§ 7.41 p.m.
My Lords, I beg to move that the Farm Capital Grant (Variation) Scheme 1980, which was laid before this House on 31st January, be approved. I think that it might be for the convenience of the House if we took at the same time the Horticulture Capital Grant (Variation) Scheme 1980, which was also laid before the House on 31st January. These two schemes are subject to Affirmative Resolution by your Lordships. But I should like to refer also to the Farm and Horticulture Development (Amendment) Regulations 1980, which were laid at the same time, but which, strictly speaking, do not require debate as they are subject to the Negative Resolution procedure. But they all form part of the same proposals which represent the first step towards a new simplified scheme.
As your Lordships know, we have had a number of capital grant schemes. Over the years these schemes have been modified, supplemented and sometimes replaced in line with the ever-changing requirements of the needs of the agricultural industry. In my view, there is no question that the various capital grant schemes have greatly benefited the agricultural industry and have contributed to its outstanding record of increasing productivity and efficiency. When we took office last May, we undertook to reduce public expenditure and to find ways of raising the efficiency of public business. The Prime Minister asked Sir Derek Rayner, in consultation with Ministers, to help to identify ways 1614 in which staffing and other costs of administration could be reduced. A study of the capital grant schemes was undertaken and we have accepted, in principle, the recommendation that the existing grant schemes should be replaced by a radically simplified and rationalised new scheme.
We are at present engaged in consultations with the farmers' unions and other organisations, including those representing the staff concerned, who can advise on the practical application of the proposals put forward. Following these consultations, a new scheme will be presented to Parliament before the Summer Recess. One of the changes which was proposed for the new scheme was a rationalisation of the grant rates. This followed speculation in the farming Press over recent months as to whether the Government's intention to reduce public spending might result in changes to the grant rates. My right honourable friend the Minister of Agriculture believed it was right to end this uncertainty and, at the same time, to take a step towards the proposed rationalisation. The schemes before us today do this.
The schemes came into operation on 1st February 1980, the day after being laid before Parliament. If we had given longer notice, this would have invited a flood of applications, with all the undesirable effects which that would bring. The orders make two main changes; they adjust certain grant rates and they introduce a limit on the total amount of investment which can attract grant. If I might take the grant changes first, contrary to a widely held view most grant rates have been increased. Taking all three schemes—the Farm Capital Grant (Variation) Scheme, the Horticulture Capital Grant (Variation) Scheme and the Farm and Horticulture Development (Amendment) Regulations—a total of 59 rates go up and 43 go down. Forty-four rates remain unchanged. The basic rate of grant for buildings and works under the FCGS and the HCGS is now 22.5 per cent. Under the Farm and Horticulture Development Scheme it is 32.5 per cent. This change will remove the previous discrimination against sheep housing compared with cattle buildings. Grant-aided investment on sheep housing 1615 has been increasing over recent months and we wish to encourage this trend. I am sure that the industry, which has been pressing for such an improvement for some time, will welcome it. Although horticulturists will get slightly less aid for buildings and works under the HCGS than before, there has been an equivalent increase in the rates for these items under the FHDS.
We have retained the present grants for horticultural plant and equipment at their existing levels, because we recognise that horticulture generally benefits less from price support arrangements than does agriculture. I hope that growers of protected crops, in particular, will see the continuance of these grants as an indication of the Government's confidence in the future of this sector, which we all know is facing increasing difficulties, not least from rising energy costs.
Assistance for dairy and cattle buildings is reduced to 22.5 per cent. under the national scheme and 32.5 per cent. under the EEC scheme. They were given a higher rate in 1976, in order to encourage the better utilisation and conservation of grassland and economic milk production. We believe that, in the present climate, there is less justification for the advantage given in 1976, especially following three devaluations of the green pound and two increases in the milk price, which have benefited dairy farmers substantially. It is for the same reasons that grants for dairy plant and equipment for the loading and unloading of silos, which were introduced in 1976, will no longer be available under the national schemes, although they will continue, at lower levels, under the FHDS.
Where grant on other forms of equipment has been reduced, it is worth remembering that this equipment benefits from the 100 per cent. write-off provisions in the year of purchase for income tax purposes. Farmers and growers outside the Less Favoured Areas will generally get 10 percentage points higher grants under the FHDS than under the FCGS. Inside the Less Favoured Areas, they will enjoy a further five percentage points advantage on most items.
