continental partners, despite the huge efforts that have been made.

Many of the speeches we have heard this evening have referred to the impact on the economics of farming. Two figures stand out from the Ministry's data on the income of livestock producers. This year's figures show a drop in income on last year of 63 per cent for livestock producers in the less favoured areas and, more seriously, of 76 per cent. in the lowlands.

Mr. Robert Foster, a much respected commentator on livestock, has told me that he fears for lowland livestock producers, not so much from the economic point of view as because of the disruption for the rest of farming if they go out of beef production. Many of them may adjust their farming practices, which will affect others. Mr. Foster was also concerned that animals may be produced in the wrong places, with food moving to the animals rather than the other way round. I hope that the Minister will consider that sage advice from so worthy a commentator.

The Government's comprehensive spending review covered the calf processing scheme. Will the Minister clarify the Government's position? In their consultation document, they said: The Government's initial view is that the CPAS should be closed in the UK on 30 November 1998. It is recognised that this will have implications for calf producers' returns. Later, the document says: No final decision has yet been taken and views are invited, by 2 July 1998. The livestock producers to whom I have talked accept that the scheme has to change. Many would like a phased reduction in the current aid so that the price of pure beef-bred calves was lowered, finishers' input prices were lowered and we could start getting the economics of the industry back into some order. They also see dairy bull crosses, with the lower price of calves, as a way of encouraging home-produced processing beef, turning back some of the tide of imports resulting from the strength of the pound. The expenditure review talks about the calf processing scheme ending. The terminology is ambivalent, and it would be useful to know whether the Minister is still of a flexible mind or whether the Treasury has made his mind up and the scheme will close with no further debate.

Livestock producers recognise the need for change, but they want it on the basis of a resumption of good, orderly marketing. They also want the lifting of the ban on beef on the bone. The Minister may be able to enlighten us on an important point. Although I accept that beef on the bone cannot be exported from Northern Ireland, I have not understood why, in such a closed community which has effectively been declared BSE-free, it is not possible to eat beef on the bone from the Northern Ireland stock.

Mr. Mark Todd (South Derbyshire)

Will the right hon. Gentleman give way?

Mr. Jack

I want to make progress; I want to leave the Minister of State adequate time to reply to the debate.

The self-same livestock producers say that they will find it difficult to justify the continuation of the over-30-months scheme in its current form after 1 February next year. They would very much like a rolling scheme, raising the upper limit to 31 months, 32 months and 33 months as we pass the scheme's anniversary. Many livestock producers would welcome the Minister's comments on that.

I should like to turn the Minister of State's mind to the subject of the British cattle movement service. Although I acknowledge that the Government have finally decided to adopt the previous Government's policy of paying some of the costs—at least in the first year—I am anxious to secure from the Minister of State a clear assurance that, over the remaining 14 years of the Workington-based scheme, the Government will not make a profit from it. Farmers recognise that the operation of the cattle passport scheme may incur expense but, as we have heard, their income is extremely perilous and they would not like to think that the Government were making a profit from them.

Much has been said about the need for good marketing. Once the beef ban is lifted, marketing will play a vital role in ensuring that British beef rightly finds its way back into Europe's marketplaces. My hon. Friend the Member for Mid-Worcestershire reflected on the fact that, in Northern Ireland, some £2 million has been found to assist the marketing of beef. I calculated, pro rata, that that is the equivalent of £11 million for the remainder of the UK. Does the Minister agree with that calculation? In spite of the fact that MAFF's budget seems to have been well and truly pinched by the expenditure review, will he be able in the new performance-based world in which we live to find some money to aid the re-establishment of the beef market?

I hope that the Minister of State will forgive me if I job back for a moment to the cattle movement service. Earlier today, I faxed to his office some farmers' concerns about the way in which the registration scheme in particular will operate. Although I appreciate that he will not be able to go into detail on the matter in this debate, it would be helpful if he made the position clear.

