ECC 19th Report: Common Agricultural Policy

HL Deb 09 April 1981 vol 419 cc719-53

6.21 p.m.

Lord Mottistone rose to move, That this House takes note of the report of the European Communities Committee on the Commission's reflections on the Common Agricultural Policy (12271/80) and on the proposals for fixing agricultural prices 1981–82 (5091/81) (19th Report, H.L. 126).

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I have the privilege of moving this Motion because the regular chairman of the sub-committee, the noble Lord, Lord Cledwyn of Penrhos, has been indisposed during this last month and he asked me to take over the handling of the report to which the Motion refers.

I am aware that we had an agricultural debate not very long ago—on 15th March to be precise—but I make no apology for this debate, which relates specifically to the common agricultural policy and the price review, as opposed to the more general nature of the earlier debate. I must give my gratitude to the sub-committee who gave me tremendous support and indeed enabled me to make my contribution to dealing with what was a very speedy operation, as I will shortly describe.

I should also like to offer my gratitude to the clerk and to the special adviser who helped us under these somewhat difficult circumstances to produce the report and to do so very quickly and very well. Finally, I should like to acknowledge the help that we received from various ouside bodies who gave us both written and oral evidence—but as your Lordships will see when you get Volume 2 of this report, which sadly is not available at this stage because of the rushed nature of our process in handling it, we were able to take oral evidence only from a selected few people; in particular the Minister. I should like at this point to say how much we appreciated the Minister giving evidence to us and the skill with which he had clearly grasped his subject, and also the openness with which he gave answers to practically every question that came his way. We were indeed most grateful for that.

We also took evidence from the National Farmers' Unions of England and Wales, Scotland and Northern Ireland. Very belatedly—but we did try to fit it in—we took evidence from consumers. That was all we could achieve. The reason for this was that we received the price proposals from the Commission for consideration only about four weeks before the Ministers made their decisions on them last week. That gave us four weeks to do all this work. This was due in part to the fact that we have a new Commission, and so therefore they were not able to start work until it was a little late, and also because of the sad death of Mr. Gundelach, which slowed it down a bit more.

Having said that, I personally feel as, I am sure, does the sub-committee—and indeed we make this point in the report—that the time limit within which one has to consider the Commission's proposals for price review are always too short. When considering this it did occur to me that we are part, as it were, of the bureaucratic machine, but I believe one can be slightly more conscious of one's own contribution in this affair if one considers that we are genuinely seeking to take evidence from people in a way that, generally speaking, the Commission and many others have developed a high regard for; and not only ourselves but also, one imagines, similar bodies in other countries of the Ten would seek to do the same. If they do not do so, then perhaps they should in order to provide the guidance to their own Ministers from a wider background than they might otherwise get. It seems to me that this very short time scale is something that is thoroughly reprehensible and one to which the Commission could well give very special attention in order to try to make proposals a little earlier or seek to wind up their conclusions a little later.

We did talk to my right honourable friend the Minister about this aspect when he was giving evidence, and to a certain extent he was sceptical about the possibilities of finding some way of doing this. He was sceptical because, on the one hand, if the Commission puts up its proposals too soon it will find there have been changes in world markets subsequently and the proposals would be even more of a nonsense than perhaps people sometimes think they are anyway. On the other hand, if one leaves it too long before Ministers arrive at any conclusion as to how the proposal should be accepted or modified, the result will come too late for those such as farmers and processors, and indeed all other bodies concerned, to take their actions consequent upon the decisions. So this is a very knotty problem. However, in his evidence the Minister said—and I personally attach importance to this—that he hoped to take advantage of the British presidency of the Council in the latter half of this year to discuss with his colleagues how the process could be improved, and in particular how a more orderly process might be introduced.

Your Lordships will be aware that in the report of the Select Committee on the common agricultural policy about a year ago we recommended that there should be a five-year rolling programme. For the reasons that I have already advanced with regard to lengthening this time interval between proposals and conclusion, this—as the Minister pointed out—has its difficulties, because of the fluctuating state of the world market in all the commodities which are the concern of the common agricultural policy. However, he said—and he quoted milk as being a particular area in which this might be applied—that there must be some attempt, which, in his opinion, there had not yet been, to have a long-term plan for how to handle that kind of commodity. The more of a long-term underlying plan there is, the easier it will be to make price proposals based on a firm foundation each year, and the easier it will be for the farmers, the processors and other persons concerned, to make their own long-term plans, which they would so dearly like to do.

So I believe that this whole question of the timetable is extremely important, and it is because one had to deal with this so quickly that one found oneself debating the subject after the Council of Ministers had made a decision. In another place, they most valiantly managed to get their debate in before the Council of Ministers' meeting to arrive at their conclusions. But they had to rush their affairs just as we did. I must confess that I think that in our Select Committee we rather thought that the Ministers would not reach a conclusion quite so quickly, and that we would therefore still, at this stage, be giving them advice.

However, there has been a further complication which is symptomatic of the same rush situation. That is that, because of business in another place, my right honourable friend the Minister had to make his Statement to another place last Friday on what happened when the Ministers made their decision. I understand—if he will not object to my saying this at this stage—that my noble friend the Minister of State is going to take advantage of this debate to do your Lordships the courtesy of commenting upon the Statement, when he addresses us shortly. I hope that my noble friend will not take it amiss if, in the further remarks that I have to make, I remark upon what his and my right honourable friend said last Friday, in anticipation that he will be saying something rather similar when he comes to speak.

I do not propose to conduct a detailed post-mortem of the Commission's proposals and I can, I am sure, rely on my noble colleagues on Sub-Committee D to make their comments on those areas of the proposals and the conclusions which affect themselves. But I think one can say—and this is an example of the good news first—that there are good points in the Council of Ministers' conclusion. We note with satisfaction that it agreed to certain things which are of particular concern to the United Kingdom, on which the committee's views in the report coincide with the position adopted both by our Minister and by the Council's decisions: for example, no revaluation of the green pound; continuation of the variable premium arrangement for beef and maintenance of the school milk programme. I also welcome acceptance of the continued butter subsidy and, especially, the special support for Northern Ireland, bringing it more into line with the Irish Republic, and an assurance of continuing arrangements for New Zealand butter and of whisky refunds.

On the general level of price increases, which are reported to be of the order of 9.5 per cent. on average, as against 7.8 per cent. which was proposed originally by the Commission, we note that this does not square with the committee's conclusion in the report, that the level of the Commission's original proposals should not be exceeded. I am turning, as your Lordships will see, to what my noble friend on the Front Bench may think is the bad news—the points with which we disagree.

Moreover, such measures as have been adopted under the general description "co-responsibility" appear likely to have little effect in restraining surplus production. I would draw your Lordships' attention to paragraphs 64 and 68(ii) in the report on that point. In particular, on milk, which is responsible for over 40 per cent. of the costs of the common agricultural policy, decisions appear very much at variance with the report's conclusions: almost average price increase; no super-levy—despite the Council's undertaking last year to implement it if production continued to increase, which it has done—and discrimination in the existing "linear" levy aggravated by ½ per cent. increase. All those are points which we consider do not meet either the recommendations in the report, or what we believe the Commission is basically trying to achieve.

My right honourable friend's Statement in another place said that the Council agreed to a 1981 budget provision for milk fixed at 10 per cent. below the previous year, and the need to ensure that the 1981 budget provision for milk was not exceeded. He went on to say: Council would take measures should they prove necessary, to limit surplus production and contain budgetary costs". My right honourable friend also said that the Commission declared that package consistent with ensuring a rate of increase in agricultural expenditure in 1982 close to, or if possibly below, the rate of increase in "own resources." The Council undertook to adopt in good time any further measures which should prove necessary to achieve this objective". I suggest to your Lordships that there are several apparent inconsistencies in what I have just been saying, and that the budgetary implications of this settlement require detailed, and sceptical, examination.

Before moving on to that, I should like to add one point. I hope that my noble colleagues, or some of them, will be advancing strongly the views of the farmers when they come to speak, but I should like at this stage to say a few words with regard to the food processors. I must, of course, declare an interest in that I am employed by the Cake and Biscuit Alliance, which is a trade association looking after the manufacturers of those products. I get the general impression from what I have read that the farmers, though traditionally never satisfied with anything, seem to think that this settlement is something which they can live with, but I do not think that the food processors could be said to be as happy. This point needs to be made.

May I summarise their disappointment and the points that they make? First, they say that many EEC farmers will receive price increases above the inflation rate in their countries, and even further out of line with the movements in world prices. They also say that the settlement will transfer regressively funds from consumers—"consumers" in this respect includes processors, because they consume from the farmers—to farmers and from Britain to other EEC countries, all of which, except for Italy and Ireland, are wealthier than ourselves. They say, too, that they think the official estimate of the budgetary cost is too low—I shall come to that shortly—and that it ignores the stimulus to extra output which will have to be exported at a loss and the consequent weakening of world market prices. They conclude by saying that the issue of reform of the common agricultural policy has again been shirked. I think most people would probably agree with that last point. We have also been informed that the consumers are dissatisfied with the conclusions.

Having said that, noble Lords will see that in the report it was recommended that proper account should be taken of the need for farmers to meet, this time, with some degree of compensation for their loss of net profit over the years. So it was with that in mind that the committee made its report. The result has gone further than we either recommended or expected in order to meet the needs of the farmers.

Turning to the budgetary implications, unless there is expansion of common agricultural policy expenditure, kept far below average during the 1970s and below the rate of increase in "own resources", the latter will be rapidly exhausted and all other Community expenditure squeezed. The Commission's "Reflections"—and its "Reflections" is the second paper which we are considering—largely address themselves to this fact and propose wide extension of the principle of co-responsibility and, most of all, as we describe it in the report, draconian action on milk.