The Advisory Committee on Agriculture and Horticulture, under the chairmanship 1616 of Sir Nigel Strutt, recommended in their most recent report that more incentives should be given for water conservation. I am therefore glad to be able to tell your Lordships that we have decided to increase to 22.5 per cent. the rate of grant on water supplies and conservation. We considered that, to reduce grant for field drainage to the basic rate, would probably have led to an unacceptable lowering of the amount of work undertaken. For this reason, we deviated slightly from our policy of rationalisation by creating additional grant rates of 50 per cent. for the lowlands under the FHDS and 37.5 per cent. under the FCGS.
Over the last 20 years, the area of land drained has steadily risen from just over 40,000 hectares per year to over 100,000 hectares in England and Wales and, in the five years between 1975 and 1979, the value of investment grant-aided has risen from £16 million to £33 million per year. I believe that this shows the appreciation by farmers and landowners of the value of drainage. I am confident that the capital grant schemes will continue to make a major contribution to this investment, which is so very important.
We are, of course, retaining the 70 per cent. grant for hill drainage in Less Favoured Areas. In recognition of the special natural handicaps with which these areas have to contend, we are also retaining the 50 per cent. level of grant on hill land improvements.
If I could refer to the new limits, a substantial proportion of grant is going to a small number of applicants who are operating large enterprises. In the main, these applicants have benefited from the tax changes which were made by my honourable friend the Chancellor of the Exchequer in his Budget and so they will have a higher proportion of net income available for investment. We have, therefore, decided to impose a limit on the amount of investment which can qualify for grant.
Under the national schemes, the limit is 160,000 European Currency Units, which is about £100,000, on which grant may be paid in any six year period. Under the EEC Scheme—the Farm and Horticulture Development Scheme—the limit is not 160,000 units but 220,000 European Currency Units, which is about £136,000.
1617 We consider that this represents a reasonable level of investment for a family farm. But there will be no retrospection. In applying the limits, no account will be taken of any expenditure on which grant has been claimed where the application for approval of that expenditure—whether under the national schemes or the FHDS—was received before 1st February 1980. These limits will apply in addition to the existing labour unit limit and applicants will no longer be eligible under the national schemes while they have a current development plan approved under the FHDS.
Only a relatively small number of large enterprises will be affected by these limits. Under the national schemes, perhaps 1 per cent. of applicants will be caught by them over a six year period. Under the FHDS we expect only about 1 in 5 of development plans to be affected but all applicants will, of course, be eligible for grant on investment up to that limit. It is only grant on investment which exceeds the limit which will be affected. The limits and the changes in rates are expected to produce important savings for the Exchequer which are estimated at £4 million in 1980–81, rising to £35 million in 1983–84. We shall keep a close watch on the trends in grant applications, the cost of which will depend on the use which farmers make of the schemes.
In making these changes we have taken into consideration current events in farming and horticulture and the likely pattern of demand over the next few years. We would not rule out changes if these become desirable in the future. We believe however that these arrangements are in line with the present needs of the industry. I present them to your Lordships believing that, together with the changes still to come, they will enable the grant schemes to continue to benefit agriculture and horticulture in the continuous process of adapting and innovating.
§ My Lords, I commend these schemes to your Lordships.
§ Moved, That the Scheme laid before the House on 31st January 1980 be approved.—(Earl Ferrers.)
§ 7.53 p.m.
§ Lord CLEDWYN of PENRHOS
My 1618 Lords, I read these orders with considerable interest and I should have liked to speak in some detail upon them, but in view of the hour and the substantial debate which is to follow I will seek to restrain myself.
I welcome some of the assurances which the noble Lord the Minister of State has given to the House and I should specifically like to congratulate Sir Nigel Strutt and his committee on the excellent work which they have done. There is one point to which I should like to address myself, and I should appreciate it if the noble Earl could answer me before the conclusion of the debate.
I must express some concern about the possibility, which seems to me to be inherent in the report, that the level of grant aid for field drainage may well be substantially reduced as a result of these orders. The Minister of State said that some of our apprehensions may well be unjustified. If he can satisfy me on this point I shall be very happy. There are some cuts in public expenditure which can be justified but there are others which do inflict long-term damage of a most serious character. Some grants made by the department are an investment. They bring returns in due course which are far greater than their value, and grants for field drainage fall into that precise category.
I well recall that when I was the Minister of Agriculture we had to economise in various ways; but I was always chary of cutting some services, and field drainage was one of them. Indeed, I increased the grant on field drainage because I felt that it was in the national interest and in the interests of agriculture. I understand that it is calculated that about 7 million acres of food-producing land are in need of drainage in the United Kingdom, and the consequences of cutting drainage grants will be incalculable. I should be grateful if the Minister of State could say whether the Government are proposing to make a saving of £3½ million on field drainage alone and what the amount of savings in the other categories is likely to be. This is what the House will want to know.
