HL Deb 25 March 1981 vol 418 cc1162-72

2.52 p.m.

Lord Gisborough rose to call attention to the problems facing British agriculture; and to move for Papers.

The noble Lord said: My Lords, it may be thought an appropriate time to discuss this Motion, as negotiations are at present in progress regarding CAP prices, and there has not been an agricultural debate in your Lordships' House for some time. I must draw attention to the fact that time allows for an average of only seven or eight minutes per speaker, if we are to get through the list for the debate in two and a half hours and to allow the Minister to reply. I must myself declare an interest as a farmer.

I know that the House will be particularly looking forward to the contribution of the noble Lord, Lord Elphinstone. He is well qualified to speak, having been trained at the Royal Agricultural College, Cirencester, with its wide ranging and comprehensive agricultural courses. He is a successful arable farmer from the heartlands of Scotland and joins a lot of other Scottish farmers in your Lordships' House, such as the noble Lord, Lord Mackie, the noble Earl, Lord Mansfield, and the noble Lord, Lord Lyell. But I advise him to pay no attention if he ever hears people calling for home rule for England! The House will listen with great interest to his speech.

Farming net income has declined by 50 per cent. over the last four years, having declined by 24 per cent. in real terms in 1980 alone. The fall has been quite simply because the prices of goods and services used by farmers have risen much faster than the prices which they have received for their products—14 per cent. against 6 per cent. The fall was most marked on cattle and sheep farms in the lowlands, as well as in the hill and upland areas. Without any improvement in prices, the ability of some farmers to continue to survive by increasing their level of production will soon be overtaken by the squeeze and output will start to suffer.

More and more farmers keep going only by borrowing from the bank and the 1980 level of overdrafts was some 30 per cent. above the 1979 level, which was 70 per cent. above the 1978 level. Farmers therefore now work largely for the banks. Little wonder that livestock breeding numbers have reduced in recent years, while European herds have been expanding, and thereby our productive base has been disappearing. Profits are inadequate or non-existent and, as money is not available, capital investment in fixed assets declined by 10 per cent. in 1980. There has been a corresponding sharp decline in applications for grants.

Investment in plant, machinery and vehicles fell by 23 per cent. in volume from 1979 levels. Consequently, unemployment in the agricultural machinery industry doubled, while that in the tractor industry rose by 150 per cent. The number of farms in the United Kingdom continued to decline, with 5 per cent. fewer than five years ago. Small farms can no longer support a family, and yet their land price on sale remains far above economic reality. There is also a situation where smaller farms cannot afford to employ labour, and the farmer has to work longer hours and receive less reward than any workers' union would allow for its members.

Dairying is the biggest farm enterprise and the Commission's proposals, that our dairy farmers should, in effect, have to pay for surpluses of milk abroad when France is giving illegal aids to its producers, are certainly not acceptable. The Commission's proposals appear to penalise our intensive and efficient milk units, while supporting the small and inefficient producers on the Continent—a totally wealth reducing exercise.

With regard to the hills, the value of output and average incomes have fallen markedly. This seems particularly so in the North in 1979–80, and the forecast for 1980–81 is further falls in net incomes overall. This seems to be in spite of the increase in the hill livestock compensatory allowances; though the sheep order, which was laid before the House on 28th November, provided a level of support that will certainly be of help to hill farmers and was a good bargain with the Community.

The cereals co-responsibility proposals are unacceptable. There are, after all, no abundant world supplies, nor evidence of an EEC structural surplus. Further, cereals store well and can easily be sold on world markets. The need for co-responsibility in oil seeds is doubtful and the standard quantity of 2.2 million tonnes is likely to be exceeded in 1981. Why should co-responsibility be appropriate for a crop of which the EEC is still a large importer? I hope that other noble Lords will take up the problem of individual commodities in more detail.

Continental farms are also suffering to some extent, but they have not had such a long period of poor results to cope with and the success of the present negotiations on price increases is vital if many British farms are to survive in cultivation. The original Commission proposal of 7½ per cent. went only halfway to meet the 15 per cent. price increase which was needed to sustain reasonable farm incomes in efficient farms on the Continent. But, allied to the proposal to reduce the MCAs by five points. 7½ per cent. would have resulted in an overall fall in real incomes averaging all crops for United Kingdom farms.