The Commission itself asserted vigorously that the package it proposed in its price proposals—the other paper which we are considering—was the most which could be tolerated within budgetary constraints. Therefore an explanation is required—I would not expect my noble friend the Minister of State to provide it at this stage—from the Commission for its apparent volte face. The Commission's original proposals for common agricultural policy prices and related measures for 1981–82 were estimated to cost the budget in a full year 825 million European currency units, net, or 490 million European currency units, net, after allowing for extra income of 335 million European currency units from co-responsibility levies, et cetera. The table in paragraph 34 of our report refers to this. The Commission said that this was all that could be accepted while keeping the growth of the common agricultural policy cost within the rate of growth of own resources. My right honourable friend's statement in another place suggests that the package agreed by the Council means a considerably increased net claim on the budget, though it is not quite clear how much by. I take it, from a press report, that it is of the order of 1,096 million European currency units, which would be of the order of one-third more than the Commission's original proposals, which the Commission said went as far as it was possible to go. It is not yet clear what the overall effect on the Community's budget will be—what extra income, if any, will accrue to "own resources", given the failure of the Council to implement its undertaking to implement a super-levy for milk. Perhaps my noble friend will be able to comment on that. It seems to me that not implementing the super-levy is one of the more important actions that the Commission has failed to take, having been so strong about it earlier on.

I do not want to bore your Lordships by going on with this analysis of the situation. I should like to turn briefly to the "Reflections", a rather whimsical title for what the Commission thinks ought to happen to the common agricultural policy in the future. The committee all agreed that it was a most disappointing document: disappointing at this time when most people are agreed that some revision of the mechanics of the common agricultural policy must come about in order to make sure that it retains some sort of solvency; disappointing in that it made so few really coherent proposals; disappointing in that, having made such proposals as it did, the Commission then made no effort to work towards implementing them, if not implementing them fully, in its own price proposals for this year. So I believe that we really must insist that the Commission goes back to the drawing board and produces something much more coherent if it is to save the common agricultural policy from being financially overwhelmed.

Lord Harmar-Nicholls

My Lords, would my noble friend allow me to say a word?

Lord Mottistone

I have nearly finished. I was about to conclude, but I have been interrupted by my noble friend. May I finish by saying—it is no good. I am sorry. I shall have to conclude my speech. I do not want to go on unnecessarily. Perhaps I shall have an opportunity in closing the debate to say what I was going to finish with. I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on the Commission's reflections on the Common Agricultural Policy (12271/80) and on the proposals for fixing agricultural prices 1981–82 (5091/81) (19th Report, H.L. 126).—(Lord Mottistone.)

6.49 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers)

My Lords, I am sure your Lordships will be grateful to my noble friend Lord Mottistone for introducing this debate today and for giving the House the opportunity to debate the report which the European Communities Committee of your Lordships' House has produced on the very important matter of the common agricultural policy. I think he introduced it in a highly responsible and very effective way.

It is a pleasure to see the noble Lord, Lord Cledwyn of Penrhos, back in his place. He is normally chairman of the committee but he was obliged to give over his responsibilities to my noble friend. He, as always, has a great welcome here.

May I also thank my noble friend Lord Mottistone for the kind remarks of appreciation which he made of my right honourable friend the Minister? Although we had the opportunity about two weeks ago of a short debate on agriculture, the committee had not by then reported. Therefore it is quite correct to have a debate today which is confined to the common agricultural policy and its structures.

Although the report has only recently been produced, it has of course been slightly overtaken by events because the Council of Ministers agreed last week on the terms of the price fixing, which my noble friend admitted came as some surprise to him and I do not think he was necessarily alone in that. I thought that it might be helpful if I were to endeavour at the outset to explain to your Lordships what have been the terms of the prices which have been agreed and how they relate to the recommendations which the committee made in their report, because apart from anything else, your Lordships were not sitting when the Statement was made in another place and therefore your Lordships did not have the advantage of being able to hear at first hand what has been achieved.

In any event, in a number of instances the results of the price fixing have fallen remarkably in accord with the wishes of your Lordships' committee. Of course, not in all cases, and my noble friend has been able to point to some where they have not been met, but on the whole I think it is remarkable how closely they have followed the wishes of your Lordships' committee. So, if it is for the convenience of your Lordships, I should like at the end of the debate to answer any questions which your Lordships may feel you would like specifically to address to me during the course of the debate in regard to other matters relating to the common agricultural policy.

The Select Committee said in their report that they considered the timetable for the price fixing to be most unsatisfactory this year, in that the Commission's proposals were not presented very early. I can well understand those views. The proposals are important and we all wish to have time to examine them, but I think one has to recognise the fact which my noble friend recognised, that with a new Commission this year and with the much regretted death of Mr. Gundelach, who had given so much of his life to work for the Commission, there were special reasons for the delay in the publication of the proposals. On the other hand, the final agreement with the Council of Ministers has been achieved in almost record time—certainly a record for the last eight years. So often the negotiations about the price fixing go on well into the middle of the year that I think it is a cause for great rejoicing that at least this year not only were the discussions completed speedily but they yielded decisions which were particularly good from this country's point of view.

Before the price fixing my right honourable friend the Minister of Agriculture outlined in a debate in another place the objectives which the British Government had in the negotiations which were about to take place. In fact, every single objective which my right honourable friend outlined in that speech was achieved in the negotiations and I think that is a remarkable achievement.

There were basically three areas in which we were endeavouring to improve the position. First, in terms of the impact upon the budget and the methods of restraining the sharp rises which have taken place over the last few years in the cost of the common agricultural policy, which has been of considerable concern to many people. Secondly, with regard to the interests of the consumers; and thirdly, with regard to the interests of our producers and farmers.

In terms of the budget, the effect of the final agreement is one which I feel sure your Lordships will be able to approve. In the year before this Government came into office the common agricultural policy was taking up 80 per cent. of the total budget of the European Community. In 1979 it took up 75 per cent. In the last two years we have been able to reduce the proportion of the European budget which is devoted to the common agricultural policy to less than 70 per cent. In the last three years of the previous Administration the cost of the common agricultural policy increased by an annual average of over 20 per cent. As a result of the price fixing, both last year and this year, the average increase in overall costs of the common agricultural policy will be of the order of 11 per cent. Therefore, if we look at it in terms of the rate of growth of expenditure over the last two years, it has been halved. I think that is a very significant step forward.

In the areas most concerned—those of surpluses—important agreements were reached at this price fixing. The biggest surplus of all, to which my noble friend quite rightly drew your Lordships' attention, is milk, and my right honourable friend obtained agreement by all the Council of Ministers that the Community budget provisions for the milk section for 1981 will be held at 10 per cent. below that which they were in 1980. It is intended that the budget for expenditure in the milk section will be totally adhered to and if, for any reason such as an increase in production, the budget limitations are threatened, the Council of Ministers will take action in order to avoid further inroads into the budget. In this important sector, therefore, there has been a real improvement in budget terms in 1981.

One of the fastest rising areas of common agricultural expenditure was the fruit and vegetable sectors, mainly applying to production in the Mediterranean areas of the Community. I am glad to say that in this sector, again, the Council of Ministers agreed to a limitation on overall costs and there will probably be a saving of something in the order of £40 million as a result of the agreements which have been reached.

In the area of cereals the Council of Ministers agreed that co-responsibility measures should be applied in the marketing year 1982–83 and this will probably show a further saving of £40 million. In the area of beef production, intervention changes will show savings of £38 million.

In total, therefore, in the four main areas of potential or current surplus production—which are milk, cereals, fruit and vegetables, and beef—very important progress has been made. So far as the British Government's unadjusted contribution to the European budget is concerned, our initial estimates are that a combination of the changes which took place, both in the European monetary system exchange rates and in the price fixing, will mean that there is a slight reduction in the British contribution.

It is often said—and frequently erroneously—that the common agricultural policy works against the interests of the consumers, and I regret that some hasty statements have given the public a very false impression of the effect which this review will have on consumers. My noble friend Lord Mottistone said that they were dissatisfied, but the total effect on consumers of this year's price fixing will be an addition of less than one quarter of one per cent. on the retail price index and it will only be of the order of 1 per cent. on the food price index in a full year. If I might be permitted to inject a small political observation, it would be that a 1 per cent. increase in the food price index in a full year as a result of this price fixing is in contrast to the increase in food prices of 1 per cent. per fortnight which took place during the period of the previous Administration.

The reason for some of the false figures and facts which were given on the day when the price fixing took place was, I think, largely a lack of understanding of what had been achieved. Many newspapers reported that beef would go up by 5p per pound as a result of the price fixing. That might have been so had we not succeeded in retaining the beef premium scheme, which is another point which the committee wanted. In fact, this has been retained and so the consumers will be insulated from the much needed higher prices for producers.

Reports were made that bacon would go up by 7p per pound. In reality, because there is no intervention in the bacon market, the increase in pigment prices which were agreed will primarily relate to imports from third countries, which of course are only a minor part of the total bacon market. The only adverse effect on bacon prices is likely to be that which arises from the higher cereal feed costs together with a small change in MCAs. Even these in a full year are unlikely to amount to more than 2p per 1b. of bacon. Many newspapers reported that there would be an extra 1p on bread. In reality the increases in cereal prices will account for no more than ½p on a loaf when the full effects of the prices have worked through. In terms of areas such as butter and cheese, although the new arrangements will result in higher intervention prices, when the effects are fully worked through, the reality is that these markets are highly competitive, with Denmark, Ireland and other continental producers and the British producers all fighting for a bigger share of the United Kingdom market, and it is quite likely that that competition will have a restraining effect upon butter and cheese prices. Added to this my right honourable friend obtained agreement on a continuing inflow of New Zealand butter on to the British market, and that is not without its importance.

As a result of these negotiations, therefore, as far as the consumer is concerned, Britain now enjoys a butter subsidy which is unique to the British consumer. It enjoys a beef premium which is funded 25 per cent. from the European Community, and it enjoys a lamb premium scheme which is funded 100 per cent. from the European Community, both of which give the housewife the advantage of low market prices. These three schemes, the butter, the beef and the lamb, together are worth £300 million, and they will give a benefit to the British housewife which is not available in any other European country.