Farmers are going through a difficult time and we know that they are going to go through an even more difficult period in the months which lie ahead. This, 1619 therefore, is not the moment to undermine the confidence of farmers in this country. I greatly hope that, if I am right in my suspicion that the Government are proposing to make a major cut on field drainage, they will think again, because I would regard it as a very important step to take, a step which would in fact affect food production in this country over a considerable period of time. I wish that I could speak at greater length on this matter but, as I say, in view of my noble friend's desire to open his debate on a very important subject, I will desist. I merely appeal to the Government to think again about this particular point.
§ Lord SANDFORD
My Lords, could I quickly raise a point with the Minister, not on the rate or the scale of his grants but on the administration of them, particularly in relation to the proposals that I understand are going to be tabled later on this year in connection with Sir Derek Rayner's proposals for streamlining and simplifying the procedures? The context in which I want to do this is the recommendation of an earlier report from the advisory council to the Minister, that ADAS, who have such an important role to play in administering these grants, should assume greater responsibility for the conservation of the landscape, the conservation of wildlife, public access to the countryside, tourism and other industries based on farms. That report was accepted, and ADAS have been seeing how they can implement those extra responsibilities. It has involved a good deal of work in those parts of the country where conservation policies are particularly important, such as national parks, areas of outstanding natural beauty, nature reserves and so on.
I appreciate that that has got to continue side by side with economies and simplifications in the procedure which may make it possible to reduce staff in ADAS, or at any rate make the same staff able to get through a greater amount of work. If, among these proposals, it is intended—as I believe it is—to abolish the prior approval as part of the streamlining process, then it is very important that farmers should know where they stand before undertaking capital work not only in relation to the agricultural aspects of their proposals but in relation 1620 to the impact of those proposals on the countryside, on the landscape, on wildlife, on nature reserves, et cetera. That is to say, they must be able to understand the relationship of their proposals on which they hope to get grant aid to the conservation policies in force in particular areas.
I should be very grateful if the Minister could tell us now whether the consultation process has been begun—by which national park authorities, for instance—and the local staff of ADAS can begin to work out the mechanisms by which this process is to go on. My inquiries today have led me to find that there is no knowledge of this change in the process among the national park authorities so far, so I should like to be reassured tonight that a process of consultation is to begin and I should be grateful if the noble Earl would write to me and give me details of what procedures are intended.
§ 8 p.m.
§ Baroness ELLIOT of HARWOOD
My Lords, I should like to ask one or two questions and I declare an interest that, as a farmer, I am a member both of the FHDS scheme and the Farming Capital Grants scheme. I view with some dismay the fact that at a period when everybody knows that the farming industry is in very low water these changes will probably reduce production and what farmers can do.
As the evening is late I promise not to speak for more than two or three minutes. Why must we have a limitation on the investment, to the effect that grants will be paid up only to the first three employees on a farm? There are some farms with a great many shepherds, for instance, and three employees is perhaps only half of what they have to use. On the other hand, there may be another farm with tremendous mechanisation and only two people are used, and therefore they will get the benefit of no limitation. That in itself is rather unfair.
So far marginal land has been included in the grant aid; and the noble Lord, Lord Cledwyn of Penrhos, has drawn attention to the question of draining, which is very important indeed. In marginal land, of course, a great deal more draining has to be done than on very well cultivated land. Also, having had six or seven years' experience of sending in applications.
1621 for approval before one can start a scheme, or before one knows that if one starts a scheme the grant will be available, I view with some anxiety what the noble Lord, Lord Sandford, has said, that farmers will be able to start (if they are brave enough to start) without the approval of the Ministry. I think there must be some safeguard about that, otherwise nobody will start a scheme of draining or hill drainage, or whatever it may be, unless they know that they have the approval of the Ministry. Up to date one has worked closely with the Department of Agriculture and they have been extremely helpful, but I would not dream of starting a scheme without getting their approval. I realise this is supposed to be one of the things which will cut down on administrative expenditure. It may do that, but if at the same time it deters people (which I am afraid it will do unless they have great confidence in the approval of their scheme) I think it will be a great mistake.
I realise that all these things must be looked upon as being economic, but I have now been in this work for so many years that I think the way in which our agriculture in this country is run is extremely economical. Sitting, as I do, on the Committee on EEC agricultural schemes, one realises how very much more efficient is British agriculture than continental agriculture; and when I see in the schemes a bias towards the small farmer, although to some extent it will help our own small farmers, what it is really designed to do is to help the very uneconomic small farms on the continent, where people earn their living by doing something else and just call themselves farmers for perhaps two or three days in the week.
