AGRICULTURE

HL Deb 27 April 1977 vol 382 cc587-678

4.12 p.m.

Debate continued.

Earl FERRERS

My Lords, perhaps we may continue the immediate debate. I would say at the outset that I should like to thank my noble friend Lord Middleton for introducing this debate today. It has come at an opportune time even though the result has been a somewhat disorderly process of speeches relating to agriculture, some of them partly on the Statement and some partly on the debate. I do not propose to comment in detail upon the specific proposals which the noble Lord has made, first because they are too complicated and, secondly, because they need consideration. I wish my remarks to contribute to what one might call the wider and more general scene in which agriculture has a considerable part to play and in which, as a farmer, I should declare an interest.

In the national debate and in the media, the interests of agriculture and the interests of the consumer appear to be in total opposition to each other. I agreed very much when the noble Lord, Lord Peart, said that, in fact, that is not so or should not be so; but the way these things are produced gives that impression. So fundamental is this misconception that it needs to be nailed at the outset. It is in the consumer's interest to take account of agriculture's interests; yet over the years agriculture has taken a lower position in the pecking order of priorities of people's consideration. I sometimes wonder why this is so. I think that it may be that when things are going right they get taken for granted and it is only when they go wrong that they come to the top of the pile for attention. If British Leyland goes "bust" or British Airways has a strike, the nation's attention is, quite properly, riveted. When British agriculture continues quietly to supply half the population of the country with probably the cheapest food in the world without going "bust" and without a strike nobody bothers to say, "Hurrah for this success! I wonder how that has come about. Is there something we can learn from this?" I think it should be trumpeted from the roof tops; but we just take it for granted. But, my Lords, we take agriculture, whether our own or Europe's or the world's, for granted at our peril.

Most of the country's resources are finite—resources such as coal, tin, copper, lead and oil. The more they are plundered, the quicker they are exhausted. Agriculture, as a resource, far from being finite is both infinite and renewable. At a time when all the common forms of energy are measurable and decreasing, when President Carter calls upon the American people to restrict their use of energy because it is running out, it behoves us to remember that, farmed well, agriculture is not only a source of food but also a source of energy, of increasing energy and of infinite energy. What is more, the residue of agricultural energy is the renovation of the resource. In simple detail, the residue of the oil which fuels the lorry is the stink of diesel; the residue of the oats which fuel the horse is the stink of muck—and the muck itself in turn rejuvenates the resource for a bigger contribution the next time round.

My Lords, I would not wish from this to suggest that I am prophesying, as others may, a return to the era of the horse and buggy nor that I am so juvenile as to suggest that power stations will be run on oats. I seek to emphasise a fact which people do not recognise: that agriculture is a source of energy as well as a means of filling people's bellies. If, as the pundits forecast, the population of the world will double in the next 40 years, then, ipso facto, at some time there will be a shortage not only of energy but also of food.

Looking at the broad canvas of life, agriculture should, by any standards, be cherished and developed. The importance of it far transcends the problems of whether or not the farmer or farm worker is getting an adequate return for his work, important though that is; or whether the consumer is receiving adequate, cheap food, desirable though that may be. If the national debate on agriculture is to descend, as it always does, to that level, I suggest that we are playing with straws and are unmindful of the stack. So, as a world resource, and as a national resource, agriculture must never de taken for granted or undervalued. My fear is we do both. The question that I would ask is this. As a nation, are we getting the best out of our agriculture not just as a means of satisfying short-term needs as economically as possible but of ensuring that it can contribute adequately to the long-term demands which will be bound to be made of it?

If I am able to carry your Lordships thus far, I would go on to state the obvious; but, because it is obvious, it deserves restating. Agriculture is a long-term business employing large resources of land and capital although, in this country, very few people. Mr. de Paula put it quite clearly in a publication called Farm Finance and Fiscal Policy when in reference, among other things, to the slow turnover of agriculture and to the capital investment in it, he pointed out that the National Coal Board takes seven months to turn over its gross assets; Marks and Spencer take eight months to turn over their gross assets; ICI, 13 months; and British agriculture takes between four years and nine years to turn over its gross assets. The degree of capital intensity in the industry, using the same comparisons, can be show n by the fact that the National Coal Board has £3,000 of assets invested for each person employed; Marks and Spencer has £12,000; ICI has £16,000; and agriculture has £38,000 of assets invested for each person it employs. All but 8 per cent. of this is provided by the landlord and tenant; only 8 per cent. by outside borrowing.

If there be a moral to this story, it must be that agriculture is a vast but economical slow-moving industry. It is a peculiar industry and, as such, requires peculiar treatment. If it has long-term requirements which it must fulfil, then we must subject it to long-term considerations and not perpetually frustrate those aims by the inevitable pressures and expediencies of short-term manoeuvrings. There is, I readily accept, bound to be a conflict of interest here; but try how you will, my Lords, you will not make the industry alter direction quickly. Like an old-fashioned steam-roller, it just pounds on deflecting a little one way or the other.

Are we therefore going in the right direction? I venture to think not—at least, not sufficiently in the right direction. My noble friend Lord Middleton quite rightly referred to the Government White Paper Food from our own Resources which was published in 1975, and which stated that they looked for an increase in output of 21½ per cent. a year until 1980. That was when the noble Lord was Minister. In other words, within the five-year period there was an anticipated increase of production of 12½ per cent. Now, two years after the start, far from seeing the increase, we have seen the decrease of 20 per cent. to which my noble friend referred. So to achieve the Government's target by 1980 we will have to see an increase of 32½ per cent. over the next three years.

I for one cannot see how that is going to be achieved, though I do not seek to blame the Government wholly for this drop in production, because my noble friend quite rightly said a large proportion of it is due to the weather. But weather or Government, in the end it is not just the farmers who suffer but the nation and the balance of payments—and the consumers who see the cost of food go up.

Had the 2½ per cent. annual increase been achieved, we would be saving ourselves some £750 million per year on annual imports. It has not been achieved. Production has gone down. During 1976 alone the cost of food imports rose by some £700 million, and the cost of producing food rose in this country by 20 per cent. in one year and it has doubled in the past four years. Yet at the same time we as a country have been producing less of the nation's food requirements; and, worse still, the proportion of the food which we could grow has dropped, and productivity per man has dropped by 14 per cent. in two years.

At the moment I suggest that we are losing out on fulfilling short-term requirements, and we are not properly positioned to fulfil long-term requirements. One of the ways in which this situation can be remedied is by investment. It is vital that investment is made in agriculture, despite inflation and recession. This can be done in one or two ways, or both. First, we can increase the price paid for the product and therefore the profitability to the farmer. What few people realise is that three-quarters of agriculture's new investment is found out of farm profits; and if the profits are not there, the investment will not be forthcoming. It is as simple as that.

The second way is by nurturing that unquantifiable but vital object to which my noble friend Lord Middleton referred: confidence. This is the key to all investment in any industry. Here I should like to say, in the most courteous way I can, that many of the present Government's actions, which were taken to redress what they saw as injustices in various aspects of our life, have, nevertheless, had a far from beneficial effect on the confidence of agriculture. I refer, as indeed my noble friend did, to such things as capital transfer tax, which, at a time of rising costs, can only result in farms becoming smaller; or capital gains tax, which, by intending to tax unfair gains, has in a period of inflation become a tax on inflation, and has thereby reduced to agriculture what has historically been one of its prime sources of funds, namely, the disposal of fixed capital assets to provide capital for expansion. Again, I instance the granting of hereditary tenancies, which, for all its meritorious reasons, can only have the long-term effect of making agricultural rents go sky high, of ensuring a complete dry-up of investment in tenanted holdings, and no farms for younger farmers to farm. Similarly, the tied cottage provision, whatever its merits may be, can only have a detrimental effect on investment.

In referring to some of these aspects of legislation—and these are a sample—I do so not to rehearse again, or to accentuate again, our points of disagreement on them, but to re-emphasise that whatever their merits may have been in other directions—and I readily acknowledge that there are many considerable merits for them—their effect on agriculture, which was not the prime cause or the objective of the legislation, has been highly damaging to the confidence required for investment.

One cannot consider investment and productivity in isolation of our position as members of the European Economic Community. We all get worked up—and understandably so—about mountains of butter and sugar, and lakes of wine and milk, and so forth. These are graphic expressions; but I believe that we have to be tolerant of them. In any form of managed agriculture what one is hoping to achieve is in fact the impossible; it is the balance between supply and demand. Despite the plethora of devices, incentives and restrictions which ingenious man can devise, in the end production is controlled by the weather, and—thank goodness!—no ass has succeeded in controlling that yet.

In seeking to control the fortunes of any primary product, to say nothing of a number of primary products which react against each other, all one can hope to do is to control the extremes of fluctuation. In my modest judgment we have therefore to be prepared to accept excesses from time to time in order to guard against short falls which, equally, are hound to occur but which are far worse. One has only to reflect on what happened 12 months ago to potato prices, following a bad harvest—not only in this country but the whole of Europe—to realise that to achieve a surplus is not necessarily always anti-social. Again, last week-end we had reports of the £1 and £2 cabbage. This is what happens in a shortage, and there is no point in conducting a witch-hunt on the basis that some knave is profiteering. The fact is that whenever there is a shortage of a primary product, the law of supply and demand inevitably operates, and prices rise.

Baroness PHILLIPS

My Lords, would the noble Earl forgive me? He is developing his argument—which is extraordinarily interesting—but surely the laws of supply and demand do not operate at the moment. The £1 cabbage is with us because of the shortage of cabbages; but cabbages do not become cheap when we have an overproduction or when the Almighty is more bountiful to us.

Earl FERRERS

My Lords, my understanding of the situation, which I am sure the noble Baroness knows more about, is that the reason why the £1 cabbage was £1 and not 50p or 25p was because there was a shortage. If the noble Baroness and her housewifely friends desist from buying cabbages at that price, she will find that the law of supply will operate and prices will come down. The noble Baroness is absolutely right to refer to this.

The point I was trying to make was that I saw that somebody suggested that there should be an inquiry to find out who is profiteering. In fact, whenever there is a shortage of a primary product this is hound to happen. These phenomena are not the fault of the farmers who, because there is a shortage, probably do not have much to sell; it is not the fault of the Government, nor of the EEC. They are the effects of Nature, and if the price to be paid for minimising shortages is the occasional surplus, then so be it; and, like an insurance policy, we have to pay for it. But I agree that we must try to become more sophisticated as to how we prevent and how we deal with those surpluses.

I would here suggest that we should beware of the simple argument: let the countries which produce the surpluses have the benefit of the surpluses. That is an easy argument to understand, but if you feed back into an already saturated market the excess, you exacerbate the saturation. The logical way out is to cut your loss and remove as quickly as possible the excess. The quicker you do that, the quicker you get back to stability. For all its faults, the Common Agricultural Policy has enabled the Common Market to come about. Clearly, it must be altered and adjusted and the emphasis shifted not merely for the benefit of just ourselves but for all the members of the EEC, and in this we must play our full part as members and colleagues together. But I believe there is a very real possibility that if the present Minister continues to insist on getting what he believes to be the best possible solution for United Kingdom consumers alone, irrespective of the views of his partners who have equal if differing interests, then he is in real danger of prejudicing the standing of the United Kingdom in Europe and alienating the friendship and respect which exists there for our country. I am bound to say to the noble Lord, Lord Peart, that the conduct of his successor in Europe over these last negotiations has been as embarrassing to us at home as it must have been to his colleagues in Europe.

Lord NORTHFIELD

No!

Earl FERRERS

The noble Lord says, "No": but one must remember that at this time he has been occupying a privileged position of authority as President of the Council of Ministers and he has believed that he was acting as the champion of the British consumer. That is, of course, a perfectly fair line to take, but he has shown a discourteous disregard for his European partners—

Several noble Lords: Oh!

Earl FERRERS

—and, my Lords, an astonishing disregard for the interests of British agriculture, for which he is the Minister; and he has been prepared to frustrate and indeed to block the Community's plan, all for less than one penny per pound subsidy on butter. Whatever good reasons there may be, he has held up those negotiations for a month, and what has finally come out of them is remarkably little, I would venture to suggest that was not "tough bargaining". It was not successful bargaining. It was a humiliating process in which I fear he has been left with few winnings and even fewer friends—

Lord DAVIES of LEEK

You are spoiling it.

Earl FERRERS

My Lords, the noble Lord, Lord Davies, may say that I am spoiling what I have to say. If it was capable of being spoilt, that is at least a compliment. But I do not make these remarks without having thought about them, because I realise it is a serious thing to say. But I do say to the noble Lord, Lord Davies of Leek, quite sincerely that in the European Community we have got to act as partners. We cannot go and try to run it our own way. We have got to act on a collective basis. The noble Lord, Lord Peart, knows that. Here we have had a situation where the United Kingdom, however good the reasons were, have said, "We are not going to agree and we shall not agree." We have frustrated the agreement for a whole month, with very little result, and the fear is that such action will have alienated our friends in Europe.

An attitude of mind is what has got to be accepted to make a success of the Common Market. A common attitude of mind is bound to be the only force that will make any Community effort go. An attitude of mind which is determined to keep the green pound wildly out of line with the currencies of other countries is not one which can contribute to a Common Agricultural Policy. When the system was conceived, it was never anticipated that the currencies would take the heavy and unequal battering which events have proved they were to take. The noble Baroness, Lady Robson, was quite right when she said that it was inflation that has in fact been the cause of the green pound being out of alignment. But there is nothing common or even fair about trading which follows a pattern in which the green pound is out of alignment by 30 per cent. or so. Food is imported into this country with vast EEC subsidies on it. That is fine for the consumer who gets his food supplies subsidised, but it is unfair to our Community partners who are providing the funds and it is also unfair to British farmers who are being denied their proper return. Every 10 per cent. by which the green pound is artificially inflated keeps United Kingdom farm incomes down by £225 million per year. That is over and above the effect that we see on the home market, where Irish cattle can come in carrying an EEC subsidy, which then lowers the market for British cattle, which of course have no such subsidy.

Again, over the question of pigmeat, to which the noble Lord, Lord Mackie, quite rightly referred—we have seen the pig producers facing frantic losses simply because of the imports of pigmeat from the Common Market, which have carried subsidies to which the British producer has not been a party. In effect, it could be argued that the consumer has largely been subsidised by the British farmer. The political temptation for any Minister—and the noble Lord, Lord Peart, will know this only too well—who is pressured by a Government, quite rightly trying to contain inflation and to respond to the short-term needs of the 100 per cent. who are consumers as opposed to the 3 per cent. who are engaged in agriculture and yet whose interests are in the end the same, is tremendous. But that is short-sighted in the long-term interest of consumers because the long-term interest must be an adequate supply of food.

However intractable our own problems appear to be, it does one good to realise that there are others who are deeply envious of our situation. On a recent visit to Australia and New Zealand, one man said to me: "You are so lucky. In England you have your agriculture so well buttoned up." I do not know whether many people in this country would agree with that, but it is a refreshing view to hear and it does one good to realise that there are other agricultures which, for all their advantages of size or climate, have to operate in world markets with no protective sysem and no Government help. Theirs is a real plight. As a result, the cattle farmers in Australia, right across the board, are losing money and New Zealand are apprehensive about their future markets. Their cheese quota comes to an end this year and their butter quota gradually reduces and comes to an end in 1980, when it will be reduced to 115,000 tons. Even then, it is half their total production and I wonder what the future holds for them. When one considers that the whole EEC production of butter for 1976 was 1,750,000 tons, one realises what a small proportion New Zealand butter represented, and I only hope that the right honourable gentleman will not fail to argue the case for continued entry of a reasonable amount of New Zealand dairy products.

I said at the outset that agriculture has far more to offer than just providing a livelihood for those engaged in it, and so it has. Less than 3 per cent. of the workforce produce more than half our food requirements to a value of some £6,000 million— more than the total agricultural output of Australia and New Zealand put together. The increase in productivity per man over the years has been higher than that in any other industry, and that has happened without strikes, without confrontation and without bitterness. In an age when industrial unrest and disquiet, for whatever reasons, sickens society as much as it does industry and sets man against man, and even causes disruption within the home, it is not irrelevant to look at agriculture and ask: What is different here? Perhaps, being a fragmented industry, it has less uniformity and less conformance. Perhaps, consisting of individualists, it has less desire for uniformity and for conformance.

Might we not reflect that, despite high-sounding but fundamentally self-orientated phrases such as "industrial muscle" and "the power of industry", a nation is made up of individuals—individuals who wish to think, to live and to behave as individuals? Yet those same people find that the gradual metamorphosis of industrialised society has precipitated them, frequently unwillingly and sometimes unwittingly, into big battalions which, by their very nature, are designed to prevent their doing what they want to do—to prevent individuals from being individuals. If it be that smaller and more diffuse conglomerates of people, both of management and of managed, bring a greater understanding to each other and to each other's problems and a greater contentment in life, as well as providing the format for a highly successful industry, it may be prudent for both politicians and industrial economists to throw that fact into the melting pot along with all their other figures which are designed, whether by prognosis or by result, to prove just the opposite. British agriculture is a success story and I only hope that we do not, either by design or by mistake, take it for granted.

4.40 p.m.

The Lord Bishop of CARLISLE

My Lords, I am grateful to the noble Lord, Lord Middleton, for introducing a subject which is of great national importance, and one that in particular concerns so many of the people in the County of Cumbria, where I myself serve. It is because of this, and because of the known generosity of your Lordships, that I am emboldened to make my maiden speech on this subject. Perhaps, however, I, too, should declare an interest. I am the only member of the Episcopal Bench to have a flock of sheep not just of the two-legged variety, but of the four-legged woolly kind. I am the proud possessor of what we would call in Cumbria 11 "yows", and one "tup" and, as inform my brethren on the Bishops' Bench, the advantage of the woolly sheep is that although they may do a lot of bleating they can neither use a telephone nor write a letter!

It would not be right for me in a maiden speech to raise any controversial issues, however important or germane they may he to the subject in hand. I must therefore leave to others any discussion of tied accommodation, or the capital transfer tax and its effect on family farms at a time when consolidation is very badly needed, rather than disintegration. Nor would it be proper for me to comment on the present taxation policy, which appears to be severely hampering our forestry which is of very great importance in Cumbria, where I believe we have an outstanding contribution to make, especially with our excellent forestry department at Newton Rigg, which, as your Lordships will know, has an international reputation. Perhaps all that I would say is that that excellent White Paper Food from our own Resources, which has already been referred to, may have many of the answers and I hope that it has not been forgotten.