Our MCAs have already been reduced by six points, due to the recent adjustment in the European currency unit central rate, and yet the Commission still propose a further five points reduction. Such a green pound revaluation would act severely on our farms and would reduce the cost of living by only about ¼ per cent., and reduce our payments to the EEC budget by only about £12 million in 1981. Positive MCAs have emerged, not because of our trading strength but because of our oil strength. If sterling remains strong, only a reduced inflation rate compared with the EEC average could justify a revaluation of the green pound. The Minister must, therefore, continue to resist revaluation, if our competitive position to sell against European produce is not to be destroyed. However, there is hope in the Commission's latest thoughts of a 10 or 12 per cent. price increase, and perhaps the Government will be able to quantify the effect of such a figure on the farmers and on the housewife.

But farm price increases all have to be paid for. We must remember that the agreement to cut Britain's budget bill runs only for two years. There is no reason to suppose that Britain's problems of large food imports will have gone by then. Yet while reform of the CAP is called for by all, there are no signs of any positive proposals being put forward. The situation where France, one of the richest of the EEC countries with 27 per cent. of EEC farm output, has its farm prices subsidised to a generous extent by British contribution, cannot be allowed to last for ever. If not before, the crunch; will come when the 1 per cent. VAT limit is reached. This could happen in 1982 or 1983. Whatever problems we have now will be as nothing when Spain as well as Portugal and Greece have joined the Market. Then there will be little hope of keeping to the 1 per cent. VAT rate. Meanwhile, the guidance fund to provide for farm modernisation has now shrunk from 30 per cent. to 5 per cent. of the EEC farm fund which has been overwhelmed by the size of the guarantee payments.

The biggest problem for the EEC is the support of small farms, and hill and marginal areas. Yet these small farms have to be maintained to preserve the population structure of the countryside. Also, the hill farms in Britain provide half our beef-cow herd and our breeding sheep flock. The problems of maintaining small farms will remain for ever and will get worse as larger farms for ever become more efficient. Last month in the forestry debate we heard of the desirability of integrating forestry with hill sheep farms, planting up the high and far-off land so that forestry should eventually provide an annual income for the sheep farmer in addition to his hill stock. Furthermore, the lesser but more concentrated acreage left for sheep would, as has been proved in areas like Dumfries, provide an equal or better output, and the need for subsidy would be reduced.

Is this not therefore the time for the Government to offer farmers the use of their work experience labour to plant up, with the farmers' help and labour, successive plantations so that the sheep farmer may eventually become an annual timber producer, needing less support from the CAP, providing much needed timber and making good use of the presently unemployed? Planting is labour-intensive and the work requires young trees, stakes and wire, the production of which itself is fairly labour-intensive.

But we must not just look to see what subsidies we can gain now and in the future. We must look to see what we can do to help ourselves. One of the most important yet most neglected aspects of farming, and in particular food production, is marketing. Many British producers have a high quality and grading discipline, but far too many do not. This point was well made by Sir John Sainsbury who said that there should be a greater penalty for growers who cheat the system by sloppy grading of their produce which then compares badly with the strictly graded imported produce. The success of Danish bacon, sold on reliability of quality, is a very good example. France and Germany both have central bodies to encourage good marketing for agricultural produce. Perhaps Britain should have a similar organisation. Such an organisation, it is claimed, would help to counter some of the inroads into this country of foreign produce and help sales of our produce abroad.

I hope we shall hear other positive ideas in this debate, for it is surely better to aim at self-help, where possible, than to argue about hand-outs. The benefits to Britain of membership of the Common Market are indisputable, but as a large importer of food we pay high prices, whether to featherbed the small continental farmer or to buy over the threshold from outside the Community. Along with Germany, we provide a large proportion of the CAP fund to bear 100 per cent. of the cost of propping up the farmers. The time has come for national exchequers to share the burden. This cost will concentrate the mind of national Governments to try to keep the rising costs of the CAP under better control. My Lords, I beg to move.

3.5 p.m.

Lord Peart

My Lords, I am grateful for the opportunity again to debate agriculture. I wish this debate had been a little later, when the Minister has returned from Europe and when we know what has or has not been achieved. Nevertheless, I am glad to have the opportunity to echo some of the difficulties which are affecting the farming community. I have here a document which was presented to me by the National Farmers' Union. It was partly quoted by the noble Lord opposite. It is an excellent document.