I hope the noble Earl will view with a critical eye what the EEC are recommending in the way of limitations, and that the Farm Capital Grant scheme (which is our own scheme) will not be cut down in any way, provided that the approval of the Ministry is there for increase in production.
§ 8.6 p.m.
The EARL of CAITHNESS
My Lords I should like to raise two small but quite major points. The first point relates to the overall limit on which grant can be claimed. At the moment, as my noble friend said, it is £100,000 on the FCGS scheme and 1622 approximately £136,000 on the FHDS scheme. As I understand it, this is linked to the European currencies and therefore, if the value of the pound increases, so there will be a proportionate reduction in the amount of grant; so that we could have the pound increasing and only be able to claim grants on, say, £100,000 on the FHDS scheme and £75,000 on the Farm Capital Grant scheme. This could be a very serious encumbrance on the farming community.
The other point concerns the lack of flexibility created by the new paragraph 5A in the principal scheme. At the present time if one is under a FHDS scheme one can also apply for grant under a FCGS scheme, but the revised paragraph does not permit this flexibility. So there is the situation where a person has applied for a horticultural scheme grant of, say, £80,000; 50 acres come up next door which the farmer must buy, and work is already commencing under the horticultural scheme on a cattle building, but as a result of buying the new land he must build on another bay to the cattle building. It now takes weeks, if not months, to get an alteration to the FHDS scheme, and that will cause considerable delays when there are contractors on site, erecting the building. At the moment all he does is to get an urgent works authority under the Farm Capital Grant Scheme, which is a very much quicker process, and the building can be put up, to the benefit of all. Can my noble friend comment on the speed with which the revised procedures will be brought in, so that the FHDS scheme that one is claiming under at the moment will be speeded up if any alteration needs to take place to that scheme?
§ 8.9 p.m.
Lord BRUCE of DONINGTON
My Lords, the House will be grateful to the noble Earl for having explained so clearly the purport of the two statutory instruments to which he has referred. In introducing the scheme he said that a total of 59 rates would go up, 43 would go down and some 44 rates would remain unchanged. It was only at a later stage that we knew the total financial impact, which he put at a saving of £4 million in 1980–81 rising to £35 million in 1983–84.
We on this side of the House would like to support the instruments which he has 1623 introduced to us, on the principle of course that we are in favour of the intervention of Government in private industry wherever it is necessary so to do in order to ensure continued progress in the industry, for innovation and all that kind of thing; but what we find a little difficult is the dichotomy that exists between the noble Earl on the one hand and Sir Keith Joseph on the other. Whereas intervention in private manufacturing industry is deemed to be poison, something that goes right to the root of the whole enterprise of private industry, when it comes to agriculture then suddenly Government intervention into private agricultural industry becomes a virtue. I would not wish to enlarge upon this indefinitely at this time of the evening, but I am bound to point out the slight incongruity of the situation.
Undoubtedly the farming community would say, and possibly with some justification, that if it were not for these aids in many instances farmers would go bankrupt or horticultural institutes would go bankrupt, to which of course Sir Keith Joseph's answer would be, "We cannot help lame ducks because of the limitations imposed on Government expenditure". I do not want to be more playful than necessary with the noble Lord on this point, but I am bound to point out that there is this inconsistency about which the House will hear much more over the months that deploy themselves until the time, which we hope will be quite shortly, when the Government are driven to go to the country again for a new mandate. Certainly much more will be heard of it.
The noble Earl has already given the amounts of savings, and I should be very glad if he could give us the revised total figures to be spent in the next financial year under each of the schemes. We may then know the true magnitude of the intervention by the Government, intervention which we entirely support in this important sector of private industry.
§ 8.12 p.m.
My Lords, I am grateful for the observations which noble Lords have made upon these orders and I am grateful for the basic welcome of your Lordships. I must say that I thought the noble Lord, Lord Bruce of Donington, was stretching the point a little bit far 1624 when he said that before long the Government would have to go to the country again, all because we have lowered the Farm Capital Grants Scheme by 10 percentage points. It was a bit of a red herring and I do not think the noble Lord really expects me to follow it. I realise that he was, as he so graciously put it, being playful. He knows as well as I do that both parties, the party to which he belongs and the party to which we belong, hold the importance of agriculture in the standing of the country very highly indeed, and any Government that let agriculture decline or go into disuse will have a very heavy responsibility to bear. That is what we want to see protected, and we are determined to see that agriculture is permitted to play its proper part, not only as a private industry, but because it provides the food the nation requires.