As far as our farmers are concerned, they have obtained at an early date the increases which they greatly required. Last year, in real terms, farm incomes dropped by 24 per cent. and your Lordships quite rightly expressed concern at that fact two weeks ago. There is no doubt at all that there was need for a substantial increase, and we should not underestimate the role which British farmers have made in the battle against inflation. Over the three years of price fixing for which this Government have been responsible the average increase in common prices will have been only around 5 per cent. This is a very considerable degree of price restraint. The increase of between 9 and 9½ per cent. this year is an increase which I think is very well balanced as far as British agriculture is concerned, although I know that your Lordships' committee looked for an increase of about 1 per cent. less. The final result, though, is not what I would have described, as my noble friend did, as bad news. I would have described it as much in accord with what your Lordships hoped would happen and much in accord with what the Commission proposed, and it is considerably less than some of the demands which others made.

As far as the cereals are concerned, where we had three record harvests and where the financial problems are not as great as those of livestock, we achieved an actual reduction in the Commission's proposals for cereal target price increases. The increases affecting the livestock sector are vital if we are to retain our herds and our flocks in this country.

The total benefits to United Kingdom agriculture in terms of their receipts will be about an additional £325 million. When this is combined with a drop of 5 per cent. in minimum lending rate from its peak and with the announcements which have already been made for improved hill farm subsidies, the increase which has been taking place in the liquid price of milk, these will combine together to be of considerable assistance to British agriculture in meeting, the very substantial increases which have taken place in their costs. Farm wages have substantially increased over the past two years. So has the cost of fuel and energy, which in turn has substantially increased the costs of fertiliser. If we are going to retain the remarkable record of investment and productivity in British agriculture it is important that these costs at least in part are met.

Perhaps one of the most important achievements in this price fixing, in spite of considerable pressure from our Community partners, was that we succeeded in resisting any revaluation of the green pound. That is another point which your Lordships' committee made and which was met. For many years British agriculture was heavily penalised by having a constant tariff against its exports of between 25 per cent. and 45 per cent. The foreign exporter into Britain had an advantage of between 25 per cent. and 45 per cent. As a result of the earlier three green pound devaluations and a resistance in this year's price fixing to revaluation of the green pound, we are now enjoying positive MCAs, and it is now British agriculture which has the advantage in the European market. For example, when we came into office the Dutch or the Dane, who exported bacon to Britain, was receiving a subsidy of £127 per tonne on exports of bacon. Now the foreign competitor has to pay a levy of £127 per tonne and it is the British producer who has the benefit. This will enable us to improve our share of the bacon market and our share of the dairy products market in the United Kingdom. It will also enable us to embark upon a successful export campaign, which must be not only good for British agriculture but good for the British economy as a whole.

My Lords, I think I can say this, and I can do so with a certain degree of modesty as I was not a party to it. This price fixing has been a remarkable achievement which will help both in the short term and in the long term in the United Kingdom and the European Community. If one can summarise it, I will say this. In budgetary terms we have put considerable restraints upon the common agricultural policy. The British unadjusted contribution is expected to be slightly reduced. The proportion of the European budget which goes to the common agricultural policy has been substantially reduced compared with three years ago. In terms of the consumer, £300 million will benefit the British housewife and there will be only a minor effect upon food prices over the course of the entire year. In terms of British agriculture, a much needed and important injection of cash has been given in order to enable farmers to continue farming successfully, and the green pound has not been revalued. It will enable the industry to continue to make a major contribution to our essential food supplies and to the economy in general.

My Lords, I thought it would be helfpul to your Lordships if I were to give the position in regard to the price fixing at the outset of the debate. I will be entirely happy to make any further observations later on, at the end of the debate, in regard to "reflections", documents or any other points, if that should be your Lordships' wish.

7.9 p.m.

Lord Mackie of Benshie

My Lords, I must thank the Minister for his speech and for the valuable information and comments he has given us. At this point I would like to apologise to him and to the House for the fact that I shall have to leave to catch the 8.40 p.m. shuttle to Edinburgh immediately after speaking. I intend no discourtesy. The time taken to consider the Scottish Matrimonial Homes Bill rather upset my calculations. I want to speak on this Motion because, like the noble Lord, Lord Mottistone, I was a member of the sub-committee. I echo his remarks, his gratitude to those who gave evidence to us and to our clerk and specialist advisers.

I would first of all declare an interest, since I am a farmer, which is fairly well known, and I have a slight prejudice towards farmers. I would start with comment on the price review. The first thing to say is that this is not going to make anyone in farming rich. It will enable them just to keep up—if we have a good yield year—with the much reduced income that farming enjoyed, or failed to enjoy, last year.

That does not mean that a number of farmers do not do quite well. It is a fact that last year, for example, the big cereal growers, the monoculture men in the South, had an excellent year. But those men have enormous capital investments, very high inputs and a degree of skill which has been developed since the war in monoculture, which has done an enormous amount of good for this country in the saving of imports and the increasing of food supplies. But on the whole, agriculture from John O'Groats to Devon is not in a good way. A whole number of other industries are also not in a good way, but it is noticeable that the farmers of this country have accepted—and they are used to bargaining—the fact that they are getting 9.5 per cent. instead of what the international farmers' organisation asked for, which was 15 per cent. They have accepted that with very good grace and they realise that they must play their part in the battle against inflation as, indeed, they have done and are doing at this moment.

I am very glad that the Minister put the figures right with regard to the rise in the price of food. The facts are that this objective of the common agricultural policy has been fulfilled. The CAP has been enormously successful in producing adequate supplies of food in Europe for the European consumer, and enormously successful in giving a continuity of supply and a guarantee of supply. The consumers have had that food at a price which is reasonable for the incomes that they are earning, and certainly the proportion of income paid for food has dropped. I do not say that they do not have a case for watching the rise—of course they have—but I think that we must accept that the CAP has had a very successful run since the foundation of the Community in producing food, in increasing the supply of food for the citizens of Europe and in guaranteeing them against a world market which, as we have seen with sugar this year and with cereals in 1973–74, can fluctuate to a very great degree.

It is also necessary to know that the CAP does not control the activities of the Cake and Biscuit Alliance and the retailers and distributors of this country The facts are that of the end price for food to the consumer only 30 per cent. goes to the farmer and 70 per cent. goes to the chain of processors, distributors and so on. I do not say that they do not deserve it, but the farmer is not to blame for the whole of the rise in the price of food.

Having said that, I think that the committee were absolutely right in their view that we need to have a long-term plan by which processors and farmers can plan. I do not think it matters when the actual price review takes place because, in fact, most of the grain is sown later nowadays—it is winter corn—and of course the timing of the price review does not matter to the farmer's plan. The farmer must have a longer-term plan than from year to year. He has to know that milk is not to be a favoured commodity and that over a period of years the price will not rise and will, indeed, fall in real terms.

What we are failing to do in the CAP is to control the surpluses. I greatly applaud the Minister's efforts and I admired his tremendous grasp of his subject and the way in which he tackled his fellow agricultural Ministers on the Council of Ministers. However, I rather disagree with my temporary chairman Lord Mottistone about the Commission being wrong. The Commission tries but it is the Council of Ministers which decides. Unless we do something about milk, the whole business will break down; and it will break down, of course, because of the fact that there will not be the money to continue to produce enormous surpluses. It will break down also because the public will become absolutely fed up with seeing the surpluses continually being produced and being exported to countries of which they do not approve, as happens at present.

So what the Minister must keep emphasising and what we must keep rubbing in to our continental partners is that they will kill the goose—and I am talking particularly of France—if they carry on in this way. In France they have a 10 per cent. rise and then they have a devaluation. France is one of the countries which will have an actual rise in price. It is one of the countries from which the danger of the over-supply of milk is the greatest.

I think that we must continue to press for a levy—what is known as the super-levy—on milk which goes directly on the area or country which produces the surplus instead of, as at present, penalising the whole of the producers, including the efficient producers in Britain (where we do not have a surplus of milk and milk products) who is penalised unfairly by the present levy and its rise. It was very interesting to hear the Minister say that the Council have decided that if there is a surplus they will do something about it. I do not know what they will do. The only thing that they can do, as far as I can see, is to apply the super-levy if they find during this year that the situation is getting out of hand.

I do not wish to say much more because other members of the committee wish to speak. I am very glad that the Minister has praised the settlement and has put it in proper perspective. I think that we must say to the country that the CAP has worked in this country's interests: it has produced a lot of food and reduced the international price of food, with which the CAP is often compared. But unless our continental partners realise that they must control surpluses, the whole thing will break down.

7.18 p.m.

Lord Walston

My Lords, I should like to begin by making three introductory remarks. First, I should like to thank and congratulate the noble Lord, Lord Mottistone, on the way in which he has introduced his report and the way in which I am told—and unfortunately I was not here, so it is only secondhand evidence—he took the chair during the meetings of Sub-Committee D. Secondly, I should like to join in the tribute he paid to Finn Gundelach who was a very fine man and a very fine commissioner. He will certainly be missed and his influence will for a long time be felt. Thirdly, I should like to make it clear that, although I am speaking from the Benches or (shall I say?) the Bench of the Social Democrats, I am not enunciating party policy, because that has not yet been formulated. My comments are purely my own, although I would hope that they will be fairly close to what eventually will become the party's agricultural policy, modified perhaps by some of the views of my noble friend Lord Sainsbury.

I think that perhaps it would be useful if I were to remind your Lordships of what is going on in the world at large and not simply in this country or, indeed, in Europe. Just before this debate took place I was glancing through the Financial Times and I saw three headlines which caught my attention. One of those headlines was, World Cereal Harvest Warning from the FAO in Rome", that the shortage of cereals throughout the world is becoming critical. The second headline was: Poor nations seek food and food aid contracts", and was drawing attention to the appalling situation with regard to world hunger, famine and malnutrition that exists in many parts of the world today. The third was: Eastern bloc forced to revise farm output targets"; and it went on to tell us that the Soviet Union is now proposing to give a 50 per cent. bonus to all those farms which this year sell more than they did last year. So desperate are they for food that they are resorting to the well-known capitalist forms of financial incentive. Therefore, we should not think solely of butter mountains, wine lakes and all the rest, because although we have them, to a lesser extent than we had in the past, in the world as a whole the picture is very different indeed.