I want therefore to confine my remarks to one area, that of upland farming and the importance of our agricultural policy there. The excellent discussion paper The Countryside: Problems and Policies, which emanated from the Countryside Review Committee which was set up in 1974, spoke of the considerable bitterness which modern farming can so often cause; in particular, in the improvement of upland where the drive for higher output can also lead to a loss of access, so that improvement of grazing or the introduction of arable into the large-scale scenery of hill country is seen by many as, at best, alien; at worst, a desecration.

I would plead that upland agriculture is not just to be considered as an uneconomic food production exercise, although indeed without Government grants it would hardly have survived at all, but rather that it is an integral part of the whole agricultural system, and that it is possible for the rightful expectations of farmers, ecologists and holiday makers, all of whom see the uplands from a particular angle, not to be mutually destructive but to be complementary. Certainly, the EEC grants are being very well used in the Farm and Horticultural Development Scheme to help the larger of the hill farms, but could that scheme possibly be made more flexible to help the small hill farmer as well?

I have no doubt that your Lordships will also be aware of an experiment, born in the Lake District nearly 10 years ago, called the Upland Management Experiment—UMEX for short—which has now moved into what we might call a very healthy adolescence and which, in a very realistic fashion, has come to grips with the problems. One farmer summed up the situation which existed and, if I may, I will quote his words: The Lake District is undergoing rapid change once again, where the combined effect of uncontrolled numbers of visitors, the decline in farming and the associated decay of the landscape have far-reaching implications for the social and community life of the area. Very substantial change in the population of the Lake District (as in many other upland areas) is taking place. The indigenous community is moving out. Farms are running down, small hamlets and villages declining to the point where a viable community is not possible. In their place, strangers move in who may be present for only a short time and who have little or no connection with the land and even less dependence on it. The changes in the landscape are a reflection of such fundamental social change. There is no need for me to underline the seriousness of the situation which those words describe.

I will not take up your Lordships' time by describing how the experiment has worked out, but will say only that that same farmer was able to report last summer that as a result of UMEX, which has now developed into the Upland Management Service, …the area will be able to evolve in a way which will ensure the future of a viable farm system, so protecting the landscape and, therefore, recreational interest, from continuine decay or partial fossilisation. In addition to the improved amenities for the visitor, the lansdcape has been better maintained and the scheme has generated more employment, bringing money into an area where farming and rural industry had been declining. I dare to hope that one result of this debate may be that the Upland Management Service will go on being developed, and that the importance of the upland areas to our whole national scene may be realised afresh by all those who are concerned in this business of agriculture.

I hardly dare to quote poetry to your Lordships, but there is, I fear, a somewhat scurrilous paraphrase of Gray's Elegy in a Country Churchyard circulating in the area from which I come, which has as its title An Upland Lament, and I am afraid that, sometimes, rival paraphrases of this kind have just an essence or a germ of truth in them. It says: Ecologists toll the knell of changing ways, The caravans wind slowly o'er the lea. The farmer sadly leaves his farming days, To tend the camper and the EEC.

4.49 p.m.

Lord DAVIES of LEEK

My Lords, it has, indeed, been a privilege and a great pleasure to listen to the right reverend Prelate the Bishop of Carlisle, who spoke for just seven minutes of delightful thinking and language on the problems of farming. I had the honour to represent a constituency which had 3,000 farms in it, 1,400 of them being under 30 acres, in the Pennine upland areas. As a young boy I lived on farming land in upland areas in Cardigan and visited church on harvest day, when the little Welsh church was lit up by the sinking sun and the vicar was illuminated—wrongly, I sometimes think —by the brilliant sun, while the hay was redolent and the turnips and cabbages showed the work of the men on the land.

All that was brought back to me in the right reverend Prelate's speech today. But, together with the language, there was a philosophy and a deepness of thought that made a man realise that the further away he gets from the source of his food and his eating, and the more sophisticated he gets because of the technology of his world, the more he is in danger of destroying the very lifeblood of his existence—agriculture, the land and good farming. I am sure that we in this House are grateful to the right reverend Prelate. We shall he delighted to hear him speak on other subjects, for his erudition, ecclesiastical knowledge and obvious knowledge of agriculture will he available henceforth to all of us.

I like the noble Earl, Lord Ferrers. I find that he is a charming human being; I have travelled with him. Much though I was yearning to interrupt his speech, how I controlled myself! Perhaps I am learning that F should not interrupt. Therefore I will refer only in passing to his excellent speech. It was a little too rough. When one speaks about farming, nobody can blame Labour, in its years in and out of power, for not understanding the problems of agriculture. The 1945 Labour Government reconstructed British agriculture and—never mind about politics—brought to it a breath of fresh air. In the 1870s and in the 1920s, British agriculture was in the dumps and forgotten. Because of the actions of this Labour Government. British agriculture is on the front page of British. European and world news.

I was delighted to hear the noble Baroness speak about one of the fundamental problems. If you own only a very small farm of 25 acres—I knew people who had to eke out their livelihood on farms of that size and smaller—there is a great temptation to sell it for anything up to £150,000 because of inflationary prices. There is a great temptation to leave the farm and grab the lucre. I will not develop this point, because the House is well-informed and all noble Lords speaking in the debate have wide knowledge and understanding. It is obvious to this House, and it should be obvious to the nation, that the inflationary selling of land is a deterrent, in the ultimate, to the production of cheap food.

I wonder how many noble Lords were at the Farmers' Club on 8th December? The Minister of Agriculture, Fisheries and Food spoke to the Farmers' Club and said that we in Britain ought to be trying to bring about the most efficient kind of farming which the Nine can produce, but asked whether the other Eight will allow us to do it. The Minister then gave examples to the club of why we should not try to apply exactly the same test to every single country in the EEC. That is what the speeches in both this House and the other place have been trying to do. It is absolutely idiotic to try to apply the same agricultural production tests to British farming as are applied to French, German, Dutch, Danish and other farming. The mistake of the Common Agricultural Policy is that it tries to do exactly that.

I want us to take in the point that when we criticise the findings of the CAP we do so not in a destructive way but in order to be constructive. For example, the noble Lord, Lord Mackie of Benshie, made a plea for the marketing boards. He should inform himself about these boards. At the Farmers' Club the Minister said that these boards are an excellent instrument in the hands of British farming. But what is happening this week? This week the dairy manufacturers of France, Germany, the Netherlands, Eire and Denmark have launched a campaign to prove that Britain's five dairy marketing boards are monopolies and, therefore, are completely contrary to the Treaty of Rome. They are having a conference to launch that campaign and are going to charge Britain with having a marketing board monopoly that is contrary to the Treaty of Rome. Let us not become involved in too deep an argument about this. These manufacturers saved British agriculture during the transitional period.

Do noble Lords, who support 101 per cent. in some cases the Common Market, agree that the marketing board system should he swept completely aside? Do they not agree with our Minister's efforts in Brussels to try to protect it? Do they not know that Sections 53 and 54 of the Treaty of Rome imply that we cannot apply certain methods of subsidy or encourage work in industry under Sections 10 and 12 of the Industries Act without the sanction of Brussels? In other words, Sections 10 and 12 of the British Parliament's Industry Act are contrary to Sections 53 and 54 of the Treaty of Rome, and now they are trying to prove that the marketing boards are contrary to the Treaty of Rome. What is the matter with the country? Are we afraid?

I will try to speak for less than 15 minutes; I have already spoken for eight. There is another attitude. We are called by some people a nation of spongers. Therefore at last the Government are now producing, and every noble Lord can obtain a copy of it, a paper which is published each month that deals with Britain's economy. When I look at it what do I find? I find rising confidence. When I listened to the threnody of the noble Lord opposite—it was a threnody in a minor key, lamenting—I should not have thought that we had done anything. But when one reads some of the newspapers one finds that sterling is rising in confidence, that our production is increasing and that the fight against inflation has been succeeding—marginally, I agree; but it has been courageously succeeding. We have improved our balance of payments, and our industrial investment has also improved. However, most of the investment is not coming to Britain. The multinationals and the big British firms are investing in the Common Market and are therefore putting us in an invidious competitive position compared with the Market. We speak about our North Sea oil reserves of 550,000 barrels a day, bringing us in £4,000 million, yet we go around shouting, "Ichabod, Ichabod, the glory has departed". Why do we not do something about it?

Foolish people make Imperialistic speeches in 1977 as though we were living in 1877. They speak about the role of the Foreign Office. We have more ambassadors and more dignitaries than Tommy Lipton had tea leaves 60 years ago. We are loaded with the edifices that were in existence in the last century at the height of our Imperialism. Why do not we as a nation prove that we can be the most prosperous nation in Europe? We can do this if we cut our commitments overseas and if we stop pretending that we are a military Power, on a par with Russia and the United States of America. We can do it, but it requires a change of heart and a real understanding that we are living in the 20th century when war no longer solves problems.

I shall have to cut half of my speech; I am going to speak only for 15 minutes. The other day I went with my wife to do some shopping, and she showed me a cabbage which I would not have cooked for my dog. I am not going to tell your Lordships the price that she paid for it. My wife did not tell me, but I know that my greengrocery bills are bigger now than they have ever been. Some people who seem to have ulterior motives are still trying to pretend that we are spongers, but the Cambridge Economic Policy Review said this—and I want to spike this down because I am tired of being told that the Common Market is subsidising us: The total balance cost to the country of buying relatively expensive food and making a net contribution to the Community's agricultural budget is currently running in excess of £600 million a year". I was interested to hear that Mr. John Silkin, the Minister of Agriculture, Fisheries and Food, has spoken out at Luxembourg in an effort to get what I would consider to be an attitude to agriculture that in effect says that, although we are in the Common Market, each country has to farm according to the idiosyncrasies of its farmers and the type of land and of climate in which he is farming.

In passing I would say, particularly to my noble friend Lord Collison, that what is forgotten in all this is the farm worker. I know that farm workers are better paid than they were when I was a child, watching them in Llandyssil market or in cattle markets in Monmouth, or in Leek when I was a young man. Whatever we say about the farm worker, he has been one of the most loyal workers in British industry, and, strangely enough, he has as great an affection for the farmer as he has for his animals. It is part of his living, but despite his £48.80 a week in money terms—and we know that that is 19 per cent. higher than the figure the year before last—he is still 0.5 per cent. lower in real wages than he was two years ago. As long as we have food prices like this no Prime Minister, whether he is Liberal, Conservative or Labour, can get an intelligent incomes policy which will help the British industrialist and the British farmer—and if you do not believe me, believe our erudite Committee.

My study is loaded with copies of documents. There is one Committee which sat and discussed this matter 54 times; there is the White Paper on green money; there is the TUC Economic Review, and there is a report of the Select Committee from which I should like to quote one portion. It says: In the view of the Committee"— that is our Committee— the renewed growth of the Guarantee Section of FEOGA"— that is one of these damned acronyms, which in English means the European Agricultural Guidance and Guarantee Fund— threatens to swamp the whole EEC budget, and to retard the development of other policies such as the social policy, the Regional Fund and joint expenditure on research". It also says: Measures to make processing, marketing and farm structure more efficient occupy far less attention than that given to the support of farm price levels". Then the trade union Economic Review —and they know what they are talking about—says that, the generally high CAP support prices are at levels which suit EEC producers and"— and here is the 64,000 dollar point— reflect the use of food prices as a social instrument to support a relatively inefficient European agricultural structure". That is the point—European agriculture—and then they give the figures of the sizes of the farms, and the large farms of Germany and of France—all of them, thousands and thousands of little acreages, which ale subsidised by the Common Market system; and they are subsidised now, believe it or not, as much as anything at the expense of the British farmer. If this House would take the trouble to study some of these documents which are now overwhelming us, the remoteness of this system would suddenly dawn upon us.

What are we to do about it, my Lords? That is a question for the future which we shall leave to another debate. Let us be fair to the Government now in power. As the Common Market is now working, no Conservative or Liberal Prime Minister would have got a fairer deal than we have at the present moment.

5.6 p.m.

Lord MONK BRETTON

My Lords, first I should like to congratulate the right reverend Prelate on his maiden speech. I am so glad that he spoke about the hills because I should not be able to do that, beyond the fact that I remember attending the CEA Conference in Edinburgh, the first time it had ever been held in the United Kingdom, and I recall that the opinion of Europeans dealing with the upland areas in their respective countries was that we gave our hill farmers a fairly hard time one way and another and the principal reason they had survived was the great technical back-up we were able to give them and the quality of the advice from our colleges, and so forth.

I should like to refer to the remarks made by the noble Lord, Lord Davies of Leek. My worry is that one watches the progress of French farming under the Common Agricultural Policy and one notices that they are making great strides with their structure. I am not so sure that if European agriculture is grossly inefficient now it is going to remain so for very long, and the principal worry is that we may become too complacent and make no progress and we shall be seriously overtaken. I would add the comment that I hope the Labour Government manage to keep the reputation that they had from the time of the 1948 Act, and I am most concerned whether they are not losing it now. We have already heard a good deal on the general position and I do not want to go through that agate, but to deal with some of the specific points where I believe the shoe pinches, in the hope that if something could be done about those specific points we might be able to progress a little better.

For a start, on the subject of confidence, figures have been given about the income of farmers having declined in real terms. I have a note here that since 1973/74 the figure is minus 18 per cent. Of course these are averages and I emphasise the big variations that there must have been in 1976–77—did one grow potatoes? Was one a livestock farmer? Was one a pig farmer? Was one in the drought area or not? The drought did not seriously affect farming in the North. It must be emphasised that averages can conceal a very great deal. Certainly confidence was not too good even two years ago and since that time there is no doubt that understanding of the implication of CTT and the consequent need to keep liquidity has been dawning steadily on the farming community. That will create conflict with investment. Whether we shall be insulated in the future from the CAP has also worried farmers a great deal.

Regarding the Statement today, which leads on from the question of confidence, there is something I should like to ask about it. One fears that Irish yarded cattle may very well flood over to the markets here next autumn. Farmers will be grateful indeed to hear of the underlying support measures that have been introduced, but I personally wonder whether the markets will be perhaps quite good all through the summer and down to support levels as Irish cattle come over in the winter, and whether that is going to discourage farmers in the United Kingdom from yarding cattle to fatten next winter. Our seasonal scale seems to have gone completely awry these days. We used to get lower prices in the summer and higher prices in the winter when it is more costly to produce fat cattle. This change is a very significant thing. I do not know quite how long it will go on. I think guidance on that would be very welcome indeed.

On taxation I should like to say as much as I can as quickly as I can. The averaging of farmers' profits has been mentioned, and it might interest the House to know that in Australia for anyone who can be classified as a primary producer, three-year averaging of all income has been available, I believe, for a long time. I think that some means whereby a sole trader or partner can put money to reserve in the way that a company can would be better still, and something worthy of thought. However, perhaps of greater importance still, there is the problem of inflation and tax. It is more important to achieve accurate and fair assessment of the real profits of businesses in this country, where we have high taxation, than it is practically anywhere; whether we have done enough over this, with the complications caused by inflation, is very much open to question.

We have indeed stock valuation relief, which was vital; it is temporary only. We have, however, to await a full solution. The 100 per cent. allowance for machinery was given. Something that was not done at all was to consider amending the allowances for agricultural buildings; there has been no change at all. There was a proposal moved in another place last year that the period of write-off should be reduced from 10 years to three, with some flexibility in that. The proposal was turned down on the score that it would cost £15 million. I find it worrying that nothing was done.

I should like to say that I do not believe that a wholesale rush into indexation because of inflation would have been right. I agree entirely with the Government's attitude to that in the main. However, the matter is different as regards depreciation. In fact, I believe correct depreciation and assessment to tax of businesses must come before anything, because it is fundamental to our recovery not to damage businesses through taxation.

If one considers the position of someone who invested, say, £50,000 in buildings in 1972, he is getting his 10-year write-off. If one considers it using the concept of a depreciation fund, which at the end of 10 years builds up so that he has sufficient money, or what should be sufficient real worth, to be able to make a similar investment again, I think we shall find that that man will be left with only about half the real worth that he put in; and if his actual physical investment is of no further economic use in 10 years he will have lost half his money by investing at all. This is certainly a thought that does not encourage investment. So I hope that something will be done about reducing the write-off period, not necessarily to three years but so that some compromise is found. Another suggestion I have is that specialist buildings, which are pretty temporary in nature, might be treated in the same way as plant, or perhaps on a 25 per cent. reducing instalment system. I hope these comments are not controversial. They are meant to be strictly as constructive as possible.

I would say a little about CGT and CTT, the two capital taxes. We do have very high rates in this country by comparison with many others, and one wonders very much where this is going to lead us. There is no doubt that the farmer with more than 1,000 acres and the owner of let land, neither of whom has an agricultural allowance against CTT, are really in a state of what I would call suspended animation. Whether it is intended that they should continue to exist or not appears singularly open to doubt. The effect upon them of having to build up cash resources in an attempt to pay CTT is defeating investment.

I understand that there have been cases of difficulty in the middle brackets—the smaller farms—where gifting is being attempted; not so much because of capital transfer tax but because of capital gains tax, which comes on top of it. We must recognise the dangers of capital gains tax. It has been defined as a tax the rate of which is determined by inflation and which is a flat-rate tax upon wealth. In these circumstances it may very well hit the people in the middle, some of whom are the middle-sized farmers. We need to consider what is happening in this area and whether—I hope that I am not asking too much or being controversial—the remaining capital gains tax notional assessment on gifts might not be withdrawn and matters rearranged.

The land-owning situation is definitely a matter of concern. I fear that if nothing is done there will be a long period of stagnation and possible disaster. The landowner shoulders many burdens and difficulties compared with those who are considered to be running a business—it would be so much easier if they were recognised as running businesses. I cannot emphasise that too much.

There are great limits to the extent to which the institutional investor can replace the private owner. The scope is limited, because the institutions are interested in Grades 1 and 2 land only. There is the matter of cost. Professional land agents are excellent people and I have absolutely no quarrel with them. However, more such people would need to be employed, whether land is held by institutions or nationalised, than with private landowning.

The third possibility in default of institutional ownership or nationalisation is fragmentation. I fear that this will take place to a great extent in areas where the institutions are not interested, and there is a danger that in the end no one may be adequately interested. I could raise many more matters, but I hope that those few small points which I have mentioned will not be forgotten.

5.24 p.m.

Lord WOOLLEY

My Lords, I do not propose to weary the House with a great many statistics. In the debate so far we have been very well informed and I find it is very interesting and extremely encouraging to experience the great depth and width of knowledge that exists in your Lordships' House on this great industry of agriculture. I know that many noble Lords are very expert on this subject. As a working farmer with more mud on my boots than ideas in my head these days, I feel somewhat inadequate. However, there is something to be said for mud on one's boots—at least it gives one a sense of perspective, and T prefer it.