The NFU believe that agriculture is facing a crisis and that the decline of 24 per cent. in real terms in 1980 alone is endangering the future of British agriculture and of our domestic food supplies, and is creating serious problems in the industries which supply agriculture. All of the subsidiaries—for instance, the engineering sections of different firms—are affected. The crisis in our major industry is important, but I believe that in the end we shall triumph over the difficulties.

The package of EEC farm prices and related measures which was put forward for 1981–82 by the Commission on 18th February fails completely to meet the need for a substantial increase in United Kingdom farm prices. The adoption of the package would be disastrous for the industry. We must consider the importance of our industry. I have here some figures which show what can be achieved and what has been achieved over a long period of time. We produce more than most countries. Our agriculture is perhaps the most efficient in the world. Our scientific staff, who are important, are the envy of the world. I was at a reception the other evening for the President of Nigeria at which he emphasised the importance in agriculture of soil conservation. We, the British, must be proud of having given the lead in this and many other directions throughout the world. I hope that we shall continue to do so.

I am sorry to have to strike a sour note at this point. I have here an extract from Big Farm Weekly of 12th February 1981. The heading is, "New axe over ADAS". The report says: A significant step towards further staff cuts in ADAS and other departments is due to be taken by the Ministry of Agriculture's senior policy-making group, the Management Board, tomorrow (Friday). The cuts will be based on proposals drawn up last month by department heads as the first move in reducing staff numbers by almost 2,000 (one-sixth) by 1984. The cuts come on top of those already made within ADAS under the reorganisation of the regions and early retirements first reported in BFW Jan 1. A continuing fear in ADAS is that professional, scientific and technical staff are being excessively weakened in relation to the administrative and executive grades. With only three ADAS representatives on the twelve-man management board, and a proposal now before the Minister to reduce this to one, morale among ADAS staff in the regions is said to be lower than at any time since the reorganisation of the old NAAS into ADAS. 'The cuts already made in research and development suggest that the advisory service always gets the brunt of the staff reductions ', an official ADAS staff representative said this week. Meanwhile the impression among advisers in regional offices that they are getting a raw deal relative to other Ministry departments seems to be growing, with some claiming that even their clerical staff are being taken away from them. However, a reduction of clerical services within ADAS relative to other departments was denied by a senior Ministry spokesman this week ". I want the noble Earl, Lord Ferrers, to put this point to his Minister. There must be no cutting down on this major advisory service. I can remember when I was succeeded by a Conservative Minister—overnight part of the advisory service was affected. It is one of our great achievements to have created an organisation which emerged out of the war, certainly; but over a long period of time successive Ministers have always defended it. The noble Earl knows ADAS well and is always a good friend of agriculture. He must look at this sympathetically.

That is one example, but there is another problem which affects ADAS; that is, the reorganisation of the regions. For example, in the northern region, from which I come, and where we have a great centre in Newcastle-upon-Tyne, that body is to be cut out altogether and is to be transferred down to Leeds. At this time, when we need to stimulate activity in the regions, that is an action which is a tragedy. I cannot understand why MAFF are doing this. It does not just apply to a great agricultural organisation which is being transferred to Leeds in Yorkshire; the same thing is going to happen in Wales. Aberystwyth, which is the great centre of Welsh agriculture; their main activities are going to be taken to Cardiff. I believe that is wrong. Here is an organisation which again is the envy of the world. We all know about the grassland developments in that part—and indeed other matters. Here are two great areas which are of vital importance to agriculture. Why make these changes now? Why should the axe fall now on this great service which has done so much? That is really what I want to drive home today.

I pay tribute to what the Government are doing. I have here a press notice which says: Lord Ferrers urges United Kingdom industry to grasp opportunities offered by agricultural development in South-East Asia". Who is going to do that? If we are going to approve a policy which the Ministry of Agriculture thinks is important, we should make certain that there is no cutting down on this fine advisory service which we have created over a long period. I am glad that the noble Lord has said that, as a result of what he heard on his tour abroad, in those countries there are developing great opportunities for British business. It is good policy for Britain to build up our resources, to show the world what we have done in agriculture and to show that our British technical and management expertise in agriculture, in processing, in marketing and in research can have a valuable role to play. That is why so many countries want our experts in order to improve the productivity of agriculture in the countries concerned.