There is a further point that I should like to make clear at the outset of my remarks. It is that, in my view, the common agricultural policy should concern itself solely with the economic aspects of agriculture, with the actual production of food and other agricultural products; and that the very real social and environmental problems which are closely tied up with agriculture should be dealt with by other mechanisms through the Regional Fund and through various other ways open to both the Community and individual countries. However, if we try to twist the common agricultural policy into fulfilling not only the needs of food production, looking at not only the importance of ensuring for those who produce the food a reasonable standard of living, but also in preventing the creation of rural slums, in providing work for those who otherwise would be out of work in rural areas, in preserving the environment and the beauties of it, then the task is indeed impossible.

Having said that, let me turn to the real problems with which the committee was faced, with which the Commission and the Council of Ministers are faced, and indeed with which all those who are interested in the common agricultural policy have to concern themselves. For many years, we have realised that too much food is being produced within the Community for the needs of the Community, and the cost of that food is too high. It is too high not only from the point of view of the actual consumers within the Community, but it is far too high in world terms. Therefore, in spite of the crying need for food in other parts of the world, the money simply is not there to make it available to those people who need it.

It has been held until the present time—and is still held by many but I am glad to say by a diminishing number of people—that the correct way to deal with this is simply by invoking the price mechanism: too much food is being produced, so lower the price and less food will be produced. I do not want to go into the arguments about that. I have repeated them to your Lordships and particularly to my colleagues on the sub-committee, probably from their point of view ad nauseam. All I would say is that I, personally, strongly disagree with this view and I believe that the facts bear me out; that in real terms the price of agricultural products has been diminishing but the total amount of food that is produced has been increasing. What is more, if the price mechanism were to work eventually—and, of course, in the long-run it undoubtedly would—it could only work with the results of increasing rural poverty, which is something that none of us wants and against which the Treaty of Rome specifically turns it face; a lack of investment in agriculture, a decline in research in agriculture and eventually a decline in efficiency in agriculture, for which in the long-run the consumer has to pay.

Therefore, although I do not turn my back 100 per cent. on the price mechanism, I think that it should be invoked with the greatest degree of caution. Here I must say that I disagree with one of the comments that is made in this report, on page 10. But for all that, I am in entire agreement with those who say, as we all say, that the cost of the common agricultural policy must be contained, and that it cannot go on escalating.

The noble Earl has pointed out that in a very modest way progress has been made in containing the total cost, and I congratulate him and his right honourable friend on their success in doing that, and I do so ungrudgingly. But I do not believe that under the present system it will be possible to contain the cost of the common agricultural policy within the limits within which we all think it should be contained. Here I find myself in complete agreement with the noble Lord, Lord Mackie of Benshie, when he spoke about a long-term policy.

Farming is a long-term occupation. Plans have to be laid for many years in advance for whole systems of agriculture; for rotations, for balance between crops and livestock, for different forms of livestock. They all have to be planned and cannot be changed from year to year. One can direct agriculture into the proper channels only if one has a long-term plan. Therefore, I repeat what I have said on many occasions, and which I am very glad to say this report also supports, that, as a first step in reforming the common agricultural policy, the Commission should produce a common food policy—one stretching ahead for five years on a rolling basis and setting out in pretty specific terms the total amount of food which it considers is required from the producers within the Community; and undertaking to buy the total amount of that food at prices which will reflect a reasonable return on capital, a reasonable return on skills and a reasonable standard of living.

I think that that can be done without any of this year-by-year haggling within the Commission and within the Council of Ministers. It can be done on a formula, if it is so wished, and that would be a great step forward. However, you cannot say to a farmer that he is to produce so much and no more. For one thing, he will not pay attention to it; for another thing, it is, in my view, an undue interference with his liberty; and, for a third thing—possibly the most important—you cannot control the climate. There will be occasions when there will be very large surpluses, and there will be many occasions when there will be modest surpluses. Let the farmers grow their surpluses if they wish, but do not let them come to the Commission and say, "Now you must buy these surpluses from us at these exaggerated prices". Let them be sold on the world market at whatever price they can receive. That is the basic theory that, in my view, should underlie the common agricultural policy; that fair prices should be paid for the quantity needed and the rest takes its chance on world markets.

Perhaps I may make one small digression here, as we are talking about fair prices. In his speech, the noble Earl mentioned the target prices as if they were—and I am sure that he did not mean to give this impression—the prices which farmers, in fact, receive. I have in front of me a list of the target prices as regards the United Kingdom, and the intervention prices; the intervention price being, as your Lordships well know, the price at which, in theory, farmers are able to sell if they cannot sell in any other way. In fact, it is frequently the case that for technical reasons farmers have to accept a lower price than the intervention price. It has to be of a certain quality, and it has to be in fairly large quantities which only the largest farmers can meet. We shall let that pass, but, whereas the target price for wheat is £142, the intervention price—the price which is important—is only £102, which is very little more than it was last year. In fact, it is a 6 per cent. increase rather than the 7.7 per cent. on the intervention price. That is a minor interpolation, but it puts the matter in rather better perspective.

Let me come back to the food plan and the total quantities. How can this be done? It is an enormously complex problem, as your Lordships know, and it certainly would not be right to attempt to go into it in any detail here. At one time people used to talk of quotas. "Quotas" has now become a dirty word and must never be used. At one time we used to talk in this country of standard quantitites—a very valuable concept which was adopted by Governments of both complexions in the old days, as my noble friend Lord Peart well knows.

The fashionable word now is "quantum". I do not mind what it is called, but it brings forward the concept that the total amount produced for which the guaranteed price is going to be paid should be specified. This can be enforced in a variety of different ways. In sugar beet, it already exists. There are quotas for each factory. That could be extended to the big dairy combines and the co-operative dairies. It could be extended to the wine co-operatives in Southern France and in Italy if it were thought desirable. It can be done.

It could be dealt with simply by withholding some of the price paid for whatever the commodity might be, and at the end of the year, when the total amount had been worked out, if it was in excess of the quantum there would be a pro rata reduction in the amount paid out to the farmers. Or it could be done, as the Community have suggested and put into practice, by the co-responsibility levy. Here again, while I do not think it is the ideal way of doing it, I strongly support any move in this direction, and the co-responsibility levy, particularly with the super-levy, is a valuable move in this direction.

All I would say is that, if such a thing is introduced, I believe that it should be pro rata with the amount by which the quantum has been exceeded, so that if it is exceeded by only 2 per cent. there is a small amount of co-responsibility levy, whereas if it is exceeded by 25 per cent. it will be a very substantial amount. I am quite certain that the clever brains within the Ministry of Agriculture in this country, in the Commission in Brussels and in other places, could between them work out a perfectly feasible means of achieving these ends once the principle had been accepted.

There is only one further point that I want to make. That is that we in this country—and it applies particularly to this country rather than to the other countries of the Community, which have never been used to it—must realise that the days of cheap food are over; that there is a growing world food shortage; that our position as virtually the sole importer of food has now disappeared; and that as a long-term insurance we must look increasingly to our own farms and our own fields for our own food, and must be prepared to pay a fair price for that food.

The bargain basement shopping around has disappeared. It rears its head every now and again but it is not there in perpetuity, as it appeared to be in those far-off days between the wars, and indeed before the First World War. That is a lesson which the British consumer must learn and must accept. He is prepared to accept it when he has to pay more for his postage stamps, telephone calls, cigarettes, glass of beer, his underground ticket or his rent, but when it comes to what he thinks is 1p on the price of bread—and in fact, as the noble Earl has told us, it is more likely to be ½p on the price of bread—hands go up in horror and he says, "This must never be".

There is no reason at all why the consumers of this country should be insulated entirely from the effects of inflation when it comes to food but submit to them—though possibly with a bad grace—when it comes to everything else. I go along with the noble Earl when he says—I think the noble Lord, Lord Mackie, also said this—that British farmers over the years have in fact, by taking a lower profit margin and, above all, by increasing their efficiency, contributed more to the fight against inflation than has any other sector of the community.

7.36 p.m.

Lord Sandford

My Lords, as an outsider to this sub-committee I was glad to respond to an invitation from the chairman to take part. I am a member of the Select Committee, and on one or two occasions attended the deliberations of this sub-committee on this report. I should like to make one or two general points and then deal with one specific matter that has been the concern of the sub-committee. The general point is first to congratulate the chairman of the subcommittee on the work they have done here, and to congratulate my right honourable friend the Minister for the agreement he has secured at the Council of Ministers.

In addition to that, and perhaps even more welcome in the long run, there was the evidence we heard from him to the effect that he fully intends, when the presidency falls to the United Kingdom in the latter part of the year, to use that opportunity to start in earnest on those long-term, fundamental reforms to the CAP which everybody regards as so necessary. We cannot proceed much longer—and several speakers have said this—without coming to terms with the fundamental faults which exist in the administration of the policy at the moment.

The more specific point I should like to deal with is the one to which the noble Lord, Lord Walston, referred at the beginning of his speech; namely, the attitude expressed by the sub-committee in paragraphs 65 and 66 of their report at page xxiv. This is a theme which they begin at paragraph 14 on page ix. I should like to hear from my noble friend when he speaks at the end of this debate what Her Majesty's Government's attitudes are to these particular conclusions.

The point to which the sub-committee turned their attention in paragraph 14, and encapsulate in their conclusions at paragraphs 65 and 66, is this. They wish to see the common agricultural policy support for the less viable farms in the less favoured areas greatly reduced and certainly curtailed where the produce of such farms is already in surplus, where, for instance, they are producing milk. Where a farm's produce is contributing to a surplus, the subcommittee say that they would like to see such farms—and our hill farms, of course, included—supported by national aids; that is, by United Kingdom subsidies, by United Kingdom grants.

The present EEC rules for the less favoured areas provide for a farm in this country and any other country in the less favoured areas to be supported in their nonagricultural activities, such as farm tourism enterprises, and to be encouraged to take up these enterprises whenever options are available to them in such areas. This rule recognises the contribution such farms and such farm enterprises make to the general rural economy.