I should like to thank the noble Lord, Lord Middleton, for introducing this debate. I listened to his speech with great interest and admiration. If I may say so, he covered the field remarkably well. He omitted very little of importance. He avoided—which I may be unable to do—any real reference to the Common Market. That was an exercise in restraint which may be beyond my capacity. However, the noble Lord, Lord Davies of Leek, made up for that.

May I also say how much I enjoyed listening to the maiden speech of the right reverend Prelate the Bishop of Carlisle and how fitting it was that he should talk to us about the uplands from whence he comes, and the uplands generally. That is an important aspect of the life of this country and perhaps many other countries. One of my great delights has been to see the tremendous improvement in British agriculture generally since the War. That has been a great joy to a farmer. I have travelled the line from Cheshire to London for many years. There has been a vast improvement in the standard of farming since the War, which is tremendous. That is great wealth and a great asset. Perhaps the greatest physical asset that any country possesses is its land. We have this great asset and, as the noble Earl, Lord Ferrers, said, very often it is underestimated and insufficiently appreciated. That is true; we have been wasteful of it.

As the noble Earl said, the difficulty is that agriculture is a long-term industry. We have heard that said many times and it is a fact. Politics is a short-term profession. The difficulty is that agriculture is food, and food is politics, and we are mixed up with politics. I appreciate that it is very difficult for the politicians to take long-term views because it is always the immediate and the expedient that presses upon them. I suppose that statesmen take long-term views but I do not think that we can afford many statesmen today. That sort of time is not available to us.

I greatly sympathise with the Government's dilemma. I sympathise with the Minister of Agriculture. I must be one of the few farmers in this country who has much sympathy for him, although as a rule I do not express it—I certainly did not express it before the recent negotiations. The Minister is really on the spot; it was predictable that he would be. The noble Lord the Leader of the House is also on the spot. I should like to congratulate him on his handling of the variable premiums, and pay tribute to him. In 1974 I lost a great deal of money on beef cattle and do not like to think about it. However, the variable premiums that he negotiated later that year at least put a bottom in the market. We are talking of about £32 per hundredweight for beef cattle now. Many of my cattle, although not all, will be no use at all at that sort of figure, but that is farming. Those who bought cattle last autumn and this spring, and who have fed them at the present price of feeding stuff, have lost a great deal of money.

The people even worse off are the pig producers. Some reference was made to the number of sows going to market diminishing. Of course they are diminishing. There are fewer of them to go. After a little while they will diminish altogether, the way things are going on, because the prospect for pig producers is a dismal one indeed. I know very good men who have been in the industry after their fathers before them, first-class people, who have had enough. They cannot stand it any longer. These are difficulties. When one thinks about the situation it is easy to talk about the difficulties, it is easy to discourse about the problems, but it is difficult to come up with any meaningful answers. This is the difficulty we find ourselves in—or I do, at any rate—and I do not pretend to have the answers.

If one looks back—and it is not a bad thing to look back to some extent, as long as one does not become backward looking—we had a system which was worked out (and I see here my noble friend Lord Netherthorpe, who knows even more about it than I do) and we soldiered on with it, as did the noble Lord the Leader of the House, when he was PPS to Toni Williams, in working the system under the 1947 Agriculture Act. Reference has been made to the marketing Acts. In my farming life, which is extending over a few years now, the greatest things have been the Agricultural Marketing Acts in the early 1930s, the 1947 Agriculture Act, and the 1948 Agricultural Holdings Act giving reasonable security of tenure.

We worked on from there and we had the amending Acts, and so we went forward. But what was it all about? What did we do? It was to reconcile the needs of a thriving, viable, vital, vigorous agriculture with the overall needs of the country, not only nationally but internationally, and to combine the necessary support and protection for home agriculture with the maximum degree of liberalisation of trading throughout the world for a great trading nation. This was done. I always remember a long talk I had with Mr. Harold Macmillan in 1960. He said to me, "Whoever worked out this sytem was indeed a genius because it reconciles what could be nearly irreconcilable: the needs and interests of a great food consuming country and the vital significance of the price of food in the social and economic life of this country with the requirements for a thriving agriculture".

Well, this was done. It was difficult. It was a difficult operation. I think it just about stretched the practical to the limits in doing this and keeping a balance within the United Kingdom—Scotland, Northern Ireland, Wales, England—and to do this between the different commodities, so that we got away from this "up corn, down horn" which we have got now and are suffering from very badly, and to keep the balance and to keep the industry moving forward. It is a wonderful thing to see how this has in fact been achieved. One only needs to look at the country and hear the statistics that have been produced today to realise what was achieved with the right system and the right relationship between Government—successive Governments—and an industry.

Of course it was hard going. Of course there were continuous struggles and disagreements, but at least one was struggling with one's feet on firm ground. This was the great difference. When one looks at the situation today one is rather in the position of the old countryman who was asked by a passing motorist the way to some destination. After some considerable thought he said, "I think if I were going there, I wouldn't start from here!" That is rather what I feel. So far as I am concerned, we would never have been here if I had had the say about it. But I did not, and here we are, and this is where we have to go from. I do not believe that, with the best will in the world, we are really going to make a success of the Common Agricultural Policy as long as it is pretended, and we still make ourselves believe, that it can operate in this overall way that is being attempted now. I do not think that this can be done. There has to be more flexibility. There has to be more derogation to individual countries. This is the sort of fight that the Minister of Agriculture has been forced to put up.

I do not quite go along with the noble Earl, Lord Ferrers, who seems very concerned about what our co-members in Europe will think about us. I do not suppose that the French are quite that sensitive about the ethics of international negotiation. I do not think that they will really be terribly surprised. Anybody who thought, or imagined, that the British Government, having gone into the Common Market, were just going to go happily along and accept all these things must have been very naive. Everything that has happened has been predictable, and indeed was predicted, except that I do not think that anyone, so far as I know, predicted the green pound and that we would be receiving very large subsidies contributed to a considerable degree by the German Government. Apart from that, it has been very predictable.

It is a difficult situation. I have great sympathy for those who are trying to make it work. The overall thing I should like to say is that the Government, whatever Government it may be, must not make the mistake of trying to use agriculture as the scapegoat. Confidence is at a lower ebb than I can remember since perhaps the late 1920s. People are disturbed. They do not know where they stand. They are confused. I do not want to exaggerate the financial position, and I do not think that farmers are expecting that they will be exempt from the financial stringency that is necessary for the circumstances of the country at this time. What they do need is a clearer view ahead. You need to be able to see where you are going with reasonable assurance and with stability—assurance that the bottom is not going to drop out of things. We have a degree of stability. I know that the noble Baroness, Lady Robson, said earlier that inflation may have had a great deal to do with the problem of these rapidly mounting costs. But we are in the position where I do not think that agriculture has gone beyond the point of regaining its forward impetus. I am sure that this can and will be done provided that the circumstances are such as to enable it to be done.

The noble Earl, Lord Ferrers, referred to a steamroller. I do not know whether we could be likened to a steamroller. We may have a little more flexibility than that. I agree that we were a bit heavy footed. But the steamroller. I think he would agree, needs some fire in the fire box, and this is the responsibility of Government whichever way they may do it. They cannot escape the issue, and if they have gone into a policy that is a dear food policy, which they have, they cannot escape from this by trying to make the farmers carry it on their backs.

5.40 p.m.

Baroness ELLIOT of HARWOOD

My Lords, I follow with some diffidence such a great leader of the NFU as the noble Lord, Lord Woolley. I do so with much the same feeling he expressed, in that I, too, have mud on my boots, although mine comes from the hills of Scotland, the area on which I shall be concentrating somewhat in my remarks because it is in the uplands and hills where I engage in agriculture and which I know best.

However, I have also had a good deal to do in my life with consumers and consumer organisations and I feel sure that it is no good trying to isolate the interests of the farmer from those of the consumer; both at heart have the same interests, because, if we are to produce enough food for the consumers at the lowest cost and in the most efficient way, the farmer must have the best conditions in which to produce that food. We shall not achieve that by importing a great deal more food because of agricultural production going down. In other words, it will not be in the interests of the consumer, who will have to pay far more by way of taxes, so making food more expensive. At the end of the day, therefore, the farmer and the consumer both benefit if we can achieve the sort of agricultural policy about which Lord Woolley was speaking.

I agree with those who have said that the Labour Party has produced two remarkable Ministers of Agriculture; Tom Williams and the present Leader of this House, who was until recently Minister of Agriculture. I do not wish to be controversial in my remarks today, but I must say that, considering the good record which those two Ministers had, it is rather disappointing that, while what I thought was that very encouraging paper was produced —Food From Our Own Resources—since its publication we have seen a reduction in production.

The Annual Price Review shows that in 1975–76 there was a 10 per cent. reduction in agricultural production and in 1976–77 another 10 per cent. reduction. I sympathise with Lord Woolley on the question of cattle. I was in the fortunate position last year of selling store cattle at what I thought was, and indeed turned out to be, a very good price. But the unfortunate people who bought from me fattened them and, if they put them on the market today, they will get less money than I got when I produced them as stores. That cannot be fair, and nobody will go on buying cattle to fatten if, when they sell them, they get less than they paid the person who produced them off the hills.

Another curious effect of inflation occurs in the financial returns one sees in the agricultural newspapers and pamphlets, the latter of which we all, like the noble Lord, Lord Davies of Leek, get in large quantities. In these documents some very large figures are quoted, but the enormous turnovers really represent inflation; it is inflation accounting. One gets an enormous turnover only to discover, if one analyses the figures on an inflation accountancy basis, that one is no better off than when one was dealing with far lower figures.

Lord DAVIES of LEEK

My Lords, the noble Baroness is absolutely right.

Baroness ELLIOT of HARWOOD

At the end of the day one is perhaps only slightly better off, my Lords, but this gives a rather false impression to people who do not understand inflation costing and the problem caused by the rising cost of production, let alone the rising prices which we see recorded. This has the unfortunate result that when production goes down—this was stated in a paper I received from the NFU —we must import more; by importing 5 per cent. more in 1975 we added £734 million to our total import bill.

It has already been mentioned that it takes a long time to make up any reduction in livestock. A reduction of, say, 10 per cent. in livestock over two or three years takes a very long time to make up. When we need more cattle, sheep or whatever it may be, we cannot turn on a tap and suddenly discover many more animals on the market. The noble Earl, Lord Ferrers, explained how it can take between five and nine years to change a policy or develop a policy further. I feel strongly therefore that we must keep a careful watch on the figures of production, even more so than watching the financial results at the end of the day, because, as I say, it takes a long time to make up lost production.

We have been waiting a long time for the negotiations in Brussels to be brought to a successful conclusion. The Leader of the House explained that he saw the figures only when he rose to answer a Question; I saw them for the first time when reading The Times this morning and, therefore, I could not possibly say whether the figures will he very helpful. However, we hope that the negotiations which have been completed will not have come upon the scene too late and that it will be possible to stop the decline in the breeding stock, something to which I have referred and which is one of the had things happening today.

I have no experience of the production of pigs although I have had some experience of milk production; at least, friends of mine produce milk and I therefore have some knowledge of the subject. I was glad to note in the results available today that the Milk Marketing Board and our marketing arrangements are to continue. Some noble Lords may be old enough to remember that the man who started the Milk Marketing Board in the years 1931 to 1933 was no less a person than my husband, who was for many years Minister of Agriculture. I have been discussing some of these very matters in Brussels with the group—Committee D of this House—which deals with agriculture. We went to see M. Lardinois and when I told him that it was my husband who started the Milk Marketing Board he gave me the impression that he thought I might have been Methusulah; he had no idea it was started as recently as that, although of course it was a good time ago. Perhaps I regard it as recently because I am extremely old, but, then, it will be within the living memory of a number of noble Lords here today.

I hope we will fight to keep the Milk Marketing Board because it does great work, not only in organising the dairy industry but in the selling of milk. The EEC does not have any such selling agencies; it has no method of selling milk, no doorstep selling. That form of selling is done and encouraged by the Milk Marketing Board at the same time as organising dairy production. I am sure that in this modern world we must have selling as well as production machinery because that is the way to get on the right side of the consumer.

Another problem which I hope will be solved, hopefully in the near future, is that involving the replacement of machinery and equipment used in agricultural production. I am sure we are all attracted—I certainly am—by the glossy brochures we receive about new machinery of all sorts. When I read about these machines I feel that I should love to buy them and I am certainly one of those who can be impressed by such brochures. However, when considering the results of new machinery one must be very circumspect—canny, as we say in Scotland—because it is no good investing money in machinery, however attractive it may be, if it will not help to produce cheaper and better.

Equally, one cannot buy new machinery as an investment unless one has profits and it is no good those profits being inflation profits, they must be money which is made good use of and put into machinery or whatever one is replacing, otherwise one will be in a very difficult situation. One of the most important things is to have enough profit at the end of the day to be able to make the replacements which will render one's production more efficient every year. That is also in the interests of the consumer.

I have seen it said, again in some document that was sent to me, that the reduction in value of capital as far as farm machinery is concerned has been 20 per cent. in the last 12 months. The cost of machinery has gone up by 20 per cent. It is not easy to make an extra 20 per cent. with rising costs, but that is what one will have to do if one is to equip one's farm as one would want. That is where the question of paper money comes in and where inflation is so dangerous. It may well appear in one's accounts that one's returns have gone up by 20 per cent. but put against expenditure one finds that nothing of the kind has happened.

I should like to say that those of us who are in the world of sheep and wool, as I am, are indebted to the Government because, in their Price Review, the Government at last did something to help those who produce sheep and wool. I should like to say to the noble Lord the Leader of the House that we are grateful for the kind help which was given to us in the Price Review this year.

As regards the CAP and all that that means, I believe that we in this country should concentrate on what we can produce best. That sounds very obvious and trite, but I feel that it is an important point. For instance, in Scotland, with our very large upland areas and in Wales, too, as the noble Lord, Lord Davies of Leek, emphasises, we should concentrate on using the great upland areas to produce store cattle and store sheep. We should carry on the basic production which can be turned into beef by the noble Lord, Lord Woolley, with his great farming capacity, but this must not be done at a loss. Otherwise our store cattle will not be bought and our hills will he wasted, which would be a great pity, for we cannot use them for anything else. I do not want our uplands turned into caravan sites or parks: I want them to produce food and therefore we must consider those things in relation to the upland areas.

I was very glad to read in The Times when I was trying to find out what had happened in Brussels that the variable beef premium scheme was to continue. The Minister is to be congratulated on that. I believe that if we can only keep up the impetus in production and can give confidence to the farmers—something that the noble Lord, Lord Woolley, rightly said we lacked at present—there is no earthly reason why our agriculture, which is extremely efficient, should not go ahead as it has in the past.

On the question of the adjustment of the green pound, there is an odd thing about the cost of so much that goes into retail sales. I cannot quote figures, but I remember somebody telling me years ago that, if one takes a loaf of bread as an example, the proportion of the cost of that bread which is due to rates, taxes, labour and distribution is very much higher than the cost of the wheat, which is relatively very small indeed. The cost of the wheat is far less than that of the other things that have to go into the final price of a loaf of bread. I believe that, if one applies that to other items one will find the same thing. Therefore, I am not nearly so frightened about the rise in the retail cost of food as a result of the change in the green pound as are some people. I do not believe that it will make all that much difference to the retailer, though it will make a difference to the producer, who will get a better price. It will be only a small proportion of what the retailer has to charge over the counter. Indeed, I believe that we could devalue the green pound even more without a very high rise in retail prices, but that still has to be seen.

The aim of our agricultural policy should be the best use of the land itself and the most efficient production. It should also aim for the best conditions for the agricultural worker. Someone said today that farmers and agricultural workers were good friends. I have a family at home on my farm, four generations of which have worked for three generations of Elliots. There are jolly few industries where one gets that sort of continuity. That is a marvellous thing and, in my experience—though there are always exceptions—the relationship between the agricultural worker and the farmer has always been of the best and friendliest kind. Indeed, I sometimes wonder whether I am talking about my farm or they are talking about their farm when we discuss conditions! Therefore, in this scheme of production, I am 100 per cent. behind those who want to see the agricultural worker paid a proper wage for what he does. I have had very good fortune and I believe that the agricultural workers are, on the whole, some of the best workers that we have in this country.

This is a very important debate. This is something that will mean a lot to the industry. I have great faith in the noble Lord the Leader of the House because I believe that he understands agriculture. I hope that he will speak up as hard as he can for the industry in the Cabinet and then we shall all feel that we are engaged in something that is helping the country through the present very difficult time.

5.58 p.m.

Lord WALSTON

My Lords, as always in this House, the debates on agriculture are marked by many speeches of great wisdom and knowledge and we are all grateful to the noble Lord, Lord Middleton, not only for his speech but also for giving us the opportunity to listen to other speeches. In particular, perhaps I may say how very much I appreciated the speech of the right reverend Prelate, the Shepherd of Cumbria. I hope that both his four-legged and his two-legged flocks will prosper under his wise guidance.

Some of the speeches that we have heard reflected a certain element of doom. Perhaps that was natural because, after all, we are a political body and it would be naive of us to expect that a certain amount of political capital would not be made by the Opposition and by the Government Benches, even in a matter such as agriculture. Having farmed for well over 40 years, I should like to say quite categorically that I have never known agriculture to be in a healthier state than it is today. The land is more fertile than it has ever been. It is better drained than it has ever been. The buildings are in better order than they have ever been. The farms are better equipped with modern machinery and with good quality livestock. The farm workers, and the farmers themselves, are more skilled and more trained, and they have available to them more professional and practical advice than has ever been the case in the past.

I do not think that we should forget that, nor do I think that we should forget that had things been the opposite, we would all of us have been the first to blame those who were responsible, those who have been in charge of our agricultural destinies over the past years. Therefore as in my view this is now the case, I think that we should give some credit—not all the credit—to my noble friend the Leader of the House for the part that he played in bringing this about.

Having said that, I do not intend to proceed to do nothing but praise the Government or to support existing policies, wherever they may be made, but I support entirely the stand which my right honourable friend the Minister of Agriculture has taken in Brussels with regard to the general thesis that more emphasis must be put on the consumer in agriculture and less on the producer. In my view there has, since the very inception of the common agricultural policy been an over-emphasis directed towards the producer—important though he certainly is—and insufficient towards the consumer. I think that it is absolutely right, particularly at the present time, for any Government Minister in this country to support to the full the anti-inflation policy and all the efforts that the Government and the people of this country are making to keep inflation down.