The industry would also like to know what the Minister of State can do to help boost the market for the waste products of Britain's beef industry. The beef industry is suffering from a deficit of about £58 million due to the lack of a market for tallow, meat and bonemeal

. Farmers also raised questions about a level playing field. They share a deep sense that, in some way, other people are getting off lightly. They are aware, for example, of the threats of the so-called Mercosur agreement, which is being reviewed at Community level. They want MAFF to conduct a study into whether our controls, compared with laxer regimes in countries that are sending beef to the UK, are putting us at a competitive disadvantage.

This has been an extremely worthwhile debate. We have reviewed very thoroughly the two Select Committees' findings. I look forward to hearing the Minister of State's reply.

7.52 pm

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

I am extremely grateful to the right hon. Member for Fylde (Mr. Jack) for concluding his remarks in good time. The debate has been very useful. I have lost count of the number of debates on the beef industry—this is probably the fifth or sixth—to which I have responded since May last year.

One or two personal remarks have been made about my right hon. Friend the Minister of Agriculture. I should point out that he was on a farm yesterday and, while I was in the House this afternoon, he met farmers at the headquarters of the Ministry.

I have some prepared remarks, and I can honestly say that they cover virtually all the points that have been raised in the debate. I shall try my best to get through them.

Essentially, the over-30-months scheme is a public health measure inexorably linked to the Florence agreement. It is not a free-standing scheme over which the Government have control. Although the logic of comments about the scheme is there for all to see, I remind hon. Members that it is part and parcel of the Florence agreement. To that extent, our flexibility on it is extremely limited.

Fourteen Back Benchers have spoken in the debate, which has been extremely useful and wide-ranging. I shall deal later with the calf processing scheme. If I have not done so by seven minutes past 8 o'clock, I shall need to be reminded to do so.

The ban on beef exports has of course been lifted in Northern Ireland—so, there has been progress. I accept the fact that the ban has been lifted only in Northern Ireland, where exports have been permitted since 1 June. The area has not been BSE-free, as has been said, although only 1 per cent. of cases of BSE have been found there. It was quite specifically stated that the £2 million that we awarded for the promotion of beef in Northern Ireland was a one-off contribution. It was also seen as part of the peace process. We must take on board the fact that beef exports in Northern Ireland formed a much larger part of its economy than they did in Great Britain's economy.

We are making sustained daily efforts through the date-based export scheme to get the beef export ban lifted throughout the United Kingdom. It is important to note—I hope that hon. Members will take this on board—that the date-based export scheme is now a European Commission proposal and no longer a British Government proposal. It was accepted unanimously by the Commission, so now has all the force of a Commission-driven proposal. I freely admit that there have been one or two examples of people in Europe attempting to rewrite the Florence agreement and rules, erecting hurdles to the lifting of the ban. It is no good me naming names; we need the votes of such people to get the ban lifted. Slagging off people whose support we need—there I am, ever the diplomat—serves no purpose.

On support for the beef industry, we have persuaded the burger restaurant chains to source a proportion of their beef in the United Kingdom, ending a 15-month ban. I understand that latest figures show that McDonald's is sourcing 70 per cent. of its beef in the UK. That is a major contribution. I hope that other users of beef, including schools and local education authorities, will take note of McDonald's confidence in British beef.

I do not want to go over past events, but the House must be reminded that, since March 1996, as we know from the National Audit Office report, £2.5 billion has been spent on BSE-related measures. I freely accept that many are health measures, but I must point out that, at the same time, they support beef, rendering and slaughterhouse markets. It was important that such contributions were made. The selective cull and the massive research and development programme on which MAFF has embarked in respect of BSE must also be considered. In addition—I do not think that any hon. Member has mentioned this—beef producers receive £500 million each year in normal beef subsidies.

I know that some hon. Members are upset that the Government have not paid more agrimonetary compensation; one or two have expressed their thanks, and for that we are grateful. Most of the £85 million compensation—£72.5 million—went to suckler cow producers. It was the first time that any Government had paid such compensation.

We are constantly reviewing the situation as various dates pass. We have listened to farmers' representations on financing cattle traceability, and have decided to pay the setting-up and first-year running costs. That is worth £35 million extra to the livestock industry. It is not as though we said that the scheme would not be implemented and therefore farmers would not have to pay for it. We said that it must be implemented, that it is important to build confidence in the industry and that we shall ask the taxpayer to pay for it. My intervention on the hon. Member for Ross, Skye and Inverness, West (Mr. Kennedy) was therefore quite telling.