When we were dealing recently with the Wildlife and Countryside Bill, I moved an amendment on the second day of the Report stage (col. 480 of Hansard for 12th March), which was supported by the district councils, county councils and tourist boards, for United Kingdom legislation also to reflect the philosophy which is already in the EEC Less Favoured Areas Directive. The House accepted that, but my noble friend speaking for the Government was hesitant, if not actually resistant, to it. Now our Select Committee is making the same point and I should be glad to know from my noble friend what the Government's present attitude to it, as expressed in the report, is.

The need for us to know the Government's attitude arises from the fact that up till now farmers have looked almost exclusively to MAFF and ADAS, their advisers, for guidance and support and in recent years, since we have been in Europe, to the common agricultural policy as the source of grants, subsidies and aids which have backed up that support. The implications of what our Select Committee is now saying at paragraphs 65 and 66 are that when a farmer in a less favoured area—a hill farmer in United Kingdom phraseology—is marketing a produce that is in surplus, his support (and that financial support may amount to more than half his income) will cease to become a matter exclusively for MAFF and the CAP and become instead a matter, to some extent at least, for the local authorities and the United Kingdom Treasury.

If the district and county councils, who certainly share a responsibility for the rural economy as a whole but not for agricultural support in particular, are to take up with MAFF this responsibility for administering the support for hill farmers whose product is in surplus, then we need to have ample notice of that change of policy, for it would indeed be a change of policy. But my expectation and hope—and I believe the best hope for hill farmers—would lie, rather, in the direction of the amendment I moved on Report of the Countryside Bill to which I alluded; namely, that such hill farmers should continue to be able to look primarily to MAFF for guidance and support, not only for their enterprises concerned with the production of food but for whatever other enterprises they embark upon on their farms, whether it be forestry, tourism, land management, recreation facilities or whatever, even if those activities are not exclusively in food production.

We should be able, in my view, to rely on the Ministry of Agriculture, Fisheries and Food to secure for such farmers an appropriate income, and appropriate support for their income, whether from the United Kingdom or from the EEC, whether wholly from agriculture or whether from any other farm enterprises. Unless we make some sort of move in that direction, I fear that the noble Lord, Lord Walston, will turn out to be right. We cannot continue to use the CAP alone for every sort of social and other regional economic purpose. We must find other sources of support for certain farms in certain areas. Nevertheless, I believe it would be best if the Ministry of Agriculture remained the main agency for the administration of those funds, and that is the point on which I should be glad to hear from my noble friend when he replies to the debate.

7.45 p.m.

Lord Roberthall

My Lords, I must begin by apologising to the House for having to leave before the end of the debate, and I apologise especially to the noble Earl, Lord Ferrers. My difficulty arises because I was misinformed about the enthusiasm that was likely to be generated by the Matrimonial Homes (Family Protection) (Scotland) Bill.

We are all, I am sure, grateful to the noble Lord, Lord Mottistone, for giving us this opportunity to talk about what is the most important aspect of the whole economic policy of the Common Market. It is full of unresolved difficulties which are getting worse as time progresses and, looking at it in the broadest way, one cannot help but feel gloomy about the out- look, both because of those unresolved problems and from the narrow point of view that for somebody like me who is a strong supporter of our membership of the Common Market, it is extremely difficult to defend the way in which the CAP is developing.

At the outset I wish to pay a strong tribute to the Select Committee for producing this report, particularly having regard to the time difficulties. It is an admirable document, dealing of course primarily with agricultural matters but touching on some wider matters in a clear and succinct way, and anybody who wants to be informed both on the narrower and wider aspects would be greatly helped by reading the report—and I can say that clearly because I am not a member of the committee.

I wish tonight to make only a few general remarks on subjects some of which have been covered already. As for the difficulties, the first on which I wish to comment, looking at it from the outside, is that the CAP takes the lion's share of the Community budget. I was glad to hear the noble Earl say he thought that that share was coming down. I wish I could share his optimism about the outcome of this year's review, which the report describes as taking a high risk strategy—by which I think they mean that the forecasts are not likely to come out nearly as well as has been estimated—but it is a great weakness of the Community that so much of the money it gets has to go on the CAP.

On Monday, your Lordships will be debating another report from a committee to which I belong, and that will be about the Regional Fund of the Community. The Regional Fund was supposed to help towards convergence—that is, towards making the different member states approach one another in their national wealth—and we had a lot of evidence on the subject, into which I shall not go now in view of Monday's debate. However, I would comment in this context that we were always running up against the difficulty that the amounts available for the Regional Fund were so small, that they had no impact at all on the problem, and, meanwhile, the broad effect of the CAP as it operates at present is to favour the richer rather than the poorer regions.

There is also the question of the direct United Kingdom interest, which came so much to the fore when the right honourable lady the Prime Minister was struggling to do something about the unfairness of the share paid by the United Kingdom. That, again, is a result mostly produced by the CAP. The report says that it is unlikely that any restructuring of the CAP is likely to have much effect on that problem. The Council of Ministers has undertaken to find a permanent solution to it when the present temporary solution runs out in 1982; and I do not think that much is happening in that direction at present.

The basic problem, which has already been mentioned (especially by the noble Lord, Lord Mackie of Benshie) is that of surpluses—the continuance of the surpluses, the fact that dealing with them takes up so much of the Community's funds. The constant load of surpluses around our necks is what makes it so hard for nonagricultural people to defend this large aspect of the Common Market. The surpluses arise because of the necessity to keep the poorer and less efficient farmers, especially in France and Germany, somewhere near to the standard of living enjoyed in other places; though, as the report says, that has been given up as a primary objective.

I do not think that the noble Lord, Lord Mottistone, mentioned that part of the report which struck me very much. It made the suggestion, which has been made several times before in one context or another, that the CAP ought to be confined to the main matters, and it should not be influenced by the objective of dealing with social and regional problems. I was glad to see that the Committee endorsed the suggestion—though I fear that at the moment it is a hopeless wish—that the countries which have special problems of this kind, because they cannot or will not face the necessary adjustments, should take the responsibility for them and that that responsibility should be exercised in ways which do not add to the surpluses. I consider that that was a very good and well argued part of the report.

I feel that I must leave the question of the individual prices to other noble Lords who know much more about it than I do. The main factor in coping with the surpluses is the extension of the co-responsibility principle, which I gather has been recommended because nobody thinks that the Council of Ministers will accept the suggestion of actually lowering the intervention prices. So I suppose that the report supports that as the best thing obtainable, but it made serious criticism of the way in which that is to operate, and I must say that when one reads the report one does not at the moment see signs of much progress in dealing with the surpluses.

I want to make only one other point. The report recommends that the action which was actually taken on the green pound should be supported, and I gather that, despite what the noble Earl said, British farmers are not getting a very big deal out of this and that they would have been even worse off if the recommendations about the green pound had been accepted.

The noble Lord, Lord Walston, spoke at some length about food problems, and in this connection we ought to remind ourselves that no action on the green pound puts the consumers here in a worse position than if the action had been adopted. I have often felt that there is much in the suggestion that the Community, through the CAP, does not pay enough attention to the interests of consumers and that a step in this direction would be to call it the common food and agricultural policy, rather than merely the common agricultural policy, so that at least there would be somebody to think about the interests of the consumer in the way that has been put to us so eloquently by the noble Lord, Lord Walston.

Lord Mottistone

My Lords, before the noble Lord sits down, bearing in mind that he has to leave before the end of the debate, may I say that I wonder whether he is aware how grateful I am to him for joining in and giving us the benefit of his great expertise in the deliberations which are mainly associated with Sub-committee D?

Lord Roberthall

My Lords, that is most kind of the noble Lord.

7.56 p.m.

Lord Sainsbury

My Lords, I should like to start by congratulating the noble Lord, Lord Mottistone, on the report that we are considering today, which owes so much to his chairmanship of Sub-committee D, which he took over owing to the regrettable absence through illness of the noble Lord, Lord Cledwyn of Penrhos. I also wish to express appreciation of the work of the specialist adviser and the clerk to the committee, who were working to a very tight timetable.

Every year when we have here evidence from the various interested parties, we hear largely the same arguments and we are faced by largely the same problems. In fact one has a very strong feeling of having been here before. The same criticisms are levelled at the policy year after year. The basic problems appear to be as follows. First, there are the farmers' rising costs of inputs, calculated (as has already been stated) in the case of the United Kingdom at 14 per cent. over last year, and the consequential drop in income, calculated at 24 per cent. The second problem is that of increased yields due to improving techniques of food production; and the third problem is that of static food consumption. Of particular importance, in view of the Community's milk surplus, is the falling consumption of butter. According to the latest national food survey, households in the United Kingdom are eating less butter. By the end of last year demand for margarine exceeded that for butter for the first time in almost 25 years. In view of that, it is good that the Minister of Agriculture, in his negotiations with his European counterparts, managed to retain the £65.7 million a year subsidy to encourage butter consumption in the United Kingdom.

I cannot help feeling that, when considering their price proposals, the Commission do not give enough consideration to the effect of higher prices on the pattern of consumption nor to the needs and interests of consumers generally. As has been stated so many times in our debates, the greatest weakness of the CAP is the open-ended nature of the guaranteed prices which have led to the surpluses. In the Commission's reflections it is proposed that producers should take some financial responsibility for the surpluses that they create in excess of an agreed quantity. This is not a measure to reduce surplus production but to save budget expenditure. As we state in paragraph 30 of the report—and I quote: In general, however, the Committee still feel that, despite the political difficulties, it would be better on a long-term basis to lower agricultural support prices as a means of controlling surpluses—both by reducing supply and increasing consumption—rather than introducing co-responsibility levies which do not have any consumption-increasing effects". But, as we know, instead of reducing prices of products in surplus, the agricultural Ministers have agreed on farm price rises averaging about 9.5 per cent., against the Commission's original proposal that worked out at 7.8 per cent. One may well ask what has happened to the former, prudent price policy. In the case of the two main surplus commodities, this means, in effect, an increase of 9 per cent. for butter and skimmed milk powder. In the case of common wheat and barley, it means an increase of 6 per cent.