I am quite certain that farmers are no more backward in supporting that policy than is any other member of the community, whether he be a worker or an industrialist. Whether it he a pay freeze or whatever, farmers are prepared to play their part in helping to overcome inflation in this country. For that reason I think that it is absolutely right that the Price Review of the Commission at present in Brussels should be kept at its very low figure, though undoubtedly it is far too low to recompense farmers for their rising costs. I also think that it is right that we should make very strong efforts to restrain the revaluation of the green pound. It must not be impeded altogether. It must move, and progressively as our position gets stronger over the years we must regain parity, but at this stage we must fight for a small movement, which has been achieved.

But, my Lords, while I do not go so far as the noble Earl, Lord Ferrers, did in the comment he made about my right honourable friend the Minister of Agriculture, I believe that it must be borne in mind that in the years ahead, in the months ahead and even in the weeks ahead, we have a crucial part to play in reforming the Common Agricultural Policy, in improving it, in retaining our marketing boards,—great progress has been made there—and in many other ways, including one particular way which I shall come to in a moment.

I believe that we are far more likely to make progress if our relations—and that includes the personal relations of the Ministers dealing with these matters—with colleagues and partners in the Community are good, and if we show ourselves to be well aware of the importance of the Community policy as a whole and accept our full responsibilities as full partners in the Community. Anything which tends to give people the impression that we are reluctant members, that we are trying to gain special things for ourselves which we deny to other people, cannot improve our position when we are dealing with these longer-term and very important facts which are being dealt with at present. I believe that that must be very much borne in mind in all negotia tions in Brussels, and I am quite sure that my noble friend goes along with me in that view.

While I have said that we must hold down prices for the farmer and food prices at present, that does not in any way detract from my belief that as the years go by we will have to face the unpalatable fact that we must pay more for our food. Our strong position as the sole importer of food in the world has disappeared. Many other countries are now buyers of food. Japan is an obvious example here, and there are the Middle East, the oil States, and many others, too. They are competing in the market where formerly we were alone. The population is rising and demands for higher standards are increasing all the time. Therefore, it is inevitable that food prices will rise in comparison with the cost of industrial goods. It also follows that the need to produce more food from our own resources becomes greater and greater. We must not allow ourselves to be led astray by the relatively short-term extra income coming from North Sea oil. That gives us a breathing space, but it does not fundamentally alter the long-term position.

Therefore our policy, the Community's policy, must be directed towards a greater reward for those who produce food, relative to other people, and a sufficient reward to them to enable them to continue with their modernisation, their increase in efficiency, and their efforts to prevent prices rising as high as they otherwise would if there was not this mechanisation, this increase in technology, and all the rest of it. In doing this we must act as a member of a Community; we cannot pursue our own individual agricultural policy or economic policy. I know that certain people like the noble Lord, Lord Woolley, and my noble friend Lord Davies of Leek would be happier if we were able to do so, but I will not argue with them about that; that argument, thank God! is over. We are members of the Community, we must act as such.

To my mind one of the greatest weaknesses of the Common Agricultural Policy is not that it pays too much for any given commodity—though in my view, certain prices are too high, but that is not its basic error—but that it will pay the guaranteed price, the intervention price (call it what you will) for an unlimited quantity of a particular commodity. By all means pay the European milk producer a fair price for his milk, but only for that quantity of milk which we require for our own consumption here, and not for as much as he feels inclined to produce.

Therefore this means that the Common Agricultural Policy should in the first place be based on what one can call a five year plan, a projection of the food requirements for the Community over a four, five or six year period ahead. The farmers of the Community should be told that, and they should be told what price they will get, taking inflation into account, for the particular amount of a given commodity. If they care to produce any more than that they can do so, but at their own risk, and they would have to take whatever the world price may be.

There are many technical complications in the way of achieving this. I will not go into the details of how it can be done. One can have individual quotas. In certain cases, as for sugar beet, this is already done. One can have a standard quantity, as we used to have in this country for milk. One can have a co-responsibility levy, whereby if the production exceeds the given amount it is automatically reduced by the producers taking on responsibility for disposing of the surpluses. There is a whole range of ways in which it can be done, and there are many very clever people in Brussels who could work out the best methods. I urge our Ministers to take the lead in promoting this idea of paying a good price, but a price for only that amount of food which is required, thereby putting an end to these enormous unwanted surpluses.

But despite being full Members of the Community there are other things which we can do entirely on our own, which do not need any agreement in Brussels. Particularly among those is the point which has been raised by several noble Lords and by the noble Baroness, Lady Robson, concerning taxation. There is no doubt about the fact that farming, in company with many other businesses, and particularly small businesses, is very hard-hit by inflation. I am talking about farmers; I am not talking about landowners. That is a different matter, and I would urge your Lordships, in all your Lordships' discussions and thoughts on this, to keep the distinction very clearly in mind.

I would take issue with the noble Baroness, Lady Robson, when she said—and I think these were her exact words—that land is best farmed by the owner-farmer. I disagree very strongly with that, and I think it is a very grave reflection upon approximately half our farmers, who are tenant-farmers, many of whom are as good, technically, as any owner-occupier. In fact, in many cases I would say just the reverse of what the noble Baroness said, because they are not so short of capital and have not got a very large proportion of their assets sunk in their land, but can deploy all their assets in their farming capital.

I am always tempted to embark on arguments concerning land ownership; but to do so would take too long. However, I would urge all noble Lords to respect the importance of the landlordtenant system and to realise that you can have a landlord who, though it may be the State, the Church or an institution, is every bit as good and every bit as personally involved as many of our private landlords are, be they the great landlords with their resident agents running the show or be they absentee landlords working in London offices and leaving it to a local estate agent to do it for them. There is intrinsically nothing worse in having an institutional landlord of any kind than in having the present form of private landlord that we in fact have.

Coming back to the tenant capital, which is the most important part of it, I think I am right in saying that the requirement for tenant capital over the last five years has just about doubled; and that money, as the noble Lord, Lord Middleton, and others, I think, have quite rightly said, has come in the main from the farmers' own savings. That is where the finance comes from. In my view, over that period agriculture has made sufficient profits to enable it to finance its expansion adequately. But it is not the profits which are the important thing; it is the retained profits, and if your profits are taxed at the present rate—and, as I say, this goes for all sorts of industries as well as agriculture—it is very hard indeed to find that extra money to buy those lovely machines in the glossy catalogues to which the noble Baroness, Lady Elliot, referred.

I know we have the very valuable concession of 100 per cent. depreciation in the first year. That is of very considerable help; but it is not really of so much help to be allowed to depreciate your combine harvester or your tractor 100 per cent. in the first year, even if you have the profits to make use of it, if in three or four years' time, when you come to pay for it, you have to pay double what you originally paid. You have got your 100 per cent. depreciation (and I think the noble Lord, Lord Monk Bretton, mentioned this, too) but you have not got enough money to buy the new machine; it has to be borrowed from some source or another. I would suggest to the Government that they give very serious thought indeed to some system whereby agriculture is allowed, not 100 per cent. depreciation but possibly 150 per cent. depreciation, spread over three, four or even five years, so that at the end of the day, when the machine is disposed of, you do have enough money put aside, untaxed, from your depreciation allowance, to buy a new one. I think that something of that kind would go a long way towards removing one of the biggest existing impediments to increased mechanisation and efficiency of our agriculture.

My Lords, in summary, may I repeat what I said at the beginning. I believe that agriculture is in a very healthy state, despite having weathered two extremely difficult seasons; that the Common Agricultural Policy must now be the linch-pin of our own domestic agricultural policy; and that, with proper leadership from this country and with a proper relationship between our own Government and the Governments of our partners in the Community, we can improve the Common Agricultural Policy in a way which will satisfy both producers and consumers. I believe that even within the confines of our own domestic anti-inflation policy we can arrange things in such a way that the farmer is able to continue producing more food of the sort the consumer wants, at constant prices and at lower prices than would be the case if there were not the incentives for investment and improved technology. This is an essential thing for us to do in view of the changing world food situation and the growing importance of domestic production in ensuring our own food supplies.

6.16 p.m.

Lord LYELL

My Lords, I believe that the whole House will be very grateful to, and indeed in the debt of, my noble friend Lord Middleton for introducing the valuable debate which we are having today. In the course of the debate we listened keenly and appreciatively to the information which was contained in the Statement, although of course this information will have to be dissected and digested a lot further. Also in the course of the debate we have all appreciated the maiden speech of the right reverend Prelate the Bishop of Carlisle, and indeed his close knowledge of upland farming and its contribution to the farming industry as a whole. We hope that in the future we shall hear a lot more from him, speaking on matters that pertain to four-legged sheep and, I hope, to two-legged sheep, and to the lives of all of them.

My Lords, among so many expert and qualified agronomists, working farmers and businessmen, I too have some mud on my boots. I also have plenty of ink in my pen; and I regret to say that I have other subjects—the law of patents—on my brain for tomorrow. Nevertheless, I believe that in this debate it is for me to play the part of the still, small voice which followed the Biblical fire, storm and tempest—and I would not seek to allocate those elements among any of the speakers who have preceded me. Indeed, we have had some remarkable speeches this afternoon. I have to declare a small personal interest in a farm in Scotland, but I hope that my remarks will be taken as reflecting the general views, feelings and worries of the agricultural community, particularly in Scotland.

First, all of us who are involved in farming in any way have been keyed up, and indeed expectant, for this afternoon's Statement. At first sight, the provisions and the figures appear to be a little more favourable to arable farmers than to livestock farmers; but nothing is as simple as that, of course, and we await the lengthy dissertations and articles and those large quantities of paper which, over the next month or two, will flood through the letter-boxes of all those in the agricultural community. Secondly, I believe that in spite of the very pertinent remarks of the noble Lord, Lord Walston, there is widespread apprehension in certain sectors of the community, and particularly in the livestock section. In the livestock section of the agricultural community there are already shortages of beef and of pigmeat and it is believed that these are going to get worse later this year and that, certainly by the winter, there are going to be fairly grave shortages, particularly of pigmeat.

We listened with appreciation to the noble Lord, Lord Woolley, as he pointed out the great problems of beef producers. He mentioned losses by beef fatteners and there I, too, have an interest to declare. My hair is still in my head; nevertheless, the beef industry will fight on. In that respect, all of us in that section of the industry are grateful for the efforts made over the past three years when the noble Lord the Leader of the House was, in another incarnation, in Brussels and down the passage. We are pleased that this beef premium is going to continue and looks as though it might find a permanent place in the agricultural policy of the Community. Certainly, at this particular stage of the year buyers of cattle seem to be paying high prices in the storings for what they are getting. They must have confidence that the proposals we have heard this afternoon will mean that the Government share their confidence. Indeed, it is most encouraging that the Council of Ministers accept the continuation of the beef premium system.

My Lords, the main purpose of my comments this evening is to raise one or two detailed points on the subject of pigs and pigmeat. This is one element of agriculture in which I do not have any interest at all. Noble Lords, and particularly the noble Lord the Leader of the House, may have heard that there was a delegation from the pig producers—and not just the pig farmers but the curers, the processors and the entire pig industry—in the other place on Monday of this week, when we were possibly occupied elsewhere. I happened to be in the vicinity and I heard at first hand of the problems of the pig producers. Militancy was not evident, but what was evident was a feeling of desperation that the pig industry in the United Kingdom is in particularly grave straits and that by this winter many of these producers felt that they might have no option except to give up pig farming altogether. The noble Lord, Lord Woolley, referred to one long-time pig farmer who is leaving that section of the industry. Certainly, I was concerned, and am concerned; but what is encouraging is that it is clear that the agricultural experts, who have close and detailed knowledge of the CAP and all the negotiations which are going on now and have been going on, are also very concerned about the pig and pigmeat market.

Noble Lords may have seen in the plethora of information that we have been reading in the Press today that particular emphasis is placed on the difficulties of pig farmers. This includes the processors and curers. Every speaker has laid particular emphasis on their difficulties. It seems to me that the proposals laid before us today will make only a marginal difference to pig farmers, particularly in view of the enormous amount both in money terms and percentage terms of the monetary compensatory amount payable on pig-meat entering the United Kingdom particularly from Denmark and the Netherlands. From the calculations that any of us, particularly myself, are able to make, it seems that up to 35 per cent. of the price paid to producers abroad in the Netherlands and Denmark comes from the monetary compensatory amount and from something called the transitional compensatory amount. I am informed that the amount per metric tonne of bacon and pigmeat paid out in this way is in the region of £300. This brings the price of pigmeat in the United Kingdom to its present level of around £900.

The welcome news that we have had read out to us today by the noble Lord the Leader of the House, and which we have discussed, especially the devaluation of the green pound, means that the MCA payable in respect of Dutch and Danish pork, bacon and ham, will drop from £256 to £234 per tonne thereby (as we would say in Scotland). The noble Lord the Leader of the House said that this was an improvement of approximately 8 per cent., but the farmers pointed out to me earlier this week that, even though this improvement is welcome, their costs have gone up by 35 per cent. for feedingstuffs and from 25 per cent. to 30 per cent. for the other costs they have engendered during the year. Nevertheless, an 8 per cent. improvement is welcome.

Certainly, the whole agricultural industry appreciates that the pig subsidy of 50p per score was a gesture by the Government; but, alas! this good will has been swept away by a continuing rise in the cost of feedstuffs and other costs which visit the pig farmers. Noble Lords will be aware of the widespread anger and resentment felt in member countries of the Community over the Government's decision to make this particular payment of 50p per score, especially after the devaluation of the green pound was delayed from last autumn until today. I think this ill-feeling in the Council of Ministers must be all the more regrettable to the noble Lord the Leader of the House whose natural charm is currently visited upon us but which was in days of yore greatly appreciated in the EEC when the farm prices were under discussion. The words "natural charm"—and I am delighted to quote them—are not mine but those of the expert correspondents who could see what a beneficial influence was cast upon the proceedings abroad when he was there. I think we are all sad that it seems that some of the good will engendered by the noble Lord has been dissipated throughout these lengthy negotiations, these four months, for, as my noble friend Lord Ferrers said, a halfpenny on butter.

Nevertheless, the pig producers whom I met spoke very respectfully of the noble Lord the Leader of the House. However, they spelt out their fears to us most clearly. These pig producers appreciate the 50p per score payment, but what worries them is the feeling that the MCA, as at present calculated on the basis of 85 per cent. of the pigmeat intervention price, discriminates too harshly on them, because they feel that if the MCA were to be calculated on the intervention price for feeding stuffs for pigs which goes as far as maize, barley, oats, rye and so on, the MCA would be more than half. If there is one major grievance, I believe that this is it.

The Dutch and Danish pig population is approximately the same as ours; that is, from 7.5 million to 7.7 million animals. Yet our numbers are declining rapidly and sows are being slaughtered currently at the rate of 8,000 a week instead of the normal figure of 6,000 a week. This is a very grave sign of lack of confidence in the industry. All of us appreciate that the Government, though they may wish to, are unable to perform miracles. We ask that some method of reducing the MCA on pigmeat be explored and be put into action as a matter of urgency. This, together with the devaluation of the green pound, would go some little way towards the salvation of the British pig industry.

As a more general plea, could the noble Lord the Leader of the House tell us what long-term guarantees the Government could give to farmers and to the farming industry, to the processors and to everyone involved in agriculture directly and indirectly, especially in view of the consumers' interest having a major part to play in prices legislation? All of us who farm or who are involved in agriculture recognise that the housewife will not and cannot pay exorbitant prices for our produce. Yet, at the same time, no industry can be carried on with mounting losses. Certainly these losses are evident in the beef market, and in some sectors of the industry they are far more grave than elsewhere.

All of us here in this House and in the country, farmers, agronomists and those with continuing healthy appetites, see that the CAP is not perfect; yet there is a fair amount of political leeway in any negotiations which take place there or, indeed, we hope, in this country. It seems to us that relations in the Council of Ministers have been unnecessarily stretched but certainly have not been irreparably damaged. Our debate has taken place amid a flurry of activities of the Price Review. However, I would feel that the House would consider a longer view of agriculture, and I think that for this reason the remarks of the noble Baroness, Lady Robson, on owner-occupiers as farmers have been particularly appreciated.

Would the noble Lord the Leader of the House convey to his colleagues in the Cabinet and Government that agriculture as an industry recognises that it cannot be immune from the nation's economy, be it weak or be it strong? Would he accept that the Common Agricultural Policy and the Annual Price Reviews are looked upon merely as annual reports, while we in the farming industry have to take a view over five or even 10 years? For the same reason, do the Government accept that there is continuing fear and apprehension as a result of far-reaching changes in taxation, be they with us or proposed? The noble Lord, Lord Walston, spoke of glossy machinery. Indeed, he presented a case for increased depreciation allowances. However, we have to recognise that in a period of inflation we need tax reliefs for not only these glossy machines on the farm but also we need stock reliefs to pay for these glossy black cattle that I find in my area and elsewhere. Noble Lords will appreciate that one is taxed in the same way on stock in trade as on machinery. We need the stock relief, my Lords; we are very happy that we are getting it and we hope that it will continue.

Surely if this fear of major changes in taxation, be it capital, income or local taxation, affects the efficiency of British agriculture, could at least concessions be considered? My noble friend Lord Ferrers referred to fiscal and other measures, tied cottages and so on. Although these measures appear laudable, my noble friend stressed—and I hope all of us will continue to stress—how often such action has the most unexpected results which are entirely detrimental to British agriculture, and, let us not forget, to the British consumer.

My Lords, we are all very grateful to the noble Lord, Lord Middleton, for the opportunity to hold this debate, to discuss the immediate problems which concern our agricultural industry and for giving us the chance to ask the noble Lord the Leader of the House a number of questions—both current and looking to the future—regarding the industry and the country.

6.33 p.m.

Lord WISE

My Lords, I, too, add thanks to the noble Lord, Lord Middleton, for initiating this debate. The Statement the noble Lord repeated is most opportune. I should also like to add my congratulations to the right reverend prelate for his excellent Maiden speech. I am a great lover of the hills, and being a member of the International Sheep Dog Society, I have many friends who are hill farmers. I envy them their sheep dogs but I certainly would not want to be a hill farmer myself—I consider it much too much like hard work.

I agree with the noble Lord, Lord Walston, when he said that farming today is in a fairly reasonable state; buildings and drainage are better than they have ever been. That is undoubtedly so. But I cannot share his optimism of the future. The people who have invested heavily in these improvements must be a little despondent now. The speeches today all reflect the general feeling of the industry and the fears which it has. The lack of confidence and the lowering of profit margins is surely indicated by the fact that the industry's gross investment in buildings declined again in 1976 and, I understand, is now only some two-thirds of its 1974 level. Likewise plant and machinery investment I understand has also declined by some 5 per cent. since 1974.