If I may just quote some figures—and I will not take up too much time because this is a short debate. We must stress the importance of British farming because a lot of people are still critical of British farming. I do not know why. They object to what they call "subsidy payments", but I believe that successive policies over a long period of time have produced an industry which is second to none. Perhaps I may quote Richard Butler, who has done remarkably well, succeeding a distinguished father. He said: British farming is one of our nation's greatest assets. In the mid-1970s output from British farms was three times the turnover of the coal industry. Four times that of British Rail. We produce very much more food than Canada. We produce as much as Australia and New Zealand combined. Neither North Sea oil nor our coal reserves are our only hope of economic salvation. British agriculture is a resource of at least equal importance. The former are finite resources, whereas agriculture is a resource which should be perpetual. It is a question of priorities. We can survive without oil or coal; we cannot without food". When I was first made a humble Parliamentary Private Secretary, I remember going back to my constituency. A miner said to me, "Fred, why are you taking an interest in agriculture? This is an industrial seat". My reply to him was, "Don't you eat?" There was nothing said after that. I believe that is something which all must think about. Britain has attained 70 per cent. self-sufficiency in a temperate type of food production. We can satisfy our consumer demands for eggs and fresh milk; five-sixths of our meat and most of our fresh vegetables. Yet, of course, we spend £2,500 million a year buying imported food which we can grow ourselves. I think that must be put right. The role of British farming as an import saver is highly significant, and yet it could be improved.

After all, our farming communities are large employers of labour. An expansion of home agriculture is good for the national economy and a sound investment, not only for the farmer but for all food consumers. As to the Market, I take the view that we cannot leave. I used to be very critical about the Community but I believe that in the present circumstances we should not contemplate leaving. Our role there is to see what we can achieve, and in all fairness to the Minister I believe that he is doing a very good job. So we must be as ruthless as our EEC partners, and occasionally even more ruthless than we have ever contemplated.

I believe that in this short debate we should highlight home production and our role in Europe. But I hope that at some later stage, three or four weeks from now when the Minister returns from Brussels, we shall be able to have a much bigger debate than we are having today. However, I have given my point of view and I hope that the speeches which will follow will be as brief as I have tried to make mine.

Baroness Gaitskell

My Lords, before my noble friend sits down, may I ask him whether it would not be true to say that, when it comes to comparing it with the success of the EEC, we have played down the success of our own agriculture? We have lost out on that.

Lord Peart

My Lords, wherever I have been, even in the EEC, I have stood for British agriculture; there is no question about that. I know that the present Minister is doing so, and I believe that other Ministers have done it. Certainly it is one of our greatest industries.

3.18 p.m.

Lord Mackie of Benshie

My Lords, I wish to thank the noble Lord, Lord Gisborough, for introducing this debate at this time, because I think it is useful for the Minister to have the support of this House in the battles ahead. I hate to disagree with the noble Lord, Lord Peart, but I think it is a very good time to have the debate because of that very fact, and I trust it will influence the Minister and support him in the very tough battle that he will have. I am particularly glad to speak in this debate just before the maiden speech of my noble neighbour, Lord Elphinstone, who farms down the Howe of Strathmore from me. It is excellent country and rather well farmed, much better than my land is; similarly, I am sure that his speech will be very much better than mine, and I look forward with enormous pleasure to hearing it.

I do not think that one can expand a great deal on what the noble Lord who opened the debate said about agriculture. One can only back it up. The fact is that agriculture is in an extraordinarily bad way. Even I myself started the last year rather complacent about what a clever chap I was, and in one account I actually had a little money, but I am afraid that at the present day that no longer applies. The last year has been a disastrous year for the good land, particularly for fruit farmers. But it is not of the good land and the reasonably sized farms that we should talk. We should be talking about the vast mass of production which comes from farmers throughout the country in units which are not necessarily large, or the best sized, but which have done a tremendous job. They are suffering and suffering really badly.