In further reference to the cereal sector, production over the last five years has been rising steadily. Com- mon wheat production has risen from 34 million tonnes to 47 million tonnes, no doubt due to rapidly rising yields, as well as good harvests. Barley production has risen from 32 million tonnes to 40 million tonnes. Yet demand is falling, with Community intervention stocks of cereals of 6.5 million tonnes. Cereals are central to the pricing of agricultural products, affecting the costs of dairy and livestock producers as well as food processors. The Commission's proposed price support will neither stem production nor encourage consumption. Also, of course, it means increased expenditure on cereal export subsidies. It is the Commission's aim to encourage the greater use of Community-produced cereals by making third country grain less competitive. This was criticised by many witnesses, and to my mind rightly so. MAFF informed the Committee that our imports of hard wheat and maize from North America cannot be replaced by Community grain". This tax will be particularly detrimental to Britain.

The package contains few of the Commission's original ideas for penalising the Community's farmers for over-production. As has already been said, for example, the super-levy on milk has disappeared. In the words of the Financial Times correspondent: EEC Farm Ministers seem still to favour an attack on agricultural surpluses—but not yet". No comment on the farm price settlement would be complete without a reference to green currencies. No doubt the farming community are pleased that the Minister of Agriculture, Mr. Peter Walker, managed to resist demands for a revaluation of the green pound, which would have effectively reduced British prices. We sometimes forget that there are no genuine common prices to producers in the Community, because of the existence of the green currencies. What originally started as a temporary measure has become virtually permanent and can be manipulated to the advantage of individual members. For example, as a result of the recent change French dairy farmers will be getting an increase of over 12 per cent. and the Italians 15 per cent. in national currency terms.

The other distorting factor is the existence of national aids. These can have considerable effects on the competitive position of member states and on surplus production. In paragraph 17 of the report we say—and I quote: Member States continue to provide in the aggregate more funds for national aids to agriculture than the whole cost of the CAP". Although there is little information publicly available on this subject, it has become known that the French are providing new national aids worth about £430 million. The committee believe that the Commission should monitor the actions of national Governments in this area and control those which may disturb the operation of the CAP.

It is regrettable, in my opinion, that this excellent report of Sub-Committee D, the conclusions of which were known to the Minister, has apparently had very little effect on the outcome of the agriculture Ministers' negotiations, with the result that the day of reckoning has been postponed. Structural surpluses are likely to remain and, with higher prices, may even increase. The effect on the Community budget is already causing deep pessimism in Brussels. It would seem that the agriculture Ministers have apparently adopted the slogan, We will fight the good fight another day".

8.8 p.m.

Baroness Elliot of Harwood

My Lords, as the seventh or eighth Member of your Lordships' House to take part in this extremely interesting debate, I shall be very short. But, first of all, I wanted very much to thank Lord Mottistone for the admirable way in which he has chaired the committee, and also the members of the committee for the interest which I think we all have in it and in the work that it does.

I want to congratulate the Minister, too, on getting an agreement in the first week in April in 1981. Of course, those of us who are farmers would like to have agreements in November or December the year before. But what happened in 1980 was disastrous, particularly to hill farmers, because we did not get the agreement about sheepmeat until, I think, October. By that time nearly all the sheep farmers with hill lambs had had to sell them because they could not keep them, as they had to look after the grass for the winter for the ewes, with the result that most of the hill sheep farmers missed the increase in price for sheep which came in November and December. This year, I hope, will be different. I hope that, because the Minister has successfully concluded an agreement, which may not be perfect but which is much better than the one we had in 1980, disasters like the one we had last year—and I am talking about sheep; I know about sheep; I am a sheep farmer—will be avoided. I would congratulate the Minister on having concluded the agreement so soon.

As a great many members of the committee have spoken, and as I agree with everything they have said, I shall be very brief. The problem of surpluses is one which most people have stressed. It is a very serious one. But it would be much more serious if it were a problem of shortages so as to lead to the same situation in the United Kingdom and the Northern countries as in the Southern part of the world, as was outlined in the Brandt Report. But I do not think it should be impossible to find ways of dealing with the surpluses which are occurring in the EEC. I think that the current agreement which the Minister of Agriculture has made about prices has been a little pessimistically dealt with by one or two people, and more particularly by those concerned with consumer organisations.

My noble friend Lord Ferrers here, and the Minister in his speech in the other place, said that one-quarter of 1 per cent. would be put on to retail prices as a result of these new arrangements; and that will be approximately 1 per cent. on the food prices in a whole year. I do not think that that is a very large increase for the consumer—and I stand here in this House wearing, as it were, two hats. I wear the hat of a farmer and also that of a consumer. In this week alone, I led a vote—against the Government on that occasion, I am afraid—because I was representing the views of the consumers. I think there should be—and I have thought this ever since I was chairman of a consumers' organisation—an interest between both sides. There must be fair play for both consumers and producers. I think that on this occasion fair play is really in evidence. I, too, received a similar letter to that received by my noble friend Lord Mottistone from the Food Manufacturers' Federation. I read it with great care. I realise that they have to put their case for their manufacturing side; but I think that it is important for them to realise that they would not have anything to manufacture from the agricultural point of view if it were not for the fact that the farmers are growing as much food as they can in this country and that they are dependent upon the imports of such food as we cannot produce ourselves.

The agricultural industry is an industry which is fundamental to this country. If it is in a bad way—and in the last two years it has been in a bad way—it affects the whole economy of our nation. It also affects individuals as well. That is why I always stand up for the farming industry, although I am personally involved in it. I was going to mention the details of the arrangements that have been come to between our Minister and the Common Market, but as my noble friend Lord Ferrers has outlined them so carefully I will avoid doing that. They are in many ways very satisfactory. I do not share the pessimistic view of the noble Lord, Lord Sainsbury, who feels that much more could have been done. I think it is a step in the right direction.

I agree that the question of selling surpluses is one to which far more attention should be given. I should like to see a more careful study among the EEC people in Brussels into the ways in which we can encourage the buying of some of the food which the farmers are producing. I do not think that enough study is made of that. Too much is concentrated entirely on production and not enough on selling. I hope that after the very unfavourable view taken on the selling of surplus produce to Russia for very much lower prices than the European countries pay, that situation is entirely unacceptable. I would hope that someone in Brussels in the Commission would be concentrating on trying to think of ways of relating production and consumption in a much better way than before.

I thought that what the noble Lord, Lord Walston, said about a food policy as opposed to a production policy is one that we could explore further. I am sure that that would be one way of dealing with this matter. It is better to have surpluses than not enough food. On that, we are on the right side. It will take some time to change the organisation of the CAP. It is not being done as rapidly and successfully as we would want, but how much better that we in Europe should be discussing the question of food surpluses or food distribution, all working if not exactly together at least in a Community interested in trying to do the same thing, than having what I think all of us in this House at the moment have known, which is two European wars. This is infinitely better and infinitely more helpful to the world, far more so than any of the appalling conditions that occurred in the past.

I do not take too depressing a view about the situation. There is a lot to do still, but at least we are talking together or trying to act together and that is a good thing. As your Lordships know—and I have said this many times—I am a practical hill farmer, a Scottish farmer. What I am saying today represents a lot of what the Scottish National Farmers' Union, of which I am a member, would approve of. I would say one word to my noble friend Lord Sandford who is always interested in and talking about hill farmers. It is that what the hill farmers want is an economic price for what they produce and sell. It is that which the hill farmer wants. No doubt the hill farmer would or could enjoy Community services (in which he is very interested), but at the end of the day what makes the hill farmers and the development of the hills in England, Wales and Scotland is the price they get for the animal they are selling; and it is an animal which is not in surplus but which everybody wants and, what is more, one which we can export.

Do let us get our priorities right. What is going to help the hill farmer is whether or not he gets an economic return for his products. That is what I think, under the current arrangements which have been made by our Minister, will be very much better this year. It could not be worse. I am certain it will be very much better. I should like to say "Thank you" to the Minister for the fact that he has stuck up for the hill farmers, which is a fundamental part of our farming community. I know that the noble Lord, Lord Peart, agrees with this because I have had many conversations with him. Knowing well Cumberland and the North of England, he knows what a vital part this plays in the agricultural world there.

I am an optimist. I have been through very bad times, then good times and also bad times again. But I never despair. I always think that round the corner something is going to be better. I think this agreement which has been made by the Minister and expounded brilliantly by my noble friend Lord Ferrers will be of enormous help to us in the future.

8.21 p.m.

Lord Beaumont of Whitley

My Lords, the noble Lord, Lord Mackie, has already spoken from these Benches on the straightforward approach to the report as it stands. I wish to touch on another consideration, which is a certain amount that it does not say. Indeed, I want to talk—though not for very long—on the matters to which the noble Lord, Lord Sandford, and the noble Lord, Lord Walston, have already referred. Some of this is included in the report in paragraphs 65 and 66 and the paragraphs to which the noble Lords referred. It concerns the social and regional objectives and also the environmental objectives. I speak, in a way, as an ex-member of Sub-Committee G straying into your Lordships' deliberations.

In particular, I want to say something about the reactions of the European Environmental Bureau over a period of time to the CAP and to the kind of remarks which are made in this report. The recent debates in the Wildlife and Countryside Bill mean that, certainly in this House, we now have considerable parliamentary awareness of the tensions between contemporary agriculture, wildlife and landscape conservation. The European dimension has not been so much explored and is slightly less well understood.

Environmental problems in rural areas of the Community are many and varied, ranging from the impact of intensive farming techniques on the lowlands of Northern Europe (for instance, pollution, landscape impoverishment, habitat destruction, nuisance from factory farms, et cetera) to ecological problems, stemming from the abandonment of terraced agricultural land on the slopes of the Alps. The relationship between these problems and the mechanism of the CAP is complex; and, in many cases, it is difficult and perhaps rather artificial to separate national from Community legislation.

Nevertheless, the CAP provides the framework for national policy and has a dominant role in setting the pattern of incentives for individual farmers. Its emphasis on price policy has inhibited the development of more sensitive and flexible policy instruments at both Community and national levels. From an environmental point of view, excessive intensification has taken place in some areas, while there has been premature abandonment for under-utilisation of resources elsewhere. As the chief instrument for allocating agricultural resources at the Community level, the CAP must bear some of the responsibility for this.