We are losing sound agricultural land at the rate of some 50,000 acres every year for urban and road developments, and other uses. The estimates for future demand are even greater. That is a very sobering thought. Surely it is in the nation's interest to utilise to its fullest extent every other available acre. Noble Lords have spoken very fully and comprehensively on many of the problems which are facing industry today: the problems of land usage, taxation, investment and the economic position in general. I do not want to go all over those again, but there is one matter which worries me. May I quote a small part from the introduction of the report of Lord Raglan's Select Committee on the European Communities regarding EEC farm prices, which your Lordships debated a few weeks ago. This says: The price that the consumer pays consists of three elements. The agricultural raw material price, the cost of processing and the further charges in distribution. The agricultural element varies greatly from product to product and is decreasing steadily in relation to the other two". This I find most disturbing. It seems to me somewhat indefensible that food prices are continually rising disproportionately higher than the price paid for the basic commodity.

I can well remember the discussions that I had with my good friend the late Lord Royle regarding meat prices. I am sure that noble Lords will remember how logically and persuasively he put forward his point of view. He never wholly succeeded in convincing me that sometimes the price of meat in the shops was high in relation to the farm gate price. One appreciates that not only in meat but in all other commodities there is much handling, processing, packaging and conveying before it eventually reaches the housewife. I am not implying in any way that a greater profit than should be is taken at any particular step. I cannot, for I am not in any way qualified to assess this. But possibly there are too many steps; possibly, it passes through too many hands. But I feel that it would be a very worthwhile exercise if the noble Lord and his Committee could study this in some depth.

The farmer is the only link in this chain who is unable to recoup his extra costs as they arise from time to time by passing them on. Tractor prices rose a day or so ago from between 6 per cent. and 7 per cent. Fuel prices I believe have risen again today by 1p or 1½p a gallon. But these price rises will not put one penny a ton on the price that the farmer receives for his corn next harvest. The merchant who buys it will be able to pass on his increased costs of his customer.

Again, I would welcome a study into the structure of agricultural marketing. This is probably the most important facet of the whole business, and is probably where it fails most. So much money, expertise and hard work goes into producing a first-class product and then it is just left to the forces of the open market. Farmers are beginning to combine. Groups and syndicates are being formed, mostly connected with buying, although not wholly so. Producer groups are being formed. For example, I am sure that one of the problems which big industry faces could certainly be alleviated by more efficient and better organised marketing. The industry is cyclical in operation, continually suffering from either under- or overproduction, each in effect causing the other. A more orderly system of marketing ensuring continuity of supply would certainly be of great benefit.

Having said that, I am somewhat bereft of ideas as to how that could best be achieved. The noble Lord, Lord Walston, again touched on that in his speech. I am certain that not only in pigs but in all other commodities, continuity of supply, regulated to meet demand, is essential. Perhaps that might be achieved by standard quantities and similar measures. Personally, I should like to see more producer boards but I do not suppose that is possible. At any rate, I would welcome a study being made into the whole subject.

Mr. Silkin has enormous problems. It is incumbent upon him, obviously, to keep food prices as low as he possibly can and obviously it is a matter of political expediency. Nevertheless, that does not absolve him from his obligations to the agricultural industry. It is essential that supplies are continuous, and the Government have stated that it is their policy to produce even more at home—a policy with which I would think there is complete accord. We can do it, my Lords. We have the technical skill and the expertise, but we must have in addition the where-withal. Increased investment is essential, and that can come only from profit.

I sometimes look back on my childhood in the years before the war and, on reflection, I am sure that my parents spent a far greater percentage of their income on the basic necessities of life providing for their family than I do or in fact ever have done. That must surely be typical of all families. Our standard of living is far higher. It is a good thing and we are all grateful for it. We have our television sets, our wall-to-wall carpeting, and so on. We now tend to accept these luxuries as the norm and we also accept price increases for them as they come along. If we expect and are prepared to pay the full price of the luxuries of life, surely we must expect and be prepared to pay the full cost for the basic necessities of life.

6.42 p.m.

Viscount TRENCHARD

My Lords, my excuse for speaking in this debate is some 30 years in the food industry, in manufacturing and in retailing and, from the buyers' point of view, buying food across the farm gate in this country and abroad, and buying overseas food for this country. Today I have no commercial interest in that industry but perhaps I should declare that I am still President of the Bacon and Meat Manufacturers' Association and of the IGD, a body which spans food manufacturers and retailers. I am also a member of the ARC.

The noble Lord the Leader of the House, Lord Peart, knows very well that in the past my views have not always coincided with those of the NFU and that, if anything, I have been one who has advocated freer trade and not too much special protection. I have always added that competition must be fair and that measures must be taken to prevent serious dumping. It is against that background that I say to him today that I am more alarmed at the future supplies of food in this country, at prices which our consumers can afford, than I have ever been, and I am more nearly aligned with many of the views of the NFU than I have ever been.

I do not believe that the country as a whole has yet fully absorbed the full degree of our poverty, by international standards, and what the pound sterling will truly buy. I do not believe that we have absorbed the consequences of the inflation of recent years at home, which is still continuing. I think this lack of understanding of the position and the traditional belief in Britain that we shall always be able to buy food has been made worse because, for two decades up to 1973, we frankly got the majority of our food in this country below the cost of production and distribution.

How was that so? For those two decades until 1973 there were far more than the normal surpluses in the world, and particularly of basic commodities such as grain. We had very high subsidies at home, whether called "agricultural" or "food", and wherever you inject subsidy it brings down the price of food. Finally, we had a very sympathetically-valued pound—one really has to say an overvalued pound—based on our past economic performance rather than on our current economic performance. Those three things have made it more difficult for the British consumer to take in and understand the price rises that have occurred since 1973.

I think they are still being shielded to quite a high degree by the £400 million a year subsidy from the EEC; and while I believe that is extremely helpful in our essential battle against inflation, looking to the long term it worries me, and I almost have to use the word "immoral" about it. I think we should thank the EEC so far. There are things which are wrong with the CAP—and I agree with various speakers who have mentioned them today—but before we went into the EEC we thought we would have to pay a premium for food but that we should get most of it back by paying less tax for subsidies. In effect, at the end of 1973, we had the biggest commodity price explosion of the century, worldwide, and the fact that we were in the EEC in 1974, if anything, saved us money rather than cost us money. Food was actually cheaper in the Market than outside.

What of the future? Most agricultural experts do not believe there will be so many surpluses over the next decade as there were over the two decades up to 1973. There will be some, in the nature of the business, but they will be less and there will be longer perods of shortage. One thing is quite certain: we shall not often be able to buy those surpluses unless our pound strengthens a very long way. Others will buy them.

I think it is safe to assume that there will be fewer subsidies in the next decade if Government expenditure, which all Parties agree must be controlled, is to be kept under some degree of control. I believe that the pound is now more realistically valued. I may not have the credentials to be able to emphasise just how much oil might boost it, but certainly without oil our inflation now has caught up with any backlog of over-devaluation that existed.

By the time Europe ceases—and I believe that Europe must cease—to subsidise food to the extent that is being done at the moment, it will pay us poor British to be able to produce a very substantial part of the temperate food stuffs—over £2,000 million worth of them—that we import into this country today. I hate to say so, but I believe we are now the peasants. My farm friends, I believe, are efficient peasants. They have invested quite heavily in recent years. Their units are reasonably large if they are not fragmented by taxation. They are therefore low-cost producers, and they are low cost for another reason. Farm wages, I am afraid, today are only half those in most of the continental countries; indeed, they are only one-third of some of them. We are also talking about supplying our own market and thus distribution costs, which are very import- ant in food, particularly in the very large area of fresh food, are inevitably lower. So that the whole comparative costs picture suggests that we should produce as much as we possibly can of our temperate foodstuffs in Britain.

The old dilemma of cheap food on the one hand, versus the balance of payments and more home production on the other, boosted by reasons of defence and security and social reasons, is no longer a dilemma. These alternatives are now all on the same side. Cheap food for the future for poor Britain will be produced at home in terms of things which can be produced well in our climate. The Government, to a degree, recognised this in Food front our own Resources, published in April 1975, but I believe that the formative work on that document was done in a period when the pound bought 2 dollars 40 cents. I told the noble Lord the Leader of the House, in another capacity in another place, that I believed that at the time when the White Paper was published we were being somewhat kind to some of our traditional suppliers in not wanting to upset them. So that I regarded it as a little weak at the time, and I certainly regard it as obsolete because of the movement in the rate of exchange since then.

Noble Lords have fully covered the fact that our production since the publication of that Paper has gone down and not up. We know that the weather has had a bearing on this, and that and taxation, which has also had a bearing on it, have been touched on by other speakers. The Government cannot do more than appoint a Minister for Drought, which they did last year in relation to the weather. On taxation, I just hope that they will take note of what is said, because one of the things one notices in contrast with Europe is the much more efficient, larger units that we have; and I hope that we can maintain my large-scale peasant friends!

I will venture, if I may, to raise one aspect of the green pound which has not been mentioned, and I shall probably be a bore and foolish to do it. But I do not think it is fully realised that the green pound and the MCA system distort the competitive situation against producers in a weak currency country. The reason why that happens, if your Lordships will bear with me, is as follows. If, for instance, the pound is devalued in relation to Continental countries' currencies by 10 per cent., the MCA system will automatically compensate the Dutch or Danish producer for that 10 per cent. What the man who invented the system left out was: What had caused that devaluation? The scheme was designed in order to maintain the status quo in agricultural trade, and to avoid fluctuations by currencies moving as I have described. But what was not taken into account was: Why do currencies move?

If, as in our case in recent years, the currency has moved because British inflation of costs as well as prices has been running at 20 per cent., while the Continental countries' inflation has been running at only 10 per cent. then the following situation arises. The MCA compensates the Dutch or Danish producer in his own currency, so that he gets the same amount. He puts up the price in London by 10 per cent., which covers his own inflationary costs compared with a year ago. What of the British producer? Because the foreigner puts up his price by only 10 per cent., he cannot move his price by more than 10 per cent., but his inflation costs have moved up by 20 per cent. and, because of oil, machinery from overseas and other things, they have really moved up more.

We have heard powerful pleading over many years from the farming lobby, if I may so call it, and not just on one side of the House there is a feeling that farmers always complain and cry "Wolf". I just want to say that, while I have been one of those who believed that in the past, I now believe that the wolf is not far away today in a great many commodities, and certainly there is no sign of the investment which is required, the essentially very long-term investment which could produce the food we shall need in two, three or four years' time.

I understand the justifiable obsession with short-term prices which Governments have had for the last four years. But if you emphasise the short term continually for four years then long-term policy suffers, and in many areas long-term policy is suffering badly and is certainly not moving in the right direction. It is a difficult message, but I believe that consumers as a whole and union members must somehow understand that we have had very favourable factors in the past and that we have been living in a bit of a fool's paradise as far as food is concerned. In international terms, it is still cheaper in this country than in nearly any other; of course, in pound terms it feels as though it has gone up a long way. But what consumers and union members must realise is that if the production point of view is not given more emphasis now, bearing in mind how poor the country is, inflation will be much worse in a few years' time and there really will be major shortages.

Producers need long-term confidence. The steps taken in Brussels may or may not be a good deal in the circumstances this year. But what the producers and the secondary industry based upon them must know is: Will they be returned to a position of fairer competition? Is the green pound arrangement to be phased out? It is perhaps impossible for Government to stipulate a fixed programme, but is there a long-term policy to put them on a fair competitive basis?

The note on which I should like to end is that I believe it would pay us in this country to suggest to our Continental partners that a long-term plan to phase out the green pound by easy stages should be adopted. I believe that if we took the initiative here, and convinced them that we were determined to phase out this arrangement which was never designed for this purpose—even if it was over more than five years—they would be a lot more co-operative on maintaining milk marketing boards, on fish agreements, on sugar and even on defence arrangements and the purchase of defence equipment, or the building of research stations in this country rather than in others. I believe that we shall need their co-operation in very many areas and that it would pay us to take the initiative now, to say "Thank you, Europe. We need the subsidy for quite a time, but we know that eventually, in our present economic condition, we must produce a lot more at home and we are set on that plan." I believe that we should get more co-operation, in areas that would help us and the consumer, if we took that kind of attitude.

Lord DAVIES of LEEK

My Lords, before the noble Viscount abandons that very interesting analysis of green money, I am sure he is aware of the Eighteenth Report of our own Committee on green money which stated: The Committee believes that to maintain indefinitely the present level of divergence between green rates and market rates would he untenable and would run counter to the whole concept of the Common Market". There are many difficult complications which it would be improper for me to go into now. However, I am grateful to the noble Viscount for making that speech; it was music to my ears.

7 p.m.

Lord COLLISON

My Lords, I also want to thank the noble Lord, Lord Middleton, for introducing this debate on agriculture. I believe that it is good to discuss our industry from time to time. Perhaps we should do so more frequently. Also I congratulate the right reverend Prelate the Bishop of Carlisle for what he told us in his maiden speech, which was greatly enjoyed by us all. We who work in agriculture have a love for the countryside, the hills and the vales, and the right reverend Prelate's description of the countryside came over vividly. We are very grateful to him. I intended to mention some of the facts which have been put on record in the Annual Review and to quote the accelerating cost, pointing out that although farm incomes had increased, in real terms there had been a decrease. Noble Lords have, however, thoroughly dealt with those problems and I do not therefore intend to take up any more of your Lordships' time on that aspect.

May I make two comments. The speech of the noble Baroness, Lady Robson of Kiddington, interested me. The noble Baroness will find that I shall say similar things about relations in agriculture. The noble Baroness also mentioned the possibility of allowing the value of the pound to rise rather than holding it down as we have been doing, by all accounts, in the past. It may be worth thinking about this possibility. Our balance of trade situation is improving. Then the oil is coming. It could be that in dealing with the problem of inflation we would gain an advantage if the value of the pound were allowed to rise. I leave that suggestion with those who know more about the subject than I do. However, it is a point which I thought I ought to mention.

I was sad to listen to what was said about the way in which my right honourable friend the Minister in another place handled the discussions in Brussels. I know John Silkin. He is a kind man, and I should have thought that he was incapable of discourtesy. In any case, I do not feel that what he had to do in Brussels was a political matter. I do not wish to make a political comment. I feel that there is another side to the coin: that John Silkin felt he had a duty to perform in Brussels which would not be liked by his colleagues in the Nine. He was in much greater difficulty than he would have been had he not been Chairman of the Council at the time. This made it much harder for him, and I think that we should recognise that fact. I do not wish to labour the point, but my view is that John Silkin ought to be congratulated on, if one may use the word, the compromise he has been able to arrive at.

It is a question of trying to decide what are the most urgent problems which face the agricultural industry of this country. Many of them have been mentioned, but the greatest degree of interest and discussion has revolved around our entry into the Common Market and the consequential adjustments which we are required to make, having become members of that Community. There is no doubt that these adjustments constitute a challenge to us all.

It is natural that we should feel the impact of the new policies. The infrastructure of our own industry has been built up over many years and developed along very particular lines. We had our own very effective support system which had to be changed. We have marketing boards which, in my view, have been highly effective. Some of us were quite worried when we learned, or half learned, that the Milk Marketing Board might possibly be illegal. I was very glad to hear what was said by my noble friend on the Front Bench this afternoon: that efforts are being made to ensure the continuation of the Milk Marketing Board. I am a great believer in these boards—not only in the Milk Marketing Board but in the rest of them.

It is inevitable that we should have felt the impact of new policies—of intervention and of direct support—compared with what we were doing in this country. It is also true that we have criticised some of the policies which came out of Brussels. For example, we were concerned about the proposal to tax vegetable fats and oils in order to protect butter. We were concerned that the isoglucose production was to be taxed. I am glad to hear once more this afternoon that the tax on isoglucose is to be only half the level which was proposed and that there is to be no tax on vegetable oils. These matters were criticised in our own committee, and it is encouraging to know that what was said there was taken up elsewhere and has had an effect.

The objectives of the Common Market have been precisely stated in the Treaty. One can put in other words rather than the stiff words of the Treaty what were the objectives of the Common Market when it was founded. They were to create a policy which would allow free trade in agricultural goods within the Community; to give Community farmers incomes comparable with those of workers in industry; to stabilise markets; to increase productivity and to ensure reasonable consumer prices. All of us must agree that those objectives are reasonable and ones which we desire. However, as has been said today several times, some of those objectives appear to conflict with each other.

We have heard much today about the apparent conflict which can arise when one wishes to give an advantage to the producer—when one wants to "up" his income in relation to what may be the interests of the consumer. The debate on the green pound has revolved around that question. People have looked at the Common Market at a time when food prices have been rising. They know that the Common Market policies are partly responsible for that and there will be other increases in the future because of our need for the two transitional steps that remain and because of the revaluation of the green pound. They have seen the creation—if that is the word—of these "mountains". They have seen the wine lake gradually filling up. They saw that the butter was sold and sent to Russia at low prices, but that loophole has been stopped. The general public find it difficult to understand why all this is happening and tend to blame the Market for it.

But this problem about who benefits, or who is to benefit in the future—the producer, and if it is the producer then how do we protect the consumer—is no new problem. It is a classic dilemma. I call it that quite deliberately. That dilemma has been in existence—I almost used the word, "always"—certainly ever since the Industrial Revolution caused many people to go into the town. Ever since that time there has been a cry for cheap food.

Writing in The Times of 11th April, Hugh Clayton said: The characteristic of the price debate which has continued unabated in Britain throughout the 1970s has been that most people think only of how they are affected personally. If shoppers are told that they must pay more for sugar or tea or anything eke, they seldom stop to wonder if the higher price might benefit the worker who cuts the cane or picks the leaf or does anything else". Of course the workers are involved. The worker, as much as the farmer, is part of the industry, and it has been the complaint of the farm workers through their union, the NUAAW, that the farm worker has always remained on the bottom rung of the salaries ladder; unfortunately that remains true as we have just heard from the noble Viscount, Lord Trenchard. Paragraph 39 of the Annual Review tells us that in the year ended 30th September 1976 the average earnings of full-time hired men in the United Kingdom were £48.80 per week. That is 19 per cent. higher than in the previous year, but in real terms it is a fall of 0.5 per cent. as my noble friend Lord Davies of Leek has already told us.

We are also told that in 1976/77 weekly earnings are expected to be about £53 a week. In the same Review it is explained to us that labour productivity has increased over the years by 3.5 per cent. Of course, this is partly due to greater efficiency and a declining labour force. Nevertheless, what a good record! If it could be matched throughout industry, the country would have no problems today. I believe we have a right to be proud of what we have done. Those facts clearly reflect the enormous and rapid development in agriculture from a labour intensive industry to a highly efficient, highly complex and highly productive industry. Unfortunately the remuneration of the workpeople for the skills they have had to acquire, and are using so well, has not improved in step.