Recently I saw one extraordinary figure relating to Scottish agriculture which highlighted exactly what the noble Lord, Lord Gisborough, said—that farmers are working for the banks. In fact, in Scotland the total amount paid in interest was two and a half times the net income last year. These are horrifying figures, and they show exactly the sort of thing that is happening to a very large number of farmers throughout Scotland, and England too. One of the worst features of the whole affair is that, with the high interest rates, the people who have been hardest hit have been the farmers who have been trying to modernise and have spent money bringing their farms up-to-date; they are now borrowing money to pay the interest which they have incurred from trying to be more efficient and developing their production to the benefit of the country.

There is also no doubt that the other great indicator is beginning to show in spite of the outside factors. By that I mean the price of land. The price of land is falling singnificantly in England, and more than significantly in the north of Scotland, where it has almost halved. The number of farms for sale is another indication of the general state of farming. It is one indication which people always ask about when they hear about the high prices being paid for farms. There is now no question but that those prices are coining down.

There is one thing I would like to do in this debate and that it is to dispel the idea that we are sitting in a world of plenty and that food for the population of these islands is to be had very easily by buying it from abroad. I was looking at some figures this morning and I thought them quite significant. They are from the Department of Agriculture in the United States, their figures for world production and consumption of cereals, and we are talking about total grains, including rice. In 1973–4 production was 1,370 million tonnes, which is a lot of grain. It rose in 1978–79 to 1,531 million tonnes, but consumption followed it, from 1,364 million tonnes in 1973–4 until six years later it was 1,487 million tonnes. That is 20 million tonnes a year by which consumption is increasing in the world. We all know that world reserves at the moment are nearly down from the 1973–4 level. I do not think we are sitting in a safe world, where Britain can buy her requirements at will, when in fact the consumption of grain in the world is going up by more than the total production of grain in the British Isles. The most we have produced is 19 million tonnes, and consumption is rising at 20 million tonnes a year. These are fantastic figures.

The other thing I should like to say is that the EEC, the CAP, has done a terrific job in making European agriculture make a contribution to the food of the world. There are one or two very interesting figures. I shall not quote many, but I do think it is significant that the total EEC production of grain in the last 20 years has increased by 61 per cent., and that off a slightly smaller acreage than we have today. This shows a tremendous increase in efficiency, and it also shows a tremendous confidence on the part of the farmers of Europe in the CAP. I have no doubt at all that, for all its faults, the CAP has done a remarkable job, not for the farmers but for the people of Europe as a whole.

I know that this is a short debate and I have calculated the period that everyone can speak, and mine is due to end in two minutes' time. So I must say what I think should be done. First of all, I think that the Government should pull out all the stops; in other words, bring in all the national subsidies they are allowed to pay under EEC rules to the hills and the marginal country. They are really suffering hard and we are going to lose a large number of communities unless they are helped. There is already the ability to double the suckler cow subsidy, and for expenditure of relatively little money the Government could preserve a very valuable source of the breeding stock which we require in farming in this country.

I was very glad that the noble Lord, Lord Gisborough, mentioned the integration of forestry and agriculture, because again subsidies to integrate our forestry with hill farming, as he suggested, could be extremely valuable and get us a long-term asset that we badly need. The other thing that is absolutely vital—and the two go together and I do not believe that they differ—is that we really must have a further drop in interest rates. It is absolute nonsense that producers should constantly be paying out money to the rentiers: I do not believe that that is anything other than inflationery. It cannot be right that you hammer producers in order to pay money to the bankers. We have got to get interest rates down. And of course, along with this, we have got to get inflation down. I shall not go into matters of incomes policies and other things, but surely there must be methods other than the sledgehammer we appear to be using at the moment. But of course, inflation, interest rates and other things have done more harm to agriculture than any other single factor.

I end by saying that we have got to back the Minister in his efforts in Brussels all we can. At present, I understand, the Commission are proposing only about an 8 per cent. rise, and with it they are proposing a revaluation of the green pound, which would in fact wipe out any rise for British farmers. That is totally intolerable. I was very glad, at a meeting of the EEC sub-committee on agriculture the other day, to hear the Minister of Agriculture—who made an excellent job, I may say—catogorically say that he could not have a revaluation of the pound and that farming required the rise the Commission were proposing the very least. He said that he was backing the rise, and he appreciated that it meant that farmers were going to take another drop in income and contribute fodder to the fight against inflation. Nevertheless, I think some figure round about that, without any revaluation, is totally necessary for British farming.