The noble Lord, Lord Cledwyn, was, I am bound to say, a man after my own heart. To start with, he was a very distinguished Minister of Agriculture. I was glad to see him lay such importance on drainage because it is, in my judgment, a very important part of agriculture. If you have not got your land adequately drained you do not get the structure of the soil right, and if you do not get the structure of the soil right you do not get the crops. He was quite right, if I may say so, to be concerned about the lowering of the levels of grant. But I think I can persuade him of this point, that the level of grant at the normal rate on the EEC scheme has gone down from 60 per cent. to 50 per cent. and on the national scheme from 50 per cent. to 37½per cent., but in the Less Favoured Areas the level remains at the same rate.
He asked me about the financial side of it. I can tell him that the level of grant-aided investment for under drainage over the last five years, between 1975 and 1979, has gone up from £16 million a year to £33 million a year. So he will see that there is a considerable continuity of investment in drainage. The area of land drained has gone down marginally in 1977. In 1975 it was 109,000 hectares, then it went up to 114,000 and then dropped to 101,000. When he asks what is the estimated effect, it is very difficult to say what the effect will be because it depends on whether farmers have got the confidence to invest, the level of borrowing and a number of different factors. Of the 1625 estimated savings of £35 million in 1983–84 it is expected that about half will come from changes in the grant rates.
I would point this out, because I think it is important. Although these changes are coming in as from 1st February, anyone who has taken part in a Farm and Horticulture Development Scheme and has had approval of that scheme in advance of 1st February will be able to continue that scheme at the rates which then apply. In cases where some rates have gone up he will be able to get the benefit of the increase. Recipients will not get a decrease in rate for those schemes already in operation before 1st February. I think that is an important point.
My noble friend Lord Sandford referred to what was going to happen in the future about prior approval. I should like to tell him that of course the abolition of prior approval does not take place under this present scheme; he is thinking of what is likely to happen in the future. We propose to make special arrangements in sensitive areas such as national parks, areas of outstanding natural beauty and sites of special scientific interest. There will be a scheme leaflet which will remind farmers of the desirability of conserving the natural beauty and amenity of the countryside, and it will make clear that in the specified areas the farmer will have to consult the responsible statutory authority about his proposals before starting work if he wishes to claim the grant. If the farmer and the authority reach agreement on the work to be done then it can go ahead.
If there is an unresolved disagreement it will be a condition of grant that before any work starts ADAS must be consulted. The advisory service will, as they do now, offer advice and seek to assist the farmer and the authority to reach agreement. If they do, the work can go ahead. In the event of disagreement the Minister will consider the case on its merits, as at present, when the grant is claimed. When claiming a grant an applicant will have to sign a declaration that he has consulted the appropriate authority and reported any disagreement as required. If he cannot make this declaration, or it is found to be false, grant may be withheld or recovered. So it will be up to the farmer to make quite sure that he has consulted the appropriate authority before 1626 entering on expenditure for which he hopes to claim a grant.
My noble friend asked who has been consulted. A consultation document has been circulated to all the interested parties including the national parks authorities and the Countryside Commission. I will be happy to write to my noble friend as he suggested to amplify these matters if he feels concerned about this. My noble friend Lady Elliot said that she was concerned about the limitation that had been put on the scheme with regard to labour units. I think in fact she is in some error here, because the schemes will apply to all farms of any size which are carrying out improvements under these schemes. They will not be restricted to the larger farms; indeed smaller farms will be able to claim as well. I think my noble friend is under a misapprehension.
My noble friend Lord Caithness referred to the possibility that the limit of the grant will be lowered because of the value of the green pound. That is perfectly true; if the green pound goes up or goes down the limit will alter accordingly. He is also quite right to refer to the difficulty which can be experienced between a farm and horticultural development scheme and a farm capital grant scheme. At the moment, because there is no limit on either, we can operate both, but when there is a limit on the Farm and Horticulture Development Scheme it will not be possible to operate a farm capital grant scheme at the same time because that will, in fact, impinge on the Farm and Horticulture Development Scheme because it will mean that the limits will not be able to be adhered to if one has two schemes going at the same time.
I would merely add, if I may, because I know that this is of concern to the noble Lord, that in about August, when it is hoped that the newer schemes will come out, it is also hoped that they will be easier and more flexible, and that the Farm and Horticulture Development Scheme may be more flexible than it is now and the problem which I think he sees will, I hope, not materialise to too great an extent. However, I see that between now and the latter part of the summer it could be a problem. I hope that I have answered the points which have been made and that your 1627 Lordships' House will approve these two schemes.