For many years—and I was in charge for many of them—the union strove to establish in agriculture what we call a "wage structure", in order to ensure that men with additional skills received additional pay for those skills. In the end we got it, but as Mr. Bottini, the General Secretary of the Union who followed me has just said, there are still many farm workers who should be receiving a plus rate, or at least the craftsmen's rate, but who are not receiving it. I know that it is often because they do not apply for it, but we should make efforts to see that they get what they are entitled to. Unfortunately, the present policies of wage restraint have caused—as in other industries—the differential to become less as between the basic rate and the rate of the skilled worker.

That is not to say that I am one who clamours for the destruction of the Social Contract. I certainly believe that we have to introduce more flexibility into the next set of arrangements. But, speaking for myself and in the interests of the agricultural workers, I am sure that to sink down to a situation where what "cake" there is goes to the strong arm and the strong muscle, leaving behind those who for some reason do not use the strong arm or have not got a strong muscle, would be detrimental to the prospects of farm workers rising to the same level in terms of income, and therefore of recognition, as skilled workers in other industries. It would hinder their progress towards equality of pay.

The noble Baroness, Lady Robson of Kiddington, mentioned relations. It is a matter of some interest when one realises that, in agriculture, industrial relations are good, despite the bad wages and, in years gone by and sometimes today, the long hours and the unpleasant work. People have said this is good, and so it is, and they have congratulated the agricultural industry, both workers and farmers, on the good relations in the industry. I have said this before, and I repeat it now, because I believe it is of some import to the problems of industrial relations generally: there is a very simple reason for the good relations. We are no better in agriculture than anybody else; we are men and women, employers and workers, but what we have in agriculture—and we are so fortunate to have it—is a spontaneous and continuing consultation between the employer and the worker. In agriculture, up to one or two men are employed, but never so many that a gulf opens between management policies, on the one hand, and the workers who have to implement the policies, on the other.

Farm workers walk the farm with the farmers, they discuss policies; if there is a change in the production line they talk about it; they also talk about their own personal lives and their friends and relations, their wives and their children. This was mentioned earlier but this is the reason—and I repeat it because if we could only achieve consultation which really worked in the other massive industries where there are so many people, this would prove to be the answer. Ever since my days on the Donovan Commission I have realised that joint consultation, understanding, discussion and participation are the key to good relations throughout the industry.

My last word is that maybe there is something else. It is not emotive to say that agriculture is a natural industry. People working in farming literally have their feet on the soil, and there are disciplines which have to be accepted in agriculture. You cannot run in the face of nature. You can certainly improve your yields and your stock and your seed and so on, but in order to achieve results you have to co-operate with nature; it is something bigger than yourself that you have to deal with and accept. I am not saying this from an emotional point of view; I think it is an objective fact which may put into our industry something which the others have not got. Do not misunderstand me, my Lords, but is it not possible that working inside a shed, working at a machine, working in an office, tends to detach one from one's knowledge of what life really is. It may be that having to accept these disciplines and deal with nature and co-operate with nature, that we are not the boss, gives the farmer and farm worker something in terms of character, and perhaps a different outlook on his life and work and on other people.

I do believe that we should be doing much more to bring townspeople and agricultural country people together. I approve very much of the organisation of farm visits, of providing educational information for use in schools. I have the honour to be President of the Association of Agriculture, which has been endeavouring to do this work, and indeed I think it is doing it very successfully; 85 farm visits have been arranged in three years. We are going on to another three years. I think this is a great thing and should be done, because I believe that misunderstanding can happen between people in different industries. I should like to see consultation taking place and understanding growing, so that people no longer think of employed agricultural workers as rather second-class citizens, as perhaps some still do, but learn to understand that agriculture is a great, complex and important industry, which is entitled to the same returns as one expects in industries elsewhere.

7.23 p.m.

Lord VERNON

My Lords, in a wide-ranging debate of the kind we have had today it is tempting to dwell on the reasons for the present malaise in British agriculture, reasons which have been discussed in a number of speeches which we have heard. On this aspect, I would only say this, that if anyone is doubtful about that malaise I suggest that they have a look at the February edition of the publication Green Europe. This shows that West Germany, with 30 per cent. less useable agricultural land than the United Kingdom, is producing more of every agricultural commodity than we are, with the exception of sheep and poultry, and in many instances they are producing more than half as much again. Allowing for the higher inputs in feedingstuffs and fertiliser, and allowing also for their higher manpower on the land, the statistics should, I suggest, give one food for thought.

They also give an indication of the amount of additional food that could, and, I submit, would be grown in this country, and the huge savings that there would be to the balance of payments if the agricultural industry got the support that it needs. However, I do not propose to pursue that argument, partly because I did so in the recent debate on the green pound, and partly because I wish in my speech to concentrate on the subject of land use. I shall in fact be following up the remarks already made by my noble friend Lord Middleton in introducing the debate, regarding the very important report by the Centre for Agricultural Strategy at Reading University entitled Land for Agriculture.

We live in an overcrowded island, where competition for the land available is very keen. One of the reasons why agricultural production is hampered is the growing annual loss of land from agriculture to other uses, and to this must be added the amount of land where the full agricultural potential cannot be realised because of urban blight. The latest figures I have seen come from a Parliamentary reply in another place and refer to England and Wales only. Between 1955 and 1960, 55,000 acres were lost annually. Between 1966 and 1970, 60,000 acres were lost, and between 1970 and 1974 the figure went up to an alarming 75,000 acres a year. Looked at in another way, the whole of a medium-sized county is being lost to agriculture every decade. A proportion of it, not very large in England and Wales, goes to forestry, but that is usually the lower quality land in the uplands, and in any case what goes to forestry can always be reclaimed.

What is disturbing is the amount of land lost to industrial use, to housing and to recreation. It is disturbing because the land taken is often the best quality land, not often Grade 1, but frequently Grade 2, on the fringe of urban development. The Ministry of Agriculture fights to retain such land, but, unfortunately, they usually lose the battle. It is disturbing because, as we have already heard this afternoon, we produce little more than half the food we need to eat, the temperate foodstuffs. Finally, it is disturbing because we now know from the report to which I have referred that losses on this scale are totally unnecessary: 80 per cent. of the land needed for development between now and the year 2,000 can be found from existing derelict and waste land. My Lords, this is an astonishing figure and one which I suggest reflects discredit on successive Governments.

So what is wrong? The answer, of course, lies in the fact that green fields are very much easier and cheaper to build on than derelict land. With that in mind, the whole planning process is weighted against the agricultural interest. We have our priorities completely wrong and Government action is required to redress the balance. At planning inquiries the Ministry of Agriculture is at a severe disadvantage as compared with the Department of the Environment and local authorities. It is short of staff and those available often have to perform other duties. The Department of the Environment and local authorities tend to he represented by counsel, whereas the Ministry case may be put by a surveyor. The result is obvious.

There is no consistent way of identifying and recording derelict land. Although overseen by the Department of the Environment, differing systems obtain in different counties. The report recommends that a national land inventory be established under a new organisation. But if that is not possible in present circumstances, at least a uniform system should be adopted for recording derelict land—a system in which the Ministry of Agriculture should play a significant part.

Another defect in the present arrangements is the fact that the Ministry does not have to be consulted when areas of less than five acres are taken for development. So what happens? A speculative builder gobbles up several units of four acres, and in the end he has 20 acres or more of good agricultural land which are lost forever to agriculture. In those cases the Ministry would not even be consulted. In cases where the Ministry is consulted—that is, where the amount of land lost is over five acres—the existing method of land classification plays straight into the hands of the Department of the Environment. Although it is laid down that Grade I and Grade II land should not be used where other land is available—a rule which is often ignored in practice—by far the largest category of agricultural land, about 50 per cent. of the whole, is Grade III, and unfortunately Grade III is equated by the Ministry with third rate.

I happen to live in a part of the East Midlands where all the land is graded III. Yet the same land can produce high-yielding corn crops and excellent grassland for dairy cattle. It is certainly not third rate. One of the most urgent needs, and one to which the Centre for Agricultural Strategy rightly draws attention, is to safeguard at least the better quality Grade III land, all of which is at present regarded as expendable by the Department of the Environment.

Technical Report 11/1, published in 1976 by the Agricultural Development Service of the Ministry, suggests the definition and identification of sub-grades within Grade III. That is obviously vital. However, I am advised that the Ministry has only 28 research officers available to classify agricultural land throughout the country, and at the present rate of progress it would take five or six years to complete the task. Clearly, more resources must be made available.

I have referred to a number of the recommendations made in the report, but perhaps the most important of all is the proposal that the onus of responsibility for decisions on transfers of land should be altered to give precedence to agriculture. As a corollary to this, it is suggested that financial incentives and the Community Land Act should be used to develop derelict and waste land in urban areas rather than agricultural land on the urban fringe. Only in the most exceptional cases should Grade I, Grade If, or the better quality Grade III land be taken for development, and then only after the Department of the Environment has been able to prove conclusively that no other land is available.

My Lords, I hope that I have said enough to show that we are in the process of squandering what the noble Lord, Lord Woolley, said was our greatest physical asset—the land of this country. It is time to call a halt. I had given notice to the noble Lord the Leader of the House that I should be raising these rather detailed matters this evening. I had in fact tabled a Motion for Short Debate on the subject but I withdrew it because of this debate. I hope that when the noble Lord replies he will be able to state whether the Government accept the conclusions of the Centre for Agricultural Strategy and whether they are prepared to implement the recommendations. Further, I hope that he will be able to comment on the specific proposal that Grade III agricultural land should be subdivided into different categories.

7.37 p.m.

The Earl of ONSLOW

My Lords, I should like to mull over three subjects this evening, which are all interlinked. I should like to suggest that, with one condition, it would be sensible to implement the Layfield Committee's recommendation that agricultural land and buildings should be re-rated. The argument for de-rating agricultural land and buildings was overwhelming in the 1920s, when agriculture was in a pitiful state, productivity was poor, land lay fallow and some returned to scrub. The advance of modern agroengineering had to await the stimulus of the War and the Agriculture Act 1947, and all that flowed from those two factors. In the 1920s foreign food was cheap—it is no longer; freight costs were low and we were one of the few importing countries of agricultural produce.

As we all know, the situation now is totally different. Agriculture is much improved compared to its state in the 1920s. The noble Lord, Lord Walston, gave a very fair description of the great advances that have been made. Unfortunately, there are two sectors where there is cause for worry—the pig industry is in dire straits and the gross margins on beef are being heavily squeezed. Of course we all know that Government-aided inflation is still with us—vengefully. Therefore, de-rating is a hidden food subsidy. If food is to be subsidised in this way, let us go the whole hog and exempt the noble Lord, Lord Sainsbury, and all his shops, Sir Jack Cohen and Mr. Heinz III; perhaps we should also de-rate David Brown, New Holland and other agricultural machinery manufacturers. That would be impracticable. The de-rating of agricultural land also throws on to the small industrial and domestic ratepayers of rural and semi-rural areas a heavy and unfair burden. It also affects the taxpayer through the rate support grant.

When I commenced my remarks on the re-rating of agriculture I said that there was one condition. That one condition is of course that the farm gate prices must be—and there can be no argument over this—adjusted to take into account that re-rating of agricultural land. The second of my points is to suggest that we abolish most of the subsidies to agriculture other than the hill farm subsidies and investment grants. Surely the beef-cow subsidy and the calf subsidy can be made good again by a proper end-price system. These subsidies are expensive to operate and have in the past led to chicanery in the form of amateur plastic surgery on bovine ears.

My Lords, neither the abolition of subsidies nor a reversal of the de-rating policy can be acceptable to the farming community unless the final farm gate price is adjusted. These two problems, however, could perhaps be mitigated from the consumers' point of view—and, as several speakers have said today, the interest of the consumer and the farmer must be indentical—if we can get a proper review and proper reform of the CAP.

I should like to suggest one or two very small ways in which this might be approached. It would be possible to suggest that we go for intervention on nonperishable commodities such as grain, and deficiency payments for perishable commodities which are expensive and costly to store. Taking the example of beef, the actual storing of it finally destroys it. The moneys for these deficiency payments could come partly from the saving of these very expensive storage costs and from a certain system of levies on imports. The price level of deficiency payments would have to be related to estimated demand. Here again I agree with the noble Lord, Lord Walston, that we cannot just go on subsidising everything that the farmer produces, irrespective of the market demand. The intervention price of grain also will have an effect on the deficiency payment.

Furthermore, we must think European and not just nationally. There are things we do immeasurably better than some of our Continental partners, and there are some things they do immeasurably better than we do. For instance, we have already mentioned the Milk Marketing Board. That is a superbly efficient organisation together with the dairy companies. You cannot get delivered milk in Paris, and I do not think you can get it in any city other than in London, and this at a price for liquid milk consumption which is quite superb. On the other side of the Channel, for instance, there are the French co-operatives. I have been round a French co-operative. We have nothing in this country which approaches it in efficiency and in marketing organisation. We must learn from them, and then perhaps they will be prepared to learn more from us.

Funds must be available to change some of the farming habits. One must take one example. Rouissillon produces a vast surplus of rather bad wine. Somehow we have to change in a European context that over-production of unwanted stuff. It is surely easier to produce milk in the wetter, cooler parts of the North of Europe than it is in the Southern hotter parts. It is easier to produce fruit and vegetables in the Southern, hotter parts than in the Northern parts.

I do not put forward these ideas as Holy Writ; they are just ideas. But however good our ideas, and however constructive, they are bound to get a chilly reception from the rest of the EEC if Mr. Silkin continues behaving in the way he did last week. One of the Benelux Ministers—and the Benelux Ministers, let us remember, were our greatest friends when we wanted to get into the Market—referred to the British behaviour as "criminal". However good our ideas, we must learn that you get nothing by being rude to people who control the purse strings. These ideas will get a hostile reception if presented in the way they were presented.

My grandfather had an adage, that if you are not civil to people you will not get asked out to tea. That adage ought to be followed by Her Majesty's Government. The present Prime Minister set a very bad example by being gratuitously rude in 1974 to the Speaker of the European Parliament, and then said that it was by mistake. That example has been followed by several others of Her Majesty's present advisers—I hasten to exclude the noble Lord the Leader of the House because he is always welcome to tea. We all agree that the CAP needs revision. We shall never get that revision to take into account our views not only on the CAP but, as the noble Viscount, Lord Trenchard, said on other subjects, if we set up such an intense dislike of our methods and of our manners.

7.45 p.m.

Lord MACKIE of BENSHIE

My Lords, I want to thank the noble Lord, Lord Middleton, for raising once again the subject of agriculture. It is a great pity that he should have had to do so, because one would have thought that it is a subject that did not need raising in this House; we were all agreed and a policy had been worked out for the good of everyone, including the consumer, long ago, so that all we had to do was question a few actions. But, in fact, there is once again a rather unhappy climate—very unhappy in the case of some producers—in agriculture, and it is one of the main factors in production, and something must be done quickly in order to restore the confidence which is lacking.

I must say that my noble friend Lady Robson put her finger on an important point which is not often enough brought out. She talked of the effects of the decline in the value of the pound, and what appears to be the deliberate fostering of a fall in the value of the pound in order to promote our exports. All my life I have tried to sell dear and buy cheaply. This always appears to me to be a good thing to do. However, some of our economic mandarins appear to think that it is good to sell cheaply and buy dear. This is absolute nonsense, and it has led us into much of the trouble we are in today.

Everyone is agreed—and goodness knows I have said it often enough!—that the world situation is such that the old cheap food policy has gone forever.

Anyone who thinks we could buy our food in the world market at £700 million less—that is the sort of figure one has heard—than we are paying now does not realise that, if we stepped into the market, prices would soar. This is perfectly true, and every sensible person accepts it. But the Government, at the moment, are in a great tizzy about green money, and I do not think they can see how they can ever get on to a position of parity where we will be able to fulfil the objectives of the Common Market and trade freely across the frontiers of the Community without MCAs, ACAs, and all the other distortions which are doing so much harm to a great many people at the present time.

I do not think that it would be such a big task. The Leader of the House will not in his own Party be a particular friend of Mr. Peter Stephenson, who is Joint Secretary of the Labour Committee for Europe, but he has produced an absolutely fascinating paper, which I have no doubt the noble Lords, Lord Vernon and Lord Collison, refered to, and which we have in Committee D. He shows quite clearly that in fact the international value set on money—the deutschemark against the pound, the franc and the dollar against the pound, and so on—is in fact unreal. When money is referred to not only by him but also by economists in the United Nations as valued by its purchasing power in its own country, which is obviously a sensible way to value it, the position is entirely different and there is not such a tremendous gap between the values and the prices in Europe as there is just now. A gap there is, but not such a big one as is suggested by the false value which the international money market places on the relative currencies.

If the Government pursued a revalue of the green pound in a more realistic manner, then it would be a help to them in getting rid of the incredible distortions caused by the measures taken with ACAs and MCA in order to get over this valuation. He says, for example: The comparison between Britain and Germany is particularly striking. During 1975, the average exchange value of the pound in terms of the West German Deutschemark was 5.434 Deutschemarks to the pound, but on a consumer purchasing power parity basis the value of the pound was in fact 7.74. I recommend the Minister to study this paper because it contains a number of truths that are extremely relevant to the position we are in. The present lack of reality is doing enormous harm, particularly to pig farmers.

Viscount TRENCHARD

My Lords, might I point out to the noble Lord that, judged by purchasing power, the reason for those figures of a much higher valuation of the pound in terms of the Deutschemark is of course the fact that food at the time when that survey was made was so exceptionally cheap in this country, and of course food represents one-third of our Retail Price Index. In other words, it is a cart and horse circle.

Lord MACKIE of BENSHIE

Not entirely, my Lords. The noble Viscount said that food represented one-third of the Retail Price Index, which means that two-thirds apply to all the other factors. I accept that it is a cart and horse circle. Nevertheless, it is true that our pound is rather undervalued. The situation regarding the pig is quite ridiculous, with the MCAs being based on a totally unrealistic support price, which has never been used. If, as we have suggested, the MCAs were based at least on the price of food, we might begin to get somewhere, and I hope the Minister is in a position to say what the present measures will do in terms of the pig, as he promised when making his Statement.

Several noble Lords have referred to the question of taxation, to the iniquity of capital transfer tax, capital gains tax, the forthcoming wealth tax and so on. In my view, none of these taxes is particularly bad. I do not believe it is any disadvantage—indeed, it may be a very good thing—for a man to start out with a £50,000 overdraft if he inherits a 300 acre farm. It might make him work. There is nothing worse than for people to inherit too much money. What is entirely wrong, however, is the level of income tax. It is so high that no man, however hard he works, particularly in times of inflation, can ever hope to achieve his aim of paying this money back to the Government and achieving higher production on his farm. The tax that is wrong is income tax and, in this country, it is the highest in the world and doing an enormous amount of harm.