Now I shall answer some of the questions that the right hon. Member for Fylde asked us about the British cattle movement service. I was sorting out some of the figures recently, and it is worth pointing out that, in putting together the names and addresses and matching everything up, MAFF and the Scottish Office have spent 11,000 staff days—85,000 hours, the equivalent of 50 staff years. Without doubt, that has been a major effort.

The BCMS will be allowed to recover the costs only when in due course the charges are made. There will be no attempt to make a profit, or to go back and collect expenditure that the Government have freely contributed.

Mr. Paice

It is in Hansardnow.

Mr. Rooker

Yes, it is. I freely give that commitment; there has never been any problem about that. We are embarking on an operation that will make a major contribution to confidence in the beef industry. As I have already said, Workington will issue 3 million cattle passports—twice as many as the total number of child benefit books and new pensioner books issued each year.

We estimate that we shall record 20 million cattle movements. Comparing that number with, for example, the figure of 15 million or 16 million Visa card holders in this country, shows how very substantial an information technology enterprise we shall be running. Farmers who have cattle that move on a daily basis—perhaps from the farm to common land, or on to other holdings that they may own—can get on to the helpline. It is not our intention that they should have to record those movements on a daily basis.

The Workington helpline is now on call, having been tested successfully on its first day of operation because of the mismatch of some of the addresses. I was pleased when I found out that the president of the National Farmers Union had been given the right name and address, but there was an IT mess-up, for which we apologise. However, it proved the effectiveness of the call service, which took more than 1,000 calls on the first day, and handled them successfully.

As I believe a parliamentary answer today explains, I have arranged to put a box in the Library for all the BCMS material and literature, so that hon. Members can see what is being sent out to farmers. Over the next two weeks, the big mailshot will be undertaken—the issue of all the barcodes to the farmers. It so happens that the mailshot that went slightly wrong was designed to tell people about the helpline—so it worked.

We have agreed not to collect the specified risk material control charges, and that is worth £35 million a year. That cannot simply be dismissed as though it were not a contribution. We are also supporting the assured British meat initiative, and have awarded nearly £2 million towards the development of those new standards in the industry.

I accept, of course, what the National Audit Office says about the scale of the expenditure—that it will rise to £4 billion, even with a decline in BSE cases. The weekly figures for BSE cases are in line with the forecast that predicts eradication by 2000 or 2001; we are still on course for that. However, we shall not sacrifice any public health issue for any short-term gain; I must make that point abundantly clear.

The Government have been active in ensuring that reasonable quantities of beef are accepted into intervention, in an effort to underpin the market. Hon. Members will be aware that, early this year, we arranged for a special sale of 1,200 tonnes of United Kingdom intervention beef to our armed forces. From about mid-September, we expect the Ministry of Defence's requirements for hindquarter beef to be satisfied entirely from intervention stocks. That has helped to achieve a better market balance, and in fact there has been no intervention in Great Britain this year, and none in Northern Ireland since May.

Some hon. Members mentioned, almost in passing, that beef imports are down by 22 per cent. for the first four months of this year. Consumption is broadly the same, if not slightly higher than last year. As one of my hon. Friends said, that shows that, since last December, the British people's confidence in British beef has increased substantially, as is demonstrated by their buying it in the marketplace.

What happened last December? The British people understood that, without any equivocation, they had a Government who were not prepared to take the slightest risk with the safety of British beef.

Mr. Paice

Rubbish.

Mr. Rooker

That is the reality. Since that decision, British people have been buying British beef on a scale unparalleled in the past two or three years.

We have launched the beef labelling scheme, and hon. Members will know from my recent labours at Question Time of my efforts to raise red meat standards in the abattoirs. I have to say that I have refused another licence today, although for obvious reasons I cannot disclose any details now.