The increasingly swollen budget allocated to the CAP inhibits the development of regional and social measures which might be of benefit to the environment—it is all very well to say that it should be borne outside the CAP, but when the CAP takes up so much of the Community budget that is difficult to assure—for example, assistance for areas where agricultural abandonment and depopulation are significant problems. With so few resources being allocated to the regional budget, the need to incorporate social and environmental considerations into the CAP is all the greater. I have sympathy with the noble Lord, Lord Walston, saying "separate them out". It would be much simpler; but we cannot always make it much simpler.

It may appear that national Governments are free to introduce environmental legislation as they please; but, in practice, the CAP may inhibit certain initiatives. For example, member Governments are naturally anxious to get the maximum benefit from funds available through the European Agricultural Guidance and Guarantee Fund, and this has an influence on the structure and take-up of capital grant schemes. Some of these grants are used to finance farm improvement projects with detrimental environmental effects: for example, land drainage, wood and hedge clearance et cetera. Since the agricultural budget already bears the costs of a substantial grant structure, there is naturally a reluctance among national Governments to introduce alternative grant or subsidy schemes which might be environmentally preferable. This is part of the answer to the committees urging that this should be done by national Governments.

The CAP is the cornerstone of free trade in food and agricultural products within the Community, and my criticisms of the CAP are aimed at the principles which it endeavours to apply as well as at the mechanisms used. The specialisation resulting from free trade gives rise to a number of environmental problems, and I would argue strongly that some form of control—or if "control" is too strong a word, then adjustment—is necessary if the EEC is to escape the pronounced degree of regional specialisation which has already occurred in the United States of America.

This reflects our concern that if environmental costs are not enfranchised in market processes, the free operation of a common market may lead to an excessive, sub-optimal degree of regional specialisation.

The CAP alone is not responsible for all rural environ- mental ills. Action at each level of government is required if we are to develop a set of policies capable of producing an acceptable balance between agricultural and environmental priorities. To take one example, drainage operations in the United Kingdom are eligible for up to 70 per cent. grant aid, funded mostly from MAFF rather than from the European Agricultural Guidance and Guarantee Fund sources. These grants are in many cases a cause of the destruction of wildlife habitat. We dealt with a great deal of that during consideration of the Wildlife Bill, and indeed the noble Lord, Lord Sandford, went some way to help us all get out of that particular problem.

We have a serious problem in the whole thrust of incentives which are given by the CAP. I think that this must be borne in mind. I do not think that it can be dismissed in the way that it is dismissed in paragraphs 65 and 66. I entirely see the problems; I am not in any way trying to cast stones at the subcommittee, who have done a very good job. They recognise some of their problems themselves. One of the most interesting things is in paragraph 65, where they say: discrimination in the operation of the CAP against efficient farms, or even taxation of them, in order to provide finance to support economically less viable ones …". That contrast of efficient as opposed to economically less viable—not efficient as opposed to less efficient, except possibly in a very few in an economic sense—is a gauge of the problem that we have to face.

I entirely agree with them that we must not have the kind of national or Community policies which are going to encourage more over-production in their favouring of the less-favoured areas. But equally I think that the idea that we should place primary responsibility on Governments for the pursuit of social and regional objectives in certain rural areas is not all that realistic either. This is very much a part of what the European ideal is about. Even though it was not written into the Treaty of Rome, I am quite clear that it is a very real and proper interest of the EEC at the moment.

This is a complex subject but it cannot be simplified at the cost of leaving out some of the major problems and I think that we must, every time we deal with a subject like this, deal also with the rural, human and natural responsibilities and subjects which intermingle with this and which make part of the whole rural background.

8.31 p.m.

Lord Peart

My Lords, may I say to the noble Lord, Lord Beaumont, that I followed carefully his approach? He is an environmentalist and I understand him raising that flag. However, there are other matters in the Community and other matters in farming, for example, which are probably more important in certain circumstances.

I should like to congratulate the noble Baroness, Lady Elliot. I have seen some of her farm—I admit the ground was covered with snow, but it must be a lovely place not only to work in with shepherds, dogs and all that we have in Cumberland, but also a wonderful place for farming, in the best sense. I know that she herself is dedicated to it and I admire her for all that she does in this respect. How right she was in what she said.

Talking about the consumers, I have the whole lot here: the Dairy Trade Federation and the Food Manufacturing Federation. I have even got a CAP proposal blessed by the Retail Consortium. I declare an interest: I am the honorary president. I do not agree entirely with all this document, but it is a good one and much better than other food documents which have been sent to Members.

But, after all, let us look at who produces the food. Our farmers have had a difficult period. I have here figures taking into account the economic conditions and prospects for agriculture. Net farming income fell by almost 24 per cent. in real terms in 1980. In the United Kingdom, farming income has fallen in every year since 1976 and in real terms it is now less than half its 1976 level. The primary reason for this fall was of course that, while the prices farmers received for their produce went up by only 6 per cent. in 1980, their costs increased by 14 per cent. Noble Lords should remember that British farming has a superb record of productivity, which has increased since the war; but no industry could be expected to survive such a squeeze unless there is an improvement in farm output. I believe that the industry could suffer.

The noble Lord, Lord Sainsbury, I admire very much for the tremendous work he has done in the field of food consumption and trading, and particularly regarding the high standards that are found in his company and which he himself insists upon. I think he will agree that while we must consider the consumer, in the end the people who produce the food also have a major place in our life. In other words, I do defend the farmers, in the best sense. Sometimes they used to disagree with me, but in the end we can only produce food from our own resources if we have good farming, good technical equipment and machinery of the best kind, backed by a really fine advisory service, ADAS.

I taunted the Minister the other day, telling him that I hoped he will see there is no cutback on our main advisory services, because over the years they have continually helped to provide a very efficient agriculture which is in many ways the envy of the world; and even in Europe, in the CAP, we still play a major part. I personally believe—and I am not just saying this because there is a freemasonry between Ministers of Agriculture—that the Minister has done well in the circumstances. I mean that. It is not easy throwing out compliments when you fight each other across the Floor; but I think he has done well and it is a great pity that we were not able to discuss his Price Review proposals the other week. I have listed these very carefully.

I see that the noble Lord, Lord Walston, has come back and perhaps I may say to him that I do not care whether he is a Social Democrat or what: he is still a very nice fellow and he knows his industry. I believe he is right about the need for a food policy and I think that this should be developed. After all, we have seen starvation in the world and I have always thought when we have had surpluses in the Community that they should be taken to other countries in the world where they are needed. I know that there were difficulties about skimmed milk; but the Community and the CAP, as such, should have a food policy which is aimed at those parts of the world where we see dreadful poverty and the terrible results of malnutrition on the young population. When I looked at those pictures from Somaliland I was horrified to think that war is going on in an area where children are not being fed properly and where the people are only scraping a living on the land. I agree that this is something that the Community could do, and which is very important.

I do not want to go right through the list of what the Minister obtained at the recent Community meeting. I would only say that the price negotiations, as he said, took place this year with a background of farm incomes having fallen substantially over the past two years throughout the Community and in the United Kingdom, as the recent White Paper disclosed. I have emphasised that. There is no doubt that it is important that we should consider it now that our production has to be increased. The 1981 budget provision for milk, for example, is fixed at 10 per cent. below that of the previous year.

Agreement was also reached on co-responsibility arrangements for cereals in the marketing year 1982–83, which will provide savings estimated at £39 million. Again, more flexible intervention arrangements for beef have been made and I am glad to say that the variable meat premium is to be retained. That was something which I did myself when I was a Minister in Europe. I am very proud of it and also I am very proud that we dealt with the butter subsidy, which again is important. I could go right through this long list here which the Minister displayed when he spoke in another place. Unfortunately, we were not able to have our own special report. Nevertheless, I am sure that the noble Earl, Lord Ferrers, will still look after the interests of agriculture, and we shall listen carefully to what he says.

I think this has been a good debate. I pay tribute to the noble Lord, Lord Mottistone, for his chairmanship and to all those who have contributed to this document. I know he takes a great interest in the food industry and plays a prominent part, but he would be the first to admit that the farming community are an important element in the production of food, which affects those products which he himself would like to sell much more of. So I believe we should be grateful for what is being done now in the rural areas. What has happened in Brussels is to our advantage: I am quite certain of that, and I hope we shall recognise that we have a major part to play. I liked the sentiments of the noble Baroness, Lady Elliot, when she talked about two world wars. That is what converted me to the Community—not the Common Market's agricultural policy as such but the need to have peace, which would enable us to go forward and have more plentiful supplies of food. We really must think in those terms in many ways. The CAP may have its faults but it is there and we must try to make it work. I believe that in the end, given a fair wind ahead, we shall be able to show that we, the British people, can make our contribution there and still play a leading part in an essential political economy.

8.40 p.m.

Earl Ferrers

My Lords, one of the pleasures of debates on this subject in this House is that your Lordships can take a totally detached view and can be particularly generous about other people to whom they may be politically opposed. I am grateful to the noble Lord, Lord Peart, for what he has said about this CAP review and I am grateful to him for what he has said about my right honourable friend. I will pay my tribute to him in so far as that it was he who, as a very distinguished Minister, introduced the beef premium, and he referred to the butter subsidy too. These were two great achievements and I think that what the noble Lord said at the very end of his speech is the most important part about the whole of the common agricultural policy; it is the co-operating together of all the countries in Europe which is such a huge factor to the benefit of goodwill throughout the world and as a force of stability. It is in that context that one has to see the whole of the common agricultural policy.

My noble friend Lord Mottistone did say that he thought this reflections document should be taken back. It should not be seen as the commissioners' last word on CAP reform—for, of course, it is not. It may have its drawbacks but the Commission have been asked to produce proposals by the end of June for the restructuring of the Community's budget, with particular reference to unacceptably high contributions such as that made by the United Kingdom. This is bound to involve the Commission in a further searching look at the common agricultural policy.

This has been a fascinating debate—at least to me—and one of the points which the reflections paper made clear was that the Community can no longer afford to offer an open-ended guarantee on an unlimited volume of production—especially to those who are in surplus. That is a point to which the noble Lord, Lord Sainsbury, characteristically and perpetually returned, and quite rightly too. It is true that surplus production of the order we have seen recently is a waste of resources, while the problem of disposing of surpluses exacerbates the Community's relationships with its trading partners.

The Select Committee's impression was that the Commission's approach in this document was directed more to the financial aspects of the policy than to controlling surplus production itself. We are all well aware that the problem of surpluses must be tackled and we shall not be satisfied—and certainly Her Majesty's Government will not be satisfied—with measures which merely shift the cost of disposing of the surpluses on to the Community's consumers.

The Select Committee was also concerned, as were your Lordships, that the Commission's approach might imply discrimination against efficient farmers. I think it would be quite wrong for discrimination to be made against efficient farmers because in a world in which there is an overall great shortage of food it cannot be in anyone's long-term interest to discriminate against efficient farmers. I can assure your Lordships that the Government will not go along with any discrimination of that kind.

My noble friend Lord Mottistone said that processors did not like the price fixing results very much. I suppose that is understandable and I suppose they would have preferred it if there had been no price increase at all, because food is part of their raw material. I think the noble Lord, Lord Walston, was absolutely right when he said no longer is there cheap food; I believe he said there was no "bargain basement" of food products in the world—I think that was his expression and it was rather an attractive one. What one has to do, either as a Government or with a common agricultural policy, is to weigh up the balance of increasing price of food on the one hand and, on the other hand, give the agricultural community adequate resources with which to do their job.

The noble Lord, Lord Roberthall, said that this was "no big deal" for the farming community, and the noble Lord, Lord Mackie of Benshie, mentioned that farmers would not get rich as a result of this, Perfectly true. This result has given some increase to the farming community; it has not recouped all their costs, yet has given them some proper stimulation and return for the work they do. It is quite correct that farmers should have an increase in their prices. I should declare my interest as being a farmer myself—but I also happen to be a consumer of food.

The noble Lord, Lord Sainsbury, said that national aids were unfair. He referred to them being unfair in so far as they might have discriminated in areas where there should be no such discrimination, and he referred to France giving national aids worth over £400 million. Lord Sainsbury is quite right; if you are a member of the Community the whole purpose of a common agricultural policy is that it should be common. There are areas in which it is perfectly permissible for national aids to be given—that is quite right. What is wrong is where countries take advantage, as some countries do, of aid which facilitates unfair competition with other countries. We have seen this occur in the area of subsidised gas, with the glasshouse industry currently facing great difficulties because the Dutch have unfairly subsidised their gas.

The Commission has recognised this point and it is also one that my right honourable friend has pursued and will continue to pursue, not only in respect of the price of Dutch gas but in respect of any area in which, in the view of my right honourable friend, member states are seen to be unfairly subsidising competitive areas of agricultural production, which is against the Community's principles. I can assure your Lordships that my right honourable friend will take up such instances most strongly with the Commission, as he has done in the past.

Both the noble Lord, Lord Sainsbury, and the noble Lord, Lord Mackie of Benshie, referred to the fact that some members of the Community were getting a bigger result than we were because their currencies were devalued, and therefore they were able to add a certain amount to the prices of their commodities; and the noble Lords implied that this was unfair. I do not know that it would be particularly helpful for me to go into this particular aspect at this hour, given all the complexities of the green pound and the green currencies. I will say that there was severe pressure on the Italian lire which involved a 6 per cent. devaluation in the lire, and at the same time there was an adjustment to take account of the appreciation in sterling which occurred since the last realignment in 1979. There is a curious thing called the "basket of currencies" and when those get readjusted it very often throws out apparent anomalies. One of those anomalies was that some countries were able to devalue their currencies and thereby, admittedly, get a better result. But the answer is that agriculture cannot be insulated indefinitely from the effect of currency movements, and, so long as some currencies strengthen and others weaken, a system of common prices must at some stage adjust itself.

I would only remind your Lordships that when we were a country with a weak currency and other countries had stronger currencies, we were glad to take advantage of the opportunity which that gave us from time to time to devalue the green pound, and thereby to obtain price increases which were higher than the average. Now that the boot is on the other foot, we cannot complain too much about that.

My noble friend Lord Sandford and the noble Lord, Lord Beaumont, both referred to a highly important area of agriculture, which is the less favoured areas—what we call the hill farms—and the essential requirement that those who farm in those areas should be entitled to a proper livelihood. They questioned whether, in fact, there was a possibility of some form of financial assistance being given to them, which, in the circumstances of the environment, might be better than increasing the cost of the common agricultural policy by permitting greater surpluses.

My noble friend Lord Sandford suggested that the Government should give assistance to farmers in these areas for non-agricultural purposes, such as tourism and craft industries which help to increase employment and prosperity in the countryside. I agree that it would be quite wrong to look to the common agricultural policy as a major instrument for solving rural problems of a regional or social character, rather than an agricultural character. The danger of trying to use the common agricultural policy for this is, as the noble Lord, Lord Beaumont, fears, that it could exacerbate the problems of over-production in the more favoured areas. Apart from limited measures of structural improvement which are possible on a Community basis, it must be for national Governments to tackle these problems, provided that they do so within the Community's rules of competition.

My noble friend Lord Sandford and the noble Lord, Lord Beaumont, both referred to paragraph 66 of the committee's report. I agree with the broad objectives of this which are, I think, consistent with the Government's policy. It is not our approach, when considering the appropriate level of support prices, to take into account the particular problems of less favoured regions or categories of farmers. On the other hand, we see a continuing place for Community support to special measures of assistance to clearly delineated areas with particular natural handicaps, such as our own hill areas.

We also see a continuing need for support to structural improvement through aid to investment, amalgamation and so on. We see a continuing place for Community, as well as national, resources here. But I agree with the committee that it is important that such aid should not be used to exacerbate existing surplus problems, or to distort competition.

My noble friend referred to the amendment which he moved on the Wildlife and Countryside Act. This all ties up with the same area which he and the noble Lord, Lord Beaumont, were discussing this evening. All I can tell them is that the Government are considering this whole range of problems sympathetically. There is a clear need, at least in some less favoured areas, for farmers to diversify their activities in order to obtain a more satisfactory and secure income. There are obvious advantages in the co-ordination of assistance for these purposes being exercised by the Ministry of Agriculture, who will be able to take an overall view of the farmers' position. On the other hand, I am bound to tell your Lordships that there are practical difficulties, not least in terms of the availability of finance and manpower. I would say to my noble friend Lord Sandford that that is as far as I can go this evening, but I can assure him that this matter is being given some considerable consideration.

Of all the subjects milk, and the surplus of milk, is the one which concerned the committee and your Lordships most of the problems of the common agricultural policy. I think that we should get this clear. The net increase in prices this year is below the estimate of the increase in input costs for the dairy industry within the Community. In real terms, therefore, this will be yet another year in which the improvement in prices will not meet the increase in input costs. It cannot, therefore, be argued that the price increase itself will be a stimulus to increased production.

We regretted the decision of the Commission to withdraw its proposal for a supplementary levy. That is what your Lordships' committee wanted, and your Lordships have stated again today that that is what you would like. That is what we, too, would have liked. But this happened because of the strong opposition of a number of member states. We hope to be able to return to the principle that those who create the increased production should meet the cost of disposing of that production. I can assure your Lordships that we intend to try to pursue that policy.

My noble friend Lord Mottistone asked what the super-levy would have produced had it come into effect. The answer is that it would have produced 123 million European currency units in a full year. The matter of milk is a great problem. We wish to see that efficient milk production is permitted, but that those who cause the problems should be the ones who are responsible for disposing of the surpluses.

A number of noble Lords—Lord Mottistone, Lord Walston and Lord Mackie—referred to the long term and said how desirable it is to have a long-term policy in the common agricultural policy, because everyone will then know where he is. I agree entirely, but it is, of course, difficult to achieve in practice. I remember speaking to the noble Lord, Lord Woolley—it was not in the Chamber—and I asked him: "Why can't we have a long-term agreement on agricultural policy?" He put it very succinctly. He replied: "Remember, agriculture is long-term. Food is short-term and food is politics".

Therefore, even if you have a long-term policy and, in theory, everyone knows where he is, it has to be sufficiently flexible to take account of changing needs and changing circumstances, which is not very easy to achieve in practice. But my right honourable friend has made it plain that he has an interest in persuading the Council to adopt a longer-term approach. In particular sections—for example, in milk—there is clearly a need for action over a number of years. A four- or five-year plan, if it could be agreed, would undoubtedly help. A comprehensive five-year plan for the whole food and agriculture sector might be pretty ambitious, and I doubt whether it would be achievable.

Of course, the presidency is not a long period during which to exert a great deal of influence, and our freedom of action is very much bound to depend on whether there are other pressing issues of a more immediate nature which it will be our duty to resolve. But I can assure the House that my right honourable friend will be giving active consideration to how best, in the circumstances of the United Kingdom's presidency, the Community might be encouraged to take a longer-term look at the common agricultural policy.

I hope that I have been able to answer some of the questions which were raised during the debate. I apologise for having inflicted two speeches this evening on your Lordships. However, so far as I am concerned the debate has been of great benefit.

9 p.m.

Lord Mottistone

My Lords, at this late hour it would not be appropriate for me to respond to what my noble friend on the Front Bench has just said and I shall not attempt to do so, though it is tempting to reply to some of the points which were made. I should like very much to thank all noble Lords who have taken part, in particular those who are not members of Sub-Committee D. May I also thank those who are members of that sub-committee. However, it is very useful for us to have the benefit of the approach of other people to our problems and to widen the discussion thereby.

I must apologise for the fact that when I concluded my opening speech I could not regain my thread of thought after having been briefly interrupted. I can only put this down to the fact that this was an act of God in retribution for having stayed up last night both to speak and to vote against the bishops!

Earl Ferrers

My Lords, I thought it was a habit of the noble Lord, Lord Harmar-Nicholls.

Lord Mottistone

It could be put that way. With those concluding remarks, may I thank noble Lords again for having taken part in this debate.

On Question, Motion agreed to.