Many people say that we in agriculture are immensely efficient, that we are good producers and that our rate of production per man is high. Time and again we are told that we are much more efficient than the bulk of small farmers on the Continent. I am sorry to bore the Minister with papers on agricultural matters, but I have been looking at a particularly interesting one on the structure and performance of West German and United Kingdom agriculture. I have been discussing this with the noble Lord, Lord Vernon, and he has probably referred to this matter.

In the midst of all our congratulations to ourselves on our efficency per man and so on, the fact remains that the West Germans have a great many fewer arable acres than we have, yet they feed 7 million more people than we in the United Kingdom do; they do it on 70 per cent. of our utilisable agricultural area. To do this they have 1.8 million people on the land compared with 660,000 people here. I am not sure therefore that we are all that efficient. Bearing in mind that land is a very scarce commodity and that we have 1½ million people unemployed, we might be better served with a great many more people on the land helping to increase our production per acre.

Various figures are given in this paper and they are well worth studying. For example, for cereals, on 70 per cent. of the acreage the West Germans are producing 21,255 tons as against 13,000 to 14,000 tons in this country, and all down the line one gets that sort of comparison. Perhaps we need to look again at our much-vaunted efficiency in this country. After all, we might find ourselves in the position of the Americans, who have plenty of land but also have the lowest production per acre, much lower than ours; of course, they have a very high production rate per man and a tremendous size of input of energy to achieve that production per man rate.

There are a number of factors in agriculture that we must look at long term. Certainly we want confidence among the farming community, but we also need to look at many of the practices we are now adopting. We in this country are going more and more for monoculture. Open any farming magazine and see the advertisements for new chemicals. Every time a chemist discovers a new chemical he rushes to an experimental plot to see what it will kill. It is an appalling reflection on our care in this country that the proving of new chemicals is still voluntary, and in my view this is a highly dangerous position. There are many cases where practical farmers can show how we need to revise our thoughts in this respect.

For example, if one has the labour to clean turnips by hand, it costs no more than using chemicals and the crop is increased. I think the same can be said of a whole number of products. I am very perturbed about the application of weed killers in horticulture where, with crops like raspberries, which can last for many years, severe residual effects on the soil are already being shown. The reason for this is the agricultural policy of keeping the price down. With the encouragement to greater efficiency, to make any money out of a crop one must use these chemicals, or so the advertisements say. I doubt that very much and we need to look with a great deal more care at this whole sphere.

On the question of prices for farmers, the CAP has pushed itself into a false position. Supply and demand must eventually be the ruling factor in fixing prices and farmers, in asking for fixed prices, are not asking for high prices but for a certain amount of stability. This fact seems to have been lost in other social factors on the Continent and we should be pressing hard for it to come back into play. The social factors of small farmers should be a different matter altogether and should not be catered for purely in terms of the end price, such as is happening with milk. Until we recognise this we shall be in a lot of trouble and the CAP will be very unpopular with many people. We must begin to apply this concept in a practical manner. If we do that, I think the Community and the CAP will he excellent for the farmer and the consumer in this country, but until we get it to work in a practical way it will probably be harmful not only to the farmer but to the consumer.

7.49 p.m.

Lord SANDYS

My Lords, I have listened with great interest to the previous 16 speeches—to very nearly the whole of each one—and what has struck me strongly is the debt we owe to my noble friend Lord Middleton for initiating this debate. I have been particularly impressed by the wide variety of opinions expressed, and I had no idea before the debate began how difficult it would be to reconcile two points of view. First, there was the opinion of my noble friend Lord Trenchard, who said, I am more alarmed about the future supply of food than I have ever been". How can that be reconciled with the view of the noble Lord, Lord Walston, who said, "I myself have never known agriculture in better health"?

Lord WALSTON

My Lords, may I interrupt the noble Lord to ease his difficulty? I stand by what I said, but I would remind him that I also said that, in the future, world supplies of food were going to become more difficult and our capacity to pay for them was going to grow less. Therefore, I am entirely at one with the noble Viscount, Lord Trenchard, in being alarmed about our ability in the long term to buy, grow or acquire by other means the food that we eat.

Lord SANDYS

My Lords, the noble Lord has released me from a considerable difficulty and I am very much obliged to him for doing so. However, there are inconsistencies here and I believe that this has been a particularly valuable debate in that it has allowed us to listen to these opinions. Perhaps one of the reasons why the noble Lord, Lord Walston, speaks, as he certainly does, with very great knowledge but also with some optimism, is that he comes from the Fenlands. There, they perhaps enjoy greater prosperity than do other parts of the country and of the industry which have been mentioned this afternoon especially the pig industry to which my noble friend Lord Lyell referred in some detail.

Your Lordships have been particularly pleased that this has been the opportunity for a notable maiden speech by the Right Reverend Prelate the Bishop of Carlisle. He was almost the only speaker to deal with forestry—a subject to which I shall refer later in my remarks. He dealt particularly with the uplands, a preoccupation which was echoed by many speakers, especially my noble friend Lady Elliot, who speaks with such knowledge of the hills, particularly in Scotland.

I took exception to what the noble Lord, Lord Davies of Leek, said in his closing remarks. He said, "No Conservative Minister would have got a fairer deal". I imagine that when he was addressing those remarks to your Lordships he had in mind the Statement which the noble Lord the Leader of the House had repeated; but I believe that he will find himself confounded in 12 months' time when we return to the debating table, possibly with another Government in office. I believe that negotiations can be less protracted and will engender very much less heat in their course when a Conservative Minister is once more in office.

Lord DAVIES of LEEK

My Lords, I shall manfully acknowledge that, if it so happens.

Lord SANDYS

My Lords, the noble Lord, Lord Davies of Leek, is always courteous in debate, but I believe he is misguided in his approach. I also feel that he was misguided—and this proves how different opinions in this House can be—when he produced the document Talking Points on Britain's Economy. I happen to have a copy of it too, and I drew an entirely different opinion from it. I reflected upon the fact that right at the very back of the document one finds references to efficient British agriculture and the rise in exports of agricultural machinery. As agriculture happens to begin with "A" and is listed as a most important industry and one of the most efficient in the world, it is a great pity that the Government did not see fit to give it an earlier priority in this document. However, I shall let that pass because priorities are always difficult. The point illustrates what a very great variety of opinion there can be about a relatively small matter. I refer, of course, to this particular small document.

I should like to begin my remarks with the Statement that was made this afternoon because the debate has of course been coloured by what the noble Lord the Leader of the House said. We read our papers this morning and I was interested to see what the Consumers' Association had to say. They described the Luxembourg deal as, Short term gains with long term losses I believe that that is an accurate statement. Consumers in this country may well welcome the short term advantage of the butter subsidy, but I am perfectly certain that they will rue the day when this agreement runs out and we reach the day of reckoning which is to come. As certainly as night follows day, the negotiations which will take place at future dates must take into account the matters referred to by my noble friend Lord Trenchard. I particularly welcomed his remarks, which were directed to a far more long term view of negotiations with our European partners.

I believe that we should take into account in this debate what took place during the drought last summer and that we should reflect upon what was suffered by certain parts of this country. I do not suggest that farms in the North of England or Scotland suffered to a great extent but, nevertheless, there were extremely substantial losses. If I may be allowed to quote a very few figures, losses incurred have ranged from £ 18,000 on a 400-acre farm to £50,000 on a 12,000-acre farm. Those figures may appear remarkable but they are accurately costed and I have no reason to believe that they are exaggerated. In large numbers of cases, water had to be brought very considerable distances in tankers at regular intervals to feed stock in large numbers.

I believe that the drought will have much greater long-term effects than people realise, for the soil is tired. We had bleaching in 1976, and leaching in the autumn of last year when the rains began and followed through until March and April this year. So what we need more than anything else is to feed the soil, and I believe that the work carried out in all the agricultural research centres—Rothamstead, in particular, of course—and that done by ADAS and its advisers will have a highly beneficial effect upon all those who choose to ask for soil samples to be investigated. They will almost certainly discover that the pH factor in their land is lower than they thought.

I believe that there are ways of remedying this and I feel that the Government should take into account the document referred to by the noble Lord, Lord Mackie of Benshie, and others, including my noble friend Lord Vernon. That is the document Green Europe. It commends to us the value of using fertiliser to a greater extent than we do. Of course, everyone will immediately say that the cost of imports will be enormous but I most respectfully remind your Lordships of a debate which took place in this House only a week ago on the subject of the Falkland Islands. In this particular context, I feel that one should think very carefully about the situation in regard to the giant seaweed. My noble friend Lord Boyd of Merton introduced a particularly interesting Unstarred Question and said: As the report shows and as I have mentioned, large quantities of kelp—giant seaweed—exist around the Falkland coastlines, within areas which it is free for us to develop with the Islanders". —[Official Report, 20/4/ 1977; col. 228.] I believe that here there is an industry which could be very beneficially expanded with the assistance of the British Government and which would reduce our imports of costly foreign fertiliser. In case the Ministry does not look at foreign debates, I should say that I am referring to column 228 of the Official Report for 20th April. It is very well worth reading because I maintain that we should look to our friends around the world to assist us in the very great task of fertilising the agricultural land of this country. Alginates Industries Limited, in which I must assure your Lordships that I have no interest whatsoever, is the firm with an exclusive right in this particular field to which I refer, and so we would do well to hope that the British Government will consider this position further.

I now wish to continue a little further on the Wye College study referred to as Green Europe, because I believe that there is a very interesting problem here. If we are considering, as the noble Lord, Lord Mackie of Benshie, did, the comparison between output in Western Germany and the United Kingdom—and he referred to the production of cereal and other commodities—we should bear in mind how very important it is to consider the situation in regard to the green pound. I believe, and so do my noble friends on this side of the House, that the devaluation of the green pound by so small an amount is one of the most unfortunate effects which we have considered in this afternoon's Statement.

At the same time, one must consider the question of the Annual Review of agriculture. My noble friend Lord Middleton referred in particular to the reduction in investment and he especially mentioned the 19 per cent. reduction in investment in farm buildings. This is a very significant factor when it comes to the question of confidence, and no matter how hard one may look at this factor one sees that it has spread increasingly over the past two or three years. I stood at this Dispatch Box at this time of year in 1974, 1975 and 1976 and I seem to be making the same speech over and over again. Perhaps the noble Lord the Leader of the House will be making a speech similar to those he has made on previous occasions, but this does not get away from the fact that there is a very serious problem which has accumulated and compounded over the years—

The Earl of ONSLOW

My Lords, I wonder whether the noble Lord can answer me a question in relation to his point about the 19 per cent. drop in investment in agricultural buildings. Is this a 19 per cent. drop by price or by volume? If it is by price it must mean that the volume decreases even more seriously.

Lord SANDYS

My Lords, I understand that the percentage drop is in terms of volume, but I speak subject to further investigation. I do not know whether the noble Lord the Leader of the House has further information on this point.

It would be appropriate if at this stage I turn to a different matter; namely, the integration of farming and forestry and the whole question of the uplands policy, to which the right reverend Prelate the Bishop of Carlisle referred. He said that the forest industry was severely handicapped in the situation in which it finds itself. I would entirely agree with him in that particular regard. But I also bear in mind the Statement made on 30th March by Mr. Denzil Davies, as reported at column 163 of the Official Report of another place, and it would be churlish not to acknowledge the improvements costing a small sum, in Government terms, of £350,000 in 1977–78, rising to £1.8 million in 1980–81.

However, the central point concerns CTT. The problem concerning this has gone unanswered for the past several years. When my noble friend Lord Lovat raised it in his debate on forestry last year it went unanswered, and I wish to raise it here once again this evening. In our opinion the valuation on timber should be the value at the date of death or transfer, and not the value on sale. This is particularly significant in a fluctuating market, bearing in mind that the ownership of the crop may have been transferred two or three times in the course of its life. I speak from experience, my Lords. Only recently I felled a crop of ash which was planted in 1905. It passed through two hands in that period of time. I have the advantage of the crop today, but also the responsibility of replanting at a very much greater cost than it would have been in 1974, and certainly at a cost which bears no comparison whatsoever with the cost of planting in and maintaining from 1905.

This is a very significant area because the combination of forestry and farming is beneficial not only from an environmental point of view, to which so much attention is paid, but also especially in relation to the question of the water-table. This may not seem to be a significant factor after such a very wet season, but it is highly significant when considering the situation last summer when the water-table went lower and lower as the months went by. Those farms which were fortunate enough to have tree-surrounded fields enjoyed the benefit of years of cultivation and the combination of forestry with farming.

It is also interesting that countries which have suffered a dust bowl have tried to reintroduce forestry and farming. I understand that in Soviet Russia there is a law in this regard, though it seems that it is being carried out only partially. I believe that the future of both the forest industry and the farming industry must be taken together when it conies to questions of both transfer tax and management, and we should look very carefully at both the amenity and the ecological value, taken together with the agricultural value of our small woodlands policy.

My Lords, I turn now to a matter raised by several of your Lordships which believe to be of the greatest significance; namely, the mitigation of capital taxation, which was mentioned first by my noble friend Lord Middleton. What must be recognised here is the situation in regard to our foreign competitors in the EEC. I would draw your Lordships' attention to one single significant factor. In France in relation to a father-to-son transfer of a farm the maximum rate of taxation is 20 per cent. of the asset value. In this country we are dealing inevitably with the upper reaches, and as inflation progressively advances we are dealing in rates of 60, 70 and even 75 per cent. on the asset value of a major farm, by which I mean a farm running perhaps to about 2,000 acres.

I was horrified to hear what the noble Lord, Lord Mackie of Benshie, said regarding capital taxes when inheriting a property. I do not believe that he could have been serious when he hoped that a young man would benefit from a hank overdraft of £50,000. I would remind the noble Lord that the rate of interest, which would perhaps be up to 14 or 15 per cent., would be his first consideration, and of course there would be the repayment of the principal after that. Is it possible, my Lords, that any young man would have the temerity to be able to invest in his farm, bearing in mind that very heavy responsibility of repaying the debt?

Lord MACKIE of BENSHIE

My Lords, I should like to say, if' the noble Lord will permit me, that I allied what I was trying to point out. I am not in favour of enormously heavy taxes; and capital taxes, because of inflation, have become too high. But the point I was making quite clearly, and which I should like to stress, is that the worst aspect of our taxes is the enormously high rate of income tax.

Lord SANDYS

My Lords, I fully agree with the noble Lord when it comes to income tax, but I believe that my argument remains valid—that when it comes to the question of the family farm we should have a situation of fair comparison with our foreign competitors in Europe.

My Lords, I should like to draw my remarks to a close. I believe that this debate has been particularly valuable, but there was a very strong overtone in many of the speeches—and I think rightly so—of concern and anxiety about the future of the industry. I do not believe that the noble Lord, Lord Walston, was right in scoffing at the gloom because, rightly, parts of the industry feel a very great anxiety about the prospects in the years to come.

Lord ENERGLYN

My Lords, before the noble Lord sits down, would he allow me to add three comments to his fascinating and constructive speech? The first is in regard to the water-table. I should like to underline that one of the hidden dangers in a water-table is, of course, the development of the micro-organisms, or the non-development thereof; and it could well be that, unless we follow the lead of places like Rothamstead, we can have epidemics similar to that of Dutch Elm disease, in which I am particularly interested. Secondly, I should like to draw the noble Lord's attention to the development in Hungary of the conversion of coal into fertiliser. Here is an area of interest which would be new to Britain; in other words, a new use for coal in the fertilisation of our soils.

Lastly, if your Lordships will permit me, I should like to add another source of fertiliser which has come only recently—and I declare an interest—as a result of our researches on the ash which is produced in solid fuel power stations. This so-called pulverised fuel ash contains all the trace elements which were present in the soil 300 million years ago, when the earth saw a verdancy it has never seen since. These trace elements still exist in this pulverised fuel ash, of which we are producing something like 5 million tons a year. Here is a source of fertiliser within the country which has never been used before. We also know from the physical characteristics of this powder that it will very materially affect the thixotropy and the pH of clays, so it has several advantages in its use in Britain, and I commend to the noble Lord the possibility of thinking about this as a source of fertiliser.

8.23 p.m.

Lord PEART

My Lords, I was going to say that I thought this was an interesting debate, but it is even more interesting now, if the noble Lord, Lord Energlyn, will forgive me for saying that. I think he is right. What he has said appeals to me, because my academic discipline at university was geology, but he is a "Prof" and I was only a humble graduate. I believe he has something here, and I hope he follows it up. The noble Lord, Lord Sandys, quite rightly talked about the effects of the drought on our farming and on the soil—bleaching and leaching—and I can assure him that it was not just peculiar to the South. Many people thought that the drought affected only the Southern areas, but we were affected in parts of Cumberland. And it has certainly affected farm income.

I detected a smile earlier on when it was said that farmers face financial difficulties and outward decline partly because of the drought and other conditions. But the simple fact is that the drought had a terrible effect on our industry. I know: I was there. I went over many parts of England to see it. In fact I thought it right to cancel a visit to Brazil. I thought it was far more important to see my own farmers than to go to look at schemes of irrigation in North Brazil. I can assure noble Lords that the drought had great effects on the industry, and it affected morale in many ways. It was something which had not happened and we had not experienced for many years. Let us hope that we shall recover from it. It may well be that the use of more fertilisers will be the right way to do it. And here we have a scientist who has indicated where there could be great developments in relation to the coal industry as well which could provide the necessary fertiliser.

I wish to thank all who have participated in this debate. I think it has been a fascinating debate. We have had expressed a great variety of opinions. I have always said—and I say now to noble Lords—that noble Lords should never apologise for their existence. I have attended probably more debates in another place than any other noble Lord here but I can say truthfully—not because I am speaking in this debate—that the contributions of noble Lords in various spheres of activity far surpass the sort of debate which we used to have there. They far surpass anything that another place can provide. I think that is partly because, while there are political divisions, there is a great sense of responsibility to the particular industry we are debating. I do not get the feeling that we are trying to score political points all the time. Occasionally that is so. After all, somebody said that there may be a lady Prime Minister. I do not know, but that is not the issue. That person, I suspect, has been studying Chinese agriculture. I do not know whether it will make a contribution here, but that is another matter. Some people like rice rather than other commodities; but I make no complaint about remarks like that.

But has this not been a good specialist debate in the best sense? When I look around I say that all noble Lords in their own way have made distinctive contributions. I see my noble friend with whom I used to negotiate—the noble Lord, Lord Woolley. Earlier, I saw the noble Lord, Lord Netherthorpe. I was hoping that the noble Lord, Lord Woolley, could have inspired Lord Netherthorpe to make a contribution. And how well may I say the case was put. Then I heard the noble Lord, Lord Collison, who used to negotiate from the farm workers' point of view. Who knows more on Europe than Lord Walston, on my own side? When I was a critic of Europe, he used to try to lecture me and convert me to a point of view which in the end I accepted. It was the realities of the situation which convinced me to do it.