The Meat Hygiene Service is raising standards too, and we have increased veterinary supervision in the abattoirs with poor standards of hygiene. We are publishing more information about the red meat industry than ever before, to make it more open and to prove to everyone, such as future customers in Europe and elsewhere in the world, that we have nothing to be ashamed of or to hide in this country's beef industry.

There are therefore a host of issues on which we can say that we are making a major contribution. I hope that I have covered the points in the fax that the right hon. Member for Fylde sent this morning. He mentioned deadlines for cattle passports and the penalties for late application. Those are nothing to do with the British Government. As I have made abundantly clear, those are European deadlines, and we cannot change them.

We are consulting on various aspects of cattle passports now, and we shall report to the House in due course. I have covered the points about notifying movements, and about the costs. As for resolving difficulties, if there are difficulties for any cattle farmer, the BCMS dedicated helpline is available at local call rates, and will be open from 31 August for seven days a week from 7 am to 7 pm; at present it is open for slightly shorter hours.

We are on course for starting the process from 28 September, and we are watching what goes on, on an hourly basis. If there is an hour's slippage, my right hon. Friend and I are aware of it in MAFF. Together with our staff in Workington, we are building a world-class organisation.

There are two more points to which I want to respond. The hon. Member for Ross, Skye and Inverness, West talked about the collapse of the court cases. That description is not strictly true, although the hon. Gentleman will understand that, for obvious reasons, I cannot comment on the Scottish case.

There were three other cases, one of which involved a butcher at Bletchley, who pleaded guilty and was let off with a caution for the next three years when he promised not to sell beef on the bone again. That is fine. The second butcher has elected to plead not guilty and have his case heard in a Crown court. The other case, involving Rother district council, has been adjourned initially until Monday 20 July. The law is taking its course. MAFF is not the prosecuting authority, and those cases are matters that we must leave to the prosecuting authorities.

I promised that I would deal with all the points; I hope that I have dealt with what has been said about the over-30-months scheme. Clearly, as hon. Members will appreciate, I cannot embark on a debate about the comprehensive spending review, but more than one hon. Member has asked about the calf processing aid scheme—the Herod scheme—under which more than 1 million calves have been slaughtered. It does not represent a good animal welfare situation, and it is distressing for everyone concerned—farmers, slaughterers and renderers. One does not deny that the position is very difficult.

Paragraph 18.7 of today's White Paper, about eradicating BSE, says: BSE cases in cattle are now falling rapidly, and the costs of the crisis to the taxpayer will reduce as compensation under the Calf Processing Aid Scheme is ended, and charging for the full cost of controls in abattoirs is introduced. Protection of the public will continue to be the top priority". We are consulting about the ending of the calf processing aid scheme now, and I expect it to be closed down during the current financial year, but I cannot give a precise date at this stage. The obligation to run the scheme will lapse on 30 November.

I had a conversation with my right hon. Friend the Minister of Agriculture, Fisheries and Food this afternoon after attending the House, and we discovered—perhaps "discovered" is too strong a word, so I shall say instead that we were given to understand—that the decision to close the scheme on 30 November this year was taken before the general election. That being so, the papers are of course not available to my right hon. Friend and myself.

The scheme is compulsory until the end of November, but the European Union is not willing to open the decision made in 1996, before the present Government came to office. I know that that does not lie well with the fact that the consultation is to close on 30 November. However, I repeat that we do not expect the scheme to go beyond the current financial year; indeed, I expect it to close within the current financial year. I cannot give a specific date, although we are consulting on that.

I take on board the logic of what hon. Members have said about closing the scheme before the date-based export scheme is in being, and about the effect on the market. After all, it is a market support mechanism as well as part of the public health process.

I have been open with the House. No one will ever be able to accuse me of misleading the House from the Dispatch Box. I have been as open with the House as I possibly can be on what looks like a contradiction. However, there is not a contradiction in the sense that the process is compulsory until the end of November and the EU will not revisit that decision, which was taken in 1996. However, we are still consulting—

It being three hours after the commencement of proceedings, the debate was interrupted, pursuant to the resolution [1 July].

Question deferred, pursuant to paragraph (4) of Standing Order No. 54 (Consideration of Estimates).