I must mention one or two other things before I close. First of all, I do think the Minister should back the super levy—that is, the levy which will be placed on extra milk produced in the country where it was pro- duced. I think this is the only sensible levy, to place the responsibility for producing surplus on the area that produces it, and that without exception. If there is to be a levy, then there must be no exemptions, which would totally destroy its purpose.

The Earl of Onslow

My Lords, is the noble Lord a dairy farmer?

Lord Mackie of Benshie

No, my Lords, I am happy to tell the noble Earl that I am not a dairy farmer. I gave that up 10 years ago because I was tired of pulling cows for 20 years and I was determined to die a decent fellow fattening beef! Therefore, I believe that we must back the Minister very hard in his fight.

There are many other things that we should do, one of which is that we should speed up the procedures in the EEC against, for example, surplus dumping. Scottish farmers—I am a fruit farmer—have suffered very much from the dumping of foreign pulp, especially the dumping of iron curtain country pulp in this country. My Lords, I have said enough.

3.31 p.m.

Lord Elphinstone

My Lords, I should like to begin by thanking the noble Lord, Lord Gisborough, and the noble Lord, Lord Mackie of Benshie, for their very kind words. When I first joined your Lordships' House I was by far and away the youngest member. It has taken me, I regret, five years to pluck up the confidence to stand up in your Lordships' House and I hope that your Lordships will bear with me as I speak for the first time.

To declare my interest in this debate, I must begin by saying that I am, indeed, a farmer. Whether I am as successful as the noble Lord, Lord Gisborough, has suggested I am not sure, but I rely for my daily bread upon the farming business. I speak today having made two assumptions which I hope are acceptable. The first is that the farming industry is little different from any of our other major national industries, and I feel that it is a mistake to treat is as a separate case. Secondly, I think we must accept that times are by no means easy in this industry which encompasses our nation. In common with many other situations, times are indeed hard.

I should like to suggest to your Lordships that two very different situations exist within the industry at present. These differences cut across the normal lines of demarcation between the arable and the stock farmer, between the hill and the low ground farmer, and between the large-scale and the small farmer.

We have in this country on the one hand the ordinary, traditional agriculturalist—a man cautious and conservative in his approach. As often as not he runs a family unit, employing a mixed farming system which varies little as the years go by. It is not within his business system to borrow money, and he is, therefore, rarely beholden to the moneylenders. He is a man, who, if the worst comes to the worst, can, so to speak, batten down the hatches and survive. On the other hand we have a counterpart to the traditionalist, whose outlook is very different. He has considered it his job to expand and intensify his enterprise, which he has been urged to do by successive Governments over the years. Recently, for example, we have had the two papers, Food from our Own Resources, which strongly persuaded farmers that, in their own and in the national interest, they must invest in improving their production.

A number of the more ambitious among the agricultural community have taken heed of these encouragements, and in order to expand they have borrowed both from the banks and from the longer term mortgagors. The banking community have not been hesitant to join in this dance, being only too happy to lend against ever increasing land values. Indeed, the figures, as has already been suggested, show agricultural borrowings having risen at 30 per cent. per annum steadily over the last three years. I think it needs no illustrations to suggest that this section of the community, who have responded to the call of Government to enlarge their production, are now finding themselves in a very vulnerable situation. As with other industries, they are being pinched unmercifully between rising costs, high interest rates and static product prices.

On top of this, it is now being suggested that, in order to cut EEC surpluses, co-responsibility levies be raised on some products—it seems that we are now being asked not to produce so much. This will cause added distress to a section of the industry which had faith in Government suggestions that they would be rewarded for following the expansionist line. By following this course, as it turns out, the enterprising farmer has, in some cases, put his business in jeopardy. I am not suggesting that the industry is heading for an imminent collapse; however, it will become increasingly difficult for Governments to enter into honest discussions with the farming industry regarding future requirements. Any further requests may well fall on deaf ears.

Confidence is at a low ebb; the future still looks bleak. The industry needs guidance as to the direction in which it should develop in the future. Can it afford to invest even more money with any certainty of a commercial return, or will this lead to further financial strain and added surpluses? We need answers to these and other questions, and, if the Government wish to restore the confidence of our industry in the future, now must be the time to ensure that the reward is given to those who placed their faith and their money behind the exhortations of Governments in the past.