On the other side, there is the speech of the noble Baroness, Lady Robson—I was going to say, the chief spokesman for the Liberal Party. But not so yet, I think. Lord Mackie is the chief spokseman today. No?; I am afraid I am a little confused. Then, in the processing industry, we heard from Lord Trenchard. There were others. There was my noble friend Lady Elliot, who knows a lot as a practical farmer in the hill-land uplands, and whose husband was a distinguished agriculturist. He made a major contribution to our political life at one period. I had the great pleasure once to go on a visit with him to the Middle East to look at agriculture and other industries there.

So this debate has been remarkable; but I thought it especially remarkable for the speech of the right reverend Prelate the Bishop of Carlisle. What a delightful speech! I am really in his diocese. After all, Cumberland is important from the point of view of agriculture. In Workington, we have the home and place where Kerwin lived, who was one of the fathers of modern agriculture. But Cumberland has its problems. We have wonderful pasturelands and valleys, but we have our hill-land uplands. But I agree with the right reverend Prelate so much and with Lady Elliot and others who have had experience of uplands.

I must mention that we once had an imaginative scheme which would have helped Cumberland considerably. I refer to the Pennine Rural Development Board which we sought to set up and did create in that area. We also tried to establish one in Wales, which would have been welcomed by my noble friend Lord Davies. But I am sorry to say that because of a doctrinal attitude by a new Government that scheme, which was beginning to grow up near Cumberland, was scratched. It was a scheme which was blessed by the Country Landowners' Association, the National Farmers' Union and the Agricultural Workers' Union. I am talking now about the Pennine scheme. Indeed, I appointed a distinguished Cumbrian, Tom Cowan, chairman of that body. We were going to pump capital into the hill-land uplands of the Pennines. This would have helped our hill farmers considerably. It would virtually have worked a revolution—the sort of thing which I saw in the Community, in Munich, where Herr Urchal, the German Minister, proudly showed me what Germany had done in a similar way, but on a bigger scale, and how the State had helped. We tried to do that, but I am afraid that the Party opposite for once were very doctrinal. I think that they made a mistake. One day I hope we may be able to do something about it.

I want also to congratulate the mover of the Motion. I think we owe a great debt to the noble Lord, Lord Middleton. He knows the industry well—not just the farming side but the estate side—and takes a great interest in our matters. I think we owe it to him that we have had a most interesting debate. I think it is particularly apt to have had this opportunity for discussion today. It is just over a month since we debated the Commission's CAP price proposals and agri-monetary questions on the basis of the very helpful reports from our Select Committee on the European Communities. That was a most helpful debate.

Today we have had details of the outcome of price negotiations in Luxembourg. I made a Statement and I apologised that noble Lords opposite had such a short time to study it. It was a difficult and complex statement. At the time I was pressed by, I think, the noble Lord, Lord Mackie of Benshie, about the price of pigs. I made inquiries quickly. May I get that out of the way? He asked me —and he repeated this—how much the price settlement is worth per pig. I think he said that the producers required an increase of £5 per pig to break even. The answer is—and I hope that it is right; for, if not, I know the noble Lord will come back to me—that the increase in the Community basic price from November 1st, including the effects of the green pound change is equivalent to about £3.50 per pig. The actual returns to producers will depend on cost and on market forces. As I said earlier, the Government are pressing for a change in the method of MCA calculations. We shall pursue this objective with determination in the Council of Ministers.

I think he asked also about the guarantee price for milk and potatoes. I was going to write to him about that; but I can say now that the Government announced at the end of March that the existing milk guarantee price of 9.678 pence per litre (44 pence per gallon) will continue for the time being. Now that there has been agreement on common support prices for 1977/78 the Government hope to be able to make an early announcement on the guarantee determination for the period up to the end of the transition on December 31st 1977 when, under Community rules, the guarantee will cease to exist. The guarantee determination will relate to the whole of the period; that is, from April 1st to December 31st 1977. I have done my best to answer the noble Lord. Perhaps I should now continue.

My Lords, we have undoubtedly had a very wide-ranging debate which encouraged us to stand back a little from the immediate developments and consider the broad position in farming as a whole. I believe that the noble Earl, Lord Ferrers, was right to widen the debate. This debate would have taken place even if we had had no price determination today. If it had been postponed for two or three days, we should still have had this debate. The issues of land use, which were developed by the noble Lord, Lord Vernon, and introduced also by the noble Lord, Lord Middleton, enabled us to look at the broad position—and that is right.

Anxieties are expressed by the industry in several counts. Many noble Lords touched on them today. There is concern about rising costs and the fall in net products. It is argued that confidence is low and that we are failing to make progress towards the achievement of the aims in Food From Our Own Resources. Noble Lords have mentioned specific points of concern to them such as land use policy, taxation matters, and other matters affecting particular commodities.

May I try to assure your Lordships, first, that the Government's decisions continue to be guided by the aims and priorities in the White Paper, Food From Our Own Resources. I was proud of that paper. I always believed that it was right if I ever again had the responsibility of looking after agricultural matters that we should produce a long-term policy.

I know that I was criticised for it at the time, on the grounds that it was a little delayed; but, looking at agriculture, I believe that it was right to have a broad strategy. I think we had that in 1945. The noble Lord, Lord Woolley, will remember that period which led up to the discussions between the Country Land-Farmers' Union and the National Union of Agricultural Workers which in the end led to what I regarded as one of the great landmarks in agriculture. I refer to the 1947 Act.

I need not go into details, but it was a major step forward. Here we were at the end of a war, and we did not repeat history—that bad history which happened after World War I when the Corn Production Act was revoked and when farmers who had been given a little security lost it. In the post World War II period which many of us here enjoyed the situation was quite different. The 1947 Act was a great step forward. Subsequent Conservative Administrations amended it and improved it here and there. The birth of deficiency payments was mentioned by the noble Earl, Lord Onslow—which he wanted to introduce into Europe.

There was a long-term policy backed up by a White Paper which showed where the aid would be injected, what resources outside the industry would be given to it and what resources would be employed from within the industry. It achieved a revolution. We created, as noble Lords know, a remarkable partnership at an executive level between the farmers, the farm workers and the CLA. I think of the old county committees which enabled me as a Minister, when I was a Minister longer after they had been set up, to go into different parts of the countryside and talk to farmers who had virtually executive responsibility which they used to share with representatives from the Country Landowners' Association in the area and the farm workers. It was a remarkable example of what I can call industrial democracy. We are only now talking about it in other fields, in relation to the Bullock Report. But we had it then. I make no apology for defending it here tonight.

I think it is right to have a long-term policy. That policy is still there, and for so long as I am in the Cabinet I hope I shall have the strength always to support it and to make it work in the interests of those who produce the food which, in the end, benefits the consumer. I think that White Paper is a major strategic document. I think that the Opposition are quite right to mention it in all of our debates, as they do; and to ask the Minister: are you going really to create confidence in the industry so that you can fulfill that strategy which is there before us?

It is in our national interest to encourage an industry like agriculture which, as the noble Baroness speaking from the Liberal Benches said, can make a significant contribution to improving our balance-of-payments position. That is a fact and everyone should know it. Despite all the pessimism, the United Kingdom has made some progress towards a higher level of self-sufficiency. It is unlikely that we shall ever be fully self-sufficient, but our aim should be to displace any imports which we can produce ourselves more economically than we can obtain them from abroad.

My Lords, the noble Lord, Lord Vernon, and, I believe, another noble Lord, spoke about the losses of agricultural land to development and the longterm risk to the production of homegrown foods. Our population is still expanding although the latest figures suggest at a slower rate than hitherto, and the need for new houses, new roads, new factories and their associated infrastructure is continuing to grow. In particular, the need for these new developments and the number of potential households will continue to increase for some time ahead. Let us be clear that the land for these new developments can come only from two main sources: derelict or unused urban land and agricultural land. It is of extreme importance to our economy that the first source should be used to a maximum in order to keep the use of the second to a minimum.

How can this be done, my Lords? As the Secretary of State for the Environment said in his speech last September about inner urban policy, great waste is caused if we develop good agricultural land while spare land lies available within our cities. That is common sense. Local planning authorities should try to ensure that not a single acre of agricultural land —perhaps I may use the commonly accepted term greenfield sites—is taken for development while suitable sites exist within the perimeters of existing towns and villages.

Local planning authorities now have important and wide powers under the Community Land Act to go in for positive planning. They can therefore arrange for the development of their areas in accordance with planned programmes as set out in their local development plans. It is most important that they should make full use of them. My right honourable friend the Secretary of State for the Environment has recently made two announcements of considerable importance in this context. First, he has drawn attention to the need to inject new life into the communities of our inner urban areas and our inner cities. There is to be a significant shift in emphasis in Government policy and a six point programme. This includes an increase in urban grants on a steadily improving scale over the next decade.

Secondly, he has carried out a comprehensive reappraisal of the new towns, the first since the mid-1960s and has announced that five designated areas are not to be extended. Further savings of agricultural land should follow from the proposed substantial reductions in the programmes of the third-generation new towns. Nevertheless, I would agree that there is an inexorable loss of productive agricultural land to development over the past five years up to 1973–74, that is the year for which latest statistics are available.

The amount of land that went out of agricultural use in the United Kingdom each year was 146,500 acres, of which 46.300 acres were taken for residential, industrial and recreational use. These figures represent a decrease of 10 per cent. and an increase of 29 per cent. respectively over the same figures five years ago. The question is: how do we tackle this loss?

Earl FERRERS

My Lords, may I interrupt? The noble Lord said that 146,000 acres were taken out, of which 46,000 acres were for residential and industrial use. What were the other 100,000 for?

Lord PEART

My Lords, I will follow that up and give that information. That is the only information that I have at the moment.

Earl FERRERS

My Lords, it is a large amount.

Lord PEART

It is a large amount, my Lords.

Lord MACKIE of BENSHIRE

Forestry.

Lord PEART

It could be forestry. I will not commit myself to any exact figure. I will get it for the noble Lord. Noble Lords want to know what we are going to do about this. Government policy has been firm for a number of years and throughout the terms of office of a number of different Governments. Immediately after the war in 1946 the policy was to steer development away from the better quality land on to the land of a poorer quality in the same area, and not to take any mere land than was really necessary for the development in question. That is still the policy today, not because we have become used to it and are complacent, but because despite periodical, critical reappraisals, we still find that this is the most successful formula and the most practical to apply that can be devised.

The noble Lord, Lord Vernon, asked me to do something about classification, and made some suggestions. I will give him the assurance that I will follow this up. There could be something in his argument. I will not be complacent and will see that my right honourable friend is informed about it and the officials who are concerned. This formula of defending the higher quality land, limiting the acreage used, is applied by land service officers of the Ministry when they are consulted by local planning authorities on all important developments.

The cut-off for consultation used to be five acres. This is not a political point—this is not politics as such—but I understand that when the Party opposite were in Government they very significantly weakened our defences by raising the limit to 10 acres in 1971. Manpower considerations have so far prevented a return to the tighter figure. In the majority of cases the local planning authorities and land service officers have achieved a close rapport which can do nothing but good. The essential requirement in the planning of green field site development is that the planners and the land service should consult at the earliest possible moment and well before plans start to crystallise and attitudes harden.

Lord VERNON

My Lords, before the noble Lord leaves that aspect of the subject, can he say whether the Government accept the conclusion of the Centre for Agricultural Strategy that the planning system should be altered in the way that they suggest?

Lord PEART

No, my Lords; I cannot give that assurance. I said I will have consultations on that. I will let the noble Lord know of any results. If I may turn briefly to taxation because unfortunately, I am speaking at great length. I have no doubt about the anxieties which a number of noble Lords feel. There is often unjustified pessimism here. I know that noble Lords are worried about the impact of capital transfer tax on the agricultural landlord. I believe that it is too early to predict the detailed effect on agriculture with any certainty. The tax will, after all, normally fall only once in a generation, and its impact is therefore likely to be very gradual. The tax is part of the Government's measures to promote greater social and economic equality, and it would clearly be wrong to exempt landowners.

I think that the Government have however gone to considerable lengths to protect by a variety of reliefs genuine farming business. As a result, the capital transfer tax liability of the average farmer will be only around 40 per cent. of that payable by individuals with assets of similar value who are not eligible for these reliefs. It is accordingly difficult to see the capital transfer tax as constituting a serious threat to the viability of growth of most family farms. It is true that the special reliefs enjoyed by farmers are not available to private landlords, but their position is different in a number of ways. This was mentioned by the noble Lord, Lord Mackie of Benshie. The price of tenanted land is normally much lower than land offered with vacant possession, so a landlord's liability will be proportionately lower.

Landlords can further reduce their tax bills by making use of the general reliefs, and possibly also the conditional exemption for buildings of outstanding interest. I do not believe that there is this disruptive effect. I recognise that noble Lords are worried and it is something that we must watch carefully. It is too early to assess the eventual impact of present taxes on the farming industry.

May I say a word about other matters: the noble Earl, Lord Ferrers, mentioned legislation which has affected confidence. We went back again to the tied cottage and how this was to affect matters. From what I understand, so far things are going quite smoothly and there has been no complaint sent directly to the Ministry so far as I know. It is too early to make a judgment. All these measures taken together have created anxiety. I understand that. Perhaps next year in another debate a similar speech will be made again by the noble Lord, Lord Sandys, and no doubt I will make a more favourable reply.

It has been a great success but I think I had better conclude. I will write to all noble Lords whom I have not mentioned. I have spoken for nearly half an hour, but I should like to conclude by saying that Europe has been mentioned inevitably in this debate. People have to realise that we made a decision to go into Europe. We did not only as a Government, make a decision to negotiate. I have here the terms that we negotiated. I think they were good terms. They were terms which showed that we had decided to achieve certain objectives, for instance a general improvement in the operation of the CAP and its support systems, a liberalisation of trade and assurances which were reflected in the policies put forward and in the actions which were taken and accepted by the country.

I refer to what we did for New Zealand, which was welcomed by the Government there, concerning the access of their dairy products. I think of the 1.4 trillion tons of sugar for the CAP countries. Those are just some examples. I know everything is not perfect, but there have been changes. You cannot, contrary to what many people think, change something like the CAP overnight. You have to work there, win confidence and behave in a Community manner. I accept that. I think we have achieved much and I do not blame the Community for dear food in the world. That is too naive and I think that the noble Viscount, Lord Trenchard, agrees with me on that.

The great thing is that we now have continuity of supply, which is so important. Of course there are problems with pigs, for example, and MCAs. Commissioner Lardinois would have loved to do something about the matters which need to be changed. He has now been succeeded by a very distinguished Commissioner, Mr. Gundelach; and with goodwill all round we shall get those improvements that we still want.

So I would say to my friends in Parliament: it is no good knocking the CAP. We are in Europe; the British people advocated it through a referendum and many of those who advocated a referendum are now trying to run away from the decision created by that referendum. I think the message I should like to give, arising from this debate, is this. We have had a Price Review and we have to make it work. We must see that our farmers are protected.

We have to recognise that, of course, there is the consumer's point of view. I often used to take a junior Minister, a consumer Minister, with me, together with official representatives from the Prices and Consumer Protection Department, when I went to Europe. I believe it is right to recognise that there is a consumer point of view. It is no good producing surpluses which are not eaten. I should like surpluses to be for the benefit of the Community, and I want us to play a bigger international role in food aid—and why not? So when people get worried about butter mountains—and I hope that the right reverend Prelate will understand what I mean—I would ask: How big is the butter mountain? Is it Skiddaw or Mount Everest? There is too much exaggeration about it. With nine very sophisticated nations in Europe producing commodities, inevitably there will be surpluses. I see nothing wrong if we have commercial agreements inside and outside Europe. Just as France sends her wine to us in greater quantities, even though we sometimes have penal taxes, America sends her grain to Russia even though the two political systems are incompatible. I do not know why we should apologise for that.

My Lords, I think this debate has shown that there are certain things which are still wrong in our own industries and there is an emphasis here and there which has to be improved; but with goodwill all round there is no reason why we, the British, should not continue to play a major role in Europe, which will help our agriculture and our consumers, and will be good for us internationally.

8.55 p.m.

Lord MIDDLETON

My Lords, I should like to join other noble Lords in congratulating the right reverend Prelate the Bishop of Carlisle upon his outstanding contribution to the debate. It is particularly happy that he should make his maiden speech today, with the knowledge that he has not only of the uplands of Cumbria but as a "flock master" in the most literal sense of the word. I contemplated with pleasure the pastoral uses which he might make of that which in my layman's ignorance I must describe as "a bishop's crook"—I know there is a more correct name for it, but it escapes me at the moment.

It is very appropriate that this debate should coincide with the Government's Statement on the Community price decisions. The noble Lord, Lord Woolley, said that I had avoided reference to the Common Market. I did avoid, since they were debated here only last month, the more complicated financial aspects of the Common Agricultural Policy, but I laid emphasis on the monetary and green pound problems arising therefrom. The noble Lord, Lord Woolley, is quite right. The fate of our agricultural industry is wholly bound up with the Common Market and, as the noble Lord, Lord Peart, has just said, we have to see that the CAP works. We all accept that the system is not working particularly well at the moment, but our prosperity depends upon our seeing that the CAP evolves in a sensible way as its faults become apparent and as circumstances change. It will be against our own nation's interest if any one of the Nine attempts to undermine the system for short-term political reasons.

Many noble Lords have pointed out the difficulties which are peculiar to this country. From what he has just said in a most outstanding speech, I know that the noble Lord, Lord Peart, as a former Minister of Agriculture—and here I join with the noble Baroness, Lady Elliot, in saying that he is one who is held in great respect and affection by the agricultural industry—is fully aware of the problems and disabilities to which I referred earlier. I am most grateful to him for the way in which he has replied for the Government. He knows I shall not agree entirely with him about tax, but I am more than grateful for the assurance that he has given, and especially grateful to him for saying that the Government stand by the policy of greater self-sufficiency as envisaged in Food From Our Own Resources. However, it will need all that he and the Government can do to give confidence to men like the farmer who said to me recently, summing up the problem of weak sterling and the value of the green pound: "All my sales are paid out in phoney money while I have to pay my bills in real money." If I may say so with great respect, the noble Viscount, Lord Trenchard, expressed the same sentiment in much more sophisticated language. I am most grateful to all my noble friends and indeed to all the speakers who have contributed to this most useful and interesting debate